The importance of choosing the appropriate trading environment for a retail trader
There are many options novice traders have to consider, when they’re evaluating if trading may be a viable opportunity. Whether we’re considering trading as a hobby, as an attempt to gain a part time income, or if it’s to eventually become a full time occupation, it’s worth creating a list of pros and cons in order to establish if FX is a good fit for us personally.
A pros and cons checklist also offers up an excellent comparison between the various securities and sectors we can choose; should we trade: individual shares/equities, commodities, options, Forex? In this article we’ll unashamedly walk through a pros and cons check list, attempting to prove why trading Forex makes perfect sense, for both novice and experienced traders alike.
24 hour market
When the Forex markets open on Sunday evening (GMT time) unit they shut at 4pm EST on Friday (USA New York closes) the Forex market is open to trade. Wherever you’re located globally the market is open. For sure there’s times when the liquidity and spreads will change due to liquidity issues, however, those issues will only become critical if you’re a manual trader. If you prefer complete automation, or semi automation, then not having your body clock in tune with UK time is less of an issue. If you’re based in Sydney, or Asia, there’s many times when high impact economic calendar data releases provide opportunities trading: yen, kiwi, or Aussie, that manual UK based traders will miss whilst asleep.
Markets moved by macro issues, economic news
Rather than analyzing the specific performance of a particular stock, or a sector, our Forex industry is subject to a much wider influence; global and domestic political events, economic data, fast moving events etc. For sure we could follow a sector such as the retail sector and buy or sell equities, or use CFDs to trade individual shares, or sectors. We could, for example, trade them as retail spend data is published. However, by accident and design, our global Forex market analysis will also provide us with a tremendous education opportunity; we’ll become relative experts on a number of wide ranging subjects. Interest rates, PMIs, retail sales, surveys, employment data, trade balances, deficits, quantitative easing, there’s a list of global economy important data that we’ll begin to always have at the forefront of our mind.
Impossible to attire
Cornering the market is an impossible task in an industry that turns over $4.2 trillion US dollars each trading day, it’s therefore highly unlikely that any individual, or institution can place an order that’ll move the Forex market. Sure there’s been reports, some anecdotal, of traders making fat finger orders and buying many multiples of a currency by mistake, similarly we often become suspicious when we see a currency pair move before a high impact release is published. But you can’t “insider trade” a currency, and the pre-announcement market moves are generally orders based on opinion (one way or the other).
Predictable costs
We know our costs of doing business when trading Forex. We know, within a reasonable range, what spread we’ll pay on a trade. We know, if we trade through an STP/ECN, that our likelihood of experiencing any extra costs are zero, or minimized. We know that if we trade through reputable brokers, we’ll pay no swaps costs and incur no extra commission charges. We also know that we can limit our losses within seconds by using stops, or closing trades. Whereas trading equites, if you actually hold the shares for a length of time, can be an expensive exercise in comparison. With zero account charges, you could hold a long term position trade on a currency pair with an STP/ECN broker, without incurring any charges.
Low entry level
In our Forex industry you can begin trading with a relatively small account, you can begin to grasp the basics of trading with as little as $100 and still enjoy the VIP experience traders with much larger accounts would experience.
Ideal platforms to experiment with
After you take your baby steps on an Forex trading platform you can move forward and after years of practice you’ll begin to know every aspect, every feature and benefit of your platform. This isn’t an education process you can take a classroom course in, you have to put in the hundreds of hours required and once you’ve fully got to grips with the complexities of for example MetaTrader4 you can consider yourself an apprentice quant.
All things considered our pros outweigh the cons when you’re considering which securities you’d favor trading, so much so you may have noticed that we struggled to actually come up with any cons relating to trading Forex. Which is why it is, without doubt, the most appropriate trading environment, for the vast majority of novice and intermediate level traders.
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