The popularity of foreign exchange trading (Forex, or FX)
has accelerated rapidly in recent years as the prospect of 24-hour, high-leverage,
highly liquid trading (more than $1.5 trillion in daily turnover)has caught the interest of many traders.
Previously,
access to this market had been restricted to corporations,hedge funds,large Commodity Trading Advisors and other institutional
investors. However, with the ascendancy of online trading,manyfirms have
opened up the “cash” currency market to individual traders, providing leveraged trading as well as full-feature execution platforms, charts and
real-time news.
Unlike the U.S. currency futures markets,
which have fixed daily trading hours, the Forex market is a seamless, 24-hour market. Trading occurs between large banks (which is why Forex is sometimes referred to as the“interbank” market), with numerous broker-dealers providing access to this
market for individual traders. At 2 p.m. ET each Sunday, trading begins as
markets open for the week in Wellington, New Zealand, followed by Sydney
and Singapore. At 7 p.m. ET the Tokyo market opens, followed by London at
2 a.m. and, finally, New York at 8 a.m. This overlapping movement of currency
trading among market centers allows traders to react to news immediately, and also provides the added flexibility of determining their trading schedules।
If important overseas news occurs
while the U.S. currency futures markets are closed, the next day’s opening could be a wild ride.Many(but not all)currency broker-dealers do not charge outright commission fees to individual traders. Instead, they profit from the bid-ask
spread they set.
As a result,
many currency firms promote their low spreads
rather than their low commission rates. Whether this is a good deal or not
depends on the size of the spread in a given currency.
