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TradingCurrencyOnline.com Presents...
FOREX Interview with Rafik
Patel C.E.O. ISX FX
LIMITED
Q1: When you
consider that the foreign exchange market has become
the world's largest financial market, with over $1.5
trillion USD traded daily, where does it go from
here?
A1:The FX
market is unique, in the UK there is no central
exchange, we trade via the inter bank market. With
more and more private individuals taking up margin
trading and new forex brokers setting up, I can only
see the market grow in the near future.
Q2: Other
than great liquidity, what are the principal
benefits attached to the forex market?
A2: There is
less to consider when trading the forex markets,
there are only a number of variables that affect the
pricing.
Main
advantages include
Forex Market
allows 24 hour trading
Greater
leverage - with most brokers offering 100 – 1,
Less
starting capital required,
More
Liquidity - day trading has to have enough volume to
make it worth our while. The currency market is more
liquid than all the world stock markets put
together. Currencies are always in action,
Free trading
systems
Better for
shorting - There are artificial controls built into
the market to prevent it from going down too fast.
The reason is that we live in a biased world that
likes to see things go up instead of down. One of
these artificial contraptions is the "uptick rule,"
which comes into play when shorting stocks, making
it more difficult to sell a stock short than to buy
it. This is unheard of in the currency market.
Selling currencies short while day trading is just
as easy as buying them.
Ideal for
Short Term Traders -
Q3: Limited
market access, liquidity issues-after market hours,
commission fees, capital requirements and short
selling/stop restrictions are just some of the
issues investors face when considering other
markets. Given that the forex market removes many of
these traditional barriers and therefore does not
restrict the forex traders' ability to make a trade
at the right time, are we likely to see an increase
in trading volumes this year?
A3: With all
these advantages, traders are finding it hard not to
trade currencies, online trading volumes across all
products is increasing at a substantial rate,
however FX trading, predominantly amongst retail
investors is becoming very popular.
Q4: There is
stiff competition amongst online forex service
providers for retail forex traders with some
claiming to offer the same degree of technical
analysis enjoyed by the world's largest banks and
institutional traders. Is this possible?
A4:
Technical Analysis has come a long way, more and
more forex provides now have partnerships with firms
who provide analysis. However the banks still have
an advantage, the markets are still not under
perfectly competitive economic model. The banks will
always have access to information that is not
readily available, ISX FX currently sources its
information from a number of banks to fill this gap.
Q5: Do you
subscribe to the theory that forex is less volatile
than stocks because the market is much deeper?
A5: As a bet
on the direction of a national economy, no currency
has ever dropped 25 percent in a day, or imploded as
rapidly and completely as an Enron or a Parmalat. In
the wake of those scandals, many companies are
meting out information more cautiously, making it
harder to get the real "scoop" on stocks one problem
of trading with too-high leverage is that one piece
of surprise news can wipe out one's capital. If you
treat forex trading like a business, including
proper money management, you have a better chance of
success."
Q6: U.S.
interest rates-decade lows; global trade wars and
terrorism fears have dominated the headlines
recently. What impact has this had on retail
volumes?
A6: The
above factors have all led to a decline in the
dollar. This coupled with tighter regulation of
brokers has given investors more confidence in
brokers. Also the stock market crash has driven
individuals to look at the profit opportunities
offered by forex.
Q7:
Stateside the Commodity Futures Trading Commission
(CFTC) has brought 58 actions against firms, since
its new powers were awarded in 2000. Given that
certain brokers continue to abuse the system, with
investor money sometimes not being traded in the
markets promised. What can investors do protect
themselves?
A7: The
retail forex market is in essence betting, as with
any bookmaker there is always a risk that you will
not get your winnings, or the odds will be highly
stacked against you. With tighter regulation and
increased competition, this risk of default has
largely disappeared. The risk of price manipulation
still exists and this will never really go away.
Investors need to ensure that they have an
independent price source and trade with a broker who
offers true one click dealing. Most brokers work on
the basis of the law of large numbers, acting like
the bucket shops of 50 years ago, they do not hedge
any positions and are directly competing against
there clients. This will always lead to price
manipulation and further actions by authorities will
inevitably be taken.
Q8: What is
this best way for "currency rookies" to get involved
in the market?
A8: Like
with any new form of trading you need to know what
you are doing, especially as there is margin
involved. Take all the time you need to learn this
new trading skill well -- practice everything you
learn with a demo account before you consider going
'live' with your own money. Investors should read
books, attend seminars and paper trade until they
are comfortable with there strategy.
Article
courtesy of The FOREX Vault
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