This is a proper introduction to foreign exchange for everyone who misunderstood that term. The Australian foreign exchange market can be considered as the next big thing in investment. Over these years, Australian investors have become more active in chasing their investment goals. Australian’s are more likely to hold direct shares than in previous years and Australian Stock Exchange (ASX) shareholder surveys have shown a higher level of direct share ownership.
Equity derivatives in the market like options, warrants and contracts for difference have become more familiar with the Australian public, with Options traded on the ASX showing running record levels over the past years with growth in activity coming from retail investors.
We are also trading in international equity markets, purchasing highly sophisticated structured equity products and moving into the stage of credit derivatives through collateralized debt obligations (CDOs). We have also have a growing attitude for greater risk where Gearing has become standard feature in the financial planning process; market lenders have reported that their loan books have been rising at more than 20 percent every year.
The fresh element into this active, complicated mix is foreign exchange (forex) trading. During the 1990s, retail foreign exchange (forex) dealing services took up the internet, with retail forex trading only being available in Australia since 2000. Advanced trading systems were being developed in the internet and have also enabled the delivery of large volumes of quantitative and qualitative data that forex traders rely on. It is still at its beginning stages in Australia but forex trading is catching on fast internationally. A good example of this would be that there are more forex traders than share traders in Japan.
Foreign Exchange trading is appealing to investors for a number of reasons. There is low correlation to equity and bond market returns which means that forex trading is a useful source of diversification. It is highly liquid and is the most actively traded financial market in the world where a deal can always be made. Forex markets trade 24 hours a day and investors can go in and out of this financial market any time they want. It’s a highly leveraged investment because it gives investors the opportunity to attain large gains from modest outlays.
The forex market is a market for sophisticated investors. Dealers have reported that their clients have had extensive experience in trading equities and equity derivatives. It is not unusual that they have also traded in international shares and come across the foreign exchange market while negotiating cross border transactions. They know how to implement risk management and are comfortable with the leverage. Dealers recommend that clients should determine how much money they are willing to lose and they also recommend that clients work out the amount that they are prepared to put into forex and then commit no more than 10 percent of that stake in any single trade.
The Australian foreign exchange market is a very active financial market with a reported average turnover of $US81 billion in a day in 2004 in comparison to $US52 billion a day in 2001, which is an increase of 51 percent. It is very sophisticated and is a market with its own techniques and trading strategies. It is an important market to explore for sophisticated investors.
The introduction to forex is done, please come back for the next part soon.
We recommend trading forex with Easy-Forex.
