Forex trading has risen in popularity in recent years and attracts a wide diversity of traders. These include institutional investors, large corporations, retail investors, currency speculators, to name but a few. The foreign exchange market, also known as “FX” or “forex”, is a global worldwide-decentralized financial market for trading currencies (Wikipedia, 2012). The foreign exchange market is the largest financial market in the world, with estimates of nearly $4 trillion a day in trade volume. To put the enormity of the FX trading marketing into perspective, the New York Stock Exchange (NYSE) trades a measly, in comparison, $74 billion a day. The foreign exchange market enables different types of buyers and sellers to trade through financial centres around the world, around the clock during weekdays.
As a result of the development of high-speed internet, online forex trading has also seen phenomenal growth in the last few years. Regardless of location and time zones, traders from around the world can enter the foreign exchange market and start trading. Furthermore, the world of foreign currency trading is extremely accessible, allowing complete novices to learn the basics by reading up online and opening demo accounts. Some traders will choose to go through a retail FX broker, who will charge commissions on trade executions and hedge their clients’ positions. Other traders, perhaps with more experience and expertise, will choose to trade through exchanges offering neutrality and will invariably be more familiar with more advanced foreign trading strategies.
Traders choosing to trade in currency pairs online can choose either automated third-party software, such as automated FX robots, or trade manually. Both trading strategies have their respective advantages and disadvantages. Many traders, who have been successful using manual trading strategies, will argue that no matter how sophisticated the robot is there’s no substitute for trading skills, judgement calls and discretion. On the other hand, auto trading offers a clear advantage of not letting emotions affect decisions, which sometimes results in substantial losses. Although, manual traders might counteract this argument stating many robots are developed by programmers who are not real market speculators. Furthermore, the majority of robots manufacturers know that there are limitations in the programming and a significant obstacle of integrating risk parameters into the robots still needs to be overcome.
The biggest obstacles to overcome in the world of online forex trading, and indeed other trading activities, are risk-related and psychological. Both manual and automated FX trading strategies have to overcome these obstacles, and there is still some way to go before robots can integrate risk management parameters to a sophisticated level. Despite these obstacles, the allure of online FX trading still remains and for many traders, it offers a high risk but high reward trading activity.
Bill Weston writes on a number of subjects, including online forex trading and forex trading.. For more information on foreign currency market trading, or FX trading visit: http://www.lmax.com/
