A groundbreaking collection on currency derivatives, including pricing theory and hedging applications. “David DeRosa has assembled an outstanding collection of works on foreign exchange derivatives. It surely will become required reading for both students and option traders.”—Mark B. Garman President, Financial Engineering Associates, Inc. Emeritus Professor, University of California, Berkeley. “A comprehensive selection of the major references in currency option pricing.”—Nassim Taleb. Senior trading advisor, Paribas Author, Dynamic Hedging: Managing Vanilla and Exotic Options. “A useful compilation of articles on currency derivatives, going from the essential to the esoteric.”—Philippe Jorion Professor of Finance, University of California, Irvine Author, Value at Risk: The New Benchmark for Controlling Market Risk. Every investment practitioner knows of the enormous impact that the Black-Scholes option pricing model has had on investment an (more…)

Private investors are going into Forex Market, with access to the same market data and tools used by bank, hedge funds company and professional traders.

Below here is 9 reason on why you must trade Forex.

1. Round the clock trading

The forex market is unique in that it is open 24 hours nearly 7 days a week. The market opens when the New Zealand and Australia markets open and closes when the US market closes. Due to the difference in time zone, it would seem that the forex markets are opened always.

2. No need to choose from too many counters

Unlike equities, in forex you would only need to understand the minimum of 1 pair of currencies and concentrate on it. Whereas for stocks and shares, before you can start understanding the equity you would have to sieve through thousands of companies before you can start to concentrate on trading them.

3. Liquidity

As the forex market is the biggest around, it is very liquid. Average daily turnover rose to $3.2 trillion in April 2007. Given its size, buyers and sellers can easily get their orders matched swiftly and easily. Whereas in the equity markets, one would have to wait for their orders to be matched especially if it concerns a stock that is not very well traded.

4. Good Leverage

In forex, you are able to obtain leverage up to 200:1 or even more depending on the broker. This means a minimum deposit of USD 500 can allow a trader to open a position size of 100,000 to trade. No other markets give you this advantage. However, do note that leverage can be a double-edged sword too.

Stay tune to the Forex Options Trading – 9 Reasons on Why You Must Trade Forex (Part 2 of 2)

An example that we would encounter frequently is when we travel overseas and need to exchange the local currency for the foreign destination currency and we would head to the local money changer or bank to buy the foreign currency. This is a good example that we are familiar with.

By buying and selling currencies at the money changer or bank we are already involved in this huge foreign exchange market. Banks and central banks, investment funds, hedge funds, exporters and importers, companies and retail forex traders are among the main participants in the forex market.

Banks trade to generate profits and also act as buyers and sellers of one currency against another for their clients trading and commercial transaction. While central banks buy and sell currencies to hold as reserves and protect the reserves. They also act to moderate their country’s currency strength to facilitate reasonable terms of trade in the international markets for their exports and imports.

Investment funds have a percentage of their portfolio in the forex market for many reasons like diversification, hedging, etc. While most hedge funds will speculate on currencies as it is the biggest market in the world thus able to accommodate their large trading size which is quite difficult to do in the equities or futures market.

To be continue.. at – Forex Options Trading – What is Forex? (Part 2 of 2)