Why is the Forex market attractive to investors and home-based traders?

Professional investors for individual accounts have dramatically increased their level of participation in the cash Forex markets in recent years. Add to this the growing use of cash Forex by individual investors and home-based traders, and you have a rapidly growing industry of cash flow creating profits whether the market goes up or down.

The Forex is very liquid, and this market can absorb trading volumes and per trade sizes that diminish the capacity of any other market. On the simplest level, liquidity is a powerful attraction to any investor or independent trader as it suggests the freedom to open or close a position at will.

A substantial attraction for participants in the Forex market is the 24-hour nature of the market. In Forex, a participant need not wait to react to an unfavorable event, as is the case in many markets.

Many professional investment managers have a particular time horizon in mind when they establish a position. In the Forex market, a position can be established for a specific period of time, which the trader desires.

Because the market is highly liquid, most trades can be executed at a single market price. This avoids the problem of slippage found in futures and other exchange-traded instruments where limited quantities can be traded at one time at a given price.

Over long historical periods, currencies have shown substantial and identifiable trends. Each individual currency offers a unique historical pattern of trends providing investment managers and home-based independent Forex traders diversification opportunities within this massive cash exchange, the Forex.

From 1971 until recent years, the virtual owners of this market were the banks, multinational corporations and large brokerage firms. If an individual wanted to invest in this market, he could invest with a bank and with a $1 million cash deposit backed by the requirement of a $5-$10 million net worth. A slightly better option was provided by the brokerage firms which asked a lower minimum deposit on average of a quarter million dollars.

But now, the Forex market has been opened up to small-scale, home-based traders. Unlike the huge sums previously required by the banks and brokerage firms, comparatively far lower margin requirements are finally available which now allow virtually any individual to trade with the big boys. In addition, independent traders can take advantage of the growing boom in computer and communication technologies that have made this market accessible in ways previously exclusive only to large players.