Forex trading has morphed from an industry that was primarily closed to bank dealers and large businesses, to one that is completely open and accessible to retail investors of any size, with recent November 2009 daily volumes of $3.66 trillion. The biggest advantages of trading Forex, as opposed to stocks and futures, is that high leverage trading is permitted. Therefore, Forex traders can trade positions of 100 times their equity, and a as such, a 1 percent move can lead to doubling of an accounts equity. Also, markets are open 24 hours, five days a week and are highly liquid, meaning spreads are relatively tight.

On the Other: High Leverage, Huge Risks

The biggest advantage of Forex trading, is also its biggest disadvantage. Just like a 1 percent move in one's favor can double your money, a opposite move can cause a total loss to an account. Also, since trading is around the clock, Forex traders must track economic news from around the world that can occur at any point of the day. This could lead to unexpected losses if news announcements are overlooked.

Bottom Line

Forex trading can be highly profitable, but it comes with huge risks. Forex traders are advised to use leverage responsibly and use stop losses to limit having their accounts wiped out. Also, there are a plethora of Forex news websites that offer calendars of important events to look out for.

Source:

Reuters.com: November 2009 daily volumes of $3.66 trillion

More Information:

Forex Factory: Calendars