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Walter Peters

Why is forex trading so popular?

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The forex markets are very popular among all sorts of traders. This is partly due to the immense liquidity in the currency markets which means that a trader, for example running an algorithmic program, can trade the market without distorting it.  Some smaller markets can be problematic as the trader taking a position then ‘becomes the market’. There is also the fact that a good trader that fancies their chances at being able to in some way ‘sell’ their success and will have an easier job ‘seeing’ something that everyone is already familiar with.  To put it another way, a trader that makes 10% ROI in South African equities and 10% ROI in EURUSD might get more interest in the forex portfolio just because “everybody’s heard of EuroDollar”. Some areas of trading are even more forex focused. Social and Copy trading in particular have a considerable bias towards currency markets. This is partly due to the above point, that if you want to sell your strategy you might do better to have it working in a major currency pair. It is also to some extent a legacy issue because when ZuluTrade for example started out it supported trading in forex markets, only. Currencies are an unregulated asset. This is partly because of the international and portable nature of the instrument. An equity in a UK FTSE100 company on the other hand, represents a stake in a firm which has to abide by UK company law and the rules and regulations of the stock exchanges on which it is listed. As an authorized instrument, UK brokers that offer markets in the equity will also need to gain authorization and abide with compliance regulations. This isn’t the case in forex. Maybe its unregulated nature appeals to smart individuals who just want to try and make money without what they see to be the inconvenience of red tape.

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