Forex trading and foreign exchange options are gaining in popularity. Hedge funds and corporations have been active in foreign exchange trading and foreign exchange options for some time.
There are many hedge funds whose sole purpose is trading foreign exchange. Most hedge fund firms rely on foreign currency trades and options as just one more tool in the “hedge” arsenal. One fact is irrefutable, the rest of the investment community maintains a close watch on the investments hedge fund managers make and many choose to follow their lead. Spot currency trading is the biggest pond to trade in worldwide on a daily basis. It has a higher dollar turnover than all of the stock exchanges combined.
Foreign exchanges trades are almost are driven by capital flows and the need to move money worldwide to pay for goods and services. This makes FX an ideal venue for day trading due to it’s high liquidity.
There are other factors suggesting that 2013 may be a promising year for foreign exchange as well. Two of the most obvious are raising trading costs and regulatory pressures in traditional asset markets. As a result, forex trading is becoming an attractive alternative for investors of all stripes.
Foreign exchange options, which in the past, represented little more than a business necessity in the import market, have now become an integral component of hedge fund strategy.
Currencies can be traded via an exchange or traded via a virtual network. This network is now dominated by advanced computers and a handful of market makers that are still left to handle large transactions. There are still a few institutional market makers (Humans) left; however computers now handle the bulk of the trading.
As foreign exchange trading and foreign exchange options enter main stream investor consciousness, it is important to remember that any investment strategy carries risk, and foreign currency exchange is no exception. Foreign exchange trading is an exhilarating and challenging investment option and certainly not an arena for the faint of heart.