In our opinion, to maintain a diversified and growing portfolio, stock holdings need to be balanced by foreign exchange positions. Currency rates, economic issues and the health of the company in question compound the impact of stock positions in your portfolio. We believe that FOREX (Off Exchange Retail Foreign Currency Market) provides the diversity that is necessary to maintain consistent portfolio growth.
 
1)    Trade FOREX in a bull or bear market
In the foreign exchange market, there is no short selling restriction. There is potential for profit in currencies regardless of which way the market moves. Of course, the potential for losses is equally high. Forex always involves selling one currency to buy another, so there is no structural bias to the market. Depending on short and long positions, a trader always has an opportunity for profit, or loss,  in a fluctuating market.

 

2)    Forex provides up to 50 times the leverage of stocks
For every US$1,000 you invest in stocks, you gain control of at the most US$2,000 worth of shares. But with Forex, margin of only US$1,000 gives you control of a currency trade of up to US$100,000 in currencies.^[1]
 
3)    Trade 24 hours a day
Trading stocks when the U.S. markets are closed is not easy and does not provide much liquidity. With forex, you can trade 24-hours a day, 5 days a week, in one of the largest and most liquid market in the world.
 
4)    Forex Makes Money on Interest News
Any significant news regarding interest rates directly impacts the international financial markets. In the past, when a country has raised its interest rate, its currency strengthens relative to other currencies as investors shift assets to gain better returns. The influence of stock markets has changed this equation since increasing interest rates are typically bad news for the stock markets. Investors transfer money out of the stock market when interest rates rise, which can cause the currency of the country to weaken on the broader markets.

Determining which effect will dominate can be difficult, but there is typically a consensus in the marketplace as to what a rate change will do. Rate changes are typically anticipated since they usually take place after regularly scheduled meetings of central banks.^[2]

5)    Forex Offers Broad Diversity
The balance of trade between nations is one determinant to the relative value of these currencies. A nation that imports more than it exports has a deficit trade balance, which is considered unfavorable to the value of that currency. Prudent investors know that they should diversify the U.S. Dollar balance in their assets through holding a range of currencies. This is challenging since most U.S. banks do not offer foreign currency accounts. Through foreign exchange trading, you control hundreds of thousands of dollars worth of currencies with up to 50 times more leverage than with your stocks. For every US$1,000 margin deposit, you control up to US$100,000 worth of Euros, or Pounds, or Yen, or the currency you believe will outperform the U.S. Dollar in the future.

6)    Forex – Perfect for Technical Traders ^[3]
Currencies rarely spend time in tight trading ranges, and there is a tendency for strong trends to develop. It is believed that 80% of trading volume is speculative in nature, so the market frequently overshoots before correcting itself. A technically trained trader can identify these breakouts, providing a range of opportunities for entering and exiting positions.

 

 

[1] High Leverage and low margin can magnify or lead to both substantial profits and losses.

 

[2] Risk with News Trading:

 

[3] This is a concensual opinion of our team