The reasons for people wanting to speculate will vary from person to person, but could come down to an individual wanting to create a secondary income, or perhaps they would like take it further and make FX trading their primary income. However there are many markets which an individual can speculate on so why would they choose Forex over other markets, such as stocks or bonds?
Low start-up costs
Trading accounts can be opened for as little as 250 units (of base currency). This is unlike the stock market or futures market, where considerably more capital is required (typically starting in the 1000's) to be able to participate.
Low transaction costs
For each transaction (or trade) the costs of entering and exiting are very low compared to other markets. If you trade a stock you will have a commission for the purchase, and sometimes also an exit charge. Whilst in FX you also pay to participate in each trade (via a commission or 'spread') it is considerably lower compared to other markets. If your transaction costs are lower this has a less detrimental impact on your trading profit and loss (P/L).
The use of leverage allows you to control a larger amount of money from a smaller deposit. Without leverage you would not be able to open an trading account for 200 units because (to your typical retail trader) you would not be able to afford the deposit required to speculate on FX. This is due FX being measured in 'pips' which will be covered later in the module.
Trade in bullish and bearish markets
Traditionally retail clients, particularly from the stock market, are only able to 'go long' (buy) hoping their market will rise in value. This means you are limited to only trading in bullish conditions and limits your opportunity to trade whilst the markets depreciate. With Forex and CFDs however you are able to take either long or short positions, to complement your anticipated market direction.
Trade or Hedge
With ThinkForex you can either Trade as a speculator or hedge like an investor. As a speculator you can benefit from price movements without owning the underlying asset, or if you trade physical S-shares then you can hedge your risk with CFDs to protect against losses, or gaps from weekends or holidays. Not all brokers allow you to hedge within MT4, however ThinkForex will allow you to place both long and short on the same CFD instrument.
Manual, Semi or Automatic Trading
With the ability to trade manually you are in full control of your own decision making process. But for those who are limited for time to trade or learn to trade, ThinkForex also offer the ability to trade full or semi-automated.