Forex & Its Advantages
Trading forex has a lot of benefits and advantages. Here are some of the reasons why people choose to invest in this kind of market:
In the world of forex, there are no clearing fees, exchanges fees, government fees & brokerage fees. A lot of retail brokers are being compensated by the “bid-ask spread”for their services.
Middlemen are not present in this market. Spot currency trading eradicates them allowing you to trade directly with the market responsible for the pricing on a particular currency pair.
No Fixed Lot Size
Lot or contract sizes are determined by the exchanges when we talk about future markets. Let’s take for example the silver futures. Silver futures’s standard-size contract is 5,000 ounces. On the other hand, in spot forex, you determines your own lot or position size. With this kind of strategy, spot forex allows traders to participate with accounts as as $25.
Low Transaction Costs
Under normal market conditions, the retail transaction cost or the “bid-ask spread” is typically less than 0.1%. On the other hand, larger dealers may have the spread for as low as 0.07%. Take note that leverage always an important role in this process.
24-Hour Forex Market
Don’t worry about the opening times of Forex Market. It’s open 24 hours a day from the Monday morning in Australia to the afternoon close in New York. This only means that forex market never sleeps. This will allow you to trade in the morning, noon, night, during your breakfast or even while your sleeping. Now, when is the best time to trade? We’ll find out in the coming lessons.
No One Can Corner the Market
You already know how big forex market is, right? Therefore, no one can corner or control the market price for an extended period of time because of the large number of participants trading every single second, minute or hour of the day.
In the world of forex trading, a small deposit can control a huge total contract value. Leverage plays an important role in forex trading. It provides the trader the ability to generate acceptable profits, and at the same time keeping the risk capital to a minimum.
However, you have to remember that leverage has a double-edged sword capability. If you don’t comply with the proper risk management, then this high degree of leverage can lead to large losses and gains as well.
Forex market is huge because of the large numbers of participants. This is the reason why it’s liquid. It is indeed extremely liquid. In a more clearer point, this only means that under normal market conditions, with a single click of your mouse, you can instantly buy and sell at will. Expect that there will usually be someone in the market who’s willing to take the other side of your trade. Don’t worry. You will never stuck in a trade. Remember that you can control your online trading platform, which allows you to automatically close your position once you’ve reached your desired profit level, and/or you can also close a trade if it’s going against you.
Low Barriers to Entry
I am pretty sure that you are thinking about the cost of currency trading. You would think that it costs a lot of money. In fact, it’s certainly low compared to trading stocks, options or futures. It’s good to know that there are many online forex brokers who offer “mini” or “micro” trading accounts for as low as $25 minimum account deposit.
With this kind of amount, you can definitely start trading forex. This make forex trading accessible to individuals who belong to low-to-middle income families. It may not be a big start, but it will surely give you the chance to experience trading.
Free Stuff Everywhere!
A lot of forex brokers online offer “demo” accounts to give you a taste of the basics, practice trading techniques and strategies. This will allow you to hone you skills towards better forex trading.
Don’t worry, “forex demo accounts” are absolutely free!
Demo accounts are very valuable indeed. These accounts will not only allow you to save money but will certainly give you an opportunity to try trading using “play money” before getting and opening a live trading account. This time, you need to risk real money.
After learning and understanding the advantages of the forex market, it’s now time to compare forex market with the stock market!
Proceed to the next lesson. Forex vs. Stocks
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