ishmaelDee
New Member
There are many benefits and advantages of trading forex. Here are just a few reasons why so
many people are choosing this market:
No commissions
No clearing fees, no exchange fees, no government fees, no brokerage fees. Most retail
brokers are compensated for their services through something called the "bid-ask spread".
No middlemen
Spot currency trading eliminates the middlemen and allows you to trade directly with the
market responsible for the pricing on a particular currency pair.
No fixed lot size
In the futures markets, lot or contract sizes are determined by the exchanges. A standard-size
contract for silver futures is 5,000 ounces. In spot forex, you determine your own lot, or
position size. This allows traders to participate with accounts as small as $25 (although we'll
explain later why a $25 account is a bad idea).
Low transaction costs
The retail transaction cost (the bid/ask spread) is typically less than 0.1% under normal
market conditions. At larger dealers, the spread could be as low as 0.07%. Of course this
depends on your leverage and all will be explained later.
A 24-hour market
There is no waiting for the opening bell. From the Monday morning opening in Australia to
the afternoon close in New York, the forex market never sleeps. This is awesome for those
who want to trade on a part-time basis, because you can choose when you want to trade:
morning, noon, night, during breakfast, or in your sleep.
No one can corner the market
The foreign exchange market is so huge and has so many participants that no single entity
(not even a central bank or the mighty Chuck Norris himself) can control the market price for
an extended period of time.
Leverage
In forex trading, a small deposit can control a much larger total contract value. Leverage gives
the trader the ability to make nice profits, and at the same time keep risk capital to a
minimum.
For example, a forex broker may offer 50-to-1 leverage, which means that a $50 dollar margin
deposit would enable a trader to buy or sell $2,500 worth of currencies. Similarly, with $500
dollars, one could trade with $25,000 dollars and so on. While this is all gravy, let's remember
that leverage is a double-edged sword. Without proper risk management, this high degree of
leverage can lead to large losses as well as gains.
High Liquidity.
Because the forex market is so enormous, it is also extremely liquid. This means that under
normal market conditions, with a click of a mouse you can instantaneously buy and sell at will
as there will usually be someone in the market willing to take the other side of your trade.
You are never "stuck" in a trade. You can even set your online trading platform to
automatically close your position once your desired profit level (a limit order) has been
reached, and/or close a trade if a trade is going against you (a stop loss order).
Forex vs. Stocks
There are approximately 4,500 stocks listed on the New York Stock exchange. Another 3,500
are listed on the NASDAQ. Which one will you trade? Got the time to stay on top of so many
companies?
In spot currency trading, there are dozens of currencies traded, but the majority of market
players trade the four major pairs. Aren't four pairs much easier to keep an eye on than
thousands of stocks?
Look
many people are choosing this market:
No commissions
No clearing fees, no exchange fees, no government fees, no brokerage fees. Most retail
brokers are compensated for their services through something called the "bid-ask spread".
No middlemen
Spot currency trading eliminates the middlemen and allows you to trade directly with the
market responsible for the pricing on a particular currency pair.
No fixed lot size
In the futures markets, lot or contract sizes are determined by the exchanges. A standard-size
contract for silver futures is 5,000 ounces. In spot forex, you determine your own lot, or
position size. This allows traders to participate with accounts as small as $25 (although we'll
explain later why a $25 account is a bad idea).
Low transaction costs
The retail transaction cost (the bid/ask spread) is typically less than 0.1% under normal
market conditions. At larger dealers, the spread could be as low as 0.07%. Of course this
depends on your leverage and all will be explained later.
A 24-hour market
There is no waiting for the opening bell. From the Monday morning opening in Australia to
the afternoon close in New York, the forex market never sleeps. This is awesome for those
who want to trade on a part-time basis, because you can choose when you want to trade:
morning, noon, night, during breakfast, or in your sleep.
No one can corner the market
The foreign exchange market is so huge and has so many participants that no single entity
(not even a central bank or the mighty Chuck Norris himself) can control the market price for
an extended period of time.
Leverage
In forex trading, a small deposit can control a much larger total contract value. Leverage gives
the trader the ability to make nice profits, and at the same time keep risk capital to a
minimum.
For example, a forex broker may offer 50-to-1 leverage, which means that a $50 dollar margin
deposit would enable a trader to buy or sell $2,500 worth of currencies. Similarly, with $500
dollars, one could trade with $25,000 dollars and so on. While this is all gravy, let's remember
that leverage is a double-edged sword. Without proper risk management, this high degree of
leverage can lead to large losses as well as gains.
High Liquidity.
Because the forex market is so enormous, it is also extremely liquid. This means that under
normal market conditions, with a click of a mouse you can instantaneously buy and sell at will
as there will usually be someone in the market willing to take the other side of your trade.
You are never "stuck" in a trade. You can even set your online trading platform to
automatically close your position once your desired profit level (a limit order) has been
reached, and/or close a trade if a trade is going against you (a stop loss order).
Forex vs. Stocks
There are approximately 4,500 stocks listed on the New York Stock exchange. Another 3,500
are listed on the NASDAQ. Which one will you trade? Got the time to stay on top of so many
companies?
In spot currency trading, there are dozens of currencies traded, but the majority of market
players trade the four major pairs. Aren't four pairs much easier to keep an eye on than
thousands of stocks?
Look
