Forex Trading is one of the trading techniques, through which numerous individuals are able to earn a steady income. There are numerous advantages of forex trading over other trading options, and listed below are 6 of the most important advantages.
1. Market liquidity and volatility
· Forex market is the most liquid and one of the largest financial markets associated with any form of trading.
· More than $4 trillion USD worth of activity is conducted by this market in a single day. Also, more than $1.5 trillion is conducted through spot trading.
· A forex spot trade involves a contract which allows trading of a given sum of currency pair derivative. Also, there is a market maker present at spot rate, also known as the advertised sell/buy price.
· It is owing to volatility in the forex market that traders take advantage of fluctuations in exchange rate, thereby allowing them to speculate and trade.
· With increase in volatility, the risk potential also increases; therefore, traders must consider all factors before starting a trade.
The number of buyers and sellers in a market at any given time is known as its liquidity. Therefore, with greater liquidity and number of trades completed also increase, which eventually translates into a higher volume. Volatility measures the difference in price change of any currency with time.
2. Market hours
The forex market is open and accessible for 24 hours a day and for five days in a week. Therefore, the duration of greatest liquidity is when operational hours of multiple time zones overlap. Also, it is important for a trader to understand the correlation between market activity and liquidity, since they cannot operate otherwise.
3. Low cost
· Spread is the cost at which most forex brokers allow the trade to take place. It is mainly the difference between ask price and bid price.
· In forex market the spreads are considerably tighter than spreads applied for other securities including stock. Therefore, broker must be chosen with ease to ensure cost-effective investment trading.
4. OTC forex brokers offer margin-based trading accounts, which is quite profitable when considering other forms of investment options.
5. Trading can be conducted only when a trader has sufficient margin in account. Also, with forex brokers the platforms are constantly monitoring the margin account.
6. Leverage ensures a trader gets the opportunity to trade larger positions. This is not possible if your account real balance is not quite high.
Therefore, consider all these factors before choosing forex trading over other investments.
1. Market liquidity and volatility
· Forex market is the most liquid and one of the largest financial markets associated with any form of trading.
· More than $4 trillion USD worth of activity is conducted by this market in a single day. Also, more than $1.5 trillion is conducted through spot trading.
· A forex spot trade involves a contract which allows trading of a given sum of currency pair derivative. Also, there is a market maker present at spot rate, also known as the advertised sell/buy price.
· It is owing to volatility in the forex market that traders take advantage of fluctuations in exchange rate, thereby allowing them to speculate and trade.
· With increase in volatility, the risk potential also increases; therefore, traders must consider all factors before starting a trade.
The number of buyers and sellers in a market at any given time is known as its liquidity. Therefore, with greater liquidity and number of trades completed also increase, which eventually translates into a higher volume. Volatility measures the difference in price change of any currency with time.
2. Market hours
The forex market is open and accessible for 24 hours a day and for five days in a week. Therefore, the duration of greatest liquidity is when operational hours of multiple time zones overlap. Also, it is important for a trader to understand the correlation between market activity and liquidity, since they cannot operate otherwise.
3. Low cost
· Spread is the cost at which most forex brokers allow the trade to take place. It is mainly the difference between ask price and bid price.
· In forex market the spreads are considerably tighter than spreads applied for other securities including stock. Therefore, broker must be chosen with ease to ensure cost-effective investment trading.
4. OTC forex brokers offer margin-based trading accounts, which is quite profitable when considering other forms of investment options.
5. Trading can be conducted only when a trader has sufficient margin in account. Also, with forex brokers the platforms are constantly monitoring the margin account.
6. Leverage ensures a trader gets the opportunity to trade larger positions. This is not possible if your account real balance is not quite high.
Therefore, consider all these factors before choosing forex trading over other investments.
