ADVANTAGE OF THE FOREX MARKET– There is many benefits and advantages of trading forex. Here are just a few reasons why so many people are choosing this market:
1.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
2.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.
- 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.
5.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
- 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 at $25,000 and so on. While this is all high 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 or tap 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).
- Instant Execution of Market Orders-Your trades is instantly executed under normal market conditions. Under these conditions, usually, the price shown when you execute your market order is the price you get. You’re able to execute directly off real-time streaming prices.
. Short-Selling without an Uptick– Unlike the equity market, there is no restriction on short selling in the currency market. Trading opportunities exist in the currency market regardless of whether a trader is long or short, or whichever way the market is moving. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. So you always have equal access to trade in a rising or falling market.
