Forex trading has many benefits and advantages—a reason several traders these days are selecting this market. Curious and interested in what these benefits are, and do you want to experience the same success they have? Read on ahead, and hopefully it will help you to further refine your trading strategies.
- No commissions – there are no exchange fees, no clearing fees, no government fees, no brokerage fees. Many retail brokers are paid for their services through something known as “bid/ask spread.”
- No middlemen – Spot currency trading eradicates the middlemen and permits you to trade openly with the market accountable for the pricing on a specific currency pair.
- No fixed lot size – In the futures markets, lot or contract sizes are determined by the interactions.A standard-size contract for silver futures is 5,000 ounces. However, in spot forex, you control your own lot or position size.
- Low transaction costs – The retail business deal cost (the bid/ask spread) is normally less than 0.1 percent under standard market circumstances. At bigger dealers, the spread could be as low as 0.07 percent and this depends on your leverage.
- A 24-hour market – Forex market never sleeps, from the Monday morning opening in Australia to the afternoon closing in New York.This is overwhelming for those who don’t want to trade full time basis, for the reason that you can select when you want to trade, 24 hours, round the clock, rain or shine.
- No one can manipulate the market – The foreign exchange market is gigantic and has so many members that no single individual can control the market price for a long period of time.
- Leverage – In forex trading, a small deposit can regulate a much bigger total contract worth. Leverage offers the trader the skill to make good profits, and at the same time keep danger capital to a lowest.
- High Liquidity– For the reason that the forex market is so huge, it is also very liquid. This is a benefit because it means that within normal market circumstances, with just a click of a mouse you can promptly buy and sell as you wish as there will typically be somebody in the market eager to take the other side of your trade.
- Low Barriers to Entry – You would think that being a currency trader would cost a load of cash. The truth is, when in comparison to trading stocks, options or futures, it doesn’t. Online forex brokers offers “mini” and “micro” trading accounts, other with an at least account deposit of $25.
- Free Stuff Everywhere – The majority of online forex brokers usually offers “demo” accounts to exercise trading and build your abilities, together with real-time forex news and monitoring services.
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Advantages Of Forex Trading
There are many benefits and advantages of trading forex. Here are just a few reasons why so many people are choosing this market:
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“.
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.
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.
Because the forex market is so enormous, it is also extremely liquid. This is an advantage because it 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).