Jayden 1. A marketplace that runs 24 hours a day
The forex market runs from Monday morning to the early hours of Saturday morning and it never seems to need much rest. This is a godsend for those who want to spend their free time trading forex, because you can choose when you want to trade – either in the morning, at noon or, of course, in the dead of night when everything is silent.
2. A highly liquid market
In the spot forex trading market, the daily trading volume is almost US$2 trillion. This makes the forex trading market the largest and most liquid market in the world. The market’s ability to accommodate the volume and size of transactions dwarfs that of other markets. The total daily trading volume of the forex trading market is more than three times the total daily trading volume of the securities and futures markets.
The high liquidity of the forex trading market means that under normal market conditions you can buy or sell as soon as you wish with the click of a mouse. You can even set your online trading platform to automatically close a profitable position at the point where your limit order is placed, or close a losing position when the price moves in the opposite direction to where you have set stop-loss order.
3. Highly liquid
You will often hear in the stock market that so-and-so funds or bankers are buying or selling a particular stock. In the stock market, well-funded individuals and institutions do often sway the price of a stock.
In the forex trading market, the strong liquidity of the forex trading market makes the ability of any fund or bank to control a particular currency much reduced to negligible. Banks, hedge funds, government agencies, currency brokers and individuals with substantial assets are the player in the forex trading market.
4. High leveraging
By engaging in forex trading, a small amount of margin account can control a larger amount of the total contract value. Leverage gives traders the ability to earn optimistic profits while minimizing capital risk. For example, a forex trader offers 200:1 leverage, which means that $50 in margin can buy or sell $10,000 worth of a particular currency. Similarly, with a margin of $500, a trader would be able to trade $100,000 worth of a particular currency. In contrast, securities are generally traded without margin, and futures are traded on margin but with much less leverage than forex trading.
5. Lower trading costs
Under normal market conditions, the cost of small trade, i.e. the spread between the bid and offer price, is generally less than 0.1 per cent. With larger dealers, you can get spreads as low as 0.07%, and nowadays you can generally get 3 to 5 pips for trading. Of course, the level of fees also depends on your level of leverage, which will be explained later.
6. “Mini” and “micro” account
Being a forex trader is the fact that trading stocks, options and futures are costly compared. Online forex dealers offer trading accounts, and only require a deposit of $300 or less, and we’re not saying you should open one of these accounts here, but we are telling you that even ordinary people with little starting capital can participate in the forex market.
7. There is no requirement to go up in order to go short
In the forex trading market, there are no restrictions on shorting as there are in the securities market. Whether a trader is long or short, there are opportunities for profit in the Forex market. Because forex trading always involves buying one currency and selling another, there is no structural bias against the market. Therefore, you have the same freedom to trade in both up and down markets.
8. 4 major currency pairs vs. 8,000 stocks
Let’s take the example of stocks listed in the United States. There are 4,500 stocks listed on the New York Stock Exchange in the US and 3,500 stocks listed on the Nasdaq. Which stock do you decide to trade? How about picking the winners of these stocks? This is a huge headache for the average investor.
In spot forex trading, there are only a few dozen globally traded currency pairs here, and the most important of these are just 4 currency pairs. Isn’t it easier to focus on 4 currency pairs than on a few thousand stocks?
9. Guaranteed risk limits
For risk management purposes, traders must have a position limit. This figure is set in relation to the amount of money in the trader’s account. If the required margin exceeds the available margin, this is when the electronic trading platform will automatically signal a margin call, so the forex trading market risk is minimal. Unless the size of the position held is within the account’s capacity, all open positions will be immediately forced to close. In the futures market, your positions may be liquidated at a loss and you will be liable for any deficit in your account.
