Trading forex has many advantages and benefits.
There are numerous reasons why this market appeals to so many people:
The government does not charge any fees for clearing, exchange, or brokerage services. For retail forex brokers, the commission they receive is called the “spread”.
No fixed lot size
Futures exchanges determine the sizes of the lots and contracts in the futures market. Silver futures, for example, are typically measured in 5,000 ounces.
A smaller position size or lot size is an option in forex. The maximum number of units traders can trade is 1,000.
Low transaction costs
Typically, retail transaction costs (the spread between bid and ask) are less than 0.1% in normal markets.
Depending on the transaction size, the spread may be as low as 0.07%. It depends on your leverage, and we’ll explain how that works later.
A 24-hour market
A bell is not rung to signal the start of the day. The forex market never sleeps. It opens every Monday in Australia and closes every Friday in New York.
You can trade when you want – during breakfast, lunch, dinner, and even while you sleep – which is fantastic for those who trade part-time.
No one can corner the market
During active Forex trading hours for major currencies, significant manipulation by a single entity is practically impossible.
There are so many participants in the foreign exchange market that no one entity (not even the likes of Chuck Norris or the central bank) can control it for an extended period of time.
Low Barriers to Entry
Currency trading seems like it would be incredibly expensive to get started. Comparatively, it does not work the same way as trading stocks, options, or futures. There are online forex brokers that offer “mini” and “micro” accounts, with deposits that start as low as $50.
By opening an account with the bare minimum, you don’t really need a lot of start-up capital, but it makes Forex trade more accessible to anyone with a modest amount of trading capital.
In forex trading, a small deposit can influence the total contracts value much more than a larger one. A trader using leverage has the ability to increase profits while reducing risk capital at the same time.
Traders may, for instance, buy or sell currency by putting down a margin deposit of $50, enabling them to trade $2,500 worth of currencies for $50. For instance, $500 dollars can be exchanged for $25,000 dollars, and so on.
While this is all gravy, we shouldn’t forget that leverage has a double-edged nature. If risk is not properly managed, high leverage can have both positive and negative results.
Forex is an extremely liquid market due to its enormous size. With a click of the mouse, a person can instantly buy or sell anything, regardless of market conditions.
A trade never “sticks” to you. If your position is going against you (a stop loss order), your platform can automatically close it once you reach your desired profit level (a limit order).
Everything is Free!
Most online forex brokers offer demo accounts so that you can practice trading and gain experience. They also offer real-time forex news and charts.
What’s this?! There’s no charge for any of them!
The demo account is a very valuable resource for individuals who are “financially restricted” and would like to practice trading with “play money” before opening a live trading account and risking real money.
See how the forex market compares with the stock market now that you know the advantages!