There are many benefits and advantages of trading Forex. Here are just a few general reasons why more and more people are choosing this market.
Spot currency trading eliminates the middlemen and allows you to trade directly with the market responsible for the pricing on a particular currency pair. At FinFX all trading orders are sent directly to the liquidity providers without any intermediaries to ensure minimum execution time.
No fixed lot size
In spot Forex, you determine your own lot, or position size. This allows traders to participate with the minimum trade size of 0.01 lots (1 000) with deposits as small as 100 EUR / USD / CHF / GBP.
Lower 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%.
24-Hour TradingThere 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 very convenient for those who want to trade on a part-time basis, because you can choose when you want to trade: morning, noon or at night.
No one can corner the market
The foreign exchange market is so huge and has so many participants that no single entity can control the market price for an extended period of time.
Leverage – Trading on Margin
In Forex trading, a small deposit can control a much larger total contract value. Leverage gives the trader the ability to make nice profits while at the same time keeping the risk capital to a minimum.
For example, if you trade with 1:100 leverage it means that a 100 EUR margin deposit would enable a trader to buy or sell 10,000 EUR worth of currencies. Similarly, with 500 EUR, one could trade with 50,000 EUR and so on. However, leverage can also be a double-edged sword as without proper risk management, this high degree of leverage can lead to large losses as well as gains.
Due to the massive size of Forex market, it is also extremely liquid. This 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 and thus 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).
Low Barriers to Entry
You would think that getting started as a currency trader would cost a ton of money. The fact is, when compared to trading stocks, options or futures, it doesn’t. FinFX offers Micro trading account with a minimum account deposit of 100 EUR.
Free Demo Account, Forex Education Material and Analytics
Most every Fx Broker offers a demo account to allow you to practice trading and build your skills. You will also have access to loads of free Forex education material including video tutorials, daily market analysis and trading platform guides. If you are new to Forex, we recommend that you start by opening a demo account as it is a very valuable resource for those who are financially hampered and would like to sharpen their trading skills with virtual money before opening a live trading account and risking real money.
Comparing Forex to Stock Market
If we for example look at the New York Stock exchange, there are about 4 500 stocks listed. Another 3 500 are listed on the NASDAQ. Which one will you trade? Have you got the time to follow so many companies? In spot currency trading, there are dozens of currencies traded, but the majority of market players trade the four major pairs. Aren’t four pairs much easier to keep an eye on than thousands of stocks?
That’s just one of the many advantages of the Forex market over the stock markets. Here are a few more:
The Forex market is a continuous 24-hour market. FinFX is open from Sunday 22:00 GMT+0 until Friday 22:00 GMT+0, with customer service available 24/5. With the ability to trade during the US, Asian and European market hours, you can customize your own trading schedule.
Minimal or No Commissions
With some of our trading accounts there is no commission or additional transactions fees to trade currencies online or over the phone. Combined with the tight, consistent, and fully transparent spread, Forex trading costs are lower than those of any other market. In addition, with some trading accounts FinFX is compensated for our services through the bid/ask spread.
Instant Execution of Market Orders
Your trades are 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.
Keep in mind that many brokers only guarantee stop, limit, and entry orders under normal market conditions.
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.
Centralized exchanges provide many advantages to the trader. However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded will cost them money. The cost can be either in time or in fees.
Spot currency trading, on the other hand, is decentralized, which means quotes can vary from different currency dealers meaning that Forex traders get quicker access and cheaper costs.
Buy/Sell programs do not control the market.
How many times have you heard that “Fund A” was selling “X” or buying “Z”? The stock market is very susceptible to large fund buying and selling.
In spot trading, the massive size of the Forex market makes the likelihood of any one fund or bank controlling a particular currency very small. Banks, hedge funds, governments, retail currency conversion houses, and large net worth individuals are just some of the participants in the spot currency markets where the liquidity is unprecedented.
Analysts and brokerage firms are less likely to influence the marketForeign exchange, as the prime market, generates billions in revenue for the world’s banks and is a necessity of the global markets. This means that analysts in foreign exchange have very little effect on exchange rates; they just analyze the forex market.