Why Trade Forex: Advantages Of Forex Trading

There are many advantages and benefits to trading forex.

Here are a few of the reasons why so many individuals prefer this market:

There are no commissions.

Clearing fees, exchange fees, government fees, and brokerage fees are all waived. The “spread” is a term used to describe how most retail forex brokers get compensated for their services.

There is no set size for the lot.

The exchanges determine the lot or contract sizes in futures markets. A standard-sized contract for silver futures, for example, is 5,000 ounces.

You can trade smaller lot sizes, or position sizes, in forex. Traders can now open deals with as little as 1,000 units.

Transaction costs are low.

Under normal market conditions, the retail transaction cost (bid/ask spread) is often less than 0.1 percent.

The spread on larger transactions could be as little as 0.07 percent. Of course, this is contingent on your leverage, which will be discussed later.

A market that is open 24 hours a day

There is no need to wait for the opening bell to ring. The currency market is open 24 hours a day, from Monday am in Australia to Friday afternoon in New York.

This is fantastic for those who want to trade part-time because you can trade whenever you want: morning, noon, night, over breakfast, or while you're sleeping.

No one can have a monopoly on the market.

During active trading hours for the major currencies, the FX market is sufficiently liquid that serious manipulation by any single firm is virtually impossible.

No single institution (not even a central bank or the powerful Chuck Norris himself) can control the market price for an extended period of time since the foreign exchange market is so large and has so many participants.

Leverage

A tiny deposit in forex trading can affect a considerably bigger overall contract value. Leverage allows a trader to achieve significant returns while maintaining a low risk capital position.

For example, a forex broker may offer 50-to-1 leverage, allowing a trader to buy or sell $2,500 worth of currencies with a $50 margin deposit. Similarly, $500 dollars may be traded for $25,000 dollars, and so on.

While all of this is wonderful, keep in mind that leverage is a two-edged sword. This high level of leverage, if not managed properly, can result in big losses as well as rewards.

Liquidity at a Deep Level

Because of its size, the FX market is also exceptionally liquid. This is advantageous since it allows you to purchase and sell at will under normal market conditions with the click of a mouse.

There is no such thing as being “trapped” in a trade. You can even program your online trading platform to automatically close your position once you've reached your targeted profit level (a limit order) and/or close a transaction if it's going against you (a stop loss order).

Low Entry Barriers

You'd assume that becoming a currency trader would be extremely expensive. It doesn't, in fact, when compared to trading stocks, options, or futures.

Online forex brokers provide “mini” and “micro” trading accounts, with some requiring a $50 minimum deposit.

We're not recommending that you open an account with the bare minimum, but it does make forex trading much more accessible to the typical person who doesn't have a lot of money.

Free Stuff Everywhere!

Most online forex brokers include “demo” accounts that can be used to practice trading and improve your skills, as well as real-time forex news and charting.

And what's this？! They're all completely free!

Demo accounts are extremely useful for those who are “financially challenged” and want to practice their trading skills with “play money” before risking real money by opening a live trading account.

Now that you've learned about the benefits of the FX market, compare it to the stock market.