What Are The Advantages Of Trading Forex?

There are a number of advantages in trading forex. The following are just some of them:

Nobody Can Corner the Market

The Forex market is so vast that it is impossible for any individual or institution to be in control of the market price for any length of time.

Open 24 Hours

You can simply trade whenever it suits, you as the Forex market is always open, whether it is morning in Australia, or closing time in the afternoon in New York. So if you choose to trade at three in the morning, you can.

No Middlemen

When you spot trade forex, there are no middlemen involved. This means that you deal directly with the market which is in charge of the pricing on any particular currency pair.

No Commissions

There are simply no commissions, brokerage fees, clearing fees, government charges, or exchange fees. Brokers get paid for their services through the bid-ask spread. (Don’t worry – we’ll explain later).

There Are No Fixed Lot Sizes.

If you trade commodities such as silver, gold, and so on, there are fixed lot sizes. In the case of gold, it might be 100 troy ounces, or silver can be 5,000 ounces. Not so with Forex. You can begin trading with as little as $25.00, as we said earlier. We don’t recommend that you begin with that little, but you can if you wish.

Very Low Transaction Costs

Under usual market conditions, the transaction cost – the bid-ask spread – is less than 0.1%. With the larger brokers, this might be as low as 0.07%. It will depend on your leverage, which will be discussed in a minute.

High Liquidity

The Forex market is absolutely vast. This results in very high liquidity. What that means to you is that you can buy and sell Forex whenever you choose, because there will always be someone in the market who will buy from you or sell to you, so you never get stuck in a trade. Furthermore, you can set your trading platform online to close your trade automatically. So if the level of profit that you require is reached,  your trade closes (this is called a limit order), and conversely, if the trade is going against you it will also close; this is called a stop loss order, for obvious reasons.

Level Of Leverage

When you trade in Forex, you can control a considerably larger value contract than the amount of your deposit. This lets you have the opportunity to make good profits, while keeping any risk to the minimum.

As an example, your broker might offer you 40-1 leverage. This means that if you have a deposit of $50.00 you can buy or sell $2,000 worth of currencies. If you had $500, you could trade $20,000, and so on. It all sounds great, and indeed, it is, but you need to have proper risk management in place, otherwise it can also lead to large losses.

Simple To Get Started

As we have already indicated, you can start trading with as little as $25 with some brokers. You don’t need to be another Warren Buffet, or Donald Trump. This means that the Forex market is open to almost everybody who wishes to trade.

Free Demo Accounts

Most online brokers offer demo accounts so that you can begin virtual trading without risking any money at all. This gives you a chance to get the feel of how to trade, and learn the ropes, before you risk any of your own hard-earned money. You will also find that brokers offer real time news about the markets, and charts. All of these are offered entirely free of charge.

Now that you understand many of the benefits of Forex trading, we’ll take a look and see how it all compares with buying and selling stocks and shares.