Trading the Forex market has become very popular in the last years. Why is it that Traders around the world see the Forex market as an investment opportunity? We will try to answer this question in this article. Also we will discuss come differences between the Forex Market, the stock market and the future market.
Some of the benefits of trading the Forex market are:
Superior liquidity.
Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid market in the Financial world with nearly 2 trillion dollars traded Everyday. This guarantee price stability and better trade execution. Allowing Traders to open and close transactions with ease. Also such a tremendous volume makes it hard to manipulate the market in an extended Mann.
24hr Market.
This one is also one of the greatest advantage of Forex trading. It is an around the click market, the market opens on Sunday at 3:00 am EST
when New Zealand begins operations, and closes on Friday at 5:00 pm EST when San Francisco terminate operations. There are transactions in practically every time zone, allowing active Traders to choose at what time to trade.
Leverage trading.
Trading the Forex Market offers a great buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing Traders to have only 0.25% in color of the total investment. For instance, Trader using 100:1 means that to have a $ 100,000 position, only U.S. $ 1,000 are needed on margin to be able to open that position.
Low transactions costs
Almost all brokers offer Commission free trading. The only cost Traders incursion in any transaction is the spread (difference between the buy and sell price of each currency pair). Spread this could be as low as 1 pip (the minimum Increment in any currency pair) in some pairs.
Low minimum investment
The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $ 300 USD, depending on leverage offered by the broker. This is a great advantage since Forex Traders are able to keep their investment risk to the lowest level.
Specialized trading
The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main Investments (85% of all trading transactions are made on the seven major currencies). Allowing us to monitor, and at the end get to know each instrument better.
Trading from anywhere.
If you do a lot of traveling, you can trade from anywhere in the world just having an internet connection.
Some of the most important differences between the Forex market and other markets are explained below.
Forex market vs.. Equity Markets
Liquidity
FX market: Near two trillion dollars of daily volume.
Equity market: Around 200 billion on a daily basically
Trading hours
FX market: 24hr market, 5.5 days a week.
Equity market: Monday through Friday from 8:30 to 5:00 ET EST.
Profit potential
FX market: In both, rising and falling markets.
Equity market: Most Traders / investor profit only from rising markets.
Transactions costs
FX Market: Commission free and tight spreads.
Equity market: High Commissions and Transaction Fees.
Adquisitivo
FX market: Leverage up to 400:1.
Equity market: Leverage from 2:1 to 4:1.
Specialization
FX market: most volume (85%) is made on Major Currencies (U.S., EUR, JPY, GBP, CHF, CAD and AUD.)
Equity market: More than 40,000 stocks to choose from.
Forex market vs.. Future market
Liquidity
FX Market: Near two trillion dollars of daily volume.
Future market: Around 400 billion dollars on a daily basically.
Transactions costs
FX Market: Commission free and tight spreads.
Future market: High Commissions Fees.
Margin
FX market: Fixed rate of color on every position.
Future market: Different levels of color on overnight positions than day time positions.
Trade execution
FX market: Instantaneous execution.
Future market: Inconsistent execution.
All this makes the Forex market very Attractive to Investors and Traders. But I need to make something clear, although the Benefits of trading the Forex market are Notorious, it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience, as any other market.
Some of the benefits of trading the Forex market are:
Superior liquidity.
Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid market in the Financial world with nearly 2 trillion dollars traded Everyday. This guarantee price stability and better trade execution. Allowing Traders to open and close transactions with ease. Also such a tremendous volume makes it hard to manipulate the market in an extended Mann.
24hr Market.
This one is also one of the greatest advantage of Forex trading. It is an around the click market, the market opens on Sunday at 3:00 am EST
when New Zealand begins operations, and closes on Friday at 5:00 pm EST when San Francisco terminate operations. There are transactions in practically every time zone, allowing active Traders to choose at what time to trade.Leverage trading.
Trading the Forex Market offers a great buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing Traders to have only 0.25% in color of the total investment. For instance, Trader using 100:1 means that to have a $ 100,000 position, only U.S. $ 1,000 are needed on margin to be able to open that position.
Low transactions costs
Almost all brokers offer Commission free trading. The only cost Traders incursion in any transaction is the spread (difference between the buy and sell price of each currency pair). Spread this could be as low as 1 pip (the minimum Increment in any currency pair) in some pairs.
Low minimum investment
The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $ 300 USD, depending on leverage offered by the broker. This is a great advantage since Forex Traders are able to keep their investment risk to the lowest level.
Specialized trading
The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main Investments (85% of all trading transactions are made on the seven major currencies). Allowing us to monitor, and at the end get to know each instrument better.
Trading from anywhere.
If you do a lot of traveling, you can trade from anywhere in the world just having an internet connection.
Some of the most important differences between the Forex market and other markets are explained below.
Forex market vs.. Equity Markets
Liquidity
FX market: Near two trillion dollars of daily volume.
Equity market: Around 200 billion on a daily basically
Trading hours
FX market: 24hr market, 5.5 days a week.
Equity market: Monday through Friday from 8:30 to 5:00 ET EST.
Profit potential
FX market: In both, rising and falling markets.
Equity market: Most Traders / investor profit only from rising markets.
Transactions costs
FX Market: Commission free and tight spreads.
Equity market: High Commissions and Transaction Fees.
Adquisitivo
FX market: Leverage up to 400:1.
Equity market: Leverage from 2:1 to 4:1.
Specialization
FX market: most volume (85%) is made on Major Currencies (U.S., EUR, JPY, GBP, CHF, CAD and AUD.)
Equity market: More than 40,000 stocks to choose from.
Forex market vs.. Future market
Liquidity
FX Market: Near two trillion dollars of daily volume.
Future market: Around 400 billion dollars on a daily basically.
Transactions costs
FX Market: Commission free and tight spreads.
Future market: High Commissions Fees.
Margin
FX market: Fixed rate of color on every position.
Future market: Different levels of color on overnight positions than day time positions.
Trade execution
FX market: Instantaneous execution.
Future market: Inconsistent execution.
All this makes the Forex market very Attractive to Investors and Traders. But I need to make something clear, although the Benefits of trading the Forex market are Notorious, it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience, as any other market.
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