Trading the Forex market has become very popular in recent 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. We will also discuss the differences between the Forex market, the stock market and futures market.
Some of the benefits of trade in the Forex market are:
Top liquidity.
Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid financial market in the world, with nearly 2 trillion dollars traded everyday. This ensures price stability and better trade execution. Allowing traders to open and close transactions with ease. Also as a huge volume makes it difficult to manipulate the market in a comprehensive way.
24 Market.
This one is also one of the biggest advantages of trading Forex. It is a click around the market, the market opens on Sunday at 3:00 pm EST, when it begins to operate New Zealand, and ends on Friday 5:00 pm EST in San Francisco closed operations. Some operations in virtually all time zones, allowing operators to choose the act that time to change.
Leverage negotiation.
Trading the Forex market offers a greater purchasing power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing marketers have only 0.25% margin of total investment. For example, a trader using 100:1 means that to have a U.S. $ 100,000 position, only U.S. $ 1,000 is needed in order to open room for that position.
The low transaction costs.
Almost all brokers offer Trading Commission free. The only cost traders incur in any transaction is the spread (difference between purchase price and sale of each currency pair). This spread can be as low as 1 pip (minimum increment in any currency pair) in some pairs.
Low minimum investment.
The Forex market requires less capital to start trading in other markets. The initial investment could go as low as $ 300 dollars, depending on leverage offered by the broker. This is a great advantage since Forex traders are able to maintain your investment risk to the lowest level.
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Trade specialized.
The liquidity of the market allows us to focus on a few pairs of instruments (or currency) as our main investments (85% of all business transactions are made on the seven major currencies). Enabling us to monitor, and to better understand each instrument.
Trading from anywhere.
If you do a lot of traveling, you can trade anywhere in the world just having an Internet connection.
Some of the major differences between the Forex market and other markets are explained below.
Forex Stock markets vs market
Liquidity
FX market: Near two trillion dollars of daily volume.
Equity market: about 200 billion dollars on a basis daily.
Trading hours
FX market: 24hr market, 5.5 days per week.
Equity market: Monday to 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.
Transaction costs
FX spreads market: Commission free and tight.
Equity market: High Commissions and transaction fees.
Buying power
FX market: Leverage up to 400:1.
Equity market: the leverage of 2:1 and 4:1.
Specialization
FX market: most volume (85%) is made on major currencies (USD, EUR, JPY, GBP, CHF, CAD and AUD.)
Equity market: more than 40,000 stocks to choose from.
Forex market vs. Futures market
Liquidity
FX Market: Near two trillion dollars of daily volume.
Futures Market: Around 400 billion dollars on a daily basis.
Transaction costs
Spreads in the FX market: Commission free and tight.
Futures market: high commission rates.
Margin
FX market: Fixed rate of margin on each position.
Futures Market: Different levels of margin on overnight positions positions during the day.
Trade execution
FX market: Instantaneous execution.
Futures market: Inconsistent execution.
All This makes the Forex market very attractive for investors and traders. But I need to do something clear, although the benefits of trading the Forex market are notorious, but it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience, like any other market.
About the Author:
Raul Lopez is a full time Forex trader and founder of http://www.straightforex.com a high quality Forex trading course provider.
Article Source: ArticlesBase.com – Forex: Benefits of Trading in the Forex Market
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