Why Trade Forex?
Last Update: June 15th, 2020
The Forex market is fast becoming the most attractive and popular market in the world. The traditional stock is no longer relevant and traders are moving fast into the Forex. We collected here a few reasons to show you why this is happening and what advantages the Forex market has to make is so popular.
How is trading Forex an advantage?
We choose to focus on a few very important advantages of the Forex trading and the reasons that people choose this market:
This is the largest financial market in the world
The daily volume of the Forex market is huge – over $3 trillion per day! This makes the stability of the market very good compare to stock trading. Also, the price in the Forex market is exactly what you see is what you get and you can follow it very easily.
Forex trading simplifies everything, there’s no clearing fees, no exchange fees, no government fees, no brokerage fees, no middlemen. The elimination of the middlemen gets the traders closer to the actual trade and makes the traders responsible for their pricing. The brokers are usually paid through a service called “bid-ask spread”.
Low transaction costs
The retail bargain cost in Forex trading is usually less than 0.1%. Sometimes, with larger dealers, the spread could get as low as 0.07%. You can control this with your leverage and we’ll talk more about this later.
The market is opened all day long
The Forex market is open 24 hour a day. Opening on Monday morning (in Australia) and closing in the afternoon in New York. This is great for traders that can trade all day long or in parts. You can choose the times that are convenient for your trading – day, night, when you eat or when you sleep, whenever you want. The Forex market is also huge and controlled by so many members so the prices cannot be controlled by a single entity for a long period of time.
In Forex trading you can minimize the risk by depositing a small amount that will control a larger contract value. This is controlled by leverage and can make you profitable in the Forex market. If a broker gives 50 to 1 leverage it means that with 50$ deposit you can buy or sell with 2500$. If you put 500$, you can trade with 25,000$. All this needs to be done with great risk management because high leverage can easily lead to great loss, as well as great profit.
The power of leverage:
Extremely liquid market
The Forex market is huge and therefore also very liquid. This means that on every buy or sell that you make, there will be someone who will take the other side of the trade. You will never be grounded because there’s no one on the other side.
Low Barriers to Entry
To get started you would think that you need a lot of money. The reality is that online Forex brokers have “mini” and “micro” options and some of them have a minimum of only 25$. This is great for Forex beginners because it makes the trading starting point easier. I’m not saying that you need to start with the minimum, but being cautious is never bad and starting small is good for the average trader.
Forex for free
Most Forex brokers offer many free options, services, tips and information to help you trade better. Real time charts and news, help guides, and blogs help you understand and learn about the market in real time. There are also many “demo” accounts to try the market before putting in real money. This helps you practice and develop skills before actually opening a live account.
Why Is Forex the best trading market?
You can easily predict the movements in the Forex market In the Forex market you have many repetitive patterns and it’s fairly easy to learn, recognize and analyze these movements. The prices tend to go up or down and return to the average. They stay for quite a long time up or down and this stability makes the Forex market a much easier market to follow. This gives the traders a huge advantage in controlling their trades – much better than the disordered other markets. When the trade goes down, you can still make profit The Forex market is not a one-sided market like most stock markets. Most stock markets have a bullish bias, which means that it’s harder to get the margin for a short sell and most traders would prefer the long side or upside of the market. In the Forex market it’s different. The structure of the Forex market is built so that you can buy or sell at any time and you never get a fee for selling short. Every time there’s a sell, there’s also a buy so you don’t get penalties and you don’t have to worry about short selling. This is another advantage that the Forex trading market has over the other markets. Starting with mini and micro accounts Forex brokers make it easy to start trading Forex by having mini and micro plans. You don’t need a full service broker to start trading and the online brokers are accessible and easy. Most of the brokers also supply a demo account so that new comers can try, learn and experience the market, before actually trading in real money. The starting price for trading can be as little as 100$ on the micro accounts and that’ll allow you to trade with small movements – like trading 1 cent per 1 pip movement. In the stock market or futures you need to start with at least 10,000$ in order not to lose. In the Forex market, the risk management is more efficient because you can start with a small amount of money.