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 stocks market, and the futures market.
Some of the benefits of trading the Forex market are:
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 every day. This ensures 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 manner.
This one is also one of the greatest advantages of trading Forex. It is an around the click market, the market opens on Sunday at 3:00 pm EST when New Zealand begins operations and closes on Friday at 5:00 pm EST when San Francisco terminates operations. There are transactions in practically every time zone, allowing active traders to choose at what time to trade.
Trading the Forex Market offers a greater buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing traders to have only 0.25% in margin of the total investment. For instance, a trader using 100:1 means that to have a US$100,000 position, only US$1,000 are needed on margin to be able to open that position.
Low Transaction costs.
Almost all brokers offer commission-free trading. The only cost traders incur in any transaction is the spread (difference between the buy and sell price of each currency pair). This spread 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 market. The initial investment could go as low as $300 USD, depending on the leverage offered by the broker. This is a great advantage since Forex traders are able to keep their risk investment to the lowest level.
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 in 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 by having an internet connection.
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.