Advantages Of Forex Trading - The currency market has experienced exponential growth over the past decade. With over $5 trillion traded daily by some estimates, forex is the largest and most liquid market in the world.
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Forex, foreign exchange, and the currency market known as forex has not traditionally been available to non-institutional traders.
But this is no longer the case. Currency trading is now available to anyone who wants to climb up the learning curve.
The reasons for its popularity among traders vary, but some of the advantages include 24-hour trading, high leverage, no fees, and no restrictions preventing traders from shorting the currency. Moreover, the forex market is global and makes large moves regularly throughout the 24-hour cycle.
Positive effect
Forex leverage is much higher than other traditional markets. Instead of trading in ratios of 1:1 (1 to 1) or 10:1, the forex market offers leverage of up to 500:1. So with an investment of $1,000, you can actually manage $500,000.
This makes it easy to profit from small moves and big gains (and losses) on big moves. 24 Hour Trading Available 24 hours trading is attractive to many. The market moves in three distinct phases as different areas open and close.
New York usually sees the biggest moves, but the London and Tokyo sessions also show significant price swings. Being able to trade the currency of your choice at any time of the day means great flexibility. West Coast residents don't have to be at the mall at 6am. Traders can take profits from the euro, yen or dollar at any time of the day or night, in any direction of the market, up, down or sideways.
Liquidity
Because of the huge liquidity in forex, there is no delay when executing trades. Traders do not have to wait for a small rally before selling a currency.
There is no limit. It is always possible to sell a currency regardless of the direction of the market. Unlike stocks and futures, there is no problem with buying and selling positions in Forex. You don't have to hold on to it when you want to sell.
Related costs:
No currency transaction fees are charged. Brokers make money from bid and ask spreads, not commissions. This fact reduces the cost of entering and exiting multiple positions.
This is especially important for short-term traders such as day traders. Spreads vary from broker to broker, so be sure to check this small cost and potential slippage.
Some market makers now offer guaranteed quotes, so slippage can also be eliminated in most cases. Extreme volatility is inevitable, but rare.
ECN (Electronic Communication Network) type brokers are gaining in popularity, giving access to the largest and most well-known players. Using an ECN has advantages and disadvantages that are worth researching.
For example, you can pay a commission on all trades with ECN, but profit from very tight spreads. During times of high volatility, bid-ask spreads can widen, which is not unlike a typical retail market maker.
The Electronic Communications Network (ECN) takes a more ethical approach to another major dilemma. Most brokers take the other side of the trade which appears to be a conflict of interest. While justified as a way to facilitate liquidity, this feels like a bet on the customer. This presents an important ethical issue that does not exist in ECN trading.
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Trading in your local currency was once the exclusive domain of major banks and financial institutions, but that has changed forever. We give you an advantage.
From your home office, the beach or Mexico City, as long as you have an internet connection, you can now take complete control of your financial destiny and compete with other traders big and small.
Whether you trade full time for a living or part time as a hobby, you need to know how forex can that benefits you.Advantages of forex trading