Foreign exchange or popularly known as forex is described as a contract two entities that agree to exchange the currency’s value difference between time when it is opened and closed. It is considered as the biggest and most liquid market, where both real price discovery and fair market competition survive.
Forex has a unique characteristics that make is stand from other conventional equities and future markets, offering endless advantages for the traders. Forex trading provides many benefits on a daily basis since the market is open all the time. Compared to stock trading, it is safer and easier to trade because of flexibility, available information, and more.
Below are reasons why forex trading stands out compared to other markets out there:
Flexible trading hours
In foreign trading, the market is open 24/7 unlike stocks trading that has limited time and the market closes too. The forex market is active round the clock. You can do trading in the European and American markets any time of the day but with good liquidity virtually. It gives you chance to trade on your most convenient time and day.
Minimal or no commission at all
Unlike in stocks trading, the forex brokers do not charge commission and there is no added transaction fees when trading currencies over the phone or online. These forex brokers earn money for their services through ask or bid spread. They are fully transparent with everyone they transact with.
Starts with small capital
You do not need to shell out big amount when starting with the forex market trading. Sometimes, you can invest as low as $50 and keep in mind that there is always a good potential to earn money in forex trading with small amount of capital. There is a tool called leverage that can increase your investment with small capital and it will help you boost the profits you have.
In terms of volatility, forex market experiences it all the time and it is ideal with aggressive traders. It is also worth noting that currencies are known in keeping up with the trend on long period of time.
As mentioned above, leverage is a tool that helps you boost your investment. It lets you control a larger position in the market even with lower capital on in. however, keep in mind that the potential loss is equally large as the larger positions you traded in.
No middleman involved
There are no middlemen in forex trading and that means no additional cost. Forex trading is decentralized, where the quotes can differ from various currency dealers. If you are into forex trading now, you will be able to get the best deals, faster access, and cheaper costs.
Predictable price movements
Because forex trading is an extremely speculative market, the price movement has a tendency to increase quickly and go back to the mean rapidly. With this scenario happening, handful repetitive patterns are made and easily recognizable. If you are trained in price action analysis, you can recognize the patterns right away.
Unlike with the other market, the currency pairs in forex trading usually stay longer in an exceedingly strong up or down trends. This is a great benefit for traders because it is always easy to trade in this kind of trend compared to disorganized and merging market.