The forex market is with a trading volume of more than 5 trillion USD per day by far the largest and most truly global financial market in the world.
Trading in the foreign exchange market can be dynamic, exciting and lucrative.
While investors or traders have many options in the global investment and speculation marketplace, forex offers advantages over other types of speculative financial vehicles.
Below you can view all the vital points and benefits of trading forex.
Forex is, unlike other markets, a 24/7 market, or 24/5 for retail traders.
It means you are much more flexible in deciding when to trade, other than during the weekend.
You may choose to trade during the main sessions of London and/or New York or during the quieter hours of Asia, which, contrary to common belief, sometimes offer a favorable environment, although it requires more patience for something to play out.
Forex charts are very suitable for technical / price action trading as the charts are much cleaner.
Possibly due to the immense market size, Forex charts respect important levels well, sometimes even after years.
When trading currencies, unlike other markets, and because forex is always traded in pairs, it makes no difference if the price rises or falls; the market is never biased to the upside like in stocks or indices, allowing you to catch uptrends and downtrends alike.
This fact is also expressed in our business name Bull Bear Forex.
Further, due to the huge liquidity and round-the-clock trading, there are normally no significant price gaps, particularly in the majors, other than after the weekend.
In other security markets, on the contrary, such as individual stocks, you will find large gaps between the close of one day and the open of the next, or surprising company reports can also produce substantial gaps of several percent.
Trading markets without large or many gaps is an advantage to the trader as at least this type of risk is taken out of the equation.
The cost of trading forex is much lower than of other securities, such as stocks.
The spreads, which are the difference between the bid and the ask price, tend to be much tighter, especially in the majors.
Brokers provide price data for free and there are no clearing charges.
All this makes forex trading one of the most cost-effective means of investing, or trading, for that matter.
News announcements as a major sentiment-trading opportunity with the potential to create volatility are extremely well-publicised, pre-scheduled events where one can trade either into the event, out of the event, or stay out completely.
Trading the financial markets successfully can enable you to become location-independent and partly time-independent, giving you one thing that matters most in life: personal freedom.
This is actually the greatest part of trading and is to some people even the most important of all.
The currency market is relatively simple to follow, since there are much less instruments than for example with stocks.
Also, the market landscape is more consistent than with stocks where corporations get into or disappear from the market.
Forex transactions are usually executed immediately and due to that the trade price is known, to a very high degree, once you click the Buy or Sell button.
Traders can enter or exit the market at any time in most currency pairs, making it a very liquid and volatile market.
Substantial, surprising slippage is rare and happens usually only during high risk news events, if at all.
The same does not apply for stock and futures transactions that can take minutes or hours, depending on the particular market, the technology employed and the liquidity / volume.
Once the order is filled, price might have slipped substantially.
The margin requirement, i.e. the actual money which you have to deposit in your broker account, is, due to the often-offered high leverage, considerably lower than that of other trading instruments, such as stocks, where you have almost no leverage available or to a much lower degree.
This allows you to make higher profits without the need to deposit huge amounts in your broker account.
In other markets, halts in trading, poor liquidity, or a delay between margin account deficit and the closing of an open position can result in a substantial drop below the margin funds available in the trader’s account.
In such cases, the trader is liable for all losses in equities or futures margin trading; even beyond the amount in the trader’s margin account, and must repay the brokerage for the losses in excess of funds deposited.
In contrast, forex traders are usually not exposed to this risk because positions are usually automatically exited by the broker’s trading platform before the trader’s account goes into deficit.
This means that any loss is usually limited to the size of the margin account, although there are instances where this can happen in Forex, too.
Recent regulatory changes in certain jurisdictions, such as the European Union or Australia, have provided more or total security, at least for retail clients, where now there is a general negative balance protection, although this came at the expense of a severe leverage cut for EU- or Australian-registered brokers.
Elsewhere, it depends on the broker’s terms and conditions.
Forex trading occurs around the globe in countless locations, and not in centralized exchanges such as are used for futures and equities trading.
While large financial and commercial institutions might dominate other markets, the size and decentralized nature of the forex market makes it more difficult to be manipulated.
Even the Central Banks of large nations usually do not have the capital to influence forex markets directly, although of course they influence currency rates through other means, such as their monetary policy and interest rates.
Certain other markets are susceptible to manipulation, especially small ones with few trades taking place.
In equities/stocks, industry and market pundits sometimes develop a large following of speculators.
Those followers can represent a substantial amount of capital; enough to cause movements in smaller or less liquid markets.
The huge size of the forex market, particularly in commonly-traded currencies, makes it resistant to pressures exerted by the followers of individual market analysts.
The forex market also provides a more subtle balance that helps curb influence and overt manipulation.
This balance is provided through the responsiveness of the forex marketplace.
When parties to a transaction have equal knowledge, both are more likely to be satisfied with the result.
In the forex market, participants come closer to equal knowledge than in other markets because the market reacts quickly to events as they occur.
The advantage of this characteristic is that any analysis that is flawed will not have an effect over a long period of time.
Any flaw will soon be revealed by the market action itself.
