Forex Trading or Foreign Exchange Trading refers to the simultaneous activity for trading. Thus, it is buying and selling of two different currencies.
Central Bank, government institutions, major financial institutions, small retail currency traders or speculators, companies with overseas operations, large international companies are doing Forex trading between and among them.
Advantages of Forex Trading
If we compare Forex trading to stock or equity trading, you’ll find that Forex trading has many advantages. So, there are many stock traders or equity traders are thinking to trade the Forex market because of the uncertainty that they face on the stock market.
Their main question and concern was why trade the Forex market? What are the advantages of the Forex trading? Here are a few important advantages of Forex trading over stock trading.
These are the advantages of Forex trading:
1. 24 Hour Trading in The Global Market
Hour trading in The Global Market and its opens from Monday to Friday. The market starts each trading day from Sydney, Tokyo, London, and finally to New York.
There are always market participants actively trading the Forex market, whether it is in the day or night.
Unlike the stock and future market, Forex traders can respond very quickly to any currency fluctuations or breaking news.
And in the stock or future market, the traders would have to wait until the real market opens the next morning in order to execute a trade at fair value.
The Forex trading market is the largest and most liquid market in the world. Therefore, we can see that the average trading volume of the Forex market increase every year.
Especially by the time the Forex traders can use internet for trading.
With a daily trading volume larger than all stock market combined, this will ensure price stability.
So with such liquidity, Forex Trader can open or close a position without much difficulty and most importantly, will receive a fair market price.
3. Make Money in Both Direction
The economic cycle is cyclical, we all know that. Anything that goes up must come down. When we trade on stock market, profits are usually made when the economy is booming.
This does not happen in Forex market. There is no such thing as “bull” or “bear” market in Forex. In Forex, it is no worries whether the economy is booming or in a recession.
Currency exchange rates are always fluctuating whatever major economies are performing. However, this situation will provide trading opportunity for traders to gain profit.
There are only few major currency pairs traded on the Forex market. Therefore, traders may have better time to pay attention on price movement and behavior on their currency pairs trading.
While in the stock market, there are many stocks should be monitored and it is not easy to monitor so many of them.
5. Small Trading Capital with High Profit Potential
Nowadays, the minimum amount needed to open a trading account is less than $300. Because of the competition, there are brokers that accept much lower amount.
But, this small trading amount could potentially earn hundreds of dollars per week in Forex market.
This is not possible in stock market. In both market there is possibility to lose as well. But in the Forex market, as a trader you can make money with much lower trading capital.
6. High Leverage of 100:1
Online Forex brokers are commonly offer 100:1 leverage. This substantially exceeds the common 2:1 margin offered by equity brokers and 15:1 in the futures market. While some Forex brokers even offer higher leverage of 100:1.
It is important to remember that any type of leverage allows traders to maximize their profit potential; however, the loss potential is also great. But, leverage is a double-edged sword and require the use of proper money management.
High degree of leverage will lead to big losses as well as gains. But we can manage it with proper risk management.
7. Demo Account
Forex Trading has a unique feature called “Demo Account”. In this case Forex broker allows the trader to trade with real-time price on their Forex trading platform using “demo account”.
All function on their trading platform will work as a real account. Thus, using demo account, Forex trader will get real market experience in trading without risking any capital.
With Forex trading advantages and online Forex trading platform, it’s no wonder that more and more retail investors participating in the Forex market.
Forex broker who have online trading platform is easy to find. And some of them allow you to use Forex robot on your trading.