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Advantages of Forex market

forex advantages

The Foreign Exchange Market — better known as Forex — is a world wide market for buying and selling currencies.

The FOREX was established in 1971 with the abolishment of fixed currency exchanges. Currencies became valued at 'floating' rates determined by supply and demand.

It is an OTC (over-the-counter) market, There is no centralized location of Forex — major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt.

There are several advantages of the Forex market over some other types of financial trading.

 

1)  Accessibility - It never closes. the Forex market is open 24 hours a day (except for weekends of course), unlike the regular stock or commodity markets. It's open around the clock, worldwide. Trading positions open at Monday 7am, New Zealand time and close 5pm New York time on Friday. During this time, you can enter or exit the market whenever you like. It's a continuous electronic currency exchange. You have the US market then the european and then the Asian. One of the great times to trade is during the over lapping periods. The USA and european overlap between 5am & 9am eastern and the Euro & Asian between 11pm & 1am eastern. Usually the busiest time and best to trade. This feature of the market gives you enough flexibility to manage your trading around your daily routine. The Forex market can be traded anytime and anywhere. As long as you have access to a computer and internet, you have the ability to trade the Forex market.

 

2) Liquidity - the Forex market is the most liquid financial market in the world around 1.9 trillion dollars traded everyday. The commodities market trades around 440 billion dollars a day, and the US stock market trades around 200 billion dollars a day. International banks are continuously providing bid and ask offers and the high number of transactions each day means there is always a buyer or a seller for any currency.. This ensures better trade execution and prevents market manipulation. It also ensures easily executable trading.

 

3) Efficiency - Because of its sheer size, the currency market is hard to manipulate. The ability for people to engage in 'insider trading' is virtually eliminated. As an average trader, you are less disadvantaged. You are likely to be playing on relatively equal ground along with all the other traders and investors whom you are competing against. Foreign exchange is perhaps the largest market in the world with an average daily volume of US$1.4 trillion. That is 46 times as large as all the futures markets put together! With the huge number of people trading forex around the globe, it is very hard for even governments to control the price of their own currency.

 

4) Volatility - Volatility is a measure of maximum return that a trader can generate with perfect foresight. Volatility for the most liquid stocks are between 60 to 100. Volatility for currency trading is 500. (Source: Oanda.). Trading opportunities exist when prices fluctuate. Large volume transactions and high liquidity combined with fewer trading instruments generate greater intra-day volatility in the currency market that can be exploited by day-traders. The high volatility of the currency market indicates that a trader can potentially earn 5 times more money from currency trading than trading the most liquid shares. The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction..

 

5) Trade execution - Forex is  one of the most liquid markets. I vostri ordini sono di solito eseguiti immediatamente. Many other types of investments require holding your money up for rather long periods of time.

 

6) Profit From A Bull And Bear Market - Forex traders can be profitable in bullish or bearish market conditions. Stock market traders need stock prices to rise in order to take a profit, since short-selling is a subject to strict limits in stock exchanges. In the currency market, it is easy for you to trade a currency downward so that you can profit when you think it is going to lose value. This is easy to do because currency trading simply involves buying one currency and selling another, there is no structural bias that makes it difficult to trade 'downwards'.

 

7) Minimum investment - Small amount of capital to trade Forex. The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $300 USD, depending on leverage offered by the broker. This is a great advantage since Forex traders are able to keep their risk investment to the lowest level.

 

8) Low Transaction Cost - Good brokers won' charge commissions to trade or maintain an account even if you have a mini account and trade small volumes.

 

9) LEVERAGE -In Forex, with a small amount of money, you can control bigger market positions using the leverage or margin trading. Leverage of 1:100 is common in the Fore market. It allows you to control amounts 100 times bigger than your capital, while leverage of 1:500 and 1:1000 can be found with some offshore companies (not that I would ever recommend that kind of leverage).

 

10) Demo accounts - Most Forex Brokers  have demo accounts where you can download their trading platform and practice in real-time with real market data but with "virtual money".

 

11) Technical Analysis -  Accurately predict the outcomes. Currency prices generally repeat themselves in predictable cycles so you can see what the trends are. 'Technical Analysis' helps to see these trends and profit from them.

 

12 ) Focus — 85% of all trading transactions are made on 7 major currencies. In the US stock market alone there are 40,000 stocks. There are just over 200 commodity markets, although quite a few are so illiquid that they are not traded except by hedgers. As you can see, the fewer number of instruments allows us to study each one more closely.

 

13) Expert Adivors - are marketing many valid EA to work automatically on the Forex market

 

 

 

We wish you happy and safe trading, keep reading more interesting articles on www.newethicaltrading.com 

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DISCLAIMER

 

HIGH RISK - ATTENTION:

Forex imply an elevate level of risk which might be not suitable for all investors. Leverage generate further exposition and loss risks. Before to take decision of trading forex, consider carefully yours investment objectives, expertise level and propensity to risk. Past performance is not indicative of future results. Your starting investment might be lost partially or totally. Don’t invest money you cannot afford to lose.

 

 

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