Monday, 7 July 2014

The benefits of forex trading

Why Trade Foreign Currencies?

There are many benefits and advantages to trading Forex. Here are just a few reasons
why so many people are choosing this market
:


· No commissions.

No clearing fees, no exchange fees, no government fees, no brokerage fees.
Brokers are compensated for their services through something called the bid-ask
s· No middlemen. Spot currency trading eliminates the middlemen, and allows you
to trade directly with the market responsible for the pricing on a particular
currency pair.

· No fixed lot size.

In the futures markets, lot or contract sizes are determined by the exchanges. A
standard-size contract for silver futures is 5000 ounces. In spot Forex, you
determine your own lot size. This allows traders to participate with accounts as
small as $250 (although we explain later why a $250 account is a bad idea).

· Low transaction costs.

The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent
under normal market conditions. At larger dealers, the spread could be as low as
.07 percent. Of course this depends on your leverage and all will be explained
later.

· A 24-hour market.

There is no waiting for the opening bell - from Sunday evening to Friday
afternoon EST, the Forex market never sleeps. This is awesome for those who
want to trade on a part-time basis, because you can choose when you want to
trade--morning, noon or night.

· No one can corner the market.

The foreign exchange market is so huge and has so many participants that no
single entity (not even a central bank) can control the market price for an
extended period of time.

· Leverage.

In Forex trading, a small margin deposit can control a much larger total contract
value. Leverage gives the trader the ability to make nice profits, and at the same
time keep risk capital to a minimum. For example, Forex brokers offer 200 to 1
leverage, which means that a $50 dollar margin deposit would enable a trader to
buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could
trade with $100,000 dollars and so on. But leverage is a double-edged sword.
Without proper risk management, this high degree of leverage can lead to large
losses as well as gains.

· High Liquidity.

Because the Forex Market is so enormous, it is also extremely liquid. This means
that under normal market conditions, with a click of a mouse you can
instantaneously buy and sell at will. You are never "stuck" in a trade. You can
even set your online trading platform to automatically close your position at your
desired profit level (a limit order), and/or close a trade if a trade is going against
you (a stop loss order).

· Free “Demo” Accounts, News, Charts, and Analysis.

Most online Forex brokers offer 'demo' accounts to practice trading, along with breaking Forex news and charting services. All free! These are very valuable resources for “poor” and
SMART traders who would like to hone their trading skills with 'play' money
before opening a live trading account and risking real money.

· “Mini” and “Micro” Trading:

You would think that getting started as a currency trader would cost a ton of
money. The fact is, compared to trading stocks, options or futures, it doesn't.
Online forex broker offer "mini" or "micro" trading accounts,some with a minimum account deposit of $300 or less. Now  we are not saying that you should open account with a bare minimum but it does makes forex much more accessible to the average (poorer) individual who doesn't have a lot of start-up trading capital.
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