Thanks to its advantages over other markets, such as equities or futures, the foreign exchange market became more and more popular over the past few years. It has an average trading volume of $5 trillion on a daily basis and features these other advantages.
1. Market is open 24 hours a day
The biggest advantage of trading forex is being able to enjoy a market that is open 24 hours a day for five days a week. Because currencies all over the globe are involved in transactions, there is an almost seamless transition between trading sessions in local markets. The trading week starts when the opening bell is rang during the Sydney open and ends when the closing bell is struck during the New York trading session on a Friday.
2. Liquidity is high
Almost any available currency can be traded by forex traders, unlike stock traders who are mostly limited to the domestic shares offered in their country. Forex traders transact with other traders from around the world as their brokers immediately find counter parties to be able to execute trades right away. This high level of liquidity is a benefit to traders because it allows them to open and close positions almost instantly.
3. Low Transaction Costs
Unlike most stock exchanges which are centralized, the forex market enjoys decentralization. This means that there is no need for middlemen to charge any additional costs before opening or closing trades.
In addition, the sheer number of forex brokers out there makes the industry a very competitive one. Brokers make their profits through the bid-ask spread when giving exchange rate quotes, but they try to offer the tightest spreads possible in order to attract more clients to open accounts with them.
4. There is hardly any insider trading
Forex traders monitor different economies, mostly the major ones, in deciding which currencies to trade. This means that the information is readily available through various media sources, unlike that of company information needed in stock trading.
In addition, forex calendars provide access to updated economic releases. These results are also usually announced through financial television channels, allowing forex traders to obtain the information simultaneously.
5. Easy to Enter the Market
Lastly, forex trading boasts of low barriers to entry as one can open a forex trading account for as low as $25. The leverage feature of forex accounts allows traders to control larger position sizes even with small account sizes. Of course, this is subject to margin requirements which may vary across brokers.
These are just some of the many advantages of forex trading over other financial markets, but these benefits were enough to encourage increased participation in the forex market. Although opening an account is easy and information can be quickly accessed, learning the ropes and being able to perform proper analysis takes some time.
1. Market is open 24 hours a day
The biggest advantage of trading forex is being able to enjoy a market that is open 24 hours a day for five days a week. Because currencies all over the globe are involved in transactions, there is an almost seamless transition between trading sessions in local markets. The trading week starts when the opening bell is rang during the Sydney open and ends when the closing bell is struck during the New York trading session on a Friday.
2. Liquidity is high
Almost any available currency can be traded by forex traders, unlike stock traders who are mostly limited to the domestic shares offered in their country. Forex traders transact with other traders from around the world as their brokers immediately find counter parties to be able to execute trades right away. This high level of liquidity is a benefit to traders because it allows them to open and close positions almost instantly.
3. Low Transaction Costs
Unlike most stock exchanges which are centralized, the forex market enjoys decentralization. This means that there is no need for middlemen to charge any additional costs before opening or closing trades.
In addition, the sheer number of forex brokers out there makes the industry a very competitive one. Brokers make their profits through the bid-ask spread when giving exchange rate quotes, but they try to offer the tightest spreads possible in order to attract more clients to open accounts with them.
4. There is hardly any insider trading
Forex traders monitor different economies, mostly the major ones, in deciding which currencies to trade. This means that the information is readily available through various media sources, unlike that of company information needed in stock trading.
In addition, forex calendars provide access to updated economic releases. These results are also usually announced through financial television channels, allowing forex traders to obtain the information simultaneously.
5. Easy to Enter the Market
Lastly, forex trading boasts of low barriers to entry as one can open a forex trading account for as low as $25. The leverage feature of forex accounts allows traders to control larger position sizes even with small account sizes. Of course, this is subject to margin requirements which may vary across brokers.
These are just some of the many advantages of forex trading over other financial markets, but these benefits were enough to encourage increased participation in the forex market. Although opening an account is easy and information can be quickly accessed, learning the ropes and being able to perform proper analysis takes some time.
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