✅ Advantages of forex trading

✅ Advantages of forex trading
✅ Advantages of forex trading

Trading forex is very different from trading stocks or shares. The unreliable nature of the stock markets means that many traders are now moving to trade the forex market. Many have seen that the advantages of trading the forex market far outweigh those of the stock or stock markets. In this article, I will go over some of the advantages of Forex Trading.

24 hours a day, 5 days a week

The foreign exchange market is, in its strictest sense, a 24-hour market, open from Monday to Friday. The market begins by opening in Sydney, moving on to Tokyo, London and finally New York. There are always traders trading in the market every minute of every session. The nature of the forex market means that traders can react to breaking news and place their trades accordingly.

Electronic Communication Networks or ECNs are relatively new products that have revolutionized post-trading hours. Although many of these ECNs are illiquid and poorly managed, meaning there is no guarantee that any trade you make will be executed, there are some that are regulated and provide a reliable and trustworthy service to traders.

Liquidity: a matter of trillions

The foreign exchange market is larger than the stock market, although many non-traders find this fact hard to believe. A survey conducted by the Bank for International Settlements (BIS) in 2007 found that the average daily trading volume for the Forex market reached $3.2 trillion dollars, marking an all-time high at that point for the forex market, this can be compared to another survey in 2004 that saw a trade of $1.9 trillion, an increase of 71%!

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This sharp rise can be attributed to retail investors using the many forex brokers now available online. To put it into perspective, this amount is more than all the stock markets in the world combined! Such an amount ensures that the price remains fairly stable and thus ensures the liquidity of the forex market, making it easy for forex traders to open or close their positions.

Bulls or bears? Why not be both?

The stock market often refers to a stock’s decline as a bear market and a bull market as a bull market. These terms do not exactly exist within the forex market in the true sense of their meaning. Forex traders can make profits in a rising or falling market, regardless of how the major economies perform, as rates continually fluctuate.

The simple things…

Because the foreign exchange market does not have the thousands of options that the stock market does, many of the major currencies are not traded on the foreign exchange market. This means forex traders learn the predictable movements of the currency pairs they trade and gain a better understanding of price movement and patterns.

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Start small, aim high

With the growing popularity of the forex market among retail investors, it is now possible to open a forex trading account with less than $300. Some brokers may accept a lower amount, but I would recommend reading our Top 10 Forex Brokers article to learn about the best ones we have found. As the forex market is leveraged it is possible to convert this amount into thousands of pounds, however it is also possible to lose it if you don’t have the right forex trading strategy.

It is still possible to get 100:1 leverage from some online Forex brokers, which far exceeds the 2:1 margin commonly offered by stock brokers. This higher leverage allows forex traders to maximize the potential profit from each trade they make. Although, again, a forex trader would do well to remember that leverage will also greatly increase your potential losses. The need for an effective money management strategy to minimize risk is a must for any professional forex trader.

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try before you buy

Almost exclusively unique to the forex market is a feature of most trading platforms called a demo account. This demo account will allow you to trade any strategy you want, making sure you are sure of what you are doing before you put any money on the line. This demo account will allow you to trade in “real time” at the exact market price, ensuring you have the opportunity to gain experience in the foreign exchange market before opening a live account.

These are just some of the reasons why traders are moving into the forex market en masse. Some stay, others don’t, they are the ones who investigate the ones that last the longest.

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