Forex trading is already hugely popular and becoming more popular day by day. Let’s take a look at why Forex is the best market in the world to trade.
Forex is the largest market in the world
The combined volume of equity and futures markets pales in comparison to the daily volume of the forex market, which trades over $3 trillion per day. Such huge volume equates to price stability in all but the shakiest market conditions, and guarantees that the price you see on your quote is the price you’ll pay when you place your order.
Margin leverage varies from broker to broker, but the minimum you’ll encounter is 1:100, which far exceeds any leverage you’ll find in the futures or equity markets. What this means is that you can control $100,000 worth of currency for only $1000. Be careful though; leverage is a fantastic tool for increasing your profit potential, but it also exposes you to greater risk.
Small account sizes
The forex market is much friendlier to traders with small bankrolls than the futures or equity markets. Unless you’re playing risky penny stocks, you’ll need a hefty deposit in order to trade the more established (and more expensive) stocks. Forex brokers, however, offer several different sizes of accounts, allowing you to get started with as little as $250. You can trade anywhere from 1 cent per pip on upwards, allowing you to take advantage of the great leverage offered by forex while still limiting how much you trade with.
Make money in rising or falling markets
Most stock markets tend to follow a daily trend – that is, some days are bullish (with most traders going long in the market), and some days are bearish (most traders going short the market). Going against the daily trend can therefore be increasingly risky in equity and futures markets, and in some cases requires more margin than others. This does not apply to the forex market, however. It’s just as easy to buy as it is to sell at any time of the trading day, without incurring penalties.
Trade whenever you want
Speaking of trading days, another huge benefit to trading the forex market is that you get to trade 24 hours a day, 6 days a week. The market opens every Sunday at 5pm EST, and closes Friday at 4pm EST. Compare that with the trading day of any given stock market around the world, which typically run for 7.5 hours per day only, not counting after hours and pre-market trading. Trading pre and post market hours on the stock market still does not offer the benefits of the forex market, as those hours are still limited and the volume is greatly reduced, making trades more difficult and much riskier.
Probably one of the biggest gripes stock traders have is how much the commission they’re forced to pay eats into their profits. Not so with forex – most forex brokers charge little or no transaction fee, as they make their money from the spread between the bid and ask prices of the currency pair you are trading. These spreads tend to run from 1 pip up to 5 pips for the major currencies – what this means is that you’ll typically start out a few pips down on every new trade you take, but other than that you pay nothing for your trade.