1. Forex is the largest financial market in the world.
The Forex market has a daily turnover of more than $3 trillion a day, adding dwarfing equity value with potential markets. In certain market conditions, such an immense amount of daily volume allows for excellent price stability. This means you’re probably never going to need to worry about slippage as you would when dealing with shares or products. You get the price that you see quoted on your trading screen.
2. Trade whenever you want, 24 hours a day, six days a week.
The Forex market is without an opening bell. As you wish from Sunday around 5 pm EST to Friday around 4 pm EST, you can join or exit a deal. There are three different trading sessions for you to take advantage of in the U.S., Europe, and Asia, enabling you to trade on your own timetable and respond to breaking news around the world. Although in the after-hour electronic session, it is possible to exchange some stocks and goods, the liquidity is always low, and this renders rates highly uncompetitive.
3. Commission-free trading and overall low transaction costs.
A stock trading can cost a full-service broker anywhere from $5 to $30, and usually up to $150 per transaction. In general, futures brokers charge between $10 and $30 round turns, which means you pay between $10 and $30 to join and exit every market. Most forex brokers charge little to no transaction fees; they are offset by each currency pair’s bid / ask spread. Such spreads are usually as small as 1.5 to 5 pips, depending on the broker and currency being traded-in. So essentially, the only cost associated with a Forex trade is that because of the bid / ask spread, you start being a few pips negative on any trade.
4. Market transparency and Instant execution.
Market clarity in Forex is much greater than in stocks or commodities, which means it’s easier to examine the market’s inner workings and find out what drives it. For instance, economic reports and news releases which drive the economic policy of a country are widely available and accessible to everyone interested. Whereas, the financial statements for an individual corporation are much more difficult, if not impossible to obtain. Instant execution of an order is another big forex advantage over other markets. Retail forex trading on all online platforms is usually conducted over the Internet.
The Forex market has no central exchange, no open-outcry pits, no floor brokers, and they built it this way to encourage large banks. This allows immediate transaction execution, which means no delays for you and ease of execution.
5. Low margin requirements.
Recently, the U.S. Forex margin levels have increased in the U.S., but at a rate of 1:100, this leverage is still higher than you’ll get in futures or stock markets. This means that you can monitor currency worth 100,000 for only 1,000, or 1%. For comparison, traders in futures markets post margin equal to about 5 percent -8 percent of the contract value, while equity traders usually post a margin of at least 50 percent. Nevertheless, leverage may be a double-edged sword, since a rise in leverage leads to an increase in risk but also the opportunity for benefit.
6. Price movements are highly predictable in the Forex market.
Because of its highly speculative nature, the Forex market moves appear to overshoot and then correct back to the mean. This means there are a variety of repeated trends that are easily identifiable by the trader skilled in analyzing market behavior. Forex currency pairs typically spend more time on large up or down movements than other markets, which is also a big benefit since a highly moving market is usually easier to trade than a volatile, consolidating market.
7. Equal opportunity to profit in rising or falling markets.
There is no inherent bias in the Forex market as in other capital markets. For example, most stock markets have a bullish bias, meaning traders tend to prefer the long side or upside of the market more, and it typically needs more risk to sell short in a stock market. That’s not the case with the Forex market.
As an intrinsic function of Forex market structure, buying or selling at any time is equally simple, and there is never any increased charge for selling short. In reality, if you buy a currency, you sell another currency at the same time and vice versa. One benefit the Forex trader has over those playing other markets is the right to buy or sell at any time without penalties.
8. No constraints on the number or type of transactions.
Occasionally, the futures market will have a “limit up” or a “limit down” day. This means that the price rises above a fixed daily. They prohibit level traders from entering new positions and are only permitted to exit their current position if they wish to.
It is meant to reduce uncertainty, but because the futures market for currencies follows the spot Forex market, the next day, there may sometimes be large “gaps” or areas where the price adjusted overnight to match the current Forex price. Now, if you kept a futures position overnight, it’s possible that your stop was gapped around, in which case, you’d get filled at the next best bid, which would also be extremely harmful to your trading account.
Because of the spot forex market’s 24-hour existence, even in intense market volatility, traders usually don’t worry about gaps and can almost get out at the exact price they want.
9. Mini and micro accounts make it easy to get started.
There are several Forex brokers inside the Internet that are easily available. Unlike futures or capital markets, if you have a full-service broker in Forex, it won’t help you much. Most of the larger brokers offer tight spreads, and similar price feeds, as well as demo accounts that allow you to check your business ideas before you risk real money.
Another great thing about the Forex market is that at as little as $250, you can begin. You can trade position sizes as low as 1 cent per 1 pip movement with a micro account. That means you can manage your risk effectively, even if you don’t start with much money. Not beginning with at least $10,000 in the futures or stock market is a major factor in why people fail.
10. Forex price movement lends itself wonderfully to price action setups.
Since the Forex market prices’ volatile and contrary nature, they appear to continue in one direction for a reasonable move and then return to the mean or value-area. They often tip off such moves with a market action warning. When you are educated in the art of price action analysis by a skilled trader you can build a complete trading strategy around a few basic but successful setups for price action.
Many of these trends reoccur on the 4 hour and daily charts on a regular basis and can be highly accurate. Because of the inherent high volume and high price fluctuations, Forex is the strongest market for trading through price action analysis.