There
are several advantages of the Forex market over some other types of financial
trading.
When
talking about various investments that are accessible to almost everyone, there
is one type that springs to mind. The Forex or foreign exchange market has many
advantages over other types of trading since
it is an OTC (over-the-counter) market; the Forex market is open 24 hours a
day, unlike the regular stock or commodity markets. Most investments require a
significant amount of money before you can take advantage of that investment
opportunity. You only need a small amount of capital to trade Forex. Everyone
can enter the market with as little as $1 to trade a "micro account",
which allows you to open positions of 1,000 units. One lot of 1,000 units of
currency is equal to 1 contract in micro account. Each "pip" or
"tick" (smallest currency rate movement up or down) is worth $0.10
profit or loss, depending on wheather you are going with the market or against
it. A Forex mini account gives you control over 10,000 units of currency, where
one pip is worth $1.00. While a standard account gives you control over 100,000
units of currency, and a pip here is usually worth $10.00.
Forex
is also one of the most liquid markets. When trading currencies on the spot
Forex market you have full control of your capital, meaning that you can buy
and sell your positions anytime during market open period. This is a definite
advantage because, if you need to use your account money, it can be accessed
immediately without additional commission or waiting periods. Many other types
of investments require holding your money up for rather long periods of time.
Also,
in Forex, with a small amount of money, you can control bigger market positions
using the leverage or margin trading. Leverage of 1:100 is common in the Fore
market. It allows you to control amounts 100 times bigger than your capital,
while leverage of 1:500 and 1:1000 can be found with some offshore companies.
Forex
traders can be profitable in bullish or bearish market conditions. Stock market
traders need stock prices to rise in order to take a profit, since short-selling
is a subject to strict limits in stock exchanges. Forex traders can make a
profit during both uptrend and
downtrends. Forex trading is rightfully considered risky but with a good
trading system to follow, good money management skills, and some level of
self-discipline, the risks of Forex trading can be minimized considerably.
The
Forex market can be traded anytime and anywhere. As long as you have access to
a computer and internet, you have the ability to trade the Forex market. An
important thing to remember before jumping into trading currencies is that it
is worth practicing with "paper money", or "fake money", on
the demo account. Most foreign exchange
brokers have demo accounts where you can download
their trading platform and practice in real-time with real market data but with
"virtual money". While profitable demo trading cannot guarantee your
success with real money, practicing can give you a huge advantage to become
better prepared when you start trading with your real, hard-earned money.
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