Benefits of Forex Trading

Posted by joshlai on Sat, 03/22/2008 - 19:37 in

Basic Forex Trading

No commissions, exchange, clearing or brokage fee is required. Brokers are compensated for their services through the bid-ask spread.
Eliminate middlemen. Spot currency trading eliminates the middlemen, and allows the traders to trade directly with the market responsible for the pricing on a particular currency pair. There is no fixed lot size. In spot Forex, each trader dictates his/her lot size. This allows traders to participate with accounts as small as $250.
Minimal transaction costs. The retail transaction cost (the bid/ask spread) is typically less than 0.1 percent under normal market conditions. At larger dealers, the spread could be as low as .07 percent.
24 Hours Trading. The Forex market never sleeps. For those who want to trade on a part-time basis, it is especially convenient. Any person can choose to trade at any time - morning, noon or night.
No one can control or monopolize the spot market. The forex market is so huge that no one, including a central bank can control the market price for a long period of time.
Leverage. In Forex trading, a marginal deposit can control a much larger total contract value. Leverage allows the trader to make good profits, while keeping risk capital to the minimum. A Forex brokers offer 200 to 1 leverage, which means that a $1,000 dollar margin deposit would enable a trader to buy or sell $200,000 worth of currencies. Hence, leverage can be a double-edged sword. Without prudent risk management, this high degree of leverage can lead to large losses as well as steep gains.
High Liquidity. Forex Market is so enormous, it is also extremely liquid. This means that under normal market conditions, with a click of a mouse any online trader can instantaneously buy and sell at will. The online trader can even program the online trading platform to close your position at the desired profit level, and/or close a trade if a trade is going against automatically. Most online Forex brokers offer free 'demo' accounts to practice trading, along with breaking Forex news and charting services.
“Mini” and “Micro” Trading. Online Forex brokers usually offer "mini" and “micro” trading accounts. Some even accept a minimum account deposit of $300 or less. This helps the average individuals who do not have a lot of start-up trading capital to start trading in the spot market.