In comparison to various types of investment options, the forex market is the trader’s favourite. For a well-disciplined trader, having good money management skills and a moderate risk appetite, forex can be full of benefits.
Advantages of forex over other markets:
- The forex market is basically an over the counter market so it is accessible 24 hours of a day. Stock and commodity markets are not open for trading 24 hours.
- If you consider other investment options, you would require a good amount of money to actually realise good returns and take advantage of the investment opportunity. However, for the forex market, even $1 is enough! You saw it right, $1. With an amount as small as one dollar you can start trading with a micro account. With this you can have a position of 1000 units. With each pip you could get profits of $0.10. This is with respect to a micro account.
- For a mini account, a trader will get access to 10000 units and the gain or loss on each pip or tick is worth $1.00. For a standard account, a trader will get access to 100000 units and the gain or loss on each pip or tick is worth $10.00.
- Liquidity is another very critical factor in trading. Illiquid markets can put you in affix if you want an emergency market. Forex markets fortunately are extremely liquid. You can enter and exit your position at any time. There are loads of buyers. So, if you are trading in the spot forex market and a sudden emergency arises, where you need your account money. You need not worry. You can easily exit your position without having to go through waiting periods or huge commission charges.
- Forex gives you the advantage of leverage. Most traders maintain a leverage of 1:100. This means if you have invested $10 you could hold a position of $1000 in the forex market. This is not possible in most other markets. Traders or organisations with greater risk bearing capacity can go in for a leverage ratio of 1:500 or even 1:1000.
- Have you ever thought that you can make money even in bearish market? Maybe no. this is only possible in forex market. Stock or commodity markets would require an uptrend for you to make good profits. Short selling has strict limitations in the stock market. But depending on your account size and position, it is possible to make good profits in both bull and bear markets.
- Forex trading can be done almost anytime or anywhere. There is no restriction. But before you actually invest or trade, get some practice with virtual money. This will give you a lot of exposure to the world of trading without having to worry about the risks. Practice, trade, make decisions on your own and find out for yourself how the market is faring and how your decisions have fared. Most brokers will provide you with a trading platform so that you get used to the look and feel and of course the excitement of trading.