Benefits of Forex Trading Over Other Investments

It might sound strange to many, but the forex market was initially driven on the greedy, money hungry-investors who didn’t want to lower their chances of earning profits …

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It might sound strange to many, but the forex market was initially driven on the greedy, money hungry-investors who didn’t want to lower their chances of earning profits in the stock market. The forex market was basically born out of the ashes of the old stock exchange during the 90s, when investors made big amounts of money due to the prominence of technology companies in the market who earned some immense profits, for themselves and their stock holders. When the companies finally filed for bankruptcy and were no longer able to earn the voluminous amounts of profits, the forex market was born. Forex was initially born as a market for the riches that was almost 60% times the volume of the stock exchange, with trades worth trillions happening on a daily basis. Why should you invest in forex and not anything else? Here are some reasons that you might find useful.

Photo by Allan Ajifo, CC BY 2.0

1.  Zero Commission And Exchange Fee

For those who have been investing in stocks and other futures, you might be familiar with the brokerage fee and the commission fee that the brokers charge in order to communicate with the seller or buyer. Forex unlike the other markets is the world’s largest floating market and the specialized inter-bank network makes communication between the buyer and the seller in an instant. There is no commission fee that you pay for a particular transaction although the spread of the trade is almost 5 times larger than that of any future you buy.

2. Lower Margins

When trading with other futures, a trader is supposed to keep a margin of 5% of the total value of the holding up to 50% of the value of the stock. In forex however, the margins are as low as 1% which is one of the major reasons why most new investors are moving towards forex as compared to other futures and stocks. The trader’s currency is almost 5 times in value of futures bought with the same amount of money and 50 times the value of stock. Trading on a lower margin means you can work more on formulating various investment strategies. The stop loss function is one of the major tools that should be implemented when you trade on margins.

3. Frequent Rollover Of Positions

When trading in stocks and futures, you can hold your positions for an infinite period of time and have to plan ahead whether you want to give away your position or not. Forex however is a much more dynamic market and you have to keep rolling over your positions in order to remain in the game. The positions in forex expire in every two days and rolling them over also makes you more alert and attentive about your investments.

4. Limited Risks

Several people argue whether investing in forex is risky or not. The reality is that forex is a highly volatile market where only the most patient and cool headed traders make huge profits. If you are looking at forex as a quick way to double your money then there are chances that you will face huge losses in the initial periods of forex trading. Forex offers guaranteed stops that can be used to sell a position if the price of a certain currency falls below a certain point. This works as a brilliant risk management tool and doesn’t put all your capital at risk. You can also visit websites like forexstars.com and others, to know more about risk management in forex.

5. Forex Is The World’s Largest Floating Market

With more than $1.4 trillion being spent on trades worldwide, forex is essentially a global market which is almost 50 times larger than all of the futures markets put together. The prices of the foreign currencies are somewhat regulated by the respective governments but are still highly fluctuating due to the various economic and social changes in the various countries. This allows for some of the biggest profit making opportunities and hence is much better than investing in any other futures or securities.

6. Open 24 Hours, 5 Days A Week

One of the catchiest features of the forex market is its opening window. The market stays operational continuously for 6 days in a week. This means that you can trade anytime during the day without worrying about the trading window when trading with forex. Even if there is any major economic event which affects the prices of the currencies then you do not have to wait for the market to open. Forex market stays open from Monday to Friday allowing traders to buy and sell currencies whenever they find the time to do it.

There are several benefits of trading in the forex market and the above examples are just a few of them. However, do no mistake forex trading with gambling as it is a highly dynamic market and prices fluctuate in an instant. Make sure you practice forex trading with utmost respect and patience for the best results.

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