Advantages of trading forex versus other markets
forex trading training strategy
Advantages of trading forex versus other markets:
§ The foreign exchange currency market is extremely liquid.
Daily average turnover is more than 3.2 trillion dollars the forex market has by far the most liquidity of any market in the world. This means there is practically no slippage; in other words, the price you see advertised is the price you get.
§ 24×6 hours of liquidity in a week.
The forex market is unique from other markets in that a trader can place a trade 24 hours a day 6 days a week. Where as stock and futures markets have certain trading times their respective exchanges are open, forex markets allow for trading at any time of day. This provides for more time to test strategies and larger samples of data to work off of, as well as the ability to trade during other countries’ active trading hours.
§ No actual physical market.
Since forex trading can be done from your own home there is no centralized trading market. The advantage this gives the retail forex trader is that there are no broker’s commissions or fees. Forex brokers, commonly called market makers, collect the difference between the bid and ask price on a currency trade, this is known as the spread. The effect on the trader is that their position will start off being between 1 and 10 pips negative, depending on the volatility of the currencies being traded. However, to the trader with a consistently profitable trading method, this small burden is hardly detectable.
§ It is impossible for your account to go negative in forex.
Forex market makers generally all offer trading platforms that instantly terminate a client’s open position if they have an open loss that exceeds the margin requirement. This means there is no risk of your account going negative at which point you might actually owe money to the exchange, which can happen in futures trading
§ Low margin requirements allow for leverage.
In forex trading a trader can get leverage up to 400:1 on a micro account. This means they can control 400 times the amount of money they are risking on a trade. Market players call this leverage and it provides the possibility for very large profits relative to account size, but also for very large losses.
§ Demo account trading is easily accessible.
Generally every single forex broker you will encounter offers a free demo account to learn how to trade from. If properly utilized a demo account can help teach you the mechanics of trade execution as well as give you time to develop and test your own personal trading method. A trading method that consistently makes money on a demo account, if traded the same way, should make money on a real account. The difference lies in the fact that real money trading is much more emotionally difficult on people. However, if you take the time to test your trading method on a demo account and really take it seriously, the transition to trading real money in the forex market can be relatively seamless.