Forex stands out as a highly popular investment platform because it offers a lot of liquidity and the daily transactions done are over 1 trillion dollars. Also, 80 percent of all transactions come with dollar legs and this will facilitate trading in many currency pairs.
We should also mention that we are in front of a trading market that will facilitate trading in every second of the day. Other markets do not offer that. Unfortunately most of the investment platforms will be restricted by the trading hours they operate in. This also restricts liquidity.
Why Invest in Forex Market Trading?
The most important motivation that guides you towards forex trading is high leverage offered. It is sometimes 100 to 1 or even higher with some brokers. Because of this leverage we can execute huge deals of up to half a million dollars by just using a 5000 dollars initial margin. We also need to mention other important advantages.
Let we see now comparation – Forex vs. Equities (Forex vs. stocks) comparation video :
Limited Slippage – Forex brokers will usually offer trade executions that are instant. The variation that is noticed between execution price and quoted price is limited. The prices that we see in futures market or stock market are different because an exchange is used to execute the trades. In a forex market we will only have slippage to worry about when the volatility is really high.
Low Transaction Costs – There are no commissions associated with forex transactions. This is different when compared with commodities or stock markets. Also, the structure of the forex market will eliminate other extra costs like clearing and exchange fees.
Transparency – Trades are executed a lot better when we are faced with high market transparency levels. As opposed to the stock market, the forex market is uninfluenced by private entities or corporations. Just macro factors will have an impact like a nation’s economic conditions or political events.
Investors have many advantages to trading forex but we need to understand that there are different limitations. Forex trading offers high leverage but this does not only mean that the profit gained is maximized. It also means that loss is magnified. Different online brokers will offer a trader the chance to choose desired leverage but not all give this opportunity.