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Top Five Reasons For Choosing Forex
By plrprousers | March 1, 2010
Currency exchange and stock comparisons all over the net are going to show the benefits of selecting to trade in foreign exchange. Of course if you are looking for long-term investment then that is another thing, except for hopeful traders the foreign exchange has many special features that make it particularly attractive. Here are the top 5 reasons for choosing currency trading over stock trading.
1. Twenty-four Hour Market
One practical benefit of the foreign exchange market is that it is open for trading twenty-four hours a day Monday through friday. This is because of the worldwide nature of the market and the undeniable fact that it is always business hours somewhere in the world, excluding weekends and holidays. So a forex trader can work a real job and trade in the evenings or early mornings.
2. Liquidity
Currency is liquid by definition, if liquidity measures the ease of changing an asset into cash. More frequently it is taken as the amount of money in a market. On this, too, currency scores very high.
Turnover in the forex market was almost $4 trillion per day about according to a survey by the Bank For international Settlements in December of 2007. It has probably surpassed that now.
This is considerably more than is traded on all the stock exchanges in the world added together. In forex you aren’t restricted to trading in your own country or on your own country’s currency, so the benefit to this trader of being part of this great market is clear. You have a much better likelihood of getting the price that you see or the price that you want.
3. Openness
another advantage stemming from the sheer amount of money in this market and its high trading volume, is the openness of the market. There is very small opportunity for insider dealing in a market which deals with the commercial performance of whole nations and involves each major monetary institution in the world. This means that the retail trader isn’t off balance to the limit that may be true in the exchange and lends more weight to our forex stock debate.
4. Leverage
Leverage is the trader’s most essential tool in that it allows a tiny fund to manipulate a giant position size, resulting in a massive proportionate investment return, presuming that you are profitable. The leverage offered by forex brokers tends to be higher than in stock trading.
In currency exchange, a hundred times leverage is seen as standard or low, two hundred times is common and 400 is possible in some circumstances. Of course this makes foreign exchange trading intensely risky except for a successful trader it is a serious advantage because it means more money can be made from less.
5. Trade Both Directions
When you trade foreign exchange, you’re frequently working with a currency pair, exchanging one currency for another. This means that you can trade in both directions. For example if you are trading EUR/USD, you can start by investing in either Euro Bucks or US greenbacks depending on which one you believe will rise. So you can sell or buy the pair ( go long or go short ).
In a sense this is like trading stock options or futures, but with more flexibility. The flexibility comes from the proven fact that currency values are relative to each other. They cannot all fall at the same time, as stocks can. So this is another point for forex in the forex stock comparison.
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