Forex: the advantage of currency trading


Forex trading is available 24h/day, 5 days a week

Unlike the stock market, forex trading is available 5 days a week, non-stop. Investors who may not be able to trade during the day can therefore trade on the currency market, in real time, whenever they want to instead of during set times during the day. (Click here to see the best hours for currency trading)


The forex market is the most liquid market in the world

The huge volume of currencies that are traded each day throughout the world (over $3.2 billion) allows for instant order execution, at the displayed prices and in real-time. Furthermore the stability of prices is guaranteed. The highly liquid currency market allows you to quickly convert purchase or sales transactions without being subject to large price variations. Slippage (the gap between order prices and the actual transaction price) is therefore largely eliminated. In comparison, the stock market is subject to price manipulation, larger spreads and greater risk of price fluctuations due to the smaller volumes that are traded each day. Even the central banks cannot influence currency rates in a durable fashion!


Forex economic indicators are easy to track and understand

Fluctuations of currency exchange rates in the forex market are influenced by macroeconomic indicators. There is no insider trading in forex, since indicators such as central bank interest rates, unemployment, inflation, gross domestic product and fiscal policy are known to all traders. Therefore, unlike the stock market, which is influenced by micro-economic data, there are very few indicators that need to be monitored, so it is easier to stay informed of news in the currency exchange market.


Transaction prices are very low

One of the advantages of forex trading is that brokers don't charge you for transactions. They get paid from the spread between purchase prices and sale prices. A forex transaction is ten times cheaper than a regular stock transaction, and no transaction minimums or yearly fees are imposed. No matter how large or small your transaction size is, trading costs and conditions are often identical.


Use of leverage

The average fluctuation of currencies is less than 1%. The leverage that brokers offer (between 100:1 and 500:1) is therefore necessary for trading currencies. It allows you to considerably magnify your possible gains...or losses. Therefore, with a leverage of 100:1, forex traders can take a $500,000 position with only a $5,000 margin deposit. With leverage such as this, even minimal market fluctuations will have a strong impact on your trading capital. Trading with leverage requires rigourous risk management discipline as well as systematic use of limit and stop-loss orders.


Trading the market whether it's going up or down

When you trade on the currency market, you are buying the basic currency while selling the other currency. Investors can therefore trade in rising or falling markets (long or short). You can therefore turn profits no matter what direction market is heading for.