With more than $1.5 trillion USD being traded daily, the foreign exchange market has managed to become the world's largest financial market, over the last three decades. With the large minimum deal sizes and rigid financial requirements, the Forex market, till recently, was not explored by the common trader or individual investor. But now the average investors can also engage in Forex trading. Some of the advantages of Forex trading are as follows:
24 hours tradingForex gives its traders a 24 hour trading opportunity. Being a Forex trader, you can trade 24 hours a day from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders an opportunity to trade according to their convenience, going by their own schedule and also a chance to react instantly to any breaking news of the markets.
High levels of liquidityAlso, acting as a huge attraction is the high liquidity. With almost 90% of all the currency transactions consisting of 7 major currency pairs, helps these currencies display price stability, smooth trends, narrow spreads and high levels of liquidity. This liquidity mainly comes from the banks which offer cash flow to companies, investors and market players.
No commissionWith “free of commission” trading, Forex trade lets you keep 100% of your trading profits. This makes Forex trading even more attractive as a business opportunity, especially for those who want to deal on a regular basis.
Steady trading prospectsThe market is constantly moving and since Forex trading involves buying and selling of currencies, so traders can easily operate in a rising or falling market. This is because, there are always trading prospects, whether a currency is rising or deteriorating in relation to another currency. So there is always profit potential in the Forex market, whether it’s a rising one or a falling one.
Along with these major advantages, the Forex market also has some other merits such as, Forex trading gives its traders, an opportunity to bigger profits as returns on their invested money. Also, since the market is open 24 hours a day, 5.5 days a week, it gives the investors can make their deals anytime they want to.
With such superior speed of the market, and fine liquidity, even the largest of transactions are conducted within a few seconds.
24 hours tradingForex gives its traders a 24 hour trading opportunity. Being a Forex trader, you can trade 24 hours a day from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders an opportunity to trade according to their convenience, going by their own schedule and also a chance to react instantly to any breaking news of the markets.
High levels of liquidityAlso, acting as a huge attraction is the high liquidity. With almost 90% of all the currency transactions consisting of 7 major currency pairs, helps these currencies display price stability, smooth trends, narrow spreads and high levels of liquidity. This liquidity mainly comes from the banks which offer cash flow to companies, investors and market players.
No commissionWith “free of commission” trading, Forex trade lets you keep 100% of your trading profits. This makes Forex trading even more attractive as a business opportunity, especially for those who want to deal on a regular basis.
Steady trading prospectsThe market is constantly moving and since Forex trading involves buying and selling of currencies, so traders can easily operate in a rising or falling market. This is because, there are always trading prospects, whether a currency is rising or deteriorating in relation to another currency. So there is always profit potential in the Forex market, whether it’s a rising one or a falling one.
Along with these major advantages, the Forex market also has some other merits such as, Forex trading gives its traders, an opportunity to bigger profits as returns on their invested money. Also, since the market is open 24 hours a day, 5.5 days a week, it gives the investors can make their deals anytime they want to.
With such superior speed of the market, and fine liquidity, even the largest of transactions are conducted within a few seconds.
Forex Glossary
The Foreign Exchange market has its own terminology which is normally used by all Forex brokers, investors and traders. Here is a brief list of the frequently used Forex terms and their meanings. Also besides terms, we provide you beneficial as well.Ask Price/ Offer PriceThe ask and offer price is the price at which the market is ready to trade a specific currency. This is the price where, an investor can purchase the base currency. When seeing a quote, it is located on the right side. For example, in the quote EUR/USD 1.4547/52, the ask price is 1.4552.
Base currencyThe currency listed first in a Currency Pair is known as the Base currency.
BidsA Bid is the price at which the investor is willing to purchase a currency.
Bid/Ask SpreadSimply stating, Bid/Ask spread is the variation between the bid and offer price. It can also be defined as the degree of difference in pips, amid the buying price and the selling price of a currency pair.
BrokerA person or an organization acting as an agent, putting together buyers and sellers for a commission or fee, can be defined as a Broker. They are the ones who work on behalf of their investors.
Counter CurrencyThe currency listed second in a Currency Pair is known as the Counter currency.
Currency symbolsEUR - Euro AUD - Australian DollarCAD - Canadian Dollar CHF - Swiss Franc JPY - Japanese YenGBP - British Pound
Day Trading Day trading refers to the buying and selling of positions within a single day’s trade.
Foreign ExchangeAlso known as Forex or FX, it is the process of buying of one currency in exchange of other currency in an over-the-counter market.
Leverage Leverage is the ratio of the deposited amount to the amount that can be traded. Find out
Limit orderLimit orders let the Forex investors stop further trading and leave the market at preset profit objectives. It is an order which restricts the greatest price to be paid or the lowest price to be received.
LiquidityLiquidity can be defined as the capacity of a market to allow fat transaction with negligible impact on the price stability.
MarginMargin is the minimum amount required to be deposited before an investor starts trading. This can also be known as the initial amount with which the Forex trading account can be opened.
Pip / PointWhen dealing in terms of quotes, prices are expressed in terms of Pips. Pips can be defined as “percentage in points” and are mostly the fourth decimal point i.e. 1/100th of 1%. A pip can also be defined as the smallest value at which an exchange of currency can take place.
Stop Loss OrderStop/loss commands allow the investors to set an exit point for a loss. By limiting your losses to a pre set position, Stop/loss orders help investors control their risk conditions. 'Stop-loss' can lower an investor's exposure to risk by a large proportion.
The Foreign Exchange market has its own terminology which is normally used by all Forex brokers, investors and traders. Here is a brief list of the frequently used Forex terms and their meanings. Also besides terms, we provide you beneficial as well.Ask Price/ Offer PriceThe ask and offer price is the price at which the market is ready to trade a specific currency. This is the price where, an investor can purchase the base currency. When seeing a quote, it is located on the right side. For example, in the quote EUR/USD 1.4547/52, the ask price is 1.4552.
Base currencyThe currency listed first in a Currency Pair is known as the Base currency.
BidsA Bid is the price at which the investor is willing to purchase a currency.
Bid/Ask SpreadSimply stating, Bid/Ask spread is the variation between the bid and offer price. It can also be defined as the degree of difference in pips, amid the buying price and the selling price of a currency pair.
BrokerA person or an organization acting as an agent, putting together buyers and sellers for a commission or fee, can be defined as a Broker. They are the ones who work on behalf of their investors.
Counter CurrencyThe currency listed second in a Currency Pair is known as the Counter currency.
Currency symbolsEUR - Euro AUD - Australian DollarCAD - Canadian Dollar CHF - Swiss Franc JPY - Japanese YenGBP - British Pound
Day Trading Day trading refers to the buying and selling of positions within a single day’s trade.
Foreign ExchangeAlso known as Forex or FX, it is the process of buying of one currency in exchange of other currency in an over-the-counter market.
Leverage Leverage is the ratio of the deposited amount to the amount that can be traded. Find out
Limit orderLimit orders let the Forex investors stop further trading and leave the market at preset profit objectives. It is an order which restricts the greatest price to be paid or the lowest price to be received.
LiquidityLiquidity can be defined as the capacity of a market to allow fat transaction with negligible impact on the price stability.
MarginMargin is the minimum amount required to be deposited before an investor starts trading. This can also be known as the initial amount with which the Forex trading account can be opened.
Pip / PointWhen dealing in terms of quotes, prices are expressed in terms of Pips. Pips can be defined as “percentage in points” and are mostly the fourth decimal point i.e. 1/100th of 1%. A pip can also be defined as the smallest value at which an exchange of currency can take place.
Stop Loss OrderStop/loss commands allow the investors to set an exit point for a loss. By limiting your losses to a pre set position, Stop/loss orders help investors control their risk conditions. 'Stop-loss' can lower an investor's exposure to risk by a large proportion.
Forex market offers several advantages over Equity trading, such as: 24 hours open marketThe biggest advantage of the Forex market over the Equity trading is that of a 24 hours open market. Active 5 days a week, Forex market gives its traders what Equity trading does not. Equity trading is restricted to regular business hours, making Forex, the only incessantly moving trading platform.Being a 24 hour trading market, there is always some investors, somewhere in the world who are dynamically trading foreign currencies. This also enables these investors to react to any breaking news of the market, immediately.
Higher trading volumeAlso, the trading volume in the Equity trading or the major stock exchanges is often 100 times lesser than foreign exchange market. Furthermore, majority traders are willing to buy and sell currencies because of the need of various countries, which want to continue to trade goods with each other.
No commission and transaction feesForex serves as a more cost-efficient trade as compared to Equity trading, especially in terms of both commissions and transaction fees. Most of the sites dealing with Forex trading do not charge its investors or traders with any commissions or fees, while offering them, access to all the significant market information required for trading purposes. But in case of Equity trading, commissions range from $5 to $100 or more per trade in case of full service brokers.
Price stability through superior liquidityThe trading volume of the Forex market being 100 times more than the New York Stock Exchange, there are always dealers willing to buy or sell currencies here. The superior liquidity of the major currencies also helps ensure price stability in the Forex market. But this cannot be the case with the Equity trading which has a lower trade volume. This can therefore put the investors of the stock market to liquidity risk, resulting in larger price movements.
Higher leverageForex market offers higher leverage as compared to all the major stock exchange trade markets. While the commonly available leverage from the online Forex dealers is 100:1, the leverage offered by the Equity brokers is as low as 2:1 margin. Such high leverage enables the Forex traders to trade much larger sum of currency than they have deposited. Also that depends on the one considers for trading.
Profit Potential Forex market enables its investors to trade on the upward as well as the downward trends of the market, giving them the facility to buy and sell currencies. This serves as another major advantage of Forex market over Equity trading. This is because in the equity market, it is more difficult to trade during downward trend of the market, due to some market policies. There are a certain risk aspects as well
Higher trading volumeAlso, the trading volume in the Equity trading or the major stock exchanges is often 100 times lesser than foreign exchange market. Furthermore, majority traders are willing to buy and sell currencies because of the need of various countries, which want to continue to trade goods with each other.
No commission and transaction feesForex serves as a more cost-efficient trade as compared to Equity trading, especially in terms of both commissions and transaction fees. Most of the sites dealing with Forex trading do not charge its investors or traders with any commissions or fees, while offering them, access to all the significant market information required for trading purposes. But in case of Equity trading, commissions range from $5 to $100 or more per trade in case of full service brokers.
Price stability through superior liquidityThe trading volume of the Forex market being 100 times more than the New York Stock Exchange, there are always dealers willing to buy or sell currencies here. The superior liquidity of the major currencies also helps ensure price stability in the Forex market. But this cannot be the case with the Equity trading which has a lower trade volume. This can therefore put the investors of the stock market to liquidity risk, resulting in larger price movements.
Higher leverageForex market offers higher leverage as compared to all the major stock exchange trade markets. While the commonly available leverage from the online Forex dealers is 100:1, the leverage offered by the Equity brokers is as low as 2:1 margin. Such high leverage enables the Forex traders to trade much larger sum of currency than they have deposited. Also that depends on the one considers for trading.
Profit Potential Forex market enables its investors to trade on the upward as well as the downward trends of the market, giving them the facility to buy and sell currencies. This serves as another major advantage of Forex market over Equity trading. This is because in the equity market, it is more difficult to trade during downward trend of the market, due to some market policies. There are a certain risk aspects as well
