Beginner’s Guide to Online Forex Trading – Chapter 4: Why so many people are interested in trading in Foreign

Beginner’s Guide to Online Forex Trading – Chapter 4: Why so many people are interested in trading in Foreign  

Trading in foreign currencies is gaining lots of popularity these days. This is mainly due to many advantages it presents. Given below are some of these advantages that are attracting so many people to this market:
Commissions:

One of the biggest advantages that this trading market offers is that there is no fee such as clearing, government, brokerage or exchange. The brokers get there compensation from “bid-ask” spread.
Middlemen:

In foreign currency trade there is no middleman with whom you have to deal. Here you will deal directly with the market in order to buy or sell a currency.
Lot size:

Exchanges decide the lot size or contract sizes in the future market. Silver future has a standard size of 5000 ounces. When dealing in spot Forex you are free to decide on your own lot size which allows the traders to buy lots as small as $250. However, we have explained later that it is not such a good decision to invest in such a small lot size.
Transaction cost:

Under normal market conditions the retail price of a transaction (i.e. bid-ask spread) is less than 0.1 percent, but it can even go as low as 0.07 for the larger dealers. You should keep in mind that the transaction cost depends on your leverage which we have explained later on.
24 hour market:

This is a market that never sleeps, as it operates 24/7. This factor gives advantage to those who do the trading as a part-time job or over the weekends when they have time.
No Monopoly:

Forex exchange is a huge market and there are many factors involved in its operation. Therefore, there are no chances of a single entity or even the central bank controlling it.
Leverage:

In order to succeed in Forex you need to carefully decide how much you are willing to invest. The greater the amount invested the higher the profits and lesser the risk of losses; but you must keep in mind that you need to have a proper risk management system in order to minimize the risk of loss. This can be better understood through the example that Forex brokers offer a 200 to 1 leverage, it means that a $50 margin deposit enables the trader to buy or sell currencies worth $10,000. With $500 you can trade currencies worth $100,000 and so on.
Liquidity:

Forex market is totally flexible due to its enormous size. When the market is enjoying normal conditions you can easily buy or sell your stuff. It is such a flexible market that you can pre-set it to close at a certain level of profit and/or even stop if your purchases are facing a loss.
Demo accounts:

Most Forex brokers offer demo account to “poor” or smart traders that will help them to play around a little with the money before actually going into the Forex business. This “Demo” account comes with the free news, charts, analysis and all other features that you will find in a Forex account so that you can practice before signing up for the account.
“Mini” and “Macro” Trading:

The best part of Forex trading is that you don’t need a huge amount to succeed in this business. With the help of “mini” or “macro” account you can start with as low as $300 or even less.
Bullish & Bearish Markets

You can trade in situations where the economy of a currency or market is flourishing; little unemployment where the currency is worth a lot- this is considered a bullish market. But you can also trade in a bearish market where a currency or market has lost its value. It’s from the extremes that you can make big profit and also big losses!
Stock compared to currencies:

New York Stock exchange offers 4,500 stocks whereas NASDAQ has 3,500 stocks listed. However, the trouble is deciding which stock to trade in and which company to keep an eye on? In spot trading there are dozens of currencies in which traders are dealing, however, there are only 4 pairs that are most commonly traded in. So wouldn’t it be better to deal in 4 pairs of currencies instead of dozens of currencies at the same time?

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