If you are interested in trading currencies online, you will find that the Forex market offers several advantages over equities trading.
24-Hour Trading. A true 24-hour market, Forex offers a major advantage over the limited hours of equity trading. Whether it's 6pm or 6am, somewhere in the world there are always buyers and sellers actively trading foreign currencies. Traders can respond to breaking news immediately and P&L is not affected by after-ours earning reports or analyst conference calls.
Superior Liquidity. FX boasts a daily trading volume that is 50x larger than the New York Stock Exchange, so there are always broker/dealers willing to buy or sell currencies. The significant liquidity of this market helps ensure price stability, especially for the major currencies.
Greater Buying Power. The leverage offered by most FX dealers substantially exceeds the common 2:1 margin available in equity trading. At 100:1, traders can post $1000 margin for a $100,000 position, or 1%.
Lower Transaction Costs. It is much more cost-efficient to trade Forex in terms of both commissions and transaction fees.
Trading In Both Rising And Falling Markets.
The ability to sell currencies without any limitations is another distinct advantage over equity trading. In the US equity markets, it is much more difficult to establish a short position due to the Zero Uptick rule, which prevents investors from shorting a stock unless the immediately preceding trade was equal to or lower than the price of the short sale.
* Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
Unique experiences and past performances do not guarantee future results! Testimonials herein are unsolicited and are non-representative of all clients; certain accounts may have worse performance than that indicated. Trading spot currencies involves substantial risk and there is always the potential for loss. Your trading results may vary. Because the risk factor is high in the foreign exchange market trading, only genuine “risk” funds should be used in such trading. If you do not have the extra capital that you can afford to lose, you should not trade in the foreign exchange market. No “safe” trading system has ever been devised, and no one can guarantee profits or freedom from loss.
