Forex Trade – Intelligent Forex


3 Benefits to Trading Currencies

Posted in Forex Tips by intelligentforex on January 24, 2010

Why is the foreign exchange market bigger than all the other financial markets combined and why is it growing at such a rapid pace? This article will explain the 3 core benefits to trading currencies in the forex market in an effort to answer the question of it’s unprecedented popularity.

1) Liquidity

The foreign exchange market is larger than all of the other financial markets combined, including all stock markets, futures markets and options markets. In fact, if you put all of these other global markets together, they would still only amount to one quarter of the size of the forex market. It is gigantic and therefore highly liquid. The more liquidity there is in a market, the more trading opportunities exist for both small and large traders alike.

2) Leverage

In terms of leverage, the forex market is king there too. In fact, some dealers (brokers) offer up to as high as 500:1+ leverage allowing traders to control huge sums of currency for only a modest deposit. This high leverage allows traders to make very healthy profits from only small movements in the currencies they are trading. No other market in the world offers this kind of leverage.

3) Low Barrier To Entry

Gone are the days where the forex market was only available to financial institutions and large currency speculators. Nowadays rapid advancements in data technology have opened the door to even the smallest of home traders. 24 hours a day, 5 days a week the fx market is trading and it is completely accessible to anyone with a computer, an Internet connection and a trading platform with a forex dealer (broker).

Further to this, the growing competition among forex dealers (brokers) has dramatically lowered the amount of deposit required to trade, and the spreads themselves have tightened considerably. This enables curious traders to enter the market and ‘get their feet wet’ for as little as a $500 deposit (or even less), trading mini lots. Yes, gone are the days where you needed to trade in full size lots or more. Now there are dealers allowing you to trade as low as.01 of 1 lot, which until recently was completely unheard of.

So liquidity, leverage and low barrier to entry are the 3 core benefits to trading the forex market. There are many more (such as ‘automated trading’ which is a whole other topic on it’s own). However, it is these 3 that are the driving force behind the seemingly unstoppable growth that the forex market is currently enjoying.

A word of caution. If you are interested in forex trading please be sure to educate yourself well before diving into a live trading environment. With forex trading comes significant risk that needs to be managed effectively. Don’t be fooled into thinking that you can make a fortune overnight. It takes hard work and discipline to successfully trade this market and there are no short-cuts beyond getting yourself an experienced and successful mentor who is already enjoying the forex trading success that you seek.

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