Benefits of Forex Trading

If you want to make some good money, but don’t want to leave your house, you may be wondering about Forex trading. Now, the fact of the matter is that Forex trading is not very easy, it takes skill and patience, and you need to have a bit of money set aside too. With that said, FX trades can be very profitable, and if you do it right, you can make a whole lot of money.

Now, besides the fact that you can make real cash trading currencies, you might be wondering what the benefits of Forex trading are, particularly when compared to other markets such as the stock market or commodities. Well, there are actually many benefits here, many reasons why FX trading is much better, safer, and more popular than stocks or other such markets.

No Fixed Lot Sizes in Forex Trading

Something that you will appreciate about trading currency pairs is that there are no fixed lot sizes to deal with.

When you trade something like silver, a standard size contract might be something like 5,000 ounces, which is a whole lot, and that means that you need a ton of cash to trade this sort of commodity. Moreover, stocks cost what they cost.

However, in Forex trading, you determine the lot size, which means that you can decide exactly how much money to trade and invest. Here you could trade with as little as $25, although this is not really recommended, but that is a whole different issue.

No Commissions

One of the biggest advantages that comes with Forex trading is that the vast majority of brokers don’t charge commissions. With stocks and other types of trading, you could pay huge percentages in commissions, but not with FX currency pairs.

There are usually no government fees or clearance fees, and no exchange fees or brokerage fees. FX brokers usually make their money through something known as the “spread”, which in all reality does not cost the trader anything at all.

Forex Trading Can be Done 24 Hours per Day

Another big benefit of currency trading is that it is something that can be done 24 hours per day, 5 days per week. The FX market is always open, besides on the weekends, and this gives traders ample opportunities to make healthy profits.

Very Low Transaction Costs

Another huge benefit that comes along with Forex trading is that there are very low transaction costs involved. Other markets can have much higher transaction costs, and those will eat into your profits big time.

However, with currency pair trading, the retail transaction cost, which is the bid or ask spread, can be as low as 0.1%. This is the case under normal market conditions.

If you are performing much larger transactions, the transaction costs may be as high as 0.7%, but this is still comparatively low when compared to other markets.

Leverage

Yet another benefit of Forex trading is that you can leverage trades. In other words, a very small deposit on the end of the trader can lead to control of a much larger contract value. For example, if you leverage a trade by 10 to 1, it means that you only have to invest $100, but you will be in control of a $1,000 contract.

Of course, this is a bit of a double edged sword. Yes, this can allow you to make huge profits with minimal investment, but on the other hand, if the trade goes south, you will be on the hook for the total contract value, so for the full $1,000, not just for $100.

The Market Can’t Be Cornered

Another great thing about Forex trading is that unlike with other markets, such as the stock market, there is so much liquidity that it is wholly impossible for any single entity to totally corner a market.

There is so much liquidity and so many entities trading, that no one can control market price for any extended amount of time. This is a big advantage for all traders, especially for the small time traders who don’t have much cash to spare.

Forex Trading with High Liquidity

Yet another benefit for trading currencies pairs is that this is by far the most liquid market out there. For example, when it comes to stock trading, you might want to buy a stock, but there are only a limited amount available. If you are trying to sell a stock, there has to be someone on the other end to buy it.

While this is technically true with Forex trading, because there is so much liquidity and so many traders, it’s nearly impossible to not be able to execute any transaction you wish. The bottom line is that unlike with other markets, in the FX market, you will never get stuck in a trade.

Very Low Entry Barriers

One of the biggest benefits of Forex trading for many people is that the entry barriers are very low. With many markets, you might need thousands of dollars to start trading. If you are a newbie who is just getting into it, chances are that you probably don’t have enough cash to invest in a whole lot of stuff.

However, this is not the case in the currency market, because trading accounts can be opened with as little as $25. Now, beware that opening a trading account using only the bare minimum is not recommended, but it is possible.