Why do people trade forex? What are the round-the-clock benefits that new traders are drying to have? The popularity of Forex Trade is attributed to the couple of benefits that it has brought to its traders which includes high liquidity as well as its flexibility to perform trades no matter the time of the day.
Leverage as the best feature of FX Trading
In FX trading, leverage means that you only have to deposit a small amount of initial deposit, known as margin, to be able to enter your trade. You can enter a margin as low as 3.3%, equals to 30:1 leverage. With margined trading, you get to maintain your full exposure on the Forex market while providing a percentage equal to your position’s overall value. This is very efficient considering that you can increase the profit potential when the market goes on your side and drop potential whenever the market goes against you.
Round-the-clock market
Forex trade is a decentralized market, or over-the-counter, as what others say. A decentralized market means that the structure of the market consists of different technical devices. This gives traders a chance to run a marketplace without actually having a central location. With Forex trade, you can trade anywhere across the world, no matter the time of the day.
This gives an advantage to other investors who have work to do and only have spare time every day. Additionally, investors can easily respond whenever there are currency fluctuations brought by certain economic, social, and political events that can occur at any time of the day. The FX market also offers instability 24-hours every day. So when a trading opportunity comes along, you can grab it and monetize while the tides are on you.
FX Trading offers High Liquidity
What is liquidity in Forex Trade? It refers to the activeness of a market. The liquidity of a market is determined by the number of traders that are trading actively as well as the volume of trading that they are manipulating.
The FX market is known to be the most traded market globally, gaining an average of daily turnover amounting to $5 trillion. Considering that there are a lot of FX market participants that are trading together every day, the FX market has high liquidity compared to other financial markets in the world.
No Commissions
Another reason why Forex Trading is very popular nowadays is the fact that it has no commission such as government fees, clearing fees, brokerage fees, and exchange fees. The retail brokers that you hire are paid through a service known as “spread”.
Very low transaction payment
When you trade forex, the bid/ask spread also known as transaction cost, is very low with 0.1% or less under a normal market situation. If you are going for large transactions, the transaction cost can be as low as 0.07%. Take note that this amount also depends on the leverage.
Nobody can corner the FX market
Since it has high liquidity, no known manipulation perpetrated by a single person can corner the market, especially during busy hours.
