FOREX TRADING ADVANTAGE

Advantages Over Stock TradingIf you are interested in online currency trading, you will find the forex market offers several advantages over stock and futures trading. The advantages of forex trading are as follow:24-hour forex tradingForex is a true 24-hour market.Whether it's 6 PM or 6 AM, somewhere in the world there are buyers and sellers actively trading foreign currencies. Traders involved in forex trading can always respond to breaking news immediately, and profit and loss is not affected by after hours earning reports, analyst conference calls, nor trading stoppages due to "pending news" or announcements.After hours trading for U.S. stocks and futures brings with it several limitations. ECN's (Electronic Communication Networks), also called matching systems, exist to bring together buyers and sellers - when possible. However, there is no guarantee that every trade will be executed, nor at a fair market price. Quite frequently, traders must wait until the market opens the following day in order to receive a tighter spread.Superior liquidityWith a daily trading volume that is 50 times larger than the New York Stock Exchange, there are always broker/dealers willing to buy or sell currencies in the forex markets. The liquidity of the forex market, especially that of the major currencies, helps ensure price stability. Traders can almost always open or close a position at a fair market price. This is a huge advantage of forex trading.Because of the lower trade volume, investors in the stock market and other exchange-traded markets are more vulnerable to liquidity risk, which results in a wider dealing spread or larger price movements in response to any relatively large transaction.100:1 Leverage in forex trading100 to 1 leverage is commonly available from online forex dealers, which substantially exceeds the common 2:1 margin offered by equity brokers, and 15:1 in the futures market. At 100:1, traders post $1000 margin for a $100,000 position, or 1%. Increasing leverage increases risk.While certainly not for everyone, the substantial leverage available from online forex trading firms can multiply both gains and losses. Rather than merely loading up on risk as many people incorrectly assume, leverage is essential in the forex market. This is because the average daily percentage move of a major currency is less than 1%, whereas a stock can easily have a 10% price move on any given day.The most effective way to manage the risk associated with margined forex trading is to diligently follow a disciplined trading style that consistently utilizes stop and limit orders. Devise and adhere to a forex trading system where your controls kick in when emotion might otherwise take over.Lower transaction costsIt is much more cost-efficient to trade forex in terms of both commissions and transaction fees (See the "Commission-Free Trading" section of the disclosure page).Commissions for stock trades in the online discount brokerage world typically range from $7.95-$29.95 per trade, with full service brokers typically charging $100 or more per trade. An average commission on a futures trade is $15 a round turn. Forex brokers offer much lower commission structures. Thus, investors involved in forex trading could limit their cost.Equal profit potential in both rising and falling marketsIn every open forex position, an investor is long in one currency and short the other.A short position is one in which the trader sells the base currency in anticipation that it will depreciate. This means that, in forex trading, potential exists in a rising as well as a falling market.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. This limitation does not exist in forex trading.