Home Courses Course-01 21 – Advantages of Trading the Forex Markets

21 – Advantages of Trading the Forex Markets

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We all know that Forex is the largest market in the world. Also, the majority of the people prefer trading forex over the markets like the stock market or the commodity market. This is because it provides tons of benefits to the traders.

Here are some of the significant advantages of forex trading:

Minimal commission

The best part of the forex brokers is that they do not levy any fees like clearing fee, exchange fee, or brokerage fee. Instead, they do charge something called the “spread,” as compensation for their service. And, this service charge is lesser compared to the other fees mentioned above. Nevertheless, there are forex brokers who do impose commission fee, swap fee, and relatively larger spreads. Note that, all of it depends on the type of broker you choose. There are different types of brokers in the forex market. Broadly speaking, there are two types of brokers, namely, Dealing Desk and No Dealing Desk. And the No Dealing Desk brokers are further classified into STP broker and ECN broker. So, depending on the type of broker, different types and different amounts of fee is levied.
More on this shall be discussed in the subsequent lessons.

Low transaction costs

In forex, the transaction cost is nothing but the bid/ask spread, which is typically less than 0.1% under normal market conditions. For larger transactions, the spread could get as low as 0.07%. However, this depends on the leverage as well.

Variable lot size

In the futures market, the lot sizes are determined by the exchanges. But, in the spot forex market, you have the freedom to choose your own lot or position size.

A 24-hour market

In the forex market, you don’t have to wait for an opening bell every morning. The market opens every Monday morning in Australia, which is rigorously traded until the New York market closes on Friday afternoon.

This characteristic of the market is one of the biggest advantages for part-time traders because they can trade whenever they get free.

The Forex market is not a one man’s show

The FX market is so vast and has so many members that no single market player (hedge funds, commercial companies, or even giant banks for that matter) can control the market price for a long period of time.

High Liquidity

A well-known fact about the forex market is that it is extremely liquid. This is a great advantage for the traders because they can instantly buy or sell any currency pairs irrespective of the time or conditions of the market.

Leverage

Another exceptional benefit of forex trading is that brokers allow traders to trade larger contract values even with small account size. This gives traders the ability to make good returns, and at the same time by keeping their risk minimal.

For example, if a forex broker offers 1:50 leverage, then one can take a trade worth $5,000 with just $100 in their account.

The Demo Trading Facility

Almost all forex brokers offer the facility of demo trading for free of cost.

Demo accounts are a precious resource for the ones who wish to test their strategies and skills in the market without investing their real money.

Although this is an exceptional advantage for traders, it is underrated in the industry.

Hence, these are some of the perks that the forex market offers traders.

To trade in the forex market, one must pay a clearing fee, brokerage fee, and an exchange fee.

Correct! Wrong!

Forex brokers make a profit by charging ______.

Correct! Wrong!

The forex market is a ____ market.

Correct! Wrong!

The high liquidity in the forex market allows traders to _______.

Correct! Wrong!

A giant bank can keep hold of the market for an extended period of time.

Correct! Wrong!

An underrated advantage offered by forex brokers is

Correct! Wrong!

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