Why Trade Forex – Benefits of Trading the Currency Market

The Forex market has undergone some major changes over the last 10 years. Traders with small capital bases are now able the access the over $3.2 trillion a day market, and make money on their own terms. While thousands of retail traders have entered the forex market, there are still many who sit on the sidelines asking themselves, “why trade forex” and “what are the benefits of trading the currency market.”

FX trading allows traders to take control of their finances by trading at times that are convenient to them. Here are some of the benefits of trading the forex market:

• High liquidity
• High leveraging/buying power
• The ability to edge personal savings when the local currency falling
• The benefit of low transaction costs
• The option to trade anywhere and at anytime
• There are no hidden fees
• Low initial investment
• Simpler choice of trading instruments
• High profit potential

Trade Anywhere

Most, if not all, forex brokers offer online trading. This means that forex traders can work from wherever they like (that includes

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Trading Forex gives traders the option to trade at their own time or pleasure. The same could have been said about the equity and commodity markets, if they were active 24/7.

Trade Anytime

In answering the question, "forex or stocks which is better" proponents of currency trading often cite the fact that the Forex market is accessible 24-hours. Actually, it's open from 3pm EST, on Sundays, and runs 24-hours a day, until 4pm EST on Fridays. While the market activity can slow down at certain times, day traders can take control of their work hours by working in any of the three major sessions, as it suits their preference or trading style. These trading sessions are: the London/European, the New York and the Asian/Australian.

High Buying Power/Leverage

Quite a few brokers offer leveraging as high as 400:1. In essence, with an account of $1,000, a trader can enter a position, or several positions having a total value of $400,000. If the trader manages to enter the trades in the right direction, he can quickly make very high returns on his investment. The reverse is also true. If the market should go against a trader by a significant amount, high leveraging will cause a margin call.

Edge Personal Savings

Forex traders have the benefit of being able to move their investments around to maximize returns. A trader can easily transfer his investment to a currency that has superior interest rates, or has strong macroeconomic fundamentals. In many cases, he can do this with greater ease than he would experience when making a withdrawal from his personal bank account.

Low Transaction Costs

Almost all brokers offer commission free trading. The only cost to enter a trade is the price spread (the difference between the bid and ask price), of the pair being traded. In some cases this spread is less than 1 pip (the minimum increment in any currency pair).

No Hidden Fees

Except for interest on carry trades, the deposit and withdrawal fees and the currency spreads (cost to enter a trade), there are no other fees associated with trading the Forex market.

On the next page, we will continue to look at the benefits of currency exchange rates trading.