The Many Benefits of Forex over the Stocks
Online currency trading through Internet-based companies has dramatically lowered the costs of investing, and empowered the individual investor to invest in the Foreign exchange market and this online access has made it accessible to the small and medium sized investor.
This is why Forex is gaining a lot of popularity, especially considering the Leverage given to retail investors to start Currency Trading. Simply put leverage means For Every 1 dollar you put in your account the your broker will give you up to 100 dollars, so if you start with $1,000 dollars you will get a total of $100,000. Your profit will be calculated from this $100,000 dollars and you can double or triple your money in a matter of days - or also lose it in days.
This leverage is what makes Forex Trading very profitable and attractive to many beginners. Leverage makes FX more accessible to the retail investors who don’t have thousands of dollars to start with, but when they get leverage their capital is boosted to the tune of thousands of dollars for every one dollar that is deposited.
If you have 1,000 dollars and get the leverage of 100 you will have a total of $100,000 dollars to start transacting with. You can then buy a contract which is the method used to buy or sell.
If you buy a contract you will make a profit of $10 for every one pip, which is 1/100 of a cent, so if the currency pair you have bought appreciates by 1 cent(100 pips) you will make a profit of $1,000 i.e $10 *100 pips.
Another advantage of spot FX is that you can open a free Demo Account, the demo is a practice account that you use to practice with without putting in your money, it uses virtual money to simulate real trading. Just like the same way that there is a flight simulator for pilots we have a demo for beginners.
Probably the most attractive arguments for the foreign exchange market is that it is accessible to just about anyone and everyone and the fact that you can find virtually thousands of FX brokers that provide totally Free of charge, no deposit, downloadable platform that enables you as a beginner to access the price quotes live using a free demo account makes the market available to all.
A Demo provides you with an almost identical experience as the one that you will experience when you start using real money. The demo account uses the same software that is used by real traders the only difference is that you are using monopoly money like the monopoly game, not real money.
The value of this type of practical experience is invaluable, mostly because it makes it possible for the new beginner to discover if or not they got what it takes to make it in the worlds largest financial market. The new investor can learn, evaluate and test out your their strategies and methods for many days, weeks or months before they decide they are ready to get started with real money.
However, before you start to invest, you need to learn the different terms and the strategies used. On this Site is where you can learn to everything and start making profits within a month or two, browse to our learn basics lessons section and start learning how to make money.
Benefits of Forex over Stocks
• Deal directly from live price quotes
• Instantaneous transaction execution and confirmation
• Fast and efficient execution of deals
• Lower transaction costs
• Real-time profit and loss analysis
• Full access to data and information
Deal directly from live price quotes
Online brokers are able to offer their clients real-time bid/ask quotes, which facilitates instantaneous transaction execution and no missed trade opportunities. Streaming prices also allow investors to compare an online broker’s dealing spreads to ensure they are receiving the best possible price on all their transactions.
In the stocks - stock brokers require their clients to request a price before dealing. This is disadvantageous for a number of reasons, primarily because it significantly lengthens the execution process from just a few seconds to possibly as long as a minute. In a fast paced environment, this could make a significant difference in an investor’s profit potential.
Instantaneous execution and confirmation
Timing is everything in the fast-paced currency exchange environment. Online transaction are executed and confirmed within seconds, which ensures that traders do not miss any opportunities. Even the incremental extra time it takes to complete a transaction over the phone can mean a big difference in profit potential. Online transactions are executed and confirmed within seconds, which ensures no missed opportunities.
Lower transaction costs
Simply, executing transactions electronically reduces manual effort, thereby lowering the costs of doing business. Online brokers are then able to pass along the savings to their client base. Executing electronically reduces manual procedures, therefore lowering the overall costs of doing business. Online brokers are then able to pass along the benefit of low transaction costs to their clients.
Investors also have the ability to execute transactions of between $100,000 and $10,000,000 at the same prices as the Interbank market offers for deals that are over $100,000,000. This benefits those who wish to speculate on the direction of the currencies for profit.
Real-time profit and loss analysis
The fast-paced nature of Forex compels traders to execute multiple transactions each day. It is vital for each client to have real-time information about their current position in order to make well-informed decisions. Investors can access this information and reports about their current open positions thus helping them to make informed decisions.
Full access to market information
Access to timely and relevant information is critical. Professional Investors pay thousands of dollars each month for access to major information providers. However, the very nature of the Internet affords users free access to reliable information from a variety of sources, including streaming price quotes, international news, government-issued economic indicators and reports, as well as subjective information such as expert commentary and analysis, forums etc.
In FX information is readily available from a variety of sources, such as brokers and resources such as economic calendars.
Real-time price quotes, international news, economic reports and indicators and technical analysis are all available on the internet.
The main advantage of the FX over the stocks is that it is open 24 hour where there are always buyers and sellers actively participating at any time of the day or night 5 days a week.
Forex has an average turnover volume of over $7 trillion per day, and it is the most liquid market in the world. This means that one can enter or exit trades at any time in any time, and there is very minimal execution barriers and no daily transaction limit.
A leverage ratio of up to 100:1 is typical in the FX as compared to a leverage ratio of 2 ( or a 50% margin requirement) for equities and stocks. This also makes participating in the currency exchange a double-edged sword as the high leverage makes the risk to the down side loss greater in the same way that it makes the profits potential on the up side more attractive.
Always a profit making opportunity
Transactions involve buying or selling one currency against another. Thus, there is always a chance to make profits, in a bullish or a bearish trend. Investors can always make money in a bullish or bearish trend, by either buying a currency that is appreciating or selling the one that is depreciating.
The network of the of a global inter-bank network of dealers and commercial banks, which communicate with each another on behalf of their clients through electronic networks and telephones. There isn’t an organized central exchange to serve as a central location to facilitate transactions executions the way that the New York Stock Exchange serves the equity markets.
Foreign Exchange operates in a manner similar to the way that NASDAQ in the United States operates, and it is thus also referred to as an “over the counter” or OTC.
No one can corner the market
Foreign Exchange is so enormous and with so many participants that no single entity, not even a central bank, can control the exchange prices for an extended period. Even the interventions by major central banks are becoming increasingly short-lived, and thus central banks have become less and less inclined to intervene or to manipulate the prices.
Advantages For New Beginners
Another advantage is that FX gives the new investor looking to uncover their strategies and methods is the simplicity of entry. The field of stocks is dominated by a few select online brokers who have jointly decided that $3,000 is the minimum amount that they are going to accept for them to open a stocks account and even at these level, the level of services is even decreased.
In contrast there are many Online Brokers who have established Micro accounts which allows for small level of risk by placing trades on what is known as micro lots. These accounts extend the access of the foreign exchange market to investors seeking to invest with minimum capital. Beginners can start with funds as little as $100. Moreover, these deposits can be quickly and easily transferred via a credit card or debit card and other payment methods, while the vast majority of online stock broker deposits require a wire transfer deposit.
It is for this reason that the Forex is preferred to stocks because it is much more accessible to the retail investors more than the stocks and it has certain unique factors that offer potential opportunities for more profit than in any other financial market. Beginners can take advantage of the price fluctuations to make profits from these movements.