So, what do we have as a result? Everything mentioned previously can be interesting or even exciting but the main question remains ? why do I need it. ?Is it because lately?you?ve?heard something about Forex that attracted you? Perhaps you already have a steady job or some savings that you would like to work for you?
Well, there?s no use guessing. Let us just name some of the main advantages of the Forex market in one chapter so you can easily remind yourself of them in case you had forgotten.
Millions are not required
If you start to compare the Forex and Stock markets the first thing you would realize is that there?s no use on the stock market without a couple of million U.S. dollars. A good investment in this case would be to invent a time-machine, travel back in time, buy the first shares of Intel, Apple or Microsoft and come back to the present as a billionaire. In actuality all you can do is buy something and just wait, wait and wait, praying for no collapse to happen.
On the contrary, you can access the Forex market with just a hundred bucks and a broker with a good credit leverage. Margin trading allows a?trader with a hundred dollars on his deposit to operate with tens of thousands of dollars and to make a profit using those thousands, not the?original hundred which now acts as a mortgage. In addition, a currency is nothing but a share of the country it belongs to. Money is the most precious government note, something like a share that always has demand.
High liquidity?(cash position)
The second reason why Forex is so attractive to traders is the high liquidity of this market. The daily turnover of the market is about three trillion U.S. dollars. It is the biggest market on the planet. These two facts lead to the third one: when the trading session is in full swing it?s not that hard to find a contractor for an operation with any currency, in any direction and of any volume. You are able to open and close positions almost instantly as there is always somebody willing to maintain the market and start trading with you. Moreover, you will always find somebody with the proper amount of money as there?s nothing but money in the Forex market.
If you wish to purchase or sell a certain amount of shares, however, it may not be possible and you could be left unsatisfied. This is quite a normal situation in the stock market as well as the problem of delays in transactions that may lead to additional risks. At last, you should always remember that when trading on the stock market you can risk being left with a useless bunch of paper that can?t be sold because they are worthless. Well, at least you can make a nice cutout out of them!
The Forex market is different. It deals with major and most stable currencies of the world; therefore, you are always able to purchase even a billion monetary units of any currency and in seconds sell it without any problems.
Low expenses ? less risk
Forex has minimal spread in comparison with any other market. Even the most stable market ? the gold market ? has about a single-order?difference between the purchasing and selling price even though gold has been in an upward trend for the last 20 years!
The price fluctuation change for shares on the stock market is?also many times higher than the fluctuation of?exchange rates on Forex. A fluctuation of more?than 1% in a 24-hour period is a big rarity in?the Forex market wheras the stock market has?much greater volatility as was recently exemplified in the financial crisis and the collapse of?January 2008.
Of course, you can cite as an example the collapse of the Russian currency from 6 to 20 and even to 30?rubles?to the U.S. dollar, but such a five-fold fall happened only once in many years, and there were a large number of omens presaging it. Compare that to the YUKOS company situation when the price for its shares fell from 20 U.S. dollars to 15 cents after its owner was arrested!
In addition, while a landslide of prices for shares is generally pure evil for an investor, a trader can make a profit when a currency falls as well as rises.
Finally, the major part of all shares lose their value completely if their parent company goes bankrupt. That is highly improbable with a currency.
No time limits
In comparison with a stock exchange where trading is only permitted during the session?s working hours (the working hours of a country considered) the Forex market is available 24 hours?every day. You don?t have to wait for a tender to?start as it never stops. Besides 24-hour availability Forex doesn?t have gaps (sudden changes?in price) appearing at the start of a trading session, as shares are the indicators of a company?s?state of affairs and news affecting a company?can come out when the market is closed. There?can be a wide spread when discreditable news?comes out between two trading sessions and the?next session starts with subsided rates. It?s then?that investors tear their hair out. You could say?the stock market was like some kind of a magic?box of which the inner mechanics are only understandable to the company?s owners.
There are no brakes, gaps or magic boxes in the Forex market. Everything is public, open and obvious. It all provides a trader with opportunity to analyze the market, plan his actions and even automate his trading!
Forecasting the trends of the market
If you compare the rise and fall of Forex exchange rates with the mechanics of a stock market you will see that forecasting the stock market is all about making efforts to be the first to?acquire?fresh information that will affect the price of that company?s shares and execute the necessary order to profit from that information.?Speed of execution is also necessary because,?if you fail to be among the first, there?s no use?in buying those shares anymore. The most successful traders in the stock market are insiders,?people who get the information from the sources?unavailable to the broader masses. But there?s?one problem ? it is illegal. For example, in 2009?a billionaire from Sri Lanka was imprisoned for?insider trading: he found some ?friends? in big?corporations that advised him when to buy or?sell and he gained millions. If you remember?the collapse of the YUKOS company, the Russian?government made controversial statements?several times a day and insiders took advantage?of that situation whilst small investors and common people had to drag on the coat tails of those?super-profitable deals.
Forex is another story! The rise and fall of rates in this market are dependent on regular mathematical and economic rules. There are quite a lot of them so it may seem the market is chaotic. You may compare those rules to a crowded, noisy street that creates an impression of sound chaos but if you listen to them carefully you will hear that each and every sound has its own source and place in the general picture. The Forex market is like that: after you learn statistical data-analysis methods and factors influencing the market you will be much better positioned to forecast the rises and falls of currencies successfully.
Accessibility?of information for analysis
The foreign exchange market is international and price movements are not just influenced by the actions of speculators (traders and?market makers)? but also by national and international factors. Most Forex transactions occur as a result of foreign-economic activity and the international migration of capital. The information which influences this activity is always publicly available through free portals and agencies such as Reuters and Bloomberg. At the same time information concerning other markets is usually very expensive and sometimes even unobtainable. In fact, Forex is less dependent on the ?human? factor as private traders are too small on a planetary scale and countries and market-makers operate in a specific way.
Once again if you look at a stock market you will see that it is very much dependent on human expectations. Negative PR for a company may reduce the price of its shares, whilst a false leak of insider information (from the principal of a company, for instance) may send prices up. There is no such term as ?insider information? in Forex so there cannot be any informational swindles, crossed operations, fake bankruptcies or other similar issues that investors might face. The Forex market is obvious, impartial, accessible and much more predictable.
Source: http://blog.forex4you.com/advantages-of-forex-market/
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