1.3 More Reasons to Trade Forex

Additional Reading About More Reasons to Trade Forex

There is one more reason why Forex is so popular of late: it has low start up requirements and relatively inexpensive account costs.

• Trading starts with as little as a few hundred dollars, sometimes less.
• Forex brokers typically provide free full-featured trading platforms and data feeds, and the better brokers offer extensive archives of free training materials and market analysis. With online stock brokers, traders typically need to maintain significant minimum balances or minimum average monthly trading volumes to get similar service.
• Brokers typically provide full-featured practice or demo accounts that allow smart beginners to simulate most of the trading experience and practice with play money until they feel ready to risk their capital.

Most Forex brokers charge no fees, commissions, or hidden charges. They earn their money on the difference, called the spread, between the buy and sell price, typically a few ten-thousandths, called pips, of the price. Depending on the lot sizes traded, a typical two-pip spread to open and close a position can cost anywhere from $0.20 to $20. In general transaction costs are very competitive compared to those of online stock brokers.

More Reasons to Trade Forex - Text Version

Why Trade Forex?

We are continuing to outline why people choose to trade Forex.

Why trade Forex? Forex expertise makes you a better trader and investor.

Forex markets often reflect changes in sentiment before other markets, and so offer profitable clues of where other markets are going.
Another reason why we trade Forex is the flexible hours.

Forex markets trade in a seamless 24-hour session, 5.5 days a week, from Sunday 5:15 P.M. EST until Friday 5:00 P.M. EST.

We trade Forex markets because they offer the best liquidity.

A liquid market is one that has many buyers and sellers. The more buyers and sellers at any given moment, the more likely you are to get a fair market price when you buy or sell. The more liquid a market is, the less likely it is that a few big players can manipulate prices to their advantage. Indeed, unlike in stock markets, even the biggest players will have trouble manipulating the price action in major currency pairs beyond a matter of hours.

We trade Forex because there is no centralized exchange with specialists holding monopoly power to regulate prices.

In most stock markets, the specialist is a single entity that serves as buyer and seller of last resort and controls the spread, which is the difference between the buy and sell price for a given stock. Though in theory they are regulated and supervised to prevent their abusing that power to manipulate prices at the expense of the trading public, specialists are experts at knowing when they can get away with a degree of this and force you to buy higher or sell lower.

With Forex trading, no single specialist regulates prices of individual currency pairs. Rather, multiple exchanges and brokers are competing for your business.
Another reason for trading Forex is that there is high liquidity and decentralized markets which means less slippage.

Slippage is the difference between the stated price on your screen and the actual price you pay or receive. The less liquid the market, the more often slippage happens because fewer traders are present to take the other side of your trade.

Forex markets are less prone to slippage because they are:

• Usually Highly Liquid--typically running at full speed in at least one if not two continents 24 hours a day, over five days a week and trading at such larger volumes than equities,
• They have no specialists influencing prices.

Indeed, many Forex market makers provide some kind of “no slippage” policy that lessens the degree of price uncertainty.