Forex Guide

This article tries to highlight why FOREX is considered a better option for investors when compared to Futures Trading.

You pay ZERO commissions and exchange fees!

In the futures market, you must pay commissions and exchange fees. In the FOREX market, you pay NONE of that. No commissions. No exchange fees. Not one red cent. How can FOREX do that? Simple. Because you deal directly with the market maker via a purely electronic online exchange, you eliminate both ticket costs and middleman brokerage fees. There is still a cost to initiating any trade, but that cost is reflected in the bid/ask spread that is also present in futures trading. And, because the FOREX trading platform offers instant execution off firm two-way prices, you never have to worry about price "slippage" or bad fills which happen all too often in other financial products. To see for yourself how these benefits work, open a free demo account.

You get more leverage than futures

The sheer size of the currency market (46 times greater than all futures markets combined) and the greater price stability allow you to trade with a much higher degree of leverage than is typical with futures contracts. Plus, you are able to select the degree of leverage that you wish to employ in trading. Unless you specify otherwise, FOREX sets your leverage level at FOREX's most lenient requirement. The actual margin requirements for leverage vary with account size.

For example, if your account has $30,000 in it, then the margin requirement is $1,000 for every position (approximately equal to $100,000 worth of currencies). Thus, the margin requirement is just 1% of the total value of the currencies traded - a 100:1 ratio. Click here for a demo.

Your risk is strictly limited

With FOREX, you can NEVER have a debit balance! In the event that funds in your account fall below margin requirements, the FOREX Dealing Desk will simply close all open positions. That means that, even if you are dead wrong and there is a catastrophic market move against you, you can never lose more than the amount of money you have in your account. In addition, by using stop loss orders that are guaranteed by FOREX, your risk can be further limited and defined. That provides you with tremendous peace of mind. See for yourself by making a few risk-free virtual trades in your FOREX demo account.

You get instantaneous execution and firm prices

The futures market does not offer instant execution or price certainty. Even with electronic trading and limited guarantees of execution speed, the price for fills on market orders is far from certain. In the futures market, the prices represent the LAST trade, not necessarily the price for which the contract will be filled. With FOREX currency trading, in contrast, you get instantaneous execution and price certainty. On the FX trading, you trade directly off real-time streaming prices. Your trades are filled instantly. There is no discrepancy between the displayed price and the execution price. This holds true even during volatile times and fast moving markets. Experience the benefits of instant fills and guaranteed prices by opening a free demo account.

You get maximum liquidity

Due to its enormous size (46 times bigger than all futures markets combined), the currency market is the most liquid market in the world. The spot currency market is a $1.4 trillion daily market, making it the largest and most liquid market in the world. This market can absorb trading volume and transaction sizes that dwarf the capacity of any other market. If you compare this to the $30 billion per dayfutures market, it becomes clear that the futures market provide only limited liquidity. The currency market, in contrast, is very liquid, meaning positions can be liquidated and stop orders executed without slippage. In just a few minutes, you can open a demo account and see how this works.

You can easily trade 24 hours a day

Unlike most futures exchanges, the currency market is a seamless, 24-hour market. At 5 p.m.Sunday, New York time, trading begins as markets open in Sydney and Singapore. At 7 p.m. the Tokyo market opens, followed by London at 2 a.m., and finally New York at 8 a.m. As a trader, this allows you to react to favorable or unfavorable news by trading immediately. It also gives you the added flexibility of determining your trading day. By comparison, the currency markets in the United States, such as the Chicago Mercantile Exchange and Philadelphia Exchange, have regulated hours. The CME, for instance, opens at 8:20 a.m. New York time and closes promptly at 2 p.m. Therefore, if important data comes in from England or Japan while the U.S.futures market is closed, the next day's opening could be a wild ride. (Overnight markets in futures currency contracts exist, but they can be thinly traded, not very liquid and difficult for the average investor to access.) Open a free demo account and get the ability to trade whenever you want.

by 2work-online.com