Advantages of Forex Trading .... !!!

Advantages of Forex 

Basically in Forex one can begin trading with no real money at risk in a demo account... start small with a mini-account, literally playing for 'nickle and dimes' as you learn, then graduate to a larger account and trade for higher stakes. And again, you set the size and the pace of all this activity on your own since all the trading is done through software screens. There's no actual broker to call and yell "buy... no, sell!" into the phone. Of course there is always a phone number where you can call for support or to make a backup trading order in the event you lose your internet access for some reason (computer crash, storm blackouts, etc.) You can't really start small in the stock market because lot sizes are both fixed and larger and there isn't remotely enough leverage available, especially for the novice trader.

Outstanding Liquidity

Forex is a computerized network that can handle a very large volume of transactions, representing nearly 4 trillion dollars a day on average, as noted earlier. This means that buyers and sellers are almost instantly available when you want to open or close a trade. Any stock market trader can give you nightmare stories of not being able to get an order filled at a price he wanted due to little or no action being available for the particular stock or option he was looking to move.

Unbelievable Leverage

Unlike the stock and futures markets where leverages are relatively small (5:1 , 10:1... but only for the bigger players with lots of equity to collateralize), Forex trading routinely allows for much higher leverages: as large as 50:1 max after the regulatory changes of 2010. These new rules apply to US-based brokers only -- many offshore brokers still offer 50:1+, but these are off limits to US-based traders now anyway as those same rules require us to stick with domestic brokerages. These new rules will likely remain in force for at least a decade I would imagine, barring some economic disaster that might cause Congress to go back in and make still more legislative changes to further control the financial markets.

Regardless, that's a lot of borrowing power. This is made possible because the relatively small daily movements of currency prices (a 1% daily move would be considered enormous, whereas stock prices can easily change 15-20% in a day under volatile circumstances) make it safe for the broker to lend the trader a large block of cash so that his pip value makes it worthwhile to trade. I'll explain how all the math works in a moment to make this clearer. Just know that the high leverage in Forex trading provides an entry point into the market for the small trader that just doesn't exist in the stock, commodity and to a lesser extent the futures markets.

Of course, leverage can cut both ways and wipe you out as fast as it makes you a fortune if you are reckless and don't manage your risk appropriately. It's this leveraged potential that creates both the higher risk in Forex and the ability to make a large amount of money starting with a small amount of seed capital. Make sure you are clear on this concept.

24/7 Action

The Forex market is operational around the clock for five days a week. It effectively closes from about 3PM EST on Friday and re-opens at 5PM Sunday at the start of the new trading week (which is Monday morning in Sidney and Tokyo). This timeframe generally follows the schedule of the world's banking industry. You can play with your Forex account early in the morning or in the middle of the night. Somewhere on Earth the banks are humming along!

Simplified Trading Choices

There are approximately Four thousand Five hundred stocks listed on the New York Stock exchange. Another 3,500 are listed on the NASDAQ. Which one of these 8000 possible companies will you trade? Ugh. In currency trading the majority of the market trades the 4-6 major pairs. Keeping an Eye on four pairs is much easier than focusing on thousand of stocks.

No Standard Commissions

Forex brokers earn their money by setting spreads between the BID and ASK prices which they buy and sell the various currencies at. I'll explain all this in a moment, but briefly it works like this: when you open a trade with a BUY order, you must purchase the currency at what is known as the ASK price. When you eventually close this trade you will then sell back into the market at the BID price.

To clarify, you can buy a currency at the market ASK price (you must "give them what they're asking"), or sell it at the BID price (the highest "bid" the market offers). This means that whenever you open a trade you are automatically down by the spread -- and must recover this amount to reach breakeven. From that point on it's all profit.

No Insider-Trading 

Forex trading is considered to be the perfect system of competition since all players are presented with an equal and level playing field. Fundamental information about a nation's economic policies and the scheduled release of economic news that affects currency prices is all public knowledge and completely accessible to every trader on the planet who cares to keep tabs on it, large or small. This means that nobody can cheat by possessing "insider information" of any sort. There's no such thing in Forex.

In addition, the fact that financial decisions within banks and governments are usually kept private until being executed with little or no prior warning makes it impossible to know WHEN these price-effecting events will actually occur. We can know when they are LIKELY to occur -- but can never know exactly when, for instance, a banker in Sidney is about to dump 5 million Yen on the market or a government official in Zurich has instructed his financial minister to buy up 2 billion Euros that afternoon. The private nature of money creates permanent uncertainty about the movement of prices that can never be completely eliminated, and therefore affects all players in the market equally.

The trick is to analyze the market for signals that improve your odds of knowing what's about to happen next -- but you can never be 100% certain. If that were the case the market would collapse because it's essentially a zero sum game requiring a loser for every winner.