Those of you that has been following this blog by now would have known that this blog comprises more of financial related articles. In today’s article, I will shade more light on the reasons why people should trade forex compare to other financial markets such as stocks or even bonds.
The financial market is broad, very broad and trying to participate in this market may seems nearly impossible. I will compare forex and other financial markets to show you why majority of traders trade the forex market.
When deciding to trade stocks, there are more than 3000 stocks listed in the New York Stock Exchange with about 2000 or more listed in NASDAQ, all these are in the United State of America and we aren’t counting those listed in other Stock Exchange.
If we look at commodities such as gold, oil (Brent and WTI), energy (NLG), agriculture (cocoa, sugar, wheat). These are normally traded in the future market and requires experience and large capital to trade.
CHECK OUT: 3 Business Mistake Africa Is Making
Bonds, Treasury Bills are also part of the financial market but can be expensive to buy and requires a longer period of time to yield profits.
With that being said, the best option to retail traders is online forex trading and that’s why so many people around the globe are diving into the market.
Below are some of the reasons, which I have compiled to show my readers the reasons to trade forex.
This is one of the major reasons why I love the forex market, let’s say for example you want to buy EURUSD at 1.23041. Under normal market condition, your order will get filled at that exact price. In other financial markets such as the futures and stock market where you have to put gaps and slippage into consideration.
The same applies to pending orders, though sometimes during high impact news there might be rapid fluctuation in the market and stops Loss and entry orders might not get filled by instant execution. But this is not a major problem to swing traders and those who stay longer in the market.
Liquidity is an essential tool in every market, but the forex market has more of this tool (liquidity). Liquidity simply means how quick it will be for someone to cover the other side of your trade, that’s to say to find a buyer when you want to sell and a seller when you want to buy.
More than $3 trillion is traded daily in this market, giving this market the ability to absorb any volume and transaction size thrown to it compare to only $30 Billion traded in the future market. “The higher the volume the easier it is to get into a trade and out” this is what other market such as stock lacks. One can enter into a trade in a thin market only to suffer huge slippage trying to take profits and this is what other market participant suffers. While liquidity is slightly improving in the future market, they are nowhere to be compared to the king of liquidity – Forex Market
24 Hour Market
At 7 to 8 o’clock in the morning the Frankfurt and London Market (European Session) opens and closes by 4 to 5 o’clock in the evening, by 1 to 2 o’clock in the afternoon, the New York and other financial floor in the pacific ring their bell to open (American Session), as the New York is closing the Sydney and Tokyo market opens at 10 to 11 o’clock at night (Asia Session).
NOTE: these times are in GMT +1
As one exchange floor is closing another is opening, making the trading cycle to keep rolling 24 hour in 5 days, so you don’t have to worry which part in the world you are in you can always catch the forex train except on weekends when all financial centers in the world are closed.
ALSO READ: What are Exchange Rate?
To some this might not be an advantage while to those who trade stock knows how severe and hectic commissions can be. Have you ever pay commission for nearly every transaction you make; these commissions can be so much that they can swallow part of your profits.
Though in forex trading, there are commissions paid to ECN brokers- minimal commission ranging as low as $4 for one lot traded. Most brokers are compensated with the Bid-Ask spread which are very tight.
These are just some of the critical examples that make the forex market more likely to be traded than futures, stocks or options. Also brokers and other financial institutional do not influence the market like what we see in the newspaper, this makes the forex market decentralized and difficult to be manipulated. The existence of internet and computer has made traders not need to worry about middle-men; one can easily open a brokerage account without stressful procedures.
Do not misunderstand me, the stock markets are very lovely to trade along with futures and commodities, most of the billionaires and legends we hear of today actually made their fortunes from trading stock, futures and offsetting their risk with options. Stock is pretty easy and futures quite simple to predictable once you dedicate your time and you’re willing to give it all you got then you will get a hang off it.