Why Forex Trading?
Forex trading has been there for over 30 years. Originally it was only for major banks and financial institutions. But later it became available to common people also through fincical institutions or brokers. These days all you need is a computer with an internet connection and a forex trading account. The broker from where you got the trading account, will supply you all the necessary software that is required.
So why is forex trading than stock trading? You can see the following reasons why anyone wants to prefer forex than stocks.
1) No commissions or No Fees
If you have any experiance in stock trading you probably know the different fee involved like the broker fee, government fee etc. Every time you buy a share you need to pay some amount to the broker. But in Forex you don’t need to pay any fee. The broker earns the money through spread which is the difference between the bid price and ask price. I will explain you all these terms like spread, leverage etc in the coming chapters. All you need to do is make sure that the spread is small enough to enter the forex market.
2) Its a 24 hr market
Generally stock market is only day time market where you can buy the shares only when the stock exchange is open. But forex is a 24 hr maket, 5 days a week. You can buy or sell currencies at any time you want even at 12 mid night.
3) No fixed Lot Size
Generally in stock trading you should buy the minimum lot size that is the number of shares which is set by your broker. You can not buy lower than that. But in forex you can set your minimum lot size depending on the account type. I will explain you more later about the lots and different account types the brokers offer.
4) High Leverage
Forex brokers offer high leverages like 1:100 etc. That means even if you have $100 in your account you can control a money of $10,000 in forex trading. So it involves a potential profit ratio than the stock market. If you follow good money management rules it will profit you more than the stock markets. But remember it is not a game and if you don’t follow the money management rules you may lose all your money also. I will explain you more about the leverage in the coming chapters.
5) High liquidity
Liquidity is the amount of money that flows in the market. Per day the amount of money that rotates in stock markets is around 30 million dollors. But in forex market it is around 2 trillion dollars which is much much larger than in the stock trading. So there is no point that you can not close your trades. With just one click you can close your trades in forex market. You can even set your software to close the trades at a particular point.
6) Free tools from your broker
In forex trading brokers offer you a lot of free tools. For example “Metatrader” is a forex trading platform offered by most of the forex brokers. Once you install this software it shows you how the prices are changing in different kinds of graphs. With metatrader you will also get some other additional tools which you can use to analyze the charts and find out how the currencies fluctuate. Most of the brokers also offer a free demo account where you can practise trading. It won’t involve real money. You just need to register in the brokers website to open a demo account. Once you open a demo account you can start practising trading. It will be done in minutes. Once you get enough experience, you can open a live account and trade with real money.
Put the metatrader image.
7) Low start up balances
Most of the forex brokers provide different kinds of accounts like micro accounts, mini accounts, standard accounts etc. With micro account you can start trading trading even with $10.
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