Advantages of Forex

Despite the risks, the retail market is growing by leaps and bounds. Obviously, many traders have concluded that the opportunities outweigh those risks. Here is a short list of why people are attracted to currency trading.

No commissions. There are typically no clearing fees, no exchange fees, no government fees, and no commissions. FOREX works off a bid/ask spread and the costs are contained therein. Some brokers who use the electronic communications network (ECN) transaction model, however, also may charge a small lot fee.

High liquidity. With an average of over $3 trillion in transactions daily, it is easy to execute even very large orders in foreign exchange. Online brokers most often offer instantaneous fills on retail orders.

No fixed lot size. The standard lot size in retail FOREX is 100,000 units. Most brokers offer mini-lots of 10,000, and some let you trade as few as 100 units! The variable lot size can be an excellent money management tool for the trader. It also allows the new trader to gradually increase trade size as his or her knowledge and profits rise.

A 24-hour market. There is no opening bell in FOREX! You may trade from late Sunday afternoon (U.S. time) to late Friday evening. You may come and go as you like, and trade for as long a time or as short a time as you wish.


Online access. All retail FOREX is conducted online, via the Internet. You will trade from a broker’s trading platform, which typically includes not only real-time prices and the ability to place buy and sell orders but also a variety of trading tools such as charts and indicators. Most brokers allow clients to call in orders by phone if the need arises.

Low margin, high leverage. Perhaps the most attractive element to FOREX trading is the ability to trade leverage ratios of from 10:1 up to 400:1! This means that you may control 100,000 USD with from $10,000 to as little as $250. With high leverage, a very small move may result in a 100 percent profit—or loss. Gradually increasing leverage can also be an effective money management tool.

Volatility. The FOREX markets can move quickly and sharply; profits can be large if you are correct in your price forecast.

Variety. There are more than 30 currency pairs and crosses traded, although most of the volume is concentrated in about half of those. Many traders claim individual pairs and crosses have personalities that help them make forecasts. There is enough variety to keep opportunities plentiful, but not so much as to be bewildering and confusing.

Not related to the stock market. Currencies most often move independently of the stock market, although there has been a close correlation during the 2008 financial crisis as equities are used as a measure of risk aversion. From an investment perspective it is said that currency prices are noncorrelated with stock prices. For this reason FOREX may be an attractive hedge to a larger stock market account.

Limited regulation. Because FOREX is a global interbank enterprise, regulation is necessarily limited. This, of course, can cut both ways, as mentioned earlier.

No insider trading. It is difficult to get useful inside information on currencies. Even if you did know in advance a key government statistic, the markets are so unpredictable that it is not often easy to foretell which way the market will go after a news release.