Forex trading is becoming more and more popular and many private traders now prefer the forex trading to the classic stock trading or trading in derivatives such as warrants or certificates. So why should I gain experience as a trader Forex? The main benefits of forex at a glance.
Due to its size, the forex market is an extremely liquid market, on which 24 hours a day can be traded throughout. Thus, the risk for the occurrence of larger price gaps, so-called gaps, is also much lower than in the equity markets.
Due to the high leverage, the first forex experience can be gained with low capital stakes. This enables a large number of private traders to be more active in trading than in the stock market or on the futures markets, which are only accessible with substantially higher capital requirements. Most forex brokers only require a maximum margin of 3% of the traded volume.
Almost all large currency pairs are characterized by a pronounced volatility, particularly in the course of the publication of economic data, interest rate decisions of central banks or other “breaking news”. This is why Forex trading is essential to keep an eye on the news situation.
Depending on the trading style, you should be aware before opening a position that significant messages can cause large movements in the currency pairs. However, high volatility is also exactly the property that short-term traders value and need in the Forex market to benefit from large movements in brief periods of time.
Even without an agitated news situation, majors tend to move in marked trends. This provides excellent conditions for profitable trading in almost every trading style. Daily spans of up to 200 pips in EUR/USD are no rarity and with one reason for the ongoing forex boom.
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The fact that the market operates independently of a central trading place or a stock exchange makes it possible to trade 24 hours around the globe. However, it should be noted that, especially outside of European and American business hours, there is a lower volume of trade in the majors, which can result in negative effects on the quality of the order execution. The so-called slippage, i.e. the difference between the placement of the order and the actual course of execution, may be higher at these trading times. In particular, caution is required for placing market orders without a price limit.
Nevertheless, Forex trading offers traders who pursue a job during the day or prefer to devote themselves to other activities, even if the European stock markets are already closed. Thus, the forex market offers freedoms like no other financial market.
However, the flexibility in forex trading does not only refer to the selection of trading hours, but also to the forex trading itself. Thus, regardless of the size of the account or the broker, it is possible to earn both rising and falling prices. This is not self-evident and usually only possible in the stock market with special trading accounts, which are not always easy to access for trading beginners.
If you go around in the EUR/USD long currency pair, you speculate on rising euro rates in relation to the US dollar. Conversely, a euro-short position would be given if one were to put down euro rates. It is clear that, due to the fact that a currency pair is always traded, a long position in the base currency automatically corresponds to a short position in the counterpart currency.
In contrast to the trading of secondary values in the stock market, which often have only a small volume of trade – which can have a negative effect on a fair pricing – there are virtually no limits to the order size for private traders in the forex market.
The market is extremely liquid in all major trading pairs, whereby the order size can be adjusted arbitrarily to the desired order volume and the account size of the trader. The market is therefore highly interesting for trading beginners with a small trading account, as well as for professional market participants with millions of sales, and provides excellent scalability for effective risk management through its low-cost scale.