Surely you have heard about stock and future trading already. Yes, they are both trading, but FOREX trading is different from the two and boasts off a lot of advantages.
If one opts to trade stocks, he or she will have to choose among the 4,500 stocks that are listed in the New York Stock exchange and 3,500 others that are listed in NASDAQ. While, when trading FOREX, there were dozens of currency pairs available to trade, but majority of the FOREX traders are trading only the four major pair, which is a lot easier to keep an eye compared to stocks.
Unlike with stocks and future, FOREX is open 24 hours from Monday Australia open to Friday New York closing. On the other hand, futures market closes daily. With the FOREX market open 24-hours, traders can immediately trade when important news comes in anytime of the day, while in futures, any news or important event happening while the market is close can cause major movement on the next day’s opening. Although futures also have overnight market, they are rarely traded and are difficult to access especially for average traders or investors.
Majority of the FOREX brokers are not charging commissions. They are normally compensated through spreads. Although some of the brokers now charges commissions as well, with the stiff competition that brokers have, one can surely get the best deal as compared to trading futures.
Generally, under normal market conditions, trades are executed instantly. This means, that price you see when you enter your order is the price you can get. However, during important news under extra volatile market conditions, order execution can be a little delayed.
Stocks had centralized market. Although this can offer various advantages, the use of middlemen is one of the problems with this type of exchange. The middleman is party that links between the trader and the buyer or seller of the security or instrument. This will normally cost both parties some amount of money though fees.
While FOREX trading is decentralized, thus each currency dealers can have their quotes and the tough completion that these dealers have allows traders to access the market easily at a cheaper price.
One more advantage of trading FOREX over trading futures and stocks is the certainty of its price especially under normal market conditions. Unlike with stocks and futures, prices shown are sometimes the LAST trade and not the contract price.
In FOREX trading, online FOREX broker are implementing the margin call feature which will protect the traders account. Margin call will be generated if the margin amount of the trader will exceed the trader’s available balance. When this happens, all of the trader’s open positions will be closed.
On the other hand, in trading futures, the trader’s position can be at a loss bigger than the traders account balance. Any deficit resulting to the loss will hold the traders liable.
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