Online forex trading has become the major way for most people to trade currencies anywhere in the world. In the past, only big financial institutions such as banks and trading houses could trade currencies; however, with the spread of Internet-based trading, even individual traders can now buy and sell currencies. Here are some of the benefits of online forex trading that everybody can now enjoy.
- 24 hour trading: Since there is no one centralized exchange where forex trading takes place, with online forex trading you can find a trade at virtually any time of day or night. For example, when the North American trading session is over, you can trade in Asian markets.
- High market liquidity: Liquidity refers to the high number of corporate and individual participants in the market, as well as the ability to convert assets to cash quickly. High liquidity in the currency markets allows you to complete a spot transaction in as little as two business days.
- Accessibility: You can trade from anywhere you have access to a computer and an Internet connection, as long as you have opened an account with a forex broker.
- Transparent markets: Unlike trading in stocks, where a lot of the factors that might affect the value of these securities are hidden, information on the conditions that may cause volatility in the currency markets are readily available to traders.
- Low level of entry: You can start online forex trading with as little as a few hundred dollars in your trading account, since leverage allows you to trade in larger amounts, which also significantly boosts your profit potential. You can avail of as much as 1:500 leverage, depending on your broker, meaning that with $1,000 in your trading account, you can trade as much as $500,000 in the markets.
- You can profit no matter which direction prices are moving.: Since you are trading currency pairs, you can make a profit simply by taking advantage of the relative differences in value between the two currencies.
- There are only a relatively few currency pairs you have to be familiar with: While there are potentially hundreds of stocks being traded in the stock market at any one time, there are only a handful of currency pairs that account for the majority of trading in the forex markets. These include the EUR/USD, GBP/USD, USD/JPY and EUR/GBP.
- Forex brokers do not charge commissions: In general, instead of charging you a commission for every transaction, the forex broker makes their money based on spreads, or the differences, expressed in pips, between the bid and ask price of the currencies you’re trading.
- Online forex trading is relatively easy to learn: There are a wide variety of educational resources available to beginning traders who want to learn how to trade currencies, including articles, videos and tutorials. In addition, traders can sign up for a demo account with forex brokers that allow them to make paper trades in the markets without having to risk real money.