There are many reasons why traders choose to trade in the forex market rather than in other markets. Because of its high liquidity, 24/7 schedule, and easy accessibility, forex trading has emerged as a very in-demand career, specifically for people that have a financial education background. Being your own boss and making money just by using your laptop of mobile is enough to motivate both young graduates and seasoned professionals to consider a forex trading career.
Forex trading can have very low costs, brokerage fees, and commissions. As a matter of fact, there’s really no commission in its real sense. Most forex brokers just earn money from the spreads between forex currencies.
Therefore, one doesn’t have to worry about incurring separate brokerage charges, eliminating an overhead. You can compare that to equity or other securities trading where the brokerage structure varies widely and a trader must take such fees into account.
The forex market runs all day, letting traders trade at their convenience. This is very beneficial for short-term traders who usually take positions over short durations. Few traders make trades during complete off-hours.
For instance, Australia’s day time for the East Coast of the United States. A US-based trader may trade AUD during US business hours, as little development is expected and the prices are in stable range during such off-hours of the AUD.
Such traders use a high-volume, low-profit trading strategies, since they have little profit margins due to a lack of developments specific to forex markets. Rather, they try to make profits on a relatively stable low volatility duration and compensate with high volume trades.
Traders can also take long-term positions, which can last from days to several weeks. Forex trading is very accommodating in this manner.
Compared with any other financial markets, the forex market has the biggest number of market participants. This enables it to have the highest level of liquidity, which means that even the large orders of currency trades are easily filled efficiently without any large price deviations.
This eliminates the possibility of price manipulation and price anomalies, thus allowing tighter spreads that lead to more efficient pricing. You won’t have to worry about the high volatility during the opening and closing hours, or stagnant price ranges during the afternoon, which are the trademarks of the equity market. If there’s no major event expected, you can observe similar price patterns throughout the non-stop trading.
No Central Exchange
The forex market runs an over-the-counter operation around the globe. This means there’s no central exchange or regulator for the forex market. Different countries’ central banks occasionally interfere as needed, but these are very rare events and they only take place under extreme conditions. Most such developments are also already perceived and price into the market.
Such a decentralized and deregulated market aids to avoid any sudden surprises. Compare that to equity markets, where a company can suddenly declare a dividend or report huge losses, leading to huge price changes.
In addition, the chances of insider trading are nearly zilch, as there are really no insiders in the forex market, which is dependent on global factors and perceived developments.