There are many different advantages of trading forex instead of futures or stocks, such as:
1- Lower margin
Like futures and stock speculation, a forex trader has the ability to control a large portion of the currency by essentially putting up a small margin. However, the margin requirements needed to trade futures contracts are usually around 5% of the total value of the holding, or 50% of the total value of the shares, the margin requirements for forex are around 1. %. For example, the margin required to trade forex is $ 1,000 for every $ 100,000. This means that forex trading is a currency that traders can play with 5 times more product value than futures traders, or 50 times more than stock traders. When trading on margin it can be a very profitable way to create an investment strategy, but it is important that you also take the time to understand the risks involved. You need to make sure you fully understand how your margin account works. You need to make sure you read the margin agreement between you and your clearing company. You will also want to speak to your account representative if you have any questions.
The positions you have in your account may be partially or fully liquidated in the event that the available margin on your account falls below a predetermined amount. You cannot receive a margin call until your positions are liquidated. For this reason, you should regularly monitor your margin balance and use stop-loss orders on each open position in order to limit the downside risk.
2- No commissions and no exchange rate
When you trade in futures, you have to pay stock exchange and brokerage fees. Currency trading has the advantage of being commission free. It’s so much better for you. Currency trading is a global interbank market that allows you to connect buyers and sellers in an instant.
While you don’t have to pay a broker commission to make the buyer match the seller, the margin is usually higher than when trading futures contracts. For example, if you were trading a Japanese yen / US dollar pair, the currency trading would have a spread of around 3 points (worth $ 30). Trading a JY futures contract would likely have a margin of 1 point (worth $ 10), but you will also be charged the broker’s commission on top of that. This price could be as low as $ 10 top to bottom for self-directed online trading, or as high as $ 50 for full service trading. However, it is an all inclusive price. You will need to compare both the online forex market and the specific futures commission fees to see which commission is higher.
3- Limited risk and guaranteed stops
When you trade futures contracts, your risk can be unlimited. For example, if you thought that live cattle prices would continue their upward trend in December 2003, just before the discovery of mad cow disease in American cattle. After that, the price dropped dramatically, lowering the limit several days in a row. You could not have exited your position and as a result, it could have wiped out all the capital in your account. As the price continued to fall, he would have been forced to find even more money to cover the deficit in his account.
4- Post rollover
When futures contracts expire, you need to plan ahead if you want to roll over your trades. Forex positions expire every two days and you have to renew each trade just to be able to stay in your position.
5- 24 hour market
With futures contracts, you are usually limited to trading only during the few hours that each market is open on a given day. If important news breaks out when markets close, you will have no way out until the market reopens, which could take several hours. Forex, on the other hand, is a 24/7 market. The day begins in New York and follows the sun around the world through Europe, Asia, Australia and back to the United States. You can trade anytime from Monday to Friday.
6- Free market place
The Forex market is perhaps the largest market in the world with an average daily volume of US $ 1.4 trillion, which is 46 times more than all the futures markets combined! With the large number of people trading currencies around the world, it is very difficult even for governments to control the price of their own currency.