There are a number of benefits to trading forex, including the ability to trade on margin, high liquidity and the flexibility to trade around the clock from Monday through to Saturday morning.
Leverage is a key feature of FX trading, and means you only need to put up a small initial deposit, or margin, to enter a trade. Our margins start from 2%, which is a leverage of 50:1.
Margined trading can be a more efficient use of your capital because you only have to provide a percentage of the overall value of your position, while maintaining full exposure to the market. This effectively means that you increase your profit potential if the market moves in your favour, and loss potential if the market moves against you.
For example, with $100 as position margin, you could enter a position that has an overall value of $5,000. Remember that increased leverage enhances losses as well as profits. Additionally, markets can move against you and losses can exceed your initial deposit due to rapid price movements.
Forex is an over-the-counter (OTC) market, which means trades don't take place through a centralised exchange, like shares or indices for example. FX trading takes place across the globe, around the clock, from Monday morning through to Saturday morning.
This means that unlike any other financial markets, investors can almost always respond to currency fluctuations caused by economic, political and social events as they occur, without having to wait for markets to open.
Currency markets offer price volatility 24 hours a day, so whatever your trading strategy, there is the potential to find numerous trading opportunities. This also means that the markets are constantly moving, which places even more emphasis on monitoring your positions and using the appropriate risk-management tools.
The currency market is the most heavily traded financial market in the world, with a daily average turnover of around $5 trillion. With so many global market participants trading at any one time throughout the day, the currency markets are more liquid than any other financial market.
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