Why Spot Forex
Over the last three decades, forex has become the world's largest financial market, with more than £1 trillion traded daily. Spot forex, FX or forex is part of the bank-to-bank currency market known as the 24-hour interbank market. The interbank market literally follows the sun around the world, moving from the major banking centers in Australia and New Zealand to the Far East, Europe and the United States and then back to Australia.
Until recently, the forex market wasn't suitable for the average trader or individual speculator. Large minimum transaction sizes and often-stringent financial requirements limited the forex market to large banks, hedge funds, major currency dealers and highest net-worth individual speculators. These large volume traders were able to take advantage of the many benefits offered by the forex market, including fantastic liquidity and the strong trending nature of the world's primary currency exchange rates.
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Advantages of Spot Forex Trading
There are many advantages to trading forex compared to investing with traditional methods such brokering shares (equities) or futures. Forex benefits include:
Highly trending markets
Because the foreign exchange market gaps are very limited (the market is closed briefly on weekends), it's not dramatically affected by buying programs that allow it to be easily manipulated. The forex market offers some of the smoothest trends available in any market. No other market can come close to the amount of monetary volume and participation as the forex market, making it a haven for traders who do not want to deal with gaps and price movements, erratic spikes and other choppy market conditions more commonly experienced in the lower volume markets.
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No commissions or hidden fees
Though some speculators are unaware, all financial markets have a spread (the difference between the bid and ask price). In traditional futures markets, you are not only paying the spread, but you are also paying commission charges, clearing and exchange fees on top of the spread. We offers you commission-free* trading on tradable prices in the forex market. What you see is what you get, allowing you to make quick decisions on your forex trades without having to account for fees that may affect your profit/loss or slippage between the price you have just seen on the ticker and the price upon which the order will be filled. There is no premium for calling in orders, even if you trade via the phone, use market orders, stop orders, limit orders or even contingent orders. In spot currency trading you do not have to worry about extra charges.
Better leverage (gearing or lodging your trades)
One of the main advantages for traders trading spot forex is the margin rate or leverage that is available. In spot currency trading, customers receive one low margin rate for trades done 24 hours a day. Margin rates in spot currency trading vary from around 1 to 5 percent depending on the size of transactions a particular trader initiates. Spot currency trading gives customers one rate all the time, with no hassles and no margin calls, so traders can manage their own risk efficiently and simply.
24-hour trading
Since the spot forex market, in a sense, follows the sun around the globe, it rarely experiences periods of illiquidity (low volume or widened spreads). What this means is that any trader in any time zone can trade spot forex at any time during the day or night. You no longer have to wait for the market to open when news has already hit the streets or have to stop trading because the CME, CBOT or other futures and trading pits have closed for the day. This gives the spot forex trader added flexibility and continuous market opportunities that are not available in traditional exchange-traded market products, like regular futures and stocks trading. You are no longer limited to trading during the comparatively short trading days offered by the localized times of those domestic markets.
Foreign exchange is one of the few true 24-hour markets. When trading forex, customers enjoy unparalleled liquidity 24 hours a day. In many futures markets, however, the overnight access available to traders is simply window dressing. The lack of liquidity and restrictions on what types of orders a customer can place can make trading and protecting positions a nightmare.
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Trading methodology
Trading spot currencies can be done with many different methods and you will find many types of traders. From fundamental traders speculating on mid- to long-term positions based on worldwide cash flow analysis and fixed income formulas to the technical trader watching for breakout patterns in consolidating markets to the Gann fanatic looking to duplicate the techniques of W.D. Gann, the methods for trading foreign exchange are many. Spot currencies are a great market for the trader. It is where the "big boys" trade and can provide both large profit potential, as well as commensurate risk, for the speculator.
No middlemen
Centralized exchanges provide many advantages to the trader. However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located between the trader and the buyer or seller of the instrument traded will cost the trader in time or money. Spot currency trading eliminates the middlemen and allows customers to interact directly with the market-maker responsible for the pricing on a particular currency pair. Forex traders get quicker access and cheaper costs.
Buy/sell programs do not control the market
In spot currency trading, the liquidity of the forex trading market makes the likelihood of any one fund or bank to control a particular currency very slim. Banks, hedge funds, FCMs, governments, retail currency conversion houses and large net-worth individuals are just some of the participants in the spot currency markets, where the liquidity is unprecedented. This differs from the stock markets, which can be very susceptible to the buying and selling habits of large funds.
Trade off of your profits
Ever been up on a stock and wished you could leverage that profit and get in a little more of the issue? In spot currency trading, you can. Use your open profits to add to your positions. As you gain experience, experiment with pyramid trading strategies. The options are endless because the market is cutting edge.
BPForex is a Introducing Broker to WHSelfinvest.