As the largest trading investment method in the world, it has many advantages compared with futures or stocks.
What are they?
I summarize the following six advantages: 1. Low commission similar to futures and stock speculation, a large amount of money can be controlled by paying a small margin.
However, margin requirements are typically 5 per cent of the total amount held for futures and 50 per cent for equities, compared with about 1 per cent.
For example, for a $100,000 foreign exchange transaction, the margin requirement is $1,000.
That means currency traders trade five times as much as futures and 50 times as much as equities for the same amount of their own money.
When you trade on margin, this can be a profitable way to develop an investment strategy, but it is important that you take the time to understand the risks involved.
Make sure you fully understand how your margin account works.
Once the margin available in your account falls below a predetermined amount, you should liquidate some or all of the positions created in your account.
You may not receive margin calls before the position is liquidated.
Therefore, you should regularly check your margin balance and use stop-loss orders on each open position to limit downside risk.
2. No Commission, No Transaction Fee When you trade futures, you must pay transaction fees and brokerage fees.
One of the advantages of foreign exchange trading is that there is no commission.
That’s your advantage.
Forex trading is a global interbank market that allows buyers to match sellers in real time while you don’t have to pay a broker commission to match buyers and sellers, the spread is usually higher than for futures trading.
For example, if you trade in dollars, the spread on foreign exchange trades is about 3 points ($30 worth).
In most cases, yen futures trade at a spread of 1 point (worth $10), but on top of that you will also pay a commission to the broker, which can be as low as $10 for autonomous online trading and as high as $50 for full-service trading.
However, this will include all offers.
You must compare the online forex to the specific futures commission you pay to determine which is more favorable.
3. Limited Risk, Guaranteed Stop Loss When you trade futures, your risk can be unlimited.
For example.
Before the discovery of BSE in the United States, you thought the price of live cattle would continue to rise in December 2003.
After the outbreak of mad cow disease, live cattle prices fell sharply, falling by the daily limit for several days.
You cannot exit your position, which could result in the loss of funds in your account.
As the slide continues, you have to find more money to cover the losses.
4. Position Rollover When a futures contract expires, you must plan ahead if you want to roll over the trade.
It is due every two days.
You need to continue to roll over to be able to stay in the position.
5. When futures are traded in the all-weather market, they can usually be traded for only a few hours at the opening of each day.
If there is a major news event after the close, you will not be able to exit your position before the next open, which may take several hours.
Foreign exchange trading is open 24 hours a day from Monday to Friday.
The day’s trading starts in New York, then moves on to Europe, Asia, Australia and finally back to the United States as the Earth rotates.
You can trade any time from Monday to Friday.
6. Free Market forex is probably the largest market in the world, with an average daily turnover of $1.4 trillion, 46 times that of all futures markets combined!
Many people around the world trade foreign currencies, and even governments have no control over their prices.
The New Year will be the market holiday, the Fed is about to start trimming.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
