Forex vs. Other Financial Markets
In several ways, Forex is different from other financial or stock markets. In general, the Forex market offers many opportunities for profits, notably thanks to the availability of liquidity, market accessibility and technical features adapted to novice traders. The great news is these qualities offer many advantages that can benefit traders on a regular basis.
So, we will look at the ways in which Forex differs from other markets.
Availability of liquidity on the Forex market
Forex trades 5 trillion dollars daily, so there’s no shortage of liquidity. This makes all other financial markets diminutive, averaging about $84 billion a day on average. Investors can join the market at any time without any limitation. In various stock markets, a lack of liquidity and the denial of certain transactions can occur due to a small number of investors and volume.
A market that is open 24 hours
Forex is a market which trades over the counter, which implies it is not traded through a usual exchange. This means that trading can be carried out during business and trading hours of different countries throughout the globe.
There are no restrictions on the Forex market; you can join a trade, change it, and get out of it, as you please. Unlike other financial markets, where the markets have minimal availability for limited times of the day. Forex grants you the opportunity to trade your preferred strategy whenever you want.
Trading Costs
A large number of Forex accounts trade without commission, and there are no data licenses or high fees. All trading costs are incorporated in the spread amid the buy and sell price, which is always displayed on your screen. This is entirely different in other markets because you often have to pay a commission to the spread and broker, as well as the price and charts data charges.
Despite the fact you do not see the trading costs for other financial markets, the Forex spreads are always transparent.
Safe price
When trading in Forex, there is a speed completion of orders and the price preserved as long as the market is under healthy conditions. On the flipside, other financial markets do not provide a safe price or immediate trade execution. In spite of this, the advantage of electronic transactions and the assured quick executing of order, prices in other financial markets are far from being the same. The prices charged by brokers depict the last trade, not certainly the price for which the operation will be executed.
Guaranteed risk limit
Traders can open positions by setting a loss limit in order to manage the level of risk appropriately. Also, the total risk is pertaining to the amount of money in respective trader’s account. However, in the Forex market, the risk is minimised considering the efficiency of operating in an online trading platform which generates a warning when the trader exceeds the capital in his trading account.
Every open position closes right away, notwithstanding the nature or size of the positions held in the account. Unlike the other markets, the position is resolved as a loss, and the individual is responsible for any resting debt in the account. That’s not good.
Operate in both directions
Since other financial markets are more of an investment tool than speculation which is fashioned to be bought and maintained. When a trader has currency in his portfolio which is quickly depreciating, it becomes difficult to sell. Even when a buyer is met, he can only limit his losses. In general, other markets only profit by buying cheap and selling expensive.
Unlike other markets, in Forex, traders can buy expensive and sell cheap with ease and with the possibility of making profits. This is owed to the fact that a currency is valued compared to another currency. Hence, even when a currency is sold, another is being purchased en masse.
Regardless of whether you are a novice or an experienced trader, Forex is an excellent investment tool than any other market, considering it offers more freedom of trading in all disciplines.