Since the dollar has fallen from 2002 many investors have opened their eyes to opportunities in foreign currency trading. Trading currencies can be strenuous as it is a 24 hour market and is always open somewhere. Here are a list of advantages for those considering currency trading:-
1. Market Size
It is after all the largest financial market in the world with transactions of over $2 trillion occurring every day. That also means that is highly liquid and you can therefore enter or exit positions with ease.
2. Small Capital
One does not even have to have a large capital investment to start getting good returns. You can open an account for as little as $250 and work your way up from there.
3. Potential to Profit
This is something that excites every investor and the foreign exchange market has plenty to offer. Whether a bear market or a bull market, there is a chance to make some good money here by taking an appropriate position.
4. Tax Advantages
For all forex traders it does not matter whether you made your profit on a trade in 2 minutes or one month since you entered the trade. The tax consequences will be the same. So 40% of your profit will be taxed as short term capital gains and the balance 60% as long term capital gains attracting a tax rate of 15%.
5. Trading Hours
As this is a global market which is open 24 hours you can choose the time you want to trade in the market according to your convenience. So whether you work at day or go to school at night, the market is open when ever you are ready for it.
6. No Commissions
In this market the broker does not charge commissions as do stock brokers. Instead there is a pip spread which is the difference between the buy and sell price of the currency.
7. Leverage
This is one of the most attractive advantage for investors. It is normal to get a 1:100 leverage account. Therefore if you invest $1,000 you can then buy currencies up to the value of $100,000/- So even a 1% profit means $1000 which is 100% on your investment. While in normal circumstances it would mean just $10 on your $1000 as profit.
8. Guaranteed Stops
You can always predetermine the amount of maximum loss that you are ready to sustain and the system will automatically close the position accordingly. So unlike other circumstances, you don't stand the chance to lose your shirt!
Happy Forex trading!
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