is aReferring Broker of:
New to Forex
Overview of Advantages | ||
Advantage | Forex Market | Futures Market |
24-hour market | Yes | Limited |
No-commission trading* | Yes | No |
Default settings: | Yes | No |
Guaranted limited risk | Yes | No |
*FXCM and FX Trading24 are compensated for their services by the spread between the bid and ask prices. **Without proper risk management this high leverage can lead to both positive and negative results. | ||
Liquidity
The spot forex market is a market in which 4 trillion US dollars change hands daily, making forex the largest, most liquid market in the world. The forex market can handle trade volumes and numbers of transactions that dwarf those in any other market. When you compare the 30 billion US dollar turnover in the futures market to the forex market, it is clear that the futures market offers only limited liquidity. The forex market, on the other hand, is always liquid – that is, positions can be liquidated at any time and orders are executed in the blink of an eye: 24-hour market activity.
24-Hour Market Activity
Unlike most futures markets, forex trading is a seamless 24-hour market. Trading begins with the opening of the markets in Sydney and Singapore on Sunday at 5:15 pm EST. At 7:00 pm trading begins in Tokyo, followed by London at 3:00 am and, finally, New York at 8:00 am. This allows traders to react immediately to any news, positive or negative. When key data are issued in England or Japan, while the US futures market is still closed, trade is scarcely possible when the next session opens. (There are futures markets that allow you to trade currency contracts at night, but trade is very thin and illiquid. It is difficult for the average investor to get access to those markets).
Zero Commission
In the forex market you do not pay any commissions or transaction fees. The cost of filling orders is covered by the bid/ask spread. While bid/ask spreads exist in stock and futures markets as well, traders still have to pay commission for both buy and sell orders. (FXCM and FX Trading24 are compensated for their services by the spread between the bid and ask prices.)
Order Execution – Quality and Speed
Even with electronic trading platforms and guarantees - usually limited - of fast order execution, execution prices for market orders in futures and stock markets are still rather uncertain. In futures or stock markets, the prices you see usually correspond to the most recently completed transactions and not necessarily the price at which an order can be filled. FXCM traders, in contrast, get their orders filled in the blink of an eye, and executed at the best available prices offered by competing large banks.
Guaranteed Limited Risk
To properly manage risk, it is essential for traders to place stops and limits. The distance of a limit in relation to entry and stop-prices is determined based on the balance in a trader's account. With FXCM, risk in the spot FX market is limited because the FXCM trading platform automatically triggers a margin call if the margin requirement exceeds the account balance due to trading losses. If this occurs, all open positions are automatically closed. This prevents account balances from dropping into negative territory, thus limiting risk to a maximum of the total account balance, in accordance with FXCM's guarantee. If a trade runs against you in the futures market, on the other hand, you have to liquidate with a negative balance and come up with the deficit at your own expense.
