New Discovery Gives You A Mini Forex Trading Advantage
Why trade forex? Why spend the time and effort to understand a
large and complex market like the Foreign Exchange? Well, mainly
for the chance to make large profits, while incurring low costs.
The mini forex trading market is a very lucrative market, for a
variety of reasons. I`ll go over a few of them in this article.
First, think margin. In the mini forex trading market, a
trader`s money can play with 5-times as much value of product as
a futures trader`s, or 50 times more than a stock trader`s.
Just like futures and stock speculation, a mini forex trading
market trader has the ability to control a large amount of
currency by putting up a small amount of margin. However, the
margin requirements that are needed for trading futures are
usually around 5% of the full value of the holding, or 50% of
the total value if you are trading stocks. The margin
requirements for the mini forex trading market are about 1%. For
example, the margin required to trade foreign exchange is $1000
for every $100,000.
This can be a very profitable way to trade, but it`s important
that you fully understand the risks that are involved. Always
make sure that you know how your margin account is going to
work. Read the margin agreement between you and your clearing
firm carefully. Talk to your account representative if you have
any questions.
The positions that you have in your account could be partially
or completely liquidated if the available margin in your account
falls below a predetermined amount, and you may not get a margin
call before your positions are liquidated. Because of this, you
should monitor your margin balance on a regular basis and
utilize stop-loss orders on every open position to limit risk.
That covers the profits end, but what about the costs? When you
trade in futures, you have to pay exchange and brokerage fees.
The mini forex trading market is commission free, a much better
scenario. Currency trading occurs on a worldwide inter-bank
market that lets buyers be matched with sellers in an instant.
But even though you do not have to pay a commission charge to a
broker to be matched up with a buyer or seller, the spread is
usually larger than it is when you are trading futures. And the
spread is where the brokerage makes their money.
For example, if you are trading a Japanese Yen/US Dollar pair, a
mini forex trading market trade would have about a 3 point
spread (worth $30). Trading a JY futures trade would likely have
a spread of only 1 point (worth $10), but you would also be
charged the broker`s commission on top of that. This price could
be as low as $10 for self-directed online trading, or as high as
$50 for full-service trading. However, this is generally all
inclusive pricing. It`s a good idea to compare both online mini
forex trading and your specific futures commission charges to
see which commission is the greater one. Still not convinced?
Consider the fact the mini forex trading market is highly
liquid, ensuring that a trader will never be trapped in a
position, as you can be in an equity or futures market. Or that
it trades 24 hours a day, allowing a trader to act on major
market events when they happen, rather than waiting for the
opening bell. And last, but certainly not least, it is simply to
largest market in the world. It is not regulated. No central
bank can do more than influence the market. You will never need
to worry about government interference.
mini forex trading trading is a great alternative to futures and
commodities trading. Unless you are a broker, you will likely
want to get some help in mini forex trading. As with any type of
trading, there are always some risks involved, but if you take
the time to understand the market, and design a trading system
that is right for you, you will be successful.