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There are a number of benefits to trading forex, including the ability to trade on margin, high liquidity and the flexibility to trade around the clock from Monday through to Saturday morning.
Leverage is a key feature of FX trading, and means you only need to put up a small initial deposit, or margin, to enter a trade. Our margins start from 2%, which is a leverage of 50:1.
Margined trading can be a more efficient use of your capital because you only have to provide a percentage of the overall value of your position, while maintaining full exposure to the market. This effectively means that you increase your profit potential if the market moves in your favour, and loss potential if the market moves against you.
For example, with $100 as position margin, you could enter a position that has an overall value of $5,000. Remember that increased leverage enhances losses as well as profits. Additionally, markets can move against you and losses can exceed your initial deposit due to rapid price movements.
Learn more about using leverage in forex trading or view our FX trading examples.
Forex is an over-the-counter (OTC) market, which means trades don’t take place through a centralised exchange, like shares or indices for example. FX trading takes place across the globe, around the clock, from Monday morning through to Saturday morning.
This means that unlike any other financial markets, investors can almost always respond to currency fluctuations caused by economic, political and social events as they occur, without having to wait for markets to open.
Currency markets offer price volatility 24 hours a day, so whatever your trading strategy, there is the potential to find numerous trading opportunities. This also means that the markets are constantly moving, which places even more emphasis on monitoring your positions and using the appropriate risk-management tools.
The currency market is the most heavily traded financial market in the world, with a daily average turnover of around $5 trillion. With so many global market participants trading at any one time throughout the day, the currency markets are more liquid than any other financial market.
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DISCLAIMER
Trading in foreign exchange (“Forex”) on margins entails high risk and is not suitable for all investors. Past performance is not an indication of future results. In this case, as well, the high degree of leverage can act both against you and for you. Before you decide to invest in foreign exchange, you should carefully assess your investment objectives, experience, financial possibilities and willingness to take risks. There is a possibility that you will lose your initial investment partially or completely. Therefore, you should not invest any funds that you cannot afford to completely lose in a worst-case scenario. You should also be aware of all the risks associated with foreign exchange trading and contact an independent financial advisor in case of doubt.
Leverage enables traders, using a relatively small amount of money, to take a position that is many times the initial investment. This leverage effect can work both in your favour and to your detriment. The Forex market opens up the possibility to utilize this leverage effect to a high degree; at the same time, however, it also opens up the risk of experiencing high losses. Please trade with caution when you use leverage in trading or investing. Your risk is particularly not limited to the initial investment, but can quickly fall into a negative range in the event of strong movements, meaning you may be obligated to pay far more than your initial wager.