There are many benefits to choosing Forex as your online home business. Here are just a few of the reasons why this is currently considered the best available opportunity for a home business and why so many people are choosing it:
1. Low Initial Investment/Opportunity cost.
A typical minimum to open a Forex trading account is around $1000 (less than that for mini or micro accounts). Compare this with starting a traditional small business or buying a franchise which will cost you literally hundreds of thousands of dollars and you will easily agree that this, in itself is a serious enough reason not to pass by this wonderful opportunity!
2. Low transaction costs.
The transaction cost (the bid/ask spread) is typically less than 0.05% of the contract size in normal market conditions. At times, depending on the broker, the spread could be as low as .005% (percent) or even 0 on some rare occasion. This depends on your account settings and all will be explained later. The important part is that it is cheap to place trades, e.g. a to place a $1000 trade it will cost you 10 to 50 cents – depending on currency you want to trade!
3. Highly computerized market, suitable for automation
Forex is a decentralized OTC (Over the counter) market where the transactions are settled electronically, over a network of interconnected computers. Your computer, when you start trading will also participate in this process, along with your broker's servers and the big computers at the banks.
This presents the wonderful opportunity, for the individual trader to get equipped with software tools which facilitate the trading process by monitoring the market, alerting the trader of certain conditions or even executing some pre-set actions on the trader's behalf (e.g. closing half the position when a certain price is reached).
Until recently such software was only used by the large financial institutions. This has changed drastically in the past few years as the software becomes more affordable and more and more traders begin to understand that it is pointless to spend hours staring at the screen when a computer program can do it for you. Some of the most popular such tools are the Forex Killer System and the Forex Autopilot.
4. Mini, Micro and Demo Accounts.
You would think that trading currencies would require a lot of investment. The reality is, it does not. Most Forex brokers offer "mini" and even "micro" trading accounts, with a minimum deposit of $100 or less! This is not to say that it is a good idea to open an account with the bare minimum but it does make Forex very affordable to the average individual who does not have a lot of start-up trading capital.
As a matter of fact most Forex brokers provide demo accounts for beginner traders to practice trading, along with streaming Forex news and charting and trading software. All free! These are very valuable resources for SMART traders who would like to sharpen their trading skills with 'play money' before opening a live trading account and risking real money*.
5. Forex is a 24-hour market - Trade when you feel like it!
With Forex there is no waiting for the opening bell - from Sunday nightfall to Friday daylight (EST), the Forex market never sleeps. This is particularly convenient for those who want to trade on a part-time basis, because you can pick your own hours to trade -- morning, noon or night.
6. Leverage
When you trade stocks, if you want to buy $1000 worth of stocks you have to have $1000 in your account. In Forex, a small account can command a much bigger interbank currency contract. For example, most Forex brokers offer 200 to 1 leverage, which means that a $50 cash margin in your deposit would allow you trader to buy or sell a $10,000 worth of currency. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. This is somewhat oversimplified but you get the idea? A lot has been written about how leverage is a “double-edged sword”. And it is true – in a leveraged account, the lack of proper risk management can result not only in large gains but in substantial losses. What is important to understand is that leverage is simply a tool – use it wisely and it works for you. Abuse it – and it turns against you.
7. High Liquidity
Because the Forex Market is so enormous it is also incredibly liquid. This means that you are never stuck in a situation when you are unable to close your position in cases when you don't like how yor trade is turning.
8. No Fees
No clearing fees, no exchange fees, no government fees, no account management fees, no redemption fees. Forex brokers are compensated for their services through something called the bid-ask spread or simply “spread”. The spread is essentially a commission but it is fixed and is several times lower than stock exchange market fees and commissions (read below)!
9. No market manipulation, no insider trading
The global currency market is so massive and has so many participants that no specific entity (not even a central bank like the Federal Reserve or Bank of England can command the market for a significant period of time or gain complete control over any currency pair.This levels the ground for everybody.
10. No fixed lot size
In the futures markets, for instance lot or contract sizes are determined by the exchanges. A standard-size contract for silver futures is 5,000 ounces. In spot Forex trading specify your own lot size! So you are not forced to over-trade your account – just be patient and trade smaller amounts until you grow more confident.
11. No competition between the participants - Forex is not a "0-sum" game!
Yes, believe it or not this is true! And this fact is very important, because this misconception is largely responsible for a certain sense of negativity often associated with Forex, and Forex trading. This is often going so far as to compare Forex with gambling. Nothing could be further from the truth. When X people sit at a table to play Texas Holdem there will be one winner in the end, and a win for him means a loss for everyone else - because he takes all of their money.
With Forex this is not the case. Why?
Two reasons: Firstly - there is no act of appropriation such that an object of value changes hands and becomes the property of another party without any compensation to its original owner; and secondly - unlike the game of poker where all the parties and all the resources (yours and your opponents' money) are participating in the game, in the case of Forex, the money is actually a partial representation of a countless number of other resources, namely the economy and infrastructure of a particular country. The Forex investors are only a fraction of all the participants in this huge system. In this system new valuable goods and services can be created or destroyed and any such action will create a net gain or loss in the system. This in turn will affect the underlying currencies, and this gain or loss will not be compensated out of someone else's pocket.
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Regardless of all the advantages of trading the Forex there are a number risks associated withit, as with any investment. As always emphasized by the CCTC - Commission Trading Futures, Commodities and Options bears large potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. The material presented here is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. As always - past performance of any trading system or methodology is not necessarily indicative of future results.
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* Note from admin: I personally do not recommend trading on a demo account, except for the first couple of weeks when you're learning the ropes, getting used to the mechanics of placing and closing orders and figuring out how to use your broker's software. It's like playing poker with fake money – it makes the whole exercise somewhat pointless as it takes psychology out of the picture. And the psychology of the trade, as you will learn, plays an extremely important part in the process. Therefore, my advice is – open a mini account, a micro even, if you wish, but feed it with real money. Even if it is only $300 or $200, even if your trades only bring you 2 or 3 dollars profit – the thrill will still be there, you will analyze an go through each and every trade and this will teach you invaluable lessons.
