Since the opening of the foreign exchange market to non-bank traders in 1999, its popularity has continued to increase. In financial market, whether it is private equity, real estate, options or the foreign exchange market, most investors are looking for a more satisfactory return on capital in terms of the level of risk they bear.
So why do retail investors or traders prefer to choose the foreign exchange market?
High leverage and low cost in the foreign exchange market
Market-run traders use high leverage to trade. Leverage means that the trader’s position can be much larger than the account’s capital. For example, a $5,000 account, with enough guts, can hold $10,000, $50,000, or even $100,000. Of course, when you leverage, there will be side effects in any trading market, and the foreign exchange market is no exception.
The profit and loss in any transaction are related to the size of the trader’s capital. Therefore, if the proportion of leverage is too large, and if you do not develop in accordance with your own budget, you may face an unexpected loss.
Opening account cost is low
Another advantage of the foreign exchange market is the low cost of opening an account. Although the minimum amount of activation for an account is determined by the chosen broker, it does not mean that the lower the cost, the better. It is more important to find a balance.
The other aspect of low cost is reflected in the transaction cost. The transaction cost of the foreign exchange market is only the difference between the currency pairs. If the trader’s transaction is developing in the direction that he expects, the smaller the spread, the greater gained profit.
The foreign exchange market is related to other markets.
Everyone knows the most popular story of 2013 Nikkei 225 Index, the Japanese stock market, which hit a new high under the influence of the Japanese Prime Minister and the Bank of Japan’s radical monetary policy. As all the markets in the world become more closely related, it may not be difficult to figure out that the yen is one of the best performing currencies in 2013, and the strength of the yen has helped the Nikkei 255 index achieve in 2013. A 57% return rate.
In fact, this is very understandable – because all financial markets are settled in the currency of each country, when the capital flows into the market of a country, the currency of that country will be traded in large quantities.
This thinking or analysis is also known as cross-market analysis or the correlation between markets. And the correlation between these markets has greatly promoted the development of the foreign exchange market. Because once global capital begins to move toward a country, the current trend of the country’s currency is likely to multiply.
Active Market 24 hours a day, 5 days a week
The Stock market is very unfriendly for those who need to work and want to trade. For example, the New York Stock Exchange is only opened after many people start working, and the closing is basically before people get off work, which means that if you want to maintain a positive transaction, you may need to ask someone to help with the transaction.
But there is no such problem in the foreign exchange market. It can be traded 24 hours a day, and there are different trading opportunities in each trading period, so it is very easy to find a trading opportunity that suits you.
