Advantages Of Trade In The Forex Market Final Part
Low operational costs.
Currency transaction, as a rule, isn’t integrated to the commission or operational collections. Unique costs with which it is necessary to cover to the dealer with currency at position accepting are spreads. Besides, thanks to efficiency of the exchange market, “lagging” expenses practically are absent or are minimum.
“Lagging” is the expenses arising at an exit of the trader on the market at the price lower than level which was necessary for them. For example, the trader wants to acquire the share at the price of 2,00 dollars, but by the time of order execution, the trader should take shares at the price of 2,50 dollars. A difference in fifty cents is lagging expenses. Lagging costs have considerable influence on large traders.
At purchasing of a considerable quantity of the goods, the trader creates excess supply of buy orders in the market. It forces the price to grow. By the time of purchase of all necessary quantity average price on which the goods were acquired, will be above, than the price on which them intended to acquire. On the contrary, at sale of a significant amount of the goods, the trader creates excess supply of sell orders in the market. It forces the price to decrease. By the time of sale of all goods average sales price appears more low, than the price on which originally intended to market the goods.
Thanks to low operational costs, the minimum lagging and considerable variability during the day, realization of frequent trading activities with smaller costs is possible. The rough spread will constitute no more than 0,03 % of the size of your position. As an example, you can purchase or sell 10000 US dollars, and it will entail a spread of all in 3 points that is equivalent to 3 dollars.
Only few banks and people are ready to lend money for realization of trading activities with shares. And if are ready, it is necessary to try to convince them to invest in you and in your ideas that certain shares will raise or will go down in the price. Hence, in the presence of the account for 10000 dollars frequently it is possible to dare to acquire securities only for 10000 dollars.
But at trade in currencies thanks to borrowed funds it is possible to trade currency for 10000 dollars, having on trading to the account from fifteen (for a lending margin ratio 200:1) to two hundred dollars (for lending margin coefficient 50:1). It allows the average trader having the small trading account, less than 10000 dollars, to receive considerable profits at the expense of change of currency exchange rates. The given idea is explained further in the book Â«the Dealer currency with a part-time employmentÂ».
Profit in the market with a tendency of increase and with a lowering tendency.
At stock trading profit earning is possible only in case of growth of the price of shares. If there are suspicions that the price will decrease or move in a lateral corridor, a unique way is to sell shares and to keep aloof. One of the disappointments connected with stock trading consists that the dealer can’t get profit in case of price reduction on the share. The exchange market allows selling currency on lower rate that gives the chance to get profit if there are bases to consider that value of currency will go down.
People who took the decision to participate in forex trading should start from learning the basics of currency exchange market to make sure you do not experience problems with this industry.