Margin Trading
Forex is traded on margin, typically 100:1 leverage. This is a more efficient use of your capital because you only have to allocate a very small proportion of the value of your position to secure a trade, while maintaining full exposure to the market. In effect you are able to magnify the returns on your investment. However it is important to note that although if the markets move in your favour profits will be magnified, if the position turns against you your losses will also be magnified.
24 hour market
FX trading is a true 24-hour market, beginning in New Zealand followed by Sydney, and moving around the world to Tokyo, London and New York. Unlike any other financial markets, investors can respond to currency fluctuations caused by economic, political and social events at the time they occur, without having to wait for markets to open.
Trading FX is potentially less risky than trading the share market where you are sometimes exposed to price ‘gapping’ between the time markets close and re-open.
Liquidity
The FX market is open 24 hours. It is the most heavily traded financial market in the world, with a daily average turnover of well over US$3 trillion. With so many market participants trading over 24 hours, the FX market is more liquid than any other financial market.
For example if you trade a particular currency pair, whether it is for $10,000 or $10,000,000 trade, you will typically receive the same quoted price, which may not be the case in less liquid markets such as the share market.
