Forex and I think that these two factors

Forex and I think that these two factors

In this article I will cover two important advantages offered by the Forex market traders.

Daytrading low profile

If you want to daytrade stock and you have less than $ 25,000 account, you will probably have a difficult life. The reason is that a rule is called "pattern day traders" put some restrictions on daytrading business if you have less than that amount to your account. In short: If you have less, your daytrades (positions entered and exited the same day) are limited to three in all five trading days period. Your broker should monitor your activity and make sure you do not execute trades that are not allowed by the "pattern day traders" rule. This regulation applies to shares and stock options. The foreign exchange market at the time of this writing is not included.

Control Risk

The FOREX market has two characteristics that can translate into better risk control of your craft. What I mean by risk control, the ability to define your maximum loss should the market move against you. If we do not consider the use of options or other instruments such as hedge, the way to take control of losses is using a stop loss order.
Nothing new up here. The problem at times traders face is that to stop may be made at a price much worse than originally anticipated and intended.

Generally, there are two situation where this can happen.

The first is to make liquidity in the market. Within this article, take liquidity as a synonym of scale. If poor liquidity in the market, there may be significant price difference from one execution to the next. You can see this easily in any intraday pattern of small volume safety: the price does not move in a continuous way of harmoniously as it does in a very liquid market, but it tends to "jump" from one level to the next. This can affect the performance of your orders in a negative way. This phenomenon is also known as "slippage". Here we consider in particular the exit row, but the slippage may affect your entry order as well, and this could be translated as the buy order executed at a higher price than I wanted to buy. Forex market is not afraid of competitors for liquidity. 1.5 trillion dollars are traded on Forex every day. On other markets follow a great distance.

The second factor that gives trouble is the control of risk in the occurrence of price gaps. Say your stock closed today at 63, and your guests to a 61.5. In theory, your maximum risk is 1.5 points per share. But the action for any reason opens for trading tomorrow at 57, and will be stopped out at that price, so the actual loss will be 5 points per share. Gaps are common in stocks is always important news is announced when the market is closed. Somewhere important news can cause a gap even intraday, especially in a less liquid market. Some other times, trading in shares has been suspended only wait in anticipation of important news. A gap in almost sure when the news is released. Of course, your position may also benefit from a gap if the gap direction is in your favor. But the point here is that the occurrence of defects reduces their power to control risk with a stop loss order.

The Forex market is almost always open from Monday to Friday. There could be wild intraday moves caused by the news, but the appearance of voids are very rare in the week.

These are just two of the potential advantages of the Forex market offers traders. There are many others that I will not cover here, from the cost of trading (commissions, often zero), the amount required to open an account (which can be very low). All these factors explain why the Forex market attracts more and more traders.



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