Currency Trading Advantages

In this post i’ll look at the currency trading advantages compared to trading other markets. Firstly, the major advantage that springs to mind is the low margin requirements that many FX brokers offer, making forex a high leverage investment.

Nowadays most retail fx brokers will offer at least 50:1 leverage, in some cases the leverage is as high as 500:1. If 500:1 to leverage is offered it enables a large position to be opened with a tiny amount of capital.

For example to open a USD/JPY for 1 standard 100k lot, only $200 is required! This is very low indeed. This amount of leverage is not realistic for normal trading as the inevitable outcome would be a margin call.

Another big advantage is it’s very easy to get a demo account and practice for many months before trading live.

Unlike futures trading, you can start trading forex with a very small amount of capital. Some brokers have no minimum, but realistically, if you manage to get a micro account (this is an account that allows trading $1,000 lots) you can trade with as little as $500.

Trading costs are generally very low, for example the pair EUR/USD is often only has a 2 pip spread. With most retail brokers there are no commissions, just the spread. ECN brokers often have lower spreads than retail brokers but do usually charge commissions. The spreads are usually very low on the major pairs as they are very liquid.