Advantages Of Forex: - 24-hour trading, 5 days a week with non-stop access to global FOREX dealers.
- An enormous liquid market making it easy to trade most currencies.
- Volatile markets offering profit opportunities.
- Standard instruments for controlling risk exposure.
- The ability to profit in rising or falling markets.
- Leveraged trading with low margin requirements.
- Many options for zero commission trading.
- Easily accessible and attractive for the investors of different levels.
- Protect your revenues from foreign currency transactions by hedging against exposure to adverse rate movements.
- Trading Forex has much lower transaction costs than other investment products, a very important point for active traders.
- The market on which money are assets, have highest of all possible liquidities.
- It allows to avoid a problem of the instability, existing in futures and other share investments where during one time and for a determined price can be sold only the limited quantity of contracts.
- The FOREX market is so vast and has so many participants that no single entity, even a central bank, can control the market price for an extended period of time.
- Determination of the maximum loss by using stop loss.
- Trading using an easy & fast platform.
- All transactions are over the counter (OTC) that there is no specific location for the market.
- The Market affected only by the supply & demand.
- Real time charts.
Forex Vs. Options Options are financial instruments that convey the right, but not the obligation, to engage in a future transaction on some underlying security. For example, buying a call option provides the right to buy a specified quantity of a security at a set strike price at some time on or before expiration, while buying a put option provides the right to sell. Upon the option holder's choice to exercise the option, the party who sold, or wrote, the option must fulfill the terms of the contract. Types of options: Exchange traded options (also called "listed options") is a class of exchange traded derivatives. Exchange traded options have standardized contracts, and are settled through a clearing house with fulfillment guaranteed by the credit of the exchange. Since the contracts are standardized, accurate pricing models are often available. Exchange traded options include: - Stock Options.
- Commodity Options.
- Bond options and other interest rate options.
- Index (equity) Options.
- Options on futures contracts.
Over-the-counter, or OTC options are traded between two private parties, and are not listed on an exchange. The terms of an OTC option are unrestricted and may be individually tailored to meet any business need. In general, at least one of the counterparties to an OTC option is a well-capitalized institution. Option types commonly traded over the counter include: 1) Interest rate options. 2) Currency cross rate options. 3) Options on swaps or swaptions. Employee stock options are issued by a company to its employees as compensation. Forex | Options | Largest and most liquid market in the world | Liquidity depends on underlying asset & expiry date | 24-hour trading action for 5.5 days a week | Not 24-hour. Varying trading hours based on the exchanges | Easier to calculate stop beforehand | Difficult and unreliable to place stops on underlying asset | Minimum slippage and order errors | More room for slippage due to lack of liquidity | 100:1 leverage on standard-sized accounts | Leverage depends on the type of option transaction you want to engage in. Selling Naked Calls or Puts generally requires a huge amount of margin | No commissions | Commissions on every trade | Most liquid market in the world | Limited liquidy | Limited risk, most forex brokers will automatically close your positions when your account balance goes to zero | It is possible to have a negative balance if you write an option | Instant executions, all-electronic market | Delayed fills possible |
Forex Vs. Futures: Futures is Exchange traded contracts are not issued like securities, but they are "created" when one party buys (goes long) a contract from another party (who goes short). In the beginning there are no contracts, so the number of long contracts must equal the number of short contracts. This always goes through the exchange, which means that the exchange is the counter party for all trades. However, the exchange does not take any net positions. In this way clients do not know with whom they have ultimately traded. Compare this with securities, in which an issuer issues the security. After that, it is a legal entity that is traded independently of the issuer. Even if the issuer buys back some securities, they still exist. Only if they are legally canceled can they disappear. Forex | Futures | Largest and most liquid market in the world | Liquidity dependent on month of traded contract | 24-hour trading action for 5.5 days a week | Varying trading hours based on the markets | Can profit in both bull and bear markets | Tend to have extended bearish periods | Can short-sell anytime | Trading restricted by limit up/down rule | Minimum slippage and order errors | More room for slippage and error | 100:1 leverage on standard-sized accounts | Smaller leverage | Extremely low margins 1% or better | Higher margins usually 5-8% | No commissions | Commissions on every trade | Most liquid market in the world | Limited liquidy | Instant executions, all-electronic market | Delayed fills possible in open markets | No limits on market moves | Some markets have maximum daily movement limits that can trap you in losing position | Usually free streaming quotes | Expensive fees for streaming quotes |
Forex Vs. Stocks: Forex | Stocks | 24 hour market | Open only a few hours a day | Most liquid market in the world | Limited liquidy especially in the smaller capitilzation stocks | High leverage 100:1 leverage on standard-sized accounts | 50% leverage at most 2:1 leverage to the average stock investor | Slippage is usually very limited | There is usually slippage on every order | No commissions | Commissions on every trade | Can go long or short easily | Harder to go short with uptick rule and possiblity of borrowed shares being called | Can make as many trades you want | Daytrading limitations on how many trades you can do in a period of time | Limited risk, most forex brokers will automatically close your positions when your account balance goes to zero | It is possible to have a negative balance after an adverse move in the market | Minimum slippage and order errors | More room for slippage and error | Can short-sell anytime | Need to obey uptick rule in order to short-sell | Minimum slippage and order errors | More room for slippage and error |
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