When a trader is looking to trade they are exploring optimal trading conditions and a viable opportunity to earn profits. Numerous reasons exists where traders might be of the opinion that forex trading fits the bill but let us understand on how to trade forex . Let us explore some of the benefits associated with this form of trading.
It is possible to go short and long with forex trading
Yes it is possible to go short in a market with derivative products, and an example is CFD. In fact short selling is a notable feature of dealing in forex. The reason being you always end up selling one currency that is the quote currency to purchase another one that is the base currency. A price of the forex price indicates on how one unit of the base price of a currency is worth in the quote currency.
The market hours of Forex
For five days in a week the forex market is operational for 24 hours a day. The working hours are on the longer side since the transactions between the parties are completed over the counter as there is no role of a central exchange agency. Since forex assumes to be a global exchange market it is possible to take advantage of the active working hours of a forex operation. Take note of the fact that the forex market operations are going to vary in the month of March, April along with October and November as the countries are going to shift into daylight savings on various days.
A question that some novice might ask is the forex market operational during the weekends. The market is going to close at 10 pm UK time and does not open till 9 am UK time Monday morning. Since the market happens to be only closed to retail traders as the central banks or related organizations does not have a role to play. What it means is that forex trading might take place over the weekend. It indicates that there could be a price difference between closing of Friday and the opening hours on Monday. This is known as the gap.
The traders need to take stock of the weekend hours of trading as their positions need to be altered accordingly. If you are not looking to expose your position to gapping a sensible option is to close the gapping on Friday night or limit as well as placing stop to manage the risk.
Liquidity levels tend to be higher in forex
No doubts to the fact that forex market is one of the liquid ones in the world. It indicates that there are a large number of buyers or sellers in operation at a given point of time. In fact a major chunk of activity is centred around how to make profits. A higher level of liquidity ensures that it is possible to complete transactions easily and quickly. The cost and spreads of the transaction are on the lower side.
