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When Forex trading is compared to other financial markets such as the stock market it offers a few more advantages than any of these other markets. This is what makes Forex trading very attractive to new traders. Some of the top advantages of the FX market include:

Liquidity - Because of the size of the Forex Exchange Market, investments are extremely liquid at any given time. International banks are continuously providing bid and ask quotes and the high number of transactions completed each day means there is always a buyer or a seller for any currency.

Accessibility - The market is open 24 hours a day 5 days a week. The market opens Sunday Evening Eastern time and closes Friday afternoon New York time. Trades can therefore be placed over the Internet from your home or office.

Open Market - Currency fluctuations are usually caused by changes in the environment of the economies and political landscape. News about these changes is accessible to every trader at the same time and there is no insider trading.

No commissions- Brokers earn money from the spread- difference between price at which a currency can be bought and that which it can be sold at. As mentioned above, trading on margin gives you more buying power and the potential for more profits or losses. How this works is; a 1% margin trading account allows you to control a position size of $100,000 with $1,000. When you are trading with $100,000 small market changes in the price of the currency can result in large profits or losses.

Currency movement in Forex is measured using points known as pips

For example, USA dollar, is traded in units down to 4 decimal places, the last decimal place is called a pip. Instead of $1.4 FOREX quotes like in Forex bureaus, the price is seen as $1.4012.

When you are trading $100,000 then each pip is worth $10 profit. So if this price moves up 1 pip to $1.4013 you will make $10 profit. If price changes from 1.4012 to 1.4062 there is a difference of 50 pips which represents a profit of $500. Without margin trading if you had $1000 in your account to trade with, a price change from 1.4012 to 1.4062 represents a difference of $0.5 profit. So the benefit of margin trading is increased profit potential. There are also brokers giving 5 decimal currency quotes, the fifth decimal is known as a fraction of a pip and not a pip. Therefore before determining the profit you will get from a trade it is best to determine if your Forex broker is quoting currencies using the 4 decimals points or the 5 decimal points.

Visit Forex Market Science Website and learn how Forex leverage can increase trading profits and losses and how to calculate leverage and margin so that you use it to work in your favor.

By A. Tonnie
Article Source: http://EzineArticles.com/?expert=A._Tonnie