Continuous, 24-hour trading
The currency exchange market is a true 24-hour market. Equity trading is restricted to the operating hours of the various equity exchanges. While after-hours trading has become available through Electronic Communication Networks (ECNs), there are no guarantees that the market will be liquid at all times, or that trades will be executed at "market prices".
High liquidity and greater efficiency
Trading volume in the currency markets can be 50-100 times larger than the New York Stock Exchange. Twenty-four hour, five day per week accessibility greatly increases the probability of finding dealers willing to buy or sell currencies at fair market price. Equities are more vulnerable to liquidity risks due to limited trading volumes and market accessibility. In the less liquid equity markets, large price movements may occur when individual transactions take place.
Intra-day volatility
Large volume and liquidity combined with fewer instruments generates greater intra-day volatility in the currency markets than exists in the equity markets. The volatility provides potential opportunities for trades, which could result in a profit or loss.
Low spreads
Currency trading offers spreads that are much lower than what can be obtained when buying or selling equities (especially in after-hour markets). Although the tight currency spreads of 5 pips historically have only been available for transaction sizes of $1M or higher, a shift towards offering these tighter spreads for smaller transaction sizes is occurring. FXTrade offers these types of tight spreads regardless of size.
Leverage
Typically, margin ratios associated with trading currencies are higher than those associated with trading equities. This is primarily attributed to the higher levels of liquidity within the currency markets. Margin trading allows FX market participants to trade much larger amounts than they have deposited. For example, with a margin ratio of 20:1 and a deposit of $10,000, an investor/speculator can trade amounts up to $200,000. Trading in larger volumes, in turn, allows these investors/speculators to take better advantage of small price movements.
Leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.
Profit potential regardless of market direction Forex trading involves a substantial risk of loss.
By definition, an investor with an open position is long one currency and short another. If a trader believes a currency is about to depreciate, he/she sells that currency short and goes long another currency. In the currency markets, selling or shorting is a necessary component of completing a trade. Profit potential exists in the FX market regardless of whether a trader is buying or selling as long as you took the same direction as the market.
No commissions or transaction costs
A currency transaction typically incurs no commission or transaction fee outside of the quoted spread. This is in stark contrast to the equity market, where commissions for stock trades range from $8 to $70 and higher in addition to the quoted spread.
Some brokers, such as GFT, are compensated through the bid/ask spread as a currency dealer. This includes proceeds from buying, selling, converting, as well as holding currencies and interest on deposited funds and rollover fees.
GFT is compensated by revenues from its activities as a currency dealer, including proceeds from buying, selling, converting, as well as holding currencies and interest on deposited funds and rollover fees.http://fxtrade.oanda.com/currency_trading/fx_vs_equity.shtml
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