Online foreign currency trading is similar to the futures markets in that investors are able to control large amounts of assets for a relatively small deposit, or margin. As with all investments, without proper risk management, high degrees of leverage can lead to large losses as well as gains. The leverage in online foreign currency trading is greater than a stock bought on margin and a typical futures contract. For a deposit of just $2,000 an investor can leverage $100,000 worth of foreign currency or $50 leverage for every $1 invested.
Buying a stock on margin only allows $2 leverage for every $1 invested and a typical futures contract allows around $15 leverage for every $1 invested.
Secondly, because you access the foreign exchange markets directly through an online trading platform, you pay zero exchange fees. And like futures, you can roll over foreign currency positions indefinitely. Online foreign currency trading is a 24 hour market that literally follows the sun around the world, allowing you to trade when you want to.
Unlike stocks, there are no restrictions on short selling in online foreign currency trading. Sell or buy-it doesn't matter which way you play the market when you invest in foreign currencies.
Finally, the huge number and diversity of investors involved in online foreign currency trading make it more liquid than both stocks and commodities.
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