In the last couple years, an increasing number of traders have been flocking to the foregeign currency markets. There are numerous benefits and advantages to trading Forex, which is part of what draws new traders. Just a handful of the benefits offered the individual FX trader are reviewed in this article.

Traders pay no commissions, no clearing fees, no exchange fees, no government fees, and no brokerage fees. There is a cost to transacting a currency swap, however. Forex brokers are remunerated for their services through the bid-ask spread. The difference between the bid and ask prices quoted to you by your broker is where they earn their living. The wider the spread, the more money they make on each transaction. You will want to compare the width of spreads offered by one broker to those offered by another as this is the primary source of expense and "slippage" for the retail foreign currency trader.

With no commissions or other fees, the retail cost is typically less than 0.1% when normal market conditions are prevaling. The larger dealers, are often able to narrow the bid-ask spread sufficiently to bring your cost down to .07 percent. The proportional cost you experience will depend upon your leverage, however.

FX traders are able to make a realtively small deposit to their account, but control a much larger currency value. This leverage imparts the ability to make significant profits, while at the same time requiring relatively little in the way of trading capital. Many Forex brokers offer 200 to 1 leverage. This implies that a $50 dollar margin deposit would allow a trader to buy or sell $10,000 worth of currency.

Leverage is a "double-edged sword," however. If a currency moves against you, your broker will require that you maintain adequate capital in your account to cover your margin requirements. Without proper risk management, this high degree of leverage can quickly lead to extended losses. As such, the use of leverage inflates your losses, as well as your gains. The over use of leverage is often what results in traders being confronted with margin calls and "busting" their accounts.

There are no middlemen in the FX markets. You will be trading directly with the market responsible for the pricing on a particular currency pair. There is also no fixed size that need be traded, which is dissimilar to the futures or option markets, where lot or contract sizes are determined by the exchanges. Trading spot Forex allows you to regulate your lot size, allowing traders to participate with smaller accounts while still applying proper position sizing to control risk.

Online Forex brokers offer "mini" and “micro” trading accounts, some with a minimum account deposit as low as $300, if not less. This does not mean that you should begin trading with so little capital, as under capitalized traders rarely ever survive. However, this does mean that you can better control your risk by trading smaller sized positions, then scale up to large positions as your experience and account size permit.

In the United States, we are accustomed to fixed exchange hours, but the foreign exchange operates on a 24-hour day. Trading begins on Sunday evening and continues through to Friday afternoon. During that time, the Forex market does not close. This is tremendously beneficial for those traders who trade on a part-time basis, allowing them to choose when they want to trade, whether it be in the morning, during the afternoon or even in the dead of night.

The risk of a large player cornering the market on a particular currency is also removed. The foreign exchange market is of such enormity, and has so many participants, that no individual marekt player, not even a central bank, can control the market price of a currency for an prolonged time period.

Because the Forex Market is so enormous, it is also extremely liquid. Under normal market conditions, retail traders can instantaneously buy and sell at will without risk of being "stuck" in a trade. This liquidity, combined with the 24-hour market, means that a trader can use their online trading platform to automatically close position at a desired profit level by using a limit order, or close a position if the trade moves against them with use of a stop loss order. Gapping through such order may be a common problem in the stock market where liquidity can be problematic, but the foreign currency market is much less prone to such occurrences.

You will also find that the majority of online Forex brokers offer 'demo' accounts to their prospective clients, allowing them to practice trading in live market conditions. Using a demo account allows you to experience the market with breaking Forex news and charting services. The best part is that it is offered free of charge, allowing you to make your "rookie mistakes" before you have money on the line. This is a very valuable experience for traders who would wish to sharpen their trading talent with 'pretend' money before opening a live trading account and risking real money.

As you may now be realizing, getting started as a currency trader does not necessarily require significant money. In reality, it is quite affordable even compared to trading stocks, options or futures.