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Why Choose Forex? 3


You should ensure that you fully master how your margin account functions. You’ll want to make sure that you read the agreement margin that exists between you and your clearing firm.  
 
You’ll also want to contact your account representative with any questions you might have.  

The positions which are present in your account could be moderately or completely liquidated on the basis that the margin available in your account falls beneath an amount which has been predetermined.

Your margin call might not come in before your positions are liquidated. Due to this, you should supervise your margin balance on regularly and use stop-loss orders on every open position to limit the possibility of a downside.

2. No Fees for Commission or Exchange
When you decide to trade in futures, you will have to pay for exchange and brokerage fees. The advantage of trading with FOREX is that it is commission free. This will prove to be far better for you, because currency trading is an inter-bank market which is worldwide. Therefore, it enables buyers to get coordinated with sellers immediately.

Even though there are no commission fees for broker matching buyers up with the seller, the spread is usually larger than it is when you are trading futures.

As an example: If you trade a Japanese Yen/US Dollar pair, FOREX trade will give you about a 3 point spread (worth $30). However, if you trade a JY futures trade you would most likely get a 1 point spread (worth $10) but on the other hand, you would also additionally have to pay commission to the broker. This price could be as low as $10 in-and-out for online trading which is self-directed, or as high as $50 for full-service trading. Note that the price is all-inclusive.

You will have to evaluate the difference in commission with your online FOREX and your specific futures in order to find out which commission is the greater one.

3. Limited Risk and Guaranteed Stops
Your risk can be unlimited when you are trading futures. An example would be if you thought that the prices for Live Cattle were going to continue rising in December 2003, just before Mad Cow Disease was found in American cattle.

The price for Live Cattle after that striking fall moved the limit down for several days in a row. You wouldn’t have been able to leave your position and as a result, this could’ve cleared out the entire equity in your account. As the price quickly decreased, you would have needed more money in your account in order to make up for the fall.

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