A short position is one in which the trader sells a currency in anticipation that it will depreciate. This means that potential exists in a rising as well as a declining FX market. The ability to sell currencies without any limitations is one distinct advantage over equity trading. It is much more difficult to establish a short position in the US equity markets, where the Uptick rule prevents investors from shorting stock unless the immediately preceding trade was equal to or lower than the price of the short sale. The liquidity of this market, especially that of the major currencies, helps ensure price stability.
Investors can always open or close a position, and more importantly, receive a fair market price.
Because of the lower trading volume, investors in the stock market and other exchange-traded markets are more vulnerable to liquidity risk, which results in wider dealing spread or larger price movements in response to any relatively large transaction. However, it is important to remember that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally great. Equal access to market information Professional traders and analysts in the equity market have a definitive competitive advantage by virtue of the fact that they have first access to important corporate information, such as earnings estimates and press releases, before it is released to the general public. In contrast, in the Forex market, pertinent information is equally accessible, ensuring that all market participants can take advantage of the market-moving news as soon as it becomes available. Free Demo Account EFX recommends that all prospective clients experience our platform first-hand.