The Benefits of Trading Forex

trading forex

Introduction

Forex trading holds many advantages. However, you can never benefit from them if you do not try it out. If you have already gotten a basic grasp of the basics of Forex trading, now is time for you to know why you should stop procrastinating and start participating in it.

The Forex market has a daily turnover in excess of $5 trillion. This makes it the largest financial market in the world. This sheer size, together with its other characteristics, makes it hold many opportunities for those who participate in it. 

Hence, here are some of the benefits you will be enjoying once you start trading Forex.

  • High Liquidity

The Forex market is highly liquid. Largely, this stems from its humongous size and the many traders that participate in it. As a result, it is rare not to have your order instantaneously filled. Also, because of its high liquidity, no matter how large your order is, you can be sure that it will always be filled. 

It is, however, noteworthy that increased volatility, the constant fluctuations in exchange rates resulting from varying demand and supply of different currencies, can be disastrous if not properly managed. There are stories of Forex traders who have had their accounts completely wiped out as a result of it.  

  • Low costs

The Forex market is cost-effective for traders. There are no clearing and exchange fees. Its participants have tax advantages on their profits, too. As a result, the Forex market is the only financial market where traders are able to keep as much as possible of their profits for themselves.

But there is a caveat. For example, Forex brokers make their gains by levying charges on the trades their clients take in the form of the difference between the bid and ask price, known as the spread, for each currency pair. However, some other brokers charge commissions in addition to that. 

Add to that, also, the fact that the bid-ask spread tends to be very wide when volatility is low and when the market is not being actively traded. Therefore, you must make the right inquiries about costs before you use any broker and before you trade.

  • Low barriers to entry

It is easier to start participating in the Forex market than in any other financial market. First, look at the minimum deposit required to open a Forex account. It can be as low as $10. While starting to trade with this is not advisable, it drives home the point that getting in on Forex trading is not as capital intensive as you might already be thinking.

Forex brokers offer different account types with different minimum deposit requirements to suit the needs of a wide range of Forex traders. Therefore, do not let your thought of a huge capital requirement hold you back from Forex; open an account most suitable for your situation today and start reaping gains.

  • 24-hour access

The Forex market is open 24 hours every day — from Sunday evening to Friday afternoon. This advantage is largely due to the different time zones of the different parts of the world. Consequently, the market is always open for all, operating in sessions. 

  • London: 3 a.m. to 12 p.m. 
  • New York: 8 a.m. to 5 p.m.
  • Sydney: 5 p.m. to 2 a.m.
  • Tokyo: 7 p.m. to 4 a.m.

From London to Tokyo session, the market is up and running all the time. However, that it is open all through those sessions does not mean that you can trade any time. The best time to trade, instead, is when two trading sessions overlap. 

  • Leverage

Leverage is the advantage that makes Forex trading attractive as it is. With leverage, Forex traders magnify their potential for gains. For example, if you deposit say $200 in your account, and your broker gives you a leverage provision of 1:1000, you will automatically be able to control $200,000 in trading capital. That is massive. 

Margin is related to leverage. In the earlier example, it is the $200 that must be deposited in the account. It is collateral of some sort. It is important to state that you must tread with caution in using leverage. It is a double-edged sword that can increase your potential for losses as much as it can increase your potential for gains.  

  • No research overload

Over 2,000 stocks are listed on the New York Stock Exchange. Just imagine the volume of analysis you will have to do if you want to invest profitably in that market. You will have to pore through tons of financial statements of hundreds of companies just to find out why you should buy them.

That is simply impossible. You will be worn out if you make the attempt. Now, compare that to the Forex market with only a handful of currency pairs. Even out of these, only a few are widely traded. You can, therefore, eliminate the need for a lot of analysis by simply focusing on them. To start enjoying those benefits of the Forex market and more, you should sign up for a membership plan with 1000pipBuilder. Their forex signal service is one of the best in the market.

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