Over around two decades, the financial markets have seen phenomenal growth in terms of trading volume and providing tremendous trading opportunities to the traders and investors. That is why the financial markets have become more and more accessible to a more significant number of people. The Forex market is one of the financial markets where people deal in currencies. People buy and sell currencies in order to make some profit.
Before starting Forex trading, the trader must consider the benefits and drawbacks of it before investing their time and money in the market so that they are aware of both sides of a coin. One of the most amazing features of the Forex market is that it is very much adaptable in terms of time commitment. Also, for a beginner trader, the resources required are comparatively low to start, which makes the Forex market the market of choice.
There is a lot to know about Forex trading, but if you are a novice, then you should start with some benefits of Forex trading. If you already have some idea about what a Forex is and how it works then here are some major advantages among many others which you will probably discover in your trading journey.
Some Advantages of Forex Trading are
Here are some of the major advantages of Forex trading that will help you to understand more about Forex trading. And will lure you into starting trading.
1) Biggest Financial Market
The Forex market (foreign exchange market) is one of the biggest financial markets in the world. And the Forex market is not going to give up its power anytime soon. If we talk about the trading volume of the market, it is something between 4 – 5 trillion dollars in a day. Now you can understand it yourself why this market is used as a picture of global economic and trading activity. Forex market is the most accessible trading market in the world that attracts more and more traders to participate in it from all over the world.
2) High Liquidity
The Forex market is so gigantic that one can have an idea from its liquidity. The enormous liquidity means that a large volume is traded in this market and in normal market conditions, so you do not have to wait. You can buy and sell currencies just with a click because on the other end there is always someone who is willing to trade back with you. If you want, you can also automate your trades as well.
The average global daily trading volume of the stock market is around 200 billion dollars, and for the Forex market, it is around 5 trillion dollars(Yes it is trillion with a ‘T’). This large amount of money is traded by companies, individuals, and banks for different reasons.
The high liquidity shows that the transactions in the Forex market can be done easily and quickly, and because of that, the transaction costs, also known as the spread, are low relative to other markets.
3) 24-Hour Market
The best thing about the Forex market is that it never sleeps. It stays open five days a week and 24 hours a day. So you can trade whenever you want to. In the Forex market, there is no opening bell and no waiting time to execute your order. Trading starts with Sydney session opening and shut with New York session. It means you can trade at your preferable time whether, in the morning, noon or night and also can trade actively or passively.
It stays open for such long hours because the transactions are done over the counter (OTC) directly between parties. The Forex market keeps shut down from Friday 10 PM to Sunday 9 PM (UK time). But here is one more twist, the market stays closed for retail traders but not for related organisations and central banks.
So, there are chances that there will be a difference in closing price on Friday and opening price on Sunday. That is why traders need to have a high awareness of weekend trading hours and manage their positions accordingly.
4) The Market is for Everyone
The Forex market welcomes everyone with open arms, whether it is a novice or an expert. Starting frex trading does not cost too much compared to other financial markets such as stocks, options etc. That is why it attracts a large number of people globally. Without spending too much money, a beginner trader can easily take advantage of it.
Take your time to learn and train yourself in it to become skilful. Also, it would be great if you go slow and steady by learning every aspect of it so that you can become a successful Forex trader.
5) A Decentralised Market
With this utter size of the market and the participants, no one can control it for an extended period of time. It doesn’t matter how big the institution or institutional broker is. The Forex market speedily adjusts itself and balances the playing field effectively. The Forex market is a decentralised market that is why there is no middleman in this market.
Since there is no middleman, so the traders trade directly with other participants in the market without any headache of a middleman. A retail Forex broker enables the connection as the market is directly affected by the economy of several countries itself; that’s why it is impossible to influence it by one person or company. Neither you can corner it, nor you can control it, which means you are just like a small fish in the sea.
Leverage is just like borrowing money to trade from your broker in excess than your deposited funds. It is the most powerful and the most lucrative feature of Forex trading. Leverage gives the ability to trade with a larger amount of money than the money actually in their account. So if a broker provides you with the leverage of 100:1, it means that you can trade $100,000 if you had $1000 in your account.
The more fascinating it sounds, the more losses it can cause. Because you will get benefits of the leverage and unfortunately if the predictions do not go as you thought then you need to bear that loss as well. So, always use the leverage wisely and only if it is needed.
It is a technique which is used in Forex to mitigate the risk of unwanted moves by opening numerous strategic positions. Volatility is a part of something which makes Forex so exciting. Hedging is a great way of reducing the loss or limiting the loss to a known amount. There are a number of strategies that you can use to hedge Forex, but multiple currency pair hedging is the most popular.
You can also use hedging to prevent loss in other markets as well. For instance, the USD/CAD has a reverse relation with crude oil. That is why hedging is used against falling oil prices.
8) Make Money Both Ways
It doesn’t matter whether the market is falling or rising; you can trade in either situation. You can take advantage of the opportunity in any market condition even when the price is going up and when the price is going down. With the Forex market, you can make money both ways. The high volatility is just like icing on the cake, the more risk, the more beneficial it would be if timed right. There are a lot of trading opportunities to be found; it doesn’t matter whether you are a day trader or following longer market trends.
When it comes to selecting one market that provides optimal trading conditions and the best outcomes in terms of profit, the Forex market is one of them. But the most important thing that you need to keep in mind is to choose a trustworthy broker whom you can trust completely. Because there are various scams and we don’t want you to be the part of those frauds. If you are looking for a notable broker, Brokero is one of the leading brokers who provide impressive leverage to its clients. Provides commission-free trading and many more other features that a trader looks for. Check it out and take the full advantage of the services that the broker offers.