There are favorable and unfavorable sides of Forex trading just like any other trading activity in the financial world. If you are seeking to take advantage of the market, then you must weigh both these sides and decide if it is appropriate for you.
Favorable sides of Forex Trading
It is known that the Forex market is embodied with risks that can’t be fully removed but controlled. But setting aside the risks, there are advantages that are very appealing especially to people who are dreaming of becoming financially stable just by trading inside the comfort of their own homes.
Talking about accessibility, the Forex market is known as the most accessible for retail, individual traders. Through a Forex broker, the trader can set up a trading account in Forex just for a minimum deposit of $50. Brokerages offer trading platforms that have very useful trading tools, indicators, real-time market pricing, price charts, news, and more. The market is also open, 24 hours/5 days a week, making it suitable for all kinds of traders.
Leverage is the ability to open more positions in the market, just by paying a small deposit called margin. Depending on where the trader is situated, he will have different leverage ratios that can go up to 100:1.
Possibility of Fast Returns
Being the most liquid market, the Forex market offers fast returns to those who have adequate knowledge about trading and can make the right entry and exit points.
Short Selling is Easy
In other markets, short-selling a trade will require the borrowing of assets, opening more exposure to risks. Thankfully, this isn’t the case in the Forex market.
From small-time traders to professional traders and huge financial institutions, they are able to take advantage of the liquidity in the Forex market, particularly those who are trading the major currencies.
Technical analysis is widely used in the Forex market. This trading strategy bases its analysis on price history as well as market trends.
Very Less Likely To Have Insider Price Manipulation
In stocks, commodities, and bonds markets, the activity is greatly manipulated by private information or stakeholders.
Lesser Fees and Commissions
Unlike bonds, equities, and mutual funds, there are no hidden charges and fees in currency trading.
Automated trading is very convenient among retail traders. It eliminates emotions when trading and your trades still go on despite being away from your computer.
Unfavorable Sides of Forex Trading
Now, let’s tackle the unfavorable sides of Forex trading. They may appear disheartening at first glance but there are actually a couple of ways to handle it.
Extreme volatility in the market can cause drastic changes in your trades. This may hurt your trading strategy.
May Be Disadvantageous For Small Traders
Since the market is being participated by huge financial institutions, there are instances in which retail traders are at the disadvantage because of limited funds.
Lighter Regulatory Rules
Because Forex is an over-the-counter market, trading activities are decentralized and there is no regulatory department that handles all the incoming and outgoing trades.