When you first heard about forex trading, what question could come into your mind? The first one could be about what forex trading is and then what the pros and cons of forex trading are. In this blog, we will talk about the advantages and disadvantages of forex trading which will help you to decide whether you want to invest in forex trading or not.
Forex is a very popular financial market because of its easy access, availability, low capital, fast returns, and so on. On the other hand, forex market also carries questions about its volatility, manipulation, complex strategies, etc. Before diving into the topic, let’s have a brief idea about forex trading.
What is Forex Trading?
The foreign exchange currency market is also known as the forex market. In this market, around $6 trillion in volume is being traded every day. So, you can understand how big the market is! Forex trading involves exchanging currencies as a pair. In a pair, the first currency is called the base currency and the last one is called the quote currency. Basically, you are involved in buying and selling currencies, commodities, indices etc. in forex market.
The Pros and Cons of Forex Trading
If you are considering forex trading as a full-time job or side income source, you need to check out the advantages and disadvantages of forex trading before starting it. You will be able to take errorless decisions if you are well aware of forex trading. So, what are we waiting for! Let’s start.
Pros of Forex trading
One of the most accessible markets for new traders is the forex market. With the lowest amount of money and an internet connection, anyone can start trading forex. It is the easiest financial marketplace where a trader can open a trading account with an online broker with flexible rules within a couple of days. Besides, as forex trading can be done from anywhere, one does not need to be present at a fixed place physically to execute the trades.
If you have 100 USD with you, you can start trading instantly. Most brokers allow traders to trade with 100 USD when it comes to opening a trading account. Even, some of them allow you to deposit 50 USD and let you trade. So, if you have minimum capital in your pocket, you can start trading now.
Leverage is one of the most important factors in forex trading. Leverage enables you to trade big positions in trading. In comparison to most other markets, the FX market has more resources available for leverage. Traders may have access to margin that provides leverage of 100:1 or more for initial cash placed in a trade, depending on where they are trading from.
Fast Returns and Low Cost
In forex trading, once you have made the profits, you can easily withdraw your profits through your broker. But sometimes, it depends on your broker that how fast they can issue your withdrawal process. Moreover, trading costs in the forex market are considerably lower than in other financial markets. Sometimes the bid-ask spread determines the costs of FX trading. Different brokers have different spreads. So, it is important to choose a broker wisely and patiently.
You have a great opportunity to learn by practicing in forex trading. You can easily open a demo account with any broker and practice with virtual money. You can test different strategies in that demo account to find out your own trading strategy. Besides, you can have a real time experience with the broker beforehand to find out whether the broker is suitable for your trading or not.
Cons of Forex trading
Volatility is the main and important factor in forex trading. Other financial markets will also have unstable market conditions, but the FX market is exceptionally unstable. Forex traders who are expecting for quick profits may often face unexpectedly high volatility, which can turn their currency trading tactics useless. Volatility is like a two-edged sword. It can magnify your profits or blow your account within a minute.
Big Players VS Retail Traders
So, while trading in forex as a retail forex trader, you ultimately compete with a large number of experienced traders, international organizations, national central banks, hedge funds, and other market participants. Every day, more than US$5 trillion is being traded. Big players like banks and international organizations are trading in huge volumes. Because of their trading volume, and greater access to information and technology, they have the upper hand in the forex market. They can manipulate the market according to their advantages anytime.
Emotions in Check
It is the most important skill you need to have while trading in forex. Many new traders lose control over their emotions when they face several losses in trading. To be honest, keeping emotion in check is not easy at all though it sounds easy. Trading with emotion is not supported by any professional traders. If you think that you will gain only PROFITS with no or one-two losses, you need to leave this mindset outside of the door of the forex market. But some trader cannot control their emotions and end up losing more money in trading.
Having proper knowledge about the market is crucial while you are trading in forex. You must not only educate yourself about trading in this profitable financial market, but also keep yourself informed about market conditions by following news stories, the NFP, the FOMC, and other events. Besides, finding out the appropriate strategy for profitable trading is another level of test for traders. But once you overcome these obstacles, you are enough confident to trade.
Tips to Remember
- Forex market is huge, and you can have an easy access to this market but remember, you are not only the player here. Keep the big players in mind and play accordingly.
- Train yourself properly by practicing in demo account. Invest money in trading when you are confident to LOSE. Remember, practice makes perfect.
- Do not get angry when you lose and do not get greedy when you make profits. Both are injurious to trading.
- Start with small capital and a small lot. Always maintain risk management and strategies. Trading with risk management and strategies is like sailing a ship without a captain.
- Keep yourself up to date about the forex market. Do not trade blindly. Only knowledge can save you from being a failure.
So, after getting to know about the advantages and disadvantages of forex trading, it is up to you whether you want to trade in forex or not. Don’t hesitate to contact SSF SUPPORT on telegram any time with your queries. Our experienced support team will help you with your trading issues.