This article looks at the different benefits of forex trading.
There are various benefits to trading on the foreign exchange market, some of these being the reason why traders are attracted to the market. By looking at these advantages you can determine whether or not forex trading is the best trading option for you. This article will detail the different advantages of this unique trading environment.
1. The forex trading hours
Unlike the stock market, the foreign exchange market has no set trading times. Instead this market operates on a 24 hour timeframe from Monday to Friday. There is no central exchange through which trades must pass; therefore there are no specific times as to when specific currency pairs must be traded. Of course, certain currencies are more active during particular hours; therefore, it is recommended that you research which market sessions are best suited to which forex strategies and currencies.
2. The ease of forex trading
The majority of trading markets require a broker to act as a middle man between the investor and trader; however, this is not the case when trading on the foreign exchange market. The introduction of online trading platforms has allowed traders to access and trade on the market independently. They have also eliminated the need to be in a particular location in order to trade. This means that an individual can trade from any location without a middle man – all you need is a computer and reliable internet connection. Furthermore, the methods to fund a trading account have become more user-friendly. Previously one would be required to physically contact the banks and brokers; however, nowadays platforms allow the use of debit cards and online payment methods.
3. The initial investment amount
In previous years trading on the foreign exchange market was reserved to large corporations, banks and hedge funds. This was primarily due to the exorbitant initial investment amounts required to being trading. However, with the introduction of online trading the amount of initial investment has dropped dramatically to accommodate the average individual. Nowadays, micro and mini accounts can be opened for as little as $10.
4. The size of the forex trading market
The foreign exchange market is one of the largest trading markets in the world. It has a daily turnaround of approximately $4 trillion, in comparison to the stock market’s $22.4 billion. The forex market also presents with the highest levels of liquidity among any trading market worldwide. This is due to trading between all sorts of traders including large corporations, banks, governments, hedge funds and smaller retail traders.
5. Forex trading with leverage
A well-known advantage of the foreign exchange market is that of leverage. By using leverage you are able to execute large trades using a minimal amount of trading capital. Although this seems intriguing and beneficial, it can be highly dangerous and increases the already present risk of a trade. When using leverage you should be cautious as a profitable trade with leverage can be highly advantageous; but a loss with leverage can be more damaging than if leverage levels had not been used.