Which are the Main Benefits of Forex Trading? Useful Guide

Forex, or foreign exchange, refers to exchanging one currency for another with the purpose of potentially generating revenue in online forex trading. The foreign exchange market is a global, decentralised market where trading occurs 24 hours a day, 5 and a half days per week, between traders from all around the world across all time zones.

This makes the market the most liquid market with $6.6 daily trading volume. Participants of the market are financial institutions like commercial banks, money managers, hedge funds forex brokers or individual investors. Trading forex enables traders to go long or short as well as trade a wide variety of currency pairs. If you are into online trading, then below you will find the main benefits of forex trading. Irrespective of the reason why you choose forex, you should always stick to your trading style and plan.

Flexible trading hours

As previously mentioned, the forex market is constantly active with numerous people trading forex every day. As long as there is an open market somewhere and depending on the time zone of each country, there are always people trading somewhere in the world. Although there are many benefits of forex trading in these flexible trading hours, the market is closed over the weekend. Nevertheless, rates keep changing, which is something traders need to keep in mind.

High liquidity

High liquidity in forex means that there is a big number of active buyers and sellers in the market. As a result, there is always someone willing to buy or sell and transactions are fast while costs are often low. While low liquidity usually equals little variation in currencies’ value, which means little profit most of the times, it also reduces risks especially if traders have a trading strategy in place.

Leverage

Most CFDs brokers allow traders to trade with leverage meaning that they can trade with a bigger amount than what they have initially deposited in their trading account. In other words, leverage enables higher positions with fewer funds. The most common leverage ratio is 1:30 or 1:50, which means that for every dollar in your account, you can trade up to 30 dollars for instance. However, leverage has risks as well.

High volatility

Economic instability, global economy, political events and news, natural disasters or other trends are external factors that influence the market and CFD trading, making it an extremely volatile market. This results in changes in the value of currencies which opens up multiple trading opportunities. However, there are always risks involved as changes may go against your predictions.

Low costs

There are usually low transaction costs in the forex market and there is little capital required to start trading. Brokers charge spreads for facilitating the execution of the trade. The spread refers to the difference between the buy and sell price. However, always check related costs before registering with a broker in case they charge commission or extra fees.

Accessibility

Last but not least, forex is easily accessible unlike other markets. Both beginner and professional traders can trade forex with great ease. Most online brokerages offer the MT4 trading platform, which is considered the best online trading platform for beginners, and demo accounts as well. The latter are very useful since they allow traders to test their strategies and skills in a risk- ree environment. They can also become acquainted with how the markets works.

DISCLAIMER: This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication

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