What are the advantages of trading Forex?
In this article we will discuss the various advantages of trading Forex over other markets.
Cut the middleman
When you start trading the spot Forex market you can cut out the middlemen. Most brokers allow you to trade directly with the market responsible for the pricing on a particular currency pair. E.g. you can start trading EUR/USD straight away without having to call an agent.
Low transaction costs
The retail transaction cost normally consists of spread between the bid and the ask price and or commission. These costs are now much lower than they were before internet trading. This has reduced the entry costs for many retail traders.
The Forex market is open from Monday morning in Australia to the evening in New York afternoon on Friday. Unlike the stock market which is only open certain hours of the day.
This is useful as a beginner who wants to trade on the side of a current job, you can choose whatever time of the day to trade: after work, when you finish university, after dinner, it's all up to you!
No one is in control
Since the Forex market is so large, not one person or entity can control the market for a long period of time. Unlike stocks and cryptocurrency where the insider circle of shareholders/coinholders who have majority shares/coins can at anytime sell them at anytime they want causing large slumps in prices of the asset.
The Forex market is not just big, it is also extremely liquid. This is an advantage because you can instantaneously buy and sell at will as there will usually be someone in the market willing to take the other side of your trade. This is different to other markets such as the futures where there may not be someone on the other side which means you will be stuck in a trade, normally a losing trade. Online trading has made it even easier to exit positions so you don't lose more than you wish with take profit levels which you can set before you enter and negative balance protection so you never lose more money than you deposit.
Low Barriers to Entry
Being a Forex trader doesn't mean you need a lot of money. This is because now online Forex brokers offer “mini” and “micro” trading accounts, which means you can now deposit less and start trading. However, it would be in your own interest to hold out on live trading before you have practised on a demo account.
Most Forex brokers now offer free to use demo accounts which are like replica live accounts using digital currency that you don't lose. So you basically get to trial trading before you want to get serious! Demo accounts are very useful for beginners as it gives you a taste of the risks involved before you want to even consider putting money into the broker.
On top of this brokers offer platforms with advanced charting for free which makes it even easier to analyse markets and access economic news.
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