Top 3 Advantages and Disadvantages of Forex Trading

Forex market has been growing with the increase in tourism and foreign trades. It is one of the markets which is attracting a lot of traders next to the stock exchange. But as much as it can provide profits to the investors, it has its own disadvantages which will not help you make any money. Let us look at the advantages and disadvantages to figure out how profitable it can be for traders to invest in forex.

Advantages

Accessibility

One of the qualities why forex trading is attracting a large number of traders is because it is easily accessible by individual traders. Traders can set up their own forex accounts and start trading from their comfort space. Forex trading can be easily done online, and one can easily keep track of pricing, news, price charts, and strategies through online trading. The market is accessible 24 hours for 5 days a week so the traders can easily make space for forex inbetween their daily routine.

Leverage

Leverage can make small yet significant gains in trading. Chances of getting leverage in the forex market is higher than most of the other markets today. The traders can get the leverage of 100 for 1, or more, depending upon the country they are operating from.

Disadvantages

Potential for fast returns

Forex is a market with high liquidity, and one can gain instant profits with the right strategies on the first day of trading. It is a fast-moving market and requires higher leverage to benefit forex traders. A trader needs to check different markets and be able to predict future returns in the forex market than in some other markets. This way, traders can expect faster returns.

Disadvantages

Volatility

Forex market is as volatile as other markets and sometimes can turn out to me totally unprofitable. Sometimes the forex traders can get short term profits and then face extreme volatility in forex, which brings their earlier profits to nil. This can be one of the risks that the traders need to accept before investing in the forex market.

Lighter regulatory protection

Since it is an individual’s market, the security of the regulatory oversight can sometimes be limited. Traders will always have to careful of their broker’s profile before carrying out any trading activities or signing up on a trading website. Also depending upong the area they are trading from, they need to be aware of what is the current status of forex martket to make sure that their broker is trating them fairly.

 

Fewer Residual returns

Investing in stocks, real estate, and bonds often make scheduled interest and dividend payments that can enchance the value of a purchased asset for a long time. However, forex trading aims at the gains by comparing two different currencies. The profits depend upong the different in the interest rates in two countries in between which the trader is buying or selling the currencies.

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