Every trader is likely to cite different reasons to trade forex, and there’s a lot of information out there relating to this particular market. We advise that you reference multiple sources thoroughly before making any final decision on your next steps. That said, here are our thoughts on the top benefits and advantages of forex trading. When it comes to the benefits of trading forex, its sheer size and scale sit at the top of the list. As the world’s largest financial market, more than USD 4 trillion is exchanged on average per day. Traders in all corners of the world are buying and selling currency pairs at all hours, making forex a truly global marketplace with plenty of scope for profitability. It’s the breadth of the market that contributes to many of the benefits of forex trading, including accessibility, liquidity, volatility, technology and trading hours.
Accessibility is one of the biggest advantages of forex trading. Compared to other markets, it is relatively easy to enter and does not require a large initial investment, explaining its popularity with hobbyist traders. However, regardless of the amount of capital you put down, successful trading takes knowledge and skill. Free demo accounts allow you to practice trading forex without risk, essentially providing a ‘try before you buy’ test run. By simulating a live trading environment, demo accounts give you the chance to get used to a trading platform, familiarise yourself with market movements and develop a risk management strategy, all without making any financial commitments. Most brokers offer demo accounts so if you’re considering trading forex, be sure to take full advantage of these tools first.
The rolling hours of the market are another of the main advantages of forex trading. Foreign exchange takes place over-the-counter (OTC), meaning transactions are made directly between trading parties, facilitated by a forex broker. Since it operates this way, forex trading is not subject to the opening hours of any centralised exchange system. As long as there’s a market open somewhere in the world, deals can take place. In the UK, trading begins at 9 p.m. on Sunday with the opening of the Sydney market and rolls continuously until the closing of the session in New York at 10 p.m. on a Friday. While the forex market is closed to retail traders over the weekend, it’s important to note that rates will continue to move, and you should factor this into your trading strategy to mitigate any potential risk.
Not only does the forex market require little capital for entry, but there are also low transaction costs once you’re in. Typically, brokers make money from spreads, which are measured in pips and factored into the price of a currency pair. When a broker offers you a currency pair, they’ll quote a bid (sell) price and an ask (buy) price, the pip difference between the two indicates the spread, the associated value of which you’ll pay the broker for facilitating the trade. Spreads are usually low, making forex trading relatively cheap. However, you should look into all associated costs when choosing a broker, as some may also charge a flat fee or variable commission.
Of all the reasons to trade forex, the availability of leverage is perhaps the most appealing as it allows you to open a high position with a relatively small amount of capital. Most forex brokers permit retail traders to put down a deposit and borrow against this to control a much higher stake, similar to placing a deposit down for a mortgage when dealing in property. Your available leverage will be expressed as a ratio, with most regulated forex brokers limiting maximum leverage for retail traders, with 1:30 and 1:50 being common. So, if you took advantage of 1:50 leverage, you could trade up to £50 for every £1 of capital in your account. Whilst this opens up the potential for increased profit, it can also lead to greater losses, so leverage should always be used with caution.
OTFX is a leading international online foreign exchange trading, CFD trading and related service provider. It creates a unique mirroring model and provides innovative trading tools, employs excellent trading instructors, meets strict financial standards and strives to provide the best in the market. The best online trading experience, so that traders around the world can access the world's largest and most liquid market. At the same time, customers can enjoy various advantages such as copy trading, one-click transactions and trading through real-time charts. In addition, OTFX also provides foreign exchange trading education courses, as well as providing trading tools, exclusive data and valuable resources.
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Every trader is likely to cite different reasons to trade forex, and there’s a lot of information out there relating to this particular market. We advise that you reference multiple sources thoroughly before making any final decision on your next steps. That said, here are our thoughts on the top benefits and advantages of forex trading. When it comes to the benefits of trading forex, its sheer size and scale sit at the top of the list. As the world’s largest financial market, more than USD 4 trillion is exchanged on average per day. Traders in all corners of the world are buying and selling currency pairs at all hours, making forex a truly global marketplace with plenty of scope for profitability. It’s the breadth of the market that contributes to many of the benefits of forex trading, including accessibility, liquidity, volatility, technology and trading hours.