Trading strategies

Advantages of Forex Trading

By Christy Bella | November 20, 2020

Table of Contents

Most people assume that the stock markets are where the bulk of investors’ money lies in everyday trade. That is no surprise given that the U.S. stock market alone sees transactions valued upwards of $257 billion every day. However, that figure is dwarfed by the astounding $5 trillion daily trading value of the forex market.

Understanding the basics of Forex Trading

To the uninitiated, forex can seem like a daunting arena to enter. Not only are there so many different terms to learn such as cfds forex but there are numerous variations such as trading pairs to consider. Coupled with the fact that forex is trading 24 hours a day, 5 days a week, it seems almost impossible to keep up with the ups and downs to be able to make a profit.

However, that is not quite true and the key to forex trading, as it is with any commodity or stock, is understanding trends. Specific trends manifest virtually every day, every week, and at particular times of the year. There is, of course, no guarantee that a trend will sustain itself. Instead, all trends are most reliable when considered over an extended period.

Armed with this understanding, intelligent investors make investments that have the best chances of growing within a stipulated timeframe. As opposed to stocks, forex trade generally features a shorter ‘holding’ period.

Why Choose Forex?

Forex is also attractive for its resistance to market volatility. While economic data, world events, and overall market sentiment do affect forex rates, they do not do so significantly. Most changes are limited to a few percentage points.

In this sense, forex reading is ideal for investors who like to play it safe. It allows them to dabble with small investments and pull out quickly upon earning a profit. This is arguably the best foundation and education for serious, large-scale trading anyone can wish for.

It is a good idea to consider reputable forex trading companies, especially if you want to trade forex CFDs. Reliable platforms like ForexTB will be open about the potentials and the risks, and often feature an extensive information section to help you understand. Visit them to discover more.

Top 5 advantages of Forex Trading

With time, financial markets have become accessible to even the common people for the purpose of trading. They have many options to choose from the innumerable markets and a long list of Forex Brokers in USA. available for trading by keeping the pros and cons in mind before committing their time and money to it.

Very low resources are required at the beginning in forex trading. This makes it a preferred method of trading by both, beginners and the pros. So as a beginner, if you are still confused about getting into forex trading, check out these top 5 advantages and why you should go for it!

1. It is the largest global financial market

The title of the ‘Largest Financial Market’ is held by the foreign exchange (forex) market for a long time now and this title is not going anywhere. With the forex markets being so accessible by almost everyone, each day almost $4 trillion to $5 trillion dollars are traded on an average! This means that about $50 million dollars every second!

Forex traders from every corner of the world buy and sell currency pairs all day and night. Some very important features that help to make forex trading beneficial are accessibility, volatility, technology, liquidity, and trading hours. As you read this, billions of dollars must have been traded already!

2. Everyone can get into Forex trading

Forex is versatile. It is not only for the big shots who have been in this line for a long time. it is also for people who are just beginning their work in this field. Unlike the stock markets or options, forex trading does not require a large number of resources and investment to start with. This is what makes it appealing. With a very minimal start-up amount, an average person can enter the world of forex trading with ease.

Learning anything new takes a little time. even if the investment is low, it is a possibility that you will face the ups and downs of the market. But with time, you only get better at it. Taking baby steps helps a lot. Tread the path slowly and steadily and it will take any beginner to newer heights.

3. 24-hour financial market

The word sleep does not exist in the dictionary of the forex market. This market is open for all, 24 hours a day, 5 days a week. The trader can buy and sell currency pairs whenever they want to and not when the markets want them too!

The forex trading starts when the Sydney session opens and ends when the New York session closes. This basically takes the entire day, and immediately the next Sydney session starts. The forex market is closed on weekends. Pay close attention to the rates, because they still keep changing and come up with a strategy to earn profits over the next 5 days.

So, you can easily maintain the time when you want to remain active and practice your trading – morning, afternoon, or night, as this market is open round the clock.

4. The Transaction Costs are low

Once you are in this market, you will realize that the transaction costs are way lower than any other market. The brokers, that help you complete the transaction, make money from spreads that are measured in pips and added to the price of the currency pair. Pip means ‘point in percentage’ and is used to measure the change in one currency’s value against another.

When a deal is offered by a broker, he quotes a selling price and a buy price as well as the spread (which is the pip difference between the two currencies). This spread is what the broker will be earning. So, choose a broker by looking at all the costs they are asking for as some of them also expect a flat fee or even a commission from your profits.

5. High Liquidity Market

In finance, the ease with which an asset can be bought or sold without a major change in the original cost is called liquidity. In terms of the market, liquidity depends on the activity of the market. Since the forex market works 24 hours a day, it is the most liquid market available for trading.

So, when you are trading with currency pairs like GBP/USD or EUR/GBP, these assets can be easily exchanged for money without much loss in the transaction. All you need to do is have confidence in your market predictions and the rest will follow.