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Pros and Cons of Forex Trading

Forex Trading has emerged as a popular career mostly for those people with financial background. It mostly owes its popularity to its high liquidity, easy accessibility, and 24/7 schedule.

Learn more about Forex here.

Having a career in forex trading sees to it that you are your own boss and has the comforts of making money through your laptop or mobile whenever convenient. This is enough motivation for most people – both young graduates and experienced professionals – to consider a career in forex trading.

Trade12 - forex rates charts and graphs

Tracking, forex trading, shown in charts and figures in LCD.

Read more about your chances to make money in forex trading.

Forex trading still comes with its own advantages and disadvantages.

Let us list them down for you.

Pros:

  • Accessibility

The forex market has proved itself to be one of the most accessible markets for individual traders. Traders can set their own forex accounts within a period of one to three days while beginning with a small amount of money.

Most brokerages that offer assistance are offered online. Traders can acquire access to real-time market pricing, news, price charts, tools, and strategies.

The forex market is also open 24 hours for 5 days per week. This could mean that forex trading is more adaptable to a trader’s schedule than some other type of trading.

Learn more: Tips for Choosing a Forex Broker

  • Low costs

Forex trading can have very low costs.

Even if you think about commissions, it does not really exist for brokerages since they mostly make profits from the spreads between forex currencies. Therefore, you won’t even need to worry about it. You no longer need to think about separate brokerage charges.

This makes it considerably low when compared to equities or other securities trading that has widely varying structures.

  • Liquidity

The forex market is considered to be the largest market globally by volume. Meaning that there is usually an abundance of liquidity when it comes to trading, especially in major currencies.

Traders who work with the trading desk model at forex brokerages will be propositioned with enough liquidity for trading most of the time. The brokerage itself will normally take up the position on the other side of a trade when liquidity has a chance of being small in other portions of the market.

Know more about the best way to trade forex.

Cons:

  • High Risk, High Leverage

Forex trading is available on high leverage, which can mean that you can have profit/loss exposure a couple of times of the trading capital.

Forex market lets you have a leverage of 50:1, so you will only need to have $1 in order for you to gain access to a forex position worth of $50. While you can also gain more with leverage, your loss can also be magnified.

Forex trading can easily turn into a loss-making nightmare, unless you have vast knowledge of leverage.

  • High Volatility

All markets have the possibility of volatility at one time or another. The forex market is no exception.

If you are hoping to gain short-term profits, you could be up for some disappointment. Frorex trading has the possibility of extreme volatility some times. This can end up making your trading strategies unprofitable.

  • Light Regulatory Protection

Forex trading is an over-the-counter type of trading. Trades are not carried out a centralized exchange and have limited regulatory oversight most times.

Due to this, you might need to know your own “due-diligence” investigation of your broker’s reputation and trading practices. Knowing such things is important before you sign up and create your account.

Depending on the country you live in, you may also have limited rights to recourse when you feel like you have been slighted by your broker.

See more: Reason Why Forex Traders Lose Money

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

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