Advantages and Disadvantages of Forex

/ November 27th, 2018

Advantages of Forex Trading:

1) Very High Liquidity

Forex is at the highest level in the market, because of the highest number of participants all over the world. So, it has high liquidity that’s why large orders are easily full filled in an efficient manner.

2) Trade Without Central Exchange

This market is an over-the-counter market and there is no presence of central exchange. Only in some rare cases, central banks interfere, as on some extreme conditions.

3) Highly Volatile

If the trader finds another profitable currency then he can switch to that currency and invest in the same currency.

4) Low Capital Required

Unlike other markets, a person can easily start trading in the forex market using a small amount of capital because of the presence of margin trading and a high leverage factor.

5) Training And Real-time Practice

If a person has no experience of forex market then he can boost up his skills with a lot of available training materials and practice real-time trades using demo account provided by brokers.

6) A Range Of Pairs Available For Trade

In forex, there is a range of currency pairs available by the brokers. Many of the brokers offer to trade between 40-70 currency pairs. If you have not much experience in the forex market then trade only in major currency pairs.

7) Trade 24 Hours

In forex, traders can trade 24 hours a day and five days a week. So, you have the facility to work in your comfort time.

8) Maximum Leverage

Leverage is described in ratios, for example, if the broker provides you 1:50 ratio that means for every dollar you can trade $50.


Disadvantages of Forex:

1) Price Determination Is Difficult:

The price determination process is very difficult because of the fluctuations in the rates. Rates are influenced by multiple factors. Main factors are politics or economics that can be difficult and complex to analyze and understand.

2) 24/5 Market:

The forex market is open 24 hours a day and investors need to be updated every minute about the market trends. Investors can’t sleep because they are attentive about the fluctuations in the forex market.

3) Social Trading:

Maybe the Information which is available on the internet is provided by an inexperienced trader and if an individual trader follows those predictions then he might be experienced with failure.

4) High Volatility:

The economy and global policies can change the complete scenario of the market because of its high volatility. Unfortunately, if the market goes down then definitely investors lose their money.  

5) Fear Factor:

The high-risk factor is involved in the forex market that’s why traders feel fear. It is difficult to trade in uncertain situations, if you are mentally strong then you can reduce the fear and trade efficiently.

6) Self- Directed Learning:

In the stock market, traders can be facilitated by the good services of professionals. In forex, all burden is on the shoulders of the trader.  

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