Do you want to do forex trading? Forex transactions refer to the act of buying and selling of different currencies. It’s an extremely profitable business. It’s so popular among many people because of its several advantages. But you should not ignore the disadvantages or risks when you do forex trading. Check them out to become a better forex trader.
Advantages of forex transactions:
- 24-Hour Transaction:
The forex markets never sleep. You can do forex transactions at any time you want. From Monday morning to Sunday night you can choose any time.
- Trading Options:
As a forex trader, you can get a wide variety of options. You can trade in hundreds of different currencies. Other than that, the traders have a choice of entering into a future agreement. Future agreements are available in different sizes and with different maturities for the needs of the traders.
- No Middleman:
Forex transactions allow the traders to trade directly with the market. You don’t have to deal with any middleman. Thus, the process of trading becomes easier and smoother. It also takes lesser amount of time.
Forex markets provide the most leverage among all financial markets. Some forex markets allow a leverage ratio up to 50:1 or 100:1. The arrangements in the foreign exchange markets provide the traders to lever their original investments by as many as 20 to 30 times and trade in the markets.
- Transaction Costs:
Forex markets provide lower transaction costs than other financial markets. If you compare it to percentage basis, the forex transactions costs are extremely low as compared to the trading in other markets.
There is no restriction on the amount of money that is used in forex trading. Forex markets provide traders a lot of flexibility.
- Online Services and Tools:
Online services and tools made it easy to do forex trading within a few clicks. Beginners can easily understand, monitor and analyse the markets.
- Fast and Volatile:
Forex trading is fast and volatile. One of the biggest advantages of it is that traders can lose money just as fast as they earn. It is difficult to predict the values of currencies. They change rapidly without giving any warning.
- Disconnection of Internet:
Nowadays, forex transactions are done through Internet. A major problem is that you may not complete your transaction if internet connection fails or gets disconnected. In those cases, traders become responsible for the effects of internet disconnection.
- Leverage Risks:
Good leverage can help you make huge investments. But it can work against you as well. You can also make losses which are actually greater than your investment.
A very dangerous downside of doing forex trading is that there are many scammers to steal your identity, money and financial information. There are different types of scammers such as phishing scams, fake software, fraudulent companies etc. Be very careful when you deal with any other company. Always deal with accredited and reputed companies.
As you can see forex transactions is not completely risk-free. All you need to do is to be more cautious and smart. Then you’ll definitely be a great forex trader.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.