Forex trading or foreign exchange trading is buying and selling of currencies With respect to its high liquidity, 24 hours trading system, its ease of accessibility, forex trading have evolved to be a sustainable career for most forex traders with financial backgrounds. The basics of a forex trader becoming his own boss with the comfort of maximizing profit using a computer system in his/her convenience is a big motivation for both beginners and experienced forex traders to consider forex trading as a good trading platform. However, forex trading in the forex market has its disadvantages as well as its advantages.
FEW REASONS WHY FOREX TRADING IS GOOD
1. LOW COST:
Forex trading is associated with low cost in that they are no commissions and brokerages forex trading forex in the forex market. Forex brokers make profits in forex trading from the spreads which is seen to be in between different currencies. Forex traders involved in forex trading will therefore have not to worry about including distinct brokerages and extra charges.
2. ADEQUATE FOR ALL TRADING STYLES:
The forex market operates at all hours of the day and this makes forex trading convenient to all forex traders. This is most especially advantageous to short term forex traders who are known to take trade positions over small periods. A limited number of forex traders make trades during complete off hours and because of this, they take high volumes, low profit forex trading systems due to the low profit margins. As to this reason, they decide to make profit on steady low market volatility which leads to high trade volumes.
3. OFFERS HIGH LIQUIDITY:
Unlike other financial markets, the forex market has the highest number of market contributors and participants. Due to this fact, the forex market has a large rate of liquidity which means that huge orders of currency trades are easily achieved without any form of forex market price variations. High liquidity eradicates the probability of price manipulation and price irregularities which in turn leads to effective pricing.
4. NO CENTRAL EXCHANGE:
The forex market is an over the counter market trading system and because of this, there is no existence of central exchange or regulator. There are only the existence of individual countries central banks who interfere only when needed and limitedly. This eliminates insider trading.
CHALLENGES TRADERS FACE IN THE FOREX MARKET
1. LACK OF TRANSPARENCY:
The forex market is deregulated and this leads to lack of transparency. The forex market is ruled by forex brokers who are professionals. A forex trader have no control over his/her trades and how the trades are being carried out and because of this, the trader might end up getting limited profits, limited quote views and bad prices due to the fact that he/she trades with a system provided by the broker.
2. PRICE ISSUES:
Other disadvantages is seen in the complex price determination process due to political, economic and inflation factors, forex trading as an independent self-leaning platform without any professional advice and the forex market volatile nature.
In conclusion, the fact that forex trading is good or bad depends on a forex traders point of view, one can place emphasis on its advantages and trade on that while another forex trader can place his based on the disadvantages and say it is bad. But remember, nothing is entirely good or entirely bad. There will always be advantages and disadvantages.
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.