There are many things you should think about before committing your money and time on forex trading. To help you consider, here is a list of advantages and disadvantages of forex trading.
You've heard about forex trading and how profitable it could be. But maybe, you are still hesitant to take it up. Well, of course, there are many things you should think about before committing your money and time on trading. This article will give you a summary on advantages and disadvantages of forex trading.
Advantages of Forex Trading
Forex trading could be an option to occupy your spare time, or more than that, a profession in which you try to gain profits as economically as possible. There are lots of advantages in online forex trading compared to any other business activities. They are:
1. Time Flexibility
Forex trading nowadays can be done online. It means, you can choose any time you want to do your trading. Morning trading? Fine. In the afternoon? OK. In the evening? No problem. Middle of the night? Why not!? So long as your bedmate aren't upset.
2. Place Flexibility
You can do your trading anywhere and everywhere with one caveat: you have gadget that could connect to the internet.
If you have one (or two), then trading at the office, campus, cafe, home, bedroom or even bathroom? No problem.
3. Fund Flexibility
You can choose how big your investment according to your ability. Some brokers allow initial deposit as low as $1. There are even brokers who gave you $5 when you register with them, so you can go straight to trade with it.
4. Leverage
This is one of forex trading advantages compared to other financial investment, including stock trading. Forex broker usually provides trading margin facility. With this, traders can trade in a large amount of quantity, 50 times or even 1000 times more than the amount of money they deposited.
Of course, this is not without its drawback. The larger the margin, the higher the risks. If we get margin call (MC), then it means we've run out of funds. It is something that practically nonexistent in stock trading. Or, even if there is, it is so rare and only in the most exceptional circumstances.
With those advantages, do you need another reason to take up forex trading? As for me, there is one other personal reason. It is because I don't have to dress up to go to work. Is it funny? Well, it is part of my satisfaction when I can work in my T-shirt and shorts.
Disadvantages of Forex Trading
However, despite of its many advantages, forex trading isn't easy. I don't mean to break your spirit; I just want you to be more mentally prepared to face the market. I've told you about leverage's drawback, but it is not the only thing that you must be aware of. There are some others which you have to fully understand.
1. You will not be suddenly wealthy
The opportunity to get huge profits is the main attraction of forex trading. Maybe you have heard sweet stories from successful traders who received amazing percentage of profit and you wish to emulate them. You have to be aware that stable or even fabulous profit can't be achieved in a short time.
2. Don't Underestimate Demo Accounts
Some traders feel that trading in demo account is useless or prestige-less. In my opinion, even a master trader still going to need demo account to test trading systems before applying it in the real account. Even though your funds are plenty, no one want to bear unnecessary loss.
3. Suspect Your Broker Until Proven Not Guilty
You've got to know that there are many forex broker scam. In some forums, there are even 'forex broker scam of the year' award. So, be wary and becareful in choosing your broker.
The three things I mentioned above are often purposefully concealed from fledgling traders. I hope, with this article, you understand more of what to come after you take on forex trading and could be a trader who is able to take forex trading as it is.
7 Comments
Nov 12 2022
After reading this article, I can say that only prepared and patient people can trade Forex. I have found many cons in Forex Trading that requires years of training before you can get into forex trading. But not only trading strategy and plan, I have to choose my broker carefully in my trading can it be trusted or not, I also find that it is not easy to find that. Also It's not easy to find a trading system that's right for you. A lot of things will be carefully considered otherwise I'm afraid I will lose my money in this
Jan 10 2023
Lenny Lee: I totally agree with you. As the article says, forex trading can't suddenly make you rich. Therefore, success in forex requires a good trading strategy and time. And I disagree with the above article about fund flexibility. While it is true that you can deposit $1, only the Standard and Mini accounts will give you big profits, as there are many types of accounts that you can open. Micro and cent accounts, on the other hand, can offer all the conditions of living and trading with the real market, but the profits they generate are too small. As you know, you can win cents even if you only get ten pips. So financial flexibility is not an advantage for me. Because for me, the real forex market means you need a lot of money for that.
Jan 1 2023
Trend trading is a form of trading that uses short term price patterns in the market to determine whether a currency pair is going up or down. Many traders use trend trading to make money from fluctuations in the market. Trends are generally short term price movements that are easy to see and follow. The trend trader will wait until they find a strong trending pattern before entering the market. They then sell high and buy low to profit from the trend. The first and most important benefit is that you will have greater control over your trading. When you trade with a trend, the price moves in your favour and that is why it is called trend trading. A second advantage is that you have less risk. When you trade with a trend, your risk is minimised because the trend will always move towards your target. This is why trend trading is a very safe way to trade in the Forex market.
Jan 10 2023
Rasheed : I disagree with your statement about the easy of trend trading.First of all, whether bullish or bearish, when trading trending markets, the risk of loss is minimal as long as you follow the trend. i agree with your statement. But it's also a risk if you can't predict when the trend will end, so you need to understand which candlestick pattern will appear and signal the end of the trending market. Second, if your technical analysis is not good enough to predict the market, you will suffer more losses. For example, if you open position and targeted 40 pips for example in bullish market, off course you will set SL 20 pips bellow and 40 pips to TP. Assumption you take 1:2 of ratio risk and profit. But, because you don't see and predict the market, suddenly the market at 20 pips above your trading position, get crashed. It is become signal of bearish, with the canddlestick patern appear. (It maybe the signal of hanging man, bearish engulfing, etc). It cause you to loss, and sometimes we must see the fake signal too. So trend trading for me is not just waiting for when the trend will start, but also predicting when the trend will end because I know trend traders are taking more pips than usual to increase their profits. The longer you hold in the market, the risk also more bigger. This is just my opinion and you may face some differences as traders trade differently.
Jan 10 2023
Dude, I recently became interested in forex and discovered that all forex brokers offer leverage in their trading tools. I've also seen reviews on this site, and some traders complain that the leverage they get is too low. Leverage, on the other hand, has its back drawn in this article. So my question is, why is it said in this article that leverage has such a significant advantage in trading that it can be a con? And also, what is the relationship between margin and leverage? What are Margin, Margin Call, and Leverage?
Jan 10 2023
martial arts:Your question is leverage and margin, right? First, let's talk about margin. Forex margin is the capital a broker requires from you in your trading account to open a leveraged position. Think of forex margin as a deposit that a broker holds as collateral when taking a much more leveraged position than the account can manage. In other words, it is like a financial guarantee that you give to your broker. Of course, if you lose trades with the leverage you employ, your margin will decrease. Borrowed funds, on the other hand, are leveraged to increase the potential return of an investment. The relationship between these two is that higher margins require less leverage and conversely, lower margins require more leverage.
Jan 10 2023