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.
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.