Forex advantages and disadvantages
Trading Forex, like most other types of trading in valuable assets, can have both positive and negative results. Here is my list of the advantages and disadvantages that I advise you to pay attention to first.
1: Availability. Forex is one of the most accessible markets for the average trader. You can open a trading account in three minutes, and start from $ 100. In addition, the market is open 24 hours a day / 5 days a week, which means that everyone can have a busy and varied work week.
2: Margin trading. Access to leverage allows you to play not only in rising but also in falling markets. This is twice the chance of earning. However, as well as to fill cones. Skill decides everything here.
3: Potential for a quick return. Forex is the most liquid market. This (coupled with high leverage) means that money can be recouped much faster than speculating or investing in stocks or bonds.
4: Transparency. The Forex market is far from insider investigations, commercial espionage, and behind-the-scenes agreements often inherent in the stock markets. It lends itself very well to technical analysis. A huge plus for outsiders who are not part of the business community.
Cons of Forex:
- 1: Volatility. All markets show volatility at one point or another. Forex is no different except for the strength of the swiftness with which currency quotes move. Hundreds of pips a day is the standard for high volatility pairs.
- 2: Legal regulation. Forex is an over-the-counter market. That is, transactions do not go through a centralized exchange. Because of this, traders rely entirely on the "cleanliness" and integrity of the broker. And sometimes they are very severely disappointed. Most brokers operate outside the jurisdictions of the countries where they provide services. They are registered offshore, so in the event of a dispute, they will have to go to court distant from their homeland.
Lower profitability in perspective. Stocks, for example, often pay dividends. Bonds carry a fixed percentage. This money can be reinvested to earn more and so on. Forex is a purely speculative instrument.