Pros and Cons of Forex Trading

Pros and Cons of Forex Trading

Forex trading is often perceived as a lucrative career. There is no doubt about it, but at the same time, it is not an easy money-making career. In fact, forex trading is quite challenging, though highly engaging.

The forex market is the largest as well as the most liquid market in the world. But, trading currencies is very different from trading commodities or stocks.

The high liquidity and easy accessibility make forex trading a popular career, especially for those having a financial background. The comfort of making money from your home, using your laptop or mobile while being your own boss, is enough motivation to choose forex trading as a career.

Like any other career, forex trading has its advantages and disadvantages. In this article, we will discuss the pros and cons of forex trading.

Pros of forex trading

Forex trading has several advantages. They include:

1-Low Trading Costs

Forex trading has very low costs (commissions and brokerage). A forex trader does not need to worry about separate brokerage charges and overhead costs. The overall costs for trading forex are comparably quite favorable to other markets.

2- High Liquidity

The liquidity in the forex market is incomparable to any other financial market.  The highest liquidity of the market eliminates the possibility of price anomalies and price manipulation. This enables tighter spreads leading toward more efficient pricing.

3- Easy Accessibility 

The forex market is probably the easiest capital market to open an account and start trading in. You can open your online forex trading account at finviz forex By sitting anywhere in the world with a good internet connection and a little amount, as little as $1, and start trading.

Cons of Forex Trading 

In essence, there are many pros to trading forex, but there are cons as well.

  • Lack of Transparency

When you trade forex you are actually trading against the professionals. Due to the deregulated nature of the forex market, the brokers dominate it. 

Being a broker-driven market, The forex market is not fully transparent. Moreover, a large number of forex brokers are not regulated.

A trader may not have any control over his trade proceedings in the forex market. The best solution to this problem is to deal only with regulated brokers.

  • High Volatility

The forex market is a highly volatile market. A forex trader cannot control the macroeconomic and geopolitical developments; therefore, the probability of suffering huge losses is high.

While trading in the stock market, if things go wrong, shareholders can pressurize the management to initiate the required changes. However, forex traders have no such option.

  • Patience Required 

Successful forex trading requires a lot of patience because a trader has to wait for good opportunities to arise.  And, initially, the new traders need plenty of time to get used to forex trading and the forex market in order to trade profitably.

As a novice trader, trading through a demo account could be helpful for you. It will help you polish your trading skills.