Advantages and Disadvantages of Forex Trading

by Bella Palmer

Forex trading is the most popular and the largest financial market dealing in the world. In Forex or foreign exchange market, different currencies of different countries are traded by millions or buyers and sellers all over the world. It is because Forex trading can be done not only by banks or corporation but also by individual trader. Many people who want to gain big profit have been trading in Forex market until today. Forex trading indeed offer fast money, yet before you start trading Forex, you should know pros and cons of Forex trading. Forex market, however, is more like a double-edges sword which can be both advantageous and disadvantageous.

1. Leverage

One of the biggest advantages of foreign exchange market is its high leverage. It means that traders can make more money with small amount of capital. For example, if the leverage ratio is 50:1, a single dollar can be worth up to $50 when trading. This way, the traders can gain fat money by using a small investment. However, this high leverage also can cause greater loss to the traders as well. As the chance of $50 profit, you can lose the same amount of money too.

2. 24 hours trading

Forex trading market opens for 24 hours five day a week. This means that traders are free to choose what time suits them whether it is morning or night. This advantage can also works against you. The market continues to move and the price and value can change at any time even when you are asleep.

3. Online Service

Forex trading can be done through online service and tools which easier to access anywhere you want. Within few clicks, you can enter the market and start trading. Some traders also use particular software to help them in trading. Yet, online trading is also a shortcoming of this trading when you have connection problem or when the Internet’s down. As we know, that the price and value can fluctuate in a matter of seconds. When your Internet connection fails, you may not able to monitor the market. Moreover, it can bring you a great loss when you have incomplete transaction.

4. Fast and Volatile

It means that you can make money fast in Forex market. The weakness is that you have the same chance to lose your money as fast as well. The currencies can fluctuate causing you to gain profit and the other way around since no one can accurately predict how the market goes.

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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