Top Benefits Of Forex Trading

When looking for various options to make big bucks, the Forex (i.e. “foreign exchange”) market is one of your best bets. Rest assured that at the exact moment you’re reading these lines the Forex market is the largest, most liquid and dynamic market in the world. Presented below are the main benefits of Forex trading over any other investment opportunities you may be thinking of.

1. Leverage

Most businesses require significant capital to start off. The biggest drawback that young investors face is the lack of capital to make their vision become reality. The Forex market has taken care of this problem, in that it allows investors to work with large leverage ratios, sometimes as high as 400:1. For example, a leverage ratio of 150:1 applied to $100 means that the trader controls $15.000 in funds. Larger traded amounts may increase the rate of return from an investment. Still, it is advised that newbie traders plan their leverage carefully – FX rates can also move against them!

2. Costs

The Forex market involves some of the lowest costs associated with financial services. Your transaction costs involve the minimum deposit required by the broker of your choice (in many cases as low as $50-100) and the spread (i.e. difference between the buying and selling price).

3. Availability

The Forex market offers extremely flexible hours of operation: 24 hours a day everyday, except weekends. Not depending on someone else’s schedule is a huge advantage – just think of all the times you’ve had an issue to solve with state authorities, banks or any other institutions that closed down 5-10 minutes before you got there! In contrast, the Forex market is available to everyone, regardless of whether they’re day or night people.

4. Control

Most investments are subjected to a multitude of exogenous factors, ranging from regulation by the state to competition among businesses acting in the same field and lack of control over supplier prices. Forex trading is not subjected to any of these factors: the trader simply chooses a currency pair and decides on a long position (if the respective currency pair is believed to increase) or a short position (if the respective currency pair is believed to fall). Other choices such as the optimal broker, amount traded, leverage, currency pair and time of the transaction also fall within the investor’s power.

5. Liquidity

Any market product has an associated price. The goal of any business is to convert its final product into cash or any other liquidity. Some products convert into cash after longer periods of time during which the business pays its fixed costs from other sources. The Forex market requires no conversion, as the trader is already dealing in the most liquid asset possible: cash. In other words, once a transaction is finalized, the trader is free to withdraw his or her amounts without having to wait for any conversion.

Razvan Albu

Categories: Forex

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