6 Reasons and Advantages of Forex Trading that You Must Know

There are various reasons why many people are now looking to forex trading as an additional source of income or a main job.

Some of the advantages of online forex trading compared to other trading or investments are:

1. Forex Trading Can Be Done Anywhere

reasons and advantages of forex trading

Today’s forex transactions can be done online, with a computer, laptop, tablet, or smart phone, just by clicking on the trading software provided by the broker.

Plus the speed and cost of the internet which is getting cheaper by the day, the overall cost to be able to trade forex online is very small and affordable. This is the number one advantage of forex trading.

Also Read: The 6 Type Forex Market Participants In The World

2. Can Buy and Sell Anytime

According to data from the Bank for International Settlements (BIS), an institution that oversees the world’s banks, the forex market has very high liquidity (availability of funds) reaching an average of $5.3 trillion per day.

This makes the forex market the largest market in the world, even when compared to the well-known stock exchanges in the United States (US).

Due to the large availability of funds in the forex market, whenever you want to sell, there will always be a buyer. And vice versa, whenever you want to buy, there will always be a seller.

There is no queuing system like in stock trading which often requires sellers/buyers to wait several hours to days for someone to agree on a price first.

3. Forex Trading Presents Two Way Profit Opportunities

reasons and advantages of forex trading

Forex trading is done in currency pairs.

For example in the EUR/USD pair: a “buy” transaction means buying Euros while selling US Dollars, while a “sell” transaction means selling Euros while buying US Dollars.

On the other hand, when predicting that the Euro will strengthen with the USD weakening, the trader will open a “buy” trading position.

Thus, forex traders can benefit, both when a currency weakens or strengthens.

In addition, another advantage of forex trading is that it can be done in various currencies around the world, so we will never run out of profit opportunities.

However, traders generally trade only seven major currency pairs: EUR/USD, USD/JPY, GBP/USD, NZD/USD, USD/CHF, AUD/USD and USD/CAD.

Also Read: What is Forex Trading: Definition, Markets and Forex Basics

4. Forex Market Open 24 Hours Non Stop, 5 Days a Week

Other financial markets such as stocks are usually only open during normal business hours between Monday to Friday. However, the forex market is open 24 hours a day, only Saturday and Sunday the market is closed.

This means, as a forex trader, you will be able to set your own trading hours.

If you prefer to work in the morning because you have another main job; It doesn’t matter, you can trade forex at night. Or vice versa.

You can trade forex during the day when you have busy work at night. Or if you want to specialize in trading only at the most profitable times, then you can look at the best forex trading times and hours.

5. Forex Trading Can Be With Low Capital And Low Cost

reasons and advantages of forex trading

In forex trading, there is a margin and leverage system. The margin and leverage system allows forex brokers to ‘lend funds’ in proportion to the guaranteed funds provided by the trader.

For example, with a leverage of 1:200, a trader only needs to deposit for a margin of only $100 in order to trade with a power of $20,000 (from 100 multiplied by 200). This margin and leverage makes forex trading not require large capital.

We used to know that to be able to trade forex, a minimum capital fund of tens of thousands of dollars was needed.

But not anymore. Even with a capital of $10, we can already trade forex.

There are even brokers who provide free capital for trading. It’s not a lot, an average of $5-10, but it’s okay, isn’t it, to give it a try?

In addition, business competition between brokers also makes the trading commission fees that must be paid by traders become lower and more competitive.

Advances in technology give us the freedom to choose a forex broker with the lowest trading fees and the most advanced trading software facilities as our liaison with the forex market.

6. Learn and Practice Forex Trading Available Free

There is another facility from the broker in the form of a demo trading account. With this system, we can learn and practice exactly like real forex trading, but regardless of the risk of loss. How come?

Yes, because the funds used are virtual or just toys, and this facility is also provided free of charge by the forex broker. So, if you lose, you don’t need to change money, even if you win you can’t cash it out.

This demo account is intended for beginners who want to practice and learn first before plunging into the world of forex trading.

Interested? Just register for a demo trading account, or first read the intricacies of learning forex trading in full.

If you do not understand the specific terms in forex on this page such as liquidity, margin and leverage, you can visit the Forex Dictionary. Take advantage of Forex Dictionary when you encounter new vocabulary for optimal understanding.