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Advantages and disadvantages of Forex trading

Every day the Forex market wins the increasing popularity. A great number of traders refuse the traditional futures and stock markets in advantage to Forex. Why is Forex market so attractive? We will consider the main advantages and disadvantages of this market.

forex advantages and disadvantages

Advantages of Forex market

1. Rather low barriers of the entrance.

For example, according to SEC requirements the trader for intra-day trade in the stock market will hold at least $2500000 on the account. For access to the futures markets brokers need the marginal providing and maintenance of the account of a smallest amount in some thousands of dollars.

In this respect, Forex market outstands favorably. Usually, Forex brokers offer mini lots with the leverage 1:500 which allow to conclude bargains in $1000000, having on the trading account only $2000. Certain brokers give the chance to traders to trade micro lots, thus on the account it is enough to have only some dollars. And online Forex charts will help to react to the market changes timely.

All accounts can be deposited, using credit cards or electronic payment systems. It is possible to open the account and start trading in just one day. Thus, in the Forex market can trade anyone, regardless the amount available for trading.

2. The possibility of active twenty-four-hour trading.

In the Forex market can be found active currency pairs to trade at any time. Forex is open 24 hours per day, 7 days a week. For many traders, Forex trading is a method of extra earnings, thus, the people occupied fulltime have the opportunity to open transactions on the Forex after or before the main work. It is also possible to watch the movements of the prices in the market round the clock, using Forex charts.

3. Free quotes and software.

Unlike the markets of futures and stocks where traders will pay the software for a technical analysis and receipt of the quotes, and some traders even bring a monthly payment for a trading platform. Practically all brokers of the market Forex provide to the traders excellent trading platforms free of charge, and also Forex charts which reflect the latest news and market analysis.

4. Almost no commissions.

On Forex, traders pay the bid /ask spread for the market entrance. The spread represents a difference between buy and sell of currencies, which can be determined, analyzing Forex charts. It should be noted that the spread can represent heavy expenses, according to transactions, but, in general, it is the unique service fee of the broker.

It is quite often possible to hear about the liquidity of the interbank market and its big size as the main benefit. All these factors are suitable for the institutional party of business but have no special value for private traders. Everyone can study quotes of the interbank market, analyzing graphics Forex online. In general, it is necessary to consider that private traders perform Forex trading by means of retail brokers, thus all transactions are fixed on broker servers and their most part isn't brought to the interbank market, and blocked in the company.

Forex market disadvantages

1. Forex doesn't have central regulation.

On Forex, there is no clearing center or the centralized market. Private Forex brokers are continually charged with different types of deception and fraudulent actions against the clients. And the most harmless are accusations in the artificial movement of the press for the purpose of activation of stop orders which allow, using Forex charts, to close the transaction without the participation of the trader. These stop orders enrich brokers. As a rule, a good method to avoid dishonest actions is the choice of famous brokers with good capitalization.

Management function by currency holdings at the moment belongs to Central Banks, on their sites, it is possible, analyzing Forex charts, to examine the directions of currency movement.

2. Quite a wide bid/ask spreads.

A lot of main currencies pairs have spreads about 3 pips. It means that in the case of trade in a standard lot of $100000 the trader will pay $30. So, in the case of an entrance to the market traders receive directly minus 3 pips. Thus, the market will be displaced on the whole 4 pips in the necessary direction only in order that the trader could earn $10 on this transaction.

Analyzing Forex charts, it is clear that it represents a huge minus for the intra-day trader. Of course, on fluctuations at the expense of big profit the trader will be easily able to cover a spread, but anyway, this main obstacle for the successful short-term biddings in Forex. Some Forex brokers offer rather narrow spreads, the traders have to pay attention to this criteria.

3. Negative swaps.

Depending on the currency pair swaps can be both positive, and negative. Thus, traders, using various Forex charts to hold a trade position, are forced to pay a daily percent. On separate currency pairs, the interest can be paid to the trader, but most of the brokers don't allow to traders to use such opportunity, especially on micro accounts. Negative swaps are the main disadvantage of fluctuations trading, thus, it is important to examine the policy of the broker on the relation of transactions transfer. So, considering the possibility of a negative swap, it is necessary to study regularly Forex charts to be convinced that a trend moves in the necessary direction.

But even, despite its cleart disadvantages, Forex offer enormous possibilities to get financial freedom. Research and practice are the best friends of Forex success.



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Number of comments: 4
  • Johnyeah
    • #

    Any occupation has as pros, so the cons. Most of all in Forex trading I like the freedom that it gives.

  • Sharon
    • #

    I'm a novice in the Forex market, but I enjoy every minute of trading, because the pros are much bigger than cons.

  • Chester
    • #

    I do not know such careless traders who don't pay attention at the regulation. Some licensed brokers turn out to be a scam, but without any regulation they literally can do anything they want.

  • Stacey
    • #

    The lure to become a millionaire wipes away all disadvantages.