Forex trading is one of the most popular types of trading, and for a good reason. Its multiple benefits attract traders worldwide, for accessing the markets is easier than ever. But what makes it so alluring? Why trade forex? Let’s look at some benefits you could enjoy as a forex trader.
Why Trade Forex?
1. The World’s Largest Financial Marketplace
Players in the forex market are numerous. These include governments, central banks, international corporations and individual traders. It’s thus no wonder that average daily transaction volumes exceed $6 trillion and that liquidity in the forex market is extremely high.
Thanks to this, investors are almost always guaranteed to find buyers and sellers with whom to trade quickly and at competitive prices.
2. A Flexible Two-Way Trading System
Currency trading implies a two-way trade, which can be lucrative on either side of the exchange. Indeed, investors can make money flexibly by longing or shorting foreign currencies.
For example, if you think the GBP is on an uptrend, you can simply buy that currency or “long”. If, on the contrary, you believe GBP is about to depreciate, you can instead sell, or “short”, the currency.
As such, you should note that there is no such thing as a “bear market” in forex. You can make money regardless of if a currency gains or loses value. Indeed, when you trade forex, what matters is that you accurately predict the trend of a currency.
3. Open and Independent Marketplace
Because of its high liquidity and many participants, the forex market is extremely independent. And since currencies are not manually controlled, no big players or corporations control forex prices.
Moreover, investors can easily access open, transparent news about macroeconomic factors that impact exchange rates. These include inflation rates, monetary policies, geopolitics… As a result, everyone has equal opportunities to understand the market and thus take fully informed trading decisions.
4. Longer Trading Hours
The forex market has the benefit of being open for an extended period. Indeed, thanks to the many time zones it operates in, it remains open 24 hours a day, five days a week. This offers it a significant advantage compared to the stock exchange, which only opens during the trading hours of local time zones.
As a forex trader, you will thus be able to seize more opportunities than in many other markets and trade at almost any time.
5. Highly Flexible Even During Unstable Economic Times
Forex trading is highly flexible and can be lucrative, even when two countries have gloomy economic prospects. Indeed, if one economy has a relative advantage compared to another, fluctuations in their exchange rate still give investors a chance to make profits via long or short trading.
Again, this is a great benefit for traders if we compare this to stock trading, where short selling is not that common. In times of economic instability or a bearish market, stock investors have fewer opportunities to make profits.
6. A Low-Cost Trading Solution
Forex transactions usually don’t involve commission charges. Brokers typically provide free and up-to-date quotations and chart data for investors’ reference.
Moreover, the transaction cost or “spread” is usually extremely low, as is the initial deposit forex brokers require. Investors can thus trade forex with just several hundred dollars as a starting capital. In Forex, there is no minimum amount for trading.
