Pros And Cons Forex – Forex, like all other types of investing, has pros and cons. When we talk about the Forex market, let’s go over 7 positive points and its 2 main drawbacks:
What is liquidity? It is the extent to which an asset or security can be quickly bought or sold on the market at a price that reflects its intrinsic value. An example of a highly liquid asset is currency. The Forex market can only be described as the most liquid market in the world, which sided with speculators. Thanks to its high liquidity, this market do not suffer from big slippage compared to trading small stocks or even illiquid futures like commodities in coffee.
The market never sleeps or so they say, the advantage of Forex trading allows for 24-hour trading, meaning that traders can react to rapid changes, given that the market is volatile due to a number of variables such as political news, economic changes, etc..
Exchanging More for Less
Traders can trade with more money than they have on their account. In other words, a trader with a small margin can trade a bigger position, this allows the trader to increase his profit.
What are the advantages and disadvantages of Forex?
The biggest financial market in the world is the biggest market because it provides some advantages to its participants. Some of the major advantages offered are as follows.
The Forex market is huge, it is so extraordinary that no one can manipulate it for their own benefit. You might think that central banks might have an impact on the forex market, but if you think about it, even they are having a hard time making a bigger impact.
Thanks to the minimum requirements, the Forex market is open to anyone who wants to trade. Only a small deposit is required to start your trading adventure.
This is one of the most important questions a person may have “Will I pay commission?”, Most brokers charge no commission and profit from the spread when trading, which makes it different from others. New technologies such as Electronic Communication Network (ECN) are currently offered by Forex brokers. They are known to offer better spreads but have a commission per broker lot for using ECN as your execution system.
The most attractive feature of Forex is the constant trading activity, which allows traders to take advantage of every move in any major currency pair.
Now, what about the negative? We only have two lists because they are the most instrumental.
Being decentralized, meaning it does not have one authority, and thus the Forex market is a private mode of exchange. It’s nice to know that the mechanisms that are regulated, supervise, and support their activities. The lack of centralized data means that Forex does not offer all add-ons such as volume information (as in the case of stocks and futures).
Two of One
Come to think of it, Forex works through currency pairs, which means that each exchange involves two countries and economic regions. This makes them unpredictable and can cause various reactions to certain news and events.