Want to Start Trading? Learn More about the Benefits of Forex

Among the various methods of trading, Forex stands out with its unique advantages, beginning with the ability to go short or long. As such, traders can profit regardless of the direction the market takes.

Using USD/EUR as an example, traders would go long, or buy the pair if they thought USD would increase in comparison to the Euro. If they feel it will decrease, they would go short, selling the pair. Because profits and losses depend on predictions, you can make a profit regardless of market movement.

Compared to other types of assets that you can invest in and trade, currencies have very high liquidity, indicating a large number of sellers and buyers. In fact, Forex is the most liquid of all markets in the world. Because of that, people who trade Forex can typically complete transactions quickly, which leads to comparatively low transaction costs.

The market size that leads to that high liquidity of Forex offers its own benefit. Due to the vast size of the Forex market, there is a minimal risk of a dramatic price jump before investors can finish executing their trades. Additionally, the size means it is harder for one group to manipulate the market, which allows for a more accurate analysis of supply and demand.

Many traders appreciate the fact that the Forex market is open 24/5, unlike stocks that only open for a specific timeframe every day. These 24/5 market hours are necessary since Forex transactions occur between the parties involved instead of over an exchange, meaning places around the world must be open.

The volatility of the Forex market is also an advantage depending on how you look at it. While instability can lead to losses if traders are not careful, it also allows for huge rewards when trading Forex, assuming you take precautions and know what you are doing.

Most Forex brokers offer leverage, which lets you extend the reach of your money. For this, traders can make a position while they only hold a portion of its value. The loss or profit then reflects the full value, allowing for large potential profits. However, there is a caveat with the Forex market’s volatility. Using leverage can lead to losses that are greater than deposits.

It is possible to mitigate some of the risk related to volatility and leverage via the guaranteed stops in Forex. The Forex markets let you choose the exact price at which you enter or exit a trade, with guaranteed prices. As a result, you have additional financial protection when trading.

When you choose to trade Forex, you will not have to deal with any commissions. Forex brokers make their profits via the spreads they offer instead of commissions, which is in contrast to stocks whereby brokers typically make money on spreads as well as additional commissions. The lack of commissions not only saves money for Forex brokers but it also means that you have a clear grasp of the price you will pay, without any hidden fees.

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