Forex trading is indeed a lucrative venture, but just like any money-making ventures, it has its ups and downs. Take a look at our list of the pros and cons of a Forex trading career.
Let us start with its advantages:
Low Cost
Newcomers should not fear the large commissions from Forex brokers. In real sense, there are no commissions in this venture. Brokers earn their dollars from spreads (learn more about spreads here). On top of that, newbie traders should expect the absence of separate brokerage charges. The lack of these charges crosses out an overhead and gives them financial flexibility.
Low Capital Requirement
This particular advantage is music to a prospective trader’s ears. It is so enticing to know that Forex trading only requires a small amount for initial capital. For as low as $100, you can start to participate in the Forex market.
Different Trading Styles
Forex trading can accommodate various trading styles. For traders who love to take positions for short duration, Forex trading can be advantageous to them. This is because Forex runs almost non-stop which provides traders the flexibility and convenience to trade any time they want. Whether they prefer to take positions only for a few minutes up to a few hours or hold their positions for the entire day, they can certainly do it in Forex trading.
Now, it’s time to talk about the disadvantages:
You’re on Your Own
Well, you’re not entirely alone in learning the ropes. But compared with the stock market with a ready army of advisers, you’ll be a self-learner in this venture. The stock market provides you with trading advisers, relationship managers, and portfolio managers to guide stock investors.
But Forex trading is a self-learning process, and it takes discipline and laser-like focus because you’re venturing almost on your own. Indeed, steady progress in Forex trading requires steady growth in one’s discipline.
High on Two Areas: Risk And Leverage
It may only require low cost and low capital, but it involves high risk and high leverage. Traders can undoubtedly benefit from a 50:1 ratio leverage in Forex trading. But this benefit is accompanied with a hefty nightmare: magnified losses. To lessen the impact of the hard-hitting losses that may come, you should equip yourself with technical and fundamental knowledge about Forex trading.
Furthermore, you need to equip yourself with knowledge on the right capital allocation scheme and leverage. Lastly, you should master how to control your emotions when making crucial trading decisions.
