Forex trading is the world’s largest and most liquid market. That attracts huge popularity among inexperienced new traders. That stands as proof that there are various benefits of forex trading that can lure you.
Here are 5 benefits of forex trading
1. 24-hours open market in five days
You can continuously trade so long as the market opens. Since the forex is a worldwide market, that means there is always a market open somewhere across the globe.
Globally, the major market opens in the U.S. at 5 p.m. eastern time, while it ends when the last major market in New York closes on Friday at 5 p.m.
2. High liquidity
Liquidity means the ability of an asset to be converted into cash. High liquidity, in the forex market, means there is a large amount of money move into and out of currencies.
3. Low transaction cost
Usually, the cost of the transaction is included in the price in the forex market in the form of a spread. That spread will later become the forex broker payment for facilitating the trade.
Those spreads are measured in pips. Mostly, a pip in the fourth place after the decimal point. For instance, if the bid price was 1.3442 and the asking price was 1.3444, the spread for that transaction is 2 pips.
Other than that, the brokers can also charge a commission. The commission can be in the form of a flat fee or based on a percentage of the transaction amount.
4. Ability to use the leverage
Forex brokers usually offer traders to buy and sell in the market with a big amount of leverage. That gives traders the ability to trade with bigger money than what they have in their accounts.
For instance, a trader who trades 50:1 leverage can trade $50 for every $1 in his account. In other words, that trader can control $50,000 by only $1,000.
5. Profit potential from rising and falling prices
It does not have restrictions on directional trading. By that, you can keep gaining profit when the value of your currency pair is either increasing or decreasing. If it increases, you can buy it or go long, while if it decreases you can sell it or go short.
Different from the stock market, where you need to borrow shares to sell short, in forex you just need to place a sell order to sell a currency you don’t own.
