Even though trading in the forex market is not exactly like trading stocks and commodities, it is certainly engaging yet challenging at the same time.
With online trading improving the accessibility of the forex markets, it has made this highly liquid market a lucrative option for consistent wealth creation. Since the forex market operates round-the-clock and can be accessed easily through online trading platforms, many people are opting for it as a full-time career! Even though it is certainly empowering to be your own boss, there are some pros and cons that you should weigh in before taking the leap.
Pros Of Forex Trading
Like in every trade, there are many risks in the forex market. However, that should not deter you from considering it a good source of income as trading in forex, full-time has its own advantages:
Getting started in the world of forex right from setting up your account, funding, learning, and trading is relatively easy. It makes the forex market one of the most accessible financial markets that exist, where retail investors can begin trading by investing as little as $50. Having a trading account set would generally not take more than three days. In today’s day and age, it would be hard to find a forex broker that does not support online trading on their platform. As a forex trader, you can access various tools and technical indicators on online platforms. These could be price charts, tools, market pricing, or perhaps trading strategies that you can learn about. It is a huge advantage that the forex market is open 24 hours from Monday to Friday. It allows greater flexibility as you can pick your currency pairs
as per the trading slots that are convenient or beneficial for you.
Costs are low
Commissions and brokerage costs are relatively low when it comes to forex trading. In fact, it may not be incorrect to say that there are rather no commissions at all as traders make a profit from spreads through foreign exchange currencies. You need not worry about keeping a brokerage fee aside or wondering if there are any overheads like the ones in other markets.
Suited to different styles of trading
As you build your trading strategies in the forex market, you would want to experiment until you know what works best for you. You could invest in the short-term such as a few minutes or a couple of hours. Maybe you want to go for long-term positions that you want to hold for months. The forex market allows you the flexibility to choose as per your convenience and appetite for risk.
If you go by volume, there is no financial market that is as big as the forex market in the world. Since there is such great volume involved, there is also a lot of liquidity in the market, especially in the major currencies like USD, EUR, YEN, etc. If you are a trader who is working with the trading desk model, chances are that you will already be offered adequate liquidity.
This is because the brokerage is likely to pick an opposite position when the cash flow in other parts of the market is low.
No central exchange or regulator
While the forex market may not be exactly as unregulated as the crypto market, no regulatory body directly oversees the currency market. Since it is an over-the-counter market that functions globally, not having a lot of regulations makes it easy to keep costs low. Once an order is placed, a broker can directly execute it.
Variety of Pairs to Trade
Presently, the forex market has 28 currency pairs that involve eight major currencies. How you choose a currency pair depends on various factors such as timing, economic changes, volatility patterns, etc.
Disadvantages of Online Forex Trading
It is wise to be aware of the disadvantages of trading forex online as it will help you take calculated risks. Some factors can prove to be particularly challenging and therefore having a strategy in place to tackle them can give you an edge.
Lack of transparency
The forex market may not be very transparent since it is not entirely regulated. Therefore, you may not be entirely in control of the trade you order.
How you choose your broker can impact the way your order is fulfilled, whether you get the right price and the number of trading quotes you have access to. It is best to opt for a broker who is registered by the regulatory body that operates in your country.
Volatile markets may not always be a trader’s best friend. If you are looking to make shortterm gains, you have to tread carefully or you could risk incurring huge losses. Since shortterm positions do not usually allow one enough time to think through their trading calls, it is a strategy that seasoned traders can execute after years of experience.
Complex price determination process
When factors like economic changes and political unrest affect the market, it is hard to condense such macrocosmic parameters into market predictions. Therefore, forex trading often relies on technical indicators that analyze these conditions to a certain extent and traders pick the signals to take their positions. These technical indicators contribute significantly to making this a volatile market as it is quite easy for a beginner or even an expert trader to misread them.
Think before you leap
In the forex market, you are holding the fort entirely on your own. You are completely responsible for handling your funds unlike in the share market where portfolio managers and advisors can offer assistance.
It is only when you think before you leap and get into the habit of researching, studying, and understanding the market trends regularly that you can make profit consistently. This isn’t a market where you can make quick money, rapid returns are usually a myth. What you need to actually do is develop the right skills and discipline yourself to turn forex vs crypto trading into a profitable career.