Becoming a Forex trader can be extremely rewarding if you understand how hard it is and are willing to put in the work to become successful.
Forex is a great way to make extra cash, the market has very high liquidity, and it helps you learn a lot about the world. However, there are also drawbacks you should consider before deciding to enter the currency market.
What Are the Advantages of Trading Forex?
The Currency Market Offers a Unique Way To Earn Extra Income
Trading Forex can be a great way to earn some extra money as prepared and experienced traders should farewell and be able to profit from their exchanges.
The large time window of the currency market’s trading sessions makes it much easier to have a job in addition to trading Forex.
Forex is the only financial market open 24 hours a day, as it runs from 5:00pm EST on Sunday until 4:00pm EST on Friday. Meanwhile, the stock market is only open 9:30am– 4:00pm EST on weekdays.
You can work a normal job during the day, and still have the opportunity to try to make money in Forex when you are home. This option is typically not available to traders in other markets, as they are only open during a limited portion of the day.
Swapping Currencies Furthers Your Knowledge of the World
Trading in Forex will help you understand economics and the impact of current events to a much greater extent than the vast majority of the general public.
In order to excel, you must read loads of economical, financial, and political news from across the globe to help you understand how and why the market and exchange rates move.
With enough time spent exchanging currencies, you should be able to make sense of how a certain proposed policy may impact the economy and alter a currency pair.
So, if you are looking to profit while becoming better versed in international economies and markets, the idea of becoming a Forex trader should be intriguing.
Forex’s Liquidity Allows For Trades to Be Quickly Executed
Forex is the largest trading market with an average daily volume of an astonishing $5.1 trillion. Equities pale in comparison at $84 billion around the world.
Great liquidity equates to a higher execution rate and faster trades. There is a very high likelihood that there is someone on the other side of an exchange at the exact price you are looking for. You should worry less about a trade not going through at a desired price or at all in Forex, unless you are exchanging a very rare currency pair.
Forex’s liquidity makes exchanging currencies more reliable than trading other assets. If you are more risk averse on making sure your trades are accurately carried out, it may be worth it to trade on in the currency market as opposed to any other.
Are There Any Downsides to Forex?
Although there are several unique benefits in exchanging currencies, it still has its risks and may not be for everyone.
A slight issue is that Forex must be traded through a broker. Brokers sometimes charge high fees on exchanges that are typically calculated from the currency pair’s spread and/or a flat rate per trade.
Also, not all brokers are reliable as their systems can crash and they may fail to execute your positions. Make sure that your broker has strong, credible reviews before deciding to trust them with your money.
Also, Forex trading can cause severe mental stress. You must be able to deal well with losses and never trade off of emotion. Every exchange you make must be statistically backed and strictly follow your risk management policy.
You will fail at times, especially early on. If you do not deal well with the psychological impact of struggle and times of financial turmoil, trading Forex may not be for you.
Trading in the largest financial market can be rewarding as it is open all hours most of the week, gives many an extra facet to make money, can sharpen your knowledge of the world, and its exchanges are quickly carried out at the intended price. However, consider the potential challenges of becoming a Forex trader before concluding it is right for you.