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why trade forex

Discover The Benefits of Trading Forex

Trading Forex is becoming more and more popular for active traders due to the benefits the Forex offers over other trading instruments. Recent surveys have indicated quite a large movement out of trading traditional share CFDs and into products that are available 24 hours a day like Forex.

Let’s take a look at the top 5 reasons why traders love trading Forex and whether you can benefit from this highly active and exciting market.

1. The Forex Markets are Open All Hours

The Forex markets trade 24 hours a day from when the New Zealand market opens on Monday morning until the US market closes on Friday evening.

You can be trading Forex at any time during this period, and because the market never closes, it does not gap across your stop when the market opens, leaving you with larger losses than you expected.

One of the key reasons traders have moved from share CFDs to Forex is excessive gapping in stocks and getting burned overnight. In contrast, the Forex markets tend not to gap or gap 3-4 times per year on major news items, although these are rare.

2. The Forex Markets Have Massive Turnover and Daily Volumes

The Forex market is the largest in the world, turning over trillions of dollars each day. According to the Dow Jones Newswires, the Forex markets turn over a staggering $4.71 trillion per day.

This means you can easily buy and sell large quantities if you want and not have any concerns about not getting filled. Execution is subsequently quick and effortless, and you will never find yourself waiting around for an order to execute when trading Forex, especially when trading the FX Majors.

If you are trading some of the exotics and trading size, you may have to be wary of light volume at certain times of the day.

Another critical aspect of daily turnover is understanding when the markets are the most active. The London Fix and the New York Fix are by far the most active. The Australian trading session is usually very light, unless a major economic announcement is being released, such as Australian unemployment levels or the RBA cash rate announcement.

Forex Trends USDJPY

When a trend develops in Forex, it can continue for some time. The Forex market trends more than any other market on the planet, which means you can jump onboard a trend and ride it until it ends.

This means that you can develop strategies that deliver bigger wins when you are trading Forex, and if your entry point is well designed, you can improve your risk to reward on the trade.

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Forex markets are the preferred place for savvy traders who have a great appreciation for picking low risk, high reward opportunities due to this market’s trending nature.

4. With Commission Free Trading Everywhere, You Could Say Forex is Cheap as Chips

Trading Forex is very low in cost because no brokerage is charged to execute an order. This means you can buy and sell the AUD/USD or the EUR/USD commission-free. There is a cost of trading Forex, which is the spread, the difference between the buy and the selling price.

When trading the major currencies like the EUR/USD, GBP/USD, AUD/USD, or the USD/CHF, this difference is minimal, and therefore your trading costs are lower when trading this market than any other instrument.

5. The Forex Markets Let You Take Advantage of The Power of Leverage

Finally, currencies move a few cents at a time to benefit from trading currencies you have access to leverage. This means for a small amount of cash down, and you can control a large amount of the currency.

You can typically trade a $100,000 position with as little as $1,000 (and often less) in your account. Leverage is a good thing if managed correctly, but can result in considerable losses if handled poorly. Leverage simply means that you have access to bigger wins and bigger losses, and you don’t require the full position size upfront to control your trade.

It is essential to manage your risk when trading Forex and trade small while building your trading confidence and working out which style of trading and risk management is best for your situation.

As you can see, the Forex markets provide massive liquidity, a limited chance of getting gapped, and access to leverage. It stands to reason why traders have made this their preferred trading instrument over the others.

To get started, your best option is to grab a live demo account from a reputable Forex broker and test the waters with fake money. Build your confidence in your systems and then, if appropriate, open a live trading account and start trading small.

Start Trading Forex Now

Trading Forex is not for everyone. However, if you are keen to try on Forex trading, start with the demo accounts provided by the Forex brokers to gain sufficient trading knowledge in the market. Additionally, as a new trader, is it best for you to learn Forex trading strategies before you head out on your Forex trading journey

 

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FAQ

Yes, trading Forex can be a great way to earn extra money as prepared and experienced traders should profit from their exchanges.

Most professional Forex traders do not waste their time trying to trade short time frame charts. Instead, they spend their precious time taking in the bigger picture of the market, through careful and skilled analysis of the higher time frames.

Forex trading can become gambling when you don’t know what you’re doing, and it can exist in many different ways. In most instances, Forex traders end up gambling when they don’t follow a trading strategy.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage . 75 % of retail investor accounts lose money when trading CFDs with this provider . You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money .