There are a growing number of people who are into foreign exchange trading these days however you should know that is not for everyone. To see if trading currencies is a good venture for you, below are its advantages and disadvantages.

Advantages of trading in the Forex market

The foreign exchange market dwarfs other financial markets like stocks and because of this it has remarkable liquidity. No matter how big the order is, it is almost always filled instantaneously. This almost immediate execution is not seen in thinly traded assets.

The currency market is a highly leveraged one. With the ability to trade at a margin, you can hold positions that are substantially larger than your capital. Trading at a margin can help you earn a lot of money with a smaller cash outlay.

In other financial markets, you need to keep a certain minimum balance so you can trade. For example, in stocks it is not uncommon for you to be required to maintain $25,000 in your account. This prevents individuals with average income from participating in this market. This issue is inexistent in Forex trading. The minimum balance requirement for foreign exchange accounts are usually determined by your broker, and it can be as little as twenty-five bucks.It’s not easy at all to find the right forex brokers. For that, you have to know forex well yourself. There are few brokers, like IC Markets, who can help you.

Apart from being available to people with limited capital, the foreign exchange market also allows people to trade after work. This is possible since this financial market is open 24 hours per day except weekends, which means unlike other financial markets you don’t need to wait for starting bells to do trading.

Drawbacks of Forex trading

There are also a number of disadvantages to trading in the Forex market. For starters, it is extremely volatile, and prices can be influenced more easily by socioeconomic and political factors than other asset classes. Even natural catastrophes can affect the financial market. Also, leverage can work against you. While it is true that it can increase your earnings, but it’s also possible to lose large sums of money easily if you do not secure your position properly with risk management strategies. Due to its volatility, the foreign exchange market is a time-intensive market. What this means is that lucrative opportunities can crop up when you’re working or when you’re sleeping. Traders can use of stop orders when they are unable to monitor their portfolio, or use trading software to to monitor the market and execute trades for them.