Support and resistance points and the gap are some of the most important tools of…
The advantages and disadvantages of Forex trading market
If you are thinking of starting to invest your money in the forex trading market, you may be wondering why you see everywhere ads for online forex brokers promoting the idea of starting trading with minimal capital, up to $100, with attractive promises making huge profits.
Before jumping into this dangerous world, you should think about your current situation cautiously. The forex market is not suitable for everyone: this saying is correct, you can start with a very small investment and you may even be able to win 10% daily, but unless you are fully aware of what you are doing, the chances of losing all your money in the first trade seem very likely.
Advantages of Forex Market
You can start with very low equity and leverage by taking out a loan from your online broker (typically 50 to 400 times your initial investment). This means that you can, for example, invest $100 and then “pretend” that you are actually investing up to $40,000, depending on the leverage used. This means that any slight change in the market will be reflected in large profits or losses for your open positions.
Another advantage of foreign exchange trading is that you can practice trading from the comfort of your own home. Many online brokers also offer different payment methods, such as PayPal, so you won’t find any obstacles to starting trading.
Trading hours are also an added advantage: unlike in the stock market, you can trade currencies 24/5 (or even 24/7 if you are trading crypto), so you don’t have to wake up in the middle of the day to find the right time frame for trading. This saying is correct to some extent, but noting that the market tends to be more active during certain periods while witnessing a state of calm in other hours.
One of the important advantages that some attribute to the forex market is its high liquidity, which simply means the ability to profit from both emerging and falling markets, as well as avoiding any commissions or fees. Finally, there are countless online brokers available in the Forex market.
Disadvantages of Forex Trading
Many beginner traders forget that leverage may work just as well against you as it does for you. The fact of the matter is that not using this important tool with caution and prudence can lead to heavy losses and exit the market in the long run.
Moreover, being able to start trading with very low capital does not actually mean that you should do so – many novice Forex traders ignore this fact and rush to start working with small balances which ultimately leads to losing all the money in no time due to the restrictions. Associated with capital, which usually leads to greater risk.
Finally, we do not forget that getting an adequate education is one of the fundamental factors for the success of any Forex trader. In fact, it can be said that you cannot continue in this market without being sufficiently scientifically qualified. This fact is essential, especially if you know that some traders design their strategies in a way that specifically targets earning profits from the mistakes of less experienced traders!
Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.