Benefits of trading forex

Foreign exchange, also known as Forex or FX, is the marketplace where traders buy and sell currencies with the goal of making profits from the difference in exchange rates. The fluctuating nature of the forex market presents a lot of opportunities for traders who are dependent on the price movements for making profits.

What makes the prices move

The forex market is largely driven by the law of demand and supply, but there are other factors too that influence the market, such as:

• Interest rates
• Global events
• Government debt
• Inflation rate
• Social and economic factors

Benefits of trading forex

1. Flexibility

The biggest advantage of forex trading is the flexibility it offers. You can trade forex whenever and wherever you want because the market is open around-the-clock. However, you should consider factors like the pairs’ liquidity and volatility which are different at different hours of the day depending upon when the market is active.

2. Low trading costs

Compared to other markets, the forex market offers lower spreads and commissions. Some good low cost forex brokers offer spreads starting from 0.0pips, such as:
Fxview
Pepperstone
XM
IC Markets
AAAFx

3. Low capital requirements

Another main benefit of the forex market is its accessibility. The ease of entry without requiring a huge upfront capital makes it more accessible to traders who don’t have a lot of money to start with. It gives everyone a chance to participate in trading activities.

4. High leverage

High leverage is one of the most alluring benefits of forex trading since it enables you to take up a large position with a relatively modest amount of capital. For instance, if you have $300 in your account, and you choose a leverage of 1:100, you can increase your trading capital by 100 times.

5. High liquidity

Liquidity, as used in trade, is the ease with which an asset may be purchased or sold with little impact on its value. Simply put, it depends on how active a given market is. The foreign exchange market is the most liquid market in the trading world with transactions worth more than six trillion dollars being made everyday.

Conclusion

From low barrier-entry to high leverage, all these factors make forex trading a highly favourable market for beginners as well as experienced traders. However, it’s always recommended to test the waters with a demo account instead of starting to trade with your real money and move to a live account only after acquiring skills and experience. This will help you survive longer. Happy trading!

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