Advantages of Trading Forex You Should Know
Forex trading appeals to traders of all levels of experience and financial abilities, making it one of the most popular investment options. In spite of the fact that forex trading has become more accessible over the years, understanding the basics is critical when trading forex for the first time. Forex trading offers many advantages over other financial markets. Let’s examine each one in turn.1. Low Initial Investing Cost
The Forex market is considered to be one of the markets with the lowest trading costs among other investment alternatives. This means that first-time traders looking to invest small amounts can easily enter the forex market without worrying about their finances. Most notably, brokerages like AximTrade allow you to start trading forex for as little as $1. By opening a cent account, novice traders can learn more about forex trading and experience the real market without risking significant funds.You may wonder if trading with a small Forex account is worthwhile, considering the small profit margins. While it is true that trading with a small forex account can be challenging, it can also be rewarding as it can teach discipline, risk management, and execution skills that are crucial for success in the long run.
Demo accounts are also available to beginners who wish to begin trading forex without losing any capital. The forex demo account is a free trading account backed by virtual money that traders can use to learn how to trade, test their trading strategies, and learn how the brokerage platform works. It is highly beneficial for forex beginners as it enables them to begin free online trading quickly, allowing them to practice trading before investing real money.
Explore the 10 effective ways to grow your small forex account into an account large enough to afford a decent lifestyle.
2. Round the Clock Market Hours
The forex market is a global market that operates 24 hours a day, except on weekends, so it runs 24/5. As a result, Forex trading takes place continuously as long as a market is open somewhere around the world. Forex traders come from various parts of the world, and they participate in the market according to the time zone that they live in.There are four forex trading sessions: the Sydney session, the Tokyo session, the London session, and the New York session. Trading hours begin in the U.S. when Sydney, Australia, opens at 5 p.m. Sunday, Eastern time. Friday marks the end of trading for the week when the last major market closes in New York at 5 p.m. Forex traders divide the market into three sessions: Asian (Tokyo session), European (London session), and North American (New York session).
If more than one market is open at the same time, there will be more trading activity, resulting in a greater fluctuation in the exchange rate. When the U.S. and London trading sessions overlap (8 a.m. to noon EST), there will always be the most trading activity and the best trading opportunities. Despite being less volatile than the overlap between U.S. and London markets (2 a.m. to 4 a.m.), Sydney and Tokyo trading sessions present excellent opportunities.
3. High Liquidity
Liquidity refers to the ability to convert an asset into cash in a short period of time. Among all trading markets, the forex market has the highest level of liquidity. That means that there are many buyers and sellers out there, who are trying to exchange money at all hours of the day and night.It is estimated that $6.6 trillion is exchanged every day by individuals, companies, and banks in forex, which is higher than the stock market’s daily volume. While some of the capital is converted for other purposes, most of the activity focuses on making a profit which adds to the advantages of trading forex. Another reason for this is that high liquidity makes transactions quick and easy. As a result of the constant flow of money into and out of the markets, transaction costs (spreads) are typically very low.
A superior liquidity level ensures price stability, which is the most important factor. Since forex is such a large market, there will always be someone willing to buy or sell a currency at the quoted price, so trades and transactions can be conducted anytime. However, it can be tricky to get a good fill during periods of high volatility. There is also the possibility of slippage during periods of instability, just as in any other market.
4. Lower Trading Costs
One of the other advantages of trading forex is that it takes relatively less trading costs than other markets. As it may depend on the broker you choose, most good ones will offer a free trading platform, low spreads, low commissions, free data, micro-lots, and more, so that you can keep more of the money you earn rather than having to pay fees and other expenses.Amongst the three most important forex trading costs that most novice forex traders encounter are spreads, commissions, and swaps. Failing to consider Forex trading costs can dramatically affect the performance of your portfolio and decrease your potential profit.
AximTrade standard account features the lowest spreads in the market, a minimum of 1 pip on all majors, and 0% commissions. Trading with low spreads allows you to calculate your potential profits and losses more easily, allowing you to develop a more informed trading plan. Here’s how to choose a low spread forex broker and maximize your forex earnings.
Source: 8 Advantages of Trading Forex over other Financial Instruments
