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The benefits of forex trading are crucial to know before getting into it — so you are sure that it’s worth your time. Forex Trading is one of the best asset classes to trade today, and many traders of all experience levels have Forex in their portfolio. This includes individuals to large hedge funds as well as leading banks.
Whether you want to become a full-time trader or try it to make some money on the side, Forex trading is a great option for you — Only if you put in the work to learn about Forex before going into actual trading. Let’s look at some of the benefits of forex trading to confirm that the hours you have to put into learning forex will never be a waste.
Table of Contents
What is forex trading?
Forex trading is the process of changing one currency to another to earn profits. These currencies get paired up, and traders trade these forex pairs for an agreed price.
This asset class is so profitable that it has become a market with over $6.6 trillion daily trading volume. Even though Forex comes with significant volatility, when done correctly, the benefits of forex trading outnumber the drawbacks.
The Foreign Exchange market is where currency pair trading takes place and offers a platform to the global trading community. A large number of traders within the market makes the forex market a highly liquid marketplace.
The currency pair of EUR/USD is the most traded forex pair at the moment. In addition to Forex, this marketplace also offers a platform to trade derivatives, futures, options, and swaps.
10 Benefits of forex trading
There are a large number of benefits to trading forex correctly. Understanding the benefits better can aid new traders in aligning their trading with objectives.
These are some of the most common benefits of trading forex.
- High Liquidity: With Forex being the largest financial market in the world, the number of traders in the market exceeds 10 million. With a large number of active traders at any given time, the chances of finding successful trades increase exponentially. This allows the forex market to be among the most liquid global markets.
- Beginner friendly: Trading forex as a beginner becomes much easier with the benefits that it provides. Forex offers great accessibility to its market and allows traders to be flexible with their time and resources.
The small capital requirements, low costs, and easy entry and exit from the market make Forex one of the most beginner-friendly trading methods.
In addition, Forex brokers also provide new traders with great educational content, free demo accounts, great customer support, and a plethora of other features to make their trading life much easier. New traders even can imitate and get help from seasoned traders with the help of social trading features. - Low capital requirement: Forex is a marketplace where you do not need to invest a large amount of money as capital. With a minimum of 1% margin on a trade, forex traders can enter a position and make profits from there. This makes the forex market a great place to start for traders without a large financial background.
- Availability of leverage: Leverage is something similar to a loan that traders receive from brokers. This pseudo loan allows traders to trade with more capital than what they originally invested. Leverage is capable of magnifying the returns of a successful trade that the trader takes part in.
With leverage, the need for large investments to open a trading position reduces. As a result, traders with little capital can also stand to make good profits off of Forex. - Flexible trading times: The ability to trade at any hour of the day is one of the best benefits of trading forex. Forex is a marketplace that is open 24 hours, five days a week.
When compared with most of the other financial markets, this 24-hour availability allows traders to be more flexible with their time.
Traders also can take part in forex trading as a side hustle while working a full-time job because of this. Managing your time becomes much easier when you have the freedom to trade as you please. - Trade on the go: Traders from all over the world can easily access the forex market with just an internet connection and a mobile device. While the trading platforms on the PC offer a bit rawer power and features, mobile trading platforms and web-based are also great places to do trading on.
Almost all of the brokers offer a mobile app that is dedicated to forex trading, and this can allow traders to trade from anywhere they please. Combine that with flexible trading times, and you have one of the most flexible financial markets. - No authoritative entity: The large-scale nature of the forex market allows it to be free from any single authoritative party that has a strict monopoly on it. This, in return, allows Forex to stay free from significant market manipulation by any single entity.
Not even a central bank can affect the status of the forex market in quick succession. This is another one of the great benefits of trading forex that helps create a decentralized environment. - Feature-packed brokers: Traders can expect analysis and research tools, trading signals, charts, demo accounts, and much more from a solid broker like Icon FX. In addition, you will also gain access to great forex educational content and customer service to help you get settled in the market. A free demo account is available for those who are interested in starting forex trading. This allows you to develop your skills without any risks.
- Low transaction and trading costs: In addition to the low entry capital, the forex market also has some of the lowest trading and transaction costs of any financial market. Since forex brokers take their commissions from the spreads, the need for large transaction costs becomes pointless.
So, when you trade with a forex broker with low spreads, that essentially means that the traders are paying less for their trading activities.
Not only that, but some brokers allow traders to spread as low as 0.0pip, like Icon FX, which cuts down on the trading costs even more. - Ability to go either long or short: With Forex, traders can choose whether they want to go long or short, depending on their preferences. The main reason behind this is the fact that you are selling one currency while buying the other from the pair. The profits the trader earns depend on the accuracy of the made speculation.
Why Choose Forex over Stock trading
The direction that you choose to go, may it be Forex or stock, solely depends on what your preferred trading asset is.
While both are great profitable options, the benefits of trading forex exceed that of the stocks. Because of this, most active traders choose Forex over stock as their main trading field. But don’t just take our word for it. Look at the benefits for yourself.
The direction that you choose to go, may it be Forex or stock, solely depends on what your preferred trading asset is.
While both are great profitable options, the benefits of trading forex exceed that of the stocks. Because of this, most active traders choose Forex over stock as their main trading field. But don’t just take our word for it. Look at the benefits for yourself.
- Better liquidity: Since Forex is a large financial market with over $5 trillion daily trading volume, it far exceeds the trading volume of the stock market. This allows the market to have a bigger number of traders, resulting in higher liquidity. So forex traders can find successful trades much more often than stock traders.
- Higher Volatility: A forex market is a place with high volatility, which causes massive fluctuations in asset prices. When compared with the stock market, stocks hold a more stable price range for a longer period.
While this is suitable for some traders and trading strategies, the high volatility of Forex creates much more exciting trading opportunities. Traders will have the opportunity to make much more profitable trades, given at a higher risk, and this also ranks high among the benefits of trading forex. - Better trading hours: While stocks have strict opening and closing hours, Forex does not. Forex is a market that operates 24 hours a day, five days a week. This allows traders who have other activities to attend a fair chance when trading. Many traders who engage in full-time jobs tend to choose Forex because of the flexible active hours.
Top brokers you can start Forex Trading
Choosing a reliable broker is one of the first things you should get right before getting into forex trading. With the correct broker, you will have a much easier time making a profit with Forex. As we mentioned earlier, having a good broker by your side is one of the biggest benefits of trading forex.
When choosing a broker, one must pay attention to many aspects. These can include regulatory status, fees, spreads, leverage, and the support provided. Let’s take a look at some of the best choices when it comes to reliable forex brokers.
Icon FX
When talking about reliable and regulated brokers, Icon FX is a broker you can’t afford to miss. They offer impressive spreads starting from 0.0pips and leverage that goes up to 500:1.
The broker is regulated by the ASIC and is also a registrant of St. Vincent & the Grenadines.
With Icon FX, traders can expect market analysis, social trading, free trading tools, demo accounts, fast execution speeds, and great transparency on fees.
In addition, you don’t need to invest a minimum deposit to start trading here. Traders will access thousands of assets in five asset classes, including 50 forex pairs. Another one of the benefits of trading with Icon FX is the 24/5 multilingual customer support and the availability of great educational content.
eToro
Whether you are a beginner or a veteran trader, eToro is a great place to make your trades. Traders that use eToro can enjoy 1:30 leverage, 0% commissions, and spreads starting from 0.1 for a minimum deposit of $200. eToro is also highly regulated and offers great trading platforms to suit the needs of traders.
Where eToro shines is the copy trading feature that it allows its traders to use. With this feature, traders can duplicate trades from other professional traders to increase their chances of success.
XM
As one of the biggest forex brokers in the world, XM offers its services to over 5 000 000 clients from all around the world. The traders who use XM as their broker get access to over 1000 tradable assets, 25 secure payment, and withdrawal methods, and solid trading platforms.
XM requires a minimum deposit of $5 and offers up to 888:1 leverage and low spreads starting from 0.0pips. As with any other regulated and reliable broker, XM also offers solid customer service and good educational material. XM is also a great choice to perform your trading transactions with.
You can read our top forex brokers’ articles to find out about the best forex traders in 2022. Although these articles have our unbiased opinion on each broker, we advise you to do your own research as well before making your decision.
FAQs
Among many other benefits, Forex offers a flexible, liquid, volatile, and profitable market to trade on. Low costs and high leverage make Forex a great choice for beginners as well.
Icon FX and eToro are both great options for both experts and beginners. They both offer great features and low fees, are highly regulated and offer social trading features.
While there isn’t a definitive answer, the choice depends on personal preference. However, Forex certainly has a few advantages going towards it.
Conclusion
When talking about the benefits of trading forex, there is a lot and what we have listed here are only a few of them. As one of the most flexible and liquid financial markets in the world, Forex offers a platform where traders can freely and easily perform trades and make profits.
Since now you have a better understanding of the benefits of trading forex and the brokers to go with, you have a much easier time on your forex journey.
Use what you can from this article on top of your research to make the best decision that can help navigate your career in the right direction.
