Lots of people are thinking about Forex trading at the moment. It is a form of investment that is rapidly growing in popularity. The days when the only people concerned with Forex trading pros and cons were central banks are long gone. Now, lots of ordinary retail investors are looking to the market, attracted particularly by the fact that you do not need much capital to start.
Before you start Forex trading, you should become familiar with Forex trading pros and cons. After all, you’re speculating with your money so you do want to make an informed judgment.
Forex Trading Pros and Cons – the Pros:
Leverage – Leverage is one of the main advantages of Forex trading. Forex markets are willing to grant a great deal of leverage to traders, as much as 50 to 1 or even a 100 to 1. A small amount of capital can give you control over a great deal of foreign currency.
24 hour trading – The Forex market is open 24 hours a day for five days of the week. So you can trade any time of any weekday, whenever is convenient.
Low cost trading – Fees are generally limited to the transaction spread. Forex brokers don’t usually charge a commission. So, you get to keep more of your money. This is something to consider when you reflect on the Forex trading pros and cons.
Trade online – Many services and tools are available online for the Forex trader, and these will help you not only trade but also to monitor and understand and analyse the market. There is even automated trading software available that you can programme to make transactions for you when certain propitious circumstances occur. This is one of the pros of Forex trading pros and cons.
Now let’s look at the other side of the coin.
Forex Trading Pros and Cons – the Cons:
Volatility – The Forex market is extremely volatile. Currency values sometimes change without any warning. You can make money quickly and lose it just as quickly.
Leverage – Leverage can work against you as well as for you, which makes it another one of the cons when you consider Forex trading pros and cons. That small amount of capital that gives you control of currency at the rate of 100 to 1 can lose you your money at the rate of a 100 to 1 as well.
Scams – Be careful who you trade with online. Stick to reputable companies and brokers. If you do not take this advice then you are making yourself vulnerable to identity thefts, fake software and front companies that exist only to steal your money and financial details. Scams are unfortunately one of the cons in Forex trading pros and cons.
Now you have seen some of the Forex trading pros and cons you can better decide if it’s the sort of trade for you.
Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.