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The booming popularity and the explosive increase in the number of traders worldwide have created a buzz among potential traders about the forex market. Over $5.5 trillion is traded daily, which has made forex the worlds largest and most liquid financial market.
All types of traders, from novice to experienced traders, are now thinking of currency trading. If you are also thinking about it and wondering what are the advantages of trading forex, but at the same time you are uncertain as to whether you should take the leap or not, then don’t you worry!
Read on to find out how you can benefit from opening a forex trading account and speculating on the currency markets.
Forex Trading Overview
When trading forex, you select a currency pair and according to the basic factors that influence the value of the currency, you predict the direction (rise or fall in the value of the currency). These factors include the economic growth of a country (i.e. the value of the currency you are trading), political situation, inflation, interest rate, GDP, and employment.
To understand the mechanics of how this market works, you can open a demo forex trading account and practice trading. This is a good way to learn and devise a flawless trading strategy.
Main Advantages of Currency Trading
Here are the main advantages of trading forex:
Highly Liquid
As compared to the traditional equity markets like the stock and bond markets, the forex market is highly liquid due to its very high daily volume of trading activities. Since the market is highly liquid, you can buy and sell at will anytime.
Set Automatic Close Position
Trading platforms offer you the ability to set automatic close position controls. It enables you to set your desired profit level and loss trading limit. The benefit of this feature is that it keeps emotions like greed and fear at bay. The trade automatically closes when you reach your desired profit level and also closes when the forex trade is going against you. This helps you reduce losses.
Leverage Margin Ratio
The advantage of trading in the forex market is that you can easily leverage your small deposit amount into a large contract value. Leverage margin ratio helps traders multiply profits while keeping the risk to a minimum.
For example, if you are trading forex with a leverage ratio of 1:100 it means you can trade $100 for every $1. Hence, if you raise $50 capital you can control and secure a trade of $5000.
No Geographical or Time Limitations
The currency trading market is an international market with no geographical or time limitations. Traders can trade around the clock, five days a week. The market is only closed on the weekends. This gives traders the opportunity to maximize their returns on the go from any part of the world and engage in forex trading with utmost flexibility.
Equal Opportunity for Long and Short Trades
One of the many advantages of currency trading is that the market offers traders equal profit making opportunities for long and short trades. In this market, the trader has to predict the direction of the value of currencies. Whether the currencies in the pair rise or fall if your prediction is right, you earn profits.
