The 5 Main Benefits of Forex Trading Explained

The 5 Main Benefits of Forex Trading Explained

Are you looking for a way of turning your financial resources into a solid source of income? If so, perhaps forex is the right investment vehicle that you have been searching for. In this article we will introduce some of the main benefits associated with trading currencies on the foreign exchange market.

If done correctly, forex trading can be a way to make consistent profits for your investment portfolio. The forex market is the largest and most liquid financial market in the world, with more than $4 TRILLION traded per day – which means that is has tremendous potential for growth.

There are numerous ways of trading on this market ranging from fundamental analysis (seeking out trends based on economic factors, such as interest rates and GDP growth), technical analysis (trying to predict future trends based on past price movements) to risk management systems.

1) Gain a High Rate of Return                                             

The profits that can be made from forex trading are extremely high compareing to your initial investment. Usually, the returns that one can expect when trading currency pairs range from 1% to 10% per day. Of course, the higher the profit return the higher the risk factor associated with trading. You can check out forex trading platforms like Meta Trader 5 in order to get started in Forex trading.

2) Leverage (Margin Trading)

Traders can trade currencies on leverage which means that only a small percentage of money is required for buying or selling currency if it is done on margin. Leveraged foreign exchange trading is the opportunity to make profits on currency fluctuations without actually owning that particular currency.

The amount of leverage available depends on the type of broker you are using. They but usually they offer no less than 50:1 leverage ratio. The meaning that one dollar can control fifty dollars worth of a given currency. If you want to, say, sell one million Euros in exchange for U.S. Dollars, you would need only $50,000 using 50:1 leverage trading.

3) Forex Trading is available 24/7

Unlike the stock markets which are open during business hours (9:30 am – 4 pm), foreign exchange is a 24-hour market that never sleeps. You can open a position at any time of the day and trade currencies from all around the world, 365 days per year.

4) Low Transaction Costs

As mention earlier, forex trading is done on margin which means that you do not have to put up 100% initial margin as is require by most financial markets. In addition, you can open a position with as little as 100 units of the base currency (in the standard lot size of 100,000 units).

Transaction costs are usually low and depend on your broker or trading platform. There is no commission or fee charged by forex market makers for executing a trade. On some brokers’ platforms, transaction fees are charged only when you close a position. So if you hold your trade for several days or weeks, there is no fee.

5) Fun and Rewarding

Many forex traders enjoy the challenge of trading currencies and find it entertaining. The excitement associated with earning profits can be very rewarding, especially if you are new to this type of investment.

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