Forex: Its Merits & Demerits Explored

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There is no doubt that the Forex market today has become of the most lucrative options for traders.  Since, opportunities to make it big here are not restricted only to hardcore investors or businessmen, people from different fields are willing to invest on a regular basis.  As per reports something of around USD 4 trillion is traded here on a regular basis, thus making it easy for us to gauge its popularity.  In spite of all its merits, as a beginner you should also be aware of its demerits.  Go further through the post in order to be informed duly in this regard.
 
Advantages
 

• One of the major reasons Forex traders have increased in popularity is due to its easy accessibility.  Actually the money required to initiate trading here is much lower as compared to that of futures, stock or options markets.  Therefore even those without a huge amount of cash can easily start trading here.
• The minimal transaction costs are again another reason why investors are naturally attracted towards the foreign exchange market.  These costs are determined by ask/bid spread and usually hover at around less than 0.1 percent here.
• The absence of exchange fees, brokerage fees, clearing fees and government fees act as instant draws as well.
• The presence of leverage whereby you can move huge amounts of money even with little investments makes the deal sweeter for you.  You can make decent profits with minimum risk involved.
• The market is open 24/7 and you are at liberty to choose your trading time (be it day or night) without jeopardising your work schedule.  A trader doesn’t even need to be online throughout a day in order to identify trading opportunities or profitable positions.
• The size of the market is huge (the amount of money traded every day has already been mentioned above).  The high liquidity market thus makes it easier for you to find people who are ready to buy or sell currencies from/to you.  In case of a restricted or rigid market, things wouldn’t have been so easy in this regard. 

 
Disadvantages
 
The FX market is not without its disadvantages as well.  A glimpse of the points mentioned below will give you an idea about the same:
 

• Though the market allows easy access to traders, it is not that easy to understand it.  Without the help of an experienced and trusted broker, it becomes difficult for investors, especially beginners to identify profitable positions.  Most of the times it has been found that beginners are unable to zero in on right brokers and end up suffering losses in the long run.
• The practice accounts help beginners to hone their trading skills without risking any capital.  While it is generally considered to be effective for beginners, many experts opine that these accounts can give false confidence to investors that if they are good at paper trading they will be equally good in the real market.  But in reality, practice accounts function in a controlled environment, whereby your losses won’t really be regarded seriously.  You need to have the real experience of trading in order to gauge your skills.

Find out more about the foreign exchange market at Teletrade.com.
 
Alan Starc is a dedicated web content writer with considerable experience.  Alan’s versatility as a writer is amply reflected in his well-written posts on topics like investment, insurance, loan, travel etc.