The Pros And Cons of Forex
ProsOkay, so you've just learned what Forex is, and how it's enormous and has a huge impact on the world, but why do it? Why should you invest in Forex? There are multiple reasons why, but let's get to the pros of this first. One major thing that is great for traders that Forex features is its enormous trading leverage- your mileage may vary by country, but some brokers will allow traders to trade near 45:1! With this much leverage, a small amount of money will get you at a good trading position. With stock trading, leverage is much smaller, at a mere 2:1, but there is also a con to this as well- high leverage almost always means there is going to be high risk.
Forex is insanely scalable. Most brokers will let you trade in 3 size lots, which are large, small, and micro. With large lots, each pip in a USD pair is 10$, 1$ for small, and 0.1$ for micro. Especially with swing trading, you can make large amounts of profit with these lots; with 450 pip risk, you can risk from 450$ to even 4.5$; this allows for anybody to make profit in a large movement of currencies.
You've probably already heard of this if you read our last article, but Forex is open 24/7, unlike the stock market, where it may be open one day and closed the next. With even ADSL or dial-up internet and even a phone, you can trade. This makes Forex especially accessible to anyone who knows how to trade and has the money to; this is part of the reason Forex is so big.
There's usually a very small fee when Forex trading, and it's usually so small that it's essentially unnoticeable. Why are they so low? Brokers make up for this by taking bids and ask spread on the buy side of things.
All resources are accessible from anywhere and anytime, and it's probably why you're reading this in the first place! Of course, some of the resources are paid and require money to unlock, but this is also the reason why trading is a huge place for scams. Always see reviews and testimonials before buying information like this, since it will probably be available
for free elsewhere on the internet. Paitence pays off here; always do your research, and if you aren't sure about anything, GOOGLE IT! Almost all information about Forex is available online, including current prices, data, and software. It's also very friendly to new people in the Forex world for this reason.
ConsHigh leverage was the first thing we talked about as it is one of the most attractive things about Forex, but it CAN also have a downside. Using large margin can get you insane profit and earn you boatloads of money in a short period of time, but what if you get into a losing trade with that large margin? The most likely outcome of that is that the broker
will force an exit and the trading account will be wiped off the map. Forex is in many ways comparable to gambling but also somewhat safer- just like gambling, nobody all-ins on a 5% dice roll just because you could win- you have to be smart about this. Even with 50/50 dice, you will still encounter a losing streak, and if you don't all-in every roll, you won't be broke after a losing streak. Never invest more than 1.5% of your investment capital on one trade-
by doing so, you'll only risk 15% of your capital on a 10 loss streak, which is unlikely, but can happen. That's the big thing- it may be unlikely, but it still CAN happen. With large scalability as well, Forex is great for even investors with small amounts of capital- you just have to be smart about it.
Yep, Forex is available 24/7, but it doesn't mean you SHOULD do it 24/7. Just because a restaurant offers 24/7 service doesn't mean the quality of food may be the same no matter what time it's open. In all trading, there are peak hours where it's good to make a move, and quieter hours where prices will stay where they are and mull around. It's best to observe the markets for a period of a week before actually investing to get a good hand on when the best and worst times are, so you can actually be there at the right time.
Forex is an incredibly busy and confusing world, but it doesn't mean what happens in Forex stays in Forex; anybody can start whenever they like, and with all things, with time comes proficiency. You won't learn all the tricks on the first day or the last, there are constantly new methods and new prices, and you need to be alert no matter where you are. Although there is a large amount of profit available in the Forex market, there's also a good amount of risk
involved, so hopefully this guide has helped you in deciding whether or not you'd like to start. Good luck trading!