Top benefits of forex trading every trader should know

by rohit chawla digital marketer

Due to high liquidity and incredible volume, the forex market attracts many new traders and investors every day. Forex trading offers optimal trade to millions of traders around the globe. But it is not for those with a weak heart. That said, let us discuss some core benefits of forex trading.

Forex market never sleeps.

One of the top benefits of forex trading is that the market is open 24 hours a day, for 5.5 days a week. This way, traders get to be immensely liquid and flexible with their trade. They do not have to wait for the opening and closing bell to facilitate their positions and exchange.

High volume and liquidity

Forex trading is a highly voluminous trade. Thousands of traders enter the market every day to reap profits. This way, you will always have a seller sell your trade to, and a buyer to buy from. This facilitates liquidity of the asset or security to be quickly converted into cash. Here, a massive amount of money can be transformed in and out of currencies with minimum spreads.

High leverage

Another benefit of forex trading is that it allows for a considerable amount of leverage to facilitate trading positions. With a small capital, one can trade large positions. The leverage offered in forex trading goes up to 1:500, which is pretty high compared to other markets.

Low transactional costs

The transactional costs in forex trading come from spreads charged by brokers. These spreads are lower in most cases as compared to commissions charged on other trades. The measurement of spreads is done in the form of pips. Sometimes, brokers might charge a commission or a flat fee, or something based on a percentage of the entire amount of the exchange.

Go short and long with your positions.

In most markets, you have to use instruments like CFDs to go short on positions, in forex trading, short selling comes naturally. The benefit of forex trading to go long and short can prove to be extremely advantageous. You sell one currency in a pair, which is the quote currency. You buy another currency of the pair which is called the base currency. When you think one currency in the pair will increase against the other, you go long, and you buy the currency pair. But if you think that currency will decrease in value against the other, you go short and sell the pair. This way, a trader gets to profit despite the direction and movement of the market.

Reap advantages of high volatility

Due to the high volume and billions of dollars being traded every minute of the day, most currencies face high fluctuation prices. High volatility becomes a fair benefit of forex trading. You can either go long or short on positions to take advantage of changes in the prices. However, volatility can prove detrimental when prices do not move as you expected. One has to be careful while positioning trade in extreme volatility. Traders can use various risk management tools to keep themselves at bay.

Extensive range of currency pairs

Another benefit of forex trading is that it offers an extensive range of currency pairs to trade. You can choose whichever pair offers maximum services and features to your trading and financial goals. You can speculate worldwide, betting on minor as well as minor economies.

Hedging with forex trade

One more benefit of forex trading is that one can perform hedging while trading currency pairs. Hedging refers to the process of decreasing the risks of unwanted moves in the market. When you hedge, you open multiple positions by applying mindful strategies. Yes, volatility makes the forex market exciting, but hedging makes it a bit less risky by limiting the loss to an amount. One can mitigate risk by performing hedging.

There are various ways to hedge in the forex market. But one optimal way is to trade multiple currency pairs. One must choose forex pairs that have a positive connection with each other, and then take a position in the opposite direction to limit losses and risks.

Conclusion

Apart from the top benefits of forex trading discussed above, there are many other benefits that the market offers. Investing in currencies is one great way to diversify a portfolio and mitigate risks overall.

If you are eyeing for a regulated broker to facilitate forex trade or any other trade, we recommend ROinvesting.

ROinvesting deals in a wide range of instruments like indices, stocks, ETFs, forex, commodities and stocks, and more.