Why trade forex when there are thousands of other financial markets you can trade? Here we’ll look at some specific forex trading benefits in greater detail.
Every trading day around $4 trillion is traded in foreign exchange, making forex the world’s largest market. Because of this exceptional volume, particularly in the major currency pairs, the forex market tends to be highly efficient: you can fill trades at larger sizes and dealing spreads stay competitive with many traders on either side.
The high number of participants in the forex market also tends to ensure that there is always some price activity, always something happening in the market. Dramatic price movements are not uncommon, though you should note that this presents risk as well as opportunity.
And because the forex market is truly global, you can trade right around the clock throughout the trading week (Sunday 23:00 to Friday 21:15). It’s the market that never sleeps.
Whatever your preferred trading method, the forex market will provide you with opportunities. You can use geopolitical, macroeconomic or technical factors as a basis for picking your trades. That is, you can buy or sell currencies in response to world events in specific locations, or in response to changes in major economic indicators, or you can look purely for patterns in the price history to identify trends.
You can view currencies as intimately linked to the economies which sustain them, or you can view them as abstract markets removed from material events. Or you can combine both views to develop your own trade-picking strategy. (Learn more about forex trading strategies.)
What’s more, you can employ forex trades within many different types of trading plan. Whether your goal is short-term speculation with many short-lived trades, or a longer-term hedging strategy based on the matching of several forex pairs, the forex market has something to offer you.
Many traders find that forex trading helps them to keep a check on their emotions, vital for successful trading. If you trade a particular stock you might feel an emotional investment in the company you are trading, or even in the very idea that you are a successful stock picker, which makes it hard for you to kill your position if the trade isn’t going to plan.
InterTrader provides stop-loss and limit orders to help you enact these trading limits. Stop-losses are not, however, guaranteed and may be subject to slippage and market gaps.
In the forex market, one currency’s strength is always another currency’s weakness, and buying and selling are two sides of the same coin. There are no restrictions, emotional or otherwise, on trading in a given direction.
In short, these are some of the major forex trading benefits:
While the potential volatility of the forex market can offer traders opportunities for short-term speculation, you should also bear in mind that greater volatility similarly increases your risk of sudden losses. Moreover, leveraged trading increases both the potential return on your capital and your potential losses.