Advantages of Forex Trading
The following is a list of the primary benefits of FX trading:
It requires only a small amount of capital to get started. Small investors are drawn to the forex market because it allows them to start trading with as little as a few hundred dollars.
It offers a high degree of leverage. Because of the leverage available in forex trading, even a modest amount of trading capital can yield large returns.
Selling short is just as easy as buying long. This means that making money in a currency pair that is heading down is just as easy as making money in one that is heading up.
Low transaction costs. When compared to trading other assets, FX trading has cheap transaction costs. The transaction expenses are simply incorporated into the bid/ask spread with most brokers.
Forex Trading Disadvantages
Here are some of the potential disadvantages of forex trading:
Managing to trade with high leverage. When trading with a high level of leverage, both gains and losses are amplified. When using leveraged assets, traders who fail to recognize the significance of rigorous risk control frequently lose money.
The difficulty of finding a good broker. There are hundreds of forex brokerages to select from, finding the is a very difficult task. The unfortunate truth that many forex brokers are just not reputable organizations makes this work even more difficult.
Risks associated with volatility. Volatility, like high-leverage trading, is a two-edged sword. In the span of a few moments, the bid/ask price of a currency pair might swing up or down 50, or even 100, pips. Unexpected price spikes or drops might occur at any time.