The barometer of risk-on and off has usually been the Japanese yen (JPY) but today, the break of 1.1...
20 Benefits of Trading Forex
11/30/2015 9:00 am EST
Foreign exchange (forex) trading is a vastly expanding industry thanks to developments in technology and the growth of retail brokers. Here are 20 reasons why trading forex is a great option for a successful trader:
- Free Practice Accounts: Start trading forex with play money and a free
practice account. It is generally recommended to seriously practice trading
forex for three months before opening a live account with a forex broker. It's
a great way to try out a forex broker and explore everything they have to
offer their traders.
- The Trend is Your Friend: Unlike other financial markets, the forex
market thrives on volatility. Thus, whether the market for a particular
currency pair is trending upward or downward, traders, so long as they have a
strategy, can profit in any conditions. The key is to trade with the trend:
Buy a currency pair when the market demonstrates an upward bias and sell a
currency pair when the market demonstrates a downward bias.
- Twenty-Four Hours a Day, Five-and-a-Half Days a Week: Busy work schedule?
Thanks to the global markets, traders can trade forex online 24 hours a day,
five-and-a-half days a week from the comfort of their own home. Traders can
even enter positions and place stops or limits to automatically profit while
away from their desks.
- No Dealing Desk: With no dealing desk trade execution, traders do not
trade with, or in some cases against, a dealing desk. Every trade placed is
executed back to back with one of the world's premier banks or financial
institutions, which compete to provide brokers with bid and ask prices. This
allows for fair and transparent execution when trading the forex market.
- Automated Trading Platforms: Automated trading platforms, like MetaTrader4
(MT4), Ninja Trader, TradeStation, and Strategy Trader have grown tremendously
popular recently, especially among more technologically inclined traders.
These customizable and programmable trading stations allow traders to utilize
expert advisors, specialized trading scripts, and various technical indicators
to build automated trading strategies.
- Trade News Events Live: Very often, noteworthy economic news releases like
central bank interest rate decisions, the monthly US non-farm payroll report,
and durable goods orders data have a profound influence on currency market
price action. Forex traders look forward to these regularly scheduled events
because they can reap huge profits from the market volatility that tends to
immediately follow them.
- Free Forex Education Resources: An educated forex trader is a successful
forex trader. There are a number of free forex education courses available
online to help traders become successful. Traders can additionally utilize
daily articles, videos, and trading tips to get news updates on the latest
changes in the currency markets.
- Government Regulation: A legitimate retail forex trading broker is
strictly regulated by government agencies and designed to protect the
investor. Some major regulators include the Commodity Futures Trading
Commission (CFTC) in the US, the Financial Services Authority (FSA) in the UK,
the Securities and Futures Commission (SFC) in Hong Kong, and the Dubai Multi
Commodities Center (DMCC) in Dubai.
- Diversify Your Portfolio: Diversifying your investments and creating a
balanced portfolio will help yield higher results in the long run, and more
importantly, can help protect you against bad investments, should they occur.
Currencies are a unique asset class, and individuals who trade them have
access to a market that's open 24 hours a day as well as leverage margins
higher than those of any other financial market.
- Mobile Trading: The advent of technology has enabled traders to trade
forex from virtually anywhere using their mobile devices. This secure option
of trading utilizes the ability to trade 24 hours a day, five-and-a-half days
a week, as long as there's a viable cell phone signal. Traders can view their
balance and place trades the same way they would on their computers.
- Automated Trading Signals: Highly sophisticated algorithms based on market
data have been used to develop automated trading signals that indicate when to
enter the market, which currency pairs to buy or sell, and when to exit a
trade. These trading signals are also excellent education tools. Because
traders can refer to them before placing trades, they effectively help traders
understand the logic of the forex markets.
- Real Time Charts: View charts of currency pairs in real time with live
updating directly inside a trader's broker platform. These charts provide
various technical indicators and time frames, giving traders the ability to
view the historical data of currency pairs' exchange rates, which should help
in determining whether to buy or to sell. These charts are often available on
a trader's mobile device.
- Trade Directly from Charts: Traders can enter positions directly on the
chart they are viewing. This is incredibly beneficial if while viewing a
currency pairs' chart, a trader wants to immediately enter a position. The
trader will instantly see their entry point on the chart and have the ability
to set stops or limits.
- Anonymous Trading (NDD Only): Under the no-dealing-desk execution model,
trades are placed electronically and in the name of the broker, not the
individual trader. This allows for anonymous trade execution, protecting
individuals against potential market manipulation.
- Trading Platforms: Powerful and simple-to-use trading platforms are
seemingly everywhere now. These platforms, which allow traders to place market
orders, monitor trades, and incorporate indicators into live charts, all on a
single screen, have made forex trading easier than ever.
- Three Trillion Dollars in Transactions: There is a wealth of capital
available within the forex market as traders invest in various currency pairs.
With over three trillion dollars in transactions transpiring each day, the
forex market is the largest financial market in the world.
- No Trade Restrictions: Many retail forex brokers are very lenient with
trade restrictions. These brokers allow their traders to trade during breaking
news events, place entry orders anywhere-even inside of spreads-scalp the
market, and receive positive rolls at all margin levels. A broker that has
strict trade restrictions only limits their traders' abilities to produce
- 24-Hour Customer Service: Retail forex brokers have representatives
available 24 hours a day, seven days a week, providing phone and Web-based
customer service and technical support. Additionally, there is a vast network
of experienced traders and instructors who contribute daily to forex forums to
answer questions and offer their insights.
- International Appeal: Forex traders are inherently part of a tight-knit
community that spans the globe. This community is incredibly active online and
naturally provides a support system for new traders and a means of sharing
- Big Risk with Potentially Big Profits: Trading currency involves a significant risk of loss and may not be suitable for all investors. However, there is also a great deal of money to be made by trading the forex market. Education is the key to success.
By the Staff of DailyFX.comDailyFX provides forex news on the economic reports and political events that influence the currency market.
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