20 Benefits of Trading Forex

11/30/2015 9:00 am EST

Focus: FOREX

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. 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 successful trades.
  18. 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.
  19. 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 trade ideas.
  20. 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.com

DailyFX provides forex news on the economic reports and political events that influence the currency market.

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