While every market has its own attraction, the advantages of trading forex are quite underrated. Forex trading has become widely accessible within the last few decades and nowadays more and more people are starting to wonder what the main benefits of forex trading are. Forex exchange markets provide traders with a lot of flexibility because there is no restriction on the amount of money that can be used for trading. Also, there is almost no regulation of the markets. This combined with the fact that the market operates on a 24/7 basis creates a very flexible scenario for traders.
The currency market is the largest financial market in the world. The liquidity that comes from a market that trades nearly $5 trillion every day enables you as an investor to enter and exit your positions easily without having to worry about the price jumping too far before you execute your trade. Having a market this size also makes it much more difficult for any single group to come in and try to manipulate the market. This means your analysis of supply and demand will most likely be more accurate.
Whatever preferred trading method you have, the forex market will provide you with opportunities. You can use geopolitical, macroeconomic or technical factors as a basis for picking your trades. 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.
Over the last few years the retail brokerage houses have made retail forex trading affordable, and it is highly accessible as well. Beginners in the forex market can start out using a paper account or demo, so they do not risk capital until they are comfortable trading and experienced in the forex market. Contrasting many other providers of financial services, forex brokers let you preview their services and test your trading knowledge on a practice-demo account. This way, you can trade paper money while experiencing real market conditions. What is best is that there are no restrictions applicable to this account, you can trade for as long as you need.
When it comes to trading, the bigger your capital, the larger your trade size. Foreign exchange markets give investors a lot of leverage when trading. In other words, a small amount of capital can go a long way. A trader can buy or sell up to 500 times more funds than he actually has. This way, you can easily generate more substantial gains (or losses) without having a large capital at hand. In fact, some markets allow a leverage ratio of up to 50:1 or 100:1. In other words, a single dollar can be worth up to $50 or $100 when trading. This means that you can earn a lot of money with a relatively small investment.