Trading is regarded as a high barrier-to-entry profession, but this is just not the case in today’s economy. Now, as long as you have both drive and patience, you can trade for a living, even with little to no cash.
Forex trading is a global market that runs on a 24/7 basis, offering enormous opportunities for the traders to take the plunge. Changes in technology and increasing sizes on the exchanges, have brought about several very little barriers-to-entry trading professions.
In some cases, no private capital is required. In other cases, only a trivial amount of capital will be needed to get you started. For more information on the same, download mt4 application here.
This is why there are several advantages that a career as a forex trader, also known as a foreign exchange trader, affords. This review will look at both these advantages and disadvantages as well.
Advantages of A Forex Trading Career
Compared with any other monetary markets, the forex market has the highest number of market contributors. This provides an uppermost level of liquidity, which means even large orders of currency trades are filled efficiently without any large price deviations. It eliminates the possibility of price manipulation and price irregularities, thereby permitting tighter spreads that lead to more competitive pricing.
One need not worry about the high instability during the opening and closing times, or motionless price ranges during the afternoons, which are characteristics of equity markets. Unless major events are anticipated, one can observe similar price patterns (of high, mid, or low volatility) during the non-stop trading.
Forex trading can have minimal costs (brokerage and commissions). There are no cuts in an actual sense; most forex brokers make returns from the spreads between forex cash.
You don’t have to worry about including isolated brokerage charges, eliminating an overhead. Liken that to equity or other securities trading where the brokerage structure differs widely, and a trader must take such payments into account.
Low Capital Investments
Due to constricted spreads in terms of pips, one can easily begin forex trading with a small amount of preliminary capital. Without more capital, it may not be imaginable to trade in other markets (like futures, options, or equities). While exchange on such high margins comes with its dangers, it also makes it calmer to get better profit potential with restricted capital.
Variety of Pairs of Trade
There are 28 major currency pairs concerning eight key currencies. Criteria for choosing a couple can be opportune timing, volatility outlines, or economic developments. A forex trader who loves unpredictability can easily switch from one currency pair to another.
Disadvantages of A Forex Trading Career
Complex Price Determination
Forex rates are inclined by multiple factors, primarily international politics or economics, that can be difficult to analyse and draw reliable deductions to trade on. Most forex trading occurs on methodical indicators, which is the primary cause of the high volatility in forex markets. Getting the technicals wrong will affect in a loss.
With no control over macroeconomic and geopolitical progresses, one can easily suffer huge losses in the extremely volatile forex exchange. If things go wrong with a specific stock, shareholders can put pressure on the administration to initiate essential changes, and they can otherwise approach regulators.
Lack of Transparency
Due to the liberalized nature of the forex market conquered by brokers, one trades against experts. Being broker-driven means that the exchange market may not be transparent. A trader may not have any governance on how his/her trade order gets fulfilled, may not get the most acceptable price, or get restricted views on trading estimates as provided only by his selected broker.
To sum it all up, having a career a forex trader is very rewarding, as we have seen above. However, it also comes with drawbacks. You need to weigh both and see if its worth in the long run.