You may be familiar with the trading activities of stocks and bonds. Similar to these trading activities, there is a parallel event called forex trading. In this forex market, traders will trade with currencies instead of stocks of a company. As the values of the foreign currencies will be different and will be changing consistently, you can make profits also using this trading option. Else, you can simply exchange the currencies for trade and other purposes. However, there will not be any centralized exchange for the forex market. The entire process will be decentralized. As the retail traders could not access the market directly, you can find some brokerages operating online to help you trade in the forex market. You can find these brokers offering different services. For instance, you could find some forex brokers with ZAR accounts in SA and some who do not provide such accounts. You can choose accordingly. However, it is better to know the various benefits of trading in the forex market. Let us discuss some of these benefits in brief in this article.
Benefits of trading in the forex market
The primary benefit of trading foreign exchange currencies is the high liquidity. You can convert huge amounts of currencies into cash and take them out in a short span. There will not be any delays in the process.
Lower transaction costs
In every trading market, there will be a charge or fee for each transaction. However, the transaction costs of the forex market will be lesser than all other markets. So, you will get most of your profits without deductions. In a forex market, a portion of the spread will go to the broker as transaction costs.
Availability of leverage
Another benefit of trading in a forex market is the option to use leverage to hold a position that is unaffordable with the money you currently have in your trading account. For instance, you can buy a currency pair that costs $1000 also with a balance of $100 with this leverage concept. You could not find this option in other trading arenas. So, the chances of earning profits with lower costs are high in forex.
There will be some restrictions for the market operations for each day in other types of trading markets. However, you will not have this issue of waiting for the market to open. As all countries will be in the market, you can trade 24X5 with only two days of holidays.
Long or short profit
In other kinds of trading activities, you may face risks frequently. However, you can see a reduction in risks in forex trading as you can gain profit even the value of a currency goes down. All you should do is to go short with the one that is falling against the one which is about to rise. So, you can make profits in any situation. All that is required is your knowledge of the market and some advanced strategies to make money.