The Bad and the Good of Forex Trading

The Bad and the Good of Forex Trading

Knowing the good and the bad of Forex trading is something that you should know before you delve into this type of trade.

What makes Forex a good trading option?

I have one thing that can probably covers the good section of Forex trades: the liquidity. Thanks to its high level of liquidity, one can be sure that one will make a fortune each time the money moves somewhere. High leverage level is pretty common in this type of trade, but with high leverage comes high profit. You can play around with the 100,000 USD folks by only paying the small amount of 1,000 USD, with the rest of the 99,000 USD borrowed from the Forex broker (hence why the leverage level is high).  The Best 3 of Forex Trading Strategies

Aside from the high level of liquidity and how high leverage level is such an accepted norm, the market is also open nearly 24 hours a day. If your time is somewhat taken by another type of trade, you should not be afraid because the Forex market will still be open to you even when you are already in your bed with the reading light on. The trading hubs for Forex trading are spread on many countries with differing time zones, making 24 hours operation possible.

The brokers over Forex will not ask too much of a compensation either. They will only ask for the spread when they have closed a transaction, which can be pretty low depending on the currencies being traded. 

What makes Forex a bad trading option?

The high leverage. While high level of leverage is the norm for Forex trading, you can be sure that it can be a double-edge blade for those involved. If the currency you are after somewhat moved against your wish, then you will be in a world full of debt. Paying your leverage debt will be hard thanks to how high the debt level is and the lack of profit.

The high leverage level will also bring about another complications: the high number of potential profit loss. Say that you use 100:1 leverage on 5,000 USD. This would mean you control 500,000 USD on the capital department. If you put all that 500,000 USD on a currency and that currency moves against you, the capital’s worth will be reduced, effectively reducing the amount of capital you got. Now because that capital money is not yours entirely, you loss lots of money. That is possibly the worst thing that can happen on a case of Forex trading.

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