Advantages and disadvantages of the currency forex market
Find out about the advantages and disadvantages of the
currency forex market is absolutely necessary, as well as compared to other
markets to determine which best suits our investor profile before you invest
our savings.
These are some of the points that must be taken into
account before choosing the currency market as a platform for our investments.
Advantages of forex currency market
Well used leverage
Leverage is a very useful tool if we use it wisely and
that will allow you easily increase or decrease our exposure to the market.
Open 24 hours a day
Being a global market and in continuous movement, we
can perform operations on any time of the day since the price of currency pairs
is continuous.
Very liquid market
Be so liquid is one of the biggest advantages of the
Forex market since, except for highly volatile, we will always find a
counterpart to our operations.
Cost of operations (commissions)
While operating we will find with expenses inherent to
operations in the form of Commission (fixed) or through pay a differential
(spread) between supply and demand. Either way, costs tend to be lower in
comparison with the investment in other types of financial assets.
Bi-directional operations
In this market brokers allow us to open short
positions (to take advantage of a bearish movement) or long (we can take
advantage of the upward trend) and which, therefore, makes our chances of
finding investment opportunities increase.
Disadvantages of the currency forex marketPoorly used leverage
Seeing that the broker with whom we are doing
operations allows us to open positions in a situation of 300:1 may seem a
positive feature, but have positions open that leverage is a reckless if we are
not aware of the high risk posed to our capital this way of operating.
Non-regulated market
Being a global interbank market, its regulation offers
many difficulties. Therefore, we can see how the different agents that are part
of it, such as banks or brokers, are regulated and supervised by national
institutions such as the CNMV in Spain or FINMA in Switzerland.
Without a centralized market
One of the main characteristics of this market is that
it does not have a body or centralized institution through which pass all the
operations and that it could oversee the proper functioning of the market.
These are some of the most important points that must
be taken into account when taking the decision on the currency market is the
most suitable for us or if on the contrary we must choose other financial
assets for our investments, as can be the CFDs, equity investments,... etc.
Money management and risk management is very important while you invest in Forex trading. Thanks for sharing nice article.
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