Why is Forex Trading Appealing to Retail Traders?

Why is Forex Trading Appealing to Retail Traders?

It might be the right time to ponder the opportunities offered in forex trading if you are interested in trading or have already created a portfolio. Incomparable liquidity, narrow spreads, and offers that are easy to access to every type of trader are provided by the huge scale of the global foreign exchange market.

The strong yearly growth of the forex market created a big community of traders and there is still so much scope for beginner online retail traders. Below is the list of four main reasons why you should consider the opportunities that Forex trading offers.

1.  Accessibility

Forex is easier to understand than other trading instruments making it beneficial. When trading forex for the first time, it is a better idea to have a clear understanding of the following key steps and not only what is forex trading:

a)    How to perform a trade

b)    How to manage a position

A beginner trader must also know the method of leverage trading, the risk it involves, and the significance of margin. Margin is the money in the trader’s account that acts as a deposit to open and keep a leveraged trading position.

In opening a trade, a trader is looking at a particular currency pair which is for example a EUR/USD. IN this the trader is having a view that either the euro will improve its value against the dollar (buy) or the dollar will improve its value against the euro (sell). For first-time traders, it is advisable to practice in a risk-free demo account since forex trading includes real money at risk.

Demo accounts will allow beginner traders to feel the platform and see how leverage works. City Index offers “Take Profit” and “Stop Loss” order option settings that allow managing exposure to the market. User-friendly educational materials are available if the trader wants to learn more.

2.  Flexibility

Forex is a flexible trading vehicle. It only required a small starting capital to begin trading the market. It is suitable for traders with small and big capital.

Leverage is an important factor in trading. It offers larger trading amounts of currency than the initial deposit. A lot of traders find leverage very useful though they should be aware of all the risks in advance. Leverage is usually written in a ratio. For example, a leverage of 30:1 means that a trader can trade a position of £30,000 with only £1,000.

It is also important to understand that equity from the account is set aside to keep a leveraged position. This is called margin.

Leverage trading increases the opportunity to have profit but also increases risk.

Forex market hours are open almost all the time. The forex trader can concentrate on trades at the most convenient time.

3.  Liquidity

High liquidity is one of the most attractive factors of forex. It has grown into the largest and most liquid market in the world. Many people around the globe are allowed to trade multiple positions consistently with ease because of advances in technology.

A consistent liquid market has several advantages such as:

  • Traders can get out of position at an appealing rate and the best time with minimal costs.
  • It is easier to exit a position because of narrow spreads
  • Volatility is caused by news events and not by illiquid markets

On the other hand, disadvantages are:

  • Highly leveraged trades are high risk since there is no limit to the price action that can happen in the forex market in a day.
  • Forex markets are still active even the trader is asleep. The traders need to be aware of how to handle their positions even if not actively monitoring price action.

Forex trading always comprises buying one currency and selling another and traders are looking for opportunities in a fluctuation of the market. Take note that past performances are not an indicator of future results.

4.  Opportunity

A lot of successful forex traders share strategies explaining the hard work that goes into being successful in buying and selling currencies. Carefully analyzing the news and read the charts will minimize the chance of losing trades. Some traders try to take regular small profits of gains in a short time while others desire a long-term strategy.

It is important to be aware that all traders will make a positive trade every time. Accepting losses while gaining more experience in trading is an important part of a trader’s journey.

Bear in mind that it is important to understand all the things about forex trading before beginning to trade. It does not end with “what is forex trading” especially when what you just know is the gains you can achieve.