You may be wondering why you should trade forex in the first place. There are several reasons why people decide to trade Forex.There are advantages that Forex has over other markets. One reason is that there are low transaction costs. Forex brokers make money on the spread provided (we’ll talk more on this later) when the trade is opened and closed before overnight funding charges are applied. This means that you can trade in a way that is cost effective, especially when you compare it to other markets such as equities.Trading forex has many advantages over other markets.
There are 4 main advantages:
Low transaction costs: Typically, forex brokers make their money on the spread provided the trade is opened and closed before any overnight funding charges are applied. Therefore, forex trading is cost effective when weighed up against a market like equities, which attracts a commission charge.
Low spreads: Bid/Ask spreads are extremely low for major FX pairs due to their liquidity. When trading, the spread is the initial hurdle that needs to be overcome when the market moves in your favor. Any additional pips that move in your favor is pure profit.
More opportunities to profit: Forex trading allows traders to take speculative positions on currencies going up (appreciating) and going down (depreciating). Furthermore, there are many different forex pairs for traders to spot profitable trades.
Leverage trading: Trading forex involves the use of leverage. This means that a trader need not pay the full cost of the trade but instead only put down a fraction of the cost. This has the potential to magnify your profits but also your losses.