As you know, Forex Trading or Foreign Exchange trading (also known as FX) is a global trading market where you can exchange, buy or sell any currency around the globe. We are not going to elaborate on the definition here, rather we are going to discuss the impact, advantages & disadvantages of Forex in recent times along with the process of Forex.
After 2022 the global market has changed drastically. The increased value of the Dollar against other currencies has affected the currency exchange market both positively & negatively. In this scenario, Forex Trading played a vital role. It helped to sustain the liquidity of each country through the supply of Dollars & other valuable currencies. However, forex trading also has some flaws which sometimes affect the global market. Banks, financial institutions, government & individuals, all are being affected by those. But the amount of its benefits is very high, if you can do this business with intelligence then you will really benefit. And for the forex business this Euro Daily Robot obviously a very good choice.
How Forex Trading Works
Like all other marketplaces in the Forex market, liquid assets are being exchanged every second. This is the most liquid market that runs for 24 hours. The most interesting thing about the FX market is that the exchange value changes every day relative to one another. Following that the traders make their profit.
It simply is the largest trading market all over the world. You will be surprised to know the amount that Forex deals with every day, it's around $7.00 Trillion/Day till 2022.
Forex Trading or FX trading is quite similar to exchanging shares & securities against a certain amount of money. Instead of shares & securities here you are selling or buying money. Somewhat it seems a bit confusing that you are selling money & getting money instead. To make it more clear you should know that you can do Forex trading only by exchanging one country's currency for another. If you are willing to buy Pounds then you must give a certain amount of dollars. The exchange rate is different for each country. Some countries including US & Europe have the highest valued money. Other countries like India, Singapore, Japan, South Africa, etc. have lower valued money.
FX trading is always done in pairs, you will give one currency & in exchange, you will get another currency. You can make a profit whenever the value of the currency you are selling increases. Let us make it clear with an example. Also, you can visit this Seeking alpha for daily information.
Example of Forex Trading
If you have 1000 Australian Dollars & you are willing to sell that for US dollars then according to the current exchange rate of 1:1.56 than you will get approximately 635USD. If you want to sell it later & the exchange rate for USD increases against the Australian Dollar to 1:1.80 then you will make a profit of approximately 150 Australian dollars. Similarly, if the exchange rate decreases & you need to sell the money you have instantly then you may face a loss.
Advantages & Disadvantages of Forex Trading in 2022
By the example, you may already have learned that FX has both advantages & disadvantages. If we consider a particular year then those variables may change. Below we are going to discuss the Advantage & Disadvantages of Forex based on this year.
Advantages of Forex
The main advantages are given below:
Lower Transaction Costs
During this year, Forex Trading has the lowest cost. If you are willing to enter the market of FX trading then you do not need to worry about the cost. In fact, you can say that you do not need any capital to enter the market. All you do is just converting your most liquid assets from one form to another. Many traders who make an investment through brokers may have lower transaction fees, which are even lower than trading in traditional stock exchange markets. Also, you do not need to worry about including separate eliminating overhead costs or brokerage charges. That is why the difference between the sale & purchase is lower. It also gives more people to access FX investment.
Trade Globally
This is the most popular advantage that Forex trade offers, you can trade globally all over the world. During this year the global trade of FX has gone to another level. You can participate in trading from anywhere around the globe. All countries including African countries are now following Forex trading. No matter which currency you have, you can exchange that immediately, there is no ranking here. The only thing that differs here is the exchange rate.
Suits Your TimeTable
If you are going to trade something globally then the time difference between two countries can cause a great problem. For example, if you are living in Australia & want to trade in the US then the time gap is around 15 hours. If you are doing FX trading then that is not a problem at all. It is now available 24 hours from any country you live in. For small investors, it really is a great advantage.
Highest Liquidity
It has the highest liquidity compared to any other trading market. Thus it eliminates the possibility of price anomalies & price manipulation. The traders can efficiently & easily fulfill large orders of any currency without any large price deviations. It also enables tighter extend that allows more effective & efficient market pricing
No Central Control
There is no country or organization that controls FX trading centrally. That is why there is no chance that any individual or trading firm gets more opportunities & one gets fewer opportunities. Though the central bank of a country somewhat has light control over the currency exchange. But it is not responsible for overall global FX trading in a country. It also avoids a monopolistic market or any sudden change in market policy that will affect the traders. During this year those things have gotten much easier which is why people are willing to invest in this sector.
Disadvantages of Forex
There are also some drawbacks that you should consider about this sector. Those are given below:
Sudden Change in Exchange Rate
It is true that there is no sudden change in rules & regulations in this sector, but the exchange rate can be changed at any time. If anyone stocks a certain currency with the hope that the rate will increase compared to his/her own country's currency but things go in the opposite direction then it can create a massive problem for him/her. Sometimes government rules & regulations, and economic & political influence also may affect the exchange rate or FX.
Higher Leverage, Higher Risk
The higher leverage of this market may not be beneficial all the time, it creates great risk as well. The estimated leverage of the FX market is 50:1. That indicates you need to spend only $1 to get a position in the Forex market which is worth $50 during this year. It also indicates that you can face a loss due to high leverage. That is why you need to have a vast knowledge of this sector & a potential future forecast so that you can take the right decision & choose a beneficial currency.
High Volatility
No central control means no chance of a monopolistic market, but it also leads to a volatile situation. As FX has become a global market that is why if a particular trader faces a huge loss then s/he has nowhere to go, and no one to discuss with. All he can do is watch. A great example is when Iceland & Egypt went bankrupt, the traders holding their FX could only watch their devastation, there was nothing to do.
You should always consider the disadvantages & cons before you enter a market. The only solution that can let you avoid those circumstances during this year is more & more research. No matter how much you invest, do good research on the FX market, that is all we suggest till now.
