Trading 101: Advantages of Trading Forex
The advantages of trading Forex
Forex is the most traded financial market in the world and it is where currencies are traded. The buying and selling of currencies happen over the counter (also known as OTC), making it a decentralised marketplace. Everyone is a participant of the FX market without even realising it, from ordering a product that has to be imported or even buying currency for international travel. There are numerous reasons as to why traders are attracted to the foreign exchange market which we will explore in this article.
The FX market opens on Monday morning and trades through to Saturday without any breaks. However, it is important to note that there are different trading sessions due to timezones. This can lead to overlap and tends to be the most active periods of trading the FX market sees.
Even though the FX market closes on Friday and reopens on Sunday, trading does take place on Saturday due to central banks and other organisations. It isn’t open to retail traders during this period. Due to this, there can be a variation in price from the close to the open. This is known as a gap. It is important that you are aware of FX market hours before you decide to open a position, as you may need to alter the trade accordingly. If you don’t want the position you opened to be at risk of gapping, you will need to close it on Friday. Alternatively, you could set your stop loss levels and take profit levels when making a new order on your trading platform.
Please also note that Forex trading times will differ during different months due to daylight savings, read our article on Forex Market Hours for more information.
Low-Risk Financial Market
As the forex market is highly liquid there aren’t large fluctuations in FX with movements rarely over 2% in a day compared to stocks and futures. A forex trader can customise their position size to suit their risk requirement per trade. Eightcap allows their clients to trade down to 10 cents per pip movement by simply changing the contract volume. Price movements in the forex movement can lead to high volatility providing you with an opportunity to make a profit. However, you will need to also be careful with market volatility as the market can turn against you.
As previously mentioned, the FX market is the most liquid in the world meaning there are buyers and sellers trading at the same time. Due to the liquidity the market experiences, transactions are efficient and completed almost instantly. It also normally means the spreads in the FX market are low compared to other assets.
Trading on Leverage
Eightcap offers its clients the ability to trade with leverage according to their trading needs and experience. Currency trading can be done with CFDs which require a small initial deposit instead of paying the full value of the position up front, enabling traders to make the most out of FX price fluctuations. Beginner traders may prefer low leverage in order to manage risk. Eightcap offers leverage from 1:1 – 1:400. It is important to note that the higher the leverage the higher the amount of risk you could face but on the flip side of this you can start trading with a much smaller amount. With Eightcap you can start trading the forex market with as little as $100.
When trading CFDs profits can be magnified but this also means losses could also be magnified and exceed the initial deposit. Therefore, you need to consider how to manage your risk when trading. Read our guide on the most effective risk management techniques before you open a position with us.
Access a wide range of FX pairs
Gain exposure to 40+ currency pairs including major, minor and exotic pairs. Below is an example of the variety you can open a position on:
- Major Pairs – GBP/USD, USD/JPY, EUR/USD, AUD/USD
- Minor Pairs – AUD/CAD, CAD/CHF, EUR/GBP, GBP/AUD
- Exotic PAIRS – USD/SGD