In my previous post, we tackle about the advantages and the good side that they will get from trading forex .
This time, we will going to discuss what really are the disadvantages of this whole thing called Forex.
Below are the things that a trader should have to consider:
Leverage -- With huge leverage available to forex traders the danger is that positions which carry too much risk for the account size can be taken on, leading to margin calls. Effective money management rules must be adhered to.
24 Hours Market -- Although it is convenient for the trader to trade whenever it is suitable to him, it can be a rather tough job too. This is because, at times, it is not possible for an individual trader to keep track of the Forex market, 24 hours a day.
This is where a broker comes into the picture. Retail or individual investors should try taking help from a professional broker rather than doing all the dealings himself straight with the huge market.
Brokers -- Retail traders must use a broker rather than dealing directly in the interbank market. The broker will be the counterparty in all transactions and is, effectively, making the market. They can, therefore, widen spreads or even refuse to trade during volatile trading conditions. To avoid dealing with brokers an alternative to forex is to use futures. See online futures trading for more details.
Spreads -- As the retail trader must use a broker to trade, they cannot deal at the interbank rates. A broker will generally quote a fixed spread of 3-20 pips depending on the currency pair. The underlying interbank rate might be as little as 1 pip.
Forex is a very large market but for most retail traders dealing with brokers the odds are shifted against them. Online futures trading provides a much more level playing field for most traders who want to take part in forex trading.
This time, we will going to discuss what really are the disadvantages of this whole thing called Forex.
Below are the things that a trader should have to consider:
Leverage -- With huge leverage available to forex traders the danger is that positions which carry too much risk for the account size can be taken on, leading to margin calls. Effective money management rules must be adhered to.
24 Hours Market -- Although it is convenient for the trader to trade whenever it is suitable to him, it can be a rather tough job too. This is because, at times, it is not possible for an individual trader to keep track of the Forex market, 24 hours a day.
This is where a broker comes into the picture. Retail or individual investors should try taking help from a professional broker rather than doing all the dealings himself straight with the huge market.
Brokers -- Retail traders must use a broker rather than dealing directly in the interbank market. The broker will be the counterparty in all transactions and is, effectively, making the market. They can, therefore, widen spreads or even refuse to trade during volatile trading conditions. To avoid dealing with brokers an alternative to forex is to use futures. See online futures trading for more details.
Spreads -- As the retail trader must use a broker to trade, they cannot deal at the interbank rates. A broker will generally quote a fixed spread of 3-20 pips depending on the currency pair. The underlying interbank rate might be as little as 1 pip.
Forex is a very large market but for most retail traders dealing with brokers the odds are shifted against them. Online futures trading provides a much more level playing field for most traders who want to take part in forex trading.
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