While the forex market often has a positive image, there are still some negative things about it that people should also understand. Knowing these downsides help one to deal with forex market more efficiently. Below are some of the disadvantages that one can encounter with forex market:
1. Forex market works 24/7. While this seems a great benefit since you can trade anytime, anywhere, this also has a negative side. This means traders need to spend much time on trading sessions. Especially it concerns for beginners. They don’t know when it’s better to trade Forex.
2. Perhaps you are aware that there are many trading instruments available. However, there are very limited options when it comes to the fx market. In addition, forex-related transactions are often carried out with liquid assets. It means that forex risks are normally higher than the usual types of trading.
3. Under forex trading, brokers do not normally receive commissions. While some view it as an advantage, this can be a disadvantage too since brokers may help in reducing costs of purchases. There are cases when the difference between the market price and the rate that provides the broker may help neutralize the profits.
4. Forex traders may also encounter the large size of leverage offered by some brokers. While the presence of such leverage may bring in more profit to your end, this may also require bigger capital. Essentially, it means more risks on your part. Large leverage can be quickly ruined that may bring a series of problems to you as a forex trader. This is definitely a major downside that forex traders must carefully look into.
5. Lastly, everyone knows that forex market is very huge. While this quality may mean having many great opportunities, this may also bring higher chances of uncertainty for forex traders. This is why some people regard forex trading as a mere battle of luck. Most traders rely on luck to increase their capital. The laws ruling forex trading are considered harsher than other kinds of trading. Thus, this trading may not be ideal for novice ones. You need to have a clear understanding on how everything works.
Just like any other kinds of trading, forex trading has pros and cons. These seem to be directly proportional one to another. Bearing these in mind, it is up to the traders if they take risks or settle on the safe side. However, trading is always about taking a chance and trying your luck.
P.S: Help me to find out the answer for the question: why trade Forex? Waiting for your replies in the comments.