The Benefits Of Forex Trading & the Advantages of Trade 2023
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Foreign exchange trading, commonly referred to as forex trading, is the practice of buying and selling currency values with the aim of making a profit.
As a global market, forex trading is conducted all over the world, with the largest markets located in major financial centres including New York, London, Tokyo and Hong Kong.
The forex market is vast and consists of numerous entities including banks, financial/business institutions and brokers, all speculating on the movement of currency pairs.
It is also becoming increasingly popular with retail and hobbyist traders owing to its accessibility and suitability for beginners.
If you’re interested in forex trading and are considering it as a potential investment, you’ll need to make sure that it’s the right market for your individual circumstances.
This article will look at the main benefits of forex trading and the advantages of trade, hopefully giving you a good idea of whether or not it’s right for you.
Every trader is likely to cite different reasons to trade forex, and there’s a lot of information out there relating to this particular market.
We advise that you reference multiple sources thoroughly before making any final decision on your next steps.
That said, here are our thoughts on the top benefits and advantages of forex trading.
When it comes to the benefits of trading forex, its sheer size and scale sit at the top of the list.
As the world’s largest financial market, in excess of $4 trillion USD is exchanged on average per day. Traders in all corners of the world are buying and selling currency pairs at all hours, making forex a truly global marketplace with plenty of scope for profitability.
It’s the breadth of the market that contributes to many of the benefits of forex trading, including accessibility, liquidity, volatility, technology and trading hours.
Accessibility is one of the biggest advantages of forex trading. Compared to other markets, it is relatively easy to enter and does not require a large initial investment, explaining its popularity with hobbyist traders.
However, regardless of the amount of capital you put down, successful trading takes knowledge and skill.
Free demo accounts allow you to practice trading forex without risk, essentially providing a ‘try before you buy’ test run. By simulating a live trading environment, demo accounts give you the chance to get used to a trading platform, familiarise yourself with market movements and develop a risk management strategy, all without making any financial commitments.
Most brokers offer demo accounts so if you’re considering trading forex, be sure to take full advantage of these tools first.
The rolling hours of the market are another of the main advantages of forex trading. Foreign exchange takes place over-the-counter (OTC), meaning transactions are made directly between trading parties, facilitated by a forex broker.
Since it operates this way, forex trading is not subject to the opening hours of any centralised exchange system. As long as there’s a market open somewhere in the world, deals can take place.
In the UK, trading begins at 9 p.m. on Sunday with the opening of the Sydney market and rolls continuously until close of session in New York at 10 p.m. on a Friday.
While the forex market is closed to retail traders over the weekend, it’s important to note that rates will continue to move, and you should factor this into your trading strategy to mitigate any potential risk.
Not only does the forex market require little capital for entry, but there are also low transaction costs once you’re in. Typically, brokers make money from spreads, which are measured in pips and factored into the price of a currency pair.
Note: Pip stands for ‘point in percentage’ and is the unit of measurement used to show a change in one currency’s value against another.
When a broker offers you a currency pair, they’ll quote a bid (sell) price and an ask (buy) price, the pip difference between the two indicates the spread, the associated value of which you’ll pay the broker for facilitating the trade.
Spreads are usually low, making forex trading relatively cheap. However, you should look into all associated costs when choosing a broker, as some may also charge a flat fee or variable commission.
Of all the reasons to trade forex, the availability of leverage is perhaps the most appealing as it allows you to open a high position with a relatively small amount of capital.
Most forex brokers permit retail traders to put down a deposit and borrow against this in order to control a much higher stake, similar to placing a deposit down for a mortgage when dealing in property.
Your available leverage will be expressed as a ratio, with most regulated forex brokers limiting maximum leverage for retail traders, with 1:30 and 1:50 being common. So, if you took advantage of 1:50 leverage, you could trade up to £50 for every £1 of capital in your account.
Whilst this opens up the potential for increased profit, it can also lead to greater losses, so leverage should always be used with caution.
In trading terms, liquidity refers to the ease with which an asset can be bought or sold with limited effect on its value.
In a nutshell, this depends on how active a particular market is. The global scale of foreign exchange combined with the high volume and 24-hour activity, make the forex market the most liquid market in the trading world.
What this means to you as a trader is that if you’re dealing in major currency pairs such as GBP/USD or EUR/GBP, your assets can easily be exchanged with little variance to their value.
This may seem counterproductive, as little variance means little profit, but with a strong trading strategy, this liquidity allows you to trade effectively with minimal risk. Forex liquidity falls when you move into minor or exotic currency pairs but equally, so potential profit margins can be much higher.
Ultimately, the path you choose to take comes down to your approach to risk management and your confidence in your market predictions.
The forex market is influenced by a number of external factors, including but not limited to:
- The economic stability of a given country
- The global economy as a whole
- Political news, events and policies
- Trade deals
- Natural disasters
This can make it highly volatile at times, meaning there can be significant movements in currency values and, subsequently, the opportunity to make a substantial profit.
Though this could be seen as one of the advantages of forex trading, it also comes with a high level of risk, since movement can occur in either direction.
Volatility is strongly linked to liquidity, and the more liquid major currency pairs tend to be less volatile.
Some major currency pairs, such as Australian Dollar/US Dollar (AUD/USD) and Canadian Dollar/Japanese Yen (CAD/JPY) are subject to more volatility, as are emerging market currencies.
Ultimately, if you’re looking to take advantage of market volatility, you need to tailor your strategy to any potential risk.
The ultimate goal of any form of trading is to buy low and sell high, turning a profit on your initial investment.
One of the benefits of forex trading is that you have the option to either buy or sell currency pairs depending on the state of the market.
In forex trading terms, this is known as going long or short.
- If your instinct tells you a currency pair is likely to increase in value, you would go long; for example, you would buy the pair based on a prediction of the base currency rising against the quote currency.
- You would go short if your predictions went the other way; for example, you would sell the pair if you thought the base currency was likely to fall in value against the quote currency.
In the stock market, this directional trading usually requires significant investments as it has high associated costs. Thanks to low transaction fees and liquidity, however, foreign exchange allows for easy directional trading in line with market trends.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Compared to other markets, such as those dealing in stocks and shares, forex trading is a relatively new practice. As such, it has been quicker to adapt to the technological advancements of the trading world.
Its decentralised nature means connectivity is vital to its existence and software developers continue to improve on the platforms available to forex traders.
Innovations in mobile applications, trading algorithms and global connectivity, including the rollout of 5G, continue to make it easier for individuals to trade effectively in real time from anywhere in the world, making technology one of the major benefits of forex trading.
As it takes place in a global and digital landscape, the regulation of foreign exchange is no easy task.
Thankfully, though, this works in a trader’s favour and can actually be considered one of the advantages of forex trading.
Since there’s no centralised exchange system, independent bodies are responsible for regulation in respective countries.
In the UK, this role falls primarily to the Financial Conduct Authority (FCA).
This consumer watchdog ensures that UK brokers are licensed and follow strict guidelines that protect the interests of forex traders using their services.
So, although it comes with an element of risk, as with any form of trading, using a UK-regulated forex broker will give you peace of mind that its activities will be fair, transparent and tightly monitored.
- No buy/sell commissions and tight spreads
- Leverage of up to 1:30
- FREE unlimited Demo
- 2,800+ trading instruments
- Real-time quotes and advanced analytical tools
- Fast and reliable order execution
- No API integrations
- No social copy trading
Plus500 was founded in 2008, and is considered to be a high-trust broker because not only is it regulated by top-tier bodies like the FCA in the UK and ASIC in Australia, but it is also listed on the London Stock Exchange.
Plus500 offers CFDs, 71 forex pairs and stocks. You can trade using its proprietary platform, which is available as a desktop download, a web trader and a useful, well-designed and streamlined mobile app.
Deposits and withdrawals are fast and free, and you can use a bank transfer, eWallets, and credit or debit cards to fund your account.
The minimum deposit is quite high, however, at £100.
The trading fees are about average, so there is not too much cost involved with making trades or maintaining an account at Plus500.
Plus500 does not offer access to platforms like MetaTrader, but it does have a proprietary platform called Web Trader that is simple and easy to use with a range of charting options and trading tools.
However, for those who like a lot of research in their trading apps, Web Trader and Plus500 as a whole does not provide that much detailed information.
For beginner traders, Plus500 does have a demo account where you can practice trading without risking your own capital, and the Trading Academy has a reasonable amount of educational material in the form of videos, eBooks and articles.
There is also a Traders Guide which has some further learning resources.
- Regulated by FCA, ASIC
- No withdrawal fee for US clients
- 0% commission on stocks
- Social and copy trading
- Not available in every US state
- More expensive than most of its competitors
- No MetaTrader platforms
eToro is considered the best social trading platform and is the world-leading copy trading brokerage. It is considered the best trading platform for beginners.
eToro features include:
- Graph trading scenarios
- Trading in US dollars
- Social newsfeed with open trading discussions and notifications
- Valuable trading education
- Trader matches depending on your needs and trading style
It is not listed, nor does it have a banking licence or public information regarding its financial information. However, it is regulated by the Financial Conduct Authority (FCA).
According to the eToro website, the eToro withdrawal fee in the UK varies depending on the payment method and the withdrawal amount.
For instance, a withdrawal fee of $5 is charged for any amount up to $50, while a withdrawal fee of $25 is charged for amounts above $50.
Additionally, eToro charges a conversion fee of 50 pips on withdrawals that are made in a different currency than the account's base currency.
In terms of the eToro withdrawal processing time in the UK, it typically takes one to two business days for eToro to process the withdrawal request, and the actual transfer time may vary depending on the payment provider.
If you decide to take profit on eToro, you will need to close the position to lock in your gains. The process is straightforward and can be completed in just a few clicks.
Moreover, eToro provides traders with a range of advanced order types, including take profit and stop loss, which can help manage risk and maximize profits.
Take profit stop loss is a feature that enables traders to set a specific price level at which their position will be automatically closed to lock in profits and limit losses.
It is important to note that the profits you make on eToro are subject to taxation, and you should consult with a tax professional to understand the tax implications of your trading activities.
eToro does have an inactivity fee. If you do not log in or perform any trading activity on your eToro account for a period of 12 months, you will be charged an inactivity fee of $10 per month. This fee is deducted from your available balance, and it will continue to be charged until you reactivate your account by logging in or performing a transaction.
Inactivity on eToro is defined as a period of 12 months during which there is no trading activity or login to your account. Any trading activity, such as opening or closing a position, will reset the 12-month inactivity period.
The minimum amount required to trade on eToro is $50 for most countries, and there are usually no deposit fees charged by eToro for most payment methods.
However, some payment providers may charge transaction fees or currency conversion fees, and there may be additional fees or restrictions depending on the payment method used.
It's always a good idea to check with eToro or your payment provider for specific details.
To find out more, read our eToro review.
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.
As a broker that you can trust, XTB is both well-regulated and listed on the stock exchange. The registered office is in Canary Wharf, London.
XTB offers investors and traders the opportunity to trade commodities, stocks, metals, forex, indices and cryptocurrencies, as well as ETFs and CFDs, and it is regulated in top-tier jurisdictions by FCA, CySEC, IFSEC and KNF.
Traders can easily open an account online and can choose between the commission-free Standard account or the Pro account that includes tighter spreads, but there is a commission that needs to be paid on all trades.
Deciding what platform to use to make your trades depends on your location – in most countries, you can choose MetaTrader 4 or the proprietary platform xStation (although MT4 is not available to UK customers).
XTB is a great choice for beginners thanks to the huge range of educational materials, categorized by level (beginner, intermediate and advanced) and the customer service options that are available only on weekdays.
There is a fully functional demo account so beginners can practice strategies and get used to using the platforms.
The more experienced trader will enjoy a huge range of research resources, including trading signals, technical analysis, details about different instruments, and even a heat map and market sentiments.
IG is a great share trading platform for beginners thanks to its user-friendly interface and extensive educational resources.
Pros of IG include a wide range of trading instruments and markets, as well as the ability to access multiple account types and trading platforms. The platform also offers a demo account for beginners to practise trading strategies before investing real money.
However, IG isn’t the cheapest share trading platform, with relatively high trading fees and a minimum deposit requirement of £250 when paying by credit/debit card or PayPal.
In terms of additional fees, IG charges a commission fee for share trading, starting from £8 per trade. There’s also a custody fee of 0.25% per year for holdings of £250 or more.
Overall, IG is a solid choice for beginners looking for a user-friendly platform with extensive educational resources, but investors should be aware of its fees and minimum deposit requirements.
84% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
- No minimum first-time deposit
- Optimal trading execution
- More than 1,000 CFDs
- State-of-the-art trading infrastructure
- Customer support on 14 languages via email, chat and telephone
- No copy trading
- Not available for US clients
- No bonus for EU based clients
ActivTrades is a traditional CFD broker and has been trading for more than 20 years on 140 markets. ActivTrades is authorized and regulated by the FCA, CSSF and SCB.
Its strong points include:
- No minimum first-time deposit
- No commissions
- Several payment methods for deposits and withdrawals
- Tight spreads from 0.5 pips
It offers one of the best execution speeds in the industry with low latency below 0.004s.
It utilizes the most advanced technology to improve users' trading efficiency – users can automate trades, build integrations and create trading apps using ActivTrades' market-leading CFD and spread betting technology.
Exceptional trading infrastructure is available on ActivTrader and MetaTrader 4 and 5.
ActivTrades invests deeply in specially developed educational materials for its clients – including webinars, regular outlooks, manuals, etc.
Type of offers: ActivTrades focuses on well-developed products in its trading portfolio. Customers can choose from over 1,000 CFD or spread betting instruments across forex, indices, shares, commodities, financials and ETFs.
It also offers investing solutions for its institutional partners.
Spread betting allows UK residents ONLY to trade the prices of financial instruments, including forex, indices, commodities and LSE shares.
Moneta Markets was launched in 2009 to create a brokerage that allows fast and simple access to the markets.
Regulated by both ASIC and the FCA, this is considered to be a safe broker that you can trust, whether you are a beginner trader or a professional.
With a minimum deposit of $50, traders can buy and sell commodities, indices and CFDs in shares and cryptocurrency. 45 forex pairs are available for trading too.
The STP Account is probably the best choice for beginners, with no commission on trades but fees built into the trade. The True ECN account has tighter spreads but you will pay a round turn commission of about $6 per lot, so this is probably more effective for an experienced trader.
Alongside a functional demo account, there is a Moneta Masters course that will help investors that are just starting to learn, through a series of 144 videos.
In terms of research, alongside the usual market sentiments, economic calendars and other resources, Moneta TV is a YouTube channel dedicated to all things trading that provides useful information for beginner and experienced traders.
Although the True ECN account has costly commission charges. Moneta Markets is a great broker for all types of trading.
- Highly regulated
- Advanced trading tools
- Account protection
- Low trading fees
- No US clients
- Inactivity fee
- Minimum deposit of $250
Best for: On demand
Admiral Markets, rebranding to 'Admirals', describes itself as a ‘full-spectrum financial hub’.
In practice, Admirals is a broker that offers several forex and CFD trading instruments in most currencies.
Founded in 2001, Admiral Markets is regulated by JSC, FCA, EFSA and CySEC, and offers traders access to both MetaTrader 4 and 5, with the opportunity to have several active accounts with different base currencies to take advantage of price instability.
There are several account types available, depending on the platform that you want to use.
On MT4, you can choose a standard account known as Trade.MT4. The minimum deposit for this account is 100 USD/EUR/GBP or equivalent, and you can trade 37 currency pairs as well as metal, energy, future, stock and bond CFDs.
In this account, the trading fees come from the spread, apart from with single share or ETF CFDs, which have a standard commission of 0.02 USD.
The Zero.MT4 account offers tighter spreads, with more currency pairs (45) but fewer CFD options.
The commission on forex and metal CFDs is 1.8 to 3 USD per lot, cash indices are 0.5 to 3 USD per lot, and energy CFDs are 1 USD per lot.
If you prefer the upgraded MT5, you can also have an Invest.MT5 account, alongside the Trade.MT5 and Zero.MT5. MetaTrader 5 accounts have access to more trading instruments in both Trade and Zero, but the Invest.MT5 is designed purely for buying stocks and ETFs, with more than 4,350 stocks and 200 ETFs available and a minimum deposit of 1 EUR/USD/GBP.
Deposits are free using bank transfer, card, PayPal or Klarna, but there is a 0.9% fee (or $1 minimum) for deposits made using e-wallets like Neteller or Skrill. You can have one free withdrawal a month as a bank transfer, but two if you use PayPal or e-wallets.
Admirals is available as a trading app on mobile as well as web and desktop, and the user interface and real-time trading that is available across platforms offer a seamless user experience.
The research and analytics are extensive, with technical and fundamental analysis alongside trading news, market sentiment and a market heat map. Access to MetaTrader Trading Central and a weekly trading podcast is also provided.
In terms of education, there are articles and tutorials, eBooks, trading videos, webinars and seminars as well as a FAQ and a handy glossary.
Admirals takes learning seriously with two separate courses aimed at beginner traders. The Zero to Hero course consists of 20 video lessons, a Q&A and a live session as well as a well-crafted trading strategy.
Forex 101 is a three-stage course to take beginners through to experts using a structure that includes a video lesson with detailed notes and a quiz to check knowledge.
If you are not a UK resident, the conditions might change depending on the regulation. Please, check the Admirals website for details.
Please, be aware that if you want to see UK conditions but you don't have a UK IP address, then you must select Admirals Markets UK at the bottom of the home page.
- Worldwide regulated
- Multiple platforms – MT4, MT5, etc.
- Negative balance protection
- 20% welcome bonus
- Educational content
- Wide rage of payments methods
- Fixed spreads
- You can’t buy stocks
- Quarterly and annual inactivity fees
- Custumer support is not available 24/7
- No bonus for EU based clients
- No US clients accepted
- Imitated crypto assets
AvaTrade is a CFD Regulated broker with +1,000 financial instruments and multiple trading platforms. It has been operating since 2006.
It offers a 20% welcome bonus up to $10,000, according to regulation and a free 21-day demo account with $100,000.
- FX Options
- Crypto currencies
- Spread betting
AVATrade EU Ltd is regulated by the Central Bank of Ireland. (No.C53877) Ava Trade Markets Ltd. is regulated by the B.V.I Financial Services Commission. It is also highly regulated in Australia, South Africa, Japan, Middle East, Cyprus and Israel
You can not trade with AvaTrade in the US, North Korea, New Zealand, Iran or Belgium.
Mínimum deposit of $100, no withdraw limit and no fees.
The prices of currencies affect one another, which can help to give an insight as to the economic state of a country as a whole. Trading currencies can help to boost the exchange rates of the countries involved, which then reflects well on the economic health of a country.
When you trade forex, you will have potentially limitless earning potential. You can make trades and produce income without needing to work long hours in a traditional business. You can trade at any time and with any market globally.
If you are considering trading forex but are concerned about the potential risks involved, then you should consider triangular arbitrage.
Triangular arbitrage is a relatively low-risk strategy for making profits within foreign exchange trades.
When you hire a forex broker, you will be essentially hiring a specialist to help you to make investments that provide returns. They will have expert knowledge of markets and strategies which you won’t necessarily have. It will also allow your investments to grow without you needing to continually watch the markets. Your broker will do that for you.
With online trading platforms, the addition of 5G means that you can make trades at any time and any place.
Many online platforms will have mobile apps which you can download to your smartphone. They will enable you to keep an eye on the markets, monitor your trades and make decisions regarding your strategies.
Being connected to the 5G network means that you can respond quickly to changes as they happen and don’t need to worry about missing an important trade.
Forex trading can help to boost a country's economy. When a country is seen to have a strong currency, this can help to ensure that the value of their currency remains stable, providing societies with a stable economy to live and work in.
Because Forex is global, trading can be done 24-hours per day. This means that you will be able to trade at a time and place which suits you.
Forex isn’t necessarily ‘better’ than stocks, it’s different. The right thing for you to choose will largely depend on your own needs and what you are looking for. You will need to consider your own needs and requirements before choosing which one is best for you.
Don’t invest in unless you’re prepared to lose all the money you invest.
There are many benefits to forex trading but, as with any market, there are also associated risks and it should not be entered into lightly. Whilst this article has covered the main advantages of forex trading, it’s also vital that you familiarise yourself with the potential pitfalls to ensure it’s the right decision for you.
Forex trading is not a get-rich-quick scheme. Rather, it is a long-term strategy that requires knowledge and a keen understanding of how global events can affect the market.
Before you commit to any form of financial investment, you should carry out extensive research and ensure you understand the ins and outs of the market, are familiar with all related technical terms and are comfortable taking speculative risks with your capital.
WikiJob does not provide tax, investment or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.