Like everything else in this world, foreign exchange or FOREX trading comes with its own set of pros and cons. Yes, it does seem like peaches and plums with a hint of exciting and bitter dark cocoa syrup, but it could prove to be bitterer than you would have imagined.
What attracts more number of people towards Forex trading is the promise of fast cash, a 24 hour market and easy access. With brokers accepting lower initial investments, people are flocking to Forex as a means of creating side incomes.
Forex trading is based on the principle of buying a particular currency when it is weak and making a profit form when it strengthens. Seems like a simple and fool-proof concept to digest, doesn’t it? Maybe it is; maybe not.
When it comes to Singaporeans, they already possess a significant advantage in the realm of forex trading even before they get started due to the strength of the Singapore dollar relative to other economies. Despite the excruciating burden of daily living costs, it pays to be a citizen of a powerhouse economy on a huge upswing compared to its regional neighbors. So is forex trading really the secret stairway to financial prosperity for Singaporeans?
Let us first review the pros of Forex trading to find out:
- Zero Time Constraints
Since it is open 24/7, Forex trading may be done even in the middle of the night when you had a dream about making a huge profit out of it. It can be customized as per your requirements as you can trade in different time frames – daily, weekly, or monthly.
- High Rewards Over Short Term Periods
The Forex trading market being very volatile proves to be more of an advantage than a disadvantage as the returns are very high in a short period of time. However, the key to make good use of such an advantage is understanding where you have put your money instead of making a rash decision.
- Borrowing Leverage
Some might be uncomfortable with this but for those who do not hesitate to borrow money; Forex trading is for you because it lets you trade with borrowed money. Even cash-strapped Singaporeans with poor credit scores and multiple bills to pay can take advantage of this power to make a killing if they know what they’re doing.
Marginal trading might be dangerous, but at least it is possible.
- Be Your Own Boss
Forex trading is free of any external – national or international – control. It is the fairest form of trading in today’s time because no country has laws that restrict forex trading. Thus, you have everything under your control.
- Low Nominal Charges to Pay
Apart from the broker charging a marginal amount of spread, better known as pip (price increment), there is no other fee or charge involved.
- Easy to Get Into
If you have internet connection, a phone (I know you do, I just said that to make you laugh) and an amount as small as $1,100 and the willingness to get involved, you are most welcome to do Forex trading. Thus, it is far easier to do forex trading than any other trading.
Now, after going through all that, if you are wondering why you have already not taken part in some Forex trading, here are the reasons why you might have not, aka, the cons:
- Too Much to Risk
No, I am not trying to make a fool out of you. I know I mentioned it in the pros as well but risk is risk. The thing with risk is that it can go either ways. So the bigger the risk is, the higher are the chances of losing. It really just depends on how adventurous and well-informed you are.
- Borrowing Backlash
This is not much different from the previous point, although, it is much more dangerous than the previous one. The higher amount of borrowed money you lose while forex trading, the more money you owe to someone.
Since we all know that money has the power to destroy relationships, considering that you are borrowing from an appropriate source, it might be best to avoid investing someone else’s money. In case you end up in the bad books of an undesirable lender, you might face more backlash than you could ever imagine.
- Heavy Time Investment
Even though the principle of Forex trading might be simple, it is not easy. It requires as much research as any other form of trading. There are two kinds of Forex traders – technical and fundamental. While technical traders watch graphs, fundamental traders read news reports, magazines, understand the economic climate.
So if they read in the news that the Japanese economy is on the upswing, they may start buying the yen. The economic climate has a lot of impact on Forex.
As you can see the world of forex trading is like a yin-yang. Only the financially empowered can reap the benefits and dodge the drawbacks effectively. The returns you derive from your investment could prove to be amazing if you know what you are doing and could also prove to be disastrous if you are misled.
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