Benefits of forex trading

This post was originally published by Deriv on July 28, 2022

The forex market is not only the biggest financial market in the world but also one of the most accessible markets to trade on. This marketplace is made up of buyers and sellers from all over the world participating in forex live trading and offers opportunities suitable for both beginner and experienced traders.

If you have been thinking about adding forex to your trading portfolio, read on to find out why you should. 

Trade 24/5 

The forex market is open round the clock on weekdays, giving you even more opportunities to trade international currency pairs and take advantage of their price movements. Thanks to the business hours of forex exchanges across international time zones, at least one region is operating at any point during the week. 

The four major global exchanges that start and end the trading day are Sydney, Tokyo, London, and New York — with these exchanges, forex trading starts at 9:00 pm (GMT) on Sunday and ends at 9:00 pm (GMT) on Friday. 

Gain exposure to global economic markets 

When you trade forex, you’re able to gain international exposure to different global markets depending on the currency pair or basket you trade. 

Forex currency pairs are categorised into major, minor, micro, and exotic pairs and are made up of currencies from all over the world. These three categories have different liquidity levels that represent how actively traded the currency pairs are.  

You can also trade currency basket indices. These indices measure the value of one currency against a basket of five other equally weighted global currencies, increasing your exposure to even more global markets at the same time. 

Trade a highly liquid market

Liquidity refers to how quickly an asset can be bought and sold. When a market is highly liquid, it basically means that there are lots of buyers and sellers trading at any point, leading to a higher trading volume and lower transaction costs as traders seek to complete transactions easily and quickly.

The forex market is one of the most liquid in the world (in 2019, the market was averaging over 6 trillion USD traded daily). With the large number of active trades happening every day and low costs, it becomes easier for traders to enter the forex market and start trading.

Profit from both rising and falling prices

On Deriv, you can trade forex via options, CFDs (contract for differences), and multipliers, which all allow you to potentially profit from rising as well as falling prices. With these trade types, you’ll be predicting the price movements of currency pairs or baskets, and if the price moves according to your prediction, you’ll earn a profit.

Options trades are timed, so you’ll be predicting market movements within a specific time period. On the other hand, CFD trades can stay open for as long as you want to take advantage of market movements (as long as you have sufficient funds in your account to cover potential losses in case the market moves against you). With multipliers, you’ll get to multiply your potential profits without losing more than your stake.

Start trading with low capital requirement

Thanks to the highly liquid nature of the forex market and low transaction costs, you can open a forex trade even with relatively low capital. On Deriv, all you need is a 5 USD deposit into your account, and you can start trading forex on any of Deriv’s platforms.

Make the most of high leverage

On Deriv, you can trade major, minor, and exotic currency pairs with high leverage. Trading forex with leverage gives you more market exposure by allowing you to trade more than your capital allows. This means you get to open a trade worth more than your stake. For example, with a leverage of 1:10 and a stake of 100 USD, you’ll get to open a trade worth 1,000 USD. 

The profit or loss you make at the end of your trade is based on the trade’s full value, so trading with leverage allows you to maximise your capital and increase your potential profits. However, note that this also means potential losses are increased.

Take advantage of tight forex spreads

A spread is the difference between the bid and ask prices and represents the cost to open a CFD trade. These are determined by the broker and are calculated in pips, which are small price movements of an asset.

Deriv offers one of the tightest competitive forex spreads in the industry. In a highly liquid market like forex, with a large trading volume and transactions are completed quickly, the tighter the spread, the faster you will likely gain back your capital and take greater advantage of the price changes.

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Find out more about options trading and CFD trading on Deriv before you get started. Or use a free demo account now to start exploring the forex market risk-free. This demo account is pre-loaded with 10,000 USD of virtual currency, and it’ll give you a chance to experience these benefits before you start trading with real money.