What are the advantages and disadvantages of the Forex market?

Kopito Academy
16 Feb 2023

What are the advantages and disadvantages of the Forex market?

Introduction to the advantages and disadvantages of the Forex market

As we have noted in previous articles, the Forex market is the world's largest financial market with a transaction volume of 6.6 trillion dollars per day in which traders from all over the world can trade and make a profit. Forex trading is seen as an attractive way to make money, but along with the attractiveness of this market, risks and challenges should also be taken into consideration. The Forex market has become a common profession for many traders due to its many advantages such as 24-hour trading activity, high liquidity, availability and many other advantages, but the Forex market, along with its many advantages, also has disadvantages that in this article we will familiarize you with the advantages and disadvantages of the Forex market. Among the advantages and disadvantages of the Forex market are the following:

Forex market advantages

What are Forex market advantages?

1- Low cost (fee)

Forex transactions have very low fees, which is the main reason for the high liquidity market, as well as the international competition of brokerages to provide lower fees to attract more customers. Forex market trading costs can be categorized into three categories:

1.1. Spread

Spread is the difference between purchasing rates (ASK) and sales (BID) of a currency or financial product, usually Spread in financially traded products, it is much lower than financial products with low trading volumes, in fact in higher liquidity of a financial product, spread will be lower.

1.2. Commission

The commission is actually the fixed amount that the broker receives from you for each transaction and offers you a lower spread in return.

1.3. Swap

Swap is actually the interest rate you pay to the broker for each keeping your trade open. In recent years, most brokerages that provide services to Islamic countries have added services called Swap Free to their services, using which traders can keep their trades open for a specified (predetermined) period of time without being required to pay swaps to their broker.

The sum of these three forex trading costs is much lower than the trading cost of the same product (with equal volume) in other markets.

2-  24-hours access 7 days a week – 24/7

24-hours access to Forex market

The Forex market is one of the best markets for personal traders, because traders from around the world can operate in the market for 24 hours 5 days a week, however, in the past decade, the Cryptocurrency market has tried to overtake the Forex market by offering 24/7 services (2 days more than the Forex market), But the Forex market remains the most attractive financial market in the world. The 24-hour advantage of the Forex market allows traders to register their trades on the Forex market at any time of the day and profit from its volatility.

The main reason the Forex market is 24 hours a day is the decentralized market, in fact, there is no place under the title of Central Forex Organization, and banks, financial institutions, brokerages and traders from all over the world register their transactions on the interbank network at all hours of the day.

 3- Possibility to use a variety of strategies

Possibility to use a variety of strategies in Forex market

In financial markets traders usually keep their trades open for a few seconds or months, scalping strategies may not be practically applicable in more traditional markets such as the stock market due to lower liquidity, but because of its high liquidity, the Forex market allows traders to use very short-term strategies (scalp) to profit from market volatility, these traders use trading strategies, high volumes and low profit margins, so they need a market that can cover high-volume purchases, For this reason, trading for Forex is very acceptable for them.

4- High liquidity

One of the other advantages of the Forex market is its high liquidity

As mentioned above, the forex market has the largest number of traders and the largest volume of transactions compared to other financial markets in the world. This is very important for traders because:

- It helps create more competitive rates and reduces the possibility of price manipulation and market making. Because when the depth of the market goes down, a number of traders will create extreme fluctuations or unrealistic trends for a financial product by making high volume transactions (relative to the market depth).

- It greatly reduces the cost of transactions. Because when a large number of traders are active in the market, the variety of prices offered for buying (ASK) and selling (BID) is very high, and this reduces the cost of transactions or spreads.

- Eliminates the worry of not having a buyer or seller for a financial product. Staying in the buying and selling queue is one of the concerns of most traders, because you may have bought a stock at a low price and now you are looking to sell it, there are no buyers for your stock due to the shallow depth of liquidity and market participants. .

These issues, i.e. price and behavioral health of the market, low cost and ensuring the possibility of entering and exiting the transaction at any time and at any price, are the most important issues that professional market traders are looking for, and the forex market offers them to traders.

5- Forex is a decentralized market

As mentioned earlier, there is no place under the title of Central Forex Organization and traders from all over the world register their transactions by an interbank network, this reduces one of the systematic risks of the financial market considering that no particular organization or entity can make decisions for this market and its rules are determined by participants as well as supply and demand.

6- Possibility of starting with low fund

Possibility of starting activity with low fund in Forex market

In the Forex market, due to the offer of leveraged credit from the broker, you can start trading with low funds of even $100 and of course along with this, most forex brokers allow you to use a demo account so that you can reduce the risk of your fund losses in the early stages of learning.

7- Variety in trading products

In the Forex market, you will have a diverse portfolio of trading products, which means increased investment opportunities, because you can find a good opportunity to trade and invest by checking the right trading positions in different financial products every hour and day from the market.

8- Full Forex Trading Automation

The possibility of registering profit limits and losses in Forex trading is one of the most important advantages for professional traders, Because the price may have reached your desired range while you are resting, and if you have registered a profit limit or stop loss order for your trade, the system will automatically close your trading order on profit or loss, of course this advantage is not limited to ordering closing trades, even you can automatically enter into buy or sell transactions at predetermined prices by creating Stop and Limit orders.

Forex market disadvantages

What are the disadvantages of the Forex market?

Although the Forex market has many advantages, there are also disadvantages that we have mentioned below.

1- Non transparency in the Forex market

Considering that Forex market has no particular centrality, the prices and depth of the limited market are dependent on the brokerage where you are trading, and there is no specific price integrity among different brokers, and also by examining the depth of the market you are surrounded only by the depth of the market and the orientation of traders in your brokerage.

2- Complex price fluctuation indicators

Price fluctuations in the Forex market are influenced by numerous micro and macroeconomic indicators as well as global political factors, this will make it harder to accurately analyze and interpret data about the price future of a currency.

3-Trading leverage and increased risk

Trading leverage and increased risk

In forex, by using high leverage, you can make transactions with a volume higher than your initial capital, if your analysis of the price trend and future of the traded product is correct, using leverage can create a profit even more than your initial capital, but on the other side, if your analysis of the price future is not correct, trading leverage can lead to the loss of part or all of your initial capital. In fact, leverage (leverage credit) works like a double-edged sword, in case of risk and capital management, as well as market psychology management, it can cause you profit and if it is not used correctly and with insufficient knowledge, it can cause you loss. Therefore, leveraged credit can be classified both in the category of advantages and disadvantages of the forex market.

4- Self-learning process

An investor in the stock market can get professional guidance from business analysts, financial advisors, but because of the extensive information of the Forex market, forex traders usually have to work hard to acquire the knowledge and skills of forex trading, for this reason, most beginner traders give up their trading during the early stages of their activity due to losses caused by lack of expertise and inappropriate trading in the market.


The Forex market is a broad market, with high liquidity and special possibility that increases the profitability of professional traders, to enter the Forex market, you must obtain basic market training and enter the Forex market with sufficient knowledge, we at Kopito Academy, we try to provide you with a variety of articles that provide you with enough basic knowledge to enter the Forex market.