Forex Trading in the UAE – Pros and Cons
The Pros and Cons of Forex in the UAE
Forex trading is promising to be one of the new frontiers for profitable investments in the UAE. However, the outlook is not all sunny as pitfalls inherent to the forex trading await the uninformed trader. To exploit maximum profits from forex trade a trader needs to understand the dynamics that influences the forex trading both positively and negatively.
An investor who wants to engage in forex trading in the UAE will thus need to know the various advantages that accompany this sector of investment.
## Chief most advantage of the forex trading is the fact that it is largely self-regulating with little or no muscling in by the government. The government can only impose certain interventionist measure to shore up the value of a certain currency but will in the main not interfere much with the day-to-day operations of the forex markets. This affords the UAE-based trader the latitude to conduct his business with high expectations of profits without too much government interference.
## The 24-hour market that forex trading is an advantage to anyone whether he is in the UAE or anywhere else in the globe. So long as one can exploit the time overlap that occurs between the different time zones of the different forex market, any trader is good to go in earning profits from engaging in forex trading.
## A trader will also enjoy the fact that unlike in brokerage-based trades, trading in forex does not carry extra expenses in commissions as trading is made on-line and the major cost is mainly the bid/ask spread which in most instances is cheap.
## The huge amount of trades that are carried out in forex trading daily(averaging more than $1 trillion dollars globally) provides a comfortable liquidity cushion unlike in other forms of trade the risk of the market crash is ever present. Thus, a trader based in UAE is always assured of the security of the funds he employs in the forex trade. The stable liquidity in forex market makes it easy for a trader to enter or exit forex trading without much hassle.
## Trading in forex is always conducted with the use of leverage. Leveraging forex trade enables a trader to make huge profits depending on how effective the platform a trader uses is. Some platforms enable a trader to enjoy a leverage of up to 1:500 which leads to huge profits.
## Despite these and many other advantages that accrue to a trader in forex, anyone engaged in the nascent UAE market must be made aware of the disadvantages of engaging in this form of trading.
## Despite its being an advantage to the forex trader leveraging present certain risks to the trader. In instances where huge leverage are made available to forex traders, there is an inherent danger for the account size since margin call made on the account can negatively expose the account.
## The retail trader who is just launching out might be forced to use a broker rather than to trade directly in the interbank market. The engagement of a broker could lead to widening of spreads or may force one to be exposed to the vagaries of broker’s operational inefficiencies.
## The unpredictable nature of the swing in currency values can be quite tedious to track. Since currencies rise and fall on a constantly throughout a trading day cycle, it highly unlikely to that a trader in the UAE can put a steady hand in one particular trading position. The constant monitoring throughout a 24-hour trading required to get the grips on markets can also be physically and mentally draining.
The trader who wants to trade in the forex market in the UAE must, however, be cognizant of the fact that a proper understanding of these advantages and disadvantages can lead to the initiation of proper control measures by which the trader will exploit the most profitable avenues for forex trading without much inconvenience.