In recent years, forex trading has become far more popular than ever before. It is now the most highly traded market, far outperforming stocks and shares, for example. This is partly down to its newfound accessibility, with many traders starting their investment journey through apps and online platforms.
Whether you’ve traded forex or not before, you may be starting to wonder whether it could be right for you. It probably can! In this article, you will receive a little more information on what forex trading is and some reasons why you may want to invest in forex yourself.
What is Forex Trading?
Simply put, forex trading is buying and selling currencies in a bid to make a profit. You will buy one currency in exchange for another in the hope that its value is increasing or about to increase. Currencies from around the world are traded against each other, with over $5 trillion in trades being placed every single day.
How Does it Work?
As mentioned, currencies are traded in pairs. This is the key thing to understand. Unlike buying stocksor shares, where you can simply buy one and hope for the value to increase, you must sell a currency in order to buy a currency. So, each trade is the sale of one currency and the purchase of another concurrently.
These pairs are quoted in the format of a base currency and a quote currency, such as EUR/GBP. In this pair, the Euro is the base currency and it will be sold in order to buy the quote currency, the Pound. You would do this in the hope that the value of the pound is increasing, giving you more value in your base currency when returned.
Can You Do It?
Short answer: yes! Anyone can start trading forex with a relatively small amount of money. If you are confused about it all and want some help, there are great resources out there to help you, this beginner’s guideis one great example. All you need is to choose a brokerage, set up an account and start trading.
One solid piece of advice that all beginners need to start out with is to do plenty of research. You should spend a large amount of time studying the currencies you wish to trade, as various events and reasons can cause the prices to fluctuate. Studying each country’s socio-economic climate, political events, GDP and more will all help you make informed decisions when it comes to trading. Don’t trade blind and hope for the best, do your research.
Reasons to Invest
All sounds good so far, right? There are plenty of good reasons why you might want to start investing, here are a few more of them…
?It’s Easy to Start
As previously mentioned, it is super easy to start your journey with investing. Much like with stocks, investment accounts, or savings accounts, you can sign up online and create your own investment portfolio quickly. You may need to provide some proof of identification to get started, but aside from that, there’s not much to it. Choose a broker and get started.
?High Market Liquidity
The forex market is the largest and most liquid market in the world. What does this mean? Well, high liquidity means that it’s relatively easy to buy and sell, usually for a very low cost or fee. This means that you can put your money in and get it out again just as easily. It also means that you can enter a trade with a relatively low risk of the price fluctuating too much before your trade executes.
?Brokers Provide Educational Resources
If you are still a little daunted by the whole idea, fear not. Many brokers actually provide their traders with educational resources. As you work through the app or platform, there will be guides and explanations of what every feature means, meaning you don’t have to worry about understanding everything right away. Lots of these brokerage accounts also offer free educational articles, videos, and training in how to properly research and execute trades. For beginners, this is another great reason to start working with forex.
?You Can Make Good Money
Now, there’s always a risk with trading. While you definitely can lose money-making trades, the opportunities are there to make a great profit. If you study well and pay close attention to markets, there is a good chance of making profits on each trade. Lots of forex investors start as hobbyists and end up making such good profits that they turn forex trading into a full-time income stream.
?It’s Almost Always Available
One of the great things about the forex market is the availability of the market. It trades 24/7 for almost six days a week. This is due to all the time zones sharing one market. So, as the market opens on Monday morning in the east, trading begins. It doesn’t close until Friday night in the western hemisphere, meaning it is a very flexible marketplace to get involved in. If you want to trade in your evenings or at night, you have the opportunity to do so. This is not possible with the stock market which operates Monday through Friday during office hours only.
?Trustworthy Brokers are Easy to Find
When trading forex, you need to use a broker. This is the platform, app, or company you decide to invest through. These brokers hold your money and execute your trades on your behalf when instructed to do so. The great thing is, all of these brokers are financially regulated. This means you can trust that your money is being dealt with safely, professionally and legally. Finding a trustworthy broker is easy, just look for their accreditation and financial regulation information on their website.
Investing in forex is a great way to start investing. It’s easy, accessible, flexible, and massive as a market. There are great opportunities for education, profit, and long-term investment potential. It is for these reasons that starting your investment journey with forex is a great idea.