Why do so many new traders continually become infatuated with the foreign exchange market? The forex market operates swiftly, creating a multitude of benefits for new investors and skilled traders alike. The forex market can also be deceptively simple. While it’s vital that traders approach the market with respect and knowledge, it’s also fully possible to get started with a small amount of solid knowledge and have a simple yet effective forex trading strategy.
So why trade forex you may be still asking? Here is a rundown of all the major benefits:
A Dozen Major Currency Pairs
In the forex market, traders really only need to pay attention to a dozen major currency pairs, if that — this is compared to other financial markets, that can have hundreds if not thousands of fluctuating instruments you can invest in. Many traders even focus on just two or three currency pairs, allowing them to really narrow down and concentrate on their technical analysis. This is of course much simpler for new traders that are looking to get a form of financial trading and are learning from scratch.
top traded currencies
A 24/7 Global Market
The foreign exchange market works 24/7. This gives forex traders constant opportunities to make money while still affording them some opportunity to rest and brush up on their forex trading strategy. A forex trader can jump on the market at any time and make a profit — including those who may be traveling abroad or in a different time zone entirely. Other markets have to be traded during business hours, which can be problematic for investors who have day jobs or who have other types of investment that demand their attention.
Although it is a 24/7 marketplace, it is vital to know when the most fluctuating trading times are, and when the trading centers are open:
- New York – 8:00am to 5:00pm EST
- Tokyo: 7:00 pm to 4:00am EST
- Sydney: 5:00 pm to 2:00am EST
- London: 3:00 am to 12:00pm EST
Depending on the currencies you are trading you can hugely benefit off trading at more volatile trading hours, or if you prefer a more relaxed and predictable trading session, to trade in the quieter hours.
Low Barrier to Entry
Beginner investors can find it challenging to locate investment strategies that don’t require thousands in starter capital. The foreign exchange market, on the other hand, you can get started with just as little as $25-$50 depending on the broker. A trader can start off with very little capital investment and still generate a reasonable return off their trades, thanks to the miracle of leverage and the small unit sizes. This creates a spectacularly low barrier to entry. In addition to being able to trade in small quantities, traders can also learn first off with practice accounts. Practice accounts operate just as a real account would, but they do not actually affect any cash. Traders can practice on specific currency pairs until they understand the technical aspects of FX trading.
The Help of Forex Trading Signals
How can a trader improve their performance? In many investments, traders simply need to jump in and hope that they do their best. But the forex market comes with its own type of “training wheels” that can be incredibly effective. The foreign exchange market can be deceptively complex, but traders don’t need to learn everything to start trading on the forex market. Traders actually only need to know the basics. There are forex signaling services that give traders all the information that they need to start initiating more intelligent trades. There is nothing similar for the stock market or any of the other financial markets as they include too many moving financial instruments, making it far less predictable.
Example of how forex signals look
A Rapidly Moving Market
The currency markets move very quickly. Currencies are affected by a significant number of economic aspects, and that means that the value of each currency pair is constantly changing. This affords far greater opportunities for investors who want to make money quickly. While a stock may be purchased and held indefinitely or for months, a currency pair can be traded successfully within minutes. This also means that traders don’t have to constantly worry about their open trades; as you can close trades at the end of every day to capture their profits – or more frequently if you wish. The increased volatility does mean however that you need to be more observant with any open trades you have. To counter that, the sophistication of forex trading platforms today, such as the MetaTrader 4, allow you to set Stop Losses and Take Profits so you can safeguard your trading activity, automatically closing the trade for you when certain levels are hit.
Better, More Competitive Brokers
Brokers in the forex market have extremely low fees. It’s a competitive market and forex trades need to be fast; brokers understand that they want to encourage fast trading. This also leads to better customer service, as the brokers have to be able to distinguish themselves from the competition. Forex brokers provide a variety of tools and analytical information.
Read how to find a reliable forex broker
The Ability to Leverage
Forex accounts allow traders to leverage their money. With $50 a trader can actually trade $500 worth of currency. They can then capture the profits of the currency based on the actual amount traded, not just the amount that they deposited. This creates a significant advantage to those who want to invest without a lot of funds. The ability to leverage is uniquely useful throughout foreign exchange trading. However, in a beginner’s hands, it can also be fairly risky. You can win as quickly as you can lose basically. This is why there are various trading tools such as forex signals which can make it much easier for traders, as they don’t have to rely upon just their own knowledge and intuition.
Leverage: your investment amplified
Though the forex market is growing fast, trading is still not able, for the most part, to actually affect the market. Thus, there’s more market stability. You’ll be able to create trading strategies that will work consistently, which is the key to success. In other financial markets, it’s harder to make predictions, even with key indicators involved. By trading on the currency of an entire country, it’s far easier to make decisions based on broader strokes. News traders often take advantage of this fact by trading specifically based on the country’s economic status at the time.
Extensive Tutorials and Tips
Beginners can turn anywhere for information on the forex market. Because of the rapid growth of the market, there’s a substantial amount of help available. And because traders are not in competition with each other or attempting to hide their strategies, they are more than willing to share their knowledge. More traders does not affect the profit of each individual trader; the currency and economies involved are simply too large. Foreign exchange trading is also simpler in this way as there aren’t issues such as insider trading that need to be worried about. The FX community as a whole is extremely supportive.
Flexibility and Opportunity
Traders in the forex market have a certain level of flexibility that other markets do not. Anyone will be able to jump into the market for a few hours in the middle of the night and still make a profit. Trading on the stock market requires more time and investment, which can be prohibitively challenging for newer investors. There are many people who want to slowly break into trading as a hobby rather than jumping into it as a full-time job. Forex makes this possible.
So… what are you waiting for?
Though the foreign exchange market has some risk to new investors, it also contains tremendous amounts of reward. New traders may want to start a practice account, and even a service such as that of forex signals rather than attempting to craft and initiate trades themselves. Doing so will allow any new investor the opportunity to benefit from the market without having to carry out technical analysis on their own. The forex market is swiftly growing and there’s an incredible amount of information available for those who want to get started today.