10 Reasons Why You Should Start Forex Trading
BY Chris Andreou
|ianuarie 31, 2022Over the last two decades, forex trading has become very popular. Ask any trader and they will give you different reasons why they trade forex. Some people decide to trade Forex to diversify their investment portfolio. Other people are adrenaline junkies and are driven to the currency markets seeking thrills. Trading is risky and exciting at the same time, so it attracts this sort of people.
Then there are those who treat trading as a hobby, or a part-time or full-time job to generate a healthy income. But the real question is; why you should start forex trading? Why should you trade forex over other markets?
You must take into consideration the pros and cons of a financial market before committing your time and money to it. Popularity can be a shortcut to decision making and since it is the market of choice for so many others, this might be a good enough reason why you should start forex trading too.
Forex has some significant advantages over other markets, especially for beginners. The barriers to entry are low; it doesn’t require a large initial investment and it is easily accessible.
This article will explore 10 reasons why you should start Forex trading.
So without any further delay, let’s get started!
Why you should start forex trading
Before we begin, you first need to understand what Forex Trading is and how it works.
What is forex trading?
Forex trading or foreign exchange trading (also known as FX Trading) is basically the trading of foreign currencies. The currency markets are estimated to have approximately $6 trillion in daily trading volume, making it the largest market in the world.
Forex traders assess currency values by analysing price charts and economic data to make calculated decisions about future price movements. Forex trading is the simultaneous buying and selling of foreign currencies, to try to make a profit from changes in their rates of exchange.
Trading on the foreign exchange market can generate huge profits but can also carry significant risk. For instance, let’s say you think that the Euro may strengthen against the Great British Pound and execute a trade. If the Euro does appreciate in value, you will strike a profit but if it doesn’t, you will undertake losses. Exchange rates are constantly moving so your deals may fluctuate in profit or loss and either will be realised when you decide to close the trade.
The most popular traded currencies in the Forex market are the US Dollar, Euro, Japanese Yen, Great British Pound, Australian Dollar and the Swiss Franc.
Exchange rates change according to supply and demand and there are many factors that affect currency prices.
How does forex trading work?
First of all, the forex market is not an actual physical marketplace. It is an electronic market that operates 24 hours a day, five days a week, across almost every time zone. This means that the market can be influenced around the clock by economic and geopolitical events across many different regions.
Foreign exchange trading is done over-the-counter (OTC), meaning that transactions are made directly between counter parties, or facilitated by a forex broker. There is no physical exchange (Like the stock exchange) but a global network of banks and other financial institutions make the market.
Now that you know what forex trading is and how it works, let’s dive into the reasons why you should start forex trading.
Here is a list of the top 10 reasons why you should start forex trading.
10 Reasons why you should start forex trading
1. It’s a 24 hour market so you can trade anytime
The Forex market only closes for the weekend when the banks are closed. Unlike the stock market that has set trading hours during the business day, you can trade forex around the clock. Due to the global nature of the market, a financial centre is open somewhere in the world so transactions can take place at any time of the day or night.
The FX market is divided into three main trading sessions. These are the US session, the European or London session and the Asian session. When one session is closing, another one is opening, which keeps the market open 24 hours a day.
Top tip: Consider what time zone you are in and when you will be trading. Consider trading currencies that are active during those times. There is usually, always a trade to be made somewhere in the world.
2. Anyone can learn how to trade; education is easily and freely available
One of the benefits of Forex trading is that it is easy to learn. Thanks to the rise of the internet, there is an abundance of educational resources at your disposal to help build your knowledge and skills. These include resources for beginners such as webinars, videos, forex trading courses, and articles to guide you along the way. And the best part is that it’s all usually free!
As your experience grows, there are also plenty of readily available resources for the intermediate trader who is ready to take their skill to the next level. Even though successful trading needs skill and experience, anyone can learn to trade currencies. No degrees in economics or finance are required.
Top tip: Sign up to our course and learn how to trade in 3 hours with 15 video lessons
3. It’s beginner-friendly and you can try it without taking any risk
Beginners and inexperienced traders can practice trading with a free demo account. This essentially means that you can simulate trading forex with virtual funds. The demo allows novice traders to get a feel of the trading environment and familiarize themselves with the trading platform without taking any risk. Consequently, it allows novice traders to learn the process of placing trades and developing skills and strategies.
Top tip: Demo accounts have pros and cons. Move to a live environment, trade real money and risk small amounts as soon as you can to improve your development as a trader.
4. It’s a highly liquid market so you can buy and sell with ease
The high liquidity in forex means it’s easy to find a buyer or seller so you can get in and out of the market easily. A currency can be bought and sold in the market with limited effect on its value too. Forex’s high trading volume means that it is easy and fast for a trader to enter a trade but also greatly reduces the risk of potential price manipulation from others, even by someone who trades in high volumes.
Therefore, the sheer global scale of foreign exchange, the 24-hour activity and the high trading volume increases the liquidity of the market, which in turn helps keep the prices comparatively stable.
Top tip: Just because buying and selling is easily done at the click of a button, it doesn’t mean you should trade all the time. Trade when the probabilities are stacked in your favour.
5. You can start with small amounts; forex is suitable for all budgets
Less capital is required to get you started compared to other markets, like stocks. You can open an account and start trading from as little as $50. This is one of the things that make this so appealing; you can try it with a small investment.
Top tip: Starting with small amounts can limit your profit potential; consider what your level of experience is and what your trading goals are. Then start trading with the best amount based on that.
6. There are low transaction costs
Another enticing feature of why you should start forex trading is that there are low transaction costs. Fees in Forex are incurred through the spread, which is the difference between the buy and sell price. There may also be a separate fixed commission depending on the broker and their account types.
Spreads and commission are relatively low, compared to other markets, making forex trading very attractive. Opening a trading account is usually free, there are no periodic fees and the cost to deposit/withdraw can be free.
Top tip: Check the brokers trading conditions before opening your forex trading account.
7. It is accessible to anyone with an internet connection
You can trade from anywhere in the world. Due to modern technology, the Forex market can be accessed from anywhere. Technology has made trading simpler, faster and portable. Changes can take place automatically and transactions can be made in minutes. For example, you can download the trading platform and then trade on- the- go with your smartphone. All you need is some money, a computer with an internet connection and you can start trading!
8. Good technology available for trading
Technology is one of the major advantages of forex trading. Global connectivity and the surge of 5G enables individuals to trade in real time from essentially anywhere in the world. Being a relatively new practice in comparison to other markets, Forex has not only been quick to adapt to the technological advancement of the trading industry but also quick to cater to the technological needs of the trader.
This outbreak in popularity has resulted in the creation of many educational materials and products for the Forex market. This includes innovative software for trading platforms and mobile applications for on-the-go trading. As well as experts who strive to assist forex start-ups. If you are interested in learning how to trade or even if you are looking for some products to assist you in trading, we’re confident you will find what you need easily.
9. Leverage allows you to speed up your profits (and losses)
The availability of Leverage is probably one of the most appealing reasons of forex trading. Leverage allows the ability to control and trade with higher amounts in the market, with a relatively small amount of capital.
This is much like we do with property when placing a deposit for a mortgage. by putting down a small deposit you can buy an asset that is of much greater value. In trading terms, your leverage will be expressed as a ratio. For example, let’s assume you have $1,000 in your trading account and a forex broker offers you 30:1 leverage. This means that you can trade deal sizes worth 30 x 1000 = $30,000. Although leverage can help you achieve increased profit you must exercise caution when using it.
Top tip: Without proper risk management, using high amounts of leverage can lead to large losses. It is wise to only risk a small percentage of your balance on any single trade idea.
10. Forex brokers are well regulated
You can trade Forex from most countries but there is no single entity that is responsible for regulating the forex market. Due to its global nature and decentralized exchange system, the market is regulated by financial authorities that supervise the brokers and trading platforms.
Some of these governing bodies include, The Financial Conduct Authority (FCA) in the UK, Australian Securities and Investments Commission (ASIC), the National Futures Association (NFA) in the USA and the Cyprus Securities and Exchange Commission (CySEC). These authorities regulate and monitor the brokers and set the standards for compliance that all platforms have to abide by in their jurisdictions. Such as being licensed, registered and audited regularly.
As a result, this gives traders peace of mind that they operate legitimately, your funds are safe and your trades are executed at fair market prices.
Conclusion
Forex trading is highly accessible and it is suitable for beginners and experienced traders alike. The sheer scope of this truly global marketplace creates more opportunities for profitability due to its volume, liquidity, accessibility, readily available educational resources, innovative technology and around-the-clock trading hours. It is a unique market in the opportunities it can offer.
Although there are many benefits to forex trading, it is important that you are aware of all associated risks involved in trading the currency markets too. The more you educate yourself, the more you practice and develop your skills, the more likely you will make a success of it.
Before committing to any form of financial investment, it might be a good idea to practice trading on a demo account. It’s a great place to start to familiarize yourself with the trading platform and price movements. By doing so you will be able to discover first-hand the benefits of trading forex and why it is so remarkably popular with people around the world.
Are you ready to get started?
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