With all the recent buzz around economics, people are looking for many different things to start investing and trading. While the stock market has been incredibly popular due to things like GME, they are often a gamble and at times extremely hard to predict. Another source of trading and investing people have turned towards is foreign exchange trading.
For those of you that don’t know exactly what it is, foreign exchange trading is the act of trading and exchanging currency for another form of currency. For example, going from USD to EUR. Because these currencies change in relation to each other each day, you can stand to make a lot of money if you play the market correctly and also get a little lucky. Here are several reasons as to why you should consider forex trading.
High Liquidity
When it comes to trading, you always have to either find yourself a buyer or a seller. If you struggle to find one of those things, you are going to have trouble converting whatever you have back into cash. Although this is easy to do in today’s markets, it still has a barrier that not many people are happy with. The fine folks at forexsuggest.com mention that the best thing about forex trading is the high degree of liquidity in the market. Because you are simply changing from one form of money to another, you are always going to have some form of cash at hand. High liquidity also means you can move money around easily whenever you want to. Having the ability to move your funds around rapidly and efficiently is one of the biggest reasons why people love forex trading.
You Can Make A Good Profit
The biggest reason why you’d want to involve yourself in any market is the potential for profits. The global economy is constantly fluctuating and currencies are always being compared to one another. If you invest in a currency at the right time and its value increases in relation to other major currencies, you can make a major profit when converting back. The two major currencies you always want to compare to are USD and EUR. These are generally the most used currencies in economics and therefore you should be judging the way a currency performs around these.
When it comes to volatility, the forex market is somewhere between the stock market and cryptomarket. There is going to be a degree of volatility that is greater than stocks, but it is still a fairly safe investment if you have done your research. This gives you an opportunity to increase your investments quickly. At the same time you can lose money quickly, but because the market is not as volatile as crypto, you will easily be able to mitigate your losses. With the right decisions, you can stand to make a look of money with forex trading.
A Permanent 5-Day Market
One of the biggest drawbacks to the stock market is that there is an opening and a closing time. Once the market is closed, you have to wait until the next day if you want to purchase more stocks. Trading hours start in the US when the first major markets open and even once they close, there are going to be markets around the world that are still open and ready to do business. These markets do close for the weekend however, so make sure that you have all your transactions done beforehand.
Low Transaction Costs
A massive drawback towards trading stocks and even cryptocurrencies is the high amount of fees that are in place by the platforms themselves. Not only do you have to predict correctly with your investments to make profit, you also have to beat out the fees. For long term holders this isn’t too big of a deal, however for day traders who look to profit off even the small movements, it can be rather frustrating and annoying. When forex trading, there are still fees, however they are much lower than that of the other two markets. This makes it a much easier market to day trade on as you don’t have to worry about all of your money being taken away from the platform for each transaction.
Option Trading
Although all markets have the ability to option trade and leverage, forex trading has been one of the best for this. If you believe a currency pair is going to increase in value, buying the pair and holding would allow you to long it. On the opposite end, if you believe a pair is going to go down, you can sell it, which would be shorting it. You can take this a step further by working with currencies that you don’t completely own.
Leveraging currency is extremely dangerous, but can lead to huge gains if you know what you are doing. With leveraging, you are essentially borrowing currency pairs and returning them at a later date for the same price you borrowed at plus some interest. If you make the right decisions, you will have a nice wallet to show for it.
Nobody Owns the Market
Finally, one of the best reasons why you should get into forex trading is because no one can own or control the market. Because there are so many participants in the market and there are so many currency pairs out there, no one person or corporation can control market prices for an extended period of time. Research has shown that companies can manipulate things like the stock market to their advantage in order to maximize their profits. This is something that is much more difficult to do on the forex exchange and it is another reason why so many people are drawn to it.
These are all reasons as to why you should consider getting into the forex market. Even if you still want to get involved in stocks, having a diversified portfolio across multiple different markets can help make you risk averse. Find out what currency pairs interest you and do a little research beforehand. The other thing you can do is use a demo account to help you play around and learn how everything works. How do you plan on forex trading?