Why Trade Forex?

Forex Trading Advantages

One of the benefits of forex trading is that the small investor has opportunities that may not be available in other markets, or other forms of investment.

High Yield Forex Trading

FX trading is one of the few businesses where a trader can realise a large fortune starting with a small initial investment. This is because FX trading is highly leveraged, so a small margin can control a large position.

FX markets can show significant price movements, so there is a potential for large profits and losses.

This leverage and price volatility gives you an opportunity to make a high return on your money, or conversely make significant losses. Other pages on this site help you to develop a strategy to maximise profits and to close out losses quickly while they are still manageable.

Reality of online forex trading

The Reality of forex trading is obtaining the fortune mentioned above requires a lot of hard work and it is far from easy, but it can certainly by done by most people who have a passion for trading and are prepared to work hard.

Forex Liquidity

The global FX market is very liquid due to its huge size and turnover. This means that you can easily enter or exit trading positions at the current market price whenever the market is open. The actions of a trader are unlikely to cause any significant impact on such a huge market and there will always be a buyer or seller at the market price.

In an illiquid market, such as low turnover shares, taking or exiting a position may move change market prices. In addition, a counterparty (another buyer or seller) may not be available to allow you to transact.

Openess and transparency

The FX market is also transparent. This means that any information that affects the market prices is available to all market participants. Small FX traders have access to the same information that large institututional traders use. This can again be contrasted with the stock market, where insiders may have access to price sensitive information such as unreleased sales figures not available to other stockholders.

The sheer size of the FX market (turnover of over $1 trillion per day) also means that it can’t be manipulated easily. Whilst large institutional traders or governments can cause small short term price movements, the market is too large and has too many participants for medium or long term prices to be manipulated.

Opportunity to trade long term trends

The FX markets often show long term trends. This means that when trading the forex market, the trader can take positions in the market over longer periods of time and take advantage of large long term movements which can represent significant profits. This is because currency prices movements reflect long term economic conditions. Prices move in trends as traders come to a consensus and buy or sell currencies over a period of months as prices move from one equilibrium point to another. This is certainly a big advantage of currency trading.

Forex Swing Trading

FX Trading offers the opportunity for swing trading. This is where positions are held overnight but generally not for the long term.

FX Day Trading

Trading can also be intraday. FX Intraday trading is where positions are opened and closed on the same day and are not held overnight.

Minor capital requirements

One of the great principles of forex trading is the fact that a trader can open an account with less than $1,000. Since your position is leveraged (that is you transact on margin), you can trade a position of up to $100,000 for every $1,000 of your own money. Some brokers also offer mini-contracts which have a margin of only $100 which allows you to trade a position of $10,000.

This is usually a lot less than the amount required for other investments. We recommend that you invest more than the minimum required as this will allow you to absorb any initial losses.

FX Trading Online

FX trading online is automated, and you can easily trade through the Internet 24 hours a day while the market is open. There is no need for retail premises, or to employ staff.

When you want a break, you can simply close your positions and stop trading. Compare this with owning a normal business where you need to arrange for someone to cover you if you want to go away on holiday.

There is no paperwork as this is also automated. You can view your positions and account balance on-line. You generally pay no direct fees as the broker uses the difference between the buy and sell price as his profit. Typically on a single $100,000 trade, the cost is around $50 to buy and $50 to sell.

You can easily start trading part time without having to leave your current job or business. Most trading platforms give you the ability to place stop positions to protect your profit, or close out a loss making position before the market moves against you.

Forex Trading Demo

It’s very easy to get a forex trading demo account with a broker allowing you to practice as long as you want before opening a live forex account.

24 hour Currency Trading

One of the benefits of currency trading is that the market is very liquid 24 hours a day. No other financial market even comes close to this.

Forex Trading at Home

One big advantage of forex trading is the opportunity to work at home and spend more time with your family. All you need is a good internet connection and a windows PC.

Forex Regulation

Many people who open their own business spend a lot of time and money in complying with a range of government regulations, filling in returns and keeping up to date with various laws. You may have to pay for licenses and collect sales tax. This is accepted as part of running a business, but reduces the time available for you to make money for yourself.

In comparison, FX trading is the essence of free market capitalism.

Nepotism and ability to play organisational politics counts for nothing in the FX markets. There is no-one holding you back and you will succeed or fail based on your ability to develop and implement a trading strategy.

Next post: