The sudden hype around Forex trading is not without good reason. Forex, which is the exchange of currency on the open market, provides a number of benefits that you won’t get from the stock market or other trading venues. Forex is fast, it’s fun and it has the potential to lead to big profits.
The Size of the Market
There is close to 2 trillion dollars being traded on the Forex market every single day. You don’t have that kind of liquidity in any of the other markets. With that much money floating around, there is no worrying about prices changing too much before you are able to enter or exit your trade.
With a market that is this large, it is also nearly impossible for prices to be manipulated by any one single group. This allows for a more accurate read of supply and demand as you analyze the market and your currency pairs.
Small Initial Capital
If you shop around brokers, you are going to find some that allow an initial investment of as low as $50. There is always potential to gain money in the Forex market, even when you are only putting up a small amount of money to start.
To make that small amount work at earning larger profits, you can take advantage of another Forex perk known as leverage. Leverage is a tool that can boost your investments, and your profits along with them.
Probably the most appealing aspect of the Forex market to traders is the potential to leverage trades. Leverage is a tool that lets you have control over a large amount of currency without having too much of your own capital invested. You are able to reap the rewards of a large investment, even though you don’t have those kinds of funds. There is a downside though that you have to be aware of, if there are losses they are on that leveraged amount. Managing your money and stop-loss orders are critical when using leverage.
Leverage is important, as the Forex market moves in pips, which in most case equals fractions of dollars. In order to realize any significant profit, you are going to have to be able to invest a substantial amount of money. This is where the true value of Forex trading is evident. You can have just a small amount of your own money in the account, and then booster that with leverage to increase the profit margin.
In order to bring in new business, Forex brokers will let new traders “try out” their trading platforms for free. With this demo account you can learn how to enter and exit trades, leverage, and read your indicators before you ever invest a dime. This not only helps in picking out the right broker and trading platform, it gives you a chance to learn how trading Forex works before you get started.
I would even recommend that you have a few months go at this demo trading until you are realizing profits consistently. You can work out strategies and learn techniques without any risk. The only downside is that the playing with fake money may cause you to act and react differently then when the stakes are real. Do your best to behave in the market the same way you would if it were your own money being put up for a trade to get the most benefit.
Commission Free Trading
On the stock market you are going to have to pay a commission to the broker for every trade you make. On top of that you pay the spread – or difference between the ask and bid price. In Forex you only have to pay that difference, without any added commissions.
Not having to worry about paying a commission saves the Forex trader thousands of dollars a year, the stock market traders are just throwing to the wind.
Double Profit Potential
Buy a currency when it is on the rise and you will make money. Sell a currency when the price starts to drop and you make money. Whether currency is going up or down, you have the opportunity to make money from it.
To make this work for you, you only need to study your indicators and trends to track when your currency pairs are scheduled to change direction.
Trade When You Want
There is no ringing of an opening bell for the Forex market. It is open practically 7 days a week, 24 hours a day. Since it is a world wide exchange, there is almost always a market open somewhere in the world where you can invest and make profits. This makes it easy for anyone to get involved in currency trading, no matter what their day time schedule looks like.
The open availability of the Forex market has made it a lucrative investment for people from all walks of life and occupations. No longer tied down to Wall Street hours, housewives and blue collar workers are all learning about the many benefits that Forex trading offers.
Money Management Tools
If you know how much you can afford to lose, you can set up your trades to make sure that the line is never crossed. A stop-loss order instructs a broker to stop your trade if the price falls to the level you choose. Successful Forex traders use these stop loss orders to make sure that they are never in a position to lose more of their account than they can afford to.
There are a number of reports released throughout the year that will also help a trader read the market properly. This type of data analysis can be very useful in gaining knowledge about the types of situations that cause fluctuations in the market and of your currency pairs.
If the idea of being a big time investor has always intrigued you, but time and money has always eluded you, Forex trading is the answer. Don’t be afraid to try currency trading to see if this is just the right type of money-making opportunity you have been looking for.