Are you planning to invest some money and multiply it? If yes, consider forex trading. But why? Other options like trading stocks, shares and equity are also available. You can go for them as well. But forex trading has its own advantages that you can’t ignore.
Well, there are reasons to why forex trading is getting so popular these days, and how it is a much better option for you. Let’s have a look at them.
1. It’s Easy To Get Started
To start trading in the forex market, all you need is a computer with an internet connection. In addition, there are a lot of trading applications that allow you to trade even using your smartphone. So, you don’t even need the computer most of the time.
Apart from this, you don’t need any special qualifications or a deep understanding of the market. You just need to know the basics to get started. You will be trading only in a limited number of currencies. And most probably, you already know about them.
On the contrary, if you are trading stocks and shares, there is plenty of research required on a daily basis. And without an in-depth knowledge of the market, you can’t do that.
2. Availability Of Educational Resources
It is easier to learn about forex trading if you don’t have any prior knowledge or experience. There are plenty of free educational resources available online that teach you everything you need know. Not only this, most forex brokers provide you free demo practice accounts where you can get the feel of trading and develop your skills.
3. Market Size
The foreign exchange market assists international trade in all currencies. The daily trade is between $2 trillion to $5 trillion. In terms of volume of trading, it is the largest market as compared to any other in the world. So, it allows the possibility of getting a fair price for your trade. And, you can also predict the market conditions with greater accuracy. In addition, due to the large market size, it is very easy for the buyers and sellers to find each other.
4. Trade Anytime
Unlike other types of trading, the forex market is open 24 hours, except weekends (from 22:00 GMT Friday to 22:00 GMT Sunday). You can trade anytime from anywhere in the world as long as you have the access to the internet. Due to different time zones, the market is always active and you can find buyers and sellers any time, from all over the world.
5. Low Margin Requirements
You don’t need huge investments to start forex trading. You can even start with $100. Apart from this, you can trade on a much larger amount than your initial capital investment using leverage. Therefore, you can trade on $10,000 using $100 on your part. In reality, you are just borrowing the rest of the money from the broker. If you sell the trade for $12,000, you make a profit of $1900 after repaying the broker. But there is a risk involved while using leverage as well. You can suffer the losses the same way as you make the profits. So, be careful while trading for large amounts of money.
6. Low Transition Costs
You don’t need to pay any extra costs in forex trading, as in the case of stocks and equity trading. There is no need to worry about exchange rates or commissions either. You just have to pay for your bid. And the transition charges are minimal enough not to affect your profits in any way.
7. High Volatility
Volatility is the degree of variation of the prices in trade. The volatility of foreign exchange market is very high. The prices are always changing rapidly. Therefore, it is possible to make large profits within minutes. To give you an estimate, the volatility of the normal liquid stock markets is around 50 to 100, while in the case of forex trade, it is more than 500.
8. It’s Transparent
All the processes in the forex trade are transparent. No information is hidden or suppressed by any authority or corporation. So, you don’t have to worry about some sudden downfall that will cause you losses. Everything is continuously broadcasted in the news and you can always know what is happening. Therefore, it is far easier to predict the conditions of the market and make wise decisions.
9. No One Can Manipulate The Market
The size of the forex trade market is so large, that no single corporation or industry can dominate or manipulate it. While in the case of other markets, the major players control them. The forex trade market is open for anyone who wants to buy or sell currencies, as it purely functions on the basis of demand and supply.
10. Higher Possibility To Make Profits
When you are trading in any equity or stocks, if the prices of your commodity go down, you suffer losses. But in forex trading, it is far easier to make profits under any situation. If the value of one currency goes down, the value of the other goes up. So, there is always a room to make profits by buying low-value currency or selling the one with higher value.
11. Tax Benefits
You also have tax advantages in forex trading. You have to pay your current tax rate for short term gains. However, on long term gains, you pay only 15%. Don’t confuse these terms with time. Here the short term gains are defined as the first 40% of your profits, and long-term gains are the remaining 60%. It doesn’t matter after how much time you earned your profits.
12. Limited Risk
Forex trade offers a certain level of safety when you invest your money. In the futures market, you have to sell the specific amount of the commodity at a specific time. If the prices fall down to the ground, you don’t have any control over the losses you are going to bear.
But in forex trading things are different. You can decide the price at which you want to enter or exit the trade. If the currency is going down and reaches a certain minimum value (pre-decided by you), you can exit the trade exactly at that value, and save yourself from further loss. For example, you can pre-decide to exit the trade when the value of the currency you bought goes down exactly by 1.25%. This is a great way to limit your losses.
You see, you don’t need a Ph.D. in finance to start trading in forex. All you need is the basic knowledge of how to buy and sell currencies. The opportunities that foreign exchange market provides are incomparable to any other. But just like any type of investment, there is always a possibility of loss. So, trade sensibly and invest only lower amounts while getting started.