As recently as the end of the last millennium, foreign exchange trading has been done mostly by big banks and professional traders. But in early 2000s, things have changed.
More and more online retail forex brokers opened to amateur investors. Today, many non-finance professionals compete in this market. This article discusses what makes forex trading so appealing.
1. Ease of entry
Forex brokers compete for clients. Many offer free demo accounts as a way to test their online forex systems and test trading strategies. Accounts can be open with as little as few hundred dollars.
2. There’s always a bull market
Unlike with the stock market, in currency trading there’s always a bull market. When you trade, you trade a currency pair. This means you bet on either the currency’s rise or fall against the other currency in the pair.
When one currency falls, the other in the pair must rise. So, there’s always a bull market when it comes to forex trading.
Investors can, of course, short sell stocks (bet on their fall), but this requires that your broker has shares to borrow so you can sell them short. Often, this is not available, especially for popular shares.
3. It can be simpler than with stocks
When trading forex, investors can just focus on few major currencies such as US Dollar, Euro, and Japanese Yen. Then, with technical analysis tools, and by watching economic news pertaining to specific currencies, traders can stay on top of events.
With the stock market, it gets more complicated. There are many things to watch for such as specific company events, things that happen in company’s industry, and macroeconomic news. With currencies, it’s mostly about macroeconomic news.
What’s more, most good online forex brokers provide their clients with sophisticated, real-time trading systems composed of advanced charts, live news, economic calendars, and analyst predictions.
4. Expanded offer
Some online forex brokers began to offer commodity trading in addition to currencies. It is now possible for traders to trade oil and gold, and possibly other commodities, from their forex accounts.
Since commodity prices are affected by US Dollar, many traders take advantage of their knowledge about trends in a dollar to make more educated bets on commodities.
5. 24-hour trading
Forex markets don’t close for the night, except for the weekend. Since many amateur traders have day jobs, by the time they get home, stock markets are already closed. But, forex market stays opened, and that’s another reason what makes forex trading so appealing.