Mention the words “Forex trading” to most people and you’ll get a lot of responses like, “It’s too risky”, or “It’s too unpredictable”. What a lot of people won’t actually admit to saying is: “I don’t understand it”.
It’s true that FX trading can be risky and it can be unpredictable, but that’s also what makes it attractive to some traders. Unpredictability or volatility in trading is what create opportunities, and opportunities in trading can be profitable.
The Forex market is the largest market in the world and is incredibly accessible, with people able to trade from anywhere, at any time. So, whether you’re new to currency trading or are thinking of giving it a go, it’s worth reminding yourself about some of the major benefits FX trading can bring.
A lot of people treat trading as a way to compliment their existing income. In fact, most traders start off by trading in their spare time as a way to earn extra money on top of their day job. Trading in this way lets you fit trading fit into your lifestyle, rather than making it the centre of your world.
These days you don’t need to be stuck at a desk looking at six screens of charts to be able to get a good grasp on the markets. Technology has made trading super simple and portable. For example, you can use specialist software – like PsyQuation or Autochartist – to help automate your analysis, then just trade on-the-go with a mobile device and check or update your trades when you need to.
Trading is a really simple and accessible way to diversify an investment strategy. Because of the profit potential that comes without ever having to take actual ownership of an asset, as you would if you were buying a share, trading is very popular with people looking to build on or hedge their investments in a way that’s complementary but more flexible.
To make things easier, brokers tend to take care of any fees associated with trading. This means you don’t end up paying for things like commissions, transfers or exchange fees. There are a few exceptions, depending on the type of product you’re trading and how long you hold open trades, but on the whole the cost of trading is very transparent.
Liquidity is a general term to describe an asset that can be bought in the market without affecting the overall price of that asset. Forex is considered to be highly liquid because the FX market is so large and there are so many people trading that it’s incredibly difficult to manipulate prices, even by someone trading very large volumes. So liquidity is important because it keeps prices comparatively stable.
Where most stock exchanges are open from 9am 4pm (depending on the country where they operate), the FX market trades continuously from the start of the week on Monday morning in New Zealand until it closes on Friday afternoon New York time. That means you can trade 24 hours a day, 5 days a week, giving you more trading opportunities.
The global FX market is not controlled by a centralised exchange. Instead, it operates almost constantly on a follow-the-sun cycle split into three main FX regions: Australasia, Europe and North America. The continuous trading operations between these financial centres provide traders around the world the opportunity to capture trades in different time zones. For example, if you’re based in Asia you can still trade during the European or North American time zone if you want to capture the big moves in the US dollar, the Euro or British Pound when those markets are at their busiest.
The global FX market is unique in its size, accessibility and the opportunities it can offer. By taking a moment to look at how it works and the key benefits, you’ll discover why trading is so popular with people all around the world.
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