Currency trading hinges on the stability of nations. The more stable a country is, the more stable its currency. When trading in forex, you should be looking at currencies that are highly liquid and stable, especially during times of crisis.
With the increase in trading opportunities over the last twenty or so years, it’s now easy to access financial markets from any place in the world. Besides, you don’t need thousands of dollars to start investing in foreign exchange. Depending on your availability, you can choose to trade at times that are convenient for you, which makes forex exchange a favourite among newbies and professionals alike.
Below are the seven investment benefits of currency exchange services:
Benefit #1: Huge Financial Market
One of the biggest benefits of currency exchange is the potential to make lots of money in a huge financial market. If you want to understand the global economy, you only need to watch the forex market. Going by the current statics by the time of writing this article, U$ 6.6 trillion is traded every day in the forex market. It attracts traders from everywhere in the world, making it the most accessible investment vehicle globally.
Benefit #2: Anyone Can Trade
Investing in forex trading is easy and extremely affordable. Unlike other businesses, entry costs are low; so, you don’t have to be a big shot to get in. Compared to stock trading, the low costs mean anyone can invest in forex. You can start trading in forex with as little as $500.
However, the learning curve on how to be a great trader is a bit long, and you might generate a few losses before you become an expert forex trader. So, start small and study a lot on how currency exchange services work. As you become more familiar, gradually work your way to the big bucks.
Benefit #3: High Liquidity
As mentioned above, forex trading is an expansive market. This is great for liquidity. There are huge volumes of forex in trade at any time, which means trading occurs extremely fast. With just one click, you can buy and dispose of forex at your convenience. There is always someone in the system ready to trade with you.
Of course, there are low trading lulls when not much is going on. However, even during the slowest hours, deals are still being closed. The beauty of forex trading is that you can automate the process, meaning you don’t have to physically trade. The most critical thing is to trade in popular, extremely liquid currencies.
Benefit #4: It Is a Free-for-all Market
No individual or institution can claim the ability to control foreign exchange. This is because it is a huge market crisscrossing international boundaries. As such, no single entity or individual can control market prices. In fact, in most cases, forex trading is at the mercy of factors beyond one’s control.
You can, however, predict which currencies are most valuable by looking at their stability and liquidity. Another reason no single entity or individual can control the foreign exchange market is that the market tends to level the playing field by calibrating itself. The decentralized nature of the market also makes it extremely difficult to control as middlemen are cut off. Investors trade directly with each other. Forex brokers only facilitate the two parties.
Benefit #5: Ability to Trade on Both the Lows and Highs
The good thing with foreign exchange is that you can trade when the market is going down or up. There are forex trading strategies that thrive when the market is falling.
Opportunities abound in all forex trading environments. For some experienced traders, high volatility environments are the most lucrative. However, these conditions are rife with risks due to abrupt price changes. If you time your trading with precision during these times, you can reap big dividends. Timing and execution are of the essence when trading in volatile environments.
Benefit #6: Round-the-Clock Trading
When everyone else goes to sleep, the forex market does not. You can trade for 24 hours a day, five days every week, whether you are asleep or awake! You don’t have to wait for a bell to ring or scramble to place orders before the day closes. Once the Sydney session opens, trading begins. It ends with the closing of the New York session. It then starts again in a cycle that never ends. How active you are depends on your availability and trading schedule. You can trade at noon, in the morning, or at night.
Benefit #7: Transaction Costs Are Low
The retail transaction cost is the difference between ask and bid price. This is what the broker charges. For some brokers, the spreads can be highly competitive to keep your trading costs low and your profit margins high. Be keen to understand the spreads and how they are measured. For instance, a bid price of 1.55310 and an ask price of 1.55314 for the GBP/USD forex has a spread of 0.4 pips.
Trading in forex, like any other market, comes with risks. However, as you become adept at trading, you should start making more profits than losses. This is a precision trade that involves exact timing as currencies rise and fall, or fall and rise. The profits are made in the margins. Knowing the exact moment to buy or sell is critically essential when trading in forex.