Why You should Invest in Forex Trading

Forex trading is the largest financial market in the world, recording a daily turnover of over $6 trillion. As a result, the forex trading market represents a unique and highly lucrative opportunity for traders worldwide. In addition, forex trading has proven to be a great source of income for successful investors, and unlike in the past, when this incredible market was available only to a select few, forex is now easily accessible to retail investors of any experience level.

 Forex Trading

Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world's currencies trade. It is the largest and most liquid market in the world. All the world's combined stock markets do not even come close to this. Take a closer look at forex trading and you may find some exciting trading opportunities unavailable with other investments.


What Is the Forex Market?

The foreign exchange market is where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. for instance, and want to buy perfume from France, either you or the company that you buy the perfume from has to pay the French in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) for euros. The same goes for traveling.

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One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange market. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney—across almost every time zone. This means that when the trading day in the U.S. ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly.


There are three different types of forex market:

Spot forex market: the physical exchange of a currency pair, which takes place at the exact point the trade is settled, i.e ‘on the spot’ or within a short period of time.

Forward forex market: a contract is agreed to buy or sell a set amount of a currency at a specified price, to be settled at a set date in the future or within a range of future dates.

Future forex market: a contract is agreed to buy or sell a set amount of a given currency at a set price and date in the future. Unlike forwards, a futures contract is legally binding.

Most traders speculating on forex prices will not plan to take delivery of the currency itself; instead they make exchange rate predictions to take advantage of price movements in the market.

How do currency markets work?

To trade Forex is to buy and sell currencies with the aim of making profit. Forex Trading always involve two currencies at a time, the base currency and the quote currency. The difference in price is where you make your profit or loss.

Unlike shares or commodities, forex trading does not take place on exchanges but directly between two parties, in an over-the-counter (OTC) market. The forex market is run by a global network of banks, spread across four major forex trading centres in different time zones: London, New York, Sydney and Tokyo. Because there is no central location, you can trade forex 24 hours a day.


Learning to Trade in Forex Market

The idea of learning how to trade foreign currency to enjoy a financially independent lifestyle may have sparked your imagination. Aided by the revolutionary rise of retail forex trading via online brokers during the past decade, the forex market has now opened up to just about anyone with an internet-connected device and a small deposit to use as margin.

Learning the basic mechanics of how to trade forex seems relatively easy and should not present a problem if you are already familiar with operating a computer. Still, the key to running a long-term forex trading business is consistent profitability since few people will tolerate losing money while still investing valuable time in the process.

As a beginner trader, you would like to take the opportunity to earn a lot of money and, of course, start a career in Foreign Currency Trading. Unlike the stock market and other financial markets, Forex has no centralized location, since it operates 24 hours a day in different parts of the world.

There are different ways that you can trade forex, but they all work the same way by simultaneously buying one currency while selling another. Traditionally, a lot of forex transactions have been made via a Forex Broker, but with the rise of online trading you can take advantage of forex price movements using derivatives like Contract For Difference (CFD) trading.

CFDs are leveraged products, which enable you to open a position for a just a fraction of the full value of the trade. Unlike non-leveraged products, you do not take ownership of the asset, but take a position on whether you think the market will rise or fall in value. Although leveraged products can magnify your profits, they can also magnify losses if the market moves against you.

It is recommended to choose a licensed, regulated broker that has some proven years of experience. If your broker abides by regulatory rules, then you can be sure that they are legitimate. A broker acts as an intermediary between the traders and the liquidity providers. It facilitates in the execution of clients’ orders.

Once you have an active account, you can trade but you will be required to make a deposit to cover the costs of your trades. This is called a margin account. However, it is really important to remember that becoming a profitable trader is not an overnight process. It takes time to become familiar with the markets, and there is a whole new vocabulary to learn. For this reason, reputable brokers offer a Demo Account. This is a great way to experiment with different trading strategies with virtual money and none of the risk.


Steps on how to trade forex

Step 1: Understand the Lingo. A firm grasp of the most commonly used forex lingo will make your entry into the market much simpler.

Step 2: Choose the Right Broker. Before you begin forex trading, you will need to choose a brokerage firm.

Step 3: Analyze the World Economy.

Step 4: Download a Forex Trading Platform

Step 5: Open an Account

Step 6: Fund the Account

Step 7: Enter Your First Trade

How is Forex Market Regulated?

Despite the enormous size of the forex market, there is very little regulation because there is no governing body to police it 24/7. Instead, there are several national trading bodies around the world who supervise domestic forex trading, as well as other markets, to ensure that all forex providers adhere to certain standards. For example, in Australia the regulatory body is the Australian Securities and Investments Commission (ASIC)

Forex trading is not illegal in the U.S. therefore U.S. market is heavily regulated and most companies that operate in Europe or in Australia cannot offer their services to US citizens.


Is Forex a good Investment?

When investing in the forex market, it's important to evaluate each pair and place trades accordingly. Getting used to trading forex can take some time, so it's a good idea to look for platforms that offer demo accounts. One of the realities of investing in forex is that your profits are going to be small.

Forex Trading is hard in the measure of your commitment, dedication, patience, and persistence. The more you work with dedication for the long-term, the less hard becomes the Forex Trading. The more you insist and persist, the more money you earn improving.

It is about one of the most risky businesses around. Therefore, note the risks involved before venturing into trading forex. You stand the risk of losing your entire trading capital: Forex is a very volatile market. Within a second, price could move hundreds of pips.

A commonly known fact is that most forex traders fail. In fact, it is estimated that 96 percent of forex traders lose money and end up quitting. The forex website DailyFX found that many forex traders do better than that, but new traders still have a tough timing gaining ground in this market.

You can make a living trading forex. But: It is not easy to make consistent profits. 60% of forex traders lose money, and this is a conservative estimate. As they say: “The best way to end up with $1000 in forex is to start with $2000”.


Disadvantages or Cons of Forex Exchage Trading:

Brokerage: When a brokerage is involved it often leads to lack of transparency and less outcome of the investment.
Price determination process.
Risk factor.
One Man Show.
High Volatility.
24 /7 Market.
Social trading.
Over Confident.

How do I start forex trading?

That’s where we come in. Newcomers to forex trading should always use a broker who is a) regulated and b) has a five-year track record, minimum. With trading, you will need to deposit funds to make the first trade, in what is called a margin account. Needless to say, you can make all the rookie mistakes you want with forex trading on a demo account first, without risking any of your actual money, until you gain more confidence.

Sign up for a demo account today, and take your first steps into the exciting and highly profitable world of forex trading.

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