Why should you invest in forex? This is one of the fundamental questions people ask when looking to trade in forex. What does forex trading have to offer? Forex trading can intimidate a lot of beginners because they are afraid of learning a new thing or even keeping up with foreign currencies. Forex refers to foreign currency exchange where you bet that a certain nation’s currency will buy more of a different nation’s currency at a future date. For example, if a Euro buys $2 today, then this means you can buy 100Euros for $200. However, a year from now, if the Euro buys $2.5 then you can sell your Euros for $250 making $50 in profit. So for you to be a successful forex trader you have to study some techniques and strategies that will help you win.
When do you see the returns?
This is a crucial question for anyone wanting to invest anywhere. For any investment, the answer depends on the amount of money you spend, where you are investing, which investment and how soon you learn the ropes. The good thing with forex trading is that you can do it online and in tandem with your fulltime job.
Why Invest in Forex?
Forex trading is a huge industry that is great for amateurs and experts alike. The foreign exchange market is one f the largest financial markets in the world and its traded value accounts for more than $4trillion daily average. This market consists of banks, hedge funds, retail investors, investment firms, central banks and commercial companies where participants buy, exchange, sell and speculate on currencies.
If you want to earn extra money, delving into the world of forex trading is a good idea and you could find yourself advancing to such levels that you earn a decent income from forex every month/year. Unlike other industries, investing in forex is recommended due to a higher number of trading volumes, geographical diversity, huge variety of traders, leverages and profit margins as well as longer trading hours and extreme liquidity. Here are the top reasons to invest in forex:
- Small Start-Up Capital
The forex business requires a small investment which you can build on as you gain more experience. You don’t require a huge investment to open a trading account and start trading and while you start slow, there is an opportunity to grow big by being smart, patient and consistent.
- Time Flexibility
Forex trading is convenient when it comes to time because it is active 24/7. This means you can enter and exit a trade whenever you want and therefore you can trade whenever you have time to do so which is especially beneficial to traders who have a fulltime job.
- High Profitability
If you trade wisely, forex is highly profitable because you will win more and lose less. Some people advance to such levels that they quit their jobs to focus on forex trading due to good profits.
- Great Liquidity
One of the most liquid financial markets in the world, forex makes for a great investment option because it has a huge number of buyers and sellers and hence greater opportunities to win trades and get fair prices for currency prices. There is low risk of price manipulation and it is easy to cash out.
- Welcome to Everyone Regardless of Level of Experience or Knowledge
To start a business without proper experience and knowledge can increase risk of failure. However, when it comes to forex, you don’t have to be an expert as you can start with a small amount and then grow your investment as you gain experience over time.
How to Invest in Forex
There are several ways to invest in forex including but not limited to:
Forex. This is a 24-hour cash market that deals in currency pairs. Such currency pairs e.g. EUR/USD are traded and here, the investors and traders bet that one currency will go up or down as opposed to the other. Therefore, these currencies are then bought or sold based on the exchange rate or current price.
Foreign currency options. This investment option involves the future contracts are under obligation to buy or sell currencies at a future date and hence, these foreign currency options give the holder a right to buy or sell, at a specified price and before/on a specified date in the future, a fixed amount of a foreign currency.
Foreign currency futures which are futures contracts where currencies are bought and sold based on the settlement date as well as the standard size.
Advantages of Investing in Forex
Trade Anytime. Unlike the stock market and other financial markets with fixed hours, forex markets are active 24/7 and therefore you can trade around the clock taking advantage of your free time.
Profit off of Knowledge of International Economic News. If you follow international economic news, it will be easy for you to develop trading strategies around current events and use them to make successful trading decisions hence increasing your wins.
Diversify Your Investment Portfolio. While many investors gravitate towards bonds and stocks, investing in forex is a great alternative that will help diversify your portfolio.
What You Need to Invest in Forex
A brokerage account. To be able to buy or sell currency, you need to open a brokerage account and fund it from a linked checking account or another brokerage account. This is the cash you will use to buy and sell.
Choose the best forex strategy. When it comes to forex trading, don’t base decisions on gut feelings but make educated currency purchases and sales.
Keep tabs on your investment. Forex markets are often very volatile changing very quickly and hence, if you pick your currency and choose the right asset type to enter your trade, keep an eye on your trade and make a move if it takes the wrong turn.
We suggest you to start with limited amounts and keep learning and documenting on the market, the learning curve can be faster than other type of investment, entering the market is simple but as always there are important aspects to consider and risks involved. Be wise, and good luck!