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Forex – or foreign exchange – is a type of financial trading that was once exclusive to traders in stock exchanges with direct access to the latest exchange rates for up-to-the-minute deals. However, the advent of the internet has changed all that. Now anyone with a computer and a fast internet connection can take advantage of the speed of today’s interconnected world to start trading foreign currencies.
There are clear advantages to trading in forex rather than, for example, more traditional stock market trades. It’s easier to get into than stock market trading because currency exchange, by its very nature, is a question of macroeconomics. There’s no need to delve into a particular company’s strengths and weaknesses, current and future opportunities, and there’s no requirement for specialist knowledge of a market sector. Rather, the understanding required for forex trading is a larger overview on a national scale – a more public and more easily grasped perception of a particular currency’s ebbs and flows.
Currency trades are also extremely liquid. A trader can buy and sell in a split second due to the huge numbers of trades made throughout the day. Thanks to this liquidity, it’s possible to take advantage of leverage – that is, trading large amounts with a relatively small amount of money. The speed and relatively low initial investment required for forex makes it attractive to all kinds of investors.
Finally, unless you’re dealing with the complex business of shorting stock, investing in shares requires a bull market that continues to rise. However, when dealing with forex it’s just as easy to make a profit when currencies fall as it is when they rise – giving you the flexibility to come out well in almost any market.
But how can you take advantage of the recent revolution in personal forex trading?
It’s important to be prepared before jumping in feet first. Numerous websites and books offer reams of advice for budding traders, so read as much as you can on strategies and sound tactics before you invest even a penny. Also, be aware of the risks involved – and understand that there are no completely safe options when investing in forex. The foreign exchange market is by its nature a very stable market, frequently seeing tiny changes of as little as 1% per day, so it is by no means a way to make money quickly unless you branch out into leveraging your funds. However, a savvy trader can certainly make a sizable profit from forex trading. Thanks to the unique qualities of the global currency exchange market, it can be a sound investment that will reap rewards, when carefully managed.