In the past, individual investors focused on stock options, futures, and commodities. Now, increasingly more individuals are starting to trade on the foreign currency exchange market. When you look over the advantages of Forex trading, it is easy to understand why this market is becoming so much more popular.
On a basic level, Forex trading is much more accessible to individuals than other types of trading. The foreign exchange market is open 24 hours a day so, even if you have a day job, you can still take advantage of this market. The 24 hour market also makes it possible to respond to trends as they occur. Forex trading also is possible with a much lesser investment than with other markets. With a mini Forex trading account, you can enter the market with just a couple hundred dollars or the equivalent.
A small investment on the Forex trading market can put you in charge of a very large amount of money. This is because of the high leverage margin of Forex trading. Typically, margins are in 100 to 1 but can go as high as 200 to 1. That means a $1000 investment would typically put you in charge of $100,000. Each pip of the chosen currency pair would be equal to $1 of gains or loss. For a contract which has you in charge of $100,000, a single pip would be worth $10.
This margin is what gives Forex trading its advantage. With a trading margin of 100 to 1, an investment of $1000 could result in a profit of $1000 with just a 1% profit. Do keep in mind that currencies don’t usually move more than 1% daily, unlike stock markets which can jump or fall over 10% daily.
Unlike stock markets which depend on upwards trends, traders can make money with the Forex market in upwards and in downwards trends. While there is still risk with Forex trading (as with any trading), this market can be entered with less risk so long as the trader follows good habits.
Why Forex Trading is Advantageous over Other Investments Before you start Forex trading, it is wise to practice online with virtual “fake” money first. Try numerous trades for at least a week, ideally a month period. See how well you do and learn from your mistakes before they start costing you your real money. Most reputable Forex trading websites will have programs which let you simulate trades in real time so you can get experience before you start on the market.