The Foreign Exchange or Forex market offers the largest number of trading opportunities in the world. Every day more than $1.8 trillion in volume is bought and sold over the industry’s decentralized system. Given that FX investing is one of the newest ways to earn a profit online, the speed with which it has gained popularity is impressive. Forex trading involves comparing two currencies and deciding which is likely to appreciate more over a given period of time. This type of speculation features 5 unique reasons why currency pair trading is a great choice for beginning investors.
At its heart, Forex is comparing the performance of two economies, as represented by their regional currencies. For example, when the U.S. economic outlook is good, the price of the dollar goes up. Likewise, a strong U.K. economy boosts the Pound, and when the EU is doing well, the Euro is worth more. As a FX trader, you first need to look at financial reports and recent news to determine which of two currencies is likely to do better.
You will then open an order by simultaneously purchasing the currency whose price is expected to go up and selling the currency whose price is expected to go down. When you are ready to close the order, simply reverse the transaction by selling the currency you originally purchased and buying the currency that you originally sold. Your profit is the difference in the price between the open and close of the order. This makes Forex trading one of the easiest investment opportunities to understand.
The Forex market is open 24 hours a day between 5pm EST on Sunday and 5pm EST on Friday. There are also dozens of currencies that can be selected. This means that no matter where you are located, or when you have free time free, you can always find an asset that’s available for active trading. Most other markets have much shorter hours or offer fewer choices. Some brokers even offer specialized software that lets you plan in advance to make the most of potential market conditions, by letting you create orders that go into effect if certain conditions are met. This way, you never miss out on a trade.
Unlike traditional stocks and commodities investing, in Forex, you are not taking physical ownership of an asset. Instead, you are only concerned with price differentials at the beginning and end of each trade. This format means that you can profit both when an asset’s price is going up, as well as when it’s going down. So, if you see economic news that makes you believe the Pound will lose ground to the Dollar, you can sell the GBP/USD currency pair. At the end of the order, you would buy GBP back at the lower price, and keep the difference as your profit. This gives you even more ways to make the most of your deposit.
When beginners are searching for new chances at high earnings, these three things are a major part of why Forex is a good fit for most new traders. Another important part of successful FX investing is choosing the right broker.