Trading is based on different markets with which investors have many choices. One of the most popular is the Forex or Foreign Exchange market. Liquidity, ease of investment, volatility, low costs, and many other advantages explain the popularity of this market among traders. Here are the main reasons that answer the question: why invest in Forex.
A market open 24 hours a day
The forex market is open all day, from Sunday 5:00pm ET to Friday 5.00pm ET, 24 hours a day. This is because transactions are made between two parties over the counter on all online brokerage platforms. It should be noted, however, that Forex is only closed on weekends to individuals and not to central banks. Therefore, there can be price variations between the closing on Friday and the opening on Sunday (the gap). Before closing, you must know the variations, place stops, and limits.
A market that is difficult to manipulate
Since Forex has become the largest market in the world, with over $5 trillion traded daily, it is challenging to manipulate prices. This makes it different from the stock markets, which are often influenced by professional brokers. The only economic actors that can influence the Forex market are the Central Banks, so independent traders are a priori as informed as the traders in the trading room.
High market liquidity
The currency market is known for its high liquidity. According to studies, the daily trading volume in Forex is over 5 trillion dollars. Transactions are constantly occurring regardless of the period, day, and time. Banks, companies, and individuals are interested in making profits.
A very volatile market
Forex is also known to be highly volatile. This means that the price variations are extreme. Rising and falling prices can be used to your advantage if you know how to handle the tools and risk management. Rest assured, the best online brokers have several features that help you in trading.
Very low transaction fees as well as investment
Brokers make very little profit on your Forex transactions. The cost usually does not exceed 0.1% at most. In addition, you have the opportunity to invest small amounts in currencies as low as $250. Nevertheless, it is not very recommended to invest the bare minimum. It is more prudent to have cash in your account so that you can act quickly in case of a sudden situation.
Speculation on a wide variety of currencies
Forex trading invites you to invest in currency pairs in a broad category: significant currencies such as EUR/USD, minor currencies such as CAD/CHF, and emerging currencies such as EUR/RUB or so-called exotic currencies (USD/MXN…). You will find all these currency pairs in your account. To simplify your task, you can use a trading robot that will trade for you.
Opening different positions
In Forex, you can open all kinds of positions: short or long. In other markets, the short position requires using derivatives such as CFDs. In Forex, you can use short selling at any time. Trading in Forex requires selling one currency to buy another.
A Flexible Schedule
Forex also allows you to quickly choose your trading hours. Five days a week and 24 hours a day, from Sunday evening to Friday (ET), you can open positions and trade at your own pace. This extended schedule gives you enough time and opportunity. You don’t have to stay glued to your screen to monitor the price, although you still have to be careful.
Reduced risk
Compared to other markets such as the stock market, commodities, indices, stocks, bonds, and others, Forex remains the least risky, with the possibility of hedging to minimize risk. This involves opening several strategic positions to cope with unfavorable movements. The most commonly used hedging strategy is hedging with several currency pairs. The principle is based on the choice of positively linked pairs that will be opened on positions that go opposite directions.
An opportunity to increase your profits
Before you invest, take the time to familiarize yourself with the tools and get as much information as possible. Forex is a liquid, volatile and ever-changing market. This makes it easier to monitor price movements accurately, interpret signals and make the right decision to limit losses. It is important to remember that trading in any share is a risky business.
Many platforms currently offer a demo account that allows you to have an almost real vision of the market and to act according to what is happening without spending a single penny. Once familiar with the market, you can create a real account and trade.
