Why Trade Foreign Exchange?

The foreign exchange market, commonly referred to as the Forex (or FX) market, is a decentralized global marketplace that facilitates the trade of national currencies. 

Banks, financial institutions, and other investors use the Forex market to gain profit from currency fluctuations. Does that mean trading on the Forex market is a good way for the average investor to accumulate wealth? The only way to know for sure is by trying it out for yourself. 

Nowadays, foreign exchange brokers like Oanda have made it incredibly easy to participate in the exchange of national currencies. XM is also a known name in FX trading. The XM variable spreads are similar to the interbank forex market which makes it more attractive for traders.However, that’s not the only reason why it’s in your best interests to understand the nature of capital markets.

The majority of the world’s wealthiest people have used the Forex market to their advantage. Their success at making a profit has led to Forex trading becoming a desirable pursuit, especially for those of us looking to explore investment options and attain financial benefit.

To prove that Forex trading can be highly beneficial to your financial wellbeing, we’ve put together 10 reasons why the Forex market can be an excellent tool for gaining wealth. Read on below to find out what makes Forex trades such enticing investments.

Adaptability

Having been designed with short selling in mind, the Forex market is resilient and straightforward, yet versatile enough to suit almost any schedule. Traders can go long or go short, and trades can be made via futures, options, forwards, and currency swaps. Forex traders can make a profit regardless of which way the market moves. 

Ease of access

Since the development of online trading platforms, the Forex market has become far more accessible than it used to be. Additionally, mobile technology and increased digital security have made it possible to trade from anywhere and at any time. All that’s required is a working smartphone and enough investment capital.

High liquidity

The Forex market handles billions of dollars of transactions per hour, making it the biggest financial market in the world. These transactions are liquid in nature, which means that transactions can be made instantly. Due to such high liquidity and volume of trade, transaction costs tend to be relatively low.

24-hour activity

The Forex market is open 24 hours a day, from Monday to Friday. “Gap” trades do occur over the weekend, so the Forex market is always active and susceptible to change. Combine this perpetual exchange of currency with increased ease of access, and it’s easy to understand why online Forex trading has become so popular.

Pinpoint analysis

Along with accessibility, technology has introduced several branches of software that aid with Forex trading, such as data analytics tools, monitoring programs, and automated trading capability. With these diverse software solutions, traders are able to make better decisions and take greater control of their finances.

Leveraged positions

Make your investments go further by opening minimal deposit positions on currencies. This is known as leveraging your position. It’s important to keep in mind that, although leverage can net a tidy profit, it can also swing the other way, causing a loss that is amplified by the low initial deposit.

No commissions

The Forex market has no clearing fees, no government fees, and no exchange fees. Retail brokers make a profit based on the ‘spread’ of any given currency pair. The spread is based on two prices related to the base currency; the bid price and the ask price. Traders pay the cost of the spread for the convenience of transaction immediacy.

Trial accounts

Most financial service providers offer demo accounts. Trial accounts are the ideal solution if you’re getting into Forex trading but don’t want to invite too much risk. Typically, these accounts have a small amount of currency that new traders can use to fund their first forays into Forex.

Variety

At present, there are over 180 currencies listed on the Forex market. Thanks to this variety, traders can speculate based on any global events, irrespective of whether those events involve major or minor economies. There are four currency pair categories: major currency pairs, commodity pairs, emerging pairs, and exotic pairs.

Volatility

The Forex market is highly volatile, primarily due to the sheer volume of liquid assets being traded on a daily basis. Because the Forex market is an over-the-counter (OTC) market, these trades are instantaneous. From a trader’s perspective, the Forex market creates the perfect conditions for profitable speculation.