Forex trading has existed for over 30 years, but until the rise of the Internet was almost entirely in the hands of banks and other institutions with large investment funds. This day ordinary people can participate, although financial institutions are still the major players. When I say that about US $4 trillion changes hands every day in the markets in currency trading you will realize that only a small part of it belongs to ordinary people like you and me.
To get started, you need high speed internet access, a good system or the time to learn and develop your own system, and some money to invest.
You do not necessarily need much money. Brokers now offer mini Forex trading accounts and even micro Forex trading accounts that you can open with just a few hundred dollars. But it’s better to have more, even if you do not put everything on the account at the beginning. Forex trading is risky and if you only have a few hundred dollars, you probably should be doing something safer with it.
But assuming you have the resources and you’ve decided you want to make money with a type of financial trading, let’s take a look at why this would be a better option for you relative to stock or commodity trading.
1. No commissions or fees.
If you have experience in the stock market you know how your profits can be eaten away by brokers, exchanges, and even government fees. The global nature of the Forex market means that you do not have to pay any of these. Brokers earn their money through the spread, which is the difference between bid and offer prices for a currency. All you have to do is make sure that the price will come your way far enough to cover this.
2. No fixed lot size.
In the commodity futures markets, the size of a lot or contract is set through an exchange and you cannot buy or sell less than one lot. But in spot Forex trading you can theoretically set your own lot size. Most brokers have their own standard sizes, but you can shop around and look for a broker who offers small or fractional lots.
3. A 24 hour market, five days a week.
For all the global Business Week, the Forex market never sleeps. This is great if you need to trade outside normal working hours. You can work on your 9 to 5 job and trade currencies in the evenings. Or you can start when you get up in the morning, although it is 5 a.m.
4. High leverage.
Forex brokers offer up to 200 times your margin deposit for leverage, but 100 times is more common. That means you have the chance to earn much more money from just a minimal investment. You would only need $100 or $50 to control $10,000 dollars in a trade. As long as you have good risk management, and remember also that high leverage means high risk, this may open up the possibility of a high return on your investment.
5. A massive market with high liquidity.
The Forex market is so large that even the banks, big as they are, have only a limited influence. Insider trading is not a problem. And high liquidity means plenty of money in the markets, so you never get stuck in a position unable to close a deal. Software can even close your position for you at a certain level of loss or profit.
6. Free tools and information from your broker.
Brokers are in strong competition with each other to attract traders so that they are offering more and more features. They will offer you a demo account where you can practice trading, sharpen your skills and test or even develop your own system before you start using real money. They will also provide charts that you need to identify trends, and give you access to breaking Forex news, free.
7. Low start up costs.
A good modern computer with a high speed internet connection is all that is needed to start trading currencies. If you want to use a robot for your trading you can find one for $100 to $200. Plenty of information about trading currencies, including advice on systems is available for free online.
8. You are in control.
As a Forex trader you will have full control over your investment. You can access your account through your broker’s software platform and make trades in real time yourself.
You also have control over the currency you are buying and selling. You are not restricted to deal in your own country’s currency. This means that if your national economy is in a very unpredictable situation you can change to trade two other currencies that are more stable.
So there are 8 good reasons to choose Forex over other forms of financial trading.