The search for information about Forex can be quite daunting can’t it? We’ve all gone through the experience you’re going through right now. This is what the search mostly looks like.
You google Forex in order to find something informative, you read one article and you’re left with just “blah”. Then you look at another one, still left with “blah”. Finally, you think third time’s the charm, you look through the new article and………. still “blah”. So, in the end, you’re left with nothing but “blah blah blah” and can’t wrap your head around to why these people can’t just tell you the advantages of this Forex thingy so you can easily understand?
And I get it we all want to become rich and famous. Well not famous maybe, because who wants people constantly spying on you right? Many say that money doesn’t bring happiness, but that’s just people who are too afraid to try making it. We’ve all experienced a terrible job in the past and wondered what would be the cure, the salvation? Well here’s an article about the main advantages of trading Forex that will help you determine whether or not this financial thing is for you.
The advantage of trading 24 hours
Now you may have heard about this somewhere else but the Forex market is open for 24 hours. However, we’re talking about Forex trading here, not the market. Technically you can say the same about the stock market, that it is open 24 hours, but it’s a cycle that is quite restrictive.
But what is the main advantage of Forex trading if we compare it to stocks in this case? Well, there are several reasons, but I’ll talk about the time here. And luckily for you, I have a perfect story for this.
As a matter of fact, I keep an eye on stock trading as well, a real trading extravaganza to say the least. Here’s how the story goes. It’s was a normal October day, I was just minding my own business having a cup of coffee when I encountered an article talking about Italy’s Samsung and Apple catastrophe. So to prepare you, I’ll have to tell you that I’m a real Apple fanboy, so naturally, I had some investments in their stock. So the moment the news came out I immediately knew that the price of Apple’s stock would go down immediately. Because an accusation of dumbing down their old devices is pretty serious. So what happens before something becomes cheaper? People try to sell it while it has the same price. That’s exactly what I wanted to do. But here is the problem I encountered. Apple is featured on a United States stock exchange because it is a US company. This meant that While I was in Europe having my now ruined cup of coffee, the Americans were still asleep, so the market was closed. All of this boils down to me looking at my investment just plummet down without being able to do anything, do you know how traumatizing that is?
With Forex, you don’t get that issue. You see the market is open all the time, because of the number of currencies it features there always needs to be someone processing it, so it’s not exclusive to local currencies. So let’s now try to apply this system to my story, shall we? Imagine if instead of Apple stock, I had some Euros on my account and the EU came out with an announcement that they’re breaking down the Union, The Euro would basically become useless right? In this case I would be able to immediately react, no matter where I was, even if I was in Australia, I’d have a chance to get rid of my Euros quickly ultimately avoiding a catastrophe of losses and another ruined cup of coffee, all of this without having to wait for 5-6 hours for some guy to wake up have breakfast go to work drink coffee and process my trade.
The advantage of Forex liquidity
First things first let’s discuss what liquidity actually means. Before we start isn’t it a confusing word? You would expect liquidity to be applied to something like ice. For example the question “Does ice have good liquidity?” and the answer “Um…Yes?…Water?”. But no liquidity is an attribute of a specific asset. It means how easy it is for you to sell it. And before you ask no there’s no such thing as solidity and gasisity.
To better help, you understand liquidity let me give you an example. Imagine you have a house and an apple (the fruit). Which would be easier to sell? The apple right? Because there are way more people that would be able to buy an apple than a house. This means that the apple has better liquidity. Now that we understand the concept let’s get back to the topic.
Forex trading is done with currencies, more specifically currency pairs. It means that you can buy Euros with dollars and vice versa. Currencies have a lot more applications than pretty much anything else right? You’re able to buy anything with money. When comparing this to let’s say cryptocurrencies you’re met with a clear difference.
Alright, let’s put this into perspective. For example, you now have $1,000 and you hear that the dollar is going to depreciate against the Euro because Trump made a mistake or insulted Merkel or something, nevertheless you’re aware of the depreciation. So what would you do? You would want to sell your dollars and get compensated with a stronger currency, for example, the Euro. But here’s the question, why would anyone want to buy dollars from you when the news says that they’re going to depreciate? here’s the reason. As already mentioned Forex trading is done in currency pairs and there is more than one. So it would still be a reasonable investment from the guy buying it from you as he will later be able to trade the dollar with something else, to which the dollar is doing pretty well, for example, the Yen. So as you can see, even during a depreciation you can still come out clean and sell your assets to prevent any unnecessary losses.
Why Forex Leverage is an advantage
While you were trying to learn about Forex you may have encountered this weird terminology called leverage. Like leverage when blackmailing someone? No, no no definitely not. Let me try to explain you leverage in human.
So let’s say that you have $1 dollar and want to start trading (By the way nobody will let you start trading with $1) so you go to your account on the Forex broker’s platform, deposit your $1 and try to start a trade. But what’s this? An offer from the broker which says that you can use this thing called 1:30 leverage, what does this mean? This means that the broker will help you trade with 30 times more amount than your initial deposit was. So with $1, you will be trading with $30, simple as that, but why is this an advantage?
You see Forex trading can have the largest leverage compared to anything else. Even going up to 1:500, meaning you can trade so much more with so much less. With other markets, you will need to deposit most of your trading volumes, meaning that it may cost you more. Now, sure leverage can be risky because it can also cause more losses than you can handle, but here’s the trick. Don’t use it if you don’t know how. But having the option of making more profits without a deposit is a certain plus.
Let me bring you an example of why it is so good. Let’s go way back to when the Samsung Galaxy Note 7 was in the news. Imagine, the company made a completely new phone, manufactured millions of them and it turned out that it was a faulty phone, it was exploding. They had to refund pretty much everything, recall all of the phones and rework it. So naturally, this affects their stock, like really badly. So the stock falls, some time passes and Samsung announces the Samsung Galaxy S8, one of the best phones there right now. So you immediately know that the stock price is going to increase, so its a good time to buy while it is still low, but oh no! it’s the end of the month and you have very little money left, meaning that you won’t make too much. Sure you’ll be able to get some leverage but nothing substantial. So the problem here is that you know that there is money to be made, but you don’t have the option to do it. When trading Forex you’ll definitely have that option of using high-leverage when you’re 100% sure you can make a profit.
The advantage of Forex trading prices
Forex trading could be hard to learn, but it doesn’t mean that you have to go broke to start. For example, there are brokers out there that offer really easy access to the markets. Most of the times you will be met with about $250 as a minimum deposit. I understand this may still be quite a lot for developing countries, but for people living in Western Europe, North America or Australia it’s not that much. However, there are sometimes even better deals that you can take. For example one of the smallest minimum deposits is featured with a broker called XM, which could be a good way to start learning about the trading process.
I know why this could be new information for you as it is very rarely disclosed. Most of the time when people search for a trading industry they’re met with the stock market, which isn’t as accessible. For example, the average minimum deposit with stockbrokers is $5,000, which is quite daunting for a beginner to invest so much from the get-go.
Deposit Bonuses & No Deposit Bonuses
You may have heard about The Deposit and No Deposit Bonuses. These are exclusive for Forex trading as no other market features them.
Here’s a really simple explanation with an example. Say you go to the mall and decide that you need to buy exactly two things that are in separate shops. So you go into one shop and you purchase your item, after which you are given a gift card of $50, which you can only spend in the store.
After the first purchase you go to the other store, but before you can buy, you are immediately given a gift card of $50 that you can use in that specific store.
So these are the deals you can be expecting when offered bonuses. The first store represents a Deposit Bonus, meaning that when you register and make an account with a broker, it will give you the bonus only after you have deposited. Most of the times there are guidelines included like, if you deposit $250 you’ll get $250 as a bonus as well, giving you a subtotal of $500 to trade with. Now, obviously you cannot withdraw the $250 bonus, it would be stupid for brokers to give out free money, you can only use it to trade.
The second store represents a No Deposit Bonus, meaning that when you register and make an account with a broker, you will not have to make a deposit in order to receive the bonus, it will be given to you automatically. So you can basically start without even having to invest anything. And by the time you’re finished, you may have made enough in profits to actually withdraw it.
Forex trading instruments are also an advantage
We have to now get to the technical aspect of trading Forex. Overall it has proven many times to be a lot more comfortable. You see there are tech companies that are designed to make the software on which you actually make your trades. The fact is that most of these instruments get updated every year, which makes them a lot easier and more comfortable to use.
One of the biggest advantages of Forex trading instruments is the multi-tasking aspect. For example, you can have multiple charts open, with which you can stay up to date with more than 1 currency pair. The reason this is very useful is the reaction time and diversification that you can improve with your traders.
Forex trading is all about quick reactions and knowledge. You need to always be up to date with the prices in order to make the best move. having multiple charts to look at creates sort of a busy nature that helps you not get bored. In addition, it helps you make profits on a currency pair when you may be losing on a different one.
The advantage of diversity
Another good aspect of Forex trading is the diversity that you will get used to. For example, you will have a lot more choices for your trades and they don’t have to be centralized to a specific place. For example, you can easily trade USD from India or anywhere in the world and not have to wait for the markets to open in the US, but we already covered that. What else?
The choice of brokers for Forex trading is a lot bigger. There are way more Forex brokers than stockbrokers for sure. The reason? The decentralized market once again. Foreigners have a lot more incentive to open up a Forex brokerage rather than a stock brokerage, because of the diversity of assets. The amount of currency pairs is an asset in itself. Because you can access more than a million pairs if you so wish to. But when trading stocks, you’re most of the times limited to only Country specific stocks.
Top 3 advantages of trading Forex
We were able to cover quite a lot in this article. But please consider the fact that Forex trading is not only just full of advantages. There can also be disadvantages that you can be subjected to. However, we need to outline the 3 best advantages that we discussed, these are the things that go beyond trading and can change even your lifestyle.
The 24-hour market
The trading can be done all day as you’ve already learned, but this also means that you can do it from the comfort of your home ultimately allowing you to schedule it the way you want. Attached to these physical comforts you have more profitability and faster reaction times.
The price of starting
The price of starting really helps out younger people who wish to start Forex trading. Because if you are a student, money is not your strongest feature. Having accessibility means more people apply more frequently, which in turn means more liquidity. This brings us to the third biggest advantage.
It’s easy to get rid of a bad trade
Getting out of a trade that could potentially cost you money is way easier. Being able to sell even a declining asset is something quite unique to Forex trading, it’s very hard to do it somewhere else. I think cryptocurrency comes closest in terms of trading and not spending.
So, in conclusion, you have different advantages that you can use to justify your initiation in Forex trading. Whether or not you actually start is not up to me, but hopefully, I was able to help you out with your decision.