The foreign exchange market is the world’s most liquid financial market, with a daily trading volume of approximately $6 trillion US Dollars. More than 9.6 million people worldwide engage in foreign exchange trading every day, as reported on Forexfactory and other forex news platforms. However, many people are still skeptical of forex trading’s long-term viability. Further, “Is forex trading worth it?” is a common Google query.
Read on as we break down whether or not trading foreign currency is a good use of your time and money.
What Is Forex Trading?
Forex Trading refers to the process of dealing with multiple currencies in a global market and includes the buying, selling, and exchanging of currencies at the current price. Currencies are exchanged with one another, and the trader analyzes which currency will fall or rise in value.
By trading currencies through Forex, traders aim to make good profits and earnings. The United States Dollar, Euro, Pound, and Canadian Dollar are currently the most popular currencies for Forex Trading.
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Is Trading Forex Really Worth It?
When it comes to investment, Forex Trading is worth it! This is because it is the most liquid market in the world. According to Statista, by 2019, the trading of Euros on Forex was over 2.1 trillion U.S. dollars on average on a single day. This is in comparison to the turnover of 470 billion U.S dollars recorded in 2001. This significant increase shows that this is a big boost, and the Forex Trading market has been improving and rising steadily since then.
Reasons Why You Should Invest In Forex Trading
Though forex trading offers plenty of profitable opportunities, many might still speculate about “Is It worth getting into forex trading”? Well, the most relevant and straightforward answer to this query is Yes!
Here we list a few reasons to help you understand why forex trading is worth it.
Forex Trading is much more accessible than other investment opportunities, and you can start investing whenever you want. For Forex Trading, all you need is a functional computer or laptop so you can create an account. Once the registration has been completed, then you can start trading online. Before you invest any amount, you can always do some research. By making an account with Telegram. Forex, you can have your very own personal advisor.
2. Time Flexible
When you are thinking of investing in Forex Trading, there are no time limitations whatsoever! This means that you can easily enter and exit a trade whenever you want. As multiple currencies and time zones are involved, the Forex market is always active around the clock, which is 24 hours a day and 5 days a week.
3. High Profitability
One reason that you would want to invest in Forex Trading is that it offers a chance at higher profits. Even if your initial investment is significantly less, you will be able to make a profit if you closely monitor the stocks as well as the rising and falling of currencies. Remember, the key to high profits is learning the art of trading with time. Once you get good at it, start investing a higher amount!
How To Turn A Profit In ForexTrading?
Gaining a firm grasp of the possible trajectory of underlying asset price movements is crucial for crapping handsome returns when trading forex. However, there isn’t any established rule or procedure for doing so. Most traders use technical and fundamental analysis to determine when to enter or leave a trade. Essentially, you risk losing money in the market because all you can do is make educated guesses about how prices will change. Therefore, traders employ risk management strategies, such as stop-loss orders, trailing stops, hedging, and negative balance protection, to mitigate their loss exposure. Below we list some suggestions that will help you make money trading forex.
1. Create and Follow A Trading Plan
It is challenging to single out a successful strategy for trading the foreign exchange market. A winning forex trading technique for one trader may not be appropriate for another. Therefore, it is up to you to devise a method of trading that will be successful. Discovering the best trading technique typically involves trial and error. When you find one, make sure you stick to it. Many traders fail due to switching their trading plans quite often, even when there is no need to do so.
2. Use Practice Accounts To Hone Your Skills
Trading currency pairs in the foreign exchange market (Forex) is not a get-rich-quick scheme. Placing profitable trades is a skill that can be learned but does require time and practice. Therefore, risking your real funds without having sound knowledge and experience isn’t a good idea. So, practice with a demo account first to improve the odds of your success. Once you become confident to go live, the market is all yours.
3. Secure Your Capital
Instead of focusing on making huge gains, you should prioritize minimizing losses. If you’re starting in the market, that might not make much sense. But capital preservation is a critical component of forex trading success. Realistically, the main reason why most people fail is that they exhaust their funds too quickly. They lose all their money before making what could have been a very lucrative trade. So, don’t ever stake more than 5% of your capital on a single trade. Similarly, opening too many positions on the same trading day isn’t a wise idea. A few profitable trades are way better than losing funds by opening a dozen resulting in losses.
4. Keep Leverage Low
Maintaining a positive profit margin in forex requires a risk-averse approach. Using high leverage levels carries increased trading risks. While many regulated brokers offer a maximum leverage of 1:30, it can be as high as 1:500 with some offshore brokers. Although an investor’s risk/reward profile depends on the situation’s specifics, you should avoid using excessive leverage, especially when new to the market.
5. Go for Copy Trading
One of the simplest ways to make money in forex is to copy trades made by successful traders. You can join a social trading platform to mimic trades of skilled professionals or subscribe to forex signals offered by various legitimate companies like Telegram Forex and others. Commonly, when trading with social sites, you only incur fees when making a profit. Remember, though copy trading is a great way to make money, following the wrong trader can lead to disaster.
6. Sign Up With a Funds Management Company
There are currently many options for those needing funds management services. It’s a service where a third party trades on your behalf, and the profits are split between you and the funds’ management company based on a predetermined formula. Fund management companies usually have expert trading professionals with years of forex experience. When subscribed to a funds management firm, you benefit from their expertise and profound market knowledge. However, not all investment firms are worthy of your money. Therefore, choose a money management firm with great caution. Look at the company’s rating on trust pilot and other similar sites to see what other customers say about it.
Broker’s Selection In Forex Trading – Is It Worth It?
Besides profound market knowledge and effective risk management, selecting the right broker is crucial for a fruitful trading experience. Here we list some factors you must consider before opening an account with a financial intermediary.
1. Go With An Established Broker
Before opening a real money trading account with a broker, it is important to research the company’s history and standing in the market. You can check the broker’s reputation by reading reviews on third-party sites like TrustPilot, in addition to reading client comments posted on social media.
2. Choose The Regulated One
Regulated brokers offer safer investment options than unregulated ones. Besides having enough liquidity, they keep your investments in separate bank accounts. Regulations keep brokers on track and bind them to treat you fairly and ethically. Thus, always verify your broker’s regulatory status.
3. Assess Your Broker’s Payment Options
You will need to cash in and out of your broker, hence checking the available payment options is important. Further, the time your broker takes to process a transaction and the associated fee also matters. Therefore, carefully assess the supported payment methods before proceeding with the entity.
When done correctly, trading currencies can unquestionably result in a profit. Even while the high volatility makes it a riskier investment than other financial markets, the additional liquidity still gives traders more opportunities to earn a profit. On the other hand, you can’t anticipate becoming a millionaire overnight. When it comes to currency trading, turning a profit might take anywhere from a few months to a few years.