Compared to stock trading, foreign currency trading has a few key advantages. The reasons why you should try Forex trading in 2021 are listed below.
1. Forex trading – 24 hours a day
Stocks are transactions in the stock market. These stock markets are only open during business hours, typically 9 a.m. to 5 p.m.
Forex trading is different: For almost six days a week, you can trade currency pairs 24 hours a day. So it is totally up to you to decide when you want to work as a Forex trader.
Theoretically, one can do it anytime 24 hours a day. You can do it in the morning (before going to work at your company job) or in the evening after your regular job. Or – if you make money as an FX trader – you can work whenever you want.
2. Forex Trading – Anywhere
To be able to trade FX, all you need is a device with Internet access. As a result, you can trade foreign currencies from virtually anywhere: at home, in your office, in the living room, on the balcony, in your business, or even on the beach while in the Bahamas. And with a MetaTrader 4 broker, you can trade from your mobile device with Windows Mobile or your iPhone from anywhere in the world where you have a mobile data connection.
3. Liquidity of the market and minimal costs
There are other significant advantages in addition to liquidity: minimal trading costs. Because the market is so large, the spreads between bid and ask prices are minimal—the more liquid a market, the lower the transaction costs. And the lower the transaction costs, the less the prices have to fluctuate to make a profit.
4. Make money in Forex in a declining market
The Forex is not so much dependent on the performance of the overall financial markets. You can profit from uptrends and downtrends.
Supposing you trade a currency pair, for example, Euro against the Yen. You only need to consider how the two currencies will perform against each other: Which currency will appreciate against the other? And which currency will depreciate?
If you believe EUR will fall against the Yen, then sell Euro (going short in Euros) and buy Yen (going long in Yen).
In case your prediction was correct, you made money: The Yen you purchased are now worth more than before.
If it weren’t for the spreads, Forex trading would be a zero-sum game: What the buyer of a currency pair wins (loses), his or her counterpart loses (wins) automatically.
When buying stocks, this is usually different: an investor establishes a strategic capital ratio, then selects stocks to meet that quota. In bull markets, he will make gains – the question is only whether he reaches the maximum profit given the risks taken.
Simple Yet Complex – Be prepared to learn
The Forex market seems very simple at first glance. Most of the trading volume is traded on a few most popular currencies. The most important currency pair is USD / EUR.
But exchange rates themselves are determined by various factors. These ultimately influence the supply of and demand for a particular currency. If demand for a currency increases, its prices will rise until supply and demand are again balanced.
This process happens in the ultra-liquid Forex market almost every second. Without high-speed internet access and automated trading programs, it is difficult for an absolute beginner trader to compete with more experienced ones.
The Forex market is simply more complex than it appears at first glance and requires a lot of knowledge, time, skill, and responsiveness to earn a living as a Forex trader.
