Trading Currencies: 7 Good Reasons Why Trading Currencies is an Attractive form of Investment
With the advent of fast internet connection, trading currencies has become a very attractive form of investment. Otherwise known as foreign exchange or forex, it's a market where almost anyone can become involved. You need a computer with an internet connection, some money to invest and a little time at the beginning to learn the market, develop your own system or buy into one of many off the shelf systems. Here we talk about 7 good reasons why trading currencies is a good form of investment.
The amount of money you need is not much. Many brokers are vying for your business and now offering mini or micro forex trading accounts requiring just a couple of hundred dollars to set up. Of course, there is a risk in forex trading as in any other form of investment, especially to start with as your learn the ropes, so you should stick to the old adage and not invest money you cannot afford to lose.
However, assuming you have the funds and you are keen to invest those funds to make money, then I will give you seven good reasons why you should choose trading currencies as opposed to trading in stocks, shares and commodity markets.
1) No fees or commissions.
Brokers make their money from the spread between the bid and buy price of a currency. So unlike the stock, shares and commodity markets, you do not pay fees and commissions which can absorb much of your profit.
2) Minimal start up costs.
All you need is a couple of hundred dollars to open a trading account, a computer with a high speed internet connection and you are away. You may decide to buy into some automated trading software which will set you back another $100 or so (visit my blog for monthly reviews of such products).
3) Tools and information are free.
There is a lot of competition between brokers and consequently they are falling over themselves to win your custom. A good broker will offer tutorials and demonstration accounts where you can learn to paper trade without real money while you learn the basics. They will also provide you with free charts and show you how to use and interpret them. Otherwise, all the learning and information you need is freely available on the internet via specialised websites or blogs such as mine.
4) 24 hour trading.
Because the currency market is Global, it is effectively open 24 hours per day, 5 days per week. It opens in Sydney Australia at 22:00 UTC on Sunday evening and closes at 22:00 UTC on Friday afternoon in New York. This makes it very easy to do this part time while holding down a normal day job. Once you have leaned the ropes and become successful at trading currencies, you can give up the day job and become a full time forex trader.
5) Higher levels of Leverage
The leverage that is achievable in the forex market is one of the highest that investors can obtain. Usually, the amount of leverage provided is either 50:1, 100:1 or 200:1, depending on the broker and the size of the trade. This gives you the opportunity to make a lot of money by trading with more money than is available in your trading account. Be aware, this is not for the faint hearted - if your trade goes bad you will have to pay the money back. However, when you become more experienced and successful with your trades this high level of leverage makes this form of investment stand out from the 2:1 leverage commonly provided on equities and the 15:1 leverage provided by the futures market.
6) No fixed size of contract.
Standard trading is done on 100,000 units of currency. However, with spot trading you can, in theory, determine the size of contract you wish to trade. Some brokers do have set sizes for administrative purposes but if you shop around you will find a broker who will cater for your needs.
7) Liquidity and Volume.
The liquidity of an asset is the ease with which it can be turned into cash without loss of value or at least without any significant loss in value. Currency is money and money is cash and is therefore more liquid than any other asset making it very easy to trade. The volume or amount of money being traded in the forex market every day is around $4 trillion. The international banks and other financial institutions as big and as influential as they are have no chance of dominating the market. Trading currencies is also void of the risk of insider trading which can blight other forms of investment.
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Article Tags:
trading currencies
,investment
,good reasons
,forex
,foreign currency
,leverage
,broker
,forex market
,liquidity and volume
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