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The Foreign Exchange Market – Why Invest?

Do you want to expand your income stream? Do you want to achieve financial independence? Do you want to be a millionaire by the time you reach 40 years old? Well, YOU CAN!

The key is understanding how money works. Every investor knows that money does not create money. INVESTING IT DOES! So instead of leaving your cash grow stale and cold in the bank, use it to expand your income stream. And one profitable investment you should consider is Forex trading. 

Why Invest in Forex

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” ~ Robert G. Allen

Exactly! The famous author and investor got it right: nobody gets wealthy by saving their money. Why? Because although putting your money in savings account offers security, your profit will be very minimal. The usual rate in most banks is just around one percent yearly. Now, compare that with the annual rate of inflation, which can run from two percent and higher. Leaving your money in the bank can diminish its value over time, so keep a savings account only for emergency fund. 

Now that the value of investing is established, let’s go back to the question: why invest in the Forex market? Why not in the stock market? What does it have to offer you? 

Accessibility: Anyone who wants to take part in the business of Forex trading is just a computer with Internet away from the action. Thus, it should not come as a surprise when the market’s trading volume can reach up to 3 trillion a day.

24-Hour Trading: Unlike the stock market with limited trading hours, the Forex market is open 24 hours a day and 7 days a week. You can be right there once you hear the latest scoop. There’s no need to wait in anticipation for the opening bell to ring. 

Narrow Choice: Compare to the stock market, wherein you have thousands of shares to choose from (often times leaving investors at a loss), the Forex market just revolves around the major currencies (e.g. Euro, Swiss Franc, British Pound, Canadian Dollar, and Australian dollar). This gives investors narrow choices and means no room for confusion. Even though the market is huge, it is easy to understand and get a clear picture of what’s happening in the market. 

Liquidity: The foreign exchange market has a very massive scope, making it the largest financial market and the most liquid market in the world. Every day, turnover of money can reach up to $3 trillion. Now what does this mean for you as an investor? Simple, you can buy and sell as you please under normal market condition. You’ll never be out of currency to buy and you will never be stuck with currency that you want to let go.

Forex Can’t Be Controlled or Monopolised: Since it is a large market, no one can ever corner it. Even the largest bank can’t pull off to control it for a long time. This makes it a great place for small investors to grow their money. 

Forex Profitability

It doesn’t take a genius to figure out that the main attraction of any financial market is the opportunity to gain massive profit. In foreign exchange trading, profitability is expressed and can be achieved in several ways. But before we get to that, let us first answer the question: How much money do I need to invest?

Well, you do not have to be a millionaire to start trading currencies. Unlike most financial markets, like stocks and bonds, you can start trading Forex with a relatively low capital—even with just $50. 

Now, you’re probably asking yourself: “How can I earn with such a low start-up capital?” “What chance do I have against big investors?”

Strategies to Profit in Forex:

1. Cash in on Price Movement

Foreign exchange trading is an exciting investment. Every time currencies go up or down, profits and losses are possible. To make sure that you will in the winning end: buy a currency pair and sell it a higher rate, or sell a pair and then buy it a lesser rate.

2. Keep Updated with the Trend

Knowing past trading histories is important. This is because what has happened in the past will give you an idea on what will happen in the future. Thus, when you can identify the trend, when you can get a clear picture of the market’s trading history, you will get an idea of the direction the currency rate is going. And once you’ve acquired such knowledge, use it to your advantage by trading in that direction. If it is uptrend, buying will gain you more ROI. But if it is downtrend, selling would work best for your own interest.

But the question is: how do you identify a trend? Easy, take a look at the price movement, particularly on the peaks and valleys in the charts.

3. Use Leverages Trading

As mentioned earlier, foreign exchange trading does not require large initial investment because you can always use “leveraged trading.” Leverage allows you to increase potential ROI; however, it also raises potential risks. Basically, it has a profit-and-loss potential. Nonetheless, it is a risk worth taking.

How do you use it or rather, avail of it? Get in touch with Forex brokers.

Forex brokers usually allow their customers to trade on borrowed capital. Because of this, one does have to have big initial investment to start trading and get the chance to earn profit. 

How does it work? 

Let us give you an example. When you trade at a ratio of 1:100, this means that for every $1 you invest in, the broker will put $100. Because of this leverage, you can control $10,000 by putting only $100. The higher the leverage, the higher the potential return on investment is. However, as mentioned above, the higher also the risk. That is why for beginners, we recommend starting at low leverage.

Remember: Leverage can be your best tool when trading carefully but worst trading recklessly, so be careful with your investment.

4. Learn how to hedge risk and rewards. 

Hedging is a good strategy because, in the first place, why would wait you wait until you lost all your money before you close the trade? As with most investment, you should have a margin risk. You should know your limit. You can use Forex trading software with a feature that can automatically stop trading when the limit is reached. This enables you to keep your money intact. With such a tool, you can control your maximum trading amount without monitoring the market’s movement round the clock.

Final Words

The Forex market opens great investment opportunities for investors, even those with small initial capital. So, if you want to expand your income stream, take the risk and get that chance in foreign exchange. If you do it right, you will definitely be laughing all the way to the bank. Best of luck!