If you’re considering getting into the markets as a quick way to make some money, forex is likely to have appeared on your radar. While there is plenty of scope in national and regional markets, the foreign exchange has always appealed to those traders who really want to go beyond the norm.
But what is it that makes forex so appealing? What does it hold over traditional stocks, shares and bonds you might invest in within US shores? Before you get into forex too deeply, it’s worth doing your research, such as looking up an FXTM broker review via AskTraders. In fact, we highly recommend AskTraders for a variety of different trading and investment advice.
In any case, to start off your research, let’s consider a few unique, appealing ways in which forex holds an edge over traditional stocks and shares.
Volatility is high
When you first start investigating trading in general, you will come across the term ‘volatility.’ For stocks or bonds to be volatile, they are likely to peak high, and dip low. These are markets that rarely dawdle, or trundle along at one flat speed.
Security is great, but when it comes to trading, a little volatility is always healthy. That’s a large appeal with forex. Forex markets are notoriously volatile, largely thanks to big changes in global politics and society at large. There are always some currencies that hold firm, but the volatile magic lies in your own unique pairings.
For example, USD is seen as a steadfast bet in forex. You can pair it up with shakier currency in the markets and will likely benefit from the volatility long-term. Just make sure to take control over that emotional investing!
Forex is amazingly flexible
As any forex trader about the main benefits of the foreign markets, and they will likely tell you that the flexibility is fierce. That’s because you never actually own any assets physically in this marketplace. You can effectively trade on your chosen pairs and make money off the margins.
That means you have wider scope to take risks and gambles. It’s also where ‘shorting’ comes into effect quite a bit (as you don’t have explicit ownership). That, for many traders, adds a little more excitement and opens possibilities up wide across the board.
However, as you can imagine, this comes with increasing risk. As with all trading, make sure you know your bankroll and have some form of plan B.
As the world changes – so does forex
Coming back to volatility a little, it is safe to say that the outside world has a huge effect on value within forex. While you may see some stock dip and rise based on societal movements or various scandals, bigger political events or global changes will have huge, sweeping knocks-on for forex.
For safer traders, that can be a bad thing. It may mean that, for example, if the UK and the European Union come to blows over an issue, a GBP-EUR pairing will explode in one direction or another. Thanks to the unpredictability of politics (and major issues such as the COVID-19 pandemic), this means the news has a major bearing over how much you could actually make in the long run.
This may actually encourage you to pay closer attention to the news! For many, this is an exciting slant on trading – you never really know what the latest headlines will bring, and therefore, you won’t necessarily know how forex will react.
Forex is largely accessible to newbies
What really sets forex apart from traditional trading is the accessibility. You won’t often need a large amount of capital to start trading, what’s more, you very really need more than an app or program to get started. Beyond this, there are more and more beginner forex courses and training programs opening up.
Traditional trading is often more complex, and as it has been this way for decades, it is not always the easiest option for budding traders to dive into. Forex, however, really breaks down the boundaries. Some believe it is the volatility, too, that attracts so many newbies – meaning there is always an influx of people getting into the foreign markets.
Is forex right for you?
As you may imagine, regardless of the above, forex will take time to get into and master. If you are in the process of starting a business and are looking for a passive income stream to run alongside, forex may just hold the key.
However, do be prepared to really throw yourself behind some research – and to understand the risks, too.