If you are thinking of investing in assets to achieve your financial goals, you may be trying to find out whether forex trading and the buying and selling of currencies could be a better outlet for you than other assets such as stocks. Here are seven reasons why forex often has the edge.
Accessibility
Accessibility is a major plus point for forex markets, both in terms of trading hours and account management. You can get a forex account up and running within 24 hours and start making trades with as little as £50, which is perfect for beginners.
Forex also operates globally so you can expect access to currency pairs 24 hours a day, five days a week. Trading starts at 8am in Sydney on Monday morning (9pm GMT on Sunday) and closes on Friday at 5pm in New York (10pm GMT). This makes it easier to dip in and out of trades and set up a flexible schedule for the best returns.
High liquidity
The forex market trumps every other market in terms of the volume of trades, including stocks. This large amount of activity increases liquidity, which is defined as the ease with which a currency pair can be traded on demand. Popular currency pairs such as GBP/USD and EUR/USD are highly liquid and thus, considerable amounts of money can be placed on them with small spreads.
Low transaction costs
The spread is a payment made to forex brokers for facilitating a particular trade. It is measured in pips and based on the buy and sell price for a currency pair. Larger currency pairs have lower spreads than emerging currencies such as the Mexican Peso (MXN) or South African Rand (ZAR).
Leverage
Forex brokers often help traders to buy and sell currencies with more money than they have in their accounts. This process involves leverage, which is more common in forex trading than other assets.
With a variety of potential platforms, you may be wondering is eToro any good? Taking a look at the broker’s services will give you an overview of the minimum deposit, funding methods and leverage available.
Easier to analyse
Unlike stocks and shares, forex trading is centred around the major currency pairs. This limited product set makes it easier to follow and analyse small changes in the market and to use informed decision making to execute better trades. Forex also lends itself better to technical analysis of price charts.
Directional trading
In forex, you will be able to buy or short currency pairs depending on how you think it will fluctuate over time. This means you can benefit from both rising and falling prices. This is not as easy for other assets as short selling can require asset borrowing and increased risk exposure.
Advance to crypto trading
Cryptocurrencies share similarities to forex trading and are an excellent option if you want to target greater returns in a shorter time span. Bitcoin (BTC), for example, is traded via peer-to-peer tech, which lowers transaction costs and is not influenced by everyday geopolitical factors. It’s also fast and easy to buy bitcoins, you can even have the option to buy bitcoin with debit card.
