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Foreign exchange, or forex trading, is the buying and selling of different currencies to generate a profit.
Forex trading or foreign exchange trading platforms, like our top choice Prime XBT, work in a variety of locations throughout the globe, including New York, London, Tokyo, and Hong Kong.
Several participants in the foreign exchange market speculate on the relative value of different currency pairings.
Because of how accessible and adaptable Forex trading is for beginners, its popularity has increased among retail and amateur traders.
So, why should you trade forex? If foreign exchange trading is something you're interested in, keep reading ahead to learn more about the benefits of Forex trading and how it can help improve your financial standing.
Why Should You Trade Forex: History of the Forex Market
The Foreign Exchange Market (Forex) is the world's biggest and most liquid market.
The rise of the Internet made possible its expansion into retail. So, several online best Forex trading platforms are now available to the general public.
The foreign exchange market began accepting individual traders in the late 1990s. The first fully-functioning retail internet brokers launched around this period.
Why should you trade forex? Simply because it’s one of the oldest markets. The foreign exchange market had been open for decades, primarily to large financial institutions.
The Foreign Exchange (Forex) market is now worth billions of dollars daily, with retail customers contributing approximately 5% of the overall volume or about 250 billion dollars daily.
Foreign currency is essential for many enterprises, including large international trading firms, financial institutions, hedge funds, etc.
For the uninitiated, exchanging one currency for another online result in a quite sizable monetary outflow. To put it another way, Forex is the international currency exchange market.
>>Sign up and start Forex trading on Prime XBT today!
Why Should You Trade Forex?
Why should you trade forex? While deciding on a market to trade, professionals seek favorable market circumstances and a high probability of making a profit.
Millions of traders throughout the globe believe the foreign exchange (forex) market meets these requirements due to the following reasons:
1. It’s a Large and Global Market
Why should you trade forex? One of the greatest advantages of trading forex is, of course, the market's enormous size.
Our review of XTB notes that more than $4 trillion US dollars are traded daily, making it the biggest financial market in the world.
Currency pairs are bought and sold around the clock by traders from all over the globe, making FX a truly global marketplace with vast profit potential.
Accessibility, liquidity, volatility, technology, and trading hours are only some advantages of forex trading, all made possible by the market size.
2. It’s Good for Beginners
One of the major benefits of forex trading is that it is easily accessible. This market's appeal among casual traders stems from the low barrier to entry it presents compared to others.
But, knowledge and expertise are required for effective trading regardless of how much cash you put down.
With a free demo account, you may start foreign exchange trading without putting your money on the line.
Demo accounts allow you to practice trading without risking your money by replicating real-world conditions. This lets you get used to the platform, learn how the market works, and formulate a risk financial management plan.
If you're thinking about trading forex, it's in your best interest to take advantage of the practice accounts offered by most brokers.
>>Sign up and start Forex trading on Prime XBT today!
3. Ability To Go Long or Go Short
Why should you trade forex? Forex trading naturally incorporates short selling, unlike other markets where it must be done via derivative goods.
As you must always make a purchase with one currency (the quotation currency) to make a sale, this is the case (the base currency).
A forex pair's value is determined by the amount of the quote currency required to purchase one unit of the base currency.
For instance, in the currency pair GBP/EUR, the pound sterling acts as the "base" currency while the euro "quotes" for the pair. One euro equals 1.12156 British pounds if the GBP/EUR exchange rate is 1.12156.
If you believe the pound's value will rise concerning the euro, you should purchase the pair (going long).
Why should you trade forex? You can sell the pound/euro pair if you anticipate a decline in the pound's value (going short). You can make money regardless of how the market goes since your gain or loss will be proportional to how well your prediction works.
4. 24 Forex Market Hours
Why should you trade forex instead of stocks? The forex market is open nonstop from Sunday at 5 p.m. EST through Friday at 4 p.m. EST*.
As noted in our review of Saxo, foreign currency (FX) deals are executed privately between buyers and sellers rather than on a centralized exchange. Hence, trading hours tend to be protracted. The foreign exchange market (Forex) is open around the clock every day of the year, except weekends and holidays.
Each day is divided into four "trading sessions," coinciding with when banks in London, New York City, Sydney, and Tokyo open for business. These sessions, particularly when they overlap, see great trading activity.
In March and April, as well as in October and November, the opening hours of the currency market will fluctuate due to the varying dates on which various nations will implement daylight saving time.
Find out the optimal time of day to trade foreign exchange in your area.
5. Does Forex Trade on Weekends?
The foreign exchange market is closed from Friday at 4 pm EST through Sunday at 5 pm EST. Forex trading, however, does occur over the weekend because the market is solely closed to retail dealers, as opposed to central banks and affiliated entities.
This implies the potential for a price gap between Friday's market closing and Sunday's market opening.
Weekend forex trading hours are an important consideration for traders, who may need to adjust their holdings.
Consider closing your trade on Friday night or setting stop-losses and take-profits to reduce the risk of gapping if you do not want to take the chance.
>>Sign up and start Forex trading on Prime XBT today!
6. Volatility Creates Trading Opportunity
Why should you trade forex if the market is volatile? Extreme price swings may be seen in certain currencies due to the enormous number of daily currency trading, which amounts to billions of dollars per minute.
Speculating on the direction of market fluctuations may result in substantial profits. The market's volatility may work for or against you, so using risk management strategies to reduce your exposure is crucial.
7. Leverage Can Make Your Money Go Further
Still asking yourself why should you trade forex? Leveraged trading in currency pairings with IG may help your money go farther. Using leverage, traders may enter the foreign exchange market by putting up just a tiny fraction of the total value of their position.
For EUR/USD trades, a 2% initial deposit may be needed to initiate the position. The term "margin" is used to describe the first down payment.
You may earn substantial returns on a little initial investment when trading on margin since your profit or loss will represent the entire worth of the position when it is closed.
The risk of losing more than you initially invested is increased, though. This highlights the need for traders to consider the whole value of their leveraged forex position before entering any trades.
8. Trade a Wide Range of Currency Pairs
Forex trading lets you speculate on the relative strength of big and small economies worldwide by trading a broad range of currency pairings.
About 80 different currency pairings are available via IG, including:
- Minor currency pairings include the US Dollar and its counterparts across the world.
- Large-scale currency pairings include the pound-dollar, euro-dollar, and dollar-yen
- Exotic pairings, such as TRY/JPY, EUR/CZK, USD/MXN
- Newly formed pairings of currencies, such as the EUR/RUB, USD/CNH, and AUD/CNH
You may trade these pairs from a single account with only one login.
>>Sign up and start Forex trading on Prime XBT today!
9. Hedge With Forex
Why should you trade forex with hedging is another important question you should ask yourself.
To protect yourself against adverse swings in the foreign exchange market, you may hedge your bets by taking out numerous positions.
While market volatility adds to forex's allure, hedging may help protect your investment or keep your losses manageable.
Hedging with numerous currency pairings is a typical approach to reducing risk when trading foreign exchange.
You can help minimize your loss by trading currency pairs that are connected positively but in opposite directions, such as the British pound and the Euro. For instance, a short EUR/USD trade loss can be offset by a gain on a long GBP/USD position.
10. Access Tools To Help You Trade
In addition to its online, mobile, and tablet platforms, our CMC markets review notes that forex trading platforms provide advanced traders access to several specialized platforms.
Risk management tools (such as stops and limits), interactive charting, and built-in news feeds are options available to you.
We also provide various tools to help you become a successful Forex trader. If you're new to foreign exchange trading, you can use a ton of courses that are both accessible and interesting.
Still wondering why should you trade forex? The short answer is that you may test the waters of foreign exchange trading with a free demo account and $10,000 in virtual money.
Why Should You Trade Forex Instead of Stocks?
Why should you trade forex instead of stocks? There are a few reasons why some investors choose trading forex over equities.
- Increased volatility: Stock market values tend to be very steady and fluctuate over extended time periods. Although this isn't always a good thing, the Forex market's volatility may provide a wealth of chances for day traders.
- Market opening hours: Although stock exchanges are only open at certain times, the foreign currency market is always active.
- Higher liquidity: The foreign exchange market has a daily average turnover of $5 trillion, whereas the stock market has a daily average turnover of just $1 trillion
Your risk tolerance and long-term financial objectives should inform your decision between a foreign exchange (FX) and the stock market.
>>Sign up and start Forex trading on Prime XBT today!
Why Should You Trade Forex: FAQs
Why should you trade Forex? Here, we answer a few frequently asked questions about why should you trade Forex.
What Is the Benefit of Forex Trading for the Economy?
Exchange rate fluctuations may improve a country's economic condition because of the interconnected nature of currency markets. Increasing the volume of currency trade between two nations positively affects both economies.
What Are the Benefits of Forex Trading Over Traditional Business?
You can place trades at any time of day or night, regardless of where you are, since Internet trading gives you access to every market in the world as it opens and closes.
How Can I Manage My Risk in Forex Trading?
Although forex trading has many advantages, there is also a higher risk due to the volatile market and leveraged trading instruments.
You may reduce your exposure to currency fluctuations by adopting a trading strategy and employing stop-loss and take-profit orders appropriate for your risk tolerance and market conditions.
What Instruments Can I Trade Forex With?
Rolling spot forex trading with a forex broker is an alternative to actual currency. Speculating on the movement of a currency pair's price in the future is made possible without actually needing to acquire or receive the underlying currency.
What Is the Easiest Forex Pair To Trade for Beginners?
Each forex trader has unique interests and risk tolerance, so the best currency pair to trade is subjective.
If you're just starting in the foreign exchange market, we recommend learning the fundamentals by focusing on the main currency pairings.
>>Sign up and start Forex trading on Prime XBT today!
What Are the Most Traded Currency Pairs?
Major currency pairings like EUR/USD, USD/JPY, GBP/USD, and USD/CHF see the largest trading volume. Beginners in the foreign exchange market should remember that the bulk of daily trading activity occurs in only a few currency pair combinations.
How Much Does It Cost To Start Trading Forex?
Trading foreign exchange might be expensive depending on your currency pairings. If you opt for forex trading with a margin, you only need a fraction of the trade's total value to get started and keep it open.
You won't have to pay anything more out of pocket for margin, but it will affect how much you can invest.
The spread is the cost incurred beyond the margin and represents the difference between the asset's 'buy' and 'sell' prices.
Trading just above the market price (buy price) starts a long position, while trading just below the market price (sell price) initiates a short position (sell price).
Finally, overnight costs might apply if you don’t finalize your position as the market closes.
When Is the Best Time To Trade the Forex Market?
Due to the potential impact of increased liquidity and volatility on currency exchange rates, the optimal timing to trade forex will vary from trader to trader. When trading begins in London at 3 am (EST), liquidity and volatility are expected to be strong.
A few hours later, a trading activity often decreases, only to pick back up once the American session begins at 9:30 am (EST).
From three in the morning on Sunday until five in the afternoon on Friday, the foreign currency market is open around-the-clock (EST). You may take advantage of the various trading sessions whenever it is convenient for you.
Remember that when certain nations move to daylight savings time, the opening hours of the currency market will also vary.
>>Sign up and start Forex trading on Prime XBT today!
How Do I Open a Forex Trading Account?
To open a forex trading account, review the accounts provided by the broker. Then, make an account by providing information about yourself, including proof of identification and your trading knowledge and experience.
You will be registered with a username and password. Once you transfer funds into your account, you can start foreign exchange trading.
With most of our best forex mobile trading platforms, there is no need to deposit money until you're ready to make a transaction.
Instead, you may open a sample account to practice your foreign exchange trading abilities.
The Bottom Line: Why Should You Trade Forex
So, why should you trade Forex? Anybody with access to a computer or mobile device and a desire to make money may participate in foreign exchange trading with an online platform like Prime XBT.
While profits with Forex trading are substantial, the leverage and risk associated are also relatively high.
If you want to make a fortune in foreign exchange, keep up with the latest market trends and top-performing currency pairings. Additionally, you need to be willing to take a risk.
>>Sign up and start Forex trading on Prime XBT today!
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