The forex market is a pool of opportunities and offers a high-profit potential to those who have market knowledge and trading skills. Gaining enough knowledge and developing relevant skills was a tough task in the earlier days. But nowadays, anyone and everyone can get into forex trading due to the free online resources and advanced trading platforms like MT5 that have made both learning and trading easier for all. Hence, currency trading can be a rewarding experience for those who are interested in indulging in continuous learning. But if you are still trying to decide whether to enter the dynamic currency market, this article can help you by providing solid reasons to take your first step in the trading journey. So, keep reading till the end.
1. Opportunity to start small
The first reason many beginners step into the forex world is that they get an opportunity to start small. You don’t need huge capital to mark a humble beginning to your trading career. In fact, starting with a small amount of trading capital would be the best approach for a beginner as it allows them to limit their exposure to risk while also getting some hands-on experience in trading. Many brokers allow you to open a live account with $50, $100 or $250 as a minimum deposit requirement. You can also consider micro or cent accounts, which allow you to trade with just $10 as an account balance.
Talking about the investment in technology, all you need is a basic computer system or smartphone with a stable internet connection. You will be able to access the market right after registering with a reputed broker and signing up for a trading account on a simple yet powerful platform like MT4 or its successor and an advanced platform, i.e., MT5. MetaTrader platforms are free and loaded with many tools, promising a seamless trading experience. Finding a low-cost broker with tight spreads and low commissions allows you to save on trading costs as well.
If you find a broker offering high leverage for a low margin requirement, you can open larger positions with a smaller capital, allowing you to grow your account in less time. But you need to be mindful of the risk that comes with leverage and use it in limits per your risk tolerance. However, the availability of leverage surely makes forex trading more attractive to small retail traders as they get a chance to earn higher profits without a huge amount in their trading account.
2. Flexibility
The 2nd reason that can convince you to get into forex trading is the high flexibility and numerous options. Unlike other financial markets, the Forex market doesn’t have a fixed timing. The market remains open throughout the day except on weekends and special holidays. The market hours are divided into 4 trading sessions on the basis of time zones. You can choose to trade during Asian, European, American or Australian sessions at your convenience. The highest trading volume is recorded during session overlaps, making it the perfect time for scalping or day trading.
Forex currency pairs are one of the most traded asset classes in the world, and the easy access adds to the flexibility. You get a lot of options to choose from as well. You can explore different trading styles based on the timeframe that you prefer for analysis, and you are free to follow your own strategies for making profits. There are no rigid rules, and this allows traders to explore, experiment, and enhance their gains by finding the most suitable options for themselves. Consider trading automation to make things easier, saving both time and energy.
There are quite a few options to choose from for trading accounts, too. You can start with a free demo account for practice, try a micro account to trade in smaller lot sizes and go live with a standard account when you feel ready. You can also find zero-spread or commission-free accounts based on your preference. Another notable option in the forex world is swap-free accounts, which are ideal for Muslim traders to trade without breaking religious rules that prohibit interest-based transitions.
3. High-profit potential
One thing that all forex traders will unanimously agree upon is the high-profit potential offered by the forex market, which is also a major reason behind the growing number of retail forex traders. The currency pair prices are always moving, and even a minor fluctuation gives you a chance to catch enough pips for profits. You won’t have to worry about a bear market, as even the downtrend gives you an opportunity to make money from shorting the pair. Thus, there is no bad time to trade forex, as anyone with a solid strategy and risk management plan can navigate the market smoothly.
Major currency pairs like EUR/USD are considered to be the safe haven of traders as they are more stable and fall under the category of less risky trading instruments. As I stated earlier, the availability of leverage also adds to the profit potential, as your profitability is directly linked to your trade size. You just need to be cautious with the risk, and setting an optimal risk/reward ratio can amplify your gains. It does take some time to become consistently profitable as a trader, but being patient and disciplined can surely take you a long way in your trading journey.
The lower trading cost is another factor that increases the profit potential in forex trading. Forex brokers tend to charge lower commissions in comparison to the brokers of other financial markets. The spreads on major pairs can also go as low as 0.2 pips with some brokers. You won’t have to worry about your profits being cut down due to the high cost of trading, and this makes forex trading an attractive option for many small traders.
4. Liquidity
As I said earlier, forex currency pairs are the most traded asset class in the world. Currencies are the most liquid assets on their own, and this liquidity is also present in the currency market. Forex brokers allow traders to access the market at the most favourable conditions with the help of a deep liquidity pool where top-tier financial institutions and banks function as liquidity providers. The brokers will help you place your orders at the best prices, allowing you to open and close trades without delay, as you will always find a matching order.
Liquidity is a major prerequisite for a smooth trading experience, as having a seller for every buyer and having a buyer for every seller is essential to executing an order. You get to take advantage of liquidity by trading during active market hours and trading with major pairs, as they are most liquid with tight spreads. Liquidity is especially important for scalpers as they have to enter and exit multiple trades within a short span of time. The same applies to day traders, who also look for daily trading opportunities. In fact, liquidity is essential for all types of traders as you need it for swift entry and exit.
5. Beginners get a fair chance
Many people think that only expert traders with in-depth knowledge can make profits from the forex market. But we need to remember that they were also inexperienced newbies in the past, and they achieved success with hard work and persistence. Their success is proof that beginners get a fair chance in the global currency market. Trading can be challenging at first, but it does get easier when you spend enough time studying the market and developing your skills. But if you are still unsure about becoming an independent trader, you can try out other alternatives.
Investing in managed forex accounts and copy trading is popular among newbies as it allows you to follow in the footsteps of a seasoned professional. These methods allow you to earn passive income from the market while leaving all the decisions to a top trader that you trust. Such innovative trading solutions were introduced to give beginners a fair chance to get an equal amount of profitable opportunities irrespective of their experience and knowledge in trading. With these solutions, you can earn some profits and learn more about the market.
Wrap Up
So, these were the top 5 reasons to consider forex trading as a source of income. Becoming a forex trader is truly empowering as it allows you to earn profits from anywhere and anytime, which can be your home, workplace or even while travelling by trading on the go. All you need is knowledge, skills, a solid strategy, and emotional control, as your trading decisions need to be logical. There are a lot of options to choose from, and finding the best ones for yourself takes you to success.
Founder Dinis Guarda
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