Five reasons why you should consider forex trading

What is forex trading?

When currency pairs are bought and sold in larger quantities on online marketplaces with the aim to make profit, it’s called forex trading. Forex, or the FX market, is one of the largest financial marketplaces in the world, with daily trading volumes exceeding trillions of dollars.

Forex trading has grown immensely in popularity over the last two decades, attracting a wide range of traders. Whether you want to diversify your investment portfolio, seek excitement or generate income, the motivations for forex trading are varied. But what makes forex trading stand out from other financial markets?

Before diving into any market, it’s crucial to understand its advantages and potential drawbacks. Forex trading, particularly for beginners, offers several benefits that set it apart. This article highlights compelling reasons to start trading forex.

24-hour market

The forex market is open 24 hours a day, closing only on weekends. Unlike stock markets with specific trading hours, extended opening hours of the forex market allow you to trade more flexibly.

The market is divided into Sydney, Tokyo, London and New York sessions, which ensures continuous trading opportunities because when one market closes, another opens.

Low initial investment and leverage

Forex trading requires a relatively small amount of capital to start, making it accessible to traders with varying budgets and financial objective. Many brokers offer trading accounts with no minimum deposit and using leverage allows traders to enter larger positions with less initial capital.

Leverage means that traders can control larger positions with a smaller amount of capital, amplifying potential profits and losses. For example, if the leverage is 1:20 investing $100 dollars allows you to place a trade worth of $2,000. Proper risk management is crucial when using leverage.

Extensive educational resources

Forex trading is accessible for beginners due to the huge amount of free educational resources available online. Webinars, videos, courses, and articles are readily available to help build your knowledge and skills.

Equiti’s educational library, for example, offers comprehensive resources tailored to traders at all levels. This includes learning about forex trading strategies, risk management and how to create a solid trading plan. As you gain experience, advanced resources can further enhance your trading abilities, making continuous learning a cornerstone of successful forex trading.

Practice risk-free with a demo account

New traders can start with a free demo account, trading with virtual funds to experience real trading conditions and markets without financial risk. This helps beginners to learn about the products and trading processes and develop their strategies before investing real money. Most of the online brokers offer demo accounts and when you feel confident to navigate real markets, you can easily switch to a live trading account.

Regulated by financial authorities

Forex trading is regulated by various financial authorities worldwide, such as the Financial Conduct Authority (FCA) in the UK and the National Futures Association (NFA) in the USA. These regulations ensure that brokers operate legitimately, providing traders with peace of mind regarding the safety of their funds and fair market prices.

To trade safely and protect your deposits, it’s important to only trade with brokers that are regulated by these reputable financial authorities. This means that the broker needs to comply with certain rules and regulations that ensure a fairer environment for all.