Why is Forex Trading So Popular? Trading on the foreign exchange market is becoming increasingly interesting for investors because it offers financial independence. In contrast to other financial derivatives, trading in currency pairs can be carried out almost indefinitely from Monday to Friday. In addition, you can invest with low equity. Another advantage of forex trading: Even inexperienced investors can learn it quite easily if you bring interest and acquire the necessary background knowledge. Nevertheless, the investment in the foreign exchange market is of course not entirely without risk.
- Forex costs comparatively low
- Forex trading offers easy access
- Foreign exchange trading is possible with a low minimum deposit
- No guarantee of success in Forex trading
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Advantages of Forex trading compared to other markets
The popularity of Forex trading can be particularly remarkable well explain in comparison with other markets: as is well known, money never sleeps. Forex trading is practically carried out around the clock on the stock exchanges in New York, Frankfurt, London, Tokyo and many more. However, many markets have very restricted trading hours. Unlike trading many other financial instruments, there is no physical trading venue in Forex trading; it takes place without settlement on a stock exchange. Therefore, the forex costs are often lower when investing.
Forex for traders with full-time jobs
Due to the flexibility in terms of time, forex trading is also suitable for traders who cannot control their positions around the clock, Currency trading is possible 24 hours a day, five days a week. Let's take a look at what the main trading hours are:
- Japanese yen are mostly traded during Japanese business hours. (Main trading hours between 0:00 a.m. and 8:00 a.m.GMT)
- New Zealand dollars, Hong Kong dollars and Australian dollars are traded at similar times.
- The main trading hours for European currencies are between 8:00 a.m. And 4:00 p.m. GMT.
As we can see, due to the time difference, trading in the currency markets is theoretically always possible (except for the weekend).
Tip: The money never sleeps and Forex trading is possible almost around the clock, but traders should still be well rested. A tired mind does not like to act and is often thoughtless. Therefore, traders should allow themselves sufficient rest periods.
Reasons why Forex trading is so popular
There are other reasons why trading in currency pairs is becoming increasingly popular. In addition to the comparatively low forex costs, there are many other arguments for trading on the foreign exchange market.
If you want to start trading forex, you have comparatively easy access to the market. In general, every trader can start trading Forex, and with many brokers, even with low minimum bets. Not infrequently, only deposits of 50 euros are required. It is often possible to test forex trading at no cost. In this case, brokers offer a free demo account with virtual credit. Investors do not have to set up an extra deposit for trading currencies - another advantage that speaks for forex trading. The forex broker comparison shows which providers offer particularly low minimum bets and even a demo account. It's worth checking.
Supply and demand
Basically, the market mechanism in Forex trading is easy to learn. Supply and demand set the price. The development in turn is shown in the chart image, which can be understood with the appropriate tools and some practice. The market usually reacts immediately to a changed environment. Given normal market conditions, transactions are carried out within a few seconds as the currencies are subject to constant demand. The Forex market is nowhere near as volatile as the crypto market, for example; therefore it is a little easier to assess. Nevertheless, it is not recommended for inexperienced investors to act entirely without prior knowledge or a suitable strategy.
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Further reasons for the popularity
Another reason for the enormous popularity of forex trading is that Competitor. It is a competitive broker market. What does that have to do with the popularity of the trade? As there are more and more providers for Forex trading, traders have a wide choice. Competitors are known to stimulate business. It is no different with Forex brokers. They try to outbid each other with particularly attractive terms to convince investors, such as attractive forex costs, services and trading platforms. In addition to the well-known MetaTrader 4, numerous further developed trading platforms are offered. There is even special trading software for particularly ambitious investors. Apps are also provided for mobile access so that traders can conduct Forex trading even more conveniently.
Due to the growing number of Forex traders, there is a steadily growing community. In these forums, for example, the latest developments on the market are discussed and joint trading strategies are developed and improved. These Forex forums are available in numerous languages and are also available around the clock. Forex communities can also be found on Facebook and other social networks, who exchange information about forex trading and share the latest developments.
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Marginal trading made easy
The margin is one of the fixed forex costs. The amount of the security deposit can vary, as a forex broker comparison shows. Marginal trading is particularly interesting for traders with little equity. The security deposit can bring significantly more capital into the market than is actually available; the broker actually makes advance payments. The high leverage effect of the Forex brokers enables transactions up to 500 times larger. In this way, Forex traders can increase their market exposure and at the same time keep their deposits extremely low.
Foreign exchange trading with security deposit quickly possible
Generally, it does not take much time to start trading foreign exchange. Anyone who has already opened their account can start trading within a few minutes. Due to the low security deposit, a comparatively small minimum amount has to be paid in (with most brokers).
Leverage can also become a disadvantage
The leverage not only increases the popularity of forex trading, he can also be detrimental. At this point we would like to point out that the lever can lead to the complete loss of the security deposit.
Note: In order to practice trading with the lever first, we recommend using a demo account. Since virtual credit is traded, the losses are also virtual in nature. The traders do not lose their own capital, only the credit made available.
Flexibility in trading is crucial for many investors
For many traders, flexibility is the decisive factor in addition to the low Forex costs Point for trade. The foreign exchange market is extremely flexible and can be used almost around the clock. Compared to the conventional securities market (closes every afternoon), Forex traders can always trade when their time allows. The extended time window is particularly advantageous for part-time traders. This is why there are so many investors in Forex trading who trade alongside their normal business. Of course, the volumes traded are not comparable to those of ambitious traders.
Ease of trading as an essential factor for success
The simplicity also ensures the increasing popularity of trading on foreign exchange markets. Access is particularly easy, as is handling. Forex brokers, such as Naga Markets, also offer mobile trading in the form of apps. This allows investors to trade anywhere in the world, regardless of the times.
Ease of understanding will delight inexperienced traders
The Forex market is easy to understand compared to other markets. Of course, traders should deal with the basic information and mechanisms. But in general, access is much easier and the developments can be easily recognized with a little help (e.g. using tools). If you are interested in Forex trading and deal with the basics, you will understand the market better and can act with a little more caution. Of course, this knowledge is no guarantee that the trades will be successful.
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Residual risk remains with Forex trading
The Forex The market is decentralized. This means that it is not tied to any location and there is no central regulation. That is why it is not always easy to find a suitable Forex broker. Traders should pay particular attention to regulation, from the country where the broker is based. Governmental or semi-governmental agencies exist, for example, in the following states:
The best-known supervisory authorities include the CySEC and FCA. As most brokers take pride in their received license and provide information on their website. If you are specifically looking for these licenses, you can make your search for a suitable forex broker easier.
Avoid offshore brokers
There are many forex brokers who do not have suitable regulations. These are so-called offshore brokers. Since customers often have no legal certainty here, they should avoid these providers. Fortunately, there are now many Forex brokers that have a license.
Use the demo account to test the broker
If you want to be on the safe side, you can first open a free demo account to broker testing. It quickly becomes clear what the trading conditions look like and the services are well developed. If you don't get along with this Forex broker, the demo account can be uninstalled quickly without your own capital flowing in.
Why do some inexperienced investors have problems with Forex trading?
No question that Forex trading is growing in popularity. But there are always reports that inexperienced investors have a low success rate. What can that be? The cause is various factors, such as:
- Wrong or missing strategy
- No discipline
- Missing experience
- Expectations too high
- No loss limitation
- No risk or money management
Wrong or missing strategy
In principle, Forex trading should always be carried out with a suitable and individual trading strategy become. Those who choose the wrong strategy quickly suffer losses. Experience has shown that trading entirely without a strategy is not recommended, since traders are not given suitable dates for entering or exiting the trade and trading completely without a plan.
No discipline and lack of experience
Expectations that are too high, no discipline or lack of experience are common causes of trader failures. No master has yet fallen from heaven; Even very successful Forex traders started out small. Investors often overestimate themselves and have too high expectations of their profits or skills. This creates pressure that the trade with the next trend must be successful. If it is not, traders often react frustrated and act emotionally. Since emotions are bad advisors when investing, such trades often don't end well.
No loss limitation
Every trader should set a loss limitation so as not to lose all of the capital at once.
Conclusion: Forex trading allows an easy entry, but is not suitable for all traders
Trading on the foreign exchange market is becoming more and more popular because it is comparatively easy to implement. In addition, entry into the market is possible with little equity. With the lever, traders can bring significantly more capital into the market than is actually available. This of course increases the possible profit. But be careful, the lever can also work the other way round. In Forex trading, a loss limitation is absolutely advisable in order to implement balanced risk and money management in the long term. A suitable trading strategy is also required, combined with a little discipline. Only those who deal with the basics and are willing to learn can gradually familiarize themselves with the trade. A demo account with free virtual credit, for example, as provided by many brokers, such as FXTM and ETFinance, helps here. This allows you to try the lever without risking your own losses. Strategies can also be tested with the demo account without risk. Nevertheless, a strategy does not promise a 100 percent profit. Although Forex trading has many advantages and is extremely flexible, there is no guarantee of profit. Has the popularity of Forex trading reached you too? Invest in the foreign exchange market and test whether your investment goals can be achieved by investing in currency pairs.