The currency markets present one of the best alternatives to earning supplementary income. Statistically, more than $5.3 trillion in turnover is transacted per day. This makes Forex the most popular in global financial markets.
There are a few reasons why the forex market has become so popular in the last couple of decades. One of them is the rapid rise in online trading. Back in the days, only banks and institutional investors had direct access to the foreign exchange market. But since online trading platforms started to emerge in the early 2000s, a lot has changed.
Online forex trading is easily accessible
Every individual can now access the market via online forex brokerage platforms. However, not every broker suits every trader. Different traders find some brokers more suited to their style of trading, risk appetite, budget, location. This is why before you jump in with both feet it is good to check a few reviews and opinions about some of the top-ranking brokers. You can check this forex website for preliminary research on the broker that suits you best.
Once the task of selecting your broker is out of the way, then the next thing will be to search for the best educational platform to learn the basics, practice using a demo account and then decide what amount you intend to start with for your initial deposit.
Statistically, 75% of beginner forex traders lose money, which is why it is important to maintain caution even after landing a succession of wins. The market is currently very volatile, which makes it ideal for online trading. In forex, we say volatility is a friend. This is because the higher the volatility, the more the trading opportunities for short-term traders.
Why it is time to trade forex
The primary reason for joining the forex market now is volatility. In the stock market, it is impossible to profit from both sides of the market unless you are an elite investor. Shorting in the stock market can attract high fees and high margin requirements from your broker. In the forex market, traders can capitalize on the high leverage provided to invest in small units of the currency pair listed.
For instance, with as little as $1,000, a trader can start a forex trading career with an account that can access $100,000 in market value. This is made possible after choosing a 100:1 leverage. With this account, a trader can also capitalize on brokerage platforms that offer micro-lot trading, which means that instead of investing in standard lots of 100,000 units per trader, you can invest in as little as 1,000 units per position.
This means that for every pip movement in a currency pair, you stand to gain or lose $1.00 from your $1,000 account. This means that with an average movement of 10-20 pips per trade and an average of 3-5 traded per day, you only risk a maximum of 10% of your initial deposit per day. And that is assuming all your 5 trades result in maximum losses of $20.00 each. As your account grows bigger, you can increase the level of risk to $30-$50 per trade, which also increases your profit potential.
Conclusion
It is possible to make several trades as you learn the ropes before wiping out your starter account. In the stock market, you will be lucky to invest in two stocks with $1,000, unless you choose penny stocks, which can be riskier than forex trading.
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