Top 10 Reasons Why Forex is the Best Market to Trade
Reading time: 8 minutes
If you are reading this article, you are most probably curious about the foreign exchange market and online trading. People are always striving for the best, and when it comes to trading, everyone wants to get the best trading conditions, superior trading platforms, and, of course, to trade at the best market prices. Millions of traders choose to trade Forex, as they have come to an understanding of why Forex is the best market to trade. These traders explore the potential of the market and seize possible opportunities that could be unlimited. So, why is Forex the best market to trade? The reasons are many and we are going to explore all of them, but before we jump into it, let us first explore a brief history of the Forex market.
What is the Forex Market in 2018
Forex, also known as foreign exchange, is the largest and the most liquid market in the world. Its retail part has come with the development of the Internet. This allowed retail clients to trade Forex online via various trading platforms. Forex opened its doors to retail clients in the late 1990s. At this time, the first retail online brokers started their operations. Forex, as a market had been functioning for decades before that, it was just that it only accepted institutional clients. Currently there are trillions of US dollars traded daily on the Forex market, with retail clients contributing nearly 5% of the total volume or around 250 billion US dollars in daily turnover. Why is the Forex market so large? Large multinational trade companies, financial institutions, hedge funds and lots of other companies require foreign currencies to operate their businesses. As you may understand, one currency is bought online for another currency, and this creates quite a reasonable flow of funds. In other words, Forex is the global place for trading currencies.
Now we have an understanding of what the Forex market is, let's take a look at the top ten reasons to trade in the foreign exchange market.
Reasons Why Forex is the Best Market to Trade
Different traders have different reasons to choosing the Forex market. The truth is, Forex has a lot to offer for any type of trader and there are plenty of reasons to trade Forex online. The main reasons why Forex is the top market to trade are explained below. Not every point will be applicable to your needs or your trading strategy, yet most traders define the following reasons as the answer to the question of why Forex is the best market for trading online.
How do traders make money online? The mechanics behind trading are rather simple. You are acquiring an asset for a favourable price and you expect to get rid of this asset. The more volatile the market is, the more opportunities there are to acquire and get rid of the assets you have. As you may understand, if the market is not moving, holding your capital in it makes little sense. Volatility in the Forex market is great, and you can regularly expect to see a price move for around 50-100 pips on one of the major pairs on almost any day of the week. This means a potential loss or gain of 500-1,000 USD if one lot (or 100,000 currency units) is traded and the quoted currency is USD. Traders always look for volatile markets and volatile instruments, this is why volatility is one of the main benefits of the Forex market.
While volatility is quite important and truly tells us why Forex is the best market to trade, we should never disregard accessibility. Even though Forex is volatile, and it is possible to catch lots of market moves, this market is more accessible than any other online trading market. Trading Forex online can be started with as little as 100 USD. Compared with many other markets, this is a rather low trading capital requirement. What is also great about Forex market accessibility is that you can easily sign up for your trading account from your PC. Most retail Forex brokers operate online, and all you have to do to start with Forex is to register, submit your documents, and perform a deposit on your Forex trading account. Even though accessibility does not really influence the quality of the market, it certainly gives a reason why Forex is the most interesting market to look at. When it comes to inexperienced traders, Forex trading can be easily accessed via a free demo account, this way, you can start paper Forex trading in a matter of minutes.
Software advancements make our lives easier, and the same is true with online trading. There are more Forex trading platforms appearing every year, and there are even more regular updates for established Forex trading software. Compared to many other online trading markets, technological advancements are definitely why Forex is one of the most potentially lucrative markets to trade. In addition to this, the retail Forex software industry is also enriched by third party software providers who supply various add-ons and plug-ins for the most common trading platforms, including MetaTrader 4 and MetaTrader 5. This is why Forex is an innovative way to trade online.
You probably know that the simple rule of trading is to buy low and sell high. In Forex, you can also sell assets without owning them – this is known as going short. Let's check this possibility with an example. You have 10,000 EUR on your account and you want to trade USD/JPY currency pair. Without actually purchasing either USD or JPY, you can just go short on this pair and sell yen for dollars, while your actual account balance is in EUR. Such a feature tells us why Forex is a good market to trade. On top of this, you can trade Forex on a margin, which implies the use of leverage. With the help of this leverage, you can trade much bigger amounts than your deposit. This is an advantage and a disadvantage at the same time, as your potential gain can be many times bigger than your deposit, but so can your potential loss.
Forex trading is heavily monitored, and many Forex brokers are regulated by more than one authority. This shows that Forex is one of the safest markets to trade, although it only applies to regulated brokers.
6. Bonuses and Promotions
Forex brokers create substantial trading volumes, due to the leverage they offer. This is why it is often possible to get rewarded with a certain deposit bonus when opening a Forex trading account. Why is Forex the most exciting market to trade? Because next to the bonuses, brokers offer a number of other incentives and promotions. Admiral Markets, for example, offers you withdrawable points for your trades. This way you can compete, have fun, and get rewarded with a real account as a prize.
It takes time to master Forex trading, but once you have, a whole new world of opportunities opens up for you. You may become an account manager and start getting profits not only from your trading, but also as a commission for managing accounts.
Social networks become more and more popular every day, and as Forex is the largest market, it also has the largest amount of trading forums and trading networks. This way, you get to experience a whole community of Forex traders, making Forex the most social market to trade. As the retail market has been developing for nearly two decades, you can easily find lots of experts, contributors, educators, critics, and other members of the community in every possible language.
9. Education Materials
As Forex is the most accessible market to trade, there are many beginners opening trading accounts daily. To make sure that this group of people can trade efficiently, Forex brokers supply various materials to enhance the knowledge of rookie traders, making Forex the most beginner-friendly market to trade.
Trading conditions are vital for professional day traders. Spreads and commissions on this market are quite low, making this an attractive market to trade. In fact, quite often, it is possible to experience only one or two pips spread on this market. Next to the spreads, the Forex infrastructure is well-developed, meaning that execution of trades is much smoother and simpler.
Trading Forex is an exciting, interesting, and educational process. Not only does it give you an opportunity to make trades online, but it also educates you on worldwide events. Trading is a great activity and should at least be tried out on a Demo Account.