It’s one of the first questions you ask yourself whenever you first learn about this market and the reasons are extensive. Here are the top 10 reasons to trade forex.
1. Take control of your own finances. No one wants to be a wage slave and trading forex is another way to supplement your income. The returns offered on most mutual funds, hedge funds, or managed funds is laughable usually around 5% annually. Unless you have millions to invest, that 5% doesn’t mean much until many years into the future. Most successful forex traders earn between 10% – 30% of their overall capitol each year.
2. You can make money working only a few hours a day or week on your computer. You can trade from anywhere in the world where there is an internet connection.
3. Start-up costs are low when compared with day trading stocks or futures. You can gain experience without risking your own money by using a free demo account. Online Forex brokers offer “mini” and “micro” trading accounts, some with a minimum account deposit of $300 or less.
4. You can make money when the market is going up or down. Using something called technical analysis you decide which currency pairs are best to trade depending on what your analysis tells you. The many currency pairs trend very well, meaning they move in a specific predictable direction for an extended period of time making them easier to predict.
5. Forex markets trade 24 hours a day. There is no waiting for the opening bell.
6. Unlike the crooked and deceitful practices that are always rising out of the U.S. stock market, the forex market is the world’s largest market. No one can corner the market. With a trading volume of around $3.2 trillion dollars a day( Bank for International Settlements April 2007), no single entity can control the market for an extended period of time. The forex market is also the most liquid in the world. Traders can almost always open or close a position at a fair price.
7. When trading stocks, there are over 40,000 stocks to choose from. In forex, there are 4 major currency pairs against which you will base most of you trading decisions on and you can choose one or two currency pairs and focus your analysis.
8. No commissions. No clearing fees, no exchange fees, no government fees, no brokerage fees. Brokers are compensated for their services through something called the bid-ask spread.
9. No middlemen. Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair.
10. Anyone can do this and its been proven! In a very well known and documented study, a highly successful trader by the name of Richard Dennis recruited 14 people who he knew had little to no knowledge of trading and taught them his own trading methods in order to prove a point that traders aren’t born, they are made. A book was written and their success is well known in the forex community. The 6 most successful members of that original group are now controlling over $2 billion dollars of clients money and earned $500 million in the calendar year of 2008. I say all this to make the point that anyone can learn how to become a successful trader if they want it bad enough.
So read some lessons, ask lots of questions, use a demo account to apply what you learn, and keep track of your progress. The journey will have ups and downs but in the end be well worth the effort.
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