This article looks at the different reasons why an individual should consider FX trading.
There are various reasons as to why different individuals will trade on the foreign exchange market. Some consider trading as a means of earning extra cash, whereas others are looking to pay off debts with profits made. There are also individuals who trade because they enjoy the high-paced environment. It is important to be aware of the reasons why you are trading and the trading goals you are trying to achieve.
This article will look at the different aspects of the forex market that are seen to be most attractive to the potential trader.
1. The simplicity of FX trading
Contrary to popular belief, trading on the forex market is not very complicated. In fact, the complexity of trading is dependent on how complex you make it. Many new traders believe that the more trading tools one uses, the better the trading strategy. By using numerous tools you are only increasing the amount of information being received. This can lead to an information overload and emotional reaction by the forex trader. It is recommended that one keep the FX trading plan and strategy as simple as possible. This will allow for ease of navigation and more effective trading.
It is also recommended that new traders trade with one or two currency pairings during the first few months. Once you have gained experience and built confidence you can begin trading with more currencies. By opening several positions at once you may become confused and overwhelmed, and this can lead to emotional trading.
The simplicity of the market is an attractive reason to trade the foreign exchange market.
2. The FX trading hours
Unlike equities markets that operate according to set working hours, the foreign exchange market operates on 24 hour trading hours from Monday to Friday. This is possible due to its online and decentralised format. As the market is online one can trade from any location at any time of day, and by being decentralised the trades do not have to go through a central exchange with set hours. Instead, the forex market has trading hubs at strategic locations worldwide. This allows for different trading sessions which accommodate the time zones, such as the Asian session and the European session.
This is an attractive reason to trade the forex market as you can trade from any location at any time of day as long as you have a computer and reliable internet connection.
3. The FX trading accounts
In order to trade on the foreign exchange market you will be required to open a trading account with a forex broker. Unlike the stock market, the FX trading market allows one to open accounts with small amounts of capital. The reason for this is that the broker will offer high levels of leverage to the trader. This will allow you to trade large positions with small amounts; however, leverage should be used with caution as it raises the risk of a trade dramatically.
This is an appealing reason to trade the forex market in that you can begin earning potential profits with a very small trading account balance.
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