Is Forex Trading The Right Investment For You?

Forex trading is a method of investing that has been around for centuries. It involves trading currencies in order to take advantage of constantly changing exchange rates. By buying currencies that are increasing in value and then selling them, it’s possible to grow your money and make large returns. 

When compared to other forms of investing, forex trading has many benefits. However, it also has a number of drawbacks. This post explores some of the big things to consider when deciding whether to get involved in forex trading.  

You don’t need to invest much

Unlike some investments like real estate or gold that require big upfront deposits, you don’t need huge amounts of savings to invest in forex. Some brokers allow you to start an account with as little as $100. 

That said, if you want to make a serious return, you may want to consider investing a little more. As with any investment, the more you invest, the bigger the potential returns. Just make sure that you don’t invest more than you’re willing to lose. 

Low fees

All forex brokers charge some form of commission for their service. However, these fees are generally quite low, making it easy to make a return without having to worry too much about additional fees.

Cryptocurrency exchanges and stockbroker services can often charge more in fees. However, it really does depend on which forex broker you use. Consider using broker comparison guides to get the best deal. 

24-hour trading hours

Unlike the stock market, which is only open from 9 to 5 on weekdays, the forex market is open 24/7. If you find it difficult to trade stocks because you’re constantly busy between 9 to 5 on weekdays, forex trading could be a more accessible form of investment that you can engage in during your free time.

Of course, this does mean that you have to be more constantly aware of changing currency prices – you don’t get a break at the weekend.

There are risks

While forex trading can result in much bigger returns than putting your money in a savings account, it’s also riskier. The value of a currency could fall overnight, and you could lose money if you don’t react fast enough. This is something that you have to be prepared for. 

When it comes to overall risk level, forex sits somewhere between stocks and crypto – prices are definitely not as volatile as the latter, but you do need to check your investment more frequently. Before buying a cryptocurrency, it’s always a good idea to not just look at the price but the price history, as this will tell you how volatile the relationship between a currency pair is. The likes of these AUDUSD charts are useful for telling you when to invest your money. Generally speaking, currencies used by more influential and stable countries are less volatile and pose less of risk. 

You need to do your homework

Successful forex trading does involve doing your homework. On top of looking into the history between currency pairs, it can be useful to understand what influences price changes. Events like elections, natural disasters, wars, and economic reports can all have a big impact. You cannot always predict these events, but you can sometimes take an educated guess as to the financial outcome.