The world of online trading has given millions of people the freedom to take investing into their own hands. Whether it’s commodities, futures, currencies or stocks, there are a plethora of financial instruments that people trade back and forth, giving everybody an investment option and strategy that works best for them.
Forex trading is an increasingly popular way to earn money in the short-term, but can also present unique long-term investment opportunities as well. With many new faces to the forex game, it’s to be expected that a lot of questions need answering.
Today, let’s answer five important questions about forex trading so that you can begin investing with the knowledge you need.
1. What’s the Difference Between Trading Currencies and Trading Something Else?
Many people wonder what is exactly different about forex when compared to other trading options. One huge difference is the nature of the market regulation. While stocks, commodities, and bonds are all subject to a variety of regulations and governing bodies, currency trading is not.
2. Do I Actually Own the Currencies I’m Trading?
Unlike with stocks and other financial instruments, forex trading relies solely on speculative trading solutions. In short, this means that instead of actually buying and selling currencies, you’re buying or selling positions in the market relative to what you think the currency is worth or will do.
3. How Many Currencies are Traded?
There are dozens of different currency pairs traded across many different exchanges, but you’ll find that seven are essentially traded universally. The pairs that are traded universally are EUR/USD, USD/CHF, GBP/USD, USD/JPY, AUD/USD, USD/CAD & NSZ/USD. These are generally the safest bets and the ones that many expert forex users rely on.
However, you can find more unique currency pairs on lesser-known platforms that specialize in offering pairs for trade that many other platforms do not. People utilize social trading networks such as those reviewed by InvestinGoal to find trading platforms that offer the exact currency pairs they need.
4. What Makes Forex a Good Trading Opportunity?
For many, the simplicity of forex is a huge advantage. As mentioned above, with seven major trading pairs, you don’t have to worry about confusion arising from thousands of different investment decisions. Additionally, leverage makes it possible to trade above and beyond what you actually have (learn more about leverage here).
When combined with the fact that forex markets allow people to trade anytime, day or night, it makes for a very alluring option.
5. How risky is forex?
Many people want to know exactly how much risk is in the forex market before making a decision. Compared to some other trading options, the forex market presents minimal risks. This is because a very large number of people (and very large sums of money) are constantly being traded via forex.
This produces a relative stability that means both losses and gains are reduced. If you are looking for a trading option that combines relative stability with micro-managing opportunities, then forex trading is a great solution.
Conclusion
Forex is a very common form of trading, but those new to it will undoubtedly have many questions. These five questions about forex trading are among the most common; the answers to them can help reassure or explain how the markets work, making it easier to get involved with this investment strategy.