Is Forex Trading Suitable For You?

By: Amuro Wesley

Forex is rapidly developing into one of the top investments. What used to be available to only companies and government bodies is now accessible to personal investors. Yet despite the buzz and excitement around this market, is Forex trading right for you?

Here are some factors you may look into.

1. Accessibility

Unlike most investment markets that open and close with the ring of a bell, Forex is open 24/7.

Trades can be made anytime from your PC, laptop, ipad and even iphone into the major trading centers such as Sydney, Tokyo, London, Frankfurt and New York.

Because of this, you can act immediately upon news that may have an impact on the market.

2. Liquidity

Due to the high volumes being traded in this worldwide marketplace, there will always be a buyer or seller ready for your trade.

The trades happen in the spot market so as to enable your position to close immediately and avoid the risks sudden market swings. Liquidity also helps ensure price stability and lower spreads.

3. Volatility

Forex market is always evolving.

Due to the liquidity of the market, you can make money whether the market is going up, down or even sideways. Volatility in other markets is often equated to risk or loss, but in Forex, volatility equates to profit potential.

4. Margin

Trading on margin means that you can buy or sell assets greater than the value of your account.

You may be able to trade on margin in other investment accounts but nothing like you can do in the Forex market.

Because currency exchange rates just fluctuate 1-2% daily, you can take advantage of your investment dollar for greater returns. The most common margin is 50:1 but you can find some trading accounts that will up to 200:1 margin.

For example, if your risk capital is $10,000, you could control $500,000 to $1,000,000 in currency contracts. This type of leverage gives you the potential to make profits very quickly but you can also lose your money just as quickly.

It is best to have a disciplined investment plan. One which does not put all of your capital at risk and has stop losses to protect your returns.

5. Profit Potential

You do not need a huge amount of investment capital to get started in this market. However, it is recommended that whatever capital you begin with is money that you can afford to lose.

With Forex mini-accounts, you can get started for as little as $100. With discipline and a proven trading plan, you could realistically convert your $100 into thousands of dollars within a few weeks or months.

Without a trading plan, you could be out of the market within days.

6. Paper Trading

Most investment companies will arrange you with a free paper trading account so that you can practice via mock trading for 60 to 90 days before doing actual trading.

It is much better to lose money on paper than to suffer a real loss to your actual account.

Once you have proven your trading plan, you can open up a margin account and start actual trading.

Forex is often traded without commissions meaning the profits are in the spread.

This makes it a lucrative investment opportunity for those who wanting to trade on a more frequent basis.

As you can see, the risks or disadvantages perceived in other markets actually turned into the profits and advantages of the Forex market. As with any other investment, you should proceed with caution, a well worked out trading plan and risking only money that you can afford to lose.

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