In our first blog post, we introduced you to the world of currency trading. It is another word for Forex trading.
Now, let’s discuss why this is a profitable investment method.
Online currency trading has recently become popular again, because it has key advantages:
- Global Market: Trading sessions around the world overlap and extend into all business days. This means that you can trade major currencies 24 hours a day, 5 days a week. There is an opportunity in the currency markets almost at any time of the day!
- Go Long or Short: Currency trading is different than ‘investing in a currency’. Because, currency traders can potentially profit from both rising and falling prices. If you simply invested in a currency, you would lose money when the currency’s price fell.
Even if you predict the fall, the best thing you could do is to sell as soon as possible. But as a CFD trader, you have another option! You can open a short position in the market and profit even when the currency loses value. You can profit (or lose) in any situation, because the market is based on speculation on asset prices.
- Low Spreads: Currency market is competitive, thus the spreads are quite low. Most currency accounts trade without a commission. The cost of entering a trade is the spread between the buy price and the sell price, which is always displayed on your trading screen.
- Unmatched Liquidity: Currency market is the largest financial market in the world. Every day, more than $4 trillion is traded in foreign exchange market. This means it is easier to get in and out of trades at any time, even in large sizes.
- Margin Trading: You can trade currencies with leverage! Certain brokers would go as high as 400:1 in terms of leverage. However, traders new to margin trading should rather aim for lower leverage because it significantly amplifies your gains and losses.
Read our next article to continue your trading education journey.
This post is also available in: Español