There are many myths about forex. Some say it’s a way to get rich quickly and effortlessly, while others say it’s a waste of time. None of the above is true, though. In reality, forex is just another financial market, same as the stock market. This is why trading forex can lead to gains as much as losses. The profit you get depends solely on the way you treat this market. Read on to find out how to succeed in the foreign exchange market and whether it is worth investing in.
What is Forex
Forex (FX or foreign exchange) is a market for currency exchange. It is an over-the-counter (OTC) market which means that currencies are traded not through a centralized exchange but the broker-dealer network. So practically anyone willing to trade currencies for profit can open a trading account with a broker and start buying and selling currency pairs at any time.
Can you Get Rich Trading Forex
One great thing about forex is that it doesn’t set any limits on your income. In the currency exchange market, the sky is the limit. However, consider that the returners are always proportional to investments. With a responsible approach and a sound strategy, one can make around 5-15% profit a year. Consider it a goal when you start because losses may exceed gains in the initial stages.
Read more: Can You Make a Living Trading Forex?
Does it Make Sense to Trade with Little Money
The majority of beginners start small. Once they feel confident in their skills and strategy, they gradually increase deposits and receive greater returns. In the initial stages, it is more important to learn than to earn. This is why no matter how humble your account is, the money you invest can become a foundation for your future capital. Moreover, it is not recommended to start trading with big sums of money in the beginning. No matter what market you are trading in, the golden rule is to invest no more than you are ready to lose.
How Long Will it Take to Learn Forex
Acquiring decent trading skills will take time. How much time? It depends on many things. How much time a day are you ready to spend trading, reading educational articles, and testing strategies? It is realistic to learn the basics in a week: getting to know the key concepts, understanding terms, and placing orders. However, you will need more time to learn how to analyze the situation in the market. For profitable trading, one needs a well-developed strategy and psychological skills to implement it. This is why, if you ask experienced traders how much time is required to learn to trade, they will probably answer that they never stop learning.
Why Trade Forex
When comparing forex with other financial markets, it’s easy to see its obvious advantages. Let’s look closer at the most important ones.
Forex is the biggest financial market that works round the clock Monday through Friday, allowing you to trade practically at any convenient time in any part of the world. Such a vast span of operation time is due to the big number of exchange centers and consequently a big number of time zones. No major stock exchange can offer you this kind of privilege.
Second, in forex, one can profit in both cases when the price of a currency is growing and when it’s declining. A trading instrument of the forex market is a currency pair. When a trader expects the price to grow, he/she goes long (buys the base currency by selling the quoted currency). When the trader thinks that the price of the pair is about to decline, he/she goes short (sells the base currency when buying the quoted currency). Thus, you don’t need to wait for the asset to grow in order to trade.
Third, high liquidity and large trading volume of major currencies make FX trading easy and quick. High liquidity or the ease at which an asset can be sold means you won’t find yourself in a situation where there are no buyers for your asset. It takes seconds to open and close a trade when it comes to the most popular currency pairs.
Finally, a large trading volume means low transaction costs. The commissions most brokers charge represent the spreads (the difference in buy and sell prices) or withdrawal fees. Thus, although the size of commission differs from broker to broker, forex transactions are relatively cheap.
Read more: Forex Trading for Beginners in 2022
One Thing to Consider
It’s better to understand the limitations of this market beforehand in order to avoid a possible sense of disappointment that many amateur traders get. The main reason for this disappointment is the expectation of getting rich practically overnight. As one can understand, these expectations are never met. The truth is before making money, one needs to go through a learning process that some people are not ready to take. The best way to avoid disappointment is to try trading and then decide whether you like it or not.
So is currency trading worth the risk? Yes, it does, but under one important condition. Forex trading is worth investing in only if you are ready to invest something more than money – time. To succeed in this unpredictable market, one needs to spend some time practicing, testing strategies, and learning from his/her own mistakes. To make this learning process risk-free, it makes sense to start trading on a demo account.
A demo account doesn’t require any deposits, but it’s a perfect tool to learn about the currency market. The teaching account gives you access to the actual trading platform and shows how the price moves in real time. You can place an order and see whether it works the way you expect it to. It is also a perfect tool for testing strategies.
To earn real money, though, you would need a real trading account. One thing you cannot learn by demo trading is overcoming psychological obstacles of greed and fear that come on the way. In a situation where trading decisions are driven by emotions, not a well-developed strategy, a trader is doomed to lose. So trade wisely.
JustMarkets is an international broker with clients from 197 countries. Millions of people have already opened trading accounts on JustMarkets to benefit from the best conditions, including low spreads, commission-free withdrawals, and a helpful team of support, working round the clock to ensure that each of our clients has the most convenient trading experience. Create a trading account on JustMarkets and start building your future today!