Trading offers an array of investment possibilities and profitable outcomes. People turn to this world for many reasons: extra income, side hustles, something to do in retirement, etc.
If you’re looking to enter into the exciting, interesting, and potentially lucrative world of trading, then a question you’ve probably asked yourself is, “what’s the difference between forex and trading in other markets? And which one should I choose?”
The first thing you need to know is that the Forex (foreign currency exchange) and stock trading markets are completely different entities. Each market has its own set of unique and appealing features.
The forex market is a decentralized global market in which all the currencies of the world are traded. It is the most liquid market globally, generating a daily average of $5.3 trillion in trades. The market is constantly influenced by news, global events, and politics, and thus a keen knowledge of such events is essential to success.
While Forex and other currency markets could be considered digital, especially in today’s climate of the internet and associated technologies like online banking, cryptocurrencies are truly digital. They cannot be likened to something like the Euro or Japanese Yen, for which there exists legal tender.
To further illustrate the decentralized concept, traditional banking takes place on demarcated or centralized servers. As noted earlier, the forex market generates a daily trading volume of $5.3 trillion. In comparison, the new digital markets do a daily average of $4.1 billion, so if you’re going to be trading Forex pairs GBP to USD, you’ll be in the camp of the former.
Forex trading accommodates leverage of 50:1. In other words, you can take a trading position to the value of $100 for a mere $2.
Caution needs to be heeded, though, as this also makes matters enticing, and hence rapid losses can occur. Since the new digital markets don’t operate within a central bank or any middlemen, transaction fees are nominal.
The volume of participants in the Forex market is larger than in any other market; thus, the market lends itself to a climate in which large volumes of currencies can be quickly traded. As a result, a single investor cannot drastically infringe upon or influence the Forex market as they might with the stock market.
Since the Forex market is prone to political machinations, global news, and announcements, profitable investment opportunities can prove easier to come by. Traders can plan by way of various techniques, including analysis and legacy issues.
The real appeal of trading
If the past year has proven anything about humanity, it’s our ability to adapt to new circumstances. New circumstances lend themselves to new opportunities, and new opportunities, in turn, can become profitable.
By electing to trade in Forex, you’re not just choosing a vocation that can yield impressive returns if you work diligently; you’re also entering into a world that will empower you with new knowledge and one that will keep you on the cusp of various developments.
The technology you’ll wield combined with your dedication to the latest updates in global news, politics, and events will educate, excite and benefit you. There’s a lot to be said for being in the know and being part of something, and by trading, in Forex, you’ll be opening yourself up to a world of evolving technologies and one filled with groups and forums of like-minded individuals. At the end of the day, it’s not just a job; it’s also a way of life.
Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.