Why forex trading is better?
Forex trading online is a form of currency trading that involves the simultaneous purchase and sale of one currency against another. It embraces all major currencies as well as some less-traded currencies, like Turkish Lira and Russian Rubles.
Compared to stocks, the Forex market is considered much less risky. The main reason is that currency values are highly correlated with each other and they all move in the same direction most of the time. Therefore, a Forex trader will never lose money unless he trades in an extremely unbalanced position.
To take advantage of this market, one should buy a currency that he thinks will appreciate against another one or – if he considers that both currencies will go down for some time – he can place a “pair trade” by taking both currencies instead of just one.
Significance of forex markets
The existence of Forex markets makes international trade much more efficient. This eliminates the need for transporting bulky inventory from one country to another, which means lower shipping and handling costs.
When one has a surplus of a currency, he can exchange it for an equivalent amount of another currency. The client must decide whether he wants to sell his currency against his intention or not. If he accepts this offer, then he will have to pay some commission fees, usually, 0% if you opt for the seller’s market and 1-5% if you agree to the seller’s price. If the client decides not to accept such an offer, then both currencies will drop until they reach equilibrium values again.
A Forex trader will have to pay a lot of attention to the market news. Through his knowledge of political events, central banks’ decisions, and other factors, he will be able to determine the best times to buy or sell currencies.
In many ways, forex trading online can be more profitable than trading stocks. First of all, there are more than enough currency pairs available. This way, it is possible for traders to make much higher returns on their investments than when trading stocks.