It is often considered a perfect method for everyone who wants to earn additional income and has some free time. Yet, Forex trading is not about free or cheap money. Most talks and rumors about it are too far from reality. Hence, if you are interested in this kind of career and want to make a try, start by weighing up all the opportunities and risks.
Forex trading is a notion, which is quite simple to understand. It involves buying foreign currencies at lower prices and waiting for them to grow in value to sell them at a profit.
So, if you ask us: “What is a Forex trader?”, we will answer that it is a person who buys and sells diversified fiat currencies on the Forex market. But that is a quite simplified definition. When an investor wants to earn from this activity, he cannot perform deals just on the basis of his intuition or by guess. It does not work like that. Traders devote a bigger part of their working hours to market monitoring, studying all sorts of charts and expert forecasts, and complicated calculations. It is not as easy as it may seem to be. However, it is true that one can start trading without prior education or large capital. Instead, one can go through courses offered by the brokerage platform selected or choose independent self-education.
Pros:
- Reasonable initial capital requirements. Compared to stocks or options, you can enter with a much smaller capital due to tight spreads and high leverages.
- High volatility. As prices of currencies fluctuate constantly, that creates opportunities for speculations.
- High liquidity. The supply and demand for foreign currencies (especially major pairs) are always sufficient.
- Variety. As a beginner, you would probably start from major currency pairs as that is less risky. But you will have an opportunity to choose from 28 variants in any case. The more diversified portfolio, the lower the risks.
- Passive earning options: from managed accounts to copy trading.
- Comfortable open hours. The Forex market works almost around the clock, so you can make deals whenever you have some free time.
Cons:
- Self-education. One usually needs to devote a few months to learning to make a successful start.
- Risks. They are connected with frequent price moves, which can be unexpected sometimes. Another factor is high leverage. They allow earning large sums with small investments, but there is also a risk to lose much more than you invested.
- Isolation. Working on one’s own sitting in front of a computer or tablet the bigger part of the day may be uncomfortable for certain people.
Also Read: Expert Tips on How to Find the Best Cryptocurrency App
In sum, if you are interested in investments and seek an additional source of income, trading Forex is one of the most optimal opportunities. Yet, you must take possible risks and difficulties into consideration as well.