Forex is a completely electronic global marketplace for currency trading, in which you can invest 24 hours a day (from Sunday to Friday). It is a decentralized market in which a large number of participants from all over the world operate (banks, companies, financial institutions, retail investors, etc) and therefore offers great liquidity that makes it a good opportunity for investors, Forex is a multi trillion dollar market that offers the opportunity to make money.
To invest in Forex we need to open an account with an online broker that will be in charge of executing the operations of purchase or sale of currencies that you request and will do so in exchange for a commission (known as spread and is based on a small differential between the purchase price and the sale price). Oanda is one of the most popular Forex brokers in the United States.
In Forex, currencies are invested through pairs, each currency pair is represented by 3 letters of the base currency and another 3 of the secondary currency (Examples: EUR / USD, UDS / JPY, EUR / GBP) The base currency refers to the number of units of the secondary currency. For example, if we have a price of the EUR / GBP at 0.8365 it is indicating that 1 euro is equivalent at that time to 0.8365 pounds sterling.
By investing in Forex we can obtain benefits when buying and selling currencies based on the prediction that a pair will have an upward or downward movement in its price.
What are the advantages of investing in Forex?
– Forex is a market with great liquidity so you can buy or sell currencies instantly without waiting. Forex is the world financial market with the highest growth projection today.
– You can invest in Forex 24 hours a day (from Sunday night to Friday afternoon). The largest volume of operations usually coincides with the opening of the main world stock exchanges (Tokyo, London and New York).
– Investing in Forex is easy. As retail investors we can choose a reliable online broker and operate ourselves over the Internet from anywhere with a computer, tablet or smartphone.
– We do not need to have a large capital, most online Forex brokers offer the possibility of starting to invest in Forex from $100 dollars.
– The commissions are low. Most brokers charge a small commission called a spread that is based on a spread between the buy and sell bid of a currency pair. There is usually another commission for keeping a position open from one day to the next but it is also usually a small percentage and it would have no effect if we trade by opening and closing our positions within the same day, before the time that this premium is applied. There are usually no higher costs for custody, currency exchange.
– Thanks to leverage you can invest with a small amount of money and obtain the effect of operating a much higher amount. For example, with a 1:50 leverage and with only $50 that you provide as collateral, you can get the benefits of operating with a capital of $2,500. Each Forex broker can offer a different level of leverage depending on the financial instrument you choose or even allow you to choose it yourself (up to the limit set by the regulations of your country). Keep in mind that leverage can bring you great benefits with little capital but it also implies greater risk, specially when shorting currency so you must be prudent and start investing in Forex with caution and knowing the risks.
– Due to its large volume of negotiation, the Forex market is difficult to manipulate by large investment group, In addition, the bankruptcy of a currency is practically impossible, instead in other markets such as the stock market it is easier to see company bankruptcies or large falls, plus Forex is recession free which compared to the stock market, it’s a great benefit.
– You can invest in Forex by opening buy or sell positions. If your prediction is that the price of a currency pair is going to rise, you can open a buy position to later close it with a sale and collect profits. On the contrary, if your prediction is that the price of a currency pair is going to fall, you can open a sell position to close it later with a purchase. In this way, by investing in Forex you can make money on both up and down trends of any currency pair.
How to start investing in Forex?
To start investing in Forex the first thing you need is to select a safe and reliable broker. We recommend that you always choose a broker that is authorized and regulated by one of the main bodies, in the United States, the SEC regulates all brokers, which s great news for traders and investors.
In my Brokers tab, there is a list of Stock and Options brokers as well if you are looking to trade equities and Cryptocurrency as well.
In addition, this type of online Forex brokers such as Forex.com and Oanda offer you the possibility to test their investment platforms with a free demo account and start investing in Forex from just $100 dollars.
Always remember that investing and day trading are risky and it is possible to lose your capital, if yo are new please take the time to learn your fundamentals and learn your charts, no matter what you will be trading, always do some diligence and use a demo account, I would personally invest at lease 3 months just to learn the basics and start with a small account.