Investment is a popular means of income supplementation, and the most popular of its forms today is the Forex trade or the currency market. As implicit in the name, the currency market deals with the exchange of currencies hence the name Forex (foreign exchange).
The Forex market witnesses a massive worldwide participation on a regular basis and registers a transaction of about $4 trillion daily. Before going into the chief reasons accounting for the popularity of this form of investment, let us just gloss over what the trade entails.
Forex – A hybrid of the terms foreign exchange, this market entails trading in various foreign currencies. The norm is to purchase a prefixed set of currencies like the EURO and the USD, at a reasonable price, and sell them when their value peaks. The valuation of the currencies in the pair is done against each other, i.e. they’re compared with each other. After the comparison, whichever currency seems to be the dearer one is sold against the other thus, resulting in a profit. Thus, the entire operation is quite simplistic once you get the hang of it. Also, another advantage here is that, there isn’t any hard and fast rule dictating which currency you should sell when. It is completely the trader’s decision.
Apart from the simple operation procedure there are also two other factors which greatly boost the popularity of Forex investment. These are as follows:
- Accessibility- In the last couple of years, due to the all pervading nature of the Internet, everything has become available at the click of a button. Naturally, the currency market also falls within the ambit of the Internet’s prowess, and due to the merging between both, foreign exchange has become an open investment zone for anyone and everyone; all that is required is an internet connection and basic knowledge. Thus, once you get initiated in the process and become aware of what happens and how, you can participate directly, without depending on any broker or middle man. This cuts down on your expenditure (broker’s commission) and helps you to amass more profits. Further, as we all know that the currency of any nation depends on a large number of national and international factors, these same factors indicate how the currency trade is going to fare; thus, any participant of the forex market needs to keep herself updated on all such events and there is no more easily and widely available source of such news than the Internet. Hence, not only has the market and any information about it, become increasingly accessible to the participants in the last few years, but also this has eliminated the ability of any one party to monopolize the entire sector.
- Leverage – This is one of the most attractive features of the currency trade. Leverage in the forex market allows the traders to invest much more cash than they actually have deposited in their accounts. Thus, enhancing their chances of making a sizable profit. This normally takes place according to a prefixed ratio for e.g. in US the leverage ratio is set at 50:1. This means that for every $1 deposited in your account you can invest up to $50 in the market. Therefore, when you make an informed and accurate decision, the chances of your making a profit will be increased 50 times more.
However, in order to shield yourself from possible losses (due to leverage which can be more than you can handle), it is advisable that in your initial days you seek the help of a professional. Click here for further information on the topic of forex.