If you’re considering forex trading, you’re not alone. And in terms of trading, it’s a young person’s game. With over 43% for forex traders falling into the 25-34-year-old age category.
Because many forex trading platforms are online and on apps, millennials, in particular, are comfortable with the new and emerging technology that surrounds this modern way of trading. But what is it, and what should you know before you start trading?
What is forex trading?
Quite simply, forex trading is buying and selling foreign currency for a profit. Alongside being the largest market in the world, it also has the greatest volume of activity, with trillions being turned over every single day.
How does it work?
The aim of forex trading is to predict if a currency will increase or decrease in value relative to another foreign currency.
Because when trading in forex you buy and sell currency simultaneously, it’s always traded in pairs. In simplest terms, if you’re going abroad and you need currency for that country, you will look at the exchange rates and try and predict when the best time would be to exchange the money for the greatest amount of foreign currency for the lowest amount of domestic currency.
Forex works in the same way, but on a much larger and faster scale.
Why trade forex?
More and more people are moving away from more traditional routes of investment and choosing forex because of the potential for high profits and fast returns. In a world where we want instant gratification, forex feeds this need.
Because of the high volume of currency being traded at any time, the forex market doesn’t sleep. Unlike the New York stock exchange that opens and closes with the ringing of a bell, the forex market is open 24 hours a day seven days a week.
Traditionally the stock market was off-limits to amateurs and people with small buy-ins, but forex trading has changed all that. There’s no need for brokers or vast amounts of cash, it’s a market that’s open to anyone.
What are the risks?
Of course, like any investment, there is an inherent risk. Because forex trading is so popular amongst social media users, there’s been a rise in illegal traders on Instagram targeting amateurs. Promising quick rich schemes, it’s easy to get lured by the thought of a champagne lifestyle.
Another major risk is because of the volume of trades and the volatility of markets, it’s easy to lose. Trades are happening every second of every day, and financial positions can be greatly impacted by changes on the forex market.
Interesting Related Article: “Forex Trading: Expectations vs. Reality“