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Advantages of Forex Trading for New Investors

By Eric Hamilton , Oct 26, 2019 05:18 PM EDT
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People who are new to the world of investing often begin by dabbling in the stock market. They set up online accounts with brokers, establish trading accounts and make their first purchases after researching hundreds of prospective stocks. Investing in the stock market or in real estate can quickly become a full-time job. Trading foreign-exchange currency pairs is a different matter. It's one of the newest and most successful forms of legal online investing. There's a lot of debate about why forex, as it's called, has been such a roaring success. Several key factors play a part in this new economic frontier for individual investors:

Liquidity is Never a Problem

Unlike some stocks and bonds, selling forex holdings is never a challenge. Trillions of dollars' worth of international currency is traded every day on forex exchanges. When you need to sell, there's always going to be a buyer. And when you're shopping for a position, a buy order is executed instantaneously.

There's a Short Learning Curve

Forex trading has its complexities, just like everything else, but the learning curve from raw beginner to skilled trader lasts somewhere between six months and a year, depending on your level of commitment. Adults who have day jobs and trade for a few hours in the evening and more on weekends often end up doing forex full-time. With fewer wrinkles than stock, bond and ETF trading, forex has exploded in popularity due to its short learning curve.

Suitable for All Kinds of People

Unlike traditional stock market trading, forex appeals to a wide range of personality types. Technical workers who spend their days concerned about Python monitoring, web design, and cyber security are among the most ardent forex traders. Likewise, those who aren't used to numerical endeavors enjoy the simplicity of straight forex trades. The beauty of forex is that it offers something for everyone. Maybe that's why it's the fastest-growing form of online trading for individual investors.

Markets Never Close

If you become a forex trader, one of the first things you notice is that it has that Las Vegas casino type feel because the action never stops. While regional markets do close for short periods of time, there's always one or two open for business. This 24/7 access is one of the big advantages for traders who are committed to 9-to-5 jobs and can only trade late at night or very early in the mornings.

Initial Investments are Low

Most online forex brokers will let traders set up accounts for less than $100. Of course, if you want to trade on margin or make complex types of deals, account minimums will be higher. But for the average person just getting into forex, a couple hundred dollars is all it takes to start trading. Brokers say the average amount that new traders open accounts with is $500. Most don't begin live trading right away. It's common for new traders to do simulated deals for several months before putting real money on the line. 

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