Current Climate Encourages Investors to Trade Forex

| 29 Jun 2012 | 0 Comments

The foreign exchange industry is a unique market that generates more than 4 trillion dollars a day in trades. As one of the most valuable trading markets in the world, it is no surprise that millions of people from across the globe trade on the foreign exchange market daily, in an attempt to make a significant return on investment within a short period of time. The recent sovereign debt crisis has led many people to trade forex, as it is regarded as a safe haven of investment that protects assets from financial, economic and political uncertainties. However, knowing which securities to trade, how to successfully execute trades and the best time to do so can be a daunting prospect for investors, leading many to approach this complex industry with caution.

trade forexAs the European Sovereign debt crisis continues to impact negatively on banks and other financial institutions worldwide, today’s investors are looking to alternative tactics to enhance their money-making potential quickly, easily and safely. While investments in bonds, mutual funds, stocks and other traditional techniques have suffered under the impact of the recession, a number of people are turning towards the forex market for a more profitable solution.

As online trading platforms are becoming increasingly accessible to individuals, currency trading has become progressively widespread amongst traders, as it helps them to diversify their investment portfolio. If executed correctly, forex trading has a great deal of profit-making potential, as the foreign exchange market combines high levels of liquidity with low initial deposits. It is therefore no surprise that the popularity of forex has flourished across the globe in recent years, attracting both individual investors and large corporate entities.

The impact of any economic recession on the forex market is usually a positive one. Governments and Central Banks around the world begin injecting funds into their respective economies in order to stimulate them, thus increasing the liquidity of the market. In addition, during a financial crisis it is very obvious which direction a currency will take, leading to an increase in trading volumes and a greater potential for the trader to make profits. Individuals looking for safe haven investments during turbulent periods therefore turn to the forex market to make a passive and recession-proof investment.

Throughout the European financial crisis, the forex market experienced considerable growth in trading volumes, as a result of traditional investment strategies experiencing a negative knock-on effect from the resulting economic crisis. As confidence in international banks continues to diminish, the multi-billion dollar making forex industry has managed to maintain its vigor, as growth in retail trading – or trading for individual purposes, continues to flourish.

Continued growth during a recession

Reports suggest that since 2007, the retail forex industry has grown by 42%, and now represents the largest share of this global market. Retail forex, which enables individuals from a range of financial backgrounds to execute trades on the forex market, has experienced the biggest growth in the last six years, whilst traditional investment techniques have reported a sharp drop in popularity. The global forex trading industry is not directly affected by one country’s government or economy; which in turn ensures that the future of forex remains strong. One of the main advantages of foreign exchange trading is that traders are able to make a profit, regardless of whether a currency rises in value or falls, meaning that throughout a recession, forex trading remains rife.

A recent report found that the retail currency trading platform of Germany’s Deutsche Bank –, saw an increase in volume of 37% in the first quarter of 2012. Many international retail forex companies have also reported a significant increase in new account openings, as a growing number of retail investors from around the world are turning to forex for the opportunity to place trades on this market, and convert their cash into an investment.

Impact of technology

technologyReasons for this growth are apparent: the last decade has seen a boom in global internet usage, enabling retail traders from every corner of the globe to access forex news, tips and information at the click of a button. The breadth of information available regarding this fascinating and rewarding industry is infinite, while the potential to earn money is unlimited. The continual, 24-hour accessibility of this market is yet another reason why international traders – both experienced and those new to the industry – are choosing to trade forex, whilst the potential to make a profit is considerable.

Investors who wish to take up trading in addition to their full-time profession can perform their trades outside of their working hours, or can set up electronic trading systems that enable automatic trades to take place. Individuals can begin trading with a deposit of as low as $50, while transaction charges across this industry remain low, in large part due to the openness and liquid nature of this market. With a combination of knowledge, understanding and attention, this high liquidity market enables traders to earn money relatively quickly, and ultimately enhance their chances of achieving trading success.

Technology has drastically supported the growth of the forex industry, as the availability of online platforms has made forex trading the most easily accessible and user-friendly investment tool available. Advances in technology have resulted in the evolution of online trading and execution, whilst the divide between retail traders and those from corporate institutions has narrowed significantly.

Online trading platforms are also available in a number of formats and can also be downloaded onto computers, laptops and mobile phones, including iPhones, iPads, Blackberrys and Android phones, allowing trades to take place at any time of day and from any location. Most forex companies also provide in-depth and real-time market information, forex tutorials, trading tips and other resourceful information to their clients, providing favorable money-making conditions to novice traders.

Trading risks

Nevertheless, forex trading is not without risk and those with the intention of trading are advised to research the markets before beginning to invest. The foreign exchange market is a volatile and challenging one to understand, particularly for the novice trader, and inexperienced traders should therefore approach it with a certain level of knowledge and discipline.

Experienced traders are also advised to approach trading with restraint, control and common sense, as many individuals hoping to make a large profit within a small space of time often overtrade, resulting in the sudden burnout, and loss, of funds. Traders with families, loans and other financial obligations are advised to maintain a continuous level of caution whilst trading, as although this market is lucrative, there is no magic formula for success that will immediately turn hundreds, or thousands of dollars, into millions.

The forex ascent continues

Despite the downsides, it is apparent that individuals from countries as far reaching as the USA, Nigeria, Malta and New Zealand continue to seek forex trading platforms as a way to safely and practically increase their revenue during a turbulent economic environment. Those willing to educate themselves about this active market and exercise a continued level of discipline can quickly and conveniently reap the rewards of their trading – provided they are conscientious and meticulous.

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