There's no doubt about it; forex trading remains one of the most popular and lucrative entities in the world. A total of $5.1 trillion is traded each day on the global market, for example, and this is lower than a 2013 peak in excess of $6 trillion.
While the lure of forex may be strong, however, the foreign exchange also exists as one of the most volatile and liquid marketplaces in the world.
This creates a significant challenge for novice investors, even if they have experience of other assets or marketplaces. With this in mind, here are three things that you should know before you commit to forex trading:
Knowledge and Understand Equals Power
Make no mistake; only informed traders can achieve sustained success in the forex market, with knowledge and understanding key weapons in the quest to make a profit.
Even basic knowledge can be empowering, with currency established as a derivative asset that does not require investors to take ownership of an underlying instrument.
Similarly, there are alternative investment vehicles that enable you to simplify the process of trading forex, including spread betting (through which you speculate whether a chosen currency pairing will rise or depreciate).
With this type of knowledge, you can become a more informed trader with an ability to optimise your activity on the market.
You can Hone your Skills Through a Demo Account
The rise of online trading platforms has made it easier than ever for investors to access the diverse world of investment in the digital age, with brands such as GKFX offering entry into a wealth of global markets.
These platforms have also evolved to offer a demo account option to traders, which enables participants to hone their strategies and gain practical experience of the forex market.
Essentially, demo accounts simulate real-time market conditions and price shifts, while empowering investors to trade using fake currency. This result is an invaluable learning experience, and one that bridges the significant gap between theory and practice.
Forex Delivers Margin-based Returns
Not only is currency a derivative, but it also delivers margin-based returns and losses depending on whether or not you're successful.
This offers both benefits and disadvantages in equal measure, as while you can earn far more than your original investment, it's also possible to incur losses that are in excess of your means.
Sure, you can negate this risk by using so-called stop-losses to automate your account activity but having understood it in the first instance is also an important starting point.
Tarik Pierce is the founder of InvestorTrip.com and regularly contributes articles to this website.
While living overseas, he uses PureVPN for a low cost VPN service.
He recommends Bluehost for setting up your own personal and/or business blog.
While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.