Is forex trading worth it

Forex trading - is it worth it?

Forex is primarily a large choice of financial instruments. We will find contracts here for all the major world currencies. In addition, companies through which we can trade on Forex, broaden their offer and introduce instruments from other markets.

This allows us to trade on contracts based on commodities, stocks and global stock indices. In addition to contracts, options are also introduced.

Forex trading: occurrence of clear trends

This phenomenon is very characteristic for Forex. Here we will see decisive price movements in one direction. What is important, these movements can last very long. This is especially important for people using the so- Investment systems. Most of them are based on the principle of following the trend and clear movement of prices, then they make the most money.

Forex trading: low correlation between instruments

Correlation is the mutual behavior of the prices of two or more financial instruments. When the prices of two instruments go in one direction and new peaks and troughs appear at the same moments, the correlation is high. When it is different, we are talking about low correlation. In the case of Forex, there are both phenomena. Instruments based on currencies, namely pairs of currencies, where on one side of the pair are the same currency, eg GBPUSD, EURUSD show a high correlation.

Likewise, some stocks, most stock indices, and commodities belonging to certain groups such as precious metals behave in a similar way. But knowing these relationships, we will always be able to find instruments that are very weak or uncorrelated. This will mean that we will always find instruments moving in different directions. What does this mean for an investor accustomed only to the stock market?

It has more investment opportunities. Stock markets have a very high correlation coefficient. When the stock market rises, everything is practically growing when it falls, almost everything falls. It is hard to earn on such a market. At Forex, movements take place in different directions. Combined with the ability to make money on the decline, almost all instruments, this gives the investor unlimited possibilities.

Forex trading: 24 hour trading

This advantage is probably quite clear. Many of us have classes that we do not want or can not give up. 24/7 trading allows you to make a transaction at any time of your choice. Persons who can not invest in the stock market can not play Forex on their own account.

Forex trading: high liquidity

There are many problems with low liquidity. First, it is difficult to buy a given financial instrument exactly at the price we set in the order. The same applies to sales. Price may very different from what we dream about. Second, it is difficult to make one big transaction. With a low liquidity market, a large commission is very volatile.

It may happen that we buy or sell at a price that is far from what we planned or did not make at all. Such problems occur on many stock exchange securities. To buy or sell them we have to do it in installments by making many small transactions.

On Forex is different. Trading mainly by banks and other large institutions, hence liquidity is very high. An individual investor can easily buy and sell, often without any price slippage.

Forex trading: the ability to play in different timeframes

Forex is a place where people with different temperament can play. Each investor prefers another transaction model. There are some who prefer to hold a few days or even weeks after buying an instrument. There are also those who prefer quick, short transactions by making them several dozen a day.

Presenting quotes in different timeframes (from minute to month) and high liquidity, creates opportunities for every investor, allowing you to match the style of the game to the character of the player.

Forex trading: watching world trends

By observing the behavior of prices on world markets you often forget about their relation to our reality. But here we can see some tendencies that we will soon feel in our wallet. The rise in wheat prices will quickly translate into the price of bread in the store.

The price of oil will soon increase at the gas station. If we decide to put up a house, we will not indifferent to the price of copper. And as soon as we set up our home, we will certainly feel the high price of natural gas. These dependencies are much more and we can all see if we know what to look for.

Despite its many advantages, Forex is also free from defects. One of the most important is its high variability (read: nervousness). Prices can change here very quickly, in a short span of time, over long distances. For very experienced players this can be an advantage, but for many it is a challenge.

It may be a problem to calculate profit and loss on Forex and to determine the size of the position you want to open. This involves the different values ​​of individual contracts and the currency in which this value is displayed.

In conclusion, however, it can be said that Forex has far more advantages than disadvantages. An average investor with specific knowledge will find here valuable insights in investment.