The Forex Market is the largest market in the world with around $5 trillion in currencies being traded on a daily basis. The trading of currencies is especially popular due to the fact that it is crucial to exchange currencies in order to conduct both foreign trade and business.
A central marketplace is not necessary for the exchange of currencies as it occurs over-the-counter, or OTC as it is more commonly known, and traders across the globe are connected through various computer networks with trades occurring in real-time.
The Forex market is open 24/5 and despite this weekend gap, there is a constant flow of traffic due to the different time zones and the fact that when one market closes, another opens.
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Why should trading be one of your hobbies?
Source: siliconindia
1. It is available 24/5
According to sashares.co.za, traders who are interested in trading Forex who are subjected to hectic work schedules will not miss out on trading opportunities as the Forex Market is open 24 hours of the day, five days a week.
When one market closes due to the time zone differences, there is another that will be open. Traders can trade at any given time of the day, anywhere in the world.
2. High liquidity as opposed to other markets
There are millions of traders who trade Forex at any given time during the day, despite time zone differences – although some markets may present lower volumes of traders depending on the market and the time zone. Based on a study made by Wikitoro.org, brokerage firm eToro alone has over 20 million traders with millions of trades executed on average per month.
Due to the high liquidity, trades can be executed quicker and more easily which means that the transaction costs, or spreads, tied to the transactions are often exceptionally low, providing traders with ample opportunities to speculate on the price movements.
3. High volatility
With higher levels of volatility comes ample opportunity to trade due to high volumes of currency being traded on a daily basis, translating to billions of dollars that are traded with each passing minute.
Traders can potentially reap large profits if they are able to speculate price movements in either an ascending or declining direction. Traders are, however, advised to ensure that they limit their exposure to the risk of losses by having risk management plans and tools in place.
Source: Admiral Markets
4. Leverage, when used correctly, is your friend
Forex is a leveraged financial instrument and by using leverage, traders are able to open larger positions despite their initial deposit, allow them the chance of greater gains.
Traders need to ensure that they understand leverage before applying it as it may also lead to great losses that may exceed their initial deposit.
Ensuring that brokers have negative balance protection and that users utilize tools such as stop loss and take profit may help in managing risk more efficiently.
5. Variety of currency pairs that can be traded
The currency pairs that the trader can trade depends on the offer the broker provides and which currency pairs they support trade-in, with most providing a wide variety.
Brokers who offer other financial instruments may offer fewer currency pairs to trade, but a majority of these brokers will offer trade-in Major currency pairs which include GBP/USD, EUR/USD, USD/JPY, and more.
6. Great potential to profit from trades
Traders who do not have a lot of time to commit to trading still have the opportunity to gain large amounts of profit if they understand the factors involved with trading along with the basics, they use a trading plan and a trading strategy that caters for their needs.
Traders who are not able to commit fulltime to analyzing markets and having a close eye on price movements can still benefit when trading as a hobby by making use of brokers who offer mobile trading in addition to algorithmic trading, copy trading, and VPS.
By utilizing mobile and automated solutions, traders who only seek to trade part-time can still benefit even when they are not able to spend a lot of time in front of their terminals.
Source: admiralmarkets
7. Trading Forex is exciting
The Forex market never stays the same due to the different economic conditions that are the driving forces behind price movements along with the fact that price movements can instantly change.
Traders who trade Forex as a hobby may become accustomed to market conditions on one day and find that when they enter the trading environment, it had already changed significantly.
It is, however, crucial for traders, even those who trade as a hobby, to stay up to date with market conditions and the driving factors that encourage the movements in price to ensure that traders keep their trading strategies up to date to ensure they can gain profit.
Tips on Trading Forex, even as merely a hobby
It is imperative for traders to spend a lot of time analyzing the markets, placing trades, and focussing on making small but consistent gains instead of focusing on immediate, large profits.
Traders need to keep in mind that small and consistent gains accumulate and they generate sizable profits over time by using a few trading strategies that have been thoroughly tested and adapted according to changing market conditions.
Any professional trader will also advise beginners that it all starts with choosing the right broker and although there is not a single broker that caters to the needs of all traders, choosing the right one more suited to the trader and their needs is the first step.
Traders need to ensure that their broker is reputable along with being fully regulated and licensed. Traders need to consider this along with the wide range of reliable services, trading platforms and exceptional customer support along with competitive spreads.
When trading Forex, due to the volatile and often unpredictable market conditions, it is crucial that traders have firm control over their emotions and ensure that they have a trading plan that will keep them focussed, disciplined and emotionally stable.
When it comes to the Forex Market, a lot of traders might have the misconception that complex and sophisticated strategies will guarantee success, when it, in reality, depends on the simplest of approaches.
Traders need to research trading strategies in finding what suits them, and then use technical indicators and fundamental data to form a strategy that they are comfortable using and which delivers results.
In addition to finding the right strategy, traders need to test their strategy thoroughly and they need to be able to either adapt the strategy to cater to different market conditions, or they need to know when it is time to abandon the strategy and implement a new one.
Source: Admiral Markets
Final Thoughts
Even when traders merely want to trade Forex as a hobby, the same rules apply as they do with serious traders. Traders need to have a basic understanding of Forex trading, the market, and the conditions that are driving forces behind price movements.
No trader wants to invest a significant amount of capital only to lose it as one of the core reasons behind trading remains the fact that traders aim to make a profit and minimize any losses.
