The accessibility to online trading platforms has made forex trading a popular concept amongst investors, coupled with the fact that interest in the global financial market has peaked. Retail forex traders can now explore trading as a source of daily income without doing so much or risking a lot of resources by investing in smaller trades and volumes. Today’s article will shed more light on what retail forex trading entails and how it could benefit you in the long run.
Retail Forex Trading
The concept of trading forex at the retail level is simple; it involves buying and selling currencies at lesser volumes for profit. However, the processes involved are more complex than they sound. Although the market is much less intricate than the institutional forex market, certain need-to-knows could seem difficult for a beginner. Retail trading generally involves using various tools and resources such as charts, analysis, economic calendars, indicators, etc. These tools help traders predict market trends, price movements, and trades.
According to recent data, the forex market has a daily trading volume of $6.6 trillion and continues to grow annually. This makes it the most significant financial market for investors. One of the primary reasons it’s a top choice is that it is much less volatile than other financial markets and investments due to its highly liquid nature. This equates to less risk involved and more opportunities for profits. This also exposes traders to opportunities for short-term investment where they can get in and out of trades quickly.
For institutional forex traders, banks are prominent forex players. Still, for retail traders, brokerage systems and online trading platforms are your go-to options as they allow for small-scale trades.
How Does the Retail Forex Market Benefit You?
There are reasons investors are heavily drawn to the forex market. Here are some of the benefits they see in the market that could also interest you.
Accessible to Beginners
The first thing anyone would tell you about the forex market is that it requires a lot of capital. Retail forex trading opens up the opportunity for small-scale investors to get into the market. With thousands of brokers available and online trading platforms, traders have multiple options to work with. Also, they get to begin with small trades, earning more profit and increasing their capital.
High Liquidity
The highly liquid nature of the forex market is one of the edges it has over other investments. A pool of investors is always readily available to trade with, increasing the ease with which participants can sell and buy assets. Roughly $6 trillion in currency is exchanged by individuals, banks, and institutions daily, and this figure is two times the annual British GDP. This liquidity can be leveraged to increase your profits or lower your risks significantly.
Opportunities To Earn Around the Clock
The market is active on a 24-hour basis, five days weekly, and whatever currency pairs you’re dealing with can easily be traded at any given time. The rolling hours of the market are a significant plus and an advantage traders can quickly capitalise on. Unlike the centralised exchange system bound by time or the stock market limited to an exchange’s opening hours, the FX market has more opening hours, and deals can always occur.
Improving Your Position With Leverage
Leverage is a concept in forex trading that enables you to open a position and pay a fraction of this as capital. With leverage, you can go further and earn higher. You can open up a position on some currency pairs with roughly 0.5% of the total value upfront. What this means for you as a trader is that you have a higher potential for profits even with smaller investments.
High Range of Currency Pairs
Being a retail forex trader doesn’t mean you are limited in investment. You can explore as many currency pairs as possible, even with a smaller capital. There are about 154 currencies in the market from 221 countries across the globe, and from this, most trading platforms offer about 130 pairs to traders. These pairs are all available to trade for retail investors and could be an opportunity to broaden your horizon as an investor. The top 5 currency pairs on your list are EUR/USD, USD/JPY, GBP/USD, USD/CNY, and USD/CAD.
Retail forex trading is the exchange of currencies to make profits. As much as there are opportunities in the market, there is usually a lot to learn before traders can attain that level of professionalism that brings in the money. Consider starting with demo trading to familiarise yourself with the market before trading with real money. Ultimately, it’s a game of tactics and strategies, and you should understand these concepts before fully entering the market.
