Currency Trading is the New Black: 10 Reasons to Trade Forex

Chances are it was the thoughts of financial success.

Well, maybe that’s what kept you going when you first started trading.

But now the chances are it’s more about the challenge, the passion to succeed and the desire to actually become a better person.

It’s my belief that currency trading is a vehicle for transformation.

Yes, transformation of your personal finances is one part of it, but I meet few serious traders who are in it solely for the money.

Instead, mastery of the markets can be about mastery of the self.

Often what holds you back in the markets is what holds you back in life. So if you can conquer the destructive tendencies that hinder your performance in the markets, it’s likely to change you for the better.

And this is perhaps the most compelling reason to trade Forex.

If that’s not enough, here are ten more reasons why currency trading might be right for you.

 

Reason #1: Flexibility of money management

One of the under-appreciated benefits of Forex trading is the degree of control you have over your money management model.

With the advent of mini and micro lots, you can get very precise in the amount of money you risk per trade. This allows for consistency in your risk management, which leads to consistency in your trading.

This flexibility is further enhanced by the way traders are charged in the Forex market. Traders are typically charged the spread when they trade. If you trade a small size then the spread you pay is correspondingly small.

This is very different to the stock market where you may face commissions of $10 or $20 on even a small trade. If you are looking to risk $50 a trade, this is a big chunk of your profits. On the Forex markets, you might pay $1 or $2 in spread for the same $50 risk.

 

Reason #2: You can always find a trend

One thing you can count on when you trade currencies is that somewhere there will be a trend.

Across all timeframes and most currency pairs Forex tends to trend.

On daily charts:

On hourly charts:

And even on 1-minute charts:

When you are in the market for a trend, you can count on currency trading.

 

Reason #3: Volatility expansions

When trading Forex I am always on the lookout for low risk ideas.

A low risk idea is not necessarily one that is going to be right – 50% or more of your low risk ideas might be losers. Rather, low risk ideas are opportunities to get into positions that have a superior risk/reward ratio.

If you lose 50% of the time but make three times your losses on winning trades, you will come out a long way in front.

Because of the way the currency markets contract into a tight range before expanding into a trend, they provide plenty of opportunity for these types of trades.

 

Reason #4: Technical analysis

One of the beautiful things about currency trading is that the Forex market seems to have read the metaphorical guide to technical analysis. It really does seem to respect technical levels, patterns and pattern failures that occur.
This is true for many of the disciplines of technical analysis:

  • Chart patterns
  • Candlesticks
  • Support and resistance

Technical indicators tend to run quite smoothly on Forex charts too. This is because the markets remain open 24 hours a day, 5.5 days a week, so there is less opportunity for gaps to occur.

 

Reason #5: Liquidity

There are many benefits to trading a liquid market, many of which are under-appreciated by inexperienced traders but seen as essential to the trader that has been there and done that.

  • You can get in and out of trades quickly without dramatically moving the market, even if you are trading at size
  • If you have a working strategy, you can expand it to trade large sizes. This is particularly important if you plan to manage money or have a signal trading master account one day
  • Liquidity allows you to use leverage effectively for short-term trading. As it is easy to get in and out without much slippage due to the depth of pricing, you can be comfortable using leverage on your position
  • Liquidity contributes to the low cost of currency trading. Due the massive volume of global transactions (and price competition between brokers), trading currencies is quite cheap.

 

Reason #6: It’s fun, satisfying and enjoyable

Don’t underestimate the passion of Forex traders.

Many people trade Forex because it is exciting and interesting.

And yes, I know that when you trade you should not do it for kicks. Successful traders treat trading like they would any other business.

But Forex traders are a passionate lot. They love trading the markets and find it incredibly enjoyable and satisfying. Just don’t place trades for the thrill of it.

 

Reason #7: 24-hour market

The Forex markets are open 24 hours a day, 5.5 days a week.

While some traders think the markets being open for 24 hours a day means that they need to be in front of their trading screens constantly, this is far from the truth.

Rather, the beauty of a 24-hour market is that you can fit trading to your lifestyle – no matter if you have a day job.

As a Forex trader you could:

  • Look at the charts once a week on Saturday and place long-term trades
  • Look at the daily charts after work or in the morning
  • Spend two hours each evening day trading
  • Swing trade by looking at the charts every hour
  • Place alerts on your account for when a price is reached or an indicator does something
  • Watch the screens for 12 hours a day, tracking each and every bit of news about a currency pair

The choice is literally yours.

And there are people doing this successfully every day.

 

Reason #8: Long and short

The Forex market is agnostic to direction.

When you trade stocks the market has a bias to the upside as the majority of buyers, including mutual funds, are long only. This means that things are good when the market is going up, but very bad when the markets are going down.

In Forex, you trade one pair against another. It’s just as easy to go short the Euro as it is to go long the Euro (when you short the Euro you are going long the USD and vice versa).

This means that currency trading can allow you to profit in all market types. There is never going to be a ban on short-selling, while you can react to the markets’ moves as they happen.

 

Reason #9: Opportunities to become a signal provider

The Forex market is changing.

Top Forex traders now have the option to share their trading success through innovative copy trading technology.

If you have a successful Forex trading strategy, you can be approved to be listed as a signal provider by any number of signal services, including MetaTrader 4 Forex Trading Signals, Signal Trader, Myfxbook or ZuluTrade.

Other traders then pay a fee (that you set) to follow your account. This fee could be upward of $100 per trader that follows you.

A top signal provider could have 500 or more followers, so you can see how lucrative this avenue can be.

 

Reason #10: You can start small

One for the newbies.

When you start currency trading you can begin small. Unlike when you trade stocks, you won’t pay hefty commissions when you trade small sizes, as I mentioned in point #1.

This means that you can begin with a small amount in your trading account – even as low as a few hundred dollars – and let your account grow with your skill and confidence levels.

 

We’re here as a resource for you.

Okay, so you want to trade currency?

You have a few options. You can you go out and pay for an expensive training course that can cost big bucks and (most likely) not get the value you paid for.

You can browse around in Forex forums, gobbling up all the free information (and misinformation) that the World Wide Web has to offer.

Or you can choose to work with a reputable broker, who offers free education as part of their service. Often this is the lowest-cost option, while still working in a structured program with passionate educators.

And, contrary to popular opinion, there is no rush for you to trade. A good broker will be quite happy for you to take your time to learn, as they realise that they will be rewarded down the track with a trader on their books who is trading consistently – and may even bring other traders to them or run a managed Forex account.

You can get started with this free Forex course, the Definitive Guide to Forex System Development and by setting up a free demo account to practice your trading risk-free.