Cryptocurrency

6 Benefits Of Forex Trading

6 Benefits Of Forex Trading

Experts believe that one should start investing in a young age in order to have a more stable future. One example of great investment ideas for young people includes starting a trading career in the Foreign Exchange Market or Forex. This involves purchasing various foreign currencies and then selling them for profit when the time is right.

Considering that the Forex market has endless opportunities and risks, here are some benefits that investors can expect in trading foreign exchange:

1. Highly-liquid market

Liquidity is the quickness of the trade activities of a platform, which means the higher the liquidity, the faster and better the trade quality. The Forex market is the largest and most liquid market in the world. It currently handles an average trading volume of about 5 trillion United States dollars which makes it a great starting point for most budding investors.

Since nearly every business requires currency to operate, one can expect that the demand for certain currencies will always remain intact even if market price fluctuates from time to time. Additionally, a highly liquid market makes it easy for investors to buy and sell financial assets with relative ease.

2. Provides opportunities to trade in different styles

There are different types of traders, all depending on the personality of the person doing the trade. What makes trading Forex so appealing is that it provides opportunities for different traders and styles, even those interested in cryptocurrency. Depending on how you like to approach your capital, certain traders can trade by either of the following:

  • Keeping long positions – this includes keeping a certain position in the market for indefinite period of time before selling it which results in creating a stable profit in time. This strategy is a classic technique for conservative traders.
  • Utilizing short-term techniques – such as scalping and day trading which allows traders to make a profit within a shorter period of time. This strategy is a favorite for traders who wish to work in a high-paced environment.

Additionally, one can also utilize different strategies simultaneously during work which makes it one of the most versatile financial markets of the world.

3. Allows trading on leverage

One of the many issues that people have with starting investments is capital. Capital is funding that’s required for the business or trade to operate effectively. There are many kinds of capital like operational capital, startup capital and others. One of the many benefits of trading in Forex is that foreign exchange investors do not need to start with a huge capital to trade foreign currencies. In fact, one of the benefits of starting a career in the market is that it gives one the chance to trade on leverage.

Leverage is the trade unit of currency in the platform. To illustrate leverage, you can imagine a 100 to 1 ratio, which means that your 100 USD will allow you to trade 10,000 USD worth of credits. This kind of leverage allows traders to start even with low capital; however having a high leverage ratio is risky as well. This involves starting with minimum capital and placing their trade in a favorable position. Should the market work with you, you can then make a nice profit out of it. Make sure you learn to manage your capital and credits wisely.

On the downside, leverage can also work against you if you are not careful, which could result in incurring losses. Beginners are advised to start with a 2:1 ratio and move up once they’ve gotten enough experience and control.

4. Readily accessible

The Forex market deals with various currencies that can be found around the world. As such, the market makes it a point to provide easy access to traders no matter where their location is and what time it is. To better accommodate traders, the market itself is open 24 hours a day, 5 days a week which gives investors plenty of time to find endless opportunities.

Additionally, even if the market is closed for the day, investors can still gain access to the market’s price fluctuations which makes it a lot more versatile compared to handling other financial assets. Another instance that makes Forex readily accessible is that it offers mini and micro trading accounts for investors with different budgets. Some of which usually have a deposit fee of only 25 USD.

Aside from the availability of the Forex market itself, most trading brokers and platforms have created mobile applications so experienced traders can do their trades on their mobile devices at any time.

5. Offers numerous resources

Considering that there are endless opportunities and risks in the market, various companies often provide numerous resources and tools that help budding investors gain the necessary skills to succeed. One example of which is the inclusion of demo trading accounts in certain platforms. This feature works by providing a real-life simulation on what it’s like to trade currencies in the market. This gives novice traders and strategy makers insight on what it’s really like to work in the market thus making it easier for them to start trading live.

6. Provides various learning opportunities

Aside from gaining a set of skills needed to succeed in trading, budding investors who trade Forex can expect a lot of learning opportunities that they necessarily can’t find anywhere else. Some of which include:

  • Financial planning such as knowing how to work with minimal capital and using it to your advantage.
  • Financial literacy such as knowing how to handle your money responsibly so that you won’t easily lose the money that you gain.
  • Risk management such as understanding how to reduce your chances of possibly losing some of your money
  • Price fluctuations such as understanding how certain factors like social, political, and environment issues can affect a currency’s value.

Plus other unique experiences that can help one realize their mistake and learn from it.

Conclusion

When executed properly, trading foreign currency can be a great way to make extra income. As the world’s economy becomes more globalized than ever, experts believe that now is the right time for young investors to start their career so they too can take advantage of the market’s numerous benefits.

Experts believe that one should start investing in a young age in order to have a more stable future. One example of great investment ideas for young people includes starting a trading career in the Foreign Exchange Market or Forex. This involves purchasing various foreign currencies and then selling them for profit when the time is right.

Considering that the Forex market has endless opportunities and risks, here are some benefits that investors can expect in trading foreign exchange:

1. Highly-liquid market

Liquidity is the quickness of the trade activities of a platform, which means the higher the liquidity, the faster and better the trade quality. The Forex market is the largest and most liquid market in the world. It currently handles an average trading volume of about 5 trillion United States dollars which makes it a great starting point for most budding investors.

Since nearly every business requires currency to operate, one can expect that the demand for certain currencies will always remain intact even if market price fluctuates from time to time. Additionally, a highly liquid market makes it easy for investors to buy and sell financial assets with relative ease.

2. Provides opportunities to trade in different styles

There are different types of traders, all depending on the personality of the person doing the trade. What makes trading Forex so appealing is that it provides opportunities for different traders and styles, even those interested in cryptocurrency. Depending on how you like to approach your capital, certain traders can trade by either of the following:

  • Keeping long positions – this includes keeping a certain position in the market for indefinite period of time before selling it which results in creating a stable profit in time. This strategy is a classic technique for conservative traders.
  • Utilizing short-term techniques – such as scalping and day trading which allows traders to make a profit within a shorter period of time. This strategy is a favorite for traders who wish to work in a high-paced environment.

Additionally, one can also utilize different strategies simultaneously during work which makes it one of the most versatile financial markets of the world.

3. Allows trading on leverage

One of the many issues that people have with starting investments is capital. Capital is funding that’s required for the business or trade to operate effectively. There are many kinds of capital like operational capital, startup capital and others. One of the many benefits of trading in Forex is that foreign exchange investors do not need to start with a huge capital to trade foreign currencies. In fact, one of the benefits of starting a career in the market is that it gives one the chance to trade on leverage.

Leverage is the trade unit of currency in the platform. To illustrate leverage, you can imagine a 100 to 1 ratio, which means that your 100 USD will allow you to trade 10,000 USD worth of credits. This kind of leverage allows traders to start even with low capital; however having a high leverage ratio is risky as well. This involves starting with minimum capital and placing their trade in a favorable position. Should the market work with you, you can then make a nice profit out of it. Make sure you learn to manage your capital and credits wisely.

On the downside, leverage can also work against you if you are not careful, which could result in incurring losses. Beginners are advised to start with a 2:1 ratio and move up once they’ve gotten enough experience and control.

4. Readily accessible

The Forex market deals with various currencies that can be found around the world. As such, the market makes it a point to provide easy access to traders no matter where their location is and what time it is. To better accommodate traders, the market itself is open 24 hours a day, 5 days a week which gives investors plenty of time to find endless opportunities.

Additionally, even if the market is closed for the day, investors can still gain access to the market’s price fluctuations which makes it a lot more versatile compared to handling other financial assets. Another instance that makes Forex readily accessible is that it offers mini and micro trading accounts for investors with different budgets. Some of which usually have a deposit fee of only 25 USD.

Aside from the availability of the Forex market itself, most trading brokers and platforms have created mobile applications so experienced traders can do their trades on their mobile devices at any time.

5. Offers numerous resources

Considering that there are endless opportunities and risks in the market, various companies often provide numerous resources and tools that help budding investors gain the necessary skills to succeed. One example of which is the inclusion of demo trading accounts in certain platforms. This feature works by providing a real-life simulation on what it’s like to trade currencies in the market. This gives novice traders and strategy makers insight on what it’s really like to work in the market thus making it easier for them to start trading live.

6. Provides various learning opportunities

Aside from gaining a set of skills needed to succeed in trading, budding investors who trade Forex can expect a lot of learning opportunities that they necessarily can’t find anywhere else. Some of which include:

  • Financial planning such as knowing how to work with minimal capital and using it to your advantage.
  • Financial literacy such as knowing how to handle your money responsibly so that you won’t easily lose the money that you gain.
  • Risk management such as understanding how to reduce your chances of possibly losing some of your money
  • Price fluctuations such as understanding how certain factors like social, political, and environment issues can affect a currency’s value.

Plus other unique experiences that can help one realize their mistake and learn from it.

Conclusion

When executed properly, trading foreign currency can be a great way to make extra income. As the world’s economy becomes more globalized than ever, experts believe that now is the right time for young investors to start their career so they too can take advantage of the market’s numerous benefits.

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Interested in more crypto content? Check out 6 Benefits Of Forex Trading and Weekly Cryptocurrency watch: Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH)

How Does Leverage Trading Work on Bitmex?

Buy low, sell high. This is the basic understanding of the word “trading”. Be it stocks or socks, crypto or lambo; what’s important is making profit by selling higher than it was bought. But of course, life is always complicated. Volatility of the crypto market, with doomsday prophecies issued from well respected figures, are few of the reasons why venturing into crypto trading requires being sufficiently armed with adequate knowledge.

Different styles of crypto trading include day trading, swing trading, scalping, HODLing, but our focus in this article will be leverage trading and how it is done on Bitmex. Leverage trading is when a trader borrows extra funds in order to increase possible profits. Existing funds serve as collateral for the loaned funds. Leverage trading is very risky in the sense that chance of profit or loss is 50/50. However, it is popular with pro traders because one is always possible to make a profit even when markets slump.

How it Works

Bitmex is an A-list crypto exchange, one of whose service includes offering users up to 100x leverage. Of course, to get started, one needs to first set up an account with Bitmex. You’re not required to give your real names as creation of anonymous accounts is permitted on the platform. First action after account creation is funding your new account. Primary crypto allowed on Bitmex is BTC. It is however designated as XBT and given the value of 1 USD per XBT. As earlier mentioned, up to 100x leverage is allowed on Bitmex. What this means is that, if you have say 0.01 BTC, a 100x leverage will allow you trade 1 BTC in a single trade.

Regardless of which exchange is being utilized, there are two options when leverage trading. Either you go long or you go short. Going long means buying a contract when its value is low because you foresee its value increasing. Trader profits when contract gets sold at the increased value. While going short is selling a contract when its value is high, because you foresee it decreasing, so that you can buy it back at its low value, thereby making profit.

Bitmex Leverage Trading Contracts

Two types of leverage trading contracts are offered on the Bitmex trading platform:

  1. Futures Contract and
  2. Perpetual Contract

Futures Contract
As the name implies, a futures contract is fixing the price for a commodity (in this case digital assets) which is to be sold in future at that fixed price regardless of changes. For instance, a rice supplier and a rice farmer draw up a futures contract to sell 10 bags of rice at $10 each in 6 months time. At the stipulated time, the 10 bags of rice is delivered and buyer pays $100 for them. It is immaterial if price for a bag of rice has increased to $18 per bag or reduced to $7 per bag.

Now, switch rice for BTC (XBT), rice supplier for trader and rice farmer for Bitmex. The good thing about leveraging with a futures contract on Bitmex is that profit is made even when price plummets. Futures contracts are usually utilized as hedges for mitigating risks.

Perpetual Contract
It is similar to Futures Contract, but as the names implies, this is a contract with no expiry date. It is perpetually being renewed, making it suitable for long term investors.

Calculating Profit (and Loss)
Yes, probably the subtitle you first searched for when reading this article. It’s all about what one gains. Here is the slightly complicated formula:

Number of Contracts x Contract Value x (1/Entry Price – 1/Exit Price)

Application of Formula:
Remember, one contract equals 1 XBT which equals $1.
At 500 contracts worth $500 whose price increases by $50, profit will be calculated thus:
500 x 500 (1/500 – 1/550) = $45.45

Safe Guides and Mistakes to Avoid

Never open a position using 100% of available balance. Leave 50% for setting stop limit.
Bearing in mind the high risk and volatility involved, it is very possible to get rekt. So, start small as you train your trading muscles.
Just because you have been offered 100x leverage does not mean you should actually take it up. Limit your leverage so as to limit possible loss.

Trading, both traditionally and cryptowise is a risky venture. That of crypto markets is intensified, thanks to volatile markets and uncertain regulatory frameworks. Nevertheless, being sufficiently armed with requisite information would go a long way.

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