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Why is the forex market so popular?

Stocks and investing (Image: Pexels

Investing has hit new levels of popularity in the 21st century, especially over the past decade or so. Whether you’re investing in cryptocurrencies or buying stocks in the entertainment sector, there are countless ways to potentially grow your wealth and protect it from inflation. The forex trading market has emerged as arguably the most popular way to do so, with a market size of over $750 billion in 2022.

Forex trading is also one of the most accessible ways to start investing and trading. It doesn’t require as much initial outlay to begin making a profit, and with the abundance of forex trading apps and platforms, there’s more than enough choice regarding brokers. Stay with us as we explore why the forex market has become so popular.

The forex market: basic information

Forex stands for foreign exchange market, a global decentralised marketplace where traders can buy and sell currencies according to their fluctuating values. Generally speaking, it’s a highly volatile place in which currency valuations can change significantly over the course of a day or even just a few hours.

The process works using forex pairs. Traders buy or sell a pair of currencies, for example, USD/EUR, and hope to make a profit each time. The currency pair shows how much one currency is valued in comparison to another. So, if you buy a currency pair at the right time, you can make money off of it when you sell.

Graph illustration (Image: Pexels)

A few reasons why the forex market is so popular

So, why is the forex market so popular in 2023? There are several high-profile reasons for its popularity, especially as volatile currency valuations over the past decade have opened the door to potentially huge profits. Here are a few of the main reasons why forex trading is so popular:

  • Easy to research: While the forex market is difficult to predict with 100% accuracy, traders have ample resources with which they can track changes. This makes detailed technical analysis remarkably easy to leverage to your advantage. You can use charts, graphics, and predictors to help you estimate how currency valuations will change. This, in turn, can lead to high profits made in a much shorter time frame than other forms of investment.
  • Accessibility: The forex market is open 24/7 for five days a week, which means it’s far more accessible than other investment markets. Furthermore, there are numerous brokers out there, all offering top-quality apps, so you can trade while on the move. Traditionally, many people were unable to partake in trading as it wasn’t particularly accessible. Forex is different, allowing traders from all walks of life to get in on the action.
  • Connection to current affairs: Almost all types of investing are heavily linked to current affairs but the forex market is arguably the most contingent on external factors such as inflation and economic events. This can make predicting currency fluctuations easy and doesn’t require specialist knowledge of a particular investment field.
  • Can be done on the cheap: Another reason why forex trading is so popular is that you can start trading without huge cash reserves. Typically, investing in traditional assets like stocks requires a relatively large amount of starting cash. Forex trading, on the other hand, can be started with comparatively small deposits.
Stocks and investing (Image: Pexels

Some golden tips for forex trading success

As with most things, you cannot expect to be able to jump straight into the forex trading world and taste success. Watching video tutorials on the forex market and learning how it works is essential to your prospects. Here are a few of the best ways to improve your forex trading:

  • Practice: Almost all forex brokers allow users to trade for free, using a demo mode. This is the perfect way to get to grips with how things work, without needlessly losing money on the wrong trades. As the saying goes, practice makes perfect!
  • Keep financial discipline: Being disciplined is a huge part of successful forex trading. You must always ensure you have funds to fall back on, especially when making risky trades. Not doing so can spell the end of your forex trading.
  • Be patient: While forex trading can deliver faster returns than other types of trading, you still need patience. For example, you must be able to wait long enough for the price to reach the level you expect it to.