The forex market is the largest financial market in the world with so many opportunities to invest and make a very good return. But, is forex a good investment? is it better to trade forex (short-term investing) or invest in forex long term? Is the forex market better than other financial markets like the stock market or cryptocurrencies? These are a few of the things that we will be covering in this article. Also, we will talk about how to invest and the best investment strategies.
But, before we get into talking about whether forex is a good investment we need to talk about what is the forex market.
What is the Forex Market?
The forex market is short for the foreign exchange market. It is where the currencies are exchanged. This pretty much makes the forex market the largest market in the world.
There are over 5 trillion US dollars traded every single day in the forex market. There are so many advantages to trading forex. The great thing about the forex market is that it is 24 hours. This gives you the advantage of trading forex any time of the day. Also, most brokers will give you a demo account for you to trade with. With a demo account, you can trade with virtual currency which will give you a lot of practice. You can also test your trading strategy with a demo account. This gives you the advantage of investing real money only when your strategy is a profitable trading strategy.
The transaction costs when investing or trading in the forex market are relatively lower than the other financial markets. Also, there is so much information out there online about trading forex. Our website is one of them. We provide you will all knowledge and tools to become a successful trader.
There are 100s of other advantages of trading forex. But, we won’t go over all of the advantages in this article, because it can overwhelm you. Now, let’s talk about why forex is a better investment than other financial instruments.
Forex vs Other Investments
How does investing in forex compare with investing in other financial instruments like stocks, bonds, real estate, or even cryptocurrency? First of all, as we talked about earlier forex is the largest financial market in the world. It is roughly 25,000 times larger than the well-known stock market. Also, forex is a more stable investment than stocks. There are fewer gaps that occur in the forex market compared to the stock market.
The technologies available for forex trading are great as well. Also, if you learn to trade forex you will have the knowledge to trade other financial instruments as well.
Is Forex a Good Investment?
As talked about before, the forex market is the largest financial market in the world. There is plenty of opportunities to make money in the forex market. There are also plenty of ways to make money in the forex market. But, the best way to make money in the forex market is to trade forex.
There are 1000s of traders out there who make a good amount of money trading forex. Some trade forex part-time and some trade it full-time.
In the next section, we will talk about different forex trading strategies that you can use to make profitable trades.
Best Forex Investment Strategies
As we discussed above to grow the investment you made on forex you have to trade forex. There are 4 forex trading styles. These are:
- Scalping – Scalping is when you go in and out of a trade within minutes to an out.
- Day Trading – with day trading you go in and out of a trade within the day.
- Swing Trading – with swing trading you hold the trade for a couple of days to a week depending on the size of the trade.
- Position Trading – You hold the trade for a couple of weeks to a month.
We personally do swing trading and that’s what we recommend to our readers. We personally don’t recommend you to do scalping or position trading. Day trading is good as well.
With swing trading, you would be using 2 types of charts mainly. The 4-hour chart and the daily chart. There are several strategies you can use to swing trade. There are 3 beginner-friendly strategies that we recommend. These are:
- The Breakout Strategy – With the breakout strategy you analyze different chart patterns that will confirm a breakout. Then you would enter the trade.
- Trading with Candlesticks – you can use candlesticks as a reversal pattern or a trend confirmation pattern to find trade entry points. Also, you can use candlesticks in conjunction with the breakout strategy to make trades as well.
- Trading with Technical Indicators – Technical indicators can be used to predict the market direction. It is a very popular way to trade forex. There are 100s of different technical indicators out there but only a few really work.
If you are interested in learning about these 3 trading strategies we recommend you check out this article. In this article, we go over these 3 trading strategies in more detail and how to use these strategies to make profitable trades.
Platforms to Trade Forex In
When investing in forex it is important to choose the right platform to trade with. Also, you have to choose a good broker as well. The best forex trading platform is the metatrader5 platform. There are other platforms out there but we recommend MetaTrader 5 for various reasons. The metrader5 platform is used by 1000’s professional traders. The platform gives you the ability to customize charts and it also provides you with all the tools necessary to trade forex. If you are interested in learning more about the best platforms for forex trading check out this article.
When choosing a good broker for investing in forex there are several important things to consider. Firstly the broker should support the MetaTrader platform. Also, the broker has to be regulated and reliable to use. If you are interested in learning about how to choose a broker make sure to check out our article on how to choose a forex broker.
How much money can you Make Investing in Forex Market?
This is one of the important questions to be answered. Of course, forex is not a get-rich-quick scheme. That said, you can make a good amount of money in the forex market if you learn the correct strategies. Also, the amount you can make depends on your initial investment. You can expect to make a return of 10 – 15% per month with trading forex.
There are several other important things that you should know such as risk-to-reward ratio and position sizing.
The mindset of the Forex Investor
Having a proper mindset is very important for investing. You should be able to be patient and have a high amount of self-discipline to really make money in the forex market. Of course, you don’t have to have a high amount will power or self-discipline to start. You will develop these skills over time. If you are interested in learning more about the trader’s mindset we recommend you to check out our article about the top 3 books for forex traders. There we talk about the best book for developing a winning traders mindset.
Also, we recommend that you keep a trading journal to keep track of your trades and also your thoughts/emotions during those trades. This will help you to understand yourself more as a trader and also will be able to know if your trading strategy works or not.
Final Thoughts
In conclusion, forex is a great investment. With forex trading, you will be able to make a very good side income or even a full-time living. Some traders go on to make millions of dollars with forex trading.
So learning to trade and invest forex will be very worth your time. There are so many resources on this website for you to learn how to trade forex profitably. If you want a more guided step-by-step method to trade forex we recommend you to get our trading guide.
