When most people hear the word forex, they may not even know what it means. A shorthand for foreign exchange, forex refers to the market where traders buy and sell currencies most days of the week.
Even though the average person is unlikely to become a trader by profession, anyone can set up an account on a site like Oanda.com and start trading currencies. That is why forex is such an important part of the investment world to understand.
People assume that forex is a complex market that only seasoned and experienced traders can understand. While those traders have the confidence to execute big money trades, there are little to no entry barriers to the forex market.
Below are a few reasons why consumers should care about forex trading, and how the forex market can impact the average person.
- Anyone Can Trade Currencies
- Forex Is Extremely Volatile
- Forex Responds To World Events
- The Forex market Impacts Consumers
- Make Money Through Currency Trading
There is often a significant gap or chasm between the way that seasoned traders or brokers can make money through investments, and what the average person can do within the financial markets.
Forex is one of those sectors where such a gap is almost non-existent. While seasoned traders are likely to buy and sell currencies in greater volume, the average person can set up an account to start trading within minutes. There are plenty of reputable platforms that allow you to buy and sell foreign currencies.
Learning about forex trading does not require much time or effort either. Many of these online portals have introductory videos and articles you can consume, giving you a better understanding of how to buy and sell currency pairs to make money.
When a person starts trading for the first time, they want to see movement in the trades they make. Sometimes people buy stocks, but they notice the stock price is barely going up or down over several weeks. That can discourage them from investing more time and money in the market.
Forex is an extremely volatile sector, which is why the average person can easily get excited about trading currencies. Given the way that currency pairs fluctuate in value over a matter of hours, a person can make money within a few hours of trading on their very first day.
Such volatility is very encouraging for the first-time trader, even though it does come with potential pitfalls. The average person gets excited when they realize they could be making a lot of money each day they are trading forex.
One of the most interesting aspects of forex trading is that currency pairs not only shift as a result of traders’ actions or the overall market, but the world as a whole. When there is a significant political event, it can have a very profound impact on the prices of specific currency pairs.
For instance, the United States experiencing a lot of inflation may eventually cause its currency’s value to rise. Such an impact can be felt throughout the forex market, as many of the popular currency pairs involve the United States Dollar.
The average consumer can come to realize that when they start trading forex, having up-to-date knowledge of world events can be very helpful. They can leverage that knowledge to trade currencies and make a profit.
Even people who do not trade foreign currencies on the forex market can feel the impact of this sector. While a significant aspect of currency movement is due to world events or central bank actions, the habits of traders around the world do have an impact as well.
If a lot of people are buying a particular currency pair, its price is likely to shift, which is also true if many traders sell some other currency pair. That is how the average consumer can feel the impact of the forex market, on the relative value of their currency.
The beauty of setting up a forex account on an online platform is that you can begin trading foreign currencies within minutes. Create an account, provide your personal information, add money to your account, and you are all set.
Such a process is even easier than the steps you have to take to buy and sell stocks. If the average person can buy shares in companies such as AMC Entertainment or GameStop, there is no reason why they cannot invest in currencies either.
Currencies are even more enjoyable to trade for the average person, as the forex market is so liquid and volatile.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.