Why Trade Currencies

With savings accounts offering pitiful returns on investments, an increasing number of individuals are looking to the stockmarket to make the most of their money, with a rising number of casual traders dipping their toes into the water.

However, an alternative to traditional stocks and shares is the trading foreign currencies where in economic conditions where the outlook is not particularly rosy - such as now - it is far easier to make money. Sceptical?

Trading foreign currencies - or Foreign Exchange as it is more frequently referred to - is the younger sibling of the stockmarket but far eclipses it in terms of size. Foreign Exchange Market is a global market which practically never sleeps, making it possible to trade currencies around the clock, should you choose to. The size of the market means it is also not feasible for a large trader to have a significant impact on trends, making the fluctuations in currency far less susceptible to false movement.

However, one of the primary reasons to trade currencies is because of the far greater potential to make profits, even during an economic downturn. Buying stocks and shares relies on the price of the asset increasing, which can be difficult when investor confidence is low. Trading currencies it is possible to make money out of a currency dropping value - providing you place your bet the right way of course - meaning that the market does not need to be buoyant to be profitable.

When you start to trade currencies, the execution can seem daunting as the markets can move rapidly and it can be difficult to keep up. Many good brokerage firms know that starting out can be the hardest part and the majority offer simulation facilities which allow a novice to trade in comparable live market conditions but without risking a penny from their account. Other incentives which can be found include allowing new investors to place very small bets when they start currency trading in a live environment until they get into the swing of things and want to up the stakes.

One of the other benefits is that because currency trading is governed by different legislation, the proceeds of free of tax in the UK - a significant advantage if you profit from your investment.

Unlike stocks and shares, brokers are not paid a commission out of your winnings - they make their money from the split that they offer to the market, meaning you get to keep every penny of the profit you make.

There are a huge number of currency pairs on the market and it is possible to pick as many combinations are you want to get started. Most experts recommend that to start with you do not pick an exotic or less commonly traded pair, but one of the majors - which include the US dollar - and stick to becoming familiar with that one pair before moving on to the next step to trade currencies.

There are two distinct methods to trade currencies - technical and fundamental. Technical traders opt to develop their trading strategy around patterns in the market, basing their predictions on the principles that currency movements are cyclical. Fundamental traders take far more stock of world affairs and political events to forecast likely movements while trading foreign currencies.

However, whichever way you opt to start currency trading, keeping up to date with forex news is essential and choice of broker can help with this. The best brokers will provide a live news feed free of charge to help their traders make the most of the opportunities in the market.

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