If you want proof of just how popular and lucrative forex trading can be, you need look no further than the market statistics. An estimated $5.1 trillion is traded globally every single day, for example, while the total value of the world’s forex market is estimated at a whopping $1.934 quadrillion.
The margin-based nature of forex trading and its high levels of volatility are not for the faint-hearted, however, while it’s also important to know that foreign exchange has a largely chequered history thanks to numerous scams and a fundamental lack of regulatory guidance.
These challenges can be overcome with a proactive and professional business mindset, however, and one that tackles risk head-on and utilises strategy to optimise the profitability of forex trading. In this post, we’ll look at the commercial advantages of forex trading while asking how a business mindset can prove beneficial.
Exploring the Advantages of Forex Trading
From a business perspective, perhaps the biggest factor in favour of forex trading is the widespread availability of leverage.
Leverage refers to the use of borrowed funds to increase the size of individual trading positions, beyond what would have been available through an investor’s existing cash balance.
This is made available through brokerage sites and margin trading, where the broker provides the borrowed funds to augment the investor’s notional deposit. This establishes forex trading as an accessible entity with relatively low overheads, creating a potentially inflated profit margin to successful traders with a solid foundation of knowledge.
In total, the only collateral that you’ll need to trade forex is a paltry 1% to 2% of the asking amount, and while this creates risk in terms of potential losses, it’s also unique when it comes to bottom line earning potential.
It can also be argued that forex trading offers a unique opportunity to leverage risk to your advantage, thanks to the derivative nature of the currency and the ability to hedge against specific pairings in a depreciating market.
How to Treat Forex Trading Like a Business
Given the commercial advantages and flexible nature of forex trading, it makes sense that you should treat your orders and portfolio as a strict business entity.
The question that remains is how do you achieve this? Well, one of your first steps should be to invest a modest amount into your initial endeavours, before looking to scale your financial commitment as you continue to become more experienced and showcase increased profits over time.
It’s also important to have a viable trading strategy and a keen sense of determinism, which can usually be honed and refined using an online demo account. This resource is available through most brokerage sites, and it plays the pivotal role of bridging the occasionally cavernous gap between theoretical knowledge and practical experience.
Such platforms also feature comprehensive analytical and risk-management tools, which can be seamlessly deployed to inform your orders and potentially cap losses once they reach a predetermined level.
This achieves the all-important goal of safeguarding your business capital while minimising individual losses and enabling you to sustain the peaks and troughs of an inherently volatile marketplace.
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