10 Reasons to Start Forex Trading To Supplement Your Income

The cost of education is more expensive now, too. Tuition for an academic session at Harvard University presently costs over fifteen times more than what it did approximately five decades ago. Little wonder that as of September 2019, Harvard Business Review put American student loans at nearly $1.6 trillion, a figure that exceeds all accumulated car loans and even credit card debt.

Sadly, despite all the growth in the economy, wages have not been rising in tandem with increasing costs. In fact, they are lagging far behind inflation. And with income inequality on the rise, things seem to be getting worse. Therefore, the era of holding onto a single source of income is long gone. Now, a single source of income is not just enough.

So, if you want to be financially free, building multiple streams of income should be your goal. Even though there are many options for you to choose from, Forex trading is a viable vehicle for earning extra income by the side.

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Introducing Forex Trading

The Forex market is a global decentralized financial market. It is the largest of its kind: over $5 trillion worth of transactions being conducted daily. The market is unique, and its characteristics have been able to draw so many people to it over the years.

Today, thousands of Traders participate in the Forex market. While there are losers, there are many who do not trade in it just to have a side income but also to achieve their financial liberation. From individuals to institutions, the Forex market has become a fantastic place to reap great returns.

So, what is traded in this dynamic market? It is currencies. In one way or the other, you have participated in the Forex market. Remember the last time you were travelling to Europe? You needed to have a stop at the currency desk at the airport to exchange your Dollars for Euros or Rands for Dollars. If you had been observant enough, you would have noticed that there was a screen displaying the value of one currency in relation to that of another. The relative values of one currency to another are known as exchange rates.

Based on the prevailing value, you were able to get a specific amount of euros in exchange for your Dollars or Rands. If the exchange rate had been higher, you would have gotten more Euros. The relative values of currencies are not static; instead, they fluctuate from time to time. And it is these fluctuations in the exchange rates that enable Traders to profit from the Forex market.

Why You Should Consider Trading Forex

The Forex market has a solution to every of your financial woes. As earlier hinted, if you are looking for an extra source of income, it can make a perfect choice. And if, far beyond a side income, immense wealth is what you seek, it can be the perfect avenue to achieve that, too.

There are plenty of reasons to start trading Forex to serve as a source of side income. However, the following is a discussion of just 12 of them:

1. Low Capital Requirement.

If you talk to those who are contemplating Forex trading, many of them will cite a lack of capital as the major reason why they have not started yet. They might also go ahead to reel out how they just cannot get on board because of the huge capital commitment that they think Forex trading requires.

Largely, this perception can be attributed to much of the misleading campaigns about Forex which depict it as an insanely exotic enterprise. The public sees Forex traders displaying humongous wealth and start thinking that to make so much from it, you will need to correspondingly invest quite much.

It is true that a large capital size boosts returns, yes. For example, with the same level of discipline and expertise, under similar market conditions, it will be easier to grow say a $2,000 account to $10,000, than it will be to grow a $10 account to the same amount. In fact, attempting the latter is simply ridiculous. Nevertheless, an untruth that needs to be attacked among most aspiring Forex Traders is that Forex trading has a huge capital requirement!

Of course, you can choose to start trading Forex right away with as little as $10.  Retail brokers offer different account types with different required minimum deposit amounts. For some of those accounts, that amount can be as high as $50,000. The average, however, for most brokers, is roughly $250. That means that, with just $250, you can start trading Forex with a decent potential for gains!

Hence, do not let the fear of a high capital requirement hold you back from starting to trade. You do not need as much as you think. Forex trading is a completely democratized endeavor, so it is available for anyone, no matter how small the amount they want to commit to it upfront is, to take advantage of.

Indeed, the low capital requirement advantage of Forex has made it possible for many to be able to protect their financial future. In fact, some of those people have been able to build generational wealth through it. The good news is that you too can become one of them. All of you must do is to sign up with our preferred broker, deposit a minimum amount, get coached on the basic technical and fundamentals and start trading!

2. A Strong Regulatory Framework.

The Forex market once gained some notoriety for scams. In its early years, many brokers set out only to defraud aspiring Forex Traders of their hard-earned funds. Most succeeded. Now, there are the industry gurus who claim that they have unique insights into the market, and so can help Traders to extract, in profits, as much as possible from the Forex market.

All these schemes culminated in ordinary folks being always discouraged from participating in Forex. They are told that their money would just go down the drain. While this concern has not totally phased out, it has noticeably dwindled and now, more and more people are seeing the golden opportunities that lie in the Forex market.

In fact, many have even come to realize that if you want to grow your money at a fast rate, it is the best place to go. This new development is really interesting when viewed in contrast with the old perceptions about it. But what is responsible for that? Largely, tightened regulatory requirements. Now, for example, there are more and stronger regulatory requirements for Forex brokerage companies.

The registration process has become more meticulous and any individual or organization seeking to get in on it will have to provide more than they have thought. This tightened regulatory atmosphere aims to protect Traders and their hard-earned money even more. And as someone wishing to venture into Forex, all you must do is to ensure that the Broker you want to use is duly licensed by any of the top regulatory agencies around.

Five of those are:

1. Financial Sector Conduct Authority (FSCA) in South Africa.
2. Cyprus Securities and Exchange Commission (CySEC) in Cyprus.
3. Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) in the United States.
4. Financial Conduct Authority (FCA) or the Financial Services Authority (FSA) in the United Kingdom.
5. Swiss Financial Market Supervisory Authority (FINMA) in Switzerland.

So, what is still holding you back? In Forex, as a result of the tight regulatory atmosphere, funds are safe, Brokers must be licensed, and state-of-the-art trading conditions must be provided by them. Our preferred Broker also keeps our Clients’ trading funds in segregated accounts meaning the Broker company’s operational funds are kept separate from Clients’ trading funds.

Use a Broker that is registered in only any of the jurisdictions mentioned above.

3. High Liquidity.

Liquidity, in financial trading, refers to the ease with which the participants of an asset class can buy and sell it without causing a drastic change in its price. It is a function of the volume of activity that the asset has. Thus, widely traded assets tend to be highly liquid. On the other hand, infrequently traded ones are often illiquid, and you will experience a lot of difficulty in trading them.

As far as the Forex market is concerned, liquidity is never an issue. With over $5 trillion worth of currencies being bought and sold every day, you can be sure that you will always have your orders filled. The highly liquid nature of the market ensures that whenever you want to buy, there will always be a seller for you to be matched with. Conversely when you want to sell.

Because the Forex market is so liquid, it is not subject to the manipulation of almost anyone. In stock-trading, Institutional Investors could step in to manipulate the prices of shares. Also, through various mechanisms such as “pump” and “dump”, greedy folks deceive others to buy worthless shares. Conversely, the Forex market is entirely different as it cannot be manipulated by anyone.

Why? First, because of its sheer size. How do you expect a $5 trillion market to be manipulated? Also, the factors that influence it are beyond the control of anyone. While governments, sometimes, might want to stabilize exchange rates, their influence is impossible to sustain. Therefore, the Forex market is the right place to be for anyone that wants fair deals.

Its high liquidity ensures that it does not budge to the whims and caprices of anyone. The same factor will also make sure that it will always present you with opportunities from time to time. So, why don’t you go for it? Get in touch with us now for more information.

Read more: Best NO DEPOSIT Forex Brokers

4. Flexible Trading Hours.

Being open for 24 hours every day, the Forex market is the ultimate ever-working machine. From 5 p.m. EST on Sunday to 4 p.m. EST on Friday, there is at least a currency pair or the other that you can trade. This advantage results from the different time zones in which different Traders live.

Also, because one form of international trade or the other is carried out every time, currencies are in an ever-constant circulation. Businesses require foreign reserves to buy commodities from overseas. And countries’ central banks must keep foreign exchange reserves so as to maintain liquidity, keep markets steady, and hedge against inflation.

So, evidently, the Forex market is a behemoth of activities. And it is those activities that make it constantly open, 24 hours a day, five-and-a-half days a week. Interestingly, you can never find this with any other financial market. The New York Stock Exchange (NYSE) is open only from Monday to Friday from 9:30 a.m. ET to 4:00 p.m. ET, that is, only within a short, specified number of hours!

The unique characteristic of the Forex market of being open almost every time means that you can easily fit your active hours into it. That is, it does not matter whether you are a Student, Home Executive or Business Executive, you can find a time that works for you to get involved in the Forex market. In fact, many part-time Traders have been able to use the varied open hours of the market to trade, while also holding on to their daily jobs and responsibilities.

Also, it does not matter the style, be it “scalping”, “swing” or “position trading”, you use to participate in it, the Forex market is up and running enough to accommodate it for you.

5. Limitless Profit Potential.

The profit potential of the Forex market is limitless. That is, the amount of money you can make in the market is uncapped. It provides an ideal trading environment that offers amazing opportunities for profitability. It all depends on your expertise, risk and money management, and the validity of your trading system.

Now, add to that the fact that this advantage is offered despite its low capital requirement. You do not have to shell out a lot of money to be able to make a lot. There are stories of Forex Traders who have been able to grow their modest accounts into six digits.  Few outliers, like George Soros, the “Man Who Broke the Bank of England”, have even been able to earn billions.

If you start trading Forex with say $250, and your strategy has a 60% winning rate, that means that 6 out of every 10 trades you take will result in gains. So, if your target is $600 every week, you can just place 10 trades per week, with $100 expected gain on each. At the end of every week, you should be able to achieve your profit goal.

Notably, the Forex market is the only financial market where you can make money irrespective of the direction of the market. For example, if you think the EUR is going up, you only buy it and make money all the way up. And if you think the value is going down, you only sell it and make your money down. However, you might say that no, you can make money in a bearish stock market also, but you will agree that the process is easier in Forex.

Finally, dear aspiring Forex trader, the sky is not your limit. In fact, it will be your starting point. Even though your desire is just to make Forex a source of extra income, it might as well blow into a source of substantial gains if you can take the time to learn, practice, and become extremely good at it.

6. Low Transaction Costs.

Before you can trade Forex, you need a regulated Broker. The Broker will serve as the middleman between you and the market. When you place a buy order, it links you up with another Trader who wants to sell. Likewise, when you want to sell, your Broker seeks another Trader who wants to buy. As you should expect, this is a service, and it comes at a fee.

In Forex, transaction costs are the expenses you incur whenever you place trades. They are the commissions and spreads that your Broker charges in providing its service. A commission-based Forex Broker makes money by charging flat fees. For example, notwithstanding market conditions, such a Broker may have a commission fee of example $5 per trade.

Most Forex Brokers, however, charge with spread, which is the difference between the bid and the ask price, the price at which you can buy and sell the currency pair respectively. For example, if the EUR/USD is 1.1042/1.1044 (bid/ask price), that means that the broker will charge a spread of 2 pips. Depending on the type of account being traded on, this can translate to different amounts.

For example, if it is a standard lot-size account, on which 1 pip equals $10, that will be just $20. This is called a fixed spread. The spread can also vary depending on the discretion of the Broker, the particular currency pair being traded, and the prevailing conditions of the market.

Inactivity and withdrawal fees and interest rates are other transaction costs that Brokers can charge.

These fees, you must note, are important because they can really eat deep into your net return. However, the good news is that in Forex, they are kept low, enabling Traders to be able to keep as much money for themselves as they earn.

7.  Leverage

If there is a feature that makes Forex trading as lucrative as it is, it is leverage. Leverage is an arrangement whereby Brokers allow their Traders to control positions far larger than what they normally would. So, it is a provision by Brokers that enables Traders to execute volumes larger than what their limited trading capital would allow.

However, your profit potential using leverage is still subject to the lot size you use. For explanation, there are four lot size types:

• Standard Lot Size: A standard lot size account is made up of 100,000 units of the base currency. The value of a pip on a currency pair quoted in dollars is $10.
• Mini: A mini lot size account consists of 10,000 units of the base currency. When trading a mini lot, one pip of a currency pair denominated in the USD is equal to $1.
• Micro: 1,000 units of the base currency make up a micro lot size account. A one-pip change equals $0.1 when trading a micro lot.
• Nano: Nano lot size accounts contain 100 units of currencies each.

Here is where it gets interesting. For example, if you use a leverage ratio of 1:100 on a $500 account, you will be able to control $50,000 ($500 × 100). Next, you might want to decide on your risk percentage, representing how much of your account equity you will be comfortable risking on each trade. A risk percentage of 5%, for example, will translate to $50 per trade on your $500 account.

With leverage, you can control so much with so little. This is one of the awesome benefits Forex trading offers. However, you should learn to use it reasonably because it can undermine your return as much it can enhance your profitability.

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8. Innovativeness

The Forex market is not static. It moves every day. It also moves, with more innovative solutions being provided every day. This notable characteristic of the industry has made it attractive to the public, resulting in an ever-increasing number of participants and overall coverage.

For example, the Forex market used to be an exclusive playground of Institutional Investors who had state-of-the-art technologies to analyze and monitor it. Those “whale” of Investors employed the best minds and the tremendous financial resources at their disposal to develop those tools, which were available only to them. Retail Forex Traders were once barely in existence.

However, that has changed in recent years. First, the internet has democratized everything. Now, Retail Brokers are available for ordinary individuals to create Forex trading accounts with. Now, almost anyone, provided they have an internet-enabled device, can participate in the Forex market.

Besides the internet, there are innovative products that are peculiar to the Forex industry. There are charting tools, automated trading systems (Expert Advisors), and other market analysis tools that have become integrated into the Forex market. The innovativeness of the industry guarantees that more and more will be added with time.

All these novel tools easily make Forex the best and most convenient financial instrument to trade. Get into it today, too, and start taking advantage of its wide array of innovative products.

9. No Analysis Overload.

Do you know why you should start trading Forex in addition to other quality financial assets to generate extra income? It is super-duper easy to do! You do not have to do too much of analysis before you can earn profits trading it. In fact, you can just concentrate on a few currency pairs or one and make it the mainstay of your trading. So, even if you do not have a lot of free time, you can keep your Forex trading business going.

However, the same cannot be said of all other asset classes. Let us contrast Forex with stocks, for example: The stock market, indeed, offers a wide range of investment options. There are thousands of mutual funds and exchange-traded funds (ETFs) from which to pick. The New York Stock Exchange (NYSE), the largest stock market in the world, has approximately 2,800 listed companies.

So, if you want to invest in stocks, you will have to do proper analyses to discover the best ones to buy and the ones you should sell. Think about it. How in the world will you be able to make the best decisions in such a situation? How? Many Brokers find it daunting to stay abreast of every one of those companies!

Trading in the Forex market will take care of that for you. You do not have 2,800 currencies to analyze. Instead, you can decide to stick to just one, two or three and still be able to generate a decent extra income for yourself. So, why would you ever want to trade any other financial instrument apart from Forex?

10. Tax Advantages.

If you want to generate an extra income and you are looking at trading, then tax should be one of your major considerations. The reason is not far-fetched: tax can have effects more devastating than transaction costs on your account. Even when your trades are profitable, tax can eat substantially into your gains.

Making profits every day trading is exciting. You will be generating the extra income you have set out to. However, if you cannot adequately shelter that income, you will be charged capital gains tax on all your trades that you held for less than a year. The good news, though, is that there is a tax advantage in Forex trading which is absent for other financial markets.

Forex trading will allow you to keep most of your gains. In fact, despite that your trades will all be under a year, only 40% of your profits will qualify for short-term capital gains tax while the remaining 60% will be taxed lower as long-term capital gains. In stock trading, you will pay more in tax! For comparison, imagine you have a profit of $20,000 from your stock trades. If you are in the 35% tax bracket, your tax on the $20,000 profit you earn estimates to:

$20,000 × 35% = $7,000.

A whopping $7,000!

However, if it is Forex, the calculation could look like this:

$20,000 × 40% = $8,000.

$8,000 × 35% = $2,800. (Your Short-Term Capital Gains Tax)

$20,000 × 60% = $12,000.

$12,000 × 15% (Long-Term Capital Gains Tax Percentage) = $1,800. (Your Long-Term Capital Gains Tax)

Total Capital Gains Tax = $2,800 + $1,800 = $4,600.

Thus, obviously, Forex trading potentially allows you to keep more of your gains than stock trading does. So, if you are looking for the financial market that could allow you to keep almost all your generated returns, is it Forex. Please note that TAX laws vary from country to country and are subject to change. Always consult a regulated Broker and your registered Accountant or TAX Specialist for informed expert advice.

Summary

There you have it, 12 reasons to start trading Forex as a source of income. Indeed, the Forex market is the most versatile of all the financial markets. It is very easy to participate in, the capital requirement is low, and in a short time, you could enjoy huge success. However, be warned: no matter how adventurous you are, use the provisions of Forex, such as leverage, responsibly. To succeed at all, you need to be in the game for the long haul. But irresponsibleness and greed will not be of help in that regard.

Diversit-e Smart Trade College (Pty) Ltd, our Employees, Sales Executives, Resellers and/or Contractors are not registered financial services providers and are not licensed to give any financial- and or investment advice. We do not manage any monies for investment purposes. Past performance does not guarantee future growth.

Invest in your knowledge by surrounding yourself with Expert Coaches and Mentors who are reputable, has social proof and are voted the Best Education company and Best Performing Broker in Africa.

Start trading Forex for that extra income you want to start doing the things you love with those you love. It could just be one of the best decisions you make.

Francois Oosthuizen

Diversit-e Smart Trade College

All info verified and applicable at time of publish. Info subject to change without any notice.