Looking at the world of trading as a beginner can be a bit intimidating. Learning about all of the assets and strategies associated with these instruments is very tiresome and time-consuming, but it can also be very rewarding.
The main issue is choosing which asset you want to trade. There’s quite a large pool as well. Currencies, stocks, commodities, cryptocurrencies and etc. So how do you choose which asset is best for you? Well, you don’t.
According to researchers from 55brokers, the best asset to trade as a beginner investor is currencies due to how much it teaches about the economy and the way markets work. Only after learning a bit about Forex is it recommended to try and diversify into another market and making it the primary focus.
Forex is an abbreviation of foreign exchange. It is the market that governs all of the world’s currencies, thus sometimes being the determining factor of various country economies. If the market does not have confidence in a specific currency, it’s going to depreciate to unimaginable proportions, thus leaving a country’s economy barren and open for foreign investors to buy as they wish.
This unique feature of the FX market is what helps traders learn a lot more about how these markets work than any other market. The reason being that most other markets like stocks and cryptocurrencies, usually force the trader to focus their attention on only the smallest part of a country’s economy.
Changes within a single stock’s price are usually attributed to the performance of the company itself rather than the performance of the economy as a whole. Therefore, this leaves the trader unprepared for what the rest of the market could potentially do during times of crisis.
Although many people would say that trading stocks is easier because it helps you focus your attention on only one company, FX experts have noted that currencies are usually a bit more predictable in that sense.
According to this FBS review, the volume of FX traders is usually due to overwhelming knowledge of local currencies in various countries, thus giving these people a massive advantage over foreign investors.
The more you’re involved with your country’s politics and news, the more you know what could potentially cause a spike or slump in the local currency’s exchange rate.
This gives an amazing advantage for the locals to be prepared for the next market change as they are well synced with the news releases of their own country, thus giving them a headstart on investments.
For example, if the central bank of Russia decides to make some changes to the interest rates, Russians would be the first to know about this, thus giving them a headstart to either sell or buy Rubbles en masse.
Another advantage of the forex market is its immense liquidity compared to every other market. Currencies are always in demand, no matter how good or bad their exchange rate is. Therefore, a trader will always manage to place a buy or sell order.
With stocks, it’s a bit different. If the market change is all too obvious, then it’s very unlikely to become a part of the hype. For example, if it’s obvious that the market is growing, very few people will be selling their assets, and if the market is decreasing, very few will be willing to buy, thus leaving you with a deteriorating asset.
Overall, we believe that FX is the superior market in 2020.