As one of the biggest financial markets in the world, the foreign exchange (forex or FX) market is a top destination for those looking for an alternative income stream. According to Statista, it deals with over six trillion dollars in volume daily.
There’s a reason there’s so much money going into the foreign exchange market: It boasts so many lucrative profit-making strategies available. From trading forex personally, to automating the process using MetaTrader 5, investors can make money actively and passively. This article explores how forex is a lucrative business opportunity and how you can automate transactions.
What is Forex Trading?
Forex trading is a shortened term for foreign exchange trading involving buying and selling currencies. The exchange of various countries’ currencies takes place on the forex market.
However, currencies are not the only financial assets you can exchange on the foreign exchange market. FX traders can also buy and sell stocks, crypto, indices, ETFs, and commodities like gold and oil.
Aside from individuals, several groups like banks, financial institutions, governments, and corporations trade forex. The goal of all participants in the market is to profit from the changes in currency exchange rates.
The market is always open on weekdays, meaning investors can execute orders 24/5. Some of the most exchanged currency pairs include EUR/USD (Euro/US Dollar) and GBP/JPY (British Pound/Japanese Yen).
Benefits of Forex Trading
Here’s why Forex trading is a popular money-making choice for both novice and experienced investors.
1. High Liquidity
With a daily trading volume of over six trillion dollars, there’s enough liquidity in the foreign exchange market to ensure buyers and sellers can enter and exit positions easily. This helps to reduce the risk of price manipulation, allowing prices to change based on the law of supply and demand.
2. Increased Accessibility
Although the FX market operates 24 hours a day, five days a week, trading occurs decentrally. Each submarket is open for a certain time, as shown below.
New York: 8 a.m. to 5 p.m. (EST)
Tokyo: 7 p.m. to 4 a.m. (EST)
Sydney: 3 p.m. to 12 a.m. (EST)
London: 3 a.m. to 11 a.m. (EST)
This allows you to exchange all day by switching from one zone to another, profiting from the market at your convenience.
3. Diverse Currencies
Forex requires keeping up with factors that affect the price of currencies, such as economic and political news. One easy way traders can stay on track is to select currencies they can easily follow.
Forex offers a wide range of currency pairs, including the US dollar (USD), Euro (EUR), Japanese yen (JPY), Pound sterling (GBP), Australian dollar (AUD), Canadian dollar (CAD), and Swiss franc (CHF).
The various currencies available allow investors to focus on a select number of currencies and find opportunities in various economic regions.
4. High Leverage Opportunity
With leverage, you can push your profits up a notch by controlling larger order sizes using a smaller capital.
Leverages range from low multiplier levels like 2x to 2000x and sometimes unlimited. This means traders can multiply their capital by almost any amount when opening a position.
Any profit from the position is multiplied due to the leverage and the loss. So, traders need to consider the impact of leverage before applying it to open a position.
5. Price Volatility
Another reason forex is lucrative is due to price volatility. Price volatility occurs when the price of an asset changes sporadically.
These price fluctuations are usually due to major economic events like news releases and geopolitical developments. Traders who keep tabs on the news can easily predict the impact of certain events on a currency pair and profit from the move.
Using MetaTrader5 To Automate Forex Trading
FX trading is lucrative but is also time-demanding. It requires learning technical analysis to pinpoint good entries and exits. Many traders skip these constraints by using algorithmic systems.
MetaTrader 5 (MT5) is a popular platform for automating forex exchanges using robots, also known as Expert Advisors (EAs). This provides traders with several benefits:
1. Passive Income
MetaTrader 5 allows traders to create automated robots to execute trades and manage positions without human interference. Traders can code their strategies into a custom expert advisor or buy existing ones from the MT5 marketplace.
MetaTrader 5 has a backtesting feature that allows traders to try new automated strategies and identify the ones with the best profit-making potential. The backtesting feature involves testing the robots on historical data to evaluate their performance and fine-tune them for the best results. Once perfected, traders can deploy tested automated strategies into a live market.
3. Efficiency and Speed
MetaTrader expert advisors eliminate the need for investors to execute trades manually, making the process faster and more efficient. These algorithmic systems can open and close positions within milliseconds, a crucial functionality in fast-moving markets. The platform also has powerful servers to limit lags and reduce slippage risks.
4. Emotion-Free Trading
Automated robots allow investors to engage in emotion-free trading by eliminating personal biases from decision-making. MetaTrader5’s EAs follow predefined rules for disciplined trading, unlike humans, who can be influenced by fear and greed.
5. Risk Management
MT5 allows traders to implement robust risk management techniques with featured expert advisors. These include setting stop-loss and take-profit levels, position sizing, and equity protection. These risk management measures ensure traders can protect their capital without being active on their screens around the clock.
Forex can be a lucrative business opportunity for investors who want an alternative income stream. For those who don’t have hours to spend on a chart, using automated systems like MetaTrader 5’s expert advisors is a smart choice.
MT5 is a powerful platform that can help traders automate their strategies for more disciplined and profitable positions. They can also free up their time to focus on other things while making more profits.