If you have recently opened your own start-up business, you will know how exciting and challenging it can be. While being your own boss is very rewarding, it also brings with it a never–ending to-do list! One thing that might be worth finding time for is investing some of your profits in global financial markets to stimulate business growth. When done right, this can give you more money to hire extra staff, buy more stock, or rent bigger premises. (Remember, trading involves significant risk of loss and many not be suitable for all investors.)
One of the most popular markets to invest in for start-ups is the world’s forex market. This is open 24 hours a day, five days a week, and is an ideal investment for busy entrepreneurs. You only need an internet connection, a computer and some cash to get going. The FX market is also pretty easy to understand and can really deliver some awesome returns in a short amount of time to help your business grow. Of course, a big decision you will have to make is which currencies and currency pairs you will put your money into.
What should you know about before you begin?
Choose your broker wisely
While this might not be about the currencies you pick to trade directly, it is an undoubted influence to factor in. In simple terms, you will not be able to trade any currencies on the FX market at all without an online broker to help!
These online sites are essentially the middlemanbetween you and the FX market itself. Rather than placing the trades personally and keeping track of them, the broker will submit orders on your behalf and give you a platform from which to manage your portfolio. It is essential to choose a reputable broker that has great customer support, a good reputation, and uses the latest cybersecurity tech on its site. This review of City Index gives a decent idea of what to look for in any broker you use.
Also called liquidity or stability, volatility is a key concept to understand when choosing currencies to trade or which pairs to invest in. It basically refers to how quickly the price of a currency or apair changes over a period of time. A highly volatile pair, for example, (such as the AUD/USD) can move a huge amount in a very short space of time. A less volatile pair (such as the EUR/USD),on the other hand, normally moves much less over the same period.
The thing to know is that neither are a bad thing in isolation. Indeed, you need some volatility in any currency to help deliver opportunities to make money from price movement. What is important is being aware of the volatility of currencies that your business has invested in and being able to handle it.
Another crucial thing to bear in mind when trading currency is the bid–ask spread given for any pair by your broker. This is essentially the difference between what they will sell any currency for andwhat they will buy it for. This difference in price is essentially what it costs you to make the trade and naturally will impact your profit. Therefore, it is always wise to look at which currencies have the best (i.e. lowest) spread before trading. Normally, more popular currencies and pairs have lower spreads and can be best to stick to.
When is the currency most active?
A very important point to think about is when the currencies you choose will be active. This should ideally tie in with when you will be trading. For UK business owners, for example, it is probably not best to choose currency pairs that are most active at 3am in the UK! On the other hand, you may wish to find currencies that are active through the day and into early evening as this is when you may be on hand to keep an eye on them. For British traders, GBP is naturally the most sensible choice here due to when the London FX session operates.
Choose your currency wisely
When it comes to FX trading, a lot of focus is put on the technical skills such as chart analysis or which strategy you will use. While this is important, you should also focus on which currencies you will invest in first. By choosing the right ones for your trading style and personal preference, you will have much more chance of success.