The forex market is the largest and most liquid in the world, with around $5.3 trillion traded every day on average. This makes it highly attractive for individuals to begin trading in an attempt to make a good profit, yet trading forex also holds many advantages for small businesses. There is an element of risk involved, and many companies won’t want to put some of their profits on the line, yet if your businesses does and has worked out how much it can afford to trade, there are various reasons for doing so.
Flexible Ways to Profit
There are many different ways to trade on the forex market, meaning you can make a profit whether a currency is rising or falling, depending on the type of trades your business makes. With much more flexible ways to trade than other markets, such as the stock market where you can only profit if they increase in value, it provides more opportunities to be successful. As a highly volatile market it can therefore be better to place trades on the assumption of some currencies weakening.
For beginners, the forex market appeals due to its more simplified nature and lack of choice compared to others. There are around seven major currency pairs that provide a good starting place, with a lot of information, news and analysis surrounding all of them to keep you well informed when making trades. Then it is simply the decision of whether you think a currency will increase or decrease in value.
Diversified and Expanded Portfolio
Trading forex with Oanda offers the opportunity to diversify the company’s existing portfolio. All SMEs need to expand and grow to be a success, and widening forex trading capabilities is a good start. Spreading your small company’s investments into more places reduces volatility and means if something goes wrong in one area, it may hopefully be offset by successes in another.
The first 40% of profits made from forex trading are taxed at short-term capital gains rates, whether they are made in the first minute or month after you enter a trade. The remaining 60% is then taxed at long-term capital gains rates, but this is still a lot better for SMEs than other options available. There are also no commissions involved either, offering more financial advantages. Consider these points before your SME begins trading forex.
(This post is brought to you by Oanda Europe Limited.)