People looking to get into trading or investing have a few options. They can trade stocks, options, futures, or Forex.
Stocks are pretty common but have some restrictions that make them less than optimal in all cases. For example, sometimes the cost of commission can make it cost-prohibitive to trade if you don't have a lot of money. The tax rules can also be complicated if you make a lot of trades in a year.
Options are like a much more confusing version of stocks and aren't really a good choice for beginning investors.
Futures are very liquid (for the most part) but can force you into using too much leverage which makes them a bad choice for beginners or people without large accounts.
Forex can sometimes be the best of all worlds. But there is one reason that Forex can be very attractive to everyone but especially to new investors:
No size limits - Positions in Forex can be as large or as small as you want. So whereas in futures if you are trading the ES (S&P 500 futures), the smallest amount of movement (called a "tick") will cause you to gain or lose $12.50, and considering the ES can move 40 or more ticks in a day, that can cause you to gain (or lose) $500 in a day. For someone who only has $1,000 with which to invest, that would potentially be a 50% loss in one day.
Now consider that in Forex, you can adjust your position size to use as much or as little of your account as you want, even so small that the smallest amount of movement possible (called a "pip" in Forex) only causes you you gain or lose $0.01. At this level, if the currency pair you are trading moves even 100 pips, it will only change the value of your account by $1.00.
What this means is that beginners can trade small enough that even if they lose money on every trade while they are learning, they won't actually lose much of their account. This means they will feel more comfortable and confident while learning and won't be worried about "oh no, if I get this trade wrong I'm going to lose so much money!"
This is important because many traders end up losing money, especially when they are learning. And if you're going to lose money for your first few months (arbitrary length of time), it's better if it only costs you a few tens of dollars or so rather than a few hundred or a few thousand.
To learn more about Forex please visit this link!
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