Financing a startup business is incredibly difficult. Since the credit crunch of 2008, mainstream banks have been less willing to fund startups, leaving many people’s dreams just that… dreams. However, being turned down by a bank doesn’t mean that your dreams cannot become reality. Instead, it merely means that you may have to find alternative sources of finance, such as forex trading. Here, we take a closer look at how you can use forex trading to finance your start-up.
What Is Forex Trading?
Forex trading, also known as FX trading involves the exchange of one currency for another at an agreed rate on the market. Forex is the world’s most traded market, and average turnover is in excess of US$5.3 trillion per day.
When forex trading, you simultaneously buy one currency and sell another. Currency values rise and fall against each other due to a number of different economic and geopolitical and factors. Forex traders profit on these price movements by speculating on which way they will move in the future.
There’s no physical location or central exchange for the forex market, and it operates 24 hours a day (from Sunday evening to Friday night) through individuals, banks and businesses.
How Does it Help?
Forex trading can be the extra source of income you need to fund your business. Although not for the faint hearted, and incredibly risky, forex trading can help you save a nest egg to start and fund your business.
It’s favored by investors for a number of reasons, including:
- A lack of commissions: brokers and governments do not charge fees, so the money you make is yours.
- No one can corner the market: At $5.3 trillion a day, not one single entity can control market price, so it’s a level playing field.
- Low barriers to entry: You can start open a trading account with less than £100.
- Leverage: A small deposit can give you control of a large total contract value thanks to leverage. This helps you make nice profits (or big losses if your risk management strategy isn’t right) while limiting your capital risks.
How Do I Get Started?
To start forex trading to fund your new startup venture, you’ll need to open a trading account with a broker. With many of these brokers, you can “try before you buy” by opening a demo account before you begin risking your own capital.
Before you begin, you should also spend some time learning exactly how the markets operate and what signals you can look out for. Again, education is something offered by a lot of brokers, so be sure to shop around to find the best broker for you and your needs.
Are there any Negatives to Consider?
As with any form of investment, there are negatives attached to forex trading. Firstly, although you can make substantial gains, losses can exceed your initial deposit. This means that, if you’re not careful, you can lose your investment.
Of course, there are always that you can partially safeguard yourself against these risks, but no trade is ever guaranteed to make a profit. So, if you’re not careful, your start-up dreams could end up going up in smoke.