Three Reasons to Trade the US Dollar on the Forex Market

by Andrew McGuinness     Jul 16, 2019

Ah, the good old United States; famous for the huge cultural center on either side of the country, massive mansions, and no doubt world-renowned deliciously greasy fast food. However, one of the things that you may not be aware of that the US have succeeded, is the strength of the Dollar. The United States dollar is one of the best currencies to trade on the Forex market because there are a number of strong options to pair it with, the economy attached to the dollar is world-class, and is by far the most in-demand money option on the market today. Not convinced? Here are three good reasons why you should be trading the USD, especially if you are a beginner trader.

The dollar offers good levels of volatility. The USD is considered to be what experts call a "hard currency;" it does not undergo massive fluctuations in value, making it a safe bet for investors when compared to most of the other currencies available on the market. Think of the value of the dollar as a trader's "safe house", if they feel that their investments are getting a bit too risky and they're looking to cash out and retire, they can always "return home" to the United States dollar because it's practically guaranteed to either retain its current value or have grown in value.

The dollar is the most in-demand currency. By far, the most popular currency to trade is the American dollar. 90% of currencies traded on the Forex Market have the United States dollar as one of its matched pairs. If you're holding dollars, this gives you leverage because the dollar has a high liquidity value; you won't have any trouble buying dollars or selling them, because the currency pairs so well against the other top currencies in the world. Think of the USD as stock in Apple; everyone who does not have it wants it because they know that it will continue to grow in value, and those who do have large amounts of it are eager to capitalize on its value by selling. This makes it simple for investors to enter and exit the market when they see fit and as we all know, exiting at the right time can mean the difference between making and losing money.

The US economy just keeps on growing. So why is the dollar so valuable anyways? The answer to this question lies in the politics of the United States. For decades, politicians have been building up the US economy by offering tax breaks and other provisions to everyone from the very wealthy to small business owners in order to attract large corporations to base their business out of the country. When you have more businesses in a country that are thriving, the country has more value because everyone benefits from the buying and selling that goes on on a daily basis. As a result, the economy of the United States has grown every year, and is projected to continue to grow years after the Forex market becomes more accessible to more people in developing nations. This means that the value of the dollar, though it may falter occasionally, is a safe bet for investors looking to protect their assets.

Get unlimited access to our Learning Center,
Broker Insights and Exclusive Promotions for Free!