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Foreign exchange trading, also known as currency trading is the simple act of converting one currency to another. However, it is also a lucrative and liquid industry with high risks and high rewards. For business owners, it can be a source of extra income and also a way to get the best rates when dealing with foreign markets. Because of the remote nature of trading, it is something that business owners can take part in even while operating their firms.

Below we will discuss how forex trading can help your business and boost your finances.

Extra Income and Remote Access

New entrepreneurs cannot commit to developing and growing their business ideas without an alternate source of income. Many entrepreneurs are opening up to the reality that forex trading can help sustain them while they get their businesses off the ground. Entrepreneurship in a Box says that forex trading can help business professionals diversify their investments. By not focusing on just one venture, business owners avoid putting all of their eggs in one basket. It’s a way to preserve capital, but also a way to earn extra income.

Another great aspect of FX trading as shared by The Balance is that it’s a 24-hour market operating five days a week. This works well for entrepreneurs who are busy running their businesses during the day. As long as you have a steady internet connection, trading can be done on a laptop or a mobile phone so business owners can easily trade during downtimes at home or in the office.

Foreign Markets or Suppliers

Small Biz Trends notes that businesses that plan to expand to foreign markets or that have foreign-based suppliers can benefit from forex trading. In the foreign exchange world, large amounts of assets can be converted into cash quickly. This means that large sums of money can be converted from one currency to another with relatively small spreads. Spreads refer to the difference between the bid prices of the potential buyer and the ask prices of the potential seller. This mainly determines if you are losing or gaining from a transaction.

For US business owners who supply their products to Europe for example, they will always need to have EUR currency on hand. Forex trading is a way of hedging your risks during fluctuations in currencies by making sure that you convert your cash at the most opportune moments. A business owner can choose to trade EUR/USD if they think that the EUR will increase in value soon against the USD. They can do the opposite if there is news that could cause the USD’s value to rise. Aside from earning, the business owner has converted their USD to EUR or vice versa at a rate that is beneficial to them.

Assessing Risk Versus Reward

While there is indeed profit potential in the constant rising and falling of foreign currencies, there is also the risk of loss. Foreign exchange markets can be risky and you will need to learn to mitigate risks by getting a grasp of market fundamentals and by keeping disciplined. In a previous article on trading discipline, we discussed the five best practices for maintaining discipline in forex trading. These include carefully planning and analyzing your trades, controlling your emotions, choosing only high profitability setups, avoiding over-trading, and maintaining a trading journal.

Another important tip for business owners is to ensure that your business is a separate entity from your personal assets and liabilities. This is so that in case of any FX losses, your business venture is not affected. You can do this by choosing the right business structure such as a corporation or an LLC. According to ZenBusiness once a firm becomes an LLC it becomes a legal entity separate from its owners. Ensuring your business finances are separate from your personal finances, allows you to freely engage in the foreign exchange market without compromising your business’ success.