Trading Currencies on the Forex Market-a Different Way to Invest
Tired of the stock market, but still need to make money? For you the answer might lie in the practice of trading currencies. Just like stocks, bonds, and mutual funds, the world's currencies gain and lose value throughout the day, and astute people can make money by investing in the different currencies.
Forex is just the acronym for the Foreign Exchange, which is the market that allows you to trade the world's different currencies in volume. Anyone can trade currencies, whether you're an individual, or a bank, or other corporation. In fact, large companies like Microsoft for example all do investing just like you do, only in a larger scale. While they will have some money that does stay as cash, they have too much to just sit there and lose purchasing power to rising inflation so to combat that, they trade different investments. I don't know specifically what Microsoft invest in, but companies all over the world invest in stocks, bonds, mutual funds, currencies, real estate, and other companies in the form of providing venture capital. Electronic trading just allows the average individual investor trade currencies without having to have huge sums of money to do it. Just like with the stock market, a person who trades on the Forex markets has to know how the market works and what forces cause the different currencies to move up or down. Currency trading can be very volatile, often more so than the stock market and investors must use different strategies to help mitigate that risk. The Forex market is the largest financial market in the world where 4 trillion dollars in trading takes place each day. Investors have to know what causes different country's currencies to change in value, and that can be a lot to keep track of. Because the currency market is global it trades 24 hours a day, so your money never sleeps.
The More you Know
The more you know about currency trading, or any kind of investing, the better. If you choose to have help from a broker (here is a list), that doesn't mean you can turn your brain off and take his advice. Your advisor may be able to recommend currencies and strategies that match your risk profile, but a suggested trade may still be more risky than you are comfortable with. There are ways you can mitigate that risk. Youth has its advantages. The more working years you have ahead of you the more aggressive you can be. That's because you have many years to make back any losses you take trading currencies. Whereas if you are nearing retirement you don't have much time to make back a bad trade. The other way to lower your risk is to invest less of your total capital. A person with a million dollars cash can afford to spend a hundred grand whereas a guy with a quarter of a million dollars cannot. It's not about the size of the trade, but what percentage of your wealth that trade represents. When your broker suggest a pair of currencies to trade run it through your own checks and balances to see if you agree with it. Too many people blindly follow their broker only to lose money and be left trying to recoup their losses through arbitration. Save yourself time, money, and stress by educating yourself about currency trading before you actually risk any of your hard earned money.
Investing not Gambling
Many people would not dream of going to Las Vegas and gambling away their hard earned dollars, but they don't think twice about doing it in stock market or the Forex market. If you are making trades in any market without doing minimal research you're back in Vegas gambling. Investors make money trading currencies; gamblers seldom do. Educate yourself about currency trading, then find a broker whose philosophy meshes with yours and you'll have a better chance of investing your money without gambling it.
Jenna Harper is a professional blogger that provides news and information on financial services. She writes for Patrick Accounting, a firm that provides restaurant accounting and healthcare advice.