When it comes to investments, many people simply think of the stock market. They know that there are stocks and bonds, and maybe mutual funds, but beyond that many don’t know of the other opportunities. These traditional investments only scratch the surface of what is available. For over a decade now Forex has been making currency trading available to investors no matter what their net worth is. If you haven’t heard of Forex, now is the time to learn.
What is Forex?
Forex, derived from the words Foreign Exchange, is trading currency and profiting on the fluctuation of their values. Since most countries have their own currency, and its value is constantly fluctuating against the values of other countries’ currencies, you can make a profit by trading them.
The idea of Forex was conceived back in the 1990’s and it was made available online in 2003. Since that time investors have been making money by capitalizing on the changes in currency values.
How it Works
Let’s suppose that you believe the US Dollar is going to go up in value against the British Pound. Hypothetically speaking right now it costs 2 US Dollars for 1 British Pound, but all indicators point to that shifting and it will soon only cost 1 US Dollar for 1 British Pound. Forex has designed a platform where you can invest in the US Dollar.
Using the Forex platform you can purchase 200 Dollars at a cost of 100 Pounds. After the Dollar increases in value, you then sell your 200 Dollars for 200 Pounds. You profit because the Dollar goes up in value.
But it works the other way as well. What if indicators show that the Dollar will drop in value compared to the Pound? In that case you use the Forex platform to purchase 100 Pounds at a cost of 200 Dollars. When the value of the Dollar decreases (or the value of the Pound increases) you sell your Pounds for more than you paid for them.
It must be disclosed that Forex doesn’t work on a strict dollar for dollar scale. Because the shift in values is often so small, nobody except those with millions of dollars to invest would be able to profit. In order to help those without millions of dollars to invest, Forex uses what are called Pips. Simply speaking a Pip is 1/100 of 1%. Whenever the value of a currency changes 10 Pips, you make or lose $10.
By going through Forex you have access to nearly all of the world’s currencies (the USD/EURO is the most heavily traded currency pair out there). As one country’s economy strengthens, you capitalize off owning their currency. As their strength wanes, you buy into another country’s currency. By doing so you mitigate the risk of currency strength; a risk you can’t avoid by investing just in the stock market.
Investing Through Forex
Forex investing is not quite as easy as it sounds. There is a lot of jargon that you will need to know, and there is a lot that goes into calculating whether or not the value of one currency will go up or down. That is why there are specialized training courses available. You can get all of the training you need in order to make informed decisions and (hopefully) not lose any of your money.
Learn more about Forex today, and get started diversifying your investment portfolio.
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