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A Fun Exchange – FOREX

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I don’t know about you, but I have had the pleasure of taking some fun adventures outside the United States over the years. And each time I come back I always come back with a handful of coins and paper money that I will never use again.

There are the Yen, Euro, British Pound, Indian Rupee and so many more. It is neat looking at the collection of coins I have gathered over the years. As I look at my small collection, aside from the fun memories, I look at these and wonder if these coins can make me a profit.

With recent news all I seem to hear about is how the Euro or even the US Dollar is in trouble, but how does this really affect or work for investors?

Just like trading stocks, any investor with an interest in world currencies can trade in foreign exchange.

Foreign exchange investment, or FOREX investment, involves investing in different international currencies in order to turn a profit by trading.

Many investors are interested in using foreign exchange option trading to improve their portfolio. From the research I have put together I see there are ten big advantages of this form of investing.

  1. It enables you to play on the Forex market while limiting potential losses. If a currency pair does not end up meeting or bettering your strike price, you can wait until the contract expires, and you will only lose the cost of the premium.
  2. This type of investing combines the advantages of the FOREX market with options trading. Foreign currency options give you additional investment options which way well suit your needs.
  3. This market is acknowledged as being the most liquid in the world, which means that the investments can be turned into cash quickly and easily.
  4. The foreign exchange market is massive, and one of the largest in the world. As a result, investors have a wide range of investment options, and never have a problem finding the right trade.
  5. A foreign exchange trader requires no more than a couple of hundred dollars to start investing in this market. Many other investment options require a substantially higher amount.
  6. The foreign exchange market is unique in that it never closes. You will never have to wait for opening time to trade! Market trading hours are convenient for the investor, no matter where he or she lives. The best part is that you can trade on a schedule that works best for you and your lifestyle.
  7. The market has no physical location, and all of the trading on it is done electronically. As a result, to make a trade of any kind on this market all the investor simply needs a computer and the Internet.
  8. Trading losses and risks can easily be managed by hedging. The investor simply hedges their investments by using options and in doing so there is no risk of large losses.
  9. This market is always considered a bull market, no matter the state of the economy. There are always rising currencies, and falling currencies, so at any one time there are always bullish conditions with some currencies.
  10. The FOREX market is global, which means that there is a low risk of manipulation. In some cases stocks can be manipulated with ease, leaving the average investor out of pocket. The large size of the market is a further reason why manipulation cannot occur.(1)

When you’re just starting out, investing in foreign currencies can seem confusing, and the last thing you want to do is blindly invest your money without the education to back your decisions.

Before starting out you will need to determine what your trading style should be and how much work you’ll have to do.

Are You In for the Long Haul?

Just like traders who follow stocks and commodities, being a successful forex trader takes work, an understanding of world markets and government roles in markets that can impact the value of a country’s cash.

Are You A Short Term Investor?

If you’re eager to step up your game and you’re willing to do more research and speculation, day trading in foreign exchange is an option.

By analyzing technical data and fundamental analyses, you can identify trends in foreign currencies, and as with stocks, speculate on the future value of a country’s money by looking at stats and charts.

You can get general exchange rate information and economic indicators for the U.S. and abroad from the Federal Reserve Bank of New York. (2)

Like trading individual stocks, it may take a lot of research a to actively invest in foreign exchange.  If you’d like to get your feet wet in foreign exchange, but you’re not sure how to go about it on your own, you can open a managed account.  Instead of directing your own investments, an account manager will invest on your behalf and fully disclose to you their strategies.

For more trading information and tips, foreign exchange data and services companies like eSignal, a division of Interactive Data Corp. (Stock Quote: IDC) offers free forex trading strategies.

To Making Money,

Lourdes Janzen

LJ Investment Research 

References:

  1. http://www.biostockspro.com/10-advantages-of-foreign-exchange-option-trading/
  2. http://www.mainstreet.com/article/moneyinvesting/stocks-funds/beginners-guide-foreign-exchange-investing?page=2

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