I have been learning about the stock market, with the ambition of becoming a budding trader, for several years.
However, it’s very intimidating. There are innumerable stocks and companies to choose from.
The stock market is open on weekdays during business hours and on closed on the weekends. There are limited operating hours to practice.
You can trade stocks in different international markets on a global scale, but you must be constantly apprised of international finance markets movements.
While you can trade via penny stocks or spare change apps, it’s better to be well-informed and have a few thousand dollars to invest in a diversified portfolio.
The point is that it takes time to learn how to trade stocks. That’s why I have also been learning about Forex investing.
Forex investing is not simple but is more approachable as a practice than stock investing. The name sounds so intimidating, doesn’t it?
Well, have you ever traveled to a foreign country? Have you ever exchanged currencies at an airport, bank, or currency exchange?
Then congratulations! You’ve been a small-scale Forex investor for years and didn’t know it.
Forex Investing 101
The foreign exchange market is formally known as, “Forex.” It is a decentralized global marketplace for exchanging currencies on a global scale. Forex is the largest, liquid, financial exchange market on Earth.
Over $5 trillion is exchanged daily on the Forex exchange market. The financial value of the traditional stock market doesn’t compare.
Investing efficiently in Forex is predicated on understanding how currency exchange markets impacts tourism, commerce, and business globally. Consider that $1 USD can be exchanged for €0.90, or €1 for $1.12.
Now, if you are an American corporation with employees in France, or flying employees there for a business retreat, you’re going to lose a lot of money on the exchange.
Now scale it down to you. Imagine that you’re trading €1 for $1.12 today and it rises to €1 for $1.14 tomorrow. You’ve profited. This spread is called the price interest point, or, “pip.”
Unless you trade on a large scale on the Forex market, which is volatile since currency valuation is volatile, you must appreciate that your gains or losses will be modest.
How to Invest in Forex
There is no centralized exchange market for Forex. All trading occurs electronically 24 hours a day every business day.
You may be able to trade on the weekend depending on strategically chosen time zone periods. Forex is all about trying to exchange currencies in your favor based on supply and demand.
If you believe a currency will gain in value, you buy. Think it will decrease, then you sell. You’re always buying one currency to sell another or vice versa.
Currencies are always exchanged in pairs, like EUR/USD, the world’s most exchanged currencies. The currency to the left is called the base, or, “bid,” and one on the right is the quote, or “ask.”
Forex investing is buying or selling the base currency relative to the quote. You can also exchange:
- GPB/USD
- USD/JPY
- USD/CHF
- USD/CAD
- AUD/USD
- NZD/USD
You can trade 24 hours a day in the spot market, as in on-the-spot. Forex trading can also be done in futures, derivative markets, currency swaps, and options as well.
Take Your Time
If I tried to make this sound simple, pardon me. There is a lot to learn about profiting from Forex investing. You can also learn more at currency exchange market and broker sites like Forex or Oanda.
Read More
Three simple rules to trade the Forex market
Difference between Canadian and US Forex markets
Importance of proper education in Forex trading
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
