Investing in forex can be a great way to compliment your portfolio and further diversify your investments. In this article, we would like to help you get a better understanding of what forex investing is and what it involves. We would also like to provide you with valuable information that you can take home, apply to your portfolio, and use to make more money. After all, that’s what we all want – to increase our income and to secure our financial future. Let’s get started with the basics first.
What Is Forex Investing?
Simply put, forex trading involves the purchase of one country’s currency while selling that of another one. As currencies are traded in pairs, this process involves two simultaneous transactions. Essentially when investing in currencies, you bet that one country’s economy will outperform the other. For example, say you are looking at buying GBP against the USD. This would mean that, based on your understanding of the macro and microeconomic data, you believe that the UK economy will perform better than the US economy.
Why Invest In Forex?
When investing in currencies, the goal is to capitalize on the price fluctuations in the value of the currencies that you want to trade. Forex investing is like stock investing, with both similar market volatility, and both offering a great way to earn money. And in forex investing, similar to stock investing, you want the currency that you buy to appreciate in value, and you want to sell it at a profit. When investing in currencies, you will need to study each currency in the currency pair. These are many things that you will need to research and evaluate. For example, you will need to analyse each country’s economy, political stability, inflation rates, and GDP. You will also need to look at their corruption levels, nationalization, and regulation.
What To Consider When Investing In Forex?
There are several things that you need to consider before making your first investment. These include :
- Your sources of information and how reliable they are
- Your trading and financing costs
- Your trading conditions and leverage
- Your choice of brokerage
- Any other supporting materials that you will use
Information And Resources
Due to the vast amount of data available, it is becoming increasingly difficult for investors to determine what information will be the most helpful and the most applicable to their portfolios. Many investors use economic calendars to check economic data and to stay on top of important announcements. We personally recommend using investing.com or FXStreet.
Making sense of the economic data and how it can affect your trades can also be challenging for many investors.. In our experience, we’ve seen that many forex investors rely on trading ideas or signals, market analysis, social trading, and managed account services to help them navigate the forex market. Whilst some of these services can be helpful, it is important to find good providers, so that you avoid incurring losses.
At Mayfair Markets, we specialize in helping people from all walks of life to increase their income and get more out of their investing. We give them access to premium investing services – from trading signals to individually-tailored portfolios – all of which aim to help them achieve their financial goals. If you’re interested, you can book a free consultation with one of our experts. They will help you to outline your investment goals and create a plan for achieving them.
Trading Costs
Forex investing is easier than stock investing, in some ways, as it comes with lower minimum investment and lower trading fees. As you have less fees, you can keep a larger portion of your profits, making it a more rewarding experience for you. Many brokers claim to offer commission-free trading on stocks but, unfortunately, that is rarely the case. At the end of the day, they’re a for-profit company and they make up the lost revenue in other ways. But that is a different topic, for another day. The important thing to note is that forex trading is significantly cheaper.
Using Leverage
There are both advantages and disadvantages to leverage trading. Some trading experts argue against it, while others advocate in favour of it. In my opinion, it is a question of risk management and how much volatility you can handle. If you compare forex trading with stock trading again – you can do both with leverage and without thus 1:1 basis. It is up to you and your trading style. Obviously applying leverage to your trades can give you an upside, but it can also work against you if your position isn’t performing as expected. Once more, it is all about risk management and sticking to your trading rules.
Regulation
Wie almost forgot to mention the brokers – that is – the forex companies you use to execute your trade orders. It’s important to choose a broker that genuinely works in your interest and that isn’t looking to pocket from questionable practices. Again, this is another big topic, probably for another time, but here are a few things to check when choosing a broker:
- Their regulatory status
- Their reputation
- Their fees and trading costs
- Their response times when it comes to processing requests
My advice is to do your own research and to test their services before investing large amounts of money. Only deposit a small amount and check you’re happy with what they’re offering. If everything goes well, then you can add the full amount that you want to invest.
Final Thoughts
Investing in forex can be a great way to balance your portfolio and further diversify your investments. While investing in forex might seem tricky at first, there are plenty of online resources available to you. If you’re unsure where to start, you can also get help from managed account service providers or licensed investment firms. For more information about investing, feel free to check out our blog. For free forex trading ideas, feel free to also subscribe to our Telegram channel.
Risk Warning: The information in this article is presented for general information and shall be treated as a marketing communication only. This analysis is not a recommendation to sell or buy any instrument. Investing in financial instruments involves a high degree of risk and may not be suitable for all investors. Trading in financial instruments can result in both an increase and a decrease in capital.
