Is Forex Trading Investing?2011 Nov 18
You may often hear this question, and of course, no surprise that you will hear very different answers to this question. It depends how much yours of experience in investing and Forex markets will have your opponent.
Are you familiar with Forex market? Let me introduce it to you. Forex trading is a common platform in the currency market. Usually, trillions of dollars are being traded globally, daily, in a Forex market. Forex trading is actually one of the biggest trading markets all over the world and if you are up for investing, there are actually a lot of benefits you can get out of Forex trading investment:
Flexibility. Forex trading works round the clock. A Forex trading is accessible anytime of the week, which means accessibility and flexibility for anyone who would like to trade on their most convenient time.
Liquidity. When you say liquidity, an asset can easily be converted to cash quickly even without the presence of discount in price. With Forex trading, you can move money – and large amounts at that - in and out using a foreign currency. You can also move big amounts of money with a minimum price movement, making it one of the many great benefits of Forex trading.
Wider choices. If you are up for Forex trading investing, definitely there will be wider choices when it comes to Forex companies. With Forex trading, you have the ability to choose whichever company you see will be very helpful for you as you prosper in the Forex market. Usually Forex trading needs a low start-up, making it even more beneficial on your part.
High leverage system. Even if you invest small in Forex trading, you still stand a chance to get high leverage in your small investment. But of course it still depends on the type of investment you make. Usually if you strike a good Forex trade and you chose a good Forex broker, you can get as much as 100 times leverage of your investment. For instance, if you invest $100, you can get as much as $10000 in Forex trading investing.
Forex trading is unique and can be accessed conveniently 24/7. You no longer have to wait for the banks to open. You can trade anytime of the day you want. Experience the same benefits of Forex trading investing and see for yourself if it will also be beneficial for you.
Yes, the list of the benefits looks really attractive. But it is not an answer whether the Forex trading is investing or is it a speculation? Well, it might be both. But it will be so only in rear cases. Most of the times, Forex trading is a pure speculation with no investment characteristics.
So what makes this separation? Well investing is a long term process which uses benefits of capital to increase in value over long term. If Forex market trading is all about guessing the future in short term with high leverage (which means very high risk) and thinking that you are smarter than the whole market, well, it is a pure speculation and you don’t have any chances to make profits over long term. Unless you a power that big that you can influence and manipulate the markets. Then it is another talk. It will be an investment. You will have long or short positions in some currencies then you start a media campaign about how it is good or bad with that economy. When the whole economy will react to it the currency will react before and together.
But such strategies are only for huge hedge funds or billion-type investors who like to gamble in such games. And if you are only small retail investor who thinks that after investing in Forex market he will get rich, then just forget it. Personally I don’t know anyone who got rich by trading in Forex market, however, I personally know several persons who lost serious money with Forex market, and I don’t want you to be the another one. If you want to your money work you should start normal investing in investments like stocks, bonds or funds. It will be much better for you than gambling in Forex market.
Yes it is gambling. That’s why it is so dangerous. You catch the hazard in currency trading. That’s why investors are losing large funds of their savings. If there would be no hazard, then everybody would drop this thing after few first investments (spending) losses. But they do not, they feel attraction which is created by hazard and they just can’t it exit rationally. The brain doesn’t work rationally in this field. Everybody knows how it is difficult to make rational decisions at investing when investment markets are in big financial turmoil. But it is much harder to make rational decisions if you are taken by Forex market.
If you don’t believe this (so many investors actually believe that Forex is also an investing), then think about why so many people are going to casinos? They definitely lose money over time, because if they would not then casinos would not survive. But casinos do survive and people do lose their money. But they keep doing it. That’s because they like it. Sounds weird but they like to lose money. It’s all about adrenaline and biochemistry or in other words it is an addiction.
There is not as big distinction between casinos and Forex. Maybe Forex is just in the middle between casino and real investment, but it will be better for you to stay with real investments than look for more live things. If your life is too boring, better try something that is not on computer screen and go for real life. And if someone will tell you that Forex is investing, then you should look for real investment guru than trust anyone.
Read the next article: How to Invest during a Recession?
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