If I would walk around downtown tomorrow and I asked random people the question, “What is Forex Trading?” How many of them do you think would have any clue what I was talking about? If I had to throw out a percentage, I would say that maybe 10% would have a general idea what forex trading is, and that guess might actually be on the high side.
If you don’t know what forex trading is, don’t feel bad. It’s not a term that you hear every day. Even if you watch a news channel on investing once in a while, you still might not have picked up on the term. The concept is actually very simple. In the world today, there are many different currencies in use.
Sometimes our dollar becomes stronger vs. other currencies and sometimes it’s weaker. In other words, if we take our cash over to another country after our currency has weakened, that means that we can buy fewer goods with that same amount of money than we could have yesterday. Forex trading is merely the purchase of currencies against one another with the expectation that the currency will strengthen, which will then make your investment worth more money.
This, of course, is a very generalized explanation of forex trading, but it you’re interested in learning more details, it might serve you well to take a look at some forex guides. With these guides, you’ll not only get a more in depth understanding, but you may even decide to invest in some forex trades yourself.
Long Term Investing vs. Short Term
What do you think of when you think of long-term investments? Probably a 401(k) or a Roth IRA right? Let me ask you this. How exciting is it to invest in these retirement funds each month? It’s pretty dull isn’t it? Sure, they might increase 15% over the course of the year, which is excellent, but it still feels like your investments are rising extremely slowly in the first 10 years. Only in the later years do you earnings really start to gain momentum and get a little more exciting.
If you’re not a fan of being bored (and I don’t think any of us are), then perhaps you’d like to spice up your life with a faster paced investment in the short term. You could invest in individual small cap stocks or junk bonds and have a chance to make a killing, but these are often quite difficult to predict. With the forex market, there is often quite a wide variety of stories that contribute to the rise and fall of each currency.
And, if you can sniff out the right story at the right time, you could set yourself up for some immediate earnings. As will any short term investment, there is definitely more risk, so make sure you ease your way into this investment type. Start slow and as you begin to learn the process, then you can start to make larger trades.