It’s an exciting time for Forex trading—volatile, fast-paced, with historic shifts in the international currency markets happening weekly or daily and fortunes being made every hour. And, of course, with fortunes being lost every hour. In these challenging times, what is the place of Forex in your investment mix?
The most important consideration is the risk. Forex investments are extremely risky, with all that implies, both the good and the bad: While you can make a substantial profit in Forex trading, you can also have a substantial loss. Anyone who plans to invest in the Forex market should first build a sound foundation of mid-risk and low-risk investments to cushion themselves against loss.
The second most important consideration is the time and effort it takes to do well in the Forex market. There are brokers and automated traders galore, but real success takes research, trendwatching, a sensitivity to world affairs, and occasionally the willingness to stay up at odd hours to take advantage of fluctuations. Unlike most investment types, Forex trading doesn’t reward buying low and sitting on an investment for the next year or ten—investors buy low and sell fast, making most of their profits in short-term trading. Because of the research and constant attention Forex investments require, the best Forex traders are the ones who can spend the most time on their portfolios. If this sounds like you, then Forex may be your game. On the other hand, if you prefer not to make investment into your hobby or a second job, you should invest in Forex more cautiously and experiment, looking for the ideal balance between effort and profit.
In short, Forex trading can be an excellent addition to your portfolio, especially if you relish high risk. As with any high-risk investment, it’s important not to overextend yourself, but it’s also important not to be so timid that you make only a fraction of the gains more daring investors see. On the other hand, people whose portfolios cannot bear much risk, or who prefer more passive investment types, should give Forex investments a smaller place in their portfolios while they explore what trading in the Forex market can do for them.