When researching the various investment opportunities, a lot of people focus their efforts on retirement and property investments. While these are great avenues (and certainly everyone best be saving for their retirement in some way!), what about additional means of investment?
If you’re curious about foreign affairs, currency and the development of nations around the globe, a forex account may be for you.
What is a Forex Account?
A forex (foreign exchange) account is set up to hold and trade foreign currencies. Much like an equity account, you open the account with a bank or broker using an initial deposit of your own country’s currency, then set trades based on a combination of appreciating and depreciating currencies.
The only significant difference is that you’ll have to sign a margin agreement because you’re essentially trading with borrowed funds in some situations (more on that in a bit). The margin agreement allows the brokerage to protect their own interests by killing a trade you schedule that they deem too risky.
Getting Started with Forex
Of course before you actually put your hard-earned money into a real forex account, you’ll need to understand how this type of trading works. One very easy, risk-free way to do so is to set up a forex demo account. In a forex demo account, you can make forex trades using real-time data (and often access the brokerage’s actually dashboard) without putting in any actual money.
Using a forex demo account allows you to develop strategies based on a variety of factors, timeframes and conditions (which include different types of algorithms and manual trades). Once you’re comfortable with the nature of forex, you can put these strategies to use through a micro or full-scale forex account.
The Forex Strategy Nitty Gritty
The basic types of strategy with forex are technical and fundamental analysis. With technical analysis, you’re analyzing price trends. This is sort of like the equity markets except that the forex is open and active 24 hours a day. The most common forms of technical analysis used in forex are The Elliott Waves, Parabolic SAR, Pivot points, and Fibonacci studies.
With fundamental analysis, you’re treading into the extremely complex world of valuing entire countries. Used mostly for long-term analysis efforts, fundamental analysis can lead to short-term trades based on news and trending reports. Types of fundamental indicators include CPI (Consumer Price Index), PMI (Purchasing Managers Index) and Retail Sales.