Trading in The Forex Market : Getting to Know What Forex Trading Is and Its Weaknesses as an Investment

Trading in The Forex Market. Hearing the word “Forex”, maybe for some people it is something foreign to hear. It’s normal if you feel foreign, because this term is indeed more attached to people who are quite experienced in the investment world.

Forex or Foreign Exchange has the meaning as a foreign currency transaction. In Indonesia alone, forex is better known as forex or foreign exchange. Then, what is forex trading?

If you are starting to have a curiosity about what forex trading is, forex trading is an investment product with the activity of buying and selling foreign currencies. The activity of buying and selling foreign currencies, known as forex trading, offers attractive benefits.

Maybe you think that when you exchange money at a money changer, it is a forex trading activity. However, the explanation is actually more complex. So what is forex trading and how is it different from exchanging foreign currencies?

Trading in The Forex Market

What is forex trading? In general, forex is a transaction of exchanging the currency of the country where you live for the currency of the foreign country of your choice. In addition, forex needs are usually personal or private, one of which is as a means of payment in other countries that will be visited.

So, if you exchange money at a money changer, this activity can be referred to as foreign exchange. Meanwhile, forex trading has a different meaning.

What is forex trading? Forex trading is the activity of buying and selling foreign currencies which is usually done online. The purpose of forex trading as an investment in itself is to make a profit from the difference in sales figures made. Usually those who carry out forex trading activities are known as traders.

What is forex trading and risks as an investment?

As an investment instrument, besides offering benefits, forex trading also has its own risks. Before starting to learn about what forex trading is, it’s a good idea to know the risk profile offered by one of these forms of investment.

Have high risk

Compared to other investment instruments such as mutual funds, stocks and bonds, forex trading has the highest risk. So, what is forex trading and why is it so high risk? This high risk occurs because there is a leverage system in its activities. Leverage is a system that allows you to make large amounts of forex trading even though you have less capital.

When you start learning forex trading, you will usually be introduced to this leverage system. As an illustration regarding leverage, there will be a ratio of 1:100. This comparison indicates that, with only 1 dollar of capital you can carry out forex trading activities worth 100 dollars.

Of course this system looks quite tempting. However, you need to know that the profit you get can only be achieved if you set up this leverage system with the right ratio. If you get the strategy wrong, you might lose up to 100 dollars more.

Unpredictable currency movements

Maybe you are aware that this comparison or currency movement can be said to be very volatile. Before starting to get to know what forex trading is, you must have an in-depth understanding of the movement of these foreign currencies.

Many factors can influence foreign currency movements in the forex market. Usually the value of foreign currencies will fluctuate based on economic factors, geopolitical factors, it can even occur due to transactions being carried out.

If there are many transactions in purchases, it will certainly make the currency increase. On the other hand, if lots of people start selling their currency, there is a possibility that its value will also go down.

This understanding of what forex trading is is continuous with dynamic currency movements that will confuse you if you don’t have sufficient knowledge and will cause sizable losses if you make a wrong move.

Lots of scams

What is forex trading and how do you do it? Forex trading is usually carried out online via the internet. The lack of face-to-face transactions will certainly present a great possibility for fraud. This fraud mode is quite diverse and will present big losses.

One of them is the fraudulent broker profile. If you use brokerage services for forex trading, make sure that the broker is qualified and has good references. If not, the profits you achieve will be carried away. This also causes forex trading to have a bad reputation as an investment instrument.

Need to be active full-time

In order to avoid losses due to fraudulent brokers, when you start trading forex it’s a good idea to actively participate in fully monitoring

movement of your investment. Therefore, it will be very difficult if you make forex trading a side activity to have additional income. You have to prepare a considerable amount of time and mind in trading forex, if you are a little careless it is very likely that you will experience a loss. Therefore, after getting to know what forex trading is, it is highly recommended that you fully commit to this one investment instrument.

After knowing what forex trading is and its risks, maybe you can choose investment products that offer less security and risk, but are tailored to the risk profile of your financial goals. As an alternative, you can try to start investing through mutual funds.

Mutual funds are an investment instrument in the form of a pool of funds managed as investment capital that can be converted or converted into various types of products, such as stocks, bonds, and other financial and investment products.

The collection of funds will be managed by the investment manager. An investment manager is a management or professional institution whose job is to manage investment activities or activities that you carry out, one of which includes mutual funds.

With the advantages of investing in mutual funds that are easy to understand with less risk than risk and understanding with forex trading, it becomes a force to attract the attention of young or novice investors to start investing. However, the choice of investment instrument is returned to you according to the risk.

After understanding what forex trading is and what mutual funds are, in short, mutual funds are suitable as an investment instrument for those of you who want to start as a novice investor, you can simply deposit or entrust your investment capital to an investment manager.

Usually this investment manager is managed and held by an investment manager. Related parties will later help you to choose and buy the mutual funds you want. After a successful transaction, then you only need to pay attention to the movement and development of your investment while adding funds, just like saving.

Therefore, mutual funds are suitable as investment products for beginners and those of you who don’t have enough time to manage investments independently.