Get to know what Forex trading is and its disadvantages as an investment Hearing the word “Forex”, perhaps for some people is something that sounds familiar to them.
It’s normal if you feel unfamiliar, because this term is more closely associated with people who are quite experienced in the world of investment. Forex or Foreign Exchange means foreign currency transactions. In Indonesia itself, forex is better known as forex or foreign exchange. So, what is forex trading? If you are starting to wonder what forex trading is, forex trading is an investment product with the activity of buying and selling foreign currency.
The activity of buying and selling foreign exchange, known as forex trading, offers attractive profits. Maybe you think that when you exchange money to a money changer, it is a forex trading activity. However, actually the explanation will be more complex. So what is forex trading and how is it different from foreign currency exchange? What is forex trading? In general, forex is a transaction exchanging the currency of the country where you live with the currency of a foreign country of your choice.
Apart from that, 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, the activity can be called foreign exchange. Meanwhile, forex trading has different meanings. What is forex trading? Forex trading is an activity of buying and selling foreign currency which is usually done online. The aim of forex trading as an investment is to seek profits 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, apart from offering profits, forex trading also has its own risks. Before starting to learn about what forex trading is, it’s a good idea for you to know the risk profile offered by this form of investment. Has high risk Compared to other investment instruments such as mutual funds, shares 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 carry out large amounts of forex trading transactions even though you have less capital. When you start learning forex trading, you will usually be introduced to this leverage system. As an illustration of leverage, there will be a ratio of 1:100. This comparison indicates that, with just 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 profits you get can only be achieved if you set this leverage system with the correct ratio.
If you get the wrong strategy, you could lose up to 100 dollars more. Currency movements are difficult to predict Maybe you are aware that the comparison or movement of these currencies can be said to be very volatile. Before starting to know what forex trading is, you must have a deep understanding of foreign currency movements. Many factors can influence foreign currency movements in the forex market. Usually the value of foreign currency will change based on economic factors, geopolitical factors, and can even occur due to transactions being carried out. If there are a lot of purchasing transactions, this will certainly cause the currency to increase. On the other hand, if many people start selling the currency they own, there is a possibility that its value will also fall. This understanding of what forex trading is continuous with dynamic currency movements will make you confused if you do not have sufficient knowledge and will cause quite large losses if you make the wrong move.
Lots of fraud
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 large possibility of fraud. This fraud mode is quite diverse and will result in large losses. One of them is the profile of a fraudulent broker. If you use broker services for forex trading, make sure that the broker is qualified and has good references. If not, the profits you achieve might be taken 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 is a good idea for you to actively participate in monitoring your investment movements. Therefore, it will be very difficult if you make forex trading as a side activity to have additional income. You have to prepare quite a lot of time and thought in doing forex trading, if you are a little careless it is very possible that you will experience losses. Therefore, after knowing what forex trading is, it is highly recommended that you fully commit to this investment instrument. After knowing what forex trading is and the risks, maybe you can choose investment products that offer security and less 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 collection of funds that are managed as investment capital which can be converted or changed into various types of products, such as shares, bonds and other financial and investment products. This pool of funds will later be managed by an investment manager. An investment manager is a professional management or institution that has the task of managing the 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 the risks and understanding of forex trading, it is a strength to attract the attention of young or novice investors to start investing. However, the choice of investment instruments is returned to you according to the risk.
