What is Trading Forex and Disadvantages as an Investment



Hearing the word "Forex", maybe for some people is a foreign thing to hear. Naturally, if you feel foreign, because this term is more closely related to people who are quite experienced in the investment world. Foreign exchange or foreign exchange has the meaning of foreign currency transactions. Forex is better known as foreign exchange or foreign exchange. Then, what is forex trading?

If you start to have a curiosity about what forex trading is, forex trading is an investment product with buying and selling foreign currencies. The activity of buying and selling foreign exchange, known as forex trading, offers attractive advantages. Maybe you think that when you exchange money to a money changer, it is a forex trading activity. However, the explanation would actually be more complex. So what is forex trading and how is it different from foreign exchange?

What is forex trading? In general, forex is a transaction to exchange the currency of the country where you live with the currency of a foreign country of your choice. In addition, forex needs are usually personal or personal, one of which is as a means of payment in other countries to be visited. So, if you exchange money at a money changer, the activity can be referred to as foreign exchange. While forex trading has a different meaning.
What is forex trading? Forex trading is an activity of buying and selling foreign currencies which is usually done online. The purpose of forex trading as an investment itself is to seek profit from the difference in the sales figures made. Usually those who carry out forex trading activities are known as traders.

What is forex trading and risk as an investment?

In addition to offering benefits, forex trading also has its own risks. Before starting to learn what forex trading is, it's a good idea to know the risk profile offered by one of these forms of investment.

1. Have a 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 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 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 a capital of just 1 dollar, 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 right ratio. If you have the wrong strategy, you might lose up to 100 dollars more.

2. Unpredictable currency movements

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

Many factors can influence the movement of foreign currencies in the forex market. Usually the value of foreign currencies will change based on economic factors, geopolitical factors, it can even occur because of the transaction factors that are being carried out. If the number of transactions in the purchase, of course, will make the currency has an increase. On the other hand, if more people start selling their currency, there is a possibility that its value will also drop. 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 considerable losses if you make a wrong move.

3. Lots of scams

What is forex trading and how is it done? Forex trading is usually carried out online via the internet. The lack of face-to-face transactions will certainly present a high possibility of fraud. This fraud mode is quite diverse and will present a large loss. One of them is a fraud broker profile. If you use the services of a broker for forex trading, make sure that the broker is of good quality and has good references. If you don't, your profits will be taken away. This also causes forex trading to have a bad reputation as an investment instrument.

4. Must 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 the movement of your investment. Therefore, it will be very difficult if you make forex trading as a side activity to have additional income. You have to prepare a large enough time and mind in forex trading, if you are careless a little it is very likely that you will experience losses. Therefore, after knowing 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 collection of funds that are 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 pool of funds will be managed by the investment manager. An investment manager is a management or professional institution that has the task of managing your investment activities or activities, one of which includes mutual funds. With the advantages of investing in mutual funds that are easy to understand with less risk than the risk and understanding of forex trading, it becomes a force to attract the attention of young investors or beginners 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 investment instruments for those of you who want to start as a novice investor, you simply deposit or entrust your investment capital to the investment manager. Usually this investment manager is managed and organized by an investment manager. Related parties will later help you to choose and buy the desired mutual fund. 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 money. Therefore, mutual funds are suitable as investment products for beginners and those of you who do not have enough time to manage investments independently.

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