Whats the purpose of investing in currency, compared to investing in shares ?

I ɡοt a friend wһο gave mе a tip аbουt investing іח currency wіtһ tһаt forex.com site аחԁ іt appears tο bе promising bυt іt dosen’t seem חο differen’t tһеח investing іח shares, stocks, bonds & mutal funds.

Sο somebody please ехрƖаіח tο mе whats ѕο unique аbουt investing іח currency trading compared tο investing іח shares ???

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4 Responses to “Whats the purpose of investing in currency, compared to investing in shares ?”

Alter Ego:

May 20, 2010 at 3:33 pm

I wouldn’t recommend it if you don’t really know what you’re doing. You could lose a lot of money and fast. Investing in currencies is something that you should be at least a semi-expert in before you do it. All currencies have their value measured against other currencies. For instance:

Today, 1.00 US dollar = 0.787174 Euros

So the Euro is worth more today, as usual. As you can see, it only takes 0.787 of a Euro to make one whole dollar. The values of currencies fluctuate everyday, all day. So if you know enough to predict through graphs, charts, and financial news, which way a currency will be headed, you can buy them and if they become more valuable, you just made money. Basically, all you are doing is taking your own country’s currency and converting to a different country’s currency in the hopes that the one you get will rise in value.

Shares typically refer to publicly traded stocks which are issued most commonly by medium and large sized companies. When you purchase shares of a stock, you are letting the company borrow your money as an investment, and you hope they are going to profit in the time that you hold the stock, thus making your stock price go up. Then, when you (hopefully) sell your shares at a higher price than what you bought them for, you make money. Many stocks also pay dividends, which is a way to reward shareholders when the company is profiting. Dividends are usually some certain percentage of how much stock you own, paid out a few times a year, depending on the company.

Never get into an investment without doing what is known as “DD,” or “due diligence.” This means that you do thorough research on things you are going to invest in. You know the history of the currency or company, have knowledge about it, and a reasonable understanding of why it should make you profit.

Good luck!
guru_matt:

May 20, 2010 at 3:54 pm

forex is the world’s biggest market and trades almost 24 hours a day, 7 days a week (Closed most of Sunday, opening for Asian timezones).

When investing in stocks, bonds, commodities you are buying an asset

When currency trading you are buying and selling money (just different countries version of it).

The risk/reward ratio is very, very different.

fx trading spot trading is very, very risky. You need to understand your exposure at all times and have your maximum loss point known before you enter the trade.

If you are trading through a platform, say MT4, and trading spot prices, your are usually trading at 50 or 100 times leverage. This is fantastic if the trade goes your way, but absolutely devastating if it goes against you.

When you are trading with leverage, a small move – say 10 pips can represent a 1,000 price movement on your position – so understand what you are doing.

I trade fx, but do it through long term options. This reduces my profit potential, but I can trade a known level of risk.

People do trade full time & do quite well – so it can be done.

Get a practice trading account first (most online brokers offer one) and see how you go.
Jason:

May 20, 2010 at 4:43 pm

There are a lot of difference:
- forex is more risky
- you can leverage more money
- the forex market is a lot bigger then the stock market
- trades are done for shorter amounts of time
- the market is open 24 hours a day
Blue FX:

May 20, 2010 at 5:38 pm

The purpose of all these investments is to earn profit. But it is the vehicle that you use which makes one different from the others. All are speculative investments, meaning that investors speculate which stock/currencies/funds would appreciate in value and invest on it. When the value rises, you unload. You earn profit. Your preference would largely depend on your trading personality, your appetite for risk, and your capital management principles.