Stock Investing

Earning Money as an Investors

* The currency of a growing economy with relative price stability and a wide variety of competitive goods and services will be more in demand than that of a country in political turmoil, with high inflation and few marketable exports.

* Money will flow to wherever it can get the highest return with the least risk. If a nation’s financial instruments, such as stocks and bonds, offer relatively high rates of return at relatively low risk, foreigners will demand its currency to invest in them.

* FX traders speculate within the market about how different events will move the exchange rates.

For example:
News of political instability in other countries drives up demand for U.S. dollars as investors are looking for a "safe haven" for their money.

A country’s interest rates rise and its currency appreciates as foreign investors seek higher returns than they can get in their own countries.

Developing nations undertaking successful economic reforms may experience currency appreciation as foreign investors seek new opportunities.

The Bretton Woods system

The Bretton Woods system began to weaken in the 1960s, when foreigners accumulated large amounts of U.S. dollars from post World War II aid and sales of their exports in the United States. There were concerns as to whether the U.S. had enough gold to redeem all the dollars.

With reserves of gold falling steadily, the situation could not be sustained and the U.S. decided to abandon this system. In 1971, President Nixon announced that U.S. dollars would no longer be convertible into gold. By 1973, this action led to the system of floating exchange rates that exist today. Currently, currencies rise and fall in value according to the forces of demand and supply.

Currency Market

Volatility in the currency markets

Is an undeniable and unavoidable daily occurrence. With a daily turnover in excess of $1.5 billion and an uncountable number of factors playing into which way the market will move, it is impossible to forecast currencies with 100% accuracy. While large corporations employ market professionals to manage billions of dollars worth of currency risk, private individuals are often left at the whim of this massive market feeling uneducated and at risk.

Is FX in a bear market now or heading for one?

There is no such thing as a bear market in FX. Every major corporation, export-importer and every government in the world needs foreign currency every day to pay their bills. There is always FX trading around the world (200 times the size of NYSE daily volume).

As one currency goes down, another necessarily goes up. Anticipation is the challenge, serendipity being helpful as well.

Currency trading, foreign exchange trading, forex trading or Fx trading are just four different titles often given to act of investing in the currency exchange market. If you are interested in investing in the foreign exchange market, then you need to understand the currency trading basics.