Finance and Wealth Tips: Managing Your Forex Portfolio

| November 18, 2014

With financial trading becoming an increasingly alluring past time for anyone with even a minimal amount of disposable income, there is a far greater focus on the individual methods of investment accessible to beginners. The type of financial market that you choose to trade in is an important consideration, as this can have a sizeable impact on your ability to make generate sustainable returns.

 

The forex market has emerged as the most popular among novice and experienced traders alike, with a staggering US$5 trillion exchanged on the market every single day as of 2012. There are a number of features that distinguish forex trading from alternative investment options, while individuals who trade on the foreign exchange can also access a wide range of helpful resources.

 

The Basics: What is Forex and How Do You Trade It?

 

The most commonly asked question by any aspiring trader, forex is the term given to the foreign exchange, and trading within this market place requires the exchange of one currency for another at an agreed price. This price is determined on the over the counter (OTC) market, and currencies are always traded in designated pairs. Boasting a higher degree of liquidity and lower risk than any other open financial market, the foreign exchange is also a global trading platform and one that allows transactions 24 hours a day.

 

When trading forex, the first currency of any pair is always traded against the value of the second. There is a great deal of speculation in the market, specifically in terms of forecasting whether the value of the first currency will rise or fall against the second. This requires an ability to comprehend and analyse market trends, and as an inexperienced trader you will need to ensure that you have access to a number of tools and charts to help you develop this knowledge. The capacity to implement real time transactions is also beneficial, as this enables you to capitalise on market changes as they unfold.

 

Managing Your Wealth, Portfolio and Risk

 

Your portfolio relates to the currency pairs that you trade, and optimising its performance is an exercise in risk management whilst trading forex. Although one of the lower risk trading options available and one that offers the opportunity to profit from small price movements in a volatile and fluid market, investing in currencies can still lead to significant financial losses if you are not organised in your approach. The collapse of the Euro is an example of this risk, and failing to predict market trends is often a precursor for losses.

 

This is also why many traders look to diversify their portfolio, and expand into markets a way of minimising risk and maximizing long-term gains. Some of the income generated from forex trading can subsequently be reinvested into alternative projects, while the rest of your capital can be deployed to high interest savings accounts and other wealth management resources such as those provided by James Hay. This will help you to protect and build your wealth over time, and ensure that you are able to comfortably fund your retirement and life beyond work.

Category: Finances

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