Forex or FX, (which is short for Forex Exchange), is the largest financial market in the world, with an average daily volume of investment of more than 5 trillion dollars in 2022. It distinguishes itself as a decentralised financial centre based on the exchange of global currencies. 

It is a significant international industry with massive liquidity, which has proved to be closely monitored all over the world.

Having said that, is Forex investment relevant and profitable?

How To Invest In Forex With An Online Broker

When you don’t know where to begin, it’s best to rely on an expert in the field: a broker.

There are many brokers now available online just a few mouse clicks away. The majority of their trading platforms provide users with a very user-friendly and enjoyable trading experience.

How To Invest In Forex: What Is It?

If you still don’t fully understand what Forex is, how it works, and everything else you need to know about it, don’t worry.

Acorn2oak-fx was specifically created to assist you in navigating the sometimes perplexing maze that the vast world of foreign currency can represent.

Definition Of Forex Investment

Viewing FX as the most suitable and easiest way to learn to trade may appear questionable, yet, that is precisely what it is. What could be more relevant and instructive than beginning as a novice investor by betting on money? 

But let us start at the beginning, with the most basic definition. Forex (FX) is the foreign exchange market where all international currencies are bought and sold. Consider the dollar, the euro, the pound sterling, the Swiss franc, the yen, and all their ilk.

As a result, it is not surprising that this important financial centre captures the largest share of all investments made globally in a single day.

How Does Forex Investment Work?

A Forex transaction is so simple that most backpackers and travel enthusiasts never realised they had used at least one of them during their journeys around the world.

Forex, a tangible example

Imagine, for example, that you are going to visit the United States and want to convert a certain number of your pounds (GBP) into the local currency, the American dollar (USD), so that you can buy everything you need in cash.

According to today’s price, the applicable exchange rate (1.2181) (which is always subject to market trend and variation in supply and demand), you would have a total of $1,218.10 for £1,000.

As a result, we would say that you are purchasing $1,218.10 with your £1,000. In contrast, if you leave Florida to return to the UK with $500 in your pocket and are going to convert them again into your country’s currency, you will sell $500 to withdraw £410.48.

The Importance Of The Exchange Rate

We are especially interested in the exchange rate because it is precisely this that must be monitored closely in order to invest in Forex, and therefore bet on the evolution of prices according to the currencies targeted.

The exchange rate varies in unison with a country’s economic status and current events, as well as through the various contracts and commercial agreements concluded within the confines of that same country by the companies, organisations, and institutions that exist there.

This is why it is also wise to be prudent when trying to profit from increases or decreases in the exchange rates of specific currencies.

What Can You Trade Using Forex?

What investments can we then make with Forex? We understand it through currency exchange, or rather the variation in the course of a pair of currencies.

We use the term “pair” because we exchange one currency for another. The first currency in the pair is known as the base, and it will always represent the benchmark.

The quote or counter currency is that which one wishes to buy or sell for the benefit of the other.

When one wishes to trade a pair of currencies via Forex by predicting or speculating that the base currency will increase or decrease in relation to the quote currency, two prices, are revealed: the price of purchase and the price of sale.

The difference between them is known as the spread, and it is measured in pips.

But let’s imagine it for more clarity. Your base currency is the British pound, and the quote currency is the US dollar. For your GBP/USD pair, as of today, the buy price is 1.21152, and the sell price is 1.21114. Therefore, the spread is 0.38 pips.

To be able to invest in Forex, you must first open a position. If you believe the pound will rise against the dollar, you should purchase GBP/USD. If you believe the dollar will fall in value, you sell GBP/USD.

You win if the spread on which you trade is correct. On the other hand, if it is incorrect, losses will be incurred.

Investing In Forex: Leverage Or No Leverage?

Leverage is a powerful tool that comes up frequently in trading. It is a concept that may still be a mystery for inexperienced investors. What exactly is it?

This mechanism allows a user to borrow money from the broker that he is using to increase the buying power of his trades, and consequently receive a larger gain or loss.

Leverage represents the capability to expect a margin for the volume of the transaction. The amount of money placed in a position is fixed according to the size of a lot (100,000 units generally).

So, if you buy 1 EUR/USD lot today, you will get $101,430

Each lot fluctuation is expressed in pips (0.0001) for an account whose balance reflects the euro, which in this case is equivalent to $10. (100,000 x 0.0001).

Depending on the leverage that you choose, you will be able to take a position at a much lower cost and in proportion to the multiplication. 

Here are a couple of examples:

If we use 100:1 leverage, or multiply by 100, we can position ourselves on €100,000 in forex with a €1,000 margin.

If we use a 500:1 leverage, 200 euros of margin is sufficient to settle on a position.

It’s worth noting that the leverage provided by each broker varies. Some even offer a 500:1 return. However, exercise caution because leverage is a two-edged sword that can result in losses.

Therefore, 10:1 is a reasonable level to exceed only for pros.

Investing In Forex Opinion: The Importance Of Analysis

To make long-term, intelligent, and profitable investments, it is critical to question, document, and analyse the situation, as well as our social issues and all of their economic ramifications.

Don’t panic if the world of finance is still too foreign to you and you are daunted or already suffering from migraines at the thought of following financial news.

No one will ask you to quote which currencies were fairing better last night: the USD or GBP for example.

However, by taking an overview of events to glean some vital information, you will be surprised at how much more readable it is to stay ahead of various situations.

Investing In Forex: The Benefits

► The first steps in their understanding and simplicity

► Relative stability of countries’ currencies

► Liquidity, diversity, and availability

► Margin speculation

The first steps in their understanding and simplicity

If we consider Forex to be one of the decentralised financial markets today, it is primarily because it is based on a concept that everyone supposedly understands: the currency, its price, and its exchange rate.

There is no need for advanced economic knowledge to understand, or to have already grasped from one’s own perspective of our modern society, that each currency is not equal and is dependent on the health of the country from which it comes.

Starting with this premise and the concept of comparing pairs in order to deduce variations and bet on them, Forex trading would appear to be child’s play.

Relative stability of countries’ currencies

A country is normally considered to be sustainably solid due to the trust and reliability that can be accredited to it.

Along with taking into account the various regulatory systems of security and financial conditions to which it is subject through the various international organisations to which it belongs, such as (ECB, Fed, IMF, etc.).

While some may occasionally falter economically, they are usually supported by recovery plans that allow them to recover. As a result, it has been extremely rare in the past for a currency to fall so precipitously that it causes concern among inexperienced traders.

Liquidity, diversity, and availability

The levels of liquidity captured by Forex attest to the maintenance of spreads at contracted trends and therefore to the continuity of low-cost speculation.

Learning to trade quietly and gradually has undeniable advantages. All of this without being forced to release large sums from the first steps.

The possibility of a double position (purchase or sale) and the variety of currencies to trade make the investment journey much more manageable, recreational, and attractive to undertake.

The forex market is open 365 days a year, 24 hours a day, from Sunday evening to Friday evening.

Margin speculation

Profits on a position can be significantly increased thanks to the leverage option, which offers margin speculation. One of the attractions that encourage investor interest in Forex trading.

Investing In Forex: The Cons

► Currency market volatility

► Impact factors

► The risk of losing everything when using leverage

Currency market volatility

A currency’s price fluctuates constantly, just like any other asset that gains and loses value according to the supply and demand law that governs how markets work. Every hour, a significant announcement is made.

Volatility can have unfavourable consequences at times. Slippage can cause your stop loss to jump at prices lower than those you have set. Furthermore, the surprise effect can lead to investors making rash decisions in a panic.

Impact factors

One of the most obvious disadvantages of Forex trading today is the variety of factors that influence the value of a currency:

► A country’s social, political, diplomatic, and economic situation (current account, deficit, debt, inflation, financial rating, and purchasing power).

► Bank interest rates prevail there.

► Climate issues.

To avoid being trapped by currency value fluctuations, it will be necessary to understand as many criteria as possible.

The risk of losing everything when using leverage

Leverage does not allow for nuance. While it can provide you with lucrative profits, it can also cause you to feel dizzy at the prospect of potential losses. With its function of hedging the total value of the position, the risk of seeing all capital melt away like snow in the sun must be fully considered.

Investing in Forex: Notions to Master

► Long/short: Terms for buying and selling.

► A trader is said to be “long” (buying) one currency and “short” (selling) another.

►A standard lot represents 100,000 units of a currency. Therefore, for the British currency, this represents £100,000.

► The use of a “leveraged” order allows an investor to maximise their gains by borrowing from the broker the additional money required to cover a large position occasionally. In return, the broker keeps a portion of his user’s balance: the margin. When the position is closed, it is returned to the trader.

► Currency Pairs: A currency pair is the two currencies that are exchanged during a transaction.

► A Pip is a numerical difference between the buy price and the sell price of a currency pair.

► The spread is the difference between the buy price and the sell price of a currency pair. It is expressed as a percentage.

► Stop Loss: This order enables an investor to set a maximum loss limit that must not be exceeded in order to directly trigger the balance of his position.

► Take Profit: This order specifies the profit target for a trade. The position is closed once the latter is reached.

Investing in Forex: 4 tips before trading

1 – Select the best forex broker to invest with.

2 – Follow the news and educate yourself on the currency market.

3 – Define your orders competently.

4 – Thoroughly research the market before attempting to use leverage.

1 – Select the best forex broker to invest with.

The broker best suited to your profile will differ depending on what you expect from the online broker that will allow you to invest in Forex.

Ask yourself the right questions, assess your risk tolerance, and fully understand all of the costs associated with your investment strategy. These criteria will be decisive. 

2 – Follow the news and educate yourself on the currency market.

As we have already discussed above, a currency’s value can be greatly influenced by a variety of factors, including a country’s economic health and political framework.

The more it appears threatened, the more investors will flee due to a lack of trust, and the liquidity in circulation will prefer to depend on reliable and stable currencies.

This is why it is critical to get a minimum of news information and not be afraid to look for (verified) information yourself in order to develop a sharper attitude and investment flair, perceive different movements and their origins, anticipate future trends, and thus increase profitability.

3 – Define your orders competently.

When you open a position to invest in Forex, you have the option of giving your trade three categories of orders: stop loss to minimise your losses; leverage to maximise your transaction, and take profit.

When your investment reaches the profitability target that you set for it, you will be able to unlock the gains.

We recommend that you carefully consider these various options based on the risks that you are likely to face or the security that you require above all.

We cannot emphasise enough that there is no single, infallible investment strategy to blindly follow, but rather several, tailored to each profile.

4 – Thoroughly research the market before attempting to use leverage.

While leverage can significantly increase the gains a position can make when fully leveraged, it can also cause you to lose more.

You will receive far more than the amount you deposited into your account. Before taking this order, it is, therefore, advisable to have sharpened one’s knowledge of the market and to begin using it by experimenting with small sums and small multiplier coefficients before potentially facing an unpleasant blow.

Conclusion: how to invest in forex in 2023?

Investing in Forex is an appealing way to quickly and skillfully learn how to trade. However, far from being limited to newcomers, this decentralised market offers such lucrative opportunities that a number of highly skilled brokers have not hesitated to specialise solely in it in order to capitalise on its abundance of liquidity.

The risks, however, remain very present, and it is critical not to overlook their scope by following international news as closely as possible, or at least that which concerns the countries whose currency fluctuations are traded in order to carry out their investment transactions. 

To get started with confidence and assurance, as well as to benefit from real-time information and personalised advice, use an online broker such as Earnex, a market leader.

Frequently Asked Questions

How many currency pairs can you trade? Are you limited?

There are no restrictions on the number of currency pairs you can trade. However, depending on the online broker you choose to invest with, you may be limited to the number of pairs available on its platform. Currently, there are over 300 currency pairs.

Do you need to be an expert in trading to invest in Forex?

No, you do not have to be an experienced trader to invest in Forex. Going through a detailed guide like this one, with the route already laid out, will be more than enough to teach you everything you need to know.

What is the current ranking of the world’s ten strongest currencies (in euros)?

The four most powerful international currencies in 2022 will come from countries located in the Middle East. 1.KWD (Kuwaiti dinar) = €2.74 2 Bahraini dinar (BHD) = €2.213 OMR (Omani rial) = 2.16 €1.17 = 4 JOD (Jordanian dinar). €1.16 = 5 GBP (pound sterling). 6 KYD (Cayman Islands dollar).

Are certain currency pairs more appealing to traders than others?

The most traded currency pair on the planet is, predictably, the euro and the US dollar: EUR/USD. However, the latter is not always the most pertinent to the target. According to experts, the Australian dollar, Canadian dollar, and Japanese yen are the best currencies for long-term strategies.

Finally, is it profitable to invest in Forex?

Yes, investing in Forex in France can be extremely profitable if the trends you’ve detected pan out. Let us not forget that Forex can also lose a lot of money due to the extreme volatility of currency prices and the rapid and unpredictable changes.

How To Invest In Forex Without Trading

If you’re not a professional investor, stay clear. Below, we offer some advice on how to trade in forex for individuals who are already familiar with this market.

All of the world’s currencies are traded on the forex, or foreign exchange, market. Much more money changes hands every day than all the bond markets (stocks and bonds) combined.

Central and private banks, international corporations, investment funds, and brokers all engage in everyday currency trading. They dominate the foreign exchange market.

In recent years, however, private investors and speculators have started to invest more and more in forex. Particularly following the introduction of the Meta Trader platform, which simplified and clarified the procedure and helped in the emergence of many thousands of online traders.

Avoid trading on the FX market if you are not an experienced trader and are not actively speculating.

If you already have some experience in this type of investment and want to make the most of it, we will explain the ways to invest in forex without trading for yourself.

1 – At your own risk

After attending a weekend-long training in forex trading, you more than likely won’t make any money. It is a complicated market that requires careful research.

Persistence, willpower, and dedication are essential. Experience can be gained by practicing on a free demo account that many brokers offer.

To trade, you must pick a forex broker, ideally one in Europe with investor protection measures.  That doesn’t mean you can’t use a brokerage regulated elsewhere, but beware, some are fraudulent.

Advantages:

Decide on trading orders as you see fit.

Disadvantages:

If you are not an experienced trader, you risk losing a lot of money.

Our advice:

Before choosing a broker, make sure that it is regulated with the appropriate regulating body. Trusted brokers contain registration and license numbers, contact information, and, preferably, terms and conditions.

Also, note the financial information of the trading site. The information you find on forums or websites that compare brokers is not always reliable. They often have financial interests behind them.

Be mindful of the regulatory body’s advice on brokers that are not permitted to engage in any financial intermediary activities. Also, pay attention to any brokers who offer advice. This is not their job. They are not allowed to provide investment recommendations or promises of profit.

Be cautious.

Brokers are only used to execute market orders. The trustworthy and reputable ones provide a price list and statistics of executed orders. Finally, never invest money that you cannot afford to lose or borrowed money (beware of leverage).

2 – Do it yourself but use signals.

The majority of investors lack the discipline or time necessary to monitor the market’s development. It is, however, possible to trade with the aid of signals, which are nothing more than recommendations.

You can find hundreds of providers by searching “forex signals” or “forex alerts.” While some are free, the majority have monthly costs between £100 and £300 pounds.

The signals are delivered online and sent to your phone, email, or WhatsApp after you subscribe to the service. It is always in English. Some signals have to be entered manually, others work automatically in the account. To have the system copy all of the operations that the signal emits to your account, you only need to leave the platform open.

Advantages:

The signals are active and working every single day. They may be used in any brokerage, give access to statistics about the signals on the account, and let you choose the maximum losses and input values.

Disadvantages:

There are various sources of untrustworthy signals; they cannot accurately anticipate market developments.

Our advice:

We tested a dozen signals for two months to see if it was worth subscribing to the service. Around three quarters proved to be accurate, while the rest proved to be as reliable as tossing a coin.

We were surprised by the endless back-and-forth of signals, as well as the number of good and bad providers. The good ones were useful in three quarters of the negotiations.

3 – Use A Robot / Expert Advisor

The third choice is to purchase or hire a trading robot / expert advisor. For instance, the MetaTrader platform offers hundreds of expertly developed indicators that you may select from depending on the strategy you want to use, whether you are a beginner or a professional. Some of these experts are more well-known than others.

In practice, the robot is nothing more than a program that trades on the market, following a strategy that can be based on technical analysis, current economics, and market movements, among others. The cost varies between free and several thousand pounds. Most charge between £100 and £300 pounds.

Advantages:

They run autonomously, around-the-clock, which increases trading opportunities, record the history of all orders, you can consult and study them at any time, and they don’t have emotions.

Therefore, they are disciplined and do not hesitate or fear to trade when the market is unstable. They determine stop loss values and do not change them. On the contrary, many investors leave the trade open in the hope that the price will reverse, ending up losing even more money.

Disadvantages:

It is necessary to separate the wheat from the chaff, that is, choose the type of robot well. Some don’t work well.

Our advice:

After testing a dozen robots liked by a large number of users for a few months, we concluded that there were only two that worked well. Three scored slightly below average and some failed completely.

However, much longer testing would be needed before we could recommend any robots, as most studies suggest that good performance does not hold up over the long term.

4 – Follow someone else’s strategy (Copy Trading)

Why venture into the currency market alone when there are more capable people than you,and you can copy their orders? This is called copy trading.  

How does it work?

Subscribe to a copy trade platform and follow the strategies of chosen traders. Each time an order is placed, a signal is sent that automatically executes the same transaction on your account. It costs between £20 and several thousand pounds per month.

Advantages:

Even without any trading experience, you can profit by copying the orders of professional traders, as long as they are credible and effective.

Disadvantages:

You need to find a trustworthy and experienced copy trader.  Even if you do, prior performance does not guarantee future results. A copy trader doesn’t care about the amount the investor has in the account, or whether they want to take more or less risk.

Our advice:

The system is simple to use and accessible to everyone. The difficulty is choosing the trader.

Pay attention to the results of your trades to determine if you are dealing with a good or bad copy trader. This allows you to see what you have won and lost, how many transactions have been successful or unsuccessful, and what the maximum loss is on each.

However, just because a professional did a good job or took a few risks in the past doesn’t mean he will be successful in the future.

There is no shortage of testimonies from investors who were suddenly abandoned by good copy traders or who took too much risk, wiping out the gains.

5 – Entrust the account to a third party (Managed Forex Accounts)

This option consists of hiring a professional who trades on your behalf, entrusting them with the personal data needed to access the platform. In practice, you are delegating the management to a third person, who acts according to your risk profile.

It goes without saying that risk management is essential for this option. The service, as you can imagine, is not free. As a rule, the manager asks for between 25% to 35% of the profit he makes on your behalf. There are those whose fees are higher.

Advantages:

A good manager will take all necessary measures to ensure your success, including responsible account management. Both benefit.

Disadvantages:

Finding a competent and trustworthy professional who doesn’t take unwarranted risks or act against his better judgment is essential. This requires time and research information. There is no guarantee that you will succeed even if you find a reliable manager.

Our advice:

Trust is the key element in this way of trading the currency market. The beneficial thing is that the manager can do everything, or almost everything, except withdraw money from the account. Ideally, both win, even if you have to give up up to half of the profits.

The worst case scenario is having a shady manager who gambles with other people’s money and can take excessive risks. In this case, your money could go up in smoke.

We believe it is too risky to commit this work to a third party unless you have a trustworthy source that certifies that the manager is trustworthy to trade on your behalf. There are plenty of traders out there who will attempt to entice you with promises based on profits realised in the past.