How Effective Is Forex As Long Term Investment?
By Guest Author Jim Odels
Should you include Forex in your investment portfolio?
Forex has gained considerable popularity recently, as people have realised just how accessible it has become. For this reason, a great many people are turning to it as a method of investment. There are now thousands of individuals worldwide who make their living through investment in currencies, and similarly, people are putting some of their portfolios into forex too. The question is, does forex make sense in the long term?
What Do Most Traders Do?
The vast majority of traders do so short term. This is because this is the most profitable way of doing things to earn a regular income. The main reason however, is that one of the main forex strategies; the technical approach, is much easier to master on a short scale. Traders will monitor a variety of price charts, looking for patterns and signals which they believe indicate an ideal time to make a trade. These charts work far, far better for short term trading. With forex, a short term trade can be held for only minutes, and most spot trades i.e. simple buy or sell trades, will be closed within a day.
What Makes Long Term Trading Less Attractive?
Price movements over the long term are very hard to predict, and a lot of investors would argue that other options are better because they are easier. The flip side of course is that extremely large profits are entirely possible for those that believe they can speculate successfully. Spot trading can be difficult to profit from over a long period of time, because brokers will charge fees for every day the position is open. For this reason, options and futures are the preferred products for long term traders.
Forex tends to attract those who enjoy the thrill of making trades, and the constant price fluctuations mean that exciting and risky short term trades are more popular. Similarly, the fact that the markets are open for 24 hours a day for 5 days a week means that anyone can make small trades whenever they want, and see instant results. Constant monitoring is yet another reason short term trades are popular; brokers like Alpari even offer smartphone platforms.
Who Is Long Term Trading For?
To put things simply, long term forex investment is an advanced method of investment. It is best suited to those who already have a portfolio to work with, and are looking for another avenue to explore, because it is difficult to get immediate results. It can take time to find out whether an investment has been successful, by which point there may have been considerable expenditure in brokers fees. Long term forex trading is however, a favorite of hedge fund managers.
If you’re looking to get in to forex as a way of earning money quickly, then short term trading is definitely a better option. If however, you are looking to hedge some of your funds, then long term trading may be for you, if you’re willing to take the risks. Visit website to find out more about the trading strategies and options.