Also known as the currency market or foreign exchange market, forex is defined as the largest financial market in the world. More than $4 trillion is traded daily on average and suffice it to say that it has the potential of offering huge returns. Comprised of investment firms, banks, hedge funds, commercial companies, retail investors and central banks, the forex market allows its participants to exchange, buy, sell or speculate on different currencies. Foreign exchange investments have become rather popular due to their high profit potential. Just like in the stock market, there are several ways you can trade currencies.
If you want to participate in the foreign exchange, here are some of the ways you can do it:
This is a 24-hour cash (spot) market for trading a number of currency pairs such as Euro/US Dollar. Since currency trading is done in pairs, you are essentially betting that one currency will go up and one will go down. The exchange rate or current price is used for buying and selling the currencies.
Foreign Currency Options
When you purchase foreign currency options, you are provided with the right, but not obligation, to sell or buy a fixed amount of a currency at a specified future date and at a specified price. This is just a right and you don’t have to necessarily go through with it if it doesn’t seem profitable to you.
Foreign Currency Futures
Just like stock market futures, these are available for currencies and are bought and sold based on a settlement date and standard size. In most markets, futures are available for specific currency pairs, but gradually their scope is being expanded and futures for emerging market currency pairs are also becoming available.
Exchange-traded notes or EFTs as they are otherwise known, are products that can expose you to numerous foreign exchange markets. You can find some single currency exchange-traded funds as well as those that manage a group of currencies.
Foreign Bond Funds
These are essentially mutual funds that allow you to purchase bonds of foreign governments. In typical cases, these bonds are denominated in the currency of the country where they are being sold. As compared to your local currency, when the foreign currency rises, you will be able to earn higher interest through conversion.
Certificates of Deposit
You can find these CDs for individual as well as a group of currencies and enable you to earn interest at foreign rates.
Apart from these options, you can also choose to invest in a high-yield investment program such as bit-monster.com that can invest your money on your behalf. They also invest in the forex market and offer you substantial profits on your investment. The advantage is that you don’t have to have any knowledge or expertise and can invest your hard-earned money for earning huge returns. It is a great way of supplementing your income and not take the risk of trading on your own, which could lead to losses.