There are many different ways to invest, trade, make, and lose money out there, and just about all of them are available in some fashion on the Internet. One of the big buzz words that I’ve heard over the past couple of years has to do with Forex trading. I thought I would do a little digging on my own to find a little bit more information about forex and find out whether the things I’ve heard said or have wondered about are true, false, or somewhere in between.
- I’m not sure what Forex means? Forex is an abbreviation for foreign currency exchange. Basically, you can trade based on how one currency (e.g. the American dollar) will trade against another.
- Is forex legal? Yes, forex is very much legal.
- Is forex regulated? That’s where it gets complicated. Every currency is its own independent ‘thing’, and there’s not one body in the world that oversees all regulation. So, forex trading may be regulated within certain countries, but the fact that currency exists in so many different forms makes it impossible to regulate whether trades regarding currency exchanges can take place, and how they can be worked.
- Is there a forex market? Not really. Most market exchanges like the Nasdaq or NYSE are open for a certain period of time. Since currencies are trading 24 hours a day, forex trades can really be made 24×7.
- Can I trade forex with my brokerage? Simply put, no. I use TD Ameritrade for my non-retirement brokerage needs, and I’m allowed to trade various investment instruments such as stocks, ETFs, mutual funds, bonds, options, as well as many others. Forex is not an option, and it ties back to the reason in my last point, in that it does not have regulations around it, and most brokerages can’t or won’t trade in instruments which do not have regulations.
- Then how does one trade forex? If one is interested in trading forex, it is possible. There are many reputable sites available where you can participate in this type of trading.
- Is it risky? Sure. Since these sites are not regulated or backed by the government, you don’t have protection. Forex trading definitely amps up your level of risk, but there are many investors who are risk tolerant, and live by the rule that higher risk can lead to higher reward.
- Does Money Beagle trade forex? Nope. While I certainly appreciate those willing to take high level risks in their pursuit of making money, I do not have anywhere near that level of risk. Still, as someone interested in how the markets and investments work, I’m always interested to watch others.
- What’s this about manipulation? Recently, there was a settlement by hedge funds who were accused of manipulating the forex markets. There’s definitely a risk here. If a party has the money and gumption to make currency trades that could actually impact the price, that is, at its simplest, a form of manipulation. The markets are supposed to move on their own, and forex trading is meant to trade against those movements, not drive them. I would speculate that one way a forex trader could eliminate this risk would be to trade within currencies that have high volumes, where a staggering amount of capital would actually be needed to move the exchange.
There’s a lot to learn about this forex, and as it is a fast growing, ever evolving market, it will be interesting to see how things develop in the future.Copyright 2015 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.