Investing in FOREX Online – Three Different Ways to Invest in FOREX Online

There are several different ways to invest in Forex online. The Forex market is very volatile, however, so it’s important that you go into it knowing what you’re doing. I’m going to talk to you today about a few of these methods, and the advantages and disadvantages of each.

LONG TERM INVESTING

This is when you buy a significant amount of a currency with the intention of holding onto it for a long time. The point of this is that you’re not trading on the frequent price fluctuations that occur on the Forex market. Instead you’re making a long term bet that in a month or six months or a year the currency is going to be worth a fair bit more than it was when you first bought it.

PROS AND CONS

The advantage to long term investing when you trade Forex online is that you’re not subject to all of the crazy ways in which prices can go up and down over smaller time frames. If you buy $10,000 worth of Euros that can drop to $8000 in very short order. But if there’s an overall trend of the Euro price going up over several months against the US dollar, then you can weather short-term losses with the hope that the major trend stays the same. The disadvantage is that you have to wait. You might not be subject to all of the ups and downs of day trading or scalping, but you have to be patient before you get to actually see that significant return. And it can be tempting if you see your deposit shrinking to make a move to reverse that loss. Still though, without a lot of knowledge of how the Forex market works day-to-day, it’s your safest bet.

DAY TRADING

Here you need a little more experience. Now you’re looking at charts and using indicators to try to determine how a currency is going to perform within a few hours or days. You’re studying trends to try to find the best point in which to enter a trade, and determine the optimal point to get out again before the trend shifts.

PROS AND CONS

The advantage to day trading is that you can make more profit, quicker. If you’re experienced enough to use indicators like Stochastic or RSI, you can recognize certain patterns in the Forex market and learn when to buy and when to sell to make the most profit. You’re still not risking the huge percentages of your deposit that you have to to make scalping profitable, and you get to see your returns in much shorter time than you do with long term investing. The disadvantage is that you really have to know what you’re doing. You have to be confident in your trading strategy, and have the nerve to see it through even when losses happen, which they will. The whole purpose is to make money quickly, and so you’re risking enough that you can lose money just as quickly if you don’t know what you’re doing. This is not the place for a beginner trader.

SCALPING

When you invest in Forex online, scalping is extremely dangerous. This is the practice of making trades within seconds. You open and close a position in under a minute. Then you repeat that several hundred times, making tiny profits each time.

PROS AND CONS

The pros are that the fluctuations in that amount of time are miniscule. You’re looking to make a few pips with each trade and then get out as quickly as you can. When you’re losing you’re only losing a few pips at a time and then getting out as well. If you can maintain a winning rate of over 50 per cent, then you’re going to profit overall. The disadvantages are numerous, however, especially to a new trader. You really, really have to know what you’re doing. Like in any other profession, you have to study or apprentice before you can go out on your own. Scalping is like that – if you’re brand new, you can lose everything very quickly. You need to be able to read trends and know exactly when to open a position. You need to be so comfortable and fearless with your trading strategy that you can jump in and out without letting the outcome affect you. And you have to risk a large amount of your deposit each time to make these tiny trades worth it, so if you don’t know what you’re doing, a string of bad trades can wipe you out.

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