Forex or Foreign Exchange investments have been one of the latest craze among investors in Malaysia recently. It is being considered to be a popular scheme mainly because of the fact that investing in foreign currencies is slightly less risky as compared to investing in the stock market. Despite this, it is still a very volatile market.
Naturally, Forex investment works very much like stock investments where you will buy a certain currency at the prevailing market price and then sell them when the price increase and earn your profit from there.
Learn about technical analysis before start trading
However, there are certain techniques and strategies that one can deploy which are similar to that in the stock market before embarking into the market. You can actually apply the likes of Technical Analysis and such to gain a better understanding of your investments or potential ones.
As the movement in foreign currency rates are very small and at times only a couple cents, investing in Forex would usually involve buying them in volume instead of buy lots which are more common in stock investments. It is only through this type of strategy that you will actually be able to enjoy higher earnings. However, the risk would mean that if the price drops, then you will also suffer substantial losses as well.
Risk is always high
As an investor, you must be aware that every investment would have its risks and Forex investment stand among share investment in these terms. This is because the price and rates of foreign currencies are commonly very volatile which means that you will need to monitor your investment closely so that you know when to buy and when to sell.
It is essential to know and accept that losses are common in Forex investments so when it is time to cut your losses, then you should. On the other hand, if it is time for you to sell with a favorable rate of the currency you are holding then you should do so. Otherwise, the price might fluctuate in a matter of minutes or even seconds.
Most common currencies
The most common currencies that one would usually invest in would be the major currencies in the world like the US Dollars, the British Pounds, the Euro Dollars and such.
However, in recent years, the Chinese RMB (Renminbi) has become one of the more popular currencies that investors are interested in most likely due to the fast and rapid growth of the Chinese economy and its effect on other markets in the world. Other currencies like the Australian Dollar, Hong Kong and Singapore Dollars are also common currencies traded in these investments.
To invest in Forex in Malaysia, you only need to open a Foreign Currency Fixed Deposit with a local bank like Public Bank Berhad and such. Among the advantages of Forex investment over the stock market is that it provides a lot more freedom. As there is no central exchange, you can basically invest your money at your own pace and time.
Similar to stock market, trade on certain trading hours
Furthermore, you are not limited to the opening hours like that of the bourse because different currencies will be traded at different time zones. The most important factor about Forex investments is that it must be traded in volume. On top of that, it functions very much like the stock market where you will need to wait for a buyer before you can sell at the prevailing market rate of a specific currency.