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 In its relatively short history, the foreign exchange market had been seen mostly like a medium and long term investment opportunity. In the recent years things started to change a little due to the online expansion of forex trading.
Online trading has some strong advantages such as real time market data availability and fast trading process, that made short term speculations possible. Now the forex market is open for both investors and speculators.
Speculative trading consists in trades that target the short term price evolution for different currencies. If a speculative trader predicts a quick and strong change in the market, he will open a trading position that will allow him to gain profit. Different economic, politic and social factors can influence the forex market ant they create the perfect circumstances for speculative trading. Let’s take for example a public announcement of major economic indicators of United States economy. An experienced trader that also knows the general situation in US economy can predict that the economic indicators had negative evolution which will create a downfall in the USD quotation. He will open a USD selling position before the announcement and will close it after, when the price s down. This way he marks the profit in very short time. On the other hand, forex investing is based on the long time price evolution of the currencies, the investor trying to predict its future movements in order to gain profits. For example if a trader after a thorough market analysis concludes that in the next 2-3 years the British pound (GBP) will slowly increase its value, he will invest a certain amount of money buying GBP to sell when the price is higher, obtaining profit. Currently the forex market is the largest opened market in the world and all type of traders can enter it freely with minimum initial investments. |
