Whether you know it or not, everyone is a Forex investor. As we explain in Splitting Pennies – Understanding Forex
– just by going grocery shopping, you’re trading Forex. If you use US Dollars, you are trading Forex. If you have a savings account based in US Dollars, you are investing in Forex.
ANY global event is an FX event, ANY market event is an FX event, but NOT ALL market events are FX events. FX is the superset of markets. Remember, stocks are settled in US Dollars. That’s changing, with all the Bitcoin and blockchain proposals, but we’re still years if not decades away from signficiant paradigm shift in that regard.
Investors are starting to take note of FX. Forex is becoming part of a mainstream discussion on Wall St., although behind the scenes. This is happening in parallel with a restructuring of the market dyamics on a technical level.
Solid reasons that any portfolio should include FX strategies:
- Mainstream investments show a diminishing return
- The stock market can’t go up forever
- FX provides opportunities not seen in other markets
- Although there are risks, the risks have a different nature, and there are also more opportunities
Although everyone is a Forex investor, the majority are always losing. They are losing slowly through the rapid deterioration of the currency. Many investors make up for this with high yield investments – but they are rare in a ZIRP and coming NIRP.
Forex provides a means to diversify this risk, for investment professionals, investors, quants, corporations, pension funds, and basically anyone – even for the retail investor who only has $1. Yes, you can open an account with Oanda for only $1.
This is where we derived the name for our recent book “Splitting Pennies
” – Currencies in normal markets don’t change too much. Brexit was an exception. So in order to profit from Currency trading, leverage is used, thus multiplying risks and profits too. Forex trades are divided up so small, the smallest unit is called a “PIP” which is 1/10,000 th of a currency.