What are currencies?
Currencies are items used as a medium of exchange to buy and sell goods and services. Currency trading, also known as foreign exchange or forex trading, is when you attempt to make money by speculating on the value of one currency compared to another.
Why trade currencies?
The forex market is the largest financial market globally, with over $5 trillion daily turnovers. It means that traders are always plenty of opportunities to make money. Currencies can be traded 24 hours a day, five days a week, making them ideal for those who have full-time jobs or other commitments.
What factors affect currency values?
- Political factors: Elections, government stability and central bank policy.
- Economic factors: These can include inflation, interest rates and trade balances.
How can I trade currencies?
The best way to trade currencies is through a broker or dealer that offers a platform for trading currencies. The most popular platform for currency trading is the MetaTrader 4 (MT4) platform offered by many brokers. Alternatively, you can use a web-based platform that some brokers offer.
You will need to use a margin account to trade with leverage when trading currencies. It’s when you borrow money from your broker to trade with and can help you to amplify your profits (or losses).
What does it mean to diversify your portfolio?
Diversification is when you invest in various asset classes to reduce your risk. When it comes to investing, diversification is often considered the best strategy as it helps protect your portfolio from sudden changes in the market.
Why should I diversify my portfolio with currencies?
Adding currency investments to your portfolio can help to diversify your risk and potentially increase your returns. Currencies are not correlated with other asset classes such as stocks and bonds, which can protect during market volatility.
How can I diversify my Dubai portfolio with currencies?
One way to diversify your Dubai portfolio with currencies is to invest in a currency ETF. A currency ETF tracks the performance of a particular currency and allows you to invest in many different currencies. Alternatively, you can invest in individual currencies by buying and selling them on the foreign exchange market ( read more here).
It is essential to remember that there is always risk involved in trading currencies. Therefore, it is essential to do your research before investing and use a margin account that will allow you to trade with leverage. Using a margin account can potentially increase your profits (or losses) from trading currencies.
Traders can access the forex market 24 hours a day, five days a week, making it ideal for those with busy lifestyles. When traded correctly, currency trading can provide you with the potential to make significant profits. It is essential to remember that forex trading is a high-risk activity, and you should only trade with money that you can afford to lose.
Ways to diversify your portfolio
Invest in a variety of different asset classes
Investing in multiple asset classes is one of the best ways to diversify your portfolio. By investing in stocks, bonds, and other asset classes, you can reduce your risk and increase your returns.
Use one platform for trading multiple asset classes
Using a broker that offers a platform for trading multiple asset classes is another great way to diversify your portfolio. The Saxo Bank platform is one of the most popular platforms for currency trading and is offered by many different brokers.
Use a margin account
A margin account allows you to trade with leverage which can help you to amplify your profits (or losses). It is essential to remember that risk is always involved when trading currencies.
Invest in individual currencies
Investing in individual currencies is another excellent way to diversify your portfolio with currencies. You can potentially profit from the currencies’ changing value by buying and selling different currencies.