People trade currencies all the time, but how can currency be an investment? Here's a simple example. Imagine that you took a trip from the United States to Europe in 2002. For the trip, you changed your US dollars into euros. At the end of a trip, you typically would change any extra euros back into US dollars. But what if you didn't? In 2002, one euro was worth about 90 US cents ($0.90). Say that you decided to hold on to 500 euros, and left them sitting in your desk drawer for 5 years. In 2007, you took your euros to the bank and sold them for a 2007 price of $1.40. Since you bought the euros for $0.90 and sold them for $1.40, you made a $0.50 profit per euro. You would have made $250 just because you held on to those euros and had bought and sold at the right time. That's a 55% return in 5 years.
Forex
What is Forex? And Why Trade It?
You may not know it, but forex is actually one of the largest markets in the world, with over $4 trillion in average daily volume transacted.
So, if forex is so big, why have so few people heard of it?
The simple answer is you have probably used the forex market before, either directly or indirectly. Any time you take a trip to another country and exchange money, you just made a forex trade. Whenever you buy something in a shop that was made in another country, you just made a forex trade. You paid in your own currency and the manufacturer was paid in a different currency.
Putting Your Ideas into Action
A currency's value will fluctuate depending on its supply and demand, just like anything else. Currencies trade on an open market, just like stocks, bonds, computers, cars, and many other goods and services. A currency's value will fluctuate depending on its supply and demand, just like anything else. If something increases supply or lowers the demand for a currency, that currency will fall. For example, when Greece threatened to default on its debt, it threatened the existence of the euro, and investors around the world rushed to sell euros.
Value Investing
We invest directly in cryptocurrencies that address tangible use cases, provide economic benefits, demonstrate signs of product-market fit, and exhibit compelling crypto-economics combined with superior governance models.
But how do we know which currencies will rise and which will fall?
Over the years, our forex trading team has developed several methods for figuring out how far currencies will go.
- Fundamental Analysis: Since currencies trade in a market, we look at supply and demand. This is called fundamental analysis. Interest rates, economic growth, employment, inflation, and political risk are all factors that can affect supply and demand for currencies.
- Technical Analysis: Price charts tell many stories and at times we depend on them in making trading decisions. Charts can point out trends and important price points where traders can enter or exit the market if you know how to read them.
- Money Management: An essential part of trading. All traders need to know how to measure their potential risks and rewards and use this to judge entries, exits, and trade size.