Tips for Foreign Exchange Investing in Hong Kong
Forex investing in Hong Kong is one of the ways that you can make your money work for you. Literally.
Forex is short for foreign exchange. You earn from the daily fluctuations of various currencies around the world. For instance, if you invested while HK$1 is equivalent to US$0.13 and you withdrew while it is US$0.14, you just got a profit of US$0.01. Of course, it is a bit more sophisticated than that, but it should tell you the basics of how it works.
Forex investment is one of the most fast-paced markets – not to mention the most exciting. This type of investment used to be dominated by financial institutions, central banks, corporations and select wealthy personalities.
The data from Investopedia.com revealed that 10 firms control 75% of the volume of foreign exchange. Although they still dominate the trading, the average investor can already join in the excitement thanks to the Internet.
Tips when trading foreign currencies
Forex investing follow a few important rules.
Do your research.
Make sure you understand the market and where to get the information that will educate you about it. In general, all investments are regulated by the SFC or Securities and Futures Commission. The Hong Kong financial system is overseen by the Hong Kong Monetary Authority. Visit their sites to know more about the current investing trends in the region.
Know your risk tolerance.
This is important across all types of investments. Forex trading is extremely volatile. You need to understand that it poses a high risk. Apart from understanding the market, you also have to analyze your own investment goals.
While there are risks in investing, you can take the necessary steps that will minimize it. Take it slow at first while you are getting a feel for the market. If you encounter losses, take a step back and reassess your situation before you take another step in forex investing.
Choose the right forex broker.
The broker you will should must not only be reliable, but they should also have a couple of years worth of experience in trading currencies. Do your due diligence by understanding their rules, fees, and charges that the forex broker will impose on you. Feel free to talk to them to let them know the direction where you want your investment to go. Just make sure that the SFC licenses the broker you will hire.
Start slow.
Forex trading can be tough to enter but once you get it, monitoring and analyzing your options will be easier. Take your time to learn what you can about this investment scheme. It is advised that you start slow – ideally with a single currency pair. Try not to deal with a lot of currencies because that will be hard to monitor.
Predicting the rise and fall of the currencies can be hard to do. A single pair is enough to make you an expert. Once you have mastered this pair, you can choose to add more – as your risk can tolerate.
Remove your emotions in the equation.
Your emotions will make you forget about the logical risk parameters that you have set. When you are too happy or frightened, you might make investment decisions that will keep you from enjoying the benefits of your investment strategy.
Logical thinking is always the right way to make investment decisions. Of course, that does not mean you should tune out your gut feeling. If something does not feel right about your investment, that is usually an indication that you should study your strategy further.
Take note that it is possible for you to set up a dummy account to test how you will fare in forex investing. Try it out first to see if you are fit to try this investment scheme.
Reasons why you need to consider forex trading
Forex trading in Hong Kong is highly recommended – if your finances can take the risk. According to the Hong Kong Trade Development Council, this region is the third largest foreign exchange market in Asia. It is also the fifth largest in the world.
In 2013, the daily turnover regarding forex transactions rose to US$275 billion. This is an indication that this is a market that is worth investing – but only if you learn the rules of the trade.
Here are other reasons why you need to think about forex investing in Hong Kong.
- It has a 24-hour market that will allow you to trade on the side even as you maintain a full-time
- It can be traded regardless of where you are. Since trading happens via computer networks, traders around the world can interact with each other. In fact, Hong Kong is one of the major financial centres where this investment is aggressively traded.
- It has a high liquidity. You can open or close investing in minutes – or you can leave it in a matter of months.
- It allows a small investment. Forex brokers can give you a high leverage that will allow you to participate in forex investing despite a small investment.
- It can make you profit every day. If you close your position each night, you may be able to gain from changes in the currency exchange.
- It is easier to trade than other investment schemes. Investors find that this scheme is easier to understand compared to shares. Analysing the market is not as complicated as the other investment types.
Talk to your forex broker to understand the currency pairs that you can trade in. Apart from currencies, you can also choose to trade metals – that is also part of this investment scheme. A lot of people have gained from this investment strategy. It is a great way to diversify your portfolio.
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