The popularity of the currency exchange is growing every year. The whole essence of Forex, as an investment tool, is speculation in the exchange rates of currencies and precious metals. In simple words, the currency is purchased at one price, and after the rate increases, it is sold at another. The difference in the purchase/sale price will be the return on investment. Today, there are many ways to make investments in Forex trading, the bulk of which is based either on independent trading or on trust management of the funds invested by the investor. Let’s consider the most popular ones.
Forex Investing Methods: Their Advantages and Disadvantages
Professional investors identify four of the most popular and proven ways to invest in Forex:
- independent trading operations;
- transactions using robot advisors;
- trust management of a personal trader;
- investing in PAMM accounts.
Let’s take a closer look at each of them and analyse their pros and cons.
An independent game on the currency exchange is possible only using a certified broker — otherwise, there is no way to enter the currency exchange. The choice of a broker must be treated with the utmost severity, carefully checking its reputation, assets, reviews, etc., since there are a vast number of fraudsters among them. Consider Forextime at https://www.forextime.com to avoid unpleasant scenarios.
You need to understand that for successful trading, you should have some experience, knowledge of the essence, strategies, and intricacies of the game. Lack of basic skills in foreign exchange trading fails for most beginners. At the same time, if they are available, you can change the trading strategy as you like, withdraw funds from accounts at any time, etc. Besides, you can start independent trading without having significant capital in India or any other country: some well-known brokers provide an opportunity to open accounts with only 10-20 USD.
Among the disadvantages of such an investment, one can single out the need for a large amount of time — both for the trading and obtaining the necessary knowledge for its implementation. Besides, you will be responsible for your actions: one wrong decision can deprive you of all funds.
Trading using expert advisor robots
Today, some robot advisors, programmed to perform certain operations and actions on the exchange, based on the algorithms embedded in them, have become widespread. Most often, such assistants are used by players who have trouble trading on their own.
A Forex investor can use a free assistant or purchase it for money. However, in neither case, no one guarantees that the advisor will be able to increase the investor’s funds — their actions are based on the inherent approach, regardless of external factors. This method allows potential investors to forget about studying materials and strategies, and use their time for more handy things — a trading robot can perform actions around the clock until your account runs out of funds. An existing advisor can be easily reprogrammed and reconfigured to the strategy you are interested in, which is where its advantages end.
Of course, such an assistant can become a good simulator for beginners, but its actions are pretty predictable, and even more so, with a successful or force majeure jump in the market, it will not be able to react to it.
Trust management of a personal trader
The services of personal traders are used by investors who decide to make significant investments in Forex. They entrust their funds to a professional trader who was able to succeed in foreign exchange trading and show high profitability results. As a rule, brokers themselves advertise traders.
Of course, trading by a professional trader will be much more productive than playing a beginner or a robot. Besides, the broker bears a certain responsibility for the actions of a personal trader within the framework of a tripartite agreement concluded between a broker, a trader, and an investor. The investor can observe and control the action of the trader, making their own adjustments and choosing the optimal strategy.
However, despite the possibility of making a profit, the trader receives a pretty high part of it — from 20 to 50%. Besides, management, as a rule, is carried out only in large amounts, which makes this method unavailable for small investors.
Investing in PAMM accounts
This investment method is based on investing in a common account of several investors, the number of which in practice can reach more than one thousand.
Registration of interaction with a trader on such accounts is carried out by concluding an agreement, which prescribes all the risks, responsibilities of the parties and the size of the trader’s commission. As a rule, this amount reaches 50% of the profit received. As for the profitability of this method, it depends on the trader’s strategy and is always different. On growing accounts, the yield does not exceed 20%, which, however, indicates minimal risks for investors.
Separately, it should be noted that such PAMM accounts are a breeding ground for scammers. Therefore, to invest your capital in them, approach the choice of an account as carefully and scrupulously as possible.