How to Invest Money: Top 5 Forex Investment Options

Forex is unique as a 24/5 market, operating globally across major financial hubs. It has no central exchange, and transactions mostly occur electronically over-the-counter via brokerage firms. Major currency pairs involving the US dollar, euro, Japanese yen and British pound see trillions traded daily between central banks, commercial banks, investment management firms, multinational corporations and individual traders.

While known colloquially as "trading currencies", Forex is more accurately the speculative buying and selling of one currency against another. The goal is to profit from the fluctuating currency exchange rates as monetary policies and economic performance impact demand. Traders use leverage which allows exposure to large amounts with only a fraction of the funds.

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Below you will find all the information.

Who’s the Forex Market for and Why is it So Popular?

Forex is for anybody old enough to generally understand how this works. Statistics show that 49% of Forex traders are people aged between 25 to 44 years with over 72% of them being inexperienced in the market before joining.


This is a huge difference compared to when most Forex traders were trained and experienced.


There are several reasons why the market is growing exponentially in popularity. First, it's very easy to access. No certifications or licenses are required. All a potential investor needs is a good computer, a strong Internet connection, and a little capital.

Who’s the Forex Market for and Why is it So Popular?

Benefits of Investing Money in Forex

Even though the market is valued at a few quadrillion dollars, an average trader is likely to be concerned only with what’s in it for him. Here are a few things the Forex market will offer you:

  • Leverage


    In Forex, this term implies that a trader can use a relatively small amount of capital to control large amounts in the market. This typically comes in the form of 50:1, 100:1, 200:1, and 400:1, etc.


    Leverage allows most traders to see up to a 10% movement in their accounts in a day — something that might not even happen in a year if leverage was not available.

  • Market hours


    The Forex market operates 24 hours a day for five days a week (9 PM Sunday to 10 PM Friday GMT). And because Forex trades are made directly between the parties involved (aided by a Forex broker), the time base of a centralized system is not applicable here.

  • Volatility and liquidity


    One might argue that these terms sound like they should be on the list of disadvantages a platform has, and conceptually that could be correct. However, with Forex, they are a good thing. In Forex, liquidity means that transactions take place very quickly, resulting in low spreads (transaction costs).


    As for the volatile nature of the market, it implies that a trader can make large profits by correctly speculating on price movements.


    Volatility and liquidity are connected in some ways as the more liquid currencies, such as EUR/USD, are often less volatile.

  • A trader can profit from either movement of prices


    Just because currency prices are falling does not mean one has to pull out immediately. This market supports directional trading. Therefore, if a trader envisions a potential rise in value, they can purchase it (going long), or sell it (going short) if they think it’s about to drop in value.

  • There are many currency pairs to invest in as well as great tools to help trade them


    The availability of so many options allows you to trade different pairs depending on global events that could affect them as well as the strengths of each pair.


    The availability of trading tools and a variety of technological innovations such as trading algorithms and global connectivity make it easy to trade.

How to Invest Money in Forex?

Learning how to invest in Forex takes more than watching a few videos or reading a few articles online. Indeed, one of the benefits of investing in Forex is the volatile nature of the market. However, this can have unfortunate results for a novice if things go wrong. Nevertheless, everyone can get in on the Forex market.

To get started, there are a few key things you must do:


First, find a reputable Forex broker. These are firms that give traders access to a platform where they can trade in the Forex market. Brokers also provide their clients with good training conditions, platforms, and the support they need.


A good tip before selecting a Forex broker is to look them up on a database to ensure they’re legitimate and registered with a Forex Regulatory Organization.


Next, you should educate yourself on the Forex market. There’s a ton of free materials available. Finding a professional trader to take you under their wing and teach you the nitty-gritty of the market is a good way to start.

How to Invest Money in Forex?

Before trading, a newbie should always demo trade before risking real money. A demo account allows you to develop your strategies and get a feel of the market before investing.


Also, the use of economic calendars to keep up with the latest in Forex and other economic events will help a trader make informed decisions on which currency pairs to trade. After these preparations, a potential trader is ready to start investing.

Best Brokers for Investing in Forex

  • Are you looking for the best broker for active trading and passive investing?

  • Are you looking for companies with good trading conditions and reliable regulations?

  • Are you interested in PAMM investing, social trading, and algorithmic trading?

We’ve chosen the best investment brokers for you from those who have consistently ranked among the TOP 30 European and American independent rating lists based on various criteria.

Their principal advantages:

  • some tools like STP (Straight-Through Processing) and ECN accounts have instant order processing. Transactions in standard and professional accounts are sent to external liquidity providers and ECN systems. The average order execution speed is about 100 ms;

  • Trading tools include manual, algorithmic trading, and passive investing. Analytics from Trading Central allows free access to ZuluTrade (the independent social trading platform), auxiliary templates, and MT4 and MT5 platforms, volatility calculators, correlations, lot calculators, and a host of other management tools;

  • a wide choice of trading assets include risk diversification, conservative and high-risk strategies, and strategies for implementing direct and inverse correlation. You can trade in currency pairs, cross rates, stocks, cryptocurrencies, futures, and options;

  • all transactions including terms, conditions, commissions, spread calculation rules, and swaps are transparent;

  • prompt cash withdrawals through banks, electronic wallets (E-wallets), and other financial agencies are available.

You’ll find reliable partners while opening an account with the best brokers that are interested in a long-term cooperation and are eager to help you to succeed because your success is in their interest.


Choose the best!

Best Forex brokers

1
9.4/10
Go to broker
Your capital is at risk.
Minimum deposit:
$10
Bonus for deposit:
60%
Regulation:
FSC
2
9.2/10
Go to broker
Your capital is at risk.
You can lose your money.
Minimum deposit:
$10
Bonus for deposit:
0%
Regulation:
FCA, CySEC, FSA (Seychelles), FSCA, BVI FSC, FSC (Mauritius), CBCS, and CMA
3
9.1/10
Go to broker
Your capital is at risk.
79.27% of retail investor accounts lose money when trading CFDs with this provider.
Minimum deposit:
100$
Bonus for deposit:
0%
Regulation:
FCA, CYSEC, FSCA, SCB

Top 5 Investment Options

There are several different trading options available for Forex to suit your needs. It’s advisable to acquaint yourself with these options and weigh the pros and cons of each before making your selection.

  • 1

    Self-trading account


    This is usually run by traders who have the time and desire to manage their trades on their own. Forex doesn't require an education in economics, but having one will provide some additional benefits in the market.


    Also, these types of traders show above-average proficiency in trading currencies. To begin, they have to develop a trading plan to help them identify their goals, do thorough market research, take objective positions, and manage their trade properly.


    Using this do-it-yourself option, a trader has the potential of succeeding as long as they take sensible risks, manage their account well, and are strategic in their approach.

  • 2

    Managed accounts


    This is an investment option where a trader hires a professional to seek signals and trade currencies on their behalf. Because they believe these professionals are experts who make the best possible decisions, they invest a lot of money and expect a significant return.


    Typically in this arrangement, the investor does not pay the account manager (which could either be an individual or a firm). Instead, they agree on a Return on Investment (ROI) percentage. At the end of a fixed period, everyone gets their agreed-upon percentage.


    This is a good plan for people who want to get in on the market but have no experience or no time to monitor the account. Also, it’s excellent for companies who intend to expand their business into Forex without having to do the work.

  • 3

    PAMM account


    Percentage Allocation Management Module or Percentage Allocation Money Management (PAMM) is another option for investing money in Forex. It’s essentially a system where different investors come together and pool their funds as capital for trading.


    The key players in this setup include the Forex broker, the money managers (traders), and the investors. The arrangement is overseen by the brokerage firm to maintain a secure platform for the trading activities as well as to allow reasonable interaction between the investors and money managers.


    Usually, the investors sign a Limited Power of Attorney (LPOA) stating that they are willing to take the risk and give the manager the power to trade using their (the investor’s) capital while applying the manager’s trading strategy.


    At the end of the deal, if all goes well, the investors get their profit and capital while the trader gets the percentage that was agreed upon initially. This is advantageous for people who have little capital but would like to invest a larger amount.

  • 4

    Copy Trading


    This is a rather unique form of investing in Forex that is particularly great for people who don’t have much experience in trading. Just as the name implies, it’s a system where a trader can directly copy the positions taken by another trader/manager who is a more experienced trader.


    They usually connect their platforms with that of the professional trader. That way, whatever position they take in the market is replicated on the investor's terminal.


    If you choose this option, you’ll still retain control of your account and modify it however you like. This is a great way to use another trader’s expert knowledge and make profits based on their skills.


    It requires no advanced knowledge of the Forex market. All you need to do is select a trader you'd like to copy, find a copy trading platform, and invest your desired amount of capital. The platform then automatically replicates the expert’s positions in your account.

  • 5

    Automated trading


    This is a method of trading in Forex that uses a computer program (algorithm) to make the necessary calculations. The system is then able to automatically trade foreign currencies based on the algorithm.


    Therefore, the trading depends on pre-programmed instructions to account for variables in the market and thus determine whether to sell or buy. This is an excellent way of trading because it eliminates biased or emotional trading.


    However, it’s not a perfect system. If it were, nobody would ever trade without automated software. The system can still fail so a trader needs to keep an eye on it.

Ultimately, foreign exchange is a fluid market. It has some very attractive prospects, but don’t go in with plans of coming out a billionaire. Be cautious and prudent.


However, the possibilities in this market are endless, and more and more people are giving it a try. So, go ahead dive in, just be smart about it, and know when to stop.


Good luck!

Comparison of Forex investment options

While each of the investment options offered above have their own advantages, it's also important to compare them to determine which might be the best fit for your needs, experience level, and preferences. Here's a brief comparison:

Required Experience Control Level Profit Potential Risk Level Best For
Self-trading Account Advanced trading skills/strategies Full control over account and trades Higher potential for profits Higher risk of losses due to your own trading decisions Experienced active traders
Managed Accounts None - manager makes all trades Limited - manager has trading authority Steady returns possible if manager successful Lower to moderate - depends on manager Set-and-forget or inexperienced investors
PAMM Account No experience required Less control as part of pooled account Returns depend on overall PAMM program performance Lower due to diversification across managers Balancing involvement with risk diversification
Copy Trading No experience or decisions required Little to no control over copied trades Lower potential profits than self-trading Lower if diversified across traders Hands-off investors wanting easy trading exposure
Automated Trading Deep trading understanding required, basic programming skills desirable Hands-off approach via algorithms Profits rely on algorithm effectiveness Systematic but depends on algorithms Quantitative traders focused on algorithm development

FAQs Regarding Investing Money to Earn Income

How do I manage my risks in Forex trading?

Forex markets are not risk-free. Regardless of the precautions you take, you should be prepared for possible losses down the line. To minimize your risks, here are a few tips: start with a demo account, understand the market, create a solid trading plan, set a risk-reward ratio, use stops and limits, don’t be aggressive, and watch out for news and updates on the market.

How can I start trading in Forex?

Foreх is an easily accessible market. Just find a reputable Forex broker and create an account with them. Choose a trading option. Then you can begin to invest with help from your broker. Most people prefer automated or semi-automated options. This isn't a bad idea especially when you're new to the market. You can program the software to notify you of prospective trades to make, or better still, initiate the trade itself.

What is the best Forex trading strategy?

Forex strategies are different sets of entry and exit moves a trader can use while investing in the market. There are numerous strategies based on different criteria, however, no strategy is the ‘best’. Some are suited for a particular period or currency pair. A solid background in different strategies is a great way to know what strategy to use and when to employ them.

How much money do I need to start Forex trading?

A great feature of the Forex market is that you don’t need a lot of money to start. Because of leverage and day trading opportunities, you can start with any amount of capital you want, with as little as $10. However, the amount of capital determines how much profit you make. Typically, the more money you invest, the greater returns you get.