Do you know how currency trading affect you?
Even if you are not into currency trading, you are affected by currency trading every day.
Take a look at the products selling in the supermarket near your house.
Where do all the products come from?
You will find that many products come from different parts of the world. You will see that the shoes come from China, the coffee from Brazil, the kiwi fruit from New Zealand, the silverware from Europe, plus products from countries that you do not even know the geographical location.
How do these products end up in the supermarket?
One factor is thecurrency trading. The supermarket will order the products from the importer. The importer orders from the exporter in other countries. The importer in your country has to remit money over, and this process involves currency trading.
That is why it is not very accurate to say that currency trading is risky.
It is more accurate to say that speculation is risky.
If you need to travel to another country, you will not think that it is risky to change money. That is a form of currency trading.
The fact is that you are using your money when you change the currency. You do not bet on the movement of the currencies or borrow money from the bank for the currency exchange.
That is why the risks of currency trading do not apply to you.
The risks of currency trading come from the leverage that traders use.
If you open a currency trading account, and use only your money, you reduce the risk.
For example, you use $1,000 of your money, and trade with $50,000, you are utilizing the power of leverage.
If the trade produces a capital gain of 2%, you earn a profit of $1,000. It seems good to tell everyone that you make a hundred percent profit with currency trading.
However, when the trade produces a loss of 4%, you lose your $1,000 and you need to pay another $1,000 to the banker.
That is why currency trading is risky.
You cannot control international event, and the impact on the currency. If you use your money, and you do not need the money immediately, you can wait for the best time to sell.
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways. Personal Finance is about money, from making money to investing money. Retirement in Asia contains resources on overseas retirement.