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Why invest in currencies? First, the foreign exchange market is the biggest and most liquid financial market worldwide, with more than $5 trillion being traded everyday. There are at least five other reasons to venture in currencies.

Trading Arena. The news driving the currency prices is accessible to anyone, unlike stocks. Forex market operates 24 hours a day around the world, and theoretically speaking, there are no insiders. Currency valuations are affected by actual monetary flows and events influencing a country’s overall economic condition. At this rate, you may analyze how news encompassing a nation can impact its currency. For example, you may look into how the interest rate cut can affect the US dollar.

Capital Appreciation. Currencies move like commodities and stocks due to the prospect of capital appreciation. If the value of the currencies climb against the US dollar, you will generate profit. Conversely, if the currencies plunge relative to the greenback, you will lose money.

Global Economic Hedge. Good thing about the forex market is that it enables you to choose currencies according to your perception of their relative values over time. For example, in the United States, many traders previously feared the fiscal and monetary policy would result to inflation and devitalize the US currency. Budget deficit rose to $53 billion, the Federal Reserve retained its interest rate at a record low of 0.25%, and the unemployment rate dropped, among other concerns. At this rate, you can bet the direction of a specific currency by going long or short. You can disburse the risks throughout currencies of different countries so that you can profit from changing global macroeconomic conditions.

Hedge against Risks. You can play with currencies depending on how you assess significant events worldwide. Important occurrences include changes in top leadership, currency revaluations, political conflicts, interest rate fluctuations, recessions, new tariffs, monetary policy changes, and epidemics, among others. Currencies are sensitive to global and domestic events in nature, so a trader can second-guess the movement of a particular currency.

Diversification. Forex is a good avenue for diversification. You may incorporate currencies in your portfolio to balance your holdings, especially if it is heavily focused in American equities. Stocks move single-handedly, but currencies move close to each other. In a currency pair, when a currency escalates, the other one is declining.

Before you think of getting into forex, do your own research and ask around. Seek recommendation from an adviser if you have to. Remember, the market is extremely liquid yet risky. It is important to equip yourself with enough set of skills and ample knowledge.