Speculation vs investment

It is very important that the individual wanting to trade foreign exchange

be aware of the very marked difference between speculation and

investment. Forex trading is by nature a speculative occupation. Foreign

exchange markets are amongst the most volatile markets in the world.

When traded on a margined basis they effectively become the most

volatile in the world. Day trading in foreign exchange can be extremely

profitable and high-risk profile traders can generate huge percentage

returns even overnight. Day trading is however a mentally and

psychologically challenging activity and is by no means meant for

everyone. Day trading is essentially speculation and day traders

essentially only do that: day trading. Most people who trade foreign

.

Often the contractors of foreign exchange brokerage services are

professionals in some capacity or other. These people do not day trade

but take the occasional position from time to time. This is also

speculation and should not be confused with making an investment.

The conclusion here is that the nature of foreign exchange trading not

lend itself as much to investment as it does to speculation and hedging

 (hedging may be performed in forward instruments). It is possible in a

sense to make an investment in foreign exchange over a long-term

period but this necessitates a large account value and low leveraging