It's a little embarrassing that I've seen so many advertisements and blogs for things related to “forex” and I never bothered to look up what the heck that meant.
Thankfully, it turned out that I had heard of what it means, just not by that word. “Forex” is an abbreviation for the (huge) foreign exchange market, also known as the currency market. It's the place where you can take your United States dollars and buy Japanese yen, pounds Sterling, Euros, Canadian dollars, etc. Or the other way around, of course. The bid and ask prices for a currency pair (Euros to US Dollars, for example) determine the “exchange rate” that people pay when they travel abroad from one country to the other.
Of course, there are many more reasons to buy and sell currencies than just to get vacation spending money (or, on a larger scale, because you have employees in different countries that you need to pay). All of these boil down to the following:
“I think Currency A is going to get stronger (or weaker) relative to Currency B because … “
Traders buy a currency that they think will appreciate relative to the other, so they can buy more of it back later. There are lots and lots of people who think they know how to complete that sentence. Many of them want to charge you to find out how they complete that sentence.
I don't know a whole lot about currency trading beyond what I told you, except that some of the sharpest traders on the planet are currency traders. (I can't remember where I heard that.) Given two different strategies, I couldn't tell you which one is more sound.
This is a great example of something I shouldn't try for the simple reason that I don't understand it. This is probably the clearest, and best, rule of investing. If you don't understand an investment vehicle, it's too easy to be sold on it. To add insult to injury, the person selling you on it (or some service related to it) makes money regardless of whether you do or not.
This isn't to say I'll never invest in foreign currencies, but I shouldn't now. I barely understood the lingo!
I’m with you. If I don’t understand (fill-in-the-blank), then I just don’t do (fill-in-the-blank). And, I too had no clue about FOREX. Good post!