Trading on the Foreign Exchange or Forex market has been increasing in popularity since it went digital in the 1980s. Even without substantial financial resources, every one of us can join the fray online and measure up with other traders from around the world five days a week, 24 hours a day.
Forex traders deal in relative values. Each currency is interconnected with all the others, and so all trades occur in pairs. Even more, certain pairs of currencies are relative to other pairs. Playing on the fluctuations of value of currencies is the way in which we can make a profit on the Forex market. Even for currencies, the rules are the same as trading in anything – buy low, sell high, even when the difference is minuscule.
The Load on Your Back
In the all-encompassing world of finance and economy, one word, in particular, is thoroughly known and dreaded by all financial entities, be they central banks or individuals – debt. Like a weight that cannot be shaken, debt weighs down on us with each occasion, making every operation harder, if not impossible.
There are two types of debt – high-interest and low-interest debt. While the first only increases as time passes, leading to a full bankruptcy, low-interest debt is manageable for a longer period. Mortgages are one example in this respect. Similarly, loans taken out on an advantageously low-interest rate can be repurposed for the same goal.
Trading on the Forex market requires us to be active, flexible and to make use of financial resources in order to turn up meaningful profit. Conversely, paying our debts asks from us the same things. As a result, we cannot do both at the same time.
The Game of Greater Numbers
The financial question that arises from the confrontation between paying off the debt and investing relates to a game of numbers. The main comparison that has to be taken into consideration is between the money we keep in our pockets by not paying interest and the money we will be making through trading.
Clearly, trading on the Foreign Exchange market presents a degree of risk. However, this can be reduced by operating on the basis of a sound strategy. Using the right tools, such as the Fractal Indicator, can also provide the right course of action and can minimize the risk, paving the way to long-term returns.
Moreover, before making a case for investing into Forex instead of paying off the debt, we must note that both scenarios require a sustained, long-term financial effort from us. However, while covering the debt is looking toward the past, trading is directed to the future. The money we decide to put into trading is not lost but put toward making more money.
Instead of covering past costs, investing into Forex can provide the basis for future gains that meet and even surpass our level of debt. By doing so, we will be able to not only pay it off but continue to make money. While paying debt consumes money and time that could be otherwise used, trading creates value both immediately and in the long term. This is perhaps the strongest argument for trading in the face of covering debt.
Paying Off the Debt
Getting rid of the debt entirely or at least party before engaging in risky operations such as trading may seem like the responsible way of thinking. In this scenario, all of our efforts and income go toward unloading ourselves of the weight represented by debt. Doing so will increase our access to credit and liquidities and will increase the range of our time frame.
Moreover, ridden of the pressing cost of interest, our investment options will be greater and our time frame more flexible. Safe from needing to pay interest, we will also be saving – effective making – money. Without a doubt, using our available resources towards paying off the debt may prove to be a sound strategy in many cases.
Emotion and Personality
Debt can be frightening, particularly when income is not certain. The panic it may cause in a government, company or person is undeniable, and so, it may take precedence before any other activity. The interplay between investments, trading, debt, and gains, when managed carefully and with discipline, can, however, provide much more for us than simply paying the debt.
While being debt-free equals with the utmost degree of freedom of action, trading or investing can coexist with debt. The rush to pay it off immediately is therefore not backed by reason. The realm of possibility is wide and can handle the two scenarios and make both of the successful – but not at the same time.
Following reason, if the return on our activity on the Forex market is greater, or has the potential of being greater than the money we save by not paying interest, trading is the answer. If we have to pay more interest than what we could earn trading, paying off the debt should be our priority.
Ultimately, the choice between paying the debt and engaging in Forex trading is a matter of personality and skill. If we are able to make money through trading currencies and managing the risk and we do not have high-interest debt, trading is the choice that we should always make. Conversely, high-interest debt requires our every effort, as it impairs every other financial movement. Priorities follow existing conditions and our own personality and capabilities.