Every serious investor has felt the lure of high-risk trading at some point in their lives.It is not hard to see the attraction – the chance to make big money in a short period of time.Today it is particularly tempting, when low-risk investments such as cash and bonds offer a near-zero return. Why leave your money to die a slow death in the bank when you could be trading gold or obscure foreign currencies, shorting the price of oil or copper, or investing in frontier markets?But if making a small fortune from high-risk investing was easy, everybody would be doing it.Sam Instone, the chief executive of chartered financial planners AES International, says this is speculation, rather than investing. "It may be exciting but just like gambling, speculation is an amazing way to lose money quickly."Too many people are seduced by the get-rich-quick dream.
"They jump in, taking on high levels of risk often at precisely the wrong times – buying gold at the peak, Bitcoin after it’s jumped US$30 in an hour, or investing in penny shares that turn out to be dead cats that will never bounce."But his warning will not stop the risk-takers from pitting their wits against the market, and provided you can limit the downside it may be worth taking a chance with a small part of your wealth in the hope that it will grow to be a lot larger. Here are some of your options:Currency trading Many UAE residents will feel an instant affinity with the concept of currency trading. They are used to juggling foreign exchange, for example, earning dollar-pegged UAE dirhams, and sending them to their home country in Europe, India, the Middle East, Australia or wherever.So why not turn that knowledge to your advantage by trading currencies online?
It is quick and easy to set up an online trading account, and you can also use it to hedge against any existing currency risk when transferring earnings overseas or buying a foreign property.There are plenty of currency trading websites open to UAE would-be traders including Forex, FXPro, Xtrade, HotForex and XM. You can trade on almost any currency in the world, although most stick to the so-called "majors", notably the US dollar (USD), British pound (GBP), euro (EUR), Japanese yen (JPY), Swiss Franc (CHF) and Canadian dollar (CAD). Currencies are quoted in pairs, with EUR/USD one of the most widely traded currency pairs of all.Fawad Razaqzada, a market analyst at Forex.com, says today the key global trade is the US dollar. "The Federal Reserve is the only major central bank in the world that is looking to increase interest rates, and that is driving the dollar higher," he explains, adding that currencies typically strengthen when local interest rates rise, as investors can secure a better return.
"The Bank of Japan, European Central Bank and Bank of England are far more dovish, and the dollar is likely to remain strong unless the US economy suffers a shock downturn," he says, adding that investors must remember this is short-term trading, not long-term investing. "There is a daily financing charge and it can soon add up if you hold a losing position for a long time. It is also financially and emotionally damaging, you can be waiting a long time for your trade to turn good." It makes more sense to trade on short-term events, for example, an interest rate decision, economic data, elections, anything whose outcome can affect the relative value of a currency pair. However, Mr Razaqzada warns that it is really difficult to make money unless you know what you are doing. "You are against experienced investors, who have larger funds than you, can absorb their losses better, and hold a position for longer.".
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