Forex trading is the buying and selling of foreign currencies for a profit. This profit comes from the difference in the price when you bought the currency and the price when you sold it. When you sold it at a higher rate than when you have bought it, the difference will be your profit. Although it rarely happens, currencies sometimes go down. When you sold your currency at a lower rate than you bought it, you lose money. The risk involved in forex trading is the one that discourages people from getting into it. Like most investments, a lot of money is needed in this kinds of venture. You see, although the prices of currencies fluctuate, the fluctuations are mere cents most of the time. This means that you need to invest a lot of money in one currency to be able to enjoy in such a short time the profits. If however, you do not have the money to invest in it, you can buy a little and then wait for it to increase in value. This however may take a long while so you need to be patient. Forex trading as an investment option is vastly preferable to stock trading in the sense that you are basically dealing with money and not stock certificates. This means that while you are investing, you are still liquid. Anytime you need the money for other ventures, you can easily get your currency and exchange it to the currency that you want. This will also allow you to sell your currency immediately to people who need the currency to buy goods should the value become too low. This is different from stock certificates which may be a little hard to sell to people when the value becomes low. Remember that what you have is still money, so the risk is less. Forex trading is however riskier compared to bonds and mutual funds. The advantage however is the fact that the yield can be greater than the interests that the two can give you. Foreign currencies can go really high especially if the country carrying and using the currency becomes an economic superpower. Also, one thing that you can count on in forex trading is the fact that some currencies are basically stable. This is because the world market relies on the exchange rate for global business so the global market gives it stability.