Investing in Currency

With exchange rates between each country’s currency continuously changing, there is an opportunity to generate profit by investing in currency. There are two methods on how to do this:

1. Saving Accounts

The very basic form of investment in foreign currency is simply having a saving account in the form of that currency, betting that the value will go up against your own country’s currency. If higher interest rate also expected aside from the increase in value from exchange rate, Certificate of Deposit can be an option aside from a standard saving account.

Unless there is a major event happening in the market, this kind of investment method tends to yield slowly and can take a while to actually generate a significant increase. However it’s also safe as investor can opt to keep his investment as long as he wants regardless of the current exchange rate.

2. Currency Trading

Currencies are traded freely 24/5 around the world in the foreign exchange (forex) market. This activity happens between brokers, between banks and brokers, and between banks themselves. An investor can utilize service offered by these forex brokers to become a “retail trader” by utilizing their service to buy and sell currencies online instantly. This activity is more widely known as “forex trading”.

The following are 3 basic pointers an investor must know if he plans to invest in currency through forex trading:

1. Know the Benefits of Investing in Forex Trading

Between the 2 methods mentioned above, currency trading (forex trading) offers faster profit with much less amount needed. Let’s put the benefits into clearer points:

  • With 5.09 trillion USD traded daily (per 2016; source: wikipedia) in the volatile forex market, there is always opportunity to make more gain from good placed orders.
  • Whether it’s up and down in economic condition of countries, changes of monetary policies, or changes in political structure, there is always opportunity to make profits. Unlike businesses that depend on certain ideal conditions, forex trading has no such limitation to keep thriving.
  • Leveraged trading allows investor to trade big with less capital
  • Small movement in the market is enough to generate profit due to the size of the trade
  • With good risk management and money management form the trader side, the risk can be controlled to a certain extent.

2. Know that it can be Done by Utilizing Automated Currency Trading

If you have capital and simply want to see it grow in Currency Trading without spending extra effort to and time to learn and trade, there are a few alternatives to choose on:

1. Forex Fund Manager

Forex Fund managers can work independently or a part of an investment company. They have knowledge and skill needed to trade your capital and grow it. The factors to pay attention here are how they make their money (commission, profit sharing, or other things -> this will be the investor’s cost) and how good are they (check their portfolio).

2. Forex Robot (Expert Advisor)

With the development of technology, one can translate a trading strategy into a series of command that would be activated automatically by a software. This software is called forex robot and once it’s installed in a trading platform, it will trade the account automatically. The downside of an Expert Advisor is that it lacks flexibility to adapt with changes in the market, thus need constant tweaks and updates.

3. Copying Trades from An Experienced Traders

Copying trades from an experienced traders that make steady gain is also possible through various means. Unlike fund manager, the trader does not have direct access to investor’s account, but a system will allow the investor to attach his account and set it to copy the trading activities. Some important things to pay attention here are:

  • Check the trader’s account (especially his capital amount) and adjust risk setting accordingly. To put it simply, if the investor only have 5,000 and the trader trades with 10,000 capital, then the investor should take only half of each trade the trader takes.
  • Check the trader’s portfolio. This is of course a must step to take as no one wants to follow a losing trader. You can check SmoothGain’s Master portfolio here

3. Know the Risk 

Leveraged trading carries certain risks which an investor should aware from the start: without proper risk management, he can lose all his capital. This is why it’s important to have an experienced trader to trade the fund with strict risk management. Sure you can opt to risk it all and win big every once in a while, but this way usually end up in investor lost everything so it’s not a good option.

Investing in currency trading offers the fastest growth on capital, but it also carry a significant risk. Before risking any amount of capital by utilizing fund managers, forex robots, or copy-trading, it is important to do a thorough checking on their portfolio.