Most people are very confused by the prospect of making money by trading currencies. What makes one more valuable than another, when to buy, when to sell, and everything in-between. To make money trading currency, it’s all about common sense and understanding the markets.
Let’s say that the currency world resembles the patterns and behaviors of the people who own homes on your street…. Who has the nicest house, whose yard is always full of garbage, who’s in the garage working all hours of the day and night. If you were to guess as to which of these people are the most successful and will continue to become more successful, you would most likely go with the nicest house or the hard-working person always in the garage. When planning which currency to buy and sell, it’s a similar concept. A country with a failing economy will have a devalued legal tender, a country with a long-standing strong economy is a safe investment with little shift, and a growing or industrious country offers the best chance to make money, but of course, with a bit of risk.
There are three basic economies that currency traders will be looking into:
THE FAILING ECONOMY
Investing in the currency of a weak or third-world country will almost always be a dangerous or bad investment, but there may be some good opportunities to make short-term investments. For example, some of these countries may have documented trends, such as a value decrease during an election. Say that Country A usually has a currency value of 50 Examples against the US dollar. During their yearly elections, however, the value ratio changes to 75 Examples per $1, and about 1-2 months later levels return to the 1 dollar :50 examples norm. If you were to purchase currency at the 1 dollar: 50 examples rate when the Example ratio goes to 1 dollar:75 examples this means the dollar is stronger and you can buy more examples; however, this requires a ton of research to become half-way decent. `
THE GROWING ECONOMY
Finding a growing economy and knowing when or how to buy can be very rewarding when done right. Imagine having Japanese Yen before they took off with electronic market ownership. The trick is having the magic eye to find the next big hit before it makes worldwide news. Some people have told me that they are buying Chinese currency. Currently, China is one of the fastest growing economies that being said many people have their eye on that market. You should look for trends in markets or search for less mainstream media sources to look into countries with growing currency options.
THE STABLE ECONOMY
Making money with safer economies is a little harder. The world uses the dollar standard to measure the value of their currency, but $10 today can’t buy what it could 20 years ago. If you pull a $100 bill out of your wallet today that you’ve been saving for 20 years it actually has less value than it did 20 years ago, but when compared to a 20-year-old Greek Drachma, which would be practically worthless right now, it shows that you risk less when investing long-term in a more stable country’s currency. If you are going to take bets with your money I would say go for what provides the greatest possible return and leave stable economies alone.
If you are looking to get started you can begin trading at www.forex.com today
My advice is to research the markets you are looking at investing into for at least a month and look at trends over a decade to get a feel for where you are putting your hard-earned resources.