How you can gain a sizable return from currency trading
From mid-July to late August 1998, the major stock market averages
dropped about 20%, generating headlines and massive concerns among
investors. With less fanfare, the investment community witnessed an even
greater market move. It began last July and continued into January. The
Japanese yen rose 35% against the U.S. dollar.
When such fluctuations occur, there are winners as well as losers,
creating opportunities for disciplined investors to profit. What's
more, currency trading isn't correlated to the stock market, so
it's possible to register gains even when the Dow drops like a
stone.
How can you participate? By trading currencies, which might include
the yen, the Swiss franc, the British pound and the new euro, among
others. The risks can be enormous, though, so you need to know the rules
before leaping into the game.
For the individual investor, gaining exposure to currencies usually
means dealing in futures contracts, which are traded on the Chicago
Mercantile make money online Exchange (www.cme.com). "With futures contracts, you can
go short as easily as you can go long," says Ken Steben of Steben
Asset Management, Rockville, Maryland. That is, you can bet on a
decrease or an increase in a currency's value.
Currency trading involves the use of "margin," a
"good faith" investment an investor must put up when buying or
selling a futures contract. This process substantially raises the
stakes. "A euro contract worth more than $138,000 might be acquired
for only $3,000 in good-faith money," says William O'Grady,
vice president at A.G. Edwards, a brokerage firm in St. Louis. If the
futures prices move adversely, the investor must put up more money to
meet margin requirements.
"In currency trading, you need to control your risks while
setting targets that can offer large rewards," says Keith Raphael,
president of Crosscurrents Investment Advisory in Danbury, Connecticut.
"Knowledgeable traders try to hold losses on each trade to 1% or 2%
through stop-loss orders to their broker." Through a stop-loss
transaction, the customer orders his or her broker to set the sell price
of a security below the current market price in order to protect profits
or prevent losses it the value of the security drops.
How can you be among the triumphant 10%? Here are some tips for
investing in currencies:
* Start with a sizable stake. "Many individuals are
undercapitalized," says York. "Although you can trade
currencies with as little as $3,000, I'd put $10,000 as the minimum
necessary. You're better off with $20,000 or more."
* Follow the markets. Informed investors will know, for example,
that this year Japanese officials have been trying to "talk down
the yen" to reinflate the Japanese economy. "Make sure you
effectively use both fundamental and technical analysis," says
York. "Don't invest on hot tips."
* Plan ahead--and stick to your plan. Learn the lingo of the
futures markets so you can use different types of orders properly.
Always calculate an exit price once you have entered a new position.
"The greatest mistake made by currency traders is to let losers
ride while cutting their profits short," says O'Grady.
"They should be doing just the opposite."
* Pay attention and protect yourself. "You need to monitor
your trading activity regularly," says Raphael. On nights and
weekends (including holiday weekends), currency trading goes on around
the world.
The Risky World of Currency Trading
To give you an idea of the shifting currency rates that traders
have to analyze on a daily basis, BE calculated the exchange rates
between the U.S. dollar, Japanese yen, Brazilian real and the euro and
other major world currencies.
Value of Currency per Unit of
U.S. Japanese
Currency Symbol dollar yen
Australian dollar AUD 1.5896 0.0135
Belgian franc(*) BEF 36.7562 0.3130
British pound GBP 0.6136 0.0052
Canadian dollar CAD 1.5182 0.0129
Danish krone DKK 6.7755 0.0577
Dutch guilder(*) NLG 2.0079 0.0171
Euro EUR 0.9112 0.0078
French franc(*) FRF 5.9768 0.0509
German mark(*) DEM 1.7821 0.0152
Italian lira ITL 1764.2551 15.0247
Japanese yen JPY 117.445 1.00
Swiss franc CHF 1.4575 0.0124
United States dollar USD 1.00 0.0085
Value of Currency per Unit of
Brazilian
Currency real making money online Euro
Australian dollar 0.8606 1.7445
Belgian franc(*) 19.9005 40.3399
British pound 0.3322 0.6735
Canadian dollar 0.8217 1,6655
Danish krone 3.6691 7.4375
Dutch guilder(*) 1.0873 2.2040
Euro 0.4933 1.00
French franc(*) 3.2365 6.5607
German mark(*) 0.9650 1.9562
Italian lira 955.3611 1936.5904
Japanese yen 63.5859 128.8936
Swiss franc 0.7890 1.5994
United States dollar 0.5413 1,0972
(*) The currencies have been fixed ways to make money online against the euro
As of 3/18/88
Source: Bloomberg.com and blackenterprise.com3
From mid-July to late August 1998, the major stock market averages
dropped about 20%, generating headlines and massive concerns among
investors. With less fanfare, the investment community witnessed an even
greater market move. It began last July and continued into January. The
Japanese yen rose 35% against the U.S. dollar.
When such fluctuations occur, there are winners as well as losers,
creating opportunities for disciplined investors to profit. What's
more, currency trading isn't correlated to the stock market, so
it's possible to register gains even when the Dow drops like a
stone.
How can you participate? By trading currencies, which might include
the yen, the Swiss franc, the British pound and the new euro, among
others. The risks can be enormous, though, so you need to know the rules
before leaping into the game.
For the individual investor, gaining exposure to currencies usually
means dealing in futures contracts, which are traded on the Chicago
Mercantile make money online Exchange (www.cme.com). "With futures contracts, you can
go short as easily as you can go long," says Ken Steben of Steben
Asset Management, Rockville, Maryland. That is, you can bet on a
decrease or an increase in a currency's value.
Currency trading involves the use of "margin," a
"good faith" investment an investor must put up when buying or
selling a futures contract. This process substantially raises the
stakes. "A euro contract worth more than $138,000 might be acquired
for only $3,000 in good-faith money," says William O'Grady,
vice president at A.G. Edwards, a brokerage firm in St. Louis. If the
futures prices move adversely, the investor must put up more money to
meet margin requirements.
"In currency trading, you need to control your risks while
setting targets that can offer large rewards," says Keith Raphael,
president of Crosscurrents Investment Advisory in Danbury, Connecticut.
"Knowledgeable traders try to hold losses on each trade to 1% or 2%
through stop-loss orders to their broker." Through a stop-loss
transaction, the customer orders his or her broker to set the sell price
of a security below the current market price in order to protect profits
or prevent losses it the value of the security drops.
How can you be among the triumphant 10%? Here are some tips for
investing in currencies:
* Start with a sizable stake. "Many individuals are
undercapitalized," says York. "Although you can trade
currencies with as little as $3,000, I'd put $10,000 as the minimum
necessary. You're better off with $20,000 or more."
* Follow the markets. Informed investors will know, for example,
that this year Japanese officials have been trying to "talk down
the yen" to reinflate the Japanese economy. "Make sure you
effectively use both fundamental and technical analysis," says
York. "Don't invest on hot tips."
* Plan ahead--and stick to your plan. Learn the lingo of the
futures markets so you can use different types of orders properly.
Always calculate an exit price once you have entered a new position.
"The greatest mistake made by currency traders is to let losers
ride while cutting their profits short," says O'Grady.
"They should be doing just the opposite."
* Pay attention and protect yourself. "You need to monitor
your trading activity regularly," says Raphael. On nights and
weekends (including holiday weekends), currency trading goes on around
the world.
The Risky World of Currency Trading
To give you an idea of the shifting currency rates that traders
have to analyze on a daily basis, BE calculated the exchange rates
between the U.S. dollar, Japanese yen, Brazilian real and the euro and
other major world currencies.
Value of Currency per Unit of
U.S. Japanese
Currency Symbol dollar yen
Australian dollar AUD 1.5896 0.0135
Belgian franc(*) BEF 36.7562 0.3130
British pound GBP 0.6136 0.0052
Canadian dollar CAD 1.5182 0.0129
Danish krone DKK 6.7755 0.0577
Dutch guilder(*) NLG 2.0079 0.0171
Euro EUR 0.9112 0.0078
French franc(*) FRF 5.9768 0.0509
German mark(*) DEM 1.7821 0.0152
Italian lira ITL 1764.2551 15.0247
Japanese yen JPY 117.445 1.00
Swiss franc CHF 1.4575 0.0124
United States dollar USD 1.00 0.0085
Value of Currency per Unit of
Brazilian
Currency real making money online Euro
Australian dollar 0.8606 1.7445
Belgian franc(*) 19.9005 40.3399
British pound 0.3322 0.6735
Canadian dollar 0.8217 1,6655
Danish krone 3.6691 7.4375
Dutch guilder(*) 1.0873 2.2040
Euro 0.4933 1.00
French franc(*) 3.2365 6.5607
German mark(*) 0.9650 1.9562
Italian lira 955.3611 1936.5904
Japanese yen 63.5859 128.8936
Swiss franc 0.7890 1.5994
United States dollar 0.5413 1,0972
(*) The currencies have been fixed ways to make money online against the euro
As of 3/18/88
Source: Bloomberg.com and blackenterprise.com3