Market Overview

Currency Trading: More Stable Than Other Markets?



If you’ve been paying attention to social media stock trading you are likely getting flashbacks to the mid-late 90s when money flowed like water in web-based start-ups…right before the entire market crashed and burned. Now is not the time to buy social media stock. If you’re hoping to make money via the market, you’ll want something more stable, like…currency trading?

According to an article in The National, called “’Exceptional’ Quarter for Currency Trade with More on the Way,” currency trading experienced an exceptional first quarter in 2014 and the market isn’t showing any signs of slowing down. This is largely because of the biggest single month increase in the US Dollar to Canadian Dollar exchange rate since 2012 and a few other things that caused the market’s value of gold to shift dramatically.

Of course, not all currencies fluctuate as suddenly and wildly as we saw in January with the US dollar to Canadian Dollar ratio. The Euro remains stubbornly stable. The current Euro to pounds Currency Trading rate, as reported by Fox Trading, is holding steady at .83 (meaning that one Euro is equal to .83 British pounds.

This is in spite of the fact that the FTSE took a sudden nose dive the other night after riding high for a lengthy three weeks.

Meanwhile, in spite of years of pressure from the US to improve its currency trading rates and to allow the market to determine exchange rates and values, China is still determinedly setting a low trade rate. NewsNow pointed us to an article in The Courant called US Warns China over Currency Depreciation that goes into more detail. According to this article, the US Treasury Department is very concerned that China is trying to shift its national policy away from a market driven exchange rate. If it is, indeed, trying to move toward a state-manipulated and decided exchange rate that could throw the entire world market into flux (which would wreak havoc on trade values and Forex traders alike).

All of this is happening when more and more Forex trading is done via computer and finding a qualified Forex trader to help you get started is harder than ever. So what do you do? How do you start trading currencies if you’ve never done it before? How do you get a piece of that two trillion dollars’ worth of action?

1. It isn’t as straightforward as it seems

When you first learn about Forex and currency trading it seems pretty easy: take a few of your pounds and exchange them for something that has more value. Then exchange that for something else, etc. Easy, right? Most currency trading is actually done via set pairs of the most traded currencies on the market: pounds, Euros, US dollars, Canadian Dollars, Yen, Swiss Francs and the Australian Dollar. Get used to following these currency rates before you open an account.

2. The action is a two-in-one

Whenever you’re buying one currency, you’re selling another—all in the same transaction. That’s what trading is. You are selling your X pounds for Y Euros while simultaneously buying Y Euros for X pounds. It’s important to know this or you won’t be able to make heads or tails of the literature.

3. It isn’t always straight across.

Not all trades happen at market value. Sometimes traders will exchange one currency for another at a different rate than is currently dictated by the market. There are “bid” prices and “ask” prices. The “bid” is the rate at which the buyer wants to buy. The “ask” is the amount for which the seller is willing to sell. This is what makes it feel like stock trading.

There are countless resources out there that will teach you all about currency and Forex trading. If you’ve been curious, there is no time like the present to get started—the market is on the rise!

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


Related Articles

View Comments and Join the Discussion!