There’s a revolution happening in the currency world. Imagine posting double digit profits, with low cost trades and unlimited liquidity without sitting at your computer all day. It’s all possible with the brand new currency exchange traded funds (ETFs). These were just launched a few months ago. In fact, few investors even know they exist. These are truly unique. In fact, I would say they are revolutionary.

Find Your Comfort zone - Then You’ll Know Where to Play

The first step in the process is finding out who you are, in terms of investment style.  Your style shouldn’t necessarily change just because you’re trading in the currency market. What’s worked for you in your stock or bond investments, and the knowledge you gained there, applies to your currency investments. Sure, there are some idiosyncrasies in the way currencies move compared to stocks and bonds, but most of what you know is transferable. So don’t think you need to start from scratch or change your style. 

Once you’ve completed your self-analysis, you need to choose the best way to access the currency market which fits your investment comfort zone. Here are your choices:

1) Multi-currency deposits – This is a flexible and safe way to achieve two primary objectives: 1) Diversifying your risk outside of your home currency, and 2) achieving a respectable yield while protecting the purchasing power of your cash.   

You can park your cash on deposit and denominate it in the single currency of your choice. Or, you can park your cash in a basket of currencies. All you need is a bank account that offers multiple-currency deposits.

2) Currency Exchange Traded Funds (ETFs) – This is the new product leading the revolution.

Currency ETFs open the world of currency trading to everyone who has a standard stock brokerage account. Jump on a hot trend or position for a special situation in currencies. There’s no need for special currency trading accounts anymore.  

Seven currency ETFs are now available and I’m sure this list will grow as ETFs become more popular. Right now, these ETFs include: euro (FXE), British pound (FXB), Mexican peso (FXM), Swedish krona (FXS), Australian dollar (FXA), Canadian dollar (FXC), and Swiss franc (FXF). All are traded on the New York Stock Exchange.

It’s a product that delivers exactly what investors like us want: low cost, easy access, efficiently priced and constant liquidity. Plus, ETFs offer investment strategies that are limited only by your imagination.

3) Currency Options – Currency options are another effective and easy way to play the currency markets. Two key advantages to currency options are: 1) your risk is limited to the amount the premium you pay per option (assuming you only buy calls or puts as the opening transaction), plus your brokerage commission, and 2) options are highly leveraged so your profits can be huge if you pick a winning trade.

I believe currency options are great products for those of you who like to speculate in currency markets, shoot for big profits with limited risk, and don’t want sit in front of a trading screen all day. I recommend using currency options for intermediate-term trading opportunities based on global economic themes that affect currencies. 

4) Currency futures and Spot forex – This is where you can produce big-time returns in a very short period of time. But you also take on higher risk in the form of leverage to do it. Winning in futures and spot forex requires not only good analysis, but extremely disciplined risk control. And positions move fast… so you have to stay connected and highly focused. It’s not unusual to enter and exit a trade in the same day. SO there’s a lot of potential for big profits but you have to be disciplined.   

Currencies – Strategies for Every Investor

Most people believe currencies are inherently risky, because they know or have heard of people who blew out their accounts trading currencies. In actuality, currency prices don’t fluctuate any more than stock prices. In fact, they often change much less during the average trading day. What gets people in to trouble is trading too often, with too much leverage and with too little concern for risk. That’s a recipe for disaster in any type of investment market, not only currencies. So to be very clear, it’s not about the inherent risk embedded in currencies. 

The bottom line is there are boundless opportunities and choices in currencies for almost any type of investor… including you.