Foreign Currency Trading Can Be Risky Business

Investing in foreign currency is a high risk game for the newcomer. This financial market arena is dominated by professionals and the newcomer will be competing against a lot of highly informed, sophisticated investors who have foreign currency trading software technology only they can afford to purchase and learn to use effectively.

Currency investing, in short, is an area where mainstream investors don’t have a lot of experience, if any at all, and they have little chance to acquire the skills they need.

Foreign currency exchange facilitators such as FOREX try to make currency trading seem easy. For some it may be. There are governments such as China and others in Asia that routinely intervene to manipulate prices. FOREX may not be of much help when this kind of manipulation takes hold. FOREX offers a trial run at currency trading as if a day on the flight deck makes a person an experienced pilot.

But if you desire a specific and concentrated stake in foreign currencies exchange traded funds EFT’s deserve your special consideration. These portfolios are generally low in operating costs and high in convenience, in that they can be bought and sold like stocks throughout the trading session but not 24/7. Three dozen currency EFT’s have come into the market since 2005. Firms that offer currency EFT’s include Rydex, Barclays, and ProShares.

Neither the U. S. economy nor any other global economy is secure enough to warrant a calculated sure-bet investment strategy in currency trading. Ireland, Greece, Portugal, the United Kingdom and other countries arte either in an economic disaster or they are on the brink of one. The United Kingdom has a chance of avoiding this but the others are already there.

The Chinese yuan is manipulated by the Chinese government to keep prices artificially low and, therefore, to keep cheap prices on their goods and services. If China ever valued its currency higher we could see a global meltdown. Not a good event to contemplate for the foreign currency trader.

An investor can get some foreign-currency exposure from buying shares in multinational companies. Two-thirds of the revenues of S&P 500 companies come from overseas according to Larry Steinberg of Steinberg Financial Group. This is a startling number. One could only imagine what would happen to the S&P 500 companies with a heavy stake in foreign activities if we had a global meltdown. But if an investor wants to play in the foreign currency investment game this is probably the safest way to do it.

Many investment schemes are and have been portrayed as glamorous and exciting opportunities to make money. Lots of money. Stock options and commodity futures were once touted as every one’s path to wealth. If three out of four investors made money it would be a surprise. Incidentally these investment options are still available, but we hear very little about them.

Will Rogers said that the best way to double your money is to fold it and put it in your pocket. This may be more a bit of wit rather than investment advice, but in today’s global economy it is hard to imagine a legal and ethical investment that will pay high returns.