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How to Invest in Currency and Forex

By: , dated March 16th, 2012

With all of the considerable recent publicity about the benefits of currency trading via the forex market, more and more people want to know how to invest in currency.  Fortunately, the process has gotten much easier in the last few years due to the ready availability of online forex brokers.

All it takes to open up an account with an online forex broker and start investing in currency is some trading capital to put at risk and a relatively recent computer connected to the Internet.  You typically just have to fill out an online form, provide identification and send the broker a deposit to be used as margin to secure your leveraged trading positions.

You can then download and install either the broker’s proprietary forex trading platform or broker independent forex trading software like the very popular MetaTrader platform.  Buying or selling one currency against another then typically just involves a couple of mouse clicks.  Learning how to invest in currency via the forex market really could not be simpler, although doing so profitably might take some practice.

Still, if you want to explore other currency investment choices, you can try trading currency futures via one of the major financial exchanges that list such contracts, although minimum lot sizes and transaction fees are typically higher than those available at most online forex brokers.  Some currency linked Exchange Traded Funds (ETFs) are also available to investors that prefer to trade via stock exchanges.  In addition, some banks offer certificates of deposit in a variety of currencies.

Currency options and binary options can also be used to invest in currency. Such option contracts generally provide the buyer with the right but not the obligation to purchase one currency against another in return for paying an upfront premium. Many futures exchanges that offer currency futures also offer options on those futures contracts. In addition, trading options via a number of online currency and binary option brokers has recently become available to retail investors.

Finally, if you are not interested in establishing a leverage position or earning interest on your foreign currency, you can probably just go to your local bank or foreign currency dealer and purchase an equivalent amount of a physical foreign currency with your domestic cash. Nevertheless, available quantities tend to be limited, spreads are usually much wider, and you will then have to worry about how to store your foreign money securely.

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One Response to “How to Invest in Currency and Forex”

  1. Mark says:

    Great tips for beginners to trading currency… Kudos

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