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What is the best way to benefit financially from currency fluctuations?

I was talking to a guy down the pub the other day (I know, groan, but hear me out) and he was saying how he has several foreign accounts where he buys some sort of bonds that retain the value when your currency is stronger and then cash it in later when yours has weakened - or something along those lines. It had been a long day already by that point and I was struggling to understand his methodolgy, so, what, if any, is the realistic profitable way to gain from currency fluctuations? One thing he stated quite clearly was that he was in it for the long term and that's something I don't mind opting for if necessary...

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Simple in principle, difficult in practice, and if you hedge-bet (forgive the pun) as he was across several markets you might make modest gains. To a retail investor the cost of maintaining currency market portfolio is impractical. If you have spare money, consider engaging a specialist in Hedge funds such as Man Group - they are world leaders in this market.

Alternatively, if you REALLY want to trade on FOREX go for a major city brokerage - take your pick!

MC

Reply to
Marcus Collie

In general, if you don't know what you're doing with derivative products like these bonds, don't mess with them. In context, the currencies themselves are the "underlying" tradable item. The bonds, having a value derived from the behaviour of the currencies, are derivatives. Modern hedged trading is based almost entirely on complex interlocked use of derivatives. Direct FX traders trade for P&L on *tiny* shifts in currency values. They move vast sums of money and buy-low/sell-high on things like the difference between GBP at 1.8876 USD and GBP at 1.8874 USD. If you move enough money at this spread, you make a worthwhile profit, and it can happen within seconds. (i.e. FX trading is about as short-term an activity as can be imagined.)

Derivative products typically operate over longer periods, but you hope that the underlying moves a reasonable distance (depending on the nature of the derivative), else the transaction costs will eat you alive.

Reply to
SteveR

It doesn't directly answer your question, but to try FX trading in real time with demo money try the FX 'game' at

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It's a java platform real-time trading experience, and will show you just how difficult it is for Joe Bloggs to trade FX for any real gain.

Shano

Reply to
Shano

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