How to make money through currency conversion

Lots of talk about the currency markets these days. Currencies all trade on the Foreign Exchange Market — or the FOREX — which actually is a hour market since currencies constantly are traded around the world. You just buy them and hope they keep going up. With currencies, you have to buy. And make a bet that one is going up, while the other is going. You following all this? I know — these markets are super fast, super confusing — and not for the faint of heart. So be careful and use stop losses when making these trades. And for more on all of this follow me tracybyrnes. Real Money. Real Money Pro. Quant Ratings. Retirement Daily. Trifecta Stocks.

Most of these trades are done are through the Forex — an online foreign exchange market — which is open for business 5 days per week, 24 hours per day. To buy and sell currency, start by examining the exchange rate for various currencies around the world. Choose a currency to invest in that is expected to remain stable, or, ideally, increase in value, and do a few simulated trades on a demo trading account. Be sure to set a take-profit or stop-loss order to sell off your trade once it hits a certain price. For more tips from our Financial reviewer, including how to choose a broker, read on. This article was co-authored by Michael R. Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. Categories: Making Money. Log in Facebook Loading Google Loading Civic Loading No account yet? Create an account. Edit this Article. We use cookies to make wikiHow great. By using our site, you agree to our cookie policy. Article Edit. Learn why people trust wikiHow. Co-authored by Michael R. Lewis Updated: March 29, There are 16 references cited in this article, which can be found at the bottom of the page. Examine the exchange rate for the currency you want to buy based on the currency you want to sell. Look at how values for your chosen currency pairs have fluctuated over time. Currency exchange rates are quoted in pairs of currency. The exchange quote tells you how many units of currency will receive based on the currency you want to sell. Anything from political instability to a natural disaster may cause a fluctuation. Make sure you understand that ratios between currencies are constantly changing.

How Forex Works

Then it’s time you get acquainted with forex — a world of investment opportunity that’s less old school than your typical brokerage situation, and way more fast-paced. First, a history lesson: forex, or the foreign exchange market, used to be the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals. But, like a lot of things, the internet changed all that and the barrier to entry for forex is now much more accessible. Pretty much anyone can buy and sell currencies easily with the click of a mouse through online brokerage accounts. Forex is also known as FX or currency trading, and if you’ve ever gone abroad, you’ve taken part in it. Say you take a trip to London and need to get your American dollar converted into British pounds. The forex exchange rate between the two currencies, all based off supply and demand, determines how many pounds you get for your dollar. Essentially, the forex market is a decentralized global market where all the world’s currencies trade. It’s not too surprising then that forex markets are a lucrative spot to spend your time if you have a sophisticated understanding of how to buy and sell currencies. Just like trading stocks, you can trade currency depending on what trends you’re observing and where you think the market could be headed. But unlike trading stocks, which can be more rigid, forex trading is incredibly fluid. If you think a currency will increase in value, you can buy it. If you think it will decrease, you can sell it. The forex market is open 24 hours a day, five days a week, except for holidays — and any firm, person or country can participate. Due to the international nature of FX trading, you can find a buyer or a seller extremely rapidly. Forex is an incredibly dynamic world that essentially never sleeps. The open nature of the market means you can potentially rake in some serious side cash —but only if you understand the basics behind currency movements. When you’re in the business of sending and exchanging money, you’ll want to be sure those funds are in safe hands. Find a broker with a solid reputation or one who participates in a larger market that’s regulated in at least one, and preferably two, different countries. The larger and more stable the market maker, the more stable their trading platforms and servers. Finding a more established broker also means that they’re more likely to have employees on hand who will immediately be able to assist you — and in a world as time-sensitive as FX trading, that’s almost an essential. There are tons of options these days for finding a trading platform, and that can be a good thing and a bad thing. Test and see if the software you’re about to use sits right with you, considering you could be spending quite a bit of time on it. You can even play around with your broker’s software by opening a demo account or virtual trading account. Always see if the functionality of the software works for you — and to lower the stakes, you can test it using virtual money, not your own funds. Seriously, just do it. You always want to make sure your trades are built on a strong foundation of research. Don’t ever get into the habit of making trades impulsively — even if it does feel like you need to make a quick draw decision.

Placing a trade in the foreign exchange market is simple. The mechanics of a trade are very similar to those found in other financial markets like the stock marketso if you have any experience in trading, you should be able to pick it up pretty quickly. The objective of forex trading is to exchange one currency for another in the expectation that the price will change. More specifically, that the currency you bought will increase in value compared to the one you sold. An exchange rate is simply the ratio of one currency valued against another currency. The reason they are quoted in pairs is that, in every foreign exchange transaction, you are simultaneously buying one currency and selling. When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy ONE unit of the base currency. In the example above, you have to pay 1. When selling, the exchange rate tells you how many units of the quote currency you get for selling ONE unit of the base currency. First, you should determine whether you want to buy or sell. If you want to buy which actually means buy the base currency and sell the quote currencyyou want the base how to make money through currency conversion to rise in value and then you would sell it back at a higher price. If you want to sell which actually means sell the base currency and buy the quote currencyyou want the base currency to fall in value how to make money through currency conversion then you would buy it back at a lower price. All forex quotes are quoted with two prices: the bid and ask. The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you the trader will sell to the market. The ask is the price at which your broker will sell the base currency in exchange for the quote currency. Look at how this broker makes it so easy for you to trade away your money. Peter Lynch.