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Earning money through currency exchange

The current economic climate has led to fluctuations in many global currencies resulting in an increased interest in currency exchange as a way of making money. This article looks at some of the ways that you can earn money and some of the pitfalls.

A WORD OF CAUTION

Currency exchange is a high risk way of seeking to earn money so is not for the faint hearted. Predicting what will happen in the international money markets is notoriously difficult, particularly in the short term and relies on a good deal of technical analysis. If you can’t afford to lose money then currency exchange will not be right for you.

FOREIGN EXCHANGE CHANGING

The foreign exchange market, known as FOREX, is the world’s largest market for international money transfers. In FOREX trading units are measured per single US dollar. You trade in currency pairs, for example, if you think the value of the GBP (Sterling) will increase against the USD (US Dollar) you buy GBP’s with US dollars. If the exchange rate then rises you will sell them back, generating a profit. By using market reports and data from reputable sites, you can keep up to date with developments and monitor what is happening in the money markets, taking action as required.

CONTRACTS FOR DIFFERENCE

Contracts for Difference (CFD) allow you to make money on movements in currency without having to actually purchase the currency. When taking out a CFD you typically pay up to 25% of the currency value. If you have judged the movement in the exchange rate correctly then you will be paid out, however, if not you will have to pay out. Whilst you can make large sums of money, CFD’s are considered to be very high risk as it is possible to lose far more than you put down.

SPREAD BETTING

With currency exchange spread betting you gamble on exchange rates increasing or decreasing over a defined period of time. There are no units involved, you simply decide how much you want to put at risk. With spread betting you are able to close the bet early and still realise a profit or minimise your losses before the agreed period ends.

AND IF YOU’RE STILL KEEN

If, despite the risks, you’re still interested in earning money from currency exchanges then here are some things you should keep in mind. The most important is to ensure that you are fully educated as to how the market works and the terminology used. Step in cautiously and start small before exposing any larger sums. It can help to join forums and speak with others who are currency trading to get tips and avoid pitfalls. Make sure you set yourself targets and learn when to walk away from a trade.

Earning money through currency exchanges can be profitable. It can also go horribly wrong. It is important, therefore, to recognise the risks involved, become fully educated and learn how to assess your position so that you can take action when you need to. By proceeding with caution you might just turn a tidy profit.

Genelia writes regularly on currency issues such as making money from currency exchange and international money transfers for a range of websites and blogs. She uses industry sites such as www.currencies.co.uk in order to keep up to date with market trends.

This was posted in Bdaily's Members' News section by Genelia .