Should I Invest in Foreign Currency?

    Foreign Exchange markets have been used by central banks, local banks, small and large institutions, investment managers and retail traders for decades.

    You may read from time to time about the Reserve Bank of Australia’s (RBA) currency interventions. The RBA is buying and selling currency daily but on rare occasions will intervene to drive the price of the Aussie dollar higher or lower.

    During the Global Financial Crisis (GFC) for example, the Aussie dollar was in free-fall against the US dollar.

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    RBA Interventions

    Now you might think the RBA intervened by buying as much as they could to stop the freefall. But, RBA deputy governor Guy Debelle, stepped in to reduce the massive gap in the cost to buy or sell Aussie dollars as liquidity plummeted.

    With $US5 trillion dollars going through the markets daily and the largest institutions in the world transacting, you can see why Foreign Exchange is such a popular investment vehicle.

    You get a sense that if the biggest players in the world are involved, there must be some opportunities worth looking into.

    But it isn’t just for the big players.

    In 2016, it was noted that retail traders account for 5.5% of the entire FX market, up from 2% in 2001.

    And the popularity among savvy investors continues to grow year after year.

     

    Have you got a business trading plan for investing in Forex?

    But before you jump in to start investing in the Forex markets you want to answer yes to the following questions:

     

    ☐ Do you have a written Business Trading Plan?

    ☐ Consider the risk of loss associated with trading highly speculative products?

    ☐ Have you created trading systems that have an edge (the opportunity to profit over time)?

    ☐ Do you have multiple trading systems to take advantage of different market types including trending, range bound and volatile breakout markets?

    ☐ Do you understand and have sufficient risk management and capital protection strategies built into your models?

    ☐ Have you backtested your strategies on historical information over bull, bear and sideways markets?

    ☐ Have you proven you can execute your stops when they are hit, even when you ‘feel’ your entry decision is correct?

    ☐ Have you got redundancies built in if your power goes out or your internet drops and markets are moving fast?

     

    With all the glitz and glamour you see around Forex trading, you must understand that this is a business.

    Forex is a business run by the largest institutions, banks and money managers; all focused on extracting money from your bank account.

    investment-hobby-vs-professional

    Are you a professional or is this a hobby?

    You must treat this as a professional business and not a hobby if you are to invest in Foreign Currency professionally.

    But just because you cannot answer yes to all the questions above does not mean you cannot get a piece of the Forex pie so to speak.

    Back the Professionals

    The smart option is to join the ranks of the professional players and invest in currencies with managers who have a track record established.

    You can leverage their skill set, their business plan and their Forex street smarts in order boost your income streams.

    For those who are looking to invest in the largest and most liquid market in the world, Forex, aligning with professionals is a sensible first step.

     

    We welcome you to give our team a call to discuss your investment goals and objectives.

    You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.

    For more information on investing in currency, check out our full article: 7 Key Reasons Why Australians Invest In The Currency Markets.