Currency Trading is fast becoming a more popular way for investors to spend money. Trading currency is performed in what is called the currency market, also called the forex and is abbreviated as FX. The FX market is the largest of the trading markets and averages $4 trillion every trading day. The currency trading market is available to traders 24 hours a day and is closed only during the weekends, which starts Friday evening through Sunday. The currency market takes place during three sessions; there is the United States, European and Asian markets. When trading currency, the trades are in lots. Lots come in various sizes. Lots are valued from the base currency and all trading is in pairs. Trading in pairs means you must buy and sell currencies at the same time. Virtually all currency trading is calculated to the fourth decimal. The percentages are referred to as a pip and represent the smallest amount allowed during a trade.
Top five foreign currency to trade are:
- Dinar (Iraqi)
- Dong (Vietnamese)
- Won (Korea)
- Ringgit (Malaysian)
- Peso (Chilean)
The economy in Iraq has excellent potential for strong economic growth, due to recent political developments. There is optimism for the Iraqi dinar revalue. In 2017 the Iraqi government made progress in territories that had been controlled by a radical Islamic group, and as a result, the country has been able to increase the oil production which led to an uptick in oil exports. Investing in Iraqi dinar is an excellent long-term investment as the political climate in the country continues to improve. The stabilization of the region’s political environment seems to be developing slowly over time as will the potential for continued economic development. Currently, the dinar is valued about 1,191 dinar = $1. The increase in oil exports in addition to several events have many investors predicting the revaluation of the dinar. This can be the perfect time to invest in the currency. In 2018, a new government was elected and this a positive move as the country can now continue moving towards more stability and growth.
Currency trading is grouped into two categories, weak currencies, and the strong or more stable currencies. Currencies such as the dongs (Vietnamese) and dinar (Iraqi) are considered weak currencies. Weak currencies, while much riskier of investment, means there is a huge opportunity to receive a considerable return as the country’s economic situation improves and the currency undergoes a reevaluation. The won (Korean) and ringgit (Malaysia) are both considered stable currencies. These regions tend to have a more stable environment and, therefore, have a higher chance of good economic growth.
Currency trading is typically short-term when trading currency among well-developed countries. Trading, for example, with the US dollar and euros, Japanese yen (JPY), the Swiss franc or the British pound are all short-term investments. These trades are lower risk and, therefore, are traded and not invested.
Currency trading in markets of countries that are still developing. These countries tend to have a lot of potential for economic growth. The potential for economic growth is what leads to revalue. Revalue, or the revaluation of currency, is based on the country’s exchange rate and measured against a baseline. Baselines can be calculated using commodity prices such as gold, or wage rates. If the exchange rate in a market is fixed, the rates can only be changed the central bank.
In Vietnam, there has been an economic shift from one based on the production and maintenance of crops to one based on affordable electricity. The Vietnamese government has plans to increase electricity plants in the country to continue this economic growth.
The Korean government over the past 40 years has seen tremendous economic growth as it is has continued to focus on digital technology successfully. The countries currency value has significantly benefited from this steady economic growth.
In Malaysia, the financial state has been heading in the right direction since 1957 which is when the country gained its independence from the British. Since the country’s independence, the Central Bank has kept inflation in check, creating a suitable environment for economic growth.