How to choose foreign currency investments now? Mastering the timing and techniques of buying and selling is the key to steady profits.

Why is Forex Trading Worth Paying Attention To?

Among many investment products, the status of the foreign exchange market is often underestimated. In fact, the global daily trading volume exceeds 6 trillion USD, making it the most liquid financial market. Compared to stocks, bonds, or other investment tools, forex trading has unique advantages.

First, foreign currencies are not only investment targets but also closely related to daily life. Whether traveling abroad, shopping internationally, or engaging in cross-border trade, almost everyone has experience with forex, which makes currency investment more broadly applicable. Second, the fundamentals of the forex market are relatively transparent. As long as investors understand the interest rate policies, monetary policies, and economic data of relevant countries, they can more accurately predict exchange rate directions. Additionally, due to the enormous and dispersed scale of the forex market across global financial centers, major capital flows are difficult to manipulate, making trading decisions more based on real data rather than guesses.

What Currencies Are Suitable to Buy Now? The Key Is to Master Market Cycles

In the current forex environment, choosing the right currency pairs is crucial. The US dollar, as the global reserve currency, remains attractive for investment amid a relatively stable US economy and high federal funds rates. However, it is important to note that the US is in a rate-cutting cycle, which could put downward pressure on the dollar, so “going long on USD” requires caution.

In contrast, high-yield currencies like the South African rand and the Australian dollar, with interest rates much higher than those of major developed countries, are popular choices for investors seeking stable returns. The Japanese yen, due to its unique macroeconomic background, presents volatility opportunities during Bank of Japan policy adjustments. The euro, as the second-largest international reserve currency, often moves inversely to the US dollar and can be used for portfolio hedging.

The Core Mechanism of Currency Arbitrage

“Exchange spread” refers to the difference in exchange rates for the same currency at different times or through different channels. Traders profit by predicting exchange rate movements and executing “buy low, sell high” or “sell high, buy low” strategies.

For example, with EUR/USD, suppose an investor buys 1 standard lot (100,000 units) at 1.0800, then closes the position when the rate rises to 1.0900. The profit calculation is as follows:

Profit = (1.0900 - 1.0800) × 100,000 = 1,000 USD

A small fluctuation of 100 pips can generate significant returns, illustrating the leverage amplification effect in forex trading.

Comparison of Three Mainstream Currency Investment Methods

Bank Foreign Currency Fixed Deposit: The Lowest Risk Option

This is the simplest and lowest-risk way to participate in forex. Investors only need to open a foreign currency account at a bank, exchange at the posted rate, and deposit for a fixed term to earn interest. USD fixed deposits are popular due to relatively high interest rates and broad usage.

The advantage of fixed deposits is high safety, but the disadvantages are also clear: (1) limited liquidity (early withdrawal incurs interest penalties), (2) inability to short sell flexibly, (3) higher transaction costs (bank buy-sell spreads typically range from 0.3% to 0.47%). If the goal is to profit from exchange rate differences rather than interest, fixed deposits are not ideal.

Foreign Currency Funds: Moderate-Risk Portfolio Strategy

These products combine foreign currencies with investment targets of specific countries (usually bonds or stocks). Investors can profit from both exchange rate fluctuations and the appreciation of the underlying assets, achieving “dual returns.”

For example, purchasing a Japanese yen-denominated stock fund allows investors to gain from yen appreciation and stock price increases in Japan. This approach suits medium-term investors optimistic about a country’s economic outlook.

Forex Margin Trading: High Returns with High Risks

This is the most flexible but riskiest trading method. Investors only need to pay a certain margin to leverage large positions, with leverage ratios ranging from dozens to hundreds times.

Advantages include: extremely low transaction costs (spreads can be below 0.01%, no commission), T+0 two-way trading (buy or sell at any time), and 24-hour operation. However, high leverage means small market movements can quickly wipe out capital, so risk management is critical.

Five Practical Trading Strategies

Range Trading: Finding Opportunities in Volatility

When exchange rates repeatedly fluctuate within a certain range, traders can buy near support levels and sell near resistance levels. This strategy requires precise identification of key points and the use of technical indicators like RSI, CCI, etc., for confirmation.

Main risk: If the range is broken, losses can escalate rapidly. Strict stop-loss settings are essential.

Trend Trading: Following the Momentum

When the forex price shows a clear upward or downward trend, traders should follow the trend direction. This strategy is typically suitable for medium to long-term trading, spanning from several weeks to months.

A classic example is EUR/USD from May 2021 to October 2022. Due to aggressive Fed rate hikes and the European Central Bank’s inaction, the US dollar appreciated sharply, causing the euro to decline. Investors who identified and followed this trend profited significantly.

Key insight: Once a trend is established, it tends to persist. Setting reasonable stop-loss and take-profit levels ensures a positive risk-reward ratio.

Day Trading: Capturing Short-Term Fluctuations

For investors preferring short-term operations, day trading focuses on market volatility driven by news. Key events like Fed meetings, CPI releases, and central bank policy adjustments often trigger intense swings.

Successful day traders closely monitor economic calendars and quickly enter and exit positions around these events, usually completing trades within 1-2 days.

Core tip: Make quick decisions, close positions timely, and avoid letting short-term trades turn into long-term holdings that could lead to larger floating losses.

Swing Trading: Combining Technical and Fundamental Analysis

This strategy lies between day trading and trend trading. Traders use both technical analysis (to find volatile assets) and fundamental analysis (to catch trigger points), focusing on four key signals: upward breakout, downward breakdown, trend reversal, and retracement.

On January 15, 2015, the Swiss National Bank announced the removal of the EUR/CHF 1.2000 floor, triggering the “Swiss franc black swan” event. Swing traders who anticipated this event gained huge opportunities.

Core principle: Larger volatility offers more opportunities but also higher risks. Take profits when the market moves favorably; avoid greed.

Position Trading: Long-Term Holding Strategy

Suitable for investors who prefer not to trade frequently. This approach is based on macroeconomic factors, historical trends, and long-term policy directions, with holding periods of several months or longer.

The key is to enter at lower cost levels. For example, if expecting the USD to weaken long-term due to US recession, an investor might establish a short position near the USD index’s 10-year high of 114 to participate in the long-term trend at a lower cost.

Core principle: Lock in the long-term direction of the exchange rate, find optimal entry points within volatility cycles, and tolerate short-term noise.

Best Timing for Buying and Selling Currencies

Bank Channel Trading Hours

Investors trading through banks are limited to banking hours, generally from 9:00 am to 3:30 pm. Banks are closed on weekends and holidays, so trading is not possible then.

24-Hour Forex Margin Trading

Compared to banks’ operating hours, forex margin trading operates 24/5 because it is not centralized on a single exchange. The main trading sessions are:

Sydney session (GMT 9 pm – 6 am) Tokyo session (GMT 11 pm – 8 am) London session (GMT 7 am – 4 pm) New York session (GMT 1 pm – 10 pm)

Taiwan investors need to add 8 hours when converting times. For example, London opens at 3 pm GMT, which is 11 am Taiwan time. Due to overlaps between sessions, trading can be conducted 24 hours from Monday to Friday.

The highest trading volume occurs during the overlap of London and New York sessions, with the narrowest spreads and highest liquidity, ideal for large trades.

Creating a Personalized Investment Plan

There is no absolute “best” method for currency investment; the key is matching the approach to your own conditions:

• Seeking stable returns: Bank fixed deposits are preferred, but balance interest rate trends and exchange rate risks.
• Looking for diversified returns: Currency funds combine exchange rate differences with asset growth, suitable for medium-term investors.
• Maximizing profits: Margin trading offers maximum flexibility but requires risk management skills and market analysis.

Regardless of the method chosen, success depends on in-depth market research. Through continuous learning, simulation practice, and small real trades to accumulate experience, investors can ultimately find a trading rhythm and strategy that suits them. Opportunities in currency investment are everywhere; the key is to discover them with dedication.