How Do You Make Money Trading Currency?

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To make money trading currency, understand what makes the currency for a country go up or down in value, and use data from financial magazines and software to help make decisions. Learn why investors want to be short on negative currency accounts and long on positive accounts with information from a financial consultant in this free video on currency trading and investing.

Part of the Video Series: Currency Trading Guide
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Video Transcript

So how do you make money trading currency? You have an idea, you think you know what you want to do, but how do you really want to do it? Well you have to go back to the fundamentals of what makes a currency goes up or down in value. Generally it's whether that company is taking in more cash than they're paying out. Sort of like your home. If you see your checking account steadily going down in value, you're not feeling very good and if you go to borrow money, you're going to pay a higher rate of interest whereas if the value of your checking account is consistently going up, well the banks are going to love you, they're going to want to lend you money at the lowest rate possible. Some countries are sort of the same. How do you get that data? Well again you can go back to Bloomberg to look for it, you can go to Reuters to look for it, but the easiest way is go to your bookstore and get The Economist, the magazine. If you go to your local bookstore and buy The Economist, it costs about 4 dollars, there's a table in the back of the magazine which comes out every two weeks that talks about whether that country is bringing in more money than it's spending or spending more money than it's bringing it. It's identified as the current account. If the current account is negative and in our way of thinking, you want to be short that currency. If the current account is positive, you want to be long that currency. An example, here in the United States our current account today is about 5% of GDP. That to me means that you probably want to remain short the US dollar against other currencies that have more money coming in. Who would that be? Well the Yen certainly and the Euro would be two examples and the Swiss Franc would be a third. So get The Economist, that's the best place to start. I am Roger Groh and the question is how do you make money trading currency.


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