Lots of talk about the currency markets these days. Between Turkey's tanking Lira to China and Brexit, to, of course, our dollar, it seems currency talk makes the headlines daily.

So what does it mean -- and of course -- how do you make money off of it all?

Currencies all trade on the Foreign Exchange Market - or the FOREX -- which actually is a 24-hour market since currencies constantly are traded around the world.

But a big  difference from our equities market to the currency world is that currencies trade in pairs.

So if you want to make a bet on, let's say, the dollar, you have to also bet that a different currency, like maybe the British pound is going to fall. 

The trade looks like this: USD/GBP

Unlike if you just acquire shares of, say Amazon (AMZN) .  You just buy them and hope they keep going up.

With currencies, you have to buy both. And make a bet that one is going up, while the other is going down.

So now how do you make money on all this? What affects the currency prices?

  • Trade for starters. If the demand for a country's good and services goes up - the demand for its currency probably will too
  • Inflation can also move currency prices - mainly inflation up - currency down
  • Inflation could also lead to increase in interest rates - to curb the inflation - and that in turn can move those currency prices back up -
  • The political landscape of a country can make or break a currency. Riots in the streets? Government's going broke. You can bet the currency is gonna tank.

You following all this? I know -- these markets are super fast, super confusing - and not for the faint of heart. So be careful and use stop losses when making these trades.

Whew!

And for more on all of this follow me @tracybyrnes.

 

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