The colorful wolf

October 1, 2009

Money

Filed under: Thoughts — randy @ 21:37

Recently my friends and I chanced upon a random topic related to money: the foreign currency exchange, and how to make money from it. Starting from a very simple concept: exchange rates fluctuate, so in the long term it should be possible to make money off it. Take JPY and EUR for example. When the JPY is high and the other is low, sell the JPY, and when the reverse happens, sell back the EUR. Sounds simple, doesn’t it? Just like the infamous roulette strategy where you always bet on red/black and double your bet every time you lose. Can’t lose, but the casino thought of it and included some tricks that prevent you from winning (zero and double zero, and a maximum limit on bets).

There seem to be tricks to money exchange too. Foreign currency exchange agencies that deal in actual money have very large margins on buying/selling. I’ve seen margins of about 20% in a quick search online. And all the websites that have information on this kind of thing immediately try to get you into Forex trading. Once you get started with that there’s no end to it, and you might as well spend the extra effort and play on the stock exchange market. It seems to be that there’s a lot of fine print to read, and a lot of things you need to be aware of before you can successfully trade currency like that. It seems like it will cost a lot of time too, which is exactly what I don’t want. I want to become rich while doing nothing.

Here’s a thought. Take a fair portion of the core currencies (USD,EUR,JPY,etc.), buy whatever currency is weak compared to the currency you have right now, and in three months, re-evaluate, and buy another weak currency. You can keep your eye open for sudden drops or rises of course, cause it’ll appear on the news or you’ll hear it from friends anyway. This should only require an absolute minimum of active effort. I think the trick is that you’ll eventually end up with a currency that doesn’t “get better” any more, and you’ll have to sell it at a loss. But based on the exchange rate fluctuations of the major currencies (which you can easily get from www.xe.com btw) it seems that there will always be a ‘lucky’ point where one major currency is very weak compared to the other.

I’m probably too lazy myself to follow through on this (I know, I even amaze myself sometimes), so I thought I’d post my musings here for other people to enjoy, particularly people more experienced in the world of Forex and stock trading. I figure that either smart people will read this and disprove my theory, or stupid people might read it and try it. Either way is interesting 😀

Unrelated: what you say!? NABE!

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