Posts Tagged ‘forex’

A forex primer and some good educational videos

Monday, July 29th, 2013

Since I lived in Korea for 12 years, and since those 12 years were pretty much my entire adult life, until recently all my personal wealth was in Korean won (KRW).

While in Korea, I saw the won fluctuate between 900 KRW per 1 US dollar to about 1300 KRW to 1 USD. Obviously if I could consistently buy 1300 won per dollar and then buy dollars for 900 won, I’d make some money. If you’re not quite sure how the Forex market works, these educational Forex videos will take you from the very basics like what is Forex (think exchanging your currency for a foreign one when going on vacation).

The hard part is knowing when to buy and sell. When we were leaving Korea we wanted to turn some won into dollars. The exchange rate was about 1150. We exchanged about 75% of our money into dollars. A few months later, the exchange rate was 1050. We could have had thousands of dollars more had we waited. Now the excahnge rate is 1145. There’s lots of fluctuation here – lots of chances to make money, but also lots of chances to see things go the wrong way.

Now my experience trading currencies has always been with money I have, but, like you can with stocks, you can also trade currencies on margin. There’s a video for that too, in the link above, which explains how trading on margin is similar to buying a home with a mortgage – you use more money than you have in your account. With Forex, that means you can lose more money than you have in your account but you can also increase profits by making bigger trades that you could have otherwise.

In conclusion, the volatility of the currency market means you can do well for yourself – change is opportunity. But the market could always go against you – for example, every time the crazies in North Korea start talking about nuclear missiles, the Korean won suffers and my stress level increases.