I always assumed that you needed to use an online dealer/broker if you wanted to make money through Forex (foreign exchange market).
But then I came across this webpage:
http://www.ehow.com/how_4928810_money-foreign-exchange.html
That basically says to exchange currency at a bank yourself, in person. I just want to know why this wouldn’t work. Obviously you wouldn’t have the benefit of leverage, but this would also minimize the risk.
For one thing, there’s no dealer to automatically cancel your existing trade in case you start to lose more money than you can fund, so you could wait for the currency to rise in value again before trading.
Also, you wouldn’t have to lose out on the spread that the dealer makes a profit from.
But what about the fees that banks charge for currency exchange? And is a bank going to be the most economically-efficient place that you could go in order to exchange currency?
Could you actually start to make significant profits through forex by exchanging money yourself through a bank or somewhere else where you could exchange one country’s currency for another’s … instead of going through an online broker?
It can be done, but…. You couldn’t "trade" with any degree of frequency because the spread is beyond awful, maybe as wide as 200 pips fir EUR-USD.
Some banks outside of US allow you to keep money in a currency of your choice and you can switch it every so often. This is, for all practical purposes, longer term trading.
As far as leverage goes, you don’t have to use it with your forex broker and still do good. Read this.
July 25th, 2010 at 10:06 pm
You have somewhat the right idea, however here is the problem. I personally buy Canadian dollars at my bank. I exchange my US currency for Canadian dollars as a hedge only, not to make money. Usually the bank charges a few cents extra per dollar above the exchange rate. My bank only exchanges Canadian currency. They wont do any other type so its up to the bank as to what they will exchange. Because I live in Alaska our banks are used to Canadian currency as you must travel through Canada to drive to Alaska.
I currently have $5200 Canadian dollars in my safe and add to it from time to time. I bought most of it when the Canadian dollar was around $.78 US. Today its about $.90 US. so ive gained some in the last 12 months.
When you sell back they also don’t give you the best rate but here is the funny thing about it. The banks here in Alaska bought all the Canadian currency last summer when the Canadian dollar was at its peak. I bought it from the Alaskan banks when the Canadian dollar fell last fall against the US dollar. So in effect the banks willingly sold me their foreign currency reserves at a loss.
Best part is doing it the way I do is when I exchange it back for US dollars its non reportable to the IRS. Its a physical currency exchange and not a market trade. Thus its exempt from taxes.
References :
July 25th, 2010 at 10:54 pm
There is a spread just ask them the rate to buy then ask the rate to sell back. A round trip could cost you 3-4%. If you lose money you still have to pay the spread, making losing money real easy and making money extremly hard.
References :
July 25th, 2010 at 11:15 pm
It can be done, but…. You couldn’t "trade" with any degree of frequency because the spread is beyond awful, maybe as wide as 200 pips fir EUR-USD.
Some banks outside of US allow you to keep money in a currency of your choice and you can switch it every so often. This is, for all practical purposes, longer term trading.
As far as leverage goes, you don’t have to use it with your forex broker and still do good. Read this.
References :
http://fxmadness.com/2009/04/11/general/trading-forex-without-much-leverage/