Currency trading

[Freedom]

Hello bearers of all sorts of knowledge.

Last week someone at work was talking about paying thousands of dollars for a course in currency trading.

I have been following a thread on options trading - so I did a search on Currency trading. This does not seem to have been discussed much on this Forum

Any knowledge or expertise out there that people are willing to share?

 

[Flex]

I have never completed any currency course, but I have all my investment property loans in another currency. The benefit has been interest rates one third of the current Aussie rates, combined with the recent rise of the Aussie $ effectively reducing my principal by 20%. Add to that the capital increases of the last couple of years and it's been spectacular.

The topic has been discussed on the forum previously so perhaps a search may help you out.

There are huge ** RISKS ** associated with lending involving currecy trading, it is similar to margin lending, if your currency falls by 5% then you must provide more security. There were many farmers a decade or so ago who lost everything with foreign loans offered by the banks. The interest rates were low but the currency plummeted.

It has worked for me, but that means as always, my gain is someone elses loss and I would hate to have lost as much as I have gained. I have always kept plenty of cash aside to bail myself out if required. (In other words not be forced to sell, just to repay a loan)

As for simply trading, the risk is no different to trading anything, just make sure your crystal ball is better than the next persons.

Kind regards

Flex

 

[Tony]

Hi Flex,
The foreign loans sounds interesting & i understand that there is some danger attached to doing this. Having said that i would love more info on this.

Regards Tony

 

[abcdiamond]

Flex will obviously be able to give a better answer on this, as he is currently doing it, and I have only accidentally been involved in it.

You can borrow in US $ at about 2% interest rate (or less), BUT you have to repay in US$, and watch the curreny rates carefully.

You can also borrow in UK pounds at about 4.4%:

Regarding the currency rates
an actual example is:
if you had borrowed GBP 100,00 on 1/1/2003 you would have got $287,724 at the rate of that day.

if you repaid the loan today at todays rate, you would only need $241,341.86 to repay the full GBP100,000.

However, IF the exchange rates had gone the other way, the figures would be the other way round, and it could have cost you $341,000 to repay the orignal.

This is an area to be wary of, but if you can judge what the rates are going to do, then it can be very worthwhile.

I made $60k on a currency transaction this year, (purely on timing of the deal) but I lost about $40k in previous years. Its the same with everything, Life is a gamble !!

 

[Tony]

Guys,
Gotta say this topic has sparked my interest! I understand the potential risk involved with foreign based loans, but there must be some way to hedge yourself against that risk. Maybe use some of the interest savings to trade the same currencies as the loan, but taking the opposite position to the loan. Wonder if this will work?
Anyway, how does one go about taking such a loan?

With thanks Tony

 

[abcdiamond]

I'm not sure if all the banks do them, but the HSBC does.

http://www.hsbc.com.au

 

[MarkB]

Originally posted by Tony
Anyway, how does one go about taking such a loan?

With great caution.

Seek professional advice (such as HSBC), but accept that even professionals can make monumental mistakes.

The AOFM were the joke of the Commonwealth Government a couple of years back and they

http://www.aofm.gov.au/

got squarely roasted by the Senate Economics Committee for unrealised losses which at one stage tipped $5 billion owing to a miscalculation of the AUD/USD exchange rate.

I know people who work in the AOFM, in fact, I know the AOFM's ex CEO and would cringe when I saw him in front of Senator Conroy getting grilled (the ex CEO is a really nice guy, but then so is Conroy - he was just doing his job)

Trust me, the people who work in the AOFM are professionals and are very experienced.

Similiarly, I have heard Alan Oster (NAB Chief Economist) and Professor Bob Gregory (ANU / ex RBA Board member) lament at the error of their AUD forecasts.

Indirectly I have heard stories of Dr Chris Caton (BT's Chief Economist) expressing like sentiments.

It is nice to be able to follow cheap interest rates around the world (like 2% in the US) but, IMHO, the uncertainty that such a loan creates on your balance sheet is so great that what interest you do save (4% or thereabouts) seems negligible.

Measure twice, cut once.

MB

 

[abcdiamond]

I will second MB364 on the comment

the uncertainty that such a loan creates on your balance sheet is so great


If the thought of an interest rate change in this country worries you, consider the worry of having to watch the currency rates aswell.

 

[XBenX]

Just ask all those bankrupt farmers about foreign currency loans.

 

[stirling]

Last week someone at work was talking about paying thousands of dollars for a course in currency trading.?

Sounds like futures trading, as in share futures, index futures, pork belly's, swiss francs. You put up 1% and trading is usually short term 1 or 2 days. Currency futures are particulatly volitile as everyone is trying to second guess the other traders. You could use them to hedge a loan but they are more likely to be used to hedge a overseas payment due in a week or so. But most used by traders with different opinions on the market.

It is a zero sum game with 15% winning what the other 85% lose. You just have to make sure you are in the top 15%.

Stirling

 

[pennyk]

I got this spam today...

Secret Lucrative Unknown Business

Make All the Money you want without MLM, Gurus, or selling anything!

You would be a complete idiot not to get started in the Currency
Exchange Business.

I know some of you probably think that "idiot" is a strong word
but that is how I feel.

Remember I have reviewed business opportunities for a long time
and I can tell you that I wish I had started this business five
years ago. I would be making $50,000+ a week and not have to talk
to anyone. I do like teaching people how to make money but
$200,000 a month is nothing to sneeze at. Especially when it
requires so little time.

What most of you are asking right now is...
Currency Exchange.
What the heck is it?

Stop Messing around go here to find out in 2 minutes how
you can retire in 4 months.

If you're desperate, I'm happy to post the web address given, but I didn't want to validate their scheme...

AHhh, I can imagine all the idiots going and spending all their money making currency transactions, without any clue of what to do!!

 

[ggumpshots]

What causes a currency to rise and fall?
CurRent account deficits in Europe, Asia America etc/ govt policies in Europe Asia America etc/ oil prices/ changes of govts /natAUAL DISASTERS/ over or under reaction of the markets in Europe Asia America etc
When you have masterd that , then mastered the interaction betwen those factors sit back and phantom trade for 6 months.
If it was so easy Warren Buffet would be up to his neck in it.
I note he has transferred a lot of his funds to other currencies but he is not actively trading ie on a daily or weekly basis.
Trading currency can be very lucrative but it must be one of the hardest investment areas to master.......
Investing in another currency is less risky but still high risk,and nerve racking when the market goes against you.

Also if there are so few currency courses around you should ask yourself ........why?

Once you have mastered currency trading there is money to me made, big time but it requires constant monitoring.
Big time losses are common or more correctly the norm in my view
The Book New Market Wizards gives some insight

Second question.........How brave are you?
Have a look at the Aussie dollar over the last 2 years and tell me where it will be in 2 years!
good luck