Just a decade ago, if you wanted to venture into the largest, most liquid market in the world – the foreign currency market – your options were pretty limited.

First you had to be a savvy “online person” with one of those “really fast” DSL or cable Internet connections.

Then you had to open a special account with one of the few infant Forex firms of the day. Plus, there weren’t any decent charting packages, practice trading platforms or customer service desks we take for granted at Forex firms today.

Also, assuming you were successful in your trading, you would have spent a large part of those profits in fees. Back then, the Forex firms didn’t have the incentives they have now to offer the narrowest spreads (and therefore lowest fees) possible.

Basically, it was like jumping in the deep end of the pool blindfolded.

But again, that was 1999.

As technology has advanced over the last 10 years and the world embraced the Internet, demand for access to currency markets began to take off. And with that boom in demand, Forex firms, ETF providers and even the oldest stock exchange in the U.S. have all come forward to make currency investing and trading a much easier, cheaper and ultimately more profitable experience for your average Mom and Pop investor. Here’s just a quick glimpse at the new currency innovations of the 21st century…

The Currency Developments…and Three Easier Ways to Buy Currencies

Technically there is no physical exchange worldwide where currencies trade. There’s no trading floor where professional FX traders yell bid and ask quotes to each other across packed rooms somewhere in London or New York.

Still, financial innovation has found ways to make it easier for you to buy and sell currencies. For example…

Since 1999, Easier Forex Trading: Today Forex platforms are no longer few and far between like they were 10 years ago. Today you can sign on to the Forex platform of your choice. And because there are so many to choose from, they offer competing and very valuable services like practice accounts and tutorials that walk you through the trading process. More importantly, the increased competition has dramatically improved their bid/ask spreads making it even more profitable for you the individual.

Since 2005, Currency Exchange Traded Funds ETFs: Rydex Investments was the first to introduce a currency fund in late 2005. This allowed Forex enthusiasts to take advantage of currency moves without any special needs. You don’t need a margin account, special Forex account, or even any special training. It’s as easy and cheap as buying any other stock. Since then, WisdomTree, ProShares, PowerShares, and more ETF providers have introduced their own. Now you can buy over 25 different currency funds through various providers.

Since 2007, “Stock-like” Currency Options: The nation’s oldest exchange, the Philadelphia Stock Exchange (a.k.a. the Nasdaq OMX) introduced a new kind of currency option in mid-2007. They designed these currency options to mimic stock options as closely as possible. The theory was if you could buy regular stock puts and calls, you could buy these new currency options. Today, you can make long or short bets on 10 different currencies on the Nasdaq OMX with options. To buy them, all you need an options-approved stock account.

The Only Question Left: Are You a Currency Investor or Forex Trader?

Your in-house currency expert Ashish Advani addressed this question this past weekend, as they wrapped up the Offshore Advantage Academy in Los Cabos, Mexico.

Let’s listen in…

“If you’re looking to invest long-term, say 5-10 years, I recommend buying the currency outright. If you’re more of a short-term trader, consider currency options. And if you’re looking at an intermediate time frame of 1-3 years, ETFs are right up your alley. Typically the spot market takes more time and effort… and is best learned in the company of a professional.

Which does he prefer?

“There are better things to life than just foreign currencies – that’s why I play the options market,” he said. “I buy an option and get on with my life.”

“What’s so attractive about currency options?

“First, you have limited risk. You can’t lose more than the premium. Ashish doesn’t get into a trade without having a profit target in mind… so there’s no wishy-washy guessing about when to get-out. And perhaps best of all – options give you the ability to wait for your strategy to come true.”

“It takes about two or three minutes to put on a trade… You can get in for as little as $700 to $1,000 and can make these trades from any stock trading account… and get back to your life.”

To find out more about your own personal currency trading style, take FX University Daily’s special quiz here.

Good Currency Investing,
Kat Von Rohr, Editor
FX University Daily

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