FOREX vs FUTURES vs Currency ETFs vs Retail Forex vs Forex CFD vs Forex Spread Bet [ With which one should I trade ]
I am new to Forex trading and found out about other way's you can trade. I got really confused when looking in to all these different way's of trading forex. Which one out of these should I use and why ?
Paying on Your Travels Abroad - Forex Card vs Credit Card vs Fiat Currency vs Bank Account
Been researching a little on the best way to pay when traveling abroad. Here's what I found. Eager to know what this sub thinks. -- When you travel outside India, there are restrictions in how you can pay. The biggest concern is usually forex i.e. foreign exchange differences. As of 29 June 2022, it takes roughly 57 INR to make 1 SGD if I do that transaction via HDFC Bank. However, if I were to convert in my local city airport, the figure would be different. The same applies if I choose to do in Changi Airport, say, today itself. Not to mention the conversion fee in both latter cases. This makes understanding the best way pay during your international travels a critical discussion. Especially if you are like me who is not a fan of paying heavy markups. I recently paid over 8K INR as markup fee to HDFC Bank because of an agent mess-up. Thankfully, there are ways to limit the overhead when you convert currencies. Do note that it is impossible to avoid overhead. If you see foreign exchange, get ready to pay extra. -- There are basically 3 common ways to make payments abroad:
Get a forex card from the country where you are a citizen
Use a credit card with international payments switched on
Convert currencies locally and carry fiat money during travel
There is a 4th method that involves creating a bank account. This is not feasible if you travel as a tourist. Hence, it is out of the scope of this writeup.
Forex Card Basics for Travels
The idea is to refill a card with money where the currency exchange rate is fixed. If you buy a forex card today and fill it with INR 57k, you'll get about SGD 1K in that card. The biggest advantage is that the exchange rate is locked after you fill it. The card will still have SGD 1K when I travel to Singapore 6 months later. There are single-currency and multi-currency forex cards, which are self-explanatory. The latter is a better option in most cases. However, if you only plan to travel to Phillipines because Liu Sin Ma ChooChoo from Facebook - your online flame - lives there, go ahead with an SIF. Other benefits include not having to carry cash, fraud protection, electronic payment, etc. Forex cards can be bought for free sometimes. HDFC charges 500++ for a new forex card and then charges 75++ every time you refill it. Electronic payments (say, when you pay for a hotel abroad), there is usually no charge. I say usually because the hotel should accept the currencies available in your FX card. Otherwise, you'll be charged cross-currency fees, which if I could ELI5, I would have been effing Raghuram Rajan. Some banks seem to add a markup even when you pay using a forex card. However, this is not exactly black and white. I have found that banks usually charge a hidden fee even for electronic payments. Compare this with a Niyo Global FX that markets itself with 0% joining and markup fee. Due diligence is required here. In any case, prefer a reputable non-bank if you opt for FX card. This sub's endorsement for forex from early in 2022 - https://www.reddit.com/IndiaInvestments/comments/sesv1o/im_moving_to_uk_next_month_for_my_studied_and_i/
Credit Card as a Payment Method Abroad?
If you have enabled international transactions on your credit card (which you shouldn't generally as frauds are attracted to them), you can pay through it during your travels. The only major drawback is the currency conversion markup fee levied by your CC bank. This can range from 1%++ to 3.5%++ which can be a lot if you are staying at the Ritz. Remember the 8K markup I paid? It was heartbreaking. I would have considered buying Reddit Premium for myself and then dropped the plan later. I recommend CCs (VISA and Mastercard; Diners Club is a small club) as backup plans unless you have OneCard that offers 1% markup. The drawback here is that credit limits are laughable. BOB Financial, you unhelpful itch! Useful thread from 2019 on forex vs credit debate - https://www.reddit.com/IndiaInvestments/comments/ap3w0t/forex_vs_credit_card/
Cash
Simply convert INR to any currency and carry it. However, we're in 2022, and a lot of global merchants don't accept it anymore. Few friends who are in Scotland right now said even local transit system insisted on card payment. They had taken 100K INR in cash and didn't use even half of it. Converting cash in India has a hidden conversion fee whether you did it via an exchange agency or a travel portal. No one will tell you the fee as it is absorbed in the converted amount. I converted 20K INR into USD in late 2021 and saw that the calculation was 1 USD = 71 INR. Not a rip off but you get the idea. Drawback is exchange variations and the need to handle cash during the trip. I recommend some cash for local expenses. Say, you want to tip your gigolo when in Thailand? Go right ahead and slip that crunchy on his chest vest. --
Bottom Line
The comparison between forex and credit cards is consequential. Both are good but I feel forex cards are slightly better as they also allow ATM withdrawals for a small fee. For instance, HDFC MMT card charges $2 for every USD withdrawal. That's a steal when compared to a withdrawal made via a CC. What do I do? If you want to know, I go the extra mile. I have 2 forex cards so far, one a HDFC multi-currency one and the other a Mastercard exclusive gifted my previous employer. I applied for a Niyo Global yesterday. I have 4 CCs with decent limits + OneCard with 1% markup. All these are different charge back brands, so they all act as good buffer. If Discover doesn't work, I'll use MC and then never visit that merchant again. I also convert some cash to the tune of 20K INR just to keep them in me and my partner's common bag and then pretend to not notice when a few big notes out of it travels its way from a hand or two to a fully waxed thorax portion beneath a fishnet. This may read tricky to some who haven't travelled and paid abroad before. So, the best way to do this is to learn for experience and use this guide as a "Haan, u/rhoul ne bola tha!"
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Living in Switzerland, planning to move to EU vs ETF base currency
Hello everyone, I realized just last week that Degiro allows withdrawing funds only in the base currency of the account. This got me wondering if it breaks my long-term plan. In my case, my base currency is CHF as I work and live in Switzerland. In around 3-5 years I plan to move to another EU country where the base currency is EUR. Then, I will want to close most of the investment and buy an apartment. Now I'm wondering if I'm doing something stupid - what I do is: I invest in ETFs denominated in EUR - EUCHF rate is great now for my case so by investing in ETF denominated in EUR I'm buying also Euros. I hoped to sell the ETFs in a couple of years and buy an apartment in my destination country (in EUR). But now comes the problem: as Degiro allows withdrawals only in CHF, I have to sell the ETF in EUR and convert it (either automatically or manually) to CHF inside Degiro. Then transfer those funds out, then flip the money again to EUR. This seems a bit weird and I lose (?) on spread a bit. Are there better solutions? I came up with basically those options:
It's not a big deal and I continue doing things this way.
I should open an account in EUR (either Degiro or with someone else)
I should try to buy the ETFs in CHF (but then the choice is very limited) to avoid at least one of the conversions.
Another a bit annoying issue is that my portfolio balance as shown by Degiro is affected by the exchange rate which I don't care as I don't have plans related to using CHF. If after buying a EUR ETF, EUCHF goes down, I'm potentially negative on the investment as it calculates everything according to the base currency. This is not a big deal since I track the returns myself in Excel. I would appreciate any advice!
Cheap/Discount EU-broker mainly for Irish ETFs and Forex currency trading?
Looking for cheap EU-broker mainly for Irish ETFs and Forex currency trading. Must have low fees/spreads/monthly costs, be solid and be well regulated and well protected. IBKR and offshots are out, trading212 looks good but ain't they use basic tradingview platform for trades? Does DEGIRO allow Forex? And what else beside those I've mentioned?
Requirement of Hedged ETF (VGAD vs VGS) to reduce Currency Risk
Hi, I have recently spent a lot of time reading and researching to finalise my FIRE approach, primarily which ETF’s and their weighting. Eli from Passive Investing Australia talks about having a hedged global ETF (such as VGAD) to protect from currency risk. Reading into this more there were conflicting views on whether this would make any difference long term. After extensive consideration I boiled my 2 potential equity portfolios down to 30/70% – VAS/VGS or 30/20/50% – VAS/VGAD/VGS. Both provide 30/70% exposure to Aus/Global but the inclusion of VGAD will protect against currency risk. (Note I considered whether to go VTS/VEU or VGS for global exposure but decided on VGS for being domiciled in Aus as well as reducing number of finds, happy to hear thoughts on this as well). Also note I am 26 years old and goal is to invest for 20+ years Questions, - If long term investing, does this mitigate the issue of currency risk somewhat compared to short / medium term? - I drew chart of VGS, VGAD and AUD:USD. If AUD falls, the value of VGAD also fell but VGS fell as well (opposite would also be true if AUD rises). If the point of VGAD is to protect from impacts of currency fluctuations, what benefit is this actually giving me if it moves drastically if the AUD moves? - In what scenario will holding VGAD instead of VGS be beneficial other than is AUD rises? The whole point of this passive investing is to not try and out smart the market so it seems like holding VGAD would be betting on AUD getting stronger? - If I move to having 10% bonds in my portfolio (another question all together), could this be a case to remove the need for VGAD? Other considerations, - Is the potential protection worth the extra hassle to hold another ETF inc for rebalancing? - Impact of higher MER of 0.03% (0.18% vs 0.21%) is insignificant I believe. Thank you in advance!
I was wondering if any of you have tried trading options on currency ETFs like FXE, FXY, FXC, etc? I notice they have pretty low volume so was wondering if there are any alternative ways to trade options on currencies. I know we have Forex and Currency futures but I wanted to avoid those derivatives because they're too volatile and leveraged. Also you run the risk of getting stopped out too soon. Thank you.
What happens to stocks/ETFs that are denominated in a specific currency, if said currency goes bust (hyperinflates or dies in some other non controlled way)?
For example, people saving/investing for retirement in stocks/ETFs on European exchanges. Securities are denominated in €, but what if € doesn’t survive the 10/20/30/40y until their retirement? Also:
Is there a difference between stocks and ETFs? My layman thinking is, a stock is a share, until the company survives, you can sell the share in another currency. Is this true? What about ETFs?
What if the specific ETF is € only and has no “counterparty” in another currency? Are you entitled to a % of the ETFs shares/stocks, or does your investment “die” together with the ETF if the currency goes bust?
What happens to an ETF if the currency it is denominated in goes bust (hyperinflates or dies off in another uncontrolled way)?
For example, people saving/investing for retirement in ETFs on European exchanges. Securities are denominated in €, but what if € doesn’t survive the 10/20/30/40y until their retirement? Also:
Is there a difference between stocks and ETFs? My layman thinking is, a stock is a share, until the company survives, you can sell the share in another currency. Is this true? What about ETFs?
What if the specific ETF is € only and has no “counterparty” in another currency? Are you entitled to a % of the ETFs shares/stocks, or does your investment “die” together with the ETF if the currency goes bust?
Candian Crypto ETF's vs. owning the actual currency?
I don't hold any crypto as I'm unsure of how I feel about it this point. But I'd like to have some exposure in my portfolio. I'm slowly learning about Canadian Crypto ETF's such as QBTC or BTCC. It's not like investing in a company though in terms of learning about company debt and leadership and so I'm a bit unsure of how to understand enough to come to my own conclusions on values. I like that an ETF gives me exposure in CAD, but what's the different between investing in an ETF and actually purchasing the currency? Thanks friends!
Does currency devaluation risk exist while trading forex?
I mean ,for a european forex trader , that fund his account in euros. if they trade long the pair USD/CAD, even if the trade goes well ,a strengthening EUR vs the USD could take a bite off their USD/CAD profits, right?
Hello passive investors! I had interesting shower thought - what would hypothetically happen if the currency in which the etf is traded collapsed ? I mean inflated with the really high rate? I know that the trading currency really doesnt matter, the important is currency of underlying assets, but anyway imagine just hypothetically if you bought etf tracking S&p 500 in EUR and the EUUSD pair went brutally south with hyperinflating Euro. Could the exchange just switch to different currency and adjust the shares of etf accordingly? I absolutely dont think this could happen with Eur, but inagine buying etfs traded in turkish liras or bolivars. I know it doesnt matter, but still I feel safer buying etfs traded in USD.
What is Forex Trading? How Do Currency Markets Work?
With a total daily average turnover that is reported to be higher than $6 trillion, the foreign exchange market (Forex) exchange is one of the most popular online platforms for trading Forex anywhere in the world. The foreign exchange market does not have a central location or exchange, and it is open all day and night, beginning Sunday evening and continuing through Friday evening. You can learn more about the hours that the forex market is open here. As individuals, companies, and organizations conduct business across international borders and strive to profit from varying exchange rates, a wide variety of different currencies are continually being traded. In this article, we will understand how traders trade forex online to get profit from the most traded currency pairs and how this entire market functions. Source: Inveslo.com
Who are the key players?
The foreign currency market is largely used by central banks, commercial banks, businesses, and individual dealers. As part of your fundamental study, it is useful to comprehend how each of these market participants interacts with the foreign exchange market. Central banks are in charge of a country’s money supply, interest rates, and currency. When central banks do something, it’s usually to keep the currency of the country stable. Large quantities of currency are traded on the interbank market by retail banks. On behalf of huge organisations and also for their accounts, banks exchange currencies with one another. Compared to banks and institutions, retail forex traders conduct a significantly smaller volume of transactions. Retail forex traders seek to profit from market fluctuations by utilising both technical and fundamental analysis.
What is Forex Trading?
Foreign exchange trading is sometimes referred to as forex trading and FX trading. It gives the possibility to speculate on FX market price variations. The objective of foreign exchange trading is to predict whether one currency’s value will rise or fall compared to another. Due to continuous news releases, a forex trader may meet multiple trading chances each day. Traders use Fx trading platforms and take advantage of this by being particularly responsive to market news releases and trading depending on their perceptions of the market mood. FX is an industry word condensed from forex that is often used in place of forex. In addition, forex is an acronym for foreign exchange.
How Does Forex Trading Work?
Forex is usually traded in pairs of currencies, such as GBP/USD (sterling v US dollar). You speculate on whether the value of one country’s currency will grow or decline relative to that of another country’s currency, and you take a position accordingly. The first currency (GBP) in the GBP/USD currency pair is known as the ‘base currency,’ while the second currency (USD) is known as the ‘counter currency. In forex trading, you wager on whether the value of the base currency will grow or decline relative to the counter currency. Therefore, with GBP/USD, if you believe that GBP would appreciate versus USD, you would purchase the currency pair. Alternatively, if you believe that GBP will decline relative to USD (or that USD will increase relative to GBP), you short-sell the currency pair. Learn which currency pairs are the most actively traded on the forex market by reading our comprehensive guide.
How Trading is Done in the Forex Market
There are several methods to trade on the foreign exchangemarket, all of which adhere to the premise of buying and selling currencies concurrently using an Fx trading platform. If you feel that an FX ‘base currency’ will appreciate relative to the ‘counter currency,’ you may seek to ‘go long’ (purchase) that currency pair. If you anticipate that the reverse will occur and the market will decline, you may opt to sell the currency pair. Historically, the forex market was traded via a forex broker. With the emergence of online trading organizations, you may take a position on forex price fluctuations using a spread betting or CFD trading account. Spread betting and CFD trading accounts both allow you to speculate on the price fluctuations of an underlying asset without really owning it. Derivative trading provides prospects for leveraged forex trading. As this may be a dangerous endeavor, forex traders often use hedging tactics to mitigate currency risk and ensuing losses. Bottomline Forex trading is a fast-paced and thrilling alternative, and some traders may limit their trading to this asset class alone. They may even opt to specialize in only a few specific currency pairs, devoting a significant amount of effort to comprehending the myriad economic and political aspects that influence particular currencies. Originally Published onMedium.com Source:https://medium.com/@nilanhassan7/what-is-forex-trading-how-do-currency-markets-work-6a1ee1dc948c
Which are the major currency pairs in Forex trading?
Currency pairs are good for trading. Depends on what type of trading you prefer. There are huge amounts of currency pairs, but the most famous are majors. Growing capital explains which are the top 7 currency pairs. Let's take a look: EUR /USD – is good for lazy intraday trading. This pair provides clear signals, but sometimes volatility is low. So on a calm day, detecting 30-50 pips is good. GBP/USD – have right intraday volatility, and this pair like swinging. This pair will give it if you want to experience the market the whole day and catch more profit. GBP will give you more time to worry about orders than EUR, but it can give better profit. USD/JPY and USD/CAD – are nearly the same as EUR and GBP, it’s feasible to trade them within a day and get a profit, but I usually operate these pairs for long-term trading, it gives extremely good signals on the highest time-frames. GBP/JPY and EUJPY – are more aggressive and these pairs can give profit more quicker than majors. it’s good for scalping and volatility is higher. EUGBP – good for those who like trading in corridors. It’s quite a lazy currency pair for intraday trading, but 20-30 pips, trading in the corridor, it gives. Actually, all pairs are the same: the chart is the same, activity is the same, and signals are the same. For example, today's pair stay in the corridor, tomorrow it will deliver a trend; today it gives 30 pips, tomorrow 130 pips… and it happens with any pair. The dissimilarity is – the name of the pair and the price. So choose any pair for trading, sit on it every day, trade it, and this pair will evolve into your best friend for earning money. Read more: Top Currency Pair To Look For In Forex Trading
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