Mr

Category: Finance, Currency Trading.

For a currency deal you need a buyer and a seller.

Let us take a Mr. As soon as they do a trade, there will be a winner and a loser. Brown and a Mr Smith both residing in the U. They have enough cash funds on deposit with which they wish to trade. K. thus their home currency being Sterling. They will not need the money urgently, and can afford to wait for a substantial time should they be unlucky enough to hold a currency that might begin to depreciate. So, let us assume Mr.

Both are ducking and diving, happy to work on a small profit. Brown bought dollars. Mr. To start with, the dollar appreciated against the euro and so he sold his dollars. Brown made a profit, probably a small one, but nevertheless a profit. On the other hand, Mr.

He cashed in the profit he made, and he placed the balance of euros now held, on deposit to earn him interest. Smith who bought euros is making a loss. He decides to hold on to the euros hoping they will appreciate, and waits. However, at this stage he is only making a loss on paper, because he has not sold his euros as yet. As it happens, the euro gains in value, and actually Mr Smith is now ahead. This makes Mr. He waits a little longer to see if the euro will appreciate further, and there is another move up.

Smith decide to take a profit and he sells his euros. But the currency market never sleeps and money values fluctuate all the time. He cashes in his profit and the balance of the dollars he is holding, is placed on deposit to earn him interest. Thus, from minute one of depositing their money, either Mr. Smith will see their euros or dollars in constant action, destined to go up or down in value. Brown or Mr.

Again one of them will see his currency go up or down. Mr. Because their home currency is GBP into which they eventually want to return, they are also watching the position of Sterling in relation to the two currencies they are holding. Smith, who is in dollars, notices that Sterling is suddenly taking a heavy fall. Of course, if his dollar should appreciate and the Sterling slip further, he would sing all the way to the bank that much quicker. He is now interested for Sterling go down more and more, because he can see his way out of trouble by changing his depreciated dollars into a possibly even more depreciating Sterling.

It can be seen that it was not just a race between the dollar and the euro, but that due to a big wave, a third currency came suddenly into play throwing a lifeline to Mr. Unexpected events are detrimental to some, but beneficial to others. Smith. Often, it is thus, taking little profits possible to duck and dive especially if one is clever enough to notice when these small waves tend to occur, and therefore accumulate some nice money. All of a sudden it is not little waves, but huge waves that come. Of course abnormal conditions can arrive, as we have seen lately.

One extra large unexpected wave can do the damage. Brown or Mr. It is then, that the gain or loss to Mr. Smith can be heavy, wiping out swiftly any profits which one or the other might have accumulated over a lengthy period of ducking and diving. Since it can take a longish time for the loser to get out of trouble before the cycle turns, he has to be prepared for it. Naturally the lucky man holding the right currency is extremely pleased at that point.

For this reason, it is vital not to make investments of this kind with borrowed money, but only with money one can spare. When conditions are very volatile, it is dangerous but can be profitable. To recoup in due course, one must be patient ad not be upset I having to wait. Not everybody dares to enter that arena. In the currency game anything can happen, and it does. At the moment, the gentle opportunities of rocking up and down are hard to find, a lot depending, but not impossible on which currency one is holding. It is strange, but when you desperately need to win, it will seldom happen.

If you keep your head you can have plenty going for you in the foreign currency trading. The time one wins, is when one is not desperate to win. The key is to play with your own money and not with borrowed money because you cannot be sure what will happen and when. Sometimes a big wave can slow you down or help you, but if you are ready for the worst, the odds are you will survive and make money. There are chances of getting out of trouble when things go wrong if you have the time to wait. Impatient willy- nilly investors in this game do not last long.

Patient ones can get out of trouble if under pressure, and fight on with good chances to do well in the long run.

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