There are two main ways for a private investor to speculate on the currency markets, says Lucy Humphreys in Shares. The first is to use "margin" to control a large amount of foreign currency. This means opening an account with a broker (try London Capital Forexor E*TRADE) and making a minimum required deposit (typically £3,000). This sum then allows you to control a much larger amount of foreign currency through "leverage rates" that vary from 50:1 to 100:1. At 50:1, for example, a £2,000 deposit allows the investor to invest £100,000 of funds into his or her chosen currencies.
Spread betters, by contrast, such as City Index, Cantor, and Finspreadsallow investors to bet on movements in forex rates. Thus buying the £/$ rate at $1.8200 in early February and selling it at $1.8900 per pound in late February would have netted a £700 profit at £1 per point.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
'We face a £6m inheritance tax bill under Reeves's changes – it's sheer terror'Thousands of families fear they’ll have no option but to look at selling their firms in a fire sale to pay inheritance tax bills, due to Rachel Reeves’s changes to business property relief
-
Millions of over 50s fear pension investment risk – how should you position your portfolio?To de-risk or not to de-risk, that is the question. Act too late and you could face irreversible losses. Move too early and miss out on significant gains that could transform your retirement.
