You know about money-changers right? You go on holiday, and they change currencies for you. The ones you commonly see in Changi Airport are usually run by banks like RHB Bank & UOB Bank, and outside of that, there are many privately run money-changer businesses outside in the city and heartlands. But did you know that all money-changers deal with something called “Foreign Exchange” which is the buying and selling of currencies, and this is really what “Forex” stands for! In the next moment, you are going to discover the best-kept secrets these Forex businesses have been keeping…
What exactly does that board for “Rates of exchange” mean?
You may have noticed something that looks like this as you are going to change your money:
And I’m sure you wonder what it means if you didn’t already know… Here’s what those numbers mean:
All the buy and sell numbers are in Singapore Dollars (SGD), and the unit of currency is the amount you will be trading for corresponding to the dealer’s buying or selling prices. Sounds complicated? For example, you will be able to change 1.2818 SGD for 1 USD (Dealer’s selling price), and in order to change 1 USD to SGD, you will get 1.2607 SGD in return (Dealer’s buying price)
Of course, it doesn’t make sense to do that because as you can see, you will be losing 0.0211 SGD every time you exchange your money on the spot at the same dealer. But the more interesting part is that dealers are actually profiting 0.0211 SGD every time they trade in between these two currencies!
You may think this is quite sneaky of the dealer but every business needs a method of monetisation or else no one would do it… But did you know, it’s possible for the everyday person like you to profit the same way without a brick and mortar store, completely online, and on the spot too! And this method is called Forex Trading. After all, if there’s the oil trade, tea trade, poultry trade, why not currency trades too?
Two ways you can profit by buying low, and selling high.
#1. Buy at one dealer, and sell at another!
The buy and sell rates of every dealer change daily, so it’s very possible for you to buy at one selling price, wait a couple of days, and then re-sell it to them when their buying rates become higher than the sell price you bought it at.
– You get to touch cold hard cash.
– It will be difficult for you to make larger transactions due to the amount of cash you need to carry on hand.
– You need to spend time travelling back and forth to the dealer.
– You may need to wait months or maybe years to start seeing noticeable profits.
– You can only attempt this between the opening hours of the dealer.
– You need a sound understanding of how the currency changes happen, or else you will lose money, just like any other business.
#1. Buy and sell currencies through a foreign exchange broker!
Instead of buying and selling at a physical currency exchange dealer, you can buy and sell currencies completely online through a foreign exchange broker. A lot of people I know in Singapore engage this service through Oanda, but of course, there are other brokers to look for out there. Just be careful of certain red flags that could signal a bad broker.
Once you get the broker service down, you will be able to start buying and selling currencies, and even monitor past price changes on a chart! Websites like Investopedia.com is good to start to learn about the lingo and how it functions. Or you can download this (free) eBook right here that explains all the basics.
– Each transaction is completed within seconds right at the comfort of your own home, behind your laptop.
– You are able to trade 24 hours, 5 and a half days a week. This means you won’t have to leave your home or office to work on your transactions.
– Low cost: Compared to brick and mortar money changers, the rates foreign exchange brokers provide are much better allowing you to save more money on transaction costs!