There are many who travel abroad for both pleasure and business. Why not use the rates of exchange to your advantage? Current US law limits the amount to $10,000.00 that can be brought between most countries without declaring it. Why not pick up some local currency and exchange it later for a profit?
The great thing about foreign exchange rates is they’re easy to understand by looking at the charts. I suggest following the five and ten-year charts and pay no attention to the short-term noise of everyday news happening within a country. The complete financial collapse of a countries currency rarely happens. Typically, these happen only after massive political changes (like Venezuela or Zimbabwe for example).
This means currency often trades in patterns. This is mostly caused because all major developed countries have the ability to manipulate and stabilize their currency over time.
Here are a few such charts
US DOLLAR (USD) TO KOREAN WON (KRW): Notice the 10-year range runs a 20% movement between 1,000 and 1,200. With nearly every year ranging within a 10% spread. Meaning a fairly nice opportunity for some quick profit on a yearly basis.
US DOLLAR (USD) TO EURO DOLLAR (EUR): Here we see two five-year patterns. The first 2019-2013 from .65 to .83. The next from 2014-2018 at .82 to .97. If you zoom in on a yearly basis, you’ll see a nice 8-14% swing in exchange. Most currencies will see a pronounce swing up or down over 10-years reflecting market conditions world-wide. Meaning most major currency swings coincide at similar times around the world.
Making Money on Foreign Exchange Pros:
Cash is King: You hold onto a hard asset that is very liquid (many currencies can be exchanged at your larger banks, exchanges or international airports). However, avoid airports because they pad their rates 4-6% both ways.
Charts are easy to read: You can easily check the exchange rate to determine the patterns and when you should trade it for another currency.
Practical: If you travel somewhere frequently you can always use your cash on hand if you return again, regardless of the rates.
Many exchange options: You can change any countries currency for any other. So regardless of where you travel, you can use whatever currency you have. This may allow you to get better exchange rates than your own countries currency.
Liquid: You can trade currencies while laying in bed thanks to the myriad of online brokers. For those non-traveling folk.
Making Money on Foreign Exchange Cons:
Storage: Foreign currency must be stored somewhere safe (it’s hard to get a bank account with foreign currency).
Geopolitical risk: Some currencies can cease to exist, change the form, or even go through prolonged recession due to regional issues. If a country is in the news often due to large political or military conflict, then its best to get out fast.
Keeping careful records: You must keep track of when and at what rate you exchanged your money. This will help you determine your rate of return, and how the currency you own fairs with other currencies you may want to change it into.
Making Money on Foreign Exchange While Traveling
The key to being a good investor is always up to timing and not being greedy. If we wait too long, the o
- Pick an exit point, based on the recent chart patterns and sell when it hits.
- Don’t get greedy by thinking the exchange rates will hit past highs. This rarely happens in currencies because extreme spikes usually are caused by once in a lifetime event.
- Find an online broker or bank that can give you
the best rates. Your local bank will probably work with you if you ask!
In the end, timing is very important. If you visit when it’s at a yearly peak, then your opportunity will most likely be limited (on a short term basis). However, if you’re in the lower areas of the trading range then your upside opportunity is just that much better.