How To Make Money In The Forex Market

Many people believe that you can not make money with currency, but in themselves constitute an investment asset. " This approach addresses the professional work of Asoka Woehrmann, head of currency strategy of DWS, the manager of Deutsche Bank Group and fund manager DWS Forex Strategy, a product already on sale in Spain, which reversed the assessment of a building against other currencies.

The global foreign exchange market is the most liquid of all who exist and that makes it a niche full of investment opportunities. 'The daily trading volume in the currency market is the size of the annual GDP of France. It is a huge sum, "says this expert.

This market has the advantage that there are a variety of coins, whose relationship is reversed, ie, some are seen against other and vice versa. This opens up huge opportunities. 'For example, you have the feeling that the euro has appreciated against the dollar, but there are many currencies have done better, "explains Woehrmann. 'The best bet in 2003 was to sell the Mexican Peso against the Australian dollar. He won more than forty percent

Extreme volatility is perhaps the biggest drawback of investing in foreign currency, with the high risks involved. Woehrmann, for example, controls the volatility in derivatives, and limits losses to what in English known as stop loss, that is, setting limits from which a position is rolled. "Every operation has a level from which reviewed the situation to decide if we extend or close. This stabilizes the profitability '. The DWS Forex Strategy has a target rate of return on three-month Libor plus 200 basis points.

The fund works with 32 currencies. The management consists of several phases. The first is strategic and has a horizon of six months. At this stage the manager analyzes the economics that affect currencies and decides whether to bet on its rise or remain neutral. 'The aim of the process is to discover whether we should play, for example, with the dollar from a long short betting on appreciation or depreciation or from a neutral perspective. "

The second phase consists of a weekly tactical process in which the manager plays with combinations of one currency against another. 'For example, we conclude that the Australian dollar will appreciate against the Korean won. " The problem is that in a basket of 32 currencies combinations are many and almost impossible to trace operations. 'What we do is look like a basket currency. If the yen will appreciate against a particular currency will mean that over the other one basket, "explains Woehrmann. 'You can not multiply 32 by 32 currency pairs, but you can find out what schemes that move the market'.

Investing in the Forex market is no easy task, mainly because many currency pairs are not as liquid as may be the dollar with the euro or the yen. But also because there are not convertible currencies. 'There are many Asian and Latin American currencies are not convertible. As a speculator, you can not enter those markets. What we do in these cases is to use derivatives as facts (known as OTC) with a counterparty. Are contracts with a commitment to buy the currency within a fixed period at a concrete level. "

There are also crossings where liquidity is saturated strangled by the action of many actors, such as hedge funds or hedge funds. 'The euro dollar cross can not be saturated. We can make 500 million in operations and not see that affecting the market. Maybe one day we sell 1,000 million dollars and does not move the map. But there are crossings such as the South African rand, which is a liquid currency that is saturated as investors take refuge in it when something happens in emerging markets. That is why the rand has such high volatility. People were covered with liquid junctions. '