Investing in foreign currencies - forex versus currency futures versus foreign equity

[Saltynuts]

Sorry, but this is going to be a very, very newbish question.

I'm convinced that the U.S. dollar is going to depreciate big time versus other currencies where their governments are not printing money at 23% annual clips.

What is the best way to take advantage of this? I think the possibilities of what I could do are:

1. Forex market. I've heard this is extremely shady. Is it so shady that if I just literally plan to dollar cost average into certain foreign currencies, slowly over time, the broker or whomever can cheat me out of something? Like hidden fees or slippage or something? I've also heard you can get extreme leverage, and start accounts with very little? What kind of leverage, and what size of trades and what not do you have to make so the fees/spreads don't eat you up?

2. Futures on currency. I understand that these are traded on the CBOE just like many other futures. Are these better or worse than the forex directly? Less shady it sounds like? Spreads/fees better or worse?

3. Just buying stock on the foreign stock exchanges, like through my IB account. By doing this I would get any appreciation in the underlying stock plus whatever currency swing that I got right. But I would guess very little margin (similar to buying equities here in the US), so if I felt REAL STRONGLY about the currency swings I should either go through forex/currency futures?

All thoughts welcome. Thanks for any help, and sorry again for the newb question.

 

[BMK]

Take a look at currency ETFs, like FXE, FXB, FXY. There are options on these ETFs, but they don't have a lot of volume.

Or UDN, which is an ETF that tracks an index that measures the performance of a short position in the DX futures contract.

BMK

 

[tradrjoe]

Buy real assets like real estate or gold. They would retain their value when currencies collapse (as opposed to buying foreign currency which could also collapse together with USD)

 

[traderjo]

Sorry, but this is going to be a very, very newbish question.

I'm convinced that the U.S. dollar is going to depreciate big time versus other currencies where their governments are not printing money at 23% annual clips.

What is the best way to take advantage of this? I think the possibilities of what I could do are:

1. Forex market. I've heard this is extremely shady. Is it so shady that if I just literally plan to dollar cost average into certain foreign currencies, slowly over time, the broker or whomever can cheat me out of something? Like hidden fees or slippage or something? I've also heard you can get extreme leverage, and start accounts with very little? What kind of leverage, and what size of trades and what not do you have to make so the fees/spreads don't eat you up?

Mostly true .. lot of negatives
- No central exchange
leverage can be really crazy with so called brokers based in infamous jurisdictions
- Client money safety issue: from that point if you DO have to trade Margin FX (because of the leverage offered) stick to properly regulated UK brokers but they are still more likely to be market makers model
+better off trading on a regulated exchanges with Currency Futures or Currency ETF

2. Futures on currency. I understand that these are traded on the CBOE just like many other futures. Are these better or worse than the forex directly? Less shady it sounds like? Spreads/fees better or worse?
- Centrally exchange traded
- Conservative leverage
- can do spread of diff futures
- Has options on these futures
Negative: Low leverage and less granularity


3. Just buying stock on the foreign stock exchanges, like through my IB account. By doing this I would get any appreciation in the underlying stock plus whatever currency swing that I got right. But I would guess very little margin (similar to buying equities here in the US), so if I felt REAL STRONGLY about the currency swings I should either go through forex/currency futures?

This is bit complicated
A) assuming that your native currency is USD then whatever is traded in USD ( stock/ futures options) has no relevance to USD going up or down!
B) If you think you are really good at trading whatever overseas stock + if you think USD is going to go down then yes sure you can win on both
But if you are wrong then you could loose on both areas!



All thoughts welcome. Thanks for any help, and sorry again for the newb question.

 

[Saltynuts]

Take a look at currency ETFs, like FXE, FXB, FXY. There are options on these ETFs, but they don't have a lot of volume.

Or UDN, which is an ETF that tracks an index that measures the performance of a short position in the DX futures contract.

BMK

Thanks BMK, will do!

 

[BKR88]

Sorry, but this is going to be a very, very newbish question.

I'm convinced that the U.S. dollar is going to depreciate big time versus other currencies where their governments are not printing money at 23% annual clips.

What is the best way to take advantage of this? I think the possibilities of what I could do are:

1. Forex market. I've heard this is extremely shady. Is it so shady that if I just literally plan to dollar cost average into certain foreign currencies, slowly over time, the broker or whomever can cheat me out of something? Like hidden fees or slippage or something? I've also heard you can get extreme leverage, and start accounts with very little? What kind of leverage, and what size of trades and what not do you have to make so the fees/spreads don't eat you up?

2. Futures on currency. I understand that these are traded on the CBOE just like many other futures. Are these better or worse than the forex directly? Less shady it sounds like? Spreads/fees better or worse?

3. Just buying stock on the foreign stock exchanges, like through my IB account. By doing this I would get any appreciation in the underlying stock plus whatever currency swing that I got right. But I would guess very little margin (similar to buying equities here in the US), so if I felt REAL STRONGLY about the currency swings I should either go through forex/currency futures?

All thoughts welcome. Thanks for any help, and sorry again for the newb question.

1-Forex will give you the most leverage (50:1 in the U.S.) with the least amount invested. Nothing wrong with forex if you go with a reputable broker like Oanda. Complaints about forex are from retail traders that open an account with a bucketshop broker located on an island in the middle of the ocean because they offered a $30 deposit bonus.

2-UUP is an ETF that invests in US dollar futures. UUP has pretty decent volume in the options so you could buy DITM puts for better leverage to compete with forex. As BMK mentioned above, you can also use the ETFs that invest in specific currencies.

3-Currency Futures are OK but margin requirements are pretty steep. Forex is better IMO and no need to roll at expiration.

 

[BKR88]

I'm convinced that the U.S. dollar is going to depreciate big time versus other currencies

Just another opinion. The only one that matters though is yours

https://www.rmbgroup.com/will-bond-...ykQ&utm_content=112763699&utm_source=hs_email

 

[traderjo]

1-Forex will give you the most leverage (50:1 in the U.S.) with the least amount invested. Nothing wrong with forex if you go with a reputable broker like Oanda. Complaints about forex are from retail traders that open an account with a bucketshop broker located on an island in the middle of the ocean because they offered a $30 deposit bonus.

2-UUP is an ETF that invests in US dollar futures. UUP has pretty decent volume in the options so you could buy DITM puts for better leverage to compete with forex. As BMK mentioned above, you can also use the ETFs that invest in specific currencies.

3-Currency Futures are OK but margin requirements are pretty steep. Forex is better IMO and no need to roll at expiration.

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The only thing even with US regulated FX broker like Oanda is it is still a "Market Maker model" as compared to a genuine Exchange model.. but of course you get 1:50 leverage
Market maker means if they can't cross trades between buyer and seller then they take on O/P position
Client money safety in USA, both Futures and Fx brokers if they go belly up then there is no SIPC (fxcm. mf global PFG) cover for clients.
ETF as a share traded through a SIPC covered broker would give that protection but then the flip side is with ETF max leverage (T50) is 1:1

 

[BKR88]

Oanda is it is still a "Market Maker model"

Not a concern with a reputable broker like Oanda. Another poor complaint from retail traders looking to blame someone else for their losses.

ETF max leverage (T50) is 1:1

Which is why I suggested buying DITM puts on UUP. Much better leverage.

 

[traderjo]

Not a concern with a reputable broker like Oanda. Another poor complaint from retail traders looking to blame someone else for their losses.
C'mon...Has nothing to do with blaming the broker.. it is very well known +ve/Ve of OTC FX business model
Do a search on what Market maker and Exchange traded means
Sure those OTC brokers based in tin pot islands to be avoided but even with US/UK regulated OTC fx the diff is MM or True ECN remains
many retail traders don;t even think of this aspect.




Which is why I suggested buying DITM puts on UUP. Much better leverage.