By Kelly Ogle, News 9
A growing number of Americans are trying whatever they can to make their money work for them, including options like stocks, bonds and CDs.
Buying, selling and trading stock on Wall Street is not the only way to wheel and deal. The latest craze is trading cold, hard cash.
"Just like you buy stock with the anticipation of making money, people trade currencies with the anticipation of making money," said Marc Prosser FXCM.
The goal is to trade one type of currency for another that will appreciate in value.
"I trade the Euro versus the dollar," trader Lee Martin said. "I the past, I've traded the British pound versus the dollar."
A seller can trade any two currencies, but among the most popular are the dollar, pound, yen and Euro. If someone wants to buy Euros with dollars and the exchange rate is 1.55, which means the buyer can purchase one Euro for $1.55.
"If the Euro would go up to 1.65, essentially you would make 10 cents for every Euro you bought," Prosser said.
A buyer can expect that a currency will most likely depreciate in value compared to another. It was always the large banks and credit institutions that typically traded, but now individuals can go through brokers or log onto any number of online trading sites to buy and sell on their own.
"Currency trading has massively increased in popularity," Prosser said.
At the trading site FXCM, the number of individual traders has increased from 100 to more than 100,000 in the past eight years. Prosser said volatility in the markets is one reason for the growing interest.
"With the volatility, there's potential to both make money and lose money," Prosser said.
Martin said he's hooked. He's a counter installer by day, but finds time to watch the money markets closely.
"It's extra money," Martin said. "If I end up with an extra five, ten grand, I'll maybe go buy something I want."
Financial planner Meg Green warns of the risks involved with trading currency. She doesn't recommend currency trading for the average person. She also advised buyers to use their risk capital, or money they can afford to lose.
"I've seen plenty of people break themselves," Green said. "You work so long and so hard to gather your money together. To start gambling with it, just doesn't make sense to me."
The brokerage sites also warn trading is a game of chance. They suggest first using what's called a practice or demo account. Lee continues to use a practice account in addition to his real trading. He's lost money at times, but said he would still do it for the thrill and passion of doing it.
The Commodity Futures Trading Commission has jurisdiction over foreign exchange activity in the U.S. Traders are strongly advised to trade only with a CFTC registered entity. The CFTC warns that trading is risky and the average investor should be wary.
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