How to buy and sell foreign currencies to achieve stable profits? A complete guide from beginner to advanced levels

The foreign exchange market is the largest financial market in the world, with an average daily trading volume exceeding $6 trillion. However, for investors new to this field, to consistently make profits from buying and selling foreign currencies, it is essential to first understand the market operation logic and one’s own trading capabilities.

What is the best time to buy and sell foreign currencies?

Many people think that foreign currency trading can be done at any time, but in fact, different trading channels have completely different time restrictions.

Bank foreign currency trading hours are limited by business hours, usually only from 9:00 AM to 3:30 PM, and cannot be operated on weekends and holidays. This is inconvenient for investors who need flexible position adjustments.

Forex margin trading, on the other hand, enjoys a 24-hour advantage. Since there is no unified exchange, the market consists of four major sessions—London, Sydney, Tokyo, and New York. These sessions overlap, allowing traders to buy and sell foreign currencies around the clock from Monday to Friday. If you are in Taiwan, the London session is from 3:00 PM to 5:00 PM, and the New York session is from 8:00 PM to the next morning 5:00 AM. Both sessions have high trading volume and obvious volatility, making them suitable for finding opportunities.

What can you really earn from buying and selling foreign currencies? Core concept analysis

The profit source of foreign currency investment mainly comes from exchange rate differences—the difference in conversion prices of the same currency at different times or through different channels.

Suppose you predict the euro will appreciate, and buy 100,000 units of EUR/USD at an exchange rate of 1.0800. Two weeks later, the exchange rate rises to 1.0900, and you close the position for profit. The calculation is: ((1.0900 - 1.0800) × 100,000 = $1,000. A mere 100-point fluctuation can bring a profit of thousands of dollars, which is why foreign currency buying and selling attracts investors.

However, earning from exchange rate differences requires understanding a basic rule: buy low and sell high to profit from appreciation, sell high and buy low to profit from depreciation. The foreign exchange market allows two-way trading, so there are profit opportunities whether the market rises or falls.

What are the ways to buy and sell foreign currencies? Risks and reward trade-offs

Lowest risk option: Bank foreign currency fixed deposit

Open an account at a bank, convert TWD to foreign currency at the official exchange rate, and deposit. For example, USD fixed deposits are popular due to high interest rates and wide usage; South African Rand is also a hot choice because of its high interest rate compared to TWD. This method has a low barrier, earns only interest, and carries almost no risk, but it’s hard to gain objective exchange rate gains.

Note that banks’ buy-sell spreads are usually between 0.3% and 0.47%, which directly eats into your profits. Plus, with the current cycle of interest rate cuts in the US dollar, holding USD faces exchange rate depreciation risk, making it less cost-effective.

Moderate risk option: Foreign currency funds

Funds invest in stocks or bonds of specific countries, allowing investors to profit from both exchange rate fluctuations and the growth of the investment targets. For example, buying a JPY-denominated Japanese stock fund can realize dual profits if the yen appreciates and Japanese stocks rise.

High return but high risk: Forex margin trading

Trade through broker contracts without holding physical currency, requiring only a margin deposit to conduct large-scale operations. Leverage multiples usually range from dozens to hundreds of times. Correct market direction can double your money in a short time; wrong direction can wipe out your principal quickly.

The advantage of forex margin trading is: extremely low trading costs (spread often below 0.01%), support for T+0 unlimited two-way trading, and liquidity far superior to banks. For example, EUR/USD might have a bid of 1.09896 and an ask of 1.09887, with a spread of only 0.0082%, far lower than bank spreads.

Five practical strategies for buying and selling foreign currencies

1. Range Trading — Capturing Oscillating Markets

When exchange rates fluctuate within a certain range (e.g., EURCHF between 1.2000 and 1.2500 from 2011 to 2015), traders can buy near support levels and sell near resistance levels repeatedly for arbitrage. Use indicators like RSI or CCI to identify overbought or oversold signals.

Risk management is crucial—once the range is broken, losses can be severe. Set strict stop-loss points outside the range boundaries.

2. Trend Trading — Following the Momentum

When the exchange rate shows a clear upward or downward trend, enter positions in the trend direction. For example, from May 2021 to October 2022, due to aggressive Fed rate hikes and European Central Bank hesitation, the USD appreciated strongly while the euro depreciated. Recognizing that once a trend forms, it’s hard to change, the key is to find good entry points and set reasonable profit targets and stop-loss levels.

3. Day Trading — Tracking News Events

Short-term traders rely on news schedules. Federal Reserve meetings, economic data releases, central bank policy statements, etc., can trigger intense volatility. For example, during 2021–2022, every FOMC meeting involved rate hikes, sometimes up to 100 basis points, generating huge gains within 1–2 days. Execution must be swift, avoiding prolonged indecision.

4. Swing Trading — Profiting from Volatility Gaps

A strategy between day trading and trend trading, combining technical and fundamental analysis. Look for assets with high volatility and key signals triggering swings: breakouts, breakdowns, trend reversals, or retracements. For example, the 2015 Swiss National Bank’s sudden removal of the EURCHF 1.2000 floor caused a black swan event that yielded rich profits for swing traders. Larger volatility offers more opportunities, but also higher risks—know when to take profits.

5. Position Trading — Long-term Holding

Trade infrequently, holding long-term positions to wait for currency appreciation. Investors should combine technical, fundamental, and macroeconomic factors to judge the direction. For example, if expecting USD to depreciate due to economic recession, establish positions at reasonable levels, using the past 10-year high of 114 as a reference. The key is to reduce entry costs and find the best entry points within the volatility range.

Why choose buying and selling foreign currencies as an investment method?

Wide application—Travel abroad, online shopping, international trade, etc., all involve currency exchange. Understanding exchange rate fluctuations can help with planning and arbitrage.

Trend is easier to grasp—Compared to stocks and funds, currency fluctuations tend to be more persistent and clear. As long as you understand the interest rates and monetary policies of relevant countries, you can roughly predict the direction. For example, US CPI releases, Fed meeting minutes, and quantitative easing trends are important references.

Highest liquidity—The largest financial market globally, with daily trading exceeding $6 trillion. Financial centers across time zones operate in rotation, with high transparency and difficulty for major players to manipulate.

Summary

The ways to profit from buying and selling foreign currencies are diverse, and suitable methods vary by individual. From the steady bank deposits to aggressive forex margin trading, each has its own trading logic. The key is to choose methods aligned with your capital size, risk tolerance, and trading habits, and to accumulate experience gradually. The forex market offers endless opportunities, but also requires discipline and patience.