Recently, friends who are watching the foreign exchange market asked me, how exactly should one invest in foreign currencies to truly make money? Honestly, that’s a good question because many people’s understanding of currency investment still stays at the superficial level of “buy low, sell high.”

Let me start with a core concept: foreign currency investment mainly relies on two things—exchange rate differences and interest rate differentials. The exchange rate difference is the fluctuation in the prices between currencies, while the interest rate differential is the difference in interest rates between countries. For example, Taiwan’s fixed deposit interest rate is 2%, and the US is 5%, so that 3% gap is a potential profit. But be careful here, because it’s easy to earn interest but lose money on the exchange rate, which is why the first piece of advice for currency investment is to understand the risks.

Regarding investment methods, there are mainly three options on the market. Foreign currency fixed deposits are the safest but offer the lowest returns, suitable for complete beginners. Foreign currency funds are more flexible and can be bought and sold at any time. As for forex margin trading, that’s leverage gaming—it can yield high returns but also multiplies the risks. I’ve seen many people blow up their accounts because they used too high leverage, so this method must be approached with caution.

When choosing which currencies to invest in, my advice is to start with mainstream currencies. The US dollar is always the first choice because it’s the global settlement currency. But if you want diversification, consider safe-haven currencies like the Japanese Yen and Swiss Franc—they tend to perform steadily during market turbulence. Commodity currencies like the Australian dollar are also good because their trends are easier to grasp, mainly related to commodity prices.

Recent market dynamics are worth paying attention to. The Federal Reserve cut interest rates last year, while the European Central Bank maintained a hawkish stance, which led to the euro hitting a four-year high against the dollar. The policy divergence between the US and Japan is also increasing, with the Yen experiencing more volatility. If you’re investing in foreign currencies, these central bank policy trends must not be ignored.

On the practical side, my currency investment advice is as follows: First, avoid unfamiliar currencies. There are so many currencies in the market, but the most traded ones are just a few. Master these first. Second, always set stop-loss orders. This is especially important in leveraged trading because a sudden fluctuation can wipe out your position. Third, don’t chase highs or sell lows; wait for a trend to form before entering. Many people rush to buy at the top, which often leads to losses.

Diversification is also key. You can hold both US dollar fixed deposits and Australian dollar funds simultaneously, which allows you to earn interest rate differentials while hedging risks. Another point many overlook is timing the entry. The simplest approach is to wait for a trend to develop, usually requiring five minutes or longer. Once the trend is clear, place your orders according to your plan.

Finally, I want to say that any investment strategy requires practice. Don’t just talk about it on paper—practice with a demo account first, test your strategies in real market conditions, and see how well you can control risks. The ultimate goal of currency investment advice is: understand the market, control risks, and achieve steady profits. If you can do these three, you’ll have a basic level of investment literacy.