Recently, many people have asked me how they can make money through foreign currencies. Rather than calling it investing, I’d say it’s more that many people haven’t figured out the logic of profiting from exchange rates, and then blindly follow the crowd. I’ve organized my experience from the past few years, and I hope it can help beginners avoid detours.

First, you need to understand a basic concept: the returns from foreign currency investing mainly come from two parts—exchange rate differentials and interest rate spreads. Exchange rate differentials are the price gaps created by exchange rate movements between currencies, while interest rate spreads come from differences in interest rates across countries. For example, Taiwan’s time deposit interest rate is 2%, the United States is 5%, and that leaves a 3% interest rate spread in the middle. But there’s a trap here: many people earn interest, yet lose money on exchange rates. This is the situation of “earning the interest spread but losing on exchange rate.” I’ve seen plenty of examples where people didn’t properly assess the risk of exchange rate fluctuations, and in the end their principal was wiped out.

As for investment methods, there are mainly three types in the market. The simplest is foreign currency time deposits, which are suitable for beginners: you exchange Taiwan dollars for USD or other foreign currencies, then place them in a bank to earn interest. The advantage is safety; the downside is poor liquidity. If you terminate early, they will deduct interest. If you want more flexibility, you can consider foreign currency funds. There’s no lock-in period—you can buy and sell at any time, and the interest is typically between that of passbook/current deposit and time deposits. Another option is forex margin trading. This has the highest risk, but also the highest potential returns, because it uses leverage—usually 50 to 200 times. Forex margin trading can be done 24 hours a day. The entry barrier is low, but you must know how to control risk, otherwise it’s easy to get liquidated.

When it comes to making money from exchange rates, I think the most important thing is to pick the right underlying assets. Taiwanese people are especially fond of investing in USD, but besides that, JPY, AUD, and EUR are also worth paying attention to. These currencies can be divided into four major categories: policy-driven currencies (USD, EUR, mainly following central bank policies), safe-haven currencies (JPY, Swiss francs, backed by stable economies), commodity currencies (AUD, CAD, linked to commodity prices), and emerging market currencies (CNY, South African rand, high interest rates but large volatility).

Last year, when the Federal Reserve began cutting interest rates, it brought a lot of changes to the global currency market. I noticed that the euro against the US dollar strengthened mainly because the dollar was relatively weak. Carry trades using the Japanese yen are also very common: since Japan’s interest rates are low, investors borrow yen to invest in higher-yield assets. The British pound has also performed well lately, but be careful about the risk of repricing if US policy shifts. As a safe-haven currency, the Swiss franc is especially popular during periods of economic uncertainty.

If you want to profit from exchange rates, you must understand the factors that affect exchange rate fluctuations. Currencies from countries with low inflation tend to appreciate; rising interest rates also attract foreign capital inflows, which leads to an increase in exchange rates. Government debt, trade conditions, and political stability also all influence exchange rates. My advice is to pay more attention to international news—information from websites like CNBC and Bloomberg is very valuable.

For actual trading, forex trading is two-way. It’s not only about “buy low and sell high,” but also “sell high and buy low.” If you expect a certain currency to appreciate, you buy; if you expect it to depreciate, you sell. But the most important part is to formulate a trading strategy in advance, including your entry and exit points, stop-loss points, and take-profit points. From my own experience: beginners must never chase prices up or panic-sell. You should wait until a trend forms before entering. Usually, a trend needs at least 5 minutes to be confirmed. Once it’s confirmed, you can consider opening a position.

I also want to emphasize several key points I learned through practice. First, don’t touch currencies you don’t understand—start with major currency pairs. Second, always keep an eye on exchange rate fluctuations; this changes every day. Third, diversify your allocation—for example, hold both USD time deposits and AUD funds at the same time to hedge risk. Fourth, you must learn how to set stop-loss and take-profit orders. In forex trading, risk is high, and stop-loss is the final line of defense to protect your principal. Fifth, choosing a good trading platform matters: you should check whether it’s safe and reliable, whether the fees are reasonable, and whether the tools are comprehensive.

To be honest, making money from exchange rates may look simple, but in reality it takes a lot of effort to learn and practice. The best approach is to first practice with a demo account, using virtual funds to test your trading strategy and see how it performs in real market conditions. Once you have a deeper understanding of the market, then move on to using real funds. The barrier to investing in foreign currencies is indeed not high—you can open an account through a bank or an app—but truly making money requires knowledge, experience, and discipline. I hope these shares are helpful to you.