Recently, I saw many people in the community asking how to start investing in foreign currencies, so I’ll summarize my experiences over the years. To be honest, the threshold for investing in foreign currencies isn’t as high as you might think, but if you want to make money, you need to put in some effort.

First, you need to understand a concept: many people confuse foreign currencies with foreign exchange. Simply put, foreign currencies are the currencies of other countries besides your own, while foreign exchange is a broader concept that includes various foreign currency assets, bonds, payment instruments, and more. When we talk about foreign currency investment, it mostly refers to buying and selling foreign currencies or engaging in forex trading.

Why invest in foreign currencies? I think the main reason is risk diversification. If all your assets are denominated in your home currency, a depreciation of that currency will shrink your wealth. I personally hold positions in USD, AUD, and other foreign currencies, which can earn interest rate spreads and hedge risks. Also, compared to stocks, foreign currency trading is more transparent because participants come from all over the world, making manipulation difficult, which I really appreciate. Another point is that trading is available 24 hours, so you can enter and exit whenever you want, which is very important for someone like me who doesn’t want to be bound by fixed trading hours.

Regarding how to invest in foreign currencies, there are mainly three ways. The most conservative is foreign currency fixed deposits, which involve opening a foreign currency account at a bank, depositing money for a fixed term to earn interest, with low risk but also low returns. The medium risk option is buying foreign currency funds or ETFs, which don’t require lock-in periods and can be bought and sold anytime, offering much more flexibility than fixed deposits. If you have some experience and seek higher returns, you can consider forex margin trading, which uses leverage to amplify gains but also carries high risk. I recommend beginners start with small capital to try it out.

Foreign currency investment mainly involves earning two types of profit: exchange rate difference and interest rate spread. The exchange rate difference is the price difference between buying and selling, while the interest rate spread is the difference in interest rates between countries. For example, Taiwan’s fixed deposit rate is only 2%, but the US offers 5%, so that 3% interest rate spread is what you can earn. But be careful—sometimes you might earn the interest spread but lose on the exchange rate difference. I’ve seen this happen quite a few times. So, it’s essential to consider both interest rates and exchange rate risks.

As for which currencies to choose, my advice is to start with mainstream currencies. Of course, the US dollar is the first choice, but I also like the AUD and JPY. The AUD is a commodity currency mainly influenced by commodity prices, and its trend is relatively easier to grasp, making it suitable for beginners. The JPY and Swiss Franc are safe-haven currencies, relatively stable, and tend to appreciate during economic downturns. If you want to chase high interest spreads, the South African Rand is tempting, but it’s also very volatile, so I generally don’t recommend beginners to touch it.

Over the years of doing foreign currency investments, my biggest takeaway is that you must have a trading plan. Don’t chase highs or sell lows; wait for a trend to form before entering. I usually look at 30-minute or 2-hour candlestick charts to determine entry and exit points, then strictly set stop-loss and take-profit levels, with a maximum of two trades per day. Sometimes, doing nothing is the best choice, especially when the market is highly volatile.

Another very important point is: don’t touch currencies you don’t understand. There are so many types of foreign currencies, each with its own characteristics, but the most traded are still the US dollar, euro, and Japanese yen. I suggest beginners start with these, and only try others once they have more experience.

The risk of foreign currency investment comes from exchange rate fluctuations, which are influenced by many factors. Inflation rates, interest rates, government debt, political stability—all these affect exchange rates. So, I spend time every day reading international news and paying attention to central bank policies, which helps in judging exchange rate trends. For example, the recent Fed rate cut decisions directly impacted the movements of the dollar and other currencies.

Regarding forex trading, the biggest feature is two-way trading. You can profit not only by buying low and selling high but also by shorting. For example, if you think the euro will depreciate, you can sell EUR/USD first, and when the euro actually falls, buy it back to make a profit. This flexibility is something traditional investments can’t offer.

Finally, my advice for beginners is to start with a demo account and practice until you understand thoroughly before using real funds. There are no shortcuts in foreign currency investment—only through continuous learning and practice can you accumulate experience. Choosing a safe, reliable platform with low trading fees is also very important so you can focus more on trading itself. Over the years, I’ve taken these steps myself, and I hope it helps you too.