I recently noticed that many people around me are interested in foreign currency investment, but many of them actually don’t really know how to get started. Rather than saying that making money with foreign currencies is hard, it’s more accurate to say that many people take the wrong direction from the very beginning. I started from scratch and figured things out through trial and error myself. Today, I’m going to organize the lessons I’ve learned over the years, hoping to help beginners who want to make money with foreign currencies avoid detours.

First, let me talk about my understanding of foreign currency investment. Simply put, making money with foreign currencies mainly comes from two ways: one is exchange rate spreads (the price difference created by exchange rate fluctuations), and the other is interest rate differentials (the differences in interest rates between different countries). For example, Taiwan’s fixed-deposit interest rate is about 2%, while the United States has 5%. That 3% gap is potential profit. But there’s a catch here: you might earn interest, yet you could end up losing even more because exchange rate fluctuations wipe out more value. That’s why the line “profit from the interest rate differential, but lose from the exchange rate spread” has left a particularly deep impression on me.

As for investment methods, I’ve come across three. The first is fixed deposits in foreign currencies—this is the most conservative approach. You just need to open a foreign currency account at a bank, which is suitable for completely new beginners. The downside is that liquidity is poor; if you terminate early, interest will be deducted, and the interest rate isn’t that high either. The second is foreign currency funds, which offer better flexibility—you can buy and sell at any time. The interest rate is between that of a demand deposit and a fixed deposit. Personally, I use this method quite often. The third is foreign exchange margin trading—this is the method that people who truly want to make money through foreign currencies would choose, but it also carries the biggest leverage risk. Newcomers really need to be cautious.

When it comes to choosing which currencies to invest in, my experience is to start with major currencies first. The US dollar is definitely the first choice, but later I also started paying attention to the Japanese yen, the Australian dollar, and the Swiss franc. Different currencies have different characteristics. The US dollar and the euro are mainly influenced by central bank policies, while the Japanese yen and Swiss franc are comparatively stable (safe-haven currencies). The Australian dollar and the Canadian dollar are closely linked to commodity prices. For instance, Australia is a major exporter of iron ore. When iron ore prices fall, the Australian dollar usually depreciates too. That logic is relatively easy to grasp.

Emerging market currencies like the Chinese yuan or the South African rand have high interest rates, but exchange rates are also highly volatile, liquidity is low, and bid-ask spreads are large. I suffered losses at first and only then realized that it’s not that the higher the interest rate, the better. You also have to consider exchange rate stability and liquidity. Currencies like the US dollar, the euro, and the Australian dollar are relatively stable, which makes them more suitable for people like me who want to earn steadily with foreign currencies.

Let me share a few key points I learned during the process of making money with foreign currencies. First is choosing the right timing—don’t chase after highs or sell during dips; wait for a trend to form. I usually look at 5-minute or 30-minute charts and enter only when a clear direction appears. Second, you must set stop-loss and take-profit orders. Especially when doing margin trading, this can help you avoid liquidation. And lastly, diversify your allocation—don’t put all your eggs in one basket.

The most important thing is mindset. The foreign currency market trades 24 hours a day, and with information overload, it’s easy to get swept along by the news. I check a few international finance websites regularly, but I don’t get scared by short-term fluctuations. Also, don’t touch currencies you don’t understand. There are many currencies in the market, but the ones with the best liquidity and the easiest to manage are still major currencies and their pairs.

My final advice is: if you truly want to make money with foreign currencies, it’s best to practice first with a demo account. Don’t use real funds—test your strategy in a real market environment to see whether you can achieve consistent profits. That’s exactly how I gradually worked out a method that suits me. The barrier to entry for foreign currency investment isn’t high, but to actually make money, you still need some patience and discipline.