Can you make money by manipulating currency exchange?
Romeo C asked:
What if you deposit 5000 dollar to a european bank and take it out in euro during highest rate exchange in the time of the day , would you make substantial amount of money if the process is done repeatedly?
This entry was posted
on Monday, January 18th, 2010 at 12:00 am and is filed under Investing.
You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.
What if you deposit 5000 dollar to a european bank and take it out in euro during highest rate exchange in the time of the day , would you make substantial amount of money if the process is done repeatedly?
January 18th, 2010 at 6:39 am
It could be touch and go. It all depends on the exchange rates and the percentage that you need to pay to the money exchange houses. krzylove
January 19th, 2010 at 5:06 am
With $5K, its quite negligible. Why don’t you try Yen? Jovy T
January 19th, 2010 at 10:57 pm
Hi, i recommand you a good and basic tutorial for investing. it covers all Issues related to your Investing and everything around it.
wish it will help you. guangfahang x
January 23rd, 2010 at 9:53 am
You can open an free Marketiva forex online trading account , 5 USD live fund and 10000 USD virtual fund already in your account.!
Open an free account and get $5 reward! evermore
January 26th, 2010 at 7:05 pm
Typically the banks charge a premium for brick and mortar currency exchange. The rates charged appear to vary from 5% to 20% and they don’t tell you the mainstream exchange rate, only their banking rate. The brick and mortar exchange rate changes slowly depending on the institution, while the mainstream price typically changes several times per second.
The price changes for the forex market are in “pips” which is the atomic unit of price change. For EURUSD, each pip is worth $10 on a 100,000 unit lot. Buying 100,000 euros and then waiting for the price to change by the average amount (50-120, we’ll assume 100 pips) means that you have earned $1000 USD. (I skipped some math steps for simplicity, see babypips.com if you want all of the math explained.)
As you can see, the brick and mortar banks charge many times more in conversion fees than you can realistically make in a day. If you use the same bank, but go through their forex division you can open a trading account and make money. UBS, Saxo, Man Financial, JP Morgan, even Bank of America all have forex divisions. There are many more ‘retail scale’ trading brokers that provide charting applications, leverage of 100:1 and up (so you can trade a full 100k lot on $5000), etc. Some of them also allow lot sizes as small as 1000 units, allowing you to gain or loose as little as $0.10 per pip. Leverage doesn’t cost anything, but you are responsible for the entire gain or loss for your trades. Start with a free demo, everyone has them.
In terms of “manipulating” currency exchange, you would need to have a daily trading volume of over 100 billion units (1,000,000 lots) to make even a small impact in the larger trade volume. The larger trading pools like ECN see 1000-3000 lots traded every 1-5 seconds, 24 hours a day 5.5 days per week. daraknor1