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Canadian Dollar ETF

Currency trading has become a big deal lately. I wouldn’t call it a fad but it sure feels like it with forex brokers springing up at every corner. If you’re going to be heavily involved in trading currencies, then a forex broker is certainly an asset, but most investors and stock day traders simply don’t need the hassle of opening up a new trading account if they want to just dabble a bit in currencies.

The Canadian Dollar ETF which is traded under the ticker symbol FXC is a pretty heavily traded ETF that can be the platform to enter the currency trading market. Why did I choose FXC? Well, one reason is because it trades very in tune with the natural resources market (being that Canada is blessed with many of these resources). Having a currency ETF trade with something tangible and something the average investor can grasp is certainly a good starting point.

Another reason why the Canadian Dollar ETF is a good trading vehicle is because the news that comes out of Canada is pretty easy to access and the economy is very stable for the most part. You won’t get any massive day-to-day swings like you would with some other wold currencies and that is certainly a positive when you are trying to learn how the currency market works.

Now, I’m not saying that trading the actual currency isn’t better after you learn the ropes, but when first starting out I’d definitely stick to a stable ETF. Trading currency involves massive leverage and even the slightest swing can put a big dent in your capital. Because the Canadian Dollar ETF is, well, an ETF, you’ll most likely only be able to leverage it 3 to 1 on margin. And the swings are pretty low (rarely does it move more than 0.75% in a trading day) that it can provide just enough “excitement” and chance for profit, but without the risk of getting shell shocked.

So in closing, I highly recommend the Canadian Dollar ETF for traders who want to dabble or learn about currency trading. As always, good luck!

This entry was posted on Tuesday, July 26th, 2011 at 10:24 pm and is filed under Trading Tips. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.