Thinking about trading forex, but not sure you want to the leverage spot forex trading or trading currencies via the futures market? If so, you’ll want to check out Exchange Traded Funds (ETFs).
The topic of ETFs has been a popular one of late. These instruments provide traders and investors the opportunity to participate in markets that were previously unavailable.
The Euro Currency Trust (symbol FXE) was the first forex-based ETF. It was introduced by Rydex Invesments about a year ago. Each share of FXE represents 100 Euros, plus accrued interest (the Euros are on deposit, and as such earn interest). That means each share will have a value of 100 x EUR/USD (the quoted rate of US Dollars per Euro).
Trading in the ETFs can be made on either the long or short side.
In June of 2006, Rydex increased the forex ETF offerings to include:
- CurrencyShares Australian Dollar Trust – FXA
- Currency Shares British Pound Sterling Trust – FXB
- CurrencyShares Canadian Dollar Trust – FXC
- CurrencyShares Mexican Peso Trust – FXM
- CurrencyShares Swedish Krona – FXS
- CurrencyShares Swiss Franc – FXF
I’ve long been of the view that one did not “invest” in the forex market. It’s a trader’s market because of the leverage involved. The introduction and expansion of the forex ETF market, though, does allow the long-term investor to take part.
To learn more about forex ETFs, check out the Rydex site at www.CurrencyShares.com.
If you want to learn more about forex trading, check out this free forex trading guide.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
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