Working with different currencies in investments

The key facets to consider when you look at currencies are its volume and its liquidity. These factors will affect the speed at which you can trade, which is key to maximizing profits or minimizing losses. The US Dollar is still the most common currency for traders; the other popular currencies are the Swiss Franc, the British Pound Sterling, The Yen from Japan and the Euro.

All of these currencies can be good for many types of investor: whether you're a casual personal investor, considering investing for long-term gains or a day trader. They are all liquid; they all show good trend performance and if you want to day trade they generally have daily peaks and troughs.

Financial commentators most often put their focus on the three biggest currencies, the Yen, Dollar and Euro. However, you should consider widening your focus for both short-term and long-term profits.

As with all investments, you should never consider the past performance of a currency as a guarantee that it will continue to behave in that way.

Here are the 'personalities' of some of the most commonly traded currencies:

The British Pound, or Pound Sterling - As trades in the Pound Sterling are at a much lower volume than either the Yen or Euro, you should avoid short-term trades However, the Pound is a very worthwhile long-term investment.

The Euro - The Euro has proved a good place for new currency traders to start. Crucially it is traded in high volumes, has a good open interest rate and value can change quickly enough to make it worthwhile as a day-trading currency. The Euro is becoming more and more popular with traders, both inexperienced and old hands at the game.

The Japanese Yen - Consider the Yen as a one of your long-term investments. It does show the volatility to make it worthwhile for day trading, but its behavior can be very erratic. Volume of trades and interest rates are high.

The Swiss Franc - This currency should probably be considered in the same class as the Pound Sterling, volumes are not great and interest rates are low. It's possible that the Swiss Franc may even disappear as Switzerland's economy is integrating with the Eurozone countries. It has been a good long-term investment in the past. Don't even think about trading the Swiss Franc on a day-to-day basis, the trading volume is too low and daily fluctuations are not worthwhile.

Looking outside these old favorites are two you might consider as alternatives. The Canadian Dollar and Australian Dollar have both won favor as long-term investments. There is a low volume of trades and low opening interest rates; price spikes can be major. Either of these currencies is certainly worth looking at, particularly if you want to diversify your investments.