Editor’s Note: Today, we have another currency trading insight from our colleague, Imre Gams. As Imre shares below, we’re entering a “golden age” for forex traders. Below, he shows why it’s all unfolding, and how traders are taking advantage. Read on…
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Think you can’t make money in today’s market?
That’s the relentless message mainstream financial media organizations are pumping out.
But it’s simply not true…
Sure, stock market investors are cursing the Fed and battling a bear market. But currency traders have never been happier.
I launched the beta version of my Currency Trader advisory in October 2022. (A “beta” version means we verify the accuracy of a system internally before sharing it with investors.)
And so far, 20 out of 21 of my recommended trades have been winners.
That’s a 95%-win rate.
Calculating dollar gains on currency trades is a little tricky. It depends on how large your account is… and how much risk you’re comfortable with.
But one trade I recommended gave Currency Trader beta testers the chance to make $1,694 on a $10,000 account… in just one day.
Another could have netted you a $2,145 gain on a $10,000 account… in just three days.
That’s a 21% return – roughly double the average annual return of the S&P 500 over the past 30 years.
The good news is, you don’t need a $10,000 account to get started. You can start as a currency trader with a lot less than that.
So today, I’ll pull back the curtain on the top-down “macro” trend that’s powered this winning streak.
It’s all down to a momentous decision last year by the world’s most powerful central bank, the U.S. Federal Reserve…
In 2020, the coronavirus spread out of China and around the world.
In response to the economic issues this created, the Fed doubled-down on its 2008-era policies.
It dropped interest rates back down to zero… and cranked up the printing presses.
But this ultra-loose monetary policy… plus the $5 trillion in direct stimulus Congress authorized… helped fuel the worst inflation since Reagan was in the White House.
The eventual result was that last March, the Fed had to start raising rates again to fight inflation (an inflation that it had previously claimed wouldn’t last for long).
As the Fed raised rates, it triggered a bear market in stocks. And it caused a $7 trillion wealth wipeout for stock market investors.
If you had money in stocks last year, you almost certainly took a hit to your wealth.
But the Fed’s move had an unexpected side-effect. Because it set the stage for the currency – or forex (short for foreign exchange) – market to make a big comeback.
In fact, it’s led to the best trading environment for forex in 15 years.
We’re seeing dramatic moves across the major currencies almost every week. Each one is an opportunity to scalp outsized trading returns.
So, why did this happen?
It’s all down to interest rates.
Capital goes where it’s treated best. So, currencies that offer higher interest rates suck in capital from lower-yielding currencies.
Say you can earn 1% interest in a bank account in Australia… but you can earn 3% interest in New Zealand. Wouldn’t you move your money out of Australia and into New Zealand?
Well, that’s what hedge funds, currency traders, investment management firms, and businesses do, too.
As they sell their Australian dollars (AUD) and buy New Zealand dollars (NZD), the value of NZD relative to AUD increases.
It’s like supply and demand of a product. If people demand less of something, the price falls. If demand increases, the price goes up.
That’s what happened here, and that move between these two currencies created an opportunity to profit.
That’s why currency traders are happiest when there are big differences – or spreads – in interest rates around the world.
And that’s exactly what’s been happening since the Fed started raising rates again last March.
It set off a chain reaction of rising interest rates around the world, as other central banks followed suit.
We’ve seen this play out between the U.S. dollar and its European counterparts – the euro and the British pound.
Last July, the euro fell to parity with the dollar (meaning one euro equals one U.S. dollar). The last time this happened was back in 2002.
Last September, the British pound dropped to an all-time low against the dollar. That coincided with the British government trying to pass a reckless budget.
But this currency action all made sense.
The Fed has jacked up U.S. interest rates to 4.5%. The equivalent rate is just 2.5% in the eurozone and 3.5% in Britain.
Yet despite the Fed’s frenzied rate hiking, inflation in the U.S. is still running at an annual pace of 6.5%. That’s more than three times higher than the Fed’s target rate of 2%.
That means a lot more pain to come for investors sticking to traditional asset classes like stocks and bonds.
But it means that great opportunities to trade forex are here once again.
Over the coming days, I’ll reveal more about my forex trading strategy.
Of the 21 trades I’ve recommended, 20 have been winners. And thanks to fat spreads between interest rates, there are plenty more opportunities to profit.
On February 9 at 8 p.m. ET, I’ll be hosting a free trading breakthrough session… Where you can gain access to over $4,000 worth of bonuses just for attending.
I’ll even reveal what I’m looking to trade next. So, claim your spot for this event right with one click right here.
Happy trading,
Imre Gams
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
