Volatility creates opportunity in the forex market

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Note from Chris: Thirteen trades… and each winner. This is the record that Imre Gams has accumulated over the past four months. If you had called all of them, you could have turned a $5,000 bet into $10,815, more than double your money.

Imre is a seasoned trader now working with friend from Legacy Research and master trader Jeff Clark. And as you’ll hear from Imre in the Q&A below, currency trading allows you to avoid the bear market in stocks.

This is because you can always find at least one currency rising against another. And thanks to the Fed’s aggressive rate hikes…currency markets have gone from a sleepy backwater to a traders’ paradise.

If you’re looking for a way to make profit that isn’t tied to stocks… pay close attention to what Imre has to say. And for more on how he gave Jeff’s followers the chance to more than double their money on his business referrals, check out his on camera interview with Jeff here.


Q&A with Imre Gams, Editor, Currency trader

Chris Lowe: There’s a lot of buzz around Legacy Research about your new currency trading tip. In beta testing, you have won 13 consecutive trades. For people unfamiliar with currency trading, why should it be on their radar today?

I am : Many of the largest and most profitable trades in history have occurred in the currency market.

Take Andy Krieger. He’s the brilliant trader I’ve had the pleasure of working with for years. In 1987 he became famous for shorting the New Zealand dollar. He left this trade with $300 million in profits for his business.

Or hedge fund manager Stan Druckenmiller… He’s made millions of dollars from single-currency trades – multiple times. And Bill Lipschutz was earning his company $300 million a year in currency trading (forex).

Then there is George Soros. He is famous for “breaking the Bank of England”. He bet against the British pound to the tune of $10 billion and made over $1 billion in profit. He remains one of the 300 richest people in the world largely due to this trade.

Currency trading is also not correlated to stocks. It’s just a fancy way of saying that currencies and stocks don’t always move in the same direction. So it doesn’t matter if stocks fall, as they have all year. You can always find a currency rising or falling against another currency.

But currency trading is so appealing at present because of the magnitude of the moves away from zero that we see in interest rates all over the world. Since starting to rise in March, the Fed has raised its key rate by 0.5% to 3.2%. Now other central banks are following suit.

Interest rates are an important factor in determining the value of one currency relative to another currency. Thus, these interest rate movements cause huge movements of currencies against each other.

And that is what we are looking for as traders. We profit from currency movements. The more movement, the greater the opportunity.

Cris: Can you unpack that for readers who may not be aware of what’s going on with interest rates?

I am : Currencies died as an exciting market for trading following the 2008 financial crisis.

Indeed, many global central banks were cutting interest rates to zero in the wake of the crisis. And that sparked a race to the bottom for global currencies. There was an incentive for all these central banks to devalue their currencies as much as possible.

And when all the central banks do the same thing…and push interest rates down to zero…it has a chilling effect on currency movement.

Low interest rates mean low energy…and low volatility…in the currency markets. Higher interest rates mean higher energy and higher volatility.

And now, 14 years after the crash of 2008, we are moving from low to high energy. Central banks strengthen currencies instead of weakening them. They are trying to combat the inflationary pressures that we see around the world.

Cris: The Fed led the charge in raising rates to fight inflation. Can you talk about the pressure this creates for other central banks and other currencies?

I am : This is where it gets really interesting. The US government issues the world’s reserve currency – the US dollar. Thus, every central bank in the world holds US dollars in reserve.

Foreign governments use these reserves to buy raw materials, the price of which is in dollars. They also use them for trade. Just as English is the international language of business, the US dollar is the international currency of business.

Many countries also hold debt denominated in US dollars. So if the Fed makes the dollar stronger by raising interest rates, there will be a lot of additional pressure on those countries to pay those debts.

This means they have to raise interest rates to bolster their own currency, just to defend themselves.

But what if you’re in an economy like Japan, which has been in persistent deflation since the 1990s?

They failed to revive their economy. They can’t afford to raise rates. But at some point, they have to.

This is what we see in Europe. This is also what we see in Australia and Canada, to some extent.

The Fed bullies other central banks into compliance. The Fed does not care whether the European Central Bank or the Bank of Japan raises rates or not. But they will have to raise tariffs to remain economically competitive.

Cris: Why does raising interest rates strengthen a currency?

I am : In a nutshell, the higher the interest rate, the more interest you can earn by securing your principal in that currency.

One of the most famous currency exchanges was the carry between the Australian dollar and the Japanese yen. Historically, Australia had higher interest rates than Japan. Traders therefore borrowed in yen and then sold those yen on the foreign exchange market to buy Australian dollars.

Because the interest rate on the yen is so low, it is virtually free to borrow. Then all you have to do to make a profit is switch to Australian dollar assets with higher yields.

And the more transactions that sell yen, the lower it goes. Conversely, if a lot of people are buying Australian dollars to take advantage of the higher yields there, the stronger that currency becomes.

Again we see these kinds of “spreads” – or differences between interest rates. This is why currency trading is so exciting now. It was a relatively stable market. Now it’s anything but stable.

The British Pound is the most recent example of wild currency market volatility. After the country’s former prime minister, Liz Truss, announced around $50 billion in unfunded tax cuts, the pound slumped to its lowest level ever against the dollar.

It led to a rout of UK government bonds… It scared the lives of pension fund managers, who hold a lot of those bonds… And it led to Truss stepping down as Prime Minister after just six weeks at this job.

We can point to the unfunded tax cuts… or the lack of confidence in Truss’ ability to manage the pound. But thanks to the wild swings in US interest rates, the market no longer knew how to properly value the British currency. So we see these volatile swings.

Cris: And you were able to profit 13 times in a row on these swings. It’s impressive. How do you calculate earnings on a currency exchange like this?

I am : As traders, we measure our gains and losses in “pips”. It means “point percentage”. A pip refers to the fourth decimal place of an exchange rate quote.

For example, if the Euro/US Dollar currency pair moves from 1.2050 to 1.2051, the pair appreciates by 1 pip. The dollar value of each pip depends on various factors, including the value of the trade.

Since beginning our testing in July, my forex exchange recommendations have returned a total of 1,163 pips.

A modest pip value would be $5 per pip. In this case, our trades so far would have returned $5,815 (1,163 pips x $5). A pip value of $5 would suit novice traders…or people with a relatively small account balance of $2,500 to $5,000.

A higher pip value of $10 per pip would have given us a gain of $11,630 on these trades, while a value of $20 per pip would have resulted in a gain of $23,260.

The best part is that it is possible to achieve these kinds of results with a relatively small balance in your brokerage account.

Cris: Thank you for this excellent introduction to currency trading. It’s not something we’ve looked at closely before here at To cut. And your track record so far proves that it can be very lucrative, even with a raging bear market on Wall Street.

I am : You’re welcome. I go into much more detail about everything in the interview I recorded with Jeff Clark. I therefore encourage those interested in the types of gains I have been able to make in this market to watch it here.

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