Today's
comment is by Jack Crooks, The Sovereign Society's Currency Director
and editor of the brand new service "Crooks on Currencies."
Dear A-Letter Reader:
There’s a revolution happening in the currency world. Imagine posting
double digit profits, with low cost trades and unlimited liquidity
without sitting at your computer all day. It’s all possible with the
brand new currency exchange traded funds (ETFs). These were just
launched a few months ago. In fact, few investors even know they exist.
These are truly unique. In fact, I would say they are revolutionary.
I’ll tell you more about this spectacular new development in a moment.
First, I’d like
to dispel a common myth. Many people think of the currency market as
the province of wheeling and dealing risk seeking swashbucklers. They
envision currency traders moving from one conquest to another—throwing
caution to the wind. Well there are some of those guys in the market,
but they usually don’t last very long. The reality is you make money by
devising an investment strategy based on solid fundamental and
technical analysis and then tailoring your investments to your specific
risk/reward objectives. Choices abound!
Find Your Comfort zone - Then You’ll Know Where to Play
The first step
in the process is finding out who you are, in terms of investment
style. Your style shouldn’t necessarily change just because
you’re trading in the currency market. What’s worked for you in your
stock or bond investments, and the knowledge you gained there, applies
to your currency investments. Sure, there are some idiosyncrasies in
the way currencies move compared to stocks and bonds, but most of what
you know is transferable. So don’t think you need to start from scratch
or change your style.
Once you’ve
completed your self-analysis, you need to choose the best way to access
the currency market which fits your investment comfort zone. Here are
your choices:
1) Multi-currency deposits –
This is a flexible and safe way to achieve two primary objectives: 1)
Diversifying your risk outside of your home currency, and 2) achieving
a respectable yield while protecting the purchasing power of your
cash.
You can park
your cash on deposit and denominate it in the single currency of your
choice. Or, you can park your cash in a basket of currencies. All you
need is a bank account that offers multiple-currency deposits.
2) Currency Exchange Traded Funds (ETFs) – This is the new product leading the revolution.
Currency ETFs
open the world of currency trading to everyone who has a standard stock
brokerage account. Jump on a hot trend or position for a special
situation in currencies. There’s no need for special currency trading
accounts anymore.
Seven currency
ETFs are now available and I’m sure this list will grow as ETFs become
more popular. Right now, these ETFs include: euro (FXE), British pound
(FXB), Mexican peso (FXM), Swedish krona (FXS), Australian dollar
(FXA), Canadian dollar (FXC), and Swiss franc (FXF). All are traded on
the New York Stock Exchange.
It’s a product
that delivers exactly what investors like us want: low cost, easy
access, efficiently priced and constant liquidity. Plus, ETFs offer
investment strategies that are limited only by your imagination.
3) Currency Options – Currency
options are another effective and easy way to play the currency
markets. Two key advantages to currency options are: 1) your risk is
limited to the amount the premium you pay per option (assuming you only
buy calls or puts as the opening transaction), plus your brokerage
commission, and 2) options are highly leveraged so your profits can be
huge if you pick a winning trade.
I believe
currency options are great products for those of you who like to
speculate in currency markets, shoot for big profits with limited risk,
and don’t want sit in front of a trading screen all day. I recommend
using currency options for intermediate-term trading opportunities
based on global economic themes that affect currencies.
4) Currency futures and Spot forex – This
is where you can produce big-time returns in a very short period of
time. But you also take on higher risk in the form of leverage to do
it. Winning in futures and spot forex requires not only good analysis,
but extremely disciplined risk control. And positions move fast… so you
have to stay connected and highly focused. It’s not unusual to enter
and exit a trade in the same day. SO there’s a lot of potential for big
profits but you have to be disciplined.
Currencies – Strategies for Every Investor
Most people
believe currencies are inherently risky, because they know or have
heard of people who blew out their accounts trading currencies. In
actuality, currency prices don’t fluctuate any more than stock prices.
In fact, they often change much less during the average trading day.
What gets people in to trouble is trading too often, with too much
leverage and with too little concern for risk. That’s a recipe for
disaster in any type of investment market, not only currencies. So to
be very clear, it’s not about the inherent risk embedded in
currencies.
The bottom line is there are boundless opportunities and choices in currencies for almost any type of investor… including you.
JACK CROOKS, Currency Director
On behalf of The Sovereign Society
EDITOR’S NOTE:
Do you want to profit from the currency revolution? Today we are
launching Jack’s new investment trading service, “Crooks on
Currencies.” Every month, he will provide his readers with trading
ideas and strategies to profit using currency ETFs. You’ll receive a
special email about this new currency service later today.
