Why I’m Dodging the “Currency Blue-Chips”
By Evaldo Albuquerque, Editor, Exotic FX Alert
Who said size doesn’t matter?
It does. And bigger is not always better – especially when you’re investing.
If you limit yourself to only investing in the biggest blue-chip companies, then you’re dooming yourself to mediocre investment returns. You are also missing out on all the profits you could have had elsewhere.
Now yes, blue-chip stocks have mature businesses with stable cash flows. But they seldom give you the opportunity to rack up triple-digit gains in weeks or even days – like small-cap stocks do.
It’s the same in the currency market.
There are certain large volume currencies that most traders buy and sell on a daily basis. I call these “the blue-chip currencies.” These currencies are fine to trade, but they move slowly. That means less profits over time.
Personally, I’d rather focus my energy on the currencies that move faster – and hand out double and triple-digit winners for switched on investors. Here’s how it works…
Where to Find the Next Triple-Digit Winners
What makes little known, small-cap stocks move so much faster than big stocks?
These stocks don’t get as much attention as big blue-chips. As a result, a fewer number of shares trade hands every day. That means these stocks have much lower volume.
If you think about it, investors’ buying and selling activity is what sets the price. With the lower volume, these stocks don’t need a whole lot of extra buying power behind them to make some huge moves. (And those huge moves = huge profit potential.)
The same idea applies to the currency market.
Every day, most traders focus on trading the big “blue-chip” currencies like the euro, Japanese yen or Swiss franc. As a result, the major currencies have a ton of trading volume.
But just like in stocks, more volume means these major currencies move more slowly. These major currencies hardly move hundreds of pips in hours.
Then you get the “small-cap” type currencies, with lower trading volume. They hide in a completely overlooked corner of the foreign-exchange market.
…Emerging markets.
Simply put, it doesn’t take a lot of extra buying to get these currencies to blast off. Their lower trading volume forces them to move much faster.
Many overlooked currencies, such as the South African rand, Turkish lira, and Israeli shekel, offer tremendous potential.
Let me show you what I mean…
Forget the Euro! Trade These Little
Currencies Instead
Among currency traders, the EUR/USD (euro) is the hands-down most popular currency pair to trade. For one reason or another, every trader follows what’s going on with the euro.
But only a select few savvy traders realize that other European currencies offer much better profit potential.
Just like little ducklings follow the mother duck wherever she goes, a few European currencies tend to follow the euro wherever it goes. The only difference is that they move faster, leading to great profit opportunities.
The euro “ducklings” include the Turkish lira, the Czech koruna, Polish Zloty, and the Hungarian forint. They all tend to move in the same direction as the euro, but with greater speed. That means higher profits for you, if you call the euro’s move correctly.
In mid-August, for example, I believed the euro had a pretty good shot of sinking against the U.S. dollar thanks to the escalating sovereign debt crisis. But I didn’t simply short-sell the euro.
Instead, I recommended my Exotic FX Alert subscribers short a currency that flies under most traders’ radar: the Hungarian forint. In the spot market, that means buying the pair USD/HUF.
I knew that, if I was right, the euro would move lower. But the overlooked European currencies like the Hungarian forint would plummet. In other words, the dollar would skyrocket against the forint. Take a look at what happened…
In the chart above, you can see the comparison between the euro and the forint since my subscribers first had the chance to follow my recommendation.
Traders who shorted the euro during that time earned a 110% profit, assuming a conservative 20:1 leverage. Not bad.
But traders who sold the Hungarian forint did much better. They eventually locked in a 2,800 pip profit (or roughly 300%), also assuming a conservative 20:1 leverage. They tripled their money.
It Couldn’t Be Easier to Tap into Emerging Markets
Everyone knows investments in emerging markets offer tremendous profit potential. But only few realize currencies provide an easy way to explore those markets from right here in the U.S., within the comfort of a U.S. brokerage firm.
With a simple Forex brokerage account, you can easily buy the most promising emerging market currency and/or sell the ones most likely to drop. It’s certainly the easiest way to cash in on the fast pace of emerging markets.
Remember, just like stock investors who only buy blue chips, traders who only look at major currencies are missing out some huge gains.
For big currency profits, go small. Trade currencies from emerging markets.
Best Regards,
Evaldo Albuquerque
Editor, Exotic FX Alert
http://evaldo.worldcurrencywatch.com/
EDITOR’S NOTE: Now you can get an insider’s look at all Evaldo’s research and currency plays for a single dollar. Click here for details.
