This Market is Red-Hot … Are You Profiting from It?

If you could choose only ONE global financial market to invest in this year what would it be?

Stocks? Perhaps, if you want to sign up for a roller-coaster ride up and down, without much real progress. The S&P 500 Index is up just 7.5% this year, with plenty of stomach-churning volatility along the way — including four separate drawdowns in the past year alone averaging -9%.

Bonds? Forget about it, with record-low interest rates around the world — negative rates in many countries — you’re simply NOT getting paid to take the risk of a bond-market bubble bust. Case in point, global bonds suffered a $1 trillion selloff in just two days after Donald Trump’s surprise victory.

Commodities? Inconsistent. They’ve been all over the map this year. Take gold, which surged 28% higher in the first half of this year — hitting a high of $1,377 an ounce — only to plunge 14.5% since early July right back below $1,200 again.

Forex has been one of THE BEST markets for investors to consistently make money this year!

“Forex” is shorthand for “foreign exchange,” which means trading one currency for another.

All day, all night, currencies are traded all over the world.

The $5.3-trillion-a-day global currency market is the world’s largest and most-liquid market. It trades nearly around the clock, 24-7.

And it thrives on the one thing we’ve had in abundance this year: Volatility!

Rising volatility typically is NOT good news for stock or bond investors, because most of the time stocks sell off in tandem.

Whenever there is a “panic,” stock market correlations go to 1.0, which simply means that almost ALL stocks decline together, but currencies are different.

The global forex market trades in pairs. For instance, the Euro/U.S. Dollar pair. They can’t both go down together because they are on opposite sides of the same coin.

If the euro falls, the dollar must rise. And the same thing is true of every currency pair. It’s a zero-sum game … one currency wins at the expense of another.

In other words, there is always a bull market, and always a bear market to profit from when trading forex. And if you think about it, you have up to twice the profit potential in forex as compared with other markets.

Granted, one drawback with forex is that currency pairs can sometimes move at a glacial pace. It’s like watching your grass grow at times.

But there are two powerful offsetting factors that forex traders can turn to their advantage: Volatility and leverage.

Factor #1: Volatility in global currency markets has surged this year to the highest levels since 2011. And it’s easy to see why. There are plenty of tricky macro crosscurrents in the world today.

In 2015, the Federal Reserve started tightening monetary policy. Meanwhile, the European Central Bank and the Bank of Japan, among other central banks, are still printing money with reckless abandon.

Some central banks are tightening monetary policy, while others are easing policy. And of course, the Chinese are systematically devaluating their currency against the dollar.

This worldwide divergence in monetary policy is a major driver of currency moves, amplifying swings both up and down, which means more profit potential for savvy forex traders.

Now, add in the political dysfunction we’re seeing around the world — beginning with Grexit … then Brexit … and perhaps as soon as next week, Italia-exit — and you can see why forex traders are having a field day in this environment.

Bottom line: If you’re not trading forex today you are missing out on some big profit potential in the world’s hottest market right now.

Tomorrow morning in Money and Markets, I’ll show you how you can harness the power of Factor #2, forex leverage, which allows you to go for big gains with little risk, even on small currency moves.

Good investing,

Mike Burnick
Director of Research

P.S. Forex isn’t only one of the hottest markets this year, it’s also a fast-growing market for new investors. Still, forex trading may be a mystery to many investors, but the reality is it’s easier than ever before to open a forex account and start profiting from this market. My colleagues Boris Schlossberg and Kathy Lien take the mystery out of forex in their exclusive report: High Probability Trading Setups for the Currency Market. Download a free copy now to see what you’ve been missing in the wonderful world of forex trading.

Mike Burnick, with 30 years of professional investment experience, is the Executive Director for The Edelson Institute, where he is the editor of Real Wealth Report, Gold Mining Millionaire, and E-Wave Trader. Mike has been a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. He also served as Director of Research for Weiss Capital Management, where he assisted with trading and asset-allocation responsibilities for a $5 million ETF portfolio.