Brad’s Note: Today, I’m sharing an essay about a unique market we don’t normally cover here at Wide Moat Research.
But as you’ll read below from a man who’s been involved in it for decades, conditions are aligning across the world to create an opportunity unlike any he’s seen in years.
Over his 35-year career, Larry Benedict has traded more than $500 billion worth of assets in this market – the largest in the world… and learned the best strategies for spotting promising movements within it.
In the essay below, he’ll share how those looking to diversify their portfolio into this asset class could profit from the opportunity on his radar.
To learn more about what’s happening in this market, read the essay below. And click here to join Larry tonight at 8 p.m. ET and hear his favorite trade to make today.
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It was 3 a.m. and the phone rang.
My broker had woken me up because the Japanese yen just reached the price level that I’d told him to notify me at.
Groggily, I gave him a new higher price and told him to call me if it reached that.
Just fifteen minutes later, the phone rang again.
This was a common occurrence when I first began trading currencies back in the ’80s.
Back then, headlines declared that America had lost its financial and technological edge… and that Japan was on the cusp of world supremacy.
Some speculated that the yen would soon be the new world reserve currency – much the same way people fear about the Chinese yuan today.
Lawmakers complained of unfair trade deals, stolen intellectual property, and other threats due to this Japanese dominance.
Yet the collapse was already underway. New tariffs effectively blocked Japanese imports from the U.S. market.
And Japan’s central bank attempted to keep the value of the yen low, which caused a stock bubble. When that burst, it sent the country into a “lost decade” recession.
Due to all this action, we saw crazy price movement and volatility throughout the ’80s and ’90s. That made this a fascinating space to work in – to the extent that, over my 35-year career, I ended up trading more than $500 billion worth of currencies.
But that was the ’80s and ’90s. More recently (the past decade or so), central banks around the world have kept tight control over their country’s currency.
That prevented many of the wild swings and big trading opportunities that we saw in the past.
But lately, things are feeling more like they did when I first started trading currencies.
And that means this market should be on your radar…
A Reliable, Lucrative Strategy
Many people are unfamiliar with the foreign exchange market… more often abbreviated as “forex” or “FX.”
But in fact, this is the largest market in the world. The forex market averaged around $7.5 trillion worth of trades per day in 2022.
And there’s one big reason I’ve traded so much currency over my career. FX is one of the most reliable and lucrative trading strategies out there.
This is the BarclayHedge Currency Traders Index since its inception…
That’s one of the smoothest, most consistent hedge fund strategies I have seen.
And if you look at stress points, this strategy did well. In the chart above, you can see how forex weathered the Asian currency collapse in the late ’90s… Soros vs. the Bank of England (when the legendary currency trader made $1 billion by betting against the British pound)… the tech bubble collapse of 2000… and even the COVID-19 crash.
Given that the recent volatility shows no signs of waning, that’s a valuable trait.
Even better, forex returns come from a completely different opportunity set compared to the stock market.
Since 1990, this FX hedge fund index had a -0.08 correlation to the S&P 500, with a better risk-return profile.
That means forex trading is a great way to add some diversity to your portfolio. It can work even when other things aren’t.
And as I mentioned above, there are several reasons this market is more interesting now than it has been in over a decade…
To start, the value of the euro relative to the U.S. dollars in our pocket hit a 20-year low last year. We haven’t seen this kind of parity since around 2002. That’s giving us some interesting dynamics to work with.
Beyond that, inflation and interest rates have been soaring. That’s led to abrupt changes in monetary policy on a global scale.
Currencies are particularly sensitive to macro events like this. And ultimately, when interest rate narratives take hold of the market, FX becomes the place to be.
How to Get Started
The good news is, to trade forex nowadays, you no longer have to be woken up in the wee hours of the morning by your broker.
Many online platforms now exist to help anyone get started in this space.
But forex trading isn’t quite like trading from your stock brokerage. There are some significant differences.
For one, forex trades 24 hours a day, from Sunday at 5 p.m. ET through Friday at 5 p.m.
And many people use leverage to amplify their returns. That’s a powerful tool that requires very careful management to ensure it works for you and not against you.
So I want to lend my experience to anyone interested in learning about forex.
That’s why I’m preparing a special session to educate traders on how to get started. It will go live on April 19 at 8 p.m. ET.
There, I’ll explain more about why we’ve seen interest in forex growing… and some of the exciting things I see happening in this space.
I want to guide you through this opportunity, so please plan to tune in.
You can RSVP with one click right here.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict