6 lessons learned the hard way trading currencies online from Ecuador


As you may have read earlier this week, in early 2017 I started trading currencies online.  Now 1 year and several mistakes later…

Here´s what I learned….

1. Buy right!  Don´t buy a currency for ANY other reason except that it´s a good deal based off the last 6 months to a year of trading.  Don´t buy because you ´want´ the currency, or for the interest rate it offers or to diversify your portfolio!  ONLY buy it if it´s hitting 6 month or one year or 10 year lows… or for some reason you consider it a great deal!

2. Buy (and sell) slow.  Often, when currencies start to move, you often buy too quick, especially if it´s a currency you´ve been eyeing.  For instance, say you plan to hold $50k of Russian Ruble.  It pops a little and goes on sale, don´t buy $50k right then, instead buy $10k one day, $10k the next day, $10k in two more days, $10 the next week, etc etc.  Often, you don´t know when a currency will bottom out so don´t buy too early.  But on the other hand if you keep waiting to start buying the currency might turn around and you never got in.

3. Play events.  Remember the missile scare in September of 2017?  Or how about when Brexit first came out?  These events created huge currency and metal price swings.  Buy in and hold until prices normalize, then sell. The turnaround can take days or months, but know that it will turnaround.

4. Hold.  This may be the boring part of your portfolio but you will gain the most often buy diversifying your portfolio over time (buying right, often during events) and HOLDING a little bit of many different currencies for the long haul.  Put as CDs if the currency offers interest.

5. Know the correlations.  After following this for a year now, I can honestly say NOBODY knows what currencies will do, let alone me. Some currencies flow together like the oil-based currencies that often offer better interest rates (BRL, RUB, ZAR) and the EuroZone (EUR, GBP, DKK, HUF, SEK, NOK) and the other natural resource based ones like (AUD, NZD, CAD).  Consider this when setting up your portfolio.

6. The short-term.  After buying and selling currencies for over a year now, I can honestly say I´m not interested in doing it actively anymore.  It´s too unpredictable.  You never know when a currency will rebound, or continue to sink and sink or continue to inflate.  But there´s one thing I´ve found easier to predict in the short-term, metals.  Everbank offers what they call un-allocated metals which makes it much easier for you to play the daily price trends.  And I´ve found metals move a lot, buy when priced low, sell when priced high according to the 3 and 6 month averages.  Check out the chart below, the dips are a little more predictable. Just a little when compared to currencies.  Over the last year there were five dips, if you bought in and sold when metals peaked again you could have made 10% or so each time!

Now´s the time, divorce yourself from the US Dollar no matter where you live!

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4 mistakes and how I still made $34k off currency markets this year

I´ve always thought, “why should you be married to the US dollar JUST because you are American?”

Here´s the test, are your savings in US dollar (that includes stocks, bonds, US real estate)?

Do you get a steady income in US dollars?

If you answered YES and YES, then look down at your finger bro, you married!

So that´s what attracted me to investing in foreign currencies and precious metals.  There´s many ways to do it, I trade through Everbank, an FDIC insured bank out of Florida which has the option of accounts in foreign currencies.  They are also the official sponsor of the Jacksonville Jaguars.

Over the last year since Mr. Trump got elected we´ve been blessed with VERY volatile currency markets.

Remember when the Euro was about 1 to 1 on par with the dollar in March, 2017?

Now, the dollar will buy you about 20% less than that in Europe.

So, why not profit off these currency movements?

Over the course of 2017, my first full year trading actively online I´ve messed up a lot, still made a bit over $30k, but could have made a lot more.

Here´s how my strategy has changed as I gained more experience…

I started out 2017 with the strategy… GET the HECK out of the dollar.  MISTAKE. (The dollar still has it´s place in our financial system.)

Then, by the end of January 2017 I realized I wasn´t going to make any money unless I sold, so I became Mr. day trader… MISTAKE.  (Stress!  And I often was too quick on the trigger.)

Then I decided I was going to hold all my money in the currencies that offer the best interest rates (at the time making around 6-8% annual but are now making around 4% annual) and make a bunch of money passive each month. MISTAKE (All the interest-bearing currencies move together and I couldn´t stomach the price swings.)

Then I decided I was going to diversify my portfolio right then and there. MISTAKE. (Diversify with time and patience buying only when the currencies are a good price.)

And yet through all these strategy changes on the fly I still came out about $34k ahead of this time last year.

So now, my new and improved, revised strategy after one year in the game is ALWAYS buy right, play world events, hold a basket of currencies long-term and play metals in the short term (they move a lot and I´ve found are a bit easier to predict in the short-term).  

Of course, your risk tolerance will influence your strategy as currencies can move QUICK in one direction or the other but I suggest getting in the game and divorcing yourself from the US dollar!

And yes, it is something you can do easily from Ecuador.

Hasta pronto, if you liked this sign up for my Ecuador Insider’s newsletter so you can check out my latest posts(not available online) on living and investing in Ecuador:

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1 hidden paradise in the Andes of Ecuador for land developers

Imagine the mountain-country life, eternal spring weather year-round, no mosquitos (too high), all within 30 minutes of a major city, 20 minutes too an international airport and 10 minutes to the nearest major hospital and shopping malls.  

And it’s all connected by a new highway inaugurated 2 years ago at the end of 2015 connecting the Quito city proper to the airport.  

With this new road you can get to and from Quito within about 20 minutes.  Only a matter of time people figure it out, and they are!  

You can find this “country-living near the city” life in Tumbaco, a valley just east of Quito and where I call home.  

Plus, the area is still on the come-up and deals on land can still be found.  

This week i spoke to one friend of mine who is a developer in my area whose family focuses on smaller 20-40 house projects in the area.

She said the land in the Tumbaco area typically costs around $70-100 per square meter but deals can be had.  

It’s still on the come up compared to it’s ritzy neighbor Cumbaya, a suburb closer to Quito, which already boasts high prices and is fully developed.

She said her family typically spends $500 per m2 of construction on the houses she builds (almost always the shared walls duplex-style typical in Ecuador).  (My take: That figure seems high to me based on my experience, I’ve built higher-end things in Ecuador around $250-400 per m2.)

Her family often focuses on 3 bedroom 2.5 bathroom houses that average 123m2 and sell for around $125,000.  

The average size of her developments are around 40 houses.  That’s a profit per house of $63,500 x 40 units = roughly 2.5 million.  

Of course, you’d have to subtract off that the requirements Ecuadorians have for these types of developments which are pretty basic… a nice wall, paved parking area and an electric gate along with a green grassy area.  

When finished and sold out the developer leaves but will then help elect a community president who will handle managing the homeowners association and collecting monthly fees from then on out. 

She says you need about 7400m2 (about 2 acres) to do a typical 40 unit development like she does.  At the market cost mentioned earlier, that’s a budget of about $500,000 for the land.  (My take: But I bet you could find something a lot less knowing how and where to look.)

If interested in this area let me know, maybe i can help…

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