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!
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