Value Investing Vs Forex Trading

I just took a look at the headlines and noticed that the Nikkei (^N225) just plummeted more than 7% in early Japanese trading because of global recession fears. News flash: This isn’t breaking news. Situations like this make me so glad that my financial futures lies with trading currency.

Value investing in stocks where you buy and hold positions for 30-40 years hoping that they have continued growth that builds and builds is down right scary. I don’t have these fears while trading forex because good money management and limited hold times gets me out of the market when I want. But if you have a $1 million 401(k) that you’ve been building for 30 years, it’s almost impossible to pull the trigger and sell even after you’ve watched 30-50% of your hard earned money deteriorate.

Foreign currencies have very cyclical trading ranges. This makes for great opportunities for technical traders, where technical analysis holds much more true than stocks. And with the leverage you are able to use for currency, I know that with a minimal amount of capital invested, I can increase my profits and limit my exposure. For all of you new to forex, this also means that you are just as likely to lose money faster because of the leverage too.

So while a global recession might effect a certain currency pair, there is the pair on the other side that is reaping the benefit. But just like you have to set some form of stop-loss in forex for fear of the margin call, I can’t see myself sitting back and watching my 403(b) rot and die. If I knew nothing about the fundamentals about any of the world stock markets and you showed me a chart, I could tell you that we were in a crisis. But if you showed me a series of currency pairs for the same time period, I wouldn’t be able to tell you we were in a recession. Because some would be up, some would be down, etc. And the best part is, there are only a few pairs if you trade the G10 currencies, so you can just switch to trading another if one doesn’t fit your trading style.

So be thankful if you are trading forex and all of your money isn’t in the stock market. It’s times like these that reassure my decision to switch to currencies.

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