Forex and currency trading is extremely risky … and if you don’t know what you’re doing, you could be in a world of pain. That’s why I stick to easy strategies in stocks and options.
Take the Swiss Franc in 2015 when the Swiss National Bank unexpectedly unpegged the franc per euro. That led to the bludgeoning of FXCM (a forex broker), as shares plummeted 88% one day after the “black swan” event.
Recently, we saw similar action with the Turkish Lira.
In 2018, we saw the Lira whiplash traders… and in 2019, we saw the unstable currency weaken significantly against the U.S. dollar due to political tensions.
Banks like BNP Paribas and Barclays lost millions… and Citigroup Inc. (CITI) stared in the face of a $180M loss on a loan to a trader who took a bevy of “wrong-sided” bets linked to the Lira.
I don’t know what the “smart money” was thinking with this bet… but my guess is they were playing for a bounce and thought they would get paid… little did they know, the markets could remain irrational for extended periods of time.
Traders Can’t Hide From Their Losses
One junior trader learned it the hard way.
Bloomberg dropped an expose on Morgan Stanley just the other day, noting “The firm is investigating suspected mismarking of securities to conceal losses of as much as $140 million in a portfolio handled day-to-day by London-based Scott Eisner, a 2014 Yale University graduate and associate at the firm…”
There were multiple traders in question when it came to the concealed losses. Thiago Melzer was in charge of running the foreign exchange and emerging markets Americas desk, while Mitchell Nadel ran macro trading in the Americas (this included interest rates and currency bets).
The 27-year old Eisner managed orders for various currencies… and of course, he knew what was going on with Morgan Stanley’s profit and loss (PnL) — knowing he would either get fired or be moved to a lesser role if he owned up to the losses.
So what did these fat cats do?
They used currency options and decided to “mismark” their PnL because they knew if they placed a certain value on the currency bets… it didn’t really reflect the true worth.
Get this… in the third quarter, Morgan Stanley actually “booked” some of the losses, yet it showed more than a 20% rise in fixed-income trading revenue (part of it was offset by a drop in Foreign Exchange).
Little did the bulge bracket know, there was a group of traders who were using funky “accounting” to conceal their losses. The kicker: these traders were either suspended or fired, they got off pretty much scot-free.
The traders probably didn’t expect to sit in such massive losses… and that’s the problem with trading currencies — you never really know when things will revert to the norm.
That’s more than enough reason to not trade them, in my opinion.
So what’s the better solution?
Trade stocks… because they’re so easy to trade if you have the right strategy in place.
Trading Made Easy
There’s one strategy I like to attack the market with all the time — the catalyst runup.
Now, I’ve simplified my strategy down to just one trade a week. All I have to do is look for my highest-conviction trade idea every single week… and repeat that process to stack up.
Let me show you how it all works.
I painstakingly filter through the hundreds of biotech and pharmaceutical stocks (this sector is my bread-and-butter) out there and find the one with the most powerful setup.
I come up with a thesis and a plan of attack with specific prices to enter, take profits, or stop out.
Here’s a look at an example of one of my most recent top trade ideas.
The company is DMPI – and they have some data coming November 22nd. It should make a move up higher into that event. So, the details for the trade are below!
This is my favorite play of the week!
DelMar Pharmaceuticals (DMPI)
Catalyst Dates: Phase 2 data updates November 22nd
Buy Zone: $.65 to $.75
Profit Zone: $.85 or higher
Stop Zone: $.50 or below
Here’s the pattern I spotted in DMPI.
If you look at the chart above, DMPI was forming an ascending triangle pattern (a breakout pattern)… and I was playing for a move above $0.85.
The icing on the cake was the fact DMPI had an upcoming catalyst and typically when we see a bullish setup with a data release… the stock runs up into the event.
If you looked at the trade plan that I sent out to clients, the buy zone was between $0.65 and $0.75. So you could’ve put a limit order to buy at $0.70 (right in the middle)… and you would’ve got filled.
Thereafter, you could’ve entered a stop-loss order at $0.50… and put your limit order to sell half at $0.85… and the rest at $1 (this level typically serves as a magnet).
How did that trade turn out?
Well, it went right to my target… and even broke above $1.
That means you could’ve netted an average return of 32.14% in just a few days…
It’s really that simple… I let my clients know all the pertinent details about my best trade idea for the week… and all you have to do is execute.
You’re probably wondering how the trade turned out…
Well, it got right to my target, just as I expected.
If you’re thinking about trading forex and currency options… I don’t think that’s a great way to grow your trading account. Instead, check out Fast 5 at the lowest price ever — it’s the same strategy I used to go from a broke college graduate to a 7-figure trader.