Monday, September 17, 2007

Forex Trading - 2x Currencies with Huge Profit Potential Now

Most forex traders tend to stick with the majors against the dollar when trading forex, but some of the lesser traded currencies can have as much if not bigger profit potential. Here we will look at two of them, in which a simple buy and hold strategy could make 100% or more per annum.

Two great currencies to trade are the Australian and Canadian Dollar Why?

Because their commodity producing nations and there currencies reflect this.

There are huge rises across the board as the new emerging economic giants of India and China expand at a rapid rate and need commodities to fule this growth.

Just using a buy and hold strategy in these currencies could yield triple digit gains per annum, with low leverage.

This is not a clever strategy, its common sense and suits the patient trader.

Lets look at why this strategy works:

The Canadian dollar has risen as a result of the higher oil prices and should continue to do so, as long as oil prices remain firm and they dont look like dropping much in the near future. Canada has the second largest known reserves of oil and only Saudi Arabia has more. Furthermore, Canada has been the largest supplier of oil to the U.S for the last 7 years, supplying more than even Saudi Arabia. In conclusion, strong oil prices and volatility in the Middle East strengthens the Canadian dollar against its southern neighbor.

Now lets look at Australia. The country is the third-largest producer of gold in the world today.

The Australian Currency is clearly affected by the fortunes of gold prices, therefore gold price increases nearly always strengthen the Australian dollar while decreases will weaken it - relative to most other currencies.

Understand this simple fact:

A forex investor needs to understand which nation's currencies are vulnerable to commodity price increases - in broad terms:

The US economy is highly sensitive to world commodity price rises in general and rises normally put pressure on the US dollar while the Australian and Canadian dollar streghten.

Will the gains continue?

If you look at the huge rises in the Australain and Canadian dollars in recent years, you will see how lucrative a buy and hold strategy can be.

Will commodity prices continue to strengthen?

We dont know, nothing in life is certain but the likelihood is yes, and buying the dips at key support and holding these currencies long term, looks a good way to make some triple digit gains - of course the key is to enter with the best risk reward and we will look at the techncial view in the next part of the article and how to enter these two great trading opportunities.


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