What’s the world’s largest market?<\/p>\n
If you answered stocks or bonds, you’re not alone.<\/p>\n
The truth is most folks have never heard of it… let alone considered trading it.<\/p>\n
But the answer is the currency market.<\/p>\n
It’s also known as the foreign-exchange (forex) market, which has daily trading volumes of about $7.4 trillion.<\/p>\n
That’s 32 times larger than the U.S. stock market. <\/em><\/p>\n It’s no wonder some of the biggest trades of all time have taken place in forex.<\/p>\n These are trades that have netted hundreds of millions of dollars in profit.<\/p>\n One famous currency trade even hauled in more than $1 billion. (More on that below…)<\/p>\n And there’s something interesting about these forex trading wins that you should know about.<\/p>\n Some of these trades took place when stocks were in a bear market, like they are today.<\/em><\/p>\n That’s because the currency market and the stock market tend to move independently from each other.<\/p>\n As you’ll see today, it’s why forex trading is the perfect “escape hatch” for folks sick of losing money in stocks.<\/p>\n The first forex trade I want to bring to your attention was a friend and mentor of mine – Andy Krieger.<\/p>\n In 1987, he made millions for the firm he worked for, Bankers Trust, on a single currency trade.<\/p>\n And he took in this haul in one of the worst environments ever for stock market investors.<\/p>\n As you may recall, on Monday, October 19, 1987, the Dow crashed 22.6%. To this day, it’s the biggest one-day crash for the Dow in percentage terms.<\/p>\n The press dubbed it Black Monday.<\/p>\n This caused investors to flee the U.S. dollar and seek refuge in alternative currencies such as the New Zealand dollar (the kiwi).<\/p>\n At the time, the kiwi carried a relatively high yield. So, investors kept piling in. And it kept going up versus the U.S. dollar.<\/p>\n But my mentor could see a boom-bust scenario developing. He said to himself, “This is a stupid situation. I don’t believe the kiwi should be this strong.”<\/p>\n So, he placed a monumental trade against it. His sell orders are rumored to have exceeded the entire money supply of New Zealand.<\/p>\n And it paid off…<\/p>\n Krieger bet so heavily against it, the kiwi fell 10% in a day. That’s a huge move for a currency.<\/p>\n And he hauled in $300 million for Bankers Trust – an unheard-of win at the time – right around the time that stock market investors were losing their shirts.<\/p>\n But even that gain paled in comparison to the one George Soros earned by betting on a falling British pound five years later…<\/p>\n In 1979, what’s now the European Union, introduced a new currency system.<\/p>\n At the time, European currencies floated freely against each other. But to encourage trade, it created a managed system to reduce exchange-rate volatility.<\/p>\n This meant the British central bank had to artificially prop up the value of the pound to keep up with the strongest currency in Europe – Germany’s deutschmark.<\/p>\n This meant raising interest rates to attract capital into the pound. And Soros saw this was causing too much pain for the British economy.<\/p>\n And in 1992, he pounced.<\/p>\n He bet heavily against the British pound, taking on the Bank of England in the process.<\/p>\n He figured the pound would tumble against the German currency if he applied enough pressure…<\/p>\n And that’s what happened. Following what’s known in Britain as Black Wednesday, the pound fell as much as 30%.<\/p>\n Soros banked more than $1 billion on this trade.<\/p>\nKrieger vs. the Kiwi<\/h2>\n
A Billion-Dollar Trade<\/h2>\n