By Sean Hyman

The best currency traders that I know don’t concentrate on what’s happening right now. They don’t get focus on the present, or get hung up on the daily price action.

Instead, they peer into the future and predict what will happen in the currencies markets months ahead of time. Then they build a portfolio that will benefit as that scenario starts to become a reality.

Why do they bother looking so far into the future?

It’s because stock markets and currencies will respond ahead of that. For instance, if investors think that we’re going to be out of the recession in the next six months, then they will start buying up stocks and certain currencies now!

Why? If they wait until everyone and their brother knows the recession is over, then the best values will be gone. They want to buy now, when they can secure the best prices. It’s a professional’s job to stay a step ahead (or two or three steps ahead) of the retail investor.

The retail investor waits until the coast is clear…then they invest. However, by that time, the next move is well under way and they’ve missed the best of the gains (percentage wise).

I firmly believe that we are past the trough of the recession (at least in the currency market). We’re probably not quite back into expansionary mode yet by any means, but we’re past the worst. For a visual of what I’m talking about, see the chart below.

We’re past the dip and recovering!

It’s at those times that you start to put your offensive players back out on the field and retire your defensive ones until the next economic downturn.

Now why would I think that we’re past the trough of the recession? The average length of a recession going back to 1900 has been about 17 months. See the chart below.

Even though it’s bad, recessions don’t last as long as they used to!

However, if you consider the time period after World War II (blue part of the graph), then you’re looking at recessions lasting an average of more like 9-12 months.

So far we’ve been in this recession for 17 months. That means it’s time to start bringing back your offensive line. Tune in tomorrow and I’ll tell you exactly which currency to recruit for your portfolio…

Until next time…happy trading!
Sean

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