Forex Trading - 2 X Currencies With Huge Profit Potential Now

by : Kelly Price

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 and here we will look at two of them, in which a simple buy and hold strategy could make 100% or more.

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

Because their commodity producing nations and there currencies reflect this and the global economies thirst for commodities is seeing huge rises across the board as the new emerging economic giants of India and China expand at a rapid rate.

Quite simply just using a buy and hold strategy in these currencies can 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:

Take the Canadian dollar first, its risen as a result of the higher oil prices and should continue to do so as long as oil prices remain firm.

A little known fact is that Canada has the second largest known reserves of oil, 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 Saudi Arabia.

In conclusion strong oil prices volatility in the Middle East strengthens the Canadian dollar.

Now let's look at Australia which 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!

Of course these nations produce more commodities than the ones mentioned, but they are a good example of how commodity prices affect currencies.

A forex investor needs to understand which nation's currencies are vulnerable to commodity prices and how and this is easy to do with a bit of research but in broad terms:

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

Will the gains continue

If you look at the huge rises in the above currencies in recent years you will see how lucrative a buy and hold strategy can be. Will commodity prices continue to strengthen?

We don't know, nothing in life is certain but the likelihood is yes, and buying the dips at key support and holding these currencies looks a good way to make some triple digit gains over the longer term.

We will look at the techncial view in the next part of the article and how to enter these great trading opportunities