- Everything you need to know about making money is about to change.
Not that kind of change.
This kind of change.
And one of the most basic ways to make money
is to change it into different money.
I'm talking about the foreign exchange market, also known as
forex, also known as FX, also known as trading cash
for cash and then back to cash again.
And in this world of cash, change and profit,
there's no better motherf*cker than the US dollar.
Since 1944, the world has relied heavily on
the dollar, and recent news makes it seem
like that's truer now than ever.
Experts are literally saying it's foolish to fight
the dollar right now, that this creates the
easiest trade in currencies maybe ever.
It's that strong and getting stronger.
But how did it get to this point?
And how can we profit from it?
It starts with how countries trade.
When two countries do business, it's a lot easier
if they can trade in a common currency.
If Mexico uses pesos to buy kangaroos from Australia,
Australia might not be able to use
those pesos to buy pandas from China,
not without doing all kinds of currency conversions first.
Instead, most countries trade in US dollars,
keeping large reserves of greenbacks.
And there's more here.
If a country's native cash goes down the toilet,
it still needs to have plenty of
valuable US cash for conducting trade and perhaps
more importantly, for paying off their debts.
Every day there are massive amounts of
foreign currencies being exchanged for the dollar
at specific rates, called the exchange rate.
And the exchange rate can vary wildly
due to factors like inflation and unemployment.
Remember what I said, like 3.5 seconds ago,
making money is about change.
This is what makes forex so exciting.
Daily change means daily opportunities to make money,
especially in a time like now, where it
seems like everything is in absolute chaos.
And even though it has its dangers, forex trading
can be a lot simpler than stocks and crypto.
You already get it.
It's just cash for different cash.
Yes, currency values are impacted by a
wider range of factors than stocks.
But there's no blockchains, no wheat indexes, no
temperamental CEOs trying to be funny on Twitter.
Plus, it's a decentralized market open 24/7
Like wherever you are right now, even if you're
watching this at 3AM, you could hit pause,
make your first forex investment, hit play, and then
cash out when this video is over.
I mean, that's super unrealistic.
But the point is, you can trade forex
pretty much however you want, whenever you want.
The downside?
You might end up making the kind
of unrealistic investments a 3 AM investor would likely make.
But the main attraction here is that there's
a way to invest small and make bunches. But how?
And why is the US dollar surging
while nearly everything else is falling?
Well, first, the how.
The percentages you make in forex
are low compared to stocks.
And because of this, forex brokers
take a high leverage approach.
We'll talk more about high leverage later.
But basically, brokers will let you borrow
eye popping amounts, matching your investment at
crazy ratios, which can mean huge money.
However, if your little leverage investment goes
wrong, then you're facing some crazy payback.
Still, forex is relatively simple, and you might
even be benefiting from it without even knowing.
And even if you're not just starting,
everybody needs the same thing - a friend.
So why not have the best friend there is?
The almighty.
Not quite that mighty,
This almighty.
Someday, when you're an expert forex trader, you might
get into exchanging Brazilian reals for Iranian rials.
But when you start trading, your
first focus should be US Dollars.
As the world's reserve currency, it's the guy
to know in order to get around.
It's sort of like English.
Not everyone uses it, but it's used everywhere.
How did the dollar get this spot?
Why not the euro, why not the yen, yuan, or Bitcoin?
Well, long story short, at a crucial time, the dollar
was backed by more gold than anyone else, making it
almost as valuable as the yellow metal itself.
So countries without much gold started
acquiring the next best thing - dollars.
Flash forward, and the world economy
is off the gold standard.
But the greenback is still the currency
that other countries hold the most of,
meaning it just remains dominant.
But that doesn't mean it's invincible.
The dollar, like any currency, can dip due
to things like inflation, interest rates, wars, droughts,
and any other factor that hits the news.
But when it comes to internal
challenges, even when the US economy shrinks,
it's still massive and stable.
And this means the dollar gets way more
benefit of the doubt over other currencies.
Perfect example.
Typically, when a country imports more than
they export, known as a trade deficit,
that country's currency value falls.
The US? been in a deficit since the '70s without significant issues,
and there's a few other things that it has going
for itself as well, like it's unlikely the US will be invaded,
or face heavy sanctions.
And perhaps most importantly, the dollar
is strong due to comparison.
When the world economy is in decline, the US,
even though they're not doing great, tends to
do better than just about everyone else.
The only real short term existential threat to the US Dollar
is its foreign debt, much
of which is held by China.
And we shouldn't downplay this.
It's a serious threat, especially as the
Chinese yuan, and especially, especially as the
yuan gain traction as reserve currencies.
But at present, the Chinese economy is too reliant
on the export of goods to the US
to risk crippling the purchasing power of the dollar
by telling America to pay up on its debts.
To my mind, though, all you really need to
know is that in times of international struggle, like
during, say, a pandemic the dollar actually gets stronger.
This is why currency veterans essentially everywhere are
blatantly saying, don't bet against the US. Dollar.
Not now.
In the last few years, two of the world's most
important currencies have really had a tough go at it.
The value of the euro has
dropped 20% compared to the dollar.
The yen has dropped 34%, and
it's probably not going to stop.
The euro will likely continue to struggle
as the war in Ukraine continues to
upset the energy market, disrupt wheat trade,
and just generally make everyone really sad.
Meanwhile, in Japan, its public debt currently
sits at about 260% of its GDP.
And here's what I was saying earlier.
Since last year, Japan has had a
trade deficit, again, meaning it pays more
for imports than it earns from exports. For the US,
that didn't end up being a huge deal.
But for Japan, this brought about a ton of
fear that its central bank will start printing more cash,
driving down the value of the yen.
And unfortunately, those fears alone are enough to
drive down the value of the yen.
So, again, in the wider world, when things turn
scary and investors take fewer risks, they turn to
the safe haven they know best - the dollar.
It's not fair.
But even when a global recession is the result of US tomfoolery,
the belief that the dollar will
recover and the fear of what will
happen if it doesn't, actually stabilizes it.
This resilience is called the dollar smile, and it's the
key to just about everything exciting in the forex market
right now, stuff you can actually profit off of.
Okay, so first you need to understand
how one profits off of currencies.
You don't make money on the initial trade.
You make money on the turnaround, similar to crypto.
So you trade $1 and get €1 back.
You wait, and, lucky for you, the euro gets stronger.
Now, €1 can actually buy $1.15.
So when you exchange your Euros back for dollars,
you get $1.15, a 15 cent profit.
Without getting into the nitty gritty,
the long and short of this is that you have to
invest a lot in order to make a decent profit.
Or the other option is leverage, amplifying both
your profit potential and, more importantly, risk.
Forex brokers won't waste their
time on small investments.
What they will do is let you borrow at bonkers ratios
to your original investment as high as 1 to 400.
More common is 1 to 100.
So instead of trading with $1,000 using leverage,
you might have $100,000 in buying power.
The idea is that at an exchange rate of $1 to €1,
$100,000 gets you €100,000.
Then, when the exchange rate seesaws, so the
Euro gets 10% stronger relative to the dollar after your trade,
you can sell the €100,000 back for
$110,000, giving you $10,000 in profits minus the interest on
your $100,000 loan or on your own, that $1,000 would
have yielded you a profit of $100.
But having gone the high leverage route, you
made nearly ten times more after fees.
Sounds awesome, right?
Why aren't you doing this already?
Because you're loan accrues interest.
And if the exchange rate never seesaw, then at a certain
point, your broker is going to want their money back.
And if the opposite happens and the
trade goes in the negative, then all
that leverage is now working against you.
And that's not just high risk that's sell
your house and all your possessions level risk.
Are you up for that?
High leverage is a serious game for serious players.
It's one that you probably shouldn't play if
you have no idea what's going to happen
to the value of the dollar tomorrow.
I mean, maybe some US tech company
will announce a breakthrough in geothermal energy
and the dollar will skyrocket.
Or maybe China will call in America's debt
and the dollar will collapse in value.
Sure, you can turn hundreds into
thousands and thousands into millions, and
you can do that almost immediately.
But you can also turn the same hundred
into nothing, or worse, into negative thousands.
But here's the thing, while high leverage forex
might be the worst possible place for you
to get started in active trading, with a
modest and straightforward approach, low leverage might actually
be the perfect entry point.
And it's actually much simpler than it sounds.
Even if you've been barely paying attention.
You must have heard me say
dollar like 50 times already.
That's because the dollar is your friend.
If you're looking to trade it, get to know it.
See how it's doing.
Check in on it like you should your grandma.
- I may have died if I hadn't been wearing it.
- Then focus on a few other currencies, like
the euro, the real or the riyal.
Then keep an eye on things like inflation rates,
elections and unemployment reports of the countries
that you're following, and see if you can
pick up on any shortterm patterns.
Once you do, maybe just then you
can dip a toe into active trading.
And even if you have no intention of ever
trading currencies, I have good news for you.
First, it's important to understand how these things work and
what experts are saying, because it's just going to help
you understand the world just a tad more and you're
going to end up making more money.
Second, you can benefit from this dollar
dominance by simply using the dollar.
For the last year, one of the biggest concerns
of most Americans is inflation stealing their money.
It totally sucks.
But I found it quite refreshing to hear
that while things aren't amazing for the dollar
right now, relative to just about everything else,
the dollar is kind of killing it.
Even compared to most investments,
it's doing pretty well.
The dollar isn't just dominant, it's resilient.
Even when it dips, it always bounces back.
Remember this phrase, the dollar smile?
It means that whether the US economy is at its strongest
or at its weakest, the value of the dollar tends to
go up like either side of a smile.
And while I'm sure it won't be that
way forever, we can be pretty happy knowing