I told you it is close but maybe still a bit early for the top of Euro against US$ at the moment. But I cannot help but jumped in when I saw the news about the worsening Irish credit crisis. I'm still thinking it may yet be the top for Euro and it may still be strengthening a bit. However, no one can really pick the exact top for anything. If the Euro trend reverts, it can be swift and violent. And I want to be in the game, even if it means I may see some paper loss initially.
I assume everyone knows what the Euro zone is facing, especially the PIIGS, standing for: Portugal, Italy, Ireland, Greece and Spain. These five countries in the Euro-zone foolishly did what a lot of big-time spenders do, borrow way too much during good times and then run into problems repaying their debt. That, of course, raises the specter of debt defaults, the kind of news that rattles investors and pounds world markets. I urge you to read more about the problems of the PIIGS at http://www.huffingtonpost.com/dan-dorfman/piggs-problems-could-pepp_b_497463.html.
As I told you, I started shorting Euro early this year and made a good profit with it. It was an easy money. But when everyone became so bearish and the trade became so popular by Jun, it was the time to get out and move on. I thought I might not have any good chance to make money again by shorting Euro as it is such a bad currency with so many critical problems involved. But I'm happily wrong! It has not only reverted its course which I did predict, it has done that so powerfully, which is way beyond my expectation. I cannot believe it is all over again with the Euro euphoria and a great money making opportunity presents itself right in front of my eyes AGAIN! Not sure if you have heard Big Mac Index. Long story short: the Economist uses the price of the ubiquitous McDonald's meal to calculate the "Big Mac Index", a guide showing how far from fair value different world currencies are. Currently based on the Big Mac Index, Euro is way too expensive against US$, although it may have not yet reached the point of 50% over-valued, which I hoped for. The great investor, Jim Rogers, once said: I don't move and wait till the time when the money lies in the corner. I simply go there and pick it up. Friends, I really think this is one of the kind moments Rogers has described. Don't miss it.
There is a very easy way to short Euro, using ETF with a symbol EUO. This is an inverse fund with a leverage, i.e. twice the inverse performance of the EUR/USD daily price change. In other words, if Euro increases by 1% against US$, EUO will reduce in price by 2% on that day. Vice versa, if Euro decreases by 1%, EUO will increase by 2%. So it is a perfect way to bet against Euro and we hope EUO will increase to make a profit. As I said, I have got into this trade. Since I may be still a bit early, I'll use a so-called "average down" technique to establish my positions. I stated with a relatively small position to get a foot in. If EUO decreases in the next few days (meaning Euro is strengthening), I will buy more EUO at a reduced price and will do so further down the road. This way, my average cost of the ultimate total position will be substantially reduced. This is a very effective way to establish your positions in trading, so that you won't miss some great opportunities by hopelessly waiting for the lowest price possible. Buying EUO is just as buying any stock, simple and easy. I'm totally convinced that in the next few months, you will be happy to see that you are on the trend to profit. But please be mindful of your position size. Any trade has some risk and don't overkill by betting too much beyond your capacity.
No comments:
Post a Comment