Profiting With A Falling Dollar

Everywhere you turn there are signs showing the dollar is going down in value. Products our stronger dollar could buy much cheaper are now costing much more. It takes a few more of our greenbacks to buy that same lead painted toy from China, or that barrel of thick goo that we put in our imported cars from Japan as we fill up our tanks and nearly choke on our $4 lattes.

Since our country is no longer able to make decent products anymore, we have no choice but to import them from somewhere. While other economies are flourishing from our purchases they still have to convert our dollars to a local currency.

That being said, most people are suffering from higher priced products yet the rich just keep getting richer. As market conditions change so does the rich investment strategy.

The average person has one investment strategy: invest, hold and pray. The rich see every market change as the time to change investment strategy. When they see oil prices going up, they invest in oil stock; when the dollar drops they buy into the Euro or another currency.

For example: In February 2006 the Euro/Dollar (EUR/USD) was around 1.2400; as of January 2008 it sits around 1.4800. For someone with a standard account with $20,000 invested, a single standard lot of $1,000 in a trade (or 5% of their account margin) with a 100:1 leverage would have made $24,000 in profit, boosting their total account value to $44,000.

A little over 100% return in just 2 years isn't too bad for a single trade. The people with a Certificate of Deposit only earned around 5%, not to mention the high number of folks with mutual funds who took a loss. I wonder how many people lost 15%-25% of their mutual funds. On another note, the higher oil prices go, the farther the dollar sinks against the Canadian dollar. The lower oil prices go, the more the dollar gains on the Canadian dollar. On extreme days I have seen the USD/CAD move by 300 pips in a 24 hour period. That means a 15-30% return in a single day.

To answer the question of what to do with a falling dollar, simply trade against it. Take the time to learn the Forex market because you will lose money as quickly as you make money if you don't.