Through The Forex Trenches With Wade Hansen by J. Gopalakrishnan & B. Faber
Wade Hansen has been involved in investor education his entire career. Most recently, he cofounded Learning Markets and Pfx Global (Profiting With Forex) to help individual investors learn to take control of their investment portfolios. He has also created investment courses in stock, options, futures, and forex trading for Yahoo! Finance, Saxo Bank, and thinkorswim Group.
Hansen, who is actively involved in managing his own stock, option, and forex portfolio, is the coauthor of three books, the most recent of which are All About Forex Trading and All About Investing In Gold. He has also written articles for Forbes, Yahoo! Finance, Stocks & Commodities, and Nasdaq.com. His investment commentary and educational articles are featured across the web and at www.learningmarkets.com.
S&C Editor Jayanthi Gopalakrishnan and Staff Writer Bruce R. Faber interviewed Hansen on June 27, 2011.
Wade, how did you get started in trading currencies?
I started trading about 10 years ago. I had been invested in stocks since the mid-1990s. Right after 2000, trading currencies was just starting to become a little more mainstream in the US. I think it was through an early Fxcm account I had where I was just trying to find good resources for currency trading information. There just was not much out there. I was already involved in stock trading. I was a registered representative for a financial services company, and I decided to shift my focus away from stocks into currency trading for a while.
I did a lot of studying and research while I was trading, and eventually ended up with a few trading partners. We started a commodity trading advisory and then one of my partners, John Jagerson, and I wrote our first book, Profiting With Forex. It came out in 2006. Our second forex trading book just hit the shelves.
Which one is that?
It is called All About Forex Trading. I started as an individual trader, moved on, and started a commodity trading advisory. We wrapped that up a year or two ago, as we decided we did not want to deal with regulatory overhead and oversight anymore, and have stuck with individual education since that time.
You made a transition from equities to currencies. What led you to move away from trading equities?
I liked looking at the bigger picture in investing. I wanted to see what was happening on a global scale with money flows and interest rate differentials, and how politics played a role.
An interesting thing about the currency universe is that — especially if you were looking for currencies that have a large degree of liquidity — you are limited to a relatively small pool. If you want to dig down into some of the smaller currencies, you can, and there are plenty of them out there, but there are not a lot of big ones that have a lot of trading volume. It is easier to keep your arms wrapped around 98% of the forex market than it is to keep your arms wrapped around 98% of the listed stocks out there.
Are there specific currency pairs you favor over others?
It depends on what is happening at any given moment. Lately, the euro/Swiss franc has really been on a tear. Really, anything crossed with the Swiss franc has been moving. For a while, when we were coming out of the downturn, currencies were a great place to be. The aussie was great to watch. Before that, when the carry trade was in full swing, anything crossed with the yen, especially currencies that came from countries with higher interest rates, like the aussie/yen, the kiwi/yen, and the pound/yen, was a favorite for a lot of traders.
Since you look at the global aspects when it comes to trading currencies, what, in your opinion, moves the currency markets the most?
Again, that depends on what is happening in the markets. There is one fundamental factor out there that is always the trump card for the currency markets, and that is fear. If global fear levels rise like we saw in 2007 and 2008, we see a lot of people moving toward safe-haven currencies. The US dollar is one of them not because people really like the dollar, but because people really like US Treasury notes, and you have to buy those in US dollars. So if you are outside of the US and you want to buy Treasuries, you have to convert your currency into US dollars, and then buy the T-notes. So that increases demand for the US dollar.