The Forex Nitty Gritty

Is Trading Forex or Commodities Better?

TFNG Admin — Sun, 29 Aug 2010 21:43:42 +0000

There are a number of questions the trader needs to ask himself when planning to trade. Do I have the capital to risk in trading? Can I devote the time required to learn the mechanics of trading and to follow the market or markets in which I choose to trade. A basic question might be “is trading Forex or commodities better for me”? In answering the questioning is trading Forex or commodities better the trader will learn about market volume, liquidity, daily price fluctuations, margin requirements, and the like. The trader will have certain preferences and basic knowledge that might lend themselves better to trading a given set of commodities or a given currency pair. While the beginning trader is picking trading hardware, choosing an electronic trading platform, and choosing a broker through which to trade asking a question like “is trading Forex or commodities better?” will help focus his or her attention on the kind of details that lead to successful trading. When the foreign exchange markets are trading sideways and a commodity like wheat is going through the roof due to draught in Eurasia the beginning trader may believe that he has the answer to “is trading Forex or commodities better.” However, the question is best answered taking the long view.

A successful Forex trading system can make money in the largest market in the world. Trillions of dollars worth of currencies are traded on the foreign currency exchanges over time. This gives the trader access to a very liquid market in any of a number of major currency pairs. These pairs include any two of the euro, US dollar, Japanese yen, pound sterling, Australian dollar, Canadian dollar, or the Swiss franc. Trading outside of the majors can put the trader in a market with less volume, less liquidity, and, often, less potential for profits. In trading the major pairs a trader commonly will be able to take advantage of small market changes throughout the trading day, buying and selling on cue from his trading software. The market moves will not be huge but with sufficient trading leverage there is the potential for good profits. There is always risk trading at a high level of leverage but many believe that the high liquidity of the Forex markets makes their software more statistically accurate so that they can better manage risk by adept trading. There are good and bad reasons to trade the Forex market but the high volume and liquidity are typically ranked as good reasons to trade currency pairs.

The commodity markets are well known to experience large price fluctuations. This is especially true of agricultural commodities where yearly demand can “eat up” supply. A current example is the severe drought in Eurasia which has sent wheat futures skyrocketing. Commodities trading always has the possibility of large price fluctuations based on new market news. This is attractive to many traders but always carries a level of risk that other traders wish to avoid. Thus, asking “is trading Forex or commodities better” might be rephrased. The trader might ask, “Is trading a highly liquid and profitable market better than trading a potentially volatile market?” In both cases the trader will need to devote a fair amount of time to learning to trade in either market. He or she will also need to devote time to trading. In either market it is entirely possible that if you sit out a day and don’t trade that you will miss a big, and potentially profitable, market move. Good Forex advice, like commodity advice, might be that you choose what fits your skills, inclinations, and allotted time and review your results.

More Resources

Copyright © 2008
This feed is for personal, non-commercial use only.
The use of this feed on other websites breaches copyright. If this content is not in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint:
)

Trading Sideways

TFNG Admin — Mon, 16 Aug 2010 23:05:12 +0000

Commentators are saying that the Forex markets are trading sideways these days. That is to say there are no big up or down moves in any major currency pairs. It would seem that everyone is thinking Forex strategy and Forex news, waiting for markets to break. Part of this is the uncertainty brought on by the slowly resolving recession and not knowing who will really break out and how soon and how fast. It also has to do with the issue of managing the huge amounts of debt that governments have taken on to stimulate their economies while simultaneously worrying about political problems brought on by high unemployment. Forex and sovereign debt are still closely linked. As markets are still trading sideways good Forex advice would seem to be to follow the herd and not commit excessive capital until market direction becomes clearer.

As markets continue trading sideways China continues orchestrating Yuan revaluation. In prepared statements the State Administration of Foreign Exchange in China said it adopts “a go with the flow” attitude in the management of its Forex reserves. The statements continues to say that any buying and selling of US debt is and will be based upon taking advantage of market conditions and not based upon political messages. The agency states that US debt provides good security and low transaction costs and that it is the largest single debt market on the planet. None of this really tells the currency trader anything but is politically reassuring. Based upon the statement we can expect to see things trading sideways. Any market movement will come with China’s buying and selling of dollars and its demonstration of a willingness to see the value of the Yuan float upward.

One issue that could affect the issue of the Forex market trading sideways is the fact that the US congress will soon pass new regulations governing the financial industry. To the extent that these regulations restrict Forex trading they will remove huge players from the Forex markets. Much of the speculation about this issue has to do with financial losses that the big banks in the USA could take. For the Forex trader the issue is if less trading volume will lead to less liquidity. A less liquid market could be a more volatile market and trading sideways could become a thing of the past. Understanding the Forex markets could change if there are fewer players or if other players enter the Forex markets to take up the slack. Nevertheless, trading Forex is still a mixture of anticipation and reaction. Currencies trade higher on good economic news and when the news hits the market traders react differently based upon their perception of the news and when they are able to execute their trades. Thus technical trading will still work for those well versed in pattern analysis and diligent in execution.

Factors influencing the EUR/USD pair are still important, as an example, as the market is trading sideways. When something substantial happens the markets will move. As always success in Forex means a plan and a method. A little research and practice trading while the market is trading sideways may be in line.

More Resources

Big Insider Forex Trading

TFNG Admin — Thu, 29 Jul 2010 02:29:18 +0000

: Image via Wikipedia

Big insider trading can get you a big fine and a jail term in the US securities markets. However, foreign banks, especially those holding huge foreign currency reserves routinely engage in big insider Forex trading and usually profit by it. How can the average Forex trader avoid getting hurt by big insider Forex trading? How can the average Forex trader anticipate and profit from big insider Forex trading. It probably has to do with walking in the shoes of the other trader for a bit. It is very easy for anyone to think of the world in terms of “them out there” and “us.” For a North American to trade successfully in foreign exchange markets it behooves the trader to walk a bit in the shoes of a currency trader from India, China, Germany, or Australia, to name a few possibilities. Whether one is trading factors influencing the EUR/USD pair or concerned about the Yuan exchange rate the actions of large central banks can be the main drivers of currency rates. Anticipating big insider Forex trading can lead to lucrative returns in Forex trading.

From the viewpoint of the USA China is holding an awful lot of US debt and could exert undue influence on the value of the dollar and on the US economy. From the viewpoint of someone in China there are not a lot of options when it comes to buying someone else’s debt. You can buy Yen, Euros, Pounds, Swiss francs, Australian dollars and Canadian dollars. However, the largest pools of capital are dollars and Euros. China has diversified its debt holdings but now has to worry about the Euro falling relative to the dollar and the seemingly eternal debt problems of Japan. The Chinese government has to balance the politics of modernizing an ancient country with its status as a world economic and political power. China has typically seen to its own needs first but, as seen just before the recent economic summit, has had to bow to international pressure to let the Yuan float compared to other world currencies. When China decides to change how it trades its currency it will do so in the most advantageous way possible. This is really big insider trading. As they are busy orchestrating Yuan revaluation the North American trader needs consider the needs of China as seen by the Chinese in order to anticipate how fast and how far Yuan revaluation will go. Anticipating correctly could lead to healthy profits in months to come.

European banks have come to the support of the Euro as the PIIGS and Forex crisis has threatened the economies and political stability of countries within the common market. Demonstrations and near riots in Greece followed austerity measures meant to give confidence to the rest of the Common Market that Greece would work to rein in its debt problems. In Europe these days big insider Forex trading has to do with maintaining the currency, keeping the politics of the European Union stable, and keeping home constituencies happy. When we see European central banks acting in their own self interest we should not be surprised. If the North American looks at things from the viewpoint of a banker in Berlin, Paris, or Rome he or she may successfully anticipate big insider Forex trading and make a tidy profit.

More Resources

Bank Forex Trading

TFNG Admin — Sat, 24 Jul 2010 01:03:55 +0000

: Image via Wikipedia

Bank Forex trading could disappear depending upon how regulators apply the new laws being passed by congress to regulate the United States financial industry. The big banks such as Morgan Stanley, Goldman Sachs, Citigroup, and J.P. Morgan Chase all profit handsomely from Forex trading. These profits could go away with the new law. Commentators have said that bank Forex trading could just move offshore but current legal opinion is that the new regulations would apply to banks and their foreign subsidiaries. The rules could even extend to foreign banks that do business in the United States. For the Forex trader the question is if cessation of bank Forex trading will substantially reduce trading volume and liquidity. Will price spreads increase? Will the absence of big traders skew the Forex market itself? Although the downward direction of the Euro or a rising dollar and lower commodity prices will still drive Forex exchange rates the Forex market may not respond as fluidly with less volume and liquidity.

The fact is that because companies and nations need to trade currencies the Forex market will continue and, in all likelihood, any loss in United States bank Forex trading will be picked up by traders and institutions outside of the United States. This could have an effect on Forex trading by itself. If the profits made in United States bank Forex trading go elsewhere it could also have a small but measurable effect on balance of trade and the value of the dollar versus other currencies. From a strictly economic viewpoint the loss of profits in the United States while it attempts to climb out the recession could, in theory, slow the process and harm the value of the dollar. The counter argument is that by cleaning house in the United States financial establishments the next market crash and recession will be delayer or averted. A stable banking system will probably do more to help the dollar over time. As usual understanding the Forex markets can be both complicated and obvious and traders are already taking the prospect of no United States bank Forex trading into account in their trades.

No matter what the effects on the average currency trader the fact is clear that a new world is in store for the large United States financial institutions that congress is blaming for the stock market crash and the recession. Good Forex advice may well be to watch the situation carefully in order to profit from any changes in trading that occur as a result of the coming regulations. It is possible that the accuracy of trading software predictions may suffer slightly if trading volume is significantly less that normal for the Forex markets but in the end Forex double bottoms and Forex double tops will signal market reversals. Nevertheless, the same trading signals will still work and those who learn market fundamentals and do their homework will prosper in Forex trading whether the banks are trading Forex or not.

More Resources

Orchestrating Yuan Revaluation

TFNG Admin — Tue, 22 Jun 2010 02:37:41 +0000

For those wishing to trade the effects of a revaluation of China’s currency it will be wise to remember that there is perception and there is reality. The news just broke from Chinese Central Bank sources that China will allow “greater flexibility” in the value of its currency, the Yuan exchange rate. China is orchestrating Yuan revaluation. With the economic summit in Canada a week away China has come under increasing international pressure to let its currency, called the Renmibi or Yuan, rise with market forces. The US congress is considering legislation labeling China a “currency manipulator” which could lead to a number of very specific and painful sanctions and, probably, a trade war. Nobody would benefit from an all out trade war and it appears as though China is going to let its currency slowly rise compared to everyone elses. Now the question for the Forex trader is what signals to watch when trading. There will be real economic indicators and there will be China’s elite orchestrating Yuan revaluation.

“China’s decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy,” President Mr. Obama said in a prepared statement. It would seem that both sides are involved in orchestrating Yuan revaluation. It is a little like the old days when China was closed off from the world and analysts poured over the most cryptic proclamations of the Chinese government for hidden meaning. Just how fast will China let the Yuan rise in value? What will they do if their own internal political problems take precedence? What will the US and other do if the revaluation of the Yuan is so painfully slow is to be almost no existent? Good Forex advice will be to watch the market more so than China officials orchestrating Yuan revaluation. Politicians and diplomats have ulterior motives based upon their constituencies. The market is its own boss and responds to the trades of millions of traders.

Nevertheless, slow for fast, orchestrated or not, the fact that China will allow its currency to fluctuate more and more with the Forex market will be welcome, both to traders and to the economy at large. For the Forex trader the issue will be just how fast and how far the revaluation of the Yuan will progress. The likelihood is that the Yuan will soon be worth more dollars, Yen, Euros, and Pound Sterling. However, as market forces exert themselves there will be speculation as to how fast the revaluation will occur with Forex traders betting on both slower and faster changes in value. Success in Forex means a plan and a method. Traders will need to watch and learn as China loosens up its currency controls. It is only possible to plan when there is sufficient information and transparency. China is orchestrating Yuan revaluation with the help of its trading partners in order to come to an agreed upon solution. How this will work out for the day to day Forex trader will only become clear with time and observation of the markets.

More Resources

Free Forex Training Webinar – Steve Nison

TFNG Admin — Wed, 09 Jun 2010 14:01:15 +0000

Steve Nison will host this 60-minute live online web seminar.

This information is geared to all traders and investors regardless of experience or technical expertise, who want to make sure they are using candles correctly. These techniques are specifically designed to be used in all markets (including options) and all time frames – with a special emphasis on using candles in Forex.

Many people claim to teach candlesticks, but there is only one correct source in the Western world: Nison Candlesticks… candlesticks the right way.

Topics covered in this high energy, informative and entertaining seminar include:

Steve reveals exactly how to quickly find the early reversal signals so you can jump on a new trend just as it starts.
Discover what the candlestick line is telling you about the health of the market so you know exactly when to enter, exit or stand aside.
See how to avoid some of the most common misuses of candles that could cost you big $$$.
Participate in the live Q&A to have rock-solid confidence about what you learned at the webinar.
Understand how to use candles with Western indicators for super-confident trading.
Discover the tactics that called the recent highs in the major indexes and in the EUR/USD.
See how candle signals are different in the Forex market compared to non-FX markets.

PLUS… Receive THREE Special Bonuses When You Attend

Bonus 1: Steve reveals his all time, most important trading rule. You should not attempt a trade without this. This one rule alone is worth attending this webinar!

Bonus 2: Steve gives his Forex market outlook

Bonus 3: Following the webinar, you’ll be granted special access to view the full recording of the entire webinar to review this valuable training and ensure you understand how to implement these new strategies in your own trading!

(Though the webinar will be recorded, the fickleness of technology means we cannot guarantee that the recording will turn out properly. To ensure you don’t miss any of this valuable information we strongly recommend you attend the live version of this session.)

This information is geared to all traders regardless of experience or technical expertise who want to make sure they are using candles correctly. Steve will show you his techniques and strategies that are specifically designed for any market and can be used in all time frames.

CLICK HERE TO REGISTER for this powerful webinar on June 9th at 8:00 pm EST!

More Resources

Forex Trading and Economic News

TFNG Admin — Tue, 08 Jun 2010 14:55:48 +0000

To understand the recent rise of the dollar, Swiss franc, and Yen in connection with the fall of the Euro one needs to understand the connection of Forex trading and economic news. The Euro dropped again the other day and it was not the PIIGS and Forex, Forex and sovereign debt issue this time. It was a poor US jobs report! On the face of it one might expect to see the dollar go down and the Euro go up if there are economic problems in the USA. However, Forex trading and the economic news can be more complicated. In this case the poor US jobs report is seen as evidence that the global recession is not really on the mend. Thus traders did what they always do when there is economic uncertainty. They flee to the strongest currencies at the time. This meant a flight to the Yen, Swiss franc, and US dollar this last week.

An obvious fact, but something that bears remembering, is that when traders are selling Euros to buy dollars, Yen, and Swiss francs someone else is buying all of those Euros, but at a lower price than the day before. A lot of traders think that the Euro is priced at the bottom of its range or they would not have bought when they did. In understanding the Forex markets it is wise to remember that there are always two sides to every currency exchange. Nevertheless in today’s Forex trading and economic news the pressure is on the Euro to the benefit of three, currently, stable currencies.

It was only a couple of months ago that traders seeing Forex double bottoms correctly anticipated a halt to the drop of the Euro. In Forex trading and economic news there is information to guide the trader in choosing to buy or sell a given currency at a given price. However, minute by minute trading is based upon technical factors as all traders acting individually serve to make minute corrections in exchange rates. A firm knowledge of technical trading patterns is essential for the trader to take advantage of breaking economic news and the reaction of the Forex market.

For those who have purchased dollars, Swiss francs, and Yen with their Euros the question is if these currencies will continue to go up or if they will reverse when the Euro gains strength. Certainly the fact that the US is still having employment problems does not bode well for continued strength of the dollar. The Japanese economy has never regained its fabled strength of the 1980’s for that matter. An interesting twist on the Swiss franc has to do with the surfacing of debt problems in Hungary. Apparently Hungary faces debt problems that may be as severe as that of Greece. However, it turns out that many mortgages in Hungary are denominated in Swiss francs! Thus, if Hungary tries to borrow or print money to pay its way out of its debt crisis inflation of its currency will only hurt instead of help homeowners. Forex trading and economic news has a totally different meaning for homeowners in Hungary. Other economies that are more strongly tied to exports, such as Australia, also lost ground last week based on the reading of US jobs data. Good Forex advice for the day, and for always, is to keep track of the news as Forex trading and economic news go hand in hand.

More Resources

Downward Direction of the Euro

TFNG Admin — Sat, 29 May 2010 14:46:28 +0000

It would appear that the European Community $1 trillion dollar bailout package is not going to help the Euro. The downward direction of the Euro was briefly halted when last week’s the bailout promised to help the PIIGS and Forex situation. However, the price for guaranteeing the debts of Portugal, Italy, Ireland, Greece, and Spain will be that the value of the common currency will suffer. National debt has a way of doing that. Although the Euro briefly flirted with $1.30 last week with the bailout announcement it is back down to $1.27. Many are betting that the downward direction of the Euro will not stop until the Euro settles in at the level it began in 1999, less than $1.20.

Although a strong currency is a measure of the economic health of an economy it is also an impediment to exporting that economy’s products. This is why Japan and then Taiwan and then China have traditionally purchased dollars. The dollar is, in fact, a good place to hold wealth. However, these countries have tried to hold the dollar up in value to make their products more competitive in the North American market place. Now, with a slide in the Euro, the Common Market’s exports will be cheaper and more competitive. That fact could be the salvation of the weaker economies on the continent if they are able to bring in foreign exchange and boost employment. In Forex trading the Euro it may be wise to expect a continued slide to less than $1.20. On the other hand, if the continent becomes more competitive again, one might just see the common market currency start to rise again in the next year or so.

Good Forex advice is to watch the markets and trust them more than any “expert” advice. If everyone knew where the Euro is heading there would be no need for a foreign exchange market. Even though the fundamentals of European debt suggest a continued slide of the Euro the smart trader will rely upon technical analysis of the Forex market in order to buy or sell Euros. Although the temptation for American traders may be to trade the EUR/USD pair it is not necessary. Trading EUR/JPY or EUR/GBP may be more profitable depending upon how the Japanese or British economies do coming out of the recession.

As always success in Forex means a plan and a method. This includes trading the apparent, continued downward direction of the Euro. Whichever currency pair one trades it is essential to be familiar with the economics, politics, and monetary policy of that nation. Then the trader can work on comparisons in understanding the fundamentals of the relationship. Meanwhile the trader must stay current on pricing and price patterns. Because price patterns repeat themselves is why technical trading works. Being current with current price patterns and knowledgeable about how to trade them will help the trader in dealing with the downward direction of the Euro.

More Resources

The Dollar and Lower Commodity Prices

TFNG Admin — Wed, 26 May 2010 12:44:13 +0000

The dollar has been granted another reprieve from its predicted demise. US Treasuries were selling well last week as another flight of capital sent investors to buying the 30 year long bond. A strong dollar and lower commodity prices are definitely linked as the Consumer Price Index (CPI) only went up 2.2% in the last twelve months. Virtually that entire rise was in the cost of oil. As the price of oil has dropped the CPI is moving sideways. The predicted inflationary surge tied to increased US debt has not happened, at least yet. A strong dollar and lower commodity prices looks, to many, to be the order of the day, week, month, and years going forward. Otherwise why would all of those folks be buying 30 year treasuries? For traders in the Forex markets it would seem that, for the time being, good Forex advice is not to short the dollar.

A strong dollar and lower commodity prices will be a boon for US consumers, reducing the cost of their purchases and, maybe leaving room for savings. The prospect of a stronger dollar does not bode especially well for selling US products overseas and could well end up worsening the US balance of payments. It would seem that investing in the US and buying dollars are bad ideas except that both of these seem to beat the alternatives. The Euro is still sliding and China’s interest rate hikes to quell inflation may cause as much as a 40% drop in property values. This could, it would seem, make investment in Chinese real estate and other projects less appealing. Does that mean the Yuan will become less valuable? Maybe by the time the Chinese decide to let the Yuan float with the market it will not go up but will go down. To some degree it may seem that understanding the Forex markets can get tougher each day. However, the market functions just fine, thank you. It responds to the buying and selling of millions of trades every day reaching a moving price consensus on every currency pair traded.

The point of this is to trade the currency market and not to worry about it. The market will hold up fine even as one currency suffers and another prospers. A stronger dollar and lower commodity prices mean one set of things to US citizens, investors, and those interested in buying US products. It means another set of things to those traders who trade a currency pair that includes the dollar. Whether a trader is Forex trading the Euro or concerned about the Yuan exchange rate versus the dollar it is the market moves and market reaction that is important. The dollar, Euro, Yuan, and the rest will all be at some set of exchange rates next year or decade but they will have to get there and money is to be made in the unevenness of the processes. Knowing where the action is, as in the decline of the Euro, or where it might be, as in the goings on in China and its real estate market will prepare the trader to be in the right place at the right time. Then he or she will need to apply the fundamentals of technical trading to profit from what the market does every day with issues such a stronger dollar and lower commodity prices.

More Resources

Yuan Exchange Rate

TFNG Admin — Wed, 24 Mar 2010 12:05:36 +0000

: Image via Wikipedia

China may allow the value of the Yuan (Renmibi) to rise later this year. China has kept the Yuan exchange rate low for years in order to sell cheaper products to the rest of the world. China’s use of a low Yuan exchange rate is merely copying what Japan and Taiwan have done for years. All three nations have bought substantial amounts of US treasury securities, which has helped keep the dollar artificially high. The Yuan, Yen and Taiwan dollar (also called the Yuan) all trade in the Forex market. If China allows the relative value of the Yuan to change it will be in response to internal affairs and not to foreign pressure. If the Chinese let the Yuan move higher it will cause a reshuffling of other currency pair values. Good Forex advice for 2010 will be to watch the Yuan.

Although China let the Yuan rise in value in the middle of the decade they have kept it pegged to the dollar for almost two years. A general consensus is that the Yuan would go up by more than a third its current value versus the dollar if allowed to float in the Forex market. In considering Forex trading and foreign currency risk the Yuan situation looms large. If the Chinese let the Yuan float you ought to buy Yuan now. If the Chinese let the Yuan float to its true value versus other currencies the question is if you want to own Yuan in a couple of years. The main reason for keeping the Yuan, Yen, and Taiwan dollar low compared to the dollar, as well as the Euro, is to be able to flood the consumer markets in North America and Europe with products that are cheaper than can be produced locally. This practice, along with a large, cheap labor pool has benefited China ever since it opened up to the world after Nixon’s visit in the early 1970’s.

China considers itself the Middle Kingdom and does not ever do things to please anyone outside of China. So long as a cheap Yuan has worked for them they have continued to depress its value versus other currencies. When China lets the Yuan exchange rate go up, or lets the Forex market do it, it is because of internal reasons. Right now China is dealing with debt issues (some hidden), serious social issues, and inflation. Raising the value of the Yuan versus other currencies will likely slow inflation in China avoiding the social and political problems of rising costs for a population that is still not paid a very high wage for its work. A sound Forex strategy and the Forex news about the Yuan could possibly guide the trader to profits this coming year as the Yuan rises in value.

When the Yuan exchange rate goes up the price of Chinese imports into North America and Europe goes up. It may be that Chinese exports will suffer and some of the huge currency flow from the rest of the world into China may be reduced. That may have a beneficial effect for many countries concerned about Forex and sovereign debt.

Will China Appreciate The Yuan? (benzinga.com)
Revaluing the Yuan: Call China’s Bluff, Or Proceed With Caution? (seekingalpha.com)
Premier: China’s yuan to remain `basically stable’ (sfgate.com)
China opposes US and EU demands for yuan revaluation (telegraph.co.uk)
China’s Currency/Commodity Strategy (seekingalpha.com)

The Forex Nitty Gritty

Is Trading Forex or Commodities Better?

More Resources

Trading Sideways

More Resources

Big Insider Forex Trading

More Resources

Bank Forex Trading

More Resources

Orchestrating Yuan Revaluation

More Resources

Free Forex Training Webinar – Steve Nison

More Resources

Forex Trading and Economic News

More Resources

Downward Direction of the Euro

More Resources

The Dollar and Lower Commodity Prices

More Resources

Yuan Exchange Rate

Related Articles

More Resources