Currency Trading Soars
Lead article in todays WSJ is about the increased volumes from trading in the currency markets. According to the article the amount of daily volume has hit $4 trillion a day. WOW! I think this is quite interesting and possibly concerning. Clearly with further globalization investors are going to look for returns where they can find them. As such the hedging of currency exposure is a very important part of that return. But more important is the role the indivdual trader plays in this daily volume. With more and more people out of work, people are looking for a way to get income. Day Traders have emerged as a way (well at least people initially think so) to easily make money. We have all seen the informercials talking about trading systems. “Three green lights and you buy, two red lights you sell”. For anyone who has actually tried to do this for a living they know this does not work. If it were that simple everyone would do it. I have never looked at these systems but I am quite sure they are trend following systems. Repeat after me “There is no Holy Grail”. I do believe in systems but they must be developed yourself and back tested tirelessly. This way you have confidence that it works. I am concerned that a certain percentage of this increased volume comes from these day traders most of whom are probably desperate people looking far a last ditch event to save them. This always ends in failure. I have never day traded ( in the sense that it was my only source of income) myself and I have great respect for those who do it and do it well. But I can tell you from the experience of some of my friends who have tried. It ain’t that easy! These are traders who have spent years Proprietary trading for large institution who when they venture out on their own struggle. The point to this post is to warn people who see the article that although it is a large and growing market it is very difficult for the individual to be successful.
Click Here to read the article from the WSJ and Click Here to get a free down load if Reminiscences of a Stock Operator one of my favorite books on trading.
Good Luck and Good Currency Trading
An Economy on Edge, So is now a time to refinance?
More bad news came out of Mr. Bernanke on Friday. GDP which was expected at 2.4% came in at 1.6%. Judging from the market reaction a much worse number was expected. 1.6% or 2.4% does not make much of a difference, the economy is weak and getting weaker as time goes on. More and more it seems that any recovery we have had was a direct result of the governments intervention and that very little of it was a permanent fix. Shortly after the numbers Bernanke came out and said that the Fed was ready to take additional steps to prevent a second recession.
The Fed “will do all that it can to ensure continuation of the economic recovery,” he said.
The purchasing of more government securities and residential mortgages to bring rates lower seems like a first step toward a renewed recovery. More importantly is the state of the consumer. Are they setting themselves up for a recovery? Paying down debt, refinancing existing mortgages (more on this later). The Fed Chairman seems to think so. His speech was very good and well received by the markets as stocks bounced back nicely. I have said it many times before Jobs and confidence that your current job is secure is the key. Get that right and the recovery will hold.
I am constantly being asked if this is the right time to refinance. That question is really only one that the individual can answer. For me I need to have a substantial savings, not just from the rate but from all the fees included (and there are many). Here is a worksheet from I found on Smart Money which is a pretty good guide.
Good Luck and Good Forex Trading
Big Ben and the Economy
Even Big Ben is feeling the pain. Here is a good article on the options available to the Federal Reserve.
CLICK HERE to read the article (worth the time)
Good Luck and Good Forex Trading.
Housing Prices Stumble
In another sign that the economy is not preforming well Existing Home Sales fell to the lowest level in fifteen years. The market was expecting a weaker number but the extent of of this fall certainly surprised participants. One reason given is the ending of the Federal Tax Credit which expired in April. I still think we have another leg down in prices. In my town prices are down about 20% from the peak. At this level sales initially picked up but after talking to local real estate agents it has once again leveled off. Of course it is very difficult to pick the bottom of the market and if I was in the market for a home I would not hesitate to purchase one at these levels. This, as I feel in 10 years prices will be higher. I think what is holding back Home Buyers is Fear and the lack of stability in the Job market. If people have jobs they will spend.
Outlook
I continue to look for range bound markets for the foreseeable future, with Asian Emerging Markets taking the biggest hit. I prefer to be short Dollars and Short Emerging Market currencies.
Good Luck and Good Forex Trading.
Roger Clemens and Trading
Roger Clemens hit the news again this week. He was officially indicted on perjury charges for lying in front of Congress. As Earl Ward, lawyer for Brian McNamee (Clemens trainer) said this “is vindication for Brian. It says that you can’t demand a hearing, get up in front of Congress, lie, and then head back to Texas. It was arrogance that led to this.”
I cannot help but agree. We saw this type of arrogance on display during Game Six of the 1986 World Series when Clemens went into the locker room late in the game and came out clean shaven. This as it looked like Boston would win the series and the Boston players would be on TV getting interviewed. Disclaimer: I am a Met Fan. It Didn’t Happen! Now of course Roger Clemens is innocent until proven guilty and if he is innocent he should fight till then end to clear his name, but as I always say, where there is smoke there is fire, and lets face it there is a lot of smoke. His trainer has said he provided Clemens with HGH and steroids. The trainer, Brian McNamee has provided used syringes and gauze to investigators and finally Clemens good (Best?) friend Andy Pettitte told investigators that Clemens told him that he used HGH. Clemens claims Pettitte “misremembered” and that rather it was really his wife that received the injections.
So how does this relate to trading? EGO! Ego is the quickest way to to failure. Never think you are bigger then the market. Lets face it, when things are going well you feel invincible. Confidence, an essential factor in trading, is over flowing and you might take a chance or two that you might not usually take. There is no thing wrong with that. It is normal and necessary. But when adding to risk it is also important to stay alert. Take the same precautions that you would when things are going poorly. Although you may risk a little more capital you should be disciplined and not let one position take you out of the game. Remember the market is bigger then any one trader and if you are wrong cut the position and move on. There is always another trade, if you still have capital.
As for Roger, I was never a big fan but I clearly recognize the talent that the man possessed. He was dominant and made every team that he played on a contender for a title. It just seems to me that in this instance he spoke before thinking (and didn’t take the advice of council), or maybe he thought his fame and recognition would allow his bold statements to go uncontested. Either way he is in for a battle and one that if guilty could prevent him from one day entering the Hall of Fame.
Good Luck and Good Forex Trading
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