currency trading

Bank Of Canada Remains Hawkish

Forex Kong 5 Comments

We’ve briefly touched on a few of the “animal characters” you will encounter during your trading career. Bears, bulls, gorillas, snakes and wolves. Here’s a bit on Hawks.

Hawks carefully monitor and control economic inflation through interest-rate adjustments and monetary-policy controls. In general, hawkish investors prefer higher interest rates in order to maintain reduced inflation.

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economy has unfolded broadly as the Bank projected in its October Monetary Policy Report (MPR). The economic expansion in the United States is progressing at a gradual pace and is being held back by uncertainty related to the fiscal cliff. Europe remains in recession. Chinese growth appears to be stabilizing. Commodity prices have remained at elevated levels since the October MPR and global inflationary pressures are subdued in response to persistent excess capacity. Global financial conditions remain stimulative, though vulnerable to major shocks from the U.S. or Europe.

In Canada, economic activity in the third quarter was weak, owing in part to transitory disruptions in the energy sector. Although underlying momentum appears slightly softer than previously anticipated, the pace of economic growth is expected to pick up through 2013. The expansion is expected to be driven mainly by growth in consumption and business investment, reflecting very stimulative domestic financial conditions.

This should bode well for long Canadian Dollar trades moving forward as a rise in interest rates is generally seen as good for the currency.

 

USD/CAD – Currency Move Expected

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The U.S Dollar and the Canadian Loonie  have been dancing close to parity for quite sometime now. Looking back over the last 2 full months the pair has been ranging within 150 pips or so – and has been a real pain to trade. For the most part this pair “should” be relatively easy to figure out, as the two currencies are generally viewed as opposite in most traders eyes. The U.S Dollar representing a safe haven currency while the Loonie is more often seen as risk related and “commodity related”. As per my general guidelines one would look to buy U.S.D and sell CAD in times when risk is off, and opposing – sell U.S.D and buy CAD in times when risk is on. Interestingly my risk barometer (the SP 500) has taken quite a dip during the same time frame – but has ultimately bounced back to almost exactly the same level as the beginning of October.

So there you have it. Little change in global risk appetite over the past few months.Little change in the difference in value of the U.S Dollar and the Canadian Loonie. Not to mention that often currencies of similar geographic region do tend to “range” more so than they “trend” and are often difficult pairs to trade. Take for example AUD/NZD or EUR/GBP – two other geocentric pairs that I rarely choose to trade.

I do expect a move in USD/CAD is coming very soon, and firmly believe that come December – Fed policy should start to weigh heavy on the U.S Dollar, coupled with accelerated global appetite for risk compounding buying interest in the commodity currencies. These two factors in combination (not to mention the strong economic numbers that we continue to see out of Canada) should bode well for the Loonie likely headed for 1.05 – 1.06 in relatively short order.

Currency Trading – When To Trade

Forex Kong 12 Comments

I rarely sleep….I never have. And these days as a full-time currency trader, its more than reasonable to assume – I never will.

It’s a problem I’ve been struggling with for as long as I can remember. No matter how minute, no matter how distant – any, and everything that makes even the tiniest of sounds (god forbid anything repetitive) has me hooked. Counting the intervals in between, doing long division, tapping my toes or clicking my teeth. I’ve got drum beats going behind the drip from the tap, symphonies playing with  local birds, a quick estimation of speed from the passing kid on a skateboard – all the while wondering “what’s the story with that damn fan in the living room?”.

Needless to say I am almost always awake and able to give the computer a quick check,  should the need arise.

For the rest of you though – there are some very specific times when it really does pay to get to work. I like to be at the computer and ready to go 2 hours before the U.S session begins – and would usually plan to stay tuned throughout  the morning  –  until the London session ends. Roughly a 4 hour period between 6:30 and 10:30 my time. Then perhaps a look after lunch, and the usual “2 minutes til close”. Currency wise – not a lot of “intraday antics” line up with U.S equities in the afternoon so…if you catch the overlap of the two sessions in the morning – you’re in good shape.

You can then chase tumbleweeds for the entire mid to late afternoon and well into the evenings until around 9:00 pm when a bit of news gets released but even then – usually nothing earth shattering. In general the Asian session is flat , and currency pairs are often observed “frozen in time”. I’ve read that a lot of currency trading strategies are build and designed around the open of London but in my experience  – have never really had much luck with that. If anything I would just look to get at it an hour earlier (5:30 a.m) and go from there.

Oh yes and of course  – I’ve got to make time to work on this confounded blog and there’s that damn spaceship I’m building on the rooftop. Anyways hope it helps…

Currency Trading – How Not To Do It

Forex Kong 21 Comments

I wasn’t really planning on getting deep into this – this soon but as the name suggests – I do trade currencies, and I do trade currencies well. You can’t just pick a currency pair, pull up a chart and plan to trade it –  as if it was a common equity. The volatility inherent to currency markets, coupled with the massive leverage offered by brokers is a sure-fire recipe for account liquidation – and the lack of good, solid “tradable” information available on the net ( in my view) is slim to none.

The currency market is designed (like no other if you ask me) to very quickly part the newcomer from his hard-earned dollars  – with the promise of massive gains, and very little start-up capital. This could not be further from the truth. Anyone even considering opening a currency trading account with the piddly “get started now with 2K and a free 50k trading account!” – will be left with zero – likely before close of their first day trading. It takes extremely disciplined trading, and razor-sharp money management rules to successfully navigate the currency world.That, paired with extensive fundamental knowledge of the underlying, and a current bead on daily news flows globally – minimum.

Each individual currency pair exhibits it own unique characteristics that cannot be discounted or disrespected.Volatility in currency trading can wreak havoc on an account, and the leverage offered is so tempting to newcomers that in combination – accounts are likely wiped out daily. I wonder if the brokerages expect anyone to even make it through the first week – building their business models solely on the “minimum required deposit” to open the account – and in turn striping you of it.

In any case…we will certainly peel the onion here over the coming weeks – but as it stands my suggestion to you would be:  Do Not Trade Currency – Until You Know How To Trade Currency.

A question….would you climb into a formula one race car, and hit the track against an armada of seasoned veterans – without first considering where the gas pedals and brakes are?…..I didn’t think so.