If you’ve tuned in to pretty much any of the news organizations lately, you’ve heard about how we’re recovering in the United States.
You’ve heard about green shoots. You’ve seen all the newly promising data. You’ve heard a President, Fed Chief and Treasury Secretary trying to convince you about how sturdy the financial ground is.
Indeed, it seems that the world is buying this growth story here in the United States. Right or wrong, that’s what matters at present.
You see, sentiment is a huge driver in the currency markets. How people “feel” about the market actually influences currencies. So, if enough people believe a trend will happen, it tends to happen – at least for a while.
So let’s begin by saying: I’m definitely not fighting the trend here. I’m riding the growth story while it lasts here in the United States.
But I’m keeping my trades on a VERY short leash. I’m also clearing a pathway to the exits just in case reality hits home anytime soon.
The “W” Recovery: Why Reality Hasn’t Sunk In Yet
If I was a speculator, I would be betting on a “W” recovery for the U.S. with a second leg down coming soon. And I tie that to the continuing as well as upcoming crisis in the housing markets.
By the way, my colleague Sean yesterday gave you three currencies to buy for the long-term. I agree with his choices, but like him, I also think there are going to be pullbacks and reversals in the short-term. The next BIG reversal is exactly what I’m talking about here.
Why do I say a reversal is coming? Let’s start with the not so positive data for a moment.
If you believe that we have seen the worst in the housing sector, think again. Remember those pesky adjustable rate mortgages (ARM)? Well, the largest majority of them are up for resets in 2011. Till we are past that hump, no meaningful recovery should be expected. And if we see one, like now, it will most likely not last.
Where I’d Put My Money Instead…
So let’s set the U.S. aside for a moment.
On the other side of the pond, in India the meaningful recovery story just continues to grow. As I have written earlier, the Indian growth story has been tainted by its dominance in the IT and Outsourcing sectors.
Lots of traders have trouble accepting any recovery anywhere else if the U.S. is still suffering. Indeed, many seem to have the “Death by Stereotype” idea. They’re skeptical of any growth story in emerging markets like India because they don’t believe India can grow without the U.S. recovering first.
Let put that idea to rest right now. The internal consumption story in India is well documented. In fact, it’s been India’s saving grace in this global downturn. It has helped India keep its head above the rest of the world as far as growth is concerned, albeit at a lower rate.
Need proof? Just check out some of the data coming out of India…
* The Industrial Production Index (IPI) blasted past what economists expected and grew 7.8% year-over-year in June.
* June IPI growth was the highest since February 2008.
* There were huge increases in the Capital Goods Index (CGI).
* On a yearly basis, the CGI grew by 11.8% year-over-year after three months of contraction.
* Yearly growth in the production of consumer goods was strong at 4% year-over-year with a 15.5% year-over-year increase in consumer durables.
Rain or Shine, This Nation Will Rise
As I have mentioned earlier, India is still heavily dependent on the monsoon (rainy season) for Agriculture, which is an important part of the GDP. And so far, the monsoons have been below average.
However, it seems like the uptick in the industrial activity will likely mitigate the negative impact of poor rains. Several indicators of consumption and investment demand such as the Purchasing Manager’s Index (PMI) and motor vehicle sales have been showing significant upticks for several months now.
No Longer Necessary in India…
All of this economic data in the past few weeks have made me more bullish on India. I am beginning to sense that India’s GDP growth in the next few quarters will blow past the world’s estimate of 6.6% growth for FY 2010.
While this may lag its main rival China’s 8%, I expect Indian GDP growth to come in around 7.5%. Not too shabby! That’s my prediction based on the improved investment outlook in infrastructure and capital goods. Both of these are indicators of laying foundations for an extended and long-term growth story from India.
I also expect tightening interest rates to help slow down the economy and avoid bubble like growth situations.
Unlike the Federal Reserve, which has pledged low interest rates for ‘extended’ periods of time, the Indian Reserve Bank is already signaling that the low interest rate days may be over soon. We may see as much as 200-300 basis points increase in Indian core interest rates in the coming six months. And this will be tremendously positive for the Indian Rupee.
Your Stock Buddies Won’t Believe This…
Years ago, before I was a Forex trader, I did the usual trader stint in the stock market. I watched P/E ratios, tracked company performance and tried to analyze which company might rise next.
Of course, it was my job at the time and I did alright with my trades. But the truth is my portfolio would have performed so much better had I known what I know now. I’ll get to that in a second.
First let’s talk about the transition.
It was a difficult time for me. Mostly I had to change my thinking and how I evaluated trades when I came over from the stock world. I had to stop thinking like a stock trader to start thinking like a currency trader.
In doing so, I learned a few tricks that can not only boost your Forex trades…but can also help you boost your returns on any stock trades you place from now on.
What Separates Currencies from Stocks in Trading
(Beyond the Obvious)
There’s one fundamental truth you need to learn when you’re making the shift from stocks to currencies…
Stocks are relatively micro and currencies are relatively macro.
By that I mean that when you study stocks, you are mainly analyzing industries and individual stocks mainly. In currencies you are analyzing the health of whole economies.
For instance, you usually analyze stocks by choosing a specific group of companies or particular industry of an economy. Then you look to see which sector or industry is performing overall (ex., Healthcare sector, technology sector, energy sector, etc.).
Once you find a leading group or industry, then you’ll usually drill down from there. You’ll start examining a handful of companies within that group or sector to see which are the most fundamentally sound and thus, most likely to be some of the “top performers” out of the group.
You would do this by looking at a company’s earnings, dividend history, etc. You buy the stocks that have a steady (and above average) growing stream of earnings and dividends. On the flipside, you avoid (or sell-short) the companies that have choppy earnings or that didn’t earn money at all yet.
Well, in currencies, you’re looking at not one specific company, but an entire country. Ergo, you have to start with the macro picture and drill down from there.
I like that because you don’t have to worry about 1 CEO or 1 CFO screwing up your overall investment trend. An economy does well because the companies within it as a whole, do well. So it’s like being able to invest in that economy broadly and with less overall risk than an individual stock.
If You Know Nothing Else About Currencies, Learn This…
In currency land, what matters most is if there’s enough inflation (CPI – Consumer Price Index) in the country to cause central bankers to hike interest rates. Currency traders drool over hiked interest rates because they can earn more money on their currency trades than if they were buying a “low yielding” country’s currency.
So inflation and interest rates are the top two things to look at. A third important factor is the economy’s overall growth, which can be found in their GDP (Gross Domestic Product) numbers.
Introducing the Holy Grail of Forex Sites
You can go to one simple site to find that information on any of the major currencies out there: www.tradingeconomics.com .
That FREE site will rank the countries that have the higher inflation, higher interest rates, higher GDP growth, etc.
This way, within seconds you can get an idea of which countries are the strongest from a “currency perspective” and which are the weaker ones.
Then, once you know this, you will improve your currency returns. As an added bonus, when you’re doing your currency research to see which countries are “better off” than others from a fundamental stand point, you’ll also know which countries you might want to “shop for stocks” in.
Frankly, I wish I had known that when I had been buying stocks – my trades would have been that much stronger from a fundamental perspective.
Keep in mind that you can also look for ETFs that will hold a “basket of stocks” from a certain country too. That may be the best way for the newer investor to get their feet wet.
This way, your currency research not only benefits your currency investments but it also helps your stock investments.
Hot Stock Tips from the Currency Trader
After all, if you’re buying stocks in the strongest economy in the world at the time…you automatically stand a better shot of your investment earning profits. In fact, you’re really making an overall investment in the health of the larger economy that the company resides in.
While I always try to pick superior stocks, I also realize that even a mediocre stock in a great economy will many times do better than a great stock in a horrible economy.
Of course, it was my job at the time and I did alright with my trades. But the truth is my portfolio would have performed so much better had I known what I know now. I’ll get to that in a second.
First let’s talk about the transition.
It was a difficult time for me. Mostly I had to change my thinking and how I evaluated trades when I came over from the stock world. I had to stop thinking like a stock trader to start thinking like a currency trader.
In doing so, I learned a few tricks that can not only boost your Forex trades…but can also help you boost your returns on any stock trades you place from now on.
What Separates Currencies from Stocks in Trading
(Beyond the Obvious)
There’s one fundamental truth you need to learn when you’re making the shift from stocks to currencies…
Stocks are relatively micro and currencies are relatively macro.
By that I mean that when you study stocks, you are mainly analyzing industries and individual stocks mainly. In currencies you are analyzing the health of whole economies.
For instance, you usually analyze stocks by choosing a specific group of companies or particular industry of an economy. Then you look to see which sector or industry is performing overall (ex., Healthcare sector, technology sector, energy sector, etc.).
Once you find a leading group or industry, then you’ll usually drill down from there. You’ll start examining a handful of companies within that group or sector to see which are the most fundamentally sound and thus, most likely to be some of the “top performers” out of the group.
You would do this by looking at a company’s earnings, dividend history, etc. You buy the stocks that have a steady (and above average) growing stream of earnings and dividends. On the flipside, you avoid (or sell-short) the companies that have choppy earnings or that didn’t earn money at all yet.
Well, in currencies, you’re looking at not one specific company, but an entire country. Ergo, you have to start with the macro picture and drill down from there.
I like that because you don’t have to worry about 1 CEO or 1 CFO screwing up your overall investment trend. An economy does well because the companies within it as a whole, do well. So it’s like being able to invest in that economy broadly and with less overall risk than an individual stock.
If You Know Nothing Else About Currencies, Learn This…
In currency land, what matters most is if there’s enough inflation (CPI – Consumer Price Index) in the country to cause central bankers to hike interest rates. Currency traders drool over hiked interest rates because they can earn more money on their currency trades than if they were buying a “low yielding” country’s currency.
So inflation and interest rates are the top two things to look at. A third important factor is the economy’s overall growth, which can be found in their GDP (Gross Domestic Product) numbers.
Introducing the Holy Grail of Forex Sites
You can go to one simple site to find that information on any of the major currencies out there: www.tradingeconomics.com .
That FREE site will rank the countries that have the higher inflation, higher interest rates, higher GDP growth, etc.
This way, within seconds you can get an idea of which countries are the strongest from a “currency perspective” and which are the weaker ones.
Then, once you know this, you will improve your currency returns. As an added bonus, when you’re doing your currency research to see which countries are “better off” than others from a fundamental stand point, you’ll also know which countries you might want to “shop for stocks” in.
Frankly, I wish I had known that when I had been buying stocks – my trades would have been that much stronger from a fundamental perspective.
Keep in mind that you can also look for ETFs that will hold a “basket of stocks” from a certain country too. That may be the best way for the newer investor to get their feet wet.
This way, your currency research not only benefits your currency investments but it also helps your stock investments.
Hot Stock Tips from the Currency Trader
After all, if you’re buying stocks in the strongest economy in the world at the time…you automatically stand a better shot of your investment earning profits. In fact, you’re really making an overall investment in the health of the larger economy that the company resides in.
While I always try to pick superior stocks, I also realize that even a mediocre stock in a great economy will many times do better than a great stock in a horrible economy.
Your Trader “Training Wheels”
My students are always after me to teach them how to use key technical indicators.
I usually tell them the same thing: Learning how to use them is just the first step. Learning when to use them…that’s the real trick.
After all, it’s one thing to know what a hammer or screwdriver does and it’s another to know the best time to use each one to get the optimal results.
In a similar fashion, traders learn how to use technical tools. But that doesn’t mean they know how to put all of the pieces together so they know when to pick and choose the best technical tool to evaluate a specific currency pair.
There is one simple tool I wish I had known from the beginning. ALWAYS follow this rule and you will stay “light years” ahead of many other traders out there…
1. The trend’s direction is THE most important indicator out there.
Sounds simple right? Well, it is. But many traders often lose sight of this very simple rule and try to trade against trends. That’s when you get in trouble.
So let’s talk about how to find the trends…
Here’s the easiest way in the world to determine a trend. I call it “trend trading with training wheels.” You can follow the trend just by tracking what’s known as the “simple moving average.”
This is an indicator that you can actually put on your price chart and it will “point the way” to the trend’s direction. It does this by smoothing out the jagged price action and showing you the overall trend where the pair is headed.
One of the more commonly used ones is the 50 day simple moving average (SMA). It can be found on any Forex charting package. Once you pull up the indicator on your charts, all you will have to fill in is the number of periods, which is “50.”
This will show the medium-term trend direction for a currency pair. Let’s take a look below to see what this looks like….
Finding the Trend: Not as Difficult As It Sounds…
So the trend direction is the most important thing to determine. If you never learn nothing else about technicals, learn that.
Because if you will trade in the direction of the trend with good risk management (not risking more than 5% of your account if stopped out in the trade), then you have a huge portion of Forex trading “licked” right there.
I’ll be back tomorrow with my second tool that I use to evaluate technicals. Till then…
I usually tell them the same thing: Learning how to use them is just the first step. Learning when to use them…that’s the real trick.
After all, it’s one thing to know what a hammer or screwdriver does and it’s another to know the best time to use each one to get the optimal results.
In a similar fashion, traders learn how to use technical tools. But that doesn’t mean they know how to put all of the pieces together so they know when to pick and choose the best technical tool to evaluate a specific currency pair.
There is one simple tool I wish I had known from the beginning. ALWAYS follow this rule and you will stay “light years” ahead of many other traders out there…
1. The trend’s direction is THE most important indicator out there.
Sounds simple right? Well, it is. But many traders often lose sight of this very simple rule and try to trade against trends. That’s when you get in trouble.
So let’s talk about how to find the trends…
Here’s the easiest way in the world to determine a trend. I call it “trend trading with training wheels.” You can follow the trend just by tracking what’s known as the “simple moving average.”
This is an indicator that you can actually put on your price chart and it will “point the way” to the trend’s direction. It does this by smoothing out the jagged price action and showing you the overall trend where the pair is headed.
One of the more commonly used ones is the 50 day simple moving average (SMA). It can be found on any Forex charting package. Once you pull up the indicator on your charts, all you will have to fill in is the number of periods, which is “50.”
This will show the medium-term trend direction for a currency pair. Let’s take a look below to see what this looks like….
Finding the Trend: Not as Difficult As It Sounds…
So the trend direction is the most important thing to determine. If you never learn nothing else about technicals, learn that.
Because if you will trade in the direction of the trend with good risk management (not risking more than 5% of your account if stopped out in the trade), then you have a huge portion of Forex trading “licked” right there.
I’ll be back tomorrow with my second tool that I use to evaluate technicals. Till then…
The Latest “Day Trader” Playground
Remember the “day trader mania” when the Internet and Tech bubbles hit back in the late 90s? Remember the Chinese stock market bubble back in 2007 when daytraders couldn’t get their hands on enough China shares?
Well there’s a new “day trader playground” in town in 2009. Only this time it’s in Russia…
You see, last year was tough on the entire world, but it was especially rough on Russia. The “R” of the “BRIC’s” actually had one of its worse years ever for both stocks and its currency, the ruble. Russia is a huge commodities-driven economy with plenty of natural resources to sell to the greater world.
So both Russia’s currency and stocks crashed hard last year when both the global economy and natural resources fell off the map.
After a year of ravaged markets, Russia’s largest stock exchange, the Micex is trading for a song. The Micex trades at an incredible average of 8 times earnings! To put that in perspective, right now the MSCI Emerging Market Index’s is trading at 18 times earnings, China is at 32 times earnings, Brazil stands 24 times earnings or even India is at 18 times earnings.
Traders – particularly day traders – are coming out the woodwork to take advantage of these “deep values.” (Or at least, what they perceive to be “deep values.”) Those day traders are creating some very interesting opportunities in the Forex market at the same time. Let me explain…
Cheap Russian Stocks = MASSIVE Currency Opportunity
The retail trading volume on the Micex has surged six fold this year. In fact, the number of Russian individual trading accounts has grown to over 630,000 as of July. These accounts generate about $1.3 billion in average daily volume, up from $220 million as recent as January.
This “added” volume is attracting traders from big institutions all over the place. Most recently big-time traders from BlackRock and Templeton have been checking out Russian stocks. Why? If you’re a big fish in the sea like these guys are, you need a ton of volume in your chosen market so you can move in and out of stocks without significantly moving the market yourself.
You or I don’t have to worry about this but an institutional money manager that moves in and out of millions of shares has to consider this a lot. It limits where they can effectively invest (which is one of the reasons why they like the currency market so much).
You see, just in ONE emerging market BlackRock fund, they’re moving $1.4 TRILLION around.
In addition to the volume, the huge volatility has investors salivating too. Russia’s Micex has surged 79% this year, which is the steepest gain of any of the indexes that track the world’s 30 biggest markets.
Russian Stock Volatility Ensures Ruble Strength
as Long as the Mania Lasts!
So needless to say, all of this focus and attention on Russian’s stocks is also pushing its ruble around too.
The dollar has been dropping broadly against most currencies since March. Likewise, the dollar has been falling vs. the ruble as well. However, not only have excesses been wrung out of the USD/RUB uptrend but as recent as May, the ruble has pushed the USD/RUB into a downtrend. That’s great news for the ruble going forward. Check it out below.
Trade the Russian Stock Market Mania through the Ruble as a “Safer Play”!
So currency traders too are joining the party by pushing the ruble higher vs. the dollar while all of this “mania” exits.
As this Russian story spreads, even more foreigners and big-name traders will come to the party. That will only cause the ruble to gain further as these foreign traders have to exchange their foreign currencies in for rubles to trade stocks denominated in rubles.
Expect the ruble to continue to gain strength – particularly as key markets around the world continue to recover, global GDP numbers start to expand once again and as energy resources like oil are used to grow these recovering economies once again.
Well there’s a new “day trader playground” in town in 2009. Only this time it’s in Russia…
You see, last year was tough on the entire world, but it was especially rough on Russia. The “R” of the “BRIC’s” actually had one of its worse years ever for both stocks and its currency, the ruble. Russia is a huge commodities-driven economy with plenty of natural resources to sell to the greater world.
So both Russia’s currency and stocks crashed hard last year when both the global economy and natural resources fell off the map.
After a year of ravaged markets, Russia’s largest stock exchange, the Micex is trading for a song. The Micex trades at an incredible average of 8 times earnings! To put that in perspective, right now the MSCI Emerging Market Index’s is trading at 18 times earnings, China is at 32 times earnings, Brazil stands 24 times earnings or even India is at 18 times earnings.
Traders – particularly day traders – are coming out the woodwork to take advantage of these “deep values.” (Or at least, what they perceive to be “deep values.”) Those day traders are creating some very interesting opportunities in the Forex market at the same time. Let me explain…
Cheap Russian Stocks = MASSIVE Currency Opportunity
The retail trading volume on the Micex has surged six fold this year. In fact, the number of Russian individual trading accounts has grown to over 630,000 as of July. These accounts generate about $1.3 billion in average daily volume, up from $220 million as recent as January.
This “added” volume is attracting traders from big institutions all over the place. Most recently big-time traders from BlackRock and Templeton have been checking out Russian stocks. Why? If you’re a big fish in the sea like these guys are, you need a ton of volume in your chosen market so you can move in and out of stocks without significantly moving the market yourself.
You or I don’t have to worry about this but an institutional money manager that moves in and out of millions of shares has to consider this a lot. It limits where they can effectively invest (which is one of the reasons why they like the currency market so much).
You see, just in ONE emerging market BlackRock fund, they’re moving $1.4 TRILLION around.
In addition to the volume, the huge volatility has investors salivating too. Russia’s Micex has surged 79% this year, which is the steepest gain of any of the indexes that track the world’s 30 biggest markets.
Russian Stock Volatility Ensures Ruble Strength
as Long as the Mania Lasts!
So needless to say, all of this focus and attention on Russian’s stocks is also pushing its ruble around too.
The dollar has been dropping broadly against most currencies since March. Likewise, the dollar has been falling vs. the ruble as well. However, not only have excesses been wrung out of the USD/RUB uptrend but as recent as May, the ruble has pushed the USD/RUB into a downtrend. That’s great news for the ruble going forward. Check it out below.
Trade the Russian Stock Market Mania through the Ruble as a “Safer Play”!
So currency traders too are joining the party by pushing the ruble higher vs. the dollar while all of this “mania” exits.
As this Russian story spreads, even more foreigners and big-name traders will come to the party. That will only cause the ruble to gain further as these foreign traders have to exchange their foreign currencies in for rubles to trade stocks denominated in rubles.
Expect the ruble to continue to gain strength – particularly as key markets around the world continue to recover, global GDP numbers start to expand once again and as energy resources like oil are used to grow these recovering economies once again.
A New Reason to Buy the Loonie
Confession: I always love to read about the central bank gatherings.
Whether it’s an all-out European Central Bank meeting or just an informal grouping of Fed-Heads, there is ALWAYS interesting currency information you can learn from these meetings.
Plus, it’s fairly easy to get your hands on information about any central bank gathering considering the media types practically falls over each other to report on anything central bankers say (and out-of-the-mainstream writers like myself focus on what they perhaps don’t say).
“Recovery Coming” According to Leading Central Bankers
Just take the most recent gathering of central bankers in Wyoming last week. Federal Reserve Chairman Ben Bernanke hunkered down with central bank governors from Italy, France and Japan.
Their purpose? To figure out how to stop stimulating the economy without slowing the recovery.
After meeting, the Central Bankers and governors seemed to pat themselves on the backs and agree that the global economy was recovering quite nicely. Nothing to worry about…at least according to them.
What does this tell me? Well, frankly, I’m inclined to believe them. Or at least, trade off their beliefs. Why? Well, even if these central bankers are overly optimistic, there are countless traders out there that are willing to follow what they’re saying. As a Forex trader, you have to follow what the herd is doing or you’ll get trampled.
Again, as I said, there are always interesting tidbits to take from these meetings. As you can see, the Wyoming meeting was no exception. They basically told us to trade as if the global recovery is already underway.
Overall, it’s the very reason I’m betting on the Canadian dollar. Let me explain…
Who’s Currency Will Benefit Here?
If you’re looking at the global economy in terms of a global recovery, then you have to consider which currencies will benefit and suffer from a recovery.
First and foremost, the U.S. dollar and the yen will be the primary currencies that get hurt (in the long run, even though the buck could get a short- term bump up in the near-term).
Meanwhile, any global recovery will mean that nations around the world will start buying oil again. That will push up prices, and a few key commodity currencies including the Canadian dollar.
I believe that you will see USD/CAD suffer from the “fall of the dollar” and from the “rise of oil.” Therefore, those that are short the USD/CAD pair over the coming weeks to months should benefit from these fundamental forces in play.
Short USD/CAD & Watch the Profits Roll In…
As economies expand, money will pour out of the defensive posture that pushed up the dollar and yen last year. That will shove up a handful of riskier currencies that have more upside potential in an expanding economy.
Bottom line: Watch for the Canadian dollar to rise and the greenback and the yen to “fall off” in the weeks ahead, as investors wrap their head around the idea of a recovery.
Happy Trading!
Whether it’s an all-out European Central Bank meeting or just an informal grouping of Fed-Heads, there is ALWAYS interesting currency information you can learn from these meetings.
Plus, it’s fairly easy to get your hands on information about any central bank gathering considering the media types practically falls over each other to report on anything central bankers say (and out-of-the-mainstream writers like myself focus on what they perhaps don’t say).
“Recovery Coming” According to Leading Central Bankers
Just take the most recent gathering of central bankers in Wyoming last week. Federal Reserve Chairman Ben Bernanke hunkered down with central bank governors from Italy, France and Japan.
Their purpose? To figure out how to stop stimulating the economy without slowing the recovery.
After meeting, the Central Bankers and governors seemed to pat themselves on the backs and agree that the global economy was recovering quite nicely. Nothing to worry about…at least according to them.
What does this tell me? Well, frankly, I’m inclined to believe them. Or at least, trade off their beliefs. Why? Well, even if these central bankers are overly optimistic, there are countless traders out there that are willing to follow what they’re saying. As a Forex trader, you have to follow what the herd is doing or you’ll get trampled.
Again, as I said, there are always interesting tidbits to take from these meetings. As you can see, the Wyoming meeting was no exception. They basically told us to trade as if the global recovery is already underway.
Overall, it’s the very reason I’m betting on the Canadian dollar. Let me explain…
Who’s Currency Will Benefit Here?
If you’re looking at the global economy in terms of a global recovery, then you have to consider which currencies will benefit and suffer from a recovery.
First and foremost, the U.S. dollar and the yen will be the primary currencies that get hurt (in the long run, even though the buck could get a short- term bump up in the near-term).
Meanwhile, any global recovery will mean that nations around the world will start buying oil again. That will push up prices, and a few key commodity currencies including the Canadian dollar.
I believe that you will see USD/CAD suffer from the “fall of the dollar” and from the “rise of oil.” Therefore, those that are short the USD/CAD pair over the coming weeks to months should benefit from these fundamental forces in play.
Short USD/CAD & Watch the Profits Roll In…
As economies expand, money will pour out of the defensive posture that pushed up the dollar and yen last year. That will shove up a handful of riskier currencies that have more upside potential in an expanding economy.
Bottom line: Watch for the Canadian dollar to rise and the greenback and the yen to “fall off” in the weeks ahead, as investors wrap their head around the idea of a recovery.
Happy Trading!
EUR/CHF launches another 60+ pips and counting!
Yesterday, I wrote an article and did a YouTube video for our partner, mywealth.com. Since the release of that article, EUR/CHF has launched forward another 60+ pips and counting. It’s literally hitting new highs as of this writing.
To view the full article and video, check it out here: http://www.mywealth.com/blog/post/potentially-safest-forex-play-entire-fx-world
Enjoy!
To view the full article and video, check it out here: http://www.mywealth.com/blog/post/potentially-safest-forex-play-entire-fx-world
Enjoy!
How to decide on which currency pair to trade: EUR/USD or GBP/USD
Many times, traders wonder “which pair is the better pick”. I say, let the charts decide it for you and take all of the guess work out of it.
Since both the EUR/USD and GBP/USD have the USD in common, their differences are EUR and GBP. So if we got a “dollar move” they’re both going to be affected some. However, the real difference comes in when you directly compare EUR to GBP and see which is the stronger/weaker currency.
You can do this by looking to the EUR/GBP pair. Right now, EUR/GBP is in an obvious downtrend. This can be seen by the red downtrend line below. It can be seen by the declining 50 day simple moving average (SMA). It can also be seen by the MACD being below the zero line and its lines crossing over to the downside. This can also be seen, most recently from it breaking down out of its upward correction (red circled area).
Therefore, CLEARLY right now, the stronger of the two is the GBP/USD. So if you feel that these pairs are headed higher, then go with GBP/USD. Right now, GBP/USD’s daily trend is upward, so that would be my pick.
Now if you felt that the trend was downward or turning downward, then you’d pick the “weaker candidate” to pick on which would be EUR/USD (buy strength/short weakness). However, right now, so far their daily trends are still upward as shown by the 50 period simple moving average on their daily charts.
Notice though, how much EUR/USD is struggling and how GBP/USD is starting to pop up higher right now. That’s due to the advantage of buying the stronger candidate. And right now, that’s GBP/USD when you directly compare the two.
You can do this for any pairs. For instance, now if I wanted to see if GBP or AUD were the strongest, I could look to the GBP/AUD pair. This could give me a bias as to whether I’d be better off buying GBP/USD or AUD/USD, for instance.
Currencies are a “comparative/relative” game. In other words, you always want to “rig the fight” with the absolute strongest candidate vs. the absolute weakest candidate and then “bet on that match” by buying the stronger vs. the weaker.
This, coupled with great risk management, will greatly improve your odds of success in trading. In other words, don’t over-leverage your account. You should probably be trading no more than 1 standard mini lot per $2,000-$3,000 in your account OR 1 micro lot per $200 to $300 in your micro account.
Since both the EUR/USD and GBP/USD have the USD in common, their differences are EUR and GBP. So if we got a “dollar move” they’re both going to be affected some. However, the real difference comes in when you directly compare EUR to GBP and see which is the stronger/weaker currency.
You can do this by looking to the EUR/GBP pair. Right now, EUR/GBP is in an obvious downtrend. This can be seen by the red downtrend line below. It can be seen by the declining 50 day simple moving average (SMA). It can also be seen by the MACD being below the zero line and its lines crossing over to the downside. This can also be seen, most recently from it breaking down out of its upward correction (red circled area).
Therefore, CLEARLY right now, the stronger of the two is the GBP/USD. So if you feel that these pairs are headed higher, then go with GBP/USD. Right now, GBP/USD’s daily trend is upward, so that would be my pick.
Now if you felt that the trend was downward or turning downward, then you’d pick the “weaker candidate” to pick on which would be EUR/USD (buy strength/short weakness). However, right now, so far their daily trends are still upward as shown by the 50 period simple moving average on their daily charts.
Notice though, how much EUR/USD is struggling and how GBP/USD is starting to pop up higher right now. That’s due to the advantage of buying the stronger candidate. And right now, that’s GBP/USD when you directly compare the two.
You can do this for any pairs. For instance, now if I wanted to see if GBP or AUD were the strongest, I could look to the GBP/AUD pair. This could give me a bias as to whether I’d be better off buying GBP/USD or AUD/USD, for instance.
Currencies are a “comparative/relative” game. In other words, you always want to “rig the fight” with the absolute strongest candidate vs. the absolute weakest candidate and then “bet on that match” by buying the stronger vs. the weaker.
This, coupled with great risk management, will greatly improve your odds of success in trading. In other words, don’t over-leverage your account. You should probably be trading no more than 1 standard mini lot per $2,000-$3,000 in your account OR 1 micro lot per $200 to $300 in your micro account.