An 8-day rally for the Dow came to an end today, as US stocks fell amid speculation out of Egypt that President Hosni Mubarek will step down. The S&P 500 and Nasdaq making a bit of a comeback, but ended the day on the downside as well.
Don’t Hate the Game, Hate the Player — Even in Forex
View the original post at http://blog.currensee.com/2011/02/dont-hate-the-game-hate-the-player-even-in-forex/
By John Forman
Last week I took on SmartMoney. This week I take on the Prism Money personal finance blog, which is hosted by none other than Reuters, my own employer (it’s a really big company, though, so no, I do not know the author and/or editors responsible). The post in question is Forex folly: Why you shouldn’t be trading currencies.
Scam Everywhere!
The wonderful part of this particular article is how the author basically paints the whole industry as a big scam. I’ve addressed the forex scam subject before, and no doubt it will come up again. Any time you have a situation where the majority of folks are bound to end up disappointed with their performance there are going to be claims of malfeasance.
Now, this is not to say there aren’t those who would seek to take advantage of the popularity of forex. That shouldn’t be a reason to avoid a market, however. If that were the case you’d have to rule out all the other markets too because there most definitely have been all kinds of bucket shops, boiler rooms, and other scams involving stocks, commodities, and everything else.
As with any situation where you’re putting your hard-earned money in someone else’s hands, you definitely want to do your due diligence ahead of time to avoid the predators. The blog post author makes some excellent recommendations where looking for CFTC/NFA registration, complaints, etc. are concerned. That is always a good idea. Be cautious about listening to posters on forum and chat sites, though. Very often the folks complaining about this or that company, group, etc. are looking to shift blame from their own failures.
Not for the average investor
Shifting to the question of whether forex is something folks should avoid or not from a more markets oriented point of view, this blog is another instance where trading and investing are being intermixed. Trading as most of us would define the term is in general terms not something most “investors” should look to do for any number of reasons. It doesn’t matter whether you’re talking about stocks, bonds, commodities, or currencies. Most investors just are not good candidates for trading. Please let’s not conflate the two different approaches to the markets.
Is trading forex any different than trading any other market?
Getting beyond the investing question, the blog author brings up some items which he thinks argue against forex trading. One is that the forex market is dominated by big banks and institutions. This is totally true. The big institutions are responsible for the vast majority of trading volume. As I recently wrote, however, the big players are not able to manipulate the forex market to their liking.
Then there’s the suggestion that the big players are in the game because it’s volatile, turns quickly, and isn’t predictable. If the large shops are in there looking to make money taking positions in currency exchange rates they clearly think there’s at least some predictability to it all. They’re not just flipping a coin.
=========
Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
=========
John Forman is a senior foreign exchange Analyst for the IFR Markets group of Thomson Reuters and author of “The Essentials of Trading.” John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.
Fed’s Warsh Resigns; Bernanke Adviser Questioned QE2: Video
Feb. 10 (Bloomberg) — Federal Reserve Governor Kevin Warsh, who was one of Chairman Ben S. Bernanke’s closest financial-crisis advisers before becoming the only governor to question the expansion of record monetary stimulus in November, resigned after five years at the central bank. Warsh, 40, a former investment banker who was the youngest-ever Fed governor when then-President George W. Bush appointed him in 2006, will leave “on or around March 31,” he said in a letter today to President Barack Obama that was released by the Fed in Washington. His term would have run through January 2018. Bloomberg’s Peter Cook reports. (Source: Bloomberg)
Twitter Reportedly in Buyout Talks with Google, Facebook
Twitter has been in low level negotiations with Google (GOOG) and Facebook about a potential sale of itself to one of those companies. The Wall Street Journal reported that the microblogging website has been in talks for a while, that have gone nowhere to date.
Commodities & Options: USO Options Trade Setting UP!
By J.W. Jones, optionstradingsignals.com
At the risk of stating the obvious, the recent market action in the commodities has been manic with wild gyrations of price in a wide variety of basic materials, metals, and energy. Given these wild fluctuations in price, I thought we could look at an options trade in USO that gives a high probability of success.
In order to give a bit of a conceptual framework for this sort of trade, let me share the way I look at these. Development of precision high altitude bombing during World War II resulted in a dramatic reduction in casualties while inflicting devastating consequences to enemy forces. I view the sort of option strategy described below as the equivalent of high altitude precision bombing. We will extract substantial profit without putting ourselves at high risk of damaging anti-aircraft fire.
As is shown on the daily price chart below, there is substantial support in the region of 35.60-36 provided by a recent swing low and the 200 period moving average.
In selecting the structure of option trades, I usually like to consider the volatility environment in which we currently operate. This is important because a very strong tendency of implied volatility is reversion to its mean. The knowledgeable trader factors this into his trades in order to put the wind at his back as much as possible. Trades can be selected and constructed to benefit (positive vega trades) or suffer (negative vega trades) from increases in implied volatility. As you can see in the chart below, implied volatility is currently in the lower quartile of its historic value for this specific underlying:
Given the current low volatility, let us look at a strategy that gives us substantial profit from an altitude of 50,000 feet and the ability to roll the trade forward for additional substantial profit. This trade is structured as a “ratio calendar spread”. Now don’t go getting hung up on the name, it is simply a two legged trade in which we buy a longer dated in-the-money call and sell a smaller number of out-of-the-money calls. The trade is diagrammed below:
For those getting used to these sorts of trades and trying to form an organizational framework, the trade can be thought of as a basic calendar spread where an additional contract of the long options is purchased. The addition of this extra contract removes the upside limit on our profitability which would exist in an ordinary calendar spread. As is often the case in option trading, this trade can also be thought of as a “first cousin” to a covered call structure where the long in-the-money contracts serve as a surrogate for long stock. I find it helpful to think of the various option constructions as individual members of several different families. Each family has a number of “family traits” that help make sense of the large number of potential constructions available to the options trader.
One of the characteristics of this family under discussion is the “Sham Wow” factor- “but wait-there’s more”. The “more” in this trade is the ability to “roll” the short calls forward as they expire or, more prudently, as they reach inconsequential value. For example, this trade would have been initiated by selling the February 37 calls at a value of around 57¢. When these calls reach minimal value, let us say 10¢ for discussion, they could be bought back, and the March calls sold to capture substantial additional premium. This process can continue for April, May, June, and July. These additional sales give the opportunity to reap additional profit for the trade.
The risks in the trade are:
1.USO breaks support and continues to sell off
2. Volatility collapses on the long leg of the trade
I have discussed both of these factors in the price chart and volatility chart above when I was developing the logic of the trade. While no guarantees exist for the behavior of either price or volatility, the current trade represents a reasonable balance between risk and probability in my opinion.
As with all our discussions, these considerations are presented for educational purposes and do not represent a recommendation. This is not a solicitation nor should it be considered financial advice. I am simply trying to demonstrate how to use the knowledge of option behavior to construct trades that benefit from high probability events. Bombs away!
Get My Trade Ideas Here: http://www.optionstradingsignals.com/profitable-options-solutions.php
J.W. Jones
The Greenback remains strong against the counterpart currencies in overnight trading
The US dollar gained versus its major counterpart currencies on Thursday overnight trading session as investors are closely watching out for auction of 30-year US treasury bonds and direction of monetary policy to be disclosed by Bank of England.
The investors and traders are hoping for increase in US treasury yields. Further the pair USD/JPY is the most reactive to movement of US Treasury yields as Japan government owns substantial holdings in American debt. Investors keep a very close watch on US bond auction as higher Treasury yields happen to be very favorable for the greenback.
The US dollar remained under selling pressure on Wednesday’s trading session as the US Treasury yields declined after overwhelming bond auction in reaction to remarks of US Federal Reserve’s chairman Ben Bernanke.
The dollar index DXY which measure’s the US dollar’s performance versus its six major rival currencies gained to 77.861 as compared to 77.661 on Wednesday.
The Euro plunged to 1.3672 versus the US dollar in Asian trading session on Thursday as compared to 1.3721 on late Wednesday. The British Pound also declined to 1.6070 against the greenback as compared to 1.6099 on Wednesday’s North American trading session.
The Pound Sterling has been moving on solid ground since last week as the Bank of England announced its decision to keep its lending rate unchanged at 0.5 percent in the last week.
Currency strategist from Barclays Capital commented, “We continue to believe that the BoE will resist raising rates until later this year and expect the first rate hike in Q4 11.”
The US dollar surged versus the Japanese Yen to 82.66 in Asian session as compared to 82.42 on Wednesday’s late trading session.
About the Author
Daily forex trading news written by Rehan from DailyForexTrade.com
Gold Trading: Are Gold Miners giving us a flashing sign?
By Chris Vermeulen, thegoldandoilguy.com
The past couple weeks I have been keeping a close eye the price of gold and the gold miners index. I check to see if its pointing to higher or lower prices in the near future using inter-market analysis, price and volume, along with technical analysis. At this time the charts are still pointing to lower prices in the coming days or weeks.
Taking a look at the daily chart of Gold
As you can see it has formed a bear flag with declining volume and the price has drifted up into a resistance level. This combination typically leads to lower prices.
With international fears floating around and the fact that inflation has started does make me a little weary of shorting gold but one thing I have learned over the years is that trading on fundamentals and news clips seen on TV is not a reason to pass on a setup if one forms in the coming days. The only thing that pays in the stock market is when the price action goes in your favor. This is why I focus on price, volume and momentum while avoiding what others are saying elsewhere. Trading is a numbers game and I put my money on the table when the odds are clearly favoring one direction. Unfortunately I am trading trades against what the masses think and feel is the right thing to do.
Gold Miner stocks are forming much of the same pattern as gold bullion but today (Wednesday) the chart actually put in a possible reversal candle. If this is correct then we should see gold and most likely silver follow suit tomorrow by moving lower and possibly even start a correction.
Gold Swing Trading Conclusion:
In short, gold stocks sold off strong today while both gold and silver closed only slightly lower. When this happens near a resistance zone, with a bearish price and volume patterns I start to look for a shorting opportunity. It has yet to happen and I’m not going to jump the gun, but I am waiting for the right opportunity to take advantage of these trading instruments.
Chris Vermeulen
Forex Daily Market Commentary
By GCI Forex Research
Fundamental Outlook at 0800 GMT (EDT + 0400)
USD
The dollar recovered lost ground during the Asia session, after an earlier bout of weakness in the aftermath of Fed Chairman Bernanke’s speech. EURUSD traded 1.3689-1.3744, USDJPY 82.20-82.60. AUDUSD was hit by a decline in full-time jobs in January. Asian equities are slightly weaker at the time of writing, mirroring small losses on the S&P 500 earlier. Bernanke’s testimony before the House Budget Committee offered little new insight into his outlook for the economy or public policy as he largely reiterated his speech from Feb. 3. He again sounded guardedly optimistic and the only (minor) new information was his acknowledgement of the back-to-back sharp drops in the unemployment rate. Specifically, he said “Notable declines in the unemployment rate in December and January, together with improvement in indicators of job openings and firms’ hiring plans, do provide some grounds for optimism on the employment front.” But he again said, “It will be several years before the unemployment rate has returned to a more normal level. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.” Atlanta Fed President Lockhart said that the QE2 asset purchase program would stick to buying USTs and would not have its scope widened to include the purchase of municipal bonds. Head of the New York Fed’s Markets Group, Brian Sack, said that there are no signs that the market is facing a shortage of particular Treasury securities.
EUR
EU President Van Rompuy said EU leaders will hold a special summit on March 11 to consider new measures to tackle the sovereign issue. The press continued to report that Bundesbank President Weber may not seek a second term at the Bundesbank, which could eliminate him as a possible successor to ECB President Trichet, whose term ends in October..
The ECB’s Bini Smaghi discussed some potential changes to the EFSF, such as debt buybacks, and said interest rates of 6% would ensure debt sustainability. He also said restructuring would be a plan B for the current crisis, as it could be more costly in the long run.
The IMF said assistance for Ireland would continue despite the political uncertainty. The Irish government said it informed the IMF and the EC of its decision to postpone further capital injections into its banks until the election is completed. The Finance Minister did say that even without these injections, the banks are adequately capitalized.
GBP
Our analysts are with the consensus and expects no change at today’s BoE policy decision, which should mean that no explanatory statement is published. That would shift the focus to the Feb. 23 meeting minutes, when the voting breakdown is revealed. However, our economist does note that “Given that this decision will take place against the backdrop of the quarterly Inflation Report [Feb 16], there is a risk of a surprise vote.” Any vote in favour of a rate hike would likely prove strongly sterling-positive in the very short term. However, over the longer term, monetary policy tightening would likely be viewed as being in conflict with the weak growth outlook.
CHF
While Swiss officials seem less concerned about deflation these days, a bad CPI print today could stir up intervention rhetoric. On the other hand, a strong print would help the Swiss franc, prompting more rhetoric on currency strength. Nevertheless, we remain constructive on CHF
AUD
The AUD fell overnight, despite the creation of 24k new jobs in January, more than consensus expectations of 17.5k. But the mix was not encouraging – part-time jobs accounted for all the increase, and some full-time jobs were lost. The unemployment rate held steady, as expected, at 5.0%. Our Australian economics team notes that today’s data is neither definitively strong enough nor weak enough to provide clear insight into the near-term rate outlook. They continue to expect the next RBA hike in August.
TECHNICAL OUTLOOK
EURJPY breaks 112.92.
EURUSD BULLISH Violation of 1.3741 has made the pair target 1.3779, break of this would expose 1.3826/62. Near term support is at 1.3572.
USDJPY NEUTRAL Rise through 82.67 would expose 82.93 while support lies at 81.78.
GBPUSD BULLISH Expect gains to target 1.6186 ahead of 1.6279/99 zone. Near-term support is defined at 1.6010.
USDCHF BULLISH Focus is on 0.9687 with scope for 0.9764 next; support at 0.9524.
AUDUSD BULLISH Resistance zone lies at 1.0200/56 while near term support lies at 1.0002.
USDCAD NEUTRAL Resistance lies at 0.9978 while initial support is at 0.9869.
EURCHF BULLISH Momentum is positive; focus is on 1.3206/87 resistance zone. Support at 1.2973.
EURGBP NEUTRAL Move above 0.8508 has turned the model to neutral; 0.8577 and 0.8520 mark the near term directional triggers.
EURJPY BULLISH Rise through 112.92 has exposed 114.01/94 resistance zone. Initial support lies at 112.06 yesterday’s low.
Forex Daily Market Commentary provided by GCI Financial Ltd.
GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.
DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Dollar Continues to Strengthen versus Counterparts
Source: ForexYard
The dollar strengthened versus all of its 16 major counterparts in today’s Asian trading, rising near a two week high versus the yen, ahead of a report today that is expected to show U.S unemployment claims declined. The slowly improving job market as well as signs consumer confidence is on a rise boosted optimism about recovery of the world’s largest economy.
The EUR/USD pair dropped over 100 pips from yesterday’s high to currently trade at $1.3633, from $1.3733. The dollar gained to 82.70 yen from 82.36 in New York yesterday.
Later today, traders should follow Britain’s Asset Purchase Facility and MPC Rate Statement. The Bank of England is expected to leave its key lending rate unchanged at a record low 0.5%. Another major indicator to be released today is the U.S unemployment claims, which is expected to show another decline; potentially boosting the USD even further if the outcome is as expected.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
EUR/AUD Likely to Enter Downward Correction
By Anton Eljwizat
The volatile of the EUR/AUD pair continues to be affected by the volatile forex market. The last week has seen a lot of bullish strength in the EUR/AUD pair. However, as I demonstrated below, it seems that the pair’s bullish run may have run out of steam, and a bearish correction could be underway soon. Forex traders can take advantage of this imminent downward movement by entering short positions at an excellent entry price.
• The Chart below is the 4-hour chart for EUR/AUD by ForexYard.
• The technical indicators that are used are the William Percent Range, Relative Strength Index (RSI), and Slow Stochastic.
• Point 1: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction.
• Point 2: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the overbought territory, signaling downward pressure.
• Point 3: The Williams Percent Range signals further bearishness for the pair, which in turn indicates further downward pressure to occur anytime soon.
EUR/AUD 4-Hour Chart
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
