Dollar in Free Fall
14 Oct 2010
The Stock market seems to like the weak dollar, but how long can that continue? If the dollar continues it's steep decline, the rally in stocks could turn to fear as the slide continues. The idea that a weak dollar can help with exports, will become a weak argument when we are paying $6 a gallon for gas and much higher food prices. Silver and gold continue to rise.
Gold Reaches All Time High
14 Sep 2010
Gold and Silver were both up again today. Gold reached $1275 even as Investors seem surprised based on the back of recent stock market gains. Possible fears of a correction, seasonal world gold demand, double dip recession or fear of future inflation seem to be some of the reasons. Gold seems to be in a position to do well no matter which way the economy goes. If the economy tanks, people want gold for a safe haven. If the economy is improving, fears of inflation. No wonder gold keeps going up. Many think that the huge deficits will eventually lead to the US and many other countries needing to inflate their way out of the spiraling debt.
Hindenburg Omen
16 Aug 2010
The Hindenburg Omen, a technical indicator developed by Jim Miekka may now be predicting a possible market crash in the next 40 days. Every recent market crash has been preceded by the Hindenburg Omen. Don't panic just yet as every Hindenbug Omen has NOT always been followed by a market crash. There are some other factors outside the Hindenburg Omen that may point to a falling stock market. Some point to a rising wedge in the stock market charts. Increases in capital gains next year may also prompt some additional selling pressure this year as the Bush tax cuts are set to expire. The timing is particularly nerve racking as we approach the month of October, the month that has been known for past stock market crashes.
Dollar Drops to a 15 Year Low vs. the Yen
11 Aug 2010
The Dow Tumbles 265 points on fears of a slowing China economy and the Federal Reserve's recent bearish economic outlook.
The Dollar rose against most other currencies on fears of slower growth in Europe and abroad. The Euro dropped sharply against the Dollar today making some wonder if the rally in the Euro over the last month is over. The Euro had Rallied from 1.20 to 1.31 recently. Today it fell to about 1.283. The wild swings in the currencies may have to do with the concern that while the Dollar may be considered safe during major drops in the stock market, there is still strong concern with the Dollar over the long run as deficits continue to rise. Many think that the Dollar will have to fall much further at some point in order to continue with such a high debt.
Euro Parity?
8 June 2010
The Euro recently broke through a critical support level of 1.20 causing more people to speculate that Euro parity with the dollar could happen in the next 18 months. The recent free fall in the Euro has turned the currency markets upside down as the Euro Yen is also at a multi year low. There are some that think the Euro may even be in danger of complete collapse as more people lose faith in the ability for Europe to get it financial house in order. First Greece and now Hungary. Who's next? Even as some of the governments make promises to cut budgets, it's yet to be seen if the people will go along with the drastic measures needed to avert fiscal melt down and default.
Dow Drops Almost 350 Points
6 May 2010
Today proved to be a wild ride as the stock market closed down sharply. The DOW dropped 347 points. At one point the Dow was down almost 1000 points before rallying back almost 700. The stock market crash could have been much worse. Some very unusual swings in certain stocks prices like Proctor & Gamble drove speculation that some computer errors may have been the cause. Could the recent volatility spell the beginning of another stock market crash? The situation in Greece and the falling Euro is at the center of much of the recent concern.
Foreign Exchange Market Information, Tools and Tips
FX or forex refers to the foreign exchange market. The foreign exchange market or FX is where currency trading takes place. The FX market is highly liquid because of the huge volume traded.
24 hours a day, speculators, central banks and, institutional investors and governments can trade currency from around the world.
Forex Basics
Forex, or foreign exchange market is an over the counter exchange of currencies. Averaging $3.2 trillion US dollars a day and operational 24 hours a day, the Forex is touted as the world’s most active and liquid market, involving trading between large banks, central banks and private traders. The 24 hour up time allows traders to trade at the slightest fluctuation of exchange rates day or night, making this the most attractive market to speculators, who make up about 95% of the trading population.
In order to understand how a currency exchange occurs, you need to understand one principle. Currency exchanges always occur in pairs. In a currency exchange transaction, you are buying one currency with another. For example, let’s say you have five US dollars and would like to have Japanese Yen. You would sell your dollars to a trader who wants to buy them with Yen, or conversely, you would purchase another traders yen with your dollars. You are simultaneously selling and buying at the same time.
Forex Quotes:
To understand how a forex quote is read, two simple ideas should be kept in mind:
- The base currency is always the first currency listed in the transaction.
- 1 is the assigned value to the base currency.
A forex quote is used to understand the strength of the base currency. Let’s look back at our previous example. You have five US dollars and would like to purchase yen. In obtaining a forex quote, you would receive information detailing how much yen 1 US dollar could buy. Traders use these quotes to assess the relative strength or weakness of the base currency vs. the other currency and attempt to judge when they can receive the most profit for their trade. This is called speculation.
Leverage:
Some traders choose to trade on leverage or trade on margin, meaning that they are not required to have the full amount of the trade in the bank in order to initiate the trade. The Forex market allows traders much more leverage than other markets, up to 200 times the current value of the trader’s account. This type of trading is much riskier, but the profits are also much greater.
How to Calculate Profit and Loss:
Calculating profit and loss is easier to understand if you understand the basic principle of buy low/ sell high. Let’s say that you have five dollars and you want to purchase Euros that are currently worth $1.50 USD. You make the purchase, speculating that the Euro will strengthen. You purchase 3.3 Euros. Now, you see that later in the day, the exchange rate for the euro is now $1.70 against the dollar. You exchange your Euros for dollars and now have $5.61, a profit of $.61. Of course, traders generally make much larger transactions, making much larger profits. But, if their timing is off, they also stand to lose quite a bit of money. For example, take your original five dollars and purchase Euros at $1.50 against the dollar. You get 3.3 Euros for your exchange. Then later, the euro falls even further, to around $1.25 against the dollar, netting a loss of $2.36.
These are the basics when it comes to entering the foreign exchange market. Of course, being successful in any endeavor means learning all the ins and outs and trading markets are full of nuances, trends and tricks.
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