Do you think adaptation to the realities of the market is the
most important thing?
Many times in the past I've written about the need to adapt,
the need to be able to change your behavior relative to the
market because the markets are ever changing. I've stated that
mechanical systems may be workable, but for only a short time
relative to the life of markets. You must learn to trade what you
see and to understand what you see on a chart.
When I first began trading there was no such things as futures
contracts for foreign currencies. Why didn't they exist? Because
there was no need for them! In the 1970's all that changed when
the US dollar went off the gold standard and began to float
against other currencies. Following that, the Chicago Mercantile
Exchange began to create currency futures to provide a place
where currency traders could hedge the risks associated with
dealing in foreign currencies. Some of these risks are direct and
some are indirect. Direct risk is involved for those who deal
directly in foreign exchange. Indirect risk involves companies
who export or import and receive payments or make payments in the
currency of another country. Ever since currency futures were
created, they have been in a state of flux. More recently, for
purposes of futures trading, currency gyrations have centered on
a massive move away from currency futures to more direct trading
in the forex markets. Currency futures, while maintaining their
volume and open interest figures, are actually less liquid than
they had been previously. Volume and open interest do not reveal
the picture of what is happening in the currency futures pits.
Volume and open interest levels are being maintained by fewer and
fewer futures traders.
In the period from 1992 to the present, we've witnessed
currency futures moving from "red-hot" to "cool" and now hot
again insofar as speculators are concerned. Foreign exchange,
which in 1992 was one of the hottest plays, first turned dull and
then back again to exciting. That this has happened can be seen
in areas of which most futures traders are ignorant. Five years
ago foreign currency traders were being paid huge salaries and
anyone with a track record could virtually name his price.
Following that, currency traders were no longer in great demand.
Now, again, there is a huge demand for successful currency
traders. Currency futures are but a small representation of the
$1.5 trillion dollar foreign exchange market. Professional
currency traders use forex, forwarding contracts, derivatives of
all kinds, and the futures pits, to deploy their various trading
and hedging strategies. Looking at only the futures is like the
blind man trying to tell what an elephant is like by feeling only
the tusks.
In past years, foreign exchange desks at banks, insurance
companies, brokers, and other institutions were seen closing down
and firing hundreds of employees. Today, they are again looking
for currency traders. In the 1990s, Midland Bank closed its
foreign New York office laying off dozens of people. Frankfurt
Bank had pulled out of New York and Tokyo closed down its foreign
exchange desk. At that time, the world's largest foreign exchange
trader was Citicorp. In the D-Mark alone, they shrank from 39
traders working at 17 different locations around the world to 4
D-Mark traders all working in one room. Keep in mind that these
were traders who had been to a greater or lesser extent using the
currency futures. The result at that time was that there were
fewer big fluctuations in the currency futures than there once
were and therefore much less profit.
However, today, just the opposite is happening. Central banks
are presently making much greater interventions in the currency
markets. They have stopped publishing targeted exchange rates.
Such action by the central banks leaves currency speculators at a
loss for what to do, and the result has been a huge surge in
forex trading. Because today forex brokers abound and are
actively marketing the idea of currency speculation, it is having
a profound effect on the foreign exchange planning of
individuals, companies, and nations.
If some day the major currencies would be the US dollar, the
J-Yen and the euro, who would need thousands of traders to trade
them? There would be far fewer currency misalignments to provide
a basis for trading. But that is not the way the world is moving.
The picture I just presented ignores the rise of China as a major
economic force on the world scene. Almost certainly, the Chinese
currency will become a major trading vehicle. The same is true
for other emerging countries. Some of them will no doubt have
important currencies from the point of view of world trade. But
will these currencies be traded in the futures markets or in
forex?
The changes in just this one area - currency trading - are an
example of how things rapidly change and point out the need for
traders to adapt. There have of course, been many other changes
in recent years. The advent of all-electronic markets has
produced markets of a completely different kind. Computers have
brought about the ability to trade in various time frames. New
exchanges have created new markets and new contracts - so many,
in fact, that it is difficult to know exactly where to direct
ones trading efforts. It is now possible to trade virtually
around the clock. It seems that somewhere, some market is
trading.
Joe Ross has been trading for more than 47 years, and is a
well known Master Trader. He has survived all the up and downs of
the markets because of his adaptable trading style, using a
low-risk approach that produces consistent profits.
Joe is the creator of the Ross hook, and has set new standards
for low-risk trading with his concept of "The Law of Charts?."
Joe was a private trader for most of his life. In the mid 80's he
shift his focus and decided to share his knowledge. After his
recovery, he founded Trading Educators in 1988 to teach aspiring
traders how to make profits using his trading approach. He has
written 12 major books on trading. All of them have become
classics and have been translated into many different
languages.
Joe holds a Bachelor of Science degree in Business
Administration from the University of California at Los Angeles.
He did his Masters work in Computer Sciences at the George
Washington University extension in Norfolk, VA. Joe still tutors,
teaches, writes, and trades regularly. Joe is still an active and
integral part of Trading Educators.
Sri Lanka Rupee, Stocks Drop After Currency Trading Band Removed Bloomberg The central bank narrowed the currency's trading band against the dollar on Feb. 3 and Feb. 6 and today, prior to announcing its removal. The monetary authority raised benchmark interest rates for the first time since 2007 on Feb.
India Eases Currency Trading Limits for Some Banks Wall Street Journal By SUDEEP JAIN MUMBAI -- India's central bank has asked banks to approach it individually for relaxing some foreign currency trading limits and has already eased restrictions for some banks, a top official said Monday. "Some limits, based on their ...
iFOREX Adds Oil to its list of Tradable Commodities MarketWatch (press release) ROAD TOWN, Tortola, Feb 09, 2012 (BUSINESS WIRE) -- Leading currency trading company, iFOREX, has recently expanded its services, giving all Forex trading accounts direct access to oil CFDs. Targeting an audience that has little or no experience with ...
This January Azerbaijan's exchange currency trading totaled $82.5 million Azerbaijan Business Center Baku, Fineko/abc.az. The Baku Interbank Stock Exchange (BBVB) has renewed statistics of its operations. BBVB reports that in January 2012 the nine participating banks concluded 28 deals in 36 trading sessions in e-trading system (BEST).
FOCUS: Technology Buoys Retail Currency Trading, Reshapes Old Models Wall Street Journal By Eva Szalay Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Retail foreign-exchange trading is emerging as one of the biggest growth areas in the currencies space, and some of the trading firms that facilitate these flows are building up a whole new ...
Morgan Stanley Currency-Trading Head Stephen Mettler Leaves Bank BusinessWeek By Michael J. Moore Jan. 26 (Bloomberg) -- Stephen Mettler, who oversaw Morgan Stanley's interest rates and foreign-exchange trading businesses, has left the bank. Mettler, who joined the firm in 1997, retired, according to an internal memo obtained by ...
Bank of England and ECB Hold Steady, Indonesia Cuts CNBC.com [CNBC] ----------------------- MULTI CURRENCIES VS THE DOLLAR Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm. Learn more: The essential vocabulary for currency trading is on Key Currency ...
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