Is the US Dollar under threat?

For those who trade Forex market, are you wonder USD is under threat? I think USD is seriously under threat due to recent development between BRIC,(especially BC; Refer: http://www.cnbc.com/id/31600755) . What is the short term impact towards FOREX market?

1. There will be substantial reduce of USD translated in FOREX, i.e. In the news above, Exporter and Importer from China & Brazil who used to use USD to finance the bilateral trade will shift the currency to Yuan and Real(Brazil Currency).

2.Big Boys (Hedge Fund, Banks who trade FX) may shift their attention to alternative currency such as Euro, Yen etc. The phenomena can be justified by USD Index which had declined recently.

3.The liquidity comparatively will be reduced. Since FX Market transaction is more then trillion dollars a day, so this will not affect the retail investors like you.

Are the Americans and other contries going to wait and let the USD depreciate in long term?

From the economy aspect, American knows BRIC already fed up buying their debt( paper printed in the thin air), they must do something. Of course different economists have different point of views.

My point of views (I am just a person who follow the logic and the market acceptance).

1. Even the US has the biggest debt in the world and technically bankrupt, one cannot ignore their buying power and population (300++ millions), many countries including China, India, Malaysia etc.... still view the US is the biggest importer. In other words, USD will be used widely if it involves transaction with the US.

2.All the biggest USD debt holders will not let USD depreciate. (It will reduce their asset's value)

3.Americans saving have been increased recently.(USD will be bought home and kept in their banks)

4.White House cannot simply print money as they may find difficulties to find USD takers.

5.If American's "real productivity" is coming back, then USD will be getting stronger again. (Note that Big American MNC is shifting back their resources such as factory back to America).

Above are some of my views.

In long term, USD will not face extinction but will not act as "Big" as in the market. We know China is not keen to float Yuan at this moment, things will change drastically if they are willing to do so. As Chinese is more rational than "Ang Mo", they will do things quietly so their asset will be protected.

FOREX: Long Term or Short Term?

In Forex market, there are different players with different point of views. One will tell you go for long term, it sounds like this " US Dollar is going doom soon, go long term in EURO, JPY etc..." Other will tell you, " US Dollar is still dominate the market, and the economy is showing sign of recovery, buy long term in USD". In the end of the day, you are confused whether going to buy or sell USD; or going to buy/sell USD for short or long term. My point of views, to buy/sell USD against other currency, you must know the participants of the market in the specific pairs. For example, if you trade USD/JPY, you must know the " big players" in the market and the time frame this players enter/exit the trade. It is tough to identify it, we don't have have the crystal ball like the "big boys" have. Even with the crystal ball, the "big boys" may make big mistakes if they are not careful.

Imagine you are watching "Casino Royale 007", a group of big boys playing poker games try to beat each other. All of them have the sufficient capital to 'earn' a seat on the table, in the end, only one winner. In Forex Market, the game is controlled by the different participants. Each of them with specific objective. Yen trader may be is an exporter or importer within specific time frame, they will enter/exit and follow by another group. The dynamic of the market is driven by supply and demand which will always move the price from one level to another level or back to equilibrium. The so-called fundamental and technical indicators for the investors to enter and exit the market will determine the chances to "win" or "loss". To trade long term or short term (or both) in Forex, it is depend how much "chips/capital" and "skills/strategies" you have to create the winning against losing chances. Of course, before you go in the market, you must willing to face the consequences and learn from it. Just like other games, practice makes perfect.

When "Big Boys" rules the game...

In Forex Market, there is a group who consider as the "house" in the casino. I refer them as 'Big Boys". Sometimes they are also known as "Market Maker".(In other word, they 'make' the market). The movement of this group is driven by their motive and objective. Who are their enemy? In the free market which is controlled by the wealthy capitalism, they only afraid of one enemy; (The Government). When the big boys "attack" the market by "directing" the price movement to their target, they will use various ways to 'shake' the novice investors emotion. When you look at the price movement, you will notice this group will always come in during and after the 'big fight' over. They are using massive capital to move the market to their destination. The 'big fight' is the point where it named "Resistance and Support" in financial term. Back to the history of 'Asian Financial Crisis' in 1997, some of greatest speculators punished the Asian Currencies including Malaysia Ringgit (RM) by using the same methods. When Malaysia Central Bank also known as Bank Negara facing outflow of huge fund overnight, the speculators 'dump/sell' ringgit. At the point the market could not absorb the massive capital outflow, RM experienced free fall from USD2.5 to USD 3.8. Economists and political leaders blamed the speculators, 'hot money' and 'asset bubble' phenomena. The speculators viewed the 'loop hole' in the supply and demand curve and punished the so called 'cronyism' system. The fact is if our country like Singapore which have huge reserve to counter the outflow, we would not experience this terror moment which make us 52% 'poorer' then Singapore. Who to be blamed?

When Machine "Crash" with Human....

While I am writing this articles, the Forex live platform window is beside it. I am seeing a Machine (which is preset) fight with human. Em...., sound like Terminator movie. Yes, when you look at the technical side, it will show the Resistance(R) and Support (S). In fact, every R&S is the point where the fight or "crash" will happen. Once the positive fundamental and 'noise' created by the market is stronger then machine, it will break to other level. If is the noise momentum is slow down, machine will win. The fight is consider "the crash" between rational(machine) and irrational (human).It happens over and over again in the Forex market. To make money in Forex market is not easy especially when you only can choose either machine or human. With the big fund(bullets) and real machine(black box) in hand, the house will always win unless you do your homework carefully. You will feel tired and even sleepy when you see the fight (red and blue color blinking). To avoid these senario, you can hedge(protect) the position by varios methods. In long term, those have more bullets will always make money faster and easily. It sound unfair, but this is the capitalism world, like it or not, you have to accept it.

Forex Market Vs Stock Market

For those who is familiar with stock market, you may want to take a look in Forex Market as another alternative investment portfolio.

Firstly, lets look at some key differences between the Forex market, and the Stock market. The Forex market can be traded 24 hours per day, but the Stock market is only open 8 hours per day. This fact alone creates a very large advantage in favor of the Forex market. It is considerably more expensive to trade stocks, than it is to trade currency, as the cost of Forex trade transactions are minimal, when compared to stock trade commission fees. However, it should be noted that due to technological advances over the last four or five years, the cost of stock trades have become considerably more reasonable.

Another Stock market flaw, is the fact that investors can fall victim to unscrupulous companies who may manipulate their stocks to a certain extent. Manipulation in the currency market is far more difficult to accomplish, if not impossible to do so. The fact that there are only six major currencies to be traded in the Forex market, is a clear advantage over the multitude of stocks available. Selecting what to trade and when, is much easier to accomplish with the Forex market. The leverage and liquidity found in the currency market is far greater than found in the Stock market, and the currency market as a whole is much larger than the Stock market.

For those who are wanted to know how to create passive income in FOREX Market, you can reach me at mikesmt@gmail.com

All the best in your investment!

Is Trading Forex an “Art” or “Science”?

Science is knowledge that developed and proven through experiment. Art is something abstract and as contrasted with scientific or technical subjects. Generally; Art=Psychology of Trading and Science=Technical Analysis. Once you view the chart (which most of the traders do), you need to know both aspects. Science will affect Art and vice verse. Both elements will always drive the price movement and once the expectation changes, so do the price direction. Smart speculators will always find the loophole of the financial system and use “Art” or “noise” to affect the price movement and novice investors emotion. They are the front liners; in every level, they will buy low (or sell high) while novice investors will always buy high (or sell low). But you will ask, “how low is low?” and “how high is high?”.The answer is “how much risk you willing to take and how deep is your pocket?” I would suggest you must have substantial capital stand by if you plan to invest in FOREX and always remember the basic rules of the games. I end this article with a quote:- “What Is Scientifically Optimal Is Psychologically Impossible”.

"Reflexivity" by Soros Vs Equilibrium Theory In FX Market.

Once again, I like to touch on this 79 years old man and the way he views market participants and reaction. Most of you who read his book will find a term called "reflexivity".

Wikipedia explains "Reflexivity is discordant with equilibrium theory, which stipulates that markets move towards equilibrium and that non-equilibrium fluctuations are merely random noise that will soon be corrected. In equilibrium theory, prices in the long run at equilibrium reflect the underlying fundamentals, which are unaffected by prices. Reflexivity asserts that prices do in fact influence the fundamentals and that these newly-influenced set of fundamentals then proceed to change expectations, thus influencing prices; the process continues in a self-reinforcing pattern. Because the pattern is self-reinforcing, markets tend towards disequilibrium. Sooner or later they reach a point where the sentiment is reversed and negative expectations become self-reinforcing in the downward direction, thereby explaining the familiar pattern of boom and bust cycles"

Well, for those who understand it, which "belief" you choose? My point of views;

Equilibrium defines supply (SS) and demand (DD) will meet in one point. Can this happen in FOREX Market? FX market is just like other market which driven by DD and SS, whether in short or long run, you will see the price come back to the original point.

"Reflexivity" will shift the demand and supply curves sharply where "noise" overcome "emotion". Behind every "loud noise" is back up by the strong force who eventually move the curve. If you are in FX market and follow the gullible "noise" at the point which pattern changes, it will burn your ass!!!

Economy (The Illussion Created by BIG BOYS) in FOREX Market

For those who read my blog, you notice that I like to use the term " BIG BOYS"... Btw, you will ask me, who the hack are they? In Mathematics Equation; BIG BOYS=CAPITALISTS . Economy= "A system in which a country’s WEALTH are controlled by private owners for profit, rather than by the state". Overall economy is an illusion created by the capitalist to capture country's wealth. In FOREX market, capitalist use it as a platform TO CAPTURE World's wealth. The capitalist will define the economy (the strongest element/variable effect FOREX Market) through channels like TV, Internet, Books etc.... Once you look at the 50 years economy chart movement, easily you can see up and down, in every cycle, it is well defined and implemented by the big boys. They will "eat up" all the followers and believer along the way... Same concept it apply to FOREX market, the big boys already layout the up coming daily, weekly, monthly, yearly chart to create GREED & FEAR in the market and "shake" the emotions of the decent retail investors like you. How to overcome it? The answer is become emotionless and do a complete study of the big boys movement, once you get it, let the system run automatically. But beware, if you are getting bigger, they will start looking at you.

What is the impact of "Carry Trade" to FOREX Market?

For those are familiar with FOREX Market, you will heard a term called "Carry Trade". In plain language, Carry trade is borrowing money from the country with low interest rate and fund the purchase of asset with higher return in the other country. Simple, if Japan offer 0.25% interest; it is wise to borrow Yen and fund the US Treasury which offer 5% return.

Investopedia explains Currency Carry Trade

Here's an example of a "yen carry trade": a trader borrows 1,000 yen from a Japanese bank, converts the funds into U.S. dollars and buys a bond for the equivalent amount. Let's assume that the bond pays 4.5% and the Japanese interest rate is set at 0%. The trader stands to make a profit of 4.5% (4.5% - 0%), as long as the exchange rate between the countries does not change. Many professional traders use this trade because the gains can become very large when leverage is taken into consideration. If the trader in our example uses a common leverage factor of 10:1, then she can stand to make a profit of 45%.

The big risk in a carry trade is the uncertainty of exchange rates. Using the example above, if the U.S. dollar was to fall in value relative to the Japanese yen, then the trader would run the risk of losing money. Also, these transactions are generally done with a lot of leverage, so a small movement in exchange rates can result in huge losses unless hedged appropriately.

I think you should get the clear picture now. The impact of carry trade can be very big if the economic experience "earthquake". One of the scenario it happened is back to end of 2008 and early of 2009. During this period, the Japanese unwind the carry trade (convert back USD to Yen) and it shifted the demand curve thus Yen appreciate tremendously. Again, to protect this kind of event, you need to hedge it properly. I am learning another hedging tool: FOREX Options. I need to experience it before sharing with you. At the same time, I feel very comfortable of my return in Forex with my current strategies.

Greed Vs Fear In Forex

In any investment, Greed and Fear will effect the players; investors(IV) or speculators(SP)- also known as market maker. Do you want to be an IV or SP? My answer is both in Forex Market. The speed of the Forex Market movement like thunder, shooting up very fast and so do coming down. SP will push up or down depend on their objectives while IV will sit there and wait. Forex- Spot Market is also associate with Forex Options. Those who had paid or collected the premium will do everything to move the market to their objectives. Anyway, wise SP or those who owns the "black box" can create fear to the normal players like you. Since FOREX unlike Stock market where u can view the order flow and exact volume, only those big boys have the real control of the pricing can move the market. This explain why normal retails investors are like the "deers" or "rabbits" running on the ground, while the big boys are "eagles" and "lions" watching from the high ground, when timing is right,....you know the ending...

How to make Money in the most liquid and volatile market in the world?

IS FOREX Trading risky? The answer is "Yes" or "No"

Yes: If you treat it like Casino by over leveraging your initial margin. Simple: If you have USD5000 to start with, leveraging 1:100 (you play up to USD500,000) will burn your ass once the market against you in 100 pips. Eg. You buy EUR/USD and if the market move 100 pips against u, you are finished. (IT CAN HAPPEN IN LESS THEN 1 SECOND!!!)

No:

1. You must know simple calculation. USD5000 pips max leverage is 1:1. Now,at least you have 5000 pips to deal with.

2. Hedging. (My definition of hedging is based on Deutsche Bank platform which allow you to sell/buy stop. Most of the platform allow you stop loss only)

3. Set yourself like machine: emmm.... we are human, this is the toughest part. "Torture your brain first"...Beside all this, you must know the psychology of the players ( Banks, Investment Banks, Hedge fund....those like Soros kind of player) ...Of course like all games, first hand news will be the best trading tool. If you have good friends like Ben Berneke, Obama, Jean-Claude Trichet, let me know.

Most of you have simple knowledge in investing will ask me...what about fundamental, technical analysis..etc..

My answer: Emotion=Fundamental + Technical

Come on.....All these are created by the big boys to "eat" you. My advice. "Turn off Bloomberg and CNBC" if you want to start trading in FOREX!!

Trading Forex is like running a Trading Business

Most of you heard about George Soros, the guy from Budapest, Hungary. He "break the Bank of England" and make $1billion in a single day... Wow! 24 hours and make $1 billion which able you ranked as Top 20 richest man in Malaysia. The fact is he is using $10billions to make the $1billion. Which mean he make 10% return in a single day.

Not surprising me in FOREX you can make this kind of return in one day, but to have $10billion?? that is another story.

I started view FOREX as a Gold Mine since Jan. 2008. Since then, I have been making little money for my Australia Trip in end of 2008. My other business, property development not doing so well due to the credit crunch.

Anyway, in Jan 2009(After my Australia Trip, I make some awesome return through a combined account with an investor. Unfortunately, I forced to close the account due to some problems created by this so called investor)

I am hoping to liquidate part of my property and focus more time in FOREX. Be frank, you need big $$$$$$$$$ to make $$$$$$ in Forex...I know the games by "throw" myself in the market...Even Soros make 10% per day, so when u heard those who make 100% per day, all the best to them.

I will start my FX company soon... Currently, I am a self trader in Forex Market. I have gone through a lot of frustrating, exciting, thrilling and rewarding moment.