Thursday, June 18, 2009

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?
 
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