DislikedHi everyone
I am new to this thread but not new to forex trading.
I like to trade the USD pairs (and indices) as part of a correlated strategy using oil and gold to help give direction. Does anyone else trade USDJPY like this?
I find it filters out many bad trades and you can cash in on the strongest moves when they happen. It is proving to be quite successful for me and the other people I trade with.
I would love to hear the views of anyone else on this approach.Ignored
I just posted an answer to a question of over two weeks ago that is relative to your post.
I was on holidays for the last two weeks because of a rules infraction in case anyone else here wondered where I was.
Here is a Copy and Paste of the Question and my answer of a few moments ago. Please come visit and post on the "Knowledge Is Power" thread.
I note just for the record that USD/JPY NEVER went over 109.00 since my absence but did go below 106.00 on Friday. I doubt if we will see 109.00 for a long long time as the Fundamentals say the Dow is going towards 10,000 now as the US Economy continues down.
Look at Fannie Mae and Freddie Mack. The signs were there one year ago. The YEN Carry trade continues to unwind. The Trend is your Friend !
The 60 to 90 Day Trend determined by me without looking at a chart is down based on the real fundamentals.
The FED is more likely to CUT than RAISE !!!
My Copy and Paste:
Today 7:18am
Warren Forex http://www.forexfactory.com/images/s...ser_online.gif
Warrenforex
Member Since Sep 2006
Posts: 1,137
http://www.forexfactory.com/images/icons/icon7.gif Here Are Some Answers For You And Others !!!
Quote:
Originally Posted by silverheat http://www.forexfactory.com/images/buttons/viewpost.gif
Hello All,
i have a few questions and i hope some of you can answer them or provide links where i can read more into the subject. i have no experience in trading. if u would recommend a book, i would probably read it, after i examine if its worth the time, or not if its too overloaded.
1) So there is the carry trade, people borrowing money in one currency investing it in another country, therefore changing it to the domestic currency, as in the yen, which is an issue right now.
- what carry trades do exists, in wich amounts of money, i read something about the yen in the trillions. are there other currencies, how big is the impact?
- what happens with the money, where does it go? I believe in stockmarket, since i realized some traders mention if the dow goes down, the carry unwinds. are there other indicators (markets) they show that the carry unwinds.
2) I read in some posts in the thread about bonds, and also the link from Warren, but i dont get it, its too complex for my experience and knowledge i gathered by now.
- why does the yield go up, when someone is selling bonds. arent there more people willing to bye them back because 1. they are cheaper and 2. they earn more b/c of the higher yield?
- what happens when the government is issuing bonds, how often do they do that, what will they accomplish with it, does this have another influence on some market other than borrowing money for gov. expenditures?
- why are there 2-Y, 10-Y, 30-Y bonds? What is the impact of issued bonds 10 years ago, that would be bought back?
- why has china so much of them?
- what are bond prices an indicator for? i read something on reuters, that if the bond yield from us-bonds is lower than that from jp-bonds, it has some impact, but i dont remember exactly what they were talking about.
I know these are a lot of questions and if you just post links it would be fine, but i dont want wikipedia entrys or similar sites, because they cover the issue on a to broad view and with unnecessary details with year dates and whatever but without implications or coherencies in regards of trading.
thanks in advance
Let us discuss the Yen Carry Trade. Last year when the Yen had a ZIRP rate of 0% and the US Dollar FED discount rate was 5.25% investors would borrow the Yen and buy the US Dollar. As long as things were quiet and stable they made profits on the spread between the two discount rates. As the Dow kept going up and up, then they used their US Dollars to buy US Stocks. There are also Carry trades in other currencies but I am only discussing the USD/JPY since that is what I mainly trade now in my trading plan.
Starting in August 2007 to present day as the spread narrowed from 5.25% to the NOW 2.0% VS the Yen discount rate of .50% you can see the benefit in the spread is now only 1.5% VS the then 5.25%
The KEY is the Dow going Down and Down and Down.
The Carry trade in USD/JPY at one time last year might have been as high as Three Trillion US Dollars ? Whatever the amount then it is a lot less now. Perhaps about One Trillion Five Hundred Million.
Whenever the Dow goes down just like before where the borrowed Yen got US Dollars which then were invested into the US Stock market for additional profits other than just the spread profit now the REVERSE is TRUE as the USD/JPY Carry trade continues to unwind. The investors SELL the Dow and other US based Stock exchanges and with the proceeds from the sales in US Dollars, they BUY back the Yen that they originally borrowed and the Yen goes UP in value or in the case of the USD/JPY Currency Pair, USD/JPY heads to 100 and NOT 110 like some Technical Traders seem to think it will.
The Fundamentals DETERMINE it as the Dow keeps going down !!!
Is that clear now ? Dear Technical FX Traders !!!
Now on to your US Bonds question.
I use the Bond Yield as an indicator in my trading FX. I mainly watch the US Bonds of 2 Years Maturity and 10 Year Maturity. You can get that always by watching CNBC as I trade USD/JPY.
Say the US Government, well actually the FED arranges to Issue One Billion US Dollars by printing 2 Year Bonds which are then sold to investors.
Now there is ANOTHER Billion Dollars created and in the overall money supply.
Now different parties buy and sell these 2 Year US Bonds as well as others but again let us focus on the 2 Year and 10 Year ones.
When there is confusion or other uncertainties in the markets more people BUY the shorter end US Bonds so in the case of the 2 Year US Bonds as it is bought more than sold the PRICE of the 2 Year US Bond goes UP and inversely the YIELD goes DOWN.
The Money could be flowing out of Gold and Oil and The Yen and the US Stock market and going mostly into US Bonds. There are actually 30 Day US Bonds as well and others such as 5 Year and 30 Year but my focus is on the ones that I follow.
What does knowing the YIELD's of the 2 Year US Bonds and the 10 Year US Bonds tell you ?
It SHOWS you were the MONEY is flowing. Go With The Flow !
When calm has returned then the money is going out of the 2 Year US Bonds and others such as when the FED mislead the markets and suggested that they might RAISE rates over 2.0% and so The 2 Year and other US Bonds were sold and the price went down and the Yield on the 2 Year US Bonds went OVER 3.0% briefly as expectations were of increases in the discount rate set by the PRIVATE FED !!!
The money Flowed into Gold and Oil as Inflation again was on the Front Burner.
Now with PANIC in the US Markets the YIELD on the 2 Year US Bonds is around 2.40% as money flows out of the Dow and into the safety of 2 Year US Bonds. However as The US Dollar Index goes below 72.00 the Price of Oil goes UP and UP as does Gold.
Knowing, understanding and watching these things can only improve your FX trading.
Again, Technicals are IMPORTANT to know Good Entry Points and Exit Points and to understand the PRESENT Pyschology of the markets as to Perception and Reality. The FUNDAMENTALS drive the markets and always will.
You NEED a EDGE by knowing the REAL FUNDAMENTALS not the ones that the so called experts tell you about. They get it right about 50% of the time. I get it right by my independent research about 80% of the time.
That is my EDGE and why most months I make profits of OVER 20% a month for myself and my clients.
If you or others have additional questions or comments then please post them on this thread.
My finger is numb now and I am off for breakfast in Happy Montreal !!!
Bruce
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