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Fundamentals stuff

  • #1
  • First Post: Jul 16, 2009 1:54am Jul 16, 2009 1:54am
Hi all,

in this thread I want to discuss some underlying fundamentals and why the currencies behave like they do. I might post some kind of briefings here and there if I have some time...

Maybe we can have a nice discussion here.

BTW: Did you know that only 1 percent of all forex exchange transactions are trade-related (source: "Currency trading and intermarket analysis")? That shed some light on the importance of a trend line in the 5m chart.
  • #2
  • Jul 16, 2009 2:07am Jul 16, 2009 2:07am
Thanks for taking the time to share. Really looking forward to it!
  • #3
  • Jul 16, 2009 3:33am Jul 16, 2009 3:33am
Quoting Xaron
Hi all,

in this thread I want to discuss some underlying fundamentals and why the currencies behave like they do. I might post some kind of briefings here and there if I have some time...

Maybe we can have a nice discussion here.

BTW: Did you know that only 1 percent of all forex exchange transactions are trade-related (source: "Currency trading and intermarket analysis")? That shed some light on the importance of a trend line in the 5m chart.
Looking forward to your thread Xaron. But let's not be too hasty in throwing out technical analysis on the basis that '1% of volume is trade related'. My understanding was that the vast majority of forex (up to 90%) is speculative but retail traders only comprised 1% of volume. Volume in forex is estimated to have increased 4 or 5 fold since the turn of the millenia, and this growth is attributed to the increasing popularity of forex as an asset class. Darkstar, for all his quality contributions on the strcuture of the forex markets, lost me at the point when he stated that the majority of transactions were done by multinational corporations who didn't give a toss about technical considerations - even those companies are still extremely aware of the technical aspects and employ specialists to advise them on hedging the risks in this area of business.
  • #4
  • Jul 16, 2009 3:43am Jul 16, 2009 3:43am
Quoting Xaron
Hi all,

in this thread I want to discuss some underlying fundamentals and why the currencies behave like they do. I might post some kind of briefings here and there if I have some time...

Maybe we can have a nice discussion here.

BTW: Did you know that only 1 percent of all forex exchange transactions are trade-related (source: "Currency trading and intermarket analysis")? That shed some light on the importance of a trend line in the 5m chart.
Would you please elaborate the definition of "trade" as used in your statement.

Thanks,

Constin
  • #5
  • Jul 16, 2009 5:44am Jul 16, 2009 5:44am
Quoting FXSurfer
I believe that he's talking about the settling (payment) of international commercial trade transactions (e.g. between the buyers and producers of a physical commodity).
No, I meant real trading volume, so transactions without any physical stuff behind it - so that what we are doing here.
  • #6
  • Jul 16, 2009 11:46pm Jul 16, 2009 11:46pm
Quoting Xaron
Hi all,

in this thread I want to discuss some underlying fundamentals and why the currencies behave like they do. I might post some kind of briefings here and there if I have some time...

Maybe we can have a nice discussion here.

BTW: Did you know that only 1 percent of all forex exchange transactions are trade-related (source: "Currency trading and intermarket analysis")? That shed some light on the importance of a trend line in the 5m chart.
I knew it was low but didn't realize it was that low.

But it does make sense.

Xaron, I must say that I enjoy your posts and look forward to reading your briefings.
Not all sins are created equal
  • #7
  • Jul 17, 2009 12:55am Jul 17, 2009 12:55am
Quoting birdt
Looking forward to your thread Xaron Looking forward to your thread Xaron. But let's not be too hasty in throwing out technical analysis on the basis that '1% of volume is trade related'. My understanding was that the vast majority of forex (up to 90%) is speculative but retail traders only comprised 1% of volume. Volume in forex is estimated to have increased 4 or 5 fold since the turn of the millenia, and this growth is attributed to the increasing popularity of forex as an asset class. Darkstar, for all his quality contributions on the strcuture...
I have worked with some companies that do business all over the world and I can say at least the ones I have worked with are very aware of technical considerations when exchanging money. The ones I have worked with usually break out in separate areas profit from currency exchange or loss at least for themselves even if they don't break it out for public consumption.


edit forgot to put in quote
  • #8
  • Jul 17, 2009 12:56am Jul 17, 2009 12:56am
Major portion of Forex's 2-3 Trillion per day market consists of Swap contracts between banks, hedge funds and CBs. Speculative Prop trading is more like 10% of the market. I think Xaron by 1% 'trade' you mean retail Spot trading or not...

Looking forward to see how people analyze news here........
The only way to get smarter is by playing a smarter opponent.
  • #9
  • Jul 17, 2009 1:50am Jul 17, 2009 1:50am
Quoting NewFX
Speculative Prop trading is more like 10% of the market. I think Xaron by 1% 'trade' you mean retail Spot trading or not...
The way I understand it that this speculative prop trading is only 1% of the overall volume. Maybe I can get more information about that...
  • #10
  • Jul 17, 2009 6:53am Jul 17, 2009 6:53am
Quoting Xaron
The way I understand it that this speculative prop trading is only 1% of the overall volume. Maybe I can get more information about that...
I find that hard to believe.. if "trading" capital consisted of only 1% of the forex market the technicals would probably not work. But we see S&R lines and fib lines working all the time.. kinda hard to imagine that 1% of the volume could influence price to heavily.
freedom
  • #11
  • Jul 17, 2009 3:52pm Jul 17, 2009 3:52pm
Quoting equilibrium6
I find that hard to believe.. if "trading" capital consisted of only 1% of the forex market the technicals would probably not work. But we see S&R lines and fib lines working all the time.. kinda hard to imagine that 1% of the volume could influence price to heavily.
all the time? are you sure?
It's random! illusion, you name it.


So, Xaron I will wait your analys.
regards.
  • #12
  • Jul 17, 2009 5:06pm Jul 17, 2009 5:06pm
Quoting Malstrom
all the time? are you sure?
It's random! illusion, you name it.


So, Xaron I will wait your analys.
regards.
lol what made you so cynical about technical analysis? Never knew how to use it correctly eh? I'm sure all you'd love to hear is how technicals are never used in this market and how they not work but if you decide to put your bored mind (as you state) to work to find the S&R levels you'll find them everywhere. This is not illusion or wishful thinking -wishful thinking would be to completely disregard the overwhelming evidence that S&R levels occur everywhere in the market.
freedom
  • #13
  • Jul 17, 2009 7:12pm Jul 17, 2009 7:12pm
Quoting Xaron
1 percent of all forex exchange transactions are trade-related
It'd be great to know how to track the 99% other than chartwise, that is, separate the wheat from the chaff numbers-wise.
Quoting NewFX
Looking forward to see how people analyze news here........
After getting that analysis, charts do very well in showing news' effect.
  • #14
  • Jul 19, 2009 10:41am Jul 19, 2009 10:41am
To begin with, here are a couple of articles for overview. Sometimes we can not directly engage fundamental analysis with currency movements but they do show the broad market sentiment which is very important.

09-10 outlook of Morgen Stanley :
http://www.morganstanley.com/views/g...8-3fb01e8a07e2

Its an old article from 2008, good for new traders;
http://www2.goldmansachs.com/ideas/g...niversary.html
The only way to get smarter is by playing a smarter opponent.
  • #15
  • Jul 27, 2009 4:07pm Jul 27, 2009 4:07pm
You might've misunderstood him. Not all speculative trading is prop trading. You have index funds, hedge funds, pensions, CTAs, etc. that are contributing a lot of volume. Yes speculative trading makes a small percentage of fx turnover compared to importing/exporting, hedging, and other commercial trading activity, but prop trading by banks is a subset of that, even. So if you consider all speculative activity it should be over 1% as you assumed.


Quoting equilibrium6
I find that hard to believe.. if "trading" capital consisted of only 1% of the forex market the technicals would probably not work. But we see S&R lines and fib lines working all the time.. kinda hard to imagine that 1% of the volume could influence price to heavily.
  • #16
  • Last Post: Aug 20, 2009 3:04pm Aug 20, 2009 3:04pm
I found some more info about speculative trading:
"About 70% to 90%[citation needed] of the foreign exchange transactions are speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency. Hedge funds have gained a reputation for aggressive currency speculation since 1996. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favor."
Source link:http://en.wikipedia.org/wiki/Foreign_exchange_market
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