When I first started trading 5ish years ago it was common to have EUR/USD swing 200+ pips in one day. Now on a good day we're lucky to get half that. Where has all the liquidity gone? Did the big players move to newer emerging markets?
- #2
- Oct 20, 2013 6:48pm Oct 20, 2013 6:48pm
- Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Be hopeful in a winning position, and fearful in a losing position.
So long as interest rates stay low, so too will investment from large players.
When you get a loan, as a borrower you are receiving that loan from someone with a surplus of funds who demands compensation for the foregoing of that cash. If current interest rate levels are around 5% then as a lender I’m much more willing to lend money than interest rates sitting at levels of around 2%.
Further to that if interest rates are sitting around 5% then maybe there are 1 million willing lenders. Then at 2% maybe there are only 150,000 willing lenders. The other 850,000 lenders may have found better investment vehicles for their money.
When interest rates are high for a currency it attracts foreign investment as the return earned in holding their domestic currency in the foreign capital maybe much greater.
Volumes may be higher over the past few years but that is no measure of real committed capital. Volumes are simply higher as the frequency of trades have become concentrated towards the shorter term with the longer term picture over the past 5 years in a state of risk. Combine with that the High Frequency Trading boom and you may imagine why “Volumes” have been on the increase.
Volumes are a compounded number arrived at by the “hot potatoes effect” where 1 transaction coming from the public into the banking system is compounded many times over as the banks “pass the buck” through their system from one dealer to the next, each time racking up transaction “volume”. This is why the 3-4 “Trillion dollar a day” is completely misleading.
When you get a loan, as a borrower you are receiving that loan from someone with a surplus of funds who demands compensation for the foregoing of that cash. If current interest rate levels are around 5% then as a lender I’m much more willing to lend money than interest rates sitting at levels of around 2%.
Further to that if interest rates are sitting around 5% then maybe there are 1 million willing lenders. Then at 2% maybe there are only 150,000 willing lenders. The other 850,000 lenders may have found better investment vehicles for their money.
When interest rates are high for a currency it attracts foreign investment as the return earned in holding their domestic currency in the foreign capital maybe much greater.
Volumes may be higher over the past few years but that is no measure of real committed capital. Volumes are simply higher as the frequency of trades have become concentrated towards the shorter term with the longer term picture over the past 5 years in a state of risk. Combine with that the High Frequency Trading boom and you may imagine why “Volumes” have been on the increase.
Volumes are a compounded number arrived at by the “hot potatoes effect” where 1 transaction coming from the public into the banking system is compounded many times over as the banks “pass the buck” through their system from one dealer to the next, each time racking up transaction “volume”. This is why the 3-4 “Trillion dollar a day” is completely misleading.
Howlin' at the Moon on the Roof
- #8
- Oct 23, 2013 10:37pm Oct 23, 2013 10:37pm
- Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Be hopeful in a winning position, and fearful in a losing position.
- #10
- Oct 23, 2013 11:14pm Oct 23, 2013 11:14pm
- | Joined Jan 2009 | Status: Fading the specs | 1,374 Posts
