Archive for September, 2009
Currency Trading: One Year After Lehman Brothers Collapse
I never realized that today, was 1 year after the fall of the legendary investment bank, Lehman brother. That started the main financial troubles of the global economy. I am not a historian (just someone that likes trading online), but I decided to look back at history. I wanted to see how the Lehman brother news affected currency trading.
I looked at the charts of 2008, and I noticed that the news broke out in the weekend meaning that the market was closed at that time. When the market opened, all the 4 currencies I like to watching (EURUSD, GBPUSD, USDJPY, GPBJPY) had a gap in them. Since the news was bad for dollar, all the currencies pairs that were ending in USD had a gap when the currency market open for the week. And all the currencies pairs starting in USD had a gap down.
In relationship to how many pips a pair can move in a day, I can say the biggest gap among the pairs I watch was USDJPY, and the biggest among other pairs was USDCHF. You can see what I am saying from the attached graph.
Trading Forex During Summer Holiday Period
Currency trading is a game that needs someone to have a strategy. Without a startegy, you are bound to fail because that means that you are trading on your emotions. And to know if you have a profitable strategy, you need to test it in the market live. Not all strategy work almost in the foreign currency market. Some strategy are conducive during sideways market i.e. when the market has no clear trend, while other work during a one sided market i.e. either bullish or bearish.
Summer period is usually the time when the market is ranging. This is because most banks and hedge fund managers are on their vacations. They are either enjoying their sweat or they are rethinking their strategy for the next trading period. Since these traders are not there, there are not enough traders that can force a trend to show.
For instance look at GBPJPY, since yesterday, i.e Sept 1st, it has been ranging. I cannot believe that. GBPJPY is a volatile currency pair. Its daily range is about 300 pips, but it moved about 150 pips yesterday. This means that a new trend is developing. I believe the trend is up since the world’s economy is sloly improving. But the question is when will the developing trend become visible? This is a question that only few people have an answer to.
Click on the picture to enlarge it