http://www.moneyshow.com/main.asp?scode=013203 Peter Bain reveals his favorite pair to trade and gives an introduction to his full length educational trading video.

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http://www.todaysfinancialnews.com — An end to the Yen carry trade could spell disaster for an already delicate world economy. Is it 1998 all over again?

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http://www.todaysfinancialnews.com/videos/?channelID=15&showID=555

Duration : 6 min

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I have invested on forex market for a while and frequently heard about carry trade. As i know, this term means to buy in like Euro/Yen pair to profit from the difference between the two currency's interest rate. The diffence in this pair's interest rate is 3.5% now, but what about the GBD/USD pair which has only o.25% in difference?

Any trade that involves borrowing money from one location at a lower rate than where it is being lent is technically a carry trade. Banks, pensions, and hedge funds will typically hold a carry trade for at least several weeks, but may hold it for several years (yen crosses are a good example), and have more interest in bidding on pairs with higher rate differences. Bottom line: yes, technically you are participating in a carry trade (but not a most desirable one).

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Currencies tend to trend more and fluctuate less violently unlike stocks which behave pretty much the different way. The reason for this is not hard to understand. Currencies trend depending on the countries’ foreign and economic policies which are macro economic in nature and the currency pairs take fairly long enough time to react to any change in policies. Where as stock movements are more or less determined by microeconomic factors and market sentiments.

Euro/US Dollar: On Par at the Beginning
When Euro was brought into force its exchange rate was set officially at 1 USD a Euro. At that time there existed hardly any difference between the economies of US and the European Union. US had a GDP of $11.0 billion and European Union was pretty up close there at $10.5 billion. While US economy was growing at a good rate of above 3% per annum Europe was a bit sluggish and recorded slightly over 1.5%.

Gradual Shift In Favor Of Euro
But this was not coming in the way of Euro’s gradual march ahead of US Dollar. Look at other key economic factors for yourself. US had a deficit budget and the balance of trade was negatively skewed against US while the European Union had some of the seriously good parameters in exact contrast to that of the US’s. The trade balance sheets looked healthy and strong standing on the near equal GDP.

During this period India, China, Russia and Brazil were making big strides in economic growth and Europe was gaining position in their trade partnerships shifting the forex currency in Euro’s favor. At a time when their reserves were growing by leaps and bounds, US Dollar was sliding continuously which contributed to the conversion of their reserves into Euro, but partially.

How Does The Market React To This?
Euro/USD is by far the biggest forex pair which accounts for $1 trillion every trading day. With so many changes in the world economic scenario and the notional trades in between the two currencies still commanding 1/3rd of the currency market, the US dollar trended constantly over the years.

The firm trend may not be apparent in short term price charts but a relatively long period chart such as 2-3 years would clarify Euro’s constant gain against USD. Till recently cross currency payments were, say for Japanese payments to Germany, first by converting Yen into USD and then USD into Euro. Now such a necessity doesn’t arise for payments.

All these things mean that the trends are going to continue for long unless there is a strong reason.

hi guys coming from the forex world where I’m limited to a few currency pairs, I’m looking to expand the markets available to my self by trading stocks. The thing that is holding me back is that there are literally thousands of stocks to look at. I am looking for someone to recommend a few stocks to look at, I’m mostly a long term technical trader (i.e i look at the chart lay down my indicators and trade regardless of what is being traded lol..)

Good theory…even better if you start with good stocks ( at least promising !) So…how about companies in raw materials? Even with Olympics over , still a huge amount of ” earthquake re-building” to do.
BHP..RIO..PCU..FCX…JRCC…
Energy, nat gas, refiners? ( hurricanes and winter coming) CNQ..HERO..SD..WNR…UNG..EP…
Shippers? ( handling both the materials and the oil ) FRO…NAT…TBSI…DRYS…GNK..GMR
…or get into the Christmas shopping spirit early ..(.if the charts say so ): AAPL…GME…NIKE..

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Hi,

Im wondering whether the cross pair currency rates are determined by speculative traders or arbitrage trading computers. For example you have two liquid pairs:

EUR/USD
USD/CAD

and a cross rate

EUR/CAD

I figure, since most of the speculative trading is done on EUR/USD and USD/CAD, the EUR/CAD exchange rate is made by arbitrage traders adjusting the correct cross rate so there is no cross currency arbitrage. That means there are a lot less speculative trades on the EUR/CAD pair than on the EUR/USD for example, percentage wise that is, right? Given that, trading on the cross rate is alot harder, since the market psychology is made up of less traders and more arb, right?

You ARE overthinking it. All that arbs do is keep the three markets in relatiave alignment. And they could be active in any or all three.

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