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American Home Business Network: Forex & Other Markets (Part I)

Saturday, October 24, 2009

Forex & Other Markets (Part I)

By Ahmad Hassam

On more active days where prices have moved significantly, the lower liquidity can cause additional outsized price movements. Just as with the London close, there is no set way in which the New York afternoon market plays out. So traders just need to be aware that lower liquidity conditions tend to prevail and adapt accordingly.

Why do investors need to exchange their domestic currencies for foreign currencies? Many want to invest in foreign assets. For that they need to convert their domestic currency into foreign currency. Companies involved in import and export business need foreign exchange to order new consignments or make payments. Multinationals need foreign exchange to repatriate profits. Big banks need foreign exchange and the list goes on. The forex market does no exist in a vacuum. You may have heard of other markets that exist like the gold, stocks, bonds, oil, futures and commodities.

Is there any relationship or correlation between these different financial markets and the forex market? There is a fair amount of noise and misinformation about the supposed relationship among these markets and the individual currency pairs. You can always find some correlation between two markets over time.

Crude oil futures contract trade on NYMEX. Gold futures trade on many exchanges. Dow futures trade on CBOT. S&P futures trade on CBOE. Stocks get traded around the world in different stock exchanges. NYSE is the most famous stock exchange. The forex market is 10-15 times bigger than all the worlds stock markets combined. There are many financial instruments and contracts that get traded in different financial markets all over the world. All these individual financial markets function according to their own internal dynamics based on data, news, positioning and sentiment. However, always keep this in kind that all the various financial markets are markets in their own right.

Each financial contract has its own characteristics, functions and markets where they trade. You should view each market in its own right perspective and trade accordingly. These markets will occasionally overlap and display varying degrees of correlation due to various underlying economic factors. Remember the sub prime mortgage markets. Crisis started in the US housing market when the bubble burst and real estate prices came down. It triggered the sub prime mortgage market crisis in 2006. From there it spread to the investment banks that have invested heavily sub prime mortgage securities. Many investment banks went bankrupt. The famous being Goldman Sachs! This made the US stock market crash. The contagion spread to Europe. In the end it developed into a global financial crisis. At times it is just a chain reaction.

A good trade will always keep an eye on whats happening in the other markets as well. In fact there is a theory that in the 21st century, savvy traders will keep on shifting their investments from one market to another to maximize their returns. In other words, they will follow the money trail. Lets discuss some major financial markets and see what conclusions we can draw for currency trading. Its always important to be aware of whats going on in the other financial markets.

Gold: Gold is considered to be an alternative to the US Dollar and a hedge against inflation. Gold is commonly viewed as a store of value in times of economic and political instability and uncertainty.

A weaker US Dollar is generally accompanied by higher gold prices and a stronger US Dollar is accompanied by lower gold prices. Over the long term, the relationship between Gold and US Dollar is mostly inverse or negative.

In the short term, the relationship between gold prices and US Dollar may not be as solid as it has been historically in the long term. This makes short term relationship between the gold prices and US Dollar generally tenuous. However, in the short term, each market has its own dynamics and liquidity. Overall, the gold market is much smaller than the forex market. There is only a limited and finite quantity of gold. No major gold mine has been discovered in the past many decades. Only the discovery of a major gold mine can bring the prices of gold right now.

If you are a currency trader than it is not difficult for you to trade gold also! Al most the same technical analysis tools are used in gold trading as in currency trading. Extreme movements in the gold prices tend to attract currency traders attention and usually influence the US Dollar in a mostly inverse fashion. At the same time, gold traders tend to keep an eye on whats happening to the US Dollar.

Oil: A lot of confusion is usually spread on the relationship between oil and US Dollar and other currencies like CAD and JPY. Correlation studies show no appreciable relationship to that effect in the short run which is where most of the currency trading is focused. The idea behind these theories is that if the country is an importer of oil, its currency will be hurt by the higher oil prices and helped by lower oil prices.

About the Author:


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Feature Article: Make the Leap to Home Based Business Success

Feature Article: Make the Leap to Home Based Business Success
Copyright © Stone Evans, The Home Biz Guy
http://www.PlugInProfitSite.com/main-21753

Before you can have a successful home based business, you must first possess 3 "intangibles." These are things that must come from WITHIN you.

 ===> Intangible 1 <===

First, you must have a strong WHY.

Why MUST you have a successful home business? What is driving you? What is it that you CAN'T have in your life anymore and/or what is it that you absolutely MUST HAVE now?

For me, I couldn't stand working 12+ hours a day anymore and missing the experience of my children growing up. I also absolutely HAD TO HAVE the freedom of being able to control my life and finances through a little box (laptop computer) that I could carry with me anywhere in the world and not be tied to anyone's time pressures or demands but my own. That was my carrot and my stick. I felt a great pain deep in my gut of missing out on my children's lives and the incredible freedom that succeeding in a home based business would provide for me. I found my why. You MUST find yours.

===> Intangible 2 <===

You must BELIEVE that it is possible.

If you don't believe that it's POSSIBLE for you to have a successful home based business or make your living from home, you won't. It's that simple.

For me, figuring out that it was possible was just a matter of realizing that many other people were ALREADY making great money working from home. If they could do it, I could too. It would just be a matter of figuring out what those people were doing and then adapting it to my situation.

There is no shortage of undeniable PROOF that people (millions of them) are making money working from home. Just get online and do some research and you'll find countless testimonials and stories of REAL PEOPLE making real money on the Internet. Or head to your local bookstore and you'll find the same documented evidence of this fact. Truth is, it's getting easier and easier to make money with your own home based business.

I've always said that "affiliate marketing" (a simple way to make money from home) is the job of the future. In the "old" days, you had to go to a potential employer, apply for the position and hope for the best. Now you can simply go to any company you want, fill out their affiliate application and start work immediately. Affiliates are the new working class. In fact, making money with affiliate programs or making your living on the Internet is WAY MORE than possible. It is pretty much (or will be soon enough) unavoidable now. Affiliate marketing is the "job" of the future that's already here TODAY.

===> Intangible 3 <===

You must be willing to MAKE THE LEAP.

Ready, FIRE, then aim... This is the operating philosophy you MUST adopt to succeed with a home based business.

That's backwards for most people who like to aim before they fire. The fact is that home based business success is a moving target... The only thing constant about it is change. You need to stop analyzing the game and simply jump into it. You can't learn from the outside... You have to be IN THE RING to truly understand it.

The lesson here is that you will never really be READY to start a home based business. You simply have to start one. It's like having children... You're never really ready, but when it happens you adapt and grow. This is what I call "Making the Leap."

The good news is that the cost of failure with having your own home based business is very small. In the "brick and mortar" world you need to evaluate things very carefully before you decide to open up a business. It's almost always necessary to invest thousands of dollars to get an offline business off the ground. However, on the Internet you can often start a successful business for less than $100. The Plug-In Profit Site is a great example of this: http://www.PlugInProfitSite.com/main-21753

You simply need to get IN THE GAME... Each moment that you stay "out there," you're wasting valuable time that you could be learning and skills necessary to build a successful home based business. In fact, if you're not in the game yet, you're ALREADY behind the times. Make the leap to creating a successful home based business today!

About the Author:

Stone Evans, The Home Biz Guy has helped thousands of people in over 200 countries around the world start and run a successful home business. Discover 3 easy steps to start your own home business and subscribe to The Home Biz Guy's FREE Home Business Secrets Mini-Course at: http://www.PlugInProfitSite.com/main-21753



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