Is Chinese want to hurt the Dollar?

So I was reading a story in the Wall Street Journal last night and I came across a well muted tidbit of information that, if it continues, could serve to hurt the Dollar in the near and demolish it in the long term.

China, the US’s largest investor, sold off a significant chunk of its T-Bills in June. Now, in recent months there has been much talk from China about their concerns regarding the US’s debt load, but trust me on this, they would not be selling the debt at this time if they did not have to.

If they did, they stand to lose a serious amount of money if the prices go down based on the sheer volume as well as psychological implications of the act.

According to other sources I read after my curiosity was peaked, it seems as if the Chinese government is spread a bit too thin right now – having increased their feverish purchase plan of almost every natural resource in the Eastern hemisphere while investing heavy in mineral and oil excavation Africa as well.

In an economy that thrives on exports to be spending as large as they have been under conditions that are being equated with the Great Depression is just plain crazy – and culturally it was probably not easy for them to stop when they realized this.

Culturally, the Chinese are all about not making mistakes or miscalculations and while they were saying things were fine, they were really not.

The theory here is that the Chinese need to unload some of the 3 Trillion greenbacks they have to raise cash – by no means am I saying that China is in trouble, but they are not as well off at this point as everyone thought.

If this is the case, Forex traders can worry if they are long Dollar positions. The fact is, the Chinese have so much impact on the Forex at this moment based solely on their reserve levels, that the hint of a selloff would panic the market.

I don’t believe the Chinese want to hurt the Dollar, I will say this a thousand times, it is not in their interest to do so. I just think that their needs might inadvertently lead to this and there is nothing anyone can do about it.

For now, I will keep my nose in the online Forex world and ears to the whispers – perhaps I can help make more sense of this as the weeks go by.

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China's Dilemma Status Quo or Shine

The Australian and New Zealand Dollars have been fairing pretty well these past few weeks. Optimism about the state of the economy and the transparency of government efforts to save what they can of their thriving commodity export business has done them well.

Forex traders are aware of the highs being made by these currencies, and specifically at the US Dollars expense.

The recent sale of US Dollars by China had done much to help these countries. With China being the primary buyer of their minerals and metals, the sale of US Treasuries signals China’s unwillingness to stop their rampant buying. I personally feel this is a mistake but I am glad they are doing it as it is helping the currencies I like to trade the most. The problem I see arising in the near term though is the rise in prices of core materials.

The Chinese cannot continue funding their purchases by selling off their US reserves, it will only serve to hurt the value of the Dollar in the long run – and as holders of 3 Trillion Dollars worth, it is a significant amount that they have at stake.

China needs to come to terms with the state of the economy and slow down on their spending right now. This can help them in two ways:

1.The amount of buying they are doing is causing increased demand which is driving up prices, if they slow down, prices fall and they can save money.

2. The amount of money they are spending stockpiling raw goods could be better spent taking up larger stakes in the US Dollar, by doing so they increase their political influence and are in a better position to get what they want out of the US.

As well, it will help their cause with World Bank members in their efforts to establish a global reserve currency.

Online Forex readers know all too well that things are not what they seem. The recent stock selloff in Asia has traders nervous.

IT would go a long way to calming markets if China were to step up and seize the moment here – it could also change the way people think en masse about the US Dollar and Renminbi as a valuable trading tool.

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Forex News: Euro Update

Data reported on Friday showed that manufacturing activity contracted at a far slower pace than expected, and that the services sector decline seen over the past 11 months was flat in July, lifting the Euro a bit.

Forex Online Investors have still not picked up on the good news from the Eurozone despite positive growth reports from France and Germany and this signals the insecurity with the reported growth on behalf of the investors due to conflicting statements from EU officials.

The next few weeks can go a long way to shedding more light on the economic situation in Europe.

At the close the Euro was up .71% to the Japanese Yen to 135.2, up .5% to the British Pound to .8676, down .03% to the Canadian Dollar to 1.5487, up .1% to the Australian Dollar to 1.7155 and up .1% to the Swiss Franc to 1.5159.

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Friday Forex Recap

This has by far been my best trading week...

I might have made more in the past but it was admittedly just hit and miss combined with patience. This last week I've been following technical indicators and doing more than just hope for the best at Bollinger boundaries.

Sunday PM through Monday PM -- NAV +3.05%
Tuesday AM through Tuesday PM -- NAV +2.93%
Wednesday AM through Wednesday PM -- NAV +8.2%
Thursday AM through Thursday PM -- NAV +3.9%
Friday AM through Friday PM -- NAV +1.1%

During the business day I've been able to take positions for hours at a time and generally end up ahead. In the evenings the market seems to slow down, but I am now generally able to scalp out dollars using the 1m and 5m in concert.

Additionally, when I am behind in a day trade or a scalping position I am often able to spot a good reversal point and take advantage of that with a second position. Doing this a few times can earn back the losses on the original trade -- assuming it still appears to be a good idea to hold onto it.

Some things I've realized this week:

* I now understand what people mean when they talk about not trading on Sunday or Friday. Now that I can begin to get a feel for the market I noticed that movement and opportunity were lacklustre during these periods.

* I can scalp! This is awesome. It's powerful to be able to scratch pips out of the markets whether they are rising or falling. It's nice to know I can do this if I have a position I want to hold but that is making me nervous as it accumulates a loss before the expected move.

* I don't know if these results will now be typical for me or not, but I do finally understand that it isn't impossible to work the markets and earn money.

* As well, I understand that I don't want to be trading around news events. If I'm carefully looking for technical setups, the last thing I want is some huge sudden movement due to news. Not only will this potentially catch me on the wrong side of a trade, but it may throw off my ability to analyze things for a while

I should note that my net asset value increases are not compounded. I do skim off most of the gains and push them into a much less risky sub-account. I have no idea whether or not I can trade with the same style when the numbers get bigger. The psychology of seeing larger losses mounting, or higher gains accrue, may throw off my style and keep me from making any money.

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Forex Scalping Information

Okay, I've been trying to find information on forex scalping and the pickings are mightly slim indeed. In fact, the so-called information on the net is so bad I'm going to write up a small post of my own... because I'm sure if you found this page you are desperately looking for some real information.

What Is Scalping?
Quite simply, very short term trading.

Why Don't Brokers Like Scalping?
Well, some brokers don't like scalping because of how they are set up. If they are not able to execute your trades quickly or efficiently enough then they risk being the source of your profits.

Does Scalping Work?
I've seen some people claiming that it works great as well as others claiming that it is impossible to do profitably. The reality is that if you can predict the direction that an equity pair will move, either up or down, then you can hop into the market and grab a few pips when it happens.

How Easy Is It To Predict Equity Pair Price Changes?
Well, that's the million dollar question! I don't have any books to sell or anything, but a lot of people claim to have solutions for you. Personally, I think if they really had solutions that worked they wouldn't waste time telling you about it, they'd be busy trading. However, in an effort to be informative, when you spend enough time watching a market (which is quite boring) you'll get a feel for it's current state and how it is moving. Often, until conditions change, you can be fairly accurate with your predictions.

Can Anyone Do This?
If you find a market maker that doesn't mind scalping, you can try. However, you must know how to place stop and limit orders with their trading platform. In particular, it would be very nice if you were able to have someting known as a trailing stop. As well you will want to understand the concept of leverage as it applies to a forex account. Basically, I'd suggest throwing $100 at a starter account and playing around, carefully, until you've made enough bad decisions to learn how things work. After that, you should have the tools needed to try out various strategies.

How Much Effort Is It?
Scalping is very time consuming. You have to spend a lot of time watching the markets, to the point that it would be difficult to do well if you had an existing full time job. Also, scalping is very demanding from a psychological point of view, as you will have large amounts of your capital ready to put into play, but you may have to wait hours before you spot a good entry point. Then, upon entry, you might find you are back out with a small loss in no time. Alternately, you might get a small profit, take it, and then watch the market skyrocket after your exit. The shorter your trading is the more attention it will take and the more nerve wracking it will be.

Are You Scalping?
I'm thinking about it. I've been opening up a grid strategy to catch swing trades, but I have noticed that using half of the scalping mentality to accumulate positions in trends may be able to have a significant positive impact on my results. I guess I'll end up letting you know how things work out.

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Forex For The Small Speculator

Today was a banner day for me... trading the AUD/JPY with a return of more than 10% NAV. The market simply walked up and down my trend lines bringing me profits with every pass. How come this doesn't happen more often?

Anyway, as a small time speculator I thought I'd outline some issues that we face compared to some of the larger traders:

• We trade in very small lot sizes
• To make any meaningful revenue we may trade with a large percentage of our NAV.
• Carry trading strategies may be meaningless

Each of these issues is something that we need to think about and potentially make some adjustments to compensate.

Small Lot Sizes
If you want to trade in small lot sizes you need to find a broker that doesn't charge you an arm and a leg for the privilege. I trade at Oanda and they let you trade with any lot size without any adjustment in spreads. I recommend them and I'd give a referral link if they had an affiliate program.

Trading Large NAV Percentags
There is nothing wrong with trading a large percentage of your NAV as long as you know what you are doing. It's a problem if you are trading this way because you keep acquiring positions as the market moves against you. It's okay if you take a measured defined risk because the market has entered a condition that you have decided represents an opportunity. It is very important to get out of losing positions once you know that your market position is unfounded.

Carry Trading Becomes Useless
If you only have hundreds of dollars in your Forex account, then there is no point trying to take advantage of carry trades. If the market didn't fluctuate so much it might be worthwhile, but in all likelihood you'll make a few bucks here and there and end up wasting your time. So what if you make 200% over a year, you still only have several hundred dollars in your account.

Concluding Thoughts
When you are trading relatively large positions relative to your account size, it can be exciting. You'll quickly win or lose tens of percentage points. If you are good you'll be able to build up a bit of a nest egg before too long and then start trading more appropriately for the size of the account you've built up. Quite simply, as your account gets larger the need to large risks dissipates.

Get out there, take your time, make sure the market sets itself up for you just right, and then stomp around and rip a few dollars out!

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Getting A Forex Education - Forex Books

How many of us in the Forex market simply jumped in the market and started trading? I know that was my path. I tossed a few dollars in an account and figured losing it would be a paid lesson in how the markets work.

I can't say that this hasn't been a valuable path. I've learned some good lessons along the way:

* it's important to let go of losses early so you have enough capital to sink your teeth into an opportunity that does work.
* No indicator or strategy has all the answers -- stop looking for the holy grail of trading
* The market can easily whipsaw you to tears if you aren't careful
* If you place close stops they will often be taken out before the market goes your way

Really, the list of anecdotal learning is endless and difficult to put into words. However, I recognize that this isn't enough to make me a successful trader, though from time to time I'm starting to taste success. It's finally time for me to bite the bullet and learn more about trading.

No, don't worry, I'm not going to buy some stupid multi-thousand dollar Forex training course. That would be stupid. Forex trading is very related to trading in general and there is no shortage of information on either subject. To make a long story short I've purchased four books recently:

* Currency Trading for Dummies
* Swing Trading for Dummies
* The 10 Essentials of Forex Trading
* Technical Analysis for Dummies

All of these were available at a nearby bookstore -- so I didn't have to order something online and wait for delivery.

More importantly, let me list the credentials of the authors of the above books. Respectively, they are:

* Mark Gallant: Chairman and founder, GAIN Capital Group. Brian Dolan: Chief currency strategist, FOREX.com
* Omar Bassal, Head of Asset Management, NBK Capital
* Jared Marinez, FXCHIEF and founder of The Market Traders Institute, Inc.
* Barbara Rockefeller, International economist and trader

My advice? Never, ever, fail to look for the ideas of experts. Even if you don't agree with everything they say, which is appropriate, they should be able to increase your understanding and improve your own thinking.

I've had some days with a NAV appreciation of 10%, 20% or more. I'd like to have a lot more days like that... and I don't think that online sources created for the purpose of flogging affiliate commissions will do that for me.

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