And What’s so Special about Forex?

Imagine in your mind …

… the freedom to trade exactly like you want to.

Is there any market in the world which allows you complete freedom?

Equity? Naehhh. Lots of issues. Liquidity. Closes late-afternoon, leaving you hanging till the next open, unless you’re day-trading. Who wants to watch the terminal all day? Next open is without your stop. Then there’s rigging. Syndicates. Inside info. Tips. Equity comes with lot of baggage. I still like it, and am in it. It doesn’t give me complete freedom, though. I live with what I get, because equity does give me is a kick.

Debt market? A little boring, perhaps. Lock-ins.

Commodities? You wanna take delivery? What if you forget to square-off a contract? Will you be buying the kilo of Gold? Ha, ha, ha…

Arbitrage? Glued to screen all day. No like. Same goes for any other form of day-trading.

Mutual Funds. Issues. Fees. Sometimes, lock-ins. MFs can’t hold on to investments if investors want to cash out. Similarly, MFs can’t exit properly if investors want to hang on. And, you know how the public is. It wants to enter at the peak and cash out at the bottom. 

Private Equity? Do you like black boxes? You drive your car? Do you know how it functions? You still drive it, right? So why can’t you play PE? Some can. Those who are uncomfortable with black boxes can’t. 

CDOs? @#$!*()_&&%##@.

Real Estate? Hassles. Slimy market. Sleaze. Black money. Government officials. Bribery. No like.

Venture Cap? Extreme due diligence required. Visits. Traveling. The need to dig very deep. Deep pockets. Extreme risk. No. 

Forex? 24 hr market. Order feed is good till cancelled. Stops don’t vanish over weekends. Stops can be pin-pointedly defined, and you can even get them to move up or down with the underlying, in tandem or in spurts. You can feed in profit-booking mechanisms too, and that too pin-pointedly. You watch about 10-11 currency pairs; you can watch more if you want to. 10-11 is good, though. You can watch 4, or even 2 or 1, up to you. Platforms are stupendous, versatile, malleable, and absolutely free of charge. You can trade off the chart. Liquidity? So much liquidity, that you’ll redefine the word. No rigging – market’s just too large. The large numbers make natural algorithms like Fibonacci work. Technicals? Man, paradise for technicals. Spreads? So wafer thin, that you barely lose anything on commissions. Oh, btw, spreads are treated as commissions in forex; there’s no other commission. Money management? As defined as you want it to be. Magnitude? As small or as large as you want to play? Comfort? You make your morning tea, sip it, open your platform, feed in orders with trigger-entry, stop and limit, and then forget about the forex market for the rest of the day, or till you want to see what’s happening. Yeah, comfort. Challenge? You’re playing with the biggest institutions in the world. What could be more challenging? I could go on. You’re getting the gist. 

Yeah.

Forex is a very special market. 

Also, the forex market is absolutely accessible to you, online. 

If you decide to enter it one day, play on a practice account till you feel you’re ready for a real account. 

If and when you do start with a real account, for heaven’s sake start with a micro account, where 1 pip is equal to 0.1 USD. 

🙂

 

 

 

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This is Getting Murky

Have you actually seen China’s account books?

Has anyone, for that matter?

How does the US pay for its imports from China?

With treasury-note IOUs?

Are Chinese GDP numbers doctored?

If yes, for how many years have the Chinese cooked their books?

How many more bailouts is Greece going to require?

Isn’t the amount of financial maneuvering increasing from bailout to bailout?

It feels as if real debt is being made to “go away” synthetically.

Things are getting murky in the financial world.

When that happens, the stage is set for tricky synthetic products to be offered.

It’s time to go on high alert.

You see, for the longest time, banks in the “developed” world have not been clocking actual business growth. However, their balance sheets are growing on the basis of trading profits. In almost all cases, the “float” is not increasing significantly from clients’ savings, or from new business. Instead it is increasing from good trading.

However, trading can go wrong for a bank. All that is required is one rogue trader. Blow-ups keep happening. For banks, good trading is at best a bonus. It is not something solid and everlasting to fall back on for eternity.

Well, that’s what most or all “developed” international banks are doing. They are relying on their international trading operations to see them through these times. (((Compare this to an emerging market like India, where an HDFC Bank generates 30%+ QoQ growth, for the last 8 quarters and counting, on the basis of actual business profits from new accounts, savings and fresh real money that increases the float))).

While the scenario lasts, what kind of synthetic products can one expect from the plastic composers of financial products?

And we are going to get something plasticky soon, since “developed” international banks have gotten into the groove of trading, and since trading is their ultimate bread and butter now.

So what’s it gonna be?

The conceivers of plastic in the ’80s still had a conscience. For example, Michael Milken’s “Junk Bonds” still had actual underlying companies to the investment. That the companies were ailing, and could probably go bust, was a different issue. In lieu of that, junk bonds were giving returns that beat the cr#p out of inflation twice over, and then some. Though investors knew that these underlying companies were ailing, greed closed their eyes, as crowds lapped up the product. We know how the story ended.

In the ’90s, anything with the flavour of IT ran like an Usain Bolt. The conceivers of plastic products here were tech enterpreneurs, coupled with bankers that pushed through their IPOs. One had a lot of shady dotcoms with zero or minus balance-sheets clocking huge IPOs, apart from being driven up to dizzy heights by greedy public, from where their fall began.

By the ’00s, whatever 2 pennies of conscience that remained were now out the window. Products like CDOs did the rounds. These had no actual underlying entity, like a bond or a debenture. They were totally synthetic, mathematical products, assembled by bundling together toxic debt. The investment bankers that conceived these products knew that the debt was toxic, and were cleverly holding the other end of the line, i.e. they sold these products to their clients as AAA, and then shorted these very products, knowing that they were bound to go down in value because of their toxic contents.

We are well into the ’10s.

What’s it gonna be?

I think it’s probably going to be a “Structure”.

There is going to be an underlying. The world is wary about “no underlyings”.

The catch is going to come from the quality of the underlying, as in when it’s ailing badly and the world thinks otherwise (in the ’80s, the junk value of the underlying was no secret. Here, it probably will be).

Where is the product going to be unleashed?

Emerging markets. That’s where money has moved to. Also, investors there are not as savvy, since they’ve not been properly hit.

Why is the time ripe?

Interest rates are kinda peaking. Investors have gotten used to sitting back and raking in 10%+ returns, doing nothing. When interest rates start to move down, that would be the stage for the unleashing of the product in question.

Lazy, spoilt investors would probably lap up such products offering something like 13%+ returns, with “certified” AAA underlying entities to the investment.

So watch out. Don’t be lazy or greedy. As and when interest rates start to move down, move your money into appropriate products that are not shady and that have safe underlyings. From knowledge, not from hearsay.

Be very selective about who you let in to give investment advice. Even someone you trust could be pushed by his or her employer institution to aggressively sell you something synthetic with a shady underlying.

Be very, very careful. Do your due diligence.

Don’t get into the wrong product, specifically one with a lock-in.