September 26, 2013 – MDT – Webinar/Currency Follow Up

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.

A question was asked about currency trading and the crosses in yesterday’s webinar

There are 3 main ways to trade currencies: Futures, Cash & ETF’s

Futures on the Major Currencies can be traded individually via a futures account on the Chicago Mercantile Exchange (CME). If you’re only interested in trading the majors…”British Pounds, Japanese Yen, Euro, Swiss Franc, Mexican Peso, Australian or Canadian Dollars”, look no further.

Do not trade the pairs (Crosses) listed through the CME as they are not liquid.

You can buy one currency and sell another simultaneously in the Futures to get into a spread or “Cross”.

The aforementioned Futures are incredibly liquid, often more so than the cash or interbank market, making the CME an excellent place to trade Futures and options on the major currencies.

The Fills are often better in the Futures since the robots (automated trading systems) overrun prices by a smidgeon enabling your resting order to get executed.

Russian Ruble, South African Rand, Swedish Krona, Norwegian Krone, Singapore Dollar, Thai Baht etc. are best traded off a cash only platform. I personally do not trade them.

Real time Currency quotes are available for free from a multitude of vendors. Bloomberg and CNBC would be the top 2.

Pure FX platforms are the preferred and often cheapest way to trade crosses or pairs for a full time professional trader.

There are a lot of Cash only platforms out there and some are not reputable. Ask your broker who they have a relationship with if you have an interest. You want to be sure to use a SEC or CFTC registered U.S. entity.

Caveat Emptor. Do your homework!

Trading Futures on a U.S. Exchange like the CME or through a registered U.S. FX Broker backed by major Money Center Banks is the safest route to go.

A savvy investor should always make sure their money is in a segregated account in their name, Not the Company they are clearing the trades through!

Black swan events do happen. Money is always safer when it’s in your name.

I.E. Investors thought their money was safe at Man Financial.

It has taken some investors years to get their funds back. Thank you Jon Corzine.

I’ve never been a fan of buying or selling the Currency ETF’s because they require a large amount of capital upfront. They don’t have the imbedded leverage of the Futures or Cash markets.

You have to put up a lot more margin money to trade the ETF’s on a dollar adjusted basis to make the same amount of profit vs the Futures.

That brings me to our Rock Star John Thomas, who is as adept as any trader on the planet using options strategies, which do have imbedded leverage, to make oodles of money.

Bottom line, if you aren’t set up for FX or Futures wait for John to give you an options strategy for the ETF’s which are instruments designed for Investors that are not glued to a screen 24/7.

keep reading the currency notes!!

Capital flows show up in the currencies first as money has to change hands before being placed in other asset classes.

“Money Never Sleeps”…Gordon Gekko

I.E. 4 weeks ago on the Wednesday webinar John, being the strategic thinker he is, was speaking about emerging markets being ripe for a bottom.

I took a quick look at the Indian Rupee, Brazilian Real and Mexican Peso which had been off my radar for a while. My conclusion was that India, Brazil and Mexico Equity Indices had all just put in tradable lows based off the currencies on the call.

The Currencies were all massively oversold as were their commensurate Equity Indices, making them ripe for a rally.

Go back and listen to that webinar, that was 20% ago. I guess I need to pay closer attention to the master.

For Glossary of terms and abbreviations click here.