Ashraf's Book: Currency Trading and Intermarket Analysis

"Reliving the summer of 2008"

Today, the markets are far apart from 2008's Lehman crash, market meltdown and the days of financial armageddon dubbed in the newsmedia as the Great Recession. Today, Gold sits at 1016, Oil at 71.50, S&P at 1071, Shanghai at 2840, VIX at 23, the 10 year note at 3.46 and the Fed funds rate at 0.25%. For an under-grad student of financial history reading this data in a hundred years, the odd one out of the above would be the Fed funds rate. Given the huge amount of money fed into the system by the Central Banks and the stimulus packages rolled out by the Goverments of the largest economies all over the world, it is little surprise that some kind of market boom has taken shape in the last few months. However, even with all this free public money entering the system, there are clear signs that the economic revival is weak at best.

The key question is whether all this free public money is able enough to revive the private sector to a level where Governments can withdraw and the private sector can take over its role generating healthy levels of growth in the global economy again? The Goverments and the Central Banks have three optinos now. Keep low the interests rates (continue AS IS), or increase the stimulus (PUMP UP) or start to withdraw the stimulus and to the increase the interest rates (WIND DOWN). The current state of the global economy suggests a continuation of AS IS policies which may result in either a cause of a heat up or a stall which would then force the global orchestrators of public policy to choose between a PUMP UP or a WIND DOWN. While continuing with the AS IS, the central bankers should be feeling confident to be signalling the markets for a WIND DOWN, however, make no mistakes, words are words and unless the economy is really fully firing up on all cylinders, the Feds and their friends around the Globe should continue with a soft hand.

If the above concept is correct, the continuation in the path of No Change with an accomodating monetary and fiscal policy, then, suggests that the markets would continue to climb, the Dollar would continue to fall and Gold and Oil should move higher and higher still. Any pitfalls, like a correction or a geo political event could only be a short term road block, even furthering the resolve of Governments to be more accomodating.

Now the question is - how long will it take for the Global economy and specially the US economy to be fully fixed so that it does not need these fiscal and monetary stimulus? The problem is, the FEDs and Co are giving an old medicine to a new problem. Given that permanent job losses have occured in the US economy due to jobs and manufacturing moving to China and India, how can the US economy be sustainable in the long run? On the shoulders of its financial skills alone, the economy is not sustainable as the case of UK shows under the "New Labour" policies of Brown and Blair for the last decade resulting in a meltdown of the UK economy. The financial muscle is now chasing Emerging Markets and commodities with a falling dollar, and there is no way the flow of funds can be regulated, unlike goods and labor. In the abscence of new "innovation streams", it is imperative that US and EU become uncompetitive due to their over valued currencies. The US can probably get out of this bit easier than EU - since it has the power to print its own money with not much hessle. The way out of the Great Recession for the US is to either print a lot of money and revalue the Dollar so that it becomes more comptetive in a global market place or to really setup fences and start a global war of protectionism. For the EU, these lessons would be learnt a little late. All this goes to the benefit of the BRICs and the Commodity Producers. This revaluation of the Dollar, followed up by the revaluation of the Euro in the following decades, can "correct" the global macro imbalances. But then, we cannot rule out the creative power of "innovation streams" that have arosen out of the US time and again in the last hundred years. "New Tech" can boost America and the rest of world - new products, solutions & services that increase productivity and provide for global needs - in infrastructure, energy, food, health care, commuications. But is America ready for New Tech or has the initiative already been taken over by China, India, Brazil and Korea??

In the short term, lets say in the next one year, we are going to be reliving the Summer of 2008 - a spike in Oil and a fall in the Dollar that causes a recession. How do we avoid it this time? If the FED continues to put all this free money in the system, the markets climb, the dollar falls, oil and gold climb, result in -guess what? a recession. Can the FED contain the stall the drop of the dollar at the cost of the "green shoots" recovery? Not really. What the FED should not l

I use a mix of fundamentals and technicals where the single entry is the less important thing. My trading style is based on BWILC from Dirk du Toit.

Leverage can become very powerful if you add to a winning position. That way you can above 20:1 without any additional risks (of course using stops in that case).
Personally I don't use stops at all - only under some circumstances (e.g. if I gear higher to be able to sleep at night. *g*).
My strategy is rather simple. Go with the trend (well, sometimes against it like now by shorting the Euro), buy dips by scaling in, use low leverage...

Xaron,
Thanks a lot! I would like to read people's real trading strategy.......8 times is not really big deal.....my break even is at 5.960 now......I don't think the pare will back to 7.2 again...haha.......even it will, I will take swap everyday....... I will add more shorts on it by the end of this year........

Good luck!! best regards!!!

Steven Blyth,
I am not showing off myself or my positions........but I just want someone to stop talking shit and let people go bankrupt...........

If I am wrong on my positions, I will lose money......and then I will learn something from it.......hope everyone read my comment also can learn something from my failure........