Thursday, March 12, 2009

Can the Forex Markets Get Worse?

Probably, but not likely.

An interesting report came out from the Blackstone Group. (

Stephen Schwarzman, Blackstone's CEO, said on Tuesday that, “Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half. This is absolutely unprecedented in our lifetime.”

After laying much of the blame for today's financial crises at the foot of credit rating agencies, he said that some of the best opportunities available for investors wishing to recoup their fortunes lie in well-chosen bond issues. I'm sure he is right, but most of those who are stung from recent losses are like the cat who just got burned on the stove – not willing to ever get back on the stove again no matter how cool it is now.

I personally don't believe those numbers. I think actual losses are a bit less, maybe 30 - 35%. Maybe 40 - 45% if everyone in a loss position tried to get out at the same time.

The worst is likely over.

That still doesn't make the people who were in ponzi schemes and experienced total loss feel very good. Actually, no one is doing very well except for mortgage investigators and those who are doing bank workouts.

Most have heard the term "smart money". It usually refers to the ephemeral group of insiders or money movers who have the best information and opportunities for profit due to the lack of understanding of the masses.

In the recent crises, there were many who didn't like the way financial markets were acting and either got out or hedged themselves in the same markets. Many oil companies hedged themselves by selling $120+ crude oil for the next few years of production, thereby insulating themselves from the current doldrums that besiege the majority of financial mavens who only seek mediocrity and a great sales pitch.

Anybody who was buying and selling of real estate in the last 3 years saw the severe drop in quality of market participants, causing the most seasoned to exit properties a year or more before values imploded.

To turn the corner in our economy now, the "smart money" has to start picking up on the opportunities available and the rest of the world has to realize it when they do it.

It obviously will take time. Fortunately, there will be movement of capital and substantial currency flows that will precede any sizeable recovery. That should result in profit potential for currency traders like ourselves.

Those of you who have continued entering ONS and FirstStrike Plus trades over the last few weeks are to be commended.

It is frustrating to deal with choppy, indecisive markets-- and especially the lackluster returns from trading them.

I too have been entering the trades, along with hundreds of others that I place in accord with my futures trading. The last 3 months have been some of the more challenging times I've experienced in my whole trading career, so don't feel alone if you are market-weary.

I just sent out the emails for OneNightStand orders for Friday. It is possible that we may get a trade or two. The action that we saw today on Usd/Chf was astounding.. I wouldn't be surprised if Thursday's action (Swiss National Bank bought euros and dollars/sold francs in an intervention move) is a blow-off move. Anyone who was previously short is likely out or turned long Usd/Chf.

The idea behind the SNB's actions was ostensibly to help the economy, which includes an interest rate cut and scheduled bond purchases. We'll all be watching to see how well their poorly timed interventions work out.


FirstStrike Plus trades executed this week:

  • eur/usd: Long @ 1.2744, stopped at 1.2625 for a 119 pip loss.
  • gbp/jpy: Short @ 136.71, stop 139.09. Trade in progress.
  • gbp/usd: Short @ 1.3993, stop 1.4132. Trade in progress.
  • usd/chf: Short @ 1.1483, stopped at 1.1628 for 146 pip loss.
  • usd/jpy: Long @ 99.14, stopped at 97.89 for a 125 pip loss.
  • eur/usd: Long @ 1.2744, stop 1.2625. Trade in progress.

As you can see, I re-entered the eur/usd the original buy point and stoploss. I know that I am taking greater risk by doing this, but the market structure has been encouraging.

There will be a more comprehensive update of the Challenge account's trades for the last few weeks this weekend. Amazing how time flies when you are busy.

Thanks for your attention and kind words.

Joel Rensink

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: and tell me to which address you would like it sent. Please do not use AOL, Hotmail or Yahoo addresses. They've been known to filter out more good mail than actual spam. Try a Gmail address. It's free, simple and perfect for traders!

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