I came across an article the other day which got my blood boiling a bit. It basically talks about trading the “spread” between the S&P 500 and EUR/JPY forex cross rate. The author was quite happy with himself for calling the spread being exceedingly wide and recommending a spread narrowing trade. He went so far as to say “Selling ES and going long EURJPY is now pretty much risk free.” I don’t know what anyone else’s definition of “risk free” is, but this trade certainly isn’t...

Frequent trading question-asker Rod is back with another one. He sounds worried that he’s asking a foolish question, but it’s hard to get better and more knowledgeable if you’re afraid to ask when something confuses you. Fortunately for me, his question isn’t too hard to answer. Hi John, I know, you will slap me for this, but I have to ask: I don’t get it, why is the Japanese Yen still a safe-haven currency? To put it similarly, why is the market still in love with Japanese Government Bonds? Is...

One of the complexities of trading foreign exchange is the whole rollover and carry interest aspect of things, as this recent question highlights. Hi John, My question is: What does carrying a trade past 5pm and thereby gain or pay interest, have to do with rolling over the T+2 forward currency contract? I understand that the banks would want to charge or pay interest at a given time, but why do some people call that carry trade and the interest associated with it rollover and why is the association so significant that on Wednesday...

Do you know the seasonal patterns which tend to play out in the forex markets? If so, then you were well positioned to take advantage of what we saw out of the likes of the dollar and the euro over the last couple of months. Both moved in accord with their historical tendencies during January and February. Take a look at as this chart of how EUR/USD tends to perform throughout the course of the calendar year. What the chart is telling you is that if you sell EUR/USD during the first 8 weeks or so of the calendar year, and hold...

Word has come out from Currensee that Oanda traders can now become members of the forex social network. This is big news because it opens the network up to customers of one of the biggest brokers around, one a lot of small and newer traders use because of its flexibility in terms of account and trade size. That means there could be a really big ramp up in membership. If you trade forex and haven’t already done so, you should check out Currensee, which is a network for active forex traders. This isn’t a forum, but...

Reader Rod is a good one for sending me questions, and generally interesting ones at that. Here’s his lastest inquiry. Dear John, What was the source of Yen strength from April to December 2009? The carry trade was back, so “unwinding of the carry trade” doesn’t seem right. “Safe haven currency” would be odd as well, as there was a global “risk on” investment theme during the year. Their trade surplus was contracting, and so was economic activity. Budget deficits as a % of GDP...

I’ve just finished reading Making Sense of the Dollar: Exposing Dangerous Myths about Trade and Foreign Exchange by Marc Chandler. You may be familiar with Chandler from appearances on CNBC. He is currently the Chief Foreign Exchange Strategist at Brown Brothers Harriman, having prior held a similar post with HSBC. He’s written a number of magazine and online articles, and teaches at NYU as well. What Chandler looks to do with Making Sense of the Dollar is to dispute many of the commonly held views about the US currency, international...

I was asked by frequent emailer Rod to address something he came across regarding the cost of forex trading as compared to trading other markets, like futures. He is referring to this blog post in which the author compares retail forex to emini S&P 500 futures. In particular, the following statements are made: “…unlike a stock, option or futures trade where one pays to enter and again to exit (but not to hold) a FX position is inherently a short-term trade, as you will be charged simply for the privilege of holding...

The other day I posted Increasing Regulation of Retail Forex Trading discussing the continued efforts of the CFTC and NFA in terms of regulating retail foreign exchange trading in the US. I came across a discussion on Trade2Win today which made me want come back to the subject, though. The thread starter asked the question “10:1 could this be the new leverage in the US ?”. This came from a single line in the CFTC”s communique: CFTC Seeks Public Comment on Proposed Regulations Regarding Retail FOREX Transactions,...

There is an article on the Financial Times website on the subject of increased regulation in the US of retail forex trading. For those who have been following along with developments over the last year (No More “Hedging” for Forex Traders, New NFA Rule Impacts More Than Just Forex Hedging, New NFA Retail Forex Leverage Restrictions) there won’t be much new information. Here’s an interesting point of reference from the article, though. The rules bring fresh oversight to a small but expanding portion of the $3,700bn-a-day...

I got the following email over the weekend. Let me know what your immediate response is. I had my own, but I won’t taint your view with what went through my mind at first. Dear sir, kindly to inform you that i’m new in forex trading. So far i always lost my money in trading forex. if you don’t mind, can you tell me what is the best forex trading technique or trading system that can make me always win and make money in my forex trading. thanks you. Aside from any other response, my recommendation to this individual...