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Chapter 2, Part II. And what the about the stock market? - Q&A

Discussion in 'Complete Trading Education- Forex Military School' started by dkami, Apr 29, 2011.

  1. dkami

    dkami Sergeant

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    Yes i have a question regarding my title
    I feel that the FED Reserve Bank or the US government (large participant) is manipulating their dollar by devaluing it against other ccys and this has been going on for some time now.The US government is also accusing China of devaluing their ccy against the USD

    Also when the tsunami hit Japan JPY become very strong very quickly and then just as quick reversed losing all its gains + more was this just a massive wash and rinse like you call it or was there more to it than this

    I feel something more sinister going here

    I would like to hear your thoughts on this Sive and other members
     
    #1 dkami, Apr 29, 2011
    Last edited: Apr 29, 2011
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  2. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Dkami
    From your post looks like that there is some confusing of manipulation and fiscal policy takes place. Let's try to find out it together.

    I have fallen under impression that you talk about fiscal policy. The point is that dollar devaluing comes not from Fed Reserve action, but from current economy situation - large debt burden, negative current account, anemic real estate market, employment and QEI + QE II programs that in fact just uncovered money printing.
    Fed by it's action just response on problems in economy, but in this case it looks like Fed maniplates the market. Fed action is a result, not the reason.
    This is like an old question - what has appeared earlier - chicken or egg?
    Under manipulation we assume moving the market against it's fundamentals. But when ECB or Fed act acording with situation - they do not manipulate the currency, rate changes due to fundamental reasons.

    Splash on JPY was due technical reasons - look, it has lasted just 5min. IF even it was a manipulation (but my thought that it wasn't) so it does not contradict with School statement that FX market couldn't be manipulated for long-term.

    The reason for this splash USD/JPY down, that seems to me logical, probably due closing of JPY carry positions, since large participants had to return large amount of JPY that they had borrowed. To close this loans - they have to buy Yens on open market.

    What do you think?
     
    #2 Sive Morten, May 2, 2011
    Last edited: May 2, 2011
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  3. dkami

    dkami Sergeant

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    Hi Sive and Thankyou for your explanation to my questions much appreciated,I have only been trading the FX for 3-4yrs and have much to learn and am wanting to learn more so the only way i can do this is to ask questions(however stupid they may seem to others) to people like yourself people that know what they are talking about and have sound experience and are willing to share their experience
    So thanks again for putting my thoughts at ease and answering my question its the Fed's action or lack of that's making it to me look like market manipulation rather than the US economy itself the real reason for the USD decline

    Thankyou so much for taking the time to teach the FX though your school and your analysis on EU your presents on this site is truly priceless I look forward to learning more in your school
     
    #3 dkami, May 2, 2011
    Last edited: May 2, 2011
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Dkami,
    This is not stupid question, absolutely -
    and you 100% right, when you ask what you want to find out.
     
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  5. Don Quixote

    Don Quixote Private

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    Rollover contracts:

    Hi Sive, Im spot trading at the moment but considering futures esp after reading above. Some questions though..Is it true that you have to renew/close/reopen contracts quite often in Futres? also doesnt liquidity dry up a little before rollover, what are the risks of not being able to get out? Could you explain the practical consequences of this?

    Many thanks
    PS: Love your EUR daily analysis, have just bought Joe DeNapoli's book as a result.
     
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  6. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Don Quixote,
    there are two major factors - currencly pair that your're trading and type of futures contract.
    First, about pair. If you trade, say, Israel shekels to USD, then probably we can get liquidity problems even not at rollover point but anytime.
    With major pairs all is OK. I trade EUR/USD pair with 1 pip spread.

    Now about the type of futures. Most currency futures are for settlement. There is such term as "First notice day" that comes apporximately the 1 month before expiration of contract. So, you have to make a rollover prior this day if you want to avoid settlement. If you will forget to do that, then any other member could force you to make delivery of EUR against USD.

    But this happens just 4 times per year, since currency futures trade at quarter basis - March, June, September, December. Currently September contract is at expiration and December is lead month now. So you will have to do rollover in November (1 month prior expiration) into March 2012 contract.
    This staff is very simple, you need just do it 1-2 times.

    Also there are mini and micro contracts on Eur - they are cash settled. So you can't be hurt by delivery. They just close at expiration and you get profit loss, at close price, if you will forget to make rollover.
     
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  7. Ismail Abdul-Aziz

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    Hello Sive,

    First of all, I would like to thank you very much more words can describe for your highly appreciated school and great explanation in the whole subject of Forex. As I learn a lot form you as I intended and actually started with honor to study everything you wrote about.

    Then allow me to participate now in that topic now....

    You said that the splash down of the USD/JPY seems logical due to closing JPY carry positions as large participants had to return large amounts of JPY that they had borrowed to close their loans. So they had to bought Yens on open market....!

    This is what you said to be the reason. But without disrespect, let me do not agree with this point because those participants would not buy Yens neither from the price level before the Tsunami nor higher than that during these 5 minutes in which the YEN got too high, and the reason for that is because they was able to wait for some hours or even these 5 minutes till the price of JPY becomes cheaper due to the catastrophe...! So why do they buy JPY higher than it can be bought few time later naturally???!!!

    I just wanted to share my thoughts with you, Dkami and the other members, and hopefully my point of view to be of interest to you to reply and comment on. AS well, we want you to share with us much of your thoughts about what really pushed the USD/JPY down during these 5 minutes...?!

    Thanks a lot...

    Ismail Abdul-Aziz

     
    #7 Ismail Abdul-Aziz, May 14, 2012
    Last edited: May 14, 2012
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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Ismail,
    I can't definitely point that volatility comes from carry closes, this is just my point of view on situation.
    But your explanation seems to me not logical, because "they was able to wait for some hours or even these 5 minutes till the price of JPY becomes cheaper due to the catastrophe...! So why do they buy JPY higher than it can be bought few time later naturally???!!!"
    When such catastrophe happens, noone thinks about get return on investment, everybody thinks how to get return of investment. That is not the question of return, but surviving.
    That's why waiting to see what will happen with JPY when half of Japan was covered by water looks at least curious. Imagine multi-million investor position on US Bond market. These USD were borrowed and coverted JPY and you have to return them.
    Will you start to think about possibility to buy/sell JPY after catastrophe a bit cheaper? Probably not, probably you will choose to hedge your position asap.
     
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  9. Ismail Abdul-Aziz

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    Thank you very much Major-General Sive Morten,

    Any way I am just here because I am a student recruited to be a solider in your high military school of Foreign Exchange -Forex- Market. Hopefully I get all the weapons needed to the battle along my way.

    I will Keep forward with you with all my hopes and effort to get the best out of your great knowledge.

    Thanks dear.

    Ismail Abdul-Aziz
     
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  10. Varvara

    Varvara Private

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    Sive wrote:
    That's why waiting to see what will happen with JPY when half of Japan was covered by water looks at least curious. Imagine multi-million investor position on US Bond market. These USD were borrowed and coverted JPY and you have to return them.
    Will you start to think about possibility to buy/sell JPY after catastrophe a bit cheaper? Probably not, probably you will choose to hedge your position asap.
    _________________

    Sive, Sorry. Could you please explain the passage? I don't see the logic of investor. Investor have a long position on USD/JPY and short on US Bonds. Am I Right? What is the purpose of buying JPY?
     
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