What do cactus spines and tie die T shirts have to do with Forex trading?  The answer is made clear in this video.  I am totally embarrased to put this video on the internet but what the heck?  I have never even been to Wall Street and I don’t care much for Chicago.  

I am just a cowboy lonesome on the trail
A starry night, a campfire light
The coyote call, the howling winds wail
So I ride out to the old sundown
Thin Lizzy - The Cowboy Song

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One of the main reasons that I love Forex trading is the freedom that it provides.  Not just the freedom from enslavement to the corporate rat race, but also freedom of mobility.  I like to travel and attend various events and when I am on the road I can take my Forex trading business with me.  If I happen to be out on an adventure in an exotic place I can simply take out my mobile device and check to see what the market is doing.  If I need to enter or exit a trade I can do it right from the Pocket PC.     This type of freedom of mobility is one of the unique benefits and one of the things that make it the ideal business in many ways.

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After we were discussing intermarket analysis in our live webinar early this morning I received this article that gives insight into three of the main investment instruments in the U.S. that are interelated.   

Gold, the Dow, T-Notes: Which Does Best During Recessions?

By Susan C. Walker, Elliott Wave International
April 11, 2008Each year, the NCAA college basketball tournament winnows its starting field of 64 teams to the Final Four teams who play for a chance to become the national champion. Congratulations to the University of Kansas and the University of Tennessee, this year’s men’s and women’s basketball champions.

The structure of the NCAA tournament got me to thinking. Wouldn’t it be great if we could set up brackets for our own investments the same way – start with 64 equities, bonds, mutual funds, commodity futures, metals, etc. Then let them duke it out against one another to see which ones emerge as the “Investment Final Four”?

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Click here to download a free 5-page report from Elliott Wave International with even more information on which investment does best during recessions. The report, excerpted from Bob Prechter’s Elliott Wave Theorist, includes in-depth historical analysis and six eye-opening tables.

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Since most of us have neither the time nor the money to act as our own version of the NCAA (which might stand for the “National Coordinator of Asset Allocation”), it’s worth knowing that Bob Prechter of Elliott Wave International has already set his mind to the task. He has specifically explored which investments do best in times of recession and which do best during economic expansions. But instead of starting with a field of 64 investments, he researched the three most popular investments – gold, the Dow, and Treasury bonds. We can call them the Treasured Three, rather than the Final Four.Gold and RecessionsSince economists and even Ben Bernanke, chairman of the Federal Reserve, now admit that it looks like the U.S. economy has entered a recession, many people may wonder whether they need to change the mix of their investments. In particular, as some prices keep going up – notably for food and gas – the threat of inflation makes people more interested in gold as an investment, since it’s usually seen as a bulwark against monetary inflation.It is this conventional wisdom that piqued Prechter’s curiosity. He wanted to find out whether it would hold up to a reality test. As he writes in The Elliott Wave Theorist, “I have often read, ‘Gold always goes up in recessions and depressions.’ Is it true? Should you own gold because you think the economy is tanking? Whenever we hear some claim like this, we always do the same thing: We look at the data.”So he and another Elliott wave analyst ran the numbers, reviewing the behavior of these three key investments during recessions following World War II, from February 1945 through November 2001. This is what they learned:Gold was not the best investment during recessions in terms of total return. The winner of this tournament was actually Treasury Notes, which had a total return of 9.96%. In contrast, gold had a total return of 8.80%, and the Dow came in at 6.89%. But that’s not all – once they figured in the transaction costs for each investment (at a 2008 level), gold fell from second to third place as a worthwhile investment during recessions. The total returns with transaction costs came out this way:

1. T-Notes	9.82%
2. Dow	6.85%
3. Gold	4.80%

This result turns conventional wisdom on its head. It’s also worth being aware of as you invest in 2008. Here’s how Prechter sums up the results:

The Best Investment During Recessions

The most important question, however, is not whether the Dow beat gold or vice versa but whether making either investment would have been better than taking no risk at all. Table 3 [see free report provided by Elliott Wave International] shows that ten-year Treasury notes beat both gold and the Dow during recessions since 1945, and they did so far more reliably. T-notes provided a capital gain in 10 of the 11 recessions, and of course they provided interest income during all of them. And the transaction costs are low….

So if you want to make money reliably and safely during recessions and depression, you should own bonds whose issuers will remain fully reliable debtors throughout the contraction. Of course, as Conquer the Crash [Editor’s note: Bob Prechter’s best-selling business book] makes abundantly clear, finding such bonds in this depression, which will be the deepest in 300 years, will not be easy. Conquer the Crash forecast that in this depression most bonds will go down and many will go to zero. This process has already begun. This time around, you have to follow the suggestions in that book to make your debt investment work. [The Elliott Wave Theorist, March 2008]

Forex Trading and Elliott Wave

Susan C. Walker writes for Elliott Wave International, a market forecasting and technical analysis company. She has been an associate editor with Inc. magazine, a newspaper writer and editor, an investor relations executive and a speechwriter for the Federal Reserve Bank of Atlanta. Her columns also appear regularly on FoxNews.com.

Today finance ministers from around the world held an emergency meeting in Washington to address food emergencies in 33 countries.   One reason for the shortage is the growing population that has surpassed the production of food through limited agricultural activity.  Population is growing and yet agriculture remains limited by the amount of land that is farmed.    Why have our political leaders been more focused on other issues when this could have been foretold decades if not centuries ago?  The answer lies once again in the oil industry.

The solution: Electric Cars Now!

The main reason for the food shortage is the growing demand for bio fuels.  Can you imagine burning food in automobiles while people are starving?   Why do we have such a situation?   The answer is clear.  In this age when development of technology has reached a level of astounding excellence we could have been driving electric cars decades ago.  The reason we do not drive electric cars is not because we are not capable of developing the technology.  The reason is because the oil industry is a powerful force that has successfully prevented totally electric cars from being introduced.  If reliable and affordable electric cars were available, oil would become worthless overnight.   Grains would be used for food and not for burning in cars.  And people would still have a more abundant supply of food.   Not to mention there would probably be no war in the Middle East.

I have been following some of the material from the Sovereign Society for some time and noticed that they seem to have some sound advice on wealth management.  Since it is very timely and corresponds with yesterday’s post I thought I would share this article here:

Issue #165: Friday, April 4, 2008

Markets Gang Up on the Euro! 

Today’s comment is by Sean Hyman, Currency Director for The Sovereign Society.

Good Day Currency Traders!

Currency traders thought they had it made. But just as they got used to making their “easy money” one way bets on euro, the unkind markets stepped in and “spooked” them.

Let me explain. Yesterday morning, the European Retail Sales numbers unexpectedly dropped to -0.5%. Economists were only expecting a 0.2% drop - if that.

No one was expecting the Eurozone to turn out a negative number. Euro traders were floored. They ran for cover - dumping the EUR/USD.

Germany - the biggest country in the EU - registered a drop of 1.6%. This is when traders started to realize the U.S. economic slowdown has finally reached them too.The British pound also dropped right along with the euro when Goldman Sachs lowered their earnings outlooks for U.K. banks.

Then the IMF released a statement that announced they had lowered their economic growth forecast to 1.3% from 1.6% previously.

Combine all of this information together and you have the makings for a rate cut in the Eurozone (as I’ve been predicting for some time). And just the fact that we could see one sent the euro tumbling.

Meanwhile, the Scene is Set for a Stronger Buck

Now when we go to the other side of the pond, data came out in the U.S. the very same day.The ISM Non-Manufacturing Index (the Services Sector reading that accounts for 88% of the U.S. economy) numbers came out at 49.6. That’s a little stronger than the 49.3 number last month. While this is still in the contraction level which is below 50, it shows that the contraction was slower than expected.

On top of this, the futures market in the U.S. now only predicts an 88% chance of a quarter point cut on April 30th and only a 12% chance of a half percentage point cut.

Combining both of those two pieces of data together and you’ve got a bullish outlook from the dollar’s point of view. Yes, contraction exists, but it’s not as bad as everyone thought. And the Fed may not be so liberal with their rate cuts this month. So that’s also bullish for the buck. 

The Euro Will Do Whatever the Data Says

This comes at a time when the euro is “priced to perfection.” That means the euro will respond to whatever the data says it should do. The euro could remain in the stratosphere as long as the data was strong. But now that some dollar data is surprising to the upside and some European data is starting to surprise to the downside…that picture is changing.This means a change is coming for the EUR/USD exchange rate. The euro may not plummet tomorrow against the buck. We’re still in a bit of a transition phase. However, it’s definitely coming.

I believe the euro will sell off broadly against most currencies, not just the dollar (but certainly against the dollar).

Once the fall starts, the euro will finally work its way down to the 1.46-1.50 level in the upcoming months.

Translation: If you’ve been shorting the euro, you’ll be rewarded in the coming months.

Sean Hyman, Currency Director

Sovereign Society

Forex Trading Education

For the past few months economic fear has hung like a dark cloud over the U.S.  and it seems that everyone feels pessimistic about the near future of the greenback.  However, common sense and history have always shown that when society as a whole reaches its peak of widespread bearish sentiment about any financial equity, it is almost certainly near the bottom.   That is why the majority of traders are always most bullish at the top of a market and bearish at the bottom which is the opposite sentiment for profiting in a market.  I can clearly remember in December of 2004 when every article I read warned of doom and gloom for the U.S. dollar for the coming year.  That turned out to be the low for the U.S. dollar for the next 2 and a half years and not until July 2007 did the dollar ever go below the low of December 2004.   This chart shows that time as a high for the EUR/USD Forex spot market.   Keep in mind that this chart shows the inverse of the dollar’s value.   When the U.S. dollar is going down in value Forex traders buy that currency pair to make a profit while it is going up.

Another thing to consider is that this is election year.  Markets are always driven by social mood.  When we have a presedential administration that creates fear in society it causes a bearish market.  As Robert Prechter of Elliott Wave International has demonstrated so well in his documentary, History’s Hidden Engine, social mood has created cycles in financial markets for decades.   Just the fact that the coming election must bring a different President is enough to start a new cycle of optimism which then becomes bullish sentiment in the financial markets.  It is not likely a coincidence that the dollar is at a record low this close to the end of the Bush administration. 

Forex Trading Strategies

4/01/2008 - Tuesday was a great example of why patience in the market is so important for most traders. When I first looked at the chart of the Dollar Index, I saw a rally that had retraced just about 61.8% of the prior decline, and the rally from the secondary low was either in five waves or close to it. [See wave c in the chart below – Ed.]

The depth of the retracement warned that a correction might be nearing an end, and the structure of the advance warned that a top of some sort was imminent. And that was the warning I issued [to subscribers - Ed.] I felt that it was just too late for most to participate to the upside. The next “play” would be to the downside, and I was waiting for the evidence that the top was actually in place. 

Read the rest here:    continued

 

There are reasons why the U.S. dollar is in the process of weakening against the Euro, Yen, Great British Pound, Canadian Dollar and other currencies.   Part of the reason is due to a strengthening of the global economy which is creating a shift in psychology for many countries to begin favoring their own currencies for savings and investment in preference to the greenback.  Beyond factors of subprime lending and the credit crunch, money supply is also a fundamental driving force for currency values.  GDP of emerging economies has grown steadily.   The Fed is actually printing less money which would theoretically create more demand and higher value and yet this has not affected the continuing decline.  The bottom line is that the demand for the U.S. dollar simply is not growing but is declining in the global market place

Learn Forex Trading the Global Business In Your Pocket - Trade Forex on your smart phone, pda, pocket PC or laptop from anywhere in the world.

There is a lot of discussion currently happening regarding whether Bernanke will open the door to federal interest rate cuts in December and if so, how significant these cuts will be.  The U.S. dollar has recently dropped to record lows against the Euro, Great British Pound, Swiss Franc and Canadian Dollar.   How will the rate cuts ultimately affect the value of the U.S. dollar and how will it affect the U.S. economy for the average consumer in the wake of the current credit crunch hysteria.  Generally, lowering of interest rates is considered to decrease the value of a currency so this could further weaken the already ailing greenback.  

On the one hand,  bearish sentiment and fear are always at their peak at the bottom of a market.  At the same time we cannot ignore the signals being given by economists that the

U.S. may be headed into a recession.  Many Forex traders are transferring their trading accounts into other currencies.   Some Americans are considering becoming expatriates in favor of other countries where their money will provide a more desirable lifestyle.  Where is the truth in all of this confusion and paranoia?  If you have any insights please leave a comment here.

Online Forex Trading

Stochastics is a popular classic indicator used by many traders today.  However, it seems that very few traders understand a really useful method of applying Stochastics and understand its limitations.  The Stochastics indicator was developed by George Lane in the 1950’s.   At that time traders simply did not have the ease of access to technical analysis tools that we have today.  Only mathematicians and engineers were involved in technical analysis and the use of indicators and they had to use the indicator formulas to plot the graphs onto paper.  Today anyone can buy an inexpensive computer and within minutes be using extremely advanced free charting software.  With the click of a mouse indicators such as Stochastics will appear on your chart without you needing to understand the formulas behind it nor the history of its development.

Stochastics is an oscillator type of indicator meaning that it moves up and down between two extreme zones which are often labeled the “overbought” and “oversold” zones.   Many traders who are eager to learn to master the art of trading quickly begin adding indicators to their charts without really understanding a purpose for using the indicator and when they try to use it they discover that it does not work for them so they then quickly abandon the indicator concluding that it just doesn’t work.  A little patience and observation will enable you to discover how to use an indicator to develop a profitable Forex trading system.

One of the first steps in understanding the use of Stochastics is being able to optimize the settings.  The key to optimizing the settings as demonstrated in the above video is to first know what it is that you would like to see from this indicator and how you plan to use it.  Then you will see that there is no general purpose setting that is intended for all currency pairs or commodity futures.  The settings will vary from one to the next and also will vary between different time frames.   Technical analysis is never an exact science because financial markets are really more organic like a living being such as a plant. Once you learn this fact and stop trying to look at markets as if they are mechanical, you will gain tremendous insight into how to profit from your forex trading business.

Forex Technical Analysis