U.S. Dollar Could Gain From Speculators Looking For Failing Banks

Friday was “Stress Test Day” and the 19 major banks analyzed by the Fed received the preliminary results of the recent stress tests performed by the top bank. These results will let the banks know what they need to do to achieve stability and where they are at risk. Some will be told they need capital now. Others will be informed of future situations where they would need to shore up capital requirements.

Only preliminary results were released with the actual results coming out on May 4. It is kind of like getting a report card from your teacher and having 10 days to fix the grades before your parents get to see it. Of utmost importance is secrecy at this time. The Obama Administration does not want the release of these preliminary reports leaked in order to prevent excessive speculation in a bank’s stock or a run on a bank.

This 10-day period before the release of the actual numbers is to prevent a shock to the banking system. Of course speculation over who is sound and who is in trouble may plague the markets from now until May 4, but that is why we have markets. There seems to always be someone willing to take the risk.

If the numbers are too good then no one will believe the Fed. If the numbers come out bad then investors may head for the hills. Either way the next 10 days are likely to be some of the most volatile we’ve seen since the fall 2008. There is likely to be speculation on both sides of the market. At times the herd will chase the good bank stocks and repel the bad bank stocks. The only thing that is certain is that no one will know the exact results from the stress tests until May 4. Any moves that take place before then will be all speculation.

The banks received their preliminary reports early in the day while the Fed waited until late to say that the top 19 U.S. banks need to hold a “substantial” amount of capital above regulatory requirements. The use of the word “substantial” is where the speculation is likely to begin. What is substantial and which banks meet this requirement will be the questions asked by many traders and investors over the next 10 days.

Since the U.S. Dollar is still the world’s reserve currency and the markets remain sensitive to banking issues, the Greenback could see quite a lot of buying if there are any signs of new banking sector trouble. One of the major concerns among traders will be that one or more of the larger U.S. banks receives the scarlet letter and gets deemed a failure.

Theory of International Trade

With international trade, as with so many other human interactions, people tend first to ask how it 'should' work before getting interested in how it 'actually' works.

The systematic study of international trade emerged in the era of mercantilist economics--- approximately the 16th through 18th centuries in Europe, as crude set of hypothesis about how nations should conduct their trade. It was felt that each nation's self-interest was served by encouraging its exports and discouraging its imports. The mercantilist view began to yield, after the late 18th century, to a free-trade view, a view arguing that a nation's self-interest would both be served best by just letting people buy and sell as they saw fit.

The main hypothesis continued to be one about how trade should be conducted.

Economists studying trade soon found that the issue of what trade policy was best could not be resolved until there was a firmer theory of what made trade flow in the directions it did. On the surface level, the answer might seem obvious: people will trade if they find it privately comfortable, but profitable for whom, for everybody?

If not for everybody, then how do we know that the gains given to some people compensate the losses it brings to others? If one country gains from trade, does it drop its trading influence? These immediate questions illustrate that the answer to what should be cannot be divorced for the task of explaining what was in question though. We cannot know how a nation or an economic group within a nation gains or loses from trade until we know what makes some people find trading profitable, and what goods they will do business on, if given the chance.

To put the point in terms of the recurring concern felt in the United States about trade with Japan: knowing is impossible who would gain or lose, by cutting down the deal with the latter until we know why its is that Japan sells steel, autos, and other merchandise to the United States in exchange for aircraft, grain, and such.

Only when we know why trading proves advantageous and whose profits are tied to trade, can we discern who would be affected by policies restricting it. The basis for trade, so far as supply is concerned, is found in differences in comparative costs. A country may be more efficient than another, as measured by factor inputs per unit of output, in the production of every possible commodity; but so long as it is not equally more efficient in every product, a basis for trade exists.

Theory to trade

• Dual And Multiple Exchange Rates
• The Euro/Swiss Franc Relationship
• Bond Spreads: A Leading Indicator For Forex
• Commodity Prices And Currency Movements
• Global Trade And The Currency Market
• Forex Leverage: A Double-Edged Sword
• Seasonality In The Forex Market

strategies and ideas under development

That's probably that missing link we needed for our website - a page with ideas and strategies under development!
While making a complete well balanced trading system always challenging for any trader either for a beginner or a pro, almost all of us have some bright ideas about specific parts of Forex trading routine: good entries, ideal exits, excellent stops etc.On behalf of our Team I'd like to welcome you to join our discussion area where we are going to look at new trading ideas and innovative approaches, make notes and conduct testing, and, of course, share trading strategies that are still under development.Should I add that I'm truly excited about this new opportunity, because I also have my not-so-old-not-so-new notebook, where I carefully wrote down interesting ideas which sparked in my mind over the time.

Risk

If you are taking risk, you need to control it - risk as much as 10% per trade, but increase your chances of success by:
1. Buying options at or in the money, to give you staying power - and prevent yourself from getting stopped out.
Many traders lose, not because they were wrong in market direction - they just were stopped out by a volatile counter move - and options will give you staying power.
2. Many traders start trailing their stops to close, they then get stopped out ' but the trade runs on to make spectacular gains. Don't fall into this trap - keep your stop in its original position - until the move is well in profit, before moving it up.
You're looking to make money fast, and you're trading selectively - so have the guts to go for a trade when it looks good - and milk it for all it's worth.