Thursday, June 11, 2009

Why well directed volatility in a currency pair is key to a successful trade

An interesting thing happened today. I was listening to CNBC in the car (on satellite radio for those that are about to hit the comment button with the reply there is no such thing) and the were talking about what direction the currency markets are currently trading in and most commentators agreed that the commodity currencies, such as the Canadian $ and the Aussie are a good investment at the moment because it turned out that they are well directed against the USD. What surprised me was a financial analyst said that he would not put his money in buying Euro since 'the Euro zone has as many problems of it's own, if not more then the US'.
As said before I'm trying to specialize in the EUR/USD pair and from what I've seen it's a very side-ways currency pair, it pretty much stays between 1.25 and 1.45 on average lately. But I think they might be right. Volatility is ultimate what makes you money. A market that barely moves is not only boring but brings in hardly any profits. I'm not saying to jump into high risk exotic currency pairs right away, since they may be a little too volatile, but maybe trade main currencies that are out of your 'comfort zone'. What I mean by that is, for example in my case, step away from the EUR/USD pair for a second and invest in a pair that brings in a higher chance of profits because you have more then one clear indicator that proves it. You can look at the current oil prices for example, oil hit about $73 a barrel today. Oil is clearly on the rise. A good idea to trade the CAD $? Well, maybe, certainly a better place to be right now then the EUR that's not willing to go anywhere this week it seems. And we want to make money right?! The point I'm trying to get across is that with so many main currencies available to you to trade with, you may have to jump around and see which one has the most well directed volatility at the moment. Who said Forex was easy?!

Disclaimer:

All opinions expressed, trade recommendations/advice on this website are solely of John van der Munnik and are not affiliated with any investment firm or any other organization. You should not make an investment only based using this website VDM Trading for your trading needs without seeking help from your own financial advisor.