Articles by Mike P. Kulej on ArticleSnatch.com

Trading Forex - are currency wars ahead?

Sat, 14 Mar 2009 00:00:00 -0400

On Thursday, March 12th, Swiss National Bank surprised investors by intervening to bring down the Swiss Franc. Over last year there was a lot of talk about just such action, but the expectation was on Bank of Japan, in light of massive Yen rally. Recently Japanese currency weakened somewhat, effectively ending any such talk. Thursday's development broadened the expectation on behalf of market participants for more of these steps. This represented the first time a leading central bank has intervened in the foreign exchange markets since 2004, when the Bank of Japan sought to weaken the Yen. At that time effectiveness of these steps was questioned, since Yen failed to react in any meaningful way. This time results was clear. The speed and magnitude with which the Franc responded, dropping 3 per cent against the Euro in a matter of minutes, also shows that if a central bank wants its currency to fall, it can deliver. Among reasons stated for intervention were sharp deterioration in SwitzerlandÃ¢â¬â¢s economy, unacceptable appreciation of the Swiss Franc against the Euro and to address the threat of deflation. The last factor is something Swiss financial authorities are particularly afraid off.** End Summary**

About the Author:
Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex LLC. He specializes in mechanical trading systems as explained on www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. He also publishes trading blog www.fxmadness.com . With questions and comments e-mail him at kulej@spectrumforex.com.

Trading Forex - exploiting weekend gaps.

Sun, 09 Nov 2008 00:00:00 -0500

Most trading is done using some type of technical analysis. There is an almost infinite number of indicators which can be used in myriad of ways. Trend lines, retracement levels, Fibonacci numbers, Elliot wave analysis, candlestick patterns, point and figure charting are also widely used. Just about any form of technical analysis can be used for trading Forex. Yet there is a trading application popular in other in other financial markets that is not widely used in currency trading - price gaps. There are couple of reasons for that. Forex is a 24 H market, therefore markets don't stop, providing continues stream of price quotes. Even during important fundamental announcements, when it is possible for price to move substantially, creating gap, it would only be visible on tick charts and hidden on any larger magnitude graphs. Most traders wouldn't even notice it, making it useless for any practical approach. Also, Forex market is the most liquid and deep of all financial markets. This means that just at about any price level there are enough buyers and sellers to make price gaps almost impossible to form.** End Summary**

Trading Forex - Icelandic Krona troubles.

Sat, 11 Oct 2008 00:00:00 -0400

It is hard to believe, that events in a small country with a population of just 320,000 people could have world wide effect. Flooded with a deluge of information during first 10 days of October, most traders probably didn't even register what was happening in Iceland. Yet it might have been there, according to some market watchers, where the current financial turmoil began. Over last few years Icelandic Krona has been very high yielding currency, paying more than 15%. For this reason, it has been popular choice in the "carry" play enjoyed by many traders against mainly Japanese Yen an Swiss Franc. This pushed the ISK to lofty levels, which, in turn, helped fuel the expansion of Icelandic financial sector, especially its banks. The nations three banks established branches abroad, mainly in UK and Europe. Business flourished. During the "unwind of carry trade" in summer last year, Krona experienced a sell off, which was seen, at the time, as temporary. However things got a lot worse earlier this year, during Bear Stern's bailout. ISK's slide continued and was much steeper than any other currency. With financial sector being disproportionately large relative to country's economy, Iceland started to suffer.** End Summary**

Trading Forex - how good are professional traders?

Sat, 04 Oct 2008 00:00:00 -0400

All of us who trade financial markets continue our education. We do it by reading books, periodicals, attending trading seminars and conferences. Just about all of us have a favorite trading book or author. Most of these people are, or have been, professional traders passing their experiences to others. Professional traders come in few categories. Some are independent, trading mostly their own accounts or small pools of money. Others come with a pedigree of trading for money management companies. In this category we can find hedge fund traders, CTA's and other money managers for large, commercial pools. Last but not least are bank traders, who trade bank's money, not just market makers. It is difficult to obtain any reliable information about independent traders results. Banks often do not disclose trading results, or they don't single out currency operations from other earnings. Only hedge funds and other money management institutions disclose results, as they should, since that is how they attract new clients. These are generally the only reliable figures for trading public to have access to and compare own achievements.** End Summary**

Trading Forex - financial bailout and the dollar.

Sun, 28 Sep 2008 00:00:00 -0400

Everybody who even perfunctory follows the news must have heard about the string of terrible financial developments in the United States. More and more investment and banking companies are going bankrupt or are being threatened by spreading credit crisis. This is a spillover effect from excessive lending practices during a prolonged housing bull market, which came to an end as a "bursting bubble" over a year ago. Now more and more companies find themselves in possession of securities tied directly to mortgages issued during that time. With more and more houses going into foreclosures and loosing value, an increasing number financial instruments are rapidly becoming non performing, or outright worthless. Companies holding them are experiencing losses going into billions of dollars. Some of them are becoming insolvent. Such was the case with Washington Mutual, which was seized by federal authorities and sold at a bargain price to JP Morgan Chase. Washington Mutual set a sad record, becoming the biggest bank to ever fail in USA. But not the only one lately. So far the crisis has claimed 12 banks, investment banks and even insurance companies, like the industry giant American Insurance Group.** End Summary**

Trading Forex - is NZD ready for a rally?

Fri, 19 Sep 2008 00:00:00 -0400

Over last few years we have witnessed historic drop in US dollar. Many currencies found themselves in a prolonged up trend, some of them reaching dizzying levels. Most notable has been Euro, which moved into all time high of over 1.6000. Canadian dollar also visited never before seen levels. Most remaining major currencies staged very impressive runs of their own. One of them was New Zealand dollar. NZD, also known as "Kiwi" experienced perhaps the most telling rally of them all. Between 2001 and early 2008 it moved 0.4000 to 0.8200, effectively doubling in value against USD. We don't see something like this often, certainly not among currencies of major, established economies. Very impressive. Earlier this year USD started to regain some strength. While eventually dollar gained ground on all currencies, NZD was the first one to exhibit weakness and turn. This happened in spite of having the highest interest rates in the developed world. According to some, they were the leading reason in Kiwi's earlier rise. By the time Reserve Bank of New Zealand cut rates for the first time in 5 years, NZD-USD had already lost 700 pips. That was in July.** End Summary**

Trading Forex - new Korean currency crisis?

Sat, 13 Sep 2008 00:00:00 -0400

Back in 1997 major financial slump rocked number of countries in Asia, an event that became known as "Asian currency crisis". Effected countries included Taiwan, Thailand South Korea and others. One of the memorable comments of the time came from one of leading Thai politicians. He blamed this whole mess on speculators, with George Soros being the main culprit. The remarks went so far as to public statement of "not being able to guarantee his safety if he visited Thailand". Quite ominous. The fallout in South Korea was brutal. The US Dollar has about doubled in value against the Won, with USD-KRW moving from just above 800 in early 1997, to 1600 by the year's end. Local stock market suffered similar fate, as did all areas of economy. Perhaps most telling was an enormous spike in unemployment, as the jobless rate soared to almost double digits, with about 9 million people out of work. This author observed the aftermath first hand, during one of his business trips to South Korea at that time. Collapse of once high flying conglomerate Daewoo under burden of debt. The sight of many construction projects suspended or stopped all over Seoul and Pusan.** End Summary**

Trading Forex- Impact of national Foreign Reserves.

Sat, 06 Sep 2008 00:00:00 -0400

Historically, central banks of just about every country, used to hold gold as national reserves, or some kind of last resort source of funding. That also was a storage of country's wealth. To some degree it's still true, but is not practical on a large scale. The role of gold has declined since the gold standard was abandoned 30 some years ago by most economies. These days a lot of countries, apart from smaller gold positions, also hold Foreign currencies as part of national reserves. This mainly applies to currencies used in international trade. Mainly USD, EUR, JPY and to a smaller degree GBP, CAD and AUD. Strategic commodities are usually priced in one of these currencies and they are also most accepted form of payments and conversions in international banking. There are two groups of countries that accumulate a surplus of foreign currencies. China, Japan and India, manufacture and export more finished goods than they import. Second group comprises of producers of raw commodities like oil and metals. Russia and Saudi Arabia are the most prominent beneficiaries of those. How much money are we talking about?** End Summary**

Trading Forex â using your demo account.

Sat, 30 Aug 2008 00:00:00 -0400

Virtually all Forex brokers provide you with a fantastic training tool, a demo account. It is an account funded with simulated funds, but behaving like a real one. Both prices and transactions are meant to simulate actual trading on given platform. In theory, trades executed in the practice account should have the feel and behavior of factual sell/buy orders. Opening demo is a very straightforward process. One fills out a form, in electronic form, with a broker of his/her choice, follows simple steps and within few minutes new account is set up and ready to use. That is all there is to it. Depending on broker, there is 50,000 or 100,000 dollars of virtual funds available for trading. First thing one should to do is to change to amount of money in demo to a level in line with personal means. If you have 5000 or 10,000 dollars available for trading, you should reset the balance in the account to that amount. The purpose of having demo account is to simulate realistic market conditions, not playing fantasy games. Next thing one should do is to learn the mechanics of the trading platform.** End Summary**

Trading Forex - summer slowdown.

Sat, 23 Aug 2008 00:00:00 -0400

All financial markets exhibit some seasonal tendencies. These behaviors are more visible in some trading instruments, while others are subjected to less of an impact. Generally speaking, these patterns are considered important enough, that an entire "science" of trading was developed, which deals with this phenomenon. That is cycle analysis, and there are market participants who consider this kind of trading the only valid approach. These seasonal tendencies are most visible in physical commodities markets. There are good reasons for that. For example, grains tend to be cheapest around harvest time, since this is the period of the year when supply is most plentiful. Natural gas is typically most expensive during winter, when demand is the highest. Stock market traders surely heard about the "presidential election cycle" as well as the "Santa Clause rally". These are all examples of seasonal patterns. Currency markets are not immune to these forces. Granted, since Forex is affected by many more influences, these tendencies have much softer basis than those in commodity markets. The sheer size of FX trading makes it difficult for any one set of circumstances effect to the price behavior repetitively.** End Summary**

Trading Forex- outside the dollar.

Sat, 16 Aug 2008 00:00:00 -0400

Almost all newcomers to the currency trading start their journey with the so called âmajorsâ. And not surprisingly so. These instruments are the most popular, most liquid, and most prominent. They are also all dollar based. What are the âmajorsâ? While there is no formal definition for that term, âmajorsâ are the USD denominated currency pairs. Virtually every time you enter a forex brokerâs site, you will see a rates table. This table will always contain quotes for following pairs : EUR-USD, USD-JPY, GBP-USD and USD-CHF. These are the âmajorsâ, followed closely by a smaller group of so called âcommodity pairsâ: USD-CAD, AUD-USD and NZD-USD. USD dominance in Forex trading should come as no surprise to anybody. After all, United States is the worldâs single largest economy, most commodities are priced in USD and international trade in goods and services is mostly quoted in green back. To top it all off, dollar is also the core of foreign reserves held by central banks of most nations. Times are slowly changing, however, and anybody who trades Forex should take a closer look at some of the other instruments available in foreign exchange arena.** End Summary**

Trading Forex- Russian Ruble, the next commodities currency.

Sat, 09 Aug 2008 00:00:00 -0400

There are some currencies known in financial circles as âcommodities currenciesâ. Their fortunes seem to be rising an falling in tandem with prices of raw materials. These are the âother dollarsâ CAD, AUD and, to a smaller degree, NZD. These countries are large producers and net exporters of a wide range of physical commodities. Oil and gas, metals, forestry and a myriad of agricultural products are imported from those countries by the rest of the world, especially exploding Asian economies. Growing consumption is followed quickly by rising prices of those materials. That, in turn, pushes currencies in exporting countries to appreciate in value. Huge run ups in AUD, CAD and NZD over last few years were the direct result of this phenomenon. Than there is Russia. Since the break up of Soviet Union and virtual collapse of its economy, a lot of changes have taken place. Privatization brought much needed capital and improvement. Obsolete plants were either closed or modernized. Rising commodities prices brought Russia to the top level of world exporters in many, if not most, industrial commodities. (We will omit Russian political situation and it's impact in this discussion.** End Summary**

Trading Forex- trading around data releases.

Sat, 02 Aug 2008 00:00:00 -0400

Forex , just like any financial market, is effected by a plethora of factors. Among many influences is economic data. That data is available to the public during economic news releases. Economic data is collected and distributed by numerous of sources. Most of the relevant numbers come from various branches of Federal government and cover area of their respective responsibilities. Some information is provided by private or academic sector, but government is a primary source of this information. Examples of the of economic data are; -personal income, -personal spending, -consumer confidence, -unemployment claims, -home sales, -nonfarm payroll. Perhaps the most important and influential of them all is FED interest rate decision, announced every 6 weeks after FED meeting. Schedule for all these announcements is set well in advance and is available on all Forex brokers' websites. It's usually displayed as âEconomic calendarâ or some minor variation of this name. Why are these events important? The numbers provide a window into economic health of the nation, and are used by people to predict the future course of economy. Strength or weakness of currency , in some measure, depends on a state of economy. That's why Forex markets react to economic news releases.** End Summary**

Trading Forex- Currencies of Eastern Europe.

Sat, 26 Jul 2008 00:00:00 -0400

Since 2000 Forex scene became less crowded. Number of traders' favorite financial vehicles have been absorbed into the new European currency, the Euro. Gone are the days when one could trade the likes of Spanish Peseta, German Mark, Belgian Franc, Italian Lira and number of others. Or are they? Since the break up of the old Soviet block, currencies of the countries previously hidden behind Iron Curtain became freely floating, viable financial vehicles. In Eastern Europe and Baltic States there are nine countries whose currencies are outside the Euro zone. In the minds of many traders, that's where the opportunities are. We are talking about states which are members of European Union, such as Poland, Hungary, Slovakia, Czech Republic, Estonia, Lithuania, Latvia and a few others. Their economies are industrialized, political systems are democratic and after decades of stagnation under communist rules they are going through period of extensive economic changes. They are becoming more and more like countries from the west. Many brokers offer some of these currencies for trading. Polish Zloty, Czech Koruna and Hungarian Forint are available and enjoy steady rise in volume.** End Summary**

Trading Forex- overtrading.

Sat, 19 Jul 2008 00:00:00 -0400

Entire libraries have been written and published on a subject of trading mistakes. Just about every trader with some experience has his own list of pitfalls. They can vary from under capitalization to over leveraging to lack of general market education. While the list can be very long, few mistakes make the list on consistent bases. One of them is overtrading. It is easy to say that, but when exactly does overtrading happen and how do we define it? More importantly how do we recognize it and prevent it from happening? Not one simple answer will be applicable to all traders, as it can only be determined in light of persons' trading style. Perhaps the easiest type of overtrading to recognize happens to traders who use clearly define systematic approach. In other words mechanical trading systems. If you are using software generated signals to trade or some other form of auto trading and you start taking more and more trades outside of your system, you are probably ovetrading. This happens usually during period of time when the system is under performing. Since all systems go through weak periods, it might easily happen to everybody.** End Summary**

About the Author:
Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex LLC. He specializes in mechanical trading systems as explained on www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. With questions and comments e-mail him at kulej@spectrumforex.com.

Trading Forex- why trade currencies? (part 2 of 2.)

Sat, 12 Jul 2008 00:00:00 -0400

In the previous article we covered some of general attributes of trading Forex. Those included liquidity, long term trends, availability of information or fundamental news, 24 H access and Forex as a tool for diversification. Here we are going to look at some very trading specific aspects advantages of getting involved in this market. Demo accounts- all of forex brokers offer demo accounts. These are virtual accounts, with no real money, which simulate live trading. On most platforms these accounts track live prices tick by tick. You can practice trading, test your strategies and hone your skills without risking real money. Except for emotional impact, trading in these accounts is exactly like live trading. Fantastic tool, not just for beginners, but also for seasoned traders. Outside of Forex, very few brokers offer something like that. Technical tools- all currencies trading platforms contain a wide range of technical analytical tools. Vast majority of these services are free with an account. Some will be more complex, some less, but in most cases there is more than an average trader will ever use. These tools are getting increasingly more complex.** End Summary**

About the Author:
Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex LLC. He specializes in mechanical trading systems as explained on www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. With questions and comments e-mail him at kulej@spectrumforex.com.

Trading Forex- why trade currencies? (Part 1 of 2.)

Fri, 11 Jul 2008 00:00:00 -0400

When a person wants to enter trading arena, one of the most important questions is âWhat should I trade?â. There is an overwhelming choice of financial instruments available for trading; stocks, bonds, futures, commodities, options, mutual funds, ETF's, all kinds of derivatives like swaps and forwards and , of course, currencies or spot Forex. Perhaps it's not a surprise, that majority of people start their trading adventure in stocks. These financial vehicles are relatively familiar to most individuals. They are mentioned in the media every day, newspapers always provide price quotes for them. Most of us own or know somebody who owns stocks. That may be direct holding in brokerage account, or an indirect one, through mutual fund or retirement plan. Taking that under consideration, why should a trader branch out into the Forex markets? Entire books could be (and have been) written on the subject. Reasons can be very diverse and compelling ,but also fairly technical and complex. We are going to focus on a few, most obvious, factors, mentioned here in no particular order. Liquidity- Forex is the most liquid financial market in the world. Period.** End Summary**

About the Author:
Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex LLC. He specializes in mechanical trading systems as explained on www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. With questions and comments e-mail him at kulej@spectrumforex.com.

Trading Forex- outlook for GBP-CHF.

Tue, 08 Jul 2008 00:00:00 -0400

With financial markets in turmoil, press is full of speculation regarding US dollar and Euro. A lot of coverage is given to unprecedented commodities boom, especially record prices for oil and grains. Precious and industrial metals also draw a lot of attention. Credit and debt markets have been on front pages for a couple of years now. Let's not forget about stock markets, which, both in US and globally, are experiencing wild swings with seemingly no end in sight. With so much going on, it's no wonder that some very large moves in currencies have escaped attention, or at least wide coverage. British Pound, for one, has not been mentioned as often as it deserves. Same goes to Swiss Franc, and by extension, the cross of these two currencies, GBP-CHF. Despite being one of speculator's favorite financial vehicle, this pair seems to be living in a shadow of it's cousin, GBP-JPY, which gets far more coverage from Forex analysts. This fact is likely due to much more vaunted stature of Japanese Yen, while Swiss Franc is so much correlated to Euro, that has been loosing trading volume to other currencies, most notably both Australian and Canadian Dollars.** End Summary**

About the Author:
Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex LLC. He specializes in mechanical trading systems as explained on www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. With questions and comments e-mail him at kulej@spectrumforex.com.

Trading Forex- dollar and inflation.

Tue, 08 Jul 2008 00:00:00 -0400

For a number of years US economy has enjoyed a relatively low inflation rate. According to official statements, annualized inflation over last decade or so has been in very low single digits. Depending on the source and method of calculation, the rate has been about 2%. That is despite massive infusion of funds into the economy in the form of very low interest rates. That course of action has been long supported by US financial authorities, the FED. For years the central bank has been concerned with growth, doing everything it could to fight economic slow down and stagnation. It was done in the form of cutting interest rates and seemingly endless liquidity increase. Let's not forget about lending hand in order to bail out large financial institutions from the masses their questionable practises created. In fact, month after month we have been treated to speeches that inflation is under control and not a threat. Until now. Published inflation figures pertain to the so called "core inflation", compilation of prices on consumer goods, which excludes food and energy.** End Summary**

About the Author:
Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex LLC. He specializes in mechanical trading systems as explained on www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. With questions and comments e-mail him at kulej@spectrumforex.com.

Trading Forex- Exotics as carry trade.

Tue, 08 Jul 2008 00:00:00 -0400

The carry trade is an investment strategy involving basic arbitrage between interest rates. Any Forex transaction comprises of simultaneously selling one currency and buying another. Object of the carry trade is to sell a currency with a low interest rate and purchase one with higher interest rate. Trader pays interest on the sold part of the trade and collects it on the currency that was purchased, capturing the rate differential. This easy strategy has been a buzzword in Forex circles for many years. There are always differences in interest rates to be exploited and sometimes they are quite substantial. To make it more appealing, these imbalances can last for a long time, years even, making the carry trade a darling among the "easy money" crowd. Such was the case for JPY which had been heavily borrowed for years in order to buy NZD, AUD and GBP, until last summer. That's when the now famous "unwind of the carry trade" took place, sinking a lot of over leveraged traders. Since then financial press has been relatively quiet on the subject. Recently, though, new variants of the method have started to pop out.** End Summary**

About the Author:
Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex LLC. He specializes in mechanical trading systems as explained on www.spectrumforex.com . Spectrum Forex LLC offers numerous services to individual traders. With questions and comments e-mail him at kulej@spectrumforex.com.

Articles by Mike P. Kulej on ArticleSnatch.com

Trading Forex - are currency wars ahead?

Trading Forex - exploiting weekend gaps.

Trading Forex - Icelandic Krona troubles.

Trading Forex - how good are professional traders?

Trading Forex - financial bailout and the dollar.

Trading Forex - is NZD ready for a rally?

Trading Forex - new Korean currency crisis?

Trading Forex- Impact of national Foreign Reserves.

Trading Forex â using your demo account.

Trading Forex - summer slowdown.

Trading Forex- outside the dollar.

Trading Forex- Russian Ruble, the next commodities currency.

Trading Forex- trading around data releases.

Trading Forex- Currencies of Eastern Europe.

Trading Forex- overtrading.

Trading Forex- why trade currencies? (part 2 of 2.)

Trading Forex- why trade currencies? (Part 1 of 2.)

Trading Forex- outlook for GBP-CHF.

Trading Forex- dollar and inflation.

Trading Forex- Exotics as carry trade.

Trading Forex â using your demo account.