How to Win at Forex Trading as a BEGINNER
Summary
TLDRThis video offers a concise guide to currency trading, focusing on emerging and commodity market currencies. It highlights key factors to consider, such as capital flight accounts, portfolio flows, and central bank activities. The speaker emphasizes the importance of gauging investor sentiment, monitoring corporate actions, and understanding the impact of commodity prices on currencies. The video also touches on technical aspects like hedging, gearing ratios, and carry trade analysis, providing insights into the macroeconomic and fundamental factors driving currency markets.
Takeaways
- 🌐 The video is focused on currency trading, particularly in emerging and commodity markets, and aims to answer common questions about this topic.
- 💼 The speaker emphasizes the importance of looking at capital flight accounts to understand currency demand and supply dynamics.
- 📈 Portfolio inflows and outflows, along with foreign holdings, are key indicators for gauging sentiment in emerging market currencies.
- 📊 Central bank activities such as repo agreements provide insights into market movements and are closely monitored by the speaker.
- 🌐 Emerging market economies typically rely on exporting commodities, which significantly influences their currency values and market interest.
- 💰 The speaker discusses the significance of credit and bond markets in assessing central bank policies and overall market conditions.
- 🏦 Corporate hoarding and burn rates for cash piles are used as gauges for foreign exchange (FX) market sentiment and activity.
- 📉 The speaker warns against buying currencies where corporations are accumulating foreign assets due to low local trust, indicating potential market instability.
- 📊 Technical analysis in currency trading includes hedging, gearing ratios, value at risk, and carry trade analysis, with the Japanese Yen being a notable example.
- 🌐 The difference between commodity-rich and non-commodity-rich nations is a major theme in currency trading, affecting market volatility and opportunities.
- 📉 The speaker highlights the impact of commodity prices on currencies of net importers, such as Turkey, and the importance of monitoring current account values.
- 🌐 Sovereign wealth funds and national wealth funds, which often accumulate profits from commodity exports, are important for understanding market stability during commodity market downturns.
Q & A
What is the main focus of the video?
-The main focus of the video is to discuss currency trading, specifically in the context of emerging market and commodity currency traders, and to provide insights into what to look for when trading currencies.
Why does the speaker emphasize the importance of capital flight accounts in currency trading?
-Capital flight accounts provide an overview of demand and supply for a currency, which is crucial for understanding market dynamics and making informed trading decisions.
What role do portfolio inflows and outflows play in the speaker's currency trading strategy?
-Portfolio inflows and outflows are paired with capital flight accounts to gauge the sentiment of foreign investors and locals, which helps in assessing interest in the marketplace and the overall health of a currency.
How does the speaker approach the analysis of central bank activities in currency trading?
-The speaker tracks central bank activities such as selling or repo agreements to get a clearer idea of market movements and to understand the central bank's policy, which can influence currency values.
What is the significance of state funds and sovereign wealth funds in emerging market economies?
-State funds and sovereign wealth funds are important because they often receive excess profits from commodity exports, which can be used to stabilize economies during periods of market suppression.
Why is the corporate side of the economy important to consider in currency trading?
-The corporate side is important because it can indicate how corporates are managing their cash piles and foreign asset holdings, which can be a gauge for foreign exchange (FX) and a reflection of local trust in the currency.
What is the difference between emerging and developed currencies according to the speaker?
-Emerging currencies are often tied to the export of physical commodities, whereas developed currencies may not have a major export focus. Emerging economies rely more on commodity exports, which can make their currencies more susceptible to fluctuations in commodity prices.
How does the speaker use technical analysis in currency trading?
-The speaker pays attention to technical aspects such as hedging, gearing ratios, value at risk, and carry trade analysis, but emphasizes that their approach is not solely based on technical analysis.
What is the significance of the current account in the context of currency trading?
-The current account reflects a country's trade balance and is an indicator of the flow of money into and out of the country. A deficit in the current account can lead to a depreciation of the currency as money is being depleted.
Why is the speaker cautious about trading certain currencies based on corporate actions?
-The speaker is cautious because if corporates are accumulating large foreign currency holdings, it may indicate low local trust in the currency, which is not a good reason to become a buyer of that currency.
How does the speaker view the role of commodity prices in the performance of emerging market currencies?
-The speaker believes that as commodity prices rise, currencies of countries that are net importers of commodities often suffer, as the cost of imports increases and can deplete the current account, leading to a decrease in investor confidence.
Outlines
📈 Currency Trading Insights for Emerging Markets
The speaker returns to video-making to address frequent queries on currency trading, focusing on emerging market currencies and commodity currencies. They emphasize the importance of monitoring capital flight accounts, portfolio inflows and outflows, and foreign holdings to gauge market sentiment. The video discusses the significance of central bank activities, state fund flows, and credit analysis in currency trading. It also touches on corporate cash hoarding and burn rates, as well as hedging and gearing ratios, value at risk, and carry trade analysis. The speaker uses the Turkish Lira as an example to illustrate the impact of commodity prices on currencies, particularly for net importers, and how current account values can reflect investor confidence.
🌐 Distinguishing Emerging from Developed Economies in Currency Trading
This paragraph delves into the differences between trading currencies of emerging and developed economies, highlighting the reliance of smaller economies on physical goods exports versus service industries in developed nations. The speaker uses Turkey as a case study to explain how a country's dependence on commodity imports can affect its currency value, especially when commodity prices rise. They discuss the impact on the current account and how it can lead to capital depletion and investor skepticism. The video also covers the role of credit in trades, particularly those sensitive to interest rate fluctuations, and the importance of understanding market liquidity through treasury yields. The speaker contrasts commodity-rich nations with those that are not, pointing out the challenges in trading major pairs due to the misconception of market volume being speculative. They conclude by advocating for a focus on emerging economies, corporate insights, and investor sentiment for effective currency trading.
Mindmap
Keywords
💡Currency Trading
💡Emerging Market Currency Traders
💡Capital Flight Accounts
💡Portfolio Inflows and Outflows
💡Foreign Holdings
💡Central Banks
💡State Funds and Sovereign Wealth Funds
💡Commodity Currencies
💡Corporate Hoarding Rates and Burn Rates
💡Carry Trade Analysis
💡Current Account
💡Volatility
💡Liquid Currency Savings
💡Commodity Exporting Economies
Highlights
Introduction to a brief video on currency trading, addressing common questions and focusing on emerging market and commodity currency traders.
Importance of examining capital flight accounts for an overview of currency demand and supply dynamics.
Pairing capital flight accounts with portfolio inflows and outflows and foreign holdings for a comprehensive analysis.
The significance of gauging perceived sentiment by foreign investors in emerging market currencies.
Tracking central banks' activities such as selling or repo agreements for a clearer understanding of currency movements.
Incorporating credit and bond market analysis to gauge central bank policy and its impact on currency.
Monitoring corporate hoarding and burn rates for cash piles as a gauge for foreign exchange.
The impact of corporates accumulating large foreign currency holdings as an indicator of low local trust.
Avoiding currencies where corporates are increasing local capital expenditure, as it's difficult to support such currencies.
Technical analysis in currency trading, including hedging, gearing ratios, value at risk, and carry trade analysis.
Trading strategies around volatility and the importance of thematic-based predictions or case studies.
Analyzing the foreign debt relative to GDP and trading the spread between liquid currency savings.
The reliance of emerging economies on exporting physical goods rather than services or banking.
The vulnerability of net commodity importers to currency devaluation when commodity prices rise.
The role of current account values in assessing the health of a currency in relation to commodity prices.
Incorporating credit into trades, especially those sensitive to interest rate swings and market liquidity.
The difference between commodity-rich nations and those that are not, and its impact on currency trading.
The misconception about the volume in major currency pairs and the importance of understanding the nature of that volume.
Emphasis on understanding corporate side and investor sentiment, both residents and non-residents, in currency trading.
The significance of current account sizes and sovereign wealth funds in emerging economies.
Concluding remarks on the nature of currency trading, emphasizing the importance of macro and fundamental analysis over technical analysis.
Transcripts
okay everyone welcome to a video I
haven't made a video in a while so
thought I'd come on here and make a very
short brief video today's video is about
currency trading and I get a lot of
emails and questions asking me about
currency trading so I'm going to keep
this short and brief but I just want to
talk about a few topics in terms of what
to look for when you're currency
trading um because I can't I don't have
the time to answer all the questions so
I thought I'd make this video um so
we're primarily Emerging Market currency
Traders and commodity currency
Traders um so I'm going to talk about
what we look at in the currency markets
some of the catalysts and just briefly
explain them um and sort of the
difference between emerging versus
developed currencies and why you should
avoid the m
so when we're when we're actually
currency trading we we're pretty much
looking at only a few things in great
detail so we we often start by looking
at Capital flight accounts uh and this
is a sort of an overview of everything
in terms of demand for a currency supply
and demand and we we pair this with
portfolio inflows and outflows and
foreign Holdings so because we're so
active in emerging market currencies
we're looking at sentiment for
currencies we're gauging perceived
sentiment by Foreign investors I.E
non-residents just as much as the
locals and we're looking at these larger
thematic themes to gauge basically
interest in the marketplace so we can
see what is the interest for a certain
currency so when we track a lot of the
central banks whether they're selling or
there's repo agreements
um that'll give you a much clearer more
precise idea of what you need to be
doing and because we're tracking these
agreements we're looking at flows into
State funds Sovereign wealth funds these
emerging market economies run on
exporting some sort of
commodity um so that's really important
and we incorporate credit we look at the
bond market whether it's ozs or anything
like that because we're looking at a lot
of the time the non-residents we can use
that to gauge more on the policy Central
Bank policy and that will give us a much
clearer picture um you know when you're
looking at the the corporate side and we
look at things like um what we call
corporate hoarding rates and burn rates
for cash piles this is another gauge for
FX you know volume when you're looking
at volume across the board so when you
you're playing these thematic themes one
of the key themes that I often look at
and I use this as an overlay for my
currency trading is looking at the
corporates on the corporate side when
you have corporates that are being
pushed to accumulate large foreign asset
Holdings foreign currency Holdings it's
generally because there's low local
trust so just because a corporate is
stepping in on the bid to buy said
currency it's usually because they're
trying to catch a leak patch leak if you
will um and that's not that's often not
a reason to become a buyer or bid that
currency so you know when we look at
currencies where the the country or the
economy in question is is putting
corporate Capital to work but they're
increasing their local capex it's very
difficult to get behind a currency and
to become a
buyer uh so that's more on the macro
side and the fundamental side when we're
looking at some of the technicals you
know we we do pay attention to things
things like looking at hedging gearing
ratios um we look at Value at risk we
look at carry trade analysis there's a
lot of great carry trades um at the
minute going on the Japanese Yen um is a
particular interesting one and we trade
around
volatility um you know and we're either
building a headwind or a Tailwind
thermatic based um prediction or case
study as I like to call it
and when you're looking at things like
you know the foreign debt relative to
GDP you know you can trade the spread
one of the things you can do is trade
the spread between uh liquid currency
savings and compare those to various
Sovereign funds National wealth funds A
lot of these emerging economies they are
an exporter of a very specific type of
commodity whether it's crude natural gas
the grains Market anything like this
palm oil
um whereas in the developed world in the
developed currencies um we don't really
have a major export these smaller
emerging economies rely on exporting
physical Goods rather than um the
service industry or banking if you will
so because of that you know take for
example turkey the Turkish Lear is a
trade we've been trading short for a
number of years now turkey has
approximately enough
crude oil in its own country for 10% of
the local resident demand the other 90%
of their crude oil demand comes from
them having to import crude from the
likes of uh the US Saudi Etc so as you
can imagine if if the spot price of
these Commodities is going up um you're
going to be in trouble uh the likes of
turkey will suffer because that money
unless they're locking in forward
accounts on on uh contracts for crude
that money is coming out of the
country's what we call the current
account and it's being depleted as the
current account value drops investors
become more wary and skeptical of
investing a lot of the time you'll
notice a direct correlation between as
commodity prices go up if you are a net
importer of Commodities you import more
than you export your currency often
suffers and we can verify that by
looking at current account values so
that's really
important we incorporate credit into
some of our trades as well most of the
active plays especially you know ones
that are most volatile to rate swings
interest rate swings and things like
this looking at uh treasury yields you
can gauge Market liquidity it's a good
indicator of
liquidity um and that's why there's
there's many opportunities in the
commodity currency space you know all
always the big theme is the difference
between commodity Rich Nations and those
that aren't so when you look at the
major pairs like cable euro dollar
they're often trending TR trending in a
in a Range bound uh Market go sideways
so it's very difficult to make money and
one of the big misconceptions that
retail Traders have is that the markets
are you know a trillion dollar business
um in in these major pairs what they
they don't realize is that most of the
volume that goes through the tick volume
is simply corporates hedging cash
accounts and it's not speculative volume
so we can't jump on the back of that and
and make profits so we like emerging
economies and we like to look at um you
know understanding the corporate side
and the investor sentiment and that's on
the residents and the non-residents the
foreign investors side as well and we
look at current account sizes in
Sovereign wealth funds National wealth
funds A lot of those oil profits natural
gas profits they go into Sovereign
wealth funds so these excess profits can
get digested when you've got periods
where the commodity Market is suppressed
um it's not so much so just wanted to
make this very short video to talk about
sort of currency
trading um and that it's really not
based on technical analysis it's not
based on
understanding uh breakout methods and
the usual stuff so I hope this helps
some people this is a very short and
brief video um there will be more to
come
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