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Mark Wrote:
I have some questions for the group. Currently I have been trading
currencies on the IMM. I have been thinking about moving over to Forex.
Can some one explain the advantages and disadvantages of both. What
mechanics will change??
I hold a position anywhere between 1min to a couple of weeks at most
usually within the 1 day to 2 day range.
I know spot will expire within 2 days -- so how do I adjust to that. Or
should I just trade the forward markets.??
If some members can give me some insight that would be great.
Thanks,
Mark
Mark:
First of all, spot markets are totally different than the forwards
markets. In forwards markets, the currencies are classified into months
and the quotes they use are in interest rates units. For instance, when
a broker goes 6's dollar is 1/32 - 1/16 and 3's Yen is 3/32 - 1/8. This
means the greenbag is trading at 1/32 (bid) - 1/16 (offer) six months
from now. The yen is trading at 3/32 - 1/8 three months from now.
These people are speculating on interest rates differentials of a given
period. Spot markets quote the markets in dollar (US) terms with the
exceptions of British Pound, Aussie and the Kiwi which is the other way
around. Secondly, spot or cash markets have no expiration date. It
just goes on to the future and trade almost 24-hours from Monday to
Friday including ANY regional holidays around the world. These markets
are ONLY closed on Saturdays and Sundays. Normal official opening of
the interbank markets start in NewZealand (Wellington), Australia,
Japan, Singapore, Hong Kong, London and the US in that sequence. With US
being the ending point of a trading day and the closing prices of the US
spot currency markets are regarded as the most crucial to chartings.
So, you wouldn't have to worry about things like charts adjustments or
contracts need to roll forwards. Practically, you can in fact hold the
positions forever if you so desire.
I gather you're mostly an intraday trader much akin to those spot bank
dealers. My suggestion is you might as well trade the spot markets
during US hours. Most of the actions happen during the US session
anyway. It'll be a different story if you're a positions trader. At
times, you just have to stay up, like what I'm doing now, to prepare for
market entries. Finally, you might want to consider profit/risk ratios
when you're considering shorting the Aus/Usd, Nzl/Usd and the Usd/Yen.
Shorting these markets requires interest payments on your part to
maintain the positions. Hope this will help. Regards.
Have a good one
Jeff Harteam
Hong Kong
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