learn forex first

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. Daily failure of scores of small business. It was good time to visit South Korea, due to low prices, but very difficult period for residents.

The country has rebounded nicely since then and became one of Asia’s most dynamic economies. KRW strengthen considerably reaching level 900 against USD in 2007. The stock market has recorded double digit gains in four of the last five years, gaining 32% in last year alone. Korean companies like Samsung Electronics Co, and Hyundai Motors Co, have established themselves as some of the world’s leading corporations.

Things have changed in 2008. Challenges like high oil prices, inflation, external debt and account deficit have shaken investors confidence. While many countries have seen outflow of funds into the dollar, this process became especially painful in South Korea. The Won has become the Asia’s worst performing currency, loosing 20% to date. Stock market was no better, falling 25%, with farther sell off of equities expected.

These developments created widely spread comparisons to situation from 1997 and were quick to be picked by the press. International Monetary Fund disagrees with this assessment and expressed confidence by saying that South Korea is a mature and resilient economy with country’s fundamentals much stronger than a decade ago. Korean financial authorities, however, felt obligated to act by intervention on Wons behalf in the open market. This seemed to stop the bleeding for now.

What can be expected next? In all reality, 1997 type sell off is extremely unlikely. As South Korean economy is cooling down together with the rest of the world, Seoul might not be able to stop bleeding of the stock market but there is one thing they can do- keep intervening on behalf of its currency. Unlike before, there are huge foreign reserves, about 250 billion dollars worth of, and they can be used to support Won.

Very likely scenario, as of this writing, is continued fall of Korean equities, in tune with broader stock declines. The Won should also keep dropping, but in much more measured and steady pace. Central Bank has not mentioned what the comfortable level for USD-KRW is, but as we noticed over last few years, major trends are very powerful and can go through any “line in the sand’ drawn by anybody.

Current rate is around 1150. Even with expected interventions, Won can easily weaken to 1300 and maybe 1400, but far short of the previous low of 1600. Also, one shouldn’t look for a fast move, but rather steady depreciation, lasting a year or two. This is not a situation for active traders, but for those who prefer longer term positions current development might present good opportunity for farther selling of KRW.

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

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. In fact, authorities launched an investigation into, what was seen as, hedge fund attack.

The nations three banks, Glitnir, Landsbanki and Kaupthing Bank, found it increasingly difficult to refinance debt over last two months as credit crunch shook the world. One by one banks have become insolvent and had to taken over by the Finance Ministry. Krona plummeted and the country became unable to meet banks obligation, leaving behind shocked investors and depositors. That include hundreds of thousands of people who have accounts in Icelandic banks abroad operations.

During the week of October the 10th, as financial markets were in turmoil world wide, ISK came under even more strain. Losses reached 30-40% against major currencies in just few days. The latest publicly available quote was EUR-ISK at 304, which is completely of the chart. By Friday even central banks stopped making market for Krona and trading has stopped. For all practical purposes this leaves Iceland bankrupt as a nation, first sovereign state to fall victim to this crisis.

In perhaps the most telling example of how far the troubles progressed, United Kingdom threatened legal action against Iceland as a country. The aim of such step is to recover money on UK’s citizens, which is stranded in failed banks. Great Britain could invoke anti terrorism laws in an effort to regain the funds. Such move would leave the small nation isolated in more than geographical sense.

Thankfully, probability of such drastic, panic driven measures is low. It is expected that the government of Iceland will ask International Monetary Fund for assistance. Organization has the funds to help, especially since, in global terms, the sums involved are manageable. In order to qualify for IMS intervention, country would have to accept some harsh terms and conditions. One of them might be very difficult to come to terms with, the future of Krona.

Some people argue that in order to avoid future problems of this magnitude, Iceland should apply for inclusion into European Union and adopt Euro. Since most of laws and regulations of the island nation are already compatible with EU, this would be a relatively painless process. Another option is to peg Krona to Euro. In that case, Iceland would also hand over control of monetary policy, including the setting of interest rates, to the European Central Bank.

Both of these options will be a tough choice for independent minded Iceland. Both of them would also effectively put an end to a freely floating currency. It seems, as of this writing, that Krona’s days are numbered. One less choice for Forex traders, even though little known and understood.

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

Value investing provides the investor a wide variety of reasons to follow it as a general investing philosophy. In this article, I’m going to explore a potential advantage of value investing that is not always discussed: the heightened possibility of another company acquiring, or buying out, the stock of a value based investment. Then I’ll examine several Magic Formula stocks that have been bought out this year, and would have provided investors in those companies a healthy return.

As Joel Greenblatt points out in The Little Book that Beats the Market, there are plenty of factors that can drive the stock of a cheaply valued company up. For one, it reaches the radar screen of value based investors once it gets low enough. Second, the company itself may find it’s stock an attractive investment and put capital to work buying back shares and lowering the share count, which leads to price appreciation because each share earns a larger portion of profits. Third, and the point here, is that a competitor or private equity group could find the entire company attractive at the market price and decide to purchase it outright.

The best part about buyouts is that they are nearly always at a premium to the current market price of the company. This makes sense of course… investors would be unwilling to sell their shares unless they could realize an acceptable return on their investment. Often, the market value premium is significant. In 2006, the average premium was 29%, and in some past years that figure has been as high as 50%.

Cheap stocks are prime candidates for acquisition, and good companies at cheap prices are even better buyout bait. These are just the companies that the Magic Formula screen was designed to find. Sure enough, even in this weak environment for buyouts, several Magic Formula stocks have been acquired in 2008 (premium is against price while stock was on MFI screen):

-Electronic Data Systems (EDS) bought by Hewlett-Packard (HPQ) at a 57% premium.
-FTD Group (FTD) bought by United Online (UNTD) at a 16.5% premium.
-Getty Images (GYI) bought by Hellman & Friedman LLC at a 36% premium.
-HireRight (HIRE) bought by U.S. Investigations Services LLC at a 120% premium.

Buyouts are a quick strike way to make a big profit, and they are most common amongst quality value stocks. Just another reason to consider making the Magic Formula Investing strategy your investing strategy.

Steven Alexander is the founder and voice behind MagicDiligence (http://www.magicdiligence.com), a website dedicated to researching stocks appearing in Joel Greenblatt’s Magic Formula Investing screen. Take a FREE 30 day Trial and see all of my Magic Formula Top Buy stock picks.

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. By some accounts, even Swedish Krone has reached comparable trading volume about a year ago.

That is when Franc started to regain some of its past luster as a safe heaven during times of uncertainty and financial turmoil. Swiss central bank started to bust interest rates and CHF staged a very impressive rally, lasting better part of a year. Combined with bearish news coming from Great Brittan, GBP-CHF has seen the most severe sell off amongst CHF crosses.

Between July 2007 and March 2008 this pair fell from 2.5000 to 1.9375. That is a staggering 5600+ pips, a huge move by any standard. In fact, it has been first time in over 10 years, and only the second time ever, that this cross fell under 2.0000, a very important psychological level. As it is often the case in such furious moves, the price rebounded sharply from the March low to about 2.0960 and has since settled into a sideways movement.

This “settled price action” is a relative term and true only in light of past few month. Comparing to other currency pairs, daily moves are still large. Average True Range still shows a reading well over 200, and 300+ pips days are the norm. Just last Thursday daily range was over 420 pips. Certainly this kind of volatility demands respect and creates trading opportunities.

Extreme price fluctuations might make it unsuitable for some traders. Also, trading GBP-CHF on short time frames, might be an expensive proposition. The spread, cost of trading, is still relatively wide. Even though over last few years spreads narrowed down, they are still minimum of 6 pips, with 8-10 pips being the norm. In frequent trading, even the larger profit potential might not offset these costs.

Trading longer time frames might be a better proposition for most traders. The recent low of 1.9375 seems to be a major low, which is likely hold for the the rest of this year. As a matter of fact, patterns on long term charts, weekly and monthly, indicate this to be a multi year low. Long term up trend is expected for the rest of the year with a target of 2.1600-2.1800 over next few months. After that next target would be 2.3000 or perhaps even 2.3500, maybe a year later.

This kind of long term expectations should be reviewed and adjusted every few months. As of this writing, the price is around 2.0470, providing us with a substantial long term trading opportunity. Due to large volatility of this pair, one shouldn’t use high leverage as there are almost sure to be severe pullbacks over time. While not suitable for everybody, GBP-CHF is certainly an exciting cross, worth of a closer look.

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

The reason behind the increase of interest and popularity of forex trading is the advent of automated systems. This is no longer the domain of financial institutions; it is now of interest to small and medium speculators as well. This market deals with trading the currency of one country for that of another country. This market works round the clock handling transactions worth trillions of dollars. This makes it one of the most dynamic financial markets of the world.

Anyone with a forex brokerage account and some experience in trading can now operate forex trading thanks to the internet, advanced networking and communication technologies. However to remain on top, it requires constant monitoring as global markets are open round the clock. What do these automated systems help you to do? Well with these systems you can choose a currency, its asking and selling price in advance. Your buy and sell orders can get instantly executed so all you need is your seed money and a broker to help you.

The automatic forex trading systems can help you reap the profits of the market despite the fact that you are not a professional trader. Automated trading through managed accounts, the program itself takes the responsibility of trading for you. Therefore automated systems help you save time as you do not handle the trading yourself. A reliable trading platform would let you manage a number of accounts at the same time which is impossible in manual trading. When you want to trade in multiple markets with multiple systems, these programs allow you to do this.

You can use automatic forex trading systems any time you like and it does not require your presence. It is impossible to miss any profitable trade, even when you are nowhere close to your computer. Taking advantage of multi-prong forex strategies and various systems therefore becomes easy. Since every system is activated according to specific trade movements, you can plan your investments and direct your risk accordingly.

There is no place for human emotions which adversely affect decisions; something that is not possible with these automatic forex trading systems. It enables you to manage and monitor many currency pairs and trade them as you deem fit.

Even when you start using an automated forex trading system, you have to allow time to learn about trading of technical analysis and market indicators, otherwise, you can not make consistent profits. No automated system can guarantee you regular profit because the market is controlled by many variables. The automated forex trading system allows you the flexibility of customizing it to suit you.

Brandon has been trading in the Forex markets for over 4 years now and currently uses forex trading software with little human intervention. If you would like to see how to properly set up a system to put your income on autopilot, click here

The reason behind the increase of interest and popularity of forex trading is the advent of automated systems. This is no longer the domain of financial institutions; it is now of interest to small and medium speculators as well. This market deals with trading the currency of one country for that of another country. This market works round the clock handling transactions worth trillions of dollars. This makes it one of the most dynamic financial markets of the world.

Anyone with a forex brokerage account and some experience in trading can now operate forex trading thanks to the internet, advanced networking and communication technologies. However to remain on top, it requires constant monitoring as global markets are open round the clock. What do these automated systems help you to do? Well with these systems you can choose a currency, its asking and selling price in advance. Your buy and sell orders can get instantly executed so all you need is your seed money and a broker to help you.

The automatic forex trading systems can help you reap the profits of the market despite the fact that you are not a professional trader. Automated trading through managed accounts, the program itself takes the responsibility of trading for you. Therefore automated systems help you save time as you do not handle the trading yourself. A reliable trading platform would let you manage a number of accounts at the same time which is impossible in manual trading. When you want to trade in multiple markets with multiple systems, these programs allow you to do this.

You can use automatic forex trading systems any time you like and it does not require your presence. It is impossible to miss any profitable trade, even when you are nowhere close to your computer. Taking advantage of multi-prong forex strategies and various systems therefore becomes easy. Since every system is activated according to specific trade movements, you can plan your investments and direct your risk accordingly.

There is no place for human emotions which adversely affect decisions; something that is not possible with these automatic forex trading systems. It enables you to manage and monitor many currency pairs and trade them as you deem fit.

Even when you start using an automated forex trading system, you have to allow time to learn about trading of technical analysis and market indicators, otherwise, you can not make consistent profits. No automated system can guarantee you regular profit because the market is controlled by many variables. The automated forex trading system allows you the flexibility of customizing it to suit you.

Brandon has been trading in the Forex markets for over 4 years now and currently uses forex trading software with little human intervention. If you would like to see how to properly set up a system to put your income on autopilot, click here