Monday, February 19, 2007

What goes up, must come down.

It seems that the Icelandic Krona has led all currency gains this year, up 5% against the dollar and 6% against the Euro according to Bloomberg news. This is not surprising to me. It is almost like the "Dogs of the Dow" theory. Where you buy the worst preforming, highest yielding stocks in the Dow from the previous year. Does it continue throughout the year, I can't tell you for sure, but remember it doesn't even have to appreciate to make this trade good. Staying still (and collecting the 15%yield) isn't so bad either. The appreciation is a bonus as far as I am concerned. Keep an eye on Turkey (Try)also as a similar story is going on there. A co-worker calls me a "Yield monkey". That may very well be true, and it may all come crashing down around me, but one of my bigger themes to the market's is that interest rates globally will converge. This as "Emerging Markets" become developed markets. If I am correct then when you see the turn (i.e. Brazil 18-24months ago)you jump in with one foot and after the trend is established drag the other one in! Remember a key element to this trade is time frame. You will not be correct from the beginning and there will be many (I repeat many!) ups and downs. So make sure that you keep your trade small enough to withstand the swings. A trade is no good if you get stopped out before it goes your way.

These are the FX Trading Ideas and Theories for today.

Good Luck and Good Forex Trading

FXTRADINGIDEAS@AOL.COM

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2 Comments:

Anonymous Caravaggio said...

Yield monkey, I like it! That's a hell of a cushion on the krona in case of depreciation. Something deep-seated inside me doesn't allow me to enter in to these types of trades, but the numbers sure are attractive.

There is another newish, well-written blog that also takes a look at the carry trade: http://globaleconomydoesmatter.blogspot.com/index.html

9:04 AM  
Blogger Caravaggio said...

Yield monkey, I like it! That's a hell of a cushion on the krona in case of depreciation. Something deep-seated inside me doesn't allow me to enter in to these types of trades, but the numbers sure are attractive.

There is another newish, well-written blog that also takes a look at the carry trade: http://globaleconomydoesmatter.blogspot.com/index.html

9:04 AM  

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