Wayne McDonell's Summer Recommendations
Thursday, July 29, 2010
, Posted by Usman Ali Minhas at 12:42 PM
1. What Are Your Recommendations On How To Trade Forex This Summer? What Should Be The Trader's Tasks In August? What Should We Prepare Before Leaving For Holidays?
In America, many traders take their summer vacation in July. They stop placing trades in the third week of June... on Quadruple Witching Friday. They spend the next week preparing end of quarter statements for their investors and partners. Once complete, they head to the Hamptons for the 4th of July. This year, this left the DOW vulnerable, as there were no long-term investors to buy stocks. The only players in the market were "traders" who saw it as an opportunity to short it down to support (9,500) and buy it back to resistance (10,500). If an "investor" would return from holidays today and find the DOW at 10,500 and he/she would think "nothing happened". However, traders moved the market 2,000 points.I've been to Zurich during August. Its a ghost town. Entire buildings are dark. No one is in the city during August. Therefore, I'd expect trading throughout Europe to reflect this. I think trading will be calm and that it generally follows the US indexes, but with less volatility. I think we'll see a drop in manufacturing and a rise in consumer spending, as well as soft support for EUR as the English flock to the south of France to get sun on their faces.
2. What Book Do You Recommend Us To Read This Summer?
The majority of traders I've met are great at technicals, but week on fundamentals. Therefore I would suggest a serious trader should read "The Secrets of Economic Indicators" by Bernard Baumohl and "Essays on The Great Depression" by Ben Bernanke... yes, THAT Ben Bernanke.3. What Should We Do When Returning To The Markets In September And What Is Your Forecast For The Major Currencies In Q4?
Preparation needs to be made for a return from holiday, not before the holiday. Traders need to anticipate what the "investors" intend to do when they return. In today's world, investors are still sitting on cash. Mutual funds don't get paid to do this. They are not banks. If they don't put the money to work, people will ask for the money back. Why pay a manager 1% of your net-worth for him/her to do nothing? My guess is that fund managers will get out of cash and bonds and start looking for deals at the end of summer. If you agree with this, then the opportunities will likely start to appear in mid-August as the early birds start pecking for worms.The secret is to plan a head. Currency Trading is a Global Macro-Economic business. Currencies don't change the markets per se. Currency valuations change based on global money flow. If money continues to flow into Bond Funds, the USD, CHF, and JPY will continue to be strong. If money flows change direction and it pushes up equities in Shanghai, Tokyo, Berlin, London and New York, then the opposite will be true. If so, the commodity currencies, such as CAD and AUD, will benefit the most. Open up your 4H or 1D charts and setup the trades now.
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Wayne McDonell is the Chief Currency Coach at FxBootcamp and a professional FOREX trader with an Entrepreneurial spirit and a business leader's mind. He is the author of "The FX Bootcamp Guide to Strategic and Tactical Forex Trading". [More about Wayne McDonell]
