cneldred

Thanks, obviously with the banking crisis the last 2 years been mental. I was just trawling through the web this morning and decided to see what was going on here.

Chris

G77

Great to see you back Chris - have missed your insight!

Hobbess

Quick question, is there a reason why the GBP/CAD rate generally looks better earlier in the day for buying CAD. Is it something to do with when markets are open and the Canadian business day starting later?

Just something I noticed in my non-scientific observations on the few days when I've been about to transact.

oicur0t

Movements aren't direct, if a price moves in one direction, it will generally fall back to a certain level, even if it goes higher later in the day.

http://en.wikipedia.org/wiki/Fibonacci_retracement

The UK session starts at 8am and we have a big trading volume so market sentiment will kick in. If there's a lot of movement in one direction, you will get some movement back in the opposite direction (most of the time). Sometimes the price will go in totally the opposite direction too, who knows? Then add some dramatic economic news during the day and that will change everything.

Alan2005

Movements like this are either profit taking or just simple book keeping - typical close to the end of the trading day when traders start to clear down their positions (professional FX traders don't usually like to be long or short anything overnight).

I know they have their believers, but fibonacci retracement, elliot waves, channels, support levels etc I find to be nothing better than financial quackery. They work up until the point that they don't.

oicur0t

They're not the law, but they are a guide. It's a bit like predicting the weather. The more things that point in the same direction the more likely things are to happen. If it was easy, everyone would do it.

cneldred

Those of you that remember me know this is my bread and butter. I trade financial futures and options for a living, that includes currencies.

As i commented earlier the markets are very very thin at the moment, they have been for about 12 months, there appears to be a huge amount of cash on the sidelines waiting for a firm signal. That signal should come this fall, confirmation of a double dip or a recovery. Personally i think the odds of a double dip are higher than a recovery.

The retracements at certain times of the day could be numerous things, daily settlement times, profit taking, financial releases. Personally i have seen a million times something we call the 4pm shuffle, this is the UK settlement times, when a lot of the cash markets close, you see prices go through the trading screens that minutes earlier seemed so remote. The reason for this is the settlements prices are the prices which are used for mark-to-market margining.

If you research Societe Generale rogue trader Jerome Kerviel, this guy used numerous methods to hide his mistrades, the biggest was forcing a spike in his favour just prior to settlement. It would buy him an additional 24hrs for his trade to recover.

Chris

Alan2005

This isn't quite true of the FX spot/forward market.

cneldred

FX markets are only used to hedge exposure, therefore if other markets are low on volume and more importantly open interest (measure of open positions on exchange based products), then there is less volume going thro the FX futures and FX spot markets.

Check volumes year on year for Chicago Mercantile Exchange FX futures contracts if you don't believe me.

Like i said its my bread and butter.

Alan2005

I do happen to know quite a bit about the FX spot/forwards market and have access to trade volumes - though I haven't been looking at them in detail. The CME futures market is somewhat different to the regular FX market (where most trading is done over EBS or reuters) - given that it is margin traded.

Not trying to pick an argument - trading is down from 2007/8, but it's not exactly what I would call anaemic.

Have actually been on a trading floor at the CME - was quite interesting, even though pit traders are a dying breed. It wasn't that busy, but it still felt a bit like being in trading places.

(Just to be clear though - I know about how it works but I'm not an FX trader by any means - day trading FX, especially on margin, is not something I would do. I know enough about it to know that it would be a bad idea for me to try it)

cneldred

Alan i was a pit trader on LIFFE, the UK version of CME. Unfortunately that place went computerized around 2000. You fail to see that every market has an underlying instrument, the cash market. And the CME FX futures market is a big part of that.

My own trading volume is currently less than 10% of pre 2007/08 levels.

The US government and FED are trying to push for more market regulations, which i believe will see OTC contracts traded on exchanges like CME, with a central clearing house. The clearing house is the answer to all the problems, they become the counterparty to every trade. Rather than me buying from you, you sold to clearing house and i brought from clearing house. That would in a large part take away the lack of trust in counterparties which played a huge part in liquidity plunge during last 2 years.

Alan2005

I don't fail to see that. The FX SPOT market is huge and the CME is not a particularly big player in it. I do remember reading about a joint venture between them and Reuters a few years that allowed the CME to tap into the OTC market, but I don't think it worked out. Most FX SPOT is traded on the inter-bank market through EBS or Reuters as I said a few posts above.

I agree that forcing all trading onto exchanges would be a good thing all round (credit relationships, transparency, all the reasons you list), but I just don't see this happening. The new regulatory stuff for vanilla FX is most likely going to be of the reporting and auditing variety.

I'm also not sure how it would solve the issue of trust in the money markets or for things like IRS or the dreaded MBS which is where the real problems lies. Would the clearing house be responsible for the interest payments as well?

cneldred

clearing houses pay interest already on any funds on deposit.

kamikaze

Is this called a "Pissing Contest" ?
Its like war of the giants, Sir alan & Donald trump going at it

Alan2005

Of course it's a pissing contest. It's the internet.

This said, I am actually interested in what chris has to say and am hoping to learn something. I'm genuinely not trying to be argumentative.