ASIA PACIFIC’S FIRST FOREX MAGAZINE

TM

www.forexjournal.com Volume 2, Issue 1

Currency Outlook 2009

Why Choosing A
Dollar-Yen Forex Broker Is So
A New Confusing
Historic
Low In
2009
Gamma So You
Trading
Options Think
On
Forex You
Part II
Can
Trade
ISSN 1793-8457

MICA(P) 274/04/2008

How To Trade A Declaration Of

Bahrain - BD 2.0
Hong Kong - HK$68
Kuwait - KD 2.0
Oman - RD 2.0
Qatar - QR 20

A News Breakout Independence

Saudi Arabia - SR 20
Singapore - S$11.00
UAE - AED 20
 CONTENTS

8 FROM THE EDITOR

10 LETTERS TO FOREX JOURNAL
TECHNICAL ANALYSIS
10 HOW TO TRADE A NEWS BREAKOUT
Chris Capre discusses a breakout strategy to employ when
trying to trade Forex news events.

TM
PSYCHOLOGY
14 SO, YOU THINK YOU CAN TRADE
Abdul Khan discusses things that successful traders do
to be successful in their trading. He also looks at things
that unsuccessful traders do that can cause them to be
unsuccessful.

CURRENCY TRADING
18 WHY CHOOSING A FOREX BROKER IS SO CONFUSING
David Waring leads a discussion answering most of the many
questions that are asked when selecting a Forex broker and
trading platform. This is a ‘must read’ for anyone trying to
separate fact from fiction and find the right place to trade
foreign exchange markets.

24 A DECLARATION OF INDEPENDENCE
Traders are constantly bombarded with tips and suggestions
in a very sterilized format with the best looking chart used to
convey the strategies. Paul Day opens a discussion on how to
formulate ideas and trading strategies that suit your desired
trading frequency and to employ a stringent risk management
regime.

 JANUARY 2009
 CONTENTS

OPTIONS TRADING
28 GAMMA TRADING OPTIONS ON FOREX – PART II:
THE ART, SCIENCE, AND NUANCES OF DYNAMICALLY
ADJUSTING EXPOSURE TO THE MARKET.
John Netto continues his series of articles on option trading
using a gamma strategy. In this article, he discusses real world
trades in the Japanese yen and gold futures using gamma
strategies to compartmentalize risk and yield smoother returns.

TM
MARKET OBSERVATIONS
36 2009 CURRENCY OUTLOOK
Ed Ponsi provides an outlook for the major currencies as we
move into 2009.

42 THE AUSSIE & POUND IN 2008

Peter Pontikis looks back at sharp rally in the value of the U.S.
dollar in the second half of 2008 and its impact on the values
of other major currencies and their cross relationships.

48 DOLLAR/YEN … A NEW HISTORIC LOW IN 2009

Ian Copsey takes a long-term look from a Fibonacci perspective
at the USD/JYP currency pair.

52 THE OUTLOOK FOR MAJOR CURRENCIES IN 2009

Our regular contributor, Dar Wong, provides his monthly
commentary and outlook for the major currency markets as we
trade into 2009.

60 UPCOMING EVENTS
61 ECONOMIC EVENTS CALENDAR
62 BROKERAGE FIRMS LISTING
 JANUARY 2009

To Research and Educate
Publisher & Managing Editor
Dickson Yap dickson@forexjournal.com
Associate Editor
Roger Reimer roger@forexjournal.com
Contributors
Abdul Khan Chris Capre
Dar Wong David Waring
Ed Ponsi Ian Copsey
John Netto Paul Day
Peter Pontikis
Graphic Designer
Ng Boon Hang
Advertising sales
Dennis Yap dennis@forexjournal.com
SINGAPORE
Address : One Raffles Place
OUB Centre #18-01
Singapore 048616
Tel : (65) 6312 8091
Fax : (65) 6312 8091
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Circulation : circ@forexjournal.com
Copyright@2008 DPR International Pte Ltd. All rights reserved. No
part of this publication may be reproduced, stored in a retrieval system or
transmitted, in any form or by any means, electronic, mechanical, photo-
copying, recording, or otherwise, without the prior written permission of
the copyright holder.
This publication is designed to provide accurate and authoritative infor-
mation in regard to the subject matter covered. It is sold with the under-
standing that the authors and the publisher are not engaged in rendering
legal, accounting, or other professional service. If legal advice or other
expert assistance is required, the services of a competent professional
person should be sought.
In commodity trading, as in stock, and mutual fund trading, there can be
no assurance of profit. Losses can and do occur. As with any investment,
you should carefully consider your suitability to trade and your ability to
bear the financial risk of losing your entire investment. It should not be as-
sured that the methods, techniques, or indicators presented in this maga-
zine will be profitable or that they will not result in losses. Past results
are not necessarily indicative of future results. Examples in this magazine
are for educational purposes only. This is not a solicitation for any order
to buy and sell.
The information contained herein has been obtained from sources be-
lieved to be reliable, but cannot be guaranteed as to accuracy of com-
pleteness, and is subject to change without notice. The risk of using any
trading method rests with the user.
 JANUARY 2009
FROM THE EDITOR
“The quality of a person’s life is in direct proportion to their commitment to excellence,
regardless of their chosen field of endeavor.”
Vince Lombardi
H appy New Year and welcome to the January 2009 issue of
The Forex Journal!
This is the time of year that we make holiday resolutions to
change our lives, our futures, or our ways of doing things. If you have
a list of New Year Resolutions, please reread them and then reread our
quote for this month and take the actions necessary to make your
resolutions a reality.
If you want to become more successful in your trading, consider the
methods that you use and how you apply those methods to the
markets. Does your trading approach fit your personality? Does it fit the amount of capital
TM
you have available to work with? Does your trading fit the market or markets that you
are most interested in following? These are often difficult questions to honestly answer.
Another thing to consider is that this short list is by no means complete.
Time-tested trading rules that are simple often provide the most consistent profits. To
enjoy a successful long-term trading career, it is vitally important to have a trading business
plan and a systematic trading methodology that incorporates trade entry, trade exit, risk
control and money management into a cohesive strategy.
At The Forex Journal, it is our goal to deliver a balance of educational material to traders of
all types and experience levels. I am sure that you will find each article informative and
educational. In this issue:
Our regular contributor, Dar Wong shares his views and commentary on the major currency
pairs as we trade into a New Year.
Abdul Khan discusses things that successful traders do to be successful in their trading. He
also looks at things that unsuccessful traders do that can cause them to be unsuccessful.
Chris Capre discusses a breakout strategy to employ when trying to trade Forex news
events.
Ed Ponsi looks at currency pair prospects in 2009.
David Waring leads a discussion answering most of the many questions that are asked
when selecting a Forex broker and trading platform.
Peter Pontikis looks back at sharp rally in the value of the U.S. dollar in the second half of
2008 and its impact on the values of other major currencies and their cross relationships.
Ian Copsey takes a long-term look from a Fibonacci perspective at the USD/JYP currency
pair.
John Netto continues his series of articles on option trading using a gamma strategy.
In this article, he discusses real world trades in the Japanese yen and gold futures using
gamma strategies.
Traders are constantly bombarded with tips and suggestions in a very sterilized format
with the best looking chart used to convey the strategies. Paul Day opens a discussion on
how to formulate ideas and trading strategies that suit you.
Our highly qualified contributors provide valuable assistance by enabling us to provide
you a broad range of material. We are always very grateful for their contributions. Each
new article presents an opportunity to learn new lessons about the markets and the tools
that are used to trade them.
I hope The Forex Journal becomes a vital part of your trading education and your personal
development. I wish you well in your personal life and in your trading journey.
Here’s to Prosperous Trading!
Roger Reimer
Associate Editor
LETTERS TO THE EDITOR
The editors of The Forex Journal™ magazine would like to hear from you, our readers. Tell us what you think about the
articles we publish. Tell us which people or companies you’d like to see us write about more—or less. Praise us, criticize
us, and ask us questions. We regularly publish letters from our readers in the print version of our magazine, reserving
the right to edit them for length and clarity. Please include your full name, address and telephone number. Thank you.
Dickson Yap (Managing Editor, The Forex Journal)
 TECHNICAL ANALYSIS

CHRIS CAPRE

How to Trade a

TM
News Breakout

10 JANUARY 2009
 Chris Capre discusses
a breakout strategy
to employ when
trying to trade Forex
news events.

TM
C
onsidering the effect of news announcements on
the markets, traders often gravitate toward news
events hoping to capture a portion of the market
response. In Forex trading, this phenomenon has drawn
speculators interest to trading news events like vultures to
an about-to-be-corpse lying in a field. It is important to
have specific methods when trading such events because of
volatility and the unique order flow surrounding them. If
a trader is going to trade a news event in the Forex markets,
we recommend that they pick the most significant of all
economic events. This list would include

1) Announcements from Central Banks such as the

Federal Open Market Committee, European
Central Bank, Bank of England, Bank of China
etc.

2) NFP

3) Fed Minutes Meeting

Other economic events move the market, but they have

significantly less impact and probability to move the mar-
kets in such a stark fashion. So, we limit ourselves to the
kings of the economic jungle.

The methods best employed during such events are a ‘fade’

strategy or ‘breakout’ strategy. For the purposes of this ar-
ticle, we will focus on the breakout method, which is de-
signed to give us an opportunity to take advantage of the
announcement pushing the pair heavily in one direction
due to the market response from the economic release.

Figure 1.1 shows the 5-minute EUR/USD chart. We al-

ways want to have the 5-minute chart up for this strat-

JANUARY 2009 11
 TECHNICAL ANALYSIS

TM
Figure 1.1 – EUR/USD

egy. We will also want two sets of Bollinger Bands on the
chart.
1) a 2.5 standard deviation Bollinger band
2) 2) a 1 standard deviation Bollinger band
As you can see, price activity contracts leading up to the
news announcement and surges when the news announce-
ment is made. The candle immediately moves sharply in
one direction and makes lower lows for the next three can-
dles.
After 15-minutes, if the move has made lower lows with
each 5-minute candle with the second candle closing out-
side of the wick of the first candle, we will trade in the
direction of the move or breakout. The first horizontal
line shows our market entry at 1.5522. Our first target

Figure 1.2 – AUD/USD

12 JANUARY 2009

Figure 1.3 : USD/JPY
is always 30 pips and our initial stop is set at 30 pips. We
will enter the position with two lots. After hitting the first
target, the stop is moved to breakeven. From here, the Bol-
linger bands come into effect.
We will use the space between the 1 and 2.5 standard devi-
ation Bollinger bands to act as a pocket or level of exclusion
for order flow. If the Bollinger bands are still pushing in
the direction of the breakout and price is contained within
them, we will stay short. The position exit will be directed
by the price action relating to the Bollinger band pocket
and either of these two conditions:
1) any candle has 60% of the body between the pair
of 1 standard deviation Bollinger bands (Purple
lines) or
2) the entire candle exists inside or in between both
1 standard deviation Bollinger bands
Then, the trade is exited. In this case, 90 pips were locked
in on the second lot with 30 pips on the first lot for a total
of 120 pips profit within one hour.
Figure 1.2 shows this method with the AUD/USD on the
5-minute chart. Price is well contained leading up to the
announcement. Then, the candle breaks down with the
second candle closing outside the first candle’s wick, and
the third candle makes a lower low. The entry is on the
open of the next candle at .9547. Our initial 30-pip tar-
TM
get is achieved quickly at .9517. The second target comes
when the price action spills out into the space between the
1 standard deviation Bollinger bands locking in another 26
pips. The profit total for this trade was 56 pips in less than
an hour.
Chart 1.3 shows our last example using USD/JPY. As you
can see, the pair climbs very quickly with the second candle
closing outside the first candle’s wick with the third candle
making a higher high. The entry is at 105.02. The profit
of 30 pips is taken on the first lot in 10-minutes and then
the move fades about 45minutes later causing us to lock in
another 32 pips for a 62-pip gain in one hour.
In conclusion, wait for three 5-minute candles to close and
make sure the second candle closes outside the low/high
of the first candle depending in the direction of the break-
out. Make sure to move the stop to breakeven after the first
target is hit and watch for the move outside of the main
pocket and into the space between the 1 standard deviation
Bollinger bands.
Chris Capre is the current Fund Manager for White Knight
Investments. He specializes in the technical aspects of trading,
particularly using Ichimoku, momentum, Bollinger bands, pivot
and price action models to trade the markets. He is considered to
be at the cutting edge of Technical Analysis and is well regarded for
his Ichimoku analysis, along with building trading systems and risk
reduction in trading applications.
JANUARY 2009 13
 PSYCHOLOGY

So, You Think

You Can Trade

TM

14 JANUARY 2009
 Abdul Khan discusses things that successful
traders do to be successful in their trading. He
also looks at things that unsuccessful traders do
that can cause them to be unsuccessful.
Introduction
When you are at a dinner party or having drinks with
friends, how do you answer when they ask what you do?
Is your answer?
a) I’m a day trader
b) I trade the markets
c) I’m self-employed
If your answer to this question was option a) or b), take
a good hard look at yourself. If your answer was c), well
done, you are on your way to becoming a trader. Good
traders do not broadcast what they do in terms of occupa-
tion, and also in terms of trading approach. Good traders
seek advice, look to learn from other good traders, avoid
placing large improbable bets and always respect the mar-
ket.
Good traders see trading as a business – they are looking to
get advice from those that have been in the business longer
than they have been. They are making sure they have ad-
equate reserve working capital, they can admit when they
have made mistakes, and they know that the market has a
big enough paddle to spank anyone.
Over the years, I have come across hundreds of individuals
who have called themselves traders. Most I have seen fail,
but the ones that were successful had some common char-
acteristics. If I could bottle those characteristics, I would
have myself a very special perfume! In the following pag-
es, I have mentioned some of those characteristics for our
readers to consider.
‘You don’t get somethin’ for nothin’!’
If you have been trading for less than 5 years, make a New
Year’s resolution to find an advisor in 2009. Otherwise, I
doubt that you will make it to the 5-year mark of your trad-
TM
ing career. These days, brokerage has become so competi-
tive that the gap between full-service and nil-advice broker-
ing has become very blurry. For this reason, the advantages
of using an experienced broker far outweigh the negatives.
For so long, the biggest argument against using an advisory
broker was “Why should I pay them?” or “Look at how
much I can save by executing my own trades?” And the
corollary should also be highlighted here – do not forget to
take into account the hidden charges you are paying with
a nil-commission broker. There is no such thing as a free
lunch and the last time I looked, the likes of CMC were
not registered as non-profit organizations.
Of course, the hard part is to find a good advisor. You
need to find someone who will not force you into trades, or
who will not try to get you to trade for the sake of hitting
his commission target for the month. You need someone
who cares about your money almost as much as you do,
someone who believes in money management rather than
averaging down into a losing position. A good advisor will
listen to your trading ideas and work as a sounding board
for you. He should ask you about your risk/reward ratio,
profit targets, the reasoning behind your ideas and trading
methodology.
He should not be an advisor who is keen to get the account
open, but leaves you to sink or swim once you have been
setup with a log in. As a client, you should be able to fol-
low his recommendations easily, and should feel comfort-
able in asking him questions about a trade with the view to
learning from the advisor, as opposed to second-guessing.
When you find an advisor, talk to him about your objec-
tives, and discuss what I call your “pain threshold” – the
point at which you have lost so much money that you both
need to re-evaluate the approach being taken. This thresh-
old should be a percentage, such as 25%, 40%, or even
50%.
An old argument used against full-service advice is that on-
line trading allows trades to be executed instantly, as op-
posed to waiting on the phone for the order to be placed.
JANUARY 2009 15
 PSYCHOLOGY
This argument no longer holds water. Today, most full-
service brokers offer online trading by developing their
own trading platforms or through a White Label Partner-
ship with an established online trading firm, such as Saxo
Bank or ACM. This gives the client the best of both worlds
– instant online trading, coupled with full advice if needed.
The cost maybe slightly higher than that of a no-advice
firm, but as I have detailed, the advantages far outweigh
the drawbacks. Additionally, with a dedicated advisor, you
are not just a number, but considered a client/customer/
human being, and treated as such.
‘Don’t pay for education’
Okay, I know what you are probably saying – “this guy just
told me that you don’t get something for nothing, and now
he is saying don’t pay to learn.” Let me explain.
Today, there are probably more trading educators out there
than brokers, and most of them are teaching the same
thing – Technical Analysis. The difference is that each put
a different slant on it to make it look like they have come
up with a new and improved mousetrap. I always tell my
clients two things about educators – first, unless they are
trading their methodology live in front of you, they are no
good.
If you find someone like Larry Williams who will trade live
(not simulated) in front of an audience for several days,
then by all means go for it. These guys will show you how
they detect their trading signals, how they implement their
trading methodologies and how they manage risk. All of
this is done as the markets are trading, as opposed to us-
ing historical data that shows only big winners and small
losers.
If their methodology is so good, why are they not using it
to trade? I know that if I had a new whiz-bang trading sys-
tem that could return 50% every month by just checking
a few signals for 30-minutes each day, I would be trading
with it and using the results to raise trading capital for my
own hedge fund. I would not waste my evenings doing
2-hour introductory sessions, followed by 2-day weekend
workshops.
Life is too short for things like that unless I was able to har-
ness the power of good marketing and charge each seminar
attendee US$5,000 to $10,000. If I could do that, I would
not need to trade and could continue to make money off
the attendees by charging them a monthly subscription for
on-going trading signals. Since each person has paid thou-
sands of dollars, they would need to continue paying the
monthly fee for at least 12 months to justify that they had
not been taken by a charlatan.
16 JANUARY 2009
Instead of paying for education, I recommend traders use
the funds for their trading account. There is no better way
to learn about trading than actually pulling the trigger with
live ammunition. This backs up my thinking about only
going to seminars where the presenter trades live. Paper
trading has limited use. After a couple of paper losses, you
start to lie to yourself about being stopped out or taking an
early profit. By trading live with real funds, you could look
to just “dip a toe into the water” to get a feel for opening
and holding positions or seeing how it feels to have the
market go against you. Look to try a few different signals
to come up with your trading style. A style that is distinctly
TM
yours, fitting your personality, your need for money, your
trading time horizon, your outside commitments such as
family, work, social etc.
Another use for the funds set aside for education is to use
them to buy books on trading. Particularly, books written
by successful traders describing their style, or books where
traders are interviewed. You want to be able to get into
the mind of a successful trader to see how they work under
pressure, how they find trades, what markets they like/dis-
like, and what traits you can adopt for your trading. Be
sure to read these books, rather than using them to raise the
height of your computer monitor!
Today, there are so many online resources offering free edu-
cation I am surprised that educators remain in business.
Use these resources first, read plenty of books and have a
go at firing a few shots yourself. After all of this, if you still
think that you need to pay someone to teach you to trade,
then please ask them if they trade live before you hand over
any money.
Be big or get out
I love my meat, and I particularly enjoy my roast dinners
every week. But the number of times I have heard from
new clients that they are looking to start with just $5,000
or $10,000 far out numbers the roast dinners I have had
over the years. What about where clients have said if they
only trade 2 lots each day, and take 15 or 20 pips a day out
of the market? At the end of the year, they will have about
$50,000. Because they only want to take 15 or 20 pips a
day, the market will just hand them profits on a platter, and
there will be no losers because the market will know they
are in a position and will move their way. Why don’t they
leave their money under the pillow and each night so the
trading fairy can come along and add to it?
C’mon folks, if you are serious about making it in trading,
you need at least US$50,000 to start with. I am not say-
ing that you need to invest the whole $50k, or leverage it
up fully 200 times. By having a sizeable account, it helps
to back you when you are wearing some pain in a posi-
tion. It also helps you to work wider stops at decent levels,
as opposed to having to work money-stops, based on how
much you can afford to lose. I always tell my clients to
avoid over-extending. That is, do not get into too large a
position where when and if the market moves against you,
you are forced into closing part of the position because of
margin issues.
A wise old broker once told me “the market will remain
irrational longer than you can remain solvent.” Invariably,
the market will turn around, but you will be back on the
sidelines licking your wounds when this happens. Over
the years, the guys I have seen make money out of trading
are the ones who trade longer-term, trade a moderate size
and who wear the pain when the market is against them.
I could count on one hand, the number of traders who
started with a small account (less than US$20,000) who
have succeeded in trading.
Stop-loss orders are an essential part of trading, but I tend
to be fairly flexible in their use. With small accounts, you
need to use them to prolong your trading life and to avoid
turning a short-term trade into a long-term investment. In
these cases, I suggest nothing less than a 40-pip stop-loss in
the Forex market, but it needs to be based on a sound entry
level around support or resistance levels. I will go further
into stop-losses in future articles.
For larger traders, I suggest stop-losses on breakouts or in-
tra-day trades where I am looking for an explosive or small
move that will run out of steam over the coming 18 to 24
hours. For longer-term trades, particularly those based on
fundamental analysis, I rarely use a stop-loss, believing that
if the market moves against the position, it will eventually
come back, particularly in Forex. In these cases, I trade
smaller, looking to add to the position when trend con-
firmation occurs. In some cases, I will work what I call a
“Stop of Last Resort” that is far away from the market but
at a point where if triggered the market is likely to continue
for a prolonged time, and it is best for my clients to be out
of the market.
As you can see, larger accounts have more flexibility. They
have more time on their side and they can see things more
clearly. Small accounts are constantly worried about the
next trade blowing them up. No matter how many times
you read or hear the saying “cut your losses, and let your
profits run,” human psychology works the opposite way.
We all like to win, and we all hate to lose. We are reluc-
tant to admit when we are wrong, and as a result, do not
cut losses. We think that if the 15 to 20 pip winners can
be maintained, a winning streak can be developed and the
account will magically grow exponentially. The problem is
that it only takes one big loss to wipe out this approach.
Believe me, big losses happen on a regular basis.
No one is bigger than the market
If you have had a good day, congratulations but tomorrow
is another day! If you had a few losses, commiserations
but tomorrow is another day! Do not let trading get you
on a real high, but do not let it get you so down that you
are ready to slit your wrists. Keep it real, and stay humble.
Humility is the big thing I have seen in good traders over
the years. They are careful not to over celebrate the win-
TM
ners, and rarely lose their cool if they get a bad fill, or are
stopped out on the high or the low of the day. Good trad-
ers do not want pats on the back, they are happy to stay
under the radar and just keep doing their thing.
This is why so many of the good money managers around
the world are hard to locate. They trade for a few select
clients, charge them heaps, and continue to perform well
above the average year in, year out. The good ones do not
want to be found. They get clients by word of mouth as
opposed to glossy ads in business magazines.
Everyday is a new market. It is one of the things I love
about trading – you never know what to expect when you
turn on the computer screen first thing in the morning. If
you had a bad day yesterday, keep in mind that today is a
new market and it could all reverse today. Similarly, if you
won big yesterday, keep in mind that it could all be taken
away today and then some.
In today’s age of the Internet, online trading and leverage of
500 times, there are more day traders than any other type
of trader/investor. It makes sense that if you are a day trad-
er, it is highly probable that another day trader will be tak-
ing the other side of your trade. For this reason, you need
to be fully prepared with all the tools that make a good
trader. You need the good backup of an advisor, you need
to have some of the traits of great traders, and you need
to have ample trading capital to do battle. Trading can be
compared to war. If you do not do the tactical homework
on your charts, if you do not show patience in pulling the
trigger, if you do not try to squeeze every last dollar out
of a winning trade, and if you cannot admit when you are
wrong then be assured your opposition will.
Abdul Khan is a Senior Client Advisor with Tricom Securities,
Australia. He has been involved in the Forex and futures markets
for over 15 years, advising beginner and hedge fund clients from all
parts of the world.
Abdul can be reached at abdul.khan@tricom.com.au.
JANUARY 2009 17
 CURRENCY TRADING

Why
Choosing A
Forex Broker Is
DAVID WARING

So Confusing

TM

18 JANUARY 2009
 David Waring leads a
discussion answering
most of the many
questions that are asked

TM
when selecting a Forex
broker and trading
platform. This is a ‘must
read’ for anyone trying
to separate fact from
fiction and find the right
place to trade foreign
exchange markets.

I
f you have looked around the Internet and/or talked
to other Forex traders, you probably know that there
is a wide variety of opinions as to which broker is the
best to trade with. Message boards are full of horror sto-
ries about trading with pretty much every Forex broker out
there. In this article, we will examine the reasons and try to
identify the source of the confusion. This article will help
traders develop a checklist, so they can determine which
broker is right for them through a process that separates
fact from fiction.

In my opinion, the main reason there are so many horror

stories about the Forex market, stems from the lack of regu-
lation that existed (and to some extent still exists today)
in the retail Forex market, when compared to equities and
futures markets. Before the Internet, the over-the-counter
Forex market was pretty much cut off limits to individual
traders. The Internet opened up the Forex market to the
JANUARY 2009 19
 CURRENCY TRADING
Screen shot – nfa.futures.org
individual trader, but the regulations designed to protect
traders from scams and shady dealing practices were slow
to follow in many countries, and still have not caught up
today in many cases.
Early on, the Forex market got its reputation as the ‘Wild
West’ of financial markets because many firms took advan-
tage of individuals who came into the ‘new’ market, and
used their lack of knowledge to rob them blind through
shoddy execution and exorbitant fees. There is no question
that some of the things that gave the Forex market its bad
name still exist today, but luckily, there are several firms
who offer a quality product and service to Forex traders,
without the scams that have existed in the past.
So, if several firms offer a quality product and service, why
is it not obvious when reviewing all the message boards and
review sites where people express their opinions on Forex
brokers? In my opinion, there are three reasons for this:
1. The Forex market is over-the-counter and there is
a lack of standardization across many of the aspects
of trading that are standardized in centralized mar-
kets like futures and stocks.
2. Retail Forex trading is a relatively new market.
There is not a lot of experience behind the comments
made in forums and on review sites. Combine this
with point #1 and you have people who angrily post
site after getting slipped on a trade around a news
event for example, instead of understanding that
this is the way that the market works.
20 JANUARY 2009
TM
3. In my experience, the best firms tend to be much
larger. The fact that larger firms have 10 times as
many clients makes it look like they receive a larger
percentage of complaints. As I see it, a firm that is
ten times as large but has twice the complaints offers
a much better service than the smaller firm receiving
half the complaints.
Regulation and Financial Stability
By walking through how I would evaluate a U.S. brokerage
firm, I am going to give a framework that traders can use
to evaluate the regulatory environment in any country. For
those who have knowledge of, or questions on, the regula-
tory environment in other countries, I encourage you to
post in the ‘comments’ section on InformedTrades.com.
The retail Forex market came under the jurisdiction of the
Commodities Futures Trading Commission (CFTC) with
the passing of the Commodity Modernization Act in 2000.
It is currently going through some changes with the recent
passing of the farm bill. The industry body that currently
enforces the laws set by the CFTC is the National Futures
Association (NFA). The National Futures Association is
a regulatory service provider for the derivatives markets.
On the NFA website (www.nfa.futures.org), you can read
about the requirements that firms offering retail Forex trad-
ing in the United States have placed on them.
In the upper right hand corner of the site, is a link that says
“Broker/Firm Information.” If you click this link you can

Screen shot – cftc.gov
enter the name of a firm and see who the owners of the
firm are, and any complaints or actions that the NFA and/
or CFTC has taken against the firm. One thing to keep in
mind is that there are many firms with only a few clients
who offer Forex trading. It is important to consider the size
of a firm when researching complaints, so you can make
sure you are comparing apples to apples.
The next web page of interest when researching firms is
the CFTC’s financial data page reporting how much capital
each of the Forex brokers has. This is important because if
the Forex broker you are trading with goes bankrupt, your
account is not protected under current regulations unlike
the stock and futures markets.
On the CFTC web page (www.cftc.gov), you will find a
section called “View Financial Data FCMs” on the right
side of the page. Clicking this link gives a report with all
the U.S. Futures and Forex firms listed on the left hand
side. Across the top are 2 columns that are important to
us. The first is the column that says “Net Capital Require-
ment,” which is the amount of funds that a firm is required
to have in liquid assets that are easily convertible into cash.
This number is set by the CFTC to make sure that a firm
has enough cash on hand if something goes wrong. If a
firm drops below this requirement, the CFTC will step in
and shut the firm down in order to protect client funds.
The next logical question that many traders will ask is –
“How close is the firm they are trading with, or considering
trading with, to falling below their “Net Capital Require-
ment?”” On this same page you should find a column that
says “Excess Net “ which gives us the cushion that a firm
has, before they would get into a potentially troubling posi-
tion.
The last thing that it is important to keep in mind is that
the CFTC has recently upped the ‘Net Capital Require-
ment’ to a minimum of $20,000,000 for all Forex firms to
be phased into effect. With this in mind, it is important
to be sure that the firm you are trading with not only has
plenty of excess capital to meet current requirements, but
also future requirements.
If you are considering opening a Forex account with a non-
U.S. firm, I strongly encourage you to do your research into
what the regulatory environment is in that firm’s country.
By doing so, you can make sure that the necessary protec-
tions are in place to protect your capital in the event that
the firm you are trading with runs into financial difficulty.
TM
How to Evaluate Transaction Costs
When trading any market, transaction costs can have a sig-
nificant effect on returns, especially for the active trader.
Unlike other markets, where transaction costs outside of
commissions are fairly standard, the Forex market is over-
the-counter and transaction costs can very widely from
broker to broker.
There are generally four things that a trader should con-
sider when reviewing the transaction costs of a broker that
he or she is considering trading with.
1. Commissions, if any, that are charged by the bro-
ker.
2. The Spread for the currency pairs that they wish
to trade.
3. The rollover rates for the currency pairs they wish
to trade, assuming they will be holding posi-
tions past the rollover cut off.
4. The quality of the execution on live trades.
The large majority of Forex brokers do not charge a com-
mission. When analyzing those that do, most traders will
add the spread for the currency pair that they are trading
to the commission to calculate the total transaction cost
for the trade. The important thing to keep in mind is
that while commissions are normally fixed, the pip value
for each currency pair varies depending on current market
rates, and whether or not the U.S. dollar is the second cur-
rency in the pair or not. As an example, the current pip
value when trading on a standard account for USD/JPY is
$9.25, and the current spread with the broker I am look-
ing at is 2.5 pips. So, if this broker were to charge a $10
commission on top of this, then my total transaction costs
would be 9.25*2.5 + 10 or $33.13.
JANUARY 2009 21
 CURRENCY TRADING
One last thing to consider on commissions, when you
inquire about the commission level, you want to know
whether the commission rate a broker is quoting is ‘per
side’ or ‘round trip.’ If the commission in the example I
just gave were quoted ‘per side,’ this would mean there is a
$10 commission to open the trade, and a $10 commission
to close the trade, bringing the total commission for the
trade to $20. If it is ‘round trip,’ this means the commis-
sion to open and close the trade is $10.
A second factor to consider when evaluating transaction
costs is what the spread is for the currency pairs that you
will be trading. You can calculate the spread in dollars by
taking the value of a 1-pip move in the currency that you
are analyzing, and then multiplying it by the spread. It
is important to keep in mind that the spread with many
brokers will fluctuate throughout the day based on the li-
quidity of the currency pair that you are trading, and the
volatility in the market at the time. With this in mind, it is
important to consider the spreads during the timeframe(s)
that you will be trading. While many traders like to in-
quire with a trader who is already trading live with the firm
they are considering on this point, generally I have found
that the demonstration platforms are a fairly accurate rep-
resentation of the spreads you will see on a live account.
A third factor to consider when evaluating transaction costs
is the rollover rates that a firm deducts from your account
when you are long a currency with the lower interest rate,
and the rate that they pay into your account when you are
long a currency bearing the higher interest rate. While this
is not very important for active traders who rarely hold po-
sitions overnight, it is especially important for traders ex-
ecuting longer-term strategies, where the rollover rate can
significantly affect the return of their strategy.
The last factor that it is important to consider when look-
ing at transaction costs is the execution that you receive on
live trades. Unfortunately, demonstration accounts are not
normally an accurate representation of live execution, so
there is no way to know this for sure, without opening an
account and executing some trades. From my experience
here as well, the message boards (for the reasons I men-
tioned earlier) are not a good representation of reality in
this regard. Once you have a live account, in normal mar-
ket conditions you should be executed without slippage
and the prices that you are being quoted should be in line
with what other market makers are quoting (which you can
see by pulling up their demo accounts). If you are being
consistently slipped on trades and/or the rates that you are
22 JANUARY 2009
being quoted are consistently off-market, then you know
there is a problem and can address it accordingly.
Trading Technology and Value Added Resources
After a trader has an understanding of the financial sta-
bility, regulatory environment and transaction costs of the
firm they are considering, probably the next most impor-
tant thing to understand is the trading technology and
value added services that the firm offers.
TM
One thing that is universally important to all traders in
terms of trading technology is platform stability. A trader’s
platform is his lifeline to the markets. If the trading plat-
form crashes, freezes up or experiences other technological
difficulties, this obviously hinders the ability to perform.
Where quality of trade execution is open to interpretation,
whether a firm’s platform is stable or not is pretty straight-
forward. I have found that the broker review sections of
forums such as Elitetrader.com are a pretty good indication
of who is strong and weak in this area.
Outside of platform stability, there are as many different
priorities traders have for trading technology as there are
trading styles and personalities. To help each individual
trader go about this decision making process in as structured
a manner as possible, I have come up with a list of features
that traders can rank in order from highest to lowest prior-
ity. Remember that many firms offer multiple platforms,
so do not assume that a firm does not have something, sim-
ply because it is not featured on their website.
1. Ease of use
2. Clarity of profit and loss report
3. Advanced order entry
4. Trading from charts
5. Backtesting
6. Web based platform versus downloaded
platform
7. Platform customization
8. Mobile trading
If you have other things that interest you, simply add them
to the list in order of priority, before checking out the dif-
ferent options that are available to you.
From a value added services standpoint, there are many
different options available depending on which firm you
select. With this in mind, you should have a good un-
derstanding of what is important to you as a trader before
beginning your search. I have included a list to assist you
with this process.
1. In-house research
2. Third-party research
3. Real-time news
4. Trade signals and recommendations
5. Charting package options
6. Managed accounts
7. Trading education
This discussion should give you a good understanding of
the main things to consider from a trading technology and
value added resources perspective when choosing a Forex
broker. Now, we will look at what are in my opinion the
last two major factors to consider – customer service and
trading desk accessibility.
Evaluating Customer Service
The retail Forex market is a relatively new market. This
means that many traders who have experience trading other
markets do not have much experience with Forex. When
you add to this the fact that much of the market has yet to
be standardized, you can see the potential for many ques-
tions that need to be answered and the importance that a
firm has an intelligent staff that is easily accessible to an-
swer those questions.
With this in mind, the first thing that I recommend when
evaluating a broker’s customer service is calling and talking
to one or two of the people there. Ask them to describe
their offerings as well as any Forex questions that you may
have. This should give a pretty good idea of the compe-
tency of the support staff and an indication of how they are
going to perform when it really matters.
The second thing I would recommend is getting an idea
of the hours when those support people are available, and
methods that can be used to contact them. Remember that
the Forex market is a 24-hour market, so a firm’s support
staff’s ability to perform overnight as well as during your
daytime is much more important than in the equities and
many futures markets. The four most common methods to
contact a broker’s support staff are:
1. Telephone
2. Email
TM
3. Live chat
4. Forums
The last and perhaps most important thing to consider
when selecting a Forex broker is to make sure a firm’s trad-
ing desk is reachable by telephone in the event of platform
failure that may occur either on your end or theirs. While
this is important in any market, it is especially important
in the Forex market, as platform stability issues are more
common here because the technology is newer and mostly
proprietary.
David Waring is the founder and community host of www.
InformedTrades.com, which is an online community devoted to
helping traders of all experience levels find the quickest path to
profitability. His site does this by organizing all of the best free video
and text trading education and news from around the Internet, into
one easy to navigate resource.
Before starting InformedTrades, David gained valuable experience
in the foreign exchange market as a Managing Director at Forex
Capital Markets LLC (FXCM), one of the largest retail Forex trading
firms in the world.
During his 7 years at FXCM, David held multiple positions, helping
grow the firm from 15 employees and 2,000 clients, to the over 600
employees and 120,000 clients that the firm has today. David also
oversaw FXCM’s managed funds division, and the launch of its
Sentiment Managed Funds Product, which had over $20 Million in
assets and returned an impressive 32% during the first 11 months
of live trading.
JANUARY 2009 23
 CURRENCY TRADING

PAUL DAY

A Declaration

TM
Of
Independence

24 JANUARY 2009
 Traders are constantly
bombarded with tips
and suggestions in a
very sterilized format
with the best looking

TM
chart used to convey
the strategies. Paul Day
opens a discussion on
how to formulate ideas
and trading strategies
that suit your desired
trading frequency and to
employ a stringent risk
management regime.

T
here are many reasons for wanting to trade the Fo-
rex markets, especially at a time when bond yields
remain historically low and equity market returns
are in negative territory across the globe. The rise of the
Internet and the surety of high-speed communication lines
have opened the markets to new participants and the pleth-
ora of online Forex brokerage firms has vastly reduced the
sum required to get oneself started and not to mention the
narrowing of the bid/offer spreads in the major currency
pairs.

The independent trader has a huge arsenal of weaponry to

use in making trading decisions. There are 24-hour finan-
cial news channels, trading magazines, blogs, independent
and institutional research and trading portals that offer

JANUARY 2009 25
 CURRENCY TRADING
both black box construction software and highly sophis-
ticated technical analysis programs. So much information
can present a problem of overload that can lead to either
trading paralysis or irrational behaviour. One must be able
to separate the wheat from the chaff and apply consistent
rules and behaviour patterns to stand more than a gam-
bler’s chance of winning.
In his highly acclaimed books, Fooled by Randomness and
The Black Swan, Nassim Nicolas Taleb explains both the
distortion that luck can have on the perception of one’s
ability, and the fallibility of well-held beliefs – not just in
trading but across all disciplines. I may walk into a Las
Vegas casino, put $10,000 on number 17 at a roulette ta-
ble and walk away with $360,000 but that does not mean
I am a gambling genius, a professor of gaming theory or
someone you would wish to take any advice from. Good
fortune does not an analyst make. I also may tell you that
debt underwritten by AMBAC and MBIA is AAA rated
and safe as houses (pardon the pun) – I would have done
this had I worked for most global bank credit risk depart-
ments or recognised ratings agencies in early 2007.
The current financial crisis enveloping the globe is a perfect
example of how badly analysts, traders, risk managers and
central bankers can get it horribly wrong. I find it funny
how the talk now is of the ‘inevitability’ of the situation
from analysts who did not see it coming and their sugges-
tion that Mr. Paulson and Mr. Bernanke are best placed to
guide the economy out of the current predicament. After
all, they both commented in late summer of 2007 that the
sub prime crisis was well contained and would not spill
over to the rest of the financial or wider communities.
I guess the reasoning behind my tirade is that, as a trader,
one is constantly bombarded with tips and suggestions in a
very sterilized format where the best looking chart to convey
said strategies are predominantly shown. I have a natural
distrust of analysts and strategy salespeople that only show
the winners – the game just is not like that – as many trad-
ers learn at their own expense. Though not a natural cynic,
I have learned to disregard any commentator who suggests
the product they are involved in is going up. A person
bullish on gold who works for buysomebullionoffme.com
or the analyst from wemakemoneywhenyoubuystocks.com
who suggests banking stocks are a screaming buy get short
shrift from me. They may be right, but how can I judge
their impartiality? It is the same with any analyst – if you
26 JANUARY 2009
trade on their advice and they are wrong, it is you who loses
money and not them.
It is important to stand on your own, to be able to formu-
late ideas and trading strategies that suit your desired trad-
ing frequency and to employ a stringent risk management
regime. It is not my intention to either put you off or to
offer some golden panacea to immense fortune. What I
would like to recommend are simple rules I employ to gain
a level of consistency in my trading that can be directly ap-
plied to the Forex markets and are equally relevant to both
TM
novice and experienced traders.
• Risk/Reward – Many traders run positions with
terrible risk/reward profiles, often risking more
than they stand to gain from an individual trade.
Indeed, many trades are entered on an emotional
basis with no stop loss in mind. This is the path
to ruin. I recommend that you run at least a
3 to 1 profit/loss ratio – i.e. unless your target
profit level for a trade is at least 3 times the dis-
tance from your entry level as your stop loss Do
not do it! By employing a 3:1 strategy – and
assuming you run the same risk per trade, a win
ratio of just 25% will protect your trading capital
over the long-run. Also, do not move your stop
further away from your entry level if the trade
moves against you. The market will not disap-
pear if you get it wrong, but you might!
• Leverage – Many online Forex platforms offer
leverage of 200 to 1. This means a $1,000 margin
account can be used to assume a $200,000 posi-
tion. Taking such risk is not in the least sensible
– do not forget at the start of 2008 there were 5
investment banks on Wall Street, rumoured to
be running leverage of around 30 to 1. None
of these firms exist in their original forms today.
GBP/JPY routinely moves 1.5% to 2% a day and
a 200:1 leverage on all your capital would see you
margin called after a 0.5% move against you. I
would suggest a maximum leverage employed of
20 to 1.
• Capital deployment – Do not put all your eggs
in one basket. Define a proportion of your trad-
ing capital you are comfortable in taking for each
 trade and stick with it. I would not risk more
than 5% of my trading capital on any one trade.
As your tradable capital increases, your position
size grows accordingly. If your tradable capital
diminishes, so should your exposure per trade.
I rate Risk/Reward, Leverage and Capital Deployment as
fundamental in my trading strategy and believe they would
assist greatly in the longevity of a trader’s participation in
the market.
Despite maintaining an overall macro view of long-term
market direction, my trading mechanism is predominantly
technically based. In this guise, I offer four broad brush
strokes that may stimulate one to try something new.
• Avoid Multicolliniarity – This applies to both
technical analysis and in positional trading.
a. In technical analysis, oscillators such as sto-
chastics, RSIs, MACD etc. are basically the
same thing – a first derivative of price – and
one should not be used to confirm another. If
using them for negative or positive divergence
(the only reason I ever use them) choose one
oscillator and stick to it.
b. In trading, if you have the view the yen will
decline; deploy 5% or your capital to your
overall JPY short. Do not sell USD/JPY,
EUR/JPY, GBP/JPY, AUD/JPY and NZD/
JPY! This combination would equate to 25%
of your tradable capital risked on, ostensibly,
the same trade. Choose one currency pair
and go with it.
• Expand your Depth of Analysis – If trading from
a technical perspective, always look at least one
timeframe up and one timeframe down from
your favoured chart period. If you predomi-
nantly trade off daily charts, also monitor hourly
or 240-minute charts and weekly charts. If you
trade on a shorter timeframe, say hourly charts,
also monitor 15-minute and daily charts to see if
they tell a different story.
• Expand your Breadth of Analysis – Markets are
obviously interrelated. If you trade GBP/USD, it
remains important to track other currency pairs
– a sharp move higher in EUR/USD is likely to
be cable bullish, while a carry-trade unwind of-
ten adversely affects the higher yielding curren-
cies and may lead to pressure on Sterling. Also
do not just stop at currencies – yield differentials,
equity markets, individual commodity prices and
the CRB index, levels of Baltic freight etc. can
all affect currency movements and big moves in
TM
other markets are often a sign of risk aversion or
margin calls, which is a warning sign that sharp
reversals could occur in trending markets.
• Trending versus Non-Trending markets.
a. In trending markets, I use short-term (3 or 5
session) moving averages of the session lows
to underpin a rally, and short-term moving
averages of the session highs to cap a decline.
When markets go into prolonged trends, it is
amazing how often this simple strategy effec-
tively captures a huge chunk of the move.
b. In ranging markets, your risk reward is in
favour of longs near the range bottoms and
shorts near the range highs – this sounds like
I am teaching you to suck eggs. But during
consolidations, markets usually look magnifi-
cent at the top and awful at the bottom and
your friendly analyst will probably be telling
you to do the opposite of what is the best
trade from a risk perspective. Try splitting a
consolidation zone into 5 horizontal segments
looking for a short-term mean reversion trade
at the extremities and paring your risk in the
central, neutral zone.
Trading the currency markets can be an exciting and re-
warding business. Setting consistent, effective rules and
methodologies can help you in your trading life and I see it
as a natural step in becoming a successful trader.
Paul Day is Deputy Head of Research at MIG Investments SA. He was
formerly Manager of Strategic Trading at HSBC Markets in London.
JANUARY 2009 27
 OPTIONS TRADING

Gamma Trading Options

JOHN NETTO
on Forex – Part II: The
Art, Science, and Nuances

TM
of Dynamically Adjusting
Exposure to the Market.

28 JANUARY 2009
John Netto continues his series of articles on option trading
using a gamma strategy. In this article, he discusses real
world trades in the Japanese yen and gold futures using
gamma strategies to compartmentalize risk and yield
smoother returns.
W
ith a once in a lifetime move across all asset
classes taking place in the Fall of 2008, there
has never been a more important time to un-
derstand the importance and consequences of gamma trad-
ing options in the market. The first article published in
the October 2008 issue highlighted some key points and
benefits of gamma trading. It discussed how to imple-
ment a strategy to better compartmentalize risk and deliver
smoother returns.
As the Chief Investment Strategist for NetBlack Capital, a
Commodity Trading Advisor, my performance assessment
is not only based on the underlying performance of the ac-
counts I manage, but also how skillfully I manage the risk
by measuring the levels of volatility commensurate with
the return. The idea being the less volatility generated in
making a return, the more skillful a manager is. This acu-
men has never been more important in light of the recent
market price action.
In this article, I am going to delve further into the ency-
clopedia of potential gamma trading strategies to cover dy-
namic repair strategies and creative exposure in the market
through calendar spreads and calendar butterflies. These
strategies, when applied with the right amount of trad-
ing acumen, really open up the possibilities for a portfolio
manager and trader.
The USD/JPY market has been a particularly volatile cur-
rency cross in the past six months. It fell to 15-year lows
in late October and has maintained a strong correlation
with the major global equity indexes. We witnessed record
volatility skews between front and subsequent month con-
tracts. In this type of environment, a way to take on bull-
ish posture is to put on a bullish calendar spread and build
back month long portfolio gamma.
A trade that I put on in the yen futures, (traded on the
Chicago Mercantile Exchange), trading at .9400 during
September 19, was selling the front month yen calls (Oct)
that expired on October 3 for a credit of 72 ticks (or $900
a contract) and buying the November calls for 145 ticks (or
$1,825). This let me take on a bullish posture in the posi-
tion and still define my risk. This position created a debit
in the account of $925 per contract.
On the downside, my breakeven was about 9350 and my
TM
breakeven on the upside was close to 9900. I was comfort-
able with both of these scenarios as I was particularly bear-
ish the equity markets. Even if the stock markets rallied, I
would feel comfortable owning the November 96 yen calls
given they did not expire until November 7, or another
35 days of action past the time the October calls were to
expire. (see Chart 1)
Meanwhile, if the market rallied, I could conceivably hedge
off my long yen exposure in the S&P 500 futures market,
which is very deep and filled with tons of intraday volatility.
When setting up trades, one thing I focus on and convey to
investors are innovative ways to better structure positions
to achieve superior risk-adjusted returns. The yen futures
are not as liquid as the S&P and do not have the same flow.
As a result, I build up my exposure on a longer-term basis
on the market I have a viewpoint, such as the yen futures.
Then, I synthetically hedge around it in a market having a
high inverse correlation, in this case the S&P 500 futures
to gain a structural edge.*
As it turned out in this trade, the yen rallied to close at
9553 (see Chart 2) on Friday, October 3. The October
calls sold for 72 ticks had expired worthless and the calls
purchased for 145 ticks had risen in value to about 220
ticks. So, if this position is closed out at this point, we can
take a 72 tick profit ($900 a contract) from the expired calls
and a 70 tick profit ($875) from the calls that still have 35
days left until expiration, for a total of $1775 in profit from
the trade.
This move provided some nice profits and I opted to take
them and move forward with the month of October. This
is one way to play this move using different month options
to build a longer-term view versus a shorter-term view, as
well as take an opinion on volatility and define your risk.
This was a slightly different dynamic than the next trade
example where we took on a different exposure profile.
The next position involves the black mamba of trading ve-
hicles – gold. My meaning here is that “one trade can kill
you.” Gold has been an enigmatic market for gold bulls
and bears, as it will take on wild swings and function in an
extremely capricious manner. It will sell hard in one direc-
JANUARY 2009 29
 OPTIONS TRADING
Chart 1
tion appearing that it will never rally, followed by rocket-
like ascensions that feel no resistance can contain the shiny
stuff.
In such an environment as described in gold, volatility be-
tween the ATM (at-the-money) front month calls (Decem-
ber calls had 4 days until expiration), which expired on
Thursday, November 20 were sporting an implied volatility
reading of 48. The January calls (expiration on December
26) showed implied volatility of 43 and the February calls
showed an implied volatility of 41. My view at the time
and the idea for setting up this trade was to get into some
January calls, which in reality would give some exposure for
the month of December.
When I put this position on, the December gold contract
was trading at $735 an ounce. As you will see from the
options graph below selling the Dec 740 calls brought in
a credit of 21.80, or $2,180 per contract. Buying twice
the Jan 740 calls (which actually trades off of the February
underlying contract) cost 47.10 x 2, or a debit of $9,420
for two contracts, and selling 1 of the Feb 740 calls took in
a credit of 59.10, or $5,910. The net result of this “calen-
dar butterfly spread” as I affectionately term them is about
- $1,330 per unit (see Chart 3).
30 JANUARY 2009
TM
My strategy and viewpoint behind this position is three
fold. First, gold had headed into a consolidation phase in
the short-term and I thought that late November and De-
cember could provide some nice trading opportunities and
by fading the short-term positive volatility skew, there was
some nice value.
The second is my viewpoint on the volatility skew between
the January and February options would expand as things
got going during the above-mentioned timeframe. This
would allow me to profit from both the underlying price
action I would gain from gamma trading around the posi-
tion and a relative expansion in volatility from the long
volatility exposure (January calls) against my short volatil-
ity exposure (February calls).
Finally, $740 is a key spot that gold has used over several
years and I felt confident that even if gold were to move
outside my short-term profit range over the first four days,
I would be able to dynamically manage it from a three-di-
mensional perspective. Meaning even if the first four days
of the position did not work out and we went above or
below, I would have another 36 days to go to delta neutral,
or whatever market viewpoint I take on at the time the
December calls expire.
 OPTIONS TRADING

TM
Chart 2

Chart 3

32 JANUARY 2009

Chart 4
Clearly, the potential scenarios are too numerous to cover
in this article. However, what needs to be taken away from
this is an alternative approach to financing some of these
options trades while still actively managing the risk and not
getting hung on a bad position.
On Thursday, November 20, December gold closed at
$749 and I squared out the December leg of the position
so that I was long twice the number of January calls as I was
the February call. Then, I shorted enough of the February
underlying gold contracts to put myself in a delta neutral
position, meaning I was simply long volatility and looked
to play the next move.
Friday, November 21, a day that I was doing a live trading
event at the Las Vegas Traders Expo, saw gold rally nearly
$50 per ounce and I began to delta hedge out of some of
the long exposure to gold that was developing as a result of
the rally higher (remember from the first article that when
you are long gamma, the more the market goes up the
longer you become and the more the market goes down,
the shorter you become). This move had the makings to
test the $815 to $830 level, providing a nice spot for gold
to sell down from based on the weekly chart. (see Chart
4).
The following Monday, November 24, saw gold rally to
$830 and I went short my full position using the Jan 740
calls as a backstop to hedge my shorts, or taking on a syn-
thetic put position. My target back on the downside from
this key inflection point rested at the level between $750
TM
and $770. This level is a place gold had used for most of
October and November as a resistance spot that would now
offer good support as $750 was a .618 Fibonacci retrace-
ment of the move higher over the previous weeks. Such a
retest seemed pretty likely in the wake of an environment
of deflationary sentiment and technical weakness that has
been pervasive across a number of markets.
In a nutshell, this encapsulates the mindset behind those
who professionally trade options and embrace the art of
gamma trading. The portfolio posturing based on playing
the flow of the market with predefined risk parameters and
offsetting your delta of your options depending on your
viewpoint is the third dimension of trading.
On Monday, December 1, gold and the rest of the com-
modity markets pulled back severely offering an oppor-
tunity to begin phasing out of the shorts that had been
initiated over the previous week until it hit $748 on Friday
December 5 on a worse than expected Non-Farm Payrolls
number. Again, being aware of what a key level $750 was,
I went from being net short to delta neutral again and can
play the move from there.
Going forward, I am still working this position and by the
time this article is published, the January call options will
have expired. However by being delta neutral, my game
plan going forward is to fade a gold move that rallies back
above $800 for much less profit objectives than the $50
to $70 experienced on the last sell down. Should gold hit
the $850 level, I would get fully short against my long call
JANUARY 2009 33
 OPTIONS TRADING
Chart 5
position. On the other hand, if gold cannot muster a rally
and heads south, I will look to start selling rallies and use
the calls as a cushion to reinitiate synthetic put positions
again. Hopefully, doing all of this while outperforming the
underlying time decay and implied volatility risk that can
hasten one’s losses when long gamma.
The trades are two possibilities that these positions could
have been handled with and will hopefully open a discus-
sion forum of conceivable ways to manage one’s trades.
The beauty of options lies in this nuance and subtlety of
position management.
John Netto is Chief Investment Strategist of NetBlack Capital, LLC,
a Commodity Trading Advisor, as well as a Market Maker on the
US Futures Exchange for the Mini Dollar Dax. He is the author of
“One Shot - One Kill Trading: Precision Trading through the Use of
Technical Analysis” (McGraw-Hill, 2004) and President of One Shot
- One Kill Trading, LLC.
John is a regular contributor for The Money Show, The Traders
Expo, The Forex Traders Expo, CME Group, Fox Business Channel,
Interactive Brokers, International Securities Exchange, ICE, MSN
34 JANUARY 2009
TM
Money, Stocks and Commodities Magazine, The Forex Journal,
ESPN Sports Radio Las Vegas, Fox Sports Radio Las Vegas, and many
other media outlets. While he loves teaching, John’s passion lies in
the trading arena and educating the public through a one-of-a-
kind Web show “SniperScope Live! Hedge Fund Trading, Unplugged”.
Viewers log in to watch, learn and interact with John as he trades
the markets in real time with real positions, real working orders,
and real money being made and lost in total transparency. Mr.
Netto used his nine-year US Marine Corps career and travels to the
Far East to learn to speak, read, and write Japanese and Chinese,
allowing him to articulate his vision of trading to an international
audience. When not engrossed in the markets, Mr. Netto spends his
free time sharpening his intuition, discipline, and risk management
skills as an avid poker player and sports handicapper. He appears
regularly on both Las Vegas and national radio discussing the art
of the trading, odds making and poker.
John resides in San Francisco, Las Vegas and New York City. He posts
free newsletters and audio blogs at his web site, www.osoktrading.
com, on all of the aforementioned topics.
 MARKET OBSERVATIONS

ED PONSI

TM
2009
Currency
Outlook

36 JANUARY 2009
 Ed Ponsi provides an outlook for the major
currencies as we move into 2009.
t is that time of year again – the time when traders tally
up the gains and losses for the year and plan for the
future. I am not going to bore you with the details that
we are living in a historic time, or write about how volatile
the markets have been in 2008. I am going to assume that
you have not been living in a cave or have been stranded
on a desert island for the past twelve months. Rather than
a look through the rear view mirror, let’s look ahead to see
what 2009 might hold for the currency markets.
Great Britain Pound
The British pound had a terrible year in 2008, falling to
multi-year lows against the Japanese yen and U.S. dollar. It
reached its lowest point against the euro since the inception
of that currency in 1999. Despite an oncoming economic
slowdown, the Bank of England’s Monetary Policy Com-
mittee, led by Mervyn King, inexplicably kept the U.K’s
benchmark Bank Rate too high for too long. As a result,
the MPC damaged any possibility of an immediate eco-
nomic recovery, but King and company realized the error
Figure 1 – GBP/USD forms bear flags in the fall/winter of 2008.
TM
of their ways and cut rates dramatically late in the year.
Since rate cuts take months to work their way through an
economy, this proves to be too little, too late; the markets
voted on this by taking the pound down hard. The British
pound fell persistently against the U.S. dollar throughout
the second half of 2008, forming a series of flag formations
as it stair-stepped lower (see Figure 1).
The downward spiral of the British pound will continue
into 2009. Look for cable to fall to at least 1.4000, a sup-
port level from early this decade, as scared money continues
to rush into U.S. Treasuries in the early months of 2009.
In 2009, the British pound should begin its long recovery,
but it will lag behind the euro, the Australian dollar and
other currencies that are better positioned to benefit from
the eventual recovery of the world economy.
Where will the pound go from here? A look at the monthly
chart shows major support in the 1.40 area, last visited in
early 2002. It is amazing how a decade’s worth of gains can
be undone in a handful of months, but that is exactly what
has happened (see Figure 2).
Source: Saxo Bank
JANUARY 2009 37
 MARKET OBSERVATIONS
Figure 2 – GBP/USD approaches old support at 1.40, unwinding years of gains.
Euro
The euro has certainly taken a detour in its quest to be-
come the world’s dominant currency. However, despite the
recent resurgence of the U.S. dollar, the euro is still posi-
tioned to eventually join, if not displace, the U.S. dollar as
the world’s reserve currency. The euro may have taken a
beating versus the U.S. dollar in 2008, but it also managed
to reach a lifetime high versus the British pound.
The euro has been far more stable than some of the inde-
pendent European currencies, such as the Polish zloty and
the Czech koruna. The zloty and koruna lost 21% and 13%
respectively versus the euro from July through December.
Figure 3 – EUR/USD appears to be forming a bottom.
38 JANUARY 2009
TM
Source: Saxo Bank
Excessive volatility in 2008 damaged the hopes of those
countries to qualify for euro adoption, which underscores
the advantages of switching to the more stable euro. In
Denmark and Sweden, support is increasing for euro adop-
tion, and as more countries join over time, the European
Union’s power and influence will increase.
Right now, the euro appears to have established a base be-
low 1.30 against the U.S. dollar. The downtrend appears
to have dissolved into a range bound situation and the euro
may be poised for a rebound. I expect the EUR/USD pair
to climb back up to 1.40 in the New Year (see Figure 3).
Source: Saxo Bank

Figure 4 – AUD/USD ranges below resistance at .70.
Australian Dollar
Australia is a major supplier of commodities to China, a
country that recently hit a speed bump on the road to dy-
namic growth. According to the World Bank, economic
growth in China will decrease to 7.5% in 2009. While
that figure represents a level of growth many countries can
only dream about, it is a sharp decline from the nearly 12%
growth experienced in China in 2007. Stock and real estate
prices in China have fallen sharply, and construction has
slowed drastically as economic growth has slowed. This can
only spell bad news for Australia, a chief supplier of copper,
aluminum and other base materials used in construction.
To bolster its economy, Beijing has already announced a
plan to spend nearly $600 billion over the next two years to
help stimulate growth. It is sad that China has resorted to
the same tactics as the bankrupt West; is it possible that the
news is even worse than what we are hearing? If China is
in deeper trouble than is currently believed, the Australian
dollar will be faced with even greater problems.
While China looms as a headache, another problem for the
aussie is the general pullback in commodity prices. Austral-
ian mining behemoth BHP Billiton was recently forced to
abandon its takeover attempt of rival Rio Tinto due to the
unprecedented slide in demand for steel and related prod-
ucts. These mining companies have been hammered by the
collapse in Chinese demand for iron ore and other minerals
used in steel, as have producers of coal, which steelmakers
consume rapidly. The current downturn is the sharpest and
deepest for China’s steel industry in at least a decade with
its output plunging 17% in October.
One positive for the Australian dollar has been the recent
TM
Source: Saxo Bank
series of interventions by the RBA (Reserve Bank of Aus-
tralia). The RBA has confirmed it spent a whopping $3.15
billion AUD (about $2 billion U.S. dollars) buying the
Australian dollar in late October as the currency appeared
on the verge of falling below 60 U.S. cents for the first
time since April 2003. The RBA acted again on November
13 when the Australian dollar hit 63.50 U.S. cents. Each
time, the RBA denied that it was defending a key level,
telling the media instead that it was adding liquidity to the
currency market.
Much like the euro, the Australian dollar is forming a bot-
tom and appears to be basing sideways. I believe that when
the global recession finally ends, demand for commodities
will explode and the Australian dollar will be back on the
offensive. Wait for AUD/USD to break above 70 cents, at
that point the bulls should be ready to run (see Figure 4).
U.S. Dollar
The U.S. dollar, along with the Japanese yen, was the dar-
ling of the second half of 2008. The incredible collapse of
the credit markets drove money out of equities worldwide
and into U.S. Treasuries, fueling demand for the dollar.
As long as turmoil reigns in the markets, the U.S. dollar
should perform well as risk-averse traders pile into Treasur-
ies. The question is this – when the credit crisis ends – I
know it seems endless but trust me, it will end someday
– will the U.S. dollar hold on to the huge gains it racked
up in 2008?
In my opinion, the answer is ‘no.’ It could be said that the
current demand for the U.S. dollar is based on panic buy-
JANUARY 2009 39
 MARKET OBSERVATIONS
Figure 5 – U.S. Dollar rally is about to encounter resistance.
ing rather than sound fundamentals and that the panic
eventually will end. When it does and traders slowly begin
to embrace risk again, money will move out of U.S. Treas-
uries and into various equity markets around the world.
This exodus out of Treasuries will put the U.S. dollar right
back on the path of weakness that has been so dominant
this decade. It is important to remember that during this
period of strength, the fundamentals of the U.S. economy
have not improved. In fact, the fundamentals in the U.S.
economy have deteriorated.
With soaring debt due to massive bailouts in what is al-
ready the world’s largest debtor nation, look for the U.S.
federal budget deficit to exceed 1 trillion U.S. dollars in
2009 alone. Perhaps the U.S. will benefit in the short run,
but the policy of bailing out failed companies is going to
weaken the U.S. economy for years to come. Under a capi-
talist system, weak companies are allowed to fail, and in the
vacuum left behind, strong companies gain market share or
enter new markets.
For example, someone in the United States might be plan-
ning to create a new automobile manufacturing compa-
ny right now, using state of the art manufacturing tech-
niques, forward looking fuel efficient designs and a lean
management structure. It would be much easier for such
a company to achieve prominence in a market that had
been vacated by failed companies such as General Motors,
which is currently seeking a bailout from the U.S. govern-
ment. If the U.S. government agrees to keep GM alive, it
40 JANUARY 2009
TM
Source: Saxo Bank
will squelch potential competition in favor of spending tax
dollars to support an inefficient, bloated company. It will
damage the industry as a whole, and postpone the evolu-
tion of the American automotive manufacturing sector by
putting a band-aid on a painful but important and neces-
sary part of economic history. This will not only happen
in the automotive sector, but potentially in many parts of
the U.S. economy.
Meanwhile, Bernanke will begin a policy of quantitative
easing in 2009 – a fancy way of saying that he will direct the
Federal Reserve to purchase 30-year U.S. Treasury Bonds
to push their price higher, resulting in lower bond yields.
Since 30-year mortgages key off of 30-year T-Bonds, this
will have the effect of creating lower mortgage rates – at
least for those in the U.S. who can still qualify for a loan.
How to pay for all of this? The answer is simple – print
money, borrow more money and raise taxes. When the
world economy finally awakens from its slumber, the U.S.
dollar will pay a hefty price for this orgy of bailouts. The
USD Index is nearing a major Fibonacci resistance level
near 90, which is the 38.2% retracement of the downward
spiral that began in 2001 (see Figure 5).
Japanese Yen
After years of serving as the punching bag of the Forex
world, the Japanese yen became the heavyweight champion
of major world currencies in the second half of 2008. The
yen crushed everything in its path, even the resurgent U.S.
dollar, and soared to a thirteen-year high versus the British
pound and a six-year high versus the euro.
After years of weakness, why did the yen suddenly become
so strong? The key phrase for 2008 was risk aversion, an
attitude among traders that has also served the U.S. dollar
well. In a normal market, traders embrace risk by purchas-
ing stocks and entering carry trades, collecting interest on
bear market in equities. Yen pairs such as EUR/JPY and
GBP/JPY fell along with global stock markets in 2008, and
those pairs should rise when the stock market recovers. In
other words, the mighty yen rally should end at the same
time the next bull market in stocks is born. Savvy cur-
rency traders use this correlation, following stock markets
to place trades in currency markets.
That is all for now! I wish you all the best in 2009.

TM
currency trades that involve shorting low-yielding curren-
cies like the yen. When traders are in a mode of risk aver-
sion, they sell stocks and close carry trades. Since many
carry trades include a short position on the yen, traders
Ed Ponsi is the President of EdPonsi.com and FXEducator.com. He
must purchase the JPY in order to close the trade. This
is a dynamic public speaker who has appears regularly on CNBC,
led to a sudden burst for the yen as traders, now spooked
CNN and Fox Business Network. His book, Forex Patterns and
by the subprime fiasco, closed their carry trades en masse.
Probabilities, is available at http://www.edponsi.com and from
Momentum players joined in, causing the Japanese curren-
major book retailers. An experienced professional trader and
cy to surge even higher. This helps explain why a country
money manager, Ed has advised hedge funds, institutional traders
can have such a dominant currency even in times of reces-
and individuals of all levels of skill and experience. Ed’s DVD series,
sion.
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Japanese yen perform in 2009? The answer depends on information, email us at info@fxeducator.com
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 MARKET OBSERVATIONS

The Aussie
PETER PONTIKI

& Pound in
2008

TM

42 JANUARY 2009
 Peter Pontikis looks back at sharp rally in the
value of the U.S. dollar in the second half of
2008 and its impact on the values of other major
currencies and their cross relationships.

The Global Background

TM
An analysis of the Australian dollar’s sharp decline in the
September quarter of 2008 must take into context the
sharp appreciation of the U.S. dollar at the same time. This
was a move that subsequently stalled as we moved into the
end of the 2008 calendar year.

It was this sharp rally in the value of the U.S. dollar in the
second half of 2008 that has primarily impacted the values
of other major currencies and their ancillary cross relation-
ships.

This rally in the U.S. dollar happened at a time of profound

financial market instability in the U.S. banking system
seems counter intuitive and needs some explanation.

To find the explanation, we need to visit longer timeframes

for the value of the U.S. dollar. This is where it becomes
apparent that the U.S. dollar was already ‘super low’ going
into banking crisis of September 2008. (Defined here as
being at its 40-year lows on a real trade weighted basis.)

To this end, the U.S. dollar recovery of the past few months
has not recouped 25% of its losses incurred during the 2000
to 2008 serial bear market. Indeed, this is technically not
enough to confirm that the said bear market has finished.

JANUARY 2009 43
 MARKET OBSERVATIONS
At this point, we can say that the recovery in the U.S. dol-
lar at the very least represents partial relief from previously
over-sold or ‘cheap’ levels prevailing into 2008.
Further, it remains difficult to define the U.S. dollar rally
of late 2008 as being a uniform run for the U.S. dollar.
As the following chart shows, the U.S. dollar enjoyed di-
vergent fates against its major counter party pairs – rising
strongly against the euro, while falling sharply at the same
time against the Japanese yen, as most currencies did dur-
ing this period.
The history is still being written about these substantial
market moves. With the volatile backdrop of the credit
crunch inspired global financial market crisis, we can brief-
ly explain the dichotomy of a U.S. dollar rally against the
euro and other Anglophone currencies and its fall against
the low yielding Japanese yen.
For its part, the Japanese yen, like that of most large Asian
economies, enjoys a substantial trade surplus as well as a
44 JANUARY 2009
high domestic savings ratio and was never immediately ex-
posed to the implications of the global rising cost of credit
as a creditor economy. In fact, it could be argued that Ja-
pan was a beneficiary of the crisis on its capital account.
On the other hand, by virtue of their deeper financial and
economic links to the United States banking system and
economy, the United Kingdom and European economies
were and are far more exposed to both the financial market
shocks and the spread of the U.S. economic slow down.
TM
The Result
The erstwhile ‘expensive’ euro (trading at record highs in
mid 2008) was sold down as it normalised itself against an
already oversold U.S. dollar, while at the same time the yen
was bought up against the U.S. dollar.
The following euro/yen crossrate chart shows the full impact
of this in the extraordinary collapse of the cross. EUR/JPY
moved from record highs to decade lows in the space of a
month as the euro abruptly returned to earth.
What did this mean for the Australian dollar?
As a second tier traded currency, the Australian dollar is
usually beholden to the movement in the major currency
crosses as well the movements in the fearful commodities
markets that fell in lock step with the darkening outlook
into 2008’s end. That was the case in this move as well.
As the next chart shows – the AUD/USD rate fall of late
2008 was basically a mirror of the fall in the EUR/USD
rate.
And so, the AUD suffered in late 2008, what most non-Yen
405551115615 515151 5615 15 15 156 56 515165 1561 651 561 651 56 15 15 15 15 5 151 51 51 551515848488 848 44
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84 84 84 88 978484 654 64 84 984 9 984 84 46 548 489 7 4 84 84 87 =7 94 984 97 7 405551115615 515151 5615 15 15 1
515165 1561 651 561 651 56 15 15 15 15 5 151 51 51 551515848488 848 44 84 84 84 84 84 88 978484 654 64 84 984 9
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405551115615 515151 5615 15 15 156 56 515165 1561 651 561 651 56 15 15 15 15 5 151 51 51 551515848488 848 44
84 84 84 88 978484 654 64 84 984 9 984 84 46 548 489 7 4 84 84 87 =7 94 984 97 7 405551115615 515151 5615 15 15 1
515165 1561 651 561 651 56 15 15 15 15 5 151 51 51 551515848488 848 44 84 84 84 84 84 88 978484 654 64 84 984 9
46 548 489 7 4 84 84 87 =7 94 984 97 7 405551115615 515151 5615 15 15 156 56

To advertise to the readers of

Call Dennis Yap at (65) 9040 4151

or email at dennis@forexjournal.com
405551115615 515151 5615 15 15 156 56 515165 1561 651 561 651 56 15 15 15 15 5 151 51 51 551515848488 848 44
84 84 84 88 978484 654 64 84 984 9 984 84 46 548 489 7 4 84 84 87 =7 94 984 97 7 405551115615 515151 5615 15 15 1
515165 1561 651 561 651 56 15 15 15 15 5 151 51 51 551515848488 848 44 84 84 84 84 84 88 978484 654 64 84 984 9
46 548 489 7 4 84 84 87 =7 94 984 97 7 405551115615 515151 5615 15 15 156 56
 MARKET OBSERVATIONS
Of course, the decline in the Australian dollar did not occur
in a vacuum and is consistent with pre-crisis correlations as
mentioned in past articles of the relationship between the
bench mark U.S. dollar cross, the Euro/USD, on the values
of the AUD (among others).

TM
As we go to press, the Australian dollar finds itself going
into the end of 2008 in a holding range pattern bounded
by the extremes of September and October between 60 and
72 U.S. cents.

In the context of its recent sharp fall, the holding pattern

represents a welcome respite and necessary consolidation
that alas may be a little too early to confirm an end to the
currencies endured in the face of a substantial short squeeze fall of 2008. Even the momentum of the September quar-
in the U.S. dollar’s value. Falling from 25 year highs, the ter fall is unlikely to be repeated.
AUD quickly plumbed the decade’s lows in a move remi-
niscent of the euro, British pound and a host of first and Needless to say, if the Reserve Bank of Australia’s buying of
second tier currency crosses. recent weeks suggests, it is an area that it at least finds value
in buying.
Falling from above 98 U.S. cent highs, the AUD dropped
to 60 U.S. cent lows to date in a basic waterfall collapse as
investors exited the previous carry trade commodity based
favourite.

The fall was indeed sharper and worse in proportion to

those experienced by the other top currencies as the Aus-
tralian dollar fell to multi-decade lows against the euro and
Japanese yen as well hitting decade lows against the Ster-
ling.

It was at this low point that the central bank become con-
cerned and entered the market with high profile defensive
buying undertaken in an effort to stabilize what had be-
come an unstable market.

46 JANUARY 2009
What about Sterling?
The sterling for its part suffered a fate little different from
that of the Australian dollar in recent months. Falling as
it did from ostensibly expensive multi-decade highs in the
over 2 U.S. dollar range to something like 20-year lows
near the 1.40 area as noted below.

Once again, this precipitous decline should be read both as

fundamental and technical realignment of both perceived

TM
value and ranges of the sterling. (Mirroring as it does in
part the overall short squeeze in the U.S. dollar).
which it has already bounced and taken back something
As the 25-year look chart implies, there is still some leeway
like a 1/3 of its September quarter’s losses.
for more marginal declines in the value of the sterling to
The suggestion being that some consolidation will now be
required of the cross, before any new trend can be discerned
in this volatile cross.

In summary, the sharp declines in the Australian dollar and

the British pound in the September quarter of 2008 should
be taken in the context of both a very sharp squeeze in the
value of the then ‘cheap’ U.S. dollar as well the Austral-
ian dollar and Sterling’s multi-decade range high/expensive
readings of the time.

U.S. dollar rate. There is better support lying near the 1.30
to 1.35 band.
Technically, it cannot be said that the decline in the Brit-
ish pound has actually troughed. [The market would need
+1.65 levels to hint of that.] The main rationale for such a
short hand summary relates to the nexus of declining rally
peaks, that continues to step lower and the lack of an ob-
served range that might suggest a base has even begun to
form.
What does this imply about the prospects for the AUD/
GBP rate? Having fallen to 5 year lows, the Australian
dollar itself appears to be at the bottom of its range from
Going forward, the prognosis for both the U.S. dollar and
other Anglophone currencies becomes more problematic.
As both sides of the respective currency equations have
alternatively come due for a consolidation in the case of
the U.S. dollar (its recent gains) and some like stability in
the conversely severely and temporarily oversold common-
wealth currencies. Currencies that are at/near ostensible
cheap levels now at 1 to 2 decade lows.
Peter Pontikis is an investment management specialist for ANZ
Private Bank and has authored a book on Foreign exchange. He
is treasurer of the international federation of technical analysts
(www.IFTA.org). The above opinions are strictly his own.

JANUARY 2009 47
 MARKET OBSERVATIONS

Dollar/Yen …
IAN COPSEY

A New
TM
Historic
Low
in 2009

48 JANUARY 2009
… Ian Copsey
takes a long-

TM
term look from
a Fibonacci
perspective at
the USD/JYP
currency pair.

I
t has been over 14 years since the 79.70 low in Dol-
lar/Yen. Over the past 10 years, it has oscillated within
the range from 101 to 135. This past year has seen the
low of this range penetrated and reach within 11 yen of its
historic low.

So, what of the coming year? Have we seen the full extent
of the weakness or will there be more losses to come? In my
JANUARY 2009 49
 MARKET OBSERVATIONS
Figure 1 – Monthly USD/JPY chart
view, it is the latter and indeed, a new historic low appears
to be highly likely.
This monthly chart extends back to around 1970. For
the most part, the direction of the chart has been basically
lower during the past 38 years. Since the peak at 277.50
in November 1982, the largest correction has been the one
that moved from the 79.70 low finally stalling at 147.66.
(see Figure 1)
Since the 277.50 high, which is shown within the first
quartile of the larger red cycle, we have seen lower lows de-
velop. This coming year will see the first bottoming of the
same red cycle expected around the end of the 3rd quarter.
The implication of this analysis is for quite strong losses
over the coming 8 to 10 months.
For some time, I have been uncertain just how the rally
from 79.70 to 147.66 developed. However, I suspect that
it came in 3 waves and was probably either the start of a flat
correction or possibly an expanded flat. The latter scenario
implies new historic lows.
50 JANUARY 2009
TM
The decline from the 147.66 high down to the 101.25 low
is labeled Wave (a). Since then, I feel we have seen a trian-
gular Wave (b) develop, ending at 110.65. The wonderful
nature of Fibonacci has shown through within this triangle.
The rally in Wave ^c was exactly 66.7% of Wave ^a, the
decline to Wave ^d was exactly 85.6% of Wave ^b and the
recovery in Wave ^e was exactly 66.7% of Wave ^c, ending
at 110.65.
Therefore, the peak at 110.65 is the end of Wave –b- and
we can derive a wave equality target in Wave –c- at 64.24
and a 138.2% projection at 46.51.
To judge which of these projections is correct; I take
the common relationships of an expanded flat Wave efb
at 23.6% and 38.2%, which imply targets at 63.66 and
53.74.
Clearly, the two that match are the 63.66 and 64.24 levels.
(see Figure 2)
Now, we need to determine whether the decline is going
to move directly lower from current levels (92.50 at the
 TM
Figure 2 – Cycle projections

time of writing) or whether we will a correction to a higher the 3rd quarter (possibly into the 4th quarter) somewhere
level. around 63.66 to 64.24.

This is finely balanced but looking at the daily chart, we While obviously a much longer timeframe call, but if all
can see that the correction from the Wave (i) low at 90.88 this occurs and we see a bounce from 63.66-64.24, then
was very swift and given that daily cycles are finding a low the implication from the structure and the major monthly
around this time, I suspect a complex correction. cycle low is for a rally back to 147.66…

There are a few possibilities here, ranging from a direct rally

in Wave c back into the 101.00 to 104.00 range, a flat cor-
rection which could still see price dip back to 90.43 to 88 Ian Copsey is a veteran technician having begun his career in Foreign
once again before recovering to the same area and finally a Exchange over 25 years ago. Over 4,000 readers worldwide have
dip in an expanded flat Wave b at between 87.20 and 89.46 read his book, Integrated Technical Analysis. His experiences range
before the rally. from working in the trading rooms at Barclays Bank in London and
Hong Kong, acting as a technical analysis specialist for Dow Jones
Looking at the daily cycles, I suspect we should reach a
Telerate in Tokyo where he provided seminars for bank traders and
peak in Wave (ii) around the end of February and from
also as the regional manager for technical analysis products in Asia
there the start of Wave (iii) should begin. This should
Pacific. He provides his popular daily forecast “The Daily Forecaster”
move down closer to the 79.70 low and may dip a little
through his website www.fx-forecaster.com.
further to around 74.50 by the middle of June and after a
correction in Wave (iv) the final low should arrive by late in

JANUARY 2009 51
 MARKET OBSERVATIONS

DAR WONG

The Outlook
TM
for Major
Currencies in
2009
52 JANUARY 2009
 Our regular
contributor, Dar
Wong, provides
his monthly

TM
commentary and
outlook for the
major currency
markets as we trade
into 2009.

L
ast year, the financial crisis that originated with the
U.S. subprime debacle rolled down the prices of
global equity. At the same time, the continual axing
of interest rates to stimulate the economies in many devel-
oped and emerging countries triggered a massive unwind-
ing of high-yielding currencies against the Japanese yen
that literally has been next to nothing among all currency
investments.

Last year from the middle of July through August, the fall
of USD/JPY affected many Japanese investors and corpo-
rations who shifted their yen profits into offshore swaps.
Major European currencies like the euro and the British
pound also fell heavily from large exposure in U.S. institu-
tional funds in addition to the pull caused by the domes-
tic housing slumps and dwindling economic growth. The
unexpected 70% slump in crude oil prices from the record
high of USD147 added a double impact to the deflation of
these slowed economies.
JANUARY 2009 53
 MARKET OBSERVATIONS
USD/JPY as of December 11, 2008 TM
As we move into 2009, crude oil prices will continue to
be a leading indicator of recovery in many economies. As
China has become a large industrialized country, it has also
become one of the biggest crude oil consumers because of
its emerging growth. Owing to the impact of the global
crisis, every country including China has been experiencing
a contraction in its exports and domestic demand. In other
words, if China were affected with shrinking growth this
year, oil prices may decline further to below USD30 per
barrel. However, if a surge in crude oil demand is realized
too soon as the result of the recovery of Asian economies,
the situation may trigger a stagflation in many developing
countries.
Since China and India are the two largest industrialized
nations in Asia, it will not be a surprise to see them emerge
from this economic rut in 2010 more quickly than other
areas. Other countries in Asia, especially those that are
oil producing and rich in commodity-based products will
emerge quickly from this rut as well.
In this first issue of 2009, I would like to give a forecast
for some major currencies that might be suitable for your
54 JANUARY 2009
Source: NetDania (2008)
investment portfolio. This could also serve as a general
guideline for managing your corporate exposure if you are
going to deal with commercial profits in any of these cur-
rencies.
Outlook for USD/JPY
The Federal Reserve and United States Congress face tough
challenges trying to reshape the U.S. economy with huge
financial bailouts. The Fed Funds rate currently stands at
1% after a series of rate cuts designed to boost the U.S.
equities markets. Job losses continue to mount with the
unemployment rate for November at 6.7 percent, the worst
unemployment level since 1993. The U.S. Labor Depart-
ment reports that citizens on unemployment benefits rose
over 4 million at the end of November 2008. The housing
crisis still infects the economy with home prices and sale
figures both declining. The financial and manufacturing
sectors of the economy are deteriorating with more collapse
cases that will need to be salvaged.
Last November, China surpassed Japan to become the larg-
JANUARY 2009 55
 MARKET OBSERVATIONS
EUR/USD as of December 11, 2008 Source: NetDania (2008)
est holder of U.S. government treasury bonds. China un-
veiled a stimulus plan of 4 trillion yuan (estimated USD580
billion) to support the U.S. and prevent further faltering in
the American economy.
From the technical outlook, USD/JPY has been mauled by
a selling frenzy caused by a loss of investor confidence. The
market began its plunge from a high of 110.66 on August
15, 2008 and has made a remarkable 50% recovery after
reaching a low 90.95 on October 24, 2008. Theoretically
speaking, this bottom is a very important level to hold as
it might well mark the end of the fall. However, if this
90.95 support level is broken, it will cast serious doubts for
growth in the U.S. economy for 2009 and deter the export
of Japanese products.
Short-term market projection (3 months) – In our opin-
ion, the market is likely to trade in the range between
90.00 and 100.00 for this quarter before the market suc-
cessfully searches for a clear direction. However, on its way
up, we expect the market will hover for a while around
96.50 and make a channel formation before it eventually
climbs higher.
It is important to remember that this projection is only
56 JANUARY 2009
TM
good if the support at 90.95 is not violated. Otherwise, the
market may go lower to attempt the region at 86.00 before
we could see some rebound from there.
Outlook for EUR/USD
The Eurozone faces a slump in output. Although central
bank policymakers have been focused on inflation in the
early part of 2008 and complaints that the rising euro was
hurting exports. The eventual decline of this currency’s
value by an estimated 20% has not helped in the increase
in the value of current accounts due to the global crisis.
In December, the European Central Bank cut its refinance
rate again by 75 basis points to 2.5 percent. During the last
quarter of 2008, retail sales and consumer markets deep-
ened its decline. Service and manufacturing figures report-
ed by the Royal Bank of Scotland Group PLC were charted
at below the expansion benchmark of 50. Gross Domestic
Product for the whole European region shrank 0.2 percent
in the third quarter of 2008 with much of the market’s pes-
simism carrying forward into the fourth quarter.
From the technical outlook, EUR/USD reached its bottom

GBP/USD as of December 11, 2008 Source: NetDania (2008)
at 1.2328 on October 27, 2008 and formed a powerful
pincer bottom for reversal thereafter. We would consider
that this market has made a good consolidating phase over
the year-end and will prepare to move higher for a techni-
cal recovery.
Short-term projection (3 months) – This market has gath-
ered sufficient bullish sentiment to counter the past frantic
selling. From the bottom gradually scaling up, the market
has successfully built another 3 progressive supports at S1
– 1.2389 (November 13, 2008), S2 – 1.2424 (November
20, 2008) and S3 – 1.2549 (December 4, 2008).
In January, we expect the market to form another support
level in the region of S4 – 1.2950 before we see the tar-
get above 1.4300 probably some time in mid February or
March. Thereafter, the market is expected to make a long
downward correction for this current recovery bull trend
that started in October of 2008. In any unlikely event, we
would advise traders to abandon all long positions if the
market turns south and drives below 1.2320.
Unfortunately, we will be unable to forecast into the second
quarter until we meet the calendar time-line. Furthermore,
it will depend a lot on the speed of recovery and stimulus
TM
policies in the Eurozone during the middle of this year for
the market to decide for a new potential direction.
Outlook for GBP/USD
The economy in the United Kingdom is very vulnerable
with additional risk coming from U.S. subprime losses
and declines of domestic housing prices. Foreclosures on
residential homes rose 12 percent in the third quarter 2008
due to the contraction in the economy and rising unem-
ployment. In November for the first time, the Chartered
Institute of Purchasing and Supply (CIPS) reported a drop
in the service index to 40.1, which was the lowest level on
record since 1996. Consumer confidence and spending are
still low while frozen credit continues to stall liquidity in
markets necessary for purchasing fixed assets. The Gross
Domestic Product (GDP) in the third quarter of 2008
slipped 0.5 percent, making its first decline since 1992.
Nearing the end of 2008, Prime Minister Gordon Brown
pledged the biggest round of tax cuts and spending increas-
es in the last two decades to counter the recession. A decla-
ration of a 25.6 billion-pound (USD38.8 billion) package
to be released over coming two years will bring the budget
JANUARY 2009 57
 MARKET OBSERVATIONS
USD/CAD as of December 11, 2008 Source: NetDania (2008)
deficit to 118 billion pounds for the 12 months through
March 2010.
In December, another round of rate cuts was introduced.
With the current benchmark rate at 2 percent, policymak-
ers hope to unlock the credit gridlock and encourage more
banks lending to good customers, improving the market
liquidity and cash flows in financial investments.
From the technical outlook, GBP/USD has been very
tricky. Some experienced traders spotted an opportunity
in EUR/GBP during the last quarter 2008. To initiate
our study of the British pound, we need to determine and
confirm that the market has bottomed before we start our
upward projection for the first quarter 2009. Otherwise, it
will be very difficult for us to gauge GBP/USD if it acts like
a bottomless pit and keeps trying to make new lows after
every consolidation phase!
Short-term projection (3 months) – If the lowest bot-
tom is assumed to be at 1.4477 on December 4, 2008,
the market will gradually recover together with the rising
euro value. If this up trend is projected correctly, we expect
the market will reach into the region around 1.5500 before
mid January followed by a progressive phase of consolida-
tion that will further build into another round of escalation
up above 1.7000 in February.
58 JANUARY 2009
TM
It is important to take note that the above hypothesis will
not be valid if the market penetrates below the low at
1.4477. If this happens, the possibility of further decline in
GBP/USD may make an attempt at 1.4000 before the sell-
ing forces halt and are overtaken by a technical rebound.
Outlook for USD/CAD
From the technical outlook, USD/CAD has formed a
strong resistance area by making a pincer top formation
around 1.3000. It is interesting to note from the weekly
chart that USD/CAD began its slide above 1.6100 in Janu-
ary 2002 and has never looked back. The market reached
its bottom at 0.9058 during early November 2008 and has
since rebounded.
As an oil-producing country, it is logical that the Canadian
dollar is strong with the backing of crude oil prices. USD/
CAD moves inversely to general crude oil prices and the
EUR/USD market. As we near year-end 2008, when oil
prices declined by an estimated 70% from the record high
at USD147, USD/CAD surged sharply to make a recovery
briefly above the 50% retracement.
Breaking through this resistance at 1.3000 will be a very
difficult. We expect the market to fall back while moving
into a sideways trend in the first quarter of 2009.
Short-term projection (3 months) – If the aforemen-
tioned resistance can be protected, we forecast the market
will track its way back down to the region around 1.1000
with the possible recovery of oil prices. It is likely the mar-
ket may even stretch its southward direction to 1.0300
should the U.S. dollar weaken fundamentally against the
euro. This could happen within the first quarter 2009 or
into the second quarter.
This hypothesis will delay if the market goes up further af-
ter breaking 1.3000. In that case, we could be looking at
1.3700 before the market reverses down.
Outlook for AUD/USD
From technical outlook, AUD/USD started its slide last
July when the U.S. dollar began to strengthen against all
Asian currencies. This was mainly due to the fundamen-
tal weakness of major European currencies against the U.S.
dollar putting an upward pressure in the greenback to
hedge against other major Asian currencies.
Taking the bottom of October 27, 2997 at 0.6006 to be the
ultimate support level, the market has formed a reasonably
strong consolidation in the last quarter as it strengthened
and stabilized in a sideways trend.
Short-term projection – If the U.S. dollar weakens against
the major Asian currencies as the result of a technical re-
covery in the EUR/USD, we should expect AUD/USD to
rise to about 0.8000. This is quite likely since the market
has dropped drastically for the last 5 months without mak-
ing a substantial correction. Another valid reason for this
scenario is that the market has made a consolidation in No-
vember and December without breaking the ultimate sup-
port, thus developing sufficient strength to climb back for a
window-dressing rally into the beginning of the New Year.
This hypothesis is valid only if the market does not pen-
etrate the ultimate support at 0.6006 in the first quarter.
Otherwise, holding on to long positions or trying to pick
new long entries could be disastrous as the market will be
uncharted territory dating back to 2003.
Outlook for USD/CNY
From the technical outlook, the USD/CNY has stabilized
around 6.8000 from last July to December. This has been
mainly due to the strengthening of the U.S. dollar against
all major Asian currencies as previously discussed. Prior
to that, the U.S. dollar has been devaluing against the
strengthening Chinese yuan from the top limit of 7.8500
since 2006.
Despite the European Union and U.S. central bank de-
mands that the Chinese currency be allowed to appreci-
ate, the value of the yuan is still very much controlled by
People’s Bank of China for fear of overheating the Chinese
economy and risking inflationary problems, especially
when GDP growth is projected to be lower in 2009 from
the global financial crisis.
In our opinion, the U.S. dollar is only temporarily strength-
TM
ening against the Asian currencies including Chinese yuan.
We believe the U.S. dollar will continue to weaken when
the European currencies start to surge against it after mid-
year with higher commodity and gold prices.
We foresee a tight cap of resistance at 7.0000 and expect
the USD/CNY rate will continue to drop progressively in
the long-term outlook with the gradual expansion of the
Chinese economy. However, we are not able to forecast
how low the rate will go as it is new uncharted territory in
this market.
Summary
We foresee a new trend of carry trades will be initiated in
markets once the financial crisis gradually settles down late
in this year or into 2010. As this current market crisis may
take 1 to 2 years to drain out the losses, some new op-
portunities will be spotted for borrowing cheap Swiss franc
(0.5%) since it is the next lowest yielding currency to the
Japanese yen (0.3%). Eventually, if the U.S. dollar were
to slide lower as expected, we predict new flight will move
into the cross rates of Chinese yuan, euro and pound as
safe havens to safeguard long-term investments for many
corporate portfolios. Of course, in this case, we are talking
about swapping from Swiss franc or Japanese yen again.
Dar Wong has 20 year of trading experiences in global derivatives
and Forex markets. His past employment in the financial industry
began in 1989 with Bank of America, followed by Bankers Trust,
Barclays ZW PLC and as a senior floor trader with S.B. Shearson
(Citigroup). Currently, besides writing for The Borneo Post and
financial magazines, he functions as a hedge advisor, coach and
seminar speaker while trading his personal account. Using his
PowerWave Trading™ concepts developed since 1998, Dar has
groomed many retail and corporate traders to become financially
successful in leveraged trading. You may read his Forex weekly
report by visiting www.pwforex.com
JANUARY 2009 59
 UPCOMING EVENTS
Feb 4, 2009 - Feb 7, 2009
The World Money Show Orlando
Stock markets and oil set new highs—just as the Fed fights a
recession. Only by treating yourself (and your portfolio) to
the most in-depth “annual checkup” at The Gaylord Palms
Resort in Orlando—can you be confident that you have
fully explored all of today’s best investment opportunities—
amidst such market wrenching economic transition. Obtain
the best financial advice from top investment gurus—all
under one roof.
Venue : The Gaylord Palms Resort, Orlando, United States.
Organiser : By Money Show
Feb 21, 2009 - Feb 24, 2009
The New York Traders Expo
Acquire the knowledge and tools from expert and fellow
traders that will take your skills and profits to new heights.
Also, visit the exhibit hall where you can investigate and test-
drive the latest trading tools.
Venue : Marriott Marquis Hotel, New York, United States.
Organiser : Traders Expo
Mar 14, 2009 – Mar 15, 2009
Asia Trader & Investor Convention
First launched in 2006, Asia Trader and Investor Convention
(ATIC) event has travelled to 7 Asian Cities, i.e., Singapore,
Kuala Lumpur, Bangkok, Ho Chi Minh City, Mumbai,
Shenzhen and Tokyo. With participation by over 300 finan-
cial services companies, including securities exchanges, retail
and consumer banks, securities brokerage firms, asset/fund
management firms, listed companies and other financial
services providers, ATIC events have attracted over 75,000
active traders and serious investors across Asia.
Venue : Kuala Lumpur Convention Centre, Malaysia
Organiser : Nextview
Apr 18, 2009 – Apr 19, 2009
Asia Trader & Investor Convention
First launched in 2006, Asia Trader and Investor Convention
(ATIC) event has travelled to 7 Asian Cities, i.e., Singapore,
Kuala Lumpur, Bangkok, Ho Chi Minh City, Mumbai,
Shenzhen and Tokyo. With participation by over 300 finan-
cial services companies, including securities exchanges, retail
and consumer banks, securities brokerage firms, asset/fund
management firms, listed companies and other financial
services providers, ATIC events have attracted over 75,000
active traders and serious investors across Asia.
Venue : Suntec City, Singapore
Organiser : Nextview
60 JANUARY 2009
May 17, 2009 – May 18, 2009
The Middle East Money Summit
With return from traditional markets expected to remain
low institutional investors are diversifying into alternative
assets to achieve superior returns and reduce risk. Today, in-
vestors has already made allocations into alternatives such as
hedge funds, private equity, commodities and are in search
for emerging trends and new strategies.
Venue : Jumeirah Beach Hotel, Dubai, United Arab Emir-
ates.
Organiser : Arabcom Group
TM
Jun 3, 2009 – Jun 6, 2009
The Traders Expo Los Angeles
In this Trader Expo you can take a productive step back from
the trading screen and look at the overall markets from a
broader perspective.
Venue : Pasadena Convention Center, Los Angeles, United
States.
Organiser : Traders Expo
Jun 6, 2009 – Jun 7, 2009
Asia Trader & Investor Convention
First launched in 2006, Asia Trader and Investor Convention
(ATIC) event has travelled to 7 Asian Cities, i.e., Singapore,
Kuala Lumpur, Bangkok, Ho Chi Minh City, Mumbai,
Shenzhen and Tokyo. With participation by over 300 finan-
cial services companies, including securities exchanges, retail
and consumer banks, securities brokerage firms, asset/fund
management firms, listed companies and other financial
services providers, ATIC events have attracted over 75,000
active traders and serious investors across Asia.
Venue : Hotel Equatorial, Ho Chi Minh City, Vietnam
Organiser : Nextview
Jul 31, 2009 – Aug 2, 2009
The Money Show San Francisco
The Money Show San Francisco is your best opportunity
to learn how to manage your portfolio during uncertain
economic times. Hear from world-class experts in more than
150 workshops on everything from market trends to stocks
& ETFs to buy and sell.
Venue : The San Francisco Marriott, San Francisco, United
States.
Organiser : Money Show
ECONOMIC EVENTS CALENDAR
Legend
AU = Australia
BoE = Bank of England
BoJ = Bank of Japan
CPI = Consumer price index
CPM = Chicago Purchasing Man-
agers
CGPI = Corporate goods price
indes
ECB = European Central Bank
EU = European Union
FOMC = Federal Open Market
Committee
GDP = Gross Domestic Product
ISM = Institute for supply Man- NAPM = National Association of
agement Purchasing Managers
JN = Japan PPI = Producer price index
MPC = Monetary Policy Com- SK = South Korea
mittee
PMI = Purchasing managers index

JANUARY 2009 26 US – Dec 2008 existing home sales data

Dec 2008 leading indicators data
AU – PPI data for Q4,2008
12 US – Retail sales date for Jan
- Dec business inventories data
13 EU – GDP Q4, 2008
27 US – Jan consumer confidence data US- consumer sentiment for Feb
1
AU – CPI data for Q1, 2009
14

TM
2 US – Dec ISM Mfg Index data
28 US - FOMC Meeting Announcement
15
3
29 US - Durable Goods Orders for Dec 2008
16 US – Feb Empire State Mfg Survey data
4 - Dec 2008 new home sales data JN – Dec Tertiary Index
JN – CPI data for Dec 2008
5 US – Construction spending data for Nov 2008 - Dec 2008 unemployment rate 17 UK – CPI data for Jan
- Dec industrial production data US - Treasury International Capital for Jan
6 US – Factory orders data for Nov EU - Merchandise Trade for Dec 2008
- ISM Non-Mfg Index for Dec 30 US – GDP data for Q4,08
- Nov 2008 Pending Home Sales Index data - Q4, 08 Employment Cost Index data 18 JN - BOJ announcement
AU – Nov 2008 retail sales data - NAPM-Chicago for Jan US – FOMC minutes
- Consumer Sentiment data for Jan - Housing start data for Jan
7 AU – Import & export data for Nov 2008 - Farm prices data for Jan - Import & export prices for Jan
8 US - Nov consumer credit data - Jan industrial production data
31
UK – BOE MPC ends two-days meeting to set
interest rates 19 US – PPI index for Jan
- Jan Leading Indicators data

9 US – Dec 2008 unemployment data
10
11
12
13 US – Nov 2008 international trade data
- Dec 2008 Treasury Budget data
14 US – Dec 2008 retail sales data
- Dec 2008 import & export prices data
- Business inventories data for Nov 2008
AU – Dec employment & Unemployment data
JN - CGPI (PPI) data for Dec 2008
15 EU – ECB Governing Council meets to set inter-
est rates
US – Dec 2008 PPI index
- Phil survey data for Jan
16 US – CPI data for Dec
- Treasury International Capital data for Nov 2008
- Dec 2008 Industrial Production data
- Consumer Sentiment data for Jan
FEBRUARY 2009
- Feb Philadelphia Fed Survey data
JN – Dec 2008 All Industry Index
20 US – CPI for Jan
1 21
2 US - Personal Income and Outlays for Dec 2008 22
- Dec 2008 construction spending data
- ISM Mfg Index data for Jan 23
AU – Import & Export data for Dec 2008
- RBA announcement 24 US – consumer confidence data for Feb
3 EU – PPI data for Dec 2008 25 US – Existing home sales data for Jan
AU – Dec retail sales data
26 US – Durable good orders data for Jan
4 EU – Dec retail sales data - Jan new home sales data
US - ISM Non-Mfg Index data for Jan JN – CPI & CPI Core data for Jan
- Unemployment data for Jan
5 UK – BOE MPC ends two-days meeting to set
- Jan industrial production data
interest rates
EU – ECB Governing Council meets to set inter- 27 EU – Unemployment data for Jan
est rates US – Q4, 2008 GDP data
US - Productivity and Costs for Q4, 08 - Feb consumer sentiment data
- Dec 2008 factory orders data - Feb farm prices data

17 6 UK – Dec 2008 industrial production data 28

- Manufacturing Output for Dec 2008
18 US - Jan unemployment data 29
- Consumer credit data for Dec 2008
19 JN - Tertiary Index for Nov 2008 30
7
20 JN – BOJ announcement for Jan 31
8
21 US - Housing Market Index for Jan
JN – Jan Merchandise trade data 9
22 US – Dec 2008 housing starts data
10 UK – Merchandise trade data for Dec 2008
JN - All Industry Index for Nov 2008
23 11 UK - Claimant Unemployment Rate for Jan
- ILO Unemployment Rate for Dec 2008
24 US – International trade data for Dec 2008
JN – CGPI (PPI) for Jan
25 AU – employment and unemployment rate for Jan

Economic release Release time ( EST) Economic release Release time ( EST) Economic release Release time ( EST)
GDP 8.30am Housing starts 8.30am Construction spending 10 am
CPI 8.30am Production & capacity CPM report 10 am
ECI 8.30am utilization 9.15am Report on business 10 am
PPI 8.30am Leading indicators 10 am on-manufacturing
Employment 8.30am Consumer confidence 10 am report on business 10 am
Personal income 8.30am Uni of Mic consumer New home sales 10 am
Business inventories 8.30am sentiment 10 am Chicago Fed national
Durable goods 8.30am Wholesale inventories 10 am activity index 10 am
Retail sales 8.30am Philadelphia Fed survey 10 am Federal budget 2 pm
Trade balance 8.30am Existing home sales 10 am Consumer credit 3 pm
The information on this page is subject to change. The Trader’s Journal is not responsible for the accuracy of calendar dates beyond press time.

JANUARY 2009 61
 BROKERAGE FIRMS LISTING

MIG Investments SA
Website Address: www.migfx.com

Year Of Company’s 2003

Foundation:

Forex Division 2003

Founded:

Regulated By: ARIF(CH), SFDF(CH)

Pip Spread On Major: 1-3 pips

Mini Account Size: US$5,000

Regular Account Size: US$5,000

Services: MIG offers 24 hour streamline dealing with aggressive spreads on 32 pairs and no commission. The competitive trading conditions include an
institutional offering with 1 pip on EURUSD & USDJPY and reduced spreads on most pairs. Standard spreads include 2 pip spreads on five cur-
rency pairs! The many advantages include no commission, exceptional margin conditions, free high quality market research, a powerful trading
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phone trading.

Languages: English, Arabic, Mandarin, Cantonese, Polish, Czech, Slovak, Malay, Danish, Dutch, French, German, Italian, Japanese,
Portuguese, Russian, Spanish, Turkish, Ukranian

Years in Business: 5 years

Instruments Traded: Forex

Country: Switzerland

Phone: +41-32-722-81-00

Fax: +41-32-722-81-01

Email: info@migfx.com

FXDD
Website Address: www.fxdd.com

Year Of Company’s 2002

Foundation:

Forex Division 2002

Founded:

Regulated By: N/A

Pip Spread On Major: 2 EUR/USD; 3 USD/JPY; 3 USD/CHF and 4 GBP/USD

Mini Account Size: US$500

Regular Account Size: US$5,000

Services: FXDD, headquartered in New York City, is a leading online foreign exchange trading firm. FXDD offers numerous
dealing platforms: FXDD Trader and Meta Trader (retail), Power Trader (institutional) and FXDD Auto (automated).
FXDD provides tight dealing spreads, instant one-click execution, free trading tools and top-rated news, no-interest
accounts, and much more.

Languages: English, Arabic, Chinese (Traditional), Japanese, Russian, Spanish, Polish, Bulgarian

Years in Business: 5 years

Instruments Traded: spot foreign exchange

Country: United States

Phone: +1 212.791.3950

Fax: +1 212.937.3845

Email: sales@fxdd.com

62 JUNE 2008