Marcus...

Marcus Padley

http://www.smh.com.au/business/so-suddenly-you-think-you-are-a-currency-expert-20101022-16y0a.html

So, suddenly you think you are a currency expert
October 23, 2010

SO THE $A hits parity and suddenly every Tom Dick and flipping Harry is a currency expert. It's as if the Aussie dollar hitting the big figure miraculously released a previously absent forex-predicting hormone into the community at large, a compound that has empowered everyone from the completely unqualified dill to the completely unqualified dill with a financial services licence and some product to sell.

All of a sudden a horde of previously indifferent clients want to know how to trade forex. Financial planners are sagely listing for their clients ways to buy currency exposure through fee-carrying $US-based products priced in Australia, products that were seemingly unnecessary when the Aussie was at US99.99? but at $US1 are suddenly of grave importance to your asset allocation.

And the futures market, for the first time in years has become momentarily popular again with the green and innocent and the interest in ASX-listed $US-based exchange traded funds, which only ever gain a seasonal popularity in a bull market, is blossoming.

Advertisement: Story continues below And it's the perfect storm for the CFD providers. Their market of choice has always been forex any way. It allows ''clients'' to trade 24 hours a day, ticks by the second, is perfect for amateur charting (even on one-second charts), and has proven itself the single best market for blowing up ''clients'' who can conveniently dispense of their funds, often with a bottle of red wine on board, while the rest of us sleep. It's a drug and the "parity" headlines are the ideal opportunity to market, when everyone has a view, but not everyone has the ability to profit from it.

It's miraculous. And it's pathetic. Come on everybody, who do you think you are?

The idea that you can suddenly speculate in foreign exchange and make money, just because its hit parity with the US dollar, is ridiculous. What could you possibly know about the future direction of the forex markets? What edge could you or your product-wielding adviser possibly have on the whole currency trading world? Where could you have possibly have got this wisdom from? I'll tell you. You ripped it out of you're a@#e, because that's the only possible place your complete guesswork, seat of the pants, mean reversion, media-fed instinct could possibly have come from. You are making it up, guessing at best, and while everyone is entitled to their opinion you will experience a random outcome if you allow your new-found wisdom to dictate where you ''gamble'' - sorry, it's a financial product, ''invest'' - your hard-earned money. I suppose all the professional currency traders that are doing their nuts in the forex markets every day, and have done so for decades, are all idiots are they, and you're the guru? Yeah, right.

Sorry, but knowing about two moving averages, doji and harami candles, support and resistance, head and shoulders and any other tidbit you picked up in a free one-hour seminar doesn't count.

The currency markets are for business, hedging, and the professional systems trader.

They are a graveyard for the part-time speculator.

There is no edge for the mortal man no matter how many home-study courses plus DVDs you buy. It is a market for companies to exchange currency, for businesses to hedge their business, for producers to lock in outcomes and for the big banks, endowed with their privileged knowledge of currency market action, to attempt to punt.

That leaves amateur speculation and rogue trading, and unless you are under 17, have attitude, can count to 10 in Greek, have a juiced up CV (big forex desks expect it), a mole in the back office, an ability to operate well beyond your limits, a foolproof method of trading illiquid derivatives and work for a big bank board that wouldn't know a Pip from a Kiwi and a Cable, you'll never make a rogue trader.

You are speculating and the only people to make money out of that are the lucky and Nick Leeson's publisher.

Marcus Padley is a stockbroker with Patersons Securities and the author of stockmarket newsletter Marcus Today. For a free trial go to marcustoday .com.au.

His views do not necessarily reflect the views of Patersons.