I was looking at my trading journal to see how far currencies have come in the past year. It is actually quite fascinating. A year ago the gbp/usd was 1.8709, euro/usd 1.2549, usd/chf 1.2679 and usd/jpy 118.88. It takes alot of guts to hold a position wide open for a year. I don't have the patience for it.

I used to use a hedging system that I have turned some of you onto. The Freedom Rocks system hedges currency pairs against each other to give you a daily positive interest payment. In essence you are "investing" in the currency markets, not trading. It works well in an upward trending market, but there is the temptation to over trade your account which can kill you if every currency tanks at the same time. Happened 'BIG TIME" in February and again in August. But looking at the above figures, if you could ride out the turmoil times you would have reaped some great rewards and had fabulous interest payments.

I found though that my Day Trading mentality worked against me. You can do both, but better have 2 accounts and be disciplined in both accounts. (Too hard for me to do).

So where will the next year go? Will we see the same movements? Boy, I wish I had that crystal ball. Make 1000 pips on the gbp/usd, 2000 pips on the euro!. That would be great. But we are about bite sized chunks with our Forecast system. We are about chipping way when a currency goes up and down.

Imagine if you held the gbp/usd for a year. You would have seen a stair step climb that would scare the you know what out of you.There were times on its climb when it dropped 700 or 800 pips over a week or so. What would you have done if you saw profits eaten up and possibly your stake also. It is a tough game to be a trend trader over a year.

I like my Day Trading while waiting for a long ride opportunity. I am waiting to see if the gbp/jpy drops back down into the 220's to ride it back up and get some great daily interest. I will also do the same with the usd/can. Although I have it shorted right now in a "day/couple of day" trade the word on the street is it could hit 1.12 by early next year. I would like to see it drop down a couple of cents then get back on the band wagon.

That is what the Forex is all about. Picking your battles over time.

I was listening to an interesting program today where someone was explaining the currency markets. Very rare to hear that on normal radio! As I am in Canada, our soaring Loonie is all over the news. The speaker was saying that to understand currency markets you have to treat countries like corporations. How are their
products (economies) doing, who is heading up the corporation, do you have a stable economy or is there martial law etc...

So it reminded me on how I learned to understand currencies. And it has served me well.
1) Gold and the US dollar. When one goes up, the other goes down.
2) Gold and the Euro. They move together
3) Oil and the US dollar. When one goes up, the other goes down.
4) High Oil hurts Japan and weakens Yen
5) High Oil benefits the U.K and Canada. Strengthens the pound and loonie
6) Gold tips off a move in Forex

So, they are saying gold is charging for $1,000 an ounce, and oil could go very quickly through $100 then further.

Get your head around this stuff and it may take some of the mystery out of the Forex.