In the general elections in Mexico on 1 July 2018, voters elected a new President, along with hundreds of other national, state and local positions. It was one of the largest election days in Mexican history. A good portion of the 120 million inhabitants of Mexico eagerly anticipated the results, al[……]
Currency Crises and How to Anticipate Them
In the early 1990s, many global fund managers invested in countries like Thailand, Mexico, and Russia to “catch the wave” in emerging market development. Toward the latter half of the decade, there were currency crises in emerging markets. As a result, fund managers had to pull out their funds becau[……]
Benzinga Fintech Summit Highlights
The inaugural Benzinga FinTech Summit in San Francisco on September 28th was a whirlwind event for the international FinTech industry. Attendees had the chance to learn about and experience the newest A.I., machine learning, deep learning, and blockchain tools being used to automate and revoluti[……]
Currency Trading Strategies in the Medium Run
Which factors determine foreign exchange rates in the medium run (year to year) and what strategies do foreign exchange traders use to leverage that? Here are some terms to consider.
- Real Interest-Rate Differential: In order to understand this trading strategy, one has to understand what real i[……]
Three Factors that Determine Foreign Exchanges Rates in the Short Run
While the three main determinants of long-run exchange rates are purchasing power parity, productivity trends, and the savings/investment balance trends, short-term determinates (within a year) are:
- Trend-Following /Bandwagon Effect: This investment strategy is based on the technical analysis o[……]
The Psychology Behind Foreign Exchange Trading Decisions
by Christopher Chen
Previous posts talked about understanding the foreign exchange market using a traditional economic model. These traditional models make sense under two critical assumptions. The first is that market participants are rational and the second is that financial markets are efficie[……]
Spot, Swap, Spread: Foreign Exchange Terms Defined
by Christopher Chen
The foreign exchange market has a trading volume of $5.3 trillion per day. The market functions like any other market – buyers and sellers of a commodity meet and trade. In the case of a foreign exchange market, as demand exceeds supply, the currency’s value will go up. The mo[……]
The Law of One Price and Arbitrage
by Christopher Chen
The Law of One Price is the economic theory that identical goods sell for the same price after exchange rates are taken into consideration. However, this is not the case. Therefore, an arbitrageur (someone who finds discrepancies in the market) looks to purchase an asset in a[……]
Currency Trading Strategies in the Long Run
by Chris Chen
The most common analytic to determine a long run foreign exchange rate is purchasing power parity (PPP). However, the system has limitations because historically, deviations from estimated PPP values have been both large and persistent. This suggests there are forces other than rela[……]
Technical Trading, Currency Carry, and Momentum Strategies
by Christopher Chen
In the immediate aftermath of World War II, 730 delegates from the Allied nations convened in a New Hampshire hotel to discuss the post-war monetary system. The delegates, led by John Maynard Keynes, developed the Bretton Woods system of monetary management, which was adopted[……]