FOREX - Ein Blick hinter die Kulissen

Foreign exchange (forex) trading is definitely the most exciting new opportunity in the investment world today. Active traders worldwide have discovered this form of speculation over the past few years. Once the domain of only international banks, new rules allow skilled speculators the opportunity to participate.

Numbers vary, but the forex market's notional value reaches in the trillions daily. Far more than the stock market and bond market combined. In this brief article I will cover a simple way to determine what currencies are on the move and in which direction they may be headed.

The forex market is divided into two separate arenas. There is the over-the-counter (OTC) forex market and the futures forex market. Since the OTC market is not centralized it is impossible to obtain information on volume, open interest, and the positions (long or short) that the major players i.e. banks, financial institutions, and international conglomerates hold. This inability to have a full picture of the OTC market makes it exceptionally difficult for speculators to properly analyze the speed and force that may drive a particular currency.

In order to resolve the lack of information provided in the OTC market the speculator needs to turn only to their futures forex exchange traded counterparts for guidance. In the futures forex market there are multiple contracts that expire in various months. The month closest to the OTC market moves in tight relationship to it. While the OTC market has little to no information about their participants, the government keeps highly detailed records on the futures forex market. What makes their constant fact gathering even more impressive is their legal requirement to make this same information available free to the public.

Once a week the Commodities Futures Trading Commission (CFTC) issues what is known as the Commitment of Traders report. This insiders report details the exact positions (long and short) of the major players, as well as the total amount that their positions increase or decrease from week to week.

Why this information is valuable is two fold. First, it gives the OTC forex trader an idea as to the general sentiment of the major players. Second, over time it shows the gradual shift in momentum from weak to strong or strong to weak. With these two helpful pieces of information an OTC forex trader can determine what position he wants to take, based on the major players, as well as when the ride may be coming to an end, so he won't be left holding his position at the top, or bottom, of the market.

There are a myriad of other ways to trade the Commitment of Traders report, in both the OTC forex market as well as the futures forex market. With diligence and the willingness to trade both forex arenas, with and against each other, every speculator should have a fulfilling trading experience. Current and historical Commitments of Traders data are available on the Internet at the Commodities Futures Trading Commission’s website: http://www.cftc.gov.

Euro FX – Chicago Mercantile Exchange Futures Only Positions as of 12/06/05

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Example of a Commitment of Traders Report from the CFTC

One of the little known secrets of “spot forex” trading is the concept of hedging. Hedging is defined as the ability to protect yourself from losses. There is an inter-relationship between spot forex, futures forex, and option forex. Each one is designed as a type of “insurance” for the other. The Commitment of Traders Report sheds light on what the “Commercials” also known as banks, governments, and and major corporations are doing to protect themselves.

In the above example the Commercials have a long position of over 100,000 contracts. This could mean one of two things, either they have had a change of heart in the overall downtrend of the marketplace or they simply want to protect themselves just in case the market spikes up on its way down. The second instance is what is most likely occurring.

This strategy of combining spot forex with a futures contract can just as easily work for the average speculators. What you do is simple, once you are capable of defining the long term direction of the trend, you can setup a forex option, or a forex futures contract to follow along with the long term direction ( the Commitment of Traders Report can help you determine that). When you trade spot forex positions, you only focus on the counter trends, the moves that go against the long term trend. By doing this you are capable of holding on to profitable trades for much longer, as well as still being able to profit from trades that go against you. By utilizing this strategy you are able to create an advantage for yourself that over 90% of “spot forex” only speculators simply don't know how to do.

As speculators we want every competitive advantage available to us. In the spot market while the rewards are great, high leverage, high volatility, and short trading periods make it difficult for the average speculator to get ahead. By using the “commitment of traders report” you are capable of getting a complete snapshot of the players in a particular currency. Which gives you the the ability to strategize your spot forex trading for the long run.

Autor: Noble DraKoln, noble@liverpoolgroup.com ist Autor der Bücher "Forex for small speculators" und "Futures for small speculators". Er ist mittlerweile 11 Jahre an der Börse als Futures Investor und Broker aktiv.