Carl Young of Johnson City, TN: How Different Traders Approach Trading in Foreign Exchanges

Carl Young Johnson City, TN learned early in his day tradingcareer that for as long as there have been financial exchanges and trading, different traders have been disagreeing on the most profitable and efficient ways to trade, be it stocks, bonds or currencies.

This is why there are so many strategies and approaches to trading in any exchange. In a way, these strategies reflect how the markets really work. If everyone was using the same strategy and the same approach, there would be no market because everyone would be doing the same things. 

The two most popular approaches to currency trading are fundamental and technical.

Fundamental Approach

Every day organizations, businesses, and governments release economic data to the markets. This data provides information whether the economy is growing or shrinking and gives a glimpse into what may happen in the future. Examples of this data are interest rates, unemployment rates, housing prices and trends, export and import volumes, consumer spending and confidence, manufacturing numbers, commodities stats and prices.

A fundamental approach suggests that this data is the primary driver of the markets. Traders that use fundamental approach trade only based on the numbers of the economies of different countries.

Technical Approach

The technical approach is very different from the fundamental approach. Technical traders believe that every market sentiment is reflected in market price. Technical traders assume that all the data that fundamental traders use have already been factored into the price charts along with the opinions of all investors, traders like Carl Young of Johnson City, TN and speculators from all over the world.

Carl Young of Johnson City, TN: Profits and Losses and the Economy

Any person interested in the economy, including Carl Young of Johnson City TN, knows that the goal of any business owner is to increase the profits and avoid the losses. However, from the standpoint of the economy, both profits and losses are equally important because they sustain and improve the living standards of people.

Part of why a price-coordinated economy is so effective is because the products or services can simply follow the leaders. Producers do not have to know the reasons why the customers are buying the products, all they have to do is manufacture and supply items that people will buy. When a business in a market economy finds a way to make great profits by creating new products or lowering costs, competition always follows. 

While socialists have been viewing profits as overcharges and greed, profits play a number of important functions in a market economy. The desire to receive a profit is what drives business owners to take the risk of creating new products and selling them. To stay competitive and survive, capitalist enterprises also need to figure out how to minimize the production costs and sell at the highest possible prices. 

Companies in socialist economies do not have this pressure, which is why socialism offers fewer incentives for efficiency and productivity and this is why socialist economies can’t compete with capitalist economies. At the same time, under capitalism, the companies not only need to figure out how to remain profitable but also constantly innovate to stay ahead of the competition.

For example, even though International Business Machines (IBM) was the first company to build a computer in 1944, Intel’s creation of a small computer chip in the 1970s allowed Intel to eventually become a leader in the marketplace. The developments in computer technologies later led to the creation of various markets and exchanges including the foreign exchange market where Carl Young of Johnson City, TN trades.

Carl Young of Johnson City TN: Prices in Foreign Exchange Markets

Carl Young of Johnson City, TN is a day trader who has an interest in market conditions and foreign exchanges.

If you break down any financial market into its basic parts, you will find that there are only two factors that drive the prices. They are risk and return. Higher risks come with higher returns and lower risks come with lower returns. This is what creates the constant flow of money between different assets.

Money flows into forex markets when assets in different countries in other markets are being bought and sold and the proceeds are converted into cash. Foreign exchange is also the market where governments and banks buy and sell their cash. Forex market is managed by a small number of very big and powerful banks, who together control close to eighty percent of the market. For example, Deutsche Bank has around twenty percent of forex market share. UBS has twelve percent and Citigroup has eleven. 

There is no central exchange, which means that essentially, the big banks run the market. They create wholesale prices that brokers, dealers, resellers and traders then use. There are regulations that apply to the banking practices of the banks, but there are no regulations that apply specifically to the forex market. 

While big banks can manipulate price and use news and many other kinds of tools to move the prices up and down, they can’t hide the volume of the transactions in the marketplace. Fundamentally, market volume is the same as market activity. If you can see a lot of activity when a price goes up or down, you know the activity is genuine. When you look at the combination of volume and price, you will be able to see what the big banks are doing themselves just like Carl Young of Johnson City,TN sees.