Where in the cycle are the major currencies?

Nowler

Established member
Sep 13, 2017
760
55
#1
Hey folks,
I have often read about particular cycles that economies go through but as I am still pretty new, especially to fundamentals, I am unsure where each economy sits in it's cycle.

Ideally I would like to find economies that are pretty much at their lower end of productivity/growth (with it all to gain, under the right circumstances) and also those at the other end (with it all to lose...), and then make my trades based off that information.

Is there any reading or videos that you would recommend to me to 1) understand these cycles better (generally speaking) and 2) to identify where each of the majors are in their cycle at this current point.

Thanks
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#2
There are 2 ways at looking at this with one being a little harder to research. Generally the cycles can be gauged by government debt and rates. Cycles have a trough (lowest point of a recession) where rates will be their lowest. The next stage is the recovery phase which is where the majors are synchronously forming (this is where growth and leading happens). Eventually an economy will hit levels of growth that lend risk to price stability and this is where rates will be at their peak (building up throughout the growth phase). Finally there is the recession phase where rates fall and government debt tends to become more popular(emerging markets tend to offer greater yield but you can't put all your eggs in this basket)

The other way to look at this is long term and short term debt. Short term debt aligns with economic cycles while long term debt aligns with major disruptions and prolonged recessions. During growth, economies accumulate short and long term debt (at different rates). When debt becomes more expensive lending subsides and recessions generally happen. Long term debt accumulates over many cycles and eventually leads to a point where short term debt cannot be afforded and then you get a deleveraging cycle which is a very deep recession akin to the 2008 crash (rare but happens although 2008 was triggered by bad lending practices)
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#3
I should point out that the last 10 years have been abnormal. We have had 10 years of low rates and now have a major debt bubble. Central banks and government lending are going to have to work very hard to allow a clean deleveraging of this debt or we could slip into a crisis that will dwarf 2008
 

tomorton

Legendary member
Feb 28, 2002
7,090
922
#4
Interesting to see where each national currency is on a scale from very hawkish to very dovish in terms of respective interest rate changes. e.g. have a look at this at places like dailyfx.com where they chart this on a graphic called "perception of monetary policy standing" - see John Kicklighter's video clips such as this recent one
.

I say "interesting", not sure if its vital for short-term trading. Depends on your strategy.
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#5
 

piphoe

Legendary member
Oct 31, 2015
10,049
194
#6
do you want to be an economist, or you want to trader?

pick: economist, really cushy job. your never proved WRONG :D
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#7
do you want to be an economist, or you want to trader?

pick: economist, really cushy job. your never proved WRONG :D
If he is looking to trade fundamentally then he needs to understand this stuff. You don't need to be an economist but do need to understand how it all works to pick out the short term opportunities.
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#8
oh ya??!! my chart IS my "economist"!
Can your chart tell you that a specific data point is about to be released and whether it's a good opportunity to trade or what pair to trade in order to gain the best opportunity? Doubt it. All your charts can tell you is hindsight.
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#9
is your economist rich?
I don't have an economist so your guess is as good as mine. What I can tell you though is every professional forex trader I have engaged with at investment banks and hedge funds trade fundamentally and they all own multiple properties globally and regularly switch between high powered sports cars. Show me a single trader playing with only charts that replicates that success! Doubt you can.
 

piphoe

Legendary member
Oct 31, 2015
10,049
194
#10
I don't have an economist so your guess is as good as mine. What I can tell you though is every professional forex trader I have engaged with at investment banks and hedge funds trade fundamentally and they all own multiple properties globally and regularly switch between high powered sports cars. Show me a single trader playing with only charts that replicates that success! Doubt you can.

i can't. i am not a professional. if YOU are god bless you
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#11
do you want to be an economist, or you want to trader?

pick: economist, really cushy job. your never proved WRONG :D
This is a good example of someone that doesn't understand how trading fundamentally works. It's not about prediction models that economists use. Trading fundamentally for the short term is about trading events where new information drives the pricing in of that information in context to the bigger picture. Trying to compare this with an economist is nonsensical.
 

piphoe

Legendary member
Oct 31, 2015
10,049
194
#12
This is a good example of someone that doesn't understand how trading fundamentally works. It's not about prediction models that economists use. Trading fundamentally for the short term is about trading events where new information drives the pricing in of that information in context to the bigger picture. Trying to compare this with an economist is nonsensical.
start a poll..almost everyone here is trading off a chart or two vs "fundamentals"...

whatever that is :cool:
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#14
start a poll..almost everyone here is trading off a chart or two vs "fundamentals"...

whatever that is :cool:
Why would I place any credibility on a poll made up of a segment of trading that has 90 to 95 percent unsuccessful traders? Just look at this site for example. Over 340k people have registered on it over the years and we have about 100 active accounts currently (adminis might be able to quote the real number but is suspect they are not allowed to as it will represent misguided information on the landing page to newcomers)!
 

FXX

Experienced member
Oct 12, 2017
1,135
181
#15
almost one here is trading off your geopolitical crap
LOL do you realise that geopolitical is just a small facet of fundamental trading!

Anyway, calling it crap in whatever your misguided understanding is really speaks for itself. I guess that makes all the institutions crap as well.