Today, I spent time looking at monthly charts. I think that it is actually the best way to learn about the market, and how it works. Surprisingly, every chart has a beautiful story to tell. And good thing is, I naturally love history. I have always loved to visit historical places.
So what have I learnt today? The biggest movement in markets is actually the ambitions of the governments and their central banks. What they plan, and announce they will do, will have the biggest impact that could last for many months.
Take a look at the chart about. Due to my weak knowledge of the economy, I will only point out 2 obvious movements in the JPY/USD Monthly Chart.
- USD slide from 2007 onwards to 2012, as 2007 is the start of the their QE program.
- Around close to 2013, Japan's Abe announces that the JPY is too strong, and wants to weaken it.
Above is the UK pound vs US$. The crazy slide in 2008 is due to Gordon Brown's policy to devalue the Pounds, in an effort to prop up their economy.
If you know the intentions of different governments, you will have hell a lot of an easier time. Looking only at short term charts might drive you mad, as there are many instances that some short term happenings, rumors or announcements will bring your trade to a Stop Loss.
The point is that is it good to know the bigger picture. If there is an announced intention of a country's governments, it is better to start shorter term trading in the same direction.
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