Your Trading Process Is More Important Than The Asset
Whether we are trading commodities, equities or fixed income securities, what we trade really isn’t important because the fundamental process remains the same.


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We have a great question here from Niroshan who asks how to trade other currency pairs like the USDMXN or the USDZAR etc, asking how we can get relevant fundamental news and details on exotic pairs like these.

Thanks for the question Niroshan, I think this is a fantastic question and I think it really has more to do with a trading process than it is the asset or security that you are trying to trade. It comes down to the process we follow by looking at any asset from a fundamental perspective.

You see, whether we are trading the major currencies, emerging market currencies, whether we are trading commodities like Oil or Gold or whether we are trading equities or fixed income securities, what we trade really isn’t important because the fundamental process remains the same for all of them, so as long as you have a process for evaluating, from a fundamental point of view, whether a particular asset is cheap or expensive it doesn’t really matter what it is that you want to trade, the process remains the same.

We always look at the specific country’s economic performance, we look at monetary policy and see where the central bank is right now and where the market thinks it is going, we look at geopolitics that might have an impact on that particular country’s currency, we look at fiscal policy in those countries, and then we also look at intermarket analysis, for example if you are trading the NOK, you need to know that the NOK is a petro-currency, if we take a look at a website like and we lookup Norway we can see that they are very dependent on Petroleum Gas and Crude Petroleum, so from an intermarket analysis that tells us two things, firstly it will be sensitive to drastic changes in the oil price and secondly due to it’s massive dependency on commodities it will carry a higher beta which means it will also be sensitive to overall risk sentiment.

On that note, it’s worth noting that there are certain additional sensitivities to emerging market currencies and their equity markets, and that is that they are very sensitive like we just said to risk sentiment due to their higher beta, but they are also very sensitive to the US Dollar, remember when you borrow in Dollar’s, like most emerging market countries do, and the Dollar suddenly goes up in value it puts massive amount of strain on you because it means that your debts are getting more expensive to service. Also, keep the Dollar’s implication on commodities in mind with emerging markets, if the Dollar is expected to appreciate that will place pressure on Commodities, and if an emerging market economy is very dependent on specific commodities then a big Dollar appreciation places an additional stress on the country and it’s currency and will thus be reflected most probably is softer monetary policy.

Another thing when it comes to emerging market currencies is that geopolitics can play a massive role. A very good example has been Turkey’s Lira which has been on a massive downward slope ever since President Erdogan took away their central bank’s independence and forced his own views onto the bank and made sure he puts a family member in charge of the central bank, that meant that the market lost complete faith that the central bank will be able to do what it needs to do, and that is hike interest rates, because Erdogan kept them from doing it. Now, taking a look at the USDTRY today you can see the massive downside today is on the back of President Erdogan saying that he gives his full support to the new central bank governor and the finance minister and could mean that the president will step out of the way and allow the central bank the independence it needs to function properly.

As fundamental global macro traders we look at all the factors that could influence an assets expected value and we try to exploit those opportunities accordingly, whether it’s oil or stocks or currencies doesn’t matter, the process remains the same.

And the great thing is that even though we don’t have the same type of in depth analysis in the terminal for the emerging market currencies like we have for the majors, the process stays the same and the squawk and news feed will still provide any breaking and incoming news for these currencies.


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