Dirty Shirts & Forex Trading

Focus: FOREX

Rick Wright Image Rick Wright Instructor, Online Trading Academy

When forex traders ask which currency pairs are the best ones to trade, and they are usually advised to trade a strong currency against a weak one, but Rick Wright of Online Trading Academy says that sometimes it's not so easy to tell the strong from the weak.

Hello traders! You know it. I know it. It seems as though most people don't get it. The economies of the major currencies out there are in bad shape. If you listen to the talking heads on the major business channels on television, things have turned the corner and are getting better. "The stock market is at multi-year highs!" they will say. While this is true in some cases, it doesn't take a PhD in economics or mathematics to understand why.

With the major central banks printing money out of thin air-actually not printing, but just adding a few zeros to their Excel spreadsheets-this money has to go somewhere. Where on earth would you put that extra money to work? Since most major currency bonds pay a GUARANTEED loss when inflation is counted, why not pour money into the stock market? It's been going up, might as well jump on that bandwagon!

So why would a central bank print more money? The idea is to weaken their currency enough vs. the other major currencies to spur on economic growth in their local markets. The weaker the currency, the more exports the country should have, inspiring job creation at home. The stronger the currency, the cheaper imports will be-which would be good for consumers when they go shopping, but not so good for job creation.