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The Nature of Currency and the Stock Market

Aug 17, 2007
Currency and currency investments change just as the trends in the stock market do. There are currencies which perform better in the stock market then others. There are several issues to take into consideration when choosing which currency you should trade with.

The most important points are the volume of that currency and the liquidity. These are both important because it will increase how quickly you can sell to ensure high profits or low losses. The most commonly traded currencies besides the American Dollar include: Japanese Yen, Swiss Franc, British Pound, and The Euro.

If you are a long term investor, a day trader, or a causal personal investor all these currencies have good liquidity, good trend performance (short and long term) as well as daily peaking for day traders.

While the focus by financial experts are usually on the big three: Euro, Dollar, Yen. There are other considerations which can increase your profits for the short term and offer solid long term trends.

The activity of a particular currency can not be a guaranteed an indicator of future performance is past performance. Below are a list of currencies and they associated "personality" in the stock market:

British Pound - The British Pound has a much smaller volume than the Euro or the Yen. This means short term trading with the British Pound needs to be kept to a minimum. Low opening interest rates combined with small volumes can cause unstable price spikes. However, the British Pound does very well in long term investing.

The Euro - If you are interested in and new to trading currencies, the Euro is the place to start. It has good volume, a high open interest, and is volatile enough that it can offer profits to the day trader.

The increasing popularity of the Euro makes it extremely safe to trade with it. The Euro is good for experienced traders as well as new investors.

Japanese Yen - The Japanese Yen is good for any long term investing. It can offer volatility for the day trader but it is much more erratic in it's daily behavior then the Euro and therefore much more unpredictable. The volume and interest is also high.

Swiss Franc- The Swiss Franc is similar to the British Pound - thin volume and low open interest. It's future viability is unknown because the Swiss economy is slowly becoming integrated into the European economy. It does have good long term growth which is ideal for any currency investor looking for long term trends.

Day trading with the Swiss Franc is out of the question, the volume is too low and there are no substantial daily spikes to make it worth while

Australian and Canadian Dollar - Both currencies are great for long term trading because each has low volume, low opening interest, and large price spikes. These currencies are good consideration if you are a currency trader and are seeking diversification away from the larger more commonly traded currencies.
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