Sometimes, we easily get lured into believing something out of rumors. Or, you have too much money and you just trade based on what others believe to be a good trend.
In this episode of Truth About FX, Walter discusses the fundamental analysis and the rationale behind the decision on whether you should or should not buy a currency. He outlines the biggest influence that might lead you to making wrong decisions: rumors. Should you go with what others say a profitable trade or should you stick with a system that you’ve already tested and proven to be effective for you?
Download (Duration: 03:14 / 3.71 MB)
In This Episode:
00:25 – an old question
01:06 – rumors behind it
02:18 – who is making the real money?
03:05 – a word of caution
Tweetables:
It’s better to stick to a system that you’ve already tested.[Click To Tweet].
You have to decide for yourself. [Click To Tweet].
Demand can be created and manipulated too. [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Hi, Walter! This is an old question but I know it comes up once in a while. Is it worth buying Iraqi Dinars/IQD?
Walter: This is an interesting one. The other one that I hear a lot of is the Vietnamese Dong/VND. I don’t know if you’ve heard about it.
Hugh: Yeah.
Walter: The idea is that there’s going to be some sort of shocks in the market. Basically, they’re sort of differ and what will happen is the IQD or the VND is going to skyrocket up in value so you should go ahead and grab them while you can.
That’s the idea here so I stay away. To me, that’s more of a fundamental analysis sort of thing and I understand the thinking behind this. There’s also a lot of like just rumors and stuff.
I know a guy who bought a bunch of stock and we all know probably people who bought stock out of rumor — you know, the penny stock is going to triple or ten times or twenty times — that didn’t work out well for him.
These sort of things, his stocks went from eleven cents to one. You know what I mean? These things are like that. To me, if you have an extra, some money, and you want to throw in the IQD and hope that something happens, I guess go for it.
To me, it makes more sense to trade a system that you’ve verified, that you know works. You’ve back tested it and you have confidence in it because you know that’s a known quality.
Whereas, try to anticipate shocks to the market or changes, those sort of things are really difficult to do even if under the best of circumstances. So, I would say it’s not worth it but I guess every trader would have to decide for himself.
Hugh: Well, at least when I first heard about them, the theory was that they’re going to get new IQD and one dinar is going to be worth one USD and is going to parody. If you bought a million, you’re going to be a millionaire or whatever.
I agree with that. It’s just too much of a risk and I think the only people really making money with that are the brokers and the banks where they’re doing the transactions.
Walter: If you think about it, usually these rumors are circulating around currencies like the dinar where there’s not really a lot of demand for it. It makes sense and it’s the same thing that happens in the penny stocks.
If anyone here listening has traded in penny stocks, you know what the game is. This people will talk up these penny stocks and then they’ll get enough people buying it ‘till the price goes up and they dump it.
They’d shouted it up, talked about it, and then they’ll actually dump it. They’re doing the opposite that they’re telling the people to do because they know that’s the best way to make money.
To me, it’s not worth it. To me, the known quality of trading a system that you know is going to work for you is probably a much better idea. I guess some has to decide for themselves.
Hugh: Yeah, exactly. Thanks for the word of warning, though.
Walter: Alright. We’ll see you next time.
Hugh: See you.
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