FX Gold Standard
| 26 April 2009
On Gold Standard A Brief History
To provide a brief history of the period when the Gold Standard was the primary means of measuring the economic conditions of a country through the fixing of their domestic currency in terms of a specified amount of gold holdings.
The US had the Bretton Woods System in place in the mid 20thcentury. Although it was enacted in 1946; the main feature of this system was that the United States adopted a monetary policy that maintained the exchange rate of the dollar in terms of a fixed value versus gold. This was a monetary management that establishes the rule of commercial as well as financial relationship with other major countries that the United States has as trading partners. It ended in 1971 when the United States unilaterally terminated the agreement that it had signed converting US dollars to gold. With this as the lead policy the US Dollar became the reserve currency for goods and services worldwide. It is a practice until now that the business economy of the world has set as the standard.
FX Gold Standard Introduction:
Considering the length of three (3) decades of trading the foreign exchange market as a group of independent investors who basically started as early as 70s. And for some reason, the group has managed to continue up until the present time. Something must be right! During the course of previous trading it was imperative that certain technical and fundamental combinations were made which delivered good and not so good trades. It was not only a matter of risk tolerance and exposure but also strategies made in actual trades.
As early as the eighties (80’s) the most prominent trading systems available were CompuServe, Telerate and of course the Reuters dealing system where all inter bank related trades and orders were placed. There are some technical systems in the market that are being introduced as reliable trading tools. The prominent charting system was done in line and bar formations that reflect overlay indicators relative to the commodity or currency involved. Although the charting technique called the ‘Candlestick Theory’ was already being used in Asia as far as the team could remember.
In essence, the FX Gold Standard was coined after years of careful deliberation, analysis combined with specific technical tools that were being applied in trading the market. It was applicable to both the commodity futures trading and the financial markets. This also was the turning point when the continuing chart was developed for the financial futures contracts whenever each contract month expires in relationship with the spot prices in the foreign exchange market. This is thoroughly explained in the book on how this was conceived and then applied in trading. It is amazing that this one has been overlooked for so many years and which gives a future indicator of how the prices would be reacting before and after each contract month is done.
The FX Gold Standard basically means that this is a trading process that methodically follows certain price parameters, movements / behavioral patterns not recognizable in a regular trading session. The combination of specific technical combinations other than the most widely used technical tools, number of trading days and sessions to properly set the time of entry and exit points. It also shows and explains the co-relationship between the spot and futures prices, what they mean and how it affects the price movements. The volume, open interest, price comparisons that determines the trend of the market is also considered in the equation.
These are just some of the highlights of the techniques that is being religiously followed. The FX Gold Standard process benefits the client/ investors more as they are made aware of what are the strategies accessible to them that would simply control and manage the inherent risks of trading these highly volatile market. Trading systems are simply tools of the trade, but the mindset and thought process can never be formulated in a simple or complex algorithmic formula. Otherwise everyone trading in this market is already a multi millionaire. AI or artificial intelligence is still in the development process until the day comes when trading signals can equate to guarantee returns on investment by more than a 100% return.
Although the finer results of this method only came in the mid 90’s when the applied system generated tremendous results especially during the major rally of the US dollar and the stock market plus the momentum and volume of the dot com era that gave fuel to the major trend. And then the unavoidable happened when the market started to turn around on the down side which the research group decided to forego the opportunity. This is what we call control and not greed. Can you equate that in a trading formula?
Comparing broker services and trading platforms does not guarantee good trades. Some even go to the extent of providing manage accounts and show all the excellent returns that has been generated from the past performances. And rating them by votes as to services provided does not constitute an FX standard but only if these brokers / trading managers be able to satisfy the clients’ goals and objectives without hurting the lifestyle. One must determine what is the standard trading in the Foreign Exchange market that would deliver a decent amount of return for an investment.
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