Stock Market Falls

Stock markets and other financial markets took a dim view of the future today (Oct. 6, 2008) with the Dow Jones Industrial Average falling below 10,000 for the first time since 2004. Credit markets remain strained and investors are wondering if the $700 billion dollar bailout will not work quickly enough to unfreeze credit markets. The credit crunch is starting to affect the average wage earner causing a crisis of consumer confidence.

Banks made bad bets on mortgage backed securities and are saddled with these securities and remain starved for cash. Stocks have taken a beating in the US, Europe, and Asia causing investors to seek the relative security of US government debt and the rising dollar continues to provide Forex opportunities. Oil dropped to below $90 dollars a barrel due to fears of a global recession.

Massive Sell Off

Said Ryan Detrick a strategist at Schaeffer’s Investment Research, “The fact is people are scared and the only thing they’re doing is selling, Investors are cleaning out portfolios and getting rid of everything because nothing seems to be working.” Selling was so intense that only 98 stocks rose while 3,092 dropped on the New York Stock Exchange.

The decline on Wall Street is an indicator that most investors believe that both the US faces a prolonged economic crisis that is swiftly spreading to other nations. Despite the fact that the yield from US Treasury Bills slipped from .50 to .42 many investors are seeking the relative safety of T Bills. Investors seem more concerned with safety rather than returns. Investors interested in Forex opportunity are taking advantage of the safety the US dollar is offering on volatile currency markets.

Negative Indicators and Forex Opportunity

The US economic news reveals several negative indicators such as rising unemployment and reduced consumer spending. All indicators point to a prolonged crisis. There is one market that allows profits to be taken even in rough economic times and that is the Foreign Exchange or Forex. In the foreign exchange market, there is no short selling restriction. There is potential for profit in currencies regardless of which way the market moves. The Forex market also allows more leverage than traditional stock markets. Margins on Forex markets can be as high as 100 to 1. That means that for every $1,000 invested the investor controls $100,000 of currency providing plenty of Forex opportunity.

Currencies are always traded in pairs and the average investor and currency pricing reflects supply and demand. Readily available information such as the leading economic indicators of a country reflects the economic health of a nation and determines the worth of a currency on Forex markets. All this information is easily found on the internet giving the average, or small, investor the ability to make trading decisions accordingly.

Forex and Portfolio Diversity

Trading Forex can add needed diversity to a portfolio. Forex traders need education, patience, and discipline. There are many currency converters readily available online and many firms offer their own electronic trading platforms. Barring a global calamity, currency does not lose value but fluctuates mildly and Forex trading is perfect for those who feel uneasy about the current stock market crisis. Using all that education, patience, and discipline can provide Forex opportunity not available in other markets.