How to know how much a “pip” is worth for any pair!

Many times, newer traders ask me how they can find out how much a “pip” is worth for any pair. Some will refer to these as pip “costs”, others will say pip “values”, etc. but it’s all the same thing.

They all want to know, if my pair moves up one increment or down one increment…how many dollars does that equate to?

Here’s the simple answer. It’s automatically calculated for you on your trading station. You can view this on the “Advanced rates” which is the default setting..OR…you can view it on the Simple rates” tab.

See both of them below.

I’ve circled (in each format) where to find the pip cost/value for a pair. Notice that any pair that ends in USD (ex. EUR/USD, GBP/USD, NZD/USD, etc.) all have pip values of $1.00 per standard mini lot. Had this been a micro account, then the pip value would be 10 times less or .10 (10 cents) per pip of movement (since a micro lot is ten times smaller than a standard mini lot).

Remember, that a standard mini lot = 10,000 units of currency and a micro lot = 1,000 units of currency.

So the pairs that end in something other than USD (ex. EUR/CHF, USD/JPY, EUR/AUD, etc.) will have pip values that change slightly over long periods of time.

However, you can easily see what a “pip” is worth in that pair BEFORE you place your trade since it’s conveniently located on your quote screen.

This is important to note because there’s a big difference in EUR/GBP’s pip value of $1.66 and EUR/AUD’s pip value of .84 (84 cents).

So one pip of movement for or against you in EUR/GBP is +/-$1.66. However, in EUR/AUD this same amount of movement is +/-$0.84 (big difference, dollar wise…yet the same amount of pips moved). Click on the charts to enlarge them.

Sean Hyman

P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.php

Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account

It appears the Swiss keep “raising the floor” on the EUR/CHF trade!

Okay, I realize that this isn’t the only pair out there. However, it is likely the ideal candidate right now as it likely has much more upside potential than downside due to the constant intervening of the SNB - Swiss National Bank (Switzerland’s central bank).

Also, keep in mind, the trend is now upward recently…and no longer downward. Being that the EUR/CHF is one of the more widely watched/traded pairs by institutions (which produce such enormous volume for a “cross pair”), it won’t be long before their automated “trend following” programs kick in and aid the central bank’s efforts.

And…it appears that the SNB keeps going into the market and selling francs “sooner and sooner” all the time. See how it continues to “raise the floor” for the EUR/CHF pair. Click on the chart to enlarge it.

Sean Hyman

www.forextradingblog.com

P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.html

At the “Economic Turning Point”?

If we’re at the “economic turning point” as I believe we are…then that will be bad for the dollar, yen and Swiss franc but will be particularly good for those currencies that tend to be influenced by inflation, commodities and risk taking…which would be the Aussie dollar, New Zealand dollar, Canadian dollar and British pound…and arguably in that order.

As an additional note, if this is true…then the natural course of “Swiss franc weakness” may kick in and help the Swiss central bank out with a weaker franc. They’ve been proactively “selling francs” but there may come a time (and we could be there now) that the market actually kicks in and “aids” their intervention efforts for a weaker franc to the euro in particular. If so, between their collective “franc selling” and the market’s turning point…it could bode well for those that are long (buyers of) EUR/CHF. The Swiss are attempting to put in a floor on the EUR/CHF pair around 1.50-1.51. So anytime it gets to around the 1.51 region, one could go long the pair with a wide stop and low number of lots and probably experience a good “upside to downside” risk ratio.

I’ll also note that, so far, the Swiss have been able to reverse the daily downtrend on the EUR/CHF pair and have “held the line” quite well so far. You can look at it from most any aspect you wish and it still holds true. The pair is technically above its downtrend line, 50 SMA, 200 SMA, etc…all of which are bullish for the EUR/CHF pair. See the chart below. Click on it to enlarge it.

Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.html

Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account

Sean Hyman

www.forextradingblog.com

British Pound “Pauses for Breath” [Part 1 of 2]

After a nearly 20% rise against the Dollar, the British Pound has been rangebound for nearly the entire month of June, with one columnist likening the situation to a “pause for breath.” For him, this amounts to a temporary cessation on the Pound’s inevitable upward path: “Compared to long term levels, the pound was still better value than its peers. He said: ‘It’s still cheap - about 10% below it’s trade-weighted average at present.’ ” For others analysts, however, the picture is not so cut-and-dried.

Forgetting about purchasing power parity for a minute, there are numerous factors which could halt the Pound’s rise. First and foremost is the British economy, which is still struggling to find its feet. “The U.K. economy will recover ‘mildly’ next year, according to the OECD, compared with a previous projection of a 0.2 percent contraction. Gross domestic product will drop 4.3 percent this year, versus a March forecast of 3.7 percent.”

Some economic indicators have begun to stabilize, but the two most important sectors, housing and finance, are still wobbly. Economists warn that “any recovery could be slow and uneven because banks are still unwilling to pump loans into the economy.” In the latest month for which data is available, mortgage lending slowed to a record low, with consumer lending not far behind. With regard to housing,”The annual fall in house prices in England and Wales slowed for a third consecutive month in June, according to property data company Hometrack, but prices were still 8.7 percent lower than a year ago.”

There is the possibility that the BOE’s quantitative easing plan and the government’s fiscal stimulus will provide the economy with the boost it needs. At the same time, both programs will have to be reined at some point, sooner rather than later in the case of government spending. With UK national debt predicted to reach 90% of GDP by 2010, “Most people - the prime minister excepted, apparently - believe that taxes will have to rise and/or public spending fall after the next election. This would at least threaten to hold back economic activity.” Not to mention that both QE and government spending could actually backfire and generate inflation without economic growth (i.e. stagflation). BOE Governor Mervyn King captured this overall sentiment, when he said, “I feel more uncertain now than ever. This is not the pattern of a recession coming into recovery that we’ve seen since the 1930s.”

In short, from a purely economic standpoint, it doesn’t look good for the Pound Sterling. But of course forex is about much more than GDP…stay tuned for Part 2, in which I’ll elaborate on this point, and bring interest rates and inflation into the discussion.

G-8: Thinking of reversing $2 Trillion in Stimulus!

This past weekend, the G-8 (Group of Eight - 8 largest industrialized nations) met and started the talks that will eventually reverse the $2 trillion in global stimulus. Of course, they aren’t about to start this process yet since it was just their Finance Ministers at this meeting…but they were setting up the process for when their central bankers will gather in early July (10th - 12th). Why is this important? Because if these central bankers are comfortable enough in talking about reversing the stimulus, then it means that they really think that the global economy is close to being able to stand on its own two feet once again. If this is the case, it will end up helping riskier currencies in the long run (AUD, NZD, CAD, GBP, etc.) and will hurt the defensive currencies that benefited when the world was falling off of a cliff (USD, JPY, CHF). Now this effect will not be immediate. In fact, the dollar and yen are gaining a bit as of this writing. But after a good pull back, look for the trend to return towards “risk seeking” and not back into the defensive mode as we had before. My top picks, of course: AUD/USD and AUD/JPY to benefit the most…as the G-8 acknowledged the rise in commodities as the global economy is recovering.

Why Forex Trading Beginners Fail in Choosing a Method that Works

Often, Forex beginners have a method complexity syndrome that separates the independent and the dependent minded ones. Finding themselves research trading methods, purchase and immediately do it, without carefully choosing to consider many factors such as risk management, discipline and psychology. Trading beginners tend to be dependent minded this way, which is very dangerous for [...]

Is Day Trading Easy?

by Hass67
Many ordinary people want to try day trading from the comfort of their homes. Do you know this fact that most fail. No more than 10% succeed at day trading in the long term. Are you interested in day trading? Than read on what it takes to be a good day trader.

Day trading is not a hobby. Day trading is a job. Dont forget day trading can be stressful.

To be successful at day trading, think that you own a small business. Think that you are the boss and you call the shots. You need a lot of discipline in day trading.

You will be wholly solely responsible for successes and failures in day trading. If you are an independent sort of personality who wants to control your destiny than day trading is for you.

Day trading only requires a computer, a good internet connection and an account with a brokerage firm to start with. In day trading you need to understand how to use software to develop and refine your trading strategies. If you are comfortable in understanding and learning technology, day trading is for you.

If you have always been fascinated with the financial markets and how they move than day trading maybe for you. Markets are amazing. If you enjoy watching CNBC than day trading is for you.

If you have never opened a brokerage account, purchased stocks or invested in mutual funds than day trading is not for you. So you need prior investing experience to succeed with day trading.

Day trading has a potential for loss. If you understand trading systems, strategies and money management principles than day trading is for you.

If you are a decisive and a persistent personality in everyday life and you can afford to commit to your trading daily than day trading is for you.

Day trading is stressful. Markets gyrate with news events that no one can foresee beforehand. Markets are ruthless. If you are psychologically strong and know you strengths and weaknesses than day trading is for you. Forex markets are best for day traders.

About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading; stocks and forex. Read about Trend Forex System. Best Forex Signal Service. Learn Forex Trading.

Forex Trading Training: Trainings That Can Lead To Successful Trading!

It’s true that no one in this world is born with a good understanding of the forex trading’s ins and outs. Now, although it might be true that personality traits combined with experience will help you get its concept a lot faster, the fact is that every one needs to have the proper training if they are to make good profits in the niche of forex market. Nowadays, many types of trainings are being offered to traders, which makes it harder for them to know which one is best for them. If you go to the Internet, what you’d find are websites, blogs, e-books and articles that provides trainings, so you, as the trader, would think that the everything you need to know in trading can easily be gained just about anywhere!

True that these free systems and e-books can be found with ease online, a number of them are outdated and will give you a little chance to succeed in trading. So if you are a beginner in this kind of business, you will be having a hard time figuring out which ones to put your trust in. Even the best online e-books will not give you everything that you need to know, as they only focus on strategies which don’t fit your situation. You might have saved money on trading in the process, but the end point here is that those savings will be lost time and time again once you plunge yourself in real trading.

For this, it is good to sign up for a formal training through a membership site, which will be headed by a trading group or a forex trader whose been on the trenches for a very long time now. They will provide you with a step-by-step process that you can follow from being a newbie to a knowledgeable trader. Newbies are usually lured to the thought that forex will give them fast and easy money, but the thing is that most of them really don’t have any idea at all about the whole thing when they start with it. You see, it’s great to have something that will teach you everything and that will also be able to answer your questions in trading.

Formal training programs have their own forums, where you can discuss your own ideas, strategies and results with your fellow traders (which is also a great way for you to learn more). A lot of forums are worth the cost of the membership fee, and others will stay as members just so they can be exposed to the experiences and knowledge of other traders. Solid trainings is most unlikely to be offered for free, except maybe at the most basic level. If what you want is just to experiment with the market, never caring too much about winning or losing in the process, then you may go for a free training. Free trainings serve as teasers by websites or brokers, hoping that you’ll join them as a paying member, wherein you can pick up top level tips. Free reports from the experts is really much more useful compared to an e-book that’s worth $20.

So, for the forex trading training that you’d be choosing, make it a point that you’d follow it thoroughly, without skipping any steps just to make money directly (remember that this could be a bad thing for you if you do!). Test out the systme that you’ve learned, then you can either do small trades or avail for the demo account. To earn good profits in trading, just keep in your head all of the knowledge that you have gained in the trainings!

Forex Scam: Tips That Can Help You In Knowing The Real Scam

The forex market is a niche that involves money, so you, as a trader, should be able to discern if what you’re looking at is one of those scams or not. This is a niche wherein deceitful people have a lot of opportunity to make money by using fraud as they launch a forex scam. In this article, you’ll be given hints as to what identifies a real scam.

Those with exaggerated claims…

It is in the nature of websites promoting forex products or services to appeal to your wishes as a trader to make lots and lots of profits and money. There’s no question with that, but once they promise you that you can earn millions in just one night… then that’s a scam that you need to look out for!

Screenshots that show great earnings on trading accounts…

Websites promoting forex products commonly provide images of their own trading account results in order to convince the people of the ability of their system to make money. People who make scams will fake their screenshots using graphics editing programs such as Photoshop, which makes it impossible to tell whether it’s a fake or not. Even if what you see is really genuine, do not pay any attention to it, as you will never know what kind of system that person is using… and those systems might not work for you as well.

There’s no guarantee offered…

A genuine forex product always offers an easy to avail money-back guarantee. What you should be looking for is a no questions kind of guarantee instead of those that say that you have to follow a set of instructions before you qualify for one. For downloadable products like EA’s (expert advisors) and e-books, trust those that are sold by the vendor Clickbank for refunds, as they are the one who handles those kinds of transactions (within 58 days of the purchase). Choose those membership sites or services that you can cancel anytime without taking any charges, and you should never sign up for a scam that binds you to a 6-month or 12-month contract.

Bad press in the forums…

Forex products will show you the testimonials and recommendations that the satisfied customers has given them. In order to be sure that such claims are authentic, you can always ask for proof: remember that a good and honest business always finds a way for you to contact those people who made such testimonials and recommendations. Also, look at what the unsatisfied customers are saying about the product (which is always present for any kind of product, no matter how good it is). You see, going through these customers’ opinions and comments (which is available in the online forums) will help you in judging the product’s credibility, whether it is a forex scam or not.

Forex Books: Picking The Best Ones For Trading

Forex books are useful tools in dealing with the forex market, especially if you are new to currency trading or a trader who aims to improve your skills in the business. A wide range of resources are available for the trader: conferences, seminars, forums, online courses and sessions with the trading experts. As helpful as these resources are, there are just times when a good book is just the thing you need. These are convenient means (as well as cost-effective ones) of learning in any kind of circumstance.

Forex books has its advantages for the trader: you can open it anytime and anywhere you want, re-read it whenever you want, repeat advanced passages and exercises as often as you need it until you absorb everything you need to know, and also schedule training sessions in your own chosen time. It can also save you time by skipping over the strategies that you already know, as going over the basics again and again (just like what happens in seminars, audio and video sessions) will just be a complete waste of your time.

Forex books are being published almost on a weekly basis, so it’s good to know what you should look for and which one to buy. You need to be very careful not to fall for scams and hypes, as you are dealing with a market that involves money. Always remember the old rule: if it sounds like it’s too good to be true, then it probably is a scam!. Also, don’t be too quick in making bad judgments just because the books are being promoted with hard sell (the copy might have been written by a professional copywriter, not by the author).

So, before you purchase any of those forex books, there are three things you need to consider: first, the areas of expertise covered in the book; second, if the book suits your level of experience and skills in the business; and third, the benefits that you can gain from those books.

Choose those forex books that are logical and reasonable, packed with professional presentation and editing (not those things that are just full of hypes!). Before buying a forex book, you should check out the book title and the author online, so as to determine whether or not the book has good information for trading, and if the author himself is a successful trader. The buyer’s reviews are also great references, as these will help you to discern if the book is right for your level of experience or not.

The Benefits Of FOREX Over Futures

From Agricultural Products To Financial Instruments

The current futures market includes much more than agricultural products. It is a worldwide market for all sorts of commodities, including manufactured goods, agricultural products, and financial instruments such as currencies and treasury bonds. A futures contract states what price will be paid for a product at a specified delivery date.

When the futures market is played by speculators, the actual goods are not important and there is no expectation of delivery. Rather, it is the contract itself that is traded as the value of that contract changes daily according the market value of the commodity.

Win Or Lose

In every futures contract there is a buyer and a seller. The seller takes the short position and the buyer takes the long position. The futures contract specifies a buying price, a quantity and a delivery date.

For example: A farmer agrees to deliver 1,000 bushels of wheat to a baker at a price of $5 a bushel. If the daily price of wheat futures falls to $4 a bushel, the farmer’s account is credited with $1,000 ($5 - $4 X 1,000 bushels) and the baker’s account is debited by the same amount. Futures accounts are settled every day.

At the end of the contract period, the contract is settled. If the price of wheat futures is still at $4, the farmer will have made $1,000 on the futures contract and the baker will have lost the same amount. However, the baker now buys wheat on the open market at $4 a bushel — $1,000 less than the original contract, so the amount he lost on the futures contract is made up by the cheaper cost of wheat. Similarly, the farmer must sell his wheat on the open market for $4 a bushel, less than what he anticipated when entering the futures contract, but the profit generated by the futures contract makes up the difference.

Profit In Speculation

The baker is still, in effect, buying the wheat at $5 a bushel, and if he hadn’t entered into a futures contract he would have been able to buy wheat at $4 a bushel. He protected himself against rising prices, but he loses if the market price drops.

Speculators hope to profit by the daily fluctuations in the futures market by buying long (from the buyer) if they expect prices to rise, or by buying short (from the seller) if they expect prices to fall.

How FOREX Differs

The foreign exchange market (FOREX) has several advantages over the futures market.

More Liquid. FOREX is a more liquid market — as the largest financial market in the world it dwarfs the futures market in daily exchanges. This means that FOREX stop orders can be executed more easily and with less slippage. The FOREX is open 24 hours a day, 5 days a week. Most futures exchanges are open 7 hours a day. This makes FOREX more liquid and allows FOREX traders to take advantage of trading opportunities as they arise rather than waiting for the market to open.
Commission-Free. FOREX transactions are commission-free. Brokers earn money by setting a spread — the difference between what a currency can be bought at and what it can be sold at. In contrast, traders must pay a commission or brokerage fee for each futures transaction they enter into.
Instant Transactions. Because of the high volume of trading, FOREX transactions are executed almost instantly. This minimizes slippage and increases price certainty. Brokers in the futures market often quote prices reflecting the last trade — not necessarily the price of your transaction.
Built-In Safeguards. Debits in futures are always a possibility because of market gap and slippage. The FOREX is less risky than the futures market because of built-in safeguards in the trading system.

How To Select A Forex Broker

If you’re thinking of trading FOREX, you’ll need to set up an account with a FOREX broker. Most traders use a broker to handle their transactions. It’s easy to feel overwhelmed by the volume of brokers offering online services. Before selecting a broker, it’s best to take the time to carefully research your options. Become knowledgeable about the available services and the fees charged by various brokers.

Brokers are the people or companies that buy and sell orders according each investor’s selections. Brokers make their living charging commissions or fees for their services.

You could, of course, attempt to decide on a selection of online brokers by getting in touch with their Internet help-desks and see how promptly they respond to your inquiry. You can check out whether their answers to your questions satisfy you. Remember, pre-sales service is likely to be better than post-sales service. This can be the case with any online business, not with just brokers.

Word-of-mouth advertising is always the most believable, and is applicable to FOREX trading as well. See who your family, friends and colleagues are working with and what, if any, complaints or problems they’ve experienced with different brokers.

You will want to be aware in advance about any fees involved. What is the spread and is it fixed or variable according to the type of account? Are there wider spreads for mini accounts? What other charges are there? Smaller spreads equate to higher profits for traders, but there may be a trade-off with poorer service.

Customer satisfaction and safety are part of the equation. Online brokers are supposed to offer automatic execution and have clear policies regarding slippage. They should be able to anticipate how much slippage to expect in both run-of-the-mill and fast-moving markets. You’ll want a broker that responds quickly with minimum slippage.

Margin accounts are the bread-and butter of FOREX trading. Things you’ll need to know include the margin requirements, how it’s calculated, does it vary with the currency traded and is it always calculated on the same of the week? Some brokers offer different margins for standard and mini accounts. Be sure you’re familiar with your broker’s margin terms before establishing an account.

Above all else, look for dependability and the facility to maneuver well in dynamic markets. Moving software is vital to online FOREX traders. The software should offer automatic trading. It may include trailing stops and trading from the chart special features or they may come attached to an extra fee. Be sure you know in advance what your trading needs are and what your broker charges for them. Check out the opportunities available by testing a demo account with a selection of online brokers.

It’s also a good idea to learn whether the broker insures clients’ funds and the scope of the insurance. Other research should include the broker’s policy for minimum account balances, interest payments on account balances, which currencies can be traded and whether non-standard sized lots can be traded.

A FOREX broker should be partnered with a large financial institution such as a bank to facilitate providing the funds essential for margin trading. In the United States brokers should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.

The bottom line is to gather all this information and then look at the overall picture before deciding to go with any particular broker.

I’m in forex? And the elements to become a successful trader

However ko trader must be a completely professional, but with a period of currency traders over a year I can accumulate a small capital. I do not know for the other trader is but for me, Forex is a real art. And when they "stick" to it, that really is a passion difficult to cut.

Due to that I say, trading is very much reflected in the people and your personality. Someone please say that each: There trader male, female trader, big trader, trader …

Because each trader has an individual personality, an individual plan, a private trading system, a number of funds and an ability to accept risk in particular. Therefore the trade of how each person is different, who do the same and one is generated from the yourself. Factors to help you successfully do that is the way you choose to do the analysis, use market analysis or to follow the analysis which is in you and in the strategy you choose. The way to bring victory for sure I do not have to bring success to you. Should be the same as the business of selling, to be successful you must have its own definition and put a lot of blood to the heart here. Because we are each a separate individual. And based on your personality, how to resolve each situation in your trade that you like is a factor to determine success for you.

To find out how your trade, you must find out how the features of your business. Definition of this type will decide your trade and the tools or analysis for you.

Ask yourself yourself you are like? Your patience or impatient, or you decide to guess text, you are still exacerbates or exciting, or have law ko and dare venture or ko. Or find themselves and overcome the weaknesses, promote the advantages of available friends. Therefore, you will be out of their way. One way you can find this easily is by writing signed Thursday by the trade you. Write today you do how much, how many died, why you win, why you lose and draw experience from.

It is therefore that the successful principles limit they have pips in a day and limit the number of PIP that they will lose. Indeed this is very simple because you have 2 wonderful tool is take profit and stop loss. These people who certainly do not go and adventurous red-tape venture. But the eyes of a trader other strategies this is not any other gambling a trader and the other people it is a code to. Ko are professional. This is the acceptable risk and the focus on a currency. They want every order to the vast numbers.

I also own a venture, like conquering the peak and the path you should choose for me how do the other relevant bit of time.
Finally, the other short-term trader also achieved success that many people dream. While those who call them as I am a firm has less to what they want.

Currency trading is a job it is "serious" to the center’s participants. For me as a trader requires you to have confidence in yourself, be confident in their choices because Forex is a market with many changes may be after the initial order will be losses a bit and then if you have the psychological need to do then you lose because of lack of understanding is that you lose own. But i have confidence that is horizontally opposed, persistent and acknowledge their error. When you see you are serious holes you must review your order open and if true that you went the wrong way then you must acknowledge the truth đấy. Persistence only do you lose to U.S. only. Some people will say to me wait, then please wait Republic capital only.

Right market with the fluctuation of the Forex will make you hòa capital is lost, but how long is important. Is when you do to reduce their capital by foot, while a place with that amount if you accept losing U.S. and investing in a currency other you can recover the funds it? Besides these factors, the players have to Forex are the very basic fields. Because if i have a fear in me one day you will be the market "early afternoon sunshine rain" this will make you lose heart attack. : D. And a factor can do more that is missing is patience because no real interesting tí when you have to sit and allowed the analysis best. It is only interesting when that money flows into the bag you.

Forex made me learn and discover the many yourself. It the daily trade I feel any more perfectly .. And perhaps that is cause for Forex become attractive than the other of money.

Here are some knowledge and opinions of individuals I hope it will help your part before entering Forex. Hope that you do not play read this article to make the choice should participate in the brain need to do this. The player then you have that is completely bring hope will help you to mind a bit. The pro, please comment for me to continue to improve themselves over.

Something helpfull for you

Has Cash Been King for the Past 10 Years?

If you’re like most investors, you’ve been nearly brainwashed with conventional market “wisdom” that stocks are the best way to grow your portfolio.

You would be crazy not to have your money in the markets, right?

But when markets drop, as we’ve seen in this credit crisis, it’s amazing how quickly the story changes.

Steve Hochberg and Pete Kendall, editors of Elliott Wave International’s Financial Forecast, challenged the notion of stocks’ superiority years before this latest downturn.

Learn how cash has been king – and will remain so – far longer than the latest news headlines may have you believe in this free excerpt from Elliott Wave International’s Credit Crisis Survival Kit.

Elliott Wave International has also made the full Credit Crisis Survival Kit available free for a limited time. In addition to this excerpt, it contains 14 other articles, reports, and videos that reveal how to survive and prosper during the credit crisis.

Cash’s Invisible Reign Made Visible
[excerpted from Elliott Wave Financial Forecast, August 2008]

With respect to cash and its status as the preeminent financial asset, however, we are starting to wonder if investors will ever come around to our point of view, which, as we explained in the March special section, is that there are times when “the phrase ‘focus on the long term’ means “get out and wait.’” As we also pointed out, the last eight years are clearly one of these times, as cash has outperformed all three major stock averages over this period. A July 3 USA Today article shows how this outlook is actually becoming more farsighted as the bear market intensifies:

3-month Treasuries Beat
S&P 500 for past 10 Years

The article says, “Investors who bought stocks for the long run are finding out just how long the long run can be.” But the farther back in time cash’s dominance stretches and the rockier the stock market gets, the farther investors seem to move from ever taking anything off the table. After stating that “there can be times, long times, when stocks won’t beat T-bills,” a professor and popular buy-and-hold advocate is cited as “optimistic that the next 10 years will be better than the past decade.” In March EWFF stated, “Cash will continue to outperform until stocks are no longer fashionable.” There is no sign that such a condition is even close to happening.

It’s somewhat amazing that cash is not capturing anyone’s fancy because a tremendous society-wide thirst for cash is spreading fast. “In a deflation,” the Elliott Wave Financial Forecast has stated, “Rule No. 1 is to unload everything that isn’t nailed down. Rule No. 2 is to sell whatever everything remaining is nailed to.” The banking system is surely deflating, because, echoing Elliott Wave Financial Forecast’s wording again, “Desperate American Banks Are Selling Everything That Isn’t Nailed Down.” SunTrust is selling its stock in Coca-Cola, an asset the bank held for 90 years. Merrill Lynch sold its founding stake in Bloomberg as well as various other subsidiaries.

Meanwhile, “Americans are selling prized possessions online and at flea markets at alarming rates.” Pawnshops and auction sites are booming. At Craigslist.org, the number of for-sale listings soared 70% in eight months. This fits with our review of Craigslist’s prospects when it was getting started in 2005: “This is just the set-up phase. Once the global garage sale really gets rolling, truly astounding volumes of dirt-cheap goods will be available on-line and elsewhere.” The global garage sale is on. The chart of the U.S. savings rate shows that the bull market in cash has come to life.

A 30-year downtrend in savings rates ended at minus 2.3% in August 2005. In May 2008, the savings rate skyrocketed to 5%. This jolt may be somewhat overstated due to the arrival of the government’s stimulus checks, but the burst should be the start of a critical new mindset among consumers. When the government showered the economy with 0 checks, many did something they never would have thought of through most of the bull market: They put the money in the bank, which is exactly what the administration did not want. In fact, federal, state and local governments are desperate for the tax revenue that a little ripple-effect spending would have generated.

According to the National Conference of State Legislatures, states must close a billion shortfall in the current fiscal year. “The problem today is that tax revenue is vanishing,” says a story about the sudden appearance of the worst fiscal crisis in New York since 1975. Even cities like East Hampton, New York, where someone paid 3 million for an oceanfront house last year, are out of money. “Nobody understands how it happened,” says one resident. The pages of this newsletter show otherwise. If we are right, a deflationary decline is depleting and destroying cash flows in novel new ways that no one alive has experienced before.