By Zachary Storella, CountingPips.com
Today, we are pleased to bring you our latest forex interview with forex trader Joel Kruger. Joel is a professional trader with a background in strategy and research and also has a new website at JKonFX.com that features his analysis, research and ideas to trade the markets profitably. He has been featured in major publications such as Bloomberg, Wall Street Journal and Reuters. He talks with us today about his new site, the transition from strategist to trader and his thoughts on the current forex trading environment. (Our questions are highlighted in bold.)
Q: Since we last interviewed you, you were primarily a currency strategist giving ideas to clients while working at a large brokerage. Now you have become a full time forex trader. Can you describe the transition you went through to your current position? What do you feel was the hardest part of the transition?
Q: You now have a new blog at JKonFX.com. For our readers who may have not seen or heard about your new site can you tell us who is the site geared to? What type of trader do you feel may benefit the most?
A: I have found over the course of my career that many traders fall victim to impulse, often rushing into bad trades out of the need to be taking on risk even though the timing isn’t right. I noticed when I was working in strategy, I was never recommending a position without first putting the idea down on paper. This technique forced me to think more about the positions I was taking, also eliminating the risk for impulsive reckless decision making. So when I launched JKonFX after going off on my own, it was less out of a desire to provide clients with my ideas and more out of my own need to ensure I continued to think my ideas through. With that said, JKonFX is a site geared towards traders on all levels, looking for ideas and insights into the market from someone who makes a living taking risk. I always try to keep it simple, and tend to focus more on the ideas and concepts rather than the less exciting academics. I suppose the trader who benefits most from my blog is the trader who can think on their own, looking for the benefit of daily insights, ideas and interactions from a colleague in their field.
Free Reports:
Q: What can be expected for new members who may want to join your site?
A: While my analysis has always been simple and to the point, the biggest difference between my analysis now and when I was on the desk is in the coverage. I am no longer covering the market to outline what happened overnight and to breakdown the latest economic data. I cover the markets based on what I am thinking as a trader. Everything is about the strategy and the trade. I have the luxury of writing about what it is that I believe is important and I am always looking to talk about the next opportunity ahead or something that might help make a better trader if there are no opportunities at that moment. So if you are joining up, know that I don’t waste words and am always looking to write about the next great trade. If you’re looking to find out what happened overnight, I would recommend a good news feed.
Q: As a professional forex trader, what markets do you pay attention to outside of the currency markets?
A: If we have learned anything over these past several years since the onset of the financial markets crisis, it’s just how correlated markets are. As such, it is important to pay attention to other major asset classes. I tend to also focus on major equity indices, bond and commodities. FX falls under the global macro umbrella and if you are trading a global market, it is important to have a feel for all the major asset classes.
Q: Is there anything you learned as a professional that you wished you had learned earlier that would have made your life (as a trader) easier?
A: Sure. We always have a way of making things more complicated than they really are. Trading is hard enough as it is without the added layer of complication. In my early years, I suppose I spent too much time worrying about the best strategy, trying to read up as much as possible without realizing that trading psychology and stress management is so much more important. Of course we need to employ effective trading strategies. But in the end, if we don’t have the right mindset, and we aren’t mentally sound, all of the strategies in the world won’t mean a thing. So stop wasting money on books (some money is ok). Instead, focus on taking trades you like and being prepared to exit those trades if they don’t do what you thought. That’s it. Keep it simple!
Q: In the forex markets, we have some really interesting situations coming into the new year of 2015. The US dollar has continued to be very strong while elsewhere, global central banks have either been cutting interest rates (CAD,AUD), implementing QE-type programs (Euro,JPY) or even upending the markets (in the case of the Swiss National Bank). Can you give us your viewpoint on the current landscape or a few major themes you are most paying attention to in the currency markets?
A: Well, I think you nailed it here. There is no getting around the primary, driving theme of policy divergence between the Fed and rest of the central banking world. This is something that will play out for the rest of 2015 and for years to come. This is all symptomatic of the crisis of 2008 with the Fed in the process of unwinding its accommodative stimulus strategy and exporting it to the rest of the world. Everything is coming full circle now and with the Fed on the tightening path while other central banks move further into accommodation, yield differentials should continue to move in the US Dollar’s favor. I think the key thing to watch here will be just how the Fed responds to the external pressures of diverging policy. There is emerging risk that despite solid US fundamentals that would suggest a more aggressive tightening, the Fed will err on the side of accommodation through 2015 so as not to create too much of a global imbalance. Which way the Fed leans could make a significant difference in the US Dollar outlook.
Q: What major events or potential changes in circumstances coming on the horizon do you feel that could have the most impact the currency markets moving forward?
A: If we forget about monetary policy divergence for a moment, which is hard to do, I think we need to also consider the ongoing saga in the Eurozone and the political instability and unrest this poses. The newly elected Greek government is challenging the status quo and this could have major implications if other nations in the Eurozone adopt a similar political leaning. The implications are huge, with the fate of the Eurozone hanging in the balance. I would also suggest geopolitical risk as a variable that should not be dismissed. The global economy has come under a good deal of stress, and with central banks easing at unprecedented levels and global equities supported on the back of this easing to record highs, it all feels a bit like a house of cards that could come tumbling down. Rapid oil price declines, tensions in Russia and the Ukraine, volatility in the Middle East and the rise of radical Islam are all big concerns that could become a lot bigger if market participants lose confidence in the effectiveness of central bank strategies and global equities start to come off hard.
Q: Do you feel there is a currency, outside of the dollar, that may have a chance to be an out-performer relative to the other majors this year that is not getting the attention, perhaps that it should?
A: I will give you two markets I think could pose opportunity over the coming months:
1) The first is the Pound (GBP). Although there is still a good amount of uncertainty surrounding the UK economy, it is probably the economy that is closest to the US economy right now. There is no denying the Fed as the first major central bank to start moving back towards policy normalization, but the Bank of England isn’t too far behind and could be the next major central bank to raise rates after the Fed. So while I wouldn’t be recommending a long GBPUSD position necessarily, I do believe there is room for GBP outperformance against the other currencies. We all recognize the ‘first in, first out’ play, with the US economy and US Dollar, ie the US was the first into the crisis and will emerge as the first out. But if we extend that idea a bit, it stands to reason the UK economy will be the second to emerge from crisis, which should mean GBP outperformance away from the Buck.
2) The second market I like going forward is AUDNZD. I am already long this market around 1.0500 and believe there is plenty of upside over the coming years. Though there is a negative yield differential with the trade, I believe the upside potential outweighs this setback. In short, I believe the RBNZ is behind the curve with respect to accommodation, and will be forced to continue to adopt a looser policy going forward. This should start to narrow yield differentials back in favor of the Australian Dollar. Additionally, I am quite bearish equity markets right now and am projecting a major liquidation in 2015. If this risk asset comes off, it will weigh more heavily on the higher yielding, risk correlated New Zealand Dollar. Finally, AUDNZD has historically been very well supported down towards parity, and as such, there seems to be a good analog argument for yet another bottom down here. I will be looking for a push back above 1.2000 into late 2015 early 2016.
Thank you very much Joel for taking the time to share your views and experiences in our latest forex interview. To read Joel’s latest currency analysis and trading strategies please visit his site at JKonFX.com
