Aaron
Lynch

On everybody’s lips at the moment is the strong performance of the Australian dollar. Its fantastic if you are travelling, giving you more purchasing power in overseas countries. If you are an exporter however, it is now making your goods and services more expensive to your overseas clients.

That’s where most people‘s view of currencies stops, but to the trader, currencies represent extraordinary opportunities to make large profits in an interesting market. Some of you may be aware that there are futures contracts over currencies e.g. the Australian Dollar, US Dollar, Euro to name a few.

The Aussie dollar is traded on our local futures market, the Sydney Futures Exchange. However, the volume is not huge at this time as this market is still gaining in popularity. Traders are aware that overseas markets exist, though they don’t often understand how they work or how they can participate. The Chicago Mercantile Exchange introduced currency futures in 1972 and they are now the leader in this market worldwide. This market is highly liquid and can be traded from almost anywhere in the world.

We need to be familiar with a few key points about any futures contract before we attempt to trade - the times the currency trades, its contract months and minimum contract fluctuations. This information can all be found from the exchange’s website or from the Safety in the Market Software.

The Australian Dollar trades on the CME (Chicago Mercantile Exchange) in both a day and night session Monday through to Friday, with the contract months being March, June, September and December. The Aussie Dollar has a minimum movement of 0.0001 and this equates to $10 US. In simple terms if the currency moves up or down 1 cent this will mean a US $1000 change in your position.

There are obviously other parts to this contract so I would recommend that you research the exchanges website to get full details before you start trading this market. Now that we have a basic understanding of the actual contract, lets look at AD-SPOTV – the spot contract for the Australian dollar.

Looking at this line chart we see the highs of the last decade in 1996 of 80 cents, against the lows in 2001 of around 48 cents. I’m sure we can all remember these times.


Using the study of price we could have traded the Aussie dollar out of the 2001 lows with simple ABC principles as known by the Safety in the Market clients and this would have produced a number of profitable trades. However, knowing more about what Gann had to offer I realise the importance of highs and lows and the anniversary dates of these significant points. This is starting to bring the study of time into our analysis and how time can be a very useful element in our trading, signalling high probability turning points.

You will note the top of this market was in 2002 was .5772 on the 6 June 2002 and by looking at key anniversary dates we can see the recent high for 2003 was the 6 June 2003 at .6702.


Whatever the analysis you employ, the currency markets provide great opportunity and usually a strongly trending market either up or down. For those who want to investigate a strongly trending currency maybe take a look at the British Pound BP-SPOTV, Swiss Franc SF-SPOTV or even the Canadian Dollar CD-SPOTV

Good Trading

Aaron Lynch