In my opinion the fact that small traders can make money right now is the result of the huge imbalances of the economic system. In an economic system using bond based currency origination inflation is something that is forced into the system out of necessity.
So if you have 16 world currencies that have a value that is declining on a daily basis the only increases that can occur are changes in the spending patterns of the country of origin or the other countries that the currency trades against.
There are three reasons why the currency market is far more risky today than at any other time in history.
1. The amount of total participants in the market
2. The amount of leverage being used
3. Quantitative easing (total debt levels)
To actively trade currencies at this point in time isn't smart. It's not because you can't make a profit doing it that makes it not smart. You're dealing with either or situations. The risk of bankruptcy and system failure is increasing everyday. So yeah the carry trade is great until a country fails.
If you aren't a huge bank or someone else with a real purpose to be in the market then you shouldn't be in it. The entire thing is a giant bubble. It's far worse than trading oil, for example. Oil gets used up. Air is always being taken out of that type of bubble. It can still crash but not in the same way that currencies are going to crash.
There could very well be a situation where all currencies go down in value at the same time. It's interesting how the forex markets don't have that as a possibility. That's exactly what is happening at this present time. The entire purchasing power of the entire system is becoming less valuable.
The money will go somewhere.
Last edited by Books; 12-21-2011 at 01:57 AM.