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February 13, 2016 2:08 PM Subscribe
What's an easy, legal, and reliable way to predict trends for currency exchange rates?
Let's say a Canadian plans to convert a sum of US dollars into Canadian dollars.
The best time to do this would be when the Canadian dollar is at its very lowest.
What are some reliable ways to predict this timing?
Let's say a Canadian plans to convert a sum of US dollars into Canadian dollars.
The best time to do this would be when the Canadian dollar is at its very lowest.
What are some reliable ways to predict this timing?
That is a billion (or more) dollar question and there is no way to reliably predict that.
posted by saradarlin at 2:24 PM on February 13, 2016 [1 favorite]
posted by saradarlin at 2:24 PM on February 13, 2016 [1 favorite]
What's an easy, legal, and reliable way to predict trends for currency exchange rates?
Short but serious answer: There isn't one, really.
Longer answer: The Canadian dollar is fairly correlated with the price of oil.
But central bank policy in both the US and Canada is going to cause movements in both currencies relative to one another.
Other factors, both foreign and domestic (and many of them utter surprises), can affect a currency.
Let's say a Canadian plans to convert a sum of US dollars into Canadian dollars.
Since the CAD is at the lowest point it's been since 2002, any day right now would be a good day to do it.
If past performance were to be any indicator, your hypothetical Canadian would need to wait another 10-15 years for such a favourable exchange rate for that transaction.
posted by mandolin conspiracy at 2:25 PM on February 13, 2016 [4 favorites]
Short but serious answer: There isn't one, really.
Longer answer: The Canadian dollar is fairly correlated with the price of oil.
But central bank policy in both the US and Canada is going to cause movements in both currencies relative to one another.
Other factors, both foreign and domestic (and many of them utter surprises), can affect a currency.
Let's say a Canadian plans to convert a sum of US dollars into Canadian dollars.
Since the CAD is at the lowest point it's been since 2002, any day right now would be a good day to do it.
If past performance were to be any indicator, your hypothetical Canadian would need to wait another 10-15 years for such a favourable exchange rate for that transaction.
posted by mandolin conspiracy at 2:25 PM on February 13, 2016 [4 favorites]
you can pick a value and what for it to happen. that won't get you the lowest value, but it will get you a low value.
for example, for a long time the usd was worth less than 700 clp (chilean pesos). i am paid in dollars. so i saved my wage in dollars until the value crossed 700 and then converted everything.
problems with include: you cannot predict how long before it will happen; you may need the money before it happens; you may lose by not doing the conversion earlier (eg by not being able to invest it in clp, in my case).
posted by andrewcooke at 2:26 PM on February 13, 2016
for example, for a long time the usd was worth less than 700 clp (chilean pesos). i am paid in dollars. so i saved my wage in dollars until the value crossed 700 and then converted everything.
problems with include: you cannot predict how long before it will happen; you may need the money before it happens; you may lose by not doing the conversion earlier (eg by not being able to invest it in clp, in my case).
posted by andrewcooke at 2:26 PM on February 13, 2016
You can't, unless you have better insider knowledge than the hedge fundies you're betting against.
If you don't have insider knowledge, your best bet is to dollar cost average: exchange the money a little bit at a time, for example 1/12th of the amount once a month for a year.
posted by sninctown at 2:33 PM on February 13, 2016 [2 favorites]
If you don't have insider knowledge, your best bet is to dollar cost average: exchange the money a little bit at a time, for example 1/12th of the amount once a month for a year.
posted by sninctown at 2:33 PM on February 13, 2016 [2 favorites]
When I lived in Germany, I listened the announcements on the radio everyday for the exchange rate between U.S. dollars and German Marks. I was on my way to the bank to exchange money when I heard that the exchange rate the next day would be noticeably more favorable by a few cents, a relatively large jump for a one day change. I turned around and went to the bank the next day.
So one way is to just track it every single day so you know what constitutes a relatively big jump from one day to the next and what the average typically is and all that. It may not be the really huge advantage you are hoping for, but that really huge advantage is mostly not available to people and folks who do have insider information are supposedly mostly forbidden by law from taking advantage of that knowledge.
posted by Michele in California at 2:41 PM on February 13, 2016
So one way is to just track it every single day so you know what constitutes a relatively big jump from one day to the next and what the average typically is and all that. It may not be the really huge advantage you are hoping for, but that really huge advantage is mostly not available to people and folks who do have insider information are supposedly mostly forbidden by law from taking advantage of that knowledge.
posted by Michele in California at 2:41 PM on February 13, 2016
Currency speculation is its own profession, it's not an answer you're going to get correctly off metafilter.
posted by fingersandtoes at 4:04 PM on February 13, 2016 [3 favorites]
posted by fingersandtoes at 4:04 PM on February 13, 2016 [3 favorites]
This is like predicting the next actions at a poker table, while other players are also predicting the next actions.
posted by sebastienbailard at 12:29 AM on February 14, 2016 [1 favorite]
posted by sebastienbailard at 12:29 AM on February 14, 2016 [1 favorite]
Prices go down when more people want to sell than to buy. They go up when more people want to buy than to sell.
So if somebody had an oracle that could reliably time the bottom of a market trend, they would buy when the oracle told them to.
If their trading volume was low enough that nobody else noticed what they were doing, then they would have a negligible effect on the market, and they might make a bit of money as the trend reversed on its own. But as soon as anybody else noticed that hey, this outfit always seems to buy right at the bottom of the market, other people would start using their activity as an oracle in its own right, and copy their trades. And that would make the market rebound faster.
Pretty soon, market success would become dominated by how quickly other traders could copy the activity of those closer to the oracle. And then traders who didn't happen to have access to super-high-speed computers located super-close to the exchanges would start trying to beat the oracle, by putting in huge buy orders just before they judged the oracle was going to do it. And that, in and of itself, might well be enough to trigger a reversal of a downward trend - meaning that they actually did beat the oracle.
The point of this thought experiment is to demonstrate that no such oracle could possibly remain reliable once news of its existence leaked out into the marketplace. And because trades are public, it always would leak out.
People who are making consistently high returns on speculative trading are not doing that by reliably predicting precise timings for highs and lows. They're doing it by making a metric shitload of trades, using carefully guarded heuristics of their own devising that are designed to be (a) non-obvious to outside observers and (b) statistically successful. No single trade is ever expected to be a guaranteed winner: the point is simply to make more on your winning trades than you lose on your losers.
People who make consistently high returns on speculative trading exist. Therefore, the money they make must be coming from somewhere. Guess what? As a casual speculator walking into any of these markets, it's gonna come from you.
So unless you're willing to devote serious amounts of work to the thing, you should mentally classify your currency conversion activity as more of an expense than an opportunity. The best time to convert your US dollars to Canadian dollars is not when you think the exchange rate is at its most favorable, but when it's acceptably favorable and you need Canadian dollars.
posted by flabdablet at 10:46 AM on February 14, 2016 [2 favorites]
So if somebody had an oracle that could reliably time the bottom of a market trend, they would buy when the oracle told them to.
If their trading volume was low enough that nobody else noticed what they were doing, then they would have a negligible effect on the market, and they might make a bit of money as the trend reversed on its own. But as soon as anybody else noticed that hey, this outfit always seems to buy right at the bottom of the market, other people would start using their activity as an oracle in its own right, and copy their trades. And that would make the market rebound faster.
Pretty soon, market success would become dominated by how quickly other traders could copy the activity of those closer to the oracle. And then traders who didn't happen to have access to super-high-speed computers located super-close to the exchanges would start trying to beat the oracle, by putting in huge buy orders just before they judged the oracle was going to do it. And that, in and of itself, might well be enough to trigger a reversal of a downward trend - meaning that they actually did beat the oracle.
The point of this thought experiment is to demonstrate that no such oracle could possibly remain reliable once news of its existence leaked out into the marketplace. And because trades are public, it always would leak out.
People who are making consistently high returns on speculative trading are not doing that by reliably predicting precise timings for highs and lows. They're doing it by making a metric shitload of trades, using carefully guarded heuristics of their own devising that are designed to be (a) non-obvious to outside observers and (b) statistically successful. No single trade is ever expected to be a guaranteed winner: the point is simply to make more on your winning trades than you lose on your losers.
People who make consistently high returns on speculative trading exist. Therefore, the money they make must be coming from somewhere. Guess what? As a casual speculator walking into any of these markets, it's gonna come from you.
So unless you're willing to devote serious amounts of work to the thing, you should mentally classify your currency conversion activity as more of an expense than an opportunity. The best time to convert your US dollars to Canadian dollars is not when you think the exchange rate is at its most favorable, but when it's acceptably favorable and you need Canadian dollars.
posted by flabdablet at 10:46 AM on February 14, 2016 [2 favorites]
This thread is closed to new comments.
posted by brianogilvie at 2:21 PM on February 13, 2016 [20 favorites]