Stock picks and tips

Maybe no event in American financial history is better known and more infamous than Black Tuesday, the day the stock market crashed and ushered in a depression that would grip the United States through the first half of the next decade. But what caused such a horrible event and what can be learned from it?

The stock market crash that most people associate with Black Tuesday, was actually a multi-day process. The previous Thursday, the market began its downward slide, with trading setting an all time record with 13 million shares trading hands that day. The Dow had reached an all-time high just a month earlier in September of 1929 with a close of 381.17. A group of bankers met during that Thursday to try to figure out how to stop the slide and they decided to take the same tact that worked to stop the last market panic in 1907. They began to buy massive amounts of blue chip stock to try to reassure investors that the market was holding steady and that they shouldn’t sell everything they had and make matters worse.

The bankers, led by Tom Lamont of Morgan Bank, Chase National Bank’s Albert Wiggin and Charles Mitchell of National City Bank thought that this method had worked, but it only led to a quieter Friday. The downfall would continue early next week.

On Monday, spurred on by negative newspaper accounts of Thursday’s crash, investors sold more and more stock off, sending the Dow into another tailspin. At the end of Monday’s trading, approximately 13 percent of the value of the Dow had been lost. Black Tuesday led to more losses that some believed were spurred on by President Herbert Hoover’s insistence that he would not veto a tariff bill that many on Wall Street thought would hurt the economy.

So, what caused the crash? Most believe an artificial economic bubble is to blame for the crash. The bubble was formed during the 1920’s and the great amount of speculative investing that happened during that time. The downturn in stock prices after the high in September saw a chain of events happen that led to the Great Depression of the 1930’s.

While no one can predict the future, it’s safe to assume that while our current economy is healthy, a possible stock market crash can happen again. But only if we learn from history can we avoid another long-term depression that shakes the American economy down to its very foundation.

When people in the media, or just people in the know, refer to the various stock markets in lower Manhattan in New York City, they usually just refer to Wall Street. The now famous financial district has become synonymous with large amounts of money, power and influence. But how did one street manage to evolve into such an important address?Ironically, most major investment firms that helped to build Wall Street into the financial force that it is today aren’t even headquartered there anymore. Thanks to technology advancements, these companies are usually headquartered in other parts of Manhattan or in neighbouring New Jersey or Connecticut. One of the most influential companies in Wall Street history, J.P. Morgan moved from the address that they helped make famous in late 2001.

The name Wall Street was actually given to the street since it formed a boundary to the New Amsterdam settlement in the early 1600’s. To help ward off the British, a 12-foot wall was built around the street to keep out invaders in 1653. In 1792, the Buttonwood agreement started the New York Stock Exchange and its headquarters would be on Wall Street.

In 1889, a newspaper that would eventually become the Wall Street Journal began publication. The paper took its name from the fact that a growing financial district was sprouting around the stock exchange and many companies that would go on to be powerful forces in the United States economy were headquartered there.

One of the most well known symbols of Wall Street, the JP Morgan headquarters, was built in 1914. The building still stands today, but is now owned and run by Deutsche Bank.

Wall Street has seen its fair share of history over the years, with the 1920 bombing that killed around 40 people and injured 400 to the great crash of 1929 that saw some people kill themselves. Today, if you check the front façade of the JP Morgan building, you can still see pock marks of the 1920 terrorist attack.

The construction of the World Trade Centers were the only real major architectural change to the financial district in the last half of the 20th century, and their subsequent destruction has left a void in the hearts and minds of many that work and live near there.

The history of Wall Street is a collage of incredible highs and devastating lows. As the center for American and some would say world finance, you can bet that there will be plenty of memories made on the most famous street in the world.

The forex chart is among the most basic tools in a forex trader’s arsenal. Simply put, it is a graph of a particular currency pair’s performance over a given period of time. Reading forex charts is essential to a trader’s business, so it’s important to know how to read them and understand what they mean.

 Every forex chart will be labeled with a currency pair: EUR/USD, USD/GBP, etc. Remember, all forex trading deals with different countries’ currency in relation to each other. The EUR/USD chart, for example, tells you how the euro and the U.S. dollar compare.

 Along the bottom of the chart is the timeline — 15 minutes, an hour, a day, a week, or some other period. Going up the right-hand side are incremental amounts. For the EUR/USD chart, the amounts might be 1.2531 at the bottom, going up to 1.2561 at the top. And of course the middle of the chart shows what position the EUR/USD pair held at what time.

 The forex chart is useful because it shows in graphic terms how a currency pair is doing. You can see at a glance whether a currency is getting stronger or weaker, and you can act accordingly. Choosing the time frame helps you see very minor trends (in a 15-minute period, say) or more long-term ones (over the course of several days, perhaps).

 You can find forex charts all over the Internet, on Web sites for forex brokers, tutors, and on other forex-related sites. Those are fine for glancing at trends now and then. But to be a serious trader, you need to have access to charts much more readily, without having to go to a Web site. That’s why trading software gives you forex charts, too (you need to have broadband Internet so you can be “always connected”). Obviously, if you’re going to be trading, you need to have convenient access to the very latest charts.

 With dozens of world currencies, there are far too many possible currency pairs for anyone to keep track of mentally. Forex charts show at a glance what any currency pair is up to, and good software allows you to save multiple charts as “favorites.” Naturally you’ll want to keep an eye on the charts representing investments you’ve already made, and it’s smart to have a few additional ones saved, too, so you can watch for trends in currencies you haven’t traded yet. You never know when a lucrative new opportunity is going to be revealed.

So you want to get involved in the foreign exchange market, or forex. You’re itching to trade one currency for another and make some profit. But you can’t just barge into Citigroup of Merrill Lynch and start throwing euros and yen around. To participate, you need a forex broker.

The preeminent forex broker for day traders (i.e., average Joes) is Advanced Currency Markets, or ACM. To many people, the Swiss company, founded in 2002, is synonymous with “forex broker,” trading about $70 billion a month.

There are dozens of other brokers, though, who service day traders. It’s done almost exclusively online, and in fact ordinary citizens rarely got involved with forex trading at all until the computer boom of the 1980s, and then exponentially more with the advent of the Internet in the 1990s. Since then, forex brokers have proliferated.

As you might expect, levels of reliability and competence vary from one broker to another. The Internet is rife with unsavory types seeking to take advantage of suckers, so you would do well to investigate thoroughly any broker you’re planning to use. Does their Web site look professional and reassuring, or is it riddled with dead links and spelling errors? Google the broker to see if they’ve been mentioned in news articles. Ask about their track record. And above all, avoid anyone who promises things that sound too good to be true, or who downplay the financial risk involved in forex trading.

Look for a broker that seems to genuinely want your business. Does the firm have customer service representatives available? Is there a phone number you can call to speak to a live person? The Web site should explain things clearly. If the site is full of language that seems designed to go over your head, look for a different broker.

If you set up an account with an online forex broker, it will work like this. First, you must apply for an account, which most brokers allow you to do online. This is to verify your identity and the validity of your bank accounts and financial records. Some brokers also require you to download their forex trading software, while others let you use whatever software you prefer. You will also have to transfer a minimum deposit to your account with your new broker. The minimum can be anywhere from $100 to $2,500.

Ideally, the broker you choose should offer service and support when you need it but should mostly simply stay out of the way and let you conduct your business. If you can find a forex broker who is professional and helpful, your experience in the forex market should be full of smooth sailing.

The foreign exchange, or forex, market is relatively young, having begun in the early 1970s after the United States dropped the gold standard and national currencies started to fluctuate widely. For about 30 years prior to that, most nations had agreed to keep their currency values stable in relation to the U.S. dollar, making a forex market unnecessary. With that no longer the case, banks quickly realized that a profit could be made in “buying” currency when it was devalued and “selling” it after it strengthened, just like any other commodity.

Today, the forex market handles about $1.9 trillion in transactions every day, and it runs 24 hours a day, five days a week. (With nations around the world involved, it’s always daytime somewhere.) The most traded currencies are the U.S. dollar, the euro, Japanese yen, British pound, Swiss franc and Australian dollar. The forex market is overwhelmingly dominated by international banks, government banks, investment banks, corporations, and hedge funds. In fact, individual traders account for only about 2 percent of the market. Nonetheless, a lot of people do try their hand at it, with varying degrees of success. In the forex market, transactions are always handled in pairs: You buy one currency and sell another one. The idea is to make a trade when you believe the currency you’re buying is going to go up in value compared to the one you’re selling. Then, if it turns out your prediction was correct, you do another trade in the reverse direction — selling the currency you originally bought and buying the one you sold — in order to reap the profits.

For example, let’s say the market reports this: GBP/EUR 1.2200. That means the cost of buying one British pound is 1.22 euros. If you believed that course was going to change, and the euro was going to become more valuable than the pound, you might sell 100,000 pounds, buy 100,000 euros, and wait. Then let’s say a few weeks later, the exchange rate fluctuates to this: EUR/GBP 1.3100. Sure enough, the euro is now worth 1.31 pounds, a profit of 0.11 per unit.

The forex market is vast and daunting and mostly inhabited by giant organizations. But it can be navigated by individuals who have studied the finer points and who want to take a risk on something potential profitable. And since the whole world uses money, the trading of that money is always going to be a major force in the financial world.