In short, the Xi government bureaucrats specifically stated that they would be taking several actions to shore up the nation’s financial health. What are the actions. They include dozens of dictatorial moves that would never work in a free economy, but are common fare in the world’s largest communist country.
For starters, brokers will no longer be allowed to publish economic reports that include targets, the price of coal will be directly controlled by the government, banks will be forced to buy and maintain much larger quantities of non-Chinese currency, private citizens will no longer be able to search online for any information about cryptocurrency, and government agencies will begin selling off excess stores of metals. How can these moves by the faltering communist dictatorship benefit everyday traders in free nations? Here’s a short list of how anyone with a computer and a brokerage account can take advantage of the Chinese central bank’s draconian interventions into its domestic economy.
The most popular quantitative trading techniques use large databases of information, current prices, and other statistical information to build mathematical models. They then use those very models to identify optimum trade opportunities. Once only used by huge firms and banks, quant methods are now available to ordinary traders. If you use multiple databases to analyze the Chinese economy, it’s possible to put quantitative approaches to work uncovering opportunities like impending drops in metal prices, a weakening yuan, and changes in stock index values.
Some quant programs are available for a small fee or free on brokerage platforms. It’s important to know that these highly sophisticated techniques are not the same as typical technical analysis. Most technical analysis-based strategies only use price data and whatever is available on a chart or from the exchanges. Quant uses all sorts of non-exchange information from the economy, social networks, and elsewhere. The one thing common to all quant analysis is statistics. Unless a database can be expressed numerically, it’s not going to work in quant.
Arbitrage is becoming rarer in this era of instant pricing and widespread information dispersal. But, if you can find a price disparity between the bid and ask rates on a given Chinese commodity, stock, bond, or other asset, it’s possible to make an immediate profit. Not recommended for those new to the marketplace, arbitrage works best when investors can immediately sell an acquired asset for a slightly higher price.
Using standard technical analysis, like moving averages or momentum indicators, anyone can track the upward and downward undulations of China’s stock indices and other markets. One method that using technical analysis to a good end in most cases is the moving-average crossover. For instance, if you think China’s SSE composite index is set to fall, check to see whether the 200-day average is above or below the 50-day moving average. Many traders say an index is trending downward once the 50 crosses below the 200.
Cryptocurrency Focused Techniques
With China’s leaders now outlawing most forms of cryptocurrency research on the part of its citizens, it’s no secret that the nation wants to dampen down demand for alternative forms of money. Indeed, the popularity of bitcoin and other cryptos could impact the value of the yuan and the old-style, centrally run economy of China. What to expect? Look for lower demand for cryptocurrencies among the millions of Chinese citizens who will be essentially locked out of that niche. That development could signal a slack demand for bitcoin, at least temporarily.
China’s intention to sell off large quantities of its metal inventories could impact global prices on things like steel, copper, and more. The way to make this bit of information work for you is to watch exactly what the Chinese government does in this regard. Read official announcements about which metals will go on the auction block, in what quantities, and when the sales will take place. In the international commodities marketplace, even a tiny piece of information can mean large profits, as long as you know how and when to use it. Note that if Chinese officials decide to sell off any of their large store of precious metals, the gold and silver markets could be in for a wild ride.