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Today we bring you an interview with hedge fund manager Howard Lindzon, author of The WallSTRiP Edge and co-founder/CEO of StockTwits. Below, Howard discusses his interest in currency trading, as well as his general approach to investing.

Forex Blog: As a forex blogger, I am eager to hear how and why you developed a sudden interest in forex.

It is not a sudden interest in forex.  For years, I had money with trend following managers and slowly saw the way people traded currencies.  My new fascination comes from all the people on stocktwits talking currencies at odd hours

Forex Blog: Does your primary interest lie in currencies, themselves, or rather in the people that trade them? In other words, is it your intention to invest directly in currencies or instead to identify companies that successfully market services to currency traders? Perhaps a combination of both?

I own the Canadian Dollar right now and also gold so my fascination is in the way different things move different markets.  Currencies move from macro policies and they seem to trend better.  For me, It’s now a combination of both.  I am learning to get a feel for currencies as I hear individuals on stocktwits actually talk about them.

Forex Blog: While it’s true that forex remains off the radar screen of many retail investors, I must point out that it’s already by the far the largest market in the world, with an estimated $4 Trillion in daily turnover. In spite of this, it seems you’re still quite optimistic about its prospects for growth?

I am optimistic because of many trends.  The online brokers are way behind and must catch up.  The forex brokers are way behind and see the retail consumer as a growth market and there seems to be chaos so it should be interesting which new winners emerge.

The world has indeed flattened and shrunk and currencies should be a more exciting topic as governments collide more often.

Forex Blog: Are there specific currencies that you are interested in, and/or that you believe are currently undervalued?

It is really exciting to watch the action in the dollar.  I try to see the big picture.  We are printing money and our policies are not changing.  it seems the us government wants a cheaper dollar which would be fine, but they are also manufacturing it, so I don;t think it will work out well for it.  I just don’t have a timeframe.

Forex Blog: As some of your readers pointed out, the forex market is currently saturated with fraud. New regulation is expected to clamp down on unethical business practices, but could also lower the appeal of forex by cutting leverage from 200:1 to levels associated with trading stocks retail. How will changes in regulation factor into your investment approach?

The regulation on our little community comes from the community itself.  If I am learning, I think I can get others excited about learning…if not to trade, than to see how the currencies and government policies affect stock prices and other markets.  I try not to worry about regulation…my size also keeps me out of the stress of it as I am too small.

Forex Blog: Shifting gears a bit, why did you decide to found/back StockTwits, a self-described “community-powered idea and information service for investments?”

I founded stocktwits to help me better track my ideas from a trusted source of friends.  It’s about getting the info i want, when I want it, on any device, from the group I want it from.  All that has happened is that thousands of others want info the same way. With the new filters and discovery features of twitter and now stocktwits, the speed to knowledge is faster than ever and its fun.

Forex Blog: How would summarize the growing appeal of StockTwits to its users? In other words, how does StockTwits (intend to) distinguish itself from the hundreds of other popular forums and message boards dedicated to the art of investing?

Community is the real differentiator.  Every community is different.  Ours just has some pretty cool features in it and i love the context our ticker has and the breadth of knowledge.  I also believe in the ‘farm system’ of distributed talent and having an expert pop up out of nowhere and get rushed to the top.  It’s like…oh my god…we need a doctor…BOOM, thousands of people are asking around for a doctor and then you get one right away.  It’s social leverage at work.

Forex Blog: If StockTwits expanded to the point where user comments/activity influenced asset prices (as happens occasionally with RagingBull and Jim Cramer’s Mad Money), would you view this is as a positive or negative development?

If we move markets, that’s good;  it’s an evolution.  I doubt we will and if we do, I am hopeful it is for the right reasons and we will do everything within our power to nudge the community in the win/win, do the right thing way.  We are going to be wrong all the time too so moving the market is not something people should be worried about.

Forex Blog: Finally, what advice to you have for investors that want to beat the market (any market, really) during the credit crisis?

I have never routinely beat the market.  I invest heavily and with a long term time frame when I feel I have an edge.  I want to beat the market not daily, weekly or yearly, but over decades.  You need to pick the asset classes that jibe with your passion, thinking, energy, risk levels, liquidity needs and then passionately chase the returns.

As part of our ongoing series, printed below is an interview with Sean Hyman, of World Currency Watch. [Blog found here]. Sean has collected over 15 years of experience as a stockbroker, manager, and trader, working for enterprises as varied as a technical analysis “call in” line for their million dollar+ clients and active traders, Charles Schwab, and FXCM. Over this period, he has refined his trading approach through the use of fundamental/technical analysis and intermarket analysis, and now takes a very “macro” approach.

Forex Blog: I would would like to begin by asking you to briefly explain your approach to analyzing and trading in the forex markets. Do you prefer technical or fundamental analysis, or a combination of both?

I use a combination. You see, fundamentals tell you what is best to trade, but not when. Technicals tell you when to trade but not what’s actually the “best” currency to trade. Therefore, I use the fundamentals to pair up the strongest currencies with the weakest currencies and look to buy those pairs upon technical entry signals. So I feel that one doesn’t have to be in “one camp or the other”. Both can compliment each other.

Right now, the U.S. Dollar Index is in a clear downtrend (as noted by trend lines or major moving averages like the 200 SMA). So I’d be short the dollar. However, pros have to be nimble too. If the global stock markets go into a tail spin once again, I’m willing to see if the Dollar Index breaks the downtrend. If it does, I’d be willing to go long the dollar at that point. A pro always has to have an opinion, but also has to be willing to constantly reassess that opinion too if it seems like the facts are changing. Honestly, right now it appears like the fundamentals are improving. However, we need the stock markets to confirm this too. If they don’t, then that’s where we could see the dollar and yen regain strength. So right now there’s a huge battle between the “deflationary camp” of traders and the “inflationary camp” of traders.

Personally I think China is more likely to help lead the way out of this global slump than the U.S. is. If you had countries like China and India fare well, then they could help to the global economy to start ‘turning the corner”. However, the U.S. has to “get in the game” at some point in order for the global recovery to be sustained. If the global economy starts to recover, then the dollar will tank as traders go after higher yielding assets. If we get a “double dip” recession, then the dollar may get its “second wind” once again. It’s more of the pros job to see which scenario tends to be winning out and go with the current trend on the chart. I have no doubt that central banks will “inflate” their way out of this recession eventually. The only question is..”Do we have a double dip recession first or do we start to mend from here?”

I think that traders love to press the central banks as they fight the intervention. Usually in the short run, the traders win…but in the long run, the central bankers win. Right now, the Swiss obviously want to hold the EUR/CHF pair to the 1.50-1.52 level. They are attempting to hold the Swiss franc down to where the EUR/CHF downtrend remains broken. If they can do this, then there are a lot of institutional “trend following” programs that will start to kick in and help their cause. If they can not “hold the line”, then the speculative traders will jump on this like a shark that senses blood in the water! Personally, I don’t think other central banks will continue to devalue their currencies from this point. Some speculate that the Aussie or New Zealanders may do this but I don’t think so at this point.

Forex Blog: You blogged recently about trading in so-called exotic currencies. Do you the recent decline in risk aversion will continue to push exotics as a whole upward? Are there any particular such currencies that you believe are especially undervalued?

If the VIX continues to drop and markets remain stable then shorting pairs like the USD/ZAR and USD/TRY could be great plays. The exotics will move much more on a “dollar fall” than will the majors. So you’d get the most “bang” there. You just have to be aware that you’ll need much wider stops with the exotics. However, you can still have good risk to reward ratios on these trades as long as your “percent of equity” at risk is still low (1-5% of your overall account balance). I personally think that these are the place to be as the global economy recovers because they have the highest growth rates AND highest interest rates. There are no “sexy” high yielders in the majors these days. Therefore it gives the exotics so much more appeal due to the lack of “true high yields” amongst the majors.

Yes! Many people aren’t confident in drawing trend lines and they routinely draw them improperly. However, is one just simply puts a 50 period SMA (simple moving average) on their chart and ONLY takes the Stochastic signal that’s in the direction of the way that the moving average is pointing (for their entry signals) then they’ve significantly improved their consistency and they are on the right side of the trade more often than they probably are right now. It’s a simple approach but it makes analysis very easy. Look to see which direction the moving average points to….and take ONLY those entry signals that are in the direction of that medium term trend that the 50 period SMA defines. This can be done with the 200 SMA as well but many traders are medium term traders and should probably start off using the 50 SMA at first. This is probably a much better approach than using two moving averages as a crossover system, for instance.

The 200 period SMA and trend lines. These deal directly with the price action itself and keeps one focused on the trend direction itself and causes one to not counter trend trade (which leads to low probability trading). High probability trading is sticking “with” the trend and never trading against it.

We need to see a concerted push higher in both stocks and commodities…and for the general consensus to change to that of a general opinion to where traders feel that we’re “for sure” recovering and the “double dip” scenario dissipates. This may take a bit longer until we see “for sure” whether we’re out of the woods yet economically or not. Oil would need to maintain  its uptrend and stocks need to decisively breakout higher. When that finally happens, then short the USD/CAD pair. Tha’s my opinion.

Trade with the trend…never pick tops/bottoms. Risk only 1-5% of your account balance at any time. It’s all an “odds” game and this type of thinking puts you on the right side of those odds. When the recovery is for sure underway, go with the higher inflation/higher interest pairs when you buy (AUD, NZD, and the exotics). Trade only the strongest fundamentals and strongest technical trends on the charts. Most trading stations have 20-30+ pairs to choose from. So pick ONLY the 1-2 top pairs that look the best on the charts to you. That will give you the most confidence in the trade as it bobs up and down on its way to profitability. Give the trades time to work themselves out. Plan on being in trades for days or weeks but not hours or minutes. That’s a recipe for disaster for most traders. Everyone wants to be a “day trader” but they really should be a “swing trader” taking trades over days to weeks and trade off of larger time framed charts (1 hour, 30 day charts or 4 hour, 40 day charts…notice that I use long look back periods).

Today, we bring you an interview with Zachary Storella of Counting Pips. He is a self-professed “independent forex trader and blogger.”

Forex Blog: CountingPips purports to offer investors “Forex Trading and Currency Information,” so I would would like to begin by asking you to outline what you perceive to be the most important themes at this stage of the economic downturn, especially as they bear on forex markets?

The major theme at play at present in the currency markets is the risk aversion versus risk appetite scenario. The risk appetite currencies have been doing quite well since early March compared to the safe havens although I think that the rally in the risk currencies may have come too far, too fast and we could be ripe for a possible correction on that front.

Well, I would tend to agree with the view out there that the global economy has probably bottomed on the evidence that the pace of decline has cooled off in many of the important economic indicators. That being said, the global economy as a whole and the economy here in the U.S., is still very weak and has a ways to go to get back on track. I am absolutely keeping an open mind in terms of the direction the global economy might take because we just witnessed a (hopefully) once-in-a-lifetime event in the financial crisis and there are many global inequalities and inefficiencies that need to be worked out and that will take time. So going forward, it looks promising but we are still in the midst of a deep recession and there are bound to be surprises.

Well, it is being said that the global recovery may be a China led recovery. I think it’s too early to tell if that will be the case. I think that there is a good chance that decoupling can be more realistic in the future as emerging economies develop. Of course, many thought that before only to be proven dramatically wrong in the last year. So really it is hard to tell until it happens…It seems to make sense in theory but the reality is a different story.

Yes, I think right now the fundamentals have taken a backseat to the general risk theme but the further away from the financial crisis we get I think we will see the fundamentals become stronger catalysts. I think it makes sense, right now on the heels of the financial crisis, an unprecedented event in recent times, that we need to work through this period before the normal rules apply again.

I think it is an accurate reflection of market developments. The high-yielders have been doing very well as of late, with some of the more exotic carry trade currencies like the Brazilian Real and South African Rand making some real moves.

At the present time, the comparison in the numbers, I don’t see it as having a huge relevance as it pertains directly to forex trading. The Nonfarm Payrolls data release is obviously big and definitely moves the markets. I see that data as helping to drive the risk mood one way or the other and traders can use it in that context. So the number comparison doesn’t mean much to me but of course, another more insightful trader could see something in it and I could be wrong.

Forex Blog:  Judging from its meeting this week, do you anticipate the Fed will raise rates in the near-term? How do you think such rate hikes (or lack thereof) will weigh on forex markets?

I don’t feel that we will see the Fed raise rates in the near term as inflation is not a problem as of yet and our economy is just too fragile at the moment. It doesn’t seem warranted. I think when rates do move higher it will bear weight on the forex market as the US economy will be in a different place, probably starting to see more inflationary pressures and/or the economy will be growing. On an overall basis, I am very interested to watch and see which economies pull out of the recession first, start raising rates and how the global economy develops from here, who leads where and what the implications are then for the currency markets.

Be quick and agile.