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Friday, 28 November 2014

Basic Trading Concepts Defined- Fundamental or Technical?

Newsletter 3

Should you trade based upon fundamentals or technicals?

This is the $64 million question that traders have debated for decades and will probably continue to debate for decades to come.
Technical Analysis Vs. Fundamental AnalysisTechnicals are based on forecasting the future using past price movements, also known as price action. Fundamentals, on the other hand, incorporate economic and political news to determine the future value of the currency pair.
The question of which is better is far more difficult to answer. We have often seen fundamental factors rapidly shift the technical outlook, or technical factors explain a price move that
fundamentals cannot. So the answer to the question is to use both. Both methods are important and have a hand in impacting price action. The real key, however, is to understand the benefit of each style and to know when to use each discipline.

Fundamentals are good at dictating the broad themes in the market, while technicals are useful for identifying specific entry and exit levels. Fundamentals do not change in the blink of an eye: in the currency markets, fundamental themes can last for weeks, months and even years.

Using Both to Make a Move

For example, one of the biggest stories of 2005 was the U.S. Federal Reserve's aggressive interest rate tightening cycle. In the middle of 2004, the Federal Reserve began increasing interest rates by quarter-point increments. The Fed let the market know very early on that it was going to be engaging in a long period of tightening and, as promised, it increased interest rates by 200 basis points in 2005.

This policy created an extremely dollar-bullish environment in the market that lasted for the entire year.
Against the Japanese yen, whose central bank held rates steady at zero throughout 2005, the dollar appreciated 19% from its lowest to highest levels. USD/JPY was in a very strong uptrend throughout the year, but even so, there were plenty of retraces along the way. These pullbacks were perfect opportunities for traders to combine technicals with fundamentals to enter the trade at an opportune moment.


Fundamentally, it was clear that the market was a very dollar-positive environment; therefore, technically, we looked for opportunities to buy on dips rather than sell on rallies.

Another example

A perfect example was the rally from 101.70 to 113.70. The retracement paused right at the 38.2% Fibonacci support, which would have been a great entry point and a clear example of a trade that was based on fundamentals but looked for entry and exit points based on technicals.


In the USD/JPY trade, trying to pick tops or bottoms during that time would have been difficult. However, with the bull trend so dominant, the far easier and smarter trade was to look for technical opportunities to go with the fundamental theme and trade with the market trend rather than to trying to fade it.

Reference: Investopedia

Japan bond yield goes negative as BOJ faces oil threat

The Bank of Japan building is pictured in Tokyo March 18, 2009. REUTERS/Yuriko Nakao

(Reuters) - Japanese government bonds traded at a negative yield for the first time ever on Friday, thanks to the Bank of Japan's massive asset-purchase scheme as it seeks to stoke inflation and revive an economy that slipped into recession in the third-quarter.

The BOJ's task got even stiffer this week as a plunge in oil prices threaten its 2 percent price goal, meaning the central bank could be forced to expand its stimulus further, soaking up more debt paper and spreading negative yields to longer-dated maturities.

The two-year JGBs traded at the yield of minus 0.005 percent JP2YTN=JBTC. Negative yield is an unusual, but not uncommon occurrence - record-low interest rates in Europe, for instance, have flipped bond investing on its head with Germany and Switzerland seeing negative yields.

Friday's milestone in Japan is a side-effect of the BOJ's resolve to spark credit growth and get the wheels of commerce turning via its quantitative and qualitative asset-purchase scheme.

The asset purchases have crushed debt yields, with those on government discount bills turning negative in September.

The central bank last month stunned markets by expanding its monetary easing program, just weeks before data showed the world's third-biggest economy had unexpectedly slipped back into recession in the third quarter.

Now, the plunge in oil prices raises fresh complications for the BOJ, which has pledged to lift inflation to its two percent target by the next fiscal year.

Oil sank more than six percent on Thursday following OPEC's decision not cut output, and is down more than 35 percent from their peak in June, a development that looks set to bring down Japan's consumer price inflation in coming months.

"Japan's core consumer price is likely to fall to around 0.5 percent by March," said Junichi Makino, chief economist at SMBC Nikko Securities.

Makino was referring to the core CPI excluding the impact of a sales tax hike in April, which the BOJ is tracking closely. Data published on Friday showed core inflation stripping out the tax effect at around 0.9 percent.

"The BOJ will likely be forced to take additional easing steps by April," Makino said.

Many market players expect negative yields could gradually spread to longer maturities as in some European countries.

In Germany three-year bonds are traded below zero and in Switzerland, even five-year bonds are traded at negative yield as they fight threats of deflation.

Reference: Hideyuki Sano

Thursday, 27 November 2014

Basic Trading Concepts Defined- Margin Trading

 

Newsletter 33

MARGIN TRADING

Lots seemed to like this article, for the ones who have missed it, herewith find it again.

What is Margin?
Margin is the amount of equity that must be maintained in a trading account to keep a position open. It acts as a good faith deposit by the trader to ensure against trading losses. A margin account allows customers to open positions with higher value than the amount of funds they have deposited in their account.

Trading a margin account is also described as trading on a leveraged basis. Most online forex firms offer up to 200 times leverage on a mini contract account. The mini contract size is usually 10,000 currency unit, 1/200th of 10,000 equals to 50 currency unit, meaning only 0.5% margin is required for open positions. Compare to future contracts, which require 10% margin for most contracts, and equities require 50% margin to the average investor and 10% margin to the professional equity traders, foreign exchange market offers the highest leverage among the other trading instruments.

The equity in excess of the margin requirement in a trading account acts as a cushion for the trader. If the trader loses on a position to the point that equity is below the minimum margin requirement, meaning the cushion has completely worn out, then a margin call will result. Generally, in online forex trading, the trader must deposit more funds before the margin call or the position will be closed. Since no calls are issued before the liquidation, the margin call is better known as ‘margin out' in this case. The account will be margined out, meaning all the positions will be closed, once the equity falls below the margin requirement.

Example:

Account

A

Account Equity

500USD

Contract Size

10,000

Currency

EUR/USD

Spread

3 pips

Margin Requirement

50USD

Leverage

1,000:50 = 200:1

Pips to margin out (1 lot)

447

Consider Account A, the margin requirement for 1 lot of position is 50USD. The free usable margin is Account Equity - (Margin Requirement + Spread) = 500 - (50 + 3) = 447. The account will be margined out if EUR/USD moves 447 pips against the position.

Why Margin Requirement Matters?
Leverage is a double-edged sword. With proper usage, it can enhance customers' funds to generate quick returns and increase the potential return of an investment. However, without proper risk management, it can lead to quick and large losses.
Consider the following example:

Account

A

B

Account Equity

500USD

500USD

Contract Size

10,000

10,000

Currency

EUR/USD

EUR/USD

Spread

3 pips

3 pips

Margin Requirement

50USD

200USD

Leverage

1,000:50 = 200:1

1,000:200 = 50:1

Pips to margin out (1 lot)

447

297

Max no. of lots at one time

9

2

Pips to margin out (max lots)

3

47

The initial conditions of the accounts are the same, except for account A, the margin requirement per lot is 50USD and account B is 200USD.
Free usable margin = Account Equity - (Margin Requirement + Spread)*no. of lots
Maximum number of lots open at one time = Account Equity / (margin requirement + spread)
In account A, for 1 lot of position, the free usable margin is 500 - (50+3) = 447, which means the account will be margined out if EUR/USD moves 447 pips against the position. The max number of lots open at one time = (500/(50+3)) = 9 lots, with 500 - (50+3)*9 = 23USD free usable margin left for 9 lots. Once EUR/USD moves 23/9 = 3 pips against the positions, there would be not enough usable margin and account A will be margined out.

In account B, the free usable margin for 1 lot is 500 - (200+3) = 297, which means the account will be margined out if EUR/USD moves 297 pips against the position. The max number of lots open at one time = (500/(200+3)) =2 lots, with 500 - (200+3)*2 = 94USD free usable margin for 2 lots. If EUR/USD moves 94/2 = 47 pips against the positions, account B would be margined out.
With 1 lot of open position, account A has 447USD usable margin as cushion before being margined out, while account B only as 297USD. However, with more usable margin, account A has higher probability of being over traded. As shown in the above example, the more open positions, the easier is the account to get margin out.

Most forex trading firms offer customizable leverage; traders can choose the leverage ratio they feel most comfortable with. Customers should be aware of how to guard against over trading an account and managing overall risk.

Reference: Investopedia

Goldman, BASF, HSBC accused of metals price fixing: U.S. lawsuit

Goldman Sachs Group Inc (GS.N), Germany's BASF SE (BASFn.DE) and two other big platinum and palladium dealers have been sued in the United States in what the plaintiff's law firm called the first nationwide class action over alleged price-fixing of the metals.

In a complaint filed on Tuesday in the U.S. District Court in Manhattan, units of Goldman, BASF, HSBC Holdings Plc (HSBA.L) and South Africa's Standard Bank Group Ltd (SBKJ.J) were accused of having conspired since 2007 to rig the twice-daily platinum and palladium "fixings" and the prices of futures and options based on those fixings.

The plaintiff, Modern Settings LLC, a Florida-based maker of jewelry and police badges, claimed metals purchasers lost millions of dollars.

The defendants illegally shared customer data, used that information to engage in "front-running" of expected price moves, and manufactured phantom "spoof" orders, according to the plaintiff.

Platinum and palladium are used in catalytic converters to curb vehicle emissions, and are also used in dentistry and jewelry.

On Oct. 16, the London Metal Exchange said it will on Dec. 1 take charge of platinum and palladium price fixing, and use a new electronic platform.

The Hong Kong Exchanges and Clearing Ltd (0388.HK) unit said the platform would replace a benchmark system established in 1989, and run by Goldman, BASF, HSBC and Standard.

The complaint said such changes "have come too late" for Modern Settings and other prospective class members. The complaint seeks unspecified damages for the defendants' alleged violations of U.S. antitrust and commodities laws.

Regulators around the world have tightened scrutiny of pricing benchmarks in recent years after uncovering evidence of rigging in currencies and the London Interbank Offered Rate.

The more stringent regulation has spawned new price setting platforms for gold, silver, platinum and palladium. Metals purchasers have filed similar lawsuits this year accusing banks of gold and silver price-fixing.

Goldman spokesman Michael DuVally and HSBC spokeswoman Juanita Gutierrez declined to comment. Standard Bank declined to comment.

A spokeswoman for BASF, the world's largest chemicals maker, said the group could not comment because it had not been notified of a complaint.

BASF generated 2.36 billion euros ($2.95 billion) in precious metals trading revenue last year. The London-based trading business is part of BASF's Catalysts division, which is the world's largest maker of catalytic converters.

Reference: Jonathan Stempel

Wednesday, 26 November 2014

Basic Trading Concepts Defined- Basics of Fundamental Analysis

high-frequency-trading-300x200 7

Traders typically approach financial markets in one of two ways: either through technical analysis or fundamental analysis. The reality is that history is full of traders who have had very successful careers as traders that employed both of these types of analyses.

Market Wizards

In fact, in Jack Schwager's best-selling classic, Market Wizards, two of the traders interviewed are Ed Seykota and Jim Rogers. Rogers is quite adamant in his statement that he believes it is impossible to make a living as a technical trader. He goes so far as to say he has never met a rich technician. Seykota actually shares the exact opposite story. According to Seykota's own interview, he was a struggling trader when he traded according to fundamental analysis. It was not until he became a technician that he started to make a living trading financial markets.

Fundamental Analysis

As stated, successful traders throughout history have employed both technical and fundamental analysis. In this article we are going to break down the basic principles of fundamental analysis in the forex market.
Fundamental Analysis is commonly defined as a method of evaluating a specific security in order to determine its intrinsic value by analyzing a host of economic and financial data. In the foreign-exchange market, a security would be a currency. Market participants are continually analyzing the emerging fundamental from a country in order to determine the intrinsic value of the country's currency. There are several key economic indicators that every trader should understand on a basic level. Fluctuations in the data of these key indicators will generally cause the value of a currency to rise and fall.

Interest Rates

These are the single greatest driver of currency value over the long-term. Most Central Banks announce interest rates each month, and these decisions are watched very scrupulously by market participants. Interest rates are manipulated by Central Banks in order to control the money supply in an economy. If a Central Bank wants to increase the money supply, it lowers interest rates, and if it wants to decrease money supply it raises interest rates.

Gross Domestic Product (GDP)

GDP is the most important indicator of economic health in a country. A country's Central Bank has expected growth outlooks each year that determine how fast a country should grow as measured by GDP. When GDP falls below market expectations, currency values tend to fall and when GDP beats market expectations, currency values tend to rise.

Inflation

Inflation destroys the real purchasing power of a currency, and, therefore, inflation is very bad for the economy in most circumstances. Each year a normal rate of inflation between 2-3% is expected, but if inflation begins moving beyond the upward targets set by the Central Bank, a currency value will actually rise due to expectation of an imminent rate hike. Higher interest rates tend to fight off inflation.

 

Unemployment

We will discuss consumer demand in a moment, but people are basically what drive economic growth; therefore, unemployment is the backbone of economic growth. When unemployment levels increase, it has a devastating effect on economic growth; consequently, when the labor market contracts and unemployment increases, interest rates are often cut in an attempt to increase the money supply in the economy and stimulate economic growth.

Consumer Demand


As stated in the previous point, people are what drive economic growth; as a result, healthy consumer demand is essential to the normal, healthy functioning of an economy. When consumers are demanding goods and services, the economy tends to move forward, but when consumers are not demanding goods and services, the economy falters.
Even if you are a technical trader, it can still be very helpful to understand these basic elements of fundamental analysis. The best forex course will oftentimes offer further insight into how the emerging fundamentals drive price behaviour.

Reference: actionforex.com

Dollar marks time ahead of holiday, U.S. data

 

Australian one dollar coins surround a U.S. twenty dollar note in this photo illustration taken in Sydney July 27, 2011. REUTERS/Tim Wimborne

Australian one dollar coins surround a U.S. twenty dollar note in this photo illustration taken in Sydney July 27, 2011. REUTERS/Tim Wimborne

(Reuters) - The dollar edged lower against the yen on Wednesday but mostly stuck to recent ranges ahead of the U.S. Thanksgiving holiday, while the Australian dollar wallowed near four-year lows against the greenback.

A spate of U.S. data is slated for release ahead of Thursday's holiday, including the final November consumer sentiment and October new home sales. While Friday is not a holiday, U.S. trading activity is expected to be light.

"People are just squaring up ahead of the holiday," said Bart Wakabayashi, head of forex at State Street in Tokyo.

"Overnight, we got some mixed U.S. data. It wasn't shiny, but relatively speaking, the U.S. continues to be the leader," he said.

The U.S. economy grew at a much faster pace than initially thought in the third quarter, with the Commerce Department hiking its estimate of GDP growth to a 3.9 percent annual pace from the 3.5 percent rate reported last month to reflect upward revisions to business and consumer spending, as well as to inventories. This underscored the U.S. economy's resilience compared with Japan's recession, an anaemic euro zone and a slowing China.

But taking some of the shine off the GDP news, separate U.S. data showed consumer confidence sliding to a five-month low and a further moderation in house price gains.

Undermining the U.S. currency, the yield on benchmark 10-year U.S. Treasury notes fell after a solid 5-year sale on Tuesday as well as month-end buying. It was last at 2.253 percent in Asian trading, down from its U.S. close of 2.261 percent on Tuesday.

The dollar bought 117.85, down about 0.1 percent on the day and below its seven-year high of 118.98 last week.

The euro last traded at $1.2469, nearly flat on the day and well above a two-year low of $1.2358 touched on Nov. 7, after a second attempt to break that level failed.

That left the dollar index also flat on the day at 87.923, below its four-year peak of 88.440 set on Monday.

The Australian dollar stole the Asian spotlight, after it dropped almost a full U.S. cent as far as $0.8514 on Tuesday, reaching a low not see since July 2010. It was last at $0.8538, up about 0.1 percent on the day.

Comments from Reserve Bank of Australia Deputy Governor Philip Lowe contributed to the selling, although his remarks about the currency being overvalued were in line with what the central bank has been saying for months.

"The AUD sits squarely at the bottom of the G10 pack in the past 24 hours and heading into the NY close, with a fresh slide in iron ore prices, now to below $70 for the first time since June 2009, adding pressure," said Ray Attrill, global co-head of FX strategy at National Australia Bank.

 

 

Reference:

By Lisa Twaronite and Ian Chua

TOKYO/SYDNEY Wed Nov 26, 2014 4:30am GMT

http://uk.reuters.com/article/2014/11/26/uk-markets-forex-idUKKCN0J92GZ20141126?type=GCA-ForeignExchange

Tuesday, 25 November 2014

Basic Trading Concepts Defined- Costs of trading

image

Cost of Trading

Choosing the best commission model for your investment needs is no easy task. There are many costs involved when trading, and understanding trading commissions, as well as other costs, can help you make the best decisions with your account.

 

What are Trading Costs

When you place a trade, there are several expenses that you face. Some are required, while others are optional. The required costs include the commissions you pay to the broker who places orders for you. Even if you use an online brokerage, you have to go through an accepted organization or individual to place your trade, and that entity receives a commission. Generally, these commissions are low, but remember to ask the broker before you open an account. Optional costs include things that you use to help you make decisions, like additional information services and market analysis. Always ensure that you use a fast Internet connection so that you get your trade in sooner. This is often important when markets are in flux because clicking to order when you see a price does not guarantee that you will get that price. The price that you will get is the one that is in effect when the brokerage receives your instruction and places the order, both of which can involve a slight delay.

 

Your broker makes money from your trades in one or two ways (or sometimes both):

When you place a trade, there are many expenses that you face. Some are required such as broker commissions, while others are optional such as additional market analysis.

Commission included in the spread

The first way that a broker makes money is the spread. When you inquire about a specific trade, your broker will give you two prices. One of these is the buy price and the other is the sell price. The difference between the bid and the ask price is referred to as the spread. Brokers who offer this type of structure will add their commission to the underlining market price.

 

Here's an example

You tell your broker that you want to buy EUR/USD, and your current price chart shows 1.1800 (Sell) and 1.1803 (Buy). This means that the broker has received a real price of 1.1797 and 1.1800 and has then added a 3-point commission inside of that spread. When you choose the "buy" button, you move into that position that will be filled or executed at 1.1803. You are paying 3 pips for that spread (the difference between 1.1803 and 1.1800). This spread is one of the costs of placing a trade. You will always start off with a loss when you open that trade, and if you want to make a profit, the price has to change enough to cover the cost of the spread, as well. In simpler terms, if the sell price goes above the price of 1.1803 you will start to make a profit.

Spread costs vary significantly, depending on the financial instrument that you want to trade and the current market conditions. When markets are calm, without much volatility or activity, you are likely to see a 2-pip spread. When volatility goes up, though, the spread may increase to reflect the extra risk.

Some brokers just charge you the spread. Others charge you a commission, as well. This works like the spread in that it applies to each trade that you place. Factor this in to help you make your investment decisions, because it will affect your overall profit margins.

Brokers will offer two prices: the buy and the sell price. A broker will then include a commission inside of the current spread.

 

Separately charged commission

Commission charges are either fixed or variable.

 

Fixed Commission

A fixed fee is the same, no matter what the volume and size of the trade may be. Your broker, for example, might charge $0.30 for each per-contract or executed trade.

Let’s see an example:

You buy 10 contracts of EUR/USD with your broker. The broker charges a fee of $0.30 per contract. As you have to open and then close a trading position, the total charge per contract is $0.60.

As you are buying 10 contracts, your total cost for opening and closing this position will be $6.00 (10 x $0.60).

 

Variable Commissions

It’s common for brokers to charge a variable commission. Generally this refers to a set dollar value per each million. An example might be a fee of $5 per $1,000,000 (notional value) of a currency transaction that is sold or bought. Frequently, the commission goes on a sliding scale in order to encourage bigger trades, but each broker is different. You'll want to research the commission and spread structure with your potential broker before making any trades.

 

Let’s see an example:

1. You buy 10 EUR/USD contracts with your broker. The current price to buy the EUR/USD is $1,367.

2. The broker charges a fee of 0.030% per one million traded (notional value). The broker charges a fee of $4.10 for 10 contracts. But remember, as you have to open and then close a position the charge would be $8.20.

3. Calculation: (Current price)  X  (Commission percentage)  X  (10 contracts)  X  (2: opening and closing the position)

4. (1367)  X  (0.030%)  X  (10 contracts)  X  (2 positions: open & close) = $8.20

Fixed commissions are charged per contract or lot, while variable commissions are charged based on the investors trading volume.

 

Overnight Financing Cost

Margin costs accrue when you borrow money from your brokerage to purchase an investment for which you do not have the cash on hand, and then you hold the investment overnight (typically after 22:00 U.K. time). These rates vary between 1.5% and 6%, usually, and are based on the current interbank rate (Libor rate, Tom next rate)

Let’s see an example:

1. The broker charges 2.5% on top of the relevant interbank rate.

2. You buy 100 Apple shares at 110.00.

3. Your trade’s total value or exposure is $11,000.

4. The margin for this product is 5%. So you are borrowing $10,450 (11,000 - 5%) from your broker.

5. With the details above we can now calculate the commission cost for holding a position overnight:

6. 10,450  X  2.5% / 365 days (we divide this by 365 days to give us the daily commission) = $0.73

If you’re using a margin account and hold a position overnight (typically after 22:00 U.K. time), the broker will usually charge a commission fee due to the risk incurred.

 

Inactivity Charges

An inactivity fee applies if you have not made any exchanges within a set period of time. Periodic minimums refer to a minimum trading-activity amount in which you must engage each month, quarter or year. Again, these rules will vary from one brokerage to the next.

 

Bottom Line

As you can see, you need to take a careful look at your own possible trading habits before choosing a relationship with a broker, as the fee structures vary widely. If you are planning to keep a trading position open for a number of days, weeks or months, it is best to do so with the lowest possible interest rate.

Entering the financial market is an exciting opportunity for many investors, although the challenges can also be nerve wracking. This article shows you the structuring of some the required costs of doing business as a trader. If you are new to this wing of finance, taking advantage of some of those optional costs could be a good idea, as well. Paying for additional technical analysis, news, charting, or information from your brokerage is one potentially helpful approach, as the more tools you have, the higher your chances of success.

 

Reference:

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U.S. prosecutors to interview London FX traders

A Citibank sign is reflected in a puddle in the City of London November 12, 2014.       REUTERS/Stefan Wermuth


(Reuters) - U.S. prosecutors will travel to London in the coming weeks to interview traders about currency market manipulation, the latest sign that authorities are closer to filing criminal charges stemming from the long-running probe, sources told Reuters.

Officials from the U.S. Department of Justice will interview current or former employees at HSBC Holdings plc, (HSBA.L) among other banks, people familiar with the matter told Reuters.

The plans to interview traders from HSBC do not necessarily indicate that prosecutors will file criminal charges against the bank or its employees, sources said, noting it is common for prosecutors to speak to witnesses in any criminal investigation. HSBC declined to comment.

The authorities have given banks under investigation until mid-December to turn over related information, one source said. JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), UBS AG (UBSN.VX), and others have disclosed that they are under criminal investigation in the foreign exchange probe.

A Justice Department spokesman declined comment, as did representatives of the banks.

The interviews come soon after U.S., Swiss, and British civil authorities fined those banks and others $4.3 billion for failing to stop traders from trying to manipulate the largely unregulated $5-trillion-a-day foreign exchange market.

The fines brought total penalties for benchmark manipulation to more than $10 billion over two years.

The Justice Department is undertaking a broad probe into whether banks have been colluding to move currency rates and boost their profits in trading, violating fraud or antitrust laws. Prosecutors are also looking at whether traders misled clients.

Authorities are expected to charge individuals and banks, though institutions are likely to resolve charges through deferred prosecution agreements or guilty pleas instead of litigation. Banks in recent years have been accused of manipulating benchmarks across a series of markets.

The foreign exchange benchmarks under investigation are used by asset managers and corporate treasurers to value their holdings, which run into the trillions of dollars.

When announcing the civil settlement over their foreign exchange business, the banks acknowledged wrongdoing, condemned the actions of the involved employees and said they were working to fix the problems.

Banks have suspended or fired more than 30 traders, clamped down on chat rooms and boosted their use of automated trading.


"NICE TEAM WORK"

  Earlier this month Attorney General Eric Holder said he expected "the beginning stages of a resolution" of the Justice Department's investigation into the foreign exchange market to come soon. Holder also confirmed in September the department had enlisted undercover cooperators as part of its probe.

The HSBC agreement specifically forces the bank to make any current and former employees available, at the bank's cost, to be interviewed by law enforcement authorities.

    The civil settlement from earlier this month over currency manipulation included online chat room transcripts in which traders are seen working together to move rates at which currency pairs like the U.S. dollar and the British pound trade.

    In one chat, an HSBC trader and others celebrate moving the rate: "Well done gents," one said. "Hooray nice team work," another responds

Reference: McGeever and Aruna Viswanatha

Monday, 24 November 2014

Global stocks grind higher after central bank stimulus signals

Traders are pictured at their desks in front of the German share price index DAX board at the Frankfurt stock exchange November 21, 2014.     REUTERS/Remote/Stringer

World stock markets ground their way higher on Monday after a frenetic round of activity at central banks in Asia and Europe showed they are willing to do more to support economic growth and higher inflation.

European shares, which had their best day in a month on Friday after the People's Bank of China cut interest rates, edged higher still on Monday after sources told Reuters at the weekend Beijing was ready to ease policy further to head off slowing inflation.

European Central Bank chief Mario Draghi also looked to be clearing the way for the full-scale government bond buying widely hoped for by financial market investors but opposed by Germany's Bundesbank.

Germany's influential Ifo survey gave a more upbeat vision of business sentiment than some other data in the past month, boding better for growth but potentially complicating the policy picture.

Jean-Louis Cussac, the head of Paris-based firm Perceval Finance, said the market was currently driven by central banks.

"Fund managers have not been selling equities during the recent pull-backs because of the 'ECB put': if the situation worsens, the central bank is ready to take further steps," he said. "The market remains volatile, and investors should be cautious."

Shares in Shanghai hit three-year highs as the prospect of further policy stimulus in China and Europe whetted risk appetite globally. The euro steadied after nearing 28-month lows.

The Shanghai Composite Index .SSEC rose almost 2 percent more on Monday, while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS jumped 1.1 percent. Tokyo was closed for a holiday.

"China's rate cut adds to the determination of global policy makers to avoid deflation and support growth," said Shane Oliver, head of investment strategy at fund manager AMP Capital in Sydney.

"While U.S. quantitative easing may have ended, it's being replaced by QE in Japan and Europe and rate cuts in China," he added. "This in turn augurs well for shares and other growth assets."

A handful of appearances by some of Draghi's colleagues may offer more clarity on whether the ECB is in danger of delivering stronger action.

The main measure of European bluechips gained 0.4 percent in early trading, prodded higher by a rebound in Ifo's indicator of business sentiment after six successive declines.

In commodity markets, oil edged down ahead of a key meeting of OPEC on Thursday amid uncertainty on whether producers would agree on a meaningful cut in output to support prices. Brent LCOc1 fell 13 cents at $80.24 a barrel, while U.S. crude CLc1 9 cents to $76.42.

Gold XAU= was steady around $1,200 an ounce, as traders cheered the prospect of more global stimulus.

Reference: Patrick Graham

Friday, 21 November 2014

FOREX-Yen rises after Japan fin min warns against rapid fall

London 4

LONDON, Nov 21 (Reuters) - The yen rose on Friday after Japanese Finance Minister Taro Aso said the currency's fall over the past week was too rapid, in one of the strongest warnings against a weak yen since Japan started its aggressive monetary stimulus two years ago.

The dollar fell to 117.355 from around 118 yen before his comments. It was last at 117.65 yen, down 0.5 percent on the day, and below a 7-year high of 118.98 yen struck on Thursday. The dollar has climbed almost 10 yen since the Bank of Japan surprisingly eased policy in late October.

The euro also fell against the yen to 147.25 yen, off a six-year high of 149.12 hit on Thursday. The single currency was also hurt by comments from European Central Bank chief Mario Draghi who said inflation expectations were dropping to levels he considered excessively low.

Most of the focus was on Aso's comments, who said rapid currency moves, whether up or down, were undesirable.

His comments triggered profit-taking on bets placed against the yen that had been built up after the Bank of Japan's easing late last month and Prime Minister Shinzo Abe's decision to delay a planned tax hike and call a snap election.

"Aso's comments are not very surprising given he is speaking about the rapid pace of the yen's fall," said Yujiro Goto, FX strategist at Nomura. "While the comments will slow the pace of yen depreciation, I don't think it will change the overall momentum. We can expect some consolidation here."

Traders said investors would look to rebuild long dollar/short yen positions if the pair drops towards 117 yen.

"Although the market reacted to Mr. Aso's comments, I don't think it would have lasting impact on the yen," said Kosuke Hanao, head of FX at HSBC in Tokyo. "Market players had predicted that some kind of correction was inevitable anyway before Japan's long weekend and the U.S. Thanksgiving week."

Monday is a labour day public holiday in Japan.

The market mood remains bullish on the dollar also given the outperformance of the U.S. economy. Figures out of the United States on Thursday was generally upbeat, led by a stunning jump in the Philadelphia Fed survey of manufacturing which soared to its highest since 1993.

Sterling dipped to $1.5655, hurt partly by a second victory by an anti-EU political party. Mark Reckless, a former Conservative party MP who defected to UKIP won the Rochester and Strood by-election.

The result underlined the political risk that will be a factor in Britain between now and the general election in May.

Reference: Anirban Nag

Thursday, 20 November 2014

For Investors- Silver reaching a new low

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The recent decision of the FOMC to end QE3 didn’t come as a surprise. The hawkish tone in the statement provided the ammunition to shoot down Shares Silver Trust (SLV) — its price fell by 6.1% during last week.  This news along with Bank of Japan’s plan to accelerate its asset purchase program strengthened the U.S. dollar and contributed to the downfall of SLV. Let’s review these news items and see what is up ahead for SLV.


When doves cry
The FOMC ended, as expected, its asset purchase program. But this wasn’t the only issue that came up from the statement. The tone was more hawkish with one dissenter, who is considered a dove. The statement was very positive mainly with respect to the progress in the labor market, as I pointed out in a recent post. This statement raised the odds of the FOMC announcing a rate hike in the very near term.

The minutes of the FOMC meeting will be released on November 19th. The minutes could provide additional insight behind the recent decision. The market’s reaction to the minutes tends to vary from the reaction to the statement. We could see a more dovish tone in the minutes, which may pull back up SLV. This was the case, at least, in the previous release of the minutes, when SLV pulled up by 1.2%.

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Basic Trading Concepts Defined- 10 Ways To Avoid Losing Money In Forex

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Follow-up from yesterday’s blog post.

6. Start Small When Going Live

Once a trader has done his or her homework, spent time with a practice account and has a trading plan in place, it may be time to go live – that is, start trading with real money at stake. No amount of practice trading can exactly simulate real trading, and as such it is vital to start small when going live.

Factors like emotions and slippage cannot be fully understood and accounted for until trading live. Additionally, a trading plan that performed like champ in backtesting results or practice trading could, in reality, fail miserably when applied to a live market. By starting small, a trader can evaluate his or her trading plan and emotions, and gain more practice in executing precise order entries – without risking the entire trading account in the process.

 

7. Use Reasonable Leverage

Forex trading is unique in the amount of leverage that is afforded to its participants. One of the reasons forex is so attractive is that traders have the opportunity to make potentially large profits with a very small investment – sometimes as little as $50. Properly used, leverage does provide potential for growth; however, leverage can just as easily amplify losses. A trader can control the amount of leverage used by basing position size on the account balance. For example, if a trader has $10,000 in a forex account, a $100,000 position (one standard lot) would utilize 10:1 leverage. While the trader could open a much larger position if he or she were to maximize leverage, a smaller position will limit risk. (For additional reading, see Adding Leverage To Your Forex Trading.)

 

8. Keep Good Records

A trading journal is an effective way to learn from both losses and successes in forex trading. Keeping a record of trading activity containing dates, instruments, profits, losses, and, perhaps most importantly, the trader's own performance and emotions can be incredibly beneficial to growing as a successful trader. When periodically reviewed, a trading journal provides important feedback that makes learning possible. Einstein once said that "insanity is doing the same thing over and over and expecting different results." Without a trading journal and good record keeping, traders are likely to continue making the same mistakes, minimizing their chances of become profitable and successful traders.

 

9. Understand Tax Implications and Treatment

It is important to understand the tax implications and treatment of forex trading activity in order to be prepared at tax time. Consulting with a qualified accountant or tax specialist can help avoid any surprises at tax time, and can help individuals take advantage of various tax laws, such as the marked-to-market accounting. Since tax laws change regularly, it is prudent to develop a relationship with a trusted and reliable professional that can guide and manage all tax-related matters.

 

10. Treat Trading As a Business

It is essential to treat forex trading as a business, and to remember that individual wins and losses don't matter in the short run; it is how the trading business performs over time that is important. As such, traders should try to avoid becoming overly emotional with either wins or losses, and treat each as just another day at the office. As with any business, forex trading incurs expenses, losses, taxes, risk and uncertainty. Also, just as small businesses rarely become successful overnight, neither do most forex traders. Planning, setting realistic goals, staying organized and learning from both successes and failures will help ensure a long, successful career as a forex trader.

Reference: By Jean Folger

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We research the best key- information to be found on Forex, How to place a trade, Managing your Risks, Investing in Shares and lots more.

Dollar, bond yields gain after Fed minutes

The dollar hit a seven-year high against the yen on Wednesday and U.S. Treasury yields rose after minutes from the latest Federal Reserve meeting showed policy-makers remained worried about the global outlook, leaving them in a dovish stance.

Investors hoped to see whether the comments from policy-makers in October affirmed the more hawkish policy statement released at the time, which said the U.S. labour market was improving and inflation was unlikely to stay subdued for long.

But the tendency has been for the minutes to go the other way of the statement, said Robbert Van Batenburg, director of market strategy at Newedge in New York.

The minutes said "a couple of members suggested including language in the statement indicating that recent foreign economic developments had increased uncertainty or had boosted downside risks to the U.S. economic outlook."

"The wording would suggest greater pessimism," said Van Batenburg. "They didn't want to create fears."

While a dovish stance would suggest lower interest rates for a longer period of time, the prospect of a stronger U.S. economy than Japan or Europe gave the dollar a tendency to rise.

The yen weakened further after the minutes were released, with the dollar rising as high as 118.05 yen JPY=, its highest level since August 2007, and was last trading at 117.98.

The yen hit a six-year trough against the euro EURJPY=. The euro EUR= was little changed against the dollar, rising 0.03 percent $1.2540.

Yields on benchmark 10-year U.S. Treasury notes US10YT=RR rose to 2.3577 percent, as their price fell 10/32.

German Bund yields rose after Bank of England minutes and data hinting at a rebound in the U.S. housing market suggested that both UK and U.S. rate hikes could be in the cards.

Ten-year Bund yields DE10YT=TWEB, the standard for euro zone borrowing costs, rose 4 basis points to 0.84 percent.

Treasuries also were pressured by Alibaba Group Holding's (BABA.N) expected $8 billion corporate bond deal, traders said, as asset managers sold Treasuries

Global equities markets fell, pulled lower by U.S. and European markets. The strong dollar weighed on Wall Street because of its impact on U.S. exports and commodity prices, said Rick Meckler, president of hedge fund LibertyView Capital Management in Jersey City, New Jersey.

MSCI's all-country world index .MIWD00000PUS fell 0.19 percent to 421.83 while the pan-European FTSEurofirst 300 share index .FTEU3 fell 0.02 percent to close at 1,359.88.

The Dow Jones industrial average .DJI fell 2.09 points, or 0.01 percent, to 17,685.73. The S&P 500 .SPX slid 3.08 points, or 0.15 percent, to 2,048.72, and the Nasdaq Composite .IXIC lost 26.73 points, or 0.57 percent, to 4,675.71.

Oil prices fell for a third straight day after the Fed's uncertain U.S. economic outlook last month erased early gains made on speculation that the Organization of Petroleum Exporting Countries will cut production next week.

Brent LCOc1 fell 37 cents at $78.10 a barrel. U.S. crude CLc1 settled down 3 cents at $74.58 a barrel.

Reference: Herbert Lash

Wednesday, 19 November 2014

Basic Trading Concepts Defined- 10 Ways To Avoid Losing Money In Forex

Money

The Global Forex Market never sleeps

The global forex market boasts over $4 trillion in average daily trading volume, making it the largest financial market in the world. Forex's popularity entices traders of all levels, from greenhorns just learning about the financial markets to well-seasoned professionals. Because it is so easy to trade forex - with round-the-clock sessions, access to significant leverage and relatively low costs - it is also very easy to lose money trading forex. This article will take a look at 10 ways that traders can avoid losing money in the competitive forex market. (There are no specifically forex focused programs, but there are still some advanced education alternatives for forex traders. Check out 5 Forex Designations.)

 

1. Do Your Homework – Learn Before You Burn

Just because forex is easy to get into doesn't mean that due diligence can be avoided. Learning about forex is integral to a trader's success in the forex markets. While the majority of learning comes from live trading and experience, a trader should learn everything possible about the forex markets, including the geopolitical and economic factors that affect a trader's preferred currencies. Homework is an ongoing effort as traders need to be prepared to adapt to changing market conditions, regulations and world events. Part of this research process involves developing a trading plan. (For more, check out 10 Steps To Building A Winning Trading Plan.)

 

2. Take the Time to Find a Reputable Broker

The forex industry has much less oversight than other markets, so it is possible to end up doing business with a less-than-reputable forex broker. Due to concerns about the safety of deposits and the overall integrity of a broker, forex traders should only open an account with a firm that is a member of the National Futures Association (NFA) and that is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a futures commission merchant. Each country outside of the United States has its own regulatory body with which legitimate forex brokers should be registered.

Traders should also research each broker's account offerings, including leverage amounts, commissions and spreads, initial deposits, and account funding and withdrawal policies. A helpful customer service representative should have all this information and be able to answer any questions regarding the firm's services and policies. (Discover the best ways to find a broker who will help you succeed in the forex market. Refer to 5 Tips For Selecting A Forex Broker.)

 

3. Use a Practice Account

Nearly all trading platforms come with a practice account, sometimes called a simulated account or demo account. These accounts allow traders to place hypothetical trades without a funded account. Perhaps the most important benefit of a practice account is that it allows a trader to become adept at order entry techniques.

Few things are as damaging to a trading account (and a trader's confidence) as pushing the wrong button when opening or exiting a position. It is not uncommon, for example, for a new trader to accidentally add to a losing position instead of closing the trade. Multiple errors in order entry can lead to large, unprotected losing trades. Aside from the devastating financial implications, this situation is incredibly stressful. Practice makes perfect: experiment with order entries before placing real money on the line.

 

4. Keep Charts Clean

Once a forex trader has opened an account, it may be tempting to take advantage of all the technical analysis tools offered by the trading platform. While many of these indicators are well-suited to the forex markets, it is important to remember to keep analysis techniques to a minimum in order for them to be effective. Using the same types of indicators – such as two volatility indicators or two oscillators, for example – can become redundant and can even give opposing signals. This should be avoided.

Any analysis technique that is not regularly used to enhance trading performance should be removed from the chart. In addition to the tools that are applied to the chart, the overall look of the workspace should be considered. The chosen colors, fonts and types of price bars (line, candle bar, range bar, etc) should create an easy-to-read and interpret chart, allowing the trader to more effectively respond to changing market conditions.

 

5. Protect Your Trading Account

While there is much focus on making money in forex trading, it is important to learn how to avoid losing money. Proper money management techniques are an integral part of successful trading. Many veteran traders would agree that one can enter a position at any price and still make money – it's how one gets out of the trade that matters.

Part of this is knowing when to accept your losses and move on. Always using a protective stop loss is an effective way to make sure that losses remain reasonable. Traders can also consider using a maximum daily loss amount beyond which all positions would be closed and no new trades initiated until the next trading session. While traders should have plans to limit losses, it is equally essential to protect profits. Money management techniques, such as utilizing trailing stops, can help preserve winnings while still giving a trade room to grow.

To be continued Tomorrow….

Reference: Jean Folger

S&P 500, Dow end at record highs, boosted by healthcare

 

CBOE_Trading_Floor 4

(Reuters) - The Dow and S&P 500 closed at record highs on Tuesday, lifted by further gains in healthcare shares and hopes for a stronger global economy.

The S&P 500 scored its fourth straight day of gains.

Actavis Plc, Gilead Sciences and other biotechs were among the biggest drivers, a day after Allergan agreed to be bought by Actavis. The Nasdaq biotech index rose 2.1 percent.

The S&P health care index added 1.6 percent. Shares of Actavis were up 8.7 percent at $269.60, helped by bullish analyst notes, while Gilead's stock rose 3.3 percent to $103.71 percent.

"A little bit of a risk trade is coming back on, and those are the areas for the M&A," said Uri Landesman, president of Platinum Partners in New York. "It's a very, very good environment to buy growth, so I don't quibble with the notion that there's going to be more M&A."

Among the biggest boosts to the Dow, shares of UnitedHealth were up 1.8 percent at $98.19.

Further supporting stocks, news of a snap election and a delayed tax increase in Japan strengthened hopes for new stimulus, a day after data showed Japan back in recession. In Europe, German analyst and investor sentiment advanced this month for the first time in almost a year.

Benign U.S. inflation data also helped.

The Dow Jones industrial average rose 40.07 points, or 0.23 percent, to 17,687.82, a record high. The S&P 500 gained 10.48 points, or 0.51 percent, to 2,051.8, its biggest one-day move since Nov. 5.

The Nasdaq Composite added 31.44 points, or 0.67 percent, to 4,702.44.

Actavis was the S&P's biggest percentage gainer; the largest decliner was Urban Outfitters, down 6.6 percent at $28.79, following results.

On the Nasdaq 100, the largest gainer was Dish Network, up 3.9 percent to $67.85, while the largest decliner was Staples, down 1.6 percent at $12.76.

Among the most active NYSE stocks were Petrobras, up 0.96 percent at $9.42, and General Electric, up 1.50 percent at $27.01. On the Nasdaq, Apple, up 1.3 percent to $115.47, was among the most active.

About 6.1 billion shares traded on U.S. exchanges, below the 6.4 billion average this month, according to BATS Global Markets.

NYSE advancers outnumbered decliners 1,862 to 1,217, for a 1.53-to-1 ratio; on the Nasdaq, 1,645 issues rose and 1,079 fell for a 1.52-to-1 ratio.

The S&P 500 was posted 77 new 52-week highs and one new lows; the Nasdaq Composite recorded 95 new highs and 56 new lows

Reference: Caroline Valetkevitch

Tuesday, 18 November 2014

Basic Trading Concepts Defined- Scalping Policy

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Scalping Policy

What is a scalping policy? Although the majority of well-established firms with a history and a significant client base have an official policy of allowing scalpers freedom with their decisions, some brokers quite simply refuse to allow scalping techniques for clients. Others process client orders slowly, and make scalping an unprofitable endeavour. What is the reason?

In order to understand the cause of this, we should discuss how brokers net out their client’s positions before passing them to the banks. Supposing that a majority of a broker’s clients are losing money while trading, what would happen if at a time these losses were to reach such a large size that some triggered margin calls which could not be met? Since Forex brokers are liable to liquidity provider banks for the profits or losses of their clients, they would have faced periodic crises of liquidity and even bankruptcy. In order to prevent such a situation from arising, brokers net-out the positions of clients by trading against them. That is, as a client opens a long position, the broker takes a short position, and vice versa. Since the result of two orders in the opposite direction is that the total exposure to the market is zero, the liquidity issue is resolved, and the firm is un-impacted by losses or profits in traders’ account.

 

Broker countertrades

But there’s a problem with this situation. We mentioned that the broker countertrades its clients’ positions, and what if the client makes a profit by closing a long position, for instance. The broker then has to close the short trade which had been opened to net out the trader’s long trade, and while doing so he incurs a loss. And well, isn’t this a great incentive for forex brokers to ensure that their clients are constantly losing money?

Well, not so much. First of all, most of the netting is done internally, where individual traders’ positions are netted out against each other without the broker having to commit any of its own funds. And the small remaining net position (the net long short or position that remains after the broker has netted out client orders against each other), is usually a losing position which can be counter-traded by the broker safely, because it is a well-established fact that the overwhelming majority of forex traders lose money.

 

Competent broker

Now that we understand that scalping does not necessarily constitute a problem for a competent broker (just like the occasional winners are not problem for casinos), we are ready to understand why some brokers dislike scalpers so much. As we said, the broker needs to net out trader positions against each other to guarantee that its liability against banks is minimal. Scalpers disrupt that plan by entering trades all over the place, at awkward times, with difficult sizes which not only forces the broker to commit its own capital at times, but also ensures that the system is bombarded with crowded trades. Add to that the possibility that the broker’s servers are not exactly lightning-fast, or modern enough to cope with the rapid flow of orders, and there you have profitable scalpers as the worst nightmare of a broker with a slow outdated system. Since scalpers enter many small, rapid positions over a short period of time, an incompetent broker is unable to cover its exposure efficiently, and sooner or later kicks the trader out by terminating his account, or slows down his access to the system so much that the scalper has to leave by his own account, due to his inability to trade.

All this should make it clear that scalpers must trade with innovative, competent, and technologically alert brokers only, who possess the expertise and the technical capability to handle the large volume of orders arising from scalping activity. A no-dealing desk broker is almost a must for a scalper. Since trades are mostly automated in the system of a no-dealing desk(NDD) broker, there is little risk of external tampering as the system is left to sort out client orders on its own (still profitable of course).

 

Strong technical tools

Scalping involves technical trading. In the very short time frames preferred by scalpers, fundamentals have no impact on trading. And when they do have, market reaction to them is erratic and entirely unpredictable. As such, a sophisticated technical package which supplies an adequate number of technical tools is a clear necessity for any scalper.

In addition, since the trader will spend a considerable amount of time gazing at the screen, reading quotes, opening and closing positions, it is a good idea to choose an interface that is not too wearying on the eyes. A bright, graphically intense platform may be pleasant to use and look at at first, but after long hours of intense concentration, the visual appeal will be more of a burden than a benefit.

Also, a platform that allows the simultaneous display of multiple time frames can be very useful for a scalper as he monitors price movements on the same screen. Although scalping involves short term trading, awareness of the price action on longer timeframes can be beneficial for money management, and strategical planning.

 

No slippage, no misquotes, timely execution

We have mentioned in the section on brokers’ scalping policies that a scalper must always seek a competent, modern broker in order to ensure that his trading style and practices are welcome. But timely execution, and precise quotes are also important for ensuring that a trader can profit with a scalping strategy. Since the scalper trades many times in the short time frame of an hour, he must receive timely, correct quotes on a system which allows rapid reaction.

If there’s slippage, the scalper will be unable to trade most of the time. If there are misquotes, he will suffer losses so often that trading will be impractical. And we should not neglect the emotional pressures which will be caused by such a stressful, difficult, and inefficient trading environment either. Scalping is already a burdensome activity on one’s nerves, and we should not agree to suffer the added trouble of broker incompetence on top of all the other problems which we have.

To conclude this section, we’ll add that scalping is a high-intensity technical trading method which requires a highly competent and efficient broker with state-of-the-art tools. Anything less will diminish your profits, and increase your problems. Among our trusted brokers we recommend FxPro as the best one fore scalping.

Reference: Tom Cleveland

Euro inches higher, eyes on Japan PM, ZEW

 

A picture illustration of Euro banknotes taken in central Bosnian town of Zenica, April 25, 2014. REUTERS/Dado Ruvic/Files

The euro clawed back some ground against the dollar in a choppy start to trade in Europe on Tuesday, with investors looking to the ZEW survey of German investor sentiment and events in Japan and the United States later for new direction.

The yen ticked lower on confirmation that Japanese Prime Minister Shinzo Abe will hold a news conference after 1010 GMT (5.10 a.m. ET), widely expected to announce a snap election and delay a hike in sales tax to help a moribund Japanese economy.

Some dealers said that after a shockingly poor set of GDP numbers on Monday, there was speculation in the market that Abe could announce plans for additional government stimulus ahead of the election.

Either way, the Bank of Japan is expected to have to print more yen in a bid to revive an economy which has struggled to grow for more than a decade.

"The yen is the only game in town really," said Graham Davidson, a spot currency trader with National Australia Bank in London.

"It looks like there are a lot of dollars to be bought by the Japanese domestic investor community and that should keep any dips for the dollar (against the yen) pretty shallow."

The dollar was a touch higher on the day at 116.72 yen JPY=, within sight of its seven-year peak of 117.06 yen touched on the EBS trading platform on Monday after Japan's poor gross domestic product data.

The Japanese economy contracted by an annualized 1.6 percent in the third quarter, quashing expectations of a rebound after plunging 7.3 percent in the second quarter.

"We need to focus on the possible supplementary budget and not just the delay of the sales tax increase," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

European Central Bank policymakers have also reiterated their intention to take further steps if a similar picture of divergence with the improving U.S. economy continues. That helped knock the euro back on Monday but it had recovered around a third of a percent to $1.2494 EUR= on Tuesday.


"I think the market is short euros but not heavily so," NAB's Davidson said. "All of the news is priced into it and we will really need to see further poor data out of Europe or strong data from the U.S. to move it on."

He said the ZEW numbers out of Germany, due at 1000 GMT (5 a.m. ET), might prod the euro lower, but pointed to purchasing manager surveys later this week as a more likely market mover.

U.S. producer price numbers are also due on Tuesday ahead of minutes on Wednesday from the Federal Reserve's latest meeting.

Reference: Patrick Graham

Monday, 17 November 2014

Basic Trading Concepts Defined- Must Know Basic Trading Rules

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Most professional traders will concur that discipline, dedication; education and experience are the key ingredients to success in the financial markets. Even though the four are quite easy to understand, they are nevertheless not that easy to implement when it comes to trading.

Financial markets seem to have a set of unwritten rules—you can choose to follow or ignore them at your own peril. This can make or break your overall success. Here are some of the essential rules for trading which need to be in your bones.

 

Trading is a business, not a gambling game

You should not view trading as a game; you should treat it as what it is—a serious business. Once you start taking it seriously, your mind-set will start changing, and you will gain control over your investments. You will also become fully prepared for whatever the market throws at you.

There is a thin line between betting on the markets and investing. You are betting when you have no apparent reason or plan as to what you are doing. When there is a reason and an idea behind your trading, you can call yourself an investor or trader.

Unless you treat trading as the serious business that it is, success won’t come your way.

 

Create a Trading Plan

Once you’ve gotten rid of the “gambling game” perspective and you’ve committed to treating trading like a serious business, a trading plan is required—every trader needs one. Come up with your own trading rules and stick to them no matter what. You can never achieve much if you lack self-discipline. Discipline is a hard practice to master. Rules are made to be broken, and you will surely break your own rules from time to time. Have a rule in place that helps you to avoid this from happening again. A rule that some traders find helpful is to stop trading for the day after they have suffered a big loss or they feel particularly emotional.

Before opening a trading position, one must always have a detailed plan and a reason for that trade. Look back at historical charting data to find your perfect entry and exit points. Discover where your trade can go wrong or what events can have an impact on your trading position, and act accordingly.

Set up your own trading rules and stick to them, no matter what

 

You Can Never Predict the Future

When trading, you must be clear about the fact that you can never predict the future. You must think in terms of probability. You must commit yourself to being successful in this business. Create a trading plan that clearly specifies

1) all the items you intend to trade with,

2) your method of trading, and

3) the market you intend to trade in.

Since trading is unpredictable, think in terms of probabilities and be careful with every decision you make.

 

Educate yourself

Embark on reading and researching as much as you can. Knowledge is a hidden secret to success. Professional traders who boast of having years of trading experience will concur with this, and that is why they never cease to learn.

This is one of the great challenges when trading. People change, and so do the financial markets—and thus trading is a constant learning curve. Like anything in life, the more knowledge and information you gain, the higher your chances of success.

Read and research as often as possible. Never cease to learn new things from the markets, yourself and experienced traders.

 

Never invest money that you can’t afford to lose

Losing money is a painful experience. The idea of losing money in itself can make any person squirm. Trading is about risking money, and you should never risk money that is destined for rent, food, bills, etc.

Your trading approach and trading psychology will drastically change when using money that, if lost, does not have an effect on your lifestyle. In short, investing money you cannot afford to lose is a sure path to financial suicide.

Never let emotions control you in any way. Banish greed from your emotional and mental makeup. Don’t trade only because you’ve seen a friend make large profits on a certain trade—it may never go the same way for you.

In trading, there is no place for emotions. Therefore, just like greed, fear isn’t something that should accompany you when you’re placing a trade. It must be said again: Do not let emotions influence your trading. Emotional stability is the key for a successful trader.

Trading doesn’t tolerate emotions. Don’t let greed and fear control your decision-making. Money meant for bills and mortgage should never, ever be invested.

 

Embrace patience

Trading may be boring at times. You need to be patient as you wait for the right opportunities. Don’t give up or quit—these are the times when good things may be about to happen.

Consider professional traders, for instance. Most will sit in front of their computer screens for hours on end, monitoring the markets, and they’ll maybe place one or two trades a week. This requires patience and discipline that some people might not have.

Although trading may be boring at times, employ patience when you monitor the markets.

 

Learn from, and accept, your losses

As a business person, you should always be aware of the fact that losses are part of trading, however difficult and emotional they may be. When you accept your losses and learn from them, you will find that you are able to cut your losses, and not allow them to get out of hand.

One of the reasons why people make irrational decisions and take irrational actions is simply because they fail to accept and learn from their losses. Most traders find themselves to be unsuccessful in the first year; most may take several years to master the art of trading.

Losses are part of trading; accept them, learn from them, and move on.

 

Adding to a losing trading position

This is when a trader keeps on holding back, instead of withdrawing from a trade that’s losing. Most new traders tend to add to their positions when they are in a losing trading position. As they continue averaging down, their losses increase.

Adding to a trading position must be done when you are actually in profit, as the markets have a tendency to keep going in that direction. Most traders stay in a losing position because of two main reasons:

o   The trader doesn’t want to admit that he or she is wrong

o   The trader doesn’t want to lose money

In most cases, a bearish market (downward-moving market) will always tend to go on being bearish, and in a bullish market (upward-moving market), there are high chances that the market will continue on being bullish. The solution is to:

o   Admit you are wrong

o   Place stop loss outside trading ranges

o   Don’t be too confident, particularly when you’ve just made a very profitable trade

Adding to a trading position when you are losing money may not be the wisest idea. Cut your losses short and let your profits run.

 

Limit your risk

Always make use of a "stop loss". A stop loss is sort of a predetermined risk that a trader should be willing to accept when venturing into the financial markets. Utilizing a stop loss is one of the best methods of giving you control of a set percentage of your total risk. It is also a good way to alleviate mental stress, making you feel comfortable with your trade.

Failure to use a stop loss could be a disaster waiting to happen. Most professional traders will never risk more than 1% to 2% of their total account size on any given trade, with a maximum of 10% on all combined trades.

Money Management is an essential part when trading. Even if you have a profitable strategy, if you do not have funds in your account, the strategy is useless. We have provided an in-depth "Money Management Module", explaining how to integrate money management into your trading strategy.

Limit your losses as much as possible. Use a stop loss, and do not exceed more than 10% of your total account size in all combined trades.

 

Start small

You only need a small amount of money to get started trading in the financial markets. Later, you can trade with large amounts of money once you start making consistent profits.

Most professional traders start with the minimum trade size possible during their first year. This usually equates to 1 lot in trading size. Once they have become more confident in their trading strategies and their feel for the markets, they increase their trading size accordingly.

Start small until you start generating consistent profits; then increase your trading size.

 

Keep a record of your trades

Having a daily routine every time you interact with the markets is a key component to becoming a disciplined trader. Maintaining a trading journal is one of the trading activities that are necessary ingredients to professional trading success. The best traders in the world have regular and consistent ways of recording and logging their trades. A trading journal reflects both a trader’s past mistakes and her victories, which are an invaluable resource of lessons to help the trader learn, grow and improve. A journal provides you with perspective, and it keeps you on track to professional trading.

Keep records of every single detail when you are trading. This will help you become disciplined and learn from your mistakes.

 

Bottom Line

To become successful, there are no specific rules and no holy grail that will help you. Discipline, experience and consistency are what make a successful and outstanding trader.

The above-mentioned basic trading rules are very important; that is, each and every individual rule is significant. But when they are all used together, with due discipline, you would be surprised at how useful they can be.

Reference: Jack Maverick

Jack Maverick

Jack Maverick is a long term trader who came up with an interesting strategy which makes him a profit every day. We thought, that is worth looking into.

Especially if you are a “starting trader”, “maintaining and increasing” your precious investment is key in your daily trading.

Find out more here

Global stocks fall, oil dips as Japan slips into recession

Passers-by are reflected on an electronic stock quotation board outside a brokerage in Tokyo, November 17, 2014. REUTERS/Issei Kato

(Reuters) - Shares fell and the oil price slid on Monday after data showed Japan had slipped into recession, raising concerns about global growth.

European shares opened lower. They followed Tokyo's Nikkei index .N225 which lost 3 percent, its biggest one-day drop since August on news that the world's third-largest economy unexpectedly shrank by an annualised 1.6 percent in the third quarter.

This followed a 7.3 percent contraction in the previous quarter caused by a rise in the national sales tax and ran counter to economists forecasts for a 2.1 percent rebound.

The data initially pushed the yen to a seven-year low against the dollar, but as Tokyo stocks fell the Japanese currency rebounded.

It also shaved $1 off the price of Brent crude oil and sent ripples across Europe, where the FTSEurofirst 300 pan-European share index was down 0.3 percent.

Data on Friday showed euro zone economic output expanded more than expected in the third quarter but remained weak.

Leaders from the G20 group of countries agreed on Sunday a package of measures they said would add an extra 2.1 percentage points to growth over five years. They also agreed steps to tackle climate change and crack down on tax avoidance.

But financial markets focused on Japan's economic downturn.

"It's a bit of shock for the market, because people believed that the Bank of Japan had everything under control. But overall, the initial negative reaction shouldn't last too long. Investors still expect central bank action worldwide to support the global economy," FXCM analyst Nicolas Cheron said.

Other Asian shares also fell. MSCI's main index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS lost 0.5 percent.

Chinese equities dropped as profit taking outweighed buying by foreign investors as a landmark Hong Kong-Shanghai trading link debuted on Monday.

The Shanghai Composite .SSEC ended down 0.2 percent and Hong Kong's Hang Seng .HSI lost 1 percent.

The yen was the big mover on foreign exchange markets. After the GDP data, it fell to as low as 117.06 to the dollar but later rebounded and was last at 116.12, up 0.3 percent on the day.

The dollar index .DXY dipped 0.1 percent as a result and the euro EUR= made a similar gain versus the greenback.

s the Japanese data stoked concerns about the global economy, undermining stronger-than-expected U.S. retail sales data on Friday, German 10-year Bund yields DE10YT=TWEB also fell, opening down 2 basis points at 0.77 percent, just above a record low of 0.716 percent.

Brent crude LCOc1 last traded at $78.32 a barrel, down 1.4 percent after the Japanese data was seen hitting global demand.

"This is another knock on crude oil prices, another bearish factor," said Tony Nunan, oil risk manager at Mitsubishi Corp.

Eyes remain on possible OPEC production cuts when the oil cartel meets next week.

Gold held near two-week highs on a softer dollar. Spot gold XAU= was last at $1,185.60.

Reference: Nigel Stephenson

Friday, 14 November 2014

Sovereign wealth fund acquisitions surge as confidence returns

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Sovereign wealth funds are buying up assets this year at their fastest rate since the financial crisis as these state-run pools of assets regain the confidence lost when big punts on western banks turned sour, Thomson Reuters data shows.

Thomson Reuters data shows sovereign wealth funds, which invest windfall revenues from oil and other exports for future generations, were involved in deals worth $40 billion in the first nine months of 2014, the highest rate since 2007.

The money was spent across 79 transactions - the highest number since 2008 - with real estate and infrastructure dominating the deal flow.

Some state-owned wealth funds had come under domestic pressure after losing an estimated $80 billion at the height of the financial crisis by investing in beleaguered Western banks.

Prominent transactions this year include the Abu Dhabi Investment Authority's participation in a consortium that bought Queensland Motorways, and Qatar Investment Authority's involvement in buying a $1.4 billion skyscraper in London's Canary Wharf.

"There are a couple of things going on such as a return of confidence because most of the activity in 2007 was in financial services businesses and a lot of that didn’t work out, so they were constrained in doing more investments," said Gavin Ralston, head of official institutions at fund manager Schroders.

Ralston also said the pickup in activity can also be attributed to sovereign funds building their own expertise, hiring analysts and financiers to seek out deals.

Real estate and infrastructure can help offset poor returns from more conventional assets such as bonds.

"These funds have always had interest in real estate as an asset class. In a prolonged low interest rate environment real assets have attraction," said Rodney Ringrow, a senior executive at State Street's official institutions business.

Norway's $860 sovereign fund, the world's largest, has featured in a number of large real estate deals this year, buying Boston's One Beacon Street tower with Metlife, Paris's La Madeleine building and the Pollen Estate in London's West End.

The fund currently has around 1.3 percent of its assets in real estate but has a mandate to take the allocation up to 5 percent.

Reference: Chris Vellacott

UK hands fraud agency all funds needed for Forex probe: source

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Britain's finance ministry will hand the country's anti-fraud agency all the funds it needs to conduct a criminal investigation into alleged rigging of the $5.3 trillion-a-day currency market, a Treasury source said.

Finance minister George Osborne has written to the Serious Fraud Office to make clear that it will be given the funds it needs for the investigation.

"I understand that the SFO is in the early stages of a major investigation into forex trading. Given the importance of this work, the Treasury will provide the required funding for this investigation," the source said the letter states.

Reference: Matt Scuffham

Thursday, 13 November 2014

Basic Trading Concepts Defined - Forex Scalping

 

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Choosing the right broker for scalping

Not every broker is accommodative to scalping. Sometimes this is the stated policy of the firm, at other times the broker creates the conditions which make successful scalping impossible. It is important that the novice scalper know what to look for in the broker before opening his account, and here we’ll try to enlighten you on these important points.

This article is part of our guide on how to use scalping techniques to trade forex. If you haven't already we recommend you read the first part of our series on forex scalping.

As important as basic concepts like leverage and spreads are for forex scalpers, they are still secondary subjects in comparison to issues related to the broker, his attitude and preferences. Quite simply, the broker is the most important variable determining the possibility, and profitability of a scalping strategy for any trader. A scalper has control over his strategies, stop loss, or take profit orders, as well as his time frame for trading, but he has no say in matters such as server stability, spreads, and the attitude of the broker to scalping.

There are hundreds of brokers operating in the retail forex market today; naturally, each has a technical capability, and business model suitable to a different trader profile. These differences are immaterial to most long term traders, for swing traders they are meaningful but not that significant, but for day traders and scalpers they are the distinction between profit and loss. At the very basic level, the spread is a tax paid on profits and losses to the broker for his services, but the relationship goes a lot deeper than that. Let’s take a look at the various issues related to the scalper-broker relationship. (Once you've read this article make sure to stop by our forex broker review section to find more informations on the most popular retail forex brokers and compare features.)

 

Low Spreads

A trader who doesn’t use the scalping or day-trading strategies will open and close may be one or two positions, at most, in a single day. Although the cost of the spread is still an important variable, a successful trading style can easily justify the relatively small fees paid to the broker. The situation is quite different for the scalper however. Since the scalper will open and close tens of positions in a short period of time, the cost of his trades will be a very significant item on his balance sheet. Let’s see an example.

Suppose that a scalper opens and liquidates 30 positions on a day in the EURUSD pair, for which the spread is commonly 3 pips. Let’s also suppose that his trade sizes are constant, and that 2/3 of his positions are profitable, with an average of 5 pips profit per trade. Let’s also say that the average size of his loss is 3 pips per trade. What is his net gain/loss without the cost of the spread included?

(Positions in black) – (Positions in red) = Net profit/loss

(20*5)-(10*3) = 70 pips in total.

Which is a significant gain. Now let’s include the cost of the spread, and repeat the calculation.

(Positions in black) – (Positions in red + Cost of the Spread) = Net profit/loss

(20*5)-(10*3+30*3) = -20 pips in total.

A nasty surprise awaits our hypothetical trader in his account. The number of his profitable trades were twice the number of his losing ones, and his average loss was about half his average gain. And in spite of that remarkable track record, his scalping activity gained him a net loss. To break even, he would need an average net profit of 9 pips per trade, all else remaining the same.

Now let’s repeat the same calculation, with another hypothetical broker where the spread is just 1 pip in the EURUSD pair. The 5 pips per win, and 3 pips per loss (the same scenario which was examined in the beginning) with a one-pip spread would bring us an outcome of

(20*5)-(10*3+30*1) = 40 pips in total profit.

Why is there such a large discrepancy in our results? Although the numbers do speak for themselves, let’s remind the reader that while we earn money only on our profitable trades, we pay the broker for every position we open, profitable or not. And that is the problem.

In sum, we need to ensure that we choose the broker with the lowest spread for the currency pair we’d like to trade. A scalper must scrutinize the account packages of different brokers thoroughly before deciding to become a client of one of them.

Reference: Tom Cleveland

Dow, S&P 500 dip, end 5-day streak of closing highs

Traders work on the floor of the New York Stock Exchange November 10, 2014. REUTERS-Brendan McDermid

The Dow and S&P 500 ended slightly lower on Wednesday, breaking their five-day streak of record closing highs as energy and utility shares lost ground, while the Nasdaq climbed.

Energy shares fell along with oil prices, with Brent crude oil breaking below $80 a barrel for the first time since September 2010. Shares of Exxon Mobil were down 1.1 percent at $95.38, while the S&P energy index dropped 0.9 percent.

S&P utilities slid 2 percent and were the biggest drag on the benchmark index, reversing recent gains. The index is still up 7.6 percent for the month so far.

The S&P 500 has rallied more than 9 percent from a six-month low in October, buoyed by supportive economic data and corporate earnings. For the year so far, it is up 10.3 percent.

"The overall environment has really shifted from negative to positive. We had our bounce back ... so the markets are fairly quiet, and I think investors are actually fairly comfortable right now," said Bryant Evans, portfolio manager at Cozad Asset Management, in Champaign, Illinois.

The Dow Jones industrial average fell 2.7 points, or 0.02 percent, to 17,612.2, the S&P 500 lost 1.43 points, or 0.07 percent, to 2,038.25 and the Nasdaq Composite added 14.58 points, or 0.31 percent, to 4,675.14.

Lifting the Nasdaq, Apple shares gained 1.4 percent to $111.25, a record high. Shares of Twitter jumped 7.5 percent to $42.54. It said during its first financial analyst day it is considering creating additional mobile applications.

Financial shares slipped after global regulators fined five major banks for failing to stop their traders from trying to manipulate the foreign exchange market. The banks included Citigroup Inc, whose shares dipped 0.7 percent.

The day's gainers included retailers, with the S&P retail index climbing 0.6 percent. Macy's Inc rose 5.1 percent to $61.57 after upbeat earnings. Shares of Fossil jumped 8.4 percent to $112.48, a day after its results.

Shares of J.C. Penney fell 1.3 percent in after-hours trading, while shares of Cisco Systems dipped 0.2 percent, both after reporting results.

Among the day's biggest NYSE decliners, SeaWorld Entertainment slumped 9.4 percent to $16.85 after earnings fell short of expectations.

NYSE advancers outnumbered decliners 1,669 to 1,410, a 1.18-to-1 ratio on the upside; on the Nasdaq, 1,645 issues rose and 1,029 fell for a 1.60-to-1 ratio.
About 5.9 billion shares traded on U.S. exchanges, below the 6.6 billion average this month, according to BATS Global Markets.

Reference: Caroline Valetkevitch