Wednesday, 30 September 2015

Swiss watchdog opens bank probe into precious metal collusion

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014.   REUTERS/Arnd Wiegmann

The Swiss competition regulator has opened an investigation into possible collusion in the precious metals market by several major banks, it said on Monday, the latest in a string of manipulation probes.

Switzerland's WEKO watchdog said its investigation, the result of a preliminary probe, was looking at whether UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui conspired to set bid/ask spreads.

"It (WEKO) has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned," WEKO said in a statement.

A WEKO spokesman said the investigation would likely conclude in either 2016 or 2017, adding that the banks were suspected of violating Swiss corporate rules.

The banks face financial penalties if WEKO finds them guilty of wrongdoing, the spokesman said. He declined to comment on the size of any possible penalty from the probe.

The WEKO investigation is the latest in a long line of probes into manipulation of the precious metals and foreign exchange markets.

Last year, Switzerland's financial regulator FINMA said it had found a "clear attempt" to manipulate precious metals price benchmarks during a cross-market investigation into trading at UBS.

As part of ongoing obligations imposed by FINMA, UBS is seeking to automate at least 95 percent of its global foreign exchange and precious metals trading by the end of 2016.

In May, four major banks pleaded guilty to trying to manipulate foreign exchange rates and, with two others, were fined nearly $6 billion in another settlement in a global investigation into the $5 trillion-a-day market.

A Julius Baer spokesman said the bank was cooperating with authorities.

In a statement, Deutsche Bank said it was cooperating with requests for information from "certain regulatory authorities" over precious metal benchmarks but declined to comment further.

Representatives for UBS, Barclays, Morgan Stanley and HSBC declined to comment. Mitsui was not immediately available for comment.

Reference: Kathrin Jones

Stocks hit two-year lows as commodities stay pressured

Global stocks slid to their lowest in more than two years on Tuesday as raw materials prices and emerging markets stayed under pressure.

Commodity prices edged up but held near multi-year lows on concern over an economic slowdown in major consumer China.

Mining and trading giant Glencore, whose shares fell by almost a third on Monday on investor concern over its debt levels, eked out gains of 4 percent in London but only after its Hong Kong-listed shares fell 29 percent.

Asian commodity merchant Noble lost 11 percent, having at one point in the session fallen by 15 percent to levels last seen in October 2008.

European shares partially recouped early losses but most major indexes remained near 2015 lows. Wall Street was set to open higher, according to index futures.

Earlier, Asian shares slid to 3 1/2-year lows on concerns a slowdown in China will dent its previously massive demand for commodities.

Emerging equities dropped 0.8 percent while sovereign dollar bond yield spreads hit 6 1/2-year highs on doubts about the creditworthiness of commodity exporting countries and companies.

Copper steadied after hitting a one-month low. It last traded at $4,979, up 0.3 percent on the day but within reach of a 6 1/2-year low below $4,855.

Platinum fell below $900 an ounce for the first time since 2009 on fears that the emissions scandal embroiling German carmaker Volkswagen could hit demand from the auto sector. It last stood at $910.75.

Gold fell 0.4 percent to $1,126.60 an ounce on worries U.S. interest rates could rise later this year.

The pan-European FTSEurofirst 300 index was down 0.3 percent, having dropped 1.7 percent earlier. Losses were led by biotech firms, which helped push the U.S. Nasdaq index down 3 percent on Monday.

VW shares fell 1.1 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan slid 1.8 percent, having earlier touched its lowest levels since June 2012. MSCI's all-country index of world shares lost 0.5 percent, touching its lowest since September 2013.

Tokyo's Nikkei index fell 4 percent to an eight-month low and turned negative for the year, with shares of commodity-linked firms and shippers pummeled.

Commodity and energy shares led Chinese stocks lower. The CSI 300 index of the largest listed firms in Shanghai and Shenzhen fell 2 percent and the Shanghai Composite lost 2.1 percent. Hong Kong's Hang Seng fell 3 percent.

The commodity-linked Australian dollar traded near 6 1/2-year lows before recovering while the Canadian dollar hit an 11-year low.

The euro was down 0.2 percent at $1.1276 as Spanish consumer prices fell at their fastest rate in seven months in September and German data pointed to inflation around zero.

"If euro zone inflation prints below market consensus tomorrow, expectations of more asset purchases from the ECB will be boosted," said Petr Krpata, FX strategist at ING. "The uncertainty about more QE by the ECB is not good for the euro."


The U.S. dollar was marginally higher against a basket of major currencies.

Some analysts said the latest market turmoil could lead the U.S. Federal Reserve to delay raising interest rates and that this was weighing on the dollar.

"The market thinks the latest bout of risk aversion will drive the Fed to postpone a rate hike," said Niels Christensen, FX strategist at Nordea. "That is weighing on the dollar, while the yen, the franc and the euro are all trading higher."

Since the Fed kept rates on hold on Sept. 17, markets have been puzzling over whether it will hike before the end of 2015.

There were mixed messages from Fed officials on Monday and investors will be looking to a speech from the U.S. central bank's Chair Janet Yellen on Wednesday for more clarity.

Brent crude oil, which lost 2.5 percent on Monday, rose 47 cents a barrel to $47.81 on signs of a tightening U.S. market, although analysts said the outlook remained weak.

($1 = 119.9500 yen)

Reference: Lisa Twaronite

Tuesday, 29 September 2015

Futures point to higher opening after selloff

Traders work on the floor of the New York Stock Exchange September 23, 2015. REUTERS/Brendan McDermid

U.S. stock index futures were up on Tuesday, a day after concerns about waning demand from China and a selloff in health care shares rattled investors and added to the uncertainty around the timing of a U.S. interest rate increase.

* Global stocks fell to their lowest in more than two years, reeling under pressure from weak raw material prices.

* Goldman Sachs said it expects sales growth for S&P 500 companies in aggregate to shrink this year for the first time in five years, hurt by slowing global growth and lower oil prices.

* The S&P 500 and the Nasdaq Composite Index have closed down for the past five sessions.

* The Nasdaq Biotechnology Index and the S&P 500 health care index fell for the seventh straight day, closing down more than 3.4 percent.

* Investors will be closely watching data expected to be released this week, culminating in nonfarm payrolls numbers on Friday, for clues on the health of the U.S. economy.

* A number of Federal Reserve officials are scheduled to speak at events this week, but mixed opinions on the timing of a rate hike is likely to add to investor jitters.

* Fed Chair Janet Yellen has said the central bank is on track to raise rates for the first time since 2006, with New York Fed President William Dudley saying the hike could come as soon as next month.

* But Charles Evans, head of the Chicago Fed, took a far more dovish view, calling for rates to stay near zero until mid-2016.

* Billionaire investor activist Carl Icahn was the latest to criticize the U.S. Federal Reserve's inaction on interest rates, warning about the unintended consequences of ultra-low interest rates on the economy and financial markets.

* Data being released on Tuesday includes consumer confidence for September, which is expected to have fallen to 96.1 from 101.5 last month. The data is expected at 10:00 a.m. ET (1400 GMT).

* U.S. companies reporting quarterly earnings on Tuesday include Costco and Diamond Foods.

* Yahoo shares rose 3.4 percent to $27.60 premarket on Tuesday, a day after the Internet company's board decided to proceed with spinning off Alibaba stake.

* Republic Airways was up 6 percent at $5.29 premarket after Deutsche Bank raised the stock to "buy" and the airline reached agreement on new contract with its pilots.

Futures snapshot at 7:15 a.m. ET (11:15 GMT):

* S&P 500 e-minis were up 9.25 points, or 0.49 percent, with 283,004 contracts traded.

* Nasdaq 100 e-minis were up 20.75 points, or 0.51 percent, on volume of 53,852 contracts.

* Dow e-minis were up 56 points, or 0.35 percent, with 48,919 contracts changing hands.

reference: Reuters

Weak currencies boost exports; pain ahead for commodity exporters: IMF

The International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 18, 2013. REUTERS/Yuri Gripas

A weaker currency gives a tangible boost to exports despite the rise of global supply chains blurring the country of origin of many products, according to research published by the International Monetary Fund on Monday.

Analysis by IMF economists found a 10 percent depreciation in a country's currency, adjusted for inflation, boosted net exports by an average 1.5 percent of economic output - mostly within the first year.

A separate chapter in the IMF's regular update on the world economy, which is expected to highlight a weaker outlook for global growth, also predicted more pain ahead for commodity exporters amid continued low prices for oil and other raw materials.

The findings on currencies suggest a hit to exports for the United States, after a real dollar appreciation against a range of trading partners worth more than 14 percent over the last year, and an export boost for countries with weakening currencies, like the euro area and Brazil.

Japan, which has seen the yen's real broad effective exchange rate fall nearly 9 percent in the last year, was an exception, given a rise in offshoring since the global financial crisis and a devastating earthquake in 2011.

Some economists argue that the overall impact of exchange rates on trade had been blunted by global supply chains, where inputs from many countries go into producing one final product.

But IMF staff found there was little evidence to suggest that the link between currencies and exports was broken.

Other research found continued low commodity prices, after a sharp drop in the value of goods ranging from metals to food since 2011, would cut 1 percentage point from commodity exporters' average growth rates in 2015-17 compared to 2012-14.

Countries exporting oil and other energy products would see a hit more than twice that size, the research found.

Lower commodity prices also dampened countries' economic potential and meant that trying to stimulate growth with low interest rates and more public spending would likely backfire, fanning inflation rather than boosting jobs and investment.

The research bolsters the IMF's call for countries to undertake deep structural reforms to boost economic output rather than relying on quick fixes, a message likely to be hammered home at IMF and World Bank meetings in Peru next week.

Reference: Krista Hughes

Monday, 28 September 2015

An interview with Francis Hunt

90% of traders lose money... So how to be in the top 10%?

Francis Hunt a technical analysis trader and coach comments. What are the bad habits to avoid? What are some trading mistakes to avoid? Is trading Forex, indices and commodities a giant casino?
Decide on a strategy that looks after all elements of money management. You've got to manage losses and you need to have a system that will make more money than it loses. Patterns are probably the most important technical analysis tool for me.

Good lessons can be learned here.

Herewith find the link:

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Asia shares sag on caution, dollar consolidates

Pedestrians holding their mobile phone walk past an electronic board showing the various stock prices outside a brokerage in Tokyo, Japan, September 9, 2015.  REUTERS/Yuya Shino

Asian stocks sagged on Monday after Wall Street's uninspiring performance on Friday and ahead of key economic indicators, while the dollar consolidated its gains against the yen and euro.

Spreadbetters forecast shaky sentiment spilling over into European equities, predicting a lower open for Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was little changed. Shanghai shares .SSEC fell 0.2 percent. Financial markets in South Korea, Hong Kong and Taiwan were closed Monday for public holidays.

Tokyo's Nikkei .N225 lost 1.2 percent on caution ahead of impending announcements including Wednesday's Japan industrial production, Thursday's China Caixin Purchasing Managers' Index (PMI) and U.S. non-farm payrolls on Friday.

"Investors would not take large positions until they digest the outcomes of these key data, so directionless trading is expected this week and volume is likely to be thin," said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo.

"If these data are better than expected, the market will likely start recovering next week."

On Friday, the S&P 500 .SPX erased an early Federal Reserve-driven rally and closed slightly lower amid a selloff in biotech shares, and the Nasdaq .IXIC lost 1 percent. The Dow .DJI, however, managed to rise 0.7 percent. [.N]

Fed Chair Janet Yellen last week revived prospects of an interest rate hike before year-end, easing concerns about slowing global growth that helped the dollar and risk assets, which have been buffeted by fears over China's sputtering economy.

Strong second quarter U.S. GDP data released on Friday further sharpened the case for the Fed to raise rates in 2015. ECONUS

Focus now turns to this Friday's U.S. non-farm payrolls as markets try to gauge whether labor market conditions are strong enough for the Fed to tighten monetary policy.

The dollar fetched 120.30 yen JPY= after edging up to a two-week high of 121.24 on Friday as U.S. Treasury yields rose on the strong U.S. GDP numbers and expectations of a Fed hike in 2015.

The euro was steady at $1.1184 EUR= after shedding 0.3 percent overnight.

Market activity is seen waning ahead of China's week-long National Day holidays from Oct. 1.

In commodities, the lackluster mood in equity markets spilled over and U.S. crude oil futures CLc1 lost 0.8 percent to $45.31 a barrel while Brent crude LCOc1 lost 0.6 percent to $48.27 a barrel.

Copper edged higher but was still stuck near one-month lows. Three-month copper on the London Metal Exchange CMCU3 edged up 0.7 percent to $5,058.00 a tonne. Prices hit four-week lows on Thursday near the $5,000-mark and are within reach of a six-year low of $4,855 seen last month.

"The recoveries we've seen over the past couple of months, have been pretty short-lived," said strategist Daniel Hynes of ANZ in Sydney.

"It highlights the increasing cautiousness around China's growth and what it means for copper despite what the supply side is doing. The PMI will be pretty key this week."

Gold treaded water after being hit by a stronger dollar. Spot gold XAU= was little changed at $1,144.45 an ounce after dropping 0.7 percent on Friday.

Platinum, drubbed recently on fears demand for the metal used in catalytic converters would diminish in the wake of the Volkswagen emissions scandal, dipped 0.3 percent to $941.00 an ounce XPT=, edging back towards the 6-1/2-year low of $924.50 an ounce plumbed last week.

Reference: Reuters

Friday, 25 September 2015

Forex Scalping

Basic Trading Concepts Defined

Not all traders will do well in scalping, but many can acquire the necessary skills for this strategy by careful practice using a step-by-step approach. As with most other activities, it is better to begin your training at the most basic level and to add upon your gains at each pace to approach perfection.
Controlling your emotions will probably be the first challenge you face as a beginning scalper. It may be difficult to adapt to the violent swings that you will have to deal with routinely, but by avoiding certain time periods, and adjusting your stop-loss order accordingly, there should never be too big a danger in scalping.
We’ll conclude this article by briefly listing the principles which must be adhered to by a committed scalper before consistent profitability is attained.

1. Discipline

Scalping is for disciplined traders. A methodical, even mechanical approach to trading currencies will increase the potential profits of any scalper, and if automation is necessary, there is no logic in delaying it. Acquiring mental discipline may require time and effort, but its beneficial in every aspect of life, and nothing will be lost as you put your trading career in order. If a trade must be closed, it must be closed. If losses need to be taken, they must be. Scalping doesn’t allow the trader much time for vacillation or worry, and whining and complaining have no place in this style. Face the realities and act in accordance: success is just around the corner.

2. Patience

Impatient, or arrogant traders don’t have a stellar future in scalping. Many people have attained great profitability in trading, but only through persistence and determination. It is even more so in scalping, where minuscule profits are expected to combine into sizable gains.

3. Calm

Scalpers need to remain calm in the face of market turmoil, especially those who want to trade directional, trending markets. Without emotional restraint, trading choices will be confused and arbitrary, and that is the least of what can be afforded by a committed scalper. Get used to losses and mistakes. Accustom yourself to mending the errors. And all should be well.

4. Regular Trade Sizes

This is always a necessity in trading, but even more so in scalping. Don’t make the mistake of doubling your trade sizes in response to a chance streak of wins. Don’t blur your vision by entering orders arbitrarily. Be disciplined, and ensure that your trades can be analyzed easily by standardizing your order sizes.

5. Concentration

Scalping can be an intense activity, and a good scalper needs to have a mind which can concentrate effectively on the task at hand for profit. If you’re scalper, make sure that the place and time period during which you’re active in the market is as peaceful and calm as possible. Have the kids sleep or play.  Ensure that you’re not distracted while scalping the forex market.

Reference: Tom Cleveland

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Wall Street joins global stocks slide; euro, bonds rise

Stocks around the world fell for a fifth day on Thursday, sliding toward two-year lows, as worries lingered over global growth and as the scandal over Volkswagen's emissions test-cheating rattled Europe's carmakers.

Government bonds prices rose on safety bids, while the dollar fell against the euro but jumped to a 13-year high against the Norwegian crown after a surprising cut in the oil producer's interest rates.

Wall Street equity indexes fell more than 1 percent in early trading, clouded by concerns about global growth and ahead of a speech later Thursday by Federal Reserve Chair Janet Yellen that comes a week after the U.S. central bank rattled markets by keeping in place near-zero interest rates.

The Dow Jones industrial average fell 189.32 points, or 1.16 percent, to 16,090.57, the S&P 500 was down 19.09 points, or 0.98 percent, to 1,919.67 and the Nasdaq Composite lost 51.50 points, or 1.08 percent, to 4,701.24.

Shares of Caterpillar fell as much as 8 percent to a five-year low of $64.65, knocking 31 points off the Dow Jones Industrial Average. The company slashed its revenue forecast for 2015 by $1 billion and said it could cut up to 10,000 jobs through 2018, amid a downturn in the mining and energy industries.

A 2.2 percent tumble for Tokyo's Nikkei as Japan returned from an extended break set a gloomy tone in Asia and Europe's bourses.


Shares of Volkswagen, which had been battered on news it cheated on diesel-emissions tests, clawed back 3 percent after some reassuring German and French sentiment data.

However, the scandal threatened to widen to VW's rivals, and share prices fell 4-5 percent for BMW, Renault, Fiat and Daimler.

Those declines dragged London's FTSE, Frankfurt's DAX and Paris's CAC 40 down 0.9, 2.0 and 1.9 percent respectively, to leave MSCI's 45-country All World index off 1 percent and with a fifth day of losses.

Prices for U.S. Treasuries and German Bunds were driven up by investor concerns over possibly slowing global economic growth and the stocks sell-off

Benchmark 10-year Treasuries notes rose 11/32 in price for a yield of 2.107 percent, down nearly 4 basis points from late on Wednesday. The 10-year yield touched its lowest level in four weeks at 2.102 percent.

Trading was choppy in the currency and emerging markets.

Norway's crown slumped 2 percent after its central bank unexpectedly cut interest rates.

The euro added to gains it had made on Wednesday, when European Central Bank chief Mario Draghi appeared to suggest a fresh round of money printing wasn't as close as many analysts had thought.

The euro was last up 0.75 percent at $1.1266.

Oil fell toward $47 a barrel as U.S. data, showing durable goods in August dropped 2 percent, reignited fears about the demand outlook in the world's largest oil consumer. Brent crude dropped 15 cents to $47.60 a barrel, after ending the previous session down $1.33.

Platinum which has been hammered by the VW scandal because it used in catalytic converters to clean exhaust emissions, also rebounded having hit its lowest level in more than 6-1/2 years. It last stood at $947.00 per ounce.

Emerging market currencies remained under heavy fire too.

The Brazilian real sank to a new all-time low of 4.2482 per dollar, clobbered by a recession, fiscal deficit and political instability following corruption allegations against leading politicians in the world's seventh-largest economy.

Reference: Reuters

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Thursday, 24 September 2015

The Secret Wall Street Code

This time we have a slightly different article.
A thriller about a genius algorithm builder who dared to stand up against Wall Street, Haim Bodek, aka The Algo Arms Dealer.
The secret of High Frequency Trading and how the market is manipulated.

From the makers of the much-praised Quants: the Alchemists of Wall Street and Money & Speed: Inside the Black Box.

A must know for many traders, good lessons can be learned here.

Herewith find the link.

Reference: VPRO Television

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Wall Street dragged down by material and industrial stocks

Traders work on the floor of the New York Stock Exchange September 22, 2015. REUTERS/Brendan McDermid

Wall Street fell in volatile trading on Wednesday as weak Chinese and U.S. factory data hit material and industrial stocks.

Data showed U.S. manufacturing growth stayed at a two-year low in September, while Chinese factory activity shrank to a 6-1/2 year low in the month.

The S&P materials index was down 1.5 percent. The industrial sector was lower by 0.9 percent, with Dow components United Technologies and Boeing falling more than 2 percent.

The volatility in the U.S. stock market has increased recently as investors fret over a China-led global economic slowdown, a concern the Federal Reserve alluded to last week when it left interest rates unchanged.

"Investors are sitting back and still assessing the Fed comments and looking more closely at global economic data," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

At 11:49 a.m. ET (1549 GMT) the Dow Jones industrial average was down 94.26 points, or 0.58 percent, at 16,236.21. The S&P 500 was down 6.76 points, or 0.35 percent, at 1,935.98 and the Nasdaq composite was down 9.49 points, or 0.2 percent, at 4,747.24.

Nine of the 10 major S&P sectors were lower, with only the health sector eking out a 0.2 percent gain.

Scott Schermerhorn, chief investment officer at Granite Investment Advisors said volatility was likely to continue until the third-quarter corporate earnings season starts.

The CBOE Volatility index, popularly known as the "fear gauge", was down 0.5 percent at 22.43, but remained above its long-term average of 20.

Declining issues outnumbered advancing ones on the NYSE by 1,739 to 1,147. On the Nasdaq, 1,488 issues fell and 1,147.

The S&P 500 index showed no new 52-week highs and 32 new lows, while the Nasdaq recorded 18 new highs and 82 new lows.


Wednesday, 23 September 2015

Fed likely to raise U.S. interest rates in December - Reuters poll

Federal Reserve Chair Janet Yellen holds a news conference following the Federal Open Market Committee meeting in Washington September 17, 2015.  REUTERS/Jonathan Ernst

The U.S. Federal Reserve likely will pull the trigger and hike interest rates in December after taking a pass last week, according to economists polled by Reuters who assigned a 60 percent probability of it happening.

For months one of the most debated topics in global financial markets, the timing of the first rate hike in nearly a decade in the world's largest economy has proven a tough call for forecasters and traders.

The outlook isn't any clearer now, after Fed Chair Janet Yellen held policy steady last week and added China and global financial markets as reasons for not moving, despite data from home suggesting it may be time.

Still, 72 of 93 forecasters polled between Friday and Tuesday picked December as the most likely month.

"The window for a rate hike this year has narrowed. While December remains in play, a rate hike this year is not a foregone conclusion," Ellen Zentner, chief U.S. economist at Morgan Stanley wrote in a note.

Indeed, it might not prove to be so certain.

The Fed stood pat on opportunities to tighten policy in June and September.

Although forecasters now seem more sure about December, they were similarly convinced about their predictions for a hike in June. But an unexpected contraction in first quarter economic growth muted those calls.

What has perhaps further muddied the waters now is that the Fed's tone and growth outlook at last week's meeting suggested a more dovish stance than earlier, even with the jobless rate close to a point that many associate with full employment and the economy expanding 3.7 percent in the second quarter.

"This has sparked a 'the Fed knows something we don't' trade in the markets," said Neil Dutta at Renaissance Macro in New York.

The decision to hold rates in a range of zero to 0.25 percent, an almost unanimous consensus among Fed policymakers who voted, has effectively thrown open the doors to the first move higher at every meeting from here on.

Yet, only nine economists in the latest survey expect the Fed to act in October, with the wider consensus from another question attaching just a 20 percent probability to this.

Of the remaining 12 in the survey of 93 respondents, who chose various periods in 2016, eight picked the first quarter.

A separate poll of primary dealers, banks which do business directly with the central bank, conducted just after the Fed's meeting ended on Thursday, threw up similar results. [FED/R]

Fresh projections from Thursday's meeting showed most policymakers also still foresee raising rates at least once this year.


While the consensus going into the September meeting narrowly predicted the Fed would take a pass, forecasters are, in hindsight, divided on whether it was the right thing to do.

Forty economists said it was, while 41 disagreed.

"There is a risk the Fed keeps rates too low for too long," said Thomas Costerg, economist at Standard Chartered, adding that financial conditions were getting too loose and risked fuelling asset bubbles.

"Looking out the window is great but the Fed should also keep an eye on the fireplace indoors."


Stocks slide on commodities' tumble, dollar up

Falling commodities prices and worries about China's economy pulled stocks sharply lower on Tuesday, while bond yields declined and the dollar rose to a near two-week high on bets U.S. officials will soon hike interest rates.

Wall Street losses neared 2 percent on selling driven by falls in oil and copper, which also helped knock down shares in Europe and left the pan-European FTSEurofirst 300 stocks index off 3.2 percent.

Wall Street's Dow Jones industrial average fell 268.45 points, or 1.63 percent, to 16,241.74, the S&P 500 lost 32.76 points, or 1.67 percent, to 1,934.21 and the Nasdaq Composite dropped 91.49 points, or 1.89 percent, to 4,737.46.

Copper prices were down 3.9 percent at two-week lows, while oil was off 2 percent. The Chinese government's efforts to stimulate growth by easing fiscal and monetary policy have failed to calm nerves in global markets.

"The market is fragile as it is," said Art Hogan, chief market strategist at Wunderlich Securities in New York. "The volatility will continue until we get some clarity from the Fed and China."

The U.S. Federal Reserve last week kept rates near zero, citing turbulence in a tightly-linked global economy, including slowing growth in China. Atlanta Fed President Dennis Lockhart said on Monday a rate hike later this year was still possible.

The selloffs in stocks and commodities boosted U.S. Treasuries prices and other lower-risk government debt, such as German 10-year Bunds. Benchmark 10-year Treasuries notes were up 18/32 in price, yielding 2.148 percent, down 7 basis points from Monday's close.

Weakness in stock markets also helped lift the yen against the dollar, though the divergence between the Fed on the one hand and the European Central Bank and Bank of Japan on the other helped push the dollar to its highest since Sept. 10 against a basket of currencies.

Though the Fed held policy steady last week, ECB officials have been stressing that monetary policy in the euro zone will remain loose for some time.

The euro was down 0.4 percent at $1.1140, having hit a high of $1.1459 on Friday. The dollar eased 0.5 percent to 119.96 yen per dollar but was still above Friday lows.

Oil prices fell as concern over global growth weakened the outlook for demand and traders took profits from Monday's 3 percent to 4 percent rise.

Brent crude, the global benchmark, was down $1.11 a barrel at $47.82.

Gold eased with stocks and commodities and also suffered from the speculation the Fed may still raise rates in 2015. It last traded at $1,123.10, a decline of 0.9 percent.

"We're still in a situation where investors are going to wait and see when a hike will happen," Capital Economics analyst Simona Gambarini said. "There's going to be a bit of volatility around precious metals until the Fed eventually does hike rates."


Tuesday, 22 September 2015

Next Bank of England move may be rate cut, not hike - Haldane

Pedestrians walk past the Bank of England in the City of London May 15, 2014.  REUTERS/Luke MacGregor

The Bank of England's next move may be to cut interest rates rather than raise them, because of the risk of persistent low inflation and an emerging market crisis that could hurt world growth, its chief economist Andy Haldane said on Friday.

Recent data suggested Britain's economy would slow in the second half of the year and inflation might remain too low, while emerging market troubles could drag on growth, he said.

Haldane's speech comes less than a day after the U.S. Federal Reserve held off from raising interest rates, blaming weaknesses in the global economy that concern the BoE too.

"The balance of risks to UK growth, and to UK inflation at the two-year horizon, is skewed squarely and significantly to the downside," Haldane said in a speech to businesses in Northern Ireland.

The case for raising interest rates was "some way from being made", he added.

"Were the downside risks I have discussed to materialise, there could be a need to loosen rather than tighten the monetary reins as a next step to support UK growth and return inflation to target."

Haldane flagged the possibility of cutting rates below their record-low 0.5 percent in March, but has not persuaded other policymakers.

 BoE's Haldane says central bank independence should be safeguarded
The Bank of England undertook additional policy loosening by buying 375 billion pounds of British government bonds between 2009 and 2012 and has since reinvested the proceeds of maturing bonds.

The BoE as a whole is edging closer to an interest rate hike, but voted 8-1 this month to keep them on hold. Fears of a hard landing in China and general weakness in emerging markets have prompted investors to defer bets on the timing of a British rate hike.

Sterling inched down after the speech but bond markets were broadly unchanged.

"Everyone knows that he is probably the most dovish member of the committee, probably by some margin," Andy Chaytor, strategist at Nomura said.


Britain's strong domestic economy would partly offset external risks but it too was showing signs of slowing, Haldane said, citing softer employment and surveys of manufacturing and construction output.

Meanwhile, a 1 percent fall in emerging market growth could shave 0.5 percent off global and British growth over two years, with Britain's banking sector a channel for contagion.

"We may now be entering the early stages of ... the 'Emerging Market' crisis of 2015 onwards," he said. "It is simply too soon to tell how potent contagion from emerging market economies to the world economy will be."

Haldane said central banks needed to consider the risk that interest rates might remain persistently lower and they should "think imaginatively" about possible solutions such as raising their inflation targets or making bond-buying programmes a permanent part of their policy tools.

A third "and perhaps most radical and durable option" would be to charge a negative interest rate via a state-issued digital currency, he said.

Reference: Reuters

Asia shares rise, dollar firm on Fed, ECB views

Employees of the Tokyo Stock Exchange (TSE) work at the bourse in Tokyo August 26, 2015.  REUTERS/Yuya Shino -

Asian shares rose on Tuesday and the dollar held steady as U.S. markets bounced back and the European Central Bank said it was prepared to ease monetary policy further.

European markets are seen steady, with financial spreadbetters expecting Britain's FTSE 100 .FTSE and France's CAC 40 .FCHI to open flat and Germany's DAX .GDAXI to start the day up 0.1 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.4 percent at 0039 EDT. Australia advanced 0.3 percent and South Korea .KS11 almost 1 percent, but most southeast Asian markets retreated. Japanese markets are shut through Wednesday.

The U.S. dollar held on to overnight gains after some Federal Reserve officials signaled the central bank is likely to raise interest rates this year.

The greenback was flat at 95.881 against a basket of six currencies .DXY, after earlier climbing 1 percent. It was also little changed at 120.47 yen JPY= following a 0.45 percent rise.

U.S. stocks gained overnight as St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart separately made the case for an increase in U.S. interest rates this year, boosting financial shares.

The comments "offer markets an element of certainty in terms of the short term future for interest rates," said Ben Le Brun, markets analyst at trading platform provider optionsXpress in Sydney.

"Volatility remains in check and probably will continue until at least the Federal Open Market Committee meeting in October."

Investors will be seeking more clarity on the Fed's decision with a number of central bank officials, including Lockhart and Chair Janet Yellen, slated to speak this week.

In Europe, ECB Chief Economist Peter Praet reiterated the bank's readiness to modify its trillion-euro bond-buying program should economic turbulence merit action, according to an interview in a Swiss newspaper..

The euro EUR= was steady at $1.1190.

Markets also took encouragement from Monday’s 1.9 percent gain in Chinese stocks, Richard Grace, chief currency and rates strategist at Commonwealth Bank of Australia in Sydney, wrote in a note.

Chinese shares extended the gains on Tuesday, with the CSI300 .CSI300 index up 1.3 percent and the Shanghai Composite .SSEC climbing 1.2 percent.

"However, it won’t take much to derail some of the optimism if the September Chinese PMI due tomorrow is on the bearish side, and this may in turn take some pricing of a tightening out of the U.S. rates market," Grace said.

Economists polled by Reuters expect the flash China factory PMI to edge up to 47.5 in September from the final 47.3 in August, but that would still leave activity near 6-1/2-year lows and point to a seventh straight monthly contraction in the sector.

Investors are also awaiting the euro zone's flash manufacturing activity reading on Wednesday, which is expected to come in slightly stable to soft in September.

Fears of a sharper slowdown in China spread turmoil in global markets over the past month and were cited by the Fed as one of the main factors that convinced it to hold rates at near-zero levels last week.

China's slowdown is already increasingly weighing on the economies of its Asian neighbors.

Taiwan's export orders - seen as an indicator of the strength of global demand for hi-tech products - contracted for a fifth month in August as demand from China and other key markets continued to deteriorate, data showed on Monday.

The bigger-than-expected orders decline does not bode well for trade-reliant Asian economies hoping for a recovery in exports heading into the year-end shopping season, and raises the chances that Taiwan's central bank will cut interest rates later this week.

Oil prices, which surged overnight on hopes that declining stockpiles and less drilling could reduce future output, surrendered some of the gains as traders took profit.

U.S. crude futures CLc1 slipped 1.2 percent to $46.10 per barrel after jumping 4 percent in the previous session. Brent futures LCOc1 were 0.9 percent lower at $48.48.

Reference: Reuters

Monday, 21 September 2015

British finance minister upbeat on slowing China economy

British Chancellor of the Exchequer George Osborne expressed his confidence in the slowing Chinese economy on Sunday, saying the country was going through a necessary transformation and was still a driver of global growth.

A string of downbeat activity data combined with wild price swings in the stock markets and a surprise currency devaluation in August have fueled fears that the Chinese economy may be slowing more sharply than was expected earlier, putting Beijing's 2015 growth target of 7 percent at risk.

"China is going through a very necessary and challenging transformation which is essential so that China's economy can go on creating good careers and good jobs and higher living standards for your 1.3 billion people," he said at the start of a five-day trip to China.

"I think the message I would say to China is, carry on with the reform, carry on with the change you're making."

UK, China to carry out study on London-Shanghai stock connection
Osborne said he was "very deliberately" visiting the Shanghai stock exchange on Tuesday and would be talking about what had happened on the financial markets over the summer.

"Of course there have been ups and downs. We've seen that through the summer. In our estimation the spillover effects, the impact of that on other financial markets, has been relatively limited," he said, speaking to an audience of Chinese technology executives.

"And if you look at the broader picture in China, even if it's not growing at double digits the way that it once did it is still creating an economy at least the size of the United Kingdom in the next five years. So it's a massive source of global growth going forward."

Despite disagreements over human rights and the former British colony of Hong Kong, China values Britain's staunch defense of free trade and lack of obstacles to investing in Britain. Chinese President Xi Jinping visits Britain next month.

London has been especially keen to attract Chinese banks and encourage offshore trade in the yuan to bolster its position as the world's main center for foreign exchange trading.

› China says UK supports inclusion of yuan in IMF's SDR basket
› China to expand Britain's RQFII quota based on market demand: joint statement
"There is no economy in the west that is as open to Chinese investment as the United Kingdom," said Osborne, who is currently frontrunner to succeed Prime Minister David Cameron as Conservative leader ahead of the 2020 election.

"We welcome Chinese investment. There is huge amounts of Chinese investment coming into Britain at the moment. Indeed we are attracting more investment than Germany, France and Italy put together into the UK."

Reference: Reuters

Asian shares slump on global growth concerns, U.S. selloff

A pedestrian is reflected on a an electronic board showing the Japan's Nikkei average (top) and other market indices including the exchange rate between the Japanese yen against the U.S. dollar (bottom) at a brokerage in Tokyo, Japan, September 9, 2015. REUTERS/Yuya Shino

Asian shares and emerging currencies fell on Monday after the U.S. Federal Reserve's decision to keep interest rates at record lows raised fresh concerns about growth globally, particularly in China.

European markets were set to follow suit, with financial spreadbetters expecting Britain's FTSE 100 .FTSE to slip 0.4 percent, Germany's DAX .GDAXI 0.5 percent, and France's CAC 40 .FCHI 0.2-0.3 percent.

U.S. stock futures ESc1 slipped 0.4 percent during the Asian day, suggesting further weakness on Wall Street after major indexes fell more than 1.3 percent on Friday on worries that slower overseas demand will hurt corporate profits. [.N]

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 2 percent, with Hong Kong .HSI down 1.2 percent, Australia 2 percent and South Korea .KS11 1.6 percent. Japanese markets are shut through Wednesday.

China was the sole Asian market to defy the downtrend, with the Shanghai Composite index .SSEC up 1.1 percent and the CSI300 .CSI300 rising 1 percent.

Investors will be focusing on flash manufacturing activity readings from China and the eurozone on Wednesday for pointers on where the global economy is heading.

A Reuters poll showed economists expect the flash September China factory PMI headline reading to edge up to 47.5 from a final reading of 47.3 in August.

But it likely remained near 6/1-2-year lows, pointing to a seventh straight contraction in activity on a monthly basis.

"It looks like a continuation of the growth worries that have hampered markets for the last few months now," said Shane Oliver, head of investment strategy at AMP Capital in Sydney.

"European and U.S. shares had sharp falls, after initially benign reactions to the Fed, and this is now flowing through to Asian markets today," he said.

Global markets have recoiled after the Fed opted on Thursday to hold rates steady, saying it would like to see further improvements in U.S. labor markets and inflation and stressing that the global economic outlook appeared less certain.

The U.S. dollar, which retreated after the Fed decision, rose 0.3 percent to 95.365 against a basket of six currencies .DXY but slipped 0.1 percent to 119.86 yen on Monday.

The euro was little changed at $1.1312.

U.S. and European debt yields also tumbled on Friday, with the policy-sensitive two-year yield US2YT=RR falling to 0.678 after hitting a four-and-a-half year high of 0.819 percent earlier in the week.

The 10-year German Bund yield EU10YT=RR fell 12 basis points to 66 basis points, its biggest one-day drop since early July. Bund futures FGBLc1 opened up 17 ticks on Monday.

"The monetary-policy-watcher world has now turned decidedly bearish" after the Fed meeting, Evan Lucas, market strategist at trading services provider IG in Melbourne, wrote in a note.

"If emerging market risk, coupled with low-growth European environment is affecting Fed decision making, sentiment uncertainty will amplify," he said.

The resulting safe-haven demand led gold to hold near its highest level in nearly three weeks.

Spot gold XAU= held steady at $1,138.9 an ounce, after gaining 3 percent in the previous three sessions.

Oil prices climbed as U.S. drilling slowed, after slumping on Friday on the selloff in U.S. stocks.

U.S. crude futures CLc1 were up 1.3 percent at $45.24 per barrel. Brent futures LCOc1 rose 1.1 percent to $47.99.


Friday, 18 September 2015

What should bankers make of the whole Bitcoin phenomenon?

A view by Lars Seier Christensen from Saxo Bank.

The world and its monetary system is in a big mess, so the conditions for introducing and promoting alternatives to traditional money have probably never been more favorable. 
Banks have lost, and - in many cases - deserved to lose the trust of their customers. Central banks even more so and governments most of all. 
Therefore, I think it is natural for us to look at the space of Bitcoin and cryptocurrencies, and even more importantly, to fully understand both the opportunities inherent in - and the threats to - the traditional banking model from the idea of decentralised transaction confirmation, smart contracts and derivatives. 
This is a paradigm shift in its early days, and early movers will be able to gain big competitive advantages by embracing and understanding this space.

The internet lesson 

Having been an early starter in the online trading space, skepticism towards cryptocurrencies was reminiscent of the comments in the mid-1990s, when it was predicted that a very large proportion of clients would one day be executing their trades via the internet. 

This new channel was a temporary fad, people would always want to trade on exchange floors, clients would never trust the internet, private clients would always have to rely on sales persons and analysts for information and advice.

In other words, forget it. In those days, trading foreign exchange was a preserve of rich people. They were, in essence, made to pay a very high price due to the lack of transparency and dubious practices of their trusted advisors.

Today, private-client foreign-exchange trading is a huge part of daily spot FX volumes, and Saxo Bank, commanding around 5-7 percent of the global volume in that space, is regularly to the found inside the Top 30 FX banks in the world, a list that otherwise only counts massive multi-billion dollar corporations with a hundred years of history. Actually, we supply infrastructure to many of these big banks to help them service the lower end of their client segments better than they can themselves. So transformation can happen. 

We have recently accepted our first Bitcoin operator in Denmark, and we are hoping to support more in the future, although it gets more complicated when the businesses are very international, spanning multiple jurisdictions.

Regulation’s tentacles

Regulation is everywhere today in the traditional financial markets. Anything that remotely resembles a financial instrument will eventually be regulated. This will for sure include Bitcoin and other cryptocurrencies. What can be regulated, will be regulated.
The traditional banking system is extremely cautious about areas that are weakly regulated, or where regulatory confusion exists. This is not because we love excessive regulation as it reduces our ability to service and assist our clients in their own best interest, leads to tremendous extra cost and complexity for no other real purpose than political cover-my-backside objectives.

But the reason banks fear unregulated markets is that, too often, regulation is introduced with the benefit of hindsight, and with retrospective consequences for financial institutions. Bankers, therefore, are looking for regulatory certainty and clarity, and would rather forego a business opportunity than run unknown risks.

So in that sense, regulation will maybe turn out to be a blessing in disguise for this space, as Bitcoin will not be fully embraced by the financial system, merchants, investors etc., before such, hopefully relatively light touch regulation is in place.

Light touch, rarely happens of course. While opening new doors to new investors and partners, it will also add tremendously to the cost of running a Bitcoin business. Today, regulatory compliance is a major cost line in any financial institution's results, and it is very difficult for smaller brokers and even banks to continue to trade profitably as such costs soar and soar.
Clearly, many of the very lowly capitalized players in the crypto space will find it very difficult to deal with a substantial extra layer of costs. So it is very wise to already now prepare systems and business procedures to secure compliance with the inevitable demands of anti-money laundering procedures, client data, risk disclosure, investor protection, insurance schemes etc. This kind of stuff is definitely coming to your town as well, and maybe sooner than you think. It will also be very wise to be proactive in engaging with regulators and explain to them the peculiarities of this space, rather than to try to fly under the radar.

Another valid objection is the lack of liquidity. I know from my own modest trades in Bitcoin, that the available liquidity is very poor. In reality, sizable transactions need to be sources off market, between individual buyers and sellers if institutionally-meaningful trading sizes are involved.

A vicious cycle ensues. Very few larger traders are in the market, creating little economic incentive to banks providing this type of service, in particular with the regulatory risks inherent in the process.

Direct involvement by established financial institutions will therefore be very limited. You really have to be an enthusiast to get involved. A cynical risk/benefit analysis will not work out.

The virtues of enthusiasm

But, fortunately, enthusiasts exist. A substantially larger number is following the market from a distance, and the underlying technology and its possible much wider application than just cryptocurrencies is beginning to be appreciated among some business analysts and technology people also in the banks.

For Saxo Bank, the possible use of CFD - contract for difference - like derivatives, is of at least intellectual interest. We know about the construction of such derivatives and turning them into smart contracts is definitely intriguing.

Also, there is a certain appeal in being at the forefront of things. It is not always the most rational thing to do in direct economic terms as often the later entrants win out. But for an organization such as Saxo Bank where our clients expect at least an occasional innovation, Bitcoin can play a role image-wise that should not be underestimated. Normally, banks are concerned about reputational risks, but reputational benefits are also possible, and this could definitely be one.

As the enthusiasm in the space is big, and communication between Bitcoin users quite efficient, there is good potential for a viral effect that could generate an interesting group of new clients although some kind of minimum transaction levels would like have to apply.

There are multiple attempts at building crypto currency exchanges with aggregate liquidity, but it is worth remembering that in the fiat foreign exchange space, most volumes are generated on single-bank platforms, not aggregate liquidity platforms. As the Bitcoin market is struggling to reach a reasonable liquidity situation, a brave bank market-maker prepared to take calculated risks of matching its clients in short-term winner of this competition, just as it was in the traditional FX space.

Double-edged sword

Volatility is a double-edged sword, although it seems periodically to be subsiding. It is clearly a negative in the commercial space, where merchants will be reluctant to carry real exchange risk on such a fast-moving means of payment. I have heard many merchants unwilling to take this point risk, even for short-term exposure. This could of course easily be automatically converted by a merchant-payment solution provider, securing immediate conversion into fiat currencies, at least for small ticket items.

On the other hand, certain investors actively look for volatility. Take the EURUSD. The world’s most important cross is at all-time lows, and yields are in general extremely low by historical standards. In such a market, the volatility offered in Bitcoin could well be an attraction to some traders, if spreads were acceptable and liquidity deep enough to put on meaningful trade sizes.

There remains a puzzle with Bitcoin. It is clearly in a downtrend since the bubble-like rally above USD 1,200 late last year. It’s been down more than 70 percent since, in spite of the enormous attention Bitcoin has recently received from the media. Normally, you would expect this explosion in demand to result in higher prices, or at least for a more moderate dip from the highs than what we have recently seen. 

Bitcoin’s potential

It would appear that there must be a substantial overhang of selling interests out there, probably from miners or early investors that are offloading heavily to meet the demand. It will be most interesting to see what happens when this selling subsides, in particular if at the same time more hedge funds and institutional interest of longer-term placements and investments in Bitcoin step in.

In a very small market of just USD 5-6 billion market cap, with a limited and probably net-reducing free float, it would seem there could be potential for significant price rises, barring heavy regulatory restrictions. So I will be looking at buying dips towards the USD 350 level. Of course, like any market analyst, I am wrong pretty much as often as I am right.

So to conclude, for the short to medium term, I see limited adoption by the bigger banks. Smaller, more innovative, and more aggressive banks, may well see an opportunity to both build a meaningful trading business and a new distribution channel that could generate some considerable visibility.

But for the long term, I think Marc Andreesen’s recent comments could well be prophetic. The underlying technology does hold significant potential to be a real paradigm shift.

We know that here is a potentially very revolutionary and disruptive idea, replacing centralized and fallible institutions of trust with decentralised and secure confirmation of transactions. The threat to central banks, commercial banks, governments, jurisdictional institutions, exchanges, payment solution providers and many, many other such centralized trusted institutions is substantial.

But he is also right that this is comparable to the internet in its early stages. The potential is there and predictable, but how exactly to exploit it and benefit from it is unpredictable.

That potential will be continuously unfolding, as smart young people work it out in thousands of both failed and successful experiments. The most important inventions, including in the financial area, are unlikely to come from establishment players, and certainly not from old traditional banks. Look elsewhere for that to happen.

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Wall St. stocks volatile after Fed holds steady on rates

Traders gather at the post that trades Cablevision on the floor of the New York Stock Exchange September 17, 2015. REUTERS/Brendan McDermid

U.S. stocks were up in volatile afternoon trading on Thursday after the Federal Reserve held off on raising interest rates in a nod to concerns about global economic weakness.

The U.S. central bank said an array of global risks and other factors had convinced it to delay what would have been the first rate hike in nearly a decade.

The focus will now move to the next Fed meeting on Oct. 27-28. Fed Chair Janet Yellen was due to hold a press conference at 2:30 p.m ET (1830 GMT).

Afternoon trading was choppy and the three major U.S. indexes were up less than one percent after hitting session highs and then briefly turning negative after the news.

The news left investors still trying to figure out the timing for the Fed's first benchmark rate increase since 2006.

Uncertainty about when the Fed will shift gears has dogged Wall Street for months - a situation that has been complicated in recent weeks by market turbulence linked to slowing growth in China and worries about the health of the global economy.

The Fed had said it will raise rates when it sees a sustained recovery in the economy.

"The Fed did the right thing. There's no need to rock the boat right now. Again the disconcerting element is the downgrade to the interest rate trajectory, which could provide solace to investor sentiment overall," said Brian Dolan, head market strategist at Drivewealth in New Jersey. "Given the global headwinds, the last thing we need right now was a hike in rates and any kind of hawkish projections."

At 2:16 p.m., the Dow Jones industrial average .DJI rose 36.68 points, or 0.22 percent, to 16,776.63, the S&P 500 .SPX gained 6.92 points, or 0.35 percent, to 2,002.23 and the Nasdaq Composite .IXIC added 22.53 points, or 0.46 percent, to 4,911.76.

Ahead of the news, U.S. interest rates futures indicated a 25 percent chance the central bank would raise rates on Thursday, while 35 of 80 economists polled by Reuters earlier this week said they expected a move.

Seven of the 10 major S&P sectors were higher, with the utilities index's .SPLRCU 1.4 percent rise leading the way. The telecommunications index .SPLRCL was off 1.4 percent.

Advancing issues outnumbered declining ones on the NYSE by 2,055 to 912, for a 2.25-to-1 ratio on the upside; on the Nasdaq, 1,696 issues rose and 1,064 fell for a 1.59-to-1 ratio favoring advancers.

The S&P 500 posted 12 new 52-week highs and 2 new lows; the Nasdaq recorded 47 new highs and 28 new lows.


Thursday, 17 September 2015

Top 10 Forex Trading Rules

Basic Trading Concepts Defined

Trading Is an Art, Not A Science

The systems and ideas presented here stem from years of observation of price action in this market and provide high probability approaches to trading both trend and countertrend setups, but they are by no means a sure-fire guarantee of success. No trade setup is ever 100% accurate. Therefore, no rule in trading is ever absolute (except the one about always using stops!). Nevertheless, these 10 rules work well across a variety of market environments, and will help to keep you out of harm's way.

Never Let A Winner Turn Into A Loser

The FX markets can move fast, with gains turning into losses in a matter of minutes, making it critical to properly manage your capital. There is nothing worse than watching your trade be up 30 points one minute, only to see it completely reverse a short while later and take out your stop 40 points lower. You can protect your profits by using trailing stops and trading more than one lot.

Logic Wins; Impulse Kills

It can be a huge rush when a trader is on a winning streak, but just one bad loss can make the same trader give all of the profits and trading capital back to the market. Reason always trumps impulse because logically focused traders will know how to limit their losses, while impulsive traders are never more than one trade away from total bankruptcy.

Never Risk More Than 2% per Trade

This is the most common and most violated rule in trading. Trading books are littered with stories of traders losing one, two, even five years' worth of profits in a single trade gone terribly wrong. By setting a 2% stop-loss for each trade, you would have to sustain 10 consecutive losing trades in a row to lose 20% of your account.

Use Both Technical and Fundamental Analysis

Both methods are important and have a hand in impacting price action. Fundamentals are good at dictating the broad themes in the market that can last for weeks months or even years. Technicals can change quickly and are useful for identifying specific entry and exit levels. A rule of thumb is to trigger fundamentally and enter and exit technically. For example, if the market is fundamentally a dollar-positive environment, we'd technically look for opportunities to buy on dips rather than sell on rallies.

Always Pair Strong with Weak

When a strong army is positioned against a weak army, the odds are heavily skewed toward the strong army winning. This is the way you should approach trading. When we trade currencies, we are always dealing in pairs - every trade involves buying one currency and shorting another. Because strength and weakness can last for some time as economic trends evolve, pairing the strong with the weak currency is one of the best ways for traders to gain an edge in the currency market.

Being Right and Early Means You Are Wrong

In FX, successful directional trades not only need to be right in analysis, but they also need to be right in timing as well. If the price action moves against you, even if the reasons for your trade remain valid, trust your eyes, respect the market and take a modest stop. In the currency market, being right and being early is the same as being wrong. Consider a scenario where a trader takes a short position during a rally in anticipation of a turnaround. The rally continues for longer than anticipated, so the trader exits early and takes a loss - only to find that the rally eventually did turn around and their original position could have been profitable.

Differentiate Between Scaling In and Adding To a Loser

The difference between adding to a loser and scaling in is your initial intent before you place the trade. Adding to a losing position that has gone beyond the point of your original risk is the wrong way to trade. There are, however, times when adding to a losing position is the right way to trade. For example, if your ultimate goal is to buy a 100,000 lot, and you establish a position in clips of 10,000 lots to get a better average price, this type of strategy is known as scaling in.

What Is Mathematically Optimal Is Psychologically Impossible

Novice traders who first approach the markets will often design very elegant, very profitable strategies that appear to generate millions of dollars on a computer back test. Armed with such stellar research, these newbies fund their FX trading accounts and promptly proceed to lose all of their money. Why? Because trading is not logical but psychological in nature, and emotion will always overwhelm the intellect in the end. Conventional wisdom in the markets is that traders should always trade with a 2:1 reward-to-risk ratio, the trader can be wrong 6.5 times out of 10 and still make money. In practice this is quite difficult to achieve.

Risk Can Be Predetermined; Reward Is Unpredictable

Before entering every trade, you must know your pain threshold. You need to figure out what the worst-case scenario is and place your stop based on a monetary or technical level. Every trade, no matter how certain you are of its outcome, is an educated guess. Nothing is certain in trading. Reward, on the other hand, is unknown. When a currency moves, the move can be huge or small.

No Excuses, Ever

The "no excuses" rule is applicable to those times when the trader does not understand the price action of the markets. For example, if you are short a currency because you anticipate negative fundamental news and that news occurs, but the currency rallies instead, you must get out right away. If you do not understand what is going on in the market, it is always better to step aside and not trade. That way, you will not have to come up with excuses for why you blew up your account. It's acceptable to sustain a drawdown of 10% if it was the result of five consecutive losing trades that were stopped out at a 2% loss each. However, it is inexcusable to lose 10% on one trade because the trader refused to cut his losses.

Reference: Investopedia 

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Wall St. opens little changed as Fed uncertainty reigns

Traders work on the floor of the New York Stock Exchange September 15, 2015. REUTERS/Brendan McDermid

Wall Street was little changed on Wednesday as investors held fire ahead of the Federal Reserve's decision on an interest rate hike.

The Fed will announce its decision on Thursday after a two-day meeting.

Speculation about when the Fed will end seven years of near-zero interest rates has dogged Wall Street for months, with the picture complicated by recent market turbulence that some see as justification for the central bank to stand pat.

Fed fund futures  see only a 30 percent chance that Janet Yellen and her colleagues will pull the trigger this week but surveys of economists have been split 50-50 on a hike.

Any reaction that follows the meeting - whether the Fed moves or not - is likely to be short-lived as investors take stock of the long-term situation, said Robert Pavlik, chief market strategist at Boston Private Wealth in New York.

"I don't think the Fed should wait until December to raise rates," he added. "You don't want to see that kind of volatility at the year-end."

At 9:49 a.m. ET the Dow Jones industrial average .DJI was up 7.68 points, or 0.05 percent, at 16,607.53, the S&P 500 .SPX was up 0.56 points, or 0.03 percent, at 1,978.65 and the Nasdaq Composite .IXIC was down 9.47 points, or 0.19 percent, at 4,851.06.

Five of the 10 major S&P sectors were higher, with the energy index's .SPNY 1.61 percent rise leading the advancers. Oil prices jumped about 3 percent after an unexpected drawdown in U.S. stockpiles. Exxon's (XOM.N) 1.6 percent rise provided the biggest boost to the Dow and the S&P 500.

Stocks have been volatile since China devalued its currency in August. The S&P 500 has had moves of at least 1 percent in 12 of the past 18 sessions.

On Tuesday, the CBOE Volatility index .VIX - popularly known as the "fear index" - closed above 22 for the 17th consecutive day, the longest it has lingered above that level in nearly four years. The long-term average is 20.

"The volatility will continue until the Fed takes control of the policy and does what they've been thinking about or talking about for the better part of two years," said John Brady, managing director at R.J. O'Brien & Associates in Chicago.

Data on Wednesday showed that U.S. consumer prices unexpectedly fell in August as gasoline prices resumed their decline and a strong dollar curbed the cost of other goods.

The consumer price index slipped 0.1 percent last month. Economists polled by Reuters had forecast the CPI would be unchanged in August.

The Fed has said it will raise rates only when it sees a sustained recovery in the economy with special emphasis on the labor market and inflation. While the job market has continued to gain strength, inflation remains below the 2 percent target set by the central bank.

The Organization for Economic Cooperation and Development trimmed its growth outlook for the global economy but said the United States is doing well enough that its central bank should go ahead with a rate increase.

"Raising interest rates now would remove uncertainty in the markets," OECD chief economist Catherine Mann said, adding that what the Fed did afterwards would matter far more than the initial move.

Shares of Hewlett-Packard (HPQ.N) were up 3.8 percent at $28.09. The company said it would cut up to 33,300 jobs.

FedEx (FDX.N) was down 2.7 percent at $149.77 after the package delivery company missed profit expectations.

U.S.-listed shares of Anheuser-Busch InBev (BUD.N) (ABI.BR) were up 7.5 percent at $116.04 after the world's biggest beer maker approached rival SABMiller (SAB.L) about a takeover.

Molson Coors (TAP.N) jumped 13.2 percent, while Altria (MO.N), which owns a 27 percent stake in SABMiller, was up about 2 percent.

Advancing issues outnumbered decliners on the NYSE by 1,746 to 870. On the Nasdaq, 1,261 issues rose and 1,040 fell.

The S&P 500 index showed one new 52-week high and no new lows, while the Nasdaq recorded 20 new highs and 10 new lows.


Wednesday, 16 September 2015

U.S. oil extends gains on stock-draw, Brent lags with Asian economies

A customer holds a nozzle to fill up his tank in a gasoline station in Nice December 5, 2014.  REUTERS/Eric Gaillard

U.S. oil prices extended gains in Asia on Wednesday on an unexpected stockpile draw and higher gasoline prices, while international crude markets were weaker on the back of low Asian economic growth expectations.

Front-month U.S. West Texas Intermediate (WTI) crude futures were trading at $44.91 per barrel at 0453 GMT on Wednesday, up 32 cents from their last settlement.

Internationally traded Brent futures were a bit weaker in comparison, gaining only 9 cents to $47.84 a barrel.

The recent divergence in American and international markets has cut the discount of the U.S. oil to the Brent global benchmark by nearly two-thirds during the past month to around $2.50 per barrel.

"We believe that this could be the market's reaction to the decline in U.S. crude production (drilling) ... further exacerbated as Iranian crude could be entering the market in Nov' 15, which puts heavy pressure on the global benchmark," Singapore-based Phillip Futures said.

Iranian crude oil that has been stored in tankers could be released quickly to world markets whenever Western sanctions against Tehran are lifted.

U.S. crude futures rose after industry group the American Petroleum Institute (API) reported a 3.1 million-barrel crude drawdown last week, versus analyst expectations for a build. A surge in U.S. gasoline prices was also supportive.

Official U.S. crude inventory data is scheduled to be released later on Wednesday.

Yet outside the United States, international crude markets remained weak largely because of high supplies from the Organization of the Petroleum Exporting Countries (OPEC) clashing with Asia's slowing demand.

Australian bank Macquarie said China's economic outlook for the fourth quarter of the year was not convincing.

"There are green shoots showing scattered evidence of improvement ... However, as of yet these signs are not broad-based so it's hard to conclude whether they are the beginning of a genuine recovery or just normal economic fluctuations," the bank said.

In other commodities markets, coal prices fell to levels last seen before the financial crisis in 2008/2009 as high mining output clashes with falling demand.

Markets are keeping a close eye on Washington in the next two days as the U.S. Fed begins a two-day session to decide whether to raise interest rates for the first time in a decade.

Higher U.S. interest rates would likely attract cash from money traders, lifting the dollar. That would be seen as a bearish signal for oil as it makes fuel imports costlier for buyers holding other currencies.