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Tuesday, 31 March 2015

Forex Scalping - How scalpers make money

Forex-Currency-Trading 11

Basic Trading Concepts Defined

Here we will take a look at the logic behind scalping, and we’ll discuss the best conditions and necessary adjustments which must be made by a scalper for profitable trading.

We have already stated that scalping is about making small profits over a long time which can reach significant amounts when combined. But of course, scalping is not about randomly entering the market and buying or selling while expecting luck to be on our side. Instead, a successful scalper is very methodical about both his decisions and expectations from the market. He aims to combine various unique features of the forex market to create profitable conditions for trading, and in this sense he aims to exploit the most basic features of the market for his purposes. Scalping is not only about exploiting economic events, price trends, and market events, but also the basic structure, and internal dynamics of the currency market itself, and this is what sets it apart from other strategies such as swing trading or trend following

 

Exploiting sharp price movements

Many scalpers like to concentrate on the sharp movements which frequently occur in the currency market. In this case, the aim is to exploit sudden changes in market liquidity for quick gains later. This kind of scalping is not very much concerned about the nature of the market traded, whether prices are trending or ranging, but attaches great importance to volatility. The purpose is to identify the cases where temporary shortages of liquidity create imbalances that offer trade opportunities.

In example, let’s consider a typical for traders of the EURUSD pair. In most cases spreads are tight, and the market is liquid enough to prevent any meaningful gaps in the bid-ask spreads. But when, for whatever reason (often a news shock, but we don’t concern ourselves with the cause here), liquidity dries out, and a significant bid-ask gap appears, the quote will be split into two distinct pieces of data: the bid is, let’s say 1.4010, while the ask is 1.4050. A very short while, the bid-ask spread will narrow, and the price will gravitate rather hastily to one side. Scalpers use these very fast fluctuations for making quick profits. Right after the price has moved up to 1.4030, and the bid-ask spread has narrowed to normal levels, a scalper may sell, for example, and as volatility takes the price lower to, 1.4020, he closes his short position to open a long one, and so on. The point is to profit from the emotional reactions of the market by remaining calm, and betting that behind the sound and fury, there is nothing of significance, at least for the immediate term.

We’ll discuss this trading method in greater detail while examining news breakouts. Gaps which can be exploited by scalpers appear most often in the aftermath of important news releases. The reader can himself open up the five minute charts of the price action after a non-farm payrolls release, for example, and observe the many “loops” where the price action returns to where it began after a series of very severe zigzags. Some scalpers exploit such periods of emotional intensity for profit in the manner just mentioned. They will buy or sell just before the release itself, and trade the sharp, brief swings for a quick profit.

 

Leverage

Scalping involves small profits compounded over a long time to generate significant sums. But often the returns from scalping are so small that even when combined over weeks or months the returns are insignificant for the amount of effort involved, due to the small size of the actual movements in the currency market. To overcome this problem, almost all traders involve some amount of leverage while scalping the forex market.

The level of leverage appropriate for a scalper is a subject of debate among traders. But in spite of the debate, the most solid advice that any beginning scalper should heed is to keep leverage as low as possible for at least the first two, three months of trading. We do not want to take significant risks while we are still unsure about which strategy we should be suing while trading. On the other hand, since the scalper is certain to use a predetermined stop-loss, and not to tamper with it (a scalper doesn’t have that much time to spend on each individual trade), a leverage ratio that is inappropriate to slower traders can be acceptable for him. For instance, a trader whose positions are held over weeks may take a long time before deciding to exit a position, even if the market is against him for a time. But the scalper will immediately close a position as soon as the stop-loss level is reached (and the process is usually automatic).

In short, a higher level of leverage (up to 20 or 50:1) can be acceptable for traders who open and close positions in very quick succession, provided that stop-loss orders are never neglected. But there is still one caveat: in cases like the aftermath of a surprise Fed decision, or an unexpected non-farm payrolls release, spreads can widen instantly, and there may not be enough time to realize the stop-loss order even with a competent forex broker, and losses would be multiplied if high leverage were to be used. To prevent such outcomes from materializing, it is a good idea to lower the leverage ratio significantly if we seek to trade market events that can cause gaps in the bid-ask spread, and create very large volatility.

 

Scalping Strategies

Although we’ll discuss scalping strategies extensively later, we need to mention here that scalping requires a considerable command of technical analysis and strategies. Since one sizable mistake can wipe out the profits of hundreds of trades taken during a whole day, the scalper must be very diligent in analysing the market, and disciplined while applying his analysis and executing his strategies.

The role of fundamental analysis in scalping is usually very limited. During the time frames preferred by scalpers, markets move in a random fashion for the most part, and it is impossible to discuss the impact of a GDP release during a one-minute period, for example. Needless to say, events influencing the forex market are not limited to the clustered major releases of each day. Many scheduled and unscheduled events provide input to the markets continuously, and as such, even short term movements have some form of macro-reasoning behind them. However, it is exceptionally difficult for the retail trader to keep updated with all kinds of news events occurring throughout the day, and what is more, the market’s reaction is itself often erratic and unpredictable. Consequently, it is difficult to use fundamental strategies in scalping.

Finally, some traders combine scalping with another approach such as trend following or range trading and only differ from the pure practitioners of these strategies in terms of their exposure times. Although this is a valid approach, the great complexities of adjusting a trend following strategy to suit a micro-timing trade plan makes this impractical in terms of both analysis and execution.

Reference: Tom Cleveland ©

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Asia up on Wall St. rally and China hopes, euro sags on Greece

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(Reuters) - Asian stocks rose across the board on Tuesday after a rally on Wall Street and steps by China to shore up its economy boosted risk appetite, while Greek debt worries again haunted the sagging euro.

Spreadbetters expected European shares to pull back slightly after Monday's rise, calling for Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI to open a touch lower.

Tracking overnight gains in U.S. stocks, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.5 percent. The index was on track for a 4 percent gain this quarter.

Australian shares .AXJO rose 0.9 percent. Bourses in South Korea, Hong Kong, Malaysia and Indonesia rose as well. Japan's Nikkei .N225 bucked the trend and lost 0.2 percent.

The often volatile Shanghai Composite Index .SSEC followed up Monday's rally, scaling seven-year highs on hopes for more infrastructure spending and monetary easing. The index led its Asian peers with a 17 percent gain this quarter.

The Dow .DJI and S&P 500 .SPX both climbed more than 1 percent Monday with sentiment buoyed by robust Chinese equities.

After unveiling details over the weekend for a modern "Silk Road" that could pump tens of billions of dollars into investment, China late on Monday announced steps to ease housing taxes and lending rules to prop up sliding house prices that have threatened economic growth.

"Tax cuts, reductions to down payments on second homes, along with further moves to (reserve) requirement ratios have all been introduced to assist China's slowing housing sector and will be a medium-term positive in the global growth story," Evan Lucas, market strategist at IG in Melbourne, said in a note to clients.

Chinese central bank governor Zhou Xiaochuan's recent warning that China needs to be vigilant for signs of deflation have also helped fuel hopes for more easing.

"We believe policymakers are increasingly concerned about

weakening growth and inflation, and will deploy more monetary and fiscal easing measures in the coming weeks," economists at HSBC said.

In currencies, the euro was down 0.4 percent at $1.0788 EUR=, adding to an overnight loss of 0.5 percent. The euro looked to lose about 10 percent this quarter versus the dollar.

The common currency fell against the dollar on worries whether Greece can secure aid before it runs out of cash in three weeks. Germany, Greece's biggest creditor, demanded that it show more commitment to reform while Athens said it cannot make an "unconditional" agreement with lenders.

The dollar was little changed at 120.20 yen JPY= after surging from an overnight low of 119.105. The greenback was poised for a modest 0.4 percent rise this quarter.

The Australian dollar found little support from prospects of more stimulus and monetary easing from China, Australia's key trading partner.

The Aussie lost 0.4 percent to $0.7626 AUD=D4 after skidding more than one percent overnight amid persistent expectations of further interest rate cuts by the Reserve Bank of Australia.

U.S. crude extended losses as the Mar. 31 deadline loomed for Iran and six world powers negotiating a deal for Tehran's nuclear program.

If agreement to end Western sanctions is reached OPEC-member Iran would be able to ship more crude into an already saturated market. [O/R]
U.S. crude was down 1.3 percent at $48.06 per barrel.

Reference: Shinichi Saoshiro

Monday, 30 March 2015

How to Become Rich, and 24 Other Insights from Warren Buffett

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Basic Trading Concepts Defined

Warren Buffett is a true genius as he is able to simplify complex ideas into quotes that will stand the test of time. Warren Buffett spent his life dispensing advice to all who would listen, earning him the nickname of the Oracle of Omaha. In the 1960s, this advice came about twice a year in letters to investors in his investment partnerships. Starting a few years later, Warren Buffett’s wisdom was distilled through the Berkshire Hathaway annual meeting and the annual shareholder letter, and in the past 20 years, Warren Buffett has become a household name through appearances on TV and interviews in magazines.

Read on for Warren Buffett’s best quotes on life, investing, and his top five insights.

 

On life

1. “You only have to do a very few things right in your life so long as you don’t do too many things wrong.”

2. “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks.”

3. “It is not necessary to do extraordinary things to get extraordinary results.”

4. “What we learn from history is that people don’t learn from history.”

5. “Chains of habit are too light to be felt until they are too heavy to be broken.”

6. “There seems to be some perverse human characteristic that likes to make easy things difficult.”

7. “Nothing sedates rationality like large doses of effortless money.”

8. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

9. “It’s better to hang out with people better than you. Pick out associates whose behaviour is better than yours and you’ll drift in that direction.”

10. “Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

 

On investing

1. “The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”

2. “Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”

3. “I don’t look to jump over seven-foot bars; I look around for one-foot bars that I can step over.”

4. “In the short term, the market is a popularity contest. In the long term, the market is a weighing machine.”

5. “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”

6. “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”

7. “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.”

8. “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”

9. “I am a better investor because I am a businessman, and a better businessman because I am an investor.”

10. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

 

Top five insights

Einstein said there are 5 ascending levels of intelligence: Smart, Intelligent, Brilliant, Genius, Simple. Warren Buffett’s top 5 insights each explain a truth about life or investing in the simplest way possible.

1. “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”

It is a gross oversimplification to say that the key to investing is to buy low and sell high. This quote from when Warren Buffett has been the basis of his most successful investments over time and the basis of how you could have avoided the last few bubbles.

2. “I tell college students, when you get to be my age you will be successful if the people who you hope to have love you, do love you.”

Warren Buffett has spent a lifetime studying conventionally successful people. It’s important to hear that at the end of the day, money is not the thing that matters most in life.

3. “The difference between successful people and really successful people is that really successful people say no to almost everything.”

Numerous greats including Steve Jobs, Bill Gates, and Warren Buffett have attributed their success to focus. Many people have long to-do lists and work on becoming more productive, when in fact, having a not-do list is more important if you want to do great things.

4. “I’ve seen more people fail because of liquor and leverage — leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.”

People succeed in life countless different ways but failures group around a few key themes. As such, you learn more from people’s failures than people’s successes.

5. “What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected': You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

One of the quotes I hate the most in investing is Peter Lynch’s “Buy what you know” as it oversimplifies investing. The above quote is sort of the same idea but highlights that the important thing is being able to evaluate companies and also avoid companies you don’t understand. It’s that simple.

Warren Buffett is quoted so much because he has developed a great deal of wisdom over his lifetime. How did he do it?

 

The secret to Warren Buffett’s success

The secret to Warren Buffett’s success is that he continuously learns. Buffett is a far better investor today than he was 50 years ago. As Charlie Munger has explained:

Warren Buffett has become one hell of a lot better investor since the day I met him, and so have I. If we had been frozen at any given stage, with the knowledge we had, the record would have been much worse than it is. So the game is to keep learning, and I don’t think people are going to keep learning who don’t like the learning process.

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Asia shares swing higher as China nears seven year high

An employee of the Tokyo Stock Exchange (TSE) looks at a stock quotation board as he works at the bourse at TSE in Tokyo March 13, 2015. REUTERS/Yuya Shino

(Reuters) - Asian stock markets rose on Monday, with China stocks nearing a seven-year peak on hopes for more infrastructure spending and policy stimulus, while oil prices suffered further from excess supply.

Activity was guarded most elsewhere in a week book-ended with holidays and a U.S. jobs report that could affect the timing of interest rate hikes there.

Shanghai shares .SSEC climbed 1.9 percent to test highs last seen in May 2008 on hints that Beijing supported the market's rise. The Hang Seng China Enterprises Index .HSCE also added 3.5 percent after China allowed mainland mutual funds to buy Hong Kong stocks.

After some early dithering, Japan's Nikkei .N225 firmed 0.8 percent, helped by talk of demand for the new quarter and financial year.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS recouped early losses to gain 0.4 percent.

European bourses were tipped to open firmer, while S&P EMini stock futures ESc1 were quoted up 0.4 percent.

Federal Reserve Chair Janet Yellen on Friday reaffirmed that U.S. rates would likely start rising later this year but emphasized the pace of tightening would be gradual and data-dependent.

The conditional outlook helped nudge longer-dated Treasury yields lower and left the dollar listless for the moment. It fetched 119.21 yen JPY= on Monday, a whisker higher than at the end of last week and short of the near eight-year peak of 122.04 set early this month.

The euro eased back to $1.0861 EUR=, having in the last two weeks pulled up from a 12-year trough of $1.0457.

Oil prices fell further as Iran and six world powers tried to reach a nuclear deal that could add more supply to the market if sanctions against Tehran are lifted.

U.S. crude CLc1 eased 77 cents to $48.10 a barrel and Brent LCOc1 lost 42 cents to $55.99.

The data diary in Asia was rather sparse, with Japan reporting a disappointing decline in industrial output for February. Figures on German inflation, European confidence and U.S. personal income and spending are due later in the session.

Flash inflation data for the euro zone are out Tuesday and manufacturing surveys on China the day after. That should be just an appetizer for Friday's U.S. payrolls report.

Economists polled by Reuters are forecasting a healthy 244,000 rise in non-farm payrolls in March. If confirmed, it would be the 13th straight month of job gains of over 200,000, a run not seen since 1994-95. ECONUS

The market reaction will be complicated by holidays across much of the western world on Friday. Only some U.S. markets will be open and then only for shortened hours.

Investors will again have to keep a wary eye on Greece and its talks with international creditors where the parties are struggling to come up with a list of acceptable reforms.

Greece will run out of money by April 20 if it does not secure funding from its European partners, a source familiar with the matter told Reuters last week.

Reference: Wayne Cole

Friday, 27 March 2015

How to Scalp Forex- Basic Trading Concepts Defined

Forex-Currency-Trading 11

Forex Scalping - Extensive Guide on How to Scalp Forex

Forex scalping is a popular method involving the quick opening and liquidation of positions. The term “quick” is imprecise, but it is generally meant to define a timeframe of about 3-5 minutes at most, while most scalpers will maintain their positions for as little as one minute

The popularity of scalping is born of its perceived safety as a trading style. Many traders argue that since scalpers maintain their positions for a brief time period in comparison to regular traders, market exposure of a scalper is much shorter than that of a trend follower, or even a day trader, and consequently, the risk of large losses resulting from strong market moves is smaller. Indeed, it is possible to claim that the typical scalper cares only about the bid-ask spread, while concepts like trend or range are not very significant to him. Although scalpers need ignore these market phenomena, they are under no obligation to trade them, because they concern themselves only with the brief periods of volatility created by them.

 

Is Forex Scalping for you?

Forex scalping is not a suitable strategy for every type of trader. The returns generated in each position opened by the scalper are usually small; but great profits are made as gains from each closed small position are combined. Scalpers do not like to take large risks, which mean that they are willing to forgo great profit opportunities in return for the safety of small, but frequent gains. Consequently, the scalper needs to be a patient, diligent individual who is willing to wait as the fruits of his labours translate to great profits over time. An impulsive, excited character who seeks instant gratification and aims to “make it big” with each consecutive trade is unlikely to achieve anything but frustration while using this strategy.

 

Attention is essential for the forex scalper

Scalping also demands a lot more attention from the trader in comparison to other styles such as swing-trading, or trend following. A typical scalper will open and close tens, and in some cases, more than a hundred positions in an ordinary trading day, and since none of the positions can be allowed to suffer great losses (so that we can protect the bottom line), the scalper cannot afford to be careful about some, and negligent about some of his positions. It may appear to be a formidable task at first sight, but scalping can be an involving, even fun trading style once the trader is comfortable with his practices and habits. Still, it is clear that attentiveness and strong concentration skills are necessary for the successful forex scalper. One does not need to be born equipped with such talents, but practice and commitment to achieve them are indispensable if a trader has any serious intention of becoming a real scalper.

 

Automated trading systems

Scalping can be demanding and time-consuming for those who are not full-time traders. Many of us pursue trading merely as an additional income source, and would not like to dedicate five six hours every day to the practice. In order to deal with this problem, automated trading systems have been developed, and they are being sold with rather incredible claims all over the web. We do not advise our readers to waste their time trying to make such strategies work for them; at best you will lose some money while having some lessons about not trusting anyone’s word so easily. However, if you design your own automated systems for trading (with some guidance from seasoned experts and self-education through practice) it may be that you shorten the time which must be dedicated to trading while still being able to use scalping techniques. And an automated forex scalping technique does not need to be fully automatic; you may hand over the routine and systematic tasks such as stop-loss and take-profit orders to the automated system, while assuming the analytical side of the task yourself. This approach, to be sure, is not for everyone, but it is certainly a worthy option.

 

 

Some words on trade sizes and forex scalping

 

Finally, scalpers should always keep the importance of consistency in trade sizes while using their favoured method. Using erratic trade sizes while scalping is the safest way to ensure that you will have a wiped-out forex account in no time, unless you stop practicing scalping before the inevitable end. Scalping is based on the principle that profitable trades will cover the losses of failing ones in due time, but if you pick position sizes randomly, the rules of probability dictate that sooner or later an oversized, leveraged loss will crash all the hard work of a whole day, if not longer. Thus, the scalper must make sure that he pursues a predefined strategy with attention, patience and consistent trade sizes. This is just the beginning of course, but without a good beginning we would diminish our odds of success, or at least reduce our profit potential.

Reference: Tom Cleveland ©

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Buckle up! Oil 'could fall to $30' say trading pros

Oil prices continued their downward spiral Friday, falling more than $1, after a short-lived rally of around 5 percent the previous day, as concerns of a disruption to supplies in the Middle East appeared to ease. Against this backdrop, hedge fund managers said the oil price would remain volatile and could even fall as low as $30.
"I believe we have a chance to go down to $30 and then going back up towards $50 or so by the end of the year," Pierre Andurand, who made his name and fortune in 2008 by predicting a sharp rise and collapse in oil prices, told CNBC.


Brent crude was at $58.15 a barrel Friday morning, down $1.22. Meanwhile, U.S. crude was down $1.06 at $50.37 a barrel, after dropping to a low of $50.25 earlier in the day.


Prices have been hit over the last 9 months by a continuing glut in supply and lack of demand. In the last few days, however, investors have become more jittery after a coalition of Arab countries led by Saudi Arabia launched air strikes against a rebel uprising in Yemen, which could impact the region's oil industry.


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Getty Images




"It's going to be hard to call because markets will remain volatile," Andurand, managing partner and chief information officer of fund management firm Andurand Capital.

Middle East turmoil

Escalating political turmoil in the Middle East that could affect oil supplies was something to watch closely, Andurand warned, and was likely to keep markets volatile.
"You can see the situation in the Middle East is very complicated and can change any day. So we can lose a lot of supplies in some countries in the Middle East. So it's something to follow very closely,"
More volatility is the last thing oil markets need with the last nine months proving something of a rollercoaster for the commodity. Since last June, the oil has price has fallen by more than 50 percent from a high of $114.
Exacerbating matters has been the refusal of the Saudi-led Organization of Petroleum-Exporting Countries (OPEC) to cut production as it seeks to retain market share in the face of growing competition from shale oil producers in the U.S.
Read MoreRead MoreOPEC oil minister: We 'have no choice' on output
There was not much chance of Saudi Arabia reversing its position any time soon, Andurand said
"I don't expect a shift from the Saudis. They have a $750 billion in foreign reserves so they can withstand lower prices for longer than anybody else. I think it would be a mistake if they stopped now, it would mean that no one would take them seriously next time and it would only encourage more non-OPEC supply growth."

Oil will recover

Others in the hedge fund industry were also convinced oil markets could be in for a turbulent time, too but several thought prices would recover in the longer-term.
Mark Swain, a partner at Smith & Williamson, told CNBC Thursday that the "biggest risk is probably the oil price" and that he was concerned about it.
"It's taken a huge fall. It's very volatile…Is it going back to 80 dollars or 90 dollars? Not even the commodities expert can tell me that, so that's something I worry about because I can't predict it," he said, also speaking to CNBC at the Investors Choice Awards in London.
Not everyone was convinced that oil was heading only in one direction, however. Richard Haworth, co-founder, chief executive and chief information officer of volatility hedge fund 36 South Capital Advisors, said that although "in the short to medium-term it may go lower, I think in the longer term, we'll see higher commodity prices across the board."
Michael Yoshikami, founder and chief executive of Destination Wealth Management, was in agreement, telling CNBC that while oil prices were likely to fall in the short-term, they would recover.
"Oil prices in the long term are going to go up. Are they going to go down in the short-term? I believe they are, to be more specific I think they're going to go down because of storage issues. There's just not enough storage for the oil but then I think oil will rally and will perhaps rally back to the $50-$60 barrel range," he told CNBC Europe's "Squawk Box" Friday.








Reference:


http://www.cnbc.com/id/
 
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.  

Thursday, 26 March 2015

ex Goldman Sachs Trader Tells Truth about Trading - Part 3

 

 

Basic Trading Concepts Defined

On February 7th 2013, the Institute of Trading and Portfolio Managements Managing Partner Anton Kreil was interviewed at Cass Business School by students of the University. In this exclusive interview Kreil gives an insight into the trends occurring in world financial markets for professional and retail traders, his thoughts on the world of banking, hedge funds, career progression for graduates within the industry and what the future may hold for those graduates seeking employment at Banks and Hedge Funds.

Reference: InstituteofTrading

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Asia shares skid; oil climbs on Yemen escalation

A woman wearing a Hakama, or Japanese traditional Kimono, holds her mobile phone as she walks past an electronic board, showing the stock market indices of various countries, outside a brokerage in Tokyo, March 23, 2015. REUTERS/Yuya Shino

(Reuters) - Asian shares slipped on Thursday as tensions in the Middle East and losses on Wall Street soured sentiment, while the dollar's bull run looked to have stalled for the time being.

Risk appetite took a knock from news Saudi Arabia and its Gulf Arab allies had launched air strikes in Yemen against Houthi fighters who have tightened their grip on the southern city of Aden.

The potential threat to oil supplies from the Gulf was enough to lift U.S. crude CLc1 $2.26 to $51.47, while Brent crude LCOc1 surged $2.47 to $58.95 a barrel.

Safe haven U.S. Treasuries also rose, nudging 10-year yields down to 1.92 percent US10YT=RR, while gold touched a three-week top around $2,000 an ounce XAU=.

A dearth of Asian data meant the path of least resistance was for stocks to fall. The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.6 percent.

Australia's main index .AXJO shed 0.9 percent, while the Nikkei .N225 lost 1.6 percent in its biggest daily decline since mid-January. Chinese markets, as so often, went their own way and Shanghai .SSEC rose 1.2 percent.

On Wall Street, a drop in technology stocks had knocked the Nasdaq IXIC. down 2.37 percent for its biggest decline in nearly a year. The Dow .DJI fell 1.62 percent, while the S&P 500 .SPX lost 1.46 percent.

Not helping was data showing spending on U.S. durable goods fell for a sixth straight month in February, fresh evidence that economic growth slowed sharply early in the year, due in part to bad weather.

That was just the latest in a run of soft U.S. indicators, a contrast to Europe where the news has been getting better.

JPMorgan noted that the gap between downward surprises on U.S. data and upward surprises on EU figures was at its widest since February last year when bad weather was also having a chilling effect on U.S. growth.

In currency markets, the dollar continued to consolidate after wild swings last week. Measured against a basket of currencies, the dollar eased 0.2 percent to 96.787 .DXY, just above a three-week trough of 96.387 set on Tuesday. Earlier this month, it scaled a 12-year peak of 100.390.

The euro EUR= was last at $1.0975, well off a 12-year trough of $1.0457 plumbed two weeks ago. Against the yen, the dollar softened to 119.32 JPY=, again just above a one-month trough of 119.22 set on Tuesday.

"While very tentative, the recent stability in the euro might suggest at least a near-term equilibrium has been reached," said CitiFX G10 strategist Josh O'Byrne.

"Though we still see EUR risks lower, we could be entering a period of consolidation," he said.

Reference: Wayne Cole

Wednesday, 25 March 2015

A Digital Finance Revolution in China

ALIBABA ALIFEST

A story about a country that made a giant leap in terms of financial technology.

What started as a service to help customers buy goods from Alibaba retailers has grown into a serious finance business on its own.

Between July 2013 and June 30, 2014, Alipay handled $778 billion in transactions.

Not many years ago, Jane Yang, a 26-year-old civil servant in Beijing, paid her landlord in three-month instalments with a stack of 100-Yuan notes. To pay her utilities—water, electricity, and home Internet bill—she went to three separate banks, where she handed cash to a teller. The process was "very time-consuming and irritating," she remembers. Even as skyscrapers and gleaming shopping malls cropped up around China's capital, most middle-class residents had never seen or used a simple check book.

Today she uses the Alipay app, China's most popular online payment service, on her smartphone to transfer money directly to her landlord's account. She pays for her utilities and her mobile-phone account through Alipay as well. Yang even keeps savings in her Alipay Yu'ebao money market account, where money accrues higher interest than it does in a traditional bank account. Yang hadn't set out to deliberately overhaul her financial habits, but new mobile technology, she says, "made so it easy."

As of October 2014, Alipay had more than 300 million registered users in China (and 17 million overseas), according to the most recent figures the company has made public. Many, like Yang, originally set up accounts in order to shop at parent company Alibaba's wildly popular retail sites Taobao.com and Tmall.com, where everything from designer clothes to pet food is for sale. The Alipay payment system works much like PayPal, except that funds are held in escrow and are released when the goods arrive in satisfactory fashion. In a society where consumers have learned to be wary of false advertising and fake products, Alipay's escrow system helped ease consumer fears—and gave Alibaba's retail sites a crucial early advantage over rival eBay.

 

$300 billion worth of goods

Today Alibaba's sites sell $300 billion worth of goods annually, dwarfing sales on eBay and Amazon combined. The company, which unlike Amazon doesn't actually stock and sell the merchandise on its sites, held its initial public offering on the New York Stock Exchange in September, raising $25 billion, the largest debut ever.

"[Alibaba and Alipay] are integral to each other’s success. But I wouldn’t be surprised if, in the long term, Alipay turns out to be the more important business.” —Ben Cavender, China Market Research Group

Alibaba and Alipay, which has been incorporated as a separate company since 2011, helped drive the very rapid expansion of online sales in China—now the world's second-largest "e-tail" market. McKinsey Global Institute estimates that by 2020, Chinese e-tailing could generate as much as $650 billion in sales, and China's market "will equal that of the United States, Japan, the United Kingdom, Germany, and France combined today."

As much as Alibaba has driven China's booming e-commerce market, it's possible that Alipay will ultimately have the bigger impact on the Chinese economy. Alibaba and Alipay "are integral to each other's success," says Ben Cavender, principal at China Market Research Group in Shanghai. "But I wouldn't be surprised if, in the long term, Alipay turns out to be the more important business—it's so flexible and has so many potential uses."

Alipay debuted as a simple e-payment system, but it's now a destination app (and website) in its own right. In addition to easing consumers into online shopping, Alipay, with its huge built-in user base, has recently made a range of financial services available to people who previously lacked easy access to tools for making payments, money market accounts, and small business loans.

As the Chinese fast become accustomed to banking on their phones, Alipay faces new competition from alternatives like Tencent's Weixin Wallet function, which enables mobile payments.

"In China today, its technology companies that are driving innovation in mobile payments," says Zennon Kapron, a financial technology and digital currency expert in Shanghai. Traditional banks and the government are not the main actors.

Between July 2013 and June 30, 2014, Alipay handled $778 billion (4.8 trillion yuan) in transactions, according to the company. It is able to process more than 10 billion transactions per day. During the popular "Singles' Day" annual sale—which is like Black Friday in the U.S. but on overdrive—Alipay handled up to 2.85 million transactions per minute, and 54 percent of its transactions are made via mobile device.

Alipay's back-end technology is similar to that of PayPal, Kapron says, but on the front end the user's experience is quite different. PayPal is best known as a payment option, a screen you may reach at the end of a transaction on a retail website, but with Alipay, customers can go directly to its app and website to make payments, check their investments, or buy movie or plane tickets. The presentation, says Kapron, is suited "for people who have quickly gotten used to using their mobile phones for everything."

 

New mobile payment technology

With these new mobile payment technologies, China has leapfrogged both checkbooks and desktop banking. Jane Yang, for example, went straight from paying rent in cash to paying via Alipay. According to PricewaterhouseCoopers, 79 percent of Chinese consumers surveyed said they were happy to receive coupons via their mobile devices, versus just 53 percent globally. And 55 percent of Chinese consumers said they expected their phone to be the main way they made purchases in the future, versus 29 percent globally.

This is a remarkable turnaround for a country that for years seemed to be stuck in a far earlier, low-tech era of consumer financial services. "The banks did nothing to make customer service easy," says ­Cavender, who notes that for many years paying a credit card bill required standing in line at a bank. It could not be done through the mail or online. Only those who had significant funds to invest and lived near large bank branches had easy access to wealth management options.

These changes coincide with rising overall incomes in China, and with the government’s desire to build a more consumer-­based society, observe Tjun Tang, senior partner and managing director at Boston Consulting Group's Hong Kong office. "In uptake of digital finance, China is probably leading the world right now," he says.

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Exclusive - Central banks agree new rules for FX market conduct

london-300x225 London 2

(Reuters) - Banks must stop traders sharing order information under a new global code of conduct that bans traditional slang usages and gives dealers more guidelines for what they can and cannot say about the world's biggest financial market.

The 8-page document, seen by Reuters, is part of efforts to head off abuses after two years of scandal over market manipulation. It was agreed this month by the foreign exchange market committees run by all of the developed world's major central banks.

It will sit as a global guide on top of the existing codes approved by each committee and also instructs asset managers to work harder at ensuring they are getting the best deal they can on currency transactions for their clients.

"FX market participants are advised to apply the global 'high-level principles' set out in this document to the FX market as it evolves, including with respect to new FX products, processes and technologies," the document, dated March 12, said.

Two years of regulatory investigations that have led to several billion dollars in fines for banks have quashed the constant chatter of a market traditionally keen on relationship-building by phone, in bars and over electronic chats.

Fining banks late last year, authorities said dealers had used code names to identify clients without naming them and swapped information in online chatrooms with pseudonyms such as "the 3 musketeers" and "1 team, 1 dream".

The Bank of England, after the sacking of chief dealer Martin Mallett for what its governor said was a string of misjudgements, last month set tougher internal rules for staff who speak regularly with bond and currency traders.

Banks have also placed limits on how dealers talk to peers, clients and the press, but many participants say they are still unclear about what is appropriate and what not and say it has decreased opportunities to make money on trading.

The code seeks to categorise confidential information and provide more guidance on what participants can say to each other about the market, particularly around orders submitted for execution in the daily benchmark fixing sessions.

"FX market participants should not pass on FX Trading Information to other FX market participants that might enable those entities to anticipate the flows of a specific client or counterparty, including around a fix," it said.

"It is acceptable to share with customers a view on the general state of and trends in the market. However, any market colour given regarding market activity should be sufficiently aggregated and anonymised so as to not disclose FX Trading Information or Designated Confidential Information."

Whether it be cockney rhyming slang originating in London's East End or impromptu descriptions of central and other banks based on national stereotypes, dealers have also invented codes to describe types of investor. The new rules seek to head that off too.

"These policies should also prohibit counterparty and customer anonymity from being circumvented through the use of slang or pseudonyms, both externally and internally," the code said.

Reference: Patrick Graham

Tuesday, 24 March 2015

High Frequency Trading and Dark Pools- part 2

High-frequency-trading 5

Here are 5 rules for interpreting Volume Patterns:


1.Know the difference between High Frequency Trader and Dark Pool Volume Patterns

HFTs create huge sudden explosive Volume spikes, however these are not always accompanied by a huge price move. This is one area that many retail traders miss entirely. Volume spikes are critical to see as they tend to precede a Shift of Sentiment™ which can alter the trend. When Volume spikes to the top or bottom of the chart window but price doesn’t move, this means that HFTs are battling the Dark Pools and do not know it. Dark Pools always win these battles as they are invisible, whereas the HFTs are on the exchanges. Dark Pool Volume Patterns develop over time, and are very consistent yet also intermittent. To find Dark Pool Volume Patterns, retail traders need to study several weeks of Volume data to find their activity.  

2.Never truncate Volume

You want to see the changes to Volume over time. Truncating removes the most important data, HFT action, or other high volume traffic which can trigger Volume Weighted Average Price VWAP orders from smaller funds and retail traders.  

3.Use a Sub-ordinate Indicator with Primary Indicators

Using a Sub-ordinate indicator with the Volume bars will make a huge difference in the speed and accuracy of the volume analysis. By establishing extreme low, low, normal, high, and extreme high values for volume it becomes far easier to interpret which Market Participants are moving or NOT moving price at that time. Dark Pool activity is easier to see when a Sub-ordinate indicator is used. HFTs always stand out so long as Volume is not truncated.  

4.Understand the Volume Patterns of all Market Participants

Volume Patterns vary distinctly with each Market Participant Group. When retail and smaller lots are buying speculatively and the large lots are allowing these smaller lot buyers to control price, the Volume will start to fade quickly as a stock runs up. Often there will be a negative divergence between Volume and Price. Dark Pools buy into stocks over several weeks to several months acquiring hundreds of thousands to millions of shares of stock. Their goal is always to NOT move price. They establish a “buy zone” range and then set orders that fire off mostly on quiet or insipid market days when the big popular stocks and indexes are flat or not very active. Dark Pool Volume has a consistency to it that is undeniable and obvious when combined with their Price Patterns. Without Volume, price looks choppy and uninteresting. Traders often miss ideal entries by not recognizing the Dark Pool Volume Patterns early on. Dark Pool activity is chased by HFTs, so using HFT strategies requires that retail traders learn to read the Dark Pool Volume and Price Patterns in combination. MACD will not show these patterns.  

5.Learn the Volume Patterns common to various Price Trend Patterns.

Volume also has distinct patterns in bottoms and tops long before the bottom formation is evident, and well ahead of the highest high of the top. This information gives retail traders a decided advantage to being prepared and ready for the correction or bottom velocity runs. With HFTs driving price up or down, Volume at bottoms or at tops is even more important than during trending patterns. Sideways patterns also reveal whether the pattern has hidden strength for a breakout to the upside, or if it is weaker than it may appear with price alone. Again, Price indicators are unable to reveal these kinds of analyses because only Volume can expose who is controlling price.  

Summary

When retail traders use Price and Volume together, they are using a complete set of data for their analysis. A complete analysis of all the data available is the standard in all industries where analytics are used. To dismiss Volume as unimportant is to ignore the standard practices of every analytical theory and process. In today’s market, Volume is far more important than it was in the 20th century. This is due to the massive changes to the Market Structure, in particular the wide variety of trading venues now used and the diverse number of new order types. Volume substantially improves trade analysis which ultimately means higher profitability, and far better consistency in trades. Reference Martha Stokes
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Fed's Williams says mid-year rate rise may be appropriate

John Williams, president and chief executive of the Federal Reserve Bank of San Francisco, takes part in a panel discussion titled ''U.S. Overview: Is the Recovery Sustainable'' at the Milken Institute Global Conference in Beverly Hills, California May 1, 2012. REUTERS/Danny Moloshok

(Reuters) - Federal Reserve policymakers should wait no more than a few months before considering raising U.S. interest rates from their current near-zero level, a top Fed official said on Tuesday.

"I think that by mid-year it will be the time to have a serious discussion about starting to raise rates," San Francisco Fed chief John Williams said in remarks prepared for delivery to Australian Business Economists.

Rather than risk overshooting on inflation, forcing the Fed to respond with potentially dramatic rate hikes, "I see a safer course in a gradual increase, and that calls for starting a bit earlier," he said.

Williams, a voter on Fed policy this year, made nearly identical remarks on March 5.

Fed officials last week removed a vow to be "patient" on raising rates, but downgraded their assessment of the economy and signaled they expect to raise rates more gradually than they had thought in December.

Reference: Wayne Cole

Monday, 23 March 2015

ex Goldman Sachs Trader Tells Truth about Trading - Part 2



 

Basic Trading Concepts Defined

This is our follow up, the second part of the series regarding ex Goldman Sachs Trader Anton Kreil.
On February 7th 2013, the Institute of Trading and Portfolio Managements Managing Partner Anton Kreil was interviewed at Cass Business School by students of the University. In this exclusive interview Kreil gives an insight into the trends occurring in world financial markets for professional and retail traders, his thoughts on the world of banking, hedge funds, career progression for graduates within the industry and what the future may hold for those graduates seeking employment at Banks and Hedge Funds.
Reference: InstituteofTrading

Oil prices drop after Saudi Arabia says it will not cut output alone

Pumpjacks taken out of production temporarily stand idle at a Hess site while new wells are fracked near Williston, North Dakota November 12, 2014. REUTERS/Andrew Cullen

(Reuters) - Oil prices dropped over a percentage point on Monday after Saudi Arabia said over the weekend that the market defined prices and the kingdom would not unilaterally cut its output to defend prices.

Since oil prices started to fall in June 2014, many analysts have expected OPEC's biggest producer to eventually curb its output as it has done many times in the past to support prices.

Yet Riyadh has so far opted to keep its output stable to protect market share against non-OPEC producers such as the United States - where production has soared as a result of the shale exploration boom - and Russia.

Benchmark Brent crude oil futures was trading at $54.65 a barrel at 3.00 a.m. ET, down 67 cents from their last settlement. U.S. WTI crude was down 72 cents at $45.85 a barrel.

"We repeat that, as for prices, the market determines it," Saudi oil minister Ali al-Naimi said on Sunday, adding that Saudi Arabia would only consider output cuts in cooperation with non-OPEC producers.

"We tried, we held meetings and we did not succeed because countries (outside OPEC) were insisting that OPEC carry the burden (of cuts) and we refuse that OPEC bears the responsibility," Naimi said.

With OPEC output making up about 30 percent of world supply and 70 percent coming from elsewhere, "everybody is supposed to participate if we want to improve prices," he said.

Analysts said that the surplus of oil in the market would increase if production is not cut.
"If OPEC production were to remain around current production levels and close to its target of 30 mb/d, the implied surplus in the oil market would expand from 0.9 mb/d to 1.3 mb/d," Barclays said on Monday.

Reference: Henning Gloystein

Friday, 20 March 2015

Basic Strategies On Making Money In The Stock Market

Newsletter 39 Hongkong

Basic Trading Concepts Defined

There is a huge amount of information out there about investing. In fact, so much information exists that it can become overwhelming. What do you need to learn about investing? Below is some of the information that you need.

Prior to signing with a broker or using a trader, see what fees you’ll be liable for. You will have variable fees for entry and exit. Those fees add up to significant amounts, quite quickly.

TIP! Keeping things simple is applicable in all areas of life and especially in stock market investing. By keeping your investment techniques simple, and following a clear and concise path, you can minimize the risk you expose your portfolio to and achieve greater success.

Each stock choice should involve no more than 5 or 10 percent of your overall capital. If the stock goes into decline later on, this helps you greatly reduce your risk.

It is vital that you go over your portfolio and you investment strategies periodically. The reason for that is the economy is changing frequently. Certain market sectors begin to out gain others, making some companies obsolete. The best company to invest in is likely to change from year to year. This is why you must vigilantly track the stocks you own, and you must make adjustments to your portfolio as needed.

Use a stock broker that will let you use all of their services in addition to online choices. This way you can delegate half of your stocks to a professional manager and take care of the rest on your own. This strategy can provide you with elements of both professional help and personal control in your stock trading.

 

Long-tern strategy

TIP! Creating a long-tern strategy is the best way to make the most money when you are investing. Be realistic when investing.

Try to avoid investing heavily in your own stock. It is okay to purchase a bit of stock in your company, but be sure to diversify. If the company does poorly or even goes out of business, you could lose most of your wealth along with your job.

Damaged stocks can work, but not damaged companies. A bump in the road for a stock is a great time to buy, but the drop has to be a temporary one. For example, a downturn is probably temporary in the event that a reversible error occurred in the company’s supply chain. Although, you have to keep in mind that companies which have had prior financial indiscretions have a higher chance of failure and possibly will not recover.

So there you have it. The basic steps of getting into stock investing and why it could make sense for you. While youth has many advantages, foresight is a hard thing for young people to grasp. So now that you have the knowledge, why not apply some of it for your own personal gain.

Reference Supernsetips

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Asia stocks stall as Fed-inspired lift peters out, dollar steady

 

An employee of the Tokyo Stock Exchange (TSE) looks at a stock quotation board as he works at the bourse at TSE in Tokyo March 13, 2015. REUTERS/Yuya Shino

Asian stocks stalled on Friday as Federal Reserve-inspired gains petered out, while the dollar steadied after rebounding from the shock of a surprisingly dovish U.S. central bank.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged down 0.1 percent after rallying 1.3 percent the previous day. But it still looked set for a gain of around 2.4 percent for the week.

Spreadbetters called for a slightly higher open for Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI. U.S. S&P futures ESc1 also pointed to small gains on Wall Street later in the day.

The region's decliners included shares in Hong Kong, Malaysia, South Korea and Thailand. Australian and Chinese stocks were among the gainers in a choppy session.

Japan's Nikkei .N225 swerved in and out of the red and was last up 0.1 percent, taking a breather after a strong rally since February that took it to a 15-year high.

"There are some signs the rally had got overheated. So the market is in a correction phase," said Masahiro Ayukai, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

U.S. shares fell overnight as the dollar's rebound dragged down oil and other commodity prices, sending energy and material sectors lower. [.N]

"Crude oil is falling again and if U.S. equities remain unstable amid differing prospects for a Fed rate hike, it will weigh on global equities," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

The dollar tumbled across the board, risky assets surged and U.S. debt yields sank after the Fed on Wednesday opened the door further for an interest rate hike but signaled a more cautious outlook for U.S. growth, cooling speculation for tightening in June.

The dollar was little changed at 120.725 yen JPY= after sinking to the week's low of 119.29 after the Fed's statement.

Helping the greenback was higher U.S. Treasury yields, which on Thursday bounced modestly from multi-week lows hit on the Fed's dovish-sounding statement. The 10-year Treasury note yielded 1.958 percent US10YT=RR after sinking to a five-week trough of 1.899 percent overnight.

The euro edged up 0.2 percent to $1.0684 EUR=. The common currency had posted its biggest one-day gain in six years against the dollar and climbed a peak of $1.1062 after the Fed.

Greece promised on Friday to speed up implementation of its extended bailout agreement and send a full list of detailed reform proposals to its euro zone partners in the coming days, German Chancellor Angela Merkel said.

However, she declined to set any date for releasing any further aid to the Greek government, which is rapidly running out of cash.

The dollar index was down 0.4 percent at 98.902 .DXY but still well above a low of 96.628 plumbed midweek. The index was on track for a 0.1 percent loss on the week after touching a 12-year high above 100.00 on March 13.

In commodities, U.S. crude oil was down 0.4 percent at $43.77 a barrel CLc1 after taking a knock overnight on the dollar's bounce and Kuwait's stance that OPEC had no option but to keep producing in an oversupplied market. [O/R]

U.S. crude has dropped to a six-year low of $42.03 a barrel earlier in the week.

Reference: Shinichi Saoshiro

Thursday, 19 March 2015

High Frequency Trading and Dark Pools

image

Basic Trading Concepts Defined

High Frequency Trading and Dark Pools are a frequent topic in stock news, and many retail traders wonder how they can have an advantage against HFTs. The easiest way to front run the HFTs is to understand the Volume Patterns of the Dark Pools, which precede sudden huge HFT runs and gaps.

There are only 3 pieces of data that come from the stock market for stock indicators and those are Price, Time, and Quantity aka Volume. From those 3 data streams, hundreds of indicators have been written over the past century. Most indicators are based on only Price and Time. With the plethora of new market venues and especially with the rise of Dark Pool Alternative Trading Systems ATS trading, Volume has become an even more important indicator.

Unfortunately, online brokers, retail vendor trading systems, and trading classes promote Price and Time indicators such as MACD, Stochastic, and Bollinger Bands but rarely is Volume explained and why it is so important.

Volume bars are critical to any trading style as they complete the data from the stock transaction. Without Volume, retail traders are hampering their analysis by leaving out a huge aspect of stock chart analysis.

Volume reflects the interest of the various Market Participant Groups, as well as which groups are actively trading the stock. If you know what to look for it is not difficult to see the various footprints of each group on a Candlestick Chart. With 9 Market Participant Groups it is essential to be able to recognize which group is buying or selling, regardless of what price appears to be doing at that time.

Price can be running up and suddenly a huge black candle or run down occurs, with no prior indication on the price chart or Price based indicators. Volume warns of such risks. Learn 5 rules for interpreting Volume Patterns in stock charts.

The analysis of only price using Price and Time indicators without any Volume indicators can lead from inaccurate to severe misinterpretation of price action, the sustainability of the run or trend, and how price will behave in the near term.

Volume reflects many aspects of the trade that Price alone does not reflect, based on the new Market Structure where Dark Pools which are the giant lot transactions are traded off the exchanges. These venerable giant institutions use carefully constructed orders which control price in ways that were never possible when the giant lots were traded on the exchanges. This one fact alone should convince retail traders that they need to spend more time studying and learning Volume Patterns along with Candlestick Patterns.

The relational values between Volume Patterns and Candlestick Patterns provide vast insights into who is controlling price, and whether there are Dark Pool institutions quietly accumulating or quietly distributing the stock WITHOUT moving price. That is the conundrum for all retail traders. If price is not moving but giant lots are buying, which happens all the time in the modern Market Structure, than just using Price indicators will not reveal the most important Market Participants until HFTs move price.

Reading Volume bars is one of the easiest of all indicators to learn and the most critical for beginner retail traders to incorporate into their stock analysis.

To be continued next Tuesday with: Here are 5 rules for interpreting Volume Patterns:

Reference Martha Stokes

Asia stocks surge, bond yields tumble on Fed caution

A man (L) looks at a stock quotation board as passers-by walk past, outside a brokerage in Tokyo February 27, 2015.   REUTERS/Toru Hanai

(Reuters) - Asian shares enjoyed their best session in 18 months on Thursday as investors priced in a later start and a slower pace for future U.S rate rises, slashing sovereign bond yields from Japan to Australia.

The shift in rate expectations hit the dollar hard at first, though the damage lessened as the session wore on. The formerly friendless euro had found itself as high as $1.10625 EUR= in wild trade on Wednesday, only to fade to $1.0767 in Asia.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS climbed 1.6 percent, its largest daily gain since September 2013. Australia's main index .AXJO jumped 1.9 percent led by banks as markets wagered on lower domestic rates.

The only laggard was the Nikkei .N225 which slipped 0.2 percent in reaction to a firmer yen.

Short-term U.S. yields boasted their biggest drop in six years after the Federal Reserve trimmed forecasts for inflation and growth, and said unemployment could fall further than first thought without risking a spike in inflation.

The median projection for the Fed funds rate at the end of 2015 was cut to 0.625 percent, down half a point from December.

Fed Chair Janet Yellen also sounded uncomfortable with the strength of the dollar, saying it would be a "notable drag" on exports and a downward force on inflation.

"There was nothing in the statement to suggest that the Fed is leaning toward a June hike," said Michelle Girard, chief U.S. economist at RBS.

"Developments leave us feeling more comfortable with our official call for the first rate hike being in September."

The market reaction was immediate and dramatic. Fed fund futures <0#FF:> surged as investors sharply scaled back expectations for how fast and far rates might rise.

The December contract rocketed to 99.59, implying a rate of 41 basis points and completely reversing the impact of the last two payrolls reports. Yields on two-year notes US2YT=RR peeled off to 0.55 percent, down a huge 12 basis points post-Fed.

RATTLED DOLLAR

The rally then rippled out to other bond markets, driving short-term yields in Australia to all-time lows and a similar reaction was expected in Europe.

The Fed's seeming caution on hikes rattled the dollar as investors have been massively long in the expectation its interest rate advantage could only get wider.

Against a basket of currencies, the dollar was down 0.3 percent .DXY=, having shed 1.8 percent on Wednesday.

The Swiss franc, sterling and the Australian dollar all enjoyed solid gains, while the New Zealand dollar NZD= got an extra boost from upbeat growth data. [TOP/CEN]

The dollar fared better on the yen with a dip to 120.50 JPY=, having been around 121.00 before the Fed's statement.

Wall Street was encouraged by the prospect that policy might stay super-loose for longer and the Dow .DJI ended Wednesday up 1.27 percent. The S&P 500 .SPX rose 1.21 percent and the Nasdaq .IXIC 0.92 percent.

Among commodities, gold held firm at $1,171 an ounce XAU=, having climbed from $1,145 on Wednesday.

U.S. crude CLc1 was off 86 cents at $43.80, though that followed a gain of 3 percent on Wednesday. Brent LCOc1 was 46 cents easier at $55.45 a barrel.

Reference: Wayne Cole

Wednesday, 18 March 2015

Why one should buy gold sovereigns

gold 3

Basic Trading Concepts Defined

At MoneyWeek, we’re long-standing fans of investing in gold. We think it’s a great way to provide insurance against any future financial crisis. Or inflation.

If you want a truly diversified portfolio, invest some of your assets in gold.

Granted, the gold price will move up and down in the future, but one day it will probably pass the inflation-adjusted high of $2,400/oz set in 1980.

 

How should you invest in gold?

Trouble is, if you’ve decided to invest in gold, you have a further decision to make. You’ve got to decide how you’re going to invest in gold.

There are lots of different options. You could invest in a gold exchange-traded fund (ETF) – a fund that does nothing but hold gold. Or buy shares in gold-mining companies. Or buy gold bars or coins.

You could also choose to invest in semi-numismatic coins. These are coins that aren’t just valuable for their gold content. The coins also appeal to collectors who are interested in coins and banknotes.

Just as it’s a good idea to diversify your portfolio across a wide range of assets including equities and bonds, it may also be a good idea to diversify your gold holdings across two or three types of gold investment.

Having eggs in various gold baskets is probably the most sensible and prudent strategy.

 

As part of this mix, older gold coins should be looked at

.Classic European and world gold coinage is an often overlooked, but extremely important sector in today’s gold market. These coins are rare which means they have more potential to appreciate in price – yet, they can often be bought at bullion prices.

Crucially, you can also save tax by investing in gold. Gold bullion and some gold coins are exempt from VAT, whilst post-1837 British sovereigns and Britannia coins are exempt from Capital Gains Tax (CGT). That’s because these post-1837 sovereigns and Britannias are legal tender.

If you’re wondering which coins are exempt from VAT, the rules are a little complex. If a coin is bought as a investment in gold bullion, then it should normally be exempt from VAT. However, if a coin is sold for more than 180% of its gold-value content, it’s clearly attractive as a collector’s item and is then subject to VAT.

Often the price of gold coins is slightly higher than modern gold bullion, but these coins offer many advantages. They’re often scarce, and can have aesthetic value as well as historical significance.

When you look at semi-numismatic gold coins, the British sovereign (originally the one pound coin) is the most widely traded.

There is constant and excellent liquidity in most countries in the world. For the investor looking for slight leverage to the gold price with the potential for the premium (numismatic value) to rise, British sovereigns are a good way to invest in gold.

 

History of the British gold sovereign

The first British gold sovereigns were minted more than 500 years ago. They were minted under Tudor king Henry VII in 1489.

The current design type with Saint George slaying a dragon on the reverse and the monarch on the front was introduced nearly 200 years ago in 1816 under George III. The sovereign was minted almost continuously from that date until 1932 when Britain went off the gold standard.

British sovereign ‘kings’ minted during the reigns of Edward VII and George V are probably the most widely owned and recognised pre-1933 gold coins.

In 1816, the British gold sovereign as we know it today was first introduced, and as the British Empire expanded under Queen Victoria during the 1800s, this coin came to be the world’s most widely distributed gold coin.

Minted originally in London, the sovereign came to be minted all over the world as Australia and South Africa came to be large gold producers. Mints in Pretoria, Bombay, Ottawa, Melbourne, Sydney and Perth minted thousands of sovereigns during the late 1800s and early 1900s.

The design of Saint George astride his brave steed, slaying the dragon, is common to the reverse of all variations of the coin.

 

Gold sovereigns: conclusion

It is estimated that only 1% of all gold sovereigns that have ever been minted are still in collectible condition. It is this relative rarity in relation to bullion coins and bars that leads to leverage whereby, in gold bull markets, the value of these coins increases by more that the actual price of gold.

Unlike paper investments or speculations, British gold sovereigns have a real and permanent tangible value. Therefore, they offer two ways to build wealth. They can offer the best of bullion and numismatics in one investment. They contain the intrinsic security of bullion or precious metal in a pure form and can also offer additional profit potential due to their aesthetic and historical appeal.

A small allocation of British gold sovereigns can be a useful component of a diversified gold portfolio.

Reference Bloomberg Moneyweek

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Fed set to ditch 'patient' rate vow as it eyes U.S., world growth

U.S. Federal Reserve Chair Janet Yellen testifies before a House Financial Services Committee hearing to receive the semi-annual report on Monetary Policy and State of the Economy, on Capitol Hill in Washington February 25, 2015. REUTERS/Jim Bourg

(Reuters) - The Federal Reserve on Wednesday is expected to lay the groundwork for its first interest rate hike in nearly a decade, as it continues to weigh whether the U.S. recovery can hold up against collapsing oil prices and a soaring dollar.

The U.S. central bank's latest policy meeting will conclude with certainty expected on one point: it will likely discard a pledge to remain "patient" before hiking rates, trimming one of the final verbal cues it has used through crisis, recession and recovery to describe its intent to keep rates near zero for a period of time.

The move would mark an important moment for Fed Chair Janet Yellen who, despite being seen as a policy dove, has overseen a steady whittling away of loose money promises: the policy statement during her first year as Fed chief shrank from 790 words to 529.

While the turn in language would open the door to an initial rate hike as early as June, the uncertain path of the global economy remains a dilemma for central bank officials who say they want more confidence in the U.S. recovery and the eventual rise of inflation before committing to a rate "lift-off."

The latest policy statement is scheduled to be released at 2 p.m. EDT (1800 GMT). The Fed will also provide updated economic forecasts by Fed policymakers. Yellen will also hold a press conference following the two-day meeting.

The economic data, however, have been muddy - strong job creation, continued growth, and generally healthy consumer demand in the United States, but a global collapse in oil prices and a rapid run-up in the dollar that could mean the Fed remains far from its 2 percent inflation target.

U.S. crude prices remained mired in the low $40 dollar a barrel range on Tuesday, and the Organization of Petroleum Exporting Countries acknowledged it may be the end of this year before low prices prompt higher-cost producers in the United States and elsewhere to trim supply.

Progress toward the Fed's inflation goal may be elusive until the price of oil finds a bottom and stabilizes.

A dollar that has soared more than 20 percent against major currencies over the past year also means imported goods are cheaper, while U.S. exports may be nicked, dragging down growth.

Ultimately, Fed officials say they are not concerned about either trend. Low oil prices have put what the IHS Global Insight consulting firm estimates to be around $2,000 into the pockets of the average American family - money that can support consumer demand and add to gross domestic product.

Fed officials also regard the dollar's appreciation as a vote of the world's confidence in the U.S. economic recovery, as investment flows towards what is now one of the few global bright spots.

"The stronger dollar is not going to be a decisive factor in the Fed's thinking," Capital Economics chief global economist Julian Jessup wrote last week. "The U.S. recovery is robust enough to weather a firmer currency."


'A COIN FLIP'

But the rising dollar and other economic data will partly determine whether the Fed opts for June, September or another date in what is now becoming a meeting-by-meeting debate over when to raise rates.

A near majority of Fed officials publicly have endorsed the idea of removing the patience pledge, putting investors and the public on notice that a rate hike could occur at any point from June onward.

"My guess is that they will drop 'patient,'" said Alan Blinder, a former Fed vice chair, who added that the choice between June and September for an initial rate hike "looks like a pretty close call ... It feels more like a coin flip to me."

Between strong U.S. monthly job creation and steady economic growth, the Fed's near-zero interest rate stance has seemed increasingly anachronistic, according to a growing group of Fed officials, economists and analysts who follow the central bank.

The federal funds rate has been at its low point since December, 2008. The last time the Fed raised rates was in June, 2006, when a roaring housing market and strong growth prompted it to push its target rate to 5.25 percent.

Investors and economists are split over whether the initial hike will come in June, or in September. Trading in Federal Funds futures contracts point to a September hike, while a recent Reuters poll of 70 economists indicated an even split between June and later in the year.

Reference: Howard Schneider and Michael Flaherty

Tuesday, 17 March 2015

Forex Fundamental Update

Forex bars

Basic Trading Concepts Defined

After last week’s dramatic NFP numbers the rise in the USD was as expected. The index reached an eleven and a half year high. It has been pulling back partly on weaker than expected retail numbers and partly short covering and profit taking.

In the equity markets, the week started with down moves in the US and notably in the FTSE and strength in the European bourses as the QE buying begins at the ECB. As the USD pulled back today the US equities recovered some ground but a down week so far.

EURUSD got to 1.049 earlier last weak and that triggers again the discussion as to whether parity will be reached. Some analysts have predicted that possibility by the end of this year, on Tuesday it didn’t look as if it would take that long. This month has seen it fall 850 pips but today saw a respite. Short covering and US data combined to produce a rally that now hovers around 1.06.

Not only is the Euro dealing with recent USD strength and data, but also the launch of QE last Monday. Add to that the spectre of the Greek situation still hanging over the EZ and we can understand why it may fall further. There has been a small amount of better than expected data that may show early signs of improvement, but its all very fragile and outweighed by the ‘bigger picture’.

Meanwhile, in NewZealand, the Reserve Bank was less dovish than some predicted and that brought strength to the Kiwi. What we are seeing increasingly is the use of the term ‘data driven’ when central banks predict the future of their monetary policy decisions. In the end it was neither hawkish or dovish, it could go either way! The Aussie dollar benefited from some good employment numbers. These events all added to the stall in the relentless rise of the USD. However commodity prices are still falling overall which will continue to weigh on the CAD, AUD and NZD. An important group to monitor.

The drop in Gold that began in January continued apace this week and the pause in the USD rally today, unlike the US equities, did not stop the downward momentum. It is trading at December lows of 1150.

The UK has had reasonable trade data this week but missed the manufacturing estimate. Mr. Carney has indicated a likely dip in inflation but remains firm that he expects rate rises going forward and does not see the need to ‘ease’. However the BOE have the option to lower rates should inflation slow too much and Mr. Carney’s warnings, which could be seen as dovish, still cause concern despite his ‘hawkish’ outlook. Its a very ‘flexible’ stance from the BOE governor.

Reference: Judith Walker

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Euro steady after rebounding from 12-year lows, Fed in focus

A picture illustration shows Euro banknotes in Zenica January 26, 2015.  REUTERS/Dado Ruvic

(Reuters) - The euro held firm on Tuesday after soft U.S. data and nerves ahead of this week's Federal Reserve policy meeting braked the dollar's rally and helped the common currency pull out from 12-year lows.

The euro was steady at $1.0568 EUR=, having rebounded overnight from $1.0457, its lowest since 2003.

The euro has been under pressure since the European Central Bank activated its 1 trillion euro bond-buying quantitative easing scheme last week and drove euro zone bond yields to record lows.


It got some relief after Monday's weaker-than-expected U.S. manufacturing, industrial output and housing data pushed down U.S. debt yields and cooled the dollar's advance.

Traders see the market getting little nervous ahead of the Fed's policy-setting meeting on Tuesday and Wednesday.

Expectations have been rising that the Fed will drop the word "patient" from its statement on the timing of interest rate increases - which has fanned expectations for tightening as early as June and helped prompt the dollar's recent surge.

But some traders have also cautioned that the dollar's strength and its potential negative impact on the economy might be mentioned by the Fed.

"The focal point for the Federal Open Market Committee meeting still remains whether 'patient' will be dropped or not, and another word might be used as a replacement," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

"But the dollar's recent strength, which is very much a political factor as well, may also get a mention and hurt dollar longs. It is a factor that participants will be keeping at the back of their minds," he said.

Participants will also keep an eye on how other asset markets react to the Fed's statement and comments from its chair Janet Yellen after the meeting.

"The main point is how Treasury yields respond to the Fed. Despite the removal of 'patience,' prospects of a September, rather than June, rate hike may linger given the dollar's appreciation and lower oil prices," said a currency trader at a large Japanese bank.

"Yields are likely to start rising when 'patience' is removed and support the dollar, but the key is whether yields can remain elevated even if the prospect of a September hike are seen to remain intact," he said.

The dollar inched up 0.1 percent to 121.44 yen JPY=, stuck in a relatively narrow range since advancing to an eight-year high of 122.04 on March 10.

The Bank of Japan concluded its two-day policy meeting on Tuesday, at which the central bank stood pat on monetary policy and maintained its massive stimulus. Market reaction was limited because the outcome was as expected.

The dollar index was little changed at 99.713 .DXY after pulling back from a 12-year high above 100.00 struck late last week.

The Australian dollar dipped slightly after minutes of the Reserve Bank of Australia's showed policymakers had left the door open at their latest policy meeting for further interest rate cuts.

The RBA cut interest rates to a record low of 2.25 percent in February and stood pat this month.

The Aussie was down 0.2 percent at $0.7623 AUD=D4, crawling closer to a six-year trough of $0.7561 plumbed last week.

Reference: Shinichi Saoshiro

Monday, 16 March 2015

ex Goldman Sachs Trader Tells Truth about Trading - Part 1

 

 

Basic Trading Concepts Defined

On February 7th 2013, the Institute of Trading and Portfolio Managements Managing Partner Anton Kreil was interviewed at Cass Business School by students of the University. In this exclusive interview Kreil gives an insight into the trends occurring in world financial markets for professional and retail traders, his thoughts on the world of banking, hedge funds, career progression for graduates within the industry and what the future may hold for those graduates seeking employment at Banks and Hedge Funds.

Reference: InstituteofTrading

Asian shares edge up ahead of Fed meeting

An employee of the Tokyo Stock Exchange (TSE) stretches his body as he works at the bourse at TSE in Tokyo March 13, 2015. REUTERS/Yuya Shino

 

Asian shares drifted higher on Monday after a downbeat session on Wall Street kept sentiment in check, while the euro recovered from a fresh 12-year low touched on the divergent monetary policy paths between the United States and the euro zone.

Financial spreadbetters expected a stronger day ahead in Europe, with Britain's FTSE 100 .FTSE seen opening 26 points higher, or up 0.4 percent; Germany's DAX .GDAXI likely to open 61 to 63 points higher, or up 0.5 percent; and France's CAC 40 .FCHI called opening 15 to 20 points higher, or up 0.4 percent.

"European markets, with the exception of the FTSE100, continued to be juiced by the European Central Bank's easy monetary policy, which started last Monday, with bond yields continuing to decline to record lows," Michael Hewson, chief market analyst at CMC Markets, said in a note.

Oil prices continued to tumble, with U.S. crude dropping more than 2 percent at one point to a six-year low amid oversupply fears. The International Energy Agency said on Friday that the global supply glut is growing and U.S. production shows no sign of slowing.

U.S. crude CLc1 shed about 1.2 percent to $44.31 a barrel, while Brent crude LCOc1 lost about 0.6 percent to $54.32.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was a few ticks higher, erasing early losses and remaining above last week's seven-week trough.

Chinese shares outperformed, rising to five-year-highs, with the CSI300 index .CSI300 and the Shanghai Composite Index .SSEC both up more than 2 percent after Premier Li Keqiang said that Beijing had plenty of scope to adjust policies in order to boost the world's second largest economy.

"Investors have nothing to fear now because the message is that if economic growth continues to slow, there will be more stimulus measures," said Tian Weidong, analyst at Kaiyuan Securities in Xi'an in northwest China.

Friday's weak U.S. inflation data failed to derail expectations that the Federal Reserve will tighten monetary policy, and U.S. shares slumped on concerns about the impact of higher rates and a stronger dollar on corporate profits. The S&P 500 .SPX marked its third straight losing week, though it stood just 3 percent below its record high set early this month.

Investors' main focus this week is on the Fed's two-day meeting beginning on Tuesday. After successive months of strong jobs data, expectations have been growing that the Fed will point towards a June rate rise by dropping a pledge to be "patient" in considering such a move.

Data on Friday showed that U.S. producer prices fell in February for a fourth straight month, pointing to tame inflation that suggests the central bank has scope to hold off.

Japan's Nikkei stock average .N225 ended slightly down after notching a fresh 15-year intraday high on Monday and logging its fifth straight winning week.

The Bank of Japan will announce its latest policy decision on Tuesday, a day before the Fed, and is widely expected to maintain its aggressive quantitative and qualitative asset-buying program to stoke growth and sustainable inflation of 2 percent.

"Rises in bank and other domestic demand-oriented shares symbolizes an improved confidence that the economy is getting out of deflation," said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.


DOLLAR DOWN BUT CLOSE TO HIGHS

The dollar took a breather from its recent rally, but remained close to multi-year highs.

The euro slipped as low as $1.0457 EUR= early in the Asian session, its lowest since January 2003, but then rebounded to $1.0528, up about 0.3 percent on the day.

Still, the euro has lost roughly a quarter of its value versus the dollar since around the middle of 2014. It suffered its biggest weekly fall since September 2011 last week, shedding 3.2 percent as the European Central Bank launched its 1.1 trillion euro bond-buying stimulus program.

Goldman Sachs now expects the euro to slide to $0.80 by the end of 2017.

Against the yen, the euro edged up about 0.2 percent to 127.60 EURJPY=R, but remained not far from a 21-month trough of 126.86 set on Friday.

The dollar index .DXY lost ground due to the euro's retracement, losing about 0.4 percent to stand at 99.947, but staying near its 12-year high of 100.420.

Against its Japanese counterpart, the dollar shed about 0.2 percent on the day to 121.23 JPY=, but was still not far from a nearly eight-year high of 122.04 hit on Tuesday.


Reference: Lisa Twaronite