Beginners Forex Education Forex Market

Overview of “Dark Pools” (AKA Parallel Markets)

In finance, a «dark pool» is a private market used by its participants to trade in different types of securities. They are basically parallel markets operating outside the most well-known regular markets. Liquidity in these markets is called «dark pool liquidity» (sorry I did not find a suitable translation for the term).

The bulk of dark pool transactions represent high-volume transactions conducted by financial institutions, such as those executed outside public markets such as the New York Stock Exchange and NASDAQ, so that they remain confidential and beyond the reach of the general public investor. The fragmentation of financial trading sites and electronic trading has allowed dark pools to be created and they can normally be accessed through cross-network or directly between market participants through private contractual arrangements. Some dark pools can be accessible to the public and can be accessed through retail brokers.

The main advantage for institutional investors in the use of dark pools is that they allow sellers to sell or buy very large volumes of stocks without showing their position to others, which avoids the impact on the market as neither the size of the transaction nor the identity is revealed until the transaction is executed. But, this means that some market participants are at a disadvantage, as they cannot see the transactions before it is executed; prices are agreed by dark pool participants, so the market is no longer transparent.

There are mainly three types of dark pools:

Independent undertakings established to provide a single differentiated basis for trading with different assets.

The dark pools are owned by a broker where the broker’s clients interact, most commonly with other broker clients (and possibly even with operators working for the company itself) under conditions of anonymity.

Some public markets set up their own dark pools to offer their customers the benefits of anonymity and non-deployment of orders in conjunction with a stock market «infrastructure».

Depending on the exact way a dark pool operates and interacts with other places, it can be considered and in fact, referred to as a «gray pool».

Dark pools have become increasingly relevant since 2007, with dozens of different parallel markets representing a substantial portion of US stock trading, a trend we will surely see in other countries as well. There are several types of dark pools and these can be run in multiple ways, including automatically, throughout the day, or at scheduled times.

Origin of Dark Pools

With the advent of supercomputers that are able to execute programs created by algorithms in a matter of milliseconds, high-frequency trading (HFT) is already dominating the daily volume of trading in many markets. For example, in the stock market HFT technology allows institutional traders to execute their multi-million dollar stock block orders ahead of other investors, taking advantage of fractional increases or falls in stock prices. When subsequent orders are executed, the benefits will be instantaneously earned by HFT traders who then close their positions. This way of legal piracy can be occurring dozens of times a day, producing huge profits for HFT traders.

Eventually, the HFT became an increasingly widespread practice in the markets, to the point that it became increasingly difficult to execute large operations through a single exchange. Because HFT’s large orders had to be spread across multiple markets, this alerted competitors that they could get in front of the order and snatch the inventory, rising stock prices. All this happened in milliseconds after the initial order was placed.

To avoid transparency of public markets and ensure liquidity for high-volume operations, several investment banks established private markets, which became known as dark pools. For traders with large orders who cannot place on public stock exchanges, or who do not want to make their intentions known, dark pools provide a market of buyers and sellers with sufficient liquidity to execute the transaction. By 2016, there were more than 50 dark pools in operation in the United States alone, mainly run by investment banks.

How do Dark Pools Work?

Liquidity can be collected off the market in dark pools using FIX and APIs. Dark groups are actually very similar to standard markets with very similar order types, prioritization rules, and pricing rules. However, liquidity is not deliberately advertised – there is no market depth information. In addition, they prefer not to display and display transactions in any public data feed as standard markets, or if they are legally obliged to do so, they will do so with the greatest possible legal delay, all this to reduce the impact on the market of any transaction. Dark pools are often formed from order books of brokers and other sources of off-market liquidity. When comparing these markets, careful controls should be made as to how liquidity numbers were calculated: some count both sides of the transaction, or even count the liquidity that was placed but not taken.

Dark pools offer institutional investors many of the efficiencies associated with trading in the order books of traditional markets, but without showing their shares to others. These markets avoid this risk because neither the price nor the identity of the company they are trading are shown. Operations in dark pools are recorded as Over-The-Counter transactions. Therefore, detailed information on volumes and types of transactions is left to the network to inform customers if they wish and are contractually bound.

Dark pools allow large amounts of funds to be pooled and large volumes of securities moved without investors having to show what they are doing and what their intentions are. State-of-the-art e-commerce platforms and the total lack of human interaction have reduced the time scale in market movements. This increased responsiveness of an asset’s price to market pressures has made it increasingly difficult to move large volumes of securities without affecting price. Thus, these markets can protect investors from market participants who use HFT (high-frequency trading) in a predatory manner.

Dark Pools and Price Discovery

For an asset that can only be publicly traded, it is generally assumed that the standard pricing process ensures that at any time the price is quite “fair” or “right”. But, few assets are available in this category as most can be traded off the market without adding transaction information to a publicly accessible data source. As a proportion of the daily volume generated by the asset traded so secretly increases, the public price could be considered fair as long as certain limits are not exceeded. However, if public trading continues to decline as hidden trading increases, it could reach the point where the public price does not take into account all information about the asset (in particular, it does not take into account what is traded in a hidden manner) and therefore the public price could no longer be considered as «fair».

However, where dark pool transactions are incorporated into a post-transaction transparency regime, investors have access to this information as part of a consolidated list of transactions. This can help the discovery of prices.

Regulation of Dark Pools

Although considered legal, dark pools can operate with very little transparency. Those who have been able to denounce the HFT as an unfair advantage to other investors have also condemned zero transparency in dark pools since they can perfectly hide conflicts of interest. The Securities and Exchange Commission (SEC) in the United States has stepped up scrutiny of these markets for complaints related to front-side practices. Illegal running occurs when institutional traders place their order in front of a customer’s order to capitalize on the rise in stock prices. Dark pools advocates insist that they provide essential liquidity, allowing markets to operate more efficiently.

Some traders using a liquidity-based strategy consider that dark pool liquidity should be advertised to allow a more «fair» trading for all parties involved.

Beginners Forex Education Forex Market

Forex Vs. Stock Trading: Which Carries More Risk and Why?

Is forex trading riskier than stock trading? And Why? To answer this question we must analyze what is the best market to trade, whether Forex or stocks, and that is what we will try to reveal in this article because a person who is just beginning in order to know the different markets you have to decide in which of them you will make your investment and two of the best options are precisely Forex or stocks.

Over time, money is losing value as a result of inflation and a large part of your capital may disappear if you don’t work. So what you should do is have your resources constantly work for you. In order to achieve this goal, one of the ways to achieve this is to become a trader, a race full of emotions that begins when you choose a market to start trading. In the following paragraphs, we will make a comparison between two giants of the modern economy: stocks vs Forex.

The Stock Market

Stocks are financial instruments that provide the ownership of a company. Depending on the number of stocks held, a person can become the owner of a business together with the other shareholders and is entitled to the profits (or losses) that are given. It should be mentioned that the percentage of the company controlled by the investor is equal to the number of its stocks. The higher the number of shares you have, the greater your participation will be and you will enjoy better profits.

Thousands of people and institutions gather in the stock market to negotiate securities that represent ownership of several companies listed on the market. The stock market has been the main asset exchange market since the time of the industrial revolution. But thanks to the arrival of new technologies and the expansion of the Internet, other markets have emerged that counterbalance traditional actions.


The Forex Market

Forex, also known as the currency market, refers to the market where participants trade and exchange coins from any country. Currency is how money is officially issued by a nation’s central bank and serves as a means of exchange outside and within a given economy. There are people and companies that carry out transactions from different nations, therefore it is necessary a scenario in which it is possible to exchange these different currencies.

“We will analyze the most relevant aspects of Forex vs Stocks to determine which may be the best investment.”

Ease of Access

Forex trading, in contrast to the stock market, is not based on physical stock exchanges but is OTC (over the counter). This means that negotiations are conducted via the Internet and people can access them anytime and anywhere, which translates into superb accessibility.

We must know that today, the negotiations with stocks (and in general with any financial instrument) are conducted via the Internet. Anyone who wants to trade, whether with currencies or stocks, just select a broker, open an account and download the trading platform. In this respect, both the Forex and stock markets are easily accessible.

Credit: Investment School


First of all, it should be borne in mind that, both in stocks and in the foreign exchange market, entry requirements are minimal and in some cases, it is possible to open accounts without making any deposits. An important element to consider is leverage, which can be accessed when negotiating. This leverage is like a loan that the broker makes to its clients to make a trade with more money than we have.

In the stock market, the usual leverage is 1:2 (you can borrow 2 dollars for every dollar you have of capital), while in Forex it can reach 500:1. There is no need to be too smart to choose the best option. The high margins offered by brokers give this point to the currency market. But…leverage can become a problem for some traders, especially for those starting out in this market. This tool allows you to multiply profits, but the same will happen with losses. So you need to use leverage with responsibility and knowledge.

Another aspect to compare between Forex and the stock market is the different trading costs. In Forex, commissions are usually lower due to the large number of brokers that exist. On the other hand, stock exchange brokers charge commissions, spreads, and other fees that can significantly increase commercial costs.

It may seem that these small costs do not have much incidence because they will mean a few cents, but as time goes by you will see how they add up and become a major expense. These small expenses can deplete a portion of your earnings. At this second point, the Forex market takes the lead with its higher leverage ratios and lower transaction costs.

Operating Hours

Probably the most obvious difference, when comparing Forex to stock trading, is trading schedules. The stock market is limited by timetables of exchanges worldwide. Forex is open 5 days a week and 24 hours a day. This Forex feature allows people to trade at any time, providing for investors who have traditional jobs. But, although the Forex market is widely accessible, there are hours with higher volumes and therefore better opportunities.

One of the features of Forex is that volatility and liquidity levels remain relatively constant over time, allowing traders to generate profits in the short term. However, that doesn’t mean that you should envy yourself to the market and spend all your time viewing the graphics. The market won’t go anywhere.

Another positive aspect of foreign exchange trading is that if you open a position and get important information that forces you to close the position, you can do it immediately without waiting for the opening of the stock exchange. When deciding between trading stocks or currencies, the advantage of Forex is obvious. Its great accessibility is a plus.

Diversity of Offers

One of the most diverse markets is the stock market. There you will find the stocks of hundreds of open capital companies belonging to a wide variety of sectors and industries. This may seem positive, but such diversity can become confusing and prevent a quick analysis of available options. Can you imagine having to analyze hundreds of stocks and then buy just one of them?

Looking at the Forex market versus the stock market, it is possible to show that with currencies the scenario is significantly different. In Forex, the most quoted instruments are the so-called major pairs (groups of currencies composed of the most important currencies) and the US dollar is part of the vast majority of transactions. A trader who is aware of the key factors affecting the dollar will have a good overview of the other currencies.

Similarly, most Forex brokers offer one more possibility: CFDs (difference contracts). These instruments allow transactions with different assets without actually having them. ¡ That means even on Forex you can trade stocks! And so, when comparing Forex vs stocks, it is the currency market that takes the lead once again thanks to CFDs.

In conclusion, thanks to its greater accessibility, vast amount of possibilities, and superior freedom, Forex manages to position itself as a better investment option than stocks. While it is true that Forex risk may be higher because of increased leverage, we have options to have good risk management and minimize them.

Beginners Forex Education Forex Market

How Is COVID-19 Impacting the Forex Market?

I’m not here today to talk about algorithmic trading or systems or tools. I’d like to tell you something that is in the focus of traders in recent days and especially because it is an important issue because it affects the lives of many people. As you know, if it affects people’s lives it affects the economy and, of course, the currency market. But how does the forex market react in this environment? We’ll tell you…

I’m sure you’ve heard of Covid, but just in case, let’s discuss. It is a virus that we can catch through the mouth, ears, nose, and even the eyes and affects the respiratory system. Symptoms are dry throat, cough, sneezing, muscle cramps, breathing problems, high fever and can be as fatal as kidney failure leading to death.

It seems that there is a consensus and that the virus started in Wuhan (China) in about December 2019 last month and has traveled through Japan, Thailand, and now America. There are several hundred people infected and he has several deaths on his back.

How Coronavirus Impacts Markets

Understanding history will help us understand the reaction of markets in a similar case, bearing in mind that each circumstance is different from the previous one. The outbreak of the virus is reminiscent of the SARS pandemic in 2002 and 2003 that killed some 800 people, most of them from China and Hong Kong, according to World Health Organization data.

SARS had a significant impact on Asian currencies, in its rates and actions from the point where infections were officially identified by the World Health Organization in February 2003 to the peak of new daily infections.

How many times have we already warned that the markets least like fear and uncertainty? With this background, the investor keeps his portfolio and prefers to be out of the market before possible strong movements that affect him in a bad way. This leads to falls in global indices and greater volatility in the foreign exchange market.

Coronavirus and the Currency Market

To the point, Ruben. It is clear that because of the nature of the coronavirus the currencies that are most affected are the Asian ones. The Japanese yen (JPY) is acting as a refuge, as it usually does in times of economic uncertainty. That is why we can see in most crossings how it is being strengthened with respect to other currencies. The Chinese yuan (CNH) is looking very weak and in most pairs, we can see strong movements down the currency.

Also important is the Australian Dollar (AUD) which, due to its direct relationship with China, is being negatively affected. This is because of Australia’s trade relationship with China. Any signs of slowdown or risk directly affect AUD.

What to Do As a Trader

It is impossible to predict what happens with active x and establish clear rules for buying or selling in these situations. The ideal is as we always say to rely on cost-effective systems that have an advantage and management with connection and disconnection rules. Systems should be created by already contemplating data or market scenarios with high and low volatility. That being so, you should have no problem when events happen. Manage your systems as if you were a watch and adjust your risk so when the volatility is triggered it affects you as little as possible.

There are traders who prefer to stay out until everything happens, fully understandable as well. But remember that most of the time there’s going to be some event that’s going to create uncertainty for you.

Beginners Forex Education Forex Basics

Top 15 Undeniable Reasons to Love Forex Trading

When it comes to trading, there are a lot of things that we love about it, we would not be trading if we didn’t love it after all. We are going to be looking at 15 of the reasons why we really love to trade and how those different loves affect our outlook at our trading.

1- You can make money.

Who doesn’t love this aspect of trading? The fact that you can make a little extra money, or even a lot of money is a real draw-in for a lot of people and it is for us too. For a lot of people, the fact that you can make money is the initial draw in and the reason why a  lot of people trade, if there was not an opportunity to make money then there would be far fewer people actually trading.

2- Anyone can do it.

The great thing about trading is that pretty much anyone can do it, of course, there are a few limitations like needing to be over the age of 18 and to have access to a computer or phone, but otherwise, there is pretty much nothing stopping you from taking part, brokers are accessible, the markets are too. If you want to trade, there is always a way of managing to do it.

3- It’s very accessible.

As with the above, trading is getting more and more accessible and it has never been easier to get involved. You only need as little as $10 or even $1 for some brokers to get started. You can also access it from anywhere that has an internet connection using a desktop computer, a laptop, or even a smartphone, heck even some fridges have the capability of doing it now too. If you want to trade, there are more than enough ways to get involved and it is very easy to get started.

4- You can do it on your phone.

As we mentioned above, your smartphone is not a full-fledged trading terminal, years ago people would never have thought that they would be able to trade on their phone, now you can. On the train, on the couch, on the toilet, no matter where you are, as long as you have your phone with you and an internet connection, then you can very easily start trading.

5- It doesn’t take long.

You don’t need to be sat in front of the computer to make trades, it can be done in a few minutes, of course when you are first starting out it will take quite a bit longer, and you need to do the initial learning, but once you know what you are doing, you can get through your trading pretty quickly. That is something that we love as we do not want to spend 5 hours a day putting on trades.

6- It provides good reading material.

There is a lot of information when it comes to trading which is great for those that have the time to read. You can read up on things pretty much anywhere you are and there will always be something new for you to read and learn about. No matter the sort of writings you like from fact to fiction, there will be some related to trading that will suit your tastes.

7- There is a great community.

The trading community is one of the best, once you get past the plastic traders or those trying to get other people’s money, the community is fantastic. They are always there ready to help, to share ideas, and to discuss different things related to trading and the markets. There are a number of different communities out there so it shouldn’t be too hard to find one that suits you. They are also a great place to let off steam and the frustrations from trading.

8- You can work from home.

One of the main draws for a lot of people is that you can work from home, you can choose your own times to trade, you can trade as much or as little as you want and you can have a nice lie each day. It is fantastic being able to trade from home and to avoid the long daily commute that you used to do when you worked your previous 9 to 5 job.

9- You don’t have a boss.

Most of us hate having a boss, it is something that pretty much any job comes with and it is something that we strive to get away from. Trading is the perfect place to get rid of your boss and to basically be your own boss. Lots of freedom to do what you need without someone peering over your shoulder is a fantastic feeling and one that trading can very much provide you.

10- There are a lot of assets to trade.

There are a lot of options and assets to choose from, you will always be able to find one to trade and one that suits your style of trading. If one is going slow, fund another, there will always be options. That is the fantastic thing about trading, there are currency pairs, oils, metals, stocks, and more to choose from, so you will always have things to do and it will always be exciting.

11- It’s never boring.

Trading is never boring, things are always happening and this makes it so good to trade. Just when you think you will have a quiet period, something will happen, a news event, a disaster somewhere, whatever it is it can really shake up the markets and move things about. Even when you have trades open, you will need to keep an eye on them simply because anything could cause the markets to move. Some currencies can be slow, but there are others that will certainly be doing something.

12- Helps you control risks in life.

A part of trading is risk management, if you’re able to do it during your time trading then you can certainly take that into other aspects of your life too. Take what you learn and start reducing the risks that you are taking in other aspects of your life too.

13- It’s a profitable hobby.

Hobbies often cost you a lot of money, trading is a little different, it can actually help you to make money, not many people can say that their hobby brings them additional income rather than costing it. It takes time and work, but it can certainly help you to make a little extra on the side.

14- You can trade at any time.

There are no limits as to when you can trade. You can trade first thing in the morning, late in the afternoon, or in the middle of the night, the markets are always open. They close over the weekends but otherwise, they are a 24/7 opportunity to make money that you certainly should be taking advantage of.

15- It provides a shot of adrenaline.

Trading can be exciting, it can really boost your adrenaline levels, especially when the trade is doing the right or wrong way, it can really pump us up and that is a great feeling, for many, it is what they trade for. If you find trading boring then you won’t get this, but for the rest of us, the excitement is enough, the money is a bonus.

Those are some of the reasons why we love trading forex and why you should too. There are of course more reasons out there, but these are the main ones that come to mind. Think about why you love trading, and keep that in mind next time you get frustrated or bored. We will always love trading, and so should you.

Forex Technical Analysis

The Link Between Interest Rates and Forex Trading

Although there are many elements that influence the appreciation of a currency, one of the most important factors to consider is a country’s interest rates. In fact, assuming everything else stays the same, forex traders need to focus on interest rates more than anything else. In this article, we will explore what interest rates mean and how they impact the value of a country’s currency.

What to Look For

If we have a stable economic and geopolitical situation around the world, the foreign exchange market will favor a currency that is seeing an increase in the interest rate and more increases in the future. Even so, the interest rate is not the only factor affecting a currency. Other factors, such as war, geopolitical concerns, inflation, correlation with other markets, and many other things can be relevant.

When the interest rate is higher, it tends to attract a lot of foreign capital. The explanation is because money always wants to go to the place where it is “best treated.” For example, if you manage a large investment fund, you will look for greater returns for your clients. If country A pays 5% in bonus while other country B pays 2% in the same type of bonus, country A is the favorite with respect to where to invest. With the intention of buying that bond or investing in that financial asset, you need to buy in that country’s currency. (Some countries will take bonds or another currency like the American dollar, but we won’t talk about that in this article)

A Case Study

Let’s say you manage a large fund outside the UK. You have the instruction to put the money somewhere, and the most natural place you can put it is to go where we can find the largest growth. Generally speaking, central banks will realize an increase in interest rates if the economy is performing well. It’s a matter of time, but sometimes you might decide to enter a stock market, where you would have to shop in the local currency. The reason for having higher interest rates is that they are worried that the economy will overheat but at the same time there is a proclivity of financial assets to go up in that situation. Looking elsewhere in the world, you make the decision that Germany is the country where you plan to invest as many of the German multinationals are enjoying a big increase in exports. To buy stocks in the DAX you will need to buy euros.

Interest rates on Forex. In this scenario, you will need to purchase the EUR/GBP pair. If the European Union has a strong economy it will not only seek to buy shares in that market, it will also seek to buy bonds. Again, you will have to buy them in Euros. In that scenario, it is the natural flow of money to go after the highest yield. You could be in a situation where the UK has an interest rate of 1%. while Europe has an interest rate of 2.25%, for example.

But, a while later the situation in the world changes dramatically. We’re on the verge of a global recession, and you need to do something with your money. This was the situation during the financial crisis, which began in a way that most people would see as counter-intuitive. When the bubble burst, the initial movement was that the other currencies won. However, the US dollar began to win rapidly over time after the initial shock. The reason for this is that there are few places in the world that can absorb the kind of transactions that the treasure market can in the United States.

In that scenario, we had an exodus of capital from countries around the world in the treasure market, which brought up the value of the dollar. This was counter-intuitive because interest rates were being lowered quickly, but frankly, people were looking to keep their money in a safe place. It didn’t matter that possibly the money was going from New Zealand which had a 6% rate at the time to the United States which was lowering its interest rates. At the time, it wasn’t about getting some kind of return, it was about protecting the briefcases.

When things began to calm down, money managers began to buy other currencies such as the New Zealand dollar, the Australian dollar, and even emerging-market currencies such as the Turkish lira or the South African rand. Emerging market currencies were particularly attractive because some of the interest rates in those countries, despite being historically low for those areas, were still five or six times higher than those in developed countries. Once people thought it was safe to invest again, this was the first place that a lot of money went.

Interest rates are the main factor affecting the value of currencies. But much of it has to do with what traders think on a political and economic level. The general rule is that when people feel comfortable, they buy assets with a higher return, including currencies that have a higher return. When they are not comfortable, currencies with a lower interest rate such as the Japanese yen or the Swiss franc have historically performed better, alongside the dollar. Be sure to first understand the market risk, so you can follow interest rates in both directions.

Forex Basic Strategies

This Information Will Help You to Beat the Forex Market

Traders and investors often think about how important it is to read and read books, websites, and all kinds of material in order to improve trading. We spend a lot of time reading, but how much time do we spend on real learning?

I’ve already talked about How to win the market and the trap of the best and it is very important to practice and learn from the market. In trading the phrase “An expert is the one who has made all the possible mistakes in his field” is fulfilled and therefore we must devote ourselves to learning from them.

The problem of the human being is that he tends to minimize the bad things of the past and then we forget that we have done well and that we have not. To solve this problem Thomas N. Bulkowski decided to make himself a kind of complete statistic of each and every one of the formations from the chartist analysis you found. His conclusions and statistics are found in a book of more than 1000 pages called Encyclopedia of chart patterns.

Bulkowski was investing in the stock market while working as an engineer until at the age of 36 he had earned enough to retire. I think teaching a little of your book will be a good way to understand how statistics are made to achieve a trading system with positive mathematical hope.

Always study the bullish and bass breaking patterns separately. In this case, study the pennants that have a bullish breaking. Translating a little we have:

  • Break-even failure: Percentage of false breakages of chartist figures.
  • Average Rise: Average growth after the figure is completed.
  • Volume trend: Volume trend (either increasing, decreasing, or constant).
  • Percentage meeting price target: Percentage by which the target price of the figure is reached.

Surprising findings: Surprising discoveries. I must admit that this part is my favorite, the detail of counting down to the smallest appreciation says a lot about their way of operating and understanding the market. In this case, he tells us that the pennants that look big and tall are better than the small and short ones. He also comments that pennants with decreasing volume have a better performance. Bulkowski devotes a section to determine that it is considered a pennant and not before giving numerous examples.

For a trend to have the strength the volume must be growing with it, if there is a movement against the trend and the volume does not follow it, then it is a movement that is not supported by professional money and therefore is a FALSE trend. Now it turns out that the chartist analysis tells us that the pennants are pauses in a trend and one feature of it is that the volume is decreasing. If you look at both branches have seen this peculiarity of the market and therefore it is foolish to study each of them thoroughly, the information is duplicated with other words.

Dedicate yourselves to doing things like Bulkowski, studying patterns, studying indicators, studying yourself in front of the market, but stop reading gurus books, blogs with magic indicators and work!

Don’t be afraid to be wrong!

Forex Market

Dirty Little Secrets About the Forex Industry

We just adore revealing things that are not talked about in the mainstream media. In our articles series, a trader could notice most of our trading methods are not ordinary. There is a reason for all that. Some could say it is a conspiracy but consider crisp and public proofs on the internet, reporting, news, forums, and other sources, some of which we present here. Dirty little secrets about forex are everywhere, in many forms, from fundamental manipulation to technical trading quirks that turn out to be manipulations too. Here is what we want to tell you.

Forex Gods

We will start from the forex rulers, the world’s largest banks are moving the currencies, not you or me, however big your pocket is. Never try this, and never get vengeful at them, forex has specifics because of the big bank interventions otherwise forex would look like the stock market as some professionals would say. Their dirty little secret is of course manipulating the forex market and the hunt for cluster groups of traders’ positions. It is not just about the Stop Loss positions or any pending orders, but about orders already triggered. Just a hint for those thinking about using a script to hide pending orders away from broker servers. As one familiar pro trader explained, the banks notice where orders are triggered, then they let a small movement that favors the traders, however, what follows is a sharp correction that cuts through most of the traders. Professionals that follow the big banks’ psychology call this accumulation (of traders) and manipulation phase, it looks like this:

Notice the far left side of the picture where the downtrend is reversing. This is the area where traders start open buying positions. The banks like these clusters and leave some movement up to keep them building on. What follows is a sharp move to the downside below the initial reversal level (middle of the picture). This is done to eliminate buyers’ Stop Loss. Only then the real trend starts which is much larger (right side of the picture) than the initial fake one. 

Now, another easier way to see this is by looking at the traders’ sentiment indicator. As mentioned in our previous articles, the IG group has a Client Sentiment Report daily on most forex pairs and other assets. Notice that the most liquid pars, also the most popular ones, are not moving according to the supply and demand logic. It is almost perfectly reversed. When buyers come in, the price falls, and vice versa. 

Hey, this does not happen on crypto! If you wonder why, cryptocurrencies’ core idea is Defi, decentralization, or no bank involvement. Even precious metals are not that manipulated despite the recent fine:

Credit: Reuters

Commodities have real supply and demand, not much room to manipulate there, however, money or currencies can be printed whenever. Printing can be digital with a press of a button too. Here is some more news about this recurring event (CBNC):

Ok, we have some raising eyebrows now, this dirty secret is repeating however there is not much “ordinary” people can do. Interestingly, according to pros, this behavior is what gives forex movements and sets it apart from the stock market, for example. Indexes by the way, also have sentiment anomalies, but be aware there is a very strong link between equities and the forex gods. 

The Brokers

Ok, these guys are not really forex gods but they still play a role to retail traders and they too, of course, have dirty little secrets. They are one part of the forex industry and are playing a similar game, even though forex unethical games come in many flavors, this one is the most popular. It is the Stop Loss hunting

Now, this is done on a smaller scale, it is not in plain sight and justice is rarely served. If you wonder why it is because they are the same team. Transparency is always the issue, you do not know what is done and if there is a conflict of interest caused by the well-known fact some brokers earn money from their clients’ losses. Stop-Loss hunting is hard to prove and the excuse is always the same, brokers are connected to different liquidity pools or banks so not every broker has the same price action. This explanation is overused. If we look up at the clients’ opinions, some brokers are labeled as stop hunters while some are not even though they are companies of the same size. Transparency is not strong with brokers so the only truth meters are the forums that reflect customer satisfaction. 

Review Misleads

Portals that reportedly host broker reviews is another dirty little secret that is present in the forex industry, however not uncommon in many other businesses. Just typing some broker name with the word “review” will overwhelm you with results. There are a few obvious ads first but then what looks like a sound review website. Sometimes the review has a great, 5-star rating, while the same broker is criticized on other portals. This is one easy clue that somebody paid for good reviews. More often than not, the same portals are owned by companies that hold broker brands, making you think they are separate entities. Of course, their brands are top-rated while the competitors are destroyed. There are also affiliate websites that just put a good word for anyone that wants it (pays), provided the affiliate website has a good number of visitors. 

We have put a lot of work writing independent broker reviews, however, if you are looking for client opinions forget about the first search results pages. Real, unbiased opinions come after, where the money noise is dimmed down. Only here there is no special interest by the brokers to mess with the truth. Alternatively to, the Forex Peace Army portal is a very good source for reviews and client opinion, but there are more out there under the served plate. 

Reading fake reviews does not end with brokers, you will also find reviews for Expert Advisors for MetaTrader platform or automated trading solutions companies. The same marketing scheme is applied, yet the source might be a company that developed the script, not only a broker. It is often mixed since you need a broker and probably a VPN service too. 


Similar to other industries, marketing borders with the ethics on one side and the law on the other. Brokerage is a heavily regulated industry yet it still has enough freedom to legally scam beginners. Even though certain regulatory measures are now more restrictive, such as leverage limit, amateurs looking for gamble trade are easy pickings for brokers. If you heard about the high percentage of losing trades in the forex industry then you get the picture of why. Of course, education is also tainted by this scheme so it is not easy to blame the client. Even those who do not want to gamble do not easily have access to good resources and learn to trade. Similar to the review search, good educational websites are rare and show only after all the junk in the first pages. 

Forex is a Scam?

Foul play is present in forex and people do not believe in the trader dream, the dream is vividly presented in marketing to lure uneducated clients. This is easy money for brokers and banks only. As it was not already plagued by the industry, forex is also a good playground for outright scammers. It is especially present today with untraceable cryptocurrencies. Scams are just another reason and alarm for beginners to dig deep when it comes to forex trading that, interestingly, elevates their research skills essential for successful forex trading. Forex has many ways to scam you, however, meticulous, patient, and curious will find their way to the trader’s dream eventually, just keep up the work. 

Forex Market

What’s Holding Back the Forex Industry?

The short answer is well known but the rabbit hole goes deep. It is the same reason we have global economic downturns, each special in its way but with a common enemy. The behavior of all actors linked to the forex industry is guided by many interests. Interests that do not align with individual forex trading. Let’s try to understand the gist since the short answer just turns people away from trading even though forex trading is one of the best ways to attain financial freedom, despite its quirks. 

Forex Views

We could bring the scam debate that plagues individual trading almost since it became available to regular folk. But we could not just stop there and tell it is the only thing on the way of what is really great about forex trading. Interestingly, the first thing that comes to mind to people about forex (also binary options) is betting, scammers in suits, and very unethical ties in the backstage of brokers. 

Some parts of the globe are educated and know a thing or two about the markets, be it equities, crypto, forex, or something else. Others do not, and unfortunately, these people are good targets for scammers. It is enough to be a victim and then the word of mouth forms groupthink. It is really hard to get out of the common conception that not all forex brokers are bad and not all traders are losers. Simply, once you get burned it is likely you will get burned again, which makes it even sadder knowing in most cases it is because these people are truthful or in desperate need of income. 

Forex Broker Agents

In so many cases broker agents are just employees with good on-phone selling skills. Sometimes not even that. Outsourcing the workforce benefits the broker industry but not the actual client. People with just a bit of common sense know if somebody is looking to save by putting a non-native speaker to speak about sensitive, demanding topics of forex trading does not care about the client or their money. Then the client or the forex trader, beginner or not, is perceived as part of the money harvest. 

We can go even deeper to understand the whole picture. These employees are also just a part of the broker scheme to make a high turnover of small deposits from small investors who are oblivious about what is about to happen, let alone about forex trading. The pressure is on sales, so much it borders with manipulation using half-truths, sometimes complete lies. If the sales team does not deliver the “investing now” hype to the client, they will get replaced eventually. All this creates a profoundly exploding “Wall Street” atmosphere seen in the movies. The reality, of course, is not easily discovered. Can you blame the business model? Some would say it is just how business is done, which gets us to the next point.

Broker Business Model

Spend some time reading about the broker model and you will notice a lot of discussions. Interestingly, some topics are not discussed much within the industry. How come there are brokers who can act as market makers with their pool of positioning against a trader that is not in conflict of interest? This conflict of interest is now covered with different technology, connectivity, liquidity providers, all of which actually belong to a bigger motion of deals between banks and brokers. Even the biggest brokers in the forex industry, like the IC Markets, openly state brokers are not following the interest of traders. Apart from a few exceptions, most make money when their clients lose. Do not get lost reading about the ECN, STP, B-book, A-book brokers, it doesn’t matter really. 

At the end of the day, it falls to the traders’ community. In these places, they can share their experience based on which a new trader can decide if some broker is good or not. But what about all the people who do not always find these sources? These portals are not what first comes out of the search or the broker’s websites. Whatsmore, the marketing is carefully designed to bring out all of the good feelings about trading even though it is superficial. Their targets are not the people who dig deep to find the right portals and information, but those that are impulsive and unaware. Since the majority of traders lose in the industry, a lucrative business will continue. 

The Big Banks Game

Forex has never been designed to bring fortunes to traders, on the contrary. A direct proof of that is the sentiment index available at one of the biggest forex houses, IG group. But this forex game has been present from the beginning, it is not the reason that is arguably holding back the industry. It is the fact major players have the final saying, even if it is against the law. Experienced traders have witnessed so many fines paid by funds and banks measured in billions yet no one questions if the same game will continue. It will, it seems, be how forex works and how it is connected with other industries. Major players turn so much volume fines are just one drop in the bucket. Like the concept of fines are made just to appease the law is present and functioning. Now, the big banks control the forex, governments can also generate money out of thin air, and the world elite has their wealth secured and multiplying, but this does not stop forex still being one of the best tools of your personal finance management.


Everyone remembers how most governments of the world were somewhat clumsy reacting to the COVID-19. Similar is with regulating the brokerage. As some broker CEOs agree, not much has been done to cope with problems related to the inappropriate approach to forex trading, more specifically risk management. Reducing leverage has not solved the problem, the leverage is still optional to a significant degree and it will still eat up reckless trading. It is not even a compromise solution between clients on the one side and brokers and regulators on the other. Clients still lose despite the reduced leverage for regulated brokers. To make you think, observe how much is invested in marketing and how much into education and responsible trading. Just to make things clear, forex is primarily a money network for the big players, regulators are under pressure but not by the traders. Invent something like bitcoin where the focus is on the network user alone and you have governments, companies, and the big banks looking to seize the control.

Media and Marketing

The media has its own place in the industry, as with many other “markets” not clearly defined on the economy table. What is presented to you on TV, in newspapers, and most of the other popular information sources are sometimes even made up reasons for crashes that unexpectedly happened. Smart presenters tell you a correlated chain of events that lead to a flash crash, for example, but they always seem to be late tellers. This does not help anyone except to keep you calm and quiet. Eat up your loss because it was an “accident” no one is responsible for. Experienced traders know what happened, and most of these events are driven by the major forex players on purpose. Pegged Swissy is a perfect example. 

Another interesting phenomenon is market presenters always sound very smart, but they are not good traders. If it is cool and easy to understand, that is what the masses want, not what traders can benefit from. 

Real Forex Trading Benefit

The real trading education starts far away from the marketing and the media for the masses. It is not always what you want to hear, but forex trading actually can be one of the best “jobs” you can get. However, to get to the top and be in the minority of winners is hard work, at least in the beginning and it is for the persistent researchers. All the unforeseen barriers to entry deny many who try. Those that remain enjoy forex knowledge which translates to many other investing areas and real life.

Forex Market

Investing in China: Opportunity Or the Next Crisis?

In the S. XV, at the time when the so-called Silk Road had its decline, a network of trade routes that from the 1st century B.C. crossed all of Asia to trade goods through territories such as present-day China, Mongolia, Turkey, even Europe, and Africa. At the end of the intermediate period, destination prices were much more inflated than at the beginning, so cheaper maritime alternatives began to emerge. This weekend gave me a chance to reflect a little more on this great country, which also has a great cultural interest.

Is it a good decision for us to invest in China?

We continually hear that China is a superpower and that its growth rates are incredible so that it can overcome the global hegemony that hosts America today. It also has a barbaric population, of which historically the majority has belonged to the lower class but there are more and more middle class with greater capacity for consumption. All this is true but… Is all that shines gold?

Understanding the Chinese Economy: Shadow Banking

We know that in the Republic of China the Communist Party rules and the Communist Party controls the big banks of the country. These big banks do what the party dictates, so in the end, they are obliged to offer loans to companies and sectors that the party wants to benefit from, and the same but on the contrary, they are forbidden to finance other companies or sectors.

In this context, there are companies that need financing and cannot resort to traditional Chinese banking, so their alternative is to resort to so-called “shadow banking”. Shadow banking (which we will refer to as non-banks) are banks that do not comply with banking regulations. In other words, the requirements are lower than the traditional banking system.

Differences between Shadow banking vs traditional banking

In general, non-banks lack access to central bank funds and other features such as deposit insurance and debt guarantees. These non-banks have fewer leverage constraints so in times of bonanza like these last few years they make more money but are more fragile when problems such as defaults appear.

The current situation in China

China has aggressively stimulated its economy in 2019 Q1 and Q3. Again, it is something that has been repeated in the Q1 of 2020 as a result of the Coronavirus (injecting money and lowering interest rates). They indicate that there is a debt saturation that is close to not being assimilated and that while the debt continues to grow, growth has stagnated.

In 2018, the hole in the Chinese deficit stands at 5%, but considering shadow banking it would rise to 11%. In 2014 it was 1% and 5% respectively. In addition, there is most likely a huge amount of loans that are not being repaid, and that will be a problem on the balance sheet of Chinese banks.

China’s GDP (GDP) is growing less.

China’s GDP is growing less and less, and now along with the impact of the Coronavirus the growth forecasts for 2020, which are forecast to be around 5-6%, are still shrinking further, in any case below the 6.1% that there was in 2019.

The debt of China

Since 2008, China’s GDP debt has doubled, surpassing 300% of GDP in 2019. This trend is not exclusive in China, since high indebtedness is something global, and here in Spain, we are not to shoot rockets either. In addition to this high level of indebtedness and the fact that the granting of financing is not based on criteria of the probability of being able to repay the money but on the interest of the scheme, We still have to add to the equation the probability of distorting the data that comes to us as there is a great deal of mistrust within Chinese audit firms.

All this helps illustrate why there is greater concern about China’s banking system. While it is difficult to have a solid view of China’s true economic strength, there are strong reasons to believe that the country is facing a complicated situation with a highly leveraged banking system full of questionable quality loans and growing defaults. While the media prefer to focus on the figures of Trump and trade, the biggest threat to the Chinese economy may be a massive financial bubble from within.

What if it’s not a big deal and we’re looking at a great investment opportunity?

The truth is that leaving aside Chinese macroeconomic issues, today there are renowned investors who tell us that there are many investment opportunities in Chinese companies and other data that can make us believe that it can be a good investment. For example, last week Charlie Munger commented in his “2020 Daily Journal Annual Meeting” that ” the most reliable and strong companies in the world are based in China and not in America”.

On the other hand, if we look above two large ETFs representing the USA and Chinese market:

And if we make the comparison we see that the average PER of the USA market is at 23.87 and that the average PER of the Chinese market is at 13.14. It is clear that the PER has many limitations and we should not rely too much on this ratio when investing, but it can serve as a little guide to compare markets. Leaving aside all its limitations, this photo comparison of these two ETFs seems to tell us that there is a big valuation difference between China and the USA. Is it possible that the USA is expensive? Or maybe China is cheap?

On the other hand, there are giants like Tencent or Alibaba that seem unstoppable to this day. We will have to continue investigating…


Will Forex Trading Last Forever?

The best researchers in the world say that the future is predictable. We can understand how things are going to evolve based on the things that occurred in the past. Some state that history repeats itself in cycles, while others believe in linear patterns where the world and societies advance to a higher state of existence.  So, let’s start with the basics… 

What facts do we know about the history of trading so far? We know that trading alone came to exist in the earliest of times when people exchanged goods without any proxy. The first coins were made of electrum, an alloy of gold and silver, and by 560 BC, the Lydians (a region in present-day Turkey) managed to create a coin made solely of gold. In those times, the value of the coin depended solely on the value of the metal it was made from. Logically, the more gold a country had, the more wealth and power it possessed.

The first expeditions to the New World began in the search for gold and more dominance in the world. European countries started to print money, which caused an imbalance between coins and paper money. This was the onset of what we know now as the gold standard.

Why is this important for forex? Well, the money we trade today is different from what it was back then. Today’s currencies are fiat currencies, which means that they are no longer backed by equal amounts of gold.  Currencies’ strength and dominance would change over time. However, it wasn’t until the 1990s that the currency trading we know today could commence.

With the introduction of internet trading, banks began creating their trading platforms. In the meantime, online trading platforms were designed for individual traders, and in 1996 the forex market came into existence. The thing is that large banking institutions saw potential from currency fluctuations early on, and this interest persisted to this day.

Different banks, hedge funds, and investment institutions are always on the lookout for what the majority of traders are doing. They always look for ways to exert more control over the market so they could manipulate the prices to their benefit. It’s a nonstop game, a trading Perpetuum mobile. So the real question one should ask is whether the banking sector will ever shut down.

If trading currencies somehow became completely unprofitable and these big institutions decided to back away, this would mean that there is another source of profit that could suffice the demands of these major players. Otherwise, large corporations and banks would take a huge loss, which they would never let happen.

It is they that are moving the market. And, although we as individuals profit from trading in this market, realistically speaking, the market would not exist (and boom) in the first place if it wasn’t for the big banks’ benefit. Therefore, if forex ever disappeared, you could still use all the trading fundamentals and apply your knowledge and skills somewhere else. This is what essentially happened with all new markets. Those who switched from stocks to currencies, for example, just needed to get accustomed to new rules of trading. 

Still, remember the last big economic crash of 2008. What happened with forex? It kept growing nonetheless. Recessions occur cyclically as economies need them to reinvent. Nevertheless, does spot forex depend on what the market is doing? No. Unlike stocks, real estate, and other investments, this market powers through.

In the spot forex world, we have natural uptrends, downtrends, and consolidation periods. When we trade, we trade one currency against the other. And, should we ever see that a specific currency is not doing as we expected it to, we can simply short it. 

Whenever one thing goes down in spot forex, something else goes up.

The USD became really strong in 2008 because everyone took their money from their investments and parked it in this safe-haven currency. This may never occur again in this form, though, because big banks will never let it happen. People will always go back in time thinking that they could use the same pattern to make money in an economic downturn. As forex is recession-proof, the only thing you should worry about is your approach.

The combined daily average exchange in the Forex market is $5.1 trillion every single day as of 2019. It is unlikely that it will suddenly collapse, but your account could. Currencies always change and so do the countries and economies. What you should wonder is if you are safe from global conditions as an individual? If you are solely trading in the currency market, do you think you are protected enough? No matter how many different currencies you trade, you only get paid in one currency. So, if that currency collapses, what are you going to do?

Think of your next move. You could consider expanding to other markets (e.g. metals) to take the edge off. You could also have other currencies on you so you too can be recession-proof. As for forex, individuals will always look for ways to make cash. Like with beauty and slimming products, people always want more money.  And, from the more macro perspective, as long as different nations exist in the world, they keep using their currencies, and international trade is enabled, forex trading is very much essential.

Yes, there have already been some changes. For example, a few years ago, the NFA banned US retail customers from trading leveraged gold and silver. That is how XAU and XAG crosses disappeared overnight for non-institutional US residents.  We know that currently only 6% of all USD is printed, whereas all other money is digital. The disappearance of paper money has been rumored for quite a while, but there would need to be a much bigger jolt to shake up the forex world.

Something would need to replace the regular currencies or there would need to be some extreme measures to hinder individual and institutional profit before it will stop – a new global currency/cryptocurrency, a major limitation on banks’ opportunities to profit, or else. Spot forex is still an incredibly lucrative industry for banks, brokers, and trading companies, so the odds of currency trading vanishing are pretty low.

Instead of thinking about the ways forex could be wiped off the map, we may be better off strategizing how to increase our own financial stability. This year has been incredibly turbulent with the amount of news and global changes, and forex still remained more or less intact. That is why currency trading is highly unlikely to disappear any time soon.

In the past few years, forex has developed from being a largely inaccessible investment tool to a worldwide phenomenon. What is more likely to happen in the future, then, is an increase in prospects for big banks to take the cream off in this market – more lenient regulations, more international trading, and certainly more opportunities to profit for both people and banks.

We are already seeing the proof of this happening with the increased mobile trading and trading software programs and platforms. Remember that a few years ago you needed a substantial amount of money to gain access to the foreign exchange market, making it nearly impossible for small investors to trade currencies without going through banks or financial organizations. In today’s world, we are fortunate enough to start with as little as $100—$200 to trade currencies. 

This bubble is not going away any time soon because this would not benefit anyone, especially not the major players. Like with weight loss pills – practically no one ever lost weight, but everyone keeps buying. You should just be smart enough not to be in the 90% losing group and take the advantage of this booming market. 

Forex Market

The Functions of the Financial Market

The role of the financial market in a modern civilized society is enormous. Its aim is to mobilize capital, distribute it among industries, control and maintain the reproduction process and improve the efficiency of the overall economic system.

The main functions of the financial market, performed by its participants, are as follows:

  • Facilitate efficient relationships between all market participants, from individuals and individual investors to large institutional investors.
  • To supervise and regulate the processes carried out in the financial system: regulation of the money supply, control of compliance with the rules established by market participants, licensing, development of legal provisions.
  • Mobilize and allocate capital to be used more efficiently and generate added value.
  • Minimise risks, including fraud prevention (combating money laundering). Ensure transparent prices and avoid price manipulation.
  • Provide liquidity to the market.
  • Guarantee the privacy and transparency of transactions made.
  • Provide necessary information.

Financial market activities are based on the liabilities of national banks to control exchange rates and to set interest rates. Foreign exchange markets and stocks, as well as commercial banks, are directly related to the development of the financial asset market. The stock market is the most interesting segment of the financial market in terms of return on investment.

Financial Market Participants

Each investor is a participant in the financial market in some way. Each of us works somewhere, making our own contribution to the GDP rate, buying something, which indirectly affects inflation and the level of consumer prices. Someone becomes an investor, buys a foreign currency or collectible currencies, or invests in bank deposits, investment companies, using loans.

But still, economic science classifies financial market participants according to their segment. This means that the financial market, simplifying a lot, is a relationship between two categories of participants: buyers and sellers The third category includes intermediaries who are directly involved in transactions, providing assistance, facilitation, and guarantees. The same financial market actor can act simultaneously as the seller, the buyer, and the intermediary.

Foreign Exchange Market

Sellers – The main sellers are the state and the banks. The country that sells a currency does so through authorized agencies and then performs a regulatory function. Sellers may also be companies engaged in foreign economic activity (sale of profits in foreign currency) and individuals.

Buyers – All agents, even sellers, can interact as buyers.

Intermediaries – This category may include commercial banks, bureaux de change, etc.

The Credit Market

Borrowers – They work internationally, borrowers are States, and the ratio of GDP to external debt is considered one of the best statistical indicators of the state of a country’s economy. At the national level, borrowers are businesses and individuals, local governments, etc. A clear example of a multilevel credit market structure is the US mortgage system, where banks issued mortgage securities to accumulate new capital for later loans.

Lenders – These market participants have reserve capital and want to increase it: individuals, investing their funds in deposits that will then be used for loans, buyers of debt securities (insurance, pensions, investment funds). Certainly, any investor can be called a lender, since it gives extra money with the aim of obtaining a percentage that is destined for development. The state can also be called a lender, which creates liquidity and distributes the money to borrowers through the central bank.

Middlemen – They are all involved in the organization of the distribution of money: banks, brokers, concessionaires, investment management companies. Insurance and pension funds can also be attributed to intermediaries, accumulating and distributing capital.

The credit market is closely related to stock and investment markets. For example, corporate bonds are a tool to raise money and security at the same time. Government bonds are one of the favorite investment options with the lowest risk for investment funds.

The Insurance Market

Insurers – These are companies, duly authorized to provide insurance services. There are open-ended insurance companies (they provide services to all market participants), captive insurers (they are owned and controlled by their policyholders), and risk reinsurance companies.

Insured – Individuals, companies, institutions, who purchase insurance services to minimize risks.

Intermediaries – There are no intermediaries, the transactions are made directly between the insurer and the insured.

All markets are closely intertwined. As mentioned above, insurance companies also participate in the investment market. It also includes insurance instruments (for example, several swaps) used by securities market agents.

Investment Market

Every person who invests his capital in a particular asset is an investor. Intermediaries can be banks, stock exchanges, different types of funds, etc.

The Securities Market

Emitters – These include organizations and companies that issue certain securities: shares, bonds, etc. When issuing, issuers agree that they must comply with all specified (agreed) requirements at the time of issuance.

Investors – They are all those who buy securities to generate income. There are strategies (buying a majority stake) and minority (making up a portfolio, buying securities in order to generate revenue only).

Middlemen – Stock exchanges, banks, insurers, rating agencies, auditors, and other participants involved in the organisation of the issue and placement of securities.

The classification described above can be grouped as follows:

The state and central banks (regulatory and supervisory organisations). Managing the largest amount of capital, these agents mainly perform the supervisory and regulatory function.

Regulators (regulatory and supervisory institutions). Establishments that do not participate directly in transactions (that is why they cannot be referred to intermediaries), but perform a control function. The oversight function is also carried out by the central bank and the state government, but it can also be a separate institution, such as a self-regulatory organization (SRO).

Financial services companies (organisations providing services to the financial market and financial intermediaries). We are talking about institutions that are often involved in organisational work: currency exchanges, stocks and raw materials, brokers, insurers, auditors, depositors, registrars, compensation companies, and consulting.

Banks (financial intermediaries). They are intermediaries involved in the distribution of capital, market regulation, and supervision of compliance with established rules.

Legal entities (lenders, investors, borrowers). The largest group of participants: companies dedicated to the placement of clients’ pension savings, investment, insurance, hedge funds, trust management companies, brokers, concessionaires, individual loan organizations, companies involved in any type of financial activity, participating in the return of money.

Natural persons (lenders, borrowers, investors): traders, speculators, individual asset managers, long-term investors, and ordinary persons, as mentioned at the beginning.

Important Financial Market Indicators

As a general rule, experienced traders actively use the economic calendar, which is provided free of charge by the broker. I recommend making this a habit if you haven’t already. Here is a short summary of some of the most important indicators in the economic calendar and tips on how to analyze them:

Interest rate – One of the main economic tools that allow managing the volume of money supply, thus also adjusting inflation. The interest rate grants loans to commercial banks. A higher interest rate increases interest rates on loans and deposits and therefore encourages consumers to invest. This, in turn, reduces the inflation rate. Influence, when the interest rate is raised, is exclusively dependent on the economy of a given country. For developed countries (e.g., the US), a higher interest rate increases the exchange rate of the national currency. In the least developed countries, raising the interest rate can be seen as an attempt to curb stagnation and thus increase investor interest.

Non-agricultural payroll (Non-Farm Payrolls) – Report on changes in the number of jobs in the US non-agricultural sector. It is considered one of the most important reports, but its impact on the dollar price lasts a relatively short time (few hours). Goes public on the first Friday of every month at 12.30 (13.30) GMT. The statistics are based on data from more than 400 households and are published by the US Department of Labor. In theory, the factor that influences the rate of the US dollar will be the deviation of the fact of the forecast by more than 40 thousand. In practice, much depends on accompanying statistics and investor sentiment.

Consumer price index – It is calculated for a specific group of goods and services that are part of the consumption basket of the average resident of the country. The index analysis for the current year is carried out in comparison with the base (baseline). The IMF, EBRD, and the United Nations recommend the statistical basis for the calculation, but there is no single approach, each country has its own calculation peculiarities. The calculation methodology can be based on the price indices of Lowe, Paasche, and Laspeyres. If the index decreases, it means that consumer purchasing power (real demand) also decreases and may partially suggest a higher rate of inflation growth.

With regard to indicators such as GDP, inflation rate, unemployment, I think everything is clear: the better the indicator, the more positive is the feeling of investors in the currency and stock markets.

Important point: the economic calendar is only a complementary information tool and in no way can it serve as the main tool to base trading strategies. At the time of news release, the market is especially volatile, therefore, the calendar is often used upside down to exit trading.

If you are still willing to try to negotiate with the economic calendar, here are some tips:

Compare the actual value with the forecast. If, for example, GDP growth was 2%, given a forecast of 2.5%, it will have a negative influence on the market. Please note that the data can be reviewed.

Evaluate the chances of an event and the expectations of investors. Let’s take an example, if what is anticipated is that the Federal Reserve increase the rate of federal funding at the next meeting, investors will consider it beforehand and will not undergo major changes at the time of the news release.

Compare the importance of news with other factors. For example, if in times of silence, the publication of statistics on US oil reserves has a significant impact on quotes, then during the peak of the US-China trade war, these data were hardly noticed.

Forex Market

Will Forex Trading Ever Be Shut Down Completely?

Given some of the changes in recent years over Forex trading laws, it is understandable to understand why traders may be concerned. Many countries have imposed very harsh restrictions on the industry and, of course, some are concerned that this may mark a possible end to Forex. The currency market can be huge, but many industries have become obsolete and extinct as well. For a Forex trader who lives professionally in this industry or wants to have a future trading currency, it is worth considering all these changes and how they may affect you.

Of all the financial markets, the Forex market is the largest in terms of liquidity.

According to the Bank for International Settlements -BIS, forex achieved an average daily turnover of $5.1 trillion in 2016.

Remember that this was the moment when several foreign exchange brokers went bankrupt following the decision of the Swiss National Bank’s (SNB) to remove the Swiss franc from the euro. The impact of this momentous decision was catastrophic and immediate. Within minutes, the franc rose by 30% against the euro and other major currencies, causing huge losses to anyone occupying short positions in the franc. Even brokers with excellent opinions declared bankruptcy.

The consequences of the decision were felt throughout the rest of 2015, reducing daily turnover in the market. Most likely, this drop in trading volume until 2015 contributed to the decrease in the average daily trading volume in the Forex market from the previous record of US$5.5 trillion in 2013. Since then, the Forex industry has continued to suffer and therefore hope of a resurgence is diminishing. After the events of 2015, the Forex market recovered somewhat until ESMA announced its plan to change its regulations in 2016.

MiFID-regulated Forex brokers began to feel the pressure even before the MiFID II regulations came into force in January 2018. As early as 2017, UK and EU brokers were already seeing a decline in revenue. Meanwhile, brokers elsewhere, such as Australia, have reported an increase in European customers throughout 2018. This shows that many customers left Europe-regulated brokers to obtain better conditions elsewhere. As a result, these brokers began to enjoy better profit margins and customer bases compared to their European counterparts.

Today, many currency brokers are losing money after European regulators began to impose stricter laws on the industry. The story is the same with all European brokers, who have been forced to reevaluate their business models or face their demise.

In addition to changes in regulation, volatility has also been very low in foreign exchange markets. The BIS reported that the volume of retail trade in 2018 was US$1.104 trillion, while that of 2017 was US$1.672 trillion, a drop of 34%. Thus, there was much less trade in the Forex market in 2018.

Volatility in 2018 was lower as the ECB announced that it would not raise interest rates throughout the year, which would reduce the volatility of the euro. The ECB has been forced to keep its interest rates low after the IMF lowered its economic growth forecast. Add to this the talks about Brexit, trade wars and elections in different European countries, which probably means this won’t change soon.

Those traders who know these facts are very concerned that the foreign exchange market is in a difficult situation. It is quite likely that the main cause of the problem was the changes in regulation. Volatility is known to diminish, but laws are very difficult to reverse once they are active. For this reason, we must debate these laws in depth that have had a disastrous effect and why the authorities came to think they were such a good idea.

Changes in Forex trading laws

The real wake-up call came in 2008 because of the financial crisis, when regulators knew they could no longer rely on the financial companies’ own mechanisms. Japan was the first country to put limits on leverage. As of August 2010, leverage was limited to 50:1 and then reduced to 25:1 as of August 2011. The US of America followed similarly by reducing leverage to a maximum of 50:1 and 20:1 for major and minor/exotic pairs respectively. In both countries, the foreign exchange market declined significantly due to leverage caps and large capital requirements that were set as necessary for retail traders to participate. Japan is also considering another reduction in leverage to just 10:1, but this law has not yet passed.

The European authorities also knew that they could not allow financial institutions to express themselves either, but their response was slower and more measured, but just as devastating. The new Forex regulations were first proposed in 2014 and came into force in 2018 encapsulated under the MiFID II name. After US regulatory changes, the EU had become the next best option for brokers and traders alike, but no longer. ESMA set a leverage limit of 30:1 for major currency pairs, as the GBP/USD live charts and 20:1 for non-main pairs. That was even less than leverage in the United States…

How the new regulations have affected the industry?

As expected, restrictive regulations have slowed down the industry’s performance and revenue. ESMA hopes that by making the laws tough, new traders will refrain from trading and thus will not lose their capital. However, these traders mostly made the decision to trade with CFD brokers in other foreign countries abroad that had and offered better trading conditions. These brokers are often less secure to deal with as regulation in offshore countries is not as strict as that in Europe. To avoid the loss of customers, it has also been noted that European brokers ask their customers to register with their non-EU entities if they want better conditions.

Does this indicate the end of an era?

If history repeats (as it usually does), current levels of low volatility can be a sign that something dramatic is about to happen. This means that of course Forex is not about to end, but is at the dawn of a new era. In fact, this should be the time when traders take advantage of markets to make huge record-breaking gains.

In addition, there may be other causes that contribute to the low levels of volatility we are seeing at the moment, apart from changes in regulation. The growing tension between the US and China may be aggravating the problems existing in the market, as traders and investors in general are waiting to check what you finally happens. Whatever way the two superpowers decide to go, it will have a huge impact on markets and present wonderful business opportunities. In general, no one likes to risk capital when markets are volatile and unpredictable, which is our current situation. Once things fall, markets are likely to resume their previous volatility levels.

What will be the near future of the Forex market?

At some level, it seems all this even an attack on the industry and regulators want to set limits on markets, as many as possible to retail traders, but this is not the case.

The Forex market will definitely be very different in a few years. It may be almost impossible to create a centralized market for Forex operations, but there may be a dynamic for brokers to report all their transactions on time in the future. MiFID II has already proposed several ways to do this, and it is not unlikely to do so.

In fact, the Forex market today looks a bit like the old stock market, where the market was threatened by “bucket shops”. At the time, stock trading was very risky because there was no simple way to convey orders to the stock exchange, but this problem was solved by technological advances. Therefore, it is not so difficult to imagine a newer technology that unifies the Forex market and makes it centralized.

Forex Market

Where Forex is Headed Over the Next 5 Years?

This is one of the most common questions people are asking the experts. Luckily no one knows for sure, otherwise, forex would not be very interesting. Predictions are not a good trade, people get it wrong most of the time. Still, if we collect some facts about the market now, one might get it right. You have to ask yourself though, would you make a decision based on a prediction that is more likely to fail? 

Forex Traders’ Way

If you ask a forex trader what will happen in 5 years, get ready for a disappointing answer. They do not know, and they do not care really. Traders know better. They have their strategies and systems that say some asset is probably going this way. but not for the next 5 years. Traders do their thing intraday, daily, and on a weekly timeframe at most. There are simply too many events that could interfere with some asset. At the end of the day, it does not matter what will happen in 5 years as long as they play the long game and play your strategy to the letter. It is how they have their share of profits.

Prediction Problems

The further we go into the future, the less predictable the outcomes are. To cover for this uncertainty, predictions get more broad or vague. If we say the bitcoin price at the end of 2025 is going to be $142500, would you bet on it? A mathematical model might give you this precise result but we all know it is a 99.99 (and then more nines)% miss. So we blend and say it is going to be higher than today. All this is based on some fundamentals, the rising crypto market, people-orientation to savings, pandemic, and so on. But no one knows if governments are going to ban crypto as the market gets bigger, we all know they do not like it.

On the other side, who knows it is the bitcoin that will perform the best out of all other, more advanced cryptocurrency concepts? Predictions are fun to listen to, but common sense says let’s spend our time finding or creating information that we can use today. 

Foretellers Way

There is a way you can use such predictions and make money, a lot of it. It is nothing new, get ready… TV. How many times have you watched smart people on popular TV news channels predicting and reasoning? Listening to them will probably set you on the losers’ side. These people have skills in analysis and presentation, but they are not good when it is trading time. To quote Ray Dalio from his “Principles” masterpiece “Truth be known, forecasts aren’t worth very much, and most people who make them don’t make money on the markets.” They make money by producing fun predictions people like to listen to, not to mention the media. 

Investors’ Way

Now let’s get to the fun part, how investors think and adjust to the fundamentals. Fundamentals play a key role obviously in how they make predictions. They do not go too far into the future, up to a year at most. We are not talking about the buy and hold forever saving strategies here of course, but analyze the state we are now at the end of 2020. Forex is interconnected with other markets, major players are the banks, governments, companies, and sometimes viruses. It is said COVID-19 just deepened the problems already present in the global economy. 

Present Time Directions

Here is a snapshot of how the currencies performed during this year:

US dollar became a questionable safe-haven for many reasons, the major one is the FED decisions and printing. The stimulus is evergrowing, however, little budge is seen in the economy fundamental measurements. 

If we speak about safe heavens, precious metals are not really in the focus. According to research, gold is about to boom in 2021, and likely to continue in the next years as the economy gets back on its feet. Aside from the supply and demand stats all pointing to a long-term bullish sentiment that stretches beyond 5-year prediction, gold is not on the big scene yet. Consequently, the US dollar is not the currency to hold in 2021 and probably not in 2022. Japanese Yen or even Euro is a safer asset at the moment, likely to strengthen their value in the coming years. 

Now, the pumping is not stopping. Today we have a record high equities level, despite the bad fundamental results with employment, spending, and general activity indicators. Something is definitely wrong with this chart:

The massive printing and stimulus policies are producing a scary storm below this peak, and as the forex market is a part of the global capital flows, equity correlated AUD and NZD might follow the ride down in 2021. Despite all this turbulence, forex hasn’t shown the turbulence a trend trader would like to see. Looking at the Euro VIX ($EVZ), the 2019 and partly 2020 are still calm for forex:

The reason behind this is the overall drop in economic activity, there is no spending or rushing to safe heavens, even though the bullish pressure is rising on the elemental values as stated above. 

We have another market to consider too, the crypto market that is taking its share of the money flow. Even though this is below a $trillion market, small compared to the enormous precious metals or forex, it is increasingly attractive to young, open-minded investors. It is regarded as a safe haven area since the DeFi concept sets crypto out of the crisis danger zone. 

They Know and Decide When

So, you have very good prediction info, and guess what, majors players know them too, and some more. Everything says there is something fundamentally wrong with the charts, they are not following the real world. Well, it is not because the big banks, governments, and other big figures decide when it is time to let go. The moment they are ready to let the storm out, they would try their best to knock (stop loss) every forex or equities trader out of their positions. A common chart pattern is an unusually large price move before it starts to strongly reverse. This move happened with the gold right before the pandemic unleashed and the bull trend base in March 2020.

Forex and other markets are not free out of control and there is no way around it. It is regarded cryptocurrency market is not in the same boat but rest assured governments have control over how this market will develop. Interestingly, more and more major companies will compete to set the ladder with their dominant currency. Facebook is one example of the Libra. Investors and companies increasingly consider crypto assets as the offset instead of the USD or other major. 

Investors’ Patience

The average guy listening to this is not really going to understand, but he might like the „conspiracy“ side of it. Investors know how the FED and the big banks think, the play hasn’t changed yet. History is repeating and so-called smart money stands by. Reversal positioning is not their play. Investors wait out for the sudden shakeout and wait for the market to settle in direction. The pause could be a week or two before they move in. They did not long the EUR/USD before 2020 US elections results, only after the USD started to weaken after the charts show it is time and the fundamentals are still in line with the prediction. 

Traders all deal with the prediction, with technicals and fundamental analysis. They protect their wealth with risk and money management. Prediction is actually what we do, but all professionals have a sound and consistent way of doing it. The title question is out of their scope as the answer will not be of any use to them. 

Forex Basics

How to Explain Why You’re Trading Forex to Your Spouse

If you’re currently married and you’ve just decided to take up forex trading or you’ve recently opened a trading account, you might have a hard time convincing your spouse that it is a lucrative investment. Many people have heard rumors that trading is a scam and doubt that it’s really possible to make money doing it, or they assume that only the rich can benefit from forex trading.

Your spouse has likely heard about these misconceptions before. Some people even believe that forex trading is similar to gambling even though trading is based more on facts and evidence over chance. When it comes to marriage, it’s important to agree on financials, so you’re likely feeling frustrated if you can’t get your spouse on the same page with your decision to become a trader.

We’ll start by mentioning that forex trading can be a very profitable investment that can help with pocket money, pay bills, help you through retirement, or even take the place of your full-time job. If you realize this, you’re probably eager to gain your spouse’s approval so that you can start investing in order to gain a return. The best way to reach an agreement is to listen to your spouse’s opinion and provide hard facts and explanations if they disagree with you. Here are some of the best responses to common objections to forex trading:

Argument #1: Trading is the same as gambling.

When you gamble, you purposefully risk money while relying on things like chance to hopefully make more money. You never know if you’re going to get lucky and win big or walk away with nothing. Forex trading is different because decisions are made based on different kinds of evidence. For example, some traders look at historical price data on charts, while others try to measure the intrinsic value of a stock versus the price it is trading at. There are several other ways that traders make informed decisions about what they are trading and where the price will go. This takes away the whole chance or luck concept that comes with gambling because you’re making evidence-driven decisions. It’s true that the market might move against you, but you are much more likely to see good results if you make informed trading decisions. Think of trading as an investment where you can take steps to improve your likelihood of seeing a large return by performing research.  

Argument #2: You can’t make money by trading.

Some people think that forex is just a big scam that draws people in, gets them to invest money, and then sucks their account dry. Perhaps this comes from the fact that there are some shady brokers out there, or because the ability to trade from home with a small initial investment just seems to good to be true. The good news is that it is very possible to make money trading and it isn’t hard to avoid being scammed. You simply need to find a trustworthy broker that is regulated so that you’ll be protected from malpractice and your money will be refunded if the company goes out of business. After that, you need to find a good trading strategy that is profitable. If your spouse is still hesitant, try trading on a demo account using your trading strategy and then show them that the account was profitable. 

Argument #3: Trading takes up too much time.

It’s true that some forex traders sit in front of their computer screen multiple hours each day, but many others only trade part-time or devote a very small amount of time each week to trading. It’s very easy to find a profitable strategy like swing trading that doesn’t ask you to constantly monitor the market. Also, with all of the convenience offered by the modern world, traders can use signal providers to receive information about trades they should enter directly via alerts on their phone, which eliminates the need to do all the research yourself. An even more convenient option would be to use a forex robot, which trades on your behalf and only needs to be monitored from time to time. 

Argument #4: You Don’t Know What You’re Doing.

Everyone has to start somewhere. Fortunately, there are a ton of free resources available online that can help new traders learn everything they need to know, from beginner concepts like terminology to more advanced subject matter like reading charts and etc. If it makes your spouse feel better, you could prove that you know a lot about forex by taking some online quizzes and showing good results or by providing your demo account results from a period of time. 

Argument #5: It costs too much money to get started.

Most beginners choose to get started with a smaller deposit, oftentimes $100 or less. Most of us can afford to spare this much, so trading might not cost as much as your spouse is thinking. Of course, you can’t expect to make huge profits right off the bat with a smaller deposit, but you can still make some much-needed money while trading off a micro account. Try to compromise over the amount of money you will invest and make a deal that you will never deposit money into your trading account that is needed for household necessities. Once you start bringing in profits, your spouse will likely feel more comfortable with you investing a larger amount of money into trading.

Forex Basics

Proof That Forex is Exactly the Earnings Opportunity You’ve Been Looking For

Have you been looking to add a little more money to your wallet lately? It’s true that there are several rumors going around about ways to do it, especially when it comes to working from home options. Sadly, it’s difficult to pick out the reliable options from the hundreds of online scams that have been surfacing lately.

Many of these money-making schemes just seem too good to be true and there’s usually some sort of catch. For example, you might be able to find freelance work online, but you’ll literally be working for hours just to make a change. Fortunately, we do know of one proven work from home method that isn’t a scam – forex trading. 

If you’ve heard of forex trading before, you might have wondered if it’s just another waste of time. The reality is that trading is actually one of the best ways to make extra cash without taking out a second job or investing in a potential scam. Hear us out and we’ll explain the key reasons why forex trading is exactly what you’re looking for.

You Can Work from Home (Or Anywhere)

Working from home has always been a luxury compared to the hustle and bustle of a daily commute, even more so now that the nation is in the grip of a pandemic that doesn’t seem to be going away anytime soon. There’s nothing better than being in your own home, being able to wear pajamas all day if you want to, and making money. Most trading platforms can also be accessed from your mobile device, so you’ll be able to trade on the go if you have somewhere else to be. Being able to quickly check your trading account at a family function or in the waiting room at your doctor’s office brings working to a whole new level of convenience that you just can’t find with a regular job.

Flexible Hours

You don’t have to choose between forex trading and working a real job because you can set your own hours as a trader. In fact, trading could save you from having to go out and get a second job if you’re badly in need of money. It can also open the door to work for full-time students or stay at home parents that wouldn’t have the option otherwise. As long as you’re disciplined enough to work when you need to, you’ll be able to work around your own schedule and take time off when you have things to do. If you’re not a morning person, you don’t even have to force yourself to wake up early because you can simply trade later in the day. The flexibility offered by trading is definitely one of our favorite perks because it’s difficult to find this anywhere else. 


If you consider investing money through some other online option, you run the risk of being scammed. Most companies pay their sales representatives to convince you to invest, so you may think you’re talking with a stay at home mom that is telling you about her legitimate results when she’s actually just tempting you with false claims. You also might read online reviews that were written by the company themselves or edited. When it comes to forex trading, you don’t have to worry about this issue as long as you choose a trustworthy broker. Since most forex brokers are regulated by government entities, they are held to higher standards and you can be assured that you won’t lose your money if they go out of business. The profits you make are actually yours and your broker will definitely ensure that your money goes out to your bank account whenever you request a withdrawal. 

You Can Actually Make Money

A lot of these online promotions that claim to make your money don’t work. One common scam asks you to spend money on products that you’re supposed to sell, but you’re left with the bill once you can’t find buyers. With forex, you make an investment into your trading account, make trading decisions based on real evidence that suggests the way the market will perform, and then you make money. It’s true that there is always a chance you could lose money, but you’ll have every resource you need at your fingertips to make informed decisions that are more likely to bring in profits. Compared to gambling, forex trading is much more structured because it is based on solid evidence, rather than chance. 

It’s Easy to Get Started

You shouldn’t assume that opening a trading account is a headache. All you have to do is learn about trading online through sources like YouTube, Investopedia, etc., find a good broker, open an account, and make your first deposit. Learning the basics and mechanics of trading is the most time-consuming step, but you can learn everything you need to know for free at your own pace. People also assume that opening a trading account is difficult, but it truly isn’t. Most brokers will allow you to open an account for less than $100 and ask you a few simple questions before you can get started.

You Get to Be Your Own Boss!

Most of us have dealt with a boss that was…less than pleasant. In a normal workplace, you have to keep your composure and deal with it or else you run the risk of losing your job. With trading, you only have to report to yourself. If you need to take a sick day, want to go on vacation, need to stop early or have any other issue, you don’t have to ask anyone or stress about it. The same thing goes if you make a mistake – you may be disappointed in yourself, but you won’t have an angry boss breathing down your neck or asking for an explanation. You can work without the threat of being fired hanging over your head. 

People Will Admire You

Once you become a successful forex trader, your friends and family are likely to look up to you and see you as someone that is financially smart. You might even be able to help teach your family members or children how to trade, which can ease their financial burdens as well. This is a great conversation starter if you’re dating or your significant other is sure to be impressed once you start making extra money on the side!

Forex Basics

The Evolution of Forex Trading

So much has happened since the 90s once the internet started to connect the world. The evolution sparked many new things that unfortunately attracted some of the dangers too. Yet, where there is danger there is a secret, an opportunity uncovered. 

Generally, we can do so much more today than when the forex idea began. Actually, currency exchange is as old as the currency itself, but we are not going to go that deep into history, books will satisfy that hunger for knowledge. 

It is the beginning of a new era today, and most experts think It comes with the birth of a new type of currencies – cryptocurrencies. However, since the possibility for individuals to trade on the forex market, many opportunities opened for us and how we can manage our wealth, and yet few remember what made it all possible. Before we go into that, new traders should know how it was back then, when traders had to really warm the chair to get things done. Essential trading things for which we need a couple of minutes now. This article will cover how traders felt forex evolution. 

Traders and Copy Machines

How do you know your strategy or an idea works? You test it on the forex market. More precisely, you backtest and forward test. Only veterans remember how that part was very, very tedious in the 90s. They had to print the chart on their target time frame on a long paper sheet, take the ruler and start drawing. The “future” of the chart was covered so they have to decide to go long or short according to their strategy, without bias. Then write down the results and move the “future” cover by one period. 

Indicators you see today were not born yet. Price Action analysis and moving averages that were manually drawn is what most traders used, no one had the luxury of complex calculus merged into indicator coding we can just snap onto charts with one click. Access to the forex market was very rare, in the USA many traded from their workplaces if their company is connected to the broker. 

Contract For Difference

This little contract evolved forex and not only forex, it opened a new era of individual trading. The 2000s began and in Australia, CFDs were available to individuals finally. The interbank currency market was at traders’ grasp. Opportunities emerged, a new way to trade – CFDs allowed to go long and short on anything. Not only that, one could trade with more asset value than their accounts could handle usually. This was the CFDs and leverage. CFDs were essentially price trading, a trader could buy or sell at one moment and close the position after, without holding the CFD underlying asset. Suddenly you can also go short, not just long as people used to with stock trading. Even today some people do not know this. 

This ability opened new dangers, the risk was exposed and the masses lacked the skills to manage it. Regulations stepped in and closed some of the freedom traders could enjoy with CFDs, especially in the USA. Today, something similar is unraveling with the crypto DeFi idea. Interestingly, regulators did not try to change the broker business model, which leads us to the next part.

Broker Evolution

ECN, DMA, A book, B book broker, and so on, all terms that evolved with IT and communications. Back then with individual trading in its infancy, you could choose 2 or 3 brokers at best. IG Group was one of the pioneers and still exists today, which cannot be said for many others. 

Spreads and liquidity was an issue, you really had to be careful what currency pairs to choose and when. Of course, fast trading strategies that are popular now are out of the picture. With IT on the rise, brokers adapted the technologies, new companies emerged creating competition. Competition curbed the spread, commissions, and generally cost of trading for individuals. 

But new problems emerged, one of the most controversial is the conflict of interest between brokers and traders. The business model of a B-book broker does not externalize the risk, in other words, when a trader wins a broker loses and vice versa. The leverage we mentioned above just explodes the number of losing accounts, since beginner traders do not handle money management well. This profitable business sparked many new brokers to open with great trading conditions we see today. Unethical marketing emerged and evolved attracting many people that went in for the gamble. And as usual, the house always wins. 

However, it seems real brokers that externalize the risk, or true A book brokers are rare. It is considered that only 2% of them exist today. Regulators reduced the leverage more and more as the solution, while the toxic business model is not discussed. Offshore, shady business and fake investing platforms networks spoiled the industry to the point forex today is commonly associated with a scam. 

The latest developments in cryptocurrency technology paved the grounds for crypto-based brokerage. These investing platforms are not regulated and the trust is not backed by any contract. Still, even some of the crypto-based brokerages are not legit, but there are exceptions of brokers with very good reputations. 

Trading Access Evolution

Computers became more powerful, affordable, and interconnected. The Wall Street floor went quiet. No longer agents yelled at the phone line, everything is digitalized now. Computers got portable, so was forex. Platforms on mobiles are giving the traders accessibility to forex trading limited only by battery and internet connection. 

Some may argue this is not a good thing. Traders can get obsessed with following the market, overtrading, and even get health issues. Because of this and extreme marketing, it is never easier to blow your account. But let’s talk about the real benefits.

Platforms became more powerful, analysis went deep, wide, and quickly. MetaTrader platform became dominant on the market with a very good range of indicators with the ability to customize almost everything. Traders recognized they can make many strategies and make custom indicators that facilitated the introduction process to forex. Many professional traders are made in a few years. 

Social Networks and Community

This activity demanded a community, and social networks and forums came into play. Ideas and knowledge are exchanged without limits in a single digital place evolving trading to a whole new level. Information was very accessible, however, as before, this freedom pulled new dangers. 

Scammers could hide easily while picking victims in search of information on how to make money out of forex. Identity problems on social networks and communication platforms allowed forex trading to be plagued in yet another way. Unethical activity is really hard to miss now, making real forex trading harder to realize its true benefits to beginner traders. 

Nowadays, traders that dig deep and want to learn forex trading have to do good research and filter all the false info and noise out of this internet mess. It all became a very big marketing stage with media, government figures, news, and hypes that just are not aligned with the best interest of individual traders. 

Still, all the new tech and community allowed other trading forms to develop, such as automated trading, copy trading, signals providers, various trading proprietary firms, crypto-related exchanges, and staking, ETF types, indexes, and so much more on the horizon. 

The Forex Market Now

Forex, as a market is here to stay, however not much has changed recently. We are witnessing record-high equity levels, and when we see a steady rise of equities forex is waning in volume. The capital is always shifting, in 2019 we have seen record low volatility in forex. In 2020 similar happened except we had a disturbance caused by the COVID-19 pandemic. Whatsmore, the rise of crypto is now taking part in that capital flow. 

There are many fundamental signs of the upcoming crisis that are actually good for forex traders. On the other side, it stirs the need for financial education on how to protect individual wealth, something that is not much talked about. 

Forex Elliott Wave Forex Technical Analysis

Three Things you Ought to Know Before Buying EURUSD

The EURUSD eased the last trading week, losing 1.18%, leaving away from the yearly high at 1.23495 reached on last January 06th. The common currency accumulates losses by 1.14% (YTD), which, added to other market conditions commented in our current analysis, carries us to expect further declines in the following trading sessions.  

1. Retail Traders Seems to Look for Long Positions

Retail traders tend to place their trades against the primary trend, remaining on the wrong side on most occasions. Regarding this market participant behavior context, retail traders reduced their short positions from 79.77% reached last January 06th to 44% last Friday’s session, as the EURUSD pair accelerated its decline. 


Retail traders’ increasing positioning to the long-side carries us to sustain the prospect for further declines in the following trading sessions.

2. The Price Violated its Short-Term Upward Trendline

The big picture of EURUSD illustrated in its daily chart reveals the violation of the secondary trendline plotted in green, corresponding to the last rally developed by the common currency since November 04th from the 1.16025 level, which found resistance on January 06th at 1.23495. This market context leads us to observe that the price could develop a correction proportional to the last rally.

In this regard, the Dow Theory view suggests that EURUSD’s corrective move depth might lie between 33% (1.21030) and 66% (1.18565). Moreover, the price could find support in the long-term upward trendline plotted in blue.

3. Timing and Momentum Oscillator Supports the Elliott Wave View.

The intraday Elliott wave view for the EURUSD pair exposed in the next 4-hour chart shows the completion of an ending diagonal pattern corresponding to wave (v) of Minuette degree labeled in blue and its bearish reaction after its finalization.

Once the common currency topped at 1.23495, the price developed an intraday corrective move subdivided into five internal segments of Subminuette degree identified in green. This five-wave sequence of lesser degree carries us to expect the progress in a potential zigzag pattern (5-3-5). 

On the other hand, the timing and momentum oscillator lead us to observe the first downward sequence’s exhaustion corresponding to wave (a) in blue. In consequence, the common currency should develop a corrective rally corresponding to wave (b). This upward move could hit the zone between 1.21576 and 1.22523.

Once the EURUSD completes its wave (b) in blue, the price action should start its bearish wave (c), which follows an internal structure subdivided into five waves. In this context, the bearish scenario’s invalidation level can be found at the end of wave (v) at 1.23495.

What’s Next?

According to’s Community Outlook, 56% of retail EURUSD traders are positioned to the long side. Likewise, the violation of a short-term upward trendline carries to expect further declines in the common currency for the coming trading sessions. Nevertheless, the EURUSD could be at the end of the first segment of a corrective formation. In this context, the price could develop an upward bounce that could reach the zone between 1.21579 and 1.22523. After the bounce conclusion, the common currency could find fresh sellers expecting to join a new downward sequence corresponding to wave (c).

If you are interested in finding trading opportunities using the Elliott Wave Principle, follow our Forex.Academy Educational Section.

Forex Market

Are the Markets Ever Actually Wrong? (Hint, It’s Possible)

Price is everything. By observing the pound rally in October, you involuntarily begin to believe in the principles of technical analysis. You’d have to be a medium to understand what Boris Johnson was talking about during his visits to Brussels and Dublin. The talks were not in vain. Referred to as, “tunnel negotiations” they took place behind closed doors and there was hardly any hope of being able to observe the light at the end of the tunnel. However, even extrasensory powers do not guarantee that you become a rich man. Mediums could be the most honest people: the reason is that they never use their powers to win the lottery or win money on Forex.

If he stays too long by the river, sooner or later he’ll be fired. After a series of painful defeats and accusations of having exceeded their authorities, people generally fall into a stupor. But not the current head of Britain’s Cabinet. The idea of becoming the shortest prime minister in the entire history of the United Kingdom was not very seductive. Johnson knew: either you control the situation or the situation will end up controlling you. Critics, especially the most spiteful,  will always get the same answer from him:

– Boris, I think you’re wrong…

– Count again!

Led to a corner, the prime minister found a legal vacuum and common ground with Brussels. True, the game is not won right now, but your position is much better now. Johnson will find it difficult to get a majority in Parliament, as DUP is against the deal as it stands and Labour thinks it is even worse than the Theresa May deal. However, nothing seems impossible for the current prime minister. If he manages to get Britain out of the EU, he will take his place in history:

– Boris, will you accept apologies?

– No, just cash.

Looking at the pound chart, you don’t need to read the news. Its recovery was a clear sign of progress in the Brexit talks and its setback showed that investors were upset about something. They have been discussing the extension of the transitional period and the second referendum where the text of the current agreement with the EU can be presented. The British already tried to divorce the EU in 2016, why shouldn’t they bring the question to a successful end? It’s like in the river in winter. The thinner the ice, the more people want to make sure it’s strong enough.

Donald Trump is also confident that the markets know more than anyone else. The President of the United States knows with certainty that it is a small world. All because of the Chinese! He is talking about progress in US-China relations and is always full of optimism not to accidentally launch the S&P 500 correction. Trump believes the White House needs a strong economy and a strong stock market, while setbacks could make your risk of losing the elections held this 2020 more likely.

So does price really take everything into account? Shouldn’t we read the news and dwell on the peculiarities of fundamental analysis? Should we just look at the graph? If everything were that easy, mediums would make a lot of money on Forex. Certainly, history knows too many examples of the times when markets were wrong. For example, they predicted a recession in the US economy in 10 cases out of 5. Trading is not easy, but it is a very interesting activity!

Forex Course

206. The Correlation Between The Stock and Forex Markets


The stock market encompasses individual stocks that create an index or a sector. An active under trader must define an approach to the equity as it differs depending on what she or he trades. When purchasing individual shares of an enterprise, some factors such as voting rights, dividend date, earnings per share, earnings releases, etc., play an important role.

The Relationship Between Forex and Stocks

The primary principles theory behind this is when there is an increase in the equity market rise. The demand for that particular currency also rises, resulting in more fund inflow from international investors. Additionally, it generates higher demand for the specific currency, leading it to rally instead of other foreign currencies.

On the other hand, when a local stock market does not perform well, this confidence lowers, resulting in investors to take their funds and put them somewhere safer and more lucrative.

Currency Correlation

Correlation is referred to as the measurement of the degree to which prices of two things have moved in a similar direction at the same time. For instance, if A and B prices always move up and down in sync, they have a correlation coefficient of 1, which implies an ideal positive correlation.

Contrarily if the value of these things moves simultaneously in the opposite direction, then their correlation coefficient is -1, which signifies a negative correlation.

Example – Correlation between Stock & Forex Markets

If the USA stock market performs well, international investors will sell their local currency to purchase USD-denominated stocks. When the demand for the dollar rises, it experiences an increase in value. In the Foreign exchange market, USD pairs will move in favor of the dollar ( i.e., The EURUSD falling, the USDCAD rising); hence a strong US stock market will favor the value of the US Dollar.

On the other hand, if the USA’s stock market is not performing well, investors will sell their USD-denominated shares and buy stocks or ETFs in places where they can generate more yield. This shows that the economy in the USA is performing badly. Since the demand for the dollar is less, it adversely affects the value of the US dollar.

Possibility Of Negative Correlation

There is also a possibility that the currency market will rise in answer to a volatile stock market. This may happen due to tons of other factors that contribute to currency performance. We will discuss more related to this topic in the upcoming course lessons.

Don’t forget to take the quiz below before you go. Cheers.

[wp_quiz id=”100352″]

Forex Course

205. How Global Equity Markets Affect The Forex Market?


The equity market is also referred to as the stock or share markets. This is an extensive marketplace where traders and investors purchase and sell shares of the publicly listed organizations. The company’s share, stock, or equity is an important financial instrument that denotes the company’s ownership. Contrary to the market, when you buy a share in the stock market, you own a percentage of the company’s overall shares.

Global equity markets have a direct impact on the Forex market. A stable equity market reflects a good currency. Generally, when the country’s equity market is performing well, it attracts higher foreign investors. Therefore, it increases the demand for the local currency, resulting in a boost in a positive trade balance as well as currency appreciation.

Contrarily, when the equity market is not performing well, the investors begin to pull out their money and invest in safer securities. This results in a decrease in the demand for a particular currency.

Impact Of Global Equity Markets On The Forex Market

Forex and equity markets trades center on the currency exchanges of various countries. In case there is a rise in the equity market, more international investors will want to put their money in that particular stock.

However, to do the same, they need to transfer their local currency to the currency of a particular country. This increases the currency demand for the nation. So when there is a huge demand for the currency, its value naturally increases in the market.

Example Of How The Equity Markets Impact Forex Market

If you are looking to invest in the UK’s stock market and your local currency is US dollars. So you need first to change the USD to GBP. This way, you are selling the US dollar while purchasing the GBP.

When more people sell the USD to buy GBP, it increases the demand for pounds, thereby boosting the value of the GBP. Additionally, it also contributes to a positive trade balance. On the other hand, since more US dollars are being sold, it increases the supply of USD, which results in a fall in the value of the dollar.

So when the demand for the currency rises, its value appreciates. This makes the forex market more bullish. Similarly, if the currency demand falls, its value will also fall. It will make the forex market more bearish.

We hope you got the gist of what we are talking about. In the upcoming course lessons, we will be learning more about various equity markets and how their movement can be used to predict the Forex price charts. Cheers.

[wp_quiz id=”101514″]

Forex Market

WARNING: The Economy Has Become a Zombie!

A year after the repo explosion, Cantillon Effect, Minsky Moment, the economy has become a zombie.

A year ago there was one of the greatest events of liquidity scarcity in history, for a moment the world economy was on the verge of collapsing fatally, forcing the Central Banks, especially the FED to print money in an accelerated manner, since the Eurodollar or reserve currency system, the dollar, had dried up and there was a demand for dollars above normal, everything was triggered by a shortage of liquidity, by excessive leverage of companies and Banks. 

This shortfall in liquidity caused enormous volatility in the US Treasury bond market, which acts as a basis and liquidity for the other markets, leading to real phases of extreme volatility in the equity markets. With extreme volatility and falling rates, all brought about by the Fed’s decision to reverse QE and the printing of currency the market was collapsing like a house of cards, this shows a fragility never before seen. This could prove that we are dealing with a zombie economy.

This was just the symptom that the economy is not going well and in fact still not going well, the virus is still the perfect excuse to lead the economy and societies to a new feudal system, where a transfer of wealth from the less affluent classes to an elite that uses the virus for social engineering experiments occurs, plus the greatest monetary experiment in history with record prints of paper money or credit money as I call fiat money, to impose a series of reforms leading to a less free and more docile society, in a new regime of semi-slavery.

And as we see to build a new world order you have to do a hard reset or a great reset, you can only get it by destroying the old system and that is why the Fed has kicked ahead and prints as if there was no tomorrow. And before the minimal reduction of its balance sheet the markets are staggering and staggering because we are; we were a year ago in Minsky with an economy in a Ponzi debtor state, which defines Minsky.

The Ponzi debtor, that before any fall will not be able to pay even the interest and this is the consequence that it is based almost mainly on the increase of the prices of the assets to continue refinancing the debt.

We have zombie companies that only survive if the stock price keeps going up, as they are still without liquidity. The Fed has to print so that the Ponzi scheme in which the world economy has become collapsed, thanks to the MMT and its idea that you can have deficits unlimited and that you can print without consequences when it is false. This is when we come across the Cantillion effect and how the economy is directed towards a feudal system.

It is precisely what describes the monetary speed, which is neither more nor less the times when money changes hands, and which has a very strong influence on the real economy, say when there is a collapse of the times when money changes hands, It is telling us directly that the real economy is freezing, and therefore inflation in the real economy is cooling, that is, apparent deflation. But when you print so much money, you get a drop in purchasing power, so you don’t directly have inflation from price hikes, you have inflation from currency devaluation, even if prices fall and technically there’s deflation, the reality that the value of credit currency falls faster than prices fall and we actually have an inflation rate for loss of purchasing value. This is what is known as the Cantillon effect.

As defined by Economipedia: The Cantillon effect explains the uneven effect that monetary policies can have on the economy. For example, if a central bank injects money into the economy, the resulting inflation (the price increase)  is not reflected uniformly. Richard Cantillon (1680-1734) became the first economist to assert that any change in the money supply distorts the structure of an economy.

This is because newly created money is not distributed simultaneously or uniformly throughout the population. The process of monetary expansion therefore involves a transfer of wealth. This basically means that those closest to the central banks take advantage of this new money and buy consumer goods or capital at a better price, that is, elites and governments. While the rest of us mortals are at a disadvantage because with less purchasing power and without access to that new credit we cannot acquire assets and when we can the asset prices have already skyrocketed, showing that the money supply is not neutral, is harmful, and produces a transfer of purchasing power from the less affluent to the wealthier classes, a reverse Robin Hood. A neo-feudal system or as they call it a new world order.

A new world order where puppet elites and governments do not allow the less affluent classes to enter the markets as they cause hyperinflation of shares, and a fall in the purchasing power of the less affluent classes, that the elites compensate by having before anyone access to the newly created credit currency. This means that the chances of the poorest people escaping are diminishing, we are facing a slave system. And it is not because of the (non-existent) free market, but because of ideas closer to the Marxism of the MMT.

And this is how the economy and the free market dies, it becomes a great Ponzi scheme, where a privileged few turn into a casino the world economy, full of zombie companies living on the cost of issuing new debt and stealing purchasing power from citizens. The Cantillon effect is the weapon that these elites use to maintain the status quo and that the great reset is the new neo-feudal system that they have prepared for us.

Forex Market

The Economic Calendar and Why It’s So Darn Interesting

Today we’ll go with an entry about a tool that interests a lot of you, the economic calendar, and its impact on Forex trading. It is constantly updated so that you have access depending on the day you are looking at it. To get started, let’s see what this tool is and why I tell you that it is a tool that should interest you a lot if you trade in currencies (or any other type of asset).


  • What is the economic calendar?
  • Is a Forex calendar important?
  • When should I look at the economic agenda?
  • What is important in a macroeconomic calendar?
  • Trading based on macroeconomic data.
  • Technical analysis, fundamental analysis, and the economic agenda.
  • Where to look for Forex news data
  • Publication of macroeconomic data
  • Global indices and commodities
  • How do I use the economic calendar?
  1. What is the economic calendar?

An economic calendar, as its very name indicates, reflects when and what economic issues will be published globally. It can be the decision of interest rates on the part of a country, indices production prices, balance of trade, economic events. In short, it shows you any event that could affect the economy and the financial markets.

  1. Is a Forex calendar important?

As you know, in the Forex market (as in all) price movements are impacted by the news, macroeconomic data, government decisions, and more. Therefore to follow an economic agenda allows us to know when the greatest movements in the market will take place. We can even use this to not do trading or even as some traders do, do news trading.

  1. When should I look at the economic agenda?

Depending on the frequency of your trading, if you do swing trading (trades that last several days) it may have little relevance in your trade and just look at it once or twice a week. If on the contrary, your operation is more aggressive, reviewing the economic calendar each day can give you an optimal point of view of the market. You know, more day trading, more focus, which is something that doesn’t sell much but that’s there.

  1. What is important in a macroeconomic calendar?

If you take a look at the agenda above you will see that many days have published enough data and many of them are not very important. This you can set to stay only with those that are really important. Even sometimes, those that are a priori important generate little movement in the market. Still, don’t trust yourself.

  1. Trading based on macroeconomic data.

It is very popular to read or listen to some traders say they trade forex with news. What they look for with it when there is high volatility is to gain a lot in a very short time. Careful, the message sounds very nice but the reality is not so much. High risk is also something to calibrate well, in addition, to stop loss sweeps, landslides when entering the market. You must keep these issues in mind.

  1. Technical analysis, fundamental analysis, and the economic agenda.

Whether you do technical analysis or fundamental analysis, the economic agenda really matters. You might think that since you do technical analysis, you don’t care about this whole macroeconomic news thing. You can really do that in part, but to follow the market keep them present or you can get some upset. If you’re in a pretty big position within the pound and there’s news about the UK Brexit referendum, this may annoy you, to put it mildly.

If you focus or are focused on fundamental analysis to make buying and selling decisions you will know the importance of following the macro calendar and will work with economic data as a source to make your decisions. 

  1. Where to look for Forex news data

On this very page, up. In addition, there are other well-known ones such as Investing, FXstreet, and different portals where you can see these types of calendars, each with a different style. In the end, it’s a matter of taste, choose the one you like the most and where you feel comfortable. The source of the data is usually the same.

  1. Publication of macroeconomic data

Some people are obsessed with when this data is published to buy or sell based on how good or bad this data has been. Error. Two points:

In free portals the publication of the data is done with some delay and to avoid this we should hire platforms like Bloomberg (it is a paste to keep them for the independent investor and do not make much sense). But even so, today the execution of orders mostly goes by algorithms. In the time it takes to observe the data, you open the broker and place an order, the algorithm may even have already closed the position. Focus your goal on other more profitable patterns.

Another thing, do you think that just because a piece of data is better than expected, it’s gonna benefit an asset that goes up or vice versa? The answer is no. Sometimes this is discounted on the price already or the data is good but worse than expected. If you are a retail trader, I recommend that you do not enter this war unless you are very clear about it.

  1. Global indices and commodities

You may wonder if this agenda is only for the Forex market or has any use in the case of trading in indices or commodities. Macro data from China without going any further are moving most of the world indices. Events in the United States cause major markets, including European indices, to be affected both positively and negatively.

Another example is oil, which in turn has a direct relationship in some currency pairs due to the countries where it is traded and where there are large reserves. The publication of oil inventories is very important data that is taken into account by investors and traders. In the end, they affect the asset or country in question, either directly or indirectly, and it is important to have control of its publication so that you do not get caught out of play.

  1. How do I use the economic calendar?

I’ll tell you how I use the economic calendar and how you can use it yourself. If you do algorithmic trading as is my case, that is, you have automated in and out of market operations, you can carry out different actions:

-Create strategies that avoid operating at times where high-impact news is published for markets (for example, on Fridays at midday).

-Adjust systems to market volatility. We can calibrate the amount and distance to stop loss based on price variability. If it is high, it is advisable to leave more distant stops so that you do not jump at the first change with strong movements. Indicators like the ATR (Average True Range) for example can help you in this.

-Disconnect systems when there are Brexit events or important government decisions at any given time.

Beyond that you can design them yourself according to your preferences, here are some ideas. In a habitual way, apart from this type of facts, I use the economic agenda like this: the weekend where I usually look at what publications there will be in the next days and every morning when I wake up where I review only the data and the next hours (of that day).

Don’t worry if you can’t stay on the screen because you work or are busy. In addition to the Internet browser you normally use, there are mobile apps that allow you to view them. In fact, you can already do it from your smartwatch. It’s not that you’re obsessed with constantly refreshing the page or app to see what’s going on, just remember that it’s all about having control.

Forex Market

Why We Don’t Have Reliable Volume Data in the Forex Market?

Professionals who see volume as a prerequisite of success view any lack of volume as an important factor. Traders need volume to know if the trade they are interested in is worth taking. They explain how volume directly affects the chart because it is what moves the market. As volume is changeable – both in the sense of the entire forex market and particular currency pairs – we wonder where this volume inconsistency stems from. 


Having left the gold standard in the 1960s, most currencies across the globe are no longer backed up by equivalent amounts of hard assets. This left much room for the governments and banks to manipulate the circulation of currencies, increasing the overall money supply. As more money is printed, consumers demand more goods, which results in increased prices. The overall volume of money in the market does not only refer to the cash that circulates in the economy, but the digital money as well (bank accounts), and any changes will have an impact on both. Forceful printing can have terrible consequences like what happened to Zimbabwe, which kept printing more money to the point of its official currency becoming entirely worthless. As money moves, so does the volume we see in the market. For example, in 2019, many noticed how the stock market experienced a long period of prosperity, supported by unprecedented growth levels. As all money flooded into stocks, the market’s expansion triggered historic lows in the spot forex. Such dynamics between the two markets depend on the concentration of money that fluctuates alternately. Volume is affected by other factors as well, such as market condition and geopolitical status, and news.


Market volume always changes and, sometimes, the volume can be really low for a longer period of time. When this happens there are a few important rules to remember:

  • Dead markets are normal and happen regardless of your skills and knowledge.
  • Do not push yourself to enter any trades if you are not getting any signals.
  • If you are testing your system now, you may not get much yield because of the state of the market.
  • If you are getting signals to trade, steer clear of the USD (especially if you are a beginner). When the market is sluggish or dead, the big banks will thrive off the USD where most traders are.
  • Take the entire trade-off at your first take profit.
  • Because the volume will return at one point, your volume indicator may not be quick enough to notice the change, so you may miss the first big move.
  • Trade smaller time frames to get quicker results in this period.
  • Prepare yourself for fluctuation volume now and do not expect tailwinds all the time.


Volume indicators are believed to be one of the most important constituents of professional traders’ algorithms. Not only do they increase the chance of winning in each trade but they also serve to prevent losses, which is a prerequisite for sustainable success. However, it is important to distinguish between volume and volatility. While we do need volume in the market, we should look for the most volatile or liquid pairs. Indicators such as the ATR are excellent tools for measuring volatility in the market and calculating the risk. The Cboe EuroCurrency Volatility Index also tracks the short-term projected volatility of the EUR/USD exchange rate. While any volatility information can prevent the trader from making the wrong choices, volatility indicators should be used together with a volume indicator to achieve the best results.  


The DOM indicator is one of the popular volume indicators in the forex community with an impressive Google search frequency. Based on the brokers’ data, this indicator offers an insight into the price levels with the heaviest volume. Traders often seem impressed with the DOM’s performance, but fail to understand that any dealing desk broker’s information is limited to levels and does not stand for the overall volume. Therefore, this indicator simply cannot help us understand volume or how the market is going to respond. What it can do, however, is hinder our development because everyone can access this information easily. The DOM is easily available on the most popular trading platforms and, due to its popularity, most traders like to use it. Yet the DOM lacks information that we could use for trading consistently. The order concentration levels it represents are not going to be the guiding light for your forex trading. Other assets like crypto have more reliable data from the exchanges about these levels, BTC is a good example with so many positions stacked around the $20k price level. 


Volume indicators are key money management and risk management tools, but many of them offer similar information. Therefore, to understand any given data concerning volume, traders need to learn how to read the numbers which they are presented with. So, if any indicator reveals a price that is several pips higher, traders need to be cautious because the information they see is incomplete. We still do not know anything about the type of orders that comprise this volume, whether they are limit or stop orders, or if the majority is entering long or short trades at the time. Traders should also be invested in discovering the predominant percentage of long and short trades because it will help them determine the correlation between volume and the types of trades forex traders are typically entering at the time. The missing information is crucial for understanding volume in the forex market, as numbers alone have no meaning. We still lack the qualitative analysis of the market to understand what is happening.


Volume will always oscillate and there is not much we can do to change that. What we can do, however, is approach it in a smart way. Your approach to trading is vital for your overall success, so if you are not prepared mentally or emotionally, your account will suffer no matter the conditions. Traders often think that the higher the volume, the better, but dead markets can also be an excellent opportunity for growth. If we succumb to the challenges and fail to apply money management skills now, we won’t be able to reap the fruits later. What you can always do to improve yourself is to focus your attention on your trading skills and system. Is there anything you can change? How can you improve your algorithm to function even better? Remember to stay on the course and power through by doing what you can and what is best for your trading account. When there are no opportunities for making money, there is abundant room for backtesting and forward testing your algorithm. If you have a strong vision, use the times with no volume to reflect on the lessons and the choices you made in the past. Even if you had big plans to quit your job in a year and devote yourself exclusively to trading currencies, now is not the time to make such changes. Keep your other sources of income and use the time you have wisely, perfecting your system for future success.


We may be looking for different tools and methods to obtain volume data, but the focal point of this article is that our attention should be elsewhere. We cannot predict the future and we certainly cannot find one indicator that will do all the work on our behalf. Rather, we should become skillful in combining different indicators to eliminate bad trades, reduce losses, and earn smart money. And, finally, we must bear in mind that times of no volume and no income are also fruitful periods for any individual to become a better and more prosperous trader. 


Forex Market

Trading, HFT and Big Data – Exposing Fake News!

Just as the white SUVs are flooding our streets, “Big Data” seems to be the hot topic. While at first, it doesn’t seem hard to understand, in this article I will try to analyze the meaning of Big Data for a Trader.

Generally, “Big Data” is defined as the process of capturing, storing, processing, and transforming data into information or decisions, when they meet one of the three “V”; they cover large volumes, require Speed, and involve a variety of types and/or sources.

I prefer to define Big Data as the generalization of the use of a very powerful set of statistical and computational tools that gives us independence in analysis. In addition to the knowledge in my area of action, which allows me to construct hypotheses that I want to try, with “Big Data” I also have the tools to not get stuck with ideas in my head.

According to the Deutsche Börse Group:

“Technological innovations have contributed significantly to greater efficiency in the derivatives market. Through innovations in trade technology, negotiations in the German Eurex are now running much faster than a decade ago and knowing the sharp increase in the volume of operations and the number of quotes. These major improvements have only been possible due to continued investments in IT by derivatives markets and clearinghouses.”

The acceleration of the trading process has also reached the side of Traders. Michael Lewis, author of the book “Moneyball” (which has become known for the movie of the same name starring Brad Pitt) has written a non-fiction book, “Flash Boys”, where he describes the story of how “kids” begin to be able to trade at the fastest possible speed, not to mention near the speed of light. These guys, investing little money and using technology and big data concepts, go to war with the High-Frequency Trading (HFT) companies and the big American banks. I’m looking forward to the movie!

A major HFT-related event took place on May 6, 2010, at the Nasdaq Stock Exchange in New York, in what would become known as the 2010 Flash Crash. At 14:32, New York time, there was an extraordinary drop and rebound in the S&P 500 index. Algorithmic trading programs were chained, first in sales orders by their criteria of stop losses and then they were chained back in purchase orders – something never seen in history – it is estimated that the price variation between minimum and maximum for as little as 36 minutes was a historical record of trillions of American dollars.

I’ve heard all about Big Data, some accurate statements, and some wrong ones. But many have ceased to be true with the evolution of technologies and the very concept of Big Data. The main known barriers to the implementation of Big Data have always been the existing infrastructures in the company, the costs, the time of implementation, and the need for knowledge. With the exception of the first, the other barriers are falling with the new technologies of Big Data.

Big Data is very expensive – False – generated by the large supply of tools and by the adoption of free open source technologies, prices, previously in the sky, have dropped to levels very accessible to all sizes of companies.

It’s a computer thing – False – there has been a major transformation in the programming environments and in the Big Data and Analytics tools, making them more accessible to non-technical people interested in using them in their area of expertise.

Takes a long time to implement – False – new techniques of agile project management and job reuse lead to tempting times of implementation.

The piece that really was missing in this puzzle was training, but since already a couple of years ago, there is a relevant offer of Big Data online courses and masters on the subject.

They always ask me for examples of companies using Big Data. Creating a list of companies always scares me, because the world of Big Data gains followers daily – if I wrote a list, it’s very likely that it was obsolete by the time you’re reading it. In the trading world, there are many banks like Bank of America and JP Morgan involved in HFT. As for Spanish banks, there is very little public information on the use of HFT, however, with all the technology currently available. One would be naive if one thought that these have not raised the use of HFT in the currency arbitration and futures market for some commodities, where they have hedging positions.

In addition to HFT, some funds state that they use alternative information for their purchase and sale decisions. This information may vary but many say they use comments and sentiment analysis in online newspapers, in public CSS and RSS, in blogs, and on Twitter and other social networks. It is unclear exactly what they do, but AQR Capital Management and Two Sigma Investments claim to use Big Data in their investment decisions.

What one has to be clear about is that whatever your strategy, we are competing today with these specialized algorithms AT ALL TIMES.

In practice, in the world of trading, Big Data is providing:

Volume: Big Data shows us the way clearly to expand our strategy. Either to include more companies or portfolios to the existing strategy or to allow the creation of many strategies competing in parallel.

Variety: Big Data is allowed through algorithms to mix price history from Private API (Bloomberg or your broker) and Public API (yahoo finance, google finance) with alternative information such as CSS and RSS readers, Web scrapers, Twitter, and other social networks.

Speed: The combined use of various computing paradigms is making it possible for independent traders or small investment firms to compete for the first time in the HFT war with large banks, as described in the book Flash Boys. An example is the use of data banks in memory, in vector format, and with parallel calculations or distributed in several computers.

And that translates into:

Within a large bank, when you follow the full development flow of a strategy until its implementation, many tasks are done before and after the Trader’s intervention. The Technology Area needs to capture, collect and store the data, the methodology department usually does fundamental analysis or simulations with this data and finally, the data comes to the Trader for the creation of their strategies. When the strategy has already been designed, it is up to the Technology to prepare a prototype for the backtesting of the strategy and finally, the strategy is implemented as an automatic algorithm in production.

Using a multi-use programming language (multi-purpose programming language), for example, Python, a trader can now gradually acquire knowledge and do the work of others.

To give an example of what we are talking about from a practical point of view, within Python the problem of collecting historical price data is transformed into a simple call to the yahoo or google API or other provider using a data read command like DataReader.

The training offered at Big Data is on the rise. The war between paid and free tools has forced traditional companies like SAS and SPSS to liberalize free versions of their software or free courses of their analytics tool.

To conclude, on the one hand, Big Data tools are increasingly accessible and integrated, in the future, you can make use of the most appropriate database for the problem, whether it is structured, unstructured, on disk, in memory or distributed, almost without realizing it. Python is a new player where this homogenization is happening very quickly and it is possible to access, within the same language, several big data tools. My prediction is that languages that do not homogenize run the risk of extinction.

On the other hand, everyone is looking at the world of Analytics. Giants in the software industry are buying Analytics companies as “churros”. That is clear evidence that statistical knowledge will gain more and more relevance and in combination with data tools will be an indispensable weapon in the future, This prediction is also confirmed by all the master’s degrees in Big Data and Analytics that have already been established and are emerging every year.

But the big change is that all of the above can only mean one thing. Big data, currently, is made for the business expert and in our case, for the trader. Big Data was born with computer scientists and has attracted many statisticians. But, the clear thing for me, is that you get much better results if the business expert knows how to drive and fix the car, than the other way around.

Beginners Forex Education Forex Market

Which Factors Truly Impact the Forex Market?

To be a successful forex trader, you need to understand what affects the value of a currency and what can cause it to change. The following factors have a direct effect on the value of currency for a country:

  • Inflation Rates
  • Interest Rates
  • Capital Flow Balance
  • Government Debt
  • Trade Terms
  • Political Factors
  • Employment Data

If you understand each of the above factors, then you’ll be able to make better predictions about the market. We will explain each factor in more detail below.

Inflation Rates

Inflation refers to the general increase in prices over time and fall in the value of purchasing money. One of the main driving factors behind a currency’s exchange rate is its country’s inflation rate. Japan, Germany, and Switzerland are a few examples of countries with low inflation rates.

-Countries with higher inflation will see decreases in the value of their currency compared to the currency it is being traded against.

-Countries with lower inflation typically see an increase in their purchasing power compared to other currencies.

Interest Rates

Interest rates tie in with inflation and forex rates. Increased interest rates raise the value of a country’s currency because they attract more foreign capital. Investors gravitate towards economies with higher interest rates because they will increase the value of their returns. This creates more of a demand for the currency and increases the exchange rate.

Capital Flow Balance

This revolves around several different factors:

  • Exports
  • Imports
  • Debt
  • Retail Sales
Government Spending

If a country has a deficit, it means that they are spending more on imports than they are making with exports. This causes depreciation in value for that country’s currency. The capital flow balance is simply the ration of imports vs exports in a country. China would be a prime example of a country with a higher export rate, which makes its currency more attractive to forex traders.

Government Debt
This involves all public or national debt that a country’s government owes. Countries that are in debt are more likely to experience inflation. If investors know that government debt is predicted, they will sell their bonds, which results in a decrease in that currency’s value. An investor might look at the government’s overall debt over a few years to decide if it is worth investing in that currency.

Trade Terms

Terms of trade are the ratio of export prices vs import prices. If the number of exports is greater, then the value of the currency increases because there is a higher demand for that country’s currency. If there are more imports than exports, the opposite occurs.

Political Factors

Investors prefer stable countries and those countries pull investors away from countries that experience more uncertainty. Being a more politically stable country results in an appreciation of the currency’s value while being less stable results in depreciation. Elections, financial crisis, policy changes regarding money, and wars have a direct effect on the currency’s overall value.

Employment Data

Employment rates can give investors an overall idea of how the economy for a given country is performing. High unemployment rates signifies that the economy is not doing well or growing with the population. This would lead to depreciation in the currency’s value as investors pull away from investing in that country.


Several different aspects of a country’s economy can influence the value of their currency. Investors are generally looking to invest in politically stable countries with high employment rates and less government debt. Higher interest rates and low inflation rates are other ideal conditions. It is important for forex traders to understand what drives a currency’s price so that they can make more accurate predictions about the market.

Forex Market

The Top 8 Must-Know Features of the Forex Market

There are more reasons to have exposure to the forex foreign exchange market beyond currency diversification. Once you do your homework, you will realize that the foreign exchange market is among the best-performing assets for traders and investors. This guide will explain what is the forex market and will present the 8 main features of the forex market that every trader should know.

What is the Forex Currency Market?

The foreign exchange, foreign exchange, or forex market is where currencies are traded. Coins are important to most people around the world, whether they realize it or not because coins must be exchanged for trading and business. If you are living in Brazil and want to buy cheese from Europe, be it you or the company where you buy the cheese, you have to pay the Europeans for the cheese in euros (EUR). This means that Brazil, the importer, would have to exchange the equivalent in value of the Brazilian Real (BRL) in euros. This applies equally to travel. A Brazilian tourist in the USA cannot pay in BRL to see Wall Street because it is not the locally accepted currency. As such, the tourist has to exchange all the BRL for the local currency, in this case, the American Dollar, at the price that is in the market.

A unique aspect of the foreign exchange market is that there is no central market for foreign exchange. Rather, forex trading is handled OTC, this means that all transactions are carried out with computer networks between traders spread around the world, instead of a centralized market. The market is open all day  (24 hours a day), 5.5 days a week, and the coins are traded globally in the world’s leading financial centers such as London, Tokyo, New York, Frankfurt, Zurich, Singapore, Hong Kong, Paris, and Sydney- across all time zones. This means that when US trading day ends, the forex market starts in Tokyo and Hong Kong. As such, the exchange market can be extremely active at any time of the day, with quotations constantly changing.

Here we mention the 8 main advantages of the Forex market that make it one of the most attractive markets for investors and traders globally.

Characteristics of the Foreign Exchange Market

  1. The best Risk/Benefit potential

The foreign exchange market offers one of the best opportunities of any financial market in terms of risk/profit, YES ( and a large YES) you know how to exploit it. The availability of forex leverage means the use of borrowed funds to control large blocks of money and thus magnify the gains and losses, creates an unparalleled potential to make profits for those with limited capital YES(and, again a great YES) learn how to handle the risk of loss. Let’s take an example, with leverage 1:100, 1% move means a 100% gain. It also means a 100% loss.

This allows us to make substantial gains in small movements in prices. However, as mentioned above, this means:

  • For $1 risk in your account, you can control $100.
  • For $1,000 risk in your account, you can control $100,000.

Many of the following articles talk about how to minimize the risk of large losses while maximizing the chances of making a profit. That involves learning to cut down on lost transactions on time and letting the winning transactions run so that you can make a profit even if you’re down on most of your transactions.

  1. The most flexible hours

The exchange market works continuously for 24 hours, 5.5 days a week, from Sunday at 5:15 P.M. EST until Friday at 5:00 P.M. EST. So, for those who work or have family commitments, they can negotiate a fully liquid market at the time that is most convenient.

  1. The lowest costs to start and operate

Forex trading is among the financial markets with the lowest cost to start and operate in terms of time and money, referring to the capital to operate, training, and equipment to operate. Like most markets, you don’t need thousands of dollars to get us started. This is why, at Forex, we can perfectly trade with high leverage (borrowed money), usually 1:100 or sometimes more.

In theory, you can usually start with as little as $100. However, you will learn that you can reduce risks and be more likely to make a profit with at least a few thousand dollars (or its equivalent) if possible. As we will see later, small forex positions that are available like mini and micro allow traders with more limited funds to trade smaller positions, keeping the share of risk capital at acceptable levels. More about this later.

Training and cost of equipment: Forex brokers typically provide fully equipped platforms and data sources for free, and the best forex brokers offer an extensive amount of free training and market analysis files. With online brokers, traders usually keep a minimum or minimum transaction volume balance to obtain quality charts and platforms from their brokers or access worthwhile research.

Free practice accounts: Even better, they typically offer practice with all the real circumstances, or, demo accounts that allow newbies to simulate much of the trading experience and practice with virtual money until they are ready to risk their capital.

Low transaction costs: Most forex brokers do not charge fees, commissions, or hidden charges. They earn money in the difference, called the spread forex, between the purchase and sale price, typically a few tithes, called pips, of the price. Depending on the size of the negotiated lots, a typical spread of 2 pips, 4 pips will be the total to open and close a position, which can cost between $0.40 and $40. Transaction costs are usually competitive when compared to online stock brokers.

  1. The exchange market offers the best liquidity

A liquid market means you have many sellers and buyers. The more sellers and buyers there are at a given time, the more likely it is that you will get a market price just when you buy or sell. The more liquid it is, the less likely a few insignificant orders or players will move prices in a wild and unpredictable way.

Indeed, contrary to the stock market, even the biggest players would have trouble manipulating the price on the main exchange pairs beyond a few hours. There are 2 exceptions to this, a few crooked central banks and Forex brokers. In reality, dishonest brokers are easily identified and it is easy to avoid with some investigation, and the risk of a central bank intervention is usually known or discovered promptly after the first incident, making markets vigilant. The more liquidity a market has, the easier it is to make a profit.

Prices are more stable and fairer, and less related to sudden and unpredictable movements. Generally, you should avoid trading in illiquid markets, except rarely when you’re trying to enter into bargain-price positions offered by those desperate to close a position. The volumes of foreign exchange markets dwarf those of equities. The latest estimates report that the average daily forex volume was around 4.71 trillion, of which retail traders represent 1.5 trillion (USD). That is the importance of the foreign exchange market, that huge volume, circulating 24 hours a day, means abundant buyers and sellers at any time of the day. That means it’s much more likely to get a fair price no matter when you sell or buy. That means you rarely see that you can sell only part of your position.

  1. Advance warnings of changes in other markets

Foreign exchange markets generally react to changing conditions before other markets, providing a valuable warning of possible changes in trends. As we will learn later, certain currencies tend to move in the same direction as industrial stocks or raw materials, and others tend to act as safe-haven assets like bonds. When these correlations are broken, this can also be a warning of a change in the direction of other markets.

  1. There is no centralised exchange with specialists maintaining the monopoly power to regulate prices

In the vast majority of stock markets, the largest specialist is a singular entity that serves as a buyer and seller of last resort, which controls the spread, which is the range between the purchase price and the selling price of a share. In theory, they must be supervised and regulated in order to avoid them from abusing the be able to manipulate prices at the expense of the public, specialists are experts in knowing when they can manipulate prices to make you buy more expensive or sell cheaper. In forex, there is no specialist to regulate the individual prices of currency pairs. Rather, there are multiple currency centers and brokers that are competing for your business. Although lack of centralisation complicates regulation, competition and easy access to price information have resulted in competitive quotations.

  1. There is no rebound rule: Just as it is easy to win on a bearish market, it is easy to win on a bullish market

Just as it is easier to row with the current than against it, it is easier to win by negotiating in the direction of a market trend. Unlike stocks (and other financial markets), in forex, it is as easy to win from the bottom markets as bullies. This is a huge advantage in the forex exchange markets. During an upward trend, when prices are rising, most traders go long, which means they buy an asset in the hope of selling it at a higher price. They’re trying to buy cheap and sell expensive, the classic way that people think is to invest.

During a downward trend, when prices are falling, it is easier to win by trading with the downward trend. So, the more sophisticated traders try to take advantage of the bearish trend and sell short; that is, sell borrowed shares in the hope of buying them in the future at a lower price, to return them and earn by difference-For example, Sell loaned shares at $100 a share, buy them at $70, return them to the broker, and pocket $30 a share. However, most stock exchange centers are controlled and regulated by those who have an interest in keeping stock prices high with restrictions and high sales costs.

  1. Forex need not be riskier than other markets

Forex has earned a reputation for being overly risky due to a combination of:

  1. A high failure rate due to novice forex traders who failed to do their homework and know the risks associated with the high leverage usually used in most forex trading.
  2. Brokers who do not provide us with minimum training to deal with the risks of using leverage. But, you can manage and reduce risks.

There are:

-Brokers, which allow you to adjust to leverage to what you can handle, will provide you with mentoring at an appropriate level.

Ways to trade forex without levers, which are no more risky than an exchange-traded fund (ETF) or a share.

-A variety of strategies to reduce risk in Forex trading, as well as new instruments to make transactions simpler and safer.

As we will see later, making money trading forex can be easier than in stocks and other more traditional asset markets, particularly bear markets. However, you need to do your homework, especially if you do or will do leverage trading, which adds risk and benefit. Part of the task is to learn simpler and more conservative techniques to make it easier to be successful in forex than with those instruments that are used more commonly. Until recently, there was not a single source to learn this more sensitive and conservative forex. No more. This is the only source for bringing these methods together in a single collection of items.

Understanding what is the forex currency market and what are the 8 main features of the forex market, as you have seen, is very important.

Forex Market

Not Having This Information About Correlations Will Keep You From Growing

I don’t know if you’ve ever heard of the correlation, but just in case I’ve been working on this article. Have you ever thought that all operations appear to be positive or negative at once? This is because you are possibly unknowingly doubling, tripling, or simply pushing your account to the limit without knowing it.

Understanding the Currency Correlation

Speaking of correlation what we tend to think is when and how prices fluctuate. And more specifically how prices move in relation to each other. This is the main idea of correlation. How does the EUR/USD move with respect to GBP/USD?

Types of Correlations

Currency pairs can be correlated both positively and negatively, let me explain what I mean. A pair of splits can be correlated in a positive aspect if its values move at the same time and in the same sense. For example, you can see this in the GBPUSD and EURUSD pairs, this is because when the GBPUSD is quoted then the EURUSD is also quoted.

The correlation is negative if there are two or more currency pairs operating in opposite directions at the same time, i.e., simultaneously. You can also see this in the case of the USDCHF and the EURUSD, because when the first pair is negotiated, then the second one falls, and the same happens on the contrary.

Correlations Are Not Constant

It’s important to know that correlation can change, because of global economic sentiment and factors, their dynamism, or any market event. This means that the correlations we find in the market, it is not important how strong, may not align with the long-term correlation between two currency pairs. The changes present in the correlations are usually based on antagonistic monetary policies, also the sensitivity of commodity prices to a currency pair…etc.

Forex Strategies and Correlation

The effect of the correlations is vital and significant in the market, therefore as a trader, you should take into account your operation based on it. I explain to you, in periods of high market uncertainty, strategies are usually used that rebalance your portfolio by replacing a few assets that become positively correlated with other assets that have a negative correlation with each other.

When this happens, the asset price movements are mutually canceled and your account risk is reduced. However, their returns are also reduced. A simple way to look at it is to take a stock that would gain value as the price of value dropped.

Important Aspects of Correlation and Forex Trading

With correlation, you can assess the risk to which your trading account is exposed. In the event that you have purchased several currency pairs that have a strong positive correlation, then you will be facing a greater directional risk.

Through correlation, you can also cover or diversify your own exposure to the foreign exchange market, plus if you have a directional bias with respect to a particular currency, then you can diversify the risk if you start using two pairs that are positively correlated. Although I don’t recommend this because if you lose the correlation you can mess it up.

Commodities, Foreign Exchange and Correlation

Commodities also correlate with currencies. You may already know this but:

-There is a positive correlation between oil and the Canadian dollar (I hope you haven’t forgotten what that means) as Canada is a major oil-producing country.

-The Australian dollar and gold are positively correlated by Australia’s imports of this precious metal.

However, gold and the US dollar have a negative correlation. Since when the USD loses value in the classic periods of inflation then investors look for an alternative reserve currency and the most traded is gold, as it acts as a safe haven value.

These examples also give you a look at how correlations are given on different assets in the market.

How Correlation Coefficients are Calculated

Correlations between currency pairs are always inaccurate and are often constantly changing. Because they depend on prices, the correlation in the foreign exchange market also depends on the economy, the monetary policy of the central bank, and the political and social conditions that correspond to each nation. But the correlations can be quantified and done through a scale that varies from +1 to -1:

0 or close to zero means no correlation. This means that two pairs that do not have a correlation will not have similar behavior and their behavior will be independent of the other.

+1 or a close value means that two currency pairs will move in the same direction.

-1 or close, negative correlation. These currency pairs will move to the opposite side 100 percent of the time.

Forex Correlation Calculator

There is a formula for calculating this:

ρxy = cov(X,Y) / σxσy

But don’t worry, I’ll leave you three portals where you can consult it:


An overview of currency seasonality:


A very complete correlation table:


Here you can see the correlation of one currency to the other assets:

How to Read the Table

I recommend consulting the correlation in forex in extended periods of time, because in 5 min for example is not the most appropriate unless you are going to exploit a specific strategy. A good idea is to view it in a daily time frame. If the correlation is very close to +1 or -1 between two pairs you see, consider it or try to avoid it if you are operating in those pairs.

Risk of Correlation in the Forex Market

Socio-political problems cause currency pair correlations to undergo sudden changes. The devaluation of oil and commodity prices has also made the previously weaker correlations stronger in certain currency pairs involving commodity currencies.

Sudden changes in correlations can usually present significant risks in the foreign exchange market and that this has affected the traders who based their trading systems on this. If they exploit this type of inefficiencies it is basic to have concrete points where to leave the position or undo it.

Importance of Correlation for Traders

For you as a trader, studying the asset correlation closely gives you a broader knowledge of the market, since you can understand the allocation of assets that seek to relate those that have a negative or low correlation and thus could reduce the volatility of your trade.

In addition, if you are a beginner trader, you will be able to establish greater control of your operation and your account will not be so exposed. Here you can have an important added value.

Correlation and Cointegration

Many times people confuse cointegration with correlation, which we were explaining earlier. With cointegration, you can identify the degree to which two currency pairs are sensitive to a particular exact price during a specific period. Cointegration goes one step beyond correlation and measures the distance between the ratio of two or more active persons and the time that they are maintained.

Cointegration as well as correlation must also be calculated. It is easy also, the greater the degree of cointegration between two currency pairs, then the probability of maintaining a constant distance grows. Being objective, identifying, and calculating the correlation is easier.

Pros and Cons of Using Correlation

Some positive and negative aspects of using correlation by trading in the currency market:


– Easy visualization and calculation of the correlation using a scale -1 and 1.

– Capacity in ample spaces of time to be able to diversify the risk.


– In the correlation you can see the strength of a relationship, however, you will not be able to obtain information about whether the relationship is cause-effect.

– The correlation cannot predict the future behavior of the market.

[Extra] How to Trade with Currency Correlations

To the point, Ruben. I know how it goes, but how can I do it if I’m starting my operation? Well, a very simple way is for you to diversify by currency. For example, if you are thinking of trading in the currency market do not trade for example EUR/USD, EUR/CAD, EUR/AUD.

In the previous case, you will be very exposed to the euro (EUR). It is better to diversify more or better, for example, EUR/USD, GBP/USD, and EUR/GBP. We now have 2 EUR, 2 GBP, and 2 USD. We have a portfolio composed of different currencies although a priori EUR/USD and GBP/USD may be correlated.

It’s a very simple and basic way to start applying it now.

Forex Market

Can Forex Escape the Current Crisis? Let’s Discuss its Future…

Forex is one of the tools that can be used today to prevent our money from losing its value and make profits in the process. To put it simply, Forex is the global market that allows the exchange of two currencies against each other.

For example, when you travel to a country you usually exchange the currency of your country for the one you are visiting in a currency exchange. In these places, you can see different exchange rates from one currency to another. You can find that an American dollar can cost 100 yen, and think that with 100 dollars you will have a huge amount of money. When you do this type of trading you are actively participating in the Forex market, as you are exchanging one currency for another. In Forex terms, you sold US dollars to buy Japanese yen. Anyway in Forex Academy you can find many more examples and tips on forex trading.

Continuing with the above example, when you finish your trip and you have money left,  you go back to the exchange house and you see that the exchange rates changed. If you’re lucky, the dollar may have gone down and the yen may have gone up, so you’ll get more dollars for your yen. These changes in the rates of one currency against the other are what allow you to win or lose money and what makes this market so interesting.

This market was born thanks to President Nixon in 1971 when he withdrew the United States from the gold standard in order to allow the value of the US dollar to float. No one could accurately predict how Nixon’s action would create a global industry of more than several trillion dollars.

In recent years, Forex has evolved from a relatively unknown and unavailable investment tool to an almost global phenomenon. The accessibility that computers give to Forex trading, the sudden emergence of multiple software tools and various Forex websites, coupled with all kinds of training and advertising offered over the internet, have made many investors want to try their luck to make a profit through it. Today many people in the world who operate in this market and many others want to enter.

What does the future of Forex hold?

Without a doubt, the Forex industry has grown exponentially in recent times, as online currency trading continues its growing popularity escalation. As such, the structure of the market has changed due to the expansion of participation in the industry, which is highlighted by the growing number of Forex brokers. Performance within the market has also changed, as the foreign exchange market was traditionally dominated by trade between distributors.

Technology has undoubtedly been one of the keys to this growth and is playing a very important role present and future of this market. The increased ease of entry into the market is largely attributable to the growing number of services and platforms. These have been backed by technological advances, which have had wonderful results, such as reducing the costs of operations, increasing the speed of transactions, and increasing transparency. As a result, e-commerce activity in the currency market has played a crucial role, now accounting for about 70 percent of daily turnover, compared to only 30 percent a decade ago.

Technology will continue to play an inevitable role in the growth of this industry. The extent to which brokers adopt the latest technological developments will play a crucial role as they earn credit for having a growing customer base and increase their market share. Some of the most recent technological advances we can find are trading algorithms and software written on specialized platforms such as MetaTrader, which can advise traders what trades to do. They can also program them to do operations automatically on a live account, making the whole process much more effective.

In line with this technological evolution, the industry has also taken a course towards mobile trading apps. At the same time, developments in online payments further facilitate the business process.

The world is very chaotic, and it is important to keep money always on the move. Forex is an excellent option to prepare for future economic crises that can affect such an unpredictable world. All you need is to invest time in your learning to unlock the potential of this market.

Forex Market

Should I Invest in Forex or the Stock Market?

When we speak about investing we think about the long-term period of holding some assets in expectation their value will increase. Therefore, investing is not the same as trading where we can also go short and use leverage in case we use CFD derivatives. Inverse investment with inverse ETFs is also an option to go short long-term, however, this option is not as extensively used by an average investor.

Now, depending on your goals and analysis you will invest in different assets. Asking this question means you want to follow opinions from other investors. Investors without an analysis of their own now have a dilemma. Advisors may advise going along with some tech companies (Tesla Motors alright), some will praise hard assets and precious metals, others will pump Bitcoin, and so on. You will find many groups with their own story, some are biased, especially those backed up by the government in one way or another.

If we compare forex and the stock market, there are huge differences, but you need to understand forex is defined as the currencies market, therefore you will be holding and investing in assets that are backed up by governments or states. Are there better options than equities or fiat investing? Crypto enthusiasts will say yes, precious metal holders will say yes, others may so no, leading you to the answer is probably in between. Diversification is the best way to reduce risk, so diversify your investments and choose different markets, you do not have to choose between forex or stocks, go wide. 

People love trading stocks, it is like a tradition and the first to come to mind when you see charts. The stock market does now have the capitalization as forex, but it is heavily traded. Liquidity is extreme with certain popular companies. Some facts have to be considered with the equities. Assuming you have the money management set up optimally, with stocks you have a high upside proposition. Companies that are hyped or have products in demand are going to multiply their value many times over whereas you cannot lose more than what is already invested. Timing is, of course, also crucial. 

You will belong to a very fun market with stock investing. There are so many shows and portals providing very interesting information about companies, their products, and strategies in the future. All this is entertaining as you take part in the action. 

Stocks also have dividends, at least some of them. You do not have this passive income with forex. In forex, you have financing swaps that could be credited, depending on the interbank rate and the broker markup, although it is more common to have charges. Companies will have dividends and you get to choose if you want to hold their shares, with forex you will have inconsistent charges or credits and there are just a few currencies you get to choose.

If you are used to stock trading or even investing, you could have some sort of attachment to a particular company. There is no such feeling in forex. Whatsmore, any information about a specific currency is not as easily translated for investing purposes. There is a lot of hidden pointers where could some currency go long term whereas companies are easier to follow. Companies you like and even having some of their products (Apple) gives you a unique feeling when you make money with them. Whatsmore, some of the research you make on a specific company could give you an edge to see trends about to happen others do not. 

On the other side, as mentioned, it is hard to go short with a stock. The options could be with some ETFs since stocks usually follow the index performance. There are situations where stocks are exposed to other factors that could halve its value. You may sometimes hear very bad news about your company and you would not be able to get out without a major loss. If you are trading indexes you will be protected from this kind of influence and of course with forex. Fundamental analysis is very important with stock investing, the news you get is very late info, you are the last to know. If you are not connected to some kind of insider sources, you just get scraps off the table. 

In forex investing you might need some fundamental research, but the kind that deals with reports and politicians’ major attunement with the certain country economy or currency. Stocks require a lot more focus on fundamentals. With forex, you have the big banks’ involvement and manipulation, in the stock market you have the insiders. There is so much going on behind the curtain that drives the stock value you just cannot foresee or control. And you cannot rely on the technical analysis here. Pay attention to mergers and acquisitions, monthly reports (you also need to know accounting and finance to get the underlying picture), how the company capital is managed, have information are they investing and its structure, what the company competitors are doing and so many more these things you have to analyze when you invest with stocks. 

After all, when things go bad with your stock, there are a lot of questions you need to answer before moving on. Are you going to keep holding your shares when it losses 50% of its value? Some companies recover, some do not. If you decide to cash out, are you going to hold the Dollar, Euro, or invest in some other companies? How do you find a recession-proof company? Airlines are killed by the pandemic even though they were holding ok during the previous recession. 

If you are investing in stocks, it is imperative to get out before the recession. But why not turn this downturn into a benefit. Your stock is unlikely to be immune to the recession so try inverse ETFs. Here are some of the ETF symbols that are inverse of the respective indices: SH – S&P 500, DOG – DOW, PSQ – NASDAQ, MRCO – Beanie Babies. 

Forex and currencies are not big movers when we compare indexes or stocks. Are they a “safer” market? Basically, no market is safe for anyone not having a plan and optimal risk management adjusted to work long term. The main advantage of forex trading/investing is that technical analysis is more effective. Some prop traders even completely rely on technical systems. This way they have more control over their emotional state, it reduces the noise, and you rely on the system rules strictly. Forex is more easy-going in this sense, unlike stocks. 

Now, let’s get back to diversification. You should diversify both the market assets and the market types with the buy and hold strategies. Diversification is a part of risk management but it is a separate rule in our book. Investors should know USD, CHF, JPY, precious metals, bonds, and to some even bitcoin are the safe heavens when the markets go down. These assets should be at least 50% of your entire portfolio. The other part can go into more risky assets such as stocks ETFs, crypto altcoins, and indexes. 

Experienced traders that asked this question a long time ago have some tips. The first one is never to fall into groupthink. People hoarding gold have a nice backup, but they do not take action, they just sit on their piles and complain when the price is going down. Have a plan, never go all-in into a single asset, diversify horizontally and vertically. Also, do not just invest, go short and long, and learn to trade too. See what other options are there except forex and stocks, we live in good times since there are so many opportunities now than 10-20 years ago.

Forex Basics

The Best and Worst Days of the Week to Trade Forex

All forex traders have a different amount of time to dedicate to trading. Some of us may only get online a few times a week, while others are on as often as possible in an effort to take advantage of the market’s 24-hour a day operating time. Still, it’s impossible to be online 24/7 because you need time to eat, sleep, and recharge, along with taking care of other daily tasks.

There’s one way around this if you want to be online as much as possible – you simply need to know when the best times to trade and not to trade are so that you can be as productive as possible when you’re online. In addition to knowing the best times to trade, you’ll also need to know when the worst times are so that you can avoid them altogether. This way you can have more free time without feeling guilty while avoiding the worst market hours so that you’re less likely to lose money! It’s a win-win either way, so break out that book you’ve been dying to read, get some chores done, or just take a nap and enjoy having the time to do things you’ve been putting off.

The BEST Times to Trade

  • One of the best times to trade is when two market sessions are overlapping because pip movement tends to skyrocket. Major news events can also cause volatility and lead to a lot of trading opportunities during these times. This includes the US/London session (8 a.m. to noon), the Sydney/Tokyo session (2 a.m. to 4 a.m.), and the London/Tokyo session (3 a.m. to 4 a.m.).
  • The London session usually tends to be the busiest of the three sessions we mentioned above, making the hours of 8 a.m. to noon the most ideal for trading.
  • The beginning of the week can be slow, but things usually seem to pick up towards the middle of the week due to the fact that the pip range widens for most major currency pairs during this time. 

The WORST Times to Trade

  • On Friday, liquidity starts to die down, so it isn’t such a bad idea to have a three-day weekend from time to time.
  • On Sundays, most people are off spending time with their family or relaxing, so there isn’t much movement in the markets. Don’t feel bad about taking Sundays off yourself, as you won’t be missing out on much market activity.
  • Holidays are another time when it’s perfectly acceptable to take a break, especially when it comes to Christmas day. Your broker’s customer support team will likely be offline as well.
  • Anytime major news events are expected to be released, it’s a good idea to avoid the market. Things can get a little crazy during these times, so it’s better not to take chances unless you’re the kind of trader that thrives in this type of market environment.
  •  If you’re experiencing emotional turmoil in your personal life, it’s best to relax and take a break so that your emotions don’t spill over into your trading decisions. This could be anything from a breakup to a death in the family, so don’t try to convince yourself that your feelings don’t warrant a break. 

The Bottom Line

If you don’t want to eat, sleep, and breathe trading 24/7, the best thing you can do is to trade during the most opportunistic market sessions, with the best chance being during the daily London session and during the middle of the week. If you’re feeling upset because you aren’t free during these times, you might want to consider swing trading as an alternative. The worst times seem to fall during periods where many other traders are taking a break, like holidays, Sundays, and Fridays.

Yet another time to avoid trading is when big news releases are expected, as the market can become very unpredictable during these times. Last but not least, you’ll want to avoid trading whenever you’re dealing with emotional issues, otherwise, your emotions might cause you to make avoidable mistakes that can cause you to lose money. After all, it’s better not to trade at all so that you aren’t losing money than it is to trade and lose out.

Forex Fundamental Analysis

Impact of ‘Commodity Prices’  On The Forex Market


Thanks to international trade, some countries prosper disproportionately than others. The disproportionality in the balance of payments is mostly owed to the type of exports a country produces. Countries that are net exporters of precious commodities tend to have a better balance of payment than net importers. For this reason, the fluctuation of these commodities tends significantly affect their economy.

Understanding Commodity Prices 

A commodity can be defined as any physical product that can be traded in any form of exchange. With commodities, there is little differentiation, if any, regardless of where they originate. For example, we can say that an ounce of gold from South Africa is the same as an ounce of gold from Australia.

Naturally, different parts of the world are endowed with different types of natural resources. Furthermore, since commodities are inherently used to produce other goods and services, their value entirely depends on their rarity and demand. Take Copper and Wheat, for example. Both are commodities. But you cannot compare the value of a kilo of copper and a kilo of wheat. Copper is a rare and limited precious commodity, while wheat is readily cultivated. Therefore, a country that is a net exporter of copper will have a better balance of payment than a country that is a net exporter of wheat.

Furthermore, let’s take an example of country A with the largest deposit of commodity X in the world. In this case, country A is basically a monopoly; if it wanted to control the commodity prices, it would reduce the production of the commodity. By doing so, the demand for commodity X would exceed the supply, which means that country A will receive higher prices. Now, imagine a scenario where vast deposits of commodity X are discovered in country B. It now means that the supply of commodity X in the international market will increase, and as a result, the price of commodity X will decrease.

For countries whose economies heavily dependent on commodity exports, the fluctuation of commodity prices heavily impacts the earnings. Furthermore, the changes in the demand for these commodities also affect the GDP of these countries. Note that the price of these commodities also varies depending on their quality. For commodities which are used for trading in the future market, the minimum quality accepted is called the basis grade,

Using Commodity Prices  in Analysis

The commodity prices usually tend to impact the economies which heavily rely on the export of commodities to fund public expenditures.

An increase in commodity prices means that the producing country will receive more income. In turn, this translates to increased wages for workers involved in the production or mining of the commodity. Since households are well compensated, their welfare will significantly increase. Note that for countries heavily dependent on commodity exports, these commodities’ mining or production usually employs a majority in the labor market. Therefore, an increase in wages will significantly impact the changes in the aggregate demand in the economy for consumer goods and services.

This increase in demand tends to lead to an increase in the production of consumer goods. As a result, there will be an expansion of the consumer industry. More so, the expansion of these sectors leads to more job creation hence lowering unemployment levels. Other sectors of the economy will also benefit from this increase in wages. The real estate sector will also flourish since the increase in wages means that households can now afford to fund the purchase of homes or qualify for mortgages.

Conversely, a decline in the prices of commodities means that the labor involved will be compensated lesser. The resultant effect will be a contraction in demand for consumer goods and services since households will be forced to prioritize expenditure on essential products. Consequently, the consumer discretion industry will contract as producers scale down operations to match the decreased demand. As a result, some jobs in these sectors will be lost, contributing to increased unemployment. Therefore, we can see there is a direct link between the changes in commodity prices to the growth of the domestic economy and changes in the domestic employment levels.

Let’s look at another scenario. Say the economy of country A is intertwined with that of country C – country A imports multiple commodities from country C. Since country A’s economy heavily relies on commodities, the prices of these commodities increase, which means that the balance of payment of country A improves and that its citizens are well off. Thus, country A can afford to import more products from country C. therefore, country C’s economy will prosper. Increased imports from A means that production in C will increase, expand its economy, and improve labor market conditions.

Conversely, when commodity prices fall, it means that economic conditions in country A might deteriorate. Consequently, imports from country C will decrease, leading to either C’s economy to contract or a slowdown in its growth. This is usually the case with Australia and New Zealand, whose economies are close to each other.

Source: St. Louis FRED

Therefore, commodity prices do not just affect the economy of countries whose exports are majorly comprised of commodities.

Impact on Currency

The impact of the changes in the commodity price in the forex market is pretty straightforward.

When a country exports a commodity to the international market, it is paid in its currency. Therefore, when the commodity prices increase, it means that the domestic currency will be in high demand. Importers of the commodity will have to convert more of their currencies into the domestic currency. As a result, the value of the domestic currency will appreciate relative to other currencies.

On the other hand, a fall in the commodity means fewer amounts of the domestic currency will be required to purchase the exports. Consequently, the domestic currency will marginally depreciate relative to others.

Sources of Data

In Australia, the Reserve Bank of Australia publishes the Index of Commodity Prices report monthly.

Source: RBA

Trading Economics has a comprehensive list of commodity prices in both the spot and futures market.

How Commodity Prices Data Release Affects The Forex Price Charts?

The latest publication of the Index of Commodity Prices report by the RBA was on October 1, 2020, at 6.30 AM GMT and can be accessed at The release of the commodity prices is expected to have a low impact on the AUD.

In September 2020, the YoY the Australian commodity index decreased by 5.8% compared to a 10.2% decline in the YoY index for August 2020.

Let’s see if this release had an impact on the AUD.

GBP/AUD: Before Commodity Price Release on October 1, 2020, 
just before 6.30 AM GMT

The GBP/AUD pair was trading in a neutral pattern before the publication of the Australian commodity index. The 20-period MA was flattened with candles forming just around it.

GBP/AUD: After Commodity Price Release on October 1, 2020, at 6.30 AM GMT

The pair formed a 5-minute bullish candle when the commodity prices were released. Subsequently, the 20-period MA steadily rose with candles forming above it, showing that the AUD weakened against the GBP.

Bottom Line

In Australia, commodity exports account for about 50% of the export income. While this report plays a vital role in forecasting the Australian economy, it is a low-impact economic indicator in the forex market.

Forex Market

Is the Forex Market Better Than Other Markets?

Let’s discuss why investing in forex (the currency market) and not in other types of products (stocks, warrants, CFDs, etc.) or other markets (IBEX, DAX, NYSE, NASDAQ, etc.) is arguably the best plan for modern traders. Before diving headfirst into Forex, we need to cover a few topics first…

What is Forex? What is the main advantage of Forex? It is, with a marked difference from the others, the largest market in the world where the traded product is currencies. The daily trading volume amounts to a whopping $6 trillion ($6,000,000,000,000).

Why does this interest us? What brings us a large volume of transactions? The more liquid a market is, that is, the more money is traded in the market, much less difficult for us to enter and exit at the price we want (are always willing many sellers and buyers of each price level).

The more volume is negotiated, the more difficult it will be for someone to control the market, we will be “more protected”, although we will have to be attentive to the movements that hedge funds can make (groups of capital-intensive investors, which at certain times may move the market in their favour) to go in the same direction as them. Another time we will discuss how to read the market and see where the big investors buy and sell.

Commissions, how much do we pay on the stock exchange versus FOREX? Bank commissions will be less aggressive on our money the more money we have. Therefore, if we are a small investor, entering the stock market will drown us before the first operation.

On the other hand, in forex, you will pay 2 or 3 market points, a variable commission for each trade you make. It’ll always be cheaper than doing it through a bank. Depending on the amount of capital, these 2-3 points can be reduced to 0.5-1 market point.

To view it numerically suppose that you choose ING direct (one of the cheapest banks) and we choose a standard forex broker (2 pips commission). We will both invest €10,000 in the market: 


10.000€ * 1.25% = 125€ of commissions.

As compared to…

Standard Forex Broker

10,000€ is equivalent to buying a mini-lot of forex, each pip of a mini-lot is 1€.

1€ * 2pips = 2€ commission.

Therefore with the same amount of money invested we pay very different commissions, in ING when investing 10,000€ in shares, we take 125€, in Forex we are charged only 2€. This is considering that in Forex we leverage and take advantage of the advantages of doing this strategy.

Other Advantages

The forex market is open 24/7, less on weekends (since, for example, when it is 8:00 AM in Europe, the Japanese are closing their day, and when it is 14:00 – 15:00 in the afternoon, they open the American markets, until 10:00 at night. Therefore, we have a wide range of possibilities). There are plenty of currencies you can trade with (although there are about 12 more traded pairs, with the extra liquidity this represents).

It’s practically impossible for a currency to go bankrupt, especially if we trade in the major currencies, instead, if we buy Apple or any other company, there’s always the risk of bankruptcy, and if not, look at Lehman Brothers, with more than 150 years of history, and that in 2008, he filed for bankruptcy.

Forex Market

When Does Latency Become an Issue in Forex Trading?

It is important that before we ask that question, that we understand what latency actually is. You may have heard the term if you have ever played a video game online and if you have most likely experienced the consequences of it. Latency is simply defined as the delay or the lapse in time between a request and a response. When does this lapse become an issue in Forex and how can you overcome it? Read on to find out.

If we go back to the video game idea, when you press button A, the latency is how long it then takes for the action to be performed by the character. In a trading sense, the latency is the amount of time that it takes for your action to be executed and to interact with the markets. Latency will affect your ability to read the markets, the ability to act on any changes and actions, and pretty much everything else that you do.

The issue of latency has become more and more relevant as technology progresses. You will often now see brokers advertising their latency and execution times, especially if they are pretty low. #For the normal user, this means very little to him, but for those looking to get the most out of their trading and to squeeze every single penny out of their accounts then it can be relevant. Now that technology is far better, the need or want for better latency and execution ties is also greater.

Latency is prevalent in everything that you do when it comes to trading, especially when using a trading terminal such as MetaTrader 4 (there are many others available too). Each and every aspect of your trading is influenced by the latency.

The magical flow of market data being streamed to your trading terminal is affected by latency. The market starts out at a marketplace or exchange, it is then passed on to the trader who is then able to look at the data within the trading platform of their choice. The speed that this data is transferred between the exchange and the users terminal is often measured in milliseconds. Latencies can be found within these streams, latencies can take place at the exchange or market-based servicers, the broker that you are using can cause additional latencies, your own internet connection can of course create latencies and is one of the larger reasons for having them, and your computer hardware and software can also cause latencies within your trading operations.

One of the more common problems when it comes to latency with the market data is known as data lag, This is where there are problems or inefficiencies with the data stream, many of these issues are completely out of yours as a traders control, such as problems with the hardware at the exchanged, in addition to bottlenecks with the internet connections which can happen without any sort of warning and won’t be recognised by the trade or those monitoring the services for a period of time.

There can also be some issues when it comes to order routing and execution, these are also the areas where latency can have the biggest effect and can potentially be the difference between a profitable or losing trade. Being able to rely on consistent order filing and low slippage on those order fills is vital for a profitable trading experience and this all relies on the data actually arriving at the market ahead of the competition.

The general route of an order and the execution goes along the lines of the order being entered by a trader remotely on an online trading platform, the order is then received by the broker, the order is then relayed by the broker to an exchange or market. The order is then placed in a queue at the exchange or market. That is generally how it goes, however during each of the four states mentioned above, there’s a chance that latency can cause some issues with this process including some delays. The problem with latency in this situation is that any sort of delay can mean that the order will be filled, but it will be filled at a price other than what it was executed at, so it could give you a much worse opening price than originally planned.

So latency can have an effect on your trading. It can be the difference between making a profitable trade or having a loss. There are, however, some things that you are able to do that can help you to manage the latency that you receive. Of course, some of it is completely out of your control, with very little you can do, but there are some things that can be done to help. For larger more institutional firms, there is something known as DMA which stands for Direct Market Access, this enables them to simply bypass a number of different stages of order executing. For a DMA order, there is simply the order being placed by the trader via a connection to an exchange or market, the order is then placed in a queue ready for execution at the market or exchange. So you can already see that half the stages are gone and so there is much less room for any latency to creep in and cause issues.

The problem is that this is not really relevant for retail traders as DMA services are quite limited. As technology is progressing through, more and more brokers are looking to bring this sort of service to retail traders, claiming to offer direct access to the markets, but until it is properly available for retail traders, there are a few things that you could do to try and help your own latency issues. Some of these things include ensuring that you have up to date computer hardware that can easily handle the running of the required software, regularly perform internet connectivity tests and ping servers to ensure that your internet is remaining stable, you should also evaluate your trading platform on a regular basis, to ensure that there are no lag issues in the updating of the charts or any other features.

Latency can be a real issue when it comes to trading and it is something that you want to ensure that you do everything that you can to keep low. It can be the difference between a profit and a loss, so do what you can to reduce it. Check your hardware, your software, and your internet, if your broker constantly has slippage and latency issues then you could potentially start looking for one that offers slightly better latency to the markets. Just be sure that you regularly monitor what latency and lag you are getting so you can be on top of your game and to ensure that you are getting the most out of your trade executions.

Forex Psychology

Transformation of the Trading World Through Jack Bogle ETFs

Mahatma Gandhi said that when you try to change the world first they don’t notice you, later they laugh at you, and then they attack you, and finally, your enemies embrace the new world you have created. When you try to change the world first they ignore you, then they laugh at you, then they attack you, and finally, your enemies embrace the new world you have created.

This pattern is repeated in revolutionaries who have transformed entire industries, like Henry Ford did with automotive or Steve Jobs with telephony and music. Similarly, Jack Bogle transformed and democratized over four decades one of the most elitist and restrictive industries in history, that of asset management. Over the course of four decades, Jack Bogle transformed and democratized one of the most elitist and restrictive industries in history, that of asset management.

On January 16, John Clifton Bogle died at the age of 89. Jack, so was he called, was little known outside the investment industry. However, its impact on savers around the world has been far greater than that of any other private or public initiative: The revolution that Bogle started 40 years ago means saving some $155.75 billion a year to investors around the world (see Annex 1 at end of the article).

Saving around $155.75 billion a year to investors around the world.

Throughout his unexpectedly long and rugged life, Bogle managed to democratize the exclusive asset management industry, dominated by large banks and high barriers to entry, to make it a service available to everyone regardless of the size of their heritage.


Bogle didn’t have it easy from the start. His family was ruined during the Great Depression of the 1930s, shortly after his birth in 1929. The lack of opportunities during the Great Economic Depression of the 1930s caused his father to fall into alcoholism, which eventually led to his parents’ divorce. But despite the difficulties he had as a young man, he managed to get into Princeton University on a scholarship.

When he remembers how hard his youth years were -combining temporary jobs with studies-, Jack joked that he felt a certain “pity” for his wealthy and carefree Princeton classmates, for they had not been given the opportunity that he interpreted as his great advantage: to learn to face real problems and to overcome serious difficulties from a very small age. He was unaware at the time, but this ability and attitude to the problems would reveal, two decades later, crucial when the time came.

Its great advantage: learn to face real problems and overcome serious difficulties.

Its first and successful stage in fund management -within the Wellington Fund- coincided with “the go-go era”: the big bullish market of the 1950s and 1960s, in which the stock market rose by an average of 14.5% a year. The years passed and his «skills» as a fund manager began to be recognized, becoming President of Wellington in 1970. It is then that motivated overconfidence as he himself confessed to his great previous success led him to realize a good number of unfortunate decisions. Later, Jack would refer ironically to his “Wellington years” in these terms:

“It was a time when it was easy to seem intelligent.” – Jack Bogle

Indeed, seeking to further increase the profitability of the fund, he incorporated an external manager who excessively concentrated his positions on a few very speculative stocks. Thus, when the first of the two major recessions that would hit the United States in the 1970s hit, the fund lost more than 50% of its value. And when the same scheme was repeated in the next recession of 1973-74, Jack was definitely fired.

It wasn’t a good time to lose your job. In the midst of an economic recession, with 44 years and six children to feed, Bogle lost his job but also became seriously ill. Several heart attacks brought him to the hospital frequently. A doctor who treated him said him in 1974 that he had “little time” left, and that the best thing was to retire to spend «the few years of life that remained» in peace to say goodbye to his family.

With 44 years and six children to feed, Bogle had not only lost his job but also became seriously ill. Several heart attacks brought him to the hospital frequently. However, Jack did not retire, but it was in those extreme circumstances of uncertainty and apparent failure, during 1974, that Bogle had what we might call an epiphany that would eventually change the world of investment in the coming decades.

Influenced both by the ideas of the Nobel Prize winner Paul Samuelson on the impossibility of beating the markets in the long term and by his experience in the damage that produce in the investor the accumulation of commissions in the long term [see Annex 3 below], in 1975 it occurred to him to take advantage of the well-oiled back-office of the manager Wellington -together with the saving of not having to pay this time any manager to select the «best» actions-, to convince the new managers of the manager of his idea; and launch the first investment fund that would replicate the behavior of the market as a whole. Thus, on December 31, 1975, the first index fund with an initial capital of $11 million was born.

First, They Ignore You and Laugh at You

Like Jack, the first index fund didn’t have it easy at first either. The press and the rest of the professional industry considered it either nonsense that did not deserve the slightest attention, or directly a blatant business error that would be studied in business schools as an example of what never needs to be done.

Paul Samuelson was one of the few who appreciated him and recommended him within a few months of his birth (he too received criticism for it, more would be lacking). Indeed, despite the efforts made to market it during its launch, within a few years the refunds began. The fact that the next bullish stock market did not start until the second half of 1982 did not help, again underlining the weight of chance in timing when it comes to launching a business idea, however good it is in itself and well-executed it is.

About to be liquidated for lack of subscriptions in the early 1980s, Wall Street was known at the bottom of Bogle as “Jack’s madness” or “guaranteed mediocrity fund”. Practically no one believed then that a simple rule of stock selection based basically on weighting the index companies according to their market capitalization -as most indices do-, be able to outperform in profitability the sophisticated stock selection strategies of thousands of highly intelligent and prepared managers, dedicated every day of the year to seek and select the best stocks from the thousands available.

Then They Attack You

But as the 1980s progressed, the facts slowly began to prove Bogle right. Private jokes and jokes against him turned into surprise and disbelief on the part of his colleagues. After a decade and a half, its index fund began to rise in the ranking, revealing itself as one of the most profitable among all the funds and investment vehicles available in the United States. Bogle was attacked as anti-American (!) for not promoting the search for excellence in the active selection of the best actions.

Colleagues who made fun of him behind his back couldn’t believe it. What initially began as a footnote anecdote in the economy and investment books, was escalating in impact to generate a heated debate in the management industry during the 1990s. The most benevolent attributed their success to sheer luck. Others directly attacked Bogle as anti-American (!) for not promoting the pursuit of excellence in the active selection of the best actions. Many industry analysts began to say that passive or indexed management was a cancer not only for the financial markets but also for the country’s economy; because by ignoring the process of discovering anomalies in prices by investing in indices, the market would eventually stagnate and lead to a static price for all the shares (an argument which has, incidentally, been rescued again recently). These attacks have continued to be repeated cyclically since then and even today, almost three decades later, there is still debate within the industry about how “bad” indexation is or is not (especially for the interests of the industry, of course).

Many industry analysts began to say that passive or indexed management was a cancer not only for the financial markets, but also for the country’s economy.

In the midst of a debate about whether indexation was good or bad, whether it would continue to work or not in the future, his health problems returned with greater intensity in the early 1990s, forcing him finally to undergo a heart transplant in 1996.

Shortly before the operation and with little chance of survival (again the doctors did not give him much hope), he gave up command of the manager he had created, Vanguard, to his second-in-command then, John J. Brennan. After surviving the operation, not knowing how long he had to live and encountering unexpected friction with the new CEO, he left the Vanguard management. He then created and took over the management of the Market Research Centre that had been named after him since 2000.

Finally, You Win

But his seed had already taken deep roots and the tree, the forest, was already unstoppable. More than four decades after its launch, Jack’s first “fund-madness” (now the Vanguard Total Stock Market Index Fund), which started with just $11 million and was about to disappear, has reached more than $800 billion in assets under management (higher than the GDP of Switzerland and similar to that of the Netherlands). Along with the rest of the funds launched afterward, Vanguard is the second-largest manager in the world (just behind BlackRock) with $5.3 billion (Anglo-Saxon trillions) in assets under management; In the United States, 50% of all funds marketed are index funds (while in Spain they only represent a surprising 1%).

The “Vanguard Total Stock Index Fund”, which started with just $11 million and was about to disappear, has reached more than $800 billion in assets under management (higher than Switzerland’s GDP and similar to that of the Netherlands).

The superiority of indexation when it comes to investing has become incontestable, and fewer and fewer choose to pay more commissions in exchange for a slim probability of surpassing the profitability that the market itself will give you in the long term. Or as he said, why strive to find the needle, being able to buy all the haystack much cheaper.

The Legacy of Bogle

Jack leaves us two big contributions to the investment world and a reminder. He first applied the common sense that any entrepreneur with his feet on the ground applies in his business: the future benefits are hypothetical and unknown, but the costs are known and real (see Annex 3).

“Investment is the only industry in which the more you pay for what you want, the less likely you are to get it.” – Jack Bogle

If we recall that the long-term profitability of the stock market is limited to about twice the average GDP of developed countries, then opting for a low-cost index investment can double our long-term equity compared to the more expensive options offered by the management industry. Private banking clients, for example, feeling special thanks to the treatment they receive and the exclusivity of the products offered to them, would be paying with half of their potential future wealth to buy products that are better for us, but they are wrapped in a more attractive and expensive “wrapping paper”. This is the immense impact that the commissions have when it comes to investing and that Bogle never tired of repeating for 40 years.

Bogle’s second legacy is far less evident to the naked eye. If active management pales in results against index-linked investment, it is not only because of the difference in total costs. It is because indexing, as an investment strategy, is better adapted to the nature of financial markets than most of the strategies used by active managers. (Central theme of the previous post «The hidden message of indices»).

Indexation, as an investment strategy, is better adapted to the nature of financial markets than most strategies used by active managers.

Indeed, if financial markets were to some extent predictable, those capable of exploiting such predictability would consistently and persistently succeed in outperforming indices by a sufficient margin that could justify higher fees. However, empirical evidence shows that surpassing the indices is a transient and not persistent phenomenon (in fact, those that have surpassed the index in recent years are the funds that most likely will not get it in the future!). So if markets are unpredictable, what kind of strategies are best suited to that nature?

Bogle had a clear answer from the start. Concave strategies (see Annex 2) work best the more predictable the dynamics of the environment in which they operate. Conversely, the more convex a strategy is, the better results you can achieve in unpredictable environments. Bogle’s vision was to realize, albeit intuitively in 1974, that if markets are unpredictable, then convex strategies will have a more favorable chance to survive and «doing better» in the long run. And that indices are a cost-effective implementation of convex strategy. The more convex a strategy is, the better results you can get in unpredictable environments.

His big business idea was to package the convex indexation strategy (resistant to our blindness to the future), pull down the price of the product (incorporating the essential importance of costs in the long-term profitability), and make it available to everyone. Bogle knew that as long as the competition is dedicated to offering attractive, sophisticated, and especially expensive concave strategies; they will be able to win some sprints in the short term (there are many funds that exceed the index to a year), but not the marathon of the long term (just 5% get it at 10-15 years). And it is not because he was a genius, but because he knew how to accept and transform into a viable product the fact that we cannot predict the future of markets.

His big business idea was to package the convex indexation strategy (resistant to our blindness to the future), pull down the price of the product (incorporating the essential importance of costs in the long-term profitability), and make it available to everyone.

The Human Side of a Revolutionary

As for Bogle’s reminder, it’s about our tendency to overestimate what we can achieve in the short term and to underestimate what we can achieve in the long term. It is in the long term that the power of exponential capitalization can materialize. Perhaps walking, running, or lifting today 1% more than yesterday may seem an irrelevant and boring change, but in a few years, it can produce extraordinary changes in our state of form. The same as consistent investment in the long term. Anodyne in the short and medium-term, but explosive in the long term.

As for Bogle’s reminder, it’s about our tendency to overestimate what we can achieve in the short term, and not to take into account what can be achieved in longer periods of time.

We tend to forget what we can achieve little by little; perhaps because of the growing need for immediate satisfaction that permeates our culture. And just focus on what we could get right away. In investment, it is much more popular a book or «trading course» on how to get 20 basis points a day on Forex, that others, such as those Bogle wrote, remind us that today is always the best time to plant the small seed of the tree that will give us shade in 20 years time.

Our expectations for the short term are usually inversely proportional to its possibility of realization. Meanwhile, we tend to dismiss the great achievements that only the long term can give us because today they seem an impossible task to achieve. Bogle did not start by trying to change the industry from one year to the next, but by planting a seed that would flourish decades later only if he endeavored to water and care for it daily. And he did it without even knowing if he’d still be alive the next month so he could keep taking care of the plant. If you want to move a mountain, one day you have to be the first to start digging-even with a spoon you can lose next month.

Jack Bogle’s life is one of those stories that moves and inspires us on various levels. When he could be considered unsuccessful and about to die, instead of giving up, he continued to struggle to start building what he considered most honest and valuable, without any guarantee of success or even the privilege of remaining alive. Without fear of recognizing that the first part of his life (for him then, his entire life) had been pursuing an illusion, striving in the wrong direction. Jack was always loyal to the search for the truth; he made a clean slate just as doctors gave him up and his family needed him the most.

Interestingly, despite Bogle’s enormous added value to society, his name will not be remembered for appearing on the Forbes list of millionaires. When he dies, he leaves his family an inheritance estimated at $80 million. Not a negligible amount, but it pales in comparison to the wealth that other giants in the industry have achieved. Like Warren Buffett ($83.5 billion) or his most direct competitor, Abigail Johnson, the CEO of fund manager Fidelity. Abigail, basically competing with Vanguard, has accumulated personal wealth of more than $17 billion in many fewer years than Jack.

But that didn’t matter to Jack. Of humble and friendly character, his personality never fit within an industry characterized by concentrating the greatest amount of pride per square meter known. When asked about the estate of his competitor Abigail, Jack replied laughing that he would not know what to do with so many “problems”. Bogle, generous even in his comments, reminded us with humility and humor that, beyond a reasonable threshold of personal wealth, increasing the wealth only leads to complicating our lives further.

Bogle, generous even in his comments, reminded us with humility and humor that, beyond a reasonable threshold of personal wealth, increasing the wealth only leads to complicating our lives further.

Jack never wanted to be the richest man in the cemetery. On the contrary, it was much more ambitious: It gradually transformed the most elitist and exclusive industry into an almost public service, helping millions of people achieve their economic goals, saving in the process $2 billion (Anglo-Saxon trillions) to millions of investors. With a sword of Damocles announcing his immediate death for most of his life, he preferred always to focus on building for the long term, continue watering the plant as long as life allowed, and leave a mark.

It was much more ambitious: It gradually transformed the most elitist and exclusive industry into an almost public service, helping millions of people achieve their economic goals, saving in the process $2 billion (Anglo-Saxon trillions) to millions of investors. And he sure did.

Annex 1: Bogle as Benefactor of HumanityVanguard

This has pushed the entire industry to lower its average commissions that it gained in popularity and volume of managed assets, leading it to a transformation today more profound than ever. This has been seen especially during the last two decades, growing each year and continuously, the percentage of assets managed passively through low-cost vehicles, mainly through index funds and ETFs.

According to Willis Towers Watson, of the approximately $81 trillion (trillions) of managed financial assets in the world, 21.6% or about $17.5 trillions are currently invested in vehicles that give exposure to indices. Therefore, if you compare an average total management fee of 1% on traditional vehicles (including investment funds and hedge funds, much more expensive), with the total average costs around 0.11% charged by Vanguard and its low-cost competitors, concludes that the Bogle revolution is saving investors about $155.75 billion a year. Every year, year after year.

That is money that first stays in the pockets of millions of people who save more efficiently for their retirement, their children’s studies, or the house of their dreams. But it’s also money that the management industry stops earning, so in certain circles, Bogle is not exactly a highly admired or popular character (something he didn’t care about). If we add the cumulative growing impact of the shift from active to passive management over the past three decades, we could be talking about total savings for investors (or loss in profits for the industry) around the $2 trillions referred to in the title of this article; almost twice the GDP of Spain.

Annex 2: Concave and Convex Strategies

The philosopher and trader Nassim Taleb classified investment strategies into two large families; concave and convex. The former try to understand empirically what happens in the markets, assuming hypotheses about their behavior in order to develop investment models with a high probability of success. During the time when such models are in sync with the dynamics of the markets, they work very well, giving sustained returns that make the funds that market them very popular. Until the underlying dynamics change or some of these hypotheses fail unexpectedly and the fund fails; ruining its investors, but not its managers (remember the LTCM fund in 1998, for example).

Conversely, convex strategies assume that it is not possible to construct predictive models about the future of markets that are accurate enough to be persistent, So the most efficient strategies will be to limit to the maximum the very likely losses, while letting the benefits run as much as possible when they appear. This produces strategies with a low probability of success (many small losses), but with a large profit on the few successes (it is the basis of option theory in the Venture Capital funds, for example). As there are numerous small losses before a high return comes, they are less popular among investors than concave strategies because nobody likes to start losing money.

Annex 3: The Impact of Commissions

The industry underestimates the huge cost impact on its customers. In part thanks to the volatility of the markets, it allows us to easily believe that -2% a year hardly affects when the stock market moves (due to its natural volatility) double up or down in a week. In other words, it tacitly sells the false belief that that -2% per year is “easily compensated and recoverable” by the talent of managers, thanks to the apparent abundance of opportunities that the volatility of markets offers every day.

Just so you know what the importance of costs in long-term investment, suffice it to remember that an annual difference of 3% in total costs (which is normal if you choose to hire the services of a private bank when managing your assets, compared to a globally diversified portfolio of cheap index funds) means in 25 years a loss of half of the capital that could accumulate.

Mr. Buffett, in the last letter to the shareholders this year 2019, expressed this same idea recalling that if at the beginning of his career he had invested 1 million dollars in an index fund like Bogle’s, today he would have $5.3 billion (!). But if I had chosen an active fund with only a 1% extra management fee, that figure would have been halved.

Forex Market

Structure of the Global Financial Market

What is the global financial market and what comprises its structure? Who participates in the financial market, what is its interaction, and how does the system function? Economic indicators of financial markets are key information for Forex traders, so let’s take a look at the actual structure of the global market as a whole.

Why is theory necessary? The term “financial market” cannot be called as one that the novice trader should first become familiar with, but nevertheless, it is necessary to understand the structure of the financial market. Understanding how the financial market works and how its participants interact with each other can lead traders to new investment opportunities, help optimize costs, and minimize risks. If one is not knowledgeable of the theory, it is not possible to become a practical professional trader. Spend 5 minutes reading this article. We hope it comes in handy!

Structure of the Global Financial Market

When you read about financial markets, do you know what you’re really dealing with? Banks, insurance funds, pension funds; the list of structures that make up the financial market is long enough. From this article, you will learn:

  • What types of financial markets exist.
  • Who participates in financial markets and how they interact with each other.
  • Which assets are subject to an interaction between market participants.
  • What functions financial markets play.

While approaches to determining the structure of the financial market and the role of each participant are different, this article will help you get an overview.

Fundamental Basis for the Trader or Everything in Due Time

If someone tells you to understand the term “financial market”, its structure and functions are essential for each trader, don’t believe it. That’s not the case. However, we can’t say that this information is unnecessary. At first, we didn’t study from A to Z on Forex. We strive to acquire the necessary skills independently. Only when we accumulate some experience by trial and error do we resort to knowledge.

It can be a webinar, a negotiation course, educational articles, or A to Z books on Forex. Depending on the level of our experience, we choose this or that type of information. If a beginner trader takes advantage of reading about 2 types of financial market analysis, fundamental and technical, a more experienced trader might be interested in learning more about the basics of trading, that great thing that is the currency market, your workplace. As they say, all in good time.

Structure of the Financial Market

All national and international markets make up the financial market. It incorporates banks, funds (pension, insurance, currency), and many other economic institutions that help accumulate and redistribute money.

As a complex system, the financial market has a multilevel structure that includes 5 market segments: foreign exchange market, credit market, insurance market, investment market, and securities market. As you can imagine, the Forex currency market represents one-fifth of the financial market.

1. Foreign exchange market: Forex

It is the market in which the question of the interaction of its participants is the currency and everything related to its equivalent. Derivative instruments can also serve as trading instruments (e.g., foreign exchange CFDs). Depending on the form, the agreement may be effective and not effective, according to the term of the transaction, the market may be current (spot) and derived currencies. Derivative market contracts may be:

-Forward. A forward contract is personalized between two parties at an agreed price, the intermediaries of the operation are the banks, we have no guarantees.

-Futures. Futures are priced on the basis of exchange rate movement, the intermediary is an exchange, the guarantees are the reserve deposit.

-Currency options and swaps.

Foreign exchange transactions can be carried out both on the stock exchange and on the OTC market (Interbank Foreign Exchange Market, Forex).

2. Credit market

In this market, there is a distribution of funds from those who have them to those who do not. Unlike in the investment market, the credit market is much more complex (it maintains a three-tier structure) and has stricter requirements for participants to meet their obligations. Levels of the credit market:

The central bank and the commercial banks. Here, the central bank acts as a regulator. Through loans, the central bank regulates the supply of money, supports banks facing temporary problems, maintains the liquidity of the banking system, and covers cash gaps.

-Commercial banks and their clients.

-Credit relationships between legal entities.

3. Insurance market

We’re talking about a separate segment because insurance companies are the world’s leading investors. By providing various types of insurance services, accumulate money, capital that can temporarily invest in metals, deposits, and stocks.

4. Investment market

It is a system based on partnerships and free competition between investment operators. It has a lot in common with the stock market, where funds are invested in stocks, but it could still take the form of equity investments, fixed assets, etc. In short, the investment market provides money to invest in any type of asset for the purpose of subsequent gains for a period of time due to an increase in the price of an asset or dividend payments.

5. Securities market: securities

It suggests a complex interaction between market participants in terms of issuance and the circulation of securities. Securities may be traded on both exchanges and beyond. In exchanges, you can only exchange registered assets that meet certain requirements. Assets can be:

They can be simple actions and preferred actions. Simple shares generally have voting privileges, while preferred stockholders may not. The dividend return is floating and may not be paid by the decision of the shareholders or in case of loss. Preference shares receive a fixed dividend from the company that does not give voting rights at the Shareholders’ Meeting.

Bonds can be (issuer – company), municipal (issuer – local authorities), state, international (for example, Eurobonds). Bonds can also be preferential (the holder will be among the first to receive money during the liquidation of the company) and subordinate (more profitable, but riskier). There is a gradation in the coupon rate and yield at maturity.

Indices are consolidated instruments consisting of a basket of securities, which reflect average price statistics for the sector or for the industry in general.

Derivatives are derivative instruments, which form a multi-level securities system.

ETF securities. An ETF is an indexed fund whose shares (units) are traded on the stock exchange. The investment structure of the fund can be any one, from securities of companies in a particular sector to a diversified portfolio, including shares, gold, etc. Unlike investment fund shares, it can carry out any transaction with ETF shares, as well as with values. As you can imagine, the Forex currency market represents one-fifth of the financial market.

There is another more general, but more accurate, classification of the world market: the foreign exchange market, the commodity market, and the stock market. The first includes all transactions with any currency (including cryptocurrency), the second includes everything related to securities, the third provides trading of metals, oil, goods, and services, including non-conventional investments (antiques, art, etc.). The three markets are connected by credit, investment, and other relationships.

Forex Market

Why are Forex Traders Losing Money in 2020?

What are the reasons why the vast majority of traders are losing money in 2020? It’s a pretty interesting question and the answers help you to better understand the market and give you a focus on what you should and should not be doing. Here, we’ve provided a summary of the most common mistakes seen within the industry this year.


  1. Insufficient training to start trading
  2. Poor approach and lack of perspective
  3. Emotions interfere with your trading
  4. Do not limit losses
  5. Making predictions
  6. Trading scams
  7. Lack of persistence

Insufficient Training to Start Trading

More than 70% of the traders who start bankrupt their accounts in the first month. This fact says it all. It’s not that they lose money, it’s that they lose all their money. It is curious as for any other kind of professions as can be a doctor, teacher, dentist We dedicate years and to do trading you turn on your computer, watch some free videos on the Internet and you already think you can make a lot of money in one or two days. ¡ Ou, mama!

This does not mean that you have the need to spend years studying and training until you can start, only that your training takes time and doing things right beyond running and running and burning your account.

Poor Approach and Lack of Perspective

As you well know, there is too much information on the Internet about the study of graphics (chartism) and technical analysis. Lots of copied and pasted information that you start to devour and that many people apply over and over again. This has two consequences:

The vast majority of people lose money because they apply the same thing and this ends up making those patterns not fulfilled in the market. This way or approach to analysis is very subjective and makes you not know if what you’re learning or applying works. What we mean is there’s a lot of people teaching how to trade from twenty-page manuals without opening a real account or without results. There are few barriers to entry in terms of training and most are very theoretical.

All this, coupled with the idea that you can open a $100 trading account and take it in a couple of days at $1000, is a fateful cocktail. Recently someone asked me if I could earn 5 euros a day with 100 euros. We are talking about 5% daily. My answer was “How many days?”. You can earn 5% in one day, but you can’t expect to earn 5% or 1% every day. You know why? Because profitability in such a short term is not up to you. I like to say this because the other person’s reaction is usually to think “Okay, you don’t know, but you can”. After a while, that person usually remembers you. Sometimes the human being needs to be wrong to realize things.

All I can tell you about all this is that you need to see this business objectively and with a real perspective.

Emotions Interfere with Your Trading

It’s normal that you don’t feel the same when your account goes up as when your account goes down. We have emotions and that you feel them is normal. The problem comes when you do the opposite and your emotions interfere with your operations. For example, your adrenaline goes up and you start to raise your exposure and the size of your positions or, worse, you’re losing and you start doing surgeries without a beat. It works something like this, “Wow, I’ve run three operations and they’ve all been positive. From now on I’m going to double my tickets”. Or so, “The last two operations have been negative, abandonment”.

You need to create a methodology that makes you make cold decisions. This I have achieved with algorithmic trading, I focus on creating systems and evaluating them, measuring them. And once they’re running, I just supervise them. In this way you gain x1000 peace of mind and feel relaxed, knowing that you do everything that is in your hand.

Do Not Limit Losses

I’m not just talking stop loss that limits your loss when an operation is against you (of course they have to be applied). I’m talking about having the ability to eliminate strategies that are having a bad performance by others that can work better.

What most traders usually do is apply a single strategy. As you know, every strategy has a winning phase and a losing phase. What is it possible for you to do when you only have one strategy and start losing? Wait, little more. However, if you work with different strategies you can remove from your account those that behave worse and constantly incorporate those that do better. This will not just depend on a system and make your curve more stable.

Limiting losses is a key aspect of survival. Someday, whatever system you’re using will stop working. What are you going to do then?

Making Predictions

If you are a trader, you will often be asked something like “what do you think of the price of bitcoin?”. The reality is, no one knows unless you have inside information about it. And it’s not usually common unless a relative of yours is a colleague of Trump’s.

Making predictions in the press or social networks is very cheap. In the case of not fulfilling people usually delete the tweet or forget. But if everything goes as they said, they will say that they were right and that they are experts in it. You should not as a Forex trader depend on this.

You also don’t need to make predictions to make money. You need trading systems with a statistical advantage in your favor. Don’t worry about how to do it, nowadays there are tools that allow you to do it without programming and create your own arsenal. This is what I do myself and I recommend you to do: focus on creating strategies, check that they are robust, apply them and supervise. That’s it.

Trading Scams

Yes, unfortunately, there are many online scams related to trading. Unregulated brokers, groups of signals that make up your results, martingale robots that burst your account. You need to know that all this is there and not fall down to know what is best for you. You need to differentiate what is right for you from what is not.

You want profitability or you want to lose everything already? Many people fall into this kind of scam not because they are clumsy, but because they have the illusion of multiplying their money in a few hours and just in case they try. It happens in different sectors, in sports betting, online shops that do not deliver their products, etc. This has been and will be there. The question you have to ask when a broker calls you offering something is whether it is aligned with your interests. This type of broker wins when you lose. Need a partner for your business who would make money if you perform badly? It doesn’t make sense. Just avoid all of it and keep your head clean to focus on what you’re really interested in generating profitability.

Lack of Persistence

Many people are attracted to trade as a way to make quick money. They start, they start with a lot of risks and when a losing streak comes they leave it. They don’t know exactly what the subject is. They seek to make money by doing anything. And they finally end up losing all the money doing a lot of things. All without results.

Like any other business, you’ll need to take some time off and not run off at the first exchange. If you’re not really attracted to trading and just looking for results, you have a lot of ballots to go out the back door.

Change the Chip

It may seem complex, but it’s very easy to avoid all of the above. From not reading biased news or predictions, from being relaxed looking at your screen while watching how the EAs are running. I certainly do not know what will happen to the price of the EUR/USD pair, or EUR/GBP. I am dedicated to creating strategies that have worked based on profitable patterns. I test them and measure their robustness and work with a number high enough not to obsess over the performance of one. I eliminate the ones that don’t work well and incorporate the ones that are working correctly.

It all comes down to working with systems that make you take positions without thinking too much and react by impulses. The only thing we have as traders is the possibility to see how things have gone in the past. We do this through backtesting. Doing reliable backtests and managing your strategies in the present is how I’ve managed to get results, doing all this in a scalable and bearable way.

If you can automate to leave out of control the divergences of doing it manually, but you can start discretionally. The important thing is not to automate by automating, the important thing is to apply strategies that work. This is what is in your hand. At present, the real question is, how can I know what works? The answer is simple, focus on statistics.

Forex Fundamental Analysis

Understanding The ‘Inflation Rate MoM’ Macro Economic Indicator


The GDP and Inflation rate are two of the most closely watched macroeconomic statistics by economists, business analysts, investors, traders, government officials, and the general population. The inflation rate has an impact on everyone, and no one is exempt from it. Understanding its effect on the currency, economy, living conditions, and how to use it for our analysis is paramount.

What is Inflation Rate, MoM?

Inflation: The increase in the prices of commodities over time is called inflation. It is the rise in the cost of living over time where the purchasing power of the currency depreciates. Inflation erodes the value of the currency, meaning a unit of currency can procure lesser goods and services than before.  Inflation occurs when more currency is issued than the wealth of the country.

Inflation Rate: The percentage increase in price for a basket of goods and services for a particular period is called the inflation rate. It is used to measure the general increase in the cost of goods and services. It is contrasted by deflation, which refers to the appreciation of the currency and leads to decreased prices of commodities. When more currency chases, fewer assets inflation occurs.

Inflation Rate MoM: The general measure of the inflation rate is YoY, i.e., Year-over-Year. It serves as a means to measure how currency has faired over the year against inflation. The rate tells how fastly prices increased. The inflation rates are often low and incremental over time and hence make more sense for a YoY comparison for general use. However, for traders and investors, MoM is more useful for close monitoring to trade currencies.

How can the Inflation Rate MoM numbers be used for analysis?

As inflation continues, the standard of living deteriorates. Inflation is an essential economic indicator as it concerns the standard of living. Hence, it requires much attention to understand and analyze. Inflation can occur due to the following reasons: cost-push inflation, demand-pull inflation, and in-built inflation.

Demand-pull inflation: When too few goods are chased by too much money, we get demand-pull inflation. It is the most common form of inflation. The demand for commodities is so high that people are willing to pay higher prices.

Cost-push inflation: It occurs when there is a limit or constraint on the supply side of the demand-supply equation. A limited supply of a particular commodity makes it valuable, pushing its price higher. It can also occur when the cost of manufacturing or procuring raw materials increase that forces businesses to sell at higher prices.

Built-in inflation: It occurs out of people’s adaptive expectations of future inflation. As prices surge, workers demand higher pay due to which manufacturing costs increase and form a feedback loop. It forms a wage-price spiral as one feeds of another to reach a new higher equilibrium.

Inflation mainly affects middle-class and minimum wage workers as they immediately experience the effects of inflation. Generally, the monthly inflation rates would be less than 1% or 0.00 to 0.20% in general. Such increments can be useful for currency traders to short or long currency pairs by comparing relative inflation rates.

Central authorities are committed to ensuring a low and steady inflation rate throughout. The policies are also drafted to counter inflation or deflation. The central authorities would likely intervene with a loose-monetary policy to inject money into the system and induce inflation when the economy is undergoing a slowdown or deflation. A tight monetary policy (withdrawing money from the economy) would be used to induce deflation to counter hyperinflation.

Impact on Currency

The monthly inflation rates are essential economic indicators for both equity and currency traders. It is an inversely proportional high-impact coincident indicator. An increase in the inflation rate deteriorates currency value and vice-versa. As it has a direct impact on the currency, the volatility induced as a result of significant changes in the inflation rate is also high.

Economic Reports

There are multiple indices to measure the inflation rate. The CPI, Producer Price Index (PPI), Personal Consumption Expenditures (PCE), GDP Deflators are all popular statistics used for measuring inflation in a variety of ways.

The Bureau of Labor Statistics (BLS) of the United States releases the CPI and PPI reports on its official website every month. The GDP Deflator is published by the Bureau of Economic Analysis (BEA) every quarter. The PCE is also published by BEA every month.

Sources of Inflation Rate MoM

BLS publishes the Consumer Price Index (CPI) and Producer Price Index (PPI) on its official website. The data is available in seasonally adjusted and non-adjusted versions, as inflation is also affected by business cycles. A comprehensive and visual representation of these statistics is available on the St. Louis FRED website. The BEA releases its quarterly GDP deflator statistics and monthly Personal Consumption Expenditure (PCE) on its official website for the public. Consolidated statistics of monthly inflation reports of most countries are available on Trading Economics.

How the Monthly Inflation Rate Data Release Affects The Price Charts

For this analysis, we will use the monthly consumer price index (CPI) to measure the rate of inflation. The Bureau of Labor Statistics releases the MoM CPI data in the US. It measures the change in the price of goods and services from the perspective of the consumer. The most recent data was released on August 12, 2020, at 8.30 AM ET and can be accessed at Forex factory here. An in-depth review of the latest CPI data release can be accessed at the BLS website.

The image below shows the most recent changes in the MoM CPI in the US. In July 2020, the US CPI changed by 0.6%, the same increase as that of June.

Now, let’s see how this release made an impact on the Forex price charts.

EUR/USD: Before Monthly CPI Release on August 12, 2020, 
Just Before 8.30 AM ET

From the above 15-minute chart of the EUR/USD, the pair can be seen to be on a steady uptrend before the CPI data release. The 20-period MA in steeply rising with candles forming above it.

EUR/USD: After Monthly CPI Release on August 12, 2020, 
8.30 AM ET

After the data release, the pair formed a long 15-minute bullish candle indicating that the news release negatively impacted the USD. The pair subsequently continued trading in the previously observed uptrend.

Now let’s see how this news release impacted other major currency pairs.

AUD/USD: Before Monthly CPI Release on August 12, 2020, 
Just Before 8.30 AM ET

The AUD/USD pair traded in a subdued uptrend before the data release. The 15-minute candles are forming just around an almost flattening 20-period MA.

AUD/USD: After Monthly CPI Release on August 12, 2020, 
8.30 AM ET

Like the EUR/USD pair, the AUD/USD formed a long bullish 15-minute candle after the news release. Afterwards, the 20-period MA steeply rises as the pair adopted a steady uptrend.

NZD/USD: Before Monthly CPI Release on August 12, 2020, 
Just Before 8.30 AM ET

NZD/USD: After Monthly CPI Release on August 12, 2020, 
8.30 AM ET

Before the data release, the NZD/USD pair traded within a neutral pattern with the 15-minute candles crisscrossing an almost flattening 20-period MA. As observed with the other pairs, the NZD/USD formed a long 15-minute bullish candle after the news release. It subsequently traded in a steady uptrend with the 20-period MA steeply rising.

Bottom Line

In theory, an increasing rate of CPI should be a strong USD, but as observed in the above analyses, a high CPI resulted in a weakening USD. The CPI is often considered a leading indicator for interest rate; hence, a rising CPI is accompanied by a rising interest rate. However, since the US Fed had already indicated that it has no intention of increasing the interest rate, a high CPI implies a depreciating USD. It is, therefore, imperative that forex traders have the Fed’s decision in mind while trading with CPI data.

Forex Basic Strategies

The ‘Daily High Low’ Based Forex Trading Strategy


The daily high low based forex trading strategy is a breakout trading strategy from the high and low prices in the daily timeframe. In forex trading, the daily timeframe is crucial as most of the significant market players use this time table in their trading. As a result, any trading strategy in the daily time frame provides better trading results compared to the lower time frame.

On the other hand, when the price creates a rally by breaking the high and low price of the daily timeframe will indicate a significant market momentum. If you can avoid the range market, the high low based strategy can provide a reliable trading result. If you can implement the trading strategy well as per the rule mentioned below, you can make a decent profit from it in any currency pair.

The Daily High Low Based Trading Strategy

The daily high low based forex trading strategy has a simple concept:

  • If the price breaks below the low of yesterday’s candle, it may move further low.
  • If the price breaks above the high of yesterday’s candle, it may move further high.

It is a standard brief of this trading strategy. Let’s have a look at the image below:

In this image above, the price has made a new higher high once it breaks above the candle high in the market area. However, there is some market condition where price moves to a range and violates the movement above or below the candle high.

If you are trading the breakout of a daily candlestick that is larger than the earlier candlesticks, you might be caught by the mean reversion of the price. In the forex market, it is often difficult to predict how long a trend could stay. Almost 70% of the time, the market moves within a range; therefore, you should find a location of the price where the breakout from a daily candle would be reliable.

The basic concept of making a good profit from the forex market is to buy from low and sell from high. Therefore, any bullish breakout from a significant support level in a daily timeframe would indicate a reliable daily breakout strategy compared to a trade setup from the middle of a trend. Let’s have a look at the image below, how the price moved up once it got a breakout from a daily candle from a significant support level.

Now look at the image below and see how the price violates the daily breakout to the upside once it reached above 50% of the possible trend.

How to Trade the High Low Breakout Strategy?

This trading strategy is simple as you can make most of the trading decision a day before the movement is expected. The main of this trading strategy is to place two pending orders above or below the yesterday candle. Therefore, you can catch any movement either upside or downside from the previous day’s candle.


We should consider the daily timeframe to determine the high and low prices. Later on, move to the lower timeframe (usually H4) to enter the trade. However, for new traders, it is recommended to stick to the daily timeframe.

Currency Pairs

This trading strategy works well in all currency pairs, including EURUSD, GBPUSD, USDJPY, or AUDUSD. However, sticking to the major and minor currency pairs would provide a better trading result. Moreover, you should avoid exotic pairs as there is a risk of the false move by hitting the high or low and reverse back.

Breakout Rules

  • Identify the currency pair that is moving within a trending environment. You can predict the direction of the price based on the market context or support and resistance.
  • For example, suppose the price is aggressively creating a higher high or lower low. In that case, the price will likely continue the current momentum until it reaches the next resistance or support level. Moreover, any breakout from a significant key level often creates a fresh move either upside and downside.
  • When the daily candle of the previous day closes, place a buy stop above the daily high, and a sell stop below the daily low to catch the breakout.
  • Move your stop loss at 50% of the daily candle.
  • For the take-profit level, you can consider the average price of the last three days’ movement. For example, if the daily candle of the last three days shows the movement of 100 pips, 50 pips, and 100 pips, the total movement would be 250 pips (100+50+100). Therefore, the average price of the last three days would be 83 pips (250/3).

Example of Daily High Low Based Trading Strategy

The image below represents the graphical view of the daily high low based trading strategy:

  • In the image above, we can see the price moved up from a significant support level with a daily close above it. A buy Stop is taken once the price had a bullish daily close from the key support level. A similar concept will apply to the bearish market once the price has a daily close from a significant resistance level.
  • The next day, the buy stop is taken, and the price moved to the take profit level. The take profit level is taken by calculating the average price of the last three candles.
  • The stop loss is set at 50% of the previous day’s candle. If the stop loss hit, it will indicate that the price will reverse or consolidate more. In that case, we should wait for a further breakout or move to another currency pair.


Let’s summarize the daily breakout trading strategy:

  • Identify the currency pair that is moving within a trend or likely to start a new trend.
  • Set buy stop above the candle if the price is moving up from a support level and put a sell stop if the price is moving down from a resistance level.
  • Stop-loss should be at 50% of the previous day’s candle.
  • Take profit will be the average price of the last three days’ movement.

In this trading strategy, the challenge is to avoid correction and choppy market. In that case, you should read the price action to determine the possible movement by measuring the price momentum. Moreover, to get the maximum benefit from this trading strategy, follow strong money management rules.

Forex Market

The The Primary Global Trading Sessions

The forex markets are a 24-hour business (Sunday to Friday), but people need to sleep, so how does it stay open 24 hours a day? Well, there are four different trading sessions based on different continents that relate to their timezone. So while London sleeps, Tokyo will be running.

The four trading sessions as the Asian session (which is both Sydney and Tokyo), the London session, and the New York session. Let’s get a little more information about each one.

The Asian Session

The Asian session runs from 22:00 GMT to 08:00 GMT, it is made up of both the Sydney markets and the Tokyo markets.

  • The most traded currency during this session is unsurprisingly the Yen which makes up around 16.5% of the transactions during this session.
  • Approximately 21% of all forex transactions occur during this trading session.
  • The liquidity during this session is often lower than in the other three sessions.
  • It is far more likely for a currency pair to range during this market rather than to go on a trending movement.
  • Most of the activity will occur at the start of the session as this is when most of the economic news is announced.
  • The most movement will be with the JPY, AUD and NZD pairs as the economic news events for these currencies occur during this session.

The London Session

The London session runs from between 08:00 GMT and 16:00 GMT, this has a slight cross over with the New York Session between 13:00 GMT and 16:00 GMT. the Londo session is considered to be the major market session and often attracts the most interest as the key financial center for Europe.

  • The session has a huge trading volume with over 32% of all trading transactions occurring during the London session.
  • There is a large amount of liquidity.
  • This is the session with the most uptrends and downtrends.
  • Spreads are often very low during this session.
  • The volatility can sometimes slow down in the middle of the London session due to London traders being off for lunch, this remains until the New York Session starts up at 13:00.
  • Market trends can sometimes reverse at the end of the session due to European traders locking in their profits.

The New York Session

The New York session runs from 13:00 GMT to 21:00 GMT, this has a slight cross over with the London session between 13:00 GMT and 16:00 GMT.

  • There is a rough estimation that about 19% of all forex transactions occur during this session.
  • There is a lot of market-moving potential during this session as 85% of all trades involve the US dollar.
  • There are high liquidity levels at the start as it overlaps the London session.
  • Most of the economic news events are released towards the beginning of this session.
  • Liquidity and volatility often decrease as the session goes on.
  • There is often little movement on Friday afternoon and a high chance for trend reversals in the second half of the day.

So that is a little overview of the three (four if you could Asia as two) trading sessions that keep the forex trading world running 24/7. The session that you should trade in depends on the pairs that you wish to trade, but we would suggest sticking to ones that don’t keep you up in the middle of the night.

Forex Economic Indicators

Tips for Trading During the Coronavirus Pandemic

Anytime a global crisis happens, investors tend to panic and start selling. Although it might seem like a bad idea to invest when things are so crazy, the market actually sees growth after the dips that are caused by the actions of fear-stricken investors. Pandemics and global disasters can actually present trading opportunities, as long as one reacts properly. Below, we will provide a few tips that can help traders make it through this pandemic on top.

Tip #1: Don’t Panic!

Pandemics are generally known for causing hysteria. The COVID-19 pandemic itself has been known to cause shortages of food and other essential items due to hording. Many people might have seen the ways that this type of panic has carried over to the stock market. For example, you might see a drop in your investments and quickly sell out your assets out of fear. Remember that selling everything and being terrified of the stock market is caused by your emotions, and that making financial decisions out of fear will cause you to make mistakes. Instead, try to focus on long-term goals and watch for bearish opportunities as the market recovers.

Tip #2: Take Advantage of the Market

During times like these, the value of stocks will go down. This makes it a good time to invest in stock for good companies while the price is down before the price goes back up. You won’t see many opportunities like these, and prices will eventually go back to normal. Just be careful, as shares in bad companies might stay down, so you’ll need to be mindful of the companies you’re investing in. Think about the fact that others are thinking from fear and anxiety and anticipate the way the market will move.

Tip #3: Consider Diversifying your Portfolio

You should be mindful of what you invest in during times of global pandemic, but it might be a worthwhile idea to invest in different resources. If you typically invest in currency pairs, consider adding commodities to the list. Having your money in different places can help to cushion the blow if one of those investments goes bad, so it’s better to have different options.

Tip #4: Be Mindful of Risks

Traders should always take precautions to limit their losses, especially during times of pandemic and hysteria. Of course, you will need to be even more careful right now. Make sure you’re using a stop loss and consider setting take profit levels or other measures to ensure that you don’t blow your account. Take another look at your trading strategy as well and look for any needed changes. You don’t need to change everything out of fear, just simply look at the way the pandemic has affected your profits thus far and see if there is anything that needs to be changed. If you don’t already keep a trading journal, consider keeping a special one until the pandemic passes so that you can keep a close eye on the ways that it is affecting your outcomes.

Tip #5: Look Towards the Future

There are a lot of reasons why COVID-19 has inspired panic, not only in traders but in all of us because of how dangerous it is and how it can affect our lives. If you haven’t found yourself doing much trading because you have too much on your mind, or if you’re feeling too anxious to trade, remember that this will pass. All of the previous pandemics have ended at some point. Try to profit from it by anticipating what the market will do but understand that it is ok to take a break from trading if your head isn’t in the game. Things will eventually go back to normal.

Final Thoughts

The COVID-19 has caused many investors to sell and take profits out of fear and anxiety. Good investors need to understand how times of crisis affect the market and make smart trading moves while practicing risk-management techniques to limit their losses. To make effective trading decisions during any times of market uncertainty, one needs to be able to handle their emotions, otherwise, they are bound to make bad trading decisions. Don’t panic and remember that this pandemic will pass, and the market will go back to normal before we know it.

Beginners Forex Education Forex Market

Not Trading Well? Here’s Why You Don’t Blame The Markets…

It can be easy to blame the markets, in fact it is what a lot of people do, something goes wrong, it can’t be my fault, it must have been the markets moving against me. Sometimes it can look like the markets are purposely fighting against you, you set a stop loss, the markets just about touch it and then shoot off in the other diffraction, everyone has experienced it, but did it know you were there?

In short, no. When you look at the big picture, it isn’t nice to hear, but you are so insignificant in the overall scheme of things when it comes to the value of your account, that even if the markets or the big fish could see you, they most likely would not even blink in your direction.

When the markets move, they are moving in the direction that thousands and thousands of traders are going, this isn’t just small fry like yourself, this includes those huge organisations and institutions that are moving billions of currency around. Just because you put on a 0.05 lot trade, doesn’t scare them, it won’t make them want to pull back to catch you out, it just isn’t something that they would spend their time or money on doing.

So if it is not the markets that are moving against you, what could it be? Could it in fact be you? The answer is most likely yes. This does not, however, mean that you are a bad trader or that you did something wrong, it just means that the timing may have been wrong, or the markets decided to move before hitting your take profit levels, these things happen and they are a part of trading, a part that will never go away.

There are a lot of things that can cause this, when you look back at your trading journal and your strategy, maybe a part of it was not followed properly, often when trading to a plan, if just a single rule is broker it can break the integrity of the trade and will make it far more likely to lose than win. Maybe you got distracted and ignored a signal that you would normally take into account. Sometimes, the conditions of the markets change and so they are no longer favourable to your current strategy and something ends up being adapted.

All of these things can lead to that loss and they are far more likely than the markets looking at your trade and wanting to take you out.

So we have worked out that it is most likely something that you have done or not done which has caused the loss rather than the markets being out to get you. So now we know that, what can we do about it? There are actually a few easy solutions, they won’t give you a 100% win rate, but they will help you to adapt to the changes that are taking place.

Double-check your strategy, maybe there is something in there that isn’t quite working properly. More often than not a trading plan is pretty in-depth, the more information in it, the more information that can be lost or misunderstood. One thing you can do if it is quite convoluted is to try and scale it down, take out the bits that do not really do anything so it is a lot clearer and far easier to follow for each trade.

Have the market conditions changed? Maybe the strategy that you were using for the past three months is no longer as effective as it used to be due to a change in the overall market conditions or sentiment. If this is the case, then you need to be able to see where your strategy is no longer effective and you need to change something. Being able to adapt your strategy is what will keep it profitable for a lot longer than just leaving it as it is, it will need constant adjustments to ensure that you are on top of this at all times.

Double-check the markets, sometimes, especially if you have been working long shifts, you can miss things in the markets, maybe there was something obvious but because you are tired you missed it. Or if the market conditions have changed, so will the patterns on the charts. If they have changed then the charts may now be showing and saying something completely different to what they did last night, make sure you double-check to see whether it has changed and then adapt your strategy to whatever those changes are. If you did miss something, then make a note of it, it will help you to always remember to check it in the future.

As a trader, there will be times when the markets look like they did something just to spite you, it is important to remember that the markets are like the sea, they do not care about a single drop of rain, however, a thunderstorm can make a lot of movements. So when the markets are moving, you as an individual is not important, it won’t move to just get you, it will move the way that the storm is blowing, if you just happen to be against it or in the wrong place, it won’t discriminate, it will take you out.

All that you can do is prepare yourself, there will be losses, there will be wins, constantly adapt to the changing markets and you will be able to be a more successful trader.

Forex Daily Topic Forex Fibonacci

Fibonacci Trading: A Reversal Candle is to be Followed by a Good Signal Candle

In today’s lesson, we are going to demonstrate an example of an H1-15M chart, which made a good bullish move upon producing a bullish reversal candle at a key Fibonacci level. The H1 chart produces an H1 bullish engulfing candle earlier, but the price does not head towards the North. It takes time then produces another bullish reversal candle. It then heads towards the North with good bullish momentum. We try to find out why it does not make a bullish move at the first attempt but makes it at the second.

This is an H1 chart. The chart shows that the price makes a good bullish move and then makes a bearish correction. It consolidates for a while at a level of support and produces a bullish engulfing candle. The H1-15M combination traders may flip over to the 15M chart to trigger entry upon getting a 15M bullish candle. Let us find out what happens next.

This is the H1 chart too. The chart shows that the price produces a bearish engulfing candle instead. We have not flipped over to the 15M chart yet. Let us find out how the 15M chart looks.

This is the 15M chart. The chart shows that the price does not produce any bullish candle closing ahead of the H1 bullish reversal candle. Thus, the price heads towards the South. The last candle comes out as a bearish engulfing candle in the 15M chart. It does not look good for the buyers anymore.

The price consolidates with more candles. The last candle comes out as a bullish engulfing candle again. The chart produces the candle at the same level. The combination traders may flip over to the 15M chart again to look for entry. Let us find out what the 15M chart produces this time.

This is how the 15M chart looks. The buyers may wait for a 15M candle to close above the last H1 candle’s close. The chart suggests that the level of support is a strong one, which may push the price towards the North with good bullish momentum.

The last candle comes out as a bullish candle closing above the last H1 candle’s resistance. The buyers may trigger a long entry right after the candle closes by setting stop loss below the level of support. We find out the level take profit with the help of Fibonacci levels.

See how the price moves towards the North. The price makes a bullish move and makes a new higher high. It makes a bearish correction and then heads towards the North again. Let us draw the Fibonacci extension on the chart.

The Fibonacci level shows that the price hits 161.8%. It goes even further up. It makes a bearish correction before producing the last wave. The level of 100% works as a level of support.

We have seen how important it is that the 15M chart produces a bullish continuation candle to offer an entry. At the first reversal, the price does not head towards the North since the chart does not produce any 15M bullish continuation. On the second occasion, it produces  a bullish continuation, and the buyers find an opportunity to go long and push the price towards the magic Fibonacci level of 161.8%


Beginners Forex Education Forex Market

What We Can Learn From Quiet Markets

The markets can be a crazy thing, huge movements up and down, huge spikes in volatility, and subject to a whole host of outside news and events that can rapidly shift them both up and down. However, there are also times when the markets are at a standstill, this is the first time for a trade as nothing is really happening, the markets are sat still, nothing is coming into range of your strategy so you really don’t have anything to do. This is the scenario that a lot of traders come against at least a few times a year, so we need to be able to know what we can do when the markets are in this situation, and to understand that there are still some things that you can do to help you improve your overall trading.


Something that we often find that a lot of people lack, especially those that are new to the market. The need to always be doing something, whether it is analysis or actual trading, it can be a strong impulse. Having a low market gives you the perfect opportunity to practice being patient, and let’s face it, it isn’t giving you much choice. Being patient does not necessarily mean just sitting in front of the computer waiting, it can also involve doing something else entirely, away from the computer or on. Being selective in your trades is a good trait to have anyway, so this is a good way to help teach you to wait and take the trades that match your strategy.

Being able to wait for the right trade instead of acting on patience is such a vital skill to learn, so take this opportunity to learn it, it will greatly improve your future trading even in more busy market conditions.


It is normal to be required to adapt to the changing markets, they are constantly moving up and down and you will need to be able to adapt to that to adjust your strategies, however, another thing that you need to be able to adapt to is when a market decides to slow down or even flatline. This could be about adapting your own perception and staying put, which ties in with patience that we mentioned above. Another way to adapt is to have a backup plan when your pairs are deciding to not move, is there anything else that you can move onto? Maybe there is a commodity or a metal that you are interested in, often when the currency markets have stopped, there is still a bit of movement in the others.

Of course, looking at a new asset to trade would require changes to your strategy and also learning how they move, but having these other options available will make it a lot easier for you to adapt and change when things are a little slow.

Strategy Flexibility

Having a flexible strategy or even more than one strategy will help you to be flexible when the markets are not behaving nicely if you can have a strategy available for when it is trending and one for when it is a little more stagnant can help you to find trades no matter what is happening. If you wish to be trading all year round, then you will need to be able to flex your strategy to suit all possible market conditions, so allowing yourself to have those additional options would be a huge benefit to your overall trading plan.

Learning Style

We all have different learning styles, some learn from sitting and reading while others learn from actually doing. If you learn from actually trading then these quiet periods could be a nightmare for you as there is nothing to do. In a situation like this, it is important that you have a look at various other ways of learning, this will help you to learn new ways to study which would then give you the opportunity to learn even in these slow times. It can be hard, it can be a little boring, to begin with, but after training yourself on new ways to learn, it will be a huge benefit in the future.

So those are a few things you can do and learn during a slow market, while it can be a slow time for trading, there are certain things that you can try to learn and teach yourself to help you get through those slower periods.

Forex Market

The Phenomenon of President Trump’s Tweets

“If they actually did this the markets would crash. Do you think it was luck that got us to the best Stock Market and Economy in our history? It wasn’t!” Do you guys use Twitter? “We are doing very well in our negotiations with China. While I am sure they would love to be dealing with a new administration so they could continue their practice of ‘rip-off USA'($600 B/year), 16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot….” Does this ring a bell?

Maybe this? “As usual, the Fed did NOTHING! It is incredible that they can ‘speak’ without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work ‘brilliantly’ with both, and the U.S. will do great…” It is extremely unique how and in what ways we have seen tweets from President Donald Trump affect the market almost immediately after he posts them and what that does to our trades. This is the type of phenomenon that we have never had to deal with before, it is something completely new for traders.

There’s been a lot of complaining all over social media about something that we cannot see coming and we substantially have absolutely no control over. Something that has the ability to pop up and ruin our wonderfully perfect technical trade almost instantly. We will try to focus on this from the politically agnostic stand of point because our number one goal should be finding ways to make money from the forex market. But this whole thing with President Trump’s tweets is pretty eccentric to anything we had to deal with before because it is constant and it is highly unpredictable. We never know when it is going to happen but we can surely anticipate that markets are going to freak out. So why this is happening? How could smart investors with all that big money be so foolish and react to something like this? Especially when most of the words from tweets end up never really materializing. It is perfectly normal to wonder about that. There are a couple of factors in play here.

Firstly, if we give the opportunity to big banks to manipulate prices a lot in a hurry, they are going to take advantage of that opportunity every single time. They don’t need to explain to anybody why they did what they did. This whole interesting moment with the huge central banks we can see only happening some of the time when we see big moves after a Trump tweet. Secondly, we have institutions. For example, hedge funds play a significant part in this because they have a lot of money and when they move, they move all at the same time. Proprietary trading firms are an example of institutional trading but to a much lesser degree. Typically they don’t have the amount of money at these hedge funds have, and their traders don’t all move in lockstep.

There has been a rumor among traders that some of these hedge funds have algorithms that are able to comb through Twitter mainly when Trump tweets something and they are targeting for certain words or a certain combination of words that will automatically trigger their algorithms to go long or to go short on whatever instrument they’re trading. It is the ultimate front-running tactic. The financial game is more about survival than anything else and these funds and firms are finding ways the keep their heads above the water. We can’t be mad at them, it is pretty innovative and it’s working. So the two main types of entities that can have a big impact on the forex market all on their own are the big banks and larger institutions, they play instant reaction games and they are both involved in this little amusement with Donald Trump’s tweets.

The question remains, what we the small retail traders can do about it? Is there any recourse for us? To be honest, there is nothing we can do to counter this phenomenon. We are just going to have to deal with this new normal. We are not going to be able to change the way we trade at all to adjust to something like this. It might be better not to worry about it. On one hand, this could make the price of a currency pair go up or down, so it is going to make a mess sometimes because we are going to be emotionally invested in those times where this external factor out of nowhere came and messed up our trade. On the other hand, there is a 50% chance that it could propel our trade even further. We have been seen some people who are complaining and the ones that benefited from these tweets.

There will always be the factors that we can’t control and they might negatively affect us but we mustn’t allow things like this to get us down. You guys don’t worry about the things that you can’t control. In forex trading, It’s always going to be something, either the markets are too crazy, it’s too dead, we have now this Trump tweets, it is always going to be something that prevents us from getting the results we think we deserve. We simply need to find a way to be immune to all the financial earthquakes. In the end, our best approach should be just to trade our system and let it organically do what it does regardless of the circumstances. These external factors are not actual factors, they should have nothing to do with our constant improvement. We don’ have any impact on them and we can’t do much about that. So traders focus on the things that actually matter without complaining. The best thing we can do is to leave politics as it is and try to make our trade better every single day.

Forex Course

139. How Professionals Trade The Different Market States?


In this series of different states of the market, we understood the terminology and the concepts involved. However, in the forex market, if we do not go practical, there is the least use to the concept. In other words, one must understand how to trade in the market, knowing its state. In this final lesson of the series, we shall dive deep into the topic and understand how to apply them in the market.

Trading a Trend

Trading a trending market is the simplest and safest way to trade in the market. This is because, in a trend, it is evident on which party is dominating the market. For example, in an uptrend, it is clear that the buyers are more powerful than sellers. And hence, we look for buying opportunities rather than selling.

In a trend, the market makes higher highs and higher lows. In other words, the market moves in one direction with temporary pullbacks in the opposite direction. These pullbacks (retracements) typically turn around to the original trend direction at the support and resistance levels. So, to trade a trend, we wait for the market to make a higher high / lower low and retrace to the S&R level, before triggering the buy or sell.

Consider the below chart of USD/CAD. The market is in a clear downtrend. The market made a new lower low by breaking below the grey ray. It then retraced back to the S&R area (grey ray) and is currently moving sideways. And this sideways movement in the market has high significance.

After the sellers made a new low, the buyers began to show up. They made it until the S&R level. And the market is currently in a range. As per the definition of a range, we know that there is strength from both the parties. In other words, the buyer who was temporarily dominating the market is slowing down as they are unable to make a higher high. And this price action is happening in the S&R area of the sellers. Therefore, we can conclude that the sellers are here to continue their downtrend.

One can enter when the price is at the top of the range (resistance) or when it starts to fall from the resistance. Placing the stop-loss few pips above the S&R level, and a take profit at the Low, is the safest approach to trade a trend.

Trading a Range

In a range, the market moves between levels – Support and Resistance. In this type of market, there is power from both buyers and sellers. Typically, the market shoots up from the support and drops from the resistance. However, randomly buying at support and selling from resistance is not the right way to trade a range like a professional. To trade a range with high odds in your favor, you must be aware of the overall trend. And you place your bets on the direction of the overall trend.

Consider the below chart of NZD/CAD. We can clearly see that the market is in a range. But, looking from the left, the market is in a strong uptrend, and the price is holding above the S&R level (grey ray). In the current market, we see that the price dropped below the bottom of the range, touched the S&R level, and shot right back up into the range. Thus, confirming that the big buyer is preparing to do the buys.

Since the price strongly reacted off from the S&R level and held above the support of the range, we can prepare to go long on the market. Stop-loss from this trade would be below the S&R level, while the target point would be at the top of the range. In hindsight, the buyers were able to push the market above than the resistance.

This brings us to the end of this series. We hope you found this lesson and the previous chapters interesting and informative. Stay tuned until we release our new set of lessons.

[wp_quiz id=”79656″]

Forex Fundamental Analysis

The Impact Of ‘Personal Saving’ News Release On The Forex Price Charts


Personal Saving is one of the main components of Personal Income. Savings can give us hints on Consumer Spending patterns and future sentiments concerning financial matters. Personal Spending and Personal Savings are two primary sections into which the Disposable Personal Income divides, and the proportion of these two helps us ascertain short-term and long-term economic activity. Hence, understanding Personal Savings and Personal Savings Rate reports can help us solidify our understanding of fundamental analysis.

What is Personal Saving?

Personal Saving is the difference between Disposable Personal Income and Personal Outlays.

Disposable Personal Income (DPI), also called After-Tax Income, is the remainder of an individual’s income after all federal tax deductions. Hence, It is the amount people can spend, save, or invest.

Personal Outlays, or Personal Spending, refers to all the expenditures incurred to conduct one’s lifestyle, like rent, internet, fuel, transportation, groceries, etc.

For example, If an individual earns 100,000 dollars per year and his tax-deductible is 30%. His DPI is 70,000 dollars. If his year around expenses amount to 63,000 dollars, then the Personal Savings would be 7,000 dollars. Here, the Personal Saving rate would be 10%. Personal Savings would be the amount left after all the expenses have been deducted from the available income.

Personal Savings Rate (PSR) is the ratio of Personal Saving to the Disposable Personal Income expressed as a percentage.

Marginal Propensity to Save (MPS): It is one more metric used to assess Saving, which is defined as the ratio of the amount saved for each additional dollar. If a person got 100 dollars extra as a bonus this month, and if he spends 60 dollars of it and saves 40 dollars, then his MPS would be 0.4 (40/100). His general savings saw an increase of 40 dollars, and his disposable income saw an increase of 100 dollars. Hence, MPS considers the change in savings to change in income rather than the actual Saving.

Factors That Affect Personal Saving

DPI: An increase in Disposable Personal Income generally translates to increased savings once the necessities are met. Low levels of DPI mean that the majority of the available income is spent on Personal Expenditures leaving little room for saving. Personal Saving has been affected by variations in household net worth, consumer debt, and housing investment. In 2008 and 2009, during the most recent recession, the personal saving rate increased by about two percentage points each year, reaching 5.9 percent in 2009.

Economic Stability: Unstable economic conditions and frequent recessionary periods induce higher saving patterns in the general public as they cut back on their expenses to save for future rainy days. A growing and healthy economy see a stable saving rate and an increase in personal consumption, as people spend more when they have a positive sentiment towards their future financial security.

Deposit Rates: Banks pay interest to depositors for their deposited money. Higher interest rates can attract the general public to save money overspending as it would generate more money for future consumption.

Individual preference: How people traditionally see debt, mortgages, and savings also determines people’s saving and spending patterns. Generally, people from unstable economic regions or developing economies tend to save more than people who have always been in a stable economy. For example, the China saving rate is 35%, while that of America is around 8%. This cultural backdrop also plays a role in people’s tendency to save and spend. The proportion of different people within the economy will determine the direction of Personal Saving Rates.

How can Personal Saving numbers be used for analysis?

Changes in the saving rate are inversely related to changes in household net worth (i.e., cost of a house) as a percentage of DPI. The ratio of household net worth to DPI typically rises during periods in which household real estate and financial assets are appreciating and falls when these assets are losing value. As household assets appreciate, incentives to save from current income are lessened, while incentives to save are increased during periods of falling asset values.

An increase in Personal Savings is good for banks as they can give out more loans in one aspect and hence is good in the long run for the economy. But, in the short term, it implies expenses are cut back, which means businesses will see a slowdown, and that is not good either. An optimal balance between Spending and Saving has to be struck for sustained growth.

Personal Savings usually see an increase during economic shocks and recessionary periods. Hence a significant spike in Saving Rate can be considered as an indicator of an ongoing financial contractionary period.

Personal Savings numbers simply would be a function of growing population and inflation. If the economy improves, so does the Personal Savings. For example, saving 100 dollars ten years back and now are two different things. We have to take inflation and increase in wages into account. Personal Saving Rate is more accurate in this regard as it is proportional. This is illustrated clearly in the below graphs of PS and PSR, respectively.

Hence, PSR is more prevalent amongst economists and investors for analysis. Also, Marginal Propensity to Save is higher for wealthier people than for poorer people. Hence, MPS can also be used to understand what is the standard of living and wealth the general public is enjoying, which reflects the strength and wealth of the overall economy itself.

Impact on Currency

As such, there is no direct one-to-one indication of Personal Savings figure to GDP, but there is a pattern here, during deflationary conditions when the currency value depreciates there is an upward spike in Personal Savings figures. In this sense, it is an inverse indicator and has a mild-to-low impact on the currency market. Economic shocks can also increase the Personal Savings figure.

Due to the long-term nature of the figures themselves, the currency volatility is low around these numbers compared to other macroeconomic indicators. Still, they are useful in understanding the long-term direction of the economy.

Economic Reports

The United States Commerce –  Bureau of Economic Analysis releases Personal Saving as part of the monthly report titled “Personal Income and Outlays.”

BEA releases the report in the last week of the month for the previous month. Quarterly and Annual reports, Seasonally adjusted versions of the same, along with Personal Saving Rate Reports, are all available under this release.

Unlike the PCE (Personal Consumption Expenditure) report, the Personal Saving figures are not expressed in percentages. Instead, the Personal Saving Rates is more popular, which is a percentage metric.

Sources of Personal Saving

The monthly Personal Saving numbers releases can be found on the official website of the Bureau of Economic Analysis under the “Current Release” section. This data can be found here – Consumer Spending – BEA. The Personal Saving Rate report can be found here.

Historical and Graphical comparisons are available on the St. Louis FRED website. Visit these pages to access this information. Personal Savings – FREDPSR – FRED.

Personal Savings date for countries other than the USA can be found here.

Impact of the ‘Personal Saving’ news release on the price charts 

The Personal Savings Rate is a big determinant of economic activity. The savings of an individual are directly related to consumer spending, which accounts for 63% of GDP. Higher savings can generate higher levels of investments and boost productivity over the longer term. The Harrod-Domar model of economic growth suggests that the level of Personal Savings is a key factor in determining growth. This has an effect on the value of the currency, and traders have a short to long term view on the currency based on the Personal Savings data. Today we will be analyzing the fourth quarter Personal Savings data of Australia that was released on the following date.

The below image shows the latest and previous Personal Savings data, where it was decreased to 3.6% percent in the fourth quarter of 2019 from 4.8% percent in the third quarter of 2019. A higher than expected reading is considered to be bullish for the currency while a lower than expected reading is considered to be bearish.

AUD/JPY | Before The Announcement

The first pair we will be examining is the AUD/JPY currency pair, and as we can see in the above image, the price has shown signs of reversal and might be going lower. Just before the announcement, the market has retraced the recent down move and is somewhere near the support turned resistance area. Technically, this is the ideal situation for going ‘short’ in the market, but it is wise to do so after we get confirmation from the market.

 AUD/JPY | After The Announcement

After the Personal Saving numbers are announced, there is a sudden surge in volatility where the price the initially moves higher, but this gets immediately sold into, and the ‘news candle’ leaves a large wick on the top. When traders found the Personal Savings to be lower than last time, they sold Australian dollars and weakened the currency. This happened as the news was not healthy for the Australian economy. Once the volatility increases to the downside, one can go ‘short’ in the pair with a stop loss above the ‘news candle’ and a ‘take-profit‘ near the ‘support’ area.

EUR/AUD | Before The Announcement 

EUR/AUD | After The Announcement

The above images are that of the EUR/AUD currency pair, and since the Australian dollar is on the right-hand side, a down-trending market, as in this case, indicates strength in the currency. After the big move to the downside, the market has started moving in a range and volatility appears to be high on both sides. Just before the news release, price is at the bottom of the range, known as ‘support,’ and from here, we can expect some buying force, which can take the market higher.

But as there is news release in the next few minutes, it can bring a drastic change in volatility, and we cannot predict where the market will go. After the announcement is made, we see a similar reaction from the market as in the above pair, and the ‘news candle’ leaves a wick on the bottom. We find that the Personal Savings was lower than last time and poor. This is why we see some buying interest in the market from the support, and thus we can go ‘long’ in the market with a stringent ‘take-profit’ near the resistance.

NZD/USD | Before The Announcement


NZD/USD | After The Announcement

These images represent the AUD/USD currency pair, where we see that the market is in a strong uptrend, and the Australian dollar is showing a lot of strength. Before the Personal Savings numbers are announced, price is above the moving average, and the uptrend is very much in place. As we do not have any forecasted data available with us, we cannot take any position in the prior to the announcement. We need to notice the change in volatility and then take suitable in the market.

After the Personal Savings data is announced, the market falls owing to poor Personal Spending data, and we see some selling pressure. But since the price does fall drastically and we do not see any trend reversal patterns, going ‘short’ in this pair is ruled out. Thus, the news announcement does not have a major impact on this pair as the uptrend is very strong.

This completes our discussion on the fundamental indicator ‘Personal Spending’ and the impact of its news release on the Forex market. If you have any questions, please let us know in the comments below. Cheers.

Forex Price-Action Strategies

Good Things Come to Those Who Wait

Patience is a virtue. Forex traders need to keep patience and must not get carried away. It is not easy, but to be successful in trading, traders must be patient. A trader needs to have a sniper approach. He is to wait for the best trade setup to trigger an entry. The Forex market often produces entry with less chance. If a trader can restrain himself from taking those entries, he would be able to keep a better winning ratio. In the end, it gives him more confidence and makes him a good trader. In today’s lesson, we are going to demonstrate an example of an entry with less chance and a good entry. Let us get started.

The chart shows that the price makes a strong bullish move. Upon finding its resistance, it makes a bearish correction. It finds its support and produces a bullish engulfing candle. Such a nice price action for the buyers this is! However, it takes one more candle to make a breakout at consolidation resistance. As far as the breakout trading strategy is concerned, this is not an A+ trade setup. The price may come back down and consolidates again. Thus, it is better to skip such an entry.

The chart produces two more bullish candles, but the price does not go too further up. It rather starts having consolidation. The buyers may keep an eye on this chart to see whether it produces a bullish engulfing candle.

The chart does not take long to produce such a good-looking bullish engulfing candle closing well above consolidation resistance. This is an A+ trade setup. The buyers may trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R. Let’s proceed to the next chart to find out how the entry goes.

The chart produces another bullish candle. The last two candles suggest that the bull has taken control. It may hit the target soon.

As expected, the price hits the target. The last candle comes out as a bullish candle having an upper shadow. The price may reverse now. Anyway, the buyers have made some green pips. Their plan has worked well.

If we look back to the chart, we find that the first entry would not be that good an entry. It would make them wait too long. Often the price goes the other way and hits the stop loss. The second one comes out as an excellent entry. It does not make them wait but hits the target in a hurry. Traders must remember that if they want to avoid waiting with their entry to hit the target, they must wait and calculate well before triggering an entry.

Forex Fundamental Analysis

Impact Of ‘Consumer Credit’ Economic Indicator On The Forex Market


Consumer Credit is one of the economic indicators used by economists to analyze the health of the economy. It can be useful to infer the direction of other economic indicators like Spending, inflation, and standard of living. Although it is a low impact indicator in the trading world, a good understanding of Consumer Credit can be beneficial for strengthening our overall fundamental analysis.

What is Consumer Credit?

Consumer Credit refers to the debt incurred by individuals to serve their immediate needs. Consumer Credit here, in general, applies to the short-term loans given out to spend on their daily requirements like groceries, paying electricity bills. Consumer Credit is different in this context from long-term loans like House Mortgages, which are secured by real-estate. Consumer Credit is usually unsecured with no collateral.

Consumer Credit in these days comes in the form of Credit Cards mostly although there are other variants. The limit of Credit available on a given Credit Card depends on the net-salary of the individual. In general, the Credit limit is 8-12 times the monthly salary. Credit Cards are issued to people usually who can show a consistent flow of income in their bank statements, which generally translates to job-holders and business people as their default rate is lower than that of unemployed people.

Consumer Credit is made available through banks, retailers (like shopping malls, retail chains) and other small agencies to enable customers to be able to fulfill their immediate needs and pay-off at a later date with interest. The credit limit, interest rate, and the time after which the interest comes into effect vary from one lender to another. There are two different types of credits, and let’s discuss them in detail below.

Installment Credit

Installment Credit is given out for a specific purchase, and is issued for a definite amount for a fixed period and fixed monthly installments. The monthly payments are usually equal, and the time frame ranges from 3-month to 5-years generally. Installment Credit is also called EMI (Easy Monthly Installments) nowadays.

It is popular among the general population as it is widely used to make goods and services which are more on the expensive side, like a car, TV, or furniture, etc.  For example, a 3500$ bike could be purchased with an EMI, where the individual may make the initial downpayment of 500$ and choose to pay the remainder 3000$ as 500$ monthly installments in the form of a 6-month tenure EMI plus a little extra service charge for issuing this Credit.

Revolving Credit

Revolving Credits are used for any type of purchase, unlike Installment Credit. Revolving Credit is mostly available in the form of Credit Cards, where the line of Credit is open to the maximum limit set by the lender.

For example, a 50,000 dollar limit Credit Card can be simultaneously used to purchase a 20,000 dollars item and also again for anything else that is worth up to 30,000 dollars. The Credit line stays open as long as the individual pays the minimum amount to settle the interest on the Credit issued. It may even never be paid in full as long as we pay the minimum interest while the overall credit piles up.

This is unsecured Credit, and hence the interest rates on this type of Credit are high, which is risky as once you default, the interests can pile up very quickly, making it very difficult to recover. For example, a 10,000 dollar revolving credit, when you miss payments, let us say for six months, then the total settlement of the Credit can go up to 20,000 dollars also. This can also affect the credit rating of the individual debarring him from future Credit approvals from the agencies.

How can the Consumer Credit numbers be used for analysis?

As Consumer Credit refers to the short-term loans which are usually paid back with a little interest, generally, Consumers take Credit for personal enjoyment or servicing immediate needs. Hence, it tells us the Consumer’s confidence towards repayment of the incurred Credit.

People facing tight monetary situations during job loss generally cut back on Spending and stay away from such Credits. Hence, an increase in Consumer Credit can be seen as a sign of a healthy and growing economy.

Increased Credit numbers also tell us that banks and other retail agencies are willing to lend out money, as they are confident about the repayment and their prospects. High Credit also signifies that the liquidity of the economy is too high, meaning there is enough cash flowing in the system to give Credit lenders confidence to supply Credits to more and more individuals.

Impact on Currency

Consumer Credit number is a proportional indicator. Higher Consumer Credit numbers are good for the economy and thereby for the currency. Lower Consumer Credit signifies tight monetary conditions resulting in deflationary situations in the marketplace, which is depreciating for the economy. When Credit goes down, so does Spending, and thereby, business slowdowns are apparent once the demand is reduced, which is terrible for the economy anyway. 

Economic Reports

In the United States, the Board of Governors of the Federal Reserve System releases the Consumer Credit report around the fifth business day of every month on their official website under the section called G.19. The reports are released in Billions of Dollars in both Seasonally Adjusted and Not Seasonally Adjusted formats. The data report set goes back until 1945. The report details of the type of credits also, like Car loans, personal loans, with which institutions being the lenders of the Credit and the related maturity periods.

Sources of Consumer Credit

Monthly Consumer Credit Reports can be found here.

Fred Consumer Credit & Consumer Credit Owned and Securitized information can be found here & here, respectively.

If you are interested in comparing the Consumer Credit numbers of different nations, you can do that here.

Impact of the ‘Consumer Credit’ news release on the price chart 

In the previous section of the article, we understood and comprehended the Consumer Credit economic indicator, which essentially measures the change in the total value of outstanding consumer credit that requires installment payments. It is also strongly related to consumer spending and credit. Repeated revisions to the methodology result in volatile figures during a specific period of time. Consumer Credit does not majorly affect the value of a currency, and the volatility witnessed during the news release is on the lower side.

The image below shows the latest month-on-month Consumer Credit data of the U.S. that is published by the Federal Reserve. Traders usually have a short term view on the market based on the data, as it is not an enormous event, and it does not have a long-term impact on the currency. A higher than expected reading should be positive for the currency while a lower than expected is considered to be negative. Let us analyze the market reaction.

GBP/USD | Before The Announcement

First, we look into the GBP/USD currency pair, where we see that the market is pretty much range-bound, and just before the announcement, price is near the ‘support’ area. The volatility appears to be high both sides, and sudden movement can be expected on any side of the market after the news release. Since the economists have forecasted a lower Consumer Credit this time, as the price is at ‘support’ aggressive traders can enter for a ‘buy’ due to pessimistic expectations. Conservative traders will only be able to take a trade after we get a clear indication from the market.

GBP/USD | After The Announcement

After the Consumer Credit numbers are announced, the market quickly goes higher and shows up a strong bullish candle. The market rightly reacted to the bad Consumer Credit data as the data was much lower than expectations. This made traders and investors sell U.S. dollars, and thus volatility increased on the upside. Now that we have got a clear indication from the market, we can confidently enter for a ‘buy’ as the data was terrible for the U.S. economy. In this case, the market is expected to make new ‘highs,’ and thus, we can hold on our trades as long as we see signs of reversal.

NZD/USD | Before The Announcement

NZD/USD | After The Announcement

The next currency pair which we will discuss is the NZD/USD pair, and from the first image (before the announcement), we can clearly say that the characteristics of the chart are similar to the previously discussed pair. The reason is that here too, the U.S. dollar is on the right-hand side. One major difference is that, just before the news announcement, price is at the ‘resistance’ area. So, based on the forecasted Consumer Credit numbers, we cannot enter for a ‘buy’ as technically this is where traders sell a currency pair.

After the news release, the price tries to go down, but it gets immediately pushed up, and the candle closes in green. This happens as a consequence of poor Consumer Credit data. In this pair, volatility is seen on both sides after the announcement. However, from a trading point of view, since some selling pressure is seen, it is advised to wait for a breakout above the ‘resistance’ and then go ‘long’ in the market.

USD/SGD | Before The Announcement

USD/SGD | After The Announcement

The above images represent the USD/SGD currency pair, and since the U.S dollar is on the left-hand side, we see a down-trending nature of the market and recently is moving in a range. The volatility seems to have slowed a bit before the news announcement, and there are no signs of reversal. Right before the announcement, price is at the bottom of the range, also known as ‘support,’ and hence one cannot go ‘short’ in the pair based on the predicted Consumer Credit data.

We should always use technical analysis along with fundamental analysis to enter a trade. After the news announcement, price falls owing to bad data, but it fails to break the ‘support.’ This illustrates the importance of the amount of impact of an economic indicator on a currency pair. Until the impact is visible, we cannot decide as to which side of the market we should be trading.

That’s about Consumer Credit and the impact of its new release on the Forex market. Please let us know if you have any queries in the comments below. All the best.

Forex Fundamental Analysis

Understanding ‘Foreign Exchange Reserves’ & Its Impact On The Forex Market

Introduction To Foreign Exchange Reserves

Foreign Exchange Reserves are foreign assets held by a country’s central bank. Most of the foreign reserves are held in the form of currencies, while the other reserves include deposits, bonds, treasury bills, other government securities. There are plenty of reasons why central banks hold reserves. And the most important reason is to control their currencies’ values. The reserves act as a backup for their liability. From an economic point of view, it essentially influences the monetary policy.

When a country’s currency falls considerably, the foreign exchange reserve acts as a backup of their economy. Typically, countries hold the US dollar as their forex reserves because it is the most traded currency in the world. Apart from that, the Great Britain Pound, Chinese Yuan, Euro region’s Euro, and Japanese Yen are the currencies that are held as FX reserves.

Understanding Foreign Exchange Reserves

Let us understand with an example, how exactly are the forex reserves accumulated.

Consider two countries, the United States and Great Britain Pound. In the present situation, let’s say the value of USD and the GBP is the same with stable economies. Now let’s say the investors start believing that the USD is going to perform exceptionally well in the coming years. So, they begin flowing in cash into the US’s real estate and the stock market. This brings up a massive demand in the US dollar, while supply in Pound.

In such a situation, people must pay more Pounds to purchase one US Dollar. Or in USD’s perspective, people must pay lesser US dollars to buy one Pound. Moving further, let’s say the US does not want its currency to get very strong. This is because it has led to high volatility in the price and dramatic moves in the market.

With this concern, the central banks start printing more of their currency (US Dollar). And this money is deployed into buying the GBP. In doing so, the supply and demand of both the currencies stabilize again. Now the Pounds that the US central banks own are the foreign reserves. This hence appears on the balance sheet of the US.

What is the Purpose of Foreign Exchange Reserves?

There are several ways central banks use FX reserves for different purposes.

The countries use their foreign reserves to keep their currency’s value at a fixed rate. An example of the same is given above. Countries with a floating exchange rate system use FX reserves to keep the value of their currency less than the US dollar. For example, Japan follows a floating system. The central bank of Japan buys US treasury so that the Yen stays below the Dollar.

Another critical function of the reserves is to maintain liquidity in case of economic crises. For instance, a natural calamity might bring a halt to local exporter’s ability to produce goods. This cuts off their supply of foreign currency to pay for imports. In such scenarios, central banks can get their local currencies in exchange for the foreign currency they have. Hence, this allows them to pay for and receive imports.

The foreign currencies are supplied by the market to keep markets steady. It also buys the local currency to prevent inflation and support its value. Central banks provide confidence to investors through reserves. They assure their foreign investors that they’re ready to take action to protect investors’ investments. This will prevent the loss of capital for the country.

Some countries use their foreign reserves to fund sectors. For example, China has used its reserves for rebuilding some of its state-owned banks.

How Forex Reserves impact the currency?

Foreign exchange reserves are important to investors as it controls the supply and demand of the currency in the forex market. Knowing that central banks try keeping the currency values stabilized, we take advantage of this and try predicting the value of a currency pair.

Let’s say the US is buying large quantities of Australian goods, bonds, etc. This would create a demand in the Australian Dollar against the US dollar. That is, the value of AUD/USD would rise in doing so. Now, if the value rises to a significant amount, the central banks will buy back the US dollars from them, which creates a demand in the USD. And this hence will bring down the value of AUD/USD to keep it stable again. Therefore, traders can look to go short on AUD/USD knowing that USD would buy back their currency to keep both the currencies stable.

Reliable Source of information on Foreign Exchange Reserves

Traders and investors need the data of foreign exchange reserves to make their investments. And this data is publicly available for free. Below are the portals to access the reports on the Forex reserves of different countries. Apart from the current data, one can access the historical data with graphical charts as well.


Impact Of Foreign Exchange Reserves’ News Release On Forex

From the above topics, it is evident that Foreign exchange reserves affect the currency of an economy. Now, we shall see how the price charts are affected when the reports are released. Typically, the impact of the news after its release is low. The Forex reserves of a country are released on a monthly basis and usually at the beginning of a moth. However, the source of the announcement is different for different countries.

For analysis, we will be considering the data released by Japan. The reports on the FX reserve is announced by the Ministry of Finance of Japan. Specifically, we will be considering the reserves that are held as USD. Consider the below report of Foreign exchange reserves (USD) held by Japan’s central bank. The news was announced on 5th March 2020. We can that the newly released data was higher than the previous month by 16.7B.


USD/JPY | Before the Announcement | 5th March 2020

Below is the chart of USD/JPY on the 15min timeframe before the release of the news. Currently, the market is showing some strength from the buyers.

USD/JPY | After the Announcement | 5th March 2020

Below is the same chart, but after the release of the news. We can see that a green candle popped at first but was eaten up by a red candle. Basically, the up move was nullified by the sellers. Also, we cannot really say that the up and down move was due to the news because the volume didn’t show any sudden spike up. Typically, for impactful news, the volume increases drastically, which did not happen for this news. However, the volatility rose a little above the average but dropped below in a few minutes. One of the reasons we could account for the low volatility and volume is that the report was almost the same as the previous month’s report.

EUR/JPY | Before the Announcement | 5th March 2020

EUR/JPY | After the Announcement | 5th March 2020

Consider the chart of EUR/JPY on the 15min timeframe given below. The news candle is marked by a rectangle around it. We can see that the price action of this pair is very similar to that of USD/JPY. Initially, the market showed a bullish move but dropped the next candle. Speaking of volatility, it was a pip or two above the average volatility. The Volume, too, did not increase during the announcement of the news, which usually happens for other impacting news. Hence, in this pair too, the FX reserves did not have an immediate impact on the currency pair.

GBP/JPY | Before the Announcement | 5th March 2020

GBP/JPY | After the Announcement | 5th March 2020

Below is the chart of GBP/JPY on the 15min timeframe. Similar to the above two pairs, in this pair too, the price action is almost the same. In 30 mins after the release of the news, the market showed a little bullish but ended on a bearish note. The volatility at this time was at the average line, and the volume was feeble. In fact, it was lesser than the time when the London or New York market opens. Hence, with this, we can come to the conclusion that the impact of Foreign exchange reserves on GBP/JPY was insignificant.


Foreign exchange reserves are the assets of other countries held by the central bank of a country. The reasons for doing so are plenty. The Foreign Exchange Reserves has its influence in determining the monetary policy. FX reserves can control the rate of a currency and can use to stabilize the same.

However, if we were to see its immediate impact on the price charts, it is low. The impact on the currency pair is usually when it is significantly overvalued or undervalued. FX reserves are also helpful to central banks in bringing up the economy to an extent. This indicator may not predict the future economy but can help economists in several other ways.

That’s about Foreign Exchange Reserves and their impact on the price charts. If you have any questions, let us know in the comments below. Cheers!

Forex Course

71. Basics Of Simple Moving Average


In the previous lesson, we understood the definition of Moving Average, their importance, and the significance of ‘length’ in MAs. We also learned the correct way of choosing the ‘length’ while using Moving Averages. In the upcoming articles, we shall see and understand the different types of moving averages. Let’s start off by learning the first type – Simple Moving Average (SMA).

Simple Moving Average

The SMA is a very simple Moving Average that is calculated by the summation of the last ‘n’ period’s closing prices and then by ‘n.’

Let us understand the above formula with an example.

When we plot 10 ‘period’ SMA on a 1-hour chart, we add the closing prices of the last 10 hours, and then divide it by 10. Similarly to plot a 5 ‘period’ SMA on a 4-hour chart, we need to add the closing prices of the candles in the last 20 hours and then divide that number by 5. These calculations are coded and embedded in the form of indicators. These indicators will be available in almost all of the trading platforms. All we need to do is to pick the indicator from the tools bar and plot them on the charts by selecting the appropriate period and timeframe.

In the below chart, we have potted three different SMAs on the chart. This chart represents the 1-hour time frame of a currency pair. As we see, longer the period of SMA, more it lags behind the price. This explains the reason why the 60 ‘period’ SMA is farther away from the 30 ‘period’ SMA; because the 60-period SMA adds up the last 60 periods and divides it by 60 as mentioned above.

When the period of an SMA is large, it reacts slowly to the price movement. Essential, SMA shows the overall sentiment of the market at any given point in time. However, SMA should always be used to find the direction of the market in the near future but not take trades based on this information alone.

Instead of looking at the current price of the market, we need to have a broader view and predict the direction of the future price movement. Using SMA, we can say if the market is in an uptrend, downtrend, or if it is moving sideways.

One major drawback of SMAs is that they are vulnerable to spikes. So, during the calculations, the prices of the currency pair, which is of no significance (high or low of spike), will be added up and shown by the SMA line. The reason behind less significance to the prices of spikes is because they give false signals, and we might think a new trend is developing, but in reality, it is just a failure of the price.

The below figure shows how the SMA would be when there are too many spikes in the chart. As we can see, the 10 ‘period’ SMA is not uniform and is not able to show the direction of the market in the occurrence of spikes.


The SMA should be plotted to know the market trend when it is not clear. It can also be used to forecast the price movement in the near future. It is very important to combine this indicator with a trading strategy as it can never produce the results when used standalone. In the next lesson, we shall introduce another type of moving average and see how it can solve the issues we face with SMA.

[wp_quiz id=”65345″]