Tag: Forex Trading

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Forex Market Analysis

Daily F.X. Analysis, 09th October – Top Trade Setups In Forex – U.K. GDP in Highlights 

On the news front, the eyes will remain on the series of economic events from the U.K., especially the GDP m/m, Goods Trade Balance, and Industrial Production m/m. The sterling may suffer today as the GDP and Construction Output are forecasted to be worse than before. Besides, the Canadian economy will also remain in highlights for the release of Employment Change and Unemployment Rate as both of these are expected to report negative data.

On the news front, the eyes will remain on the series of economic events from the U.K., especially the GDP m/m, Goods Trade Balance, and Industrial Production m/m. The sterling may suffer today as the GDP and Construction Output are forecasted to be worse than before. Besides, the Canadian economy will also remain in highlights for the release of Employment Change and Unemployment Rate as both of these are expected to report negative data.

On the news front, the eyes will remain on the series of economic events from the U.K., especially the GDP m/m, Goods Trade Balance, and Industrial Production m/m. The sterling may suffer today as the GDP and Construction Output are forecasted to be worse than before. Besides, the Canadian economy will also remain in highlights for the release of Employment Change and Unemployment Rate as both of these are expected to report negative data.

Economic Events to Watch Today  


 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.17599 after placing a high of 1.17815 and a low of 1.17325. Overall the movement of the EUR/USD pair remained flat throughout the day. The EUR/USD pair remained flat on Thursday as it closed its day on the same level it was started with. The earlier decline in the EUR/USD pair was due to the rising concerns mentioned in monetary policy accounts. At the same time, the surge in the EUR/USD pair was caused by the latest comments from President Trump about the U.S. stimulus deal.

The ECB issued its September’s monetary policy meeting minutes on Thursday that suggested that ECB could roll out more stimulus later this year as the Bank was more concerned about the pandemic hit economy than analysts had previously thought. 

The minutes revealed that ECB was more concerned about the inflation trajectory and Euro than market participants anticipated. The Euro struggled to find demand after the release of minutes that suggested that further stimulus was not too distant in the future amid an uncertain economic outlook. The ECB officials’ tone in the September meeting minutes was in contrast to the ECB President Christine Lagarde’s speech that showed no concerns about the rising Euro and was optimistic about the Eurozone economy.

Lagarde had said that the strong rebound in activity was broadly in line with previous projections. Whereas, the ECB accounts showed that members preferred the Bank to remain flexible on policy and have concerns about the pace of inflation.

Furthermore, the Vice President of the European Central Bank, Luis de Guindos, said that ECB has to use its tools at its disposal as the coronavirus pandemic depresses inflation expectations. These concerns weighed on single currency euro and dragged the prices of the EUR/USD pair in the early trading session. Whereas, in the late trading session, the U.S. President Donald Trump said that he favored a mini-accord focused on airlines and checks to all Americans. After terminating talks with Democrats for further stimulus, these comments raised hopes that some packages will be announced soon. This weighed on the U.S. dollar and raised the EUR/USD pair in the late trading session and closed the day at the opening level that provided flat movement in the pair.

On the data front, at 10:59 GMT, the German Trade Balance for August dropped to 15.7B from the projected 17.1B and weighed on single currency Euro. Whereas from the U.S. side, the Unemployment claims during last week rose to 840K against the expected 820K and weighed on the U.S. dollar that added strength to EUR/USD pair.

Daily Technical Levels

Support Resistance

1.1734    1.1784

1.1708    1.1808

1.1684    1.1834

Pivot point: 1.1758

EUR/USD– Trading Tip

The EUR/USD pair is consolidating below 1.1780 level, and the closing of candles below the triple top resistance level of 1.1780 level may drive the selling trend in the EUR/USD pair until the support level of 1.1758 and 1.1740 level. Conversely, the bullish breakout of the 1.1780 level can trigger a sharp buying trend until today’s 1.1807 marks.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.29340 after placing a high of 1.29702 and a low of 1.28913. Overall the movement of the GBP/USD pair remained bullish throughout the day. The Governor of the Bank of England’s positive comments and Trump’s support for the U.S. stimulus package pushed GBP/USD pair higher on grounds on Thursday. GBP/USD pair raised and extended its previous day’s gains despite rising concerns over the coronavirus situation in the U.K. and Brexit deal.

On Thursday, the Bank of England Governor Andrew Bailey said that the Bank was not out of power to handle the downside risks faced by the economy as the country focus was shifted to the second wave of the coronavirus crisis. Bailey said that economic recovery has been very uneven, with different sectors gaining more than others. He also said that there was an unprecedented level of uncertainty at the moment, and the risk was very much on the downside, but the Bank was not out of ammunition to fight the crisis yet. 

He added that the Bank has many policy tools that could be used promptly in response to the second wave and third wave if needed. 

Britain experienced a record decline in economic output in the second quarter of this year by a GDP contraction of 19.8%, the biggest drop since the record began in 1955. Bailey said that the country was still in a very big recession, with the economic recovery from the pandemic height very uneven. These comments from Bailey raised British Pound and helped GBP/USD pair to post gains.

The upward trend of the GBP/USD pair was further supported by the latest Trump’s call for a small stimulus package from the U.S. Congress for airline and small businesses. The change of view by Trump over stimulus measure within a day weighed on the U.S. dollar and supported the upward movement of the GBP/USD pair.

 Furthermore, the U.S. dollar was also weighed by the last week’s Unemployment Claims that rose to 840K from the projected 820K last week. The weak U.S. dollar pushed GBP/USD further on the upside on Thursday and extended its gains.

Whereas, the coronavirus cases in the north of England were getting out of control and were under a serious situation. The minister defended the government plans to introduce new restrictions that would include a ban on overnight stays and closing the pubs and restaurants in the worst-affected areas. These potential restrictions to control the coronavirus situation in the U.K. weighed on GBP and capped further gains in GBP/USD pair on Thursday.

On the data front, at 04:01 GMT, the RICS House Price Balance raised to 61% from the expected 39% and supported British Pound that added strength to GBP/USD pair. On the Brexit front, the hopes for a Brexit deal were fading in the market and weighing on British Pound with Boris Johnson giving threats to walk away from talks if the deal was not reached by 15th October. At the same time, E.U. officials have dared Johnson to walk away if he views a deal as impossible. 

According to Bloomberg, the E.U. officials are working on a plan that will find a way to carry on discussions into the second half of October despite some differences remaining on both sides. The uncertain Brexit developments have weighed on British Pound and limited the additional gains in GBP/USD on Thursday.

Daily Technical Levels

Support Resistance

1.2921    1.3013

1.2863   1.3049

1.2828    1.3106

Pivot Point: 1.2956

GBP/USD– Trading Tip

The GBP/USD is trading at 1.2960 level, holding right below an immediate resistance level of 1.2960. The resistance is extended by a double top resistance level on the hourly timeframe. Below the 1.2960 resistance level, the Sterling can trigger selling until the 1.2920 level and 1.2900 level. On the higher side, a bullish breakout of 1.2960 levels can trigger buying until the 1.3000 level. The fundamental side is busy today, and the U.K. economy is due to release series of economic events, with a special focus on the U.K. GDP data. A positive date is likely to drive a bullish breakout until 1.3000. At the same time, the negative GDP figures may lead the GBP/USD price towards 1.29350. 

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 106.026 after placing a high of 106.106 and a low of 105.923. Overall the movement of the USD/JPY pair remained bullish throughout the day. The pair USD/JPY consolidated in a range of around 106 marks on Thursday amid mixed statements from President Trump, House Speaker Pelosi, and Treasury Secretary Mnuchin related to U.S. stimulus measure. 

Earlier this week, President Trump halted further negotiations with Democrats for a stimulus measure package and said he would provide a massive stimulus measure to win the election. However, the next day, Trump backed from his statement amid the need for financial support to airlines and small businesses that had been hit hardest by the pandemic crisis. 

Trump called for a small stimulus aid for airlines, which weighed on the U.S. dollar that was moving higher due to his previous comments. U.S. stocks, however, rallied after the new call for a small package by President Trump. These statements helped the USD/JPY pair to post gains due to improved risk sentiment in the market on Thursday.

On the other hand, the House Speaker Nancy Pelosi said that a mini-accord was not possible without passing a big stimulus in response to calls for a small aid package. These contrasting statements from both sides frustrated the traders and increased concerns in the market. After Pelosi’s comments, the rally in equities that started earlier suffered and was reversed on Thursday.

On the data front, at 04:50 GMT, the Current Account Balance from Japan raised in August to 1.65T against the forecasted 1.50T and supported the Japanese Yen. At 10:02 GMT, the Economy Watchers Sentiment increased to 49.3 from the projected 45.0 and supported the Japanese Yen.

From the U.S. side, the Consumer Credit for August was released at 00:00 GMT, which dropped to -7.2B against the forecasted 14.9B and weighed on the U.S. dollar. At 17:30 GMT, the Unemployment Claims from last week raised to 840K from the anticipated 820Kand weighed on the U.S. dollar.

Despite Japan’s positive data and negative data from the United States, the currency pair USD/JPY managed to remain bullish throughout the day on Thursday. Meanwhile, the risk sentiment was also improved by the latest news that the United States has enough coronavirus vaccine for every American by March. The Health and Human Services (HHS) Secretary Alex Azar said that Americans could use vaccines by March to be available for every one of them. This improved risk sentiment weighed on the safe-haven Japanese Yen and supported the USD/JPY pair on Thursday.

Daily Technical Levels

Support Resistance

105.66    106.18

105.36    106.42

105.13    106.71

Pivot point: 105.89

USD/JPY – Trading Tips

The USD/JPY pair has violated the ascending triangle pattern at 105.800 level, and now the same level is working as a support for the safe-haven pair. On the higher side, the USD/JPY pair can continue its bullish bias until the 106.270 level. However, we can expect USD/JPY to retrace back until the support level of 105.800 level before showing us a bullish trend. Let us wait to buy over 105.800, but the next support will prevail at the 105.450 level. Let’s consider staying bullish over the 105.800 level today, and selling should also be considered only below this level today. Good luck! 

Categories
Forex Assets

Trading The CAD/SEK Forex Exotic Currency Pair & Analyzing The Costs Involved

Introduction

Introduction

Introduction

CAD/SEK is a Forex exotic currency pair, where CAD is the primary currency of Canada, and SEK (Swedish Krona) is the currency of Sweden. In this exotic currency pair, CAD is considered the base currency, and SEK as the quote currency. This pair’s price determines the value of SEK, which is equivalent to one CAD. We can quote it as 1 CAD per X numbers of SEK. For example, if the CADSEK pair’s value is at 6.5877, we would need almost 6.5877 SEK to buy one CAD.

CAD/SEK Specification

Spread

In all the financial markets, the spread represents the difference between the Bid and Ask prices. It is typically a charge that is deducted by the Forex broker. These spread values vary on the type of execution model used for trade execution.

The spread of the CAD/SEK pair on ECN is 39 pips, and on the STP model account is 44 pips.

Fees

The trading fees that forex brokers are similar to the stock market. It is deducted from the traders’ accounts as soon as they open a new position. There is no fee charged on STP accounts, but a few pips are charged on ECN accounts.

Slippage

Slippage occurs when a trader opens a trade at a price, but it opens at another price by expanding the spread. The main reason for the slippage to occur is the market volatility and the broker’s execution speed.

Trading Range in CAD/SEK

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can assess a large time period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

CAD/SEK Cost as a Percent of the Trading Range

The below tables represent the percentage values of trading costs involved while trading this particular Forex asset in various time frames. Please note that these values must be used for directional purposes only. So, for instance, if the percentage of costs involved is high in the one-hour time frame, it implies that this pair is expensive to trade in that particular time frame.

ECN Model Account 

Spread = 39 | Slippage = 5 | Trading fee = 8

Total cost = Spread + Slippage + Trading Fee

= 39 + 5 + 8 = 52

STP Model Account

Spread = 44 | Slippage = 5 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 39 + 5 + 0 = 49

The Ideal way to trade the CADSEK

The CAD/SEK is an exotic cross currency pair with sufficient liquidity. As a result, traders may find it easy to trade in this pair. If we look at the table, we would see that the percentage values did not move above 65%, representing a lower trading fee even in the lower timeframe. Therefore, trading in this currency pair is suitable for intraday, swing, and even scalping. However, the best decision is to trade when the cost of trading is at the average value.

There is another way to reduce the cost while trading this pair, and it is to place a pending order. We can either place a limit or stop order instead of the market order. In that case, the slippage won’t be considered while calculating the total costs. Therefore, in our example, the overall cost will be reduced by five pips, as shown below.

STP Model Account (Using Limit Orders)

Spread = 44 | Slippage = 0 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee

= 44 + 0 + 0 = 44

Categories
Forex Fundamental Analysis

What Should you Know About Commitments of Traders (COT) Report?

Introduction

Introduction

Introduction

One of the most significant uncertainties for policymakers is the future economic performance. All the policies adopted by governments and central banks are geared towards influencing the future’s economic performance. Economists, financial analysts, and forex traders alike use models and economic indicators to predict future economic performance. The commitment of traders (COT) report gives some insight into future economic performance.

Understanding the Commitments of Traders Report

In the US, the COT report is published by the Commodities Futures Trading Commission (CFTC). The COT report shows participation in the future market.

The COT report is comprised of four different types of reports. They are:

Legacy reports: This report breaks down the open interest positions of commercial, noncommercial, and retail traders into long, short, and spread positions. The report shows the total interest positions that are open along with the changes from the previous reporting period. This report is broken down into the long and short versions of ‘Futures Only’ and ‘Futures-and-Options-Combined’ segments. The Legacy COT report shows the open interests for 17 exchanges.

Supplemental reports: This report document contracts 13 agricultural commodities. These contracts are of both futures and options positions for noncommercial, commercial, and index traders together with nonreportable positions.

Disaggregated reports: This report covers the following five sectors; agriculture, petroleum, and its products, natural gas and its products, electricity, and metal. This report’s market participants are categorized into; producers, swap dealers, managed money, and ‘Others.’

Producers are entities whose core business activities involve the production, processing, and handling of physical commodities. These producers use the futures market to manage or hedge against risks potential to their core operations.

Swap dealer is one who enters into an agreement to exchange cash flows of a given commodity over a specific period. They use the futures market to manage and hedge against risks inherent in their swaps.

Money manager, as used in this report, means a registered commodity pool operator, an unregistered fund, or a registered commodity trading advisor identified by CFTC. They participate in the futures markets on behalf of their clients.

Others represent all other participants in the futures markets who cannot be placed in the above categories.

Traders in Financial Futures (TFF) report: This report shows the participants in the futures market for currencies, stocks, US Treasury securities, VIX, and Bloomberg commodity index. It categorizes market participants into; dealers, asset managers, leveraged funds, and others.

Dealer/ Intermediary is a participant on the ‘sell-side’ of a trade. Although they do not exclusively participate in the futures market, they have matched books meant to offset their risks. They are made up of large banks.

An asset manager is an institutional investor such as pension funds and insurance companies whose clients are predominantly institutional.

Leveraged funds hedge funds, registered commodity pool operator, an unregistered fund, or registered commodity trading advisors. Their activities in the futures market involve arbitrage across and within markets and taking outright positions.

Others include all reportable traders who cannot be placed in the above categories.

Using the Commitments of Traders (COT) Report in analysis

The COT report can be used to show whether investors are going long or short in the futures market. The CFTC collects the data used in making the COT report from reporting firms such as Futures Commission Merchants, foreign brokers, exchanges, and clearing members. Individual traders can also self-report by filling out the CFTC Form 40.

The COT report shows the open interests in the futures and options market as of Tuesday of each week. Since the COT report also shows the changes in the open positions, it can be used to show the sentiment about the economy over time. It is worth noting that the market positioning of the commercial traders and the noncommercial (speculative) traders is always the opposite of each other.

Commercial traders handle physical commodities. For them, it is natural to expect that the future price of their commodities will rise. In the futures and options market, commercial traders are hedging against risk; thus, they go short just in case prices fall. The noncommercial traders do not handle the underlying physical commodities, and thus, they are participating in the futures market speculatively and can either be long or short. Therefore, by looking at the behavior of noncommercial traders in the futures markets, we can gain insight into future price trends and the economy.

Take the above example of wheat futures, when the noncommercial traders are net short positioned in the futures market, the prices of wheat falls. Consequently, the wheat farmers and traders receive lesser pay for their products. In this case, their purchasing power is lowered, which decreases the aggregate demand in the general economy.

Impact on Currency

Forex traders pay close attention to the noncommercial traders in the financial futures. These speculative buyers tend to lead the market. When they are net long in a particular currency, it means that the demand for that currency will increase and, with it, its value relative to others. For most forex traders, the best way to trade forex using the COT report is by establishing the overbought and the oversold regions. These are the regions where trend reversal is imminent – when the noncommercial traders are at the lowest point could indicate a period of sustained short selling, and a reversal could follow.

The COT report can also be used to show a trend. For example, let’s take an instance where noncommercial traders are continuously net long on a particular currency in the futures market while the price for that currency steadily increases. With this strategy, forex traders can use noncommercial traders’ market positioning as confirmation of a trend.

Sources of Data

The US CFTC publishes the COT report.

How the publication of the COT Report Affects Forex Price Charts

The latest publication of the COT report was on October 2, 2020, at 3.30 PM ET. The release of this publication can be accessed at Investing.com.

The screengrab below is of the weekly CFTC speculative net positions of the AUD from Investing.com. To the right is a legend that indicates the level of impact the fundamental indicator has on the AUD.

As can be seen, moderate volatility is to be expected.

As of Tuesday, September 29, 2020, the AUD’s speculative net positions was 8.9K compared to the previous Tuesday’s of 16.3K. Noncommercial traders are net-long in the AUD futures, which should be positive for the AUD.

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

AUD/USD: Before the COT Report Release on October 2, 2020, Just Before 3.30 PM ET

The AUD/USD pair was trading in a neutral position before the release of the COT report. The 20-period MA was flattened with candles forming just around it.

AUD/USD: After the COT Report Release on October 2, 2020, at 3.30 PM ET

The AUD/USD pair formed a -minute bullish candle after the COT report’s release indicating that the AUD had appreciated relative to the USD. However, the pair could not sustain a bullish trend since it later continued trading in a neutral trend.

The effects of the COT report are long-term. For this reason, the weekly publication of the report has little impact on the short-term forex market.

Categories
Forex Signals

Swing Reversal On EUR/CAD Currency Pair

Categories
Forex Basics

Do Forex Scams Still Exist in 2020?

After the financial crisis of just over a decade ago, there have been many questions about whether any kind of investment or trade is really profitable. Looking further, if you want to explain to other people that “exchange money,” then they are even more skeptical because very often it is something that they had no […]

After the financial crisis of just over a decade ago, there have been many questions about whether any kind of investment or trade is really profitable. Looking further, if you want to explain to other people that “exchange money,” then they are even more skeptical because very often it is something that they had no […]

After the financial crisis of just over a decade ago, there have been many questions about whether any kind of investment or trade is really profitable. Looking further, if you want to explain to other people that “exchange money,” then they are even more skeptical because very often it is something that they had no idea that the general public can do, much less than the money was exchanged against each other.

The Main Culprit

Is Forex a scam? The main culprit, of course, is that every time there is a lot of money at stake, there are many scammers. All you have to do is write “Forex trading” on a search engine, so there will invariably be many websites that offer all kinds of scandalous benefits. For example, you will see things like “this operator made 200% returns in just one month”, which are usually attached to some kind of negotiating methodology. But what they don’t tell you is that the trader will eventually explode. If you don’t think so, look at the ranking of some sort of trade tracking forum, and watch as people come and go from above. They will have scandalous twists for a moment, and then they will suddenly disappear. This is because they exploded.

But the reality is that Forex trading is different from any other market. Yes, the potential rewards are much higher, but the reality is that some of the world’s best traders earn 20% a year. That’s not exactly sexy when it comes to a $5,000 bill. For what it’s worth, I recently had conversations with a friend of mine with one of the largest brokers in the United States, he assumed the average account was probably somewhere in the neighborhood of $2000. Even in the best of returns, you’re seeing the gain of $400 for the year. That’s not something to be moved by. With a small account, greed takes centre stage and you’ll want to double your money quickly, and then you do it again.

Think about it this way: people who exchange their retirement accounts usually do so at around 8% a year. You seem very happy about that, but very upset if you don’t double and triple your money every two months while operating on Forex. There’s a reason that a lot of the currency trading ads present something like a private jet.

The Reality

The truth is that one of the advantages of trading with currencies is that you can trade with smaller positions and build a much larger one. That said, keep in mind that leverage works against you if you abuse it. As long as you keep leverage under control, you can benefit from long-term trends. Short-term scalping is a trading style available to a few people, especially those who have jobs during the day.

That said, you can add to a trading account as you build it simultaneously. If you are given enough time and are patient enough, you may find yourself handling a relatively decent account. However, most people do not have the patience or professionalism to take the time to build that account. The real reality about Forex is that you can certainly make money doing it, but it all comes from within.

It may be a little ironic for someone who makes a living as a technical analyst to tell you this: The secret of success has nothing to do with reading graphs. Yes, you have to understand that technical analysis can give us bits of information, but the reality is that the main reason people succeed is their emotional regulation. If you can manage the losses and let the winners run, that’s what makes the difference between winners and losers.

Categories
Forex Market Analysis

Daily F.X. Analysis, October 07 – Top Trade Setups In Forex – FOMC Meeting Minutes Ahead! 

It’s going to be another busy day from the news front as the ECB and Fed officials are due to speak during the U.S. and European session today. The ECB President Lagarde is expected to speak at the Paris Europlace online International Financial Forum. Simultaneously, FOMC Member Kashkari is scheduled to discuss racism and the economy at a virtual event series. However, the investor’s focus will also stay on the FOMC Meeting Minutes from the U.S. In can be a big market mover during the mid-U.S. session.

It’s going to be another busy day from the news front as the ECB and Fed officials are due to speak during the U.S. and European session today. The ECB President Lagarde is expected to speak at the Paris Europlace online International Financial Forum. Simultaneously, FOMC Member Kashkari is scheduled to discuss racism and the economy at a virtual event series. However, the investor’s focus will also stay on the FOMC Meeting Minutes from the U.S. In can be a big market mover during the mid-U.S. session.

It’s going to be another busy day from the news front as the ECB and Fed officials are due to speak during the U.S. and European session today. The ECB President Lagarde is expected to speak at the Paris Europlace online International Financial Forum. Simultaneously, FOMC Member Kashkari is scheduled to discuss racism and the economy at a virtual event series. However, the investor’s focus will also stay on the FOMC Meeting Minutes from the U.S. In can be a big market mover during the mid-U.S. session.

Economic Events to Watch Today  

EUR/USD – Daily Analysis

The EUR/USD closed at 1.17824 after placing a high of 1.17973 and a low of 1.17047. Overall the movement of the EUR/USD pair remained bullish throughout the day. The EUR/USD pair rose to its nine-day highest level amid the broad-based U.S. dollar weakness and the strong positive macro-economic data from the European side.

The U.S. dollar was lower after the news about U.S. President Donald Trump’s health came into the market. Another factor helping the risk sentiment was the hopes that U.S. stimulus measures will now be delivered soon as Trump’s infection has brought the virus to Capitol Hill. Both Democrats and Republicans will now realize the urgency of responding to the virus impact and reach a consensus over the aid bill’s size. The renewed stimulus hoped also added strength to the risk sentiment and helped the EUR/USD pair to gain further.

At 13:00 GMT, the Final Services PMI for the whole Eurozone also rose to 48.0 from the anticipated 47.6 and supported the Euro currency. At 13:30 GMT, the Sentix Investor Confidence came in as -8.3 against the forecasted -9.2 and supported Euro. At 14:00 GMT, the Retail Sales from Europe rose to 4.4% from the expected 2.4% and supported Euro.

The Retail Sales in August from Eurozone raised nearly double than expectations to 4.4% and supported the local currency against its rival U.S. dollar and pushed the EUR/USD pair higher.

The Services PMI from all over European nations also rose and showed that the service industry improved from their previous levels and helped Euro to post gains. Furthermore, the Eurogroup meeting and the Financial Affairs Council meeting will start on 5-6th October. The Eurogroup will discuss its priorities under its new presidency and adopt a work program. The Eurozone’s policy priorities in the context of economic recovery and the draft budgets for 2021 will be discussed. Traders will look forward to meeting results for finding fresh clues about the EUR/USD pair in the coming days.

Daily Technical Levels

Support Resistance

1.1726     1.1817

1.1670     1.1854

1.1634     1.1909

Pivot point: 1.1762

EUR/USD– Trading Tip

The EUR/USD is trading at 1.1740 level, having reviolated the upward channel at 1.1750 level, mostly traded in line with our forecast to test the resistance level of 1.1801 level. On Tuesday, the EUR/USD is trading below a resistance level of 1.1801 level. Below this mark, the EUR/USD can plunge until the support resistance level of 1.1760 and 1.1740. In contrast, an upward breakout of 1.1801 can lead the EUR/USD pair towards 1.1840 areas. 

GBP/USD – Daily Analysis

The GBP/USD closed at 1.29726 after placing a high of 1.29920 and a low of 1.28995. Overall the movement of the GBP/USD pair remained bullish throughout the day. The GBP/USD pair extended its previous daily gains and reached its 11-day highest level above 1.299 level amid the broad-based U.S. dollar weakness and renewed Brexit deal hopes along with the improving risk sentiment around the market.

The British Pound to U.S. dollar exchange rate moved higher on rising expectations that the U.K. and E.U. will reach a consensus on the post-Brexit trade deal. The Goldman Sachs forecasted that both parties would reach a deal by early November.

Another factor involved in the Brexit deal’s raised hopes was the report that suggested that E.U. chief negotiator Michel Barnier aimed to hold talks with European coastal states to get the freedom to negotiate terms with the U.K. on the fisheries issue. It is one of the sticking points that have caused a delay in the Brexit deal progress. The Brexit hopes were further bolstered after Prime Minister Boris Johnson and European Commission president Ursula von der Leyen agreed that talks should be intensified to close the significant gap that has stalled the negotiations’ progress. 

All these above optimistic reports helped the local currency and pushed the GBP/USD pair on the above side. The bullish calls were supported by Goldman Sachs that urges investors to buy Sterling. However, the Goldman Sachs Bank did not completely take the prospect of no-deal Brexit out off the table and said that No-Deal Brexit’s perceived probability would remain intact beyond the next European Council meeting in mid-October.

If no deal is reached between the E.U. and U.K., Britain will leave the E.U. without a deal at the end of the transition period on December 31.

Meanwhile, on the data front, at 13:30 GMT, the Final Services PMI from Great Britain for September rose to 56.1 against the 55.1 and supported GBP. The stronger than expected Services PMI showed an expansion in the U.K. services activities and supported the already rising GBP/USD pair.

However, the U.S. dollar was weaker due to the rising risk sentiment on the reports of the quick recovery of the U.S. President Donald Trump from coronavirus infection. The stronger U.S. dollar onboard, along with the improved risk sentiment, also helped the GBP/USD pair’s plunge.

Daily Technical Levels

Support Resistance

1.2921     1.3013

1.2863     1.3049

1.2828     1.3106

Pivot Point: 1.2956

GBP/USD– Trading Tip

On Wednesday, the GBP/USD is trading at 1.2890 level after violating the upward channel at 1.2930. For the moment, the same level is expected to provide resistance to the Cable pair. We may see a slight upward movement in Sterling, especially in the wake of bullish correction until 1.2930. Failure to break this level or closing candles below the 1.2930 level is likely to drive selling bias until the 1.2865 level. The MACD and RSI are supporting selling bias, but the recent smaller histograms of MACD suggest sellers are exhausted, and we may see a slight upward correction in the market today. 

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 105.735 and a high of 105.792 and a low of 105.228. Overall the movement of the USD/JPY pair remained bullish throughout the day. After posting hefty losses on Friday, USD/JPY reversed its direction and moved higher amid the improved risk sentiment and rising optimism in the market. 

The market’s mood was improved after a bumpy weekend related to the concerning news about the health of U.S. President Donald Trump. The Leader of the world’s largest economy was tested positive for coronavirus on Friday and was shifted to a military medical facility for treatment. The Contradictory headlines about his health and its effects on upcoming Presidential elections were raising concerns throughout the weekend. 

This news canceled the above fears and raised optimism around the market, boosting risk sentiment. The U.S. equities and the U.S. Treasury yields raised on the day, giving a boost to the U.S. dollar. Simultaneously, the rising risk sentiment weighed on the safe-haven Japanese Yen and pushed the USD/JPY pair.

On the data front, at 18:45 GMT, the Final Services PMI in September from the United States remained flat with the forecasts of 54.6. While at 19:00 GMT, the highlighted ISM Services PMI from the United States rose to 57.8 against the forecasted 56.3 and supported the U.S. dollar.

The ISM Services PMI showed an expansion in U.S. services activities in September and raised hopes for the quick economic recovery that helped improve the market’s risk sentiment and weighed on the Japanese Yen due to its safe-haven nature and ultimately pushed the USD/JPY pair even higher.

Moreover, the risk sentiment was also supported by the better than expected Retail Sales report from the European Union that doubled the expected number and supported riskier assets. The European stocks raised after this report, and U.S. stocks followed them that raised the market’s risk sentiment and helped the riskier GBP/USD pair gain further in the market.

Meanwhile, the USD/JPY pair’s gains remain limited by the rising fears of a second wave of coronavirus globally in the winter season. From all across the globe, the reports were suggesting a rising number of coronavirus cases. Europe struggled hard to fight against the pandemic and contained the spread as France, and the U.K. saw a continuous rise in daily count on infection cases. 

Meanwhile, other countries like Oman, Israel, India, France, Canada, UK, and Japan also reported a rise in infected people. This raised global concerns, supported the safe-haven appeal, and capped further gains in the USD/JPY pair.

Daily Technical Levels

Support Resistance

105.39     105.91

105.08     106.12

104.88     106.43

Pivot point: 105.60

USD/JPY – Trading Tips

On Wednesday, the USD/JPY is also trading bullish at 105.750 over the stronger U.S. dollar; however, the recent bullish bias in safe-haven Japanese yen drives a slight bearish correction in the market. On the 4 hour chart, the double top resistance level of the 105.800 level keeps the pair bearish. In case of a bullish breakout, the 105.800 resistance level may lead the USD/JPY pair towards the next target level of 106.240. On the lower side, the USD/JPY may find support at 105.400 level today. I will be looking to take a buy position over the 105.810 level. Good luck! 

Categories
Forex Basic Strategies

Pairing Significant S&R Levels With RSI Indicator To Generate Accurate Trading Signals

Introduction

Introduction

Introduction

In the previous set of articles, we discussed strategies based on trend continuation or trend reversal. Let us change the subject a little bit and discuss a strategy based on ‘Support and Resistance.’ Although we all know how to trade support and resistance, there is always a problem of consistency when it comes to trading using the conventional support and resistance strategy. We have a look into some of these issues by designing a strategy that provides not only decent risk-to-reward (RR) but also a high probability of success.

Markets are continually changing due to changes in market participants, global politics, and economic events. This means if we continue to trade the usual way, we could be in trouble. It is necessary that, along with markets, we, too, change our trading strategy in order to adapt to the changing market environment.

Time Frame

The strategy works well on the 1-hour, 4-hour, and ‘Daily’ time frame. Therefore, the strategy is suitable for the swing to long-term traders.

Indicators

We make use of only one technical indicator in the strategy, and that is the Relative Strength Index (RSI) with its default settings.

Currency Pairs

The strategy is suitable for trading almost all currency pairs listed on the broker’s platform. One thing we need to ensure before choosing a currency pair is that it should be volatile.

Strategy Concept

‘Cup and Handle’ is a powerful candlestick pattern that shows the prevalence of bullish strength in the market. It is a very reliable pattern that offers excellent trading opportunities. ‘Cup’ formation indicates that the price was unable to make a proper ‘lower low’ on the higher time frame due to a strong buyer who took the price up. The ‘handle’ indicates that the market was unable to reach the previous ‘low’ due to weak sellers where eventually buyers bought at a higher price and are in the process of making a new ‘higher high.’

The logic behind the formation of the ‘Cup and Handle’ pattern makes it one of the most powerful patterns. But the pattern alone is not the basis for the strategy; we also use the RSI to take the highest probability trades. We apply the concept of ‘Cup and Handle’ pattern and RSI indicator at a long-term ‘Support’ level to execute low-risk ‘long’ trades.

The same concept applies when taking ‘short’ trades at long-term ‘Resistance’ level. Here we should look for the formation of the ‘Inverse Cup and Handle’ pattern at ‘Resistance.’ ‘Cup’ here indicates that the price was unable to make a proper ‘higher high’ on the higher time frame due to strong seller who crashed the price. The ‘handle’ indicates that the market was unable to reach the previous ‘high’ due to weak buyers where eventually sellers sold at a lower price and are in the process of making a new ‘lower low.’ We use the RSI indicator to take the highest probability trades by looking for ‘overbought’ and ‘oversold’ situations in the market.

Trade Setup

In order to use the strategy, we have considered the 4-hour chart of AUD/USD, where we will be illustrating a ‘long’ trade using the rules of the strategy.

Step 1:
The first step is to identify long-term support and resistance levels. By long-term we mean, support and resistance levels on the 1-hour time frame and above. Note that the greater number of touches, the stronger is the support or resistance. We would recommend at least three touches at the support or resistance to calling it a strong one. To raise the odds in our favour, we can look for trading at support level in an uptrend and resistance in a downtrend.
The below image shows long-term support being formed in the AUD/USD pair on the 4-hour chart.

Step 2:
Once we have identified the critical technical level, we will wait for the price to present the ‘cup and Handle’ pattern at support and ‘Inverse Cup and Handle’ pattern at resistance. Here we should make sure that when the price at support, the RSI indicates an oversold (below 30) situation in the market at least once and then shows up the pattern. On the other hand, when the price is at resistance, the RSI should cross above the level of 70, indicating an overbought situation and then show up the ‘Inverse cup and handle’ pattern.

Step 3:
After ensuring that the pattern is formed at the right place along with suitable indications from the RSI, we now discuss how to enter the trade. In a ‘cup and handle’ pattern, we enter ‘long’ right at the price break out above the ‘high’ of ‘cup’ pattern. In an ‘inverse cup and handle’ pattern, we enter ‘short’ when ‘price’ breaks below the ‘low’ of the ‘cup’ pattern.
The below image shows an example of we enter for a ‘buy’ at ‘support.’

Step 4:
After entering, it is essential to determine the stop-loss and take-profit levels for the trade. One of the primary reasons behind low risk-to-reward (RR) ratio is late ‘entry.’ Stop-loss is placed below the ‘low’ of the ‘handle’ pattern in a ‘long’ position and above the ‘high’ of the ‘handle’ pattern in a ‘short’ position. The strategy essentially says to enter when prices have travelled a decent amount of distance from support or resistance, which considerably reduces the risk-to-reward (RR) ratio.
The below image shows the result of the trade executed using the above strategy where the resultant risk-to-reward (RR) of the trade is 1:1.

Strategy Roundup

Although the ‘Cup and Handle’ pattern is a bullish continuation pattern, if we understand the logic of the pattern and apply at key technical levels, it can provide excellent opportunities for short as well as long-term traders. Using the RSI indicator along with the pattern gives an extra edge to the strategy, which makes it highly suitable in changing market environment.

Categories
Forex Signals Forex Technical Analysis

AUD/JPY Pair Failed to Gains Positive Traction – Brace for Selling!  

Today in the Asian trading session, the AUD/JPY currency pair failed to keep its early-day bullish momentum and dropped well below the 76.00 level despite the upbeat market sentiment. However, the reason for the prevalent bearish sentiment around the currency pair could be associated with the RBA’s announcement of no rate change, as well as, the RBA has a dovish view on the Australian economy, which could be considered as one of the key factors that undermine the Australian dollar and contributed to the currency pair losses. Across the pond, the currency pair declines were further bolstered after the US Secretary of State Mike Pompeo said Japan’s Prime Minister (PM) Yoshihide Suga would strengthen the relationship with the US. Thus, the Japanese yen got impressed by the above comments, which adds further downside pressure around the AUD/JPY currency pair. 

Today in the Asian trading session, the AUD/JPY currency pair failed to keep its early-day bullish momentum and dropped well below the 76.00 level despite the upbeat market sentiment. However, the reason for the prevalent bearish sentiment around the currency pair could be associated with the RBA’s announcement of no rate change, as well as, the RBA has a dovish view on the Australian economy, which could be considered as one of the key factors that undermine the Australian dollar and contributed to the currency pair losses. Across the pond, the currency pair declines were further bolstered after the US Secretary of State Mike Pompeo said Japan’s Prime Minister (PM) Yoshihide Suga would strengthen the relationship with the US. Thus, the Japanese yen got impressed by the above comments, which adds further downside pressure around the AUD/JPY currency pair. 

Today in the Asian trading session, the AUD/JPY currency pair failed to keep its early-day bullish momentum and dropped well below the 76.00 level despite the upbeat market sentiment. However, the reason for the prevalent bearish sentiment around the currency pair could be associated with the RBA’s announcement of no rate change, as well as, the RBA has a dovish view on the Australian economy, which could be considered as one of the key factors that undermine the Australian dollar and contributed to the currency pair losses. Across the pond, the currency pair declines were further bolstered after the US Secretary of State Mike Pompeo said Japan’s Prime Minister (PM) Yoshihide Suga would strengthen the relationship with the US. Thus, the Japanese yen got impressed by the above comments, which adds further downside pressure around the AUD/JPY currency pair. 

On the contrary, the upbeat market mood, backed by optimism over US President Trump’s health, could be considered one of the key factors that help the currency pair limit its deeper losses. The AUD/USD currency pair is currently trading at 75.64 and consolidating in the range between 75.60 – 76.16. As we already mentioned, the global risk sentiment got a strong boost after US President Trump leaves the hospital and feels “20-years younger”. Despite this, the doubts over Donald Trump’s remain high as a recent video from the American leader showed that he struggles while breathing. Besides, the doubts were further fueled after the White House’s recent confirmation that Trump will be under 24-hour care, and anybody nearing the President will need to wear the PPE kit. 

At the US-China front, the renewed US-China tussle also keeps challenging the market risk-on mood, adding further pessimism around the currency pair. As per the latest report, the Dragon Nation recently fueled the Sino-American tussle by criticizing the US ban on TikTok and WeChat at the World Trade Organization (WTO). 

At the AUD front, the Reserve Bank of Australia (RBA) held its cash rate, and the targeted yield on 3-year bonds unchanged at 0.25% during the latest announcement. In the meantime, the RBA has a dovish view of the Australian economy, which ten underpins the Australian dollar and contributes to the currency pair losses. It should be noted that the RBA confirmed that Unemployment and underemployment are expected to remain high for an extended period. They further added, “Wage and inflation pressures remain very depressed.”

Across the ocean, the currency pair losses got an additional boost after the US Secretary of State Mike Pompeo said Japan’s Prime Minister (PM) Yoshihide Suga is a ‘powerful force for good’, as well as Pompeo further added that he believes Suga will strengthen the relationship with the US. These positive comments tend to underpin the Japanese yen currency and drag the currency pair lower.


Daily Support and Resistance

S1 73.89

S2 74.62

S3 75.05

Pivot Point 75.36

R1 75.78

R2 76.09

R3 76.82

Looking forward, the market traders keeping their eyes on the crude oil supply data from the American Petroleum Institute (API) due later in the day. In the meantime, the updates surrounding the fresh Sino-US tussle, as well as the coronavirus (COVID-19), could not lose their importance.

Entry Price – Sell 75.862

Stop Loss – 76.262

Take Profit – 75.462

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Market Analysis

Daily F.X. Analysis, October 06 – Top Trade Setups In Forex – U.S. and ECB Central Bankers to Speak!

On the news front, the eyes will remain on the Central Bank officials such as Fed Chair Powell Speaks and ECB President Lagarde Speaks. The ECB President Lagarde is due to speak at a fireside chat at the Wall Street Journal’s online CEO Summit while Fed Chair Powell is due to talk about the U.S. economic outlook at the National Association of Business Economics annual meeting, via satellite. Audience questions are also expected.

On the news front, the eyes will remain on the Central Bank officials such as Fed Chair Powell Speaks and ECB President Lagarde Speaks. The ECB President Lagarde is due to speak at a fireside chat at the Wall Street Journal’s online CEO Summit while Fed Chair Powell is due to talk about the U.S. economic outlook at the National Association of Business Economics annual meeting, via satellite. Audience questions are also expected.

On the news front, the eyes will remain on the Central Bank officials such as Fed Chair Powell Speaks and ECB President Lagarde Speaks. The ECB President Lagarde is due to speak at a fireside chat at the Wall Street Journal’s online CEO Summit while Fed Chair Powell is due to talk about the U.S. economic outlook at the National Association of Business Economics annual meeting, via satellite. Audience questions are also expected.

Economic Events to Watch Today  

EUR/USD – Daily Analysis

The EUR/USD closed at 1.17824 after placing a high of 1.17973 and a low of 1.17047. Overall the movement of the EUR/USD pair remained bullish throughout the day. On Monday, the EUR/USD pair rose to its nine days highest level amid the broad-based U.S. dollar weakness and the strong positive macro-economic data from the European side.

The U.S. dollar was lower on Monday after the news about U.S. President Donald Trump’s health came into the market. The hopes that Trump will recover soon and be discharged from his military hospital as soon as Monday raised risk sentiment in the market and weighed on the safe-haven U.S. dollar. The fears that U.S. Presidential elections might not take place on schedule also dropped after the reports of Trump’s possible release from the hospital.

Another factor helping the risk sentiment was the hopes that U.S. stimulus measures will now be delivered soon as Trump’s infection has brought the virus to Capitol Hill. Both Democrats and Republicans will now realize the urgency of responding to the virus impact and reach a consensus over the aid bill’s size. The renewed stimulus hoped also added strength to the risk sentiment and helped the EUR/USD pair to gain further.

On the data front, at 12:15 GMT, the Spanish Services PMI for September dropped to 42.4 against the expected 46.4. AT 12:45 GMT, the Italian Services PMI rose to 48.8 from the projected 46.7 and supported Euro. At 12:50 GMT, the French Final Services PMI came in line with the expectations of 47.5. At 12:55 GMT, the German Final Services PMI rose to 50.6 against the forecasted 49.1 and supported Euro. 

At 13:00 GMT, the Final Services PMI for the whole Eurozone also rose to 48.0 from the anticipated 47.6 and supported the Euro currency. At 13:30 GMT, the Sentix Investor Confidence came in as -8.3 against the forecasted -9.2 and supported Euro. At 14:00 GMT, the Retail Sales from Europe rose to 4.4% from the expected 2.4% and supported Euro.

The Retail Sales in August from Eurozone raised nearly double than expectations to 4.4% and supported the local currency against its rival U.S. dollar and pushed the EUR/USD pair higher.

The Services PMI from all over European nations also rose and showed that the service industry improved from their previous levels and helped Euro to post gains. Furthermore, the Eurogroup meeting and the Financial Affairs Council meeting will start on 5-6th October. The Eurogroup will discuss its priorities under its new presidency and adopt a work program. The Eurozone’s policy priorities in the context of economic recovery and the draft budgets for 2021 will be discussed. Traders will look forward to meeting results for finding fresh clues about the EUR/USD pair in the coming days.

Daily Technical Levels

Support Resistance

1.1726    1.1817

1.1670    1.1854

1.1634    1.1909

Pivot point: 1.1762

EUR/USD– Trading Tip

On Monday, the EUR/USD has mostly traded in line with our forecast to test the resistance level of 1.1801 level. On Tuesday, the EUR/USD is trading below a resistance level of 1.1801 level. Below this mark, the EUR/USD can plunge until the support resistance level of 1.1760 and 1.1740. In contrast, an upward breakout of 1.1801 can lead the EUR/USD pair towards 1.1840 areas. Let’s keep an eye on the Fed Chair Powell and ECB President Lagarde Speaks to determine further market trends. The bullish bias remains dominant today.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.29726 after placing a high of 1.29920 and a low of 1.28995. Overall the movement of the GBP/USD pair remained bullish throughout the day. The GBP/USD pair extended its previous daily gains and reached its 11-day highest level above 1.299 level on Monday amid the broad-based U.S. dollar weakness and renewed Brexit deal hopes along with the improving risk sentiment around the market.

The British Pound to U.S. dollar exchange rate moved higher on Monday on rising expectations that the U.K. and E.U. will reach a consensus on the post-Brexit trade deal. The Goldman Sachs forecasted that both parties would reach a deal by early November.

Another factor involved in the Brexit deal’s raised hopes was the report that suggested that E.U. chief negotiator Michel Barnier aimed to hold talks with European coastal states to get the freedom to negotiate terms with the U.K. on the fisheries issue. It is one of the sticking points that have caused a delay in the Brexit deal progress. The Brexit hopes were further bolstered after Prime Minister Boris Johnson and European Commission president Ursula von der Leyen agreed that talks should be intensified to close the significant gap that has stalled the negotiations’ progress. 

All these above optimistic reports helped the local currency and pushed the GBP/USD pair on the above side. The bullish calls were supported by Goldman Sachs that urges investors to buy Sterling. However, the Goldman Sachs Bank did not completely take the prospect of no-deal Brexit out off the table and said that No-Deal Brexit’s perceived probability would remain intact beyond the next European Council meeting in mid-October.

If no deal is reached between the E.U. and U.K., Britain will leave the E.U. without a deal at the end of the transition period on December 31.

Meanwhile, on the data front, at 13:30 GMT, the Final Services PMI from Great Britain for September rose to 56.1 against the 55.1 and supported GBP. The stronger than expected Services PMI showed an expansion in the U.K. services activities and supported the already rising GBP/USD pair on Monday.

However, the U.S. dollar was weaker on Monday due to the rising risk sentiment on the reports of the quick recovery of the U.S. President Donald Trump from coronavirus infection. The reports suggested that Trump would be released from his military hospital as soon as Monday, and he raised the risk sentiment after breaking the concerns that election might suffer from his illness. The weak U.S. dollar onboard, along with the improved risk sentiment, also helped the GBP/USD pair’s gains on Monday.

Daily Technical Levels

Support Resistance

1.2921    1.3013

1.2863    1.3049

1.2828    1.3106

Pivot Point: 1.2956

GBP/USD– Trading Tip

The GBP/USD is holding over a strong resistance become a support level of 1.2954 level. On the 4 hour timeframe, the Cable has formed an upward channel supporting the pair around 1.2950 and 1.2925 level. Whereas, the resistance stays at 1.3003 and 1.3058 level. The MACD and 50 EMA support bullish bias, which may keep the GBP/USD pair bullish over 1.2956 level. Let’s consider taking buying trades over 1.3000 level and bearish below the same level to target 1.2956. 

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 105.735 and a high of 105.792 and a low of 105.228. Overall the movement of the USD/JPY pair remained bullish throughout the day. After posting hefty losses on Friday, USD/JPY reversed its direction and moved higher on Monday amid the improved risk sentiment and rising optimism in the market. 

The market’s mood was improved on Monday after a bumpy weekend related to the concerning news about the health of U.S. President Donald Trump. The Leader of the world’s largest economy was tested positive for coronavirus on Friday and was shifted to a military medical facility for treatment. The Contradictory headlines about his health and its effects on upcoming Presidential elections were raising concerns throughout the weekend. However, after the weekend, the news suggested that Trump was recovering, and he will be released from the hospital as soon as Monday. 

This news canceled the above fears and raised optimism around the market, boosting risk sentiment. The U.S. equities and the U.S. Treasury yields raised on the day, giving a boost to the U.S. dollar. Simultaneously, the rising risk sentiment weighed on the safe-haven Japanese Yen and pushed the USD/JPY pair on Monday.

On the data front, at 18:45 GMT, the Final Services PMI in September from the United States remained flat with the forecasts of 54.6. While at 19:00 GMT, the highlighted ISM Services PMI from the United States rose to 57.8 against the forecasted 56.3 and supported the U.S. dollar.

The ISM Services PMI showed an expansion in U.S. services activities in September and raised hopes for the quick economic recovery that helped improve the market’s risk sentiment and weighed on the Japanese Yen due to its safe-haven nature and ultimately pushed the USD/JPY pair even higher.

Moreover, the risk sentiment was also supported by the better than expected Retail Sales report from the European Union on Monday that doubled the expected number and supported riskier assets. The European stocks raised after this report, and U.S. stocks followed them that raised the market’s risk sentiment and helped the riskier GBP/USD pair gain further in the market.

Meanwhile, the USD/JPY pair’s gains remain limited by the rising fears of a second wave of coronavirus globally in the winter season. From all across the globe, the reports were suggesting a rising number of coronavirus cases. Europe struggled hard to fight against the pandemic and contained the spread as France and the U.K. saw a continuous rise in the number of daily count on infection cases. 

Meanwhile, other countries like Oman, Israel, India, France, Canada, UK, and Japan also reported a rise in the number of infected people. This raised global concerns supported the safe-haven appeal and capped further gains in the USD/JPY pair.

Daily Technical Levels

Support Resistance

105.39    105.91

105.08    106.12

104.88    106.43

Pivot point: 105.60

USD/JPY – Trading Tips

The USD/JPY is also trading bullish at 105.650 over the stronger U.S. dollar; however, the recent bullish bias in safe-haven Japanese yen drives a slight bearish correction in the market. On the 4 hour chart, the double top resistance level of the 105.800 level keeps the pair bearish. In case of a bullish breakout, the 105.800 resistance level may lead the USD/JPY pair towards the next target level of 106.240. On the lower side, the USD/JPY may find support at 105.400 level today. I will be looking to take a buy position over the 105.810 level. Good luck! 

Categories
Forex Assets

Everything About Trading The CAD/SGD Forex Currency Pair

Introduction

Introduction

Introduction

CAD/SGD is a Forex exotic currency pair where CAD represents the Canadian Dollar and the SGD, – the Singapore Dollar. For this pair, the CAD is the base currency, and the SGD is the quote currency. Therefore, the price attached to the pair is the quantity of the SGD that can be bought by 1 CAD. If the price of the CAD/SGD pair is 1.0289, it means that 1 CAD dollar buys for 1.0289 SGD.

CAD/SGD Specification

Spread

In forex trading, the difference in pips between the buying price (bid) and selling price (ask) is the spread. Forex brokers primarily generate their revenues through the spread. The spread varies depending on the type of trading account. The spread for the CAD/SGD pair is:

ECN: 7 pips | STP: 12 pips

Fees

For every individual trade made on an ECN account, one has to pay a commission. This fee varies with the broker and depends on the type of trade executed and the currency being traded. STP accounts do not have fees.

Slippage

In forex trading, slippage is the difference in the price in which a trader initiates a trade and the price at which it is executed. Slippage is a direct result of the brokers’ speed of execution and market volatility.

Trading Range in the CAD/SGD Pair

In forex, the trading range shows the fluctuation of a currency pair within s specific timeframe. The trading range is useful to estimate potential profit or loss from trading different timeframes. For example, if the CAD/SGD pair fluctuates ten pips in the 2-hour timeframe, it means that a trader can expect to either gain or lose $97 by trading one standard lot.

Below is a table showing the minimum, average, and maximum volatility of CAD/SGD across different timeframes.

The Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a larger period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

CAD/SGD Cost as a Percentage of the Trading Range

Cost expressed as the Percentage of the trading range helps a forex trader establish the anticipated trading costs under different market volatility across different timeframes.

Total cost = Slippage + Spread + Trading Fee

The tables below show the percentage costs to be expected when trading the CAD/SGD pair. The costs are expressed as a percentage of pips.

ECN Model Account

Spread = 7 | Slippage = 2 | Trading fee = 1

Total cost = 10

STP Model Account

Spread = 12 | Slippage = 2 | Trading fee = 0

Total cost = 14

The Ideal Timeframe to Trade CAD/SGD

We can see that in both the ECN and the STP accounts, costs are higher when volatility is at a minimum across all timeframes. Furthermore, we can observe that these costs tend to reduce when the volatility increases to the maximum.

For the CAD/SGD pair, costs are highest when volatility is at the lowest at 0.02 pips during the 1-hour timeframe. Conversely, the trading costs are lowest at the 1-month timeframe when volatility is at a maximum of 8.7 pips. Since high volatility can be risky and low volatility less profitable, forex traders should consider trading during times of average volatility.

More so, traders can increase their profitability by eliminating the costs associated with slippage. By using limit instead of market orders, forex traders can avoid experiencing slippage when entering and exiting positions.

Let’s have a look at how zero slippage cost affects the total costs.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 7 + 1 = 8

Notice that using the limit order type reduces the overall costs. The highest cost, for example, has reduced from 169.49% to 135.59%.

Categories
Forex Basic Strategies

Filtering The Most Profitable Trading Signals Using The ‘Zig-Zag’ Forex Trading Strategy

Introduction

Introduction

Introduction

In today’s article, we discuss a strategy that is based on the unfamous zig-zag indicator. The zig-zag indicator serves to shows changes and continuation in trends that occur in price movements. Usually, this indicator is used by traders to look for reversal points in the market. But in today’s strategy, we will use the zig-zag indicator to trade the continuation of a trend. However, if we think a little deep, this type of trading is also a form of ‘reversal trading’ where we will be finding the reversal points in a smaller trend within the larger trend.

At first glance, the indicator appears very simple but is not easy to understand by novice traders. The trading strategy that uses this indicator is not special because it uses this indicator, but since we are imparting various other concepts of technical analysis such as chart patterns, trend lines, and price action. But using this indicator alone too can generate good trading signals provided the trader is having good skill of this indicator properly.

Time Frame

The ‘zig-zag’ strategy can only be applied to the ‘Daily’ time frame. Hence, this strategy is not for intraday and short-term traders. We need to have a longer time horizon to trade using this strategy.

Indicators

We use two technical indicators in this strategy

  • Simple Moving Average (20-period)
  • Zig-Zag (default setting)

Currency Pairs

We can apply the following strategy on both minor and major currency pairs. Liquidity and volatility will not be a major issue here as we are trading on higher time frames.

Strategy Concept

We are basically using the zig-zag indicator to identify classic chart patterns of technical analysis and trade them. The indicator is very effective in reducing the noise by helping the technical trader in viewing the larger picture and general market direction. Here, we look for appropriate chart patterns and associated price action indications within the context of a trend.

When these patterns are formed just anywhere on the chart, they do not hold much value as there is no logic to that. Once we identify a trend using the simple moving average (SMA), we wait for trend continuation signs provided to us by the zig-zag indicator and the chart pattern. The formation of the chart pattern is the first sign of trend continuation. Once price action develops and the market moves in the direction of the major trend, we look for ‘entry’ signals and then only enter into a trade.

One of the astounding features of this strategy is it’s risk-to-reward (RR) ratio. Trades executed this strategy have high risk-to-reward (RR) because we are trading with the major trend and the need for a smaller stop-loss. Not only is ‘RR’ of trades high, but also the probability of winning is much higher in this strategy due to stricter rules and time given for a trade setup to be formed. Now that we got a gist of the strategy, let us find out the actions required to execute the strategy.

Trade Setup

In order to execute the strategy, we have considered the ‘Daily’ chart of the USD/JPY currency pair, where we will be illustrating a ‘short’ trade. Here are the steps to execute the strategy.

Step 1: Firstly, we have to identify the trend of the market on the ‘Daily’ chart. This can easily be done with the help of the simple moving average (SMA) indicator. If the price stays below the SMA for a long period of time, we say that the market is in a downtrend. And if it remains above the SMA for a sufficient period of time, we say that the market is in an uptrend. It is worthwhile to note that zig-zag is not being used for establishing the trend.

The below image shows that the market is in a strong downtrend in the case of USD/JPY.

Step 2: After identifying the trend of the market, we wait for the market to form a ‘head and shoulders’ pattern in a down-trending market and an ‘inverse head and shoulders’ pattern in an up-trending market. Here’s where the application of the zig-zag indicator comes into the picture. The chart pattern should essentially be indicated by the zig-zag pattern—the lines of indicator show the ‘real’ formation of the pattern in the market. In addition to this, we plot a trendline that connects the ‘lows’ (head and shoulders) or ‘highs’ (inverse head and shoulders) of the pattern as indicated by the indicator. This completes the execution of 80% of the strategy’s rules.

Step 3: We enter the market for a ‘buy’ or ‘sell’ after the price breaks the trendline and ‘tests’ it on the other side. In simple words, in a ‘head and shoulders’ pattern, we enter for a ‘sell’ when price breaks the ‘support’ trendline and re-tests after making a ‘lower low.’ While in an ‘inverse head and shoulders pattern,’ we enter for a ‘buy’ when price breaks the ‘resistance’ trendline and re-tests after making a ‘higher high.’

The below image shows how a ‘short’ entry is taken.

Step 4: Now, let us determine the stop-loss and take-profit levels for the strategy. When ‘short,’ we place a stop-loss above the right shoulder of the ‘head-and-shoulder’ pattern. Similarly, when ‘long, stop-loss is placed below the right shoulder of the ‘inverse head-and-shoulder’ pattern. Take-profit will be set at the ‘lower low ‘of the major downtrend and at the ‘higher high’ of the major uptrend. The risk-to-reward (RR) of trades executed using this strategy will be at least 1:1.5.

The below image shows the result of sample trade executed using the zig-zag strategy.

Strategy Roundup

Even though the above strategy takes a lot of time to present a potential trade, the risk-to-reward and probability of winning of these trades are worth waiting for. There are many applications of the zig-zag indicators. Traders make use of other technical indicators like the Stochastic Oscillator and Relative Strength Index (RSI) together with the zig-zag indicator to locate the overbought and oversold conditions of the market.

Categories
Forex Risk Management

How to Deal with Losing Streaks and Drawdowns

One of the aspects of being a professional trader for which many are unprepared is the depressing periods of drawdowns in forex. Losing streaks can shake you and wreak havoc on your emotions, levels of confidence, and feelings of self-esteem. If you’ve been operating for a while, you’ll know what we mean. Consecutive losses place […]

One of the aspects of being a professional trader for which many are unprepared is the depressing periods of drawdowns in forex. Losing streaks can shake you and wreak havoc on your emotions, levels of confidence, and feelings of self-esteem. If you’ve been operating for a while, you’ll know what we mean. Consecutive losses place […]

One of the aspects of being a professional trader for which many are unprepared is the depressing periods of drawdowns in forex. Losing streaks can shake you and wreak havoc on your emotions, levels of confidence, and feelings of self-esteem. If you’ve been operating for a while, you’ll know what we mean. Consecutive losses place you in a state of “panic,” which severely degrades your decision-making process.

So what can we do? How can you recover from a losing streak or even avoid it in the future? Forgive our frankness, but the reality is that you cannot completely avoid this kind of accumulation of lost trades, they are simply a fact in trading. That is why it is very important that you learn to prepare, anticipate, and deal with this inconvenience, so when the time comes, the mental and emotional impact will be reduced.

Don’t be one of those traders who thinks “this won’t happen to me” because the reality is that someday it will happen to you. Even the best trading system that can exist is not free from the occasional losing streak. Trading is a profession that focuses on statistics and probabilities, so it is very unhealthy to believe that you will never lose money. You should wait for the losses.

In the “heat” of a drawdowns period, your future as a forex trader will be determined by the way you handle yourself in that moment of hopelessness. Will you collapse under pressure and let your account disintegrate along with your emotions? Or will you remain strong, disciplined, and logical while maintaining a rational mindset and maximizing your chances of surviving the storm?

In today’s guide, we will share some tips to help you through those difficult times on your way to trading.

Drawdowns in Forex: Don’t Let Your Mind Fool You

Placing an operation is quite easy, perhaps excessively easy. It’s just a click on a button and in a matter of milliseconds, your operation is running. The ease of placing a transaction can make a trader act on impulse without really thinking about what he has done. This is especially true when you feel emotional, such as having had some consecutive losses.

When you plant an operation, you do it because you think the odds are in your favor, and you’re exploiting your advantage in the market. When you are suffering the effects of your emotional side due to a drawdown, it is easy to despair and have a sense of urgency to take another operation in an attempt to recover the recent losses. This happens even if there is no good operation to take. It is called revenge trading.

When you operate in despair, you make bad decisions, and the market uses those feelings against you. You will begin to convince yourself that there are good setups in front of you, like a person stranded in the desert who sees mirages in the distance. It’s just your mind playing tricks on you.

It is important that you maintain discipline, taking only high probability operations and not starting to operate setups of the 2nd or 3rd category just because you are eager to get your money back. Consistency is the key to success and will be a vital component in recovering from a losing streak.

Use a Trading Journal to Highlight Potential Problems

You must keep a diary designed not only to record your operations data but also contain the psychological components of your operations. This way you can track your “feeling” and “mental state” during the different phases of your trading.

Such psychological data can be used during losing streaks. Go back to your recent operations in your journal and compare all those that make up the drawdowns period. There’s a good chance you can do it to see a common problem or weakness in the way you felt at the time.

It’s very likely that all this escaped your attention in the heat of the moment when you pulled the trigger. Surely the only thing on your mind was the desperate thoughts of getting everything back with a big winning operation. The problem is that many traders will do almost anything to recover their losses in the market, but they are willing to do very little when it comes to improving their emotional and mental performance.

Before taking any surgery, you should check your diary and remind yourself what happens when you operate on impulse and without discipline.

Maintain Positive Risk-Benefit Ratios

Remember, forex is a business, and businesses need a return on investment. Every time you place an operation you are risking some of your capital with the intention of getting a return on the investment. You only risk that capital when your trading system tells you that the chances of getting a good return on your risk are in your favor.

Positive benefit-risk ratios are a mathematical concept that ensures you aim for a return greater than your risk in each of the positions. When you do the accounts you discover that the positive ratios allow you to have more operations with stops executed than those whose objective was reached and still maintain the ability to grow your account.

If you remain disciplined and focused, you will eventually begin to see your operations achieve their objectives. It is not uncommon for a properly planned operation to eliminate all losses from a slump. Maintaining strict money management is vital during difficult times, and positive risk-benefit ratios should be at the core of any sound money management system. If your money management strategy allows your losses to be greater than your profit goals, then discard them before they destroy your account.

Have Faith in Your Trading System

Losing streaks come and go. Operating with a system you can trust and put your faith in will be very important. Just as with a diet, if you don’t think it’s helping you, you won’t get attached to it and therefore never reverse your unhealthy habits. A trader needs confidence in his trading system to be able to stay in good mental and emotional condition. Trading is useless if you do not believe in the trading methodology you are practicing.

We know losing streaks will make you question your trading strategy and even tempt you to make those “in-flight adjustments” to your plan. Remember that the market is dynamic and goes through different phases. One or two of these phases may not work very well with your system. If you start changing your rules, you could turn your trading system into something useless during market conditions in which you would have experienced good profits.

Don’t try to fix something that isn’t broken: no strategy has a 100% success rate. One aspect that we find critical is that you understand the reasons why you take the operations that your system generates. Many traders blindly follow the alerts that come out of some “magic indicator” they have bought. The trader has no idea why he’s pulling the trigger, he only does it because the gauge tells him to.

How can you trust the system if you don’t even know where those operations come from? The focus should be on how the trading system sends the signals. It should be based on a logic that you can understand. This is one of the innumerable reasons why like price action trading. Operating with price action signals allows you to understand market movements and safely identify high probability situations in which you can pull the trigger without hesitation.

Refresh

No matter how long you’ve been trading forex, every day you face a major new psychological challenge. If a forex trader tells you he can operate without emotion, he’s lying. As a trader, you will always be struggling with your emotions, making sure they stay away from your trading decisions.

The periods of drawdowns caused by losing streaks will blow up your emotions and there is a good chance that they will start to bring out the worst in you. Most people take their trading performance personally, and these losing streaks become a reflection of how they see themselves as people, resulting in low self-esteem and periods of depression.

Whether you like it or not, you will experience emotional upheavals from time to time. The way you handle yourself in these situations will be what will strongly impact your chances of success. Sometimes a trader could bring to the trading screen the stress of his outer life, coming from a bad day at work or a family discussion.

The best thing you can do when you’re emotional is to get away from the graphics. This is so simple, but it can do wonders for you. Sitting in front of your trading screen in a negative state of mind is unhealthy.

Get up and go do something that takes your mind off trading. Go to the gym, it’s important to stay healthy; watch a movie, or organize something with your friends. Socializing with other people will be a refreshing experience of the solitude of your trading table. You will notice that once you have participated in some activity that you enjoy, you will return to the markets with a fresh and positive attitude.

Operates on Favourable Terms

One of the big problems of novice traders is that they tend to look at a single market and sometimes become obsessed with it. They tend to confuse bad price action signs with good ones, due to the lack of consideration of market conditions surrounding the signal. Trends are the place where you can make a lot of money, and consolidation periods are just “black holes” that work as traps for your money. Operating when the market is going nowhere is like whipping a dead horse and expecting it to do something.

Often traders are taken to stop loss on the first operation and then start “revenge operations” on the same market to try to recover the lost. It might be helpful to create a rule for yourself that you will stop operating for 24 or 48 hours if you have more than 2 missed operations on the same day. Market conditions should be the first check when you look at the charts; if there’s no movement, do yourself a favor and stay away from that market.

Don’t Give Up on Me!

Remember, losing streaks are not uncommon in trading. Each operation individually is completely independent of the previous one and the next one. Just because you’ve had eight losing operations doesn’t mean the next eight can’t be winners.

Don’t despair or get anxious, if you do this your money will flow into the pockets of traders who have confidence and discipline. Always keep money management positive-oriented, so your winning operations will outperform your losers, making drawdowns periods somewhat less likely.

Do not be prey to revenge trading or panic trading. You need to maintain confidence in your trading system, remain patient, disciplined, and always have realistic expectations of the forex market. If you are looking for a system that is logical and in which you can understand why you are placing each operation, then price action is our recommendation for you.

Categories
Forex Basic Strategies

The Power to Average in Forex

0101Price action and swing trading methodologies per se provide a powerful way to operate in markets, but when they are complemented with average value analysis, you can start to “see” much more. The word “average” is synonymous with the word “average”, which is widely used in financial markets, including the stock market. However, this can […]

0101Price action and swing trading methodologies per se provide a powerful way to operate in markets, but when they are complemented with average value analysis, you can start to “see” much more. The word “average” is synonymous with the word “average”, which is widely used in financial markets, including the stock market. However, this can […]

0101Price action and swing trading methodologies per se provide a powerful way to operate in markets, but when they are complemented with average value analysis, you can start to “see” much more. The word “average” is synonymous with the word “average”, which is widely used in financial markets, including the stock market. However, this can be an important tool when used correctly. Mathematicians, Scientists, and Data Analysts usually use the power of the average in clinical trials, predictive analysis, and other applications to predict things. In this article what we want most is to show them how the power of simple average can be applied to your forex trading.

The Wisdom of Crowds: Average on Forex

The power of averaging comes to light when used with “crowd data”. Keep in mind, when analyzing a price chart, you’re looking at the average combined thinking of all traders in the market, who are being represented in the price. For example, do you know those quizzes about guessing the amount of candy in a jar? Most people will be far away from the actual number with their assumptions, some as much as 100 times above or below the actual amount. In fact, out of 160 people, only about 4 would approach the real value.

The interesting thing is that, even though no one usually gives the correct answer, “everyone” (as a group) comes up to a fairly close number. The typical scenario shows that when the amounts said by the public were averaged, the resulting number was something like 5,231.77 when the actual amount of candy inside the bottle was 5,240. This means that data collected from the entire public were able to accurately determine how many candies were in the bottle with a difference of 9 candies, which would be a margin of error of approximately 0.17%.

This example is quite amazing and shows the power of averaging. A Youtube channel did this experiment on the candy jar, letting people put their amounts in the comments. When the results were collected and averaged, the average was within 4% of the real value. Usually what happens is that people who overestimate are canceled by people who underestimate, which naturally filters out the bad estimates. What this shows is that you can collect everyone’s thoughts and average them to get something that is mysteriously close to real value.

Probabilities and averages should be the backbone of your risk management. Another unexpected place where averages play an important role is in our risk management plan. This will certainly have a consequence on the way you think and respond to your trading performance on a long-term basis. Many forex traders have difficulty making the switch and starting to think in terms of probabilities. Unfortunately, many people have their heads full of misinformation, contradictions, and paradoxes. For this reason, most new traders rank money management and capital preservation much lower than do experienced traders.

But the bottom line is that trading is a math game. You must understand the odds and statistics, and aim to stay on the right side of the numbers by exploiting your advantages in order to succeed. The advantage we teach in these items is to exploit recurring price patterns that continue to be repeated in the same way over time. Always keep in mind, there are a certain number of traders in the market at any given time, and they are doing the same thing over and over again to try to make money. This includes large amounts of “smart money,” such as investment funds and commercial companies that have the largest volume on the market.

This behavior repeatedly generates price action signals that we recognize and use to predict price movements. These signals of purchase or sale on average will behave in the same way as they have in the past, producing results that we can capitalize on. To make the most of the power of averaging, it is also advisable to apply positive risk-benefit ratios to the risk management of our operations, so that the “average” operation will have a profit. When you apply a 1:3 benefit risk ratio to your operations, you can lose 75% of them on average to keep your account in balance (neither win nor lose). In other words, you must win 1 out of 4 operations to maintain balance, or 1 out of 3 operations to earn money.

When you look at your recent operations, you may not see these numbers, but if you continue to apply this principle, the numbers eventually “stabilize” and represent what we are exposing. For example, you could have 4 consecutive operations that end up reaching the 1:3 target, which would be a total return of 12 R (12 times the risk). After this, you could suffer a drawdown period of 5 losing operations, but it wouldn’t really be a drawdown, because you’d still be up at 7 R. On the other hand, this could happen the other way around, losing operations might come first, giving you a -5 R as a result of a losing streak. But if the next 4 operations win, the situation changes completely and you end up with +7 R.

This is somehow to be expected because the market moves through good and bad conditions to make money for each system, and the losing and winning operations will tend to cluster as the market cycles happen. Start using the power of positive risk-benefit ratios and eventually you’ll see the results. All this is true if we assume that you have an advantage in your trading system, such as using price action.

How Most Common Indicators Work

We could stay here and tell you how useless we think the indicators are, but you’re human and your curiosity will force you to explore them for yourself for sure. This is completely understandable, sometimes you need to explore them to remove any remaining doubts in your head about what you might be losing. This way you can know exactly what the indicators are and decide from your own experience whether they are for you or not. When you insert indicators to your charts, they usually expose your data in the form of a line chart or histogram. The indicator is like a “black box” that does the hard work internally.

Would it surprise you if we told you that most common indicators are just a combination of price action data and mathematical averages? Well, it is true. Indicators such as stochastic, ADX, and CCI use the maximum, minimum, and closing prices of candles and pass them through averaging formulas. The ADX recycles its own data through multiple layers of averages.

The ADX is designed to quantify a trend by a certain numerical value. The result is that, if the value is too high, the trend will be more powerful. Here you can see how in the USD/SDG pair we have had this beautiful trend, but the ADX only showed a really confusing graph of lines that does not seem to correlate with the strength of the trend, or stability.

There are some custom indicators going around, which are actually joining multiple indicators within one, in an attempt to develop an extraordinary hybrid indicator. That is why it is well known that indicators have such a horrible natural mismatch. Some are notoriously worse than others, because every time you average data, the end result responds much more slowly to the real movement of prices. When you look at what is happening within most indicators, they are actually just a game with price action data, which are passed through some mathematical averaging calculations, it is not a big deal, just the same type of data but shown in different ways. This could be an advantage for some, but several of us would be frustrated with the performance of the indicators.

It is true that some indicators can work well under specific conditions for short periods, mostly in highly biased markets; but on the other hand, these indicators will give the trader a lot of poor quality buying and selling signals during conditions that are out of the optimal market behavior for which they were designed, and this could be as much as 80% of the time.

Presenting the Average Value Analysis

This is the basis for the analysis of the average value, the study of the price relative to its average value. We use average value analysis to help us determine many things in a price chart, such as:

  • The direction of the trend
  • Strength and momentum of the trend
  • Stability of the market
  • Signs of climax/exhaustion
  • Ideal points of purchase and sale
  • On Price Extension/Opportunities Reversion Operations to Average

The middle-value properties help the trader quickly remove noise, presenting a “summary” that you can use to quickly measure conditions at first sight, and help you make smart trading decisions. But of course, the analysis of the average value is not the only aspect that makes a good sign of trading. This along with price action and swing trading work synergistically with each other to create a powerful trading methodology that helps you read the graphics.

Categories
Forex Basic Strategies

Trading Forex with the Market Gaps

A price gap can offer attractive trading opportunities, both up and down. What are the gaps and how are they traded? Today we will discuss trading with market gaps. A gap is simply a level at which the price of a share or any other financial instrument moves strongly upward or downward, leaving a visible […]

A price gap can offer attractive trading opportunities, both up and down. What are the gaps and how are they traded? Today we will discuss trading with market gaps. A gap is simply a level at which the price of a share or any other financial instrument moves strongly upward or downward, leaving a visible […]

A price gap can offer attractive trading opportunities, both up and down. What are the gaps and how are they traded? Today we will discuss trading with market gaps.

A gap is simply a level at which the price of a share or any other financial instrument moves strongly upward or downward, leaving a visible space on the price chart that denotes the lack of continuity in quotations. These moments can be used to trade with market gaps. A price gap can be observed in all types of periods, but operators usually focus on daily price charts.

“A gap occurs when news generates a strong wave of purchases or sales at a time when the market is not trading or liquidity is low.”

Price gaps are a strong driver for quotes and can occur for a variety of reasons. In general, a gap occurs when news generates a strong wave of purchases or sales at a time when the market is not operating or liquidity is low. In this way, a large number of purchase or sale orders produce a substantial movement in quotes.

Economic indicators or the political news of the day often generate price gaps in the main market indices. In the case of individual actions, performance reports, or important announcements – for example, approval of a key drug for a biotechnology business – are factors that usually impact on quotes and can generate price gaps.

In recent years with the online trading boom and high-frequency trading algorithms, it can be seen that the flow of orders in the markets is becoming faster and faster. This can speed up price movements and generate more gaps in both directions. This is perfect for trading with market gaps.

Some trading algorithms analyze the current order flow and tend to buy when the rest of the market buys and sells when the rest of the market also sells. There are also algorithms that analyze news headlines, for example, to quickly detect if a results report was above or below forecasts. In general, these algorithms accentuate price trends and tend to favour the creation of gaps in quotes. This is why trading with market gaps is increasingly common.

“Trading with market gaps is becoming more common.”

By way of illustration, we can see in the Facebook price chart (FB) a downward price gap recorded in July last year. Subsequently, the chart also offers an upward gap in quotes at the end of January 2019. In both cases, price gaps were due to market reaction following Facebook’s profit reports.

As for the relationship between the opening price and the previous day’s price, we can differentiate four different types of gaps:

  1. An bullish full gap occurs when the opening price is higher than the maximum price of the previous day.
  2. A bullish partial gap occurs when today’s opening price is higher than yesterday’s closing price, but not higher than yesterday’s maximum price.
  3. A bearish full gap occurs when the opening price is lower than the minimum price of the previous day.
  4. A bearish partial gap occurs when today’s opening price is lower than yesterday’s closing price, although it is not lower than yesterday’s minimum quotes.

“The greater the volume of quotes with which the gap occurs, the greater its relevance for operators.”

A full gap, whether bullish or bearish, is generally more important in terms of its significance on price trend than a partial gap. In addition, the higher the volume of quotations with which the gap is produced, the greater is also its relevance for operators.

How to trade with market gaps?

When operating with a price gap, it is important to analyze this gap within the general context of the price trend in the asset in order to position ourselves in an intelligent way.

“In a continuity behavior, prices move in the same direction as the gap in the medium term, while in a reversal scenario they move in the opposite direction.”

In the short term, it can happen that the price shows continuity or reversion behavior after a gap. In a continuity behavior, prices move in the same direction as the gap in the medium term, while in a reversal scenario they move in the opposite direction. It is vital to determine whether we are in a gap of continuity or reversal when trading with market gaps.

It is said that a gap is being filled when after showing the gap the price tends to cover the space that was uncovered. Once the gap began to fill, it is likely that the price will continue in that direction until it is fully filled, as there are no levels of support or resistance that can stop price movements within the gap. This is a way to trade with market gaps.

A typical case of reversal is exhaustion gaps. These occur when the market price has incorporated the news over time, and the gap marks a final boost before the trend change.

Suppose a company is experiencing difficulties and this negatively affects the course of business. In this context, prices are falling. Subsequently, the results report a bearish gap that marks exhaustion in the selling pressure. From there the trend begins to change, as sales orders reached a limit.

On the other hand, a gap in continuity can occur for example if the market expected good news – prices were rising – and business numbers exceeded even the most optimistic expectations. In this case, the results report adds more fuel to the bullish price movement, and a gap can anticipate explosive movements in quotes.

Categories
Forex Basic Strategies

How to Trade with Short Squeezes and Short Sellers?

It is always wise to be aware of the market in general. You must be aware of new trends and adapt to changes in the market. Short Squeezes are undoubtedly one of the best opportunities to look for profitable ideas in 2020. Short sellers are like the new promoters of penny stocks, who sought to inflate the stock by deceiving people. Actually, they’re even better. The former promoters of penny stocks, with their advertisements, emails, and social media posts, were not as good at raising the price of shares as are these short sellers.

It is always wise to be aware of the market in general. You must be aware of new trends and adapt to changes in the market. Short Squeezes are undoubtedly one of the best opportunities to look for profitable ideas in 2020. Short sellers are like the new promoters of penny stocks, who sought to inflate the stock by deceiving people. Actually, they’re even better. The former promoters of penny stocks, with their advertisements, emails, and social media posts, were not as good at raising the price of shares as are these short sellers.

It is always wise to be aware of the market in general. You must be aware of new trends and adapt to changes in the market. Short Squeezes are undoubtedly one of the best opportunities to look for profitable ideas in 2020. Short sellers are like the new promoters of penny stocks, who sought to inflate the stock by deceiving people. Actually, they’re even better. The former promoters of penny stocks, with their advertisements, emails, and social media posts, were not as good at raising the price of shares as are these short sellers.

Why are these short sellers so good at raising prices? Short sellers are the new promoters. They are great for raising stock prices because they love stocks that are heavily sold and start to rise after positive news for the company. They think the action should fall again.

The difference is that they have not studied. They are not learning the nuances of trading and short selling. When I sell an action, I only do it in cases where we are facing real “bombs”, about to explode, when they have risen artificially. I would never cut short an action that was going up for news on the day of its publication. That’s all these newbie short sellers do: they sell any stock that’s going up a lot. They are basing their theories on the basics of an action. They think that the company should not have such a value, so it will have to go down. That’s why they take advantage of these explosive movements in the hope that the action will fall quickly.

This is not a good short selling strategy. But I hope the short selling trend will continue. It’s great for traders looking to buy stocks. So, how can short sellers get to raise the price? When a stock goes up, all short sellers have to buy their shares to cover their position. The influx of buyers makes the price rise. Then, all short sellers just chase each other out as they increase the price. Or worse, they average. That makes the price rise even more when stocks continue to rise. Dumb short sellers don’t realize they’re the ones who keep the price going up! Let’s look at some recent examples…

Examples of Short Squeezes

Now I will show only 2 recent examples of short squeezes. The first was on January 9. The second was after a positive news release about the company. Not all short squeezes happen the first day an action goes off. Short sellers also go into stocks that are consolidating. Your thought is that the stock price will fall. But then, when stocks continue their upward trend, they begin to be driven from their positions.

Let’s see TRIL first:

Trillium Therapeutics Inc. (NASDAQ: TRIL)

TRIL was in trend for a few weeks before short squeeze. It had a breakup of several days on January 2nd but then consolidated for four days, surpassing around $1.50 on two of those days. All the short sellers thought that was the best price the stock would have. Then, on January 9, the action opened with a gap of up to $1.60. That showed that the shorts were wrong.

The short squeeze continued throughout the day, with the price rising to a maximum of $3.43. The next day, there was a slight setback in the morning. Then it shot up again, further overwhelming the short sellers who thought it was the final climb. No promoter can move stock prices this way. In two days, stocks went from $1.60 to $3.90.

Counterpath Corporation (NASDAQ: CPAH)

We have another magnificent example of a short squeeze. CPAH started shooting up after the hours of January 9. The company released the news that he’s working with Honeywell. The unified communications solution is configured to increase the productivity of mobile workers.

In the specialized press, a Honeywell executive was mentioned. When you quote a large company in a press release, it’s usually good for small business shares. It legitimizes small businesses in such agreements. In the pre-marketing operations of January 10, stocks were down all morning. Short sellers assumed that the bearish trend would continue.

At first, they were right: stocks fell slightly. But then it started to rise with a high volume. Anyone short would quickly see their account in the red. They would have to buy shares to cover their position.

But then the action consolidated for approximately two hours between $2.10 and $2.50. The short sellers were probably thinking “Ok, this is definitely the maximum price at which the stock will go up”. It then broke below the intraday support of $2.10. The shorts took that as a sign that they were right and probably increased their positions. In their minds, this was the end.

The stock dropped to $1.75 where it found support and fell laterally mid-morning. But then it went up again and broke the previous day’s peak. Those big candles on the chart represent all the short sellers who bought more shares to cover their position.

Once stocks were consolidated until midday, short sellers re-accumulated. The stock shot up again, taking all short sellers to buy to cover themselves before closing. Some stubborn ones probably stayed up all night waiting for a slot the next day. Instead, the action ran out and had two big highs in the morning.

You can see how these might be a little more difficult to trade. You have to think the opposite way to what short sellers do. Where are your risk levels? Where will you buy to cover? Once you understand this, you can take advantage of the long side.

History Does Not Repeat…

Remember the old runners. I say things like this because the past usually repeats itself. Actions have their own personality. Traders remember the stocks they trade and the stocks they fail. But trading is not an exact science. Can short selling be a good strategy?

Lately, there are many novice short sellers who give the strategy a bad reputation. So, can it be a good strategy? The short answer is yes. But, again, trading is not an exact science. It’s not as simple as opening a short or bassist position in any stock that’s rising. We must bear in mind that negotiation is always risky, and we must all know that we’ll never risk an amount we can’t afford. You should always consider your risk/reward. He needs a plan for his in and out and where he’ll cut the losses if the operation goes against him.

Short selling can be a profitable strategy. But you need to know perfectly what you’re doing. Some of my most successful students are short sellers. But they only negotiate specific patterns and use rules for each operation. You will want to focus on patterns with better options.

The best opportunities to sell short are when stocks are over-extended when a stock increases several days without a red day. Then, one day it opens up with a gap down. That’s the first time that long traders have a reason to worry. It signals a change in trend. Usually, there is a morning panic as the lengths take profits, and the shorts increase. That’s when it comes to the back of the play and there are better odds of a short.

Categories
Forex Brokers

XGlobal Markets Review

XGlobal Markets is a Forex broker, founded in 2012, offering more than 50 currency pairs, precious metals, and some CFDs on commodities and energy indices. XGlobal Markets is the trademark of X GLOBAL Markets Ltd. This Cypriot investment firm (CIF) is registered in the European Union and authorized by the Cyprus Securities and Exchange Commission (Cysec) under license CIF 171/12.

XGlobal Markets is a Forex broker, founded in 2012, offering more than 50 currency pairs, precious metals, and some CFDs on commodities and energy indices. XGlobal Markets is the trademark of X GLOBAL Markets Ltd. This Cypriot investment firm (CIF) is registered in the European Union and authorized by the Cyprus Securities and Exchange Commission (Cysec) under license CIF 171/12.

XGlobal Markets is a Forex broker, founded in 2012, offering more than 50 currency pairs, precious metals, and some CFDs on commodities and energy indices. XGlobal Markets is the trademark of X GLOBAL Markets Ltd. This Cypriot investment firm (CIF) is registered in the European Union and authorized by the Cyprus Securities and Exchange Commission (Cysec) under license CIF 171/12.

The Cysec regulation imposes certain standards and requirements on investment firms in Cyprus. An example of these requirements is, they must maintain at least € 1.000.000 to demonstrate a good economic situation. The Commission also requires Forex brokers to keep client funds in segregated accounts separate from the company’s operating funds.

As an additional guarantee to customer funds, all companies regulated by Cysec are members of the Investor Compensation Fund, which can guarantee the compensation of up to 20.000 EUR, if the company becomes insolvent. Also, all companies regulated by Cysec also comply with Mifid and therefore have the right to offer services within the EU under Mifid’s passport regime. As an additional safety measure, Xglobal Markets states that regular internal, Ernst & Young, and external audits of Deloitte are carried out.

ACCOUNT TYPES

XGlobal Markets has 4 accounts, denominated, Trading Account, Corporate Account, Demo Account and in addition, this broker offers non-cash accounts (Islamic) that comply with Sharia (for Muslim traders who do not want to earn interest for religious reasons).

The common account specifications offered by Xglobal Market are:

  • Execution Model: Market and Limit (internally matched or externally covered)
  • Order Requotes: None
  • Minimum Spreads: 0.4 pip / 4 pts
  • Spread Type: Variable
  • Commission Per Lot Traded: 7.50 USD
  • Swap Free / Islamic Conditions Available upon request
  • 77 Tradable Currencies, Metals & CFDs
  • Leverage Offered 30:1 for retail clients / up to 200:1 for professional clients (ESMA restrictions apply)
  • Minimum Deposit: 500 USD/EUR/GBP, 5,000 NOK or 50,000 JPY
  • Account Currencies Available: USD, EUR, GBP, NOK, JPY
  • Minimum Trade Size: 0.01 lots
  • Maximum Trade Size: 200.00 lots
  • Contract Size of 1.00 Lot (FX), 100,000 units of the base currency
  • Maximum Number of Open Positions: Unlimited
  • Margin Call Level: 100%
  • Stop-Out Level: 50%
  • Segregated Bank Accounts Yes, deposits held in Clients’ denominated bank accounts
  • Negative Balance Protection Yes (for retail clients)

PLATFORMS

With this broker, we will have the technology of the Metatrader4 platform (MT4). This is the platform most used by most Forex and CFDs operators. Certainly, MT4 has many advantages: experienced operators are accustomed to it, there are a large number of users of the platform, along with the programming language, very easy to learn, has determined the development of many custom tools. Some of these tools are paid and others are free.

LEVERAGE

There is a 30:1 limit for retail clients in place, and up to 200:1 for professional clients (ESMA restrictions apply).

TRADE SIZES

Trade sizes start from 0.01 lot (micro lot), and increments are 0.01 for all instruments. XGlobal Markets offers a maximum trade size of up to 200 lots per click in Forex.

TRADING COSTS

The trading costs with XGlobal Markets, are the spread and a commission of 7.5 USD for each lot traded.

ASSETS

77 tradable Currencies, Metals & CFDs on indexes and commodities.

SPREADS

A few examples of spreads applied by this broker are:

Forex: EURUSD 1.0, GBPUSD 1.5, USDJPY 1.0, AUDUSD 1.3, USDCHF 1.9, EURGBP 1.6 

Gold and Silver: XAUUSD 0.300 and XAGUSD 0.030.

Indexes: FDAX (DAX30) 1.5, FTSE100 1.5, Nikkei225 15, Dow Jones 3, SP500 0.75, and Nasdaq 1,25

Commodities: Light Sweet Crude Oil (WTI) 0.03, Brent Crude Oil 0.03, Natural Gas 0.022, and Coffee Future 0.25

MINIMUM DEPOSIT

The minimum deposit required is 500 USD / EUR / GBP or 50,000 JPY.

DEPOSIT METHODS & COSTS

The methods available for depositing are 3, bank transfer, Skrill, or Neteller:

Bank Transfer: Supports the following currencies, USD, EUR, GBP, or JPY. No deposit fees. Minimum amount to deposit, 500 USD / EUR / GBP, 50,000 JPY.

Skrill: Supports the following currencies, USD, EUR, GBP, or JPY. No deposit fees. Minimum amount to deposit, 500 USD / EUR / GBP, 50,000 JPY.

Neteller: Available for the following currencies, EUR, GBP, JPY. No deposit fees. Minimum amount to deposit, 500 EUR / GBP, 50,000 JPY.

The time taken for deposits with these methods is, bank transfer, between 2 and 5 working days. With Skrill or Neteller the deposit is instant.

WITHDRAWAL METHODS & COSTS

The withdrawal methods are the same as for the deposits, and all withdrawals will be made to the same source from which the deposits were made. These are the characteristics of the retreats:

Bank Transfer: Currency available, USD, EUR, GBP, or JPY. It does not specify the cost of these and informs that the Eurobank rates will be applied. The minimum withdrawal amount is USD 100 or the equivalent currency.

Skrill: Currencies available, USD, EUR, GBP, or JPY. Withdrawal fees are free with a limit of 1 monthly withdrawal, subsequent withdrawals will have a commission of 1%. There is no minimum amount for withdrawal.

Neteller: Available currencies, EUR, GBP, and JPY. Withdrawal fees are free with a limit of 1 monthly withdrawal, subsequent withdrawals will have a commission of 2%. There is no minimum amount for withdrawal.

WITHDRAWAL PROCESSING & WAIT TIME

XGlobal Markets processes withdrawals on the same business day you receive the request.

The waiting times according to the chosen withdrawal method are:

  • Bank transfer: 1 business day
  • Skrill: 1 business day
  • Neteller: 1 business day

BONUSES & PROMOTIONS

We haven’t found any promotions or bonuses currently.

EDUCATIONAL & TRADING TOOLS

XGlobal Markets has 4 fairly complete courses in its educational area. 

A summary of the contents you can find are:

Beginner Course: What is Forex Trading All About. The concept of Fundamental Analysis.  Introduction to Technical Analysis. How to successfully choose a bróker. The principles behind lots trading and pips calculation.

Japanese Candlesticks: Japanese Candlestick Basics. Double Candlestick Patterns. Interpreting Candlestick Patterns.

Technical Indicators: Support and Resistance Lines. Trendlines. Channel Line. Bollinger Bands. The Relative Strength Index (RSI). Moving Averages.

Money Management: Intro to Money Management. Money Management Main Guidelines. Trade Diversification and Risk Management Strategies. Trade Timing Tactics. Summary of Money Management and Trading Guidelines.

CUSTOMER SERVICE

There are several ways to contact customer service, mainly by phone and e-mail. We need a live chat to speed up consultations.

The phones and emails to contact are:

Customer Support: +357 25 262002  [email protected]   Working Hours: 24 hours, 5 days a week

Sales: +357 25 262002  [email protected]   Working Hours: 09:00-18:00 EET.

Back Office: [email protected]   Working Hours: 06:00-24:00 EET.

Marketing: +357 25 262002  [email protected]  Working Hours: 09:00-18:00 EET

Partnerships: +357 25 262002 [email protected]  Working Hours: 09:00-18:00 EET

Accounting Department: +357 25 262002  [email protected] Working Hours: 09:00-18:00 EET.

Their offices are in XGLOBAL Markets Ltd. 162 Fragklinou Rousvelt, 1st Floor. 3045, Limassol, Cyprus

Tel: +357 25 262002

Fax: +357 25 560202

Email: [email protected]

DEMO ACCOUNT

XGlobal Markets offers a free DEMO account with which you can trade in fictional money emulating a real-money operation.

A Demo account can benefit the trader in 2 ways:

– Practicing commercial techniques

– Learning the different tools of the platform.

It is very common for traders to open a Demo account before depositing money into a real account.

It is also important to know that the Demo account retains the same live prices and market conditions, simulating the exposure in a real account.

COUNTRIES ACCEPTED

XGlobal Markets reports that according to the Dodd-Frank Act approved by the United States Congress. UU, The CFTC (Commodity Futures Trading Commission) no longer allows US residents to open commercial accounts outside the U.S.

CONCLUSION

XGlobal Markets is a well-regulated broker that offers us to trade more than 50 currency pairs, precious metals, commodities, and stock indices. We have the popular MT4 trading platform, which is highly appreciated by traders.

To summarize the above, here are the advantages and disadvantages with respect to Xglobal Markets:

Advantages:

Disadvantages:

  • Commission of 7.5 USD per lot operated
  • Spread for retail customers is scarce
Categories
Forex Signals

EUR/JPY Violates Descending Triangle Pattern – Who’s Up for Buying?

Today in the early European trading session, the EUR/JPY stretched its previous session bullish trend and took further bids around an intraday top closer to 123.240, mainly due to the risk-on market sentiment. The faded safe-haven appeal was backed by the on-going optimism over treatment for the highly infectious coronavirus. Therefore, the demand for Japanese yen fell compared to the single currency Euro and we noticed an upward movement in the EUR/JPY currency pair.

Today in the early European trading session, the EUR/JPY stretched its previous session bullish trend and took further bids around an intraday top closer to 123.240, mainly due to the risk-on market sentiment. The faded safe-haven appeal was backed by the on-going optimism over treatment for the highly infectious coronavirus. Therefore, the demand for Japanese yen fell compared to the single currency Euro and we noticed an upward movement in the EUR/JPY currency pair.

Today in the early European trading session, the EUR/JPY stretched its previous session bullish trend and took further bids around an intraday top closer to 123.240, mainly due to the risk-on market sentiment. The faded safe-haven appeal was backed by the on-going optimism over treatment for the highly infectious coronavirus. Therefore, the demand for Japanese yen fell compared to the single currency Euro and we noticed an upward movement in the EUR/JPY currency pair.

A day before, the EUR/USD pair’s gains were limited after the speech of European Central Bank’s President, Christine Lagarde. She made fresh comments on the coronavirus pandemic threat and said that despite the rebounded economic activity in Eurozone, the recovery remains incomplete, uncertain, and uneven. She added that consumer spending has resumed, but they are still cautious about their jobs and income prospects, so the spending is behind its margin. Similarly, the business investment has picked up, but the weak demand and pertaining uncertainty have weighed on the investment plans.

The market trading sentiment recently got the lift from the hints of further money flow from the US and Europe. These developments were supported by the US House Speaker Nancy Pelosi’s optimism towards the COVID-19 aid package discussion. Apart from this, the European Central Bank (ECB) President Christine Lagarde repeated that the Governing Council, “continues to stand ready to adjust all of its instruments, as appropriate” Thi, in turn, boosted the market trading sentiment.

The US-China picked up further pace after the headline from the South China Morning Post (SCMP), published Tuesday’s early Asian session, suggests further hardships for the Sino-American trade deal. However, the news relies on China’s imports of the US goods under the trade agreement between Washington and China, which keeps challenging the upbeat market tone and cap further upside momentum for the currency pair.


The EUR/JPY pair is trading with a bullish bias at 123.400 level, having violated a descending triangle pattern on the four hourly charts. The triangle pattern was extending resistance at 122.850 level, and bullish crossover and formation of a bullish engulfing pattern may drive further buying until the next resistance area of 124.088 level. The leading technical indicators such as RSI and MACD also show bullish crossover, supporting bullish bias in the market. At the same time, the 50 EMA is also in support of the buying trend. Checkout a trading plan below…

Entry Price – Buy 123.288
Stop Loss – 123.292
Take Profit – 123.688
Risk to Reward – 1:1
Profit & Loss Per Standard Lot = -$400/ +$400
Profit & Loss Per Micro Lot = -$40/ +$40
Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.
iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368
Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Market Analysis

Daily F.X. Analysis, September 29 – Top Trade Setups In Forex – C.B. Consumer Confidence in Focus! 

The eyes will remain on the German Prelim CPI and Spanish CPI figures during the European session on the news front. At the same time, the C.B. Consumer Confidence and series of FOMC member’s speeches are likely to remain in the highlights today. Economists are expecting C.B. Consumer Confidence to perform better than before. Therefore the U.S. dollar can trade with a bullish bias today.

The eyes will remain on the German Prelim CPI and Spanish CPI figures during the European session on the news front. At the same time, the C.B. Consumer Confidence and series of FOMC member’s speeches are likely to remain in the highlights today. Economists are expecting C.B. Consumer Confidence to perform better than before. Therefore the U.S. dollar can trade with a bullish bias today.

The eyes will remain on the German Prelim CPI and Spanish CPI figures during the European session on the news front. At the same time, the C.B. Consumer Confidence and series of FOMC member’s speeches are likely to remain in the highlights today. Economists are expecting C.B. Consumer Confidence to perform better than before. Therefore the U.S. dollar can trade with a bullish bias today.

Economic Events to Watch Today  

 

 

EUR/USD – Daily Analysis

The EUR/USD closed at 1.16696 after placing a high of 1.16798 and a low of 1.16149. Euro to U.S. Dollar exchange rate saw fresh buying on Monday amid the broad-based U.S. dollar weakness. The U.S. dollar’s safe-haven rally was ended last week; however, the EUR/USD currency pair’s recovery was still limited on Monday.

Last week, the EUR/USD pair touched its lowest since 2-months at 1.1613 due to U.S. dollar strength gathered by safe-haven status. The U.S. stimulus package and coronavirus developments, and the coronavirus pandemic helped the U.S. dollar gain strength.

However, the U.S. dollar came under fresh pressure on Monday ahead of the U.S. Presidential debates will begin from Tuesday. The U.S. President Donald Trump and Joe Biden will face each other and debate over various topics, including the coronavirus pandemic, the U.S. economy, the latest race, and the protest issue, and the election integrity. 

The local currency faced heavy pressure before the debate and helped the EUR/USD pair to regain its strength in the market. The risk sentiment in the market was also emerging in the market with the developments made in a nasal spray for coronavirus infection. Researchers have revealed that promising results from nasal spray have been seen in ferrets; however, there was still a lot of work needed.

This news raised the EUR/USD prices as it is a riskier asset and tends to gain during times of depressed risk-averse sentiment. Meanwhile, the rising equities also helped the EUR/USD pair to post gains on Monday after the release of encouraging data from China. The rising equities also helped the rising EUR/USD pair on Monday.

However, the EUR/USD pair’s gains were limited after the speech of European Central Bank’s President, Christine Lagarde. She made fresh comments on the coronavirus pandemic threat and said that despite the rebounded economic activity in Eurozone, the recovery remains incomplete, uncertain, and uneven. 

She added that consumer spending has resumed, but they are still cautious about their jobs and income prospects, so the spending is behind its margin. Similarly, the business investment has picked up, but the weak demand and pertaining uncertainty have weighed on the investment plans. She also warned that Eurozone deflation would continue to persist in the coming months. She exclaimed that PEPP was very helpful and efficient in handling the coronavirus situation and confirmed that ECB would continue to stand ready to adjust all of its instruments in need. These concerning statements from Lagarde capped further gains in EUR/USD pair on Monday.

Daily Technical Levels

Support Resistance

1.1636      1.1698

1.1600      1.1724

1.1573      1.1760

Pivot point: 1.1662

EUR/USD– Trading Tip

The EUR/USD is trading at 1.1684 level, facing immediate resistance at 1.1685 level that marks a triple top pattern for the EUR/USD. The bullish crossover of 1.1685 level can open further room for buying until the 1.1715 area, while the bearish trend continuation below 1.1685 level may lead the EUR/USD price towards 1.1654 and 1.1627 level today. 

GBP/USD – Daily Analysis

Today in the Asian trading session, the GBP/USD currency pair continues to flash green and taking bids around above 1.2860 level, mainly due to the Brexit-positive headlines triggered after the E.U. stepped back from warnings to leave the trade and security talks. Meanwhile. They also showed a willingness to prepare a joint legal agreement, which keeps buyers hopeful and extended support to the currency pair. Apart from this, the currency pair got an additional boost after the Bank of England (BoE) policymaker eased the chance of negative interest rates in the short-term, which eventually underpinned the Brtish Pound and contributed to the currency pair gans. 

Across the pond, the broad-based U.S. dollar bearish tone ahead of the presidential debate also boosted the GBP/USD currency pair’s strong intraday positive move. The GBP/USD is trading at 1.2847 and consolidating in the range between 1.2832 – 1.2880. Moving on, the currency pair traders seem cautious to place any strong position ahead of crucial departure talks in the E.U.

It is worth recalling that the U.K. and Brussels are ready to resume the 9th-round of Brexit talks on the day. Reports suggest that negotiators will start the process to finalize a deal by the end of this week to hammer out an accord in time for the next E.U. summit in mid-October. However, the hopes of a Brexit deal were further fueled after the E.U. steps back from warnings to leave trade and security talks, shows a willingness to prepare a joint legal agreement. Hence, this news also ignores the U.K. Cabinet Minister Michel Gove’s refusal to remove the Internal Market Bill (IMB) clauses that confront the Brexit Withdrawal Agreement (WAB). This, in turn, boosted the sentiment around the British Pound and extended further support to the currency pair.

Besides, the reason for the currency pair bullish bias could also be associated with the latest reports suggesting that the Bank of England (BoE) policymaker, Dave Ramsden, lessened the possibility of negative interest rates in the short-term, which tend to underpin the local currency. Ramsden declared that he still sees the effective lower bound in the bank rate at 0.10%.

Daily Technical Levels

Support Resistance

1.2698     1.2791

1.2647     1.2833

1.2605     1.2884

Pivot point: 1.2740

GBP/USD– Trading Tip

On Tuesday, the GBP/USD pair is trading with a bullish bias at 1.2875 level, having violated the sideways trading range of 1.2770 to 1.2725 level. Most of the buying trend was triggered amid stronger Sterling and weakness in the U.S. dollar. The Cable has formed an upward channel on the hourly chart that may support the pair at 1.2827 level along with a resistance level of 1.2909 level. Bullish crossover of 1.2900 level can open up further buying room until 1.2998 level today. Let’s consider taking buying trades over 1.2827 level today. 

 

USD/JPY – Daily Analysis

The USD/JPY currency pair stopped its overnight declining streak and picked up some modest bids around above the mid-105.00 level, mainly due to the risk-on market. However, the positive tone around the equity market was being supported by the hopes of the U.S. stimulus package and optimism over the virus vaccine, which tend to undermine the safe-haven Japanese yen currency and contributed to the currency pair gains. 

On the contrary, the broad-based U.S. dollar weakness, triggered by the political uncertainty in the run-up to the U.S. Presidential election in November, becomes the key factor that kept the lid on any further gains in the currency pair. Apart from this, the concerns of increasing COVID-19 cases in many countries keep challenging the market trading sentiment, which might cap further gains in the currency pair. Currently, the USD/JPY currency pair is currently trading at 105.63 and consolidating in the range between 105.34 – 105.64. 

As we already mentioned that the market trading sentiment was being supported by optimism over a possible vaccine and treatment for the highly infectious coronavirus. These hopes fueled after the U.S. pharmaceutical giant Johnson and Johnson Inc COVID-19 vaccine experiment has shown a strong immune response to the coronavirus with a single dose in the early trial stages. Apart from this, the market trading sentiment was further bolstered by the Brexit-positive sentiment. These hopes came after the European Central Bank (ECB) President Christine Lagarde repeated that the Governing Council “continues to stand ready to adjust all of its instruments. This, in turn, boosted the market trading tone and undermined the safe-haven assets. Besides, the reason for the upbeat market sentiment could also be associated with the hints of further money flow from the U.S. and Europe. As per the U.S. House Speaker Nancy Pelosi, the COVID-19 aid package deal is possible. 

Looking ahead, the market traders will keep their focus on headlines concerning Brexit, pandemic, and the U.S. Presidential Election, which may offer important clues. It’s worth mentioning that the 1st-round of the U.S. President Election debate is expected to use American President Donald Trump’s tax payments as a fresh obstacle, which may push the U.S. dollar down.

Daily Technical Levels

Support Resistance

105.22      105.56

105.04      105.72

104.88      105.90

Pivot point: 105.38

  

USD/JPY – Trading Tips

On Tuesday, the technical side of the safe-haven pair USD/JPY continues to be steady as it’s consolidating with a bullish bias to trade at 105.460 level, and the series for EMA is now extending at 105.750 level. On the lower side, the support holds at 105.300 level. The MACD also supports the bullish bias amid a stronger U.S. dollar and diminished safe-haven appeal. A bullish crossover of the 105.750 is likely to lead the USD/JPY price towards the next resistance level of 106.250. As we can see, the 50 periods EMA is also in support of buying; therefore, we should look for buying trades in the USD/JPY pair. However, bearish trend continuation and violation of the 105.300 level can open further room for selling until 104.900. Good luck! 

 

Categories
Forex Fundamental Analysis

What Should You Know About ‘Social Security Rate For Companies’ Forex Fundamental Indicator?

Introduction

Introduction

Introduction

Social Security Program is one of the most extensive Government programs in the world that pays out billions of dollars to its citizens each year. Social Security is a macroeconomic program intended to act as a safe-net for active workers of the United States. Changes related to this program tends to affect the majority of the population. Hence, understanding its role and impact on the living conditions of people can give us a better insight into how such programs work.

What is Social Security Rate For Companies?

Social Security Program: The Social Security Program is designed to facilitate retirement benefits, survivor benefits, and disability income for the citizens of the United States. It is run by the federal agency known as Social Security Administration. Social Security is the word used for the Old-Age, Survivors, and Disability Insurance (OASDI) program.

The program was born on August 14, 1935, where President Franklin D. Roosevelt signed the Social Security Act into law of the United States. Since then, the program has continuously evolved and changed significantly over the years. It is a government insurance program designed to act as a safety net for the working population in the United States.

To be eligible for the Social Security retirement benefits, the worker must have an age of 62 at a minimum and should have enrolled and paid into the program for ten years or more. Workers who wait till later ages like 66 or 70 receive higher and higher benefits accordingly.

Apart from the worker himself, a divorced spouse can also be eligible for benefits provided she has not remarried, and their marriage lasted over ten years. Similarly, children of retirees can also be eligible until the age of 18, which can be longer in the case of disability or child being a student.

Social Security Tax: It is the tax levied upon both the employer and employee to fund the Social Security Program (SSP). It is collected as a payroll tax as mandated by the Federal Insurance Contributions Act (FICA) and the Self-Employed Contributions Act (SECA).

Social Security Rate: For the year 2020, the Social Security Rate is 12.4% that is evenly divided between the employee and the employer. It implies the Social Security Rate for Companies is 6.2%.  Social Security Tax is levied on the earned income of employees and self-employed taxpayers. Employers generally withhold this tax from the employee’s paycheck and forward it to the Government.

It is also worth mentioning that there is a tax cap to the Social Security Fund. For 2020, the Social Security tax cap is $137,700, meaning any income earned above 137,700 is not subject to the Social Security tax.

How can the Social Security Rate For Companies numbers be used for analysis?

Social Security is regressive, meaning it takes a more significant percentage of income from low-income earners than their higher-income counterparts. It occurs because of the tax cap, as mentioned earlier, due to which higher-income earner’s portion of income is not subject to this tax deduction.

The collected funds are not stored for the currently paying employee; instead, they are used for the retirees currently eligible for collection. Some have raised concerns on this way of approach when the baby boomer generation starts to collect its benefits, then the ratio of paying to the collecting people would be tipped off. It would mean that more people are collecting benefits than the people paying into it.

Hence, a common worry in the 21st century is the insolvency of the Social Security Funds due to the increased life expectancy of people and decreasing worker-retiree ratio. Proposed solutions to this from analysts were to increase the current rate to keep the program funded. Still, politicians are hesitant to endorse it due to fear of backlash or negative sentiment outburst from the public.

The 2020 report from the OASDI trustees projects that the retirement funds would be depleted by 2035 and disability funds in 2065. When that occurs, the taxes would not be enough to fund the entire Social Security program, and the Government needs to fill this gap. It may result in higher taxes on workers, fewer benefits, higher age requirements, or a combination of these.

For companies, an increase in Social Security Taxes directly cut down their profit margin, and hiring is more expensive. As a result, companies would be forced to keep employees only when required to avoid losses. Hence, Tax rates have a cascading effect on business profitability for companies as well as employment rates for the United States. When Social Security Taxes increase, the income offered to the employees is also affected, which can discourage personal consumption and spending for the working citizens.

Impact on Currency

The Social Security Rate for the Companies and the employees are revised every year. For consecutive years it tends to remain constant and tends to change in small incremental steps over a few years at a time. Hence, the volatility induced in the currency markets is almost zero to negligible most of the time unless significant changes occur. The changes also would be priced in through news updates into the market long before we receive official statistics.

Hence, Social Security Rate is a low-impact indicator and can be overlooked for more frequent statistics for the FOREX markets.

Economic Reports

The U.S. Social Security Administration provides the complete historical data of the Social Security tax rates for both the employee and employer on its official website. The Organization for Economic Co-operation and Development (OECD) also maintains the same for its member countries on its official website.

Sources of Social Security Rate For Companies

Social Security Rates for companies can be found on the Social Security Administration website.

Social Security Rates for employees can be found on the OECD’s official website.

Social Security Rates for companies (similar policies with different names) across the world can be found on Trading Economics.

How Social Security Rate for Companies News Release Affects Forex Price Charts

By law, companies are required to contribute half of the social security rate that their employees contribute. In the U.S., this rate for companies in 7.65% for each employee on the payroll for up to $ 137,700 per employee. This rate is reviewed annually and has remained unchanged in the U.S. for the past 25 years. For forex traders, this release of this rate in the U.S. is considered a non-news event since it is not expected to impact the forex market.

The screen capture below shows the current social security rate for companies in the U.S. taken from Trading Economics.

The latest review of the U.S. social security rate was on October 10, 2020, at 4.00 PM ET, and the press release can be accessed here.

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

EUR/USD: Before social security rate release October 10, 2020, 
just before 4.00 PM ET

As can be seen on the above 15-minute EUR/USD chart, the pair is on a weak downtrend before the news release. This downtrend is evidenced by the candles forming slightly below the 20-period Moving Average between 12.00 PM and 3.45 PM ET. Furthermore, the Moving Average appears to be flattening.

EUR/USD: After social security rate release October 10, 2020,
at 4.00 PM ET

As expected, there was no market volatility after the news release about the social security rate for 2020. The chart above shows a 15-minute “Doji” candle forming after the news is released. The pair later traded on a neutral pattern as the 20-period Moving Average flattened. The news release about the social security rate for companies did not have any impact on the price action of the EUR/USD pair.

Let’s quickly see how this new release has impacted some of the other major Forex currency pairs.

GBP/USD: Before social security rate release October 10, 2020, 
just before 4.00 PM ET

Before the news release, the GBP/USD pair is on a steady uptrend, as shown by the chart above. An hour to the release, the uptrend became subdued, and the pair adopted a neutral pattern.

GBP/USD: After social security rate release October 10, 2020, 
at 4.00 PM ET

After the news release, the pair forms a 15-minute “Doji” candle. It continues to trade in the neutral pattern observed earlier.

AUD/USD: Before social security rate release October 10, 2020, 
just before 4.00 PM ET

 AUD/USD: After social security rate release October 10, 2020, 
 at 4.00 PM ET

The AUD/USD pair shows a similar neutral trading patter as the EUR/USD and GBP/USD pairs before the news release. This trend is evidenced by the 15-minute candlesticks forming around a flattening 20-period Moving Average between 1.00 PM and 3.45 PM ET. After the news release, the pair forms a 15-minute “Shooting star” candle and continues to trade in the same neutral pattern as before.

From the above analyses, it can be seen that the news release of the social security rate for companies does not have any impact on the price action.

Categories
Forex Basics

Characteristics of a Successful Forex Trader

The trading plans, strategies, and goals of successful traders can differ widely, but those that are considered successful do share some important characteristics that help to further their trading career. Do you think you have what it takes to join their ranks? Take a look at our list of necessary characteristics below to form your […]

The trading plans, strategies, and goals of successful traders can differ widely, but those that are considered successful do share some important characteristics that help to further their trading career. Do you think you have what it takes to join their ranks? Take a look at our list of necessary characteristics below to form your […]

The trading plans, strategies, and goals of successful traders can differ widely, but those that are considered successful do share some important characteristics that help to further their trading career. Do you think you have what it takes to join their ranks? Take a look at our list of necessary characteristics below to form your own opinion.

Here’s a quick summary of the most important characteristics that a forex trader should possess:

  • Discipline
  • Mental Toughness
  • Independence
  • Being well-educated
  • Patience 

Discipline 

Discipline is the first characteristic on our list because it is probably the most important trait that a currency trader should have. An undisciplined trader is prone to these mistakes:

  • Trading when the timing isn’t right
  • Risking too much on a single trade
  • Investing more money than they should 
  • Overtrading

The idea here is that there are thousands of positions one could enter on any given day, but they shouldn’t. A disciplined trader watches the market and only enters trades when the timing is right, even if it means sitting on their hands for a significant amount of time each day waiting for another opportunity. Enter trades just to be trading is a bad habit that is bound to lead to the loss of your hard-earned funds.

Mental Toughness

Traders need to know that losses are an inevitable part of trading. If you act like a sore loser and sulk over every loss, you’re going to make yourself miserable. In fact, most day traders experience losing trades each day. What matters is that you make more than you lose, and if you do, then you should consider yourself a winner. The best traders pick themselves back up after experiencing losing streaks and try to learn from their mistakes if the losses are on their side. If those losses were unavoidable, then those traders move on without obsessing over it.

Independence

Most traders start out by reading articles, watching videos, and simply relying on the word of other traders. There’s nothing wrong with picking up some tips here and there, especially in the beginning. However, the best traders learn to stand on their own two feet and don’t need to rely on others once they get further into their careers. You might want to incorporate some advice from different sources together once you realize what does and doesn’t work for you.

Being Well-Educated

In order to be a successful currency trader, you obviously need to know what you’re doing. The amount of knowledge one needs exceeds far beyond basic concepts and covers a lot more territory. Smart traders understand the analytical side of things, what moves the markets, trading psychology, they know a lot about different strategies, and so on. Fortunately, anyone can learn this online because free resources are readily available if one simply applies themselves to learning in-depth. Mathematical concepts are important here too, as traders need to understand percentages, calculate risks and rewards, and do some simple math calculations quickly. 

Patience

Some might begin trading with high expectations about how quickly they will make money. This is a bad start for any trader. It takes time to become successful, especially for those that start out with a small investment. The best traders are not only patient when it comes to waiting for success and watching profits build slowly, they are also able to watch the markets to wait for the right time to enter a trade without feeling overly anxious or rushed.

Categories
Forex Trading Platforms

What to Look For In a Forex Trading Platform

Let’s dedicate this article to speaking about Forex trading platforms. In the market, there are thousands of brokers and platforms, and all promise to be the best. Each may be different in different ways, but what really interests you? What do you ask a trading program to do? Let’s discuss… What is a Trading Platform? […]

Let’s dedicate this article to speaking about Forex trading platforms. In the market, there are thousands of brokers and platforms, and all promise to be the best. Each may be different in different ways, but what really interests you? What do you ask a trading program to do? Let’s discuss… What is a Trading Platform? […]

Let’s dedicate this article to speaking about Forex trading platforms. In the market, there are thousands of brokers and platforms, and all promise to be the best. Each may be different in different ways, but what really interests you? What do you ask a trading program to do? Let’s discuss…

What is a Trading Platform?

I know you know what it is, a trading tool. Let’s go a step further, in the market, there are different types of platforms according to their function broadly:

To chart: if you know me a little you will know that I am not in favor of making decisions by looking at charts. Decisions as a result of emotions, there is no objective plan. Is not what is intended of this article so will not give you the ember with this. Some of the best known for their graphics are Pro Real-Time, Visual Chart, Ninja Trader.

To create strategies: there are also tools to develop trading strategies, most of them already automated. For example, MetaTrader allows you to create these types of trading strategies called EAs (Expert Advisors).

To do trading: Platforms to buy and sell through them. Some of the previous ones allow buying directly.

Don’t get bogged down by seeing many platforms, some offering everything (graphics, automation, and execution). This ranking is just so that you understand that a trading program can be anyone who fulfills one of these functions.

How Does a Trading Platform Work?

What this type of software tries to do is make life easier for you in your work as a trader. For example, if you like a guy’s e graphics and presentations you’re going to prefer a platform that can give it to you. If instead you develop and execute automatic trading systems as is my case you will prefer another type or you will prioritize based on it. They all try to give service in exchange for commissions through the purchases and sales you make in that same program or by paying a fee in some cases.

Which Trading Platform is Best?

The usual question. The most optimal will be the one that meets your needs. As I said previously there are different types of traders, so there are also different types of platforms based on it. It’s like we’re trying to agree on the best bank. It depends on the type of customer.

In my case to implement systems and for the operational issue, I do it with Metatrader because it is very versatile and has a great community behind it. Besides, it’s free of charge.

Which Platform Costs Less?

If it is for development and graphics I would not pay for it except some point case, but in reality today there are so many that it seems to be an unnecessary expense. As for brokers, a commission set as low as possible and reduced forks with DMA execution. If you trade in OTC markets like Forex, keep this in mind.

The Best Platforms

The best trading platforms don’t advertise aggressively or offer bonuses for two reasons. First, they don’t need one. Second, the conditions are usually good and tight, they focus on giving good service to the trader and can’t afford all this money in marketing.

The good ones are those who want you to do well and take care of you because their business is that you trade for a long time and you do well. Build long-term relationships with aligned interests and you’ll have a lot going for you.

Forex Trading Platforms

Depending on whether you trade in futures, stocks, cryptocurrencies. you may be interested in one platform or another, especially when trading. Most brokers are specialized and competitive in some of them and very few are in all or most of them. I’ll tell you in case you do Forex trading.

In the currency market for its features, tools like indicators, scripts. the queen is Metatrader. Don’t get me wrong, I’m not telling you it’s the best, but it’s the most used. That is why you will find a multitude of resources and this coupled with the fact that it is free in the vast majority of brokers makes it have a great community behind it. This is very important because you will find solutions faster with software that thousands of people use than just a few.

Like the vast majority, it has defects and many things to improve. The positive thing is that there are many people every day working for it.

Free Trading Platforms

The vast majority of brokers offer various associated trading programs. This is because it is convenient for traders to have the tools to be able to trade through competent software, an attractive interface, speed. It is simple. If the trader feels comfortable makes trades and the broker wins. In addition, if you offer good alternatives at the platform level is attractive so you can open up count on it and start working. Would you open an account with a broker who has trading tools that are not up to the task? It wouldn’t make sense. They know it well and therefore try to offer them.

Most trading platforms are free, especially on Forex. Others instead charge you a monthly, quarterly fee or a payment to acquire the lifetime license as is the case with Ninja Trader for futures. They also offer you a free platform in exchange for a minimum of trades. You’ll finally pay for doing business.

Especially if you’re starting my advice is don’t spend money on software unless you’re looking for something very concrete. Check out, if you have a not very large account at the end of the year this cost can be important. If you don’t know where to start, many brokers offer free Metatrader. Choose a good one based on your conditions.

Demo Trading Programs

I know you may be thinking that you don’t know how to choose a trading platform or how these types of tools work. Don’t worry, most have a demo version so you can practice with virtual money. You won’t have to make any kind of deposit. Don’t pay for something you don’t know or are sure you will contribute.

Download different software and try them, they are free. Take some time to see how they work and stay with the one who feels more how or suits you. From here, choose the one you choose to get to know it well and make sure you know it before starting with real money.

Something important, invest time to let go and not commit than in real failure fools that make you lose money but do not assume that everything that happens in a simulated account will happen in a real. Of course not, brokers will not execute orders so precisely and emotions come into play.

Comparison of Platforms

Are you looking for a listing of major to minor brokers with first and last names? What if that listing was conditioned by what a broker pays me for it? This is very common in this industry and it’s not bad as long as you recommend what you think is best. I will not list you because I do not want to condition you and for this, I have prepared the previous video with some conditions and requirements that will allow you to differentiate between what is a serious trading platform and what is not.

Categories
Forex Basics

What is a Forex PAMM Account?

You will see that some Forex/CFD brokers, usually the largest, offer a “PAMM Account”. What is this type of account? In short, “PAMM” (in English “percentage allocation management module” or “percentage allocation money management”) means “management module of percentage allocation” or “management of money in percentage allocation”. In other words, a PAMM account is primarily […]

You will see that some Forex/CFD brokers, usually the largest, offer a “PAMM Account”. What is this type of account? In short, “PAMM” (in English “percentage allocation management module” or “percentage allocation money management”) means “management module of percentage allocation” or “management of money in percentage allocation”. In other words, a PAMM account is primarily […]

You will see that some Forex/CFD brokers, usually the largest, offer a “PAMM Account”. What is this type of account? In short, “PAMM” (in English “percentage allocation management module” or “percentage allocation money management”) means “management module of percentage allocation” or “management of money in percentage allocation”. In other words, a PAMM account is primarily an account managed where a merchant operates on behalf of others through his account.

PAMM accounts work with the Forex/CFD broker using a software application that allows broker clients the ability to assign part or all of their accounts to management by a particular operator. The managing merchant then trades his own money, but it is supplemented by the money of other customers, who each receive a percentage of the profits or losses made by the merchant in their own accounts.

Example of a PAMM Account

Imagine that you are a retailer with your own account and other traders with the same broker ask you to manage their accounts. Let’s say you have 10,000 USD and Trader B gives you 50,000 USD to manage and Trader C gives you 40,000 USD to manage. It is now trading a total of $100,000 with a 10% allocation percentage. The allocation of operator B will be 50% and operator C 40% in line with the capital contributed to the global fund. You place a purchase order to buy 1 lot in EUR /USD. Your agent will assign the order between the parties for this trade as follows: 0.1 lots for you, 0.4 lots for Trader B, and 0.5 lots for Trader C.

Advantages of the PAMM account

A PAMM account allows a merchant to manage other people’s money easily, simply by operating normally through their existing platform. The PAMM software performs all the required calculations. Indeed, there is no limit to the number of “clients” for which the holder of a PAMM account can manage money. The account administrator can benefit from his own trades and get a percentage of the proceeds of the money he or she also manages. When the trade goes well and is profitable, it is a win-win all year round.

A special advantage that has a PAMM account for the investor is that the investor knows that the trader is risking his own funds, and has “skin in the game”, which would tend to increase confidence that the operator will be working in the style that they actually believe in, the best of their ability.

The PAMM accounts are monitored by the Broker, and the investors are reassured to know that they are aware that the money manager cannot access the actual funds contributed or make any withdrawals. On the contrary, there is a situation in which the investor must issue a check and deliver it to a money manager, and you will immediately see a huge advantage of a PAMM account.

Disadvantages of a PAMM Account

The biggest disadvantage of a PAMM account is that all parties involved must be customers of the same Forex Broker/CFD. Most of the larger brokers offer PAMM accounts, but there are other solutions available in the market that achieve the same result but can bridge different brokerages and trading platforms, such as copy exchange software, or other brands that offer PAMM style configurations but have bridges so that they can connect to accounts in most brokers. On the other hand, in reality, there is a small but realistic technical advantage for all parties to work through the same broker and platform, reducing the risk of latency problems or communication errors.

How Does it Work?

Many brokers offering PAMM accounts keep a detailed list of their PAMM money managers so investors can do some research and decide who wants to manage their funds. The lists contain details of the path of each trader’s performance and more information about who they are and what their business philosophy is. The Broker provides a limited-power document (LPOA) that both parties sign, which gives the money manager the right to manage the investor’s money according to the agreed terms and conditions: investors can, of course, end at any time and have the capacity to the negotiation of your funds transferred back to them. Monitoring, review, record keeping, etc. are facilitated through the intermediation offered by the PAMM account.

Can I have a PAMM account or make an investment in one? The answer is “yes”: if you already have a satisfied Forex/CFD broker, just ask them if they offer PAMM accounts. If they don’t, there are many brokers offering PAMM accounts.

Categories
Beginners Forex Education Forex Basics

7 Things that Successful Forex Traders Don’t Do

We often hear about the habits of successful Forex traders and study what these individuals do on a daily basis. Have you ever wondered what they don’t do? Here, we’ll take a look at some of the keys to success from the perspective of what successful traders actually don’t do. #1: Forget to Set a […]

We often hear about the habits of successful Forex traders and study what these individuals do on a daily basis. Have you ever wondered what they don’t do? Here, we’ll take a look at some of the keys to success from the perspective of what successful traders actually don’t do. #1: Forget to Set a […]

We often hear about the habits of successful Forex traders and study what these individuals do on a daily basis. Have you ever wondered what they don’t do? Here, we’ll take a look at some of the keys to success from the perspective of what successful traders actually don’t do.

#1: Forget to Set a Stop-Loss

Using a stop-loss is one of the best risk-management tools in the arsenal of a forex trader. It helps limit your losses so that you don’t lose too much money if things don’t go the way you had hoped. Some traders might choose not to use a stop-loss because they are confident about the direction that the market will go, however, nothing is ever certain when it comes to the foreign exchange market. This is why the best traders set a stop-loss and take other measures to limit their risks.

#2: Fail to Learn Something New

Those that have been trading for a while sometimes feel so confident that they think they know everything they need to know about trading already. The truth is that there is always more information out there about strategies and other insightful information that can add to one’s overall knowledge. Successful traders invest time into their education, even after becoming more established. 

#3: Worry About Other Opinions

There’s no “right” way to trade forex. With so many strategies, trading plans, and different ways of doing it, it really comes down to what works for the individual. Successful traders find a plan that works, perfect their strategy, and stick with it instead of chasing trends and trying different suggestions because someone else says they know better. 

#4: Become Overly Emotional

Emotions can run high when money is on the line, especially with the rollercoaster ride of ups and downs that come with forex trading. Feelings of grief, anger, disappointment, greed, excitement, overconfidence, and a whole host of other emotions can wreak havoc on the way that we trade. The best traders understand the psychology behind the way that these emotions interfere and have enough discipline to keep themselves calm and levelheaded or to take a break if things start to get too intense. 

#5: Risk too Much

When we speak about risking too much, the amount can vary from person to person. Still, a good idea of how much you should risk on a single trade is around 1% – 5% if you listen to the experts. If you go risking 10% here, 20% there, and things go wrong, then you could quickly blow your balance. This is especially true for successful traders that have a large investment sitting in their account.

#6: Use too Much Leverage

The leverage you use is another matter that comes down to personal preference, and you also might be limited depending on the broker you’ve chosen. Traders should still be aware that using too much leverage can cause you to lose a lot of money at once, therefore, many professionals choose to stick with a leverage option of around 1:100 even if their broker offers options that are much higher. 

#7: Set Unrealistic Expectations

One might assume that a forex trader has one goal and one goal only: to make money. However, a person really needs to focus on self-improvement once they start trading forex. It isn’t a good idea to only have one large goal or to set detailed goals about exactly how much money you will make within a certain timeframe. Successful traders set short-term and long-term goals and focus on bettering themselves so that they will make more money in the long run, rather than only thinking of dollar signs the whole way through. 

 

Categories
Forex Fundamental Analysis

Understanding ‘Social Security Rate For Employees’ Forex Fundamental Driver

Introduction

Introduction

Introduction

The Social Security Program of the United States is the government insurance program for retirees, disabled, and survivors. It is one of the most extensive Government Spending programs and affects the majority of its population. Hence, it is a macroeconomic statistic, and changes in the same results a significant impact on its citizens. An insight into the Social Security Rates and how it affects the individual and the economy as a whole can help us understand the monetary structure of the United States.

What is Social Security Rate For Employees?

The Social Security Program (SSP) is managed by the Social Security Administration (SSA) of the United States. The SSA is a federal agency and defines the SSP as a protection program against income loss due to retirement, disability, or death. The Social Security Program is officially called the Old-Age, Survivors, and Disability Insurance (OASDI) program.

The funds collected by the SSP are divided between two funds, namely the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds. Retired workers and their families, or survivors (ex: wife of an expired husband) receive benefits from the OASI funds. The DI trust funds provide benefits to the disabled and their families. The benefits are paid out monthly to the eligible people.

The Social Security Programs receives its funds primarily from the currently active employees enrolled in the program, employers, and as well as self-employed citizens. The funds received at present are not stored for the future, instead, they are utilized to pay out for the currently eligible retirees. The cycle goes on, and it means the current employee pays out for the already retired people, and when the employee himself retires would be paid out through funds collected from the paying employees at that time.

Apart from the employee, employer, and self-employed, funds receive income from investments and interests on investments, and taxations of benefits. For the year 2020, the Social Security Rate is 12.4%, which is evenly divided amongst the employer and the employee. Hence, the employee pays 6.2% of their income. Generally, It is deducted monthly from their income. On the other hand, the self-employed people like small shop owners or freelancers are subject to pay the full 12.4% themselves.

The benefits apply to people who have enrolled and have paid for a minimum of ten years. The retirement age at which they are eligible for collecting their pension is 62, while people who wait longer, like the age of 66 or 70, receive higher and better benefits accordingly. The Social Security Tax has a cap limit of $137,700, above which the earned income is not subject to the tax deduction.

How can the Social Security Rate For Employees numbers be used for analysis?

Since the Social Security deductions are directly taken out from the gross salary, it directly affects the Personal Consumption Expenditure (PCE) and thereby Consumer Spending. Both of these are macroeconomic indicators bearing high significance in terms of currency market volatility. Suppose the taxes increase, Consumer Spending decreases, which can drive the economy into a recession. Consumer spending makes up two-thirds of the United State’s GDP.

The program collects from millions of people and pays out to millions of people. The transactions are in billions of dollars every year. Any change in the percentage is bound to affect a large chunk of the country’s population directly. Hence, the changes in the rates are less frequent over the years and change only during significant policy reforms.

The regressive nature is often criticized, meaning the more affluent section of the society ends up paying lesser than the lower-income bracket people due to the tax cap limit. Also, the model of the Social Security Program is a cause of worry for many as the increased life expectancy and the diminishing worker-to-retiree ratio will ultimately result in depletion of funds soon.

As the population stops to grow, and more people retire than the number of people actively working will ultimately force the Government to either raise taxes or retirement age-limit or decrease benefits. None of those above options is favorable, and the Government needs to plug this gap in funds sooner than later.

 Impact on Currency

The Social Security Rate for the employees is revised every year. Most of the time, it tends to remain constant and changes only in small incremental steps over a few years at a time. Therefore, the volatility induced in the currency markets is negligible unless significant changes occur. Above all, the changes would be priced into the market through news updates long before official statistics are published. Hence, Social Security Rate for employees is a low-impact indicator and can be overlooked for more frequent statistics in the currency markets.

Economic Reports

The Social Security tax rates for both the employee and employer are provided by the Social Security Administration of the United States on its official website. The historical figures of the same are also available. The OECD (Organization for Economic Co-operation and Development) also maintains the tax rates for employees of its member countries on its official website.

Sources of Social Security Rate For Employees

Social Security Rates for employees is available on the Social Security Administration website.

Social Security Rates for employees is also available on the OECD’s official website.

Social Security Rates for employees (similar policies with different names) across the world can be found in Trading Economics.

How Social Security Rate For Employees Announcement Affects The Price Charts

For employees, the social security tax is deducted through payroll withholding by the employer. This rate is split in half between the employee and the employer. Since the social security rate in the US is 15.3 %, an employee contributes 7.65% of their earnings up to $137,700.

The screengrab below shows the current social security rate for companies in the US from Trading Economics.

The latest review of the US social security rate was on October 10, 2019, at 4.00 PM ET, and the press release can be accessed here.

USD/CAD: Before Employee Social Security Rate Release October 
10, 2019, just before 4.00 PM ET

As can be seen on the above 15-minute chart, the USD/CAD pair was trading on a neutral trend before the news release. This trend is shown by the candles forming around an already flat 20-period Moving Average. This trend signifies relative market inactivity at this time.

USD/CAD: After Employee Social Security Rate Release October 
10, 2019, at 4.00 PM ET

After the news release, no market volatility is observed. The US/CAD pair forms a 15-minute “Shooting Star” candle. Afterward, the pair struggled to alter the trading pattern with the candles attempting to cross below the 20-period Moving Average but subsequently continued trading in the previously observed neutral pattern.

USD/JPY: Before Employee Social Security Rate Release October 
10, 2020, just before 4.00 PM ET

Before the news release, the USD/JPY market is on a weak uptrend. The pair can be seen struggling to maintain this trend as observed by multiple bearish spikes. The pair adopts a downtrend 30 minutes before the news release.

USD/JPY: After Employee Social Security Rate Release October 
10, 2019, at 4.00 PM ET

After the news release, the pair forms a 15-minute bearish candle. However, the news is not significant enough to maintain the earlier observed downtrend.

USD/CHF: Before Employee Social Security Rate Release October 
10, 2020, just before 4.00 PM ET

USD/CHF: After Employee Social Security Rate Release October 
10, 2019, at 4.00 PM ET

Before the news release, the USD/CHF pair shows a similar trading pattern as the USD/CAD pair. The pair was trading on a neutral trend with 15-minute candles forming around a flattening 20-period Moving Average. As the USD/JPY, the pair showed signs of reversing into a downtrend 30 minutes before the news release. After the release, USD/CHF formed a 15-minute “Shooting Star” candle. It later continued trading in a downtrend with subsequent candles forming below the 20-period Moving Average.

Bottom Line

On October 10, 2019, the US effectively increased the social security rate. Theoretically, this is supposed to be positive for the USD. However, as shown by our analyses, this news release had no significant price action impact on any currency paired with the US dollar.

Categories
Forex Basic Strategies

The Amazing Combination of ‘EMA & RSI’ While Trading The Forex Market

Introduction

Introduction

Introduction

Previously, we discussed several trading strategies that involved a combination of different indicators, but the number did not exceed two or three. In today’s article, we present a trading system that is based on five different Exponential Moving Averages, combined with the Relative Strength Index (RSI). This strategy will make a lot of sense to traders who are at an intermediate level of trading. It is totally mechanical in nature and requires a thorough understanding of technical indicators of MT4 or MT5.

Time Frame

The strategy can almost be used on any time frame, but a larger one is preferred, 1 hour or higher. This means the strategy is not suitable for trading during the day.

Indicators

As said, we will use five different Exponential Moving Averages and one Relative Strength Index (RSI). This is the reason we need to be well versed in the technical indicators.

Currency Pairs

This strategy can be used with any currency pair. Also, with few commodities as well. Liquidity will not be an issue here since we are trading on the higher time frames.

Strategy Concept

Firstly, we use 80-period EMA to identify the major trend of the market. If the price is above 80 EMA, we say that the market is in a bull market, while if it is below the 80 EMA, the market is in a bear market. Secondly, we use the 21-period and 13-period EMA to point out the current trend direction, meaning, the current minor trend within the major trend. If the EMA with a shorter period is above the one with the longer period, we have a minor bull trend, and vice versa.

Third, we use the other two EMAs with even shorter ‘periods’ in conjunction with the Relative Strength Index (RSI) to generate entry signals. These are the 3-period EMA and 5-period EMA. The crossing of these two EMAs supported by the appropriate value of RSI, tells us whether to go long or short in the currency pair.

However, a more conservative approach would be by ignoring the entry signals, which are in the opposite direction of the major trend. Therefore a ‘long’ entry signal would be generated when the 3-period EMA penetrates the 5-period EMA from below and starts moving higher. Also, the 80-period EMA must be below the price action discussed above, and RSI must have a value exceeding 50. We execute the trade once the signal bar closes beyond the 5-period EMA.

Conversely, a ‘short’ entry will be taken when the 3-period EMA penetrates the 5-period EMA from above and continues lower. This must be coupled with an RSI value below 50, and 80-period EMA be above the price action.

Trade Setup

In order to explain the strategy, we have considered the 4-hour chart of USD/CAD, where we will be applying the rules of the strategy to execute a ‘long’ trade.

Step 1

Since this a trend-based strategy, the first step is to identify the major direction of the market using the 80-period EMA. It is important that the price remains above the EMA for at least four consecutive higher highs and higher lows before we can call it an uptrend. Likewise, the price should be below the 80-period EMA for a minimum of 4 lower lows and lower highs.

The below image shows a clear uptrend visible on USD/CAD on the 4-hour chart.

Step 2

Once we have identified the trend, we need to wait for a price retracement that could give us an opportunity to enter the market and ride the trend. We need to evaluate if this a true retracement or the start of a reversal. In this step, we should wait until the price develops a ‘range’ or the 80-period EMA becomes flat. This partially confirms that the retracement is real, and the price could be making a new ‘high’ or ‘low.’

In the example we have taken, we can see how the price starts to move in a ‘range’ along with the flattening of the EMA. Next, let us discuss the ‘entry’ part of the strategy.

Step 3

We shall enter the market for a ‘buy’ when all the smaller EMAs cross the 80-period from below. The 3-period EMA should penetrate the 5-period EMA and start moving forward to generate a reliable ‘buy’ signal. Along with this, at the entry bar, the RSI should be above the 50 levels, and both the 3 and 5 periods EMA should cross the 13-21 EMA channel. Once all of these conditions are fulfilled, we can take a risk-free entry into the market. The same rules apply while taking a ‘short’ trade but in reverse.

The below image clearly shows the ‘entry’ where all the conditions mentioned above are met.

Step 4

Once we have entered the trade, we need to determine the stop-loss and take-profit levels. For this strategy, the take-profit and stop-loss are placed in such a way that the resultant risk-to-reward of the trade is 2.5. The RR is derived mathematically, where we have taken into consideration the possibility of a new ‘high’ or ‘low’ as we are trading in a strong trending environment.

Accordingly, we have set the take-profit and stop-loss in our example, as shown below.

Strategy Roundup

Combining two or more technical indicators has always proven profitable for traders. The above-discussed strategy considers the trend of the market, momentum, strength of the retracement, and shift of ‘highs’ and ‘lows,’ which makes it an amazing strategy to be used while trading part-time or full-time. Since there are many rules and requirements for the strategy, the probability of occurrence of trade-setup is less, but once formed, it can provide amazing results.

Categories
Forex Basics

Classic Quotes Relevant to Forex Traders

Often when we think about certain quotes in relation to forex and trading, we are thinking of ones that are solely from those that have been successful in trading. Afterall, those are the people that we are looking up to, looking to them for advice and so we should be doing what they’re doing. There […]

Often when we think about certain quotes in relation to forex and trading, we are thinking of ones that are solely from those that have been successful in trading. Afterall, those are the people that we are looking up to, looking to them for advice and so we should be doing what they’re doing. There […]

Often when we think about certain quotes in relation to forex and trading, we are thinking of ones that are solely from those that have been successful in trading. Afterall, those are the people that we are looking up to, looking to them for advice and so we should be doing what they’re doing. There are, however, lots of very relevant quotes from people who have nothing to do with trading at all. In fact, the vast majority of the quotes that we are going to mention below are not to do with trading and are involved in all aspects of life, the one thing that they have in common though is that a forex trader could take them and apply them to their craft.

Of course, we have thrown in some trading related quotes too as they are just as important to us as traders and come directly from experts within the field. So here are some of the quotes that we have come across and what others have posted around the internet that are very much applicable to you as a trader.

“Every battle is won or lost before it’s ever fought” – Sun Tzu

Sun Tzu was a Chinese military general who was born in 544BC, so quite a long time ago, yet the words that he spoke are still very much relevant today, and especially relevant to us as traders. While he may have been referring to battles, we can apply it to our trades, each and every trade can be won or lost before it is placed. This comes down to our trading plan and sour risk management, get something wrong and the trade could be lost before we even place it, however, if you do everything right, then it puts us in a much better position to have that trade win instead of losing. It is all in the preparation.

“Luck is a preparation meeting opportunity.” – Oprah

This quote is all about being in the right place at the right time for something good to happen to you. Of course, in order to be in the right place, you need to put in the preparation beforehand. It is very similar in a sense to the Sun Tu quote as it is all about ensuring that you have put in the work before making any trades. If you have done that, once an opportunity pops up you will be in the perfect position to take it and to take advantage of it. Whereas if you were not prepared and the same opportunity came up, you would more than likely miss it and then miss out on the returns too. Just remember, there isn’t actually any luck in trading, just good planning.

“It is not the strongest or the most intelligent who will survive but those who can best manage change.” – Charles Darwin

This is extremely relevant to us as traders, the market is a fluid beast, it does not stay the same for long. In fact, it is often changing by the day. When this happens, only those that are able to adapt are able to keep up with it and to remain profitable. You often see traders doing well, but as soon as the markets change they do not know what to do, their strategy no longer works and so they start to make losses. A good trade will have additional strategies and have an understanding of how they can adapt their current strategy to remain profitable in the new conditions. A good trader needs to adapt, much like many things in life as pointed out by Charles Darwin.

“The biggest risk is not taking a risk. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” – Mark Zuckerberg

Trading is a risk, there is no way around that, many people sign up, deposit, and then hesitate, do they really want to take this risk? The answer should be yes according to Mark Zuckerberg (owner of Facebook). If you want to make money with trading then you will need to take a risk, your money could either be sitting in a bank in order to generate 0.5% interest per year, or you can trade it, there is a chance that you could lose it, but the rewards far outweigh those risks, at least they should if you are using proper risk management. Do not be afraid to take that risk, it could be the risk that changes your life.

“Risk comes from not knowing what you’re doing.” – Warren Buffett

Another one about risk, they seem to like these ones. Warren Buffet is one of the world’s most famous investors so he probably knows a little about this subject. What he is referring to is the fact that you are able to mitigate a lot of the risk involved in trading by simply having an understanding of what it is that you are doing. You can use your knowledge to reduce the risks, you can also use things like your risk management plan to help reduce things also The key is to know what it is that you’re doing, if you go in blind then the risks are tenfold what they would be with a little bit of knowledge and preparation.

“Losers average losers.” – Paul Tudor Jones

A little confusing to begin with, but Paul Tudor Jones is known as one of the greatest traders that has existed, so he probably has a good idea of what he is talking about. This quote is actually quite simple, he simply means that if you have a losing position, you should not add to it. Things like grids and the martingale strategy are prime examples of this is exactly what he is warning you away from. If you have a losing position, close it, and then start again, do not add to it as this will only add to your losses and increase the risk that is currently put on your account.

“Yesterday’s home runs don’t win today’s games” –Babe Ruth

Let’s put this simply, every day is a new day and every trade is a new trade. Do not think about what happened yesterday, concentrate on what you are doing today. Whether yesterday was profitable or you made a loss, it doesn’t matter, what matters is that you forget about that and concentrate on today. The past should not affect the present when it comes to your trading. This is easier said than done as there is a lot going through your mind, but the more you can forget yesterday, the more you can concentrate on today.

“The game taught me the game. And it didn’t spare me the rod while teaching.” – Jesse Livermore

To make this one a little simpler, it simply means that you will learn the most from actually doing it. In our case, it means just simply start trading (on a demo account to begin with of course). You will learn a lot more from taking action and seeing how it works than you will by simply reading. Of course, it will teach you some painful lessons too, but that is all part of the process of becoming a better trader. You can read 1,000 books but someone who has made a single trade whereas you won’t have will still have more experience than you.

“The goal of a successful trader is to make the best trades. Money is secondary.” – Alexander Elder

If you come into trading with the sole purpose to try and make money, then things will not work well for you as you will be throwing a lot of caution out of the window and risking too much, If you come in with the idea of becoming a good trader, to follow the rules and to be good, then you will have a lot more success and the money will naturally come to you, meaning you do not need to think about it. Concentrate on being a good trader and the money will follow is the main take away from this quote.

So those are some of the quotes from various people around the world and from all sorts of times, they are all very relevant to us as traders, these are all people who have been and are successful in what they do, so do not take their advice or meanings lightly. Stick to the ideas that they bring and they should help you to stay on track with your trading and to hopefully one day be a consistent and profitable trader.

Categories
Beginners Forex Education Forex Basics

Are You Fully Prepared for Full-Time Trading?

Something that a lot of new and experienced traders aim for is to be able to trade full time, to be able to get rid of that 9-5 or longer job, and spend your time making money on the markets. While it is a possibility, many people are not fully prepared for it. In fact, […]

Something that a lot of new and experienced traders aim for is to be able to trade full time, to be able to get rid of that 9-5 or longer job, and spend your time making money on the markets. While it is a possibility, many people are not fully prepared for it. In fact, […]

Something that a lot of new and experienced traders aim for is to be able to trade full time, to be able to get rid of that 9-5 or longer job, and spend your time making money on the markets. While it is a possibility, many people are not fully prepared for it. In fact, many people do not fully understand what it actually means to be a full-time trader, the lifestyle changes, the time it takes, the money required, and the risks that come with it.

So we are going to briefly look at the sort of things that you will need to prepare for in case you wanted to make the leap to becoming a full-time trader.

Are you prepared to leave the stability of a job?

Having a job can be a pain, especially if you do not enjoy your job, but are you prepared to get rid of it? Think about the things that it gives you, stability, and a form of financial safety are some of the main ones. You have a guaranteed income at the end of the month, would you be able to give that up for a salary that could be more, but also could be a lot less. Not having that stability can mean that some bills may not get paid, would you be able to survive that with savings or any other incomes?

Are you actually prepared for it?

So you may say that you are ready, but are you prepared for it, how is your strategy holding up? How long have you been trading with it successfully? We have seen traders in the past have a good month and then want to become a full-time trader, you will need years of consistent results to get to that stage, not just a month. You need to ensure that your strategy and finances are prepared for the change in dependency on them over a job.

Set realistic goals:

While you may wish to become a full-time trader, do not set your goals too early, you need to have realistic goals instead, ensure that you are able to give yourself enough time to gain enough knowledge and do you have enough money in your account to sustain you? Bear in mind that it takes most people years to get to that stage, so you should be setting your goals at a similar timescale.

Can you handle the lifestyle change?

Stepping away from the 9-5 job and your usual routine can be a big change, a really big change. In fact, it is not something that everyone is able to deal with. Are you able to motivate yourself to work? That is a big question as a lot of people will say yes, but when it comes to actually doing it, they don’t have the motivation. Not only is it quite difficult to motivate yourself to get up and work, but it can be difficult to get yourself motivated to stay working for a full 8 hours or so. So you really need to ask yourself if you are able to do that before you think of going full-time.

Can you treat trading like a business?

Once you go full time, it is important to understand that you are no longer working for you, you need to be able to treat your trading as a business, you need to get the understanding that this is no longer you playing with your own money, but it is your livelihood. Treat it like a business, work with the money and with risk management similar to you would if working for someone else, would you take those risks if you were still employed, if you are not able to control yourself and cannot take out those additional risks of working for yourself then you probably shouldn’t.

So those are some of the things you need to consider, it is a huge thing to go full-time, something that we would not recommend to the majority of people due to it being such a huge change and the pressures that it can put on you can cause a lot of frustrations and problems for those that are not properly prepared.

Categories
Beginners Forex Education Forex Basics

Signs that you Need to Ditch your Current Trading Strategy

Think back to the beginning of your trading career: did you adopt a trading strategy that was promoted by others, or did you create your own system that was intended to be perfect? You’ve likely come across claims of “holy grail” trading strategies before and it can be easy to get caught up believing that […]

Think back to the beginning of your trading career: did you adopt a trading strategy that was promoted by others, or did you create your own system that was intended to be perfect? You’ve likely come across claims of “holy grail” trading strategies before and it can be easy to get caught up believing that […]

Think back to the beginning of your trading career: did you adopt a trading strategy that was promoted by others, or did you create your own system that was intended to be perfect? You’ve likely come across claims of “holy grail” trading strategies before and it can be easy to get caught up believing that these systems are a one-size-fits-all answer to all your trading woes. Unfortunately, the strategies you read about online might not always work for you, or a strategy you’ve created yourself may prove to be less than profitable. If you’ve been questioning your strategy lately, see if it fits in with the following sings so that you’ll know whether to keep it up or ditch it completely.

Sign #1: You Have Trouble Following your Trading Rules

One of the most important things you need to do once you have a trading strategy is to keep using it consistently and to follow all the rules you have set. If the rules are too vague or specific to follow, this is a good sign that they need to be adjusted if possible or that the trading plan might not be well thought out enough or just too specific overall. On another note, a plan with rules that are overly difficult can also cause frustration or lead to mistakes if you’re having issues determining what to do. 

Sign #2: If you’re Feeling Burnt-Out

How much effort does your strategy take? It’s true that you’re going to have to put some time into trading if you want to make money, but you shouldn’t have to be online 24/7 to do it. If your plan is leaving you feeling burnt-out because it requires more effort than its worth, you probably need to ditch it for a less time-consuming option. After all, flexible hours are one of the main benefits of forex trading and there are many options out there that don’t require you to wake up at daybreak. 

Sign #3: The Cost is too Much 

It’s okay to spend money on indicators, strategies, and EAs and some of these systems can be profitable. However, it’s important to ensure that these systems are actually paying for themselves and bringing in some profits on top of the cost. You also need to be skeptical when the creators of these systems claim that they are foolproof or guaranteed to make a certain profit for you. Some of these options can be expensive, so be sure to look to see if you’re actually winding up with more or less money in your pocket at the end of the day.

Sign #4: It isn’t Profitable

This sign might seem obvious, but some traders might have trouble letting go of a strategy that they imagined to be perfect. If you’ve already tried changing the parameters, testing, and trading under different conditions, and you still aren’t making profits, it’s better to just let the strategy go and move on. Keep in mind that some systems work great for certain traders but don’t work well for others because of the attention they require, difficulty levels, your trading personality, and other factors. In the end, if you just aren’t making money, you need to look for a strategy that better fits with your own personal trading style.

Categories
Forex Course

148. How To Fade The Breakout By Successfully Trading It?

Introduction Most retail traders have a greedy mentality, so they always prefer to trade the breakouts to catch the home run. They believe in considerable gains in huge moves. Trading smaller moves are something they are not interested in because it takes a lot of work and time to scan the market. The problem with […]

Introduction Most retail traders have a greedy mentality, so they always prefer to trade the breakouts to catch the home run. They believe in considerable gains in huge moves. Trading smaller moves are something they are not interested in because it takes a lot of work and time to scan the market. The problem with […]

Introduction

Most retail traders have a greedy mentality, so they always prefer to trade the breakouts to catch the home run. They believe in considerable gains in huge moves. Trading smaller moves are something they are not interested in because it takes a lot of work and time to scan the market. The problem with breakout trading is that the majority of the breakouts fail. To make consistent money from the market, professionals always prefers to fade the breakout. The fading breakout essentially means trading a false breakout.

Fading Breakouts = Successfully trading the False Breakout

The image above represents the formation of a false breakout, which gives us a potential sell opportunity. Experienced industrial traders are always interested in fading the breakout because they know the crux of it. Most of the time, when the price action attempts to fade the breakout, it fails and closes back inside any of the major levels. Therefore, fading the breakout is always a smarter move than avoiding it.

Trading Strategies

Always remember that fading the breakout is a short term strategy. Therefore, please do not expect a home run while taking these trades. What we are doing here is that we are trading the false breakout moves. During the fight between the buyers and sellers, we will witness the initial moves, often failing to give the breakouts.

We are just taking advantage of these exact moves. In the end, one party always wins, and we will eventually get the breakout on the price chart. Instead of waiting for the home run, it is always advisable to trade some smaller moves, and if the market allows the home run, we must definitely go for it.

Buy Trade

The price chart below represents a false breakout in the GBP/NZD Forex pair.

As we can see in the below chart, where the price action breaks below the channel, it came back right into the channel, indicating a false breakout. After the breakout, we can see the price action holding at the support zone. We decided to go long after we saw the red candles struggling to go down and when a clear big Green Candle is formed. Instead of being disappointed that the breakout didn’t happen to take the trade, these small trades inside the major areas come handy to make money.

Sell Trade

The image below represents the formation of a false breakout in the GBP/AUD Forex pair.

As you can see, the image below represents our entry, exit, and stop-loss in this pair. When the price failed to go above the major level, it is an indication for us to take a trade inside the triangle. Therefore, when the price came back, we took the sell entry to the most recent support area. The stops above the entry should be good enough.

Another Sell Trade

The image below represents a false breakout in the GBP/AUD Forex pair.

As you can see, when the prices failed to break the trend line and started to hold below the trend line, it was a sign that it is a failed breakout. It also indicates that the sellers are going to take over the market when we look-in the price action perspective. In this trade, we choose not to close our position at the most recent higher low. Instead, we went for the actual breakout. The holds below the support area is an additional confirmation for us to go to the most recent lower low area.

That’s about Fading the breakout, and we hope you find this lesson informative. Let us know if you have any questions in the comments below. Cheers!

Categories
Forex Basic Strategies

A Brand New Forex Trading Strategy By Combining The ‘Flag & Pennant’ Patterns

Introduction

Introduction

Introduction

Until now, we discussed a bunch of trading strategies that were based on numerous technical indicators. In today’s article, we discuss a strategy that is based on a candlestick pattern. Flags and Pennants are short-term continuation patterns where the market tends to continue moving in the same direction after the formation of the pattern on the chart. These patterns are found on both short-term and long-term charts.

In the case of Flag, the initial move is a sudden, sharp directional move. It is doesn’t matter where the move is formed on the chart; what matters here is the velocity of the move. If the movement is not sharp and large, the reliability of the pattern will be under question. However, it will also use the volume indicator to confirm the strength of the Flag and pattern. Let us understand all the specifications of the strategy in detail.

Time Frame

As mentioned earlier, the Pennant-Flag strategy can be traded on time frames varying from 15 min to ‘Daily.’

Indicators

The only indicator we will be is the ‘Volume’ indicator. The rest of all is based on candlestick and price action patterns.

Currency Pairs

The strategy can only be used on major currency pairs listed on the broker’s platform. Few preferred pairs are EUR/USD, USD/JPY, GBP/USD, GBP/JPY, EUR/JPY, etc.

Strategy Concept

The strategy is based on the concept of the Pennant Candlestick Pattern. A sharp thrust creates a flagpole, and then when the market begins to consolidate into an asymmetric triangle, we wait for a breakout or breakdown. The consolidation is a brief pause before a potential break on either side. If the price clears the top of the ‘Pennant,’ we look for ‘long’ trades, and if breaks below the bottom of the ‘Pennant,’ we look for ‘short’ trades.

After a large vertical flagpole and a triangular consolidation, the market might be getting ready for a further continuation. The odds of a breakout increase when this pattern is accompanied by high volume. In a bullish flagpole, we place our ‘entry’ order above the ‘high’ of the flagpole, and in a bearish flagpole, we place our order below the ‘low’ of the Flag. Of course, when we enter, we’ll need to place a stop.

The stop is calculated by measuring the number of pips that is equivalent to 35-40 percent of the flagpole. For example, if the height of the flagpole is 100 pips, the stop will be placed 25 beneath the entry point.

Finally, we will need to define exits for our trade. Our first target will be equal to the number of pips that we are risking on the trade. Another strategy is to trail the stop-loss trade and exit when the market shows signs of reversal. Let us look at the specifics of the pattern and technique to make winning trades.

Trade Setup

In order to explain the strategy, we have considered the 4-hour chart of EUR/USD, where we will be illustrating a ‘long’ trade. Here are the steps to execute the strategy.

Step 1: The first step of the strategy is to wait for a sharp, sudden, and strong candle to show up on the chart. This usually happens after a major news announcement or after the release of economic data. This candle should compulsorily be with high volume as it indicates that big players of the market created this move. If the candle is not with high volume, the move cannot be trusted upon. We could use the economic calendar to find out the exact time of news release and the event.

In the below image, we can see a large candle that popped up after a news announcement that took the prices sharply higher.

Step 2: After the sudden move, prices should necessarily move in a triangular pattern, which is shrinking in nature. Few traders also refer to this as ‘squeeze.’ This pattern should be formed on the lower time frame. Market moving in this ‘squeeze’ pattern is very important for the strategy to work at its best. This leads to the formation of a Pennant candlestick pattern. Pennants involve two parts – a vertical flagpole and a triangular consolidation. The consolidation is usually for a shorter duration of time. Once the pattern has been formed along with the necessary conditions, let us see how to enter a trade.

The below image shows the formation of a Pennant candlestick pattern on the 1-hour chart.

Step 3: The rules of ‘entry’ are pretty simple. In a bullish setup, we place a ‘long’ entry order just above the ‘high’ of the ‘flagpole’ candle formed on the higher time frame. In a bearish setup, we place a ‘short’ entry order just below the ‘low’ of the ‘flagpole’ candle. As and when the market continues to move in the direction of the ‘flagpole,’ the order will automatically be executed.

In the case of our EUR/USD example, our ‘buy’ order gets executed as soon as prices start moving higher.

Step 4: Now, let us define the exit rules for the strategy. The stop-loss is calculated by the number of pips equal to 35-40 percent of the ‘flagpole.’ Stop-loss is placed below the entry price equivalent to the pips obtained by calculation. The ‘take-profit’ is set a price where the resultant risk to reward of the trade is 1:1. Therefore, the take-profit is determined by the stop-loss. Another exit strategy is to trail the stop loss and exit after we witness a reversal pattern in the market.

Strategy Concept

The idea behind this technique is not to place most trades but to place the best trades. The most crucial aspect of the trade is the ‘Flagpole’ candle. We need to ensure that this candle is a consequence of a major news announcement and not just a normal candle. Many traders become impatient and enter even though all criteria have not been met. Patience and discipline will help us to avoid falling into this trap and keep us on the course.

Categories
Forex Fundamental Analysis

What Should You Know About ‘Asylum Applications’ Fundamental Indicator

Introduction

Introduction

Introduction

People from war-ravaged countries seek refuge in neighboring countries for their protection and survival. There are countries where military conflicts, wars, and political tensions were so adverse that people had to leave their homeland to go to an entirely different country to protect their life and survive barely. An understanding of the refugee movements, the price neighboring countries pay, and the corresponding economic impacts for the host countries is worth knowing.

What are Asylum Applications?

It is essential that we first clarify the fundamental differences between the terms refugee, migrant, asylum seeker before we understand asylum applications.

Refugee: They are the people fleeing from their home country to neighboring countries due to armed conflict, political wars, and persecution. Their conditions are so adverse that the only way to save their life is to seek shelter in neighboring countries. The prospect of a career, financial independence are out of the question, and it is just a matter of survival for these people.

Migrants: These are the people who move out of their country of origin in pursuit of a better standard of living and to improve life quality. The reasons can include better education, finding work, or reuniting with families. Unlike refugees, migrants can return to their native safely. Migrants are subject to the immigration laws of the recipient countries.

Asylum seekers: Asylum seekers are people who have claimed to be a refugee, but their status has not been yet evaluated. This individual would have applied for asylum (place to stay) because he/she will be persecuted if returned to their homeland. Not all applicants will qualify as a refugee but will have to go through the due process to become one. Asylum applications refer to the number of people who have come from other countries to seek asylum in the host country.

How can the Asylum Applications numbers be used for analysis?

War-ravaged countries primarily produce refugees in such large numbers that the neighboring countries would need to provide aid by providing protection, shelter, food, clothing, and water. The provisions for these asylum applicants would have to be provided by the local and central Government. Based on the available resources that can be dispensed to provide aid, countries may choose to close their gates and refuse entry too.

It is difficult to give accurate estimates of the effect of asylum applications on the economy due to lack of before and after data estimates. Some researches have shown poorer host countries have had a negative impact while developed nations have had zero or some positive impact. It has also been found that the applicants have actively sought work to improve their living conditions in the host country.

It is worth noting that the countries from which people flee are often surrounded by countries of similar economic strength, meaning the host countries are also underdeveloped nations. For such countries hosting a large influx of asylum seekers would also be burdensome and negatively impact their economic conditions. Only in a few cases, there are scenarios that people have sought asylum in a developed nation. Most of the time, people move to a developed nation as migrants to seek better work and not as a refugee.

Some researches have also shown that the funds received through the relief providing organizations and programs like the World Food Program (WFP), which provide in cash or directly food, add to the income of the host country, thus boosting the economy. Adding people into the host country also increases consumer demand, as well as revenue generated through the refugees who have found work also boosts the economy.

The influx of the refugee is generally small and lies on the border sides of the country. The overall impact on the economy is many a time negligible and is significant only when the host country is a small economy in itself and is underdeveloped. The way the host country’s Government manages refugee situations also determines whether they lose or benefit out of it.

Only when the influx of asylum seekers increases suddenly due to an overnight development of some critical situations is the effect felt on the host country. Under such circumstances, the host country may need to allocate resources to provide aid, which would impact the Government spending budget. The more the funds allocated for such rescue programs, the lesser the funds available for the Government to spend on economy-boosting activities.

Large scale influx of asylum seekers can also add to unemployment in either the refugee camps or the jobs taken away from host country citizens by the refugees. Refugees are desperate for work and would offer their labor at a very minimum rate compared to the citizens of the host country. All these effects come into play during extreme war-like situations in neighboring countries; otherwise, the economy comes to a natural equilibrium in due time with negligible impact.

Impact on Currency

The impact of Asylum applications on economy and currency is not always clear due to lack of sufficient before and after scenario data. Asylum application data comes into use during critical times when we are trying to trade currencies of the host or the crisis countries. Any volatility in the market created would be through the general market sentiment reacting to the news and not from the statistics.

Hence, asylum applications are a low-impact indicator that is only useful in critical times for data gathering and analysis. Therefore, the currency markets overlook it as they would have priced in any economic shocks presented through media ahead of the statistics.

Economic Reports

The United Nations Refugee Agency (UNHCR) publishes monthly reports on asylum application count as and when they receive reports from the Government authorities of different countries. The consolidated data of the same reports are also available on Trading Economics.

Sources of Asylum Applications

We can find refugee briefs on UNHCR official website for reference and latest updates on refugee migration. Asylum Applications for available countries are consolidated and available on Trading Economics.

That’s about Asylum Applications and their importance. We hope you find this article informative and useful. Let us know if you have any questions in the comments below. Cheers!

Categories
Forex Basic Strategies

An Exclusive Strategy To Trade The Fiber (EUR/USD) Currency Pair

Introduction 

Introduction 

Introduction 

In the previous article, we discussed a trading strategy that was a combination of EMA and RSI. Presuming that all the readers easily understood it, we will now discuss a trading strategy that is a combination of three technical indicators. Today’s article will acquit us with another useful and reliable trading system that is based on the combination of Simple Moving Average, Stochastic Oscillator, and Relative Strength Index (RSI).

Time Frame

This strategy is only applicable on the 1-hour time frame. This is because all the indicators tend to sync in this time frame. Therefore, the strategy may not be suitable for day traders.

Indicators

The strategy consists of three indicators – a 150-period Simple Moving Average (SMA), Relative Strength Index (RSI) with period 3, and a Full Stochastic Oscillator with standard settings. The overbought and oversold levels for the indicators stand at 70-80 and 30-20, respectively.

Currency Pairs

As the name suggests, this strategy is exclusively meant for ‘EUR/USD.’ The liquidity and volatility of EUR/USD are extremely supportive of this strategy.

Strategy Concept

We first identify the direction of the market using the 150-period SMA and then establish a channel in the same direction. This is the first condition that has to be met before we can initiate a ‘trade.’ One could also this is a ‘channel’ based strategy as it involves going ‘long’ at the bottom of the channel and ‘short’ at the top once the indicators generate signals.

For a ‘long’ entry, we need to see if the Relative Strength Index drops in the oversold area. Once it drops, we look for a bullish crossover of the Stochastic lines, while they are also within their oversold zone. In simple words, we need a channel in a bull trend with both the indicators indicating that the market is oversold and with the Stochastic displaying a bull reversal.

Conversely, a ‘short’ trade is generated when the price starts moving in a downward channel in a bearish trend. The RSI and Stochastic should be in the overbought area that will later display a bearish reversal. As soon as the Stochastic fast and slow lines make a bearish crossover, we enter for a ‘sell’ on the next price bar. All of the above price action must happen below the 150-period SMA.

The strategy offers a high degree of capital protection as we place our stop-loss at the most recent ‘swing low’ or ‘swing high.’ As far as the ‘take-profit’ is concerned, we can use a fixed profit target, or we could scale out as the market approaches our target and protecting it with a trailing stop. An exit signal is also generated by the Stochastic indicator, which we will be discussing in the upcoming section of the article.

Trade Setup                     

In order to explain the strategy, we have considered the 1-hour chart of EUR/USD, where we will be applying the rules of the strategy to execute a ‘long’ trade.

Step 1: First of all, open the 1-hour chart of EUR/USD and establish the trend of the market. Plot Simple Moving Average (SMA) with a period of 150, Stochastic and Relative Strength Index with their default settings on the chart. If the price is above the 150-period SMA, we say that the market is in an uptrend. Whereas if the price is below the 150-period SMA, we say that it is in a downtrend. Next, draw a channel within the trend. It is better to have an upward channel in an uptrend and a downward channel in a downtrend.

Step 2: This is the crucial step of the strategy, where we align the three indicators together to generate a signal. After the identification of the trend and channel, we need to wait for the price to come at the extreme of the channel. In an upward channel, the price should be at the bottom of the channel, while in a downward channel, the price should be at the top.

Once the price reaches these extremes, we should watch the Stochastic and RSI. We enter ‘long’ when we notice a bullish crossover in Stochastic and an oversold circumstance of RSI (below 40). This means that the price might be putting up a ‘low’ that will result in a reversal. Similarly, we will go ‘short’ in the currency pair when we notice a bearish crossover in Stochastic along with an overbought condition of RSI (above 60).

The below image shows an example where the above step is being accomplished.

Step 3: In this step, we shall determine the Stop-Loss and Take-Profit for the trade where both these levels are derived mechanically. We place the stop-loss just below the ‘swing low’ from where the reversal took place. It will be above the recent ‘swing high’ in a ‘short’ trade. When speaking of the take-profit level, there is no fixed point for it. We take our profits when Stochastic reaches the opposite overbought/oversold level. At this point, we can either exit the trade, scale-out, or use a trailing stop. This can help in increasing the risk-to-reward (RR).

In our case, the risk-to-reward (RR) ratio of the trade was 1.5, which is above average.

Strategy Roundup

The RSI+Stochastic+SMA strategy is a reliable trend trading system that accurately pinpoints the bottom of a channel in a trend. More importantly, the strategy can provide the best-with-trend entry points that are necessary to increase the probability of winning. Since we are applying this strategy on a higher time frame, it will limit the effects of whipsaws that are encountered more often these days.

Categories
Forex Fundamental Analysis

Do You Know That ‘IP Addresses’ of A Nation Is Also Considered A Macro Economic Indicator?

Introduction

Introduction

Introduction

The advent of the Internet and the rapid growth of technology over the years has dramatically changed the way we define development and living standards. The number of literate people nowadays do own an electronic gadget with access to the Internet. It was not the case long before, but now access to the Internet is seen as a growth measure for countries. Understanding the IP addresses count as a means to assess how developed a nation is fascinating to acknowledge and look back on how the Internet changed the world.

What is an IP Address?

Each electronic gadget with internet access has a unique identifier called its IP address. An analogy would be like the “from” address in a post letter. Successful transfer of to-and-fro of data from mailer to recipient is possible when “from” and “to” addresses are clear. The unique address of your computer machine is used to relay data across a network in either direction.

The majority of the networks today use TCP/IP (Transmission Control Protocol/Internet Protocol) as a means to communicate with other machines over a network. The unique identifier for a computer is known as its IP address.

There are two standards for IP address: IPv4 and IPv6 (v stands for version). All computers have the IPv4 address, and it is the prior version consisting of (24 =32 bit binary digits). At the same time, it will soon exhaust all possible combinations as more people start accessing the Internet. A sample IP address would look like “138.23.45.23” this. The IPv6 (26 = 128-bit binary digits) is the later implementation that came into the picture when we realized the limitation of IPv4 as the Internet was not an immediate trendsetter during its initial launch. The IPv6 will have six numbers as part of the address and would look something like “12.158.23.61.3.23” this.

How can the IP Addresses numbers be used for analysis?

Ten-twenty years ago, this article would be invalid as the Internet’s popularity grew exponentially until today to become an indispensable part of most economies. The Internet is now the primary source of information and communication. In today’s world countries, where the majority of people do not have access to the Internet are seen as third-world countries. It is a meaningful inference, though. Countries that have high literacy rates are bound to be aware of the Internet, computers, and similar electronic gadgets. People are rapidly incorporating technology all across the world and, through the Internet, are more connected than ever before.

Even if we look at the statistics and see the countries with one of the highest number of IP addresses are generally the most developed nations. Likewise, countries with the least number of IP addresses are generally underdeveloped nations. As more people are educated, have enough money to own a computer or electronic gadget, and have access to the Internet are likely to have a better living standard than those who do not.

One likely drawback of this type of inference would be that the IP address count is also a function of the population. Countries like India or China that have a large population count would easily surpass those who have a relatively small area of land and population. In that case, a percentage of the total population could be used to compare how many people have access to the Internet. In this digital age, the Internet is a powerful tool to incorporate new technologies, take advantage of access to external resources, and rapidly grow.

Businesses that do not have a “.com” are typically seen as not an established brand themselves. A digital presence of a business is almost mandatory as it has become one of the primary sources through which people know about the company. People, businesses, corporations, and governments are all accessible to us via the Internet. Hence, IP addresses count can give us more insight into how developed a country is than we think.

For instance, Bangalore, a city in India, is nowadays referred to as the Indian Silicon Valley due to a massive number of IT and Software companies operating as a primary business center there. With India incorporating electronic gadgets and the Internet (3G, 4G, and now 5G soon) boosted the economy, providing rapid growth and for consecutive years had one of the highest GDP growth rates globally. In this sense, the IP address count trend can be used to forecast growth trends in other developing countries.

Internet is a gold mine, companies like Facebook, Google have a net worth in billions, and the traditional definitions of large businesses do not apply to internet giants. Making proper use of the Internet and the available resources can potentially help in earning huge revenues. Even currency or stock trading are all done online for which we need internet access. Even this very article you are reading requires an internet connection and a computer (or a mobile) to begin-with.

Impact on Currency

The IP address count of countries serves as a general measure of prosperity. The relative growth of countries by the count and percentage share can be used to understand how open and adaptive countries are to the latest technologies. The countries with increasing IP addresses are likely to undergo a transformation and achieve high economic growth. We can forecast long-term trends through these statistics due to which it is a low-impact leading economic indicator as currency markets focus on current economic trends.

Economic Reports

The global count of IP addresses across countries is available through an internet company known as Akamai. However, the quarterly consolidated and graph plots of these statistics of most countries are available on Trading Economics.

That’s everything about IP Address Forex fundamental driver. It is obvious that there won’t be any impact on the price charts after the news release of this economic indicator. Cheers!

Categories
Forex Market Analysis

Daily F.X. Analysis, September 22 – Top Trade Setups In Forex – Fed Chair Powell Testifies!

The economic calendar is again busy with Federal Reserve events such as today, the Fed Chair Powell Testifies. Jerome Powell is expected to testify on the CARES Act before the House Financial Services Committee in Washington DC. Besides this, the eyes will be on the Existing Home Sales from the United States. Overall, the market is likely to exhibit corrections today.

The economic calendar is again busy with Federal Reserve events such as today, the Fed Chair Powell Testifies. Jerome Powell is expected to testify on the CARES Act before the House Financial Services Committee in Washington DC. Besides this, the eyes will be on the Existing Home Sales from the United States. Overall, the market is likely to exhibit corrections today.

The economic calendar is again busy with Federal Reserve events such as today, the Fed Chair Powell Testifies. Jerome Powell is expected to testify on the CARES Act before the House Financial Services Committee in Washington DC. Besides this, the eyes will be on the Existing Home Sales from the United States. Overall, the market is likely to exhibit corrections today.

Economic Events to Watch Today  

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.7713 after placing a high of 1.18715 and a low of 1.17315. Overall the movement of the EUR/USD pair remained bearish throughout the day. The EUR/USD pair slumped on Monday amid the reclaimed safe-haven status by the U.S. dollar and the re-imposed lockdown measures to curb the spread on the virus in Europe.

The U.S. Dollar Index was up by 0.8% to 93.69 level on Monday, its highest level since August 13. This supported the greenback on its way to reclaiming its safe-haven status and pulled the EUR/USD pair on the downside.

According to the European health minister, the second wave of coronavirus in France, Austria, and the Netherlands could spike and affect the European countries and hold threats that Germany could also see infection spikes. 

The U.K. is also reporting new coronavirus cases and the Britain Chief Scientific adviser, Patrick Vallance, said that there could be 50,000 new infections every day by mid-October if the virus continues at its current rate. The rising number of coronavirus cases from Europe weighed on prices of EUR/USD pair on Monday.

Furthermore, the European Central Bank President Christine Lagarde said that Europe’s economic rebound was uncertain and uneven, and it required a careful assessment of incoming data, including the evolution of the coronavirus pandemic. On Monday, Lagarde said that the recovery strength was dependent on the future evolution of the pandemic and containment policies’ success. These remarks came in as the economists expect the ECB to expand its emergency 1.35T euros bond-buying program this year to revive inflation.

Germany’s Bundesbank also said that it expected the recovery in Europe’s largest economy to continue at a slower pace during the rest of the year. These concerning comments raised caution and stressed the local currency that ended up weighing on EUR/USD pair prices on Monday.

Meanwhile, the risk sentiment further deteriorated after the US-China tensions continue to expand along with the delayed U.S. stimulus measure that raised the safe-haven appeal. The U.S. dollar regained its safe-haven status and was up by 0.8% on Monday. This strong U.S. dollar added further pressure on EUR/USD prices.

Daily Technical Levels

Support Resistance

1.1709     1.1851

1.1649     1.1933

1.1568     1.1993

Pivot Point: 1.1791

EUR/USD– Trading Tip

The stronger U.S. dollar has also driven sharp selling in the EUR/USD pair as it trades at 1.1768 level today. The pair gains support over a double bottom pattern of 1.1736, and a bullish crossover of 1.1773 level may extend the buying trend until 1.1797 level. Bullish bias can remain strong today as most of the traders may do profit-taking in the EUR/USD pair. Let’s stay bullish over the 1.1728 level and bearish below the same level today.

GBP/USD – Daily Analysis

Today in the Asian trading hours, the GBP/USD pair was closed at 1.28156 after placing a high of 1.29664 and a low of 1.27751. Overall the movement of the GBP/USD pair remained bearish throughout the day. The GBP/USD pair extended its previous day’s losses on Monday and fell to its 5-days lowest level amid the broad-based U.S. dollar strength and rising number of coronavirus cases in the U.K., along with Brexit worries.

The rising signals drove the downward momentum in the Pound to U.S. dollar exchange rate that the U.K. government could send Britain into another lockdown. The rising concerns over Britain’s economy and the stalled Brexit process further weighed on the Sterling that dragged the GBP/USD prices on Monday.

The top science adviser of the U.K., Sir Patrick Vallance, said on Monday that U.K.’s coronavirus numbers could reach new 50,000 cases per day by mid-October. His warning was based on current trends that showed that the pandemic was doubling every seven days.

Valance said that 50,000 figure was a warning and not a prediction. In response to his warning, the fears that the U.K.’s economy could see another round of lockdown measures to control the spread of coronavirus raised and weighed on local currency. The weak British Pound added further pressure on the declining GBP/USD prices on Monday.

On the Brexit front, the former Prime Minister of the UK, Theresa May, said that she could not support the government’s plan to override parts of its Brexit agreement with the European Union. She said that moving ahead with this law would break international law and damage the United Kingdom’s trust. On Tuesday, the internal market bill will be voted on in the Commons as it had already passed the first hurdle last week. Ministers have said that the bill contains vital safeguards to protect Northern Ireland and the rest of the U.K. 

In simple terms, the bill is designed to enable goods and services to flow freely across England, Scotland, Wales, and Northern Ireland after Brexit on January 1 when U.L. will leave the E.U.’s single market customs union. However, this bill gives the government the power to change the aspects of the E.U. withdrawal agreement that was signed between both nations earlier this year. Theresa May has spoken against this bill, and the markets have started selling British Pound that ultimately led to a declining GBP/USD pair.

On the data front, the Rightmove Housing Price Index in September rose to 0.2% against the previous -0.2% and supported GBP. On the other hand, the greenback was strong across the board as it regained its safe-haven status amid the increasing concerns over the U.S. stimulus measure. The strength of the U.S. dollar added further pressure on GBP/USD pair on Monday.

 Daily Technical Levels

Support Resistance

1.2737     1.2930

1.2659     1.3045

1.2544     1.3123

Pivot point: 1.2852

GBP/USD– Trading Tip

The GBP/USD traded sharply bearish at 1.2784 support level, having violated the upward channel on the hourly chart. The triple bottom level of 1.2780 is likely to keep the GBP/USD pair supported, and violation of this may lead the Cable towards 1.2727 level. On the higher side, the GBP/USD may drive upward movement until the 1.2840 level. The 50 periods EMA are likely to extend selling until 1.2727 level. The MACD is currently moving into the bullish zone; however, it can be merely for correction. Let’s consider taking a sell trade below 1.2780 level today. 

 

USD/JPY – Daily Analysis

The USD/JPY currency pair failed to extend its early-day recovery moves and dropped to a 104.47 level while representing 0.11% losses on the day. However, the currency pair losing streak could be attributed to the downbeat market sentiment, which tends to underpin the safe-haven Japanese yen and contributed to the currency pair declines. Hence, the market trading sentiment was being pressured by the negative comments from the Federal Reserve members. 

Apart from this, the recent resurgence in the pandemic, mainly in Europe and the U.K., also weighing on the market risk tone. Across the pond, the broad-based U.S. dollar weakness, triggered by the multiple factors, could also be considered as a key factor that dragged the currency pair lower. Currently, the USD/JPY currency pair is currently trading at 104.53 and consolidating in the range between 104.47 – 104.75.

However, the market risk tone extended its previous 5-consecutive day selling bias as fears of the coronavirus (COVID-19) resurgence disturbed the global markets. In the meantime, the Federal Reserve members’ downbeat comments also exerted pressure on the global traders. It is worth mentioning that the Fed Chair Jerome Powell said that the economic recovery track remains “highly uncertainty.” Moreover, the Federal Reserve Bank of St. Louis President James Bullard, also delivered a dovish tone while stating that the Fed will be much less pre-emptive about increasing rates.

On the flip side, the renewed tussle between the U.S. and China and Trump’s latest warnings to the firms helping Iran build arms also exerted downside pressure on the market risk-tone. The tension further boosted after the U.S. Secretary of State Mike Pompeo took help from France, Germany, and the U.K. to reject China’s South China Sea claims at the United Nations (U.N.). This, in turn, underpinned the safe-haven Japanese yen and dragged the currency pair lower.

At the coronavirus front, the recent hike in the virus cases, mainly in Europe and the U.K., probes the buyers. As per the World Health Organization’s (WHO) regional director Hans Kluge, Europe reported 300,000 new infections, the most significant weekly rise ever, including the first spike in spring. Meanwhile, the U.K. is also preparing to slap new restrictions, which keeps the market trading ton sluggish and contributed to the currency pair losses.

Across the ocean, the decision-makers from the European Central Bank (ECB) and the Reserve Bank of Australia (RBA) also cited their worries in the latest appearances, which also probe the bulls. This was evident from a bearish sentiment around the equity markets, which underpinned the safe-haven Japanese yen and contributed to the USD/JPY pair’s downfall.

Despite the risk-off market sentiment, the broad-based U.S. dollar failed to gain any positive traction and edged lower on the day amid worries over the U.S. Congress’ stimulus impasse. Furthermore, the concerns about the ever-increasing number of coronavirus cases faded the optimism over the V-shape recovery, which also kept the U.S. dollar under pressure. However, the losses in the U.S. dollar kept the USD/JPY currency pair lower. Whereas, the U.S. Dollar Index that tracks the greenback against a bucket of other currencies fell to 93.623.

Looking forward, the traders will keep their eyes on the continuous drama surrounding the US-China relations and updates about the U.S. stimulus package. Given the holiday in Japan, due to the Autumnal Equinox Day, coupled with an absence of major data/events, the USD moves and coronavirus headline will be key to watch.

Daily Technical Levels

Support Resistance

104.44     105.10

104.15     105.47

103.78     105.76

Pivot point: 104.81

USD/JPY – Trading Tips

Despite sharp movement in the other currency pairs, the USD/JPY continues to follow the same technical setup. On the 4 hour chart, the downward channel is anticipated to drive selling sentiment in the USD/JPY pair as it provides resistance at the 104.800 level. On the downside, the support lingers at 104.100 level, and a bearish breakout can lead USD/JPY price further lower towards 103.700 level. The eyes will remain on the Fed Chair Powell Testifies as it may drive further market trends. 

Good luck! 

 

Categories
Forex Basic Strategies

Generating Reliable Trading Signals Using ‘The Power of Two’ Forex Strategy

Introduction 

Introduction 

Introduction 

In the previous article, we discussed a strategy that was based on three indicators, namely the RSI, Stochastic, and SMA. It was not only a bit complex in nature but involved many rules that had to be fulfilled before we could make a ‘trade.’ Also, the probability of occurrence of the signal was lower as it involved many indicators.

In today’s article, we will discuss a setup that is observed more often in the market and has a higher probability of success. Again, the strategy may not be suitable for day traders as it used a longer time frame for analysis. In this strategy, we will be examining the 4-hour time frame chart of the currency pairs. This is simpler than the previous strategy.

Time Frame

As mentioned in the previous paragraph, the strategy yields the best results when applied on the 4-hour time frame. However, the ‘daily’ is also a suitable time frame for the strategy.

Indicators

We will be using the Relative Strength Index (RSI), with a 14-bar period. The overbought and oversold levels stand at 70 and 30, respectively. We also apply the Bollinger Band indicator with its default settings.

Currency Pairs

This is the best part of the strategy, where we can apply on all currency pairs listed on the broker’s platform, including few minor and exotic pairs.

Strategy Concept

The strategy is based on a simple concept that the RSI is a very powerful indicator of a trend. It can accurately identify the highs and lows that will give rise to a new trend. This is combined with the Bollinger Band indicator to generate exact entry points for the strategy.

The trend becomes especially reliable when the reading of RSI makes a swift jump from an oversold level to a median level (above 50) and vice-versa. The Bollinger Band indicates the formation of a ‘low,’ after which we can execute a ‘long’ trade. Similarly, when Bollinger Band pin-points a ‘high,’ we execute ‘short’ trades in the market. The exact rules of ‘entry’ will be discussed in the next section of the article.

The risk-to-reward (RR) of the trades done using this strategy is highly appealing. This is because it employs a small stop-loss with a much higher take-profit. If the market is in a strong trending state, traders can ride their profits as long as they see signs of reversal.

Trade Setup 

In order to explain the strategy, we have considered the 4-hour chart of GBP/JPY, where we will be illustrating a ‘long’ trade. Here are the steps to execute the strategy.

Step 1

The first step is to open the 4-hour timeframe of the desired currency pair and plot Bollinger Band and RSI indicator on it. Just from the appearance and basic knowledge of trends, identify the trend of the market. This means if the market is making higher highs and higher lows, the market is in an uptrend. And if we see lower lows and lower highs on the chart, it is a downtrend. We can also take the assistance of a simple moving average (SMA) to get a clear picture of the trend.

In the case of GBP/JPY, it is evident from the below image that the market is in a strong downtrend.

 

Step 2

Next, we need to wait for the price to go above the highest point visible on the chart, where we will be analyzing signs of a reversal to the downside. Similarly, we need to wait for the price to go below the lowest point visible on the chart, where we will be analyzing the signs of a reversal to the upside. For example, suppose the price is near its lowest point visible on the chart. In that case, we say that market may be reversing to the upside if a bearish candle closes below the lower band of the Bollinger Band, and the immediate next candle is a bullish candle that closes above the lower band. This has to be accompanied by the RSI moving into the oversold zone (below 30).

In case of a reversal of an uptrend, a bullish candle should close above the upper band of the Bollinger band with a bearish candle that closes below the upper band. At this price, the RSI should indicate an overbought situation of the market (above 70).

Step 3

This is the easiest step of the strategy where we have to only observe the movement of price following the ‘two-candle’ pattern discussed in the previous step. Essentially, we need to see that the price starts moving in the direction of the reversal, i.e., above or below the median line of Bollinger Band. This should again be accompanied by a rising RSI for ‘long’ entry and falling RSI for a ‘short’ entry.

In the below image, we can see how the rise in price above the median line goes with a sudden rise in RSI.

Step 4

In this step, we determine the stop-loss and take-profit for the trade done using this strategy. The stop-loss is placed just below the ‘low’ or above the ‘high’ from where the market reverses. However, there is no fixed take-profit level here. We exit a ‘long’ trade once RSI goes below 50 and start moving lower. While a ‘short’ trade is exited as soon as RSI goes past the level of 50.

As we can see in the image below, the market reversed fully, and the trade turned to be extremely profitable.

Strategy Roundup

When Bollinger Band and RSI are combined to generate trade signals, we can accurately identify the market top and bottom where we take advantage of the reversal. But this can only be done efficiently after practicing well. The above strategy is suitable for swing and part-time traders.

Categories
Forex Fundamental Analysis

The Impact Of ‘Total Vehicle Sales’ Data On The Forex Market

Introduction

Introduction

Introduction

Vehicle sales figures offer us much insight into the consumer demand and overall health of the economy. Changes in vehicle sales figures could also be used for predicting the near-future direction of economic growth. Understanding how vehicle sales figures can be used to infer upcoming trends in crucial economic indicators could always give us the advantage of being ahead of the market trend.

What is Total Vehicle Sales?

Total Vehicle Sales represent the overall number of domestically produced vehicles that have been sold. The reports could be monthly, quarterly, or even yearly, depending on the reporting vehicle manufacturing companies. In other words, Total Vehicle Sales is the annualized new vehicles sold count for a given month.

The automotive industry represents a vital component of the United States economy. It makes up about 3% of the total GDP and remains the largest industry in the manufacturing sector. It is responsible for employing lakhs of people in the United States and transacts in billions each year.

How can the Total Vehicle Sales numbers be used for analysis?

At first, the importance of the vehicle sales figure may not be apparent, but vehicle sales serve useful for economic analysis. A vehicle is a significant purchase for people. People buy vehicles when they are confident about their ability to make payments. It is possible only when they have considerable disposable income or procure loans at lower interest rates.

When people’s disposable income is considerable, it means the people are affluent financially and reflects the good health of the economy. On the other hand, when loans are available to more people at lower interest rates, it means there is sufficient monetary stimulus from Central Banks to promote economic growth and money is easy to come by. Such inflationary pressures stimulate economic growth and indicate that the economy is likely to grow steadily.

The increase in vehicle sales figures reinforces the positive affirmations forecasted by other economic indicators like consumer spending or interest rates. As consumer spending comprises more than two-thirds of the GDP, an increase in vehicle sales likely indicates a healthy two or three quarters that are going to continue in the economy.

Equity markets respond and perform exceptionally well around the Total Vehicle Sales figures, as the increasing figures in sales imply increasing profits for the related companies. The increase in profits due to sales is doubled down by the stock prices soaring higher, and vice-versa also holds. Hence, the vehicle sales figures are given much-deserved attention every month by the equity traders and the media. To some degree, currency markets feed off from the equity markets, but the effect is noticeable only when the changes are significant.

Vehicle purchases are considered to be discretionary spending, and when people are paying for such items, it indicates the economy is flourishing. The relation between vehicle sales and economic growth also becomes more apparent during recessions, where vehicle sales drop significantly. During the Great recession of 2007-2009, vehicle sales fell by 3 million.

With rapid development in the automobile industry, more durable vehicles that last longer, unlike older models, are coming into the market.  It means people need not buy new vehicles as frequently as before. Hence, recent trends should incorporate this factor also into the statistics.

Alongside this, there is a shift in the industry due to disruptive brands like Tesla introducing electric cars as a contrast to combustion engines. It affects the industry and the dependent oil and gasoline industries as well. Self-driving and Artificial Intelligence equipped automobiles are catching up with the people, and this could soon invalidate many traditional jobs that came as a result of the regular gasoline cars and trucks.

The current COVID-19 pandemic already cost the economies of most countries much than they could handle, and many industries suffered heavy losses. The silver lining for the automotive industry is coming from the fact that as people resume their regular life by going back to their work require a safe commute. Things are looking brighter for the automobile industry as more people are considering the safety assured through private commute over the risk involved in the public transportation system.

Impact on Currency

Vehicle Sales acts as a coincident indicator that reflects the health of the economy at the current state. The currency markets are focused more on the leading indicators before the trends pick up. Total vehicle sales prove to be more useful for the equity markets for trading on the automobile and other related industries, but currencies require more than just vehicle sales.

Hence, overall Total Vehicle Sales are a low-impact indicator for the FOREX market and are useful in double-checking or reaffirming our leading indicator predictions. Economists and business analysts will use total vehicle sales data to report current economic health, but currency traders can overlook this indicator for other macroeconomic leading indicators.

Economic Reports

The Bureau of Economic Analysis (BEA) provides monthly reports on total vehicle sales on its official website. Apart from this, the St. Louis FRED website also details the same figures historically in a more comprehensive and visually depictive way.

Sources of Total Vehicle Sales

We can obtain Total Vehicle Sales figures for the United States from BEA.

For analysis purposes, the St. Louis FRED website offers better resources and ease of access for Vehicle Sales figures.

We can obtain Global Total Vehicle Sales figures for the majority of the countries from Trading Economics.

How Total Vehicle Sales Data Release Affects The Price Charts

In the US economy, total vehicle sales data is an important leading indicator of consumer spending and consumer confidence. It measures the annualized number of new vehicles sold domestically in the reported month. The most recent data related to this was released on August 3, 2020, at 7.00 PM ET. The total vehicle sales is a combination of all car sales and all truck sales data and can be accessed from Investing.com here. The historical data of total vehicle sales can be accessed from Trading Economics here.

The screengrab below is of the monthly total vehicle sales from Investing.com.

As can be seen, the total vehicle sales data is expected to have a low impact on the USD upon its release.

The screengrab below shows the most recent changes in the monthly total vehicle sales data in the US. In July 2020, the monthly total vehicle sales were 14.5 million compared to 13.1 million in June 2020. This increase is expected to be positive for the USD.

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

EUR/USD: Before Monthly Total Vehicle Sales Release on August 
2020, Just Before 7.30 PM ET

From the above 15-min EUR/USD chart, the pair can be seen to be trading on a neutral trend before the release of the total vehicle sales data. This trend represents a period of relative market inactivity with candles forming near a flattening 20-period Moving Average.

EUR/USD: After the Monthly Total Vehicle Sales Release on 
August 2020, 7.30 PM ET

After the data release, this Forex pair formed a 15-minute bearish candle, indicating that the USD became stronger as expected due to the increase in total vehicle sales. The data release was, however, not significant enough to cause any market volatility as the pair continued to trade in a neutral trend with the 20-period Moving Average flattening.

GBP/USD: Before Monthly Total Vehicle Sales Release on August 
2020, Just Before 7.30 PM ET

Similar to the trend that we have observed with the EUR/USD pair, the GBP/USD was trading in a neutral pattern before the data release with candles forming around a flattening 20-period MA.

GBP/USD: After the Monthly Total Vehicle Sales Release on 
August 2020, 7.30 PM ET

After the news announcement, this pair formed a 15-min bearish candle but continued trading in the neutral trend observed before the data release.

AUD/USD: Before Monthly Total Vehicle Sales Release on August
2020, Just Before 7.30 PM ET

AUD/USD: After the Monthly Total Vehicle Sales Release on 
August 2020, 7.30 PM ET

As observed with the EUR/USD and the GBP/USD pairs, the AUD/USD traded within a subdued neutral trend before the data release. The pair formed a 15-minute bearish candle after the news release, but unlike the other pairs, it continued trading in a weak uptrend.

Although it plays a vital role as an indicator within the economy, it is evident that the total vehicle sales indicator does not cause any significant impact on the price action in the forex markets.

Categories
Forex Basic Strategies

Learning The ‘Intraday Strategy’ To Trade The Forex Market

Introduction

Introduction

Introduction

In today’s article, we present to you a fairly simple but reliable trading strategy that can be used by all types of traders, irrespective of their style. It is believed that when markets are strongly trending in one direction, it gets impossible to catch the stalling point. It is only difficult to catch the ‘top’ or ‘bottom’ of the market, but it also carries a huge amount of risk. We are going to discuss a trading strategy that is contrary to this common belief. We shall try to catch the highest or the lowest point in the market by using some of the most powerful technical indicators and techniques.

Time Frame

The strategy can be used on the 5 minutes, 15 minutes, and 1-hour time frame chart. An intraday trader would apply the strategy on the 5 or 15 minutes chart, whereas a positional trader would open the 1-hour chart.

Indicators

We use the following indicators in the strategy:

  • 5-period Exponential Moving Average (EMA)
  • 10-period Exponential Moving Average (EMA)
  • 14-period Relative Strength Index (RSI)
  • Slow Stochastic Oscillator
  • K and D period – 3

Currency Pairs

This strategy can only be applied on major currency pairs of the forex market. Some of the preferred pairs include EUR/USD, GBP/JPY, GBP/USD, USD/CAD, USD/JPY, EUR/GBP, etc.

Strategy Concept

The rules of the strategy are quite simple and straightforward. We enter the market for a ‘long’ when the 5-period EMA crosses above the 10-period EMA after a prolonged downtrend. But this isn’t enough. Along with this, the RSI should be above the level of 50, and Stochastic slow and fast lines should move in the same direction (upward). Here we need to make sure that the Stochastic does not enter the overbought zone. Similarly, if the 5-period EMA crosses below the 10-period EMA after a prolonged uptrend, we prepare to enter ‘short.’ In this case, the RSI should be below the level of 50, and Stochastic lines should be moving downwards.

We exit the trade when 5-period EMA crosses beyond the 10-period EMA, where this is confirmed by the close of a candle beyond the latter. Another way to exit the trade is when the RSI drops below the 50 level. The several conditions which must be fulfilled in order to execute a trade make the strategy a good filter for trade entries. However, the two EMAs have a drawback as they can get choppy and generate false signals. We can avoid this by carefully monitoring the movement of EMA lines along with the other indicators. When the strategy is executed by following every rule of the strategy, wrong ‘trades’ can be eliminated to a great extent.

Trade Setup

In order to explain the strategy, we have considered the 5 minutes chart of EUR/USD, where we will be illustrating a ‘long’ trade. Here are the steps to execute the strategy.

Step 1: The first step is to identify the trend of the market and plot all the indicators on the chart, as mentioned in the above section. An easier way to identify the trend is by looking at the price concerning 5 and 10 period EMA. If the 5-period EMA is above the 10-period EMA, we say that the market is an uptrend. Whereas, if the 5-period EMA is below the 10-period EMA, the market is said to be in a downtrend.

In the example considered, it clear from the below image that the market is in an uptrend, and at the end, the trend seems to be weakening.

Step 2: This is the most critical step where we combine all the rules of the strategy. Once the trend has been identified, we should wait for a crossover of the 5-period EMA below the 10-period EMA, during the reversal of an uptrend. We say that the market has made a ‘top’ when both RSI and Stochastic lines start moving lower after the crossover. We should make sure that RSI does not move into the oversold zone. In order to catch the reversal of a downtrend, we should see a crossover of the 5-period above the 10-period EMA. At the crossover, the RSI and Stochastic lines should head upwards but so much that they move into the overbought zone.

The below image shows the crossover of both the EMAs that is accompanied by a ‘moving down’ RSI and Stochastic.

Step 3: Let us discuss the ‘entry’ of the strategy. We enter the market after a confirmation candle in the direction of the reversal. That means we enter ‘short’ after the close a bearish candle below both the EMAs. Similarly, we go ‘long’ after the appearance of a bullish candle, where the price closes above both the EMAs.

We can see in the below image that we are entering the market for a ‘sell’ right after at the close of the price below the 10-period EMA.

Step 4: In this step, we determine the stop-loss and take-profit for the strategy. The stop-loss is pretty straight forward where we place it just above the ‘highest’ or ‘lowest’ point. We take our profit and exit the position based on the signal provided by RSI. There two ways to exit the strategy. The first signal provided by the market to exit is when the crossover of the EMAs takes place. The second way to exit is when the RSI starts moving higher and crosses above the level of 50.

In the case of EUR/USD, as shown below, we take our profits when both the indicators indicated a reversal of the trend.

Final Words

The strategy actually generates various entry signals, and each of them can at least result in a profit for scalpers, by running very tight stops and keeping risk low. Thus, the strategy makes a reliable reversal trading system which relatively accurately pinpoints reversal points at the end of a trend and, more importantly, the ability to provide high risk-to-reward (RR) trades.

Categories
Beginners Forex Education Forex Basics

Economic Calendars and Forex Trading

An economic calendar keeps track of important news events and announcements that could affect the movement of a specific asset or the market as a whole. Economic calendars serve several different purposes and are especially useful considering that a lot of financial information can be released in a very small time span. If you’re looking […]

An economic calendar keeps track of important news events and announcements that could affect the movement of a specific asset or the market as a whole. Economic calendars serve several different purposes and are especially useful considering that a lot of financial information can be released in a very small time span. If you’re looking […]

An economic calendar keeps track of important news events and announcements that could affect the movement of a specific asset or the market as a whole. Economic calendars serve several different purposes and are especially useful considering that a lot of financial information can be released in a very small time span. If you’re looking to trade the news, then this is a must-have tool, although every forex trader needs to use one. This is what you need to look for on an economic calendar:

  • Monetary policies related to interest rates: this is related to changes in current interest rates imposed by national banks or when national banks or other accredited institutions make predictions about where interest rates will go. 
  • Monetary policies related to inflation: inflation is closely related to interest rates because national banks will adjust their interest rates to lower inflation.
  • GDP: this is the ratio of imports vs exports in a country. Having more imports versus exports generally signifies that a government is in debt, which is bad for investors. 
  • Employment rates: this is one of the main indicators of whether an economy is thriving. Investors typically steer clear of countries with high unemployment rates.

Investors need to be aware of the above because it gives them an idea of how the economy in a country is doing. News releases, especially related to finances or government policies, cause investors to make decisions. Some of these items are announced monthly, while others are released quarterly. 

In addition to keeping track of economic impacts, economic calendars also serve several other important purposes for forex traders:

  • They can tell you when to enter or exit the market: many traders enter or exit the market based on events that are indicated by their economic calendars. Trading in the direction of news events is one of the most popular trading strategies. Do keep in mind that unexpected events may take place, so it is good to have risk-management precautions or to look at other data.
  • They can help one to avoid an extremely volatile market: some volatility is good because it presents a number of opportunities to buy and sell, but too much volatility is dangerous for traders. It is more difficult to analyze the market when it is more volatile. Your economic calendar will let you know if there is going to be bad news so that you can avoid trading in these conditions altogether. 
  • They can help you get ahead: many beginners ignore economic calendars because they don’t understand how they work or how efficient they can be. Using one can help you get a better start than those traders, and it can also be helpful to those keeping a trading journal. You’ll be making better, more informed decisions and you’ll have more information to log. 

Economic calendars keep track of a lot of information. This is one of the main reasons that many beginners don’t bother with them. Many of these calendars will allow you to filter events by importance so that they can be used more efficiently. Events are labeled by colors to indicate the expected impact they will have on the market. Yellow indicates a low-impact event, orange indicates a medium-impact event, and red signifies events that should grab your attention. As you become more comfortable using an economic calendar, you’ll become more aware of what affects the market significantly and what doesn’t. 

As we conclude this article, we will remind our readers that economic calendars are must-have tools for any trader. Whether you’re just getting started or you’ve been trading without one, you need to learn how to use them to make better trading decisions. If you’re wondering where to find one, you should know that many brokers offer economic calendars on their websites for free. Try checking the education or tools section on your broker’s website. If you don’t have a broker yet or if your broker doesn’t offer them, then you can do a quick Google search for “forex economic calendar” to find many different options online.

Categories
Forex Fundamental Analysis

Understanding What ‘GDP Deflator’ Is & Its Relative Impact On The Forex Market

Introduction

Introduction

Introduction

Investors and traders are continuously trying to determine which country is growing relatively faster to make currency investment decisions. Assessing growth for capitalist economies that use inflation as fuel can be tricky to understand. The differentiation between nominal and real growth, effects of inflation, and the role of a deflator are necessary to understand to arrive at correct conclusions from statistics.

What is GDP Deflator?

Most of the economies that we have today are capitalist economies and use inflation as the primary fuel for growth. Currency traders want to go “long” on currencies of countries that are experiencing relatively higher growth than other countries. Hence, a correct assessment of growth is crucial.

The broadest and most widely used measure of the growth of economies is the Gross Domestic Product (GDP). The GDP is the monetary measure of all goods and services produced within a country for a given period (quarter or year). Although, before GDP, Gross National Product (GNP) was widely used to compare growth amongst economies. GNP measures growth beyond borders and has certain limitations in its usage as a growth measure.

GDP Deflator

It is also known as GDP Price Deflator or Implicit price deflator. It measures the price changes in all goods and services produced within an economy. It measures inflation at the macroeconomic (or national) level. As prices of commodities increase over time, the GDP values are “inflated” over time.

For instance, a country that has a GDP of 10 million dollars for the year 2019 and 12 million dollars for the year 2020 would appear to have grown 20%. If the inflation rate for the duration was 10%, meaning the prices rose by 10% for all the commodities, then 1 million dollars out of 12 million dollars came purely through increased prices and not increased production. Hence, in 2020, the real GDP was only 11 million dollars. Therefore, real growth was only 10% instead of 20%.

The Nominal and Real GDP figures are vital to understand and measure the level of inflation by calculating the GDP deflator. The following formula gives the GDP deflator:

Here, the nominal GDP is the total dollar value of all commodities produced in an economy without accounting for inflation. It is a direct monetary measure of goods and services. Real GDP is the inflation-adjusted value of GDP. It strips away the effect of inflation from Nominal GDP to show real growth.

Deflators like the Real GDP also have a base year against which all other years’ figures are compared. For the United States, 2012 is the base year, meaning GDP deflator value for the year 2012 would be 100 (as nominal and real GDP would be equal due to zero inflation). Subsequent years will have higher or lower values accordingly to indicate inflation and deflation, respectively. The base year varies from country to country.

How can the GDP Deflator numbers be used for analysis?

It is essential to understand how inflation masks the real growth and leads us to make the wrong conclusions. As seen in the above example, countries may show higher and higher GDP figures, but in reality, they may have only achieved little or no growth at all. When comparing growth over several years, the GDP deflator is key to the analysis to strip away the effects of inflation. By employing the equation above, if we get a deflator score of say 110, it would indicate there is a 10 percent inflation during the observed period.

The Consumer Price Index (CPI) is the most popular and widely used indicator to measure inflation. The GDP deflator has some advantages over the CPI. As the CPI measures inflation for a fixed basket of goods and services, which does not change frequently, the GDP is a macroeconomic aggregate measure of inflation. The GDP deflator factors in any change in economic output and investment patterns. Any new change in the goods produced or change in the consumption patterns of people is accounted in by the GDP deflator, unlike CPI. The CPI basket is static and cannot account for commodities price changes that are not in the basket, whereas the deflator is all-inclusive in this regard.

It is also necessary to know that CPI includes the most commonly used goods and services that have an impact on the economy. It updates its basket as patterns change over the years. Hence, over time the GDP deflator and the CPI have similar trends and can be used interchangeably.

Impact on Currency

The GDP deflator is a basic measure of inflation that erodes currency value. It is an inversely proportional lagging indicator. High values of the deflator are bad for the currency value and vice-versa. Since it is one of the measures of inflation, it is a low-impact lagging indicator as it is not as popular and as frequent as the CPI. It is a quarterly statistic, whose effects are already priced in through more frequent inflation measuring statistics.

Economic Reports

The Bureau of EA releases quarterly reports of the GDP price deflator alongside the quarterly GDP figures on its official website for the United States. GDP and deflators are essential macroeconomic indicators, and therefore are available on the World Bank and many other international organizations like the OECD, IMF, etc.

Sources of GDP Deflator

The BEA releases its quarterly GDP deflator statistics on its official website for the public.

The World Bank also maintains GDP and GDP deflator statistics for most countries on its official website.

Deflator figures for most countries can be easily found on the Trading Economics website.

How GDP Deflator Data Release Affects The Price Charts

In the US, the GDP deflator is released by the Bureau of Economic Analysis quarterly, about 30 days after the quarter ends. It measures the annualized change in the price of all goods and services included in gross domestic product; and is the broadest inflationary indicator. The most recent data was released on July 30, 2020, at 8.30 AM ET can be accessed at Investing.com here. An in-depth review of the GDP deflator data release can be accessed at the Bureau of Economic Analysis website.

The screengrab below is of the GDP deflator from Investing.com. On the right, a legend indicates the level of impact the fundamental indicator has on the USD.

As can be seen, GDP deflator data is expected to have a medium impact on the USD after its release.

The screenshot below shows the most recent changes in the GDP deflator in the US. The GDP deflator changed by -2.1%, worse than analysts’ expectations of a 1.1% change. This change is expected to the negative for the USD.

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

EUR/USD: Before the GDP Deflator Data Release on July 30, 
2020, Just Before 8.30 AM ET

Before the news release, the EUR/USD pair traded in a neutral pattern. This trend is evidenced by the 15-minute candles forming on an already flattened 20-period Moving Average, as shown in the above chart.

EUR/USD: After the GDP Deflator Data Release on July 30, 
2020, at 8.30 AM ET

After the data release, the pair formed a 15-minute “hammer” candle. This trend is as expected since the USD weakened against the EUR. The data release was significant enough to cause a change in the market trend. The market adopted a steady bullish stance as the pair traded in an uptrend with the 20-period Moving Average steeply rising.

GBP/USD: Before the GDP Deflator Data Release on July 30, 
2020, Just Before 8.30 AM ET

Unlike the EUR/USD pair, the GBP/USD pair was trading in a steady uptrend before the data release.

GBP/USD: After the GDP Deflator Data Release on July 30, 
2020, at 8.30 AM ET

After the data release, the pair formed a bullish 15-minute candle. It subsequently traded in a renewed uptrend with the 20-period Moving Average steeply rising similar to the EUR/USD pair.

NZD/USD: Before the GDP Deflator Data Release on July 30, 
2020, Just Before 8.30 AM ET

NZD/USD: After the GDP Deflator Data Release on July 30, 
2020, at 8.30 AM ET

The NZD/USD pair was trading in a similar neutral pattern as the EUR/USD pair before the data release. Similar to the EUR/USD and the GBP/USD pairs, the NZD/USD pair formed a 15-minute bullish candle after the data release. Subsequently, the pair adopted an uptrend with the 20-period Moving Average steadily rising.

Bottom Line

As observed in this analysis, the GDP deflator has a strong impact on the price action, enough to alter the prevailing market trend upon its release. Forex traders should avoid having any significant open positions before the GDP deflator data release to avoid being caught on the wrong side of the news release.

Categories
Forex Basics

What is Slippage in Forex Trading?

When you start trading with Forex, you’re flooded with a lot of new terms. One of those you will surely encounter is what is known as “sliding” or slippage. In short, sliding is the difference between the price you see and the price you pay. For example, you can find yourself looking at the EUR/USD […]

When you start trading with Forex, you’re flooded with a lot of new terms. One of those you will surely encounter is what is known as “sliding” or slippage. In short, sliding is the difference between the price you see and the price you pay. For example, you can find yourself looking at the EUR/USD […]

When you start trading with Forex, you’re flooded with a lot of new terms. One of those you will surely encounter is what is known as “sliding” or slippage. In short, sliding is the difference between the price you see and the price you pay. For example, you can find yourself looking at the EUR/USD pair with a selling price of 1267 by pressing the button. However, you note that it was filled in 1269. This is what would be sliding, by two pips. You might be surprised to learn that this is not necessarily harmful.

The fact that a price has slipped during a trade is not necessarily a bad thing. Unfortunately, in the past, there were several foreign exchange brokers who took liberties with their clients. This happened before Forex became much more common, and perhaps regulated in major countries. Finally, even countries like the United States were a little behind investors’ protections in foreign exchange markets, because it was a surprising explosion of interest that surprised many regulators. Beyond that, it is a non-centralized market, so it is very easy to see how difficult it was for regulators to control the whole situation.

We are moving forward today, and most Forex brokers are heavily regulated. (In fact, if you are working with an unregulated Forex broker, you should withdraw your money immediately and place it in a more reputable broker). Although it could be argued that it is very tempting to slip your customers at all times, try to perform an operation, the reality is that most accounts are not large enough for the broker to accept the risk, even if they are less honest. The fines that some of the regulators have imposed on brokers in recent years have been huge and have cleaned up the industry drastically.

Since the average retail account is about $2000 in the United States, a few cents here and there will simply be worth the millions of dollars a brokerage would face. Research shows that accounts worldwide are also roughly the same size on average. The math just doesn’t work. Most of the time, there’s a perfectly easy explanation.

I would be willing to state that more than 95% of the time I read some kind of negative online review about the slip at a brokerage firm, it has something to do with news sharing. Trading in news is a fool’s game, and while you may be very lucky occasionally, you must understand that liquidity is a major problem. What this means is that there are not as many orders. Let’s take an example, if you want to buy the Swiss franc, there must be another trader willing to sell it. When you issue a market order, you are ordering the broker to buy the Swiss franc at the best possible price. What do you think it means if the best price is three pips away? Exactly. You just bought the Swiss franc at three pips the price you’re looking at. This is totally independent with the broker, they’re just there to fulfill orders. If there is no one to sell you the Swiss franc at the amount you want, they are simply facilitating the order you gave them.

During normal operations, the slide is almost unknown, because currency markets, of course, are some of the most liquid in the world. There are some fairly thin pairs that tend to slide more than others. Let’s take another example. If you’re trading something like the USD/JPY pair, the most reasonable thing is that you don’t have volume in one of the most important pairs like the EUR/USD pair. (This is why the spread is higher in these pairs).

The solution? If you do not want to be slipped while performing your operations, you can place a limit order, tell the broker that you agree to pay this amount or more for a coin. If the markets skip their price, they’re just not full. At least you have the consolation that you haven’t paid more than you finally wanted.

Categories
Beginners Forex Education Forex Basic Strategies

What is the “Averaging Down” Strategy?

Averaging down or down-averaging is a term that describes the process of buying additional amounts of shares of an asset or financial instrument (such as Forex or commodities) at prices lower than the original purchase price. This reduces the average price paid by the investor for all of their purchased assets. Therefore, it is a […]

Averaging down or down-averaging is a term that describes the process of buying additional amounts of shares of an asset or financial instrument (such as Forex or commodities) at prices lower than the original purchase price. This reduces the average price paid by the investor for all of their purchased assets. Therefore, it is a […]

Averaging down or down-averaging is a term that describes the process of buying additional amounts of shares of an asset or financial instrument (such as Forex or commodities) at prices lower than the original purchase price. This reduces the average price paid by the investor for all of their purchased assets. Therefore, it is a strategy used to reduce the average cost in a market that has fallen in price. Is averaging down a good strategy or just another way to lose money in the market?

The answer depends on several factors. First, let’s describe how it works. You buy 10,000 shares at $100 per share, but these shares fall to $92 per share. You then buy another 1000 shares at $92 per share, which reduces his average price to $96 per share. It is true that this is a simplistic example, but we will describe the concept in more detail later.

Although it may seem to make sense, and actually sometimes works, it presents a great deal of risk. The price has to go up after the averaging is done. How many times have we acquired a stock that started to go down, invested more money after it went down, and continued to put more and more money in with the hope that the price will go up? Eventually, the point comes when we surrender and throw in the towel, shortly before the stock starts to recover. This is a very common scenario and it causes the ruin of many traders.

Description of Averaging Down Strategy

Although averaging downwards offers the appearance of a strategy, it is more a state of mind than a legitimate investment strategy. In theory, if an investor likes a stock at $35 per share, and the share price drops, but the investor still finds the stock attractive at 35, then buying more shares at a lower price offers the appearance of a discount. While there may be an unrecognized intrinsic value, buying additional shares simply to reduce the average investment cost is not a good reason to buy a share or other asset in the market as its price drops.

Averaging down allows investors to reduce their cost base in a given market position, which can work well if the market starts to rise as it allows the operator to acquire more assets at a lower price and increase its future profits. However, if the market continues to fall, capital losses will only increase further. Proponents of this technique see averaging down as a cost-effective approach to wealth accumulation; opponents see it as a recipe for disaster. In leveraged products like Forex and CFD, this practice can lead to large losses in a short time.

The strategy is often favoured by investors who have a long-term investment horizon and a counter-investment approach, that is to say, contrary to market consensus. An opposite approach refers to an investment style that is against, or contrary to, the prevailing investment trend. Here again, averaging can be a general rule: buy when there’s blood on the streets.

Interestingly, over the years, some of the world’s smartest investors, including Warren Buffett, have successfully used the averaging down strategy over the years. What also gives the illusion that this technique is an investment strategy. However, investors like Buffet can buy additional shares of a company because they feel that the shares are undervalued, not because they want to «lower the average». In addition, they have large capital resources that allow them to withstand a market downturn lasting months or years.

Is that a great strategy or not? If we average in a market that’s down and suddenly the price starts to rise strongly, then we’ll say what we did was a great strategy. However, if the market continues to fall, we must make the decision to keep averaging down or close positions to limit losses. At this point, much depends on the analysis of the market in which we are operating. If we are applying averaging down to fight price stubbornly in a market whose fundamentals clearly indicate that it will continue to fall, it is simply a gamble and a sure recipe to disaster.

On the contrary, if we have conducted a thorough analysis of the market and this study tells us that there is a likelihood that the price will start to rise, the downward averaging may make sense as long as we apply it sensibly following monetary management rules. In any case, we must always have a limit of losses as the market can be unpredictable and it is always good to have a safety net.

Stock Example

To show the difference between applying averaging down without a solid foundation and using this strategy based on more logical analysis and methodology. Let’s use it as an example of the difference between investing in a stock and investing in the company behind the stock.

If we are investing in an action, taking into account only the action of the price, we look for signs of purchase and sale based on a series of indicators. The goal is to earn money in the short and medium-term and there is no real interest in the underlying company beyond how its action might be affected by the market, news, or economic changes.

In most cases, much is unknown about the underlying company to determine whether a price drop it’s temporary or we’re talking about a big problem. The best thing to do when investing in shares under this approach (as opposed to investing in a company) is to reduce losses by no more than 7%. When stocks fall to this point, positions are closed and new opportunities are expected.

Invest In a Company

If you are buying stocks from a company (as opposed to a share), the investor has carefully researched and knows what is happening within the company and its industry. You need to know if a drop in stock price is temporary or a sign of trouble.

If you really believe in the company, averaging down can make sense if you want to increase your holdings in the company. Accumulating more shares at a lower price makes sense if you plan to hold them for an extended period.

This is not a strategy that should be used lightly. If there is a large volume of sales against the company, the investor may want to ask if they know something he does not know. These investors, who are making massive sales, are almost certainly mutual funds and institutional investors. Swimming upstream can sometimes be profitable, but it can also cause an account to be lost in a short time.

Averaging Down in Other Markets

Any market this strategy should be employed very carefully or avoided altogether if the trader does not know what it does, especially in leveraged markets like Forex or CFDs where profits and losses are magnified. In fact, this is how many traders lose their accounts. They continue to buy in heavily bearish markets in the hope that the price will rise to the extent that the losses that have accumulated are such that the inevitable ‘margin call’ arrives.

Many traders, especially beginners, have the tendency to «fight» against the market and when it starts to move against, do not bother to investigate because the market behaves in this way and simply start to open up positions contrary to the trend. In a market like Forex, where trends can be very strong, these traders end up losing big sums in a short time.

For example, a change in the interest rate policies of a major central bank such as the Fed or the BoE, are capable of shaking the market strongly and changing long-term trends. A trader who stubbornly trades against these moves and continues to add positions is only committing suicide.

Very different is when a trader adds more positions in a market whose fundamentals favor him and where the price is against him temporarily, more for technical factors than anything else. For example, it may happen that a currency pair is in bullish trend and the trader bought during a bearish correction that spread more than expected. In this case, the trader can average, to a certain extent, since he knows that the price has high chances of going back up. As we see, much depends on how the trader applies the strategy.

Who Should Apply Averaging Down?

The following table shows which types of investors can apply the averaging, and how to reduce the risk in case the market continues to fall. Here are some definitions of the main types of strategies.

Buy and Hold: It is a strategy where a person or company invests in an asset, such as an action, often for years. They are not interested in speculating on the purchased assets and their short-term movements, as they expect them to have an increase in long-term value that they can take advantage of.

Position Trading: A position trader is willing to invest in a market for months and even years until the signs of a major change in trend become evident.

Swing Trading: Swing trading operators try to take advantage of the trend movements of the market by trying to enter near the trend lows or trend highs, to win with the bullish and bearish price swings of the short and medium-term. The period in which operations are kept open is short, often for weeks or months.

Day Trading: A day trading operator conducts short-term trades where each position is usually closed before the end of the trading day.

Trading style, is it convenient to use averaging down?

Buy and Hold

Yeah, but be careful in a bullish market. Check your investments to make sure the fundamentals are still in good shape and that the technical aspects are attractive. Fibonacci setbacks work well in these circumstances. Measure the previous price increase from the minimum to the maximum of the movement and if you want to apply averaging down make the additional purchase around the Fibonacci retracement of 61.8% of the previous bullish movement. In a bearish market, then it’s best to wait. Otherwise, it’s like catching a falling knife. It can be a pretty dangerous process. Why risk it? Wait for markets to appear.

Position Trading

Yes, but it must hold the positions long enough for the market to recover and it must only be used in a market with the right conditions, that is to say in a bullish market. Ensure that the sector is also growing and that the fundamentals favour it so that any downturn in the market is due to short-term factors (as in the case of a stock with a bad quarter in a company with promising projections for the next quarter).

Swing Trading

Probably not. If we go in too early, expecting a change in trend and the price continues to fall, we can average down if the market and the industry are going up, but we do this only once. If we are tempted to average a second time, it is best to close the losing position and accept the loss. Remember, you are supposed to be a professional. Admit your mistake, take the loss, and continue.

Day Trading

No. As a day trading trader, the trader must leave before the end of the day and we have no guarantee that the price will be recovered at closing. A day trading operation should never be allowed to become a multi-day position. It is common for a trader to quickly lose their funds that way.

Categories
Beginners Forex Education Forex Basics

Activities That Can Help You Be a Better Trader

Trading can be a long process, it can be draining and it can also be unforgiving. Sitting at a computer for hours on end is never a great way to spend your day, but more often than not it seems like a necessity. When the markets are slow, or you have just lost a couple […]

Trading can be a long process, it can be draining and it can also be unforgiving. Sitting at a computer for hours on end is never a great way to spend your day, but more often than not it seems like a necessity. When the markets are slow, or you have just lost a couple […]

Trading can be a long process, it can be draining and it can also be unforgiving. Sitting at a computer for hours on end is never a great way to spend your day, but more often than not it seems like a necessity. When the markets are slow, or you have just lost a couple of trades, it is important to be able to take a step back. Do something to refresh yourself, and then come back. That is why we are now looking at a number of different activities that have nothing to do with trading, but they can still help your trading performance.

Playing Sports

This may be obvious to a lot of you, but you would be surprised how many traders either give up their physical activities in order to trade full time. Without going into the really scientific side of why sports is beneficial for you, the main aspect is the energy that it provides, you may be feeling tired straight after, but the long term effect of exercise includes boosts in energy, better concentration levels which then allows for more patience and discipline. Taking part in sport is also a great way to teach your body different aspects of discipline and preparation, important aspects of trading. Some sports like Boxing are also great for getting id of any underlying frustrations that you may have about the markets and your trading.

Yoga

A little like sports but slightly less physical (no less challenging though). Yoga can be used to help relax and focus your mind. When you have come off a few bad trades, it is hard to get out of that cycle, so being able to refocus your mind and relax is important. Being able to take what you learn in Yoga into the markets can also be fantastic, being able to channel your focus into the markets and your strategy can really help boost your productivity and profitability.

Reading

You probably thought this would be number one, it would be if we were looking at trading related books, but we aren’t, that would still be an activity to do with trading. A good book can take your mind away from your trading, to completely remove it from your mind so you can relax without the stresses.

Having said that, you can often find elements of trading in a lot of books, not necessarily related to trading, these could give you ideas of new trading strategies or ways you can adapt your own, often when your imagination is working (reading books) you can come up with ideas that you never would have before.

Talk to Other Traders

This one may seem obvious, and to be fair it is, but it is something that a lot of people do not do, many traders, especially the newer ones get absorbed into their trading, they forget about the other thousand traders around them that are going through the same thing. Talk to them, if you are having trouble with something, someone somewhere will have a solution for it, talking can help you find it, it is also a great feeling to help others, so giving your own wisdom to others can help the overall trading community.

Travel/Get Out of the House

Heading to a sunny shore or a snowy mountain may seem like a bit of an extreme, but giving your mind that extended break from trading can help refresh your mind. It can also give you a completely new and fresh perspective when you get back, often coming up with ideas you had never thought of before due to being stuck in a routine. If you cant get away for long, just get out to the local park, do something completely different, even a few hours can refresh your mind.

So there are a few different ways that you can help to refresh your mind or gain knowledge away from the trading platform, it is always important to add a bit of variety to your life, trading all day every day is not a healthy habit to get into, how you add that variety though, is up to you.

Categories
Beginners Forex Education Forex Basics

Can You Start Trading Forex With Only $200?

Can you really start to trade Forex with as little as $200? Let’s take the short and sweet answer here, yes you can. Many brokers allow you to open up accounts for as little as $10, so it is incredibly accessible, however, should you be trading with just $200 let alone the $10 entry requirement? […]

Can you really start to trade Forex with as little as $200? Let’s take the short and sweet answer here, yes you can. Many brokers allow you to open up accounts for as little as $10, so it is incredibly accessible, however, should you be trading with just $200 let alone the $10 entry requirement? […]

Can you really start to trade Forex with as little as $200? Let’s take the short and sweet answer here, yes you can. Many brokers allow you to open up accounts for as little as $10, so it is incredibly accessible, however, should you be trading with just $200 let alone the $10 entry requirement? This is where the answer is not quite as straightforward and we need to consider a number of different things before deciding whether to go ahead with such a small balance.

Many people often ask the question of how much they are able to make with a balance such as $200. Forex and trading as a whole is very much a have money to make money industry, so you may well be held back by your capital at one point or another. But we aren’t here to look at how to get rich, we are simply going to look at whether or not it would be advisable or sensible to trade with a balance as low as $200.

The first thing that we need to consider when going for such a low balance is how your risk management skills are and whether they are at the standard that you will require. The lower your balance, the stricter they need to be and the less wiggle room you will have. Have you actually tested with a balance similar to what you want to go into? Many people get the wrong idea when they sign up to a demo account and it comes with a balance of $50,000. The risk management that you can do on that account is far higher than you can on a small account, the little mistakes are hardly noticed, while on a small account, those little mistakes could potentially blow the entire account. One thing though, is that it would be a real credit to your risk management skills if you are able to grow a small account. Many people try and the vast majority of them fail, so if you are able to then it simply means that you have a knack for trading and know what you are doing.

You won’t be making millions on your $200 account, that this is perfectly clear. You can, however, make money and in the future, that may be considerably more than it is now. The wonders of compounding, this where you add whatever profit you have onto your next trade to trade slightly larger. Over a long period of time this can add up and that $200 account can grow to something substantially bigger, it will take time but it is possible. So having the motivation to carry on and to start small can mean in the future you are doing quite well for yourself.

So starting with a small account you should still be thinking about the usual risk management, things like only risking 1% of your account per trade as an example, of course, 1% of a “400 account is only $2, while on a $10,000 account it is $100, so the wiggle room is a little smaller. The good thing is that it will really allow you to hone your skills and to develop much stricter management of your funds and your account. Something that you can use in the future to really benefit yourself. Then whatever you have learned to do on your small account, it should be pretty easy to use the same techniques on a larger account in the future should you get there.

More than 20% of traders these days start with accounts lower than $999 which is often referred to as a micro account, so you are certainly not alone in starting with a smaller balance. Not everyone has the money available to trade and some are simply not serious about it, simply dipping their toes in to try it out, there are many reasons why people open up smaller accounts. It is important to remember that the higher the balance, the more flexibility that you will have. Build your account up with patience, do not risk more than you need to, and simply take your time, treat this as a long term business, and not a short term get rich quick scheme. 

We touched briefly on a demo account, something that you should have been using before going into a live account. Try and get one set up that is at a similar balance to what you are going to be using with your live account. This way, the risk management that you are using on the demo account can simply be transferred over to a  live account. There is no point practicing on a $50,000 demo account if you are going to be using a $200 account, as when you transfer over your skill, the account will most likely blow pretty quickly.

So some final thoughts to think about. If you are thinking of joining with a small balance, it is certainly possible for you to be successful, it will simply take a lot longer to achieve than it would if you start with a larger balance. It is important that you are on point with your risk management skills, do not try to push them as your account will not have the wiggle room available to do this, stick to the plan and do not deviate from it. One of the benefits of having a small account is the damage is limited, you can only lose what you have put in. So the loss of $200 will be much easier to take than the loss of $10,000, however, we know for some, that $20 is an awful lot, even or reason to ensure that you are taking your time.

So to answer our original question, yes you can trade with a $200 account. It will simply be a long and rather slow process, but something that if you are able to achieve. You can be proud of saying that you have achieved something that a lot of traders have tried but failed at.

Categories
Forex Psychology

Avoiding Burnout While Trading Forex

Forex trading can be stressful. Anyone that tells you otherwise just won’t have come across one of their bad patches yet. Every single time you trade you are being put in front of a number of different stressful situations, as they begin to build up it can cause stress, frustration, and ultimately causes burnout. I […]

Forex trading can be stressful. Anyone that tells you otherwise just won’t have come across one of their bad patches yet. Every single time you trade you are being put in front of a number of different stressful situations, as they begin to build up it can cause stress, frustration, and ultimately causes burnout. I […]

Forex trading can be stressful. Anyone that tells you otherwise just won’t have come across one of their bad patches yet. Every single time you trade you are being put in front of a number of different stressful situations, as they begin to build up it can cause stress, frustration, and ultimately causes burnout.

I am sure that there have been times in your life when you have been doing something repeatedly and you end up thinking that you can’t really be bothered to do this or that it is incredibly boring. This is often referred to as burnout and it is quite common amongst forex traders, especially if things haven’t quite been going the way you intended it to.

The good news is that there are ways to avoid or at least reduce the effect that it can have on you, it is important to recognise the signs and put into place some things that can help you to relax and unwind, otherwise, a burnout could cause a complete loss of motivation or even trading mistakes that could cost you money.

Spot the Signs Early

It is often quite hard to spot when you are going through a tough spot, a lot of the time it is normal for you, so it is important that you are able to recognise the signs of burnout coming up so you can quickly do something to help alleviate the issues. You can spot these early signs by asking yourself a few questions, they are quite straight forward but the more that you answer yes to, the more likely you are on your way to burnout.

  • Do you have feelings of self-doubt?
  • Do you question why you are trading?
  • Are you suffering from headaches?
  • Are you still sticking to your strategy?
  • Are you eating more or less?
  • Are you drinking alcohol more often than usual?

Ask yourself, if just one is yes, then take a break, if more than one is yes, then you may be on your way to mental burnout.

Take a Break

This is a simple step to take, simply step away from trading, for a day, 2 days, a week, whatever you think is necessary for you to alleviate some of that stress or thoughts of self-doubt, use this time away from trading to exercise eat healthily and simply clear your mind of trading and the stresses that come with it.

Think Back to the Start

What we mean by this, is to think back to when you started trading, the excitement that it brought, the new experiences, and the feeling of learning something new and being able to implement that into your trading strategies. Use that feeling that you had, use it to help kickstart your own passion for trading, this will help you to focus on some of the better and more positive sides of trading rather than the stressful ones that have put you into your current situation.

Find a Friend

This can be taken in two ways, you could look for someone outside of trading to speak to or to simply spend time with, time with others is a great way to get rid of stress, as long as you like them that is. Then there are trader buddies, these are people who also trade that can be there to discuss what is going on, the good thing about having a friend that also trades is that they will have also experienced the exact same things that you are now going through, they will be understanding and may even have tips on how they avoided or got out of a burnout situation.

Get Pampered

Complete relaxation and clearing of your mind, a little similar to taking a break, but this time it is all about you, you need to do something that you enjoy, whether that is a massage or a game of tennis. Think about you, cater to your own needs and loves, this is a fantastic way to reduce the risk of burnout as it clears your mind of the issue and you gain that adrenaline and euphoria of doing something that you truly enjoy.

Ask for Help

Do not be afraid to ask for help, if you go into burnout and still try to stick with it, it can be damaging not only for your trading account but for your overall physical and mental health. The worst thing you can do is try and push yourself through it. There are people around, both friends and professionals who have been trained for this sort of thing, there is no harm or shame in asking them for a little bit of help, in fact, it is strongly encouraged. The good thing about talking to professionals is that they know all the signs and they also know a lot of things that could be causing them, in fact, you may discover that your burnout is nothing to do with trading at all and is instead something that you have locked away inside or didn’t even think of as stressful.

Being able to recognise the signs and then take control of them is the key to avoiding and getting out of burnouts, it is not a good place to be but there are things that you can do to help avoid them and there is also help available out there should you need it. It is something that we all go through so it is nothing to be ashamed of, look after yourself and then you will be able to look after your trading.

Categories
Forex Psychology

How to Approach Trading Changes Positively

Change, something that you either love or absolutely loathe. Whichever approach is relevant to you, you are going to need to embrace change in life and especially when trading forex. There isn’t a moment that goes by where your single trading strategy or plan will be 100% correct. The markets change, you need to change […]

Change, something that you either love or absolutely loathe. Whichever approach is relevant to you, you are going to need to embrace change in life and especially when trading forex. There isn’t a moment that goes by where your single trading strategy or plan will be 100% correct. The markets change, you need to change […]

Change, something that you either love or absolutely loathe. Whichever approach is relevant to you, you are going to need to embrace change in life and especially when trading forex. There isn’t a moment that goes by where your single trading strategy or plan will be 100% correct. The markets change, you need to change with them, adapting to whatever is being thrown at you. It is a challenging thing to do, but a vital skill to learn.

If we take a little look at people who really excel in their field, people who do a fantastic job of getting to the top and then staying there. Let’s take a look at Taylor Swift, nothing to do with trading but bear with us. When she started out she was shy, her music was based around country themes, all about love and romance. However the generation of people who grew up with her started to get older, their taste in music began to change and so then Taylor had to change also, if she remained the same, she would have lost a lot of fans. So instead, she adapted, she changed her music, constantly, there were never more than two songs with a similar theme in a row, this enabled her to keep her fans interested and engaged in her music. She did this and it worked, she is now more popular than ever.

This same way of changing to the needs around you can be seen with many other successful people. Warren Buffett had to adjust his style when the first few investments didn’t go the right way, Michae Jordan had to change his style of play early on in his life after being dropped by his high school team. The thing that all of these people have in common is the ability to change and adapt. If you wish to become a successful trader, then you are going to need to learn how to do this yourself because lets be honest, the markets will change, they can change hour to hour, if you are not ready to change with it, then you will be making some mistakes and you will be making some losses.

One of the things that makes a lot of traders fail is either their inability to introduce some of the much-needed changes or simply that they are unwilling to do it. Traders can very easily get stuck in their own ways, they have been successful in the past so the way that they see it, is that their strategy will be successful again in the future. This is a mentality that a lot of people get, but it is also one of the most dangerous as it will only lead to losses, potentially major losses when the markets have changed.

So let’s look at things in a way that is probably more familiar to you. Let’s assume that you have a scalping strategy, your strategy relies on the markets to be going sideways, ranging up and down between particular ranges. This works fantastically when the markets are doing what you want them to do, the problems arise when the markets begin to shift, they begin to trend. You’re now trying to scalping the opposite direction to a trending market, this will lead to either a large loss or a lot of little losses, neither of which are great. If you are not able to adapt to this situation, to change your trading style, or to completely step back, then you are going to end up losing out, so we need to work out a way that you can alter your current strategy to better suit the current situation that the markets are in.

So we have an understanding that we need to make changes, that is the first step and is certainly a good step. So we make a change and of course, we test it out on a demo account. We have done that and it has worked, so we jump straight back into a live account to put the changes to practice. This unfortunately may bring in new challenges, every change that you made on the demo account will have a subsequent effect on other aspects of your trading such as your risk management plan, so simply making that single change may well have messed up the rest of your trading plan, making things a little more complicated and it may not actually improve your overall results.

It is easy to change things with your strategy, but not every change is a good change. You can very easily make a change which makes things even worse. You need to have an understanding of what changes are needed to be made and also to have both the fortitude and the discipline in order to practice with the new changes and to gain the necessary information and knowledge that comes with them in order to effectively work out whether the new results are actually positive or negative. Many people simply stop halfway through their new testing because they do not feel like it is worth the time, or they do not have the understanding that these changes take time and will often need additional tweaks to them in order for them to be fully effective.

So in order to ensure that you are able to make these changes and to make them in an environment where you are safe and more importantly your account is safe, we do this in a number of different ways. The first is of course on a demo account, every single time that you make a change to your strategy, no matter how big or small, you need to look to test it out on a demo account. This allows you to try it over an extended period of time, in an almost live environment. You need to test it out for a long period of time, not just 4 or 5 trades. Use this opportunity to tweak things. The longer you practice with it, the better your understanding of how these changes have affected your overall trading plan.

The second is to simply review charts, this does not give you the hands-on and true trading feel, but it is vitally important. By reviewing the charts, it enables you to figure out what you could have done during the day and what you could have done differently. This is invaluable as it means that the next time that a similar setup appears, you will know exactly what it is that you need to do. It’s like a sports game, they watch back over the game afterward to find out what went wrong and what could be done differently, so the next time they come up against that opposition, they will be able to deal with the threats and the team a lot better. Do not be afraid to spend some time looking for what you need to do differently, your future self will thank you for it.

So those are two methods that you can use to help implement some change. Remember that change needs to happen slowly, but the most important thing is that change needs to happen. Do not sit there hoping the markets will come back, they won’t, they will simply punish you further. So think about what you need to change, get an understanding of it, and then implement it.

Categories
Beginners Forex Education Forex Basics

Helpful Habits For Forex Newbies

Many new traders come into it not really knowing much about it, they have often seen or heard something about it, something that is a great way to make a bit of extra money on the side, or even as a carer. Coming into it with this expectation or lack of knowledge can put you […]

Many new traders come into it not really knowing much about it, they have often seen or heard something about it, something that is a great way to make a bit of extra money on the side, or even as a carer. Coming into it with this expectation or lack of knowledge can put you […]

Many new traders come into it not really knowing much about it, they have often seen or heard something about it, something that is a great way to make a bit of extra money on the side, or even as a carer. Coming into it with this expectation or lack of knowledge can put you on the back foot right from the start. Another issue that comes with this is a lack of understanding of the process and also a number of bad habits, nothing against the person, but certain habits come in with new traders. Due to this, we have come up with a list of habits that you should try and get into as a new trader. They will help in your trading and also with your chances of becoming a profitable and successful trader.

Using a Trading Journal

We appreciate that you may not actually know what this means, as someone coming into trading it may have been mentioned but it is becoming more and more apparent that people are not using them and this is a big negative against their trading. A trading journal is simply somewhere that you jot down everything that you do, and we mean everything that you do, the trades you make, the reasons behind them, the results, and more It then gives you the opportunity to look back at toys trading to see that you have been doing well and what you need to work on. It is an invaluable tool, so the sooner you get into the habit of filling one out and then keeping it up to date, the better your trading will develop.

Using Stop Losses

Part of your trading plan should have been a risk management plan. This would include using stop losses which are a way to automatically close trades when they go a certain distance into the negative. Using them is a habit that you need to start getting into, the amount of money that they could potentially save you is incredibly high and they can even save an account entirely. Losses are a part of trading, you will have a lot of them, especially as a new trader, so being able to limit those losses and to control the amount that is being risked each trade is vital. You cannot control the markets, but you can control how much you will potentially lose with each trade. It is ok to widen or tighten those stop losses as things go and as the markets change, but the one thing you must do is have them in the first place.

Set Trading Times

The markets work 24 hours a day, but that does not mean that you need to work those hours. Give yourself some set times when you want to be trading, having these set times will help you to keep concentration and will also ensure that you are not wasting your time. Don’t try and trade all your free time, treat it like a job, work certain hours and it will be easier to keep those times in the future, and to keep your discipline.

Preparing for Trades

Having your trading plan and strategy all set up before you start trading can make things much easier now and also in the future. If you start trading without a plan then what are you actually trading? You won’t know which means that the majority of your trades are going to be bad trades, whether you know that or not, there will be far more losses than wins. Having your plan will also set out certain trading rules for you, these rules are what you will follow with each trade, doing so keeps you in line with your strategy and as long as your strategy was created properly, it will help you to become profitable and successful in the long run. Having things planned beforehand also helps you to prepare and cope with the results on a psychological level which can keep you happy and will help to lower and reduce stress levels which is a major psychological issue when it comes to trading.

Specialise

Forex and trading as a whole is a huge beast, there is so much to it that if you try to do a bit of everything then you will be overwhelmed and won’t be able to do anything to a decent level. You need to be able to specialise, to pick a certain trading style and certain instruments that you wish to trade. This will then allow you to pinpoint your strategy, to get it working well for those particular instruments and timeframes. If you are a scalper, then there is no point trying to place some swing trades, stick to scalping, specialise in it and you will have a much better chance of being successful. 

So those are some of the things that you can be doing as a new trader, not everything will work for you, in fact, many of them may not, but the more habits that you try to get into the easier and quicker your trading will become. Even if you do not get into three specific habits if you notice a bad habit that you are doing (and there will be some) try and get out of it before it really sinks in and you are stuck with it for a long time.

Categories
Forex Brokers

UMarkets Review

UMarkets is a foreign exchange broker based in Saint Vincent and the Grenadines, they don’t actually have an about us page on the site which is a little strange so they are not giving much about themselves away, this is a little strange and a little concerning. We will be using this review to look […]

UMarkets is a foreign exchange broker based in Saint Vincent and the Grenadines, they don’t actually have an about us page on the site which is a little strange so they are not giving much about themselves away, this is a little strange and a little concerning. We will be using this review to look […]

UMarkets is a foreign exchange broker based in Saint Vincent and the Grenadines, they don’t actually have an about us page on the site which is a little strange so they are not giving much about themselves away, this is a little strange and a little concerning. We will be using this review to look into the services being offered to see how they compare to the competition.

Account Types

There are four different accounts available when signing up with UMarkets, we will outline some of their features below.

Mini Account: This account requires a minimum deposit of at least $500, it has a minimum trade size of 0.1 lots, and has access to online chat.

Standard account: This account needs a deposit of at least $5,000, it has a minimum trade size of 0.01 lots, has access to live chat, access to all platform features, and has access to Autochartist.

Gold Account: This account needs a deposit of at least $10,000, it has a minimum trade size of 0.05 lots, has access to live chat, access to all platform features and has access to Autochartist, SMS signals, a VIP manager, an individual direct telephone line and special promotions.

Platinum Account: This account needs a deposit of at least $35,000, has a minimum trade size of 1.5 lots, has access to live chat, access to all platform features and has access to Autochartist, SMS signals, a VIP manager, an individual direct telephone line, special promotions, one on one trading and personal reports on the stock markets.

Platforms

There are two different platforms available to use, and we have detailed them below.

MetaTrader 4 (MT4): MT4 is one of the world’s most useful trading platforms and for good reason, it does everything you could ask to make your trading life easier and is accessible from anywhere as a desktop download, mobile application, or as a web trader. Some of its other features include a convenient and tunable interface, quotes in real-time mode, account control, and transaction management, printable charts of different time periods, a wide range of technical indicators and tools and, the ability to install your own indicators and trading robots.

xCritical Platform: xCritical is another popular trading platform, some of its features include More than 170 trading instruments, the ability to form your own investment portfolio, competent risk management with limit orders, history of previous deals for analysis of strategy, built-in technical advisor Autochartist, the ability to lock and duplicate positions and, built-in online support chat.

Leverage

The maximum leverage available is 1:200, we are not sure but it seems like this is the maximum for all four account types, leverage can be selected when opening up an account, and should you wish to change it you will need to contact the customer service team with your request.

Trade Sizes

The trade sizes available to you depend on the account you are using, the different accounts have different minimum trading sizes, they are listed below.

  • Mini Account: 0.1 lots
  • Standard Account: 0.1 lots
  • Gold account: 0.5 lots
  • Platinum Account: 1.5 lots

We do not know what the maximum trade size is, or how many open trades you can have at any one time.

Trading Costs

As the accounts all use a spread based system there is no added commission on any of the acocunts. Swap charges are there, these are fees that are charged for holding trades overnight and they can be viewed within the trading platform you are using.

Assets

The assets at UAccount have been broken down into a number of categories that we have detailed below.

Forex: AUDCAD, AUDCHF, AUDJPY, AUDNZD, AUDSGD, AUDUSD, CADCHF, CADJPY, CHFJPY, CHFSEK, EURAUD, EURCAD, EURCHF, EURCZK, EURDKK, EURGBP, EURHKD, EURHUF, EURJPY, UERMXN, UERNOK, EURNZD, UERPLN, EURRUB, EURSEK, EURSGD, EURTRY, EURUSD, EURZAR, GBPAUD, GBPCAD, GBPCHF, GBPDKK, GBOHUF, GBPJPY, GBPNOK, GBPNZD, GBPPLS, GBPSEK, GBPSGD, GBPTRY, GBPUSD, GBPZAR, NOKJPY, NZDCAD, NZDCHF, NZDJPY, NZDSGD, NZDUSD, SGDJPY, TRYJPY, USDCAD, USDCHF, USDCNH, USDCZK, USDDKK, USDHKD, USDHUF, USDJPY, USDMXN, USDNOK, USDPLN, USDRUB, USDSEK, USDSGD, USDTRY, USDZARM ZARJPY.

Indices: CACEUR, DAXEUR, DOWUSD, E50EUR, FTSGBP, HSIHKD, IBXEUR, NKYJPY, NSQUSD, SP5USD, SPIAUD.

Commodities: UKOUSD, USOUSD, XAGUSD, XAUUSD, XNGUYSD, XPDUSD, XPTUSD.

Cryptocurrencies: BATUSD, BCHUSD, BTCUSD, DASHUSD, EOSUSD, ETCUSD, ETHUSD, IOTUSD, LTCUSD, NEOUSD, OMGUSD, XAIUSD, XLMUSD, XMRUSD, XRPUSD, ZECUSD.

Shares: Hundreds of shares available including Amazon, Google, Tesla, Facebook, and Netflix.

Spreads

Each account has different starting spreads if we take EURUSD the following spreads are seen.

  • Mini Account: Starting from 2.5 pips
  • Standard Account: Starting from 2 pips
  • Gold account: Starting from 1.7 pips
  • Platinum Account: Starting from 1.1 pips

The spreads are variable which means they move with the markets, more volatility means higher spreads. Different instruments also have different starting spreads, so while EURUSD on the Mini account starts at 2.5 pips, GBPAUD starts at 5.9 pips on the same account.

Minimum Deposit

The minimum deposit required to open up an account is $500 which will allow you to open up a Mini account. We do not know if the minimum amounts reduce once an account has been opened.

Deposit Methods & Costs

There isn’t a dedicated funding page detailing any available methods. At the bottom of the page are some images of MasterCard, Visa, Neteller, Skrill, Bank Transfer, and Orangepay so we would be assuming that these methods are available to use. There is also no mention of any fees, however, we may have just missed them, be sure to check with your own bank for any potential fees.

Withdrawal Methods & Costs

There is also no information on withdrawal methods, we assume that the same methods of  MasterCard, Visa, Neteller, Skrill, Bank Transfer, and Orangepay are available to withdraw with. 

The refund policy doesn’t specify any specific fees apart from a fee of 5% if less than 5 trades are made on the account, they also state that the client is responsible for any banking fees.

Withdrawal Processing & Wait Time

UMarkets will aim to process any withdrawals in a timely manner, they do not give an exact timeframe. We would hope that any withdrawal requests will be fully processed within 1 to 5 business days from the date the request is made.

Bonuses & Promotions

There are a number of different bonuses available, we will briefly outline them so you can get an understanding of the sorts of things that are on offer.

Real Demo Account: You can make a profit while trading on a demo account, the account lasts for 2 weeks, any losses are ignored but any profits are transferred to a real account. You must trade the bonus amount 10,000 times in order to withdraw the funds.

Affiliate Program: As with most brokers, there is an affiliate program, refer people to join markets and you could get 15% of each deposit up to $1,500.

Welcome Bonus: You can receive a 30% bonus on your deposit, you can receive up to $10,000, in order to withdraw the bonus you must trade 10,000 times the volume of the bonus amount.

100% Deposit Insurance: You can have insurance up to $5,000, the insurance means that any losses during the promotion will be refunded. The returns are a bonus fund and must be traded 10,000 times to withdraw it.

Educational & Trading Tools

There are a few different aspects to the educational and toll section of the site, the first being a section for economic news, outlining different things that have happened in the markets. There are also articles available, which detail different aspects of forex trading, along with those there are some videos outlining different aspects of trading such as analysis and trading psychology. There is also a glossary of trading-related terms and an economic calendar detailing upcoming news events and showing which markets the news may affect.

Autochartist is also available, this offers features to help with your trading, it can identify and react to market movements, check the quality and competitiveness of your broker’s pricing, manage your cash exposure, optimize your stop loss and take profits, capitalize on known outcomes of news events and identify and react to market movements that are not typical.

Customer Service

You can get in contact with the customer service team in a number of different ways, we are not sure what the opening time of the support team is but we suspect them to be closed over the weekends and on bank holidays.

You can use the online submission form to fill in your request, you should then get a reply via email. You can also use a number of different phone numbers and email addresses to get in contact.

Phone: +501-223-2099

Email: [email protected]

Skype: umarkets.com

Demo Account

Demo accounts are available but we do not know which account they use the trading conditions from, the only information is on the bonus page and that indicates that they only last for two weeks. A demo account allows you to test the markets and strategies without any risk to your own capital.

Countries Accepted

There is no statement about which countries are allowed and which are not so if you are thinking of signing up, before you do so, just check with the customer service team to check that you are eligible for an account.

Conclusion

UMarkets are keeping themselves pretty private, they don’t have an about us page so it is difficult to find out much about them. Their trading conditions can be a little expensive on the lower tier account due to high spreads, but these are better on the top-level acocunts. There are plenty of instruments to trade so you will always be able to find something to trade. There want much information on the deposit and withdrawal methods which is a little concerning but it doesn’t seem like there are any added fees which is good. The decision to use UMarkets as a broker is up to you, but without much information about the company, it is hard to recommend them.

Categories
Beginners Forex Education Forex Basics

Can You Make A Living By Forex Trading?

Can you earn a living from Forex trading? The short answer is, of course, yes, the forex markets offer fantastic opportunities with its high level of liquidity, 24-hour availability and the ease that there is in accessing the markets in the first place. It allows anyone with a dream to get involved and to allow […]

Can you earn a living from Forex trading? The short answer is, of course, yes, the forex markets offer fantastic opportunities with its high level of liquidity, 24-hour availability and the ease that there is in accessing the markets in the first place. It allows anyone with a dream to get involved and to allow […]

Can you earn a living from Forex trading? The short answer is, of course, yes, the forex markets offer fantastic opportunities with its high level of liquidity, 24-hour availability and the ease that there is in accessing the markets in the first place. It allows anyone with a dream to get involved and to allow people to trade at any time that suits you, so those all over the world are able to be involved with the markets. These things make it an incredibly attractive prospect for those looking to get out of their current day job.

It is important that before we look at how much you can make from it, we need to understand how it actually works. Forex is basically just the transaction and exchanging of currencies, someone will buy a currency for a certain price and so someone else is selling, the price moves, and that person that purchased the currency will then sell it on to someone else, this happens thousands of times per second with millions of different traders both buying and selling. The markets move for all sorts of reasons, natural disasters, political movements, tweets, institutions selling, and many other reasons, pretty much anything in the world has the opportunity to affect how traders feel which will then cause the markets to move. We aren’t going to go into any form of education here, as we would be here all day, but getting a general and basic knowledge of what trading is and how it works, what pips are, what spreads are, and more before even considering placing your first trade. There is so much to learn, so we suggest that you start as soon as possible.

So we want to make enough to live off, to have as our full-time income, we need to consider how much capital we need to begin with. Yes, you can start trading from as little as $10 or even $1, but can you really expect to make much from a $10 account? Even a 10% increase would only be $1. Many traders state that you should start with at least $1,000, not only does this mean that you can make some profit, but it also means that you are able to use proper risk management. Having said that, you still aren’t going to be making enough for living off an account that small, it does mean however that if you stick with it, this pot can grow to an amount that you may well be able to use to live off.

Ultimately, the more money that you have in your trading account, the more money you can make, but you need to ensure that you are applying proper strategies and proper risk management, as you need to be able to protect what you have if you want to make that amount grow. The moral of the story is simply that you need money to make money, so feel free to start with a small amount, just do not expect yourself to be making enough to quit your job with a small capital balance.

In order to be successful and to be able to make enough profit to live on you will need to have a pretty solid trading strategy and plan in place. You need to work out what your own preferred style of trading is as each of us has a completely different personality and so different styles would be suited to us. Along with the style, you will need your strategy within that style, this is basically the rules that you are putting in place that you need to follow in order to ensure that your trades are the right ones and that you aren’t simply putting on random trades.

Finally, there is your risk management plan, this is how you protect your account when to take losses and how much of your account to risk with each trade. Without all three of these things in place, you will have pretty much no chance of surviving long enough to make the money that you require. It is important to keep in mind at if you have proper strategies and risk management in place, you don’t even need to be right for 50% of your trades in order to be profitable, some strategies you only need to be right 25% of the time, so ensure that it is in place properly and that you know what you are doing.

So how much can you actually make? The good news is that there is not actually a limit, you can go as high as you need or want to. Of course, you do not want to instantly jump up to trying to make thousands a month straight away, you need to start small, it will also expand on the capital that you have in your account, the more you have the more you can potentially make. If we look at what many other traders go for, some are going for 5% per month, some 10%, and some even as high as 20% (slightly more risky). So your increases won’t be seen in monetary value, instead of as a percentage. So let’s assume that you make 10% per week, with an account of $1,000 you will be making $100 per month, the second month though your account balance is $1,100 so you will now make $110 per month ad so on, this will continue to increase as long as your account is still in tack and as long as you are sticking to your plans. With this increase, it won’t take too long before you will be making enough to live off, of course, the higher your starting balance, the higher your profits will be each month, increasing the further.

Another thing to think about is the stress that comes with trading for a living, when you are trading part-time with a full-time job as well, the pressure of needing the money within the account is pretty much negated, you have your income and so you will be able to survive whatever happens. The problem with trading for a living is the fact that you need that money, if things aren’t going well then it will cause all sorts of stress and anxieties, how will you buy food? How will you pay the rent? All questions that will cross your mind. So you need to ensure that you have some money on the side that can help cover these costs should you need them and you need to ensure that even on a bad month, you would be making enough to cover those costs, do not jump into full-time trading when you simply make just enough, you need to make more than enough each month.

Trading is however full of risk, and a lot of it. You need to get a good understanding of the risks involved and how to help negate them. Every penny that you put into your account is at risk, there is always a chance of losing it and so any money that you put into your account you should try to consider that as a loss, this will help you to remove at least some of the emotions from your trading. Developing your strategy around these risks and to help reduce them will make your journey a lot smoother. Do not go for quick profits, as this will only lead to losses and bad trades down the line, so stick to your pan and manage your risk, protect your account over making quick profits.

So the original question that we had was whether or not you are able to make a living forex trading, the answer is again yes. It Does however come with a few hurdles to get over, to have rough money in the first place, to understand the different risks involved and how you can help avoid them, and finally that you will need to build up your account over a long period of time, you will not make enough overnight, so stick with it and you may well be able to leave that 9-5 jobs of yours in order to trade full time.

Categories
Beginners Forex Education Forex Basics

Forex Trading Is A Scam!

Forex trading is a scam! That is something that you hear thrown about the internet quite a lot. We are here to take a look to find out whether not trading and forex is actually a scam. Before we even get started, we are going to point out that the answer to this question is […]

Forex trading is a scam! That is something that you hear thrown about the internet quite a lot. We are here to take a look to find out whether not trading and forex is actually a scam. Before we even get started, we are going to point out that the answer to this question is […]

Forex trading is a scam! That is something that you hear thrown about the internet quite a lot. We are here to take a look to find out whether not trading and forex is actually a scam. Before we even get started, we are going to point out that the answer to this question is both yes and no, confusing maybe, but it will all begin to make sense as we go. There are so many different aspects to trading, so many different expectations from individuals and companies that it can make it pretty hard to work out, so we are going to do the working out for you, so let’s jump in and work out whether forex trading is a scam or not.

So to begin let’s take a very brief look at the history of forex trading, forex trading is simply the exchanging of one fiat currency for another and has been around for centuries. Bartering has been around since the year 6000BC, under this system, goods were exchanged for other goods. If you have looked at history, you most likely would have seen the massive ships cargo items across the sea, simply to trade what they have for something that they need, this was the first form of foreign exchange, as they sailed out to different countries and continents. In the 6th century BC, gold coins were starting to be produced which were then used as a currency due to their portability and durability, along with their limited supply. In the 1800s the gold standard was created, this meant that governments would redeem any amount of paper money for its value in gold. The foreign exchange market was backed by the gold standard during the 1900s, countries traded with each other as they were able to convert the currencies they received into gold. During the wars, this was abolished due to the needs and so the standard currency exchange resumed.

So for something that has been going for so long, it surely can’t be a scam right? In principle, no, forex is simply the exchange of currencies as we saw, so this in itself is not a scam and never can be, what could potentially cause it to be one, are the people behind it. When we talk about the people behind it, we are referring to everyone that has any part in it, this includes the brokers, investors, so-called educational gurus, and even the traders.

When it comes to retail trading you will need to go through a broker, and this is our first stop when it comes to potential scams. There are a lot of brokers out there, in fact, there are thousands of them if not more. Each one offers you the chance to trade on the financial markets with very little effort needed. Each broker offers different features, each one is run by a different company or individual (of course some are the same) and each one has a different level of trust within the trading world. A broiler is basically an entity that allows you to request a trade, they will then push that to their liquidity providers who will match the other side of the trade, the broker will then show you the value of your trade going up and down, you can then close it.

The problem comes from the brokers that are a little less trustworthy. Some brokers trade directly against their traders, so if you put in a trade, they will take the sell counterpart, it is then in their interest that you lose your trade, so they will do what they can to potentially influence the price in order to make your trade stop out, this is a tactic that used to happen a lot more in the past, it is quite rare now due to the way the brokers work and many people now go for STP or ECN accounts which do not allow this or at least make it far harder to achieve. Other brokers have been seen to manipulate prices, and others even worse, have simply outright refused to send their clients any money when they have requested to withdraw them.

Any traders would suggest that you look for a regulated broker, these are governed by bodies who are there to try and protect their clients, yet even this is not enough to completely prevent brokers from pulling little tricks on their clients. The best thing that you can do when it comes to a broker, is to look for one that has a long track record, good reviews, and one that you are able to talk to the support team of, in order to get reassurances and to know that they are still active and there to help.

The next things to look out for are the so-called experts and gurus that you find all over the internet and especially all over social media, there seems to be a lot of experts out there willing to help you make a lot of money, for a price. The first alarm bell should be coming from the fact that they are asking for money to help you make money. You need to consider the fact that if their strategy and information is so good, they should be making enough to not need to charge for it. Some will claim that they want to give back to the community or to help others become rich, but that is nonsense, if they were rich they would simply do it for free in order to get that satisfaction. If you see someone offering ridiculous results or returns, run the other way, there is no way they are real. If you want a mentor, then go for someone with a track record, with information about them available for the public, and someone that others have used, not a random person on social media promising the world. 

Have you ever realised that the majority of people shouting on the internet about something being a scam, regardless of what it is are those that have lost their money, yet they do not actually say what has happened, just that they have been scammed. This is something to look out for, many new traders who come into trading and then lose due to a lack of understanding will instantly shout scam. When you see this, look to see whether there is actually anything to their story, if it is simply a scam, then they probably just messed up and are too embarrassed to admit it. It’s good to look for scam warnings, but be sure that you take them with a pinch of salt and actually read them, many legitimate brokers and companies have the same warnings about them even though they did absolutely nothing wrong.

Those are probably the three most prevalent forms of scamming or vocalisation of scams, if you are able to avoid them then you should be on a good track, there area  few different tips to think about though in order to help avoid scams:

  • Avoid brokers that are offering guaranteed returns.
  • Avoid brokers that are offering ridiculously large deposit bonuses, you won’t ever be able to withdraw them.
  • Any opportunity that seems too good to be true, probably is, they often prey on your desires or desperation to make you pay up.
  • Ensure that you have good knowledge and education when it comes to trading and trading terms.
  • Do not send money to anyone unless you know them or have done some proper research.
  • Read the fine print for any sneaky bits that have been hidden within them.
  • Do a background check on both individuals and companies.
  • Be diligent, look after your money and look after yourself.

So we have now seen that trading and forex in itself is not a scam, the opportunity is there, you can make a lot of money, the problem comes from the people within the industry, so use our tips in order to try and avoid those scams and best of luck on your trading journey.

Categories
Forex Brokers

UOB Kay Hian Review

UOB Kay Hian is a foreign exchange broker that is based in Singapore. There isn’t much on the site in regards to their history, instead, there is a single page indicating what some of their main selling points are, they include impeccable credentials, insightful research, user-friendly platforms, competitive rates, an extensive range of products and […]

UOB Kay Hian is a foreign exchange broker that is based in Singapore. There isn’t much on the site in regards to their history, instead, there is a single page indicating what some of their main selling points are, they include impeccable credentials, insightful research, user-friendly platforms, competitive rates, an extensive range of products and […]

UOB Kay Hian is a foreign exchange broker that is based in Singapore. There isn’t much on the site in regards to their history, instead, there is a single page indicating what some of their main selling points are, they include impeccable credentials, insightful research, user-friendly platforms, competitive rates, an extensive range of products and holistic investor educations. That is what they say about themselves, so we will be using this review to look at what is really on offer from UOB Kay Hian.

Account Types

There isn’t an online account comparison as there is just the single account type, in order to open one up you will need to go directly to the offices in Singapore, and to be eligible you must be a Singapore citizen, Singapore permanent resident, or have an employment pass. As we go through this review we will look into the services in different sections, anything that we outline will be relevant to the single account type available.

Platforms

There are three different trading platforms available, we have briefly outlined them below.

UTrade Platform

The UTrade platform allows you to trade and purchase stocks listed in Singapore, Malaysia, Hong Kong, China, and the US. A few of its main features listed are its ability to change the way you trade, have access to research insights, invest smarter with sophisticated tools, interact with live price charts, access your statements online and to trade more and enjoy exciting rewards.

CFD Platform

The UTrade CFD Pro platform allows you to trade CFDs, a few of its main features include the ability to track market activity with live quotes, create watchlists, perform smart search, you can check your portfolio, monitor margin requirements, and oversee your order book.

Forex Platform

This platform uses MetaTrader 4 which is one of the most used platforms around the world. When using this platform with UOB you get access to 44 currency pairs, seamless and advanced orders, transparent trades, a user-friendly experience, deep liquidity, access to automated trading, configurable trading tools, and access to community trading, the platform can also be used as a desktop download, mobile application or WebTrader.

Leverage

The maximum leverage available is 1:20 which is mentioned on the Levergeaed Foreign Exchange page. There is no other mention of leverage on the other asset pages so as far as we know this is the maximum leverage available. On the same page, it does also state that there is high leverage so we are not sure if they consider 1:20 as high, or if there is, in fact, higher leverage available.

Trade Sizes

We could not locate any information regarding the trade sizes, either the minimum or maximum, or even how many trades you are able to have at any one time.

Trading Costs

There are commissions charged when trading but we are currently not sure exactly what they are, we just know that they are present on all instruments except for forex and metals, where there is no added commision., we would expect swap charges to be present but we cannot say for sure as there is no relevant information about them.

Assets

There doesn’t seem to be a full breakdown of the available assets, instead, all we have is a few different categories which are bonds, CFDs for equities and indices, EFTs, equities, and Forex currency pairs. There isn’t a break down of the instruments within them so that is all that we do know, there are 40+ currency pairs available, but no list of what they actually are.

Spreads

When trading forex the spreads are starting from as low as 0.8 pips, this is the starting figure and as the spreads are variable, when there is added volatility or less liquidity in the markets, the spreads can often be seen higher than this figure. Different instruments will also have different spreads, so while they may start at 0.8 pips for some, others will start higher at 1+ pips.

Minimum Deposit

This is yet another aspect that we do not have any information about, nowhere on the site that we could see did it state what the required amount is to open up an account.

Deposit Methods & Costs

There was a mention of bank transfers on the site, but no solid information on the available methods or any added commissions for depositing. As you are required to be there in person to open up an account we would expect electronic payment providers to not be accepted and more formal processes of bank transfers to be the only real option.

Withdrawal Methods & Costs

There is no information pertaining to withdrawals, so we do not know which methods are available or if there are any added fees from UOB Kay Hian when withdrawing.

Withdrawal Processing & Wait Time

As we do not know which methods are available to withdraw, we also do not know how long it will take for withdrawals to fully process, we would hope that it would be within 7 days of a request being made but we cannot say for sure.

Bonuses & Promotions

There are 14 different promotions active at the time that we are writing this review, far too many for us to go over, but we will take a look at a few of them just to give you an idea of the sort of promotions that are available. 

Alternative Product Promotion

When you trade CFDs and leveraged products you will earn points, when you trade you gain points for the commissions on CFDs or for each 400,000 volume traded on forex and metals. You gain 3 points for every 400,000 volume traded and the smallest prize will need 1,000 points to earn it. So it will take a while to achieve.

50th Anniversary Lucky Draw

Every $100 deposited gets you an entry into the draw, there are monthly draws for $2,000 and then a grand draw in August for $50,000.

Educational & Trading Tools

There are a few different tools available, they include things called the CahrtGenie, ShareXplorer, Stock Alerts, StockScreener, and TechAnalyzer, they are all different ways to help you analyze and watch the markets for trades. Ther is also a research page which has different previews and news from around the trading world, we could not see the quality of it as you are required to log in to view it properly.

Customer Service

There are plenty of ways to get in contact with UOB Kay Hian, their customer support team is available from 8:30 am to 6 pm from Monday to Friday. You are able to contact them using an online submission form, fill it in and you will get a reply via email, you can also use the provided postal address, email address, or phone number.

Demo Account

There may be demo accounts available but there isn’t a way to open one up from on the website. As you need to go in person to open up an account you will most likely need to do that before you are able to open up a demo account. If demo accounts are available, they would allow you to test out the market without any real risk.

Countries Accepted

The following message is displayed at the bottom of the website: “This site is not directed at residents of the United States and countries belonging to the European Economic Area and is not intended for distribution to or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.”

Conclusion

UOB Kay Hian is clearly targeting their brokerage services to those that are living in Singapore, and this is obvious due to the fact that you need to live there in order to open up ana account. There isn’t a whole lot of information on the site and we assume this is due to them being a slightly more physical based broker so most of the information you will most likely get from them in person. The trading conditions are not fully known, and neither is the full breakdown of available assets. So if you are from Singapore then visiting them could make it worthwhile, but for those living in a different country, you will need to look for an international broker to join.