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MARKET WISDOM Thu 15 Aug

Even the best of the best are dead wrong sometimes

Jamie Dimon and Warren Buffett can't get it right 15 months ago Jamie Dimon and Warren Buffett were warning people not to buy bonds. At the time, US 10-year yields were at 3.0%. Today they're at 1.48%. 30-year yields are now below 2%. Here's a look at 30-year futures since: They're up 16% while the S&P 500 and Berkshire Hathaway shares are both flat. He wasn't alone. On the same weekend last year, JPMorgan CEO Jamie Dimon was warning about the 10-year rising to 4%. The point here isn't to point out incorrect calls. I've had plenty myself. It's a reminder that no one knows the future. Jamie Dimon is going to continue to be the greatest bank CEO of his era while Buffett will remain the greatest investor of all time. Sometimes you're wrong. Roll with the punches. ForexLive

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BASICS | EDUCATION FROM BROKERS Tue 13 Aug

8 things that worsen your trading performance

What are some of the biggest traps you can fall into as a trader? Trading is a process that is different for every participant: a great deal of success depends on personal qualities and strengths. And yet, a number of things are universal - the similar challenges everyone goes through and the common traps that at some point await all traders. In this article, we have gathered the potential killers of trading success as well as the recommendations on how to eliminate them or turn the situation around in case you are already suffering. #1: Being too lazy to test things It can be tempting to just start using a new trading strategy right away to bear monetary fruits as soon as possible. However, launching into the unknown is not the best idea. Practice makes perfect and it's always better to test things first. As a result, use the potential provided by demo accounts to its most: test the services provided by your broker, test a new strategy, work on your risk management and position sizing. #2: Extreme emphasis on the result A lot of traders expect to see the mind-blowing amounts of profit literally in no time. Others get fixated on the idea that every trade should be profitable. We won't argue that trading should be to your benefit, that goes without saying. However, obsession with rewards alone won't do you any good. After all, the rewards won't achieve themselves. All important things - analysis, strategy, risk management - are the elements of the trading process. So, while it's absolutely necessary to have a goal (a reasonable one, for sure), once the goal is set, you should throw all your strengths and attention to the process of trading. Learn from each trade you make - your own experience of observing and dealing with the market is your most precious asset. Focus on the key elements of trading mentioned above and try to improve your skills in each of them. #3: Lack of proper money and risk management The reasons for this misstep may be different: laziness that we have already mentioned before, ignorance, the lack of patience. Bear in mind that professional trading is not a game and that every time you put your money at stake, not just some abstract numbers you see on the screen. In addition, be always aware that by nature people are inclined to underestimate probabilities of bad events. Accept the idea that there will be losses and your job is to make sure that they don't put devour your deposit. Be prepared: don't risk too much and use Stop Loss orders. #4: Forgetting bigger timeframes Some intraday traders - beginners - perceive timeframes from daily and bigger as something remote and unrelated to what they are doing. Yet, bigger timeframes show the bigger picture. Although fractals we see on the smaller timeframes are the first to show a change in the market, they may always be just ripples that don't mean a new trend. As a result, make sure that you consult large timeframes on a regular basis to ensure that your short-term trades don't clash with some important long-term support/resistance levels. #5: Constant hurry Ask yourself a question: are you a patient person? Do you have this urge to open a trading order, no matter buy or sell, right after you have turned on your trading software just for the sake of doing something? Such a hurry to start trading is quite common these days when the process of setting up a trade is swift and easy. Another form of the illness is when a person sees a rapid movement of the price and has a sudden panic attack, seized by the fear of missing out (FOMO) a trade of a lifetime. The problem is that if you are in a hurry, you will probably cut yourself a lot of slack in market analysis and get into something you shouldn't have got into. The odds are that by doing so you will forgo risk management. In order to avoid such situations, try to consciously monitor your psychological condition during every trade. Make it a routine checkup: every time you feel that you are moving too fast, slam on the brakes, take a deep breath and think some more. #6: Not understanding the essence and logic of the market Often enough traders look at a chart but don't really see it. Remember that the price action is a result of the activity of all market participants or that a pullback comes after every big move. It's also worth noting that a lower high in an uptrend is a worrying sign for bulls or that breakouts of important levels may be false. Furthermore, candlesticks and their patterns can tell you stories about what happened with the price; that technical indicators don't bring new information but are derived from the price; that fundamental economic disparities shape the longer-term trends and the market is driven by expectations in a greater deal than by events themselves, etc. To become better at reading the market, make your forecasts for the instruments you do not trade and see how the situation turns out. Watch the price's reaction to economic releases. Apply every bit of the knowledge you get to practice. #7: Overanalzying Regrettably, there may just be too much of a good thing. You should always be able to see the price chart below all the lines you have drawn and all the indicators you have applied - no jokes! To be honest, it's hard to see how you may need more than 3-4 indicators: there is little point in applying indicators that have similar functions. In addition, a bigger number of indicators will simply make a trading strategy bulky and dysfunctional. As a result, cut the excessive things and use the remaining ones efficiently. #8: Poor planning and organization In some endeavors, it pays off to be spontaneous. However, trading is rarely one of them. It doesn't mean that trading is not creative, but that it requires disciplined execution on many levels. Here we stress not only the necessity of a trading plan with the technical details of your trades but also the need to have a daily routine in place. Make sure you organize your activity carefully. Assign defined periods of time to trading and make sure you stick to them. Conclusion Our most sincere advice is for you to try and actually apply the recommended solutions. As it often happens in trading, things listed above may seem like banality and easy stuff. Still, many traders put off amending the situation and forget about the simple steps that can make their trading life much better. What if a time to become a mindful trader has finally come? This article was submitted by FBS.

EDUCATION FROM BROKERS Fri 9 Aug

Inside bar: Your new friend in trading

A technical signpost to watch for There are a lot of candlestick patterns. Some are more distinctive, some are less. It's easy to be on the lookout for pin bars - candlesticks with long upper or lower wicks that indicate a reversal. However, such candlesticks, though quite common, do not appear all the time. Plus, there are other patterns worth paying attention to, for example, 'inside bars'. Monitoring inside bars is much less intuitive. Yet, inside bars can be no less helpful and provide traders with trade ideas that have a big probability of success. In this article, we have gathered some useful tips about inside bars. What is an inside bar? As you can deduct from the name of this pattern, an inside bar is a 2-candlestick pattern, in which the second candlestick is completely engulfed by the first one. The first candlestick is called 'mother bar', while the second one bears the name of the pattern itself. The color of the inside bar is not important. The difference between an inside bar and harami is that with an inside bar, the highs and lows are considered while the real body is ignored. An inside bar forms after a large move in the market and represents a period of consolidation. It indicates that the market is seized by indecision: neither bulls nor bears can swing the price in their favor. The idea is that after consolidation the price tends to make a strong directional move. As a result, if a trader spots a moment of calm (i.e. an inside bar), he/she will be able to trade on the breakout of the consolidation range. If an inside bar formed within a strong trend, the odds are that the breakout will occur in the direction of this trend.A string of inside bars during an uptrend All in all, the smaller the inside bar relative to the mother bar, the greater the possibility of a profitable trade setup. Plus, the best case is when an inside bar forms within the upper or lower half of the mother bar. All of this shows that the preceding trend is still strong and hence likely to continue, so an entry in its direction will pay off nicely. Stop loss orders are usually placed at the opposite end of the mother bar or around its middle if the mother bar is bigger than average. An inside bar followed by a strong breakout. Check the place where the inside bar formed: is there a strong resistance? This may explain why the price reversed down Another tip: keep track of inside bars on the daily chart and bigger timeframes. Lower timeframes contain huge amounts of "noise" and thus may give false signals. In addition, there may be several inside bars within the mother bar (i.e. 2, 3 or even 4). This simply means that consolidation will take longer, and the odds are that a resulting breakout will be stronger.  Inside bar and fakey So, trading inside bars is all about breakouts. However, it's common knowledge that breakout may turn out to be false. A "fakey" pattern represents a false breakout of an inside bar. In other words, it's when the price breaks out an inside bar but is unable to continue moving in that direction and quickly gets back. A fakey is a strong reversal signal. Fakey may consist of one candlestick (in this case it will be a pin bar) or two candlesticks (the second candlestick will erase the progress of the first one). The most important characteristic is that a false break of the pin bar should be obvious and clearly visible at the chart. An example of a 2-candlestick fakey An example of a pin bar fakey It's wise to pick up a trade signal provided by a fakey if it forms near an important support/resistance level. Conclusion A thing to like about inside bar trading strategy is that it revolves entirely around the price action. Inside bar is not the most popular type of pattern but it can enhance your understanding of the market several-fold. Don't forget to monitor trends and support/resistance levels to distinguish the continuation inside bars from potential reversal ones/fakeys. Finally, once a fakey is identified, it's a great hint of a new price swing and may be used as an entry cue as well.   This article was submitted by FBS.

EDUCATION FROM BROKERS Thu 8 Aug

How to be a forex expert

What is the forex market Anyone who has ventured into the real marketplace would definitely have an idea what a Forex is and share the many promises and possibilities this horizon can bring. What is Forex? FOREX stands for the very popular Foreign Exchange Market. Sometimes, though, people associate it or equate it to mean also currencies. Basically, forex is where people trade. The objects of the trading are the different foreign currencies. People buy and sell the currencies. The exchange market and the trading as we know it today started in the 1970's. It has no definite place. It has no definite location. The foreign exchange market is found wherever there is a financial center where people conduct constant exchanges and buying and selling. To ensure definite success in this field, the main goal has to be kept in mind.  The keywords to traders in the foreign exchange market are to 'buy low and sell high.' This is the way to get the profits coming in. Why Are People Trading in the Forex? More and more people are turning into the forex trading now. It has become popular once again and people want to enjoy the success this can bring. There are also no strict requirements to join the market. Anybody can enter it and learn how to trade. Some even study beforehand to be prepared for the big trading. Another good aspect about forex is the absence of too many fees to be able to join in. There are no commissions, no brokerage fees and no government fees. The best thing by far is that trading can be done at home. Anyone can initiate a trade online. This spells big for people who stay at home, especially those who do not feel comfortable in engaging on online businesses. With proper training and computer with internet access at hand, success is within the bounds of the home. How Does One Trade Successfully in the Foreign Exchange Market? The purpose of 'to buy low and to sell high' must be kept in mind when trading in the forex. This will be the main vision of a trader to succeed. The next task at hand is to know the trends. This means knowing when a particular currency will buy low or sell high. This is not mere prediction of possible turn of events. Thus, forex requires strategies that have been tested to make sure that a decision will be profitable. There are two basic strategies employed in forex that one can learn from tutorials or from the actual exposure to the market. The first strategy is the technical analysis. This provides that a particular price chain reflects all the necessary information regarding the market. This entails a close analysis of the various aspects of the currency like the lowest and highest prices or the opening and closing prices. The other strategy is the fundamental analysis. As the name implies, it takes the overall situation. It focuses beyond the currency. It considers the situation of the country, economy, politics and even the rumors. Thus, this requires more exposure and knowledge from the part of the trader. Conclusion The foreign exchange market promises so many possibilities to the trader. Many people may be interested in the forex but are only afraid to take the first step. This attitude should be turned around. Just have a good vision, take the necessary steps and make the forex venture a success. This article was submitted by LegacyFX. ForexLive

TECHNICAL ANALYSIS Tue 23 Jul

Non trend transitions to trend. Has the EURUSD non-trended long enough?

Is it time to prepare for a trend?  I think so.... There is a market truism that plays out eventually. That is, non-trends transitions to trends.  The EURUSD is currently in a 463 pips non-trending trading range for 2019. How does that compare to history? Not too favorably. The lowest trading range for a  calendar year since the EURUSD introduction in 2002 is 1147 pips (back in 2013). The average since 2002 is 1966 pips. The recent average is around 1450 pips.  There is room to roam. It is time to be prepared. ForexLive

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TRADING PSYCHOLOGY | BASICS Mon 22 Jul

Moody's affirms Boeing rating but downgrades outlook - lesson for forex traders?

Moody's changing their their outlook for Boeing is of some import for forex.  The firm (Boeing) is a huge US exporter (or was ….) so developments are of interest. But what caught my eye was this from Moody's Outlook for Boeing and Boeing capital corporation was changed to negative from stable change in Boeing's outlook to negative principally reflects that grounding of 737 Max aircraft will run longer than Moody's had expectedBolding mine.  The news on the 737 Max grounding has been unrelentingly negative. For many, many months now. And yet it has taken that long for the agency to reassess their outlook. I am not making a judgement on Moody's here. Maybe once I move out of my glass house I can throw stones their way. As a question, how many traders persist with views in the face of relentless counter evidence? Or even just incoming information, maybe not strong enough to termed 'evidence', but enough to reinforce doubts on the view? Our job is, on an ongoing basis, to make judgement calls and then to execute on those judgements.  How many of us take too long to do this? And at what cost? This is not a lecture, mea culpa applies. ForexLive

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TRUSTED GURUS Wed 17 Jul

Ray Dalio: A paradigm shift is coming (and here is what's to buy)

Wisdom from Ray Dalio The problem with markets is that they change. What works today probably won't work in 10 years. That's why some investment managers are superstars for a time and then flame out. However some people have managed to shift with markets and one of them is Ray Dalio. In a LinkedIn post published today he talks about paradigm shifts in markets. A great point that he makes is that paradigms -- by definition -- are things that have gone on for long enough that people think they will never end. He touches on examples like debt driving asset prices higher and low volatility leading to high volatility. A few years ago nearly everyone assumed the paradigm of free trade and globalization would continue indefinitely. Trump, Brexit and some other events upended that overnight. "In paradigm shifts, most people get caught overextended doing something overly popular and get really hurt," he writes. The difficulty is in knowing which paradigm you are in. He believes a shift is coming. In his latest piece he outlines the shifts over the past 100 years to show how they work and then his thinking about what's coming ahead. Where we are: He believes we're coming to the end of the QE cycle in part because central banks can't push yields any lower because of a lack of assets to buy. "Central banks doing more of this printing and buying of assets will produce more negative real and nominal returns that will lead investors to increasingly prefer alternative forms of money (e.g., gold) or other storeholds of wealth" He cites three things that have boosted stock prices: Cheap moneyImproved profit margins due to automation and globalizationCorporate tax cuts He says the S&P 500 would be negative over the past 20 years without those factors. What's next Dalio admits that predictions are tough but outlines a way forward. I think that it is highly likely that sometime in the next few years, 1) central banks will run out of stimulant to boost the markets and the economy when the economy is weak, and 2) there will be an enormous amount of debt and non-debt liabilities (e.g., pension and healthcare) that will increasingly be coming due and won't be able to be funded with assets. Said differently, I think that the paradigm that we are in will most likely end when a) real interest rate returns are pushed so low that investors holding the debt won't want to hold it and will start to move to something they think is better and b) simultaneously, the large need for money to fund liabilities will contribute to the "big squeeze." At that point, there won't be enough money to meet the needs for it, so there will have to be some combination of large deficits that are monetized, currency depreciations, and large tax increases, and these circumstances will likely increase the conflicts between the capitalist haves and the socialist have-nots. Most likely, during this time, holders of debt will receive very low or negative nominal and real returns in currencies that are weakening, which will de facto be a wealth tax. Dalio suspects debt will be monetized and also asks what will be the 'next-best' currency to hold. He also doesn't believe equities will provide a worthwhile return. As hinted above, he believes the thing to own is gold. I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold.

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FUNDAMENTAL STRATEGY | EDUCATION FROM BROKERS Wed 10 Jul

Weathering the storm: Why safe haven assets should interest you

A look at safe haven assets as we brace for a period of uncertainty Ongoing discussions are swirling about President Trump and President Xi's meeting at the G20 summit In Japan. This was a high-stakes meeting with concerns about a slowdown in global growth, through a protracted trade war, the forefront of investors' minds. It is not hard to see why this is the case since 40% of the world's GDP comes from the combined economies of the US and China. The meeting left many questions unanswered, and ultimately a backpedaling from the implementation of tariffs. Trade with CMS Prime today However, given Trump's volatile nature, nobody knows if further tariffs will be threatened, making traditional safe haven assets enticing. This article will point out some of the go to safe haven assets that should interest you should the ongoing trade war take a turn for the worst. ForexLive Going for Gold With the Federal Reserve having recently signaled a rate cut in July there is now a growing expectation of a global low interest rate landscape that could last for some time. One of the results of this has been the growing value of Gold against the USD. Before the last FOMC meeting Gold was kept underneath key weekly resistance on the XAU/USD chart, but with the dovish shift from the Fed Gold broke out of that level. See chart below: The technical breakout is clean and convincing and a downturn in the latest G20 US-China trade talks will result in further Gold buying. The downside of owning Gold is that, unlike Bonds and Stocks, you do not get a return for holding the asset. So, with US equity markets at their highs and bond yields falling across the world, Gold is once again regaining its attraction. A US-China trade war storm will complete the fundamental picture to that technical and result in further gold strength going forward. When investors face very stormy markets, they like to go for Gold. Bolting for Bonds High grade bonds become a place of safety in uncertain times, since they are a better than holding cash, but they still do offer a fixed rate of return if the blind is kept for its full term. The investing legend, Benjamin Graham, recommended having a 50-50 split between bonds and equities and not allowing that ratio to differ by more than a 75-25 ratio split. In other words, in uncertain times, he recommended having up to 75% of your portfolio in bonds. This would therefore make high grade government bonds, like US treasuries and UK gilts, attractive in stormy and uncertain financial. Yearning for Yen The Japanese Yen is a traditional safe haven currency. Negative interest rates, like the Bank of Japan currently has, would typically discourage currency capital inflows. However, the debt structuring of Japan means that the currency is considered very stable and safe for uncertain times. As a result, when investors and speculators are fearful, there are sudden and marked inflows into the Japanese Yen. The pair that stands out for particular downside in a fresh round of the ongoing US-China trade war would be the AUD/JPY pair. As around 30% of Australia's economy is made up of trade with China it stands to lose out on a US-China trade war. Further trade strain would result in AUD weakness and JPY strength on safe haven flows. Swinging to the Swiss franc Another safe haven currency that would attract safe haven flows would be the Swiss Franc. That would see safe haven flows resulting in CHF strength. However, it is worth bearing in mind that the Swiss National Bank (SNB) has an interest in ensuring that the CHF does not become too strong. As Switzerland has an export economy a strong CHF hurts its exporters. As a result, the SNB maintains periodic intervention in the CHF. If the CHF becomes too strong, be alert to the possibility of intervention. In certain times let the US Dollar Index be your guide The Federal Reserve is the most important central bank in the world with the US dollar being the most traded currency in the world, comprising of around 70% of all transactions on a given day. So, having a handle on what the Dollar is doing overall on any given day is going to be a key advantage for any trader. The Dollar Index will help you do just that. The US Dollar Index is a guide for the direction of the USD in any pair Trading any pair with a USD half will be guided by the USD index, so here are a couple of key facts to keep in your mind: • If the USD is the base currency (USD/xxx), then the US dollar Index and the currency pair will typically move in the same direction. • If the USD is the quote currency. (xxx/USD) then the US dollar index and the currency pair will typically move in opposite directions. The US dollar index and the smile theory. The US dollar index can give you a quick broad picture of the dollar and help you see what is going on with the market. The smile theory is worth mentioning since it is such a good way of expelling the three varying ways the dollar responds to different situations. If you look at the picture above you can see a smile. On the left-hand side of the smile you have USD strength, which is when the global economy is struggling. This is where you have JPY, CHF strength and USD gains too as it acts as a safe haven currency. The bottom part of the smile is where the USD depreciates on a dovish Fed. At the time of writing, in June 2019, the USD is falling with a more reserved Jerome Powell looking at a rate cut in July. The right part of the smile is when the USD gains value on a hawkish fed and a risk on environment. This smile theory is useful as a quick rule of thumb for understanding the dollars present position and what is likely to happen next. There is normally an inverse relationship between the value of the dollar and commodity prices. By getting into the habit of noticing the USD index as soon as you start trading you can speed up your analysis on the dollar and also gain invaluable insights to inform your next trading decision. This article was submitted by CMS Prime.

VIDEOS Fri 5 Jul

Video: What to watch for in the non-farm payrolls report and why CAD could rally

I spoke with BNNBloomberg earlier today The jobs reports for Canada and the US are due on Friday and that's going to make waves but the newfound drama around central banks is the area to watch. Want to know when we've got a new video out? Click here to subscribe to our YouTube channel. ForexLive

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