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BASICS | EDUCATION FROM BROKERS Mon 24 Jun

Automated trading using forex signals

A look into the use of forex trading signals ForexLive Many forex brokers and independent companies have developed trading systems that offer forex signals telling the user when to buy and sell. The execution of a trade could be as simple as pressing a button or making a telephone call.

TRADING PSYCHOLOGY Mon 24 Jun

Trading mistake#5: Revenge trading

Beware taking revenge on the markets Revenge is one of the most poisonous emotions we can feel, acting on it brings a cycle of destruction into our lives in life and in trading. However, whereas a person may not take revenge in their general day to day living, they may do when it comes to trading. So, this next article is designed to help us recognise and stop revenge trading. Here are three situations when we are more likely to seek to get revenge :  Immediately after a losing trade. Your stop was hit by 1 point overnight after which price soared in your desired direction. You are furious and incredulous in equal measure. When you are angry after a losing trade. Depending on your constitution you express your anger, either a clenched fist that bangs the desk, a revised eyebrow, or maybe merely the increase of tour heart rate. Regardless of your temperament you are ticked. You scan the news feeds furiously looking for another trade. You find one and you are stopped out. You are even angrier, and you increase your leverage and take another trade. You get the picture.     After a period of drawdown. Mentally you were prepared to accept X% of drawdown. Then that X% of drawdown is exceeded. You are angry, disappointed and frustrated. You feel that you have let down your family, your fund, your loved ones. You feel a failure. You read an internet troll who insulted your reasoning, called you a son of a donkey and, horror of horrors you actually believe him ;-). You now think , well what does it matter I may as well max out the leverage and try and make it back on one big all or nothing trade. You have mentally crumbled and believed a tissue of lies that is leading you to to lose discipline, focus and perspective.  Due to stubborn pride. Well, it went like this. Let's imagine a hypothetical example. You had this public argument on a forum with a trader humbly calling himself , 'Forexgenius 789' .He called you a 'dirty rat' (shock, horror) because you were shorting the EUR/USD pair. It created a small ripple on the forum and two other people 'liked his comment'. One of whom was a guy whose AUD/USD position you questioned three months ago. You gave four reasons to short the EUR, all of which made sense, but 'Forexgenius 789' says only chumps short the EURUSD pair and that you are ignorant, naive and probably are a born loser (you see 'Forexgenius 789' is a natural encourager and the life and soul of the party). Of course, he never comment on our site ;-). The problem is that, this time, he is right. You are the wrong side of the trade and you did miss a critical part in your analysis. You are not a 'dirty rat', nor are you a born loser. However, you are wrong on this occasion. It happens to every trader. Now, you know that you should immediately close your position when you know you are wrong.However, you don't. You hold on out of pride. You keep arguing with 'forexgenius' about your position. This is stubborn pride an it can trigger a waterfall of revenge trading. Don't be proud. Be humble. Take the loss, learn the lesson and let 'Forexgenius 789' have his moment in the sun and make a note to yourself, not to goad him next time he takes his turn in the rain' ForexLive

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TRADING PSYCHOLOGY Fri 21 Jun

Trading mistake#4: Over trading

How much is too much? This is one of those frustrating questions to answer because there are not an evenly distributed assortment of trading opportunities. Some weeks have more obvious trading opportunities than others. This means that in theory you can keep taking the trades as long as they present themselves. However, this can also there are times it is hard to spot when you are overtrading. Some traders try to limit themselves to a certain number of trades per week. Other traders have an equity loss limit for the week, when that is hit they head to the weekend early. The answer that people find to this question is different, but one thing is key, make sure you have a response when you notice that you are overtrading. How to recognise it? This it something that is easier to experience than necessarily articulate. There can be a fine line between overtrading and being active in the market. However, here are a few key things that you can recognise:  You have lots of positions open and you are changing your mind on them a lot, e.g long USD in the AM, but change your mind for no real reason in the PMYou are placing trades indiscriminately - you sell at a big support level here, a key option expiry there, you read a blog on the strength of the Yen and open a few small positions.You are losing equity - This is a good sign that you are overtrading, since the indecision and changing around is hurting your bottom line How to stop it? Withdraw from the markets. Take an early weekend, a week off trading. Anything to slow down pulling the triggerIf you are still struggling, then reduce your risk and widen your stops. Consider averaging into positions in order to avoid emotional attachment to any one trade in particular. Become accountable to a trading partner. Someone who you can share your monthly results with. Do not do this on a public forum as it will not benefit you as much as sharing results privately. If your results are good you'll be pumped up as a 'trading master', if your results are bad you'll be beaten down as a 'trading failure'. Neither are good for your development, so find someone who can help with your accountability.  Over now to our seasoned readership, what tips do you have on stopping overtrading?   ForexLive

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TRADING PSYCHOLOGY Thu 20 Jun

Trading mistake#3: Not being accountable

The power of accountability Hooray! My tech problems yesterday are resolved, so I am able to post again. A big thank you to Justin for jumping in and posting part 2 of our 5 part trading mistake series. As a recap, the series looks like this: Mistake #1 Over leveragingMistake #2 Speculator's GuiltMistake #3 Not being accountableMistake #4 Over tradingMistake #5 Revenge tradingToday we are on Mistake #3, the mistake of not being accountable. Having spoken to a group of around 70 or so traders and aspiring traders over the last three days in Dubai I have been once again convinced of the value of this site. Understanding fundamentals is so key to trading and the breakout in Gold, which was clearly signalled with the Fed's leaning towards a cut last night, was a trade I was pointing out to the group I was speaking to last night. The fundamentals, not the technicals, were going to lead the breakout or otherwise of Gold on the 1350 level.  This is where ForexLive.com is so valuable, the constant fundamental analysis of the team here and not to mention our regular contributors who add their valuable market wisdom to our proverbial pot. It was good to be flying the Forexlive.com flag as a free, fundamental resource for retail FX traders. When trading becomes gamblingI was also convinced of this trading lesson, the mistake of not being accountable. From the person who was many thousands out of pocket on open wheat positions to the person long and loaded into Gold, before the Fed meeting. Both asking me for direction and advice with a slight frenzied feel. It was uncomfortable to witness people under strain with large positions they are not sure to hold, but are unequally unsure about whether to close. When trading becomes gambling then hopetimism followed by the inevitable crash. Now, don't think I am one to pour scorn on those who have made these errors. Oh no, I feel the pain and I have been there. I am just a voice in the desert saying, put your trading house in order. Let me show you how. And today, here is lesson three, find some accountability.Mistake #3 Not being accountableWhen I started learning to trade, back in 2009, I did it from the internet. It was a nightmare of a process. You would be hit by a barrage of multiple factors: trading robots, internet forums with 'experts' telling you how to trade, people insulting other people, and internet marketers touting for your business more than your progress. It can take a while for the fog to clear. In fact, you may still be in that confusing position. One of the lessons that I have learnt during that time is that accountability is a great tool in helping your progress as a trader. There is something strangely powerful in just having to articulate your current trading state to another person. It makes you own your mistakes in a personal way, puts perspective on your success and provides greater clarity on your solutions too. So, can I encourage you to keep greater accountability with your trading? Here are four ways: Find a FX trader who you can be accountable to. Why not go through each other's trades in the last month and ask each other questions about that record. Articulating your trading can help flag a problem and reinforce good habits that are working. Ideally this will be a person who has years pf experience in the market and can teach you how to marry fundamentals, technical and sentiment together. If you can't find someone to help you in this way, keep a trade journal and then make some comments after each trade. I find this less effective than speaking to another person, but you will know your own best learning methodsThis will depend on the nature of your finances and personal relationships, but have a close friend or family member you are accountable to if you are struggling with blowing up your trading accounts. Why not give them an equity figure you will start demo trading with if you hit a certain level. Having a 'think-again' equity level could help stop the rot before it eats too much capitalConsider getting a group of FX traders to meet in your area. Could you have a coffee shop meet up once a month or once a quarter? Learning online is good, but there is no replacement for face to face contact. I don't know about you, but when I meet someone face to face I find that a far more helpful experience than just meeting someone online. One gentleman brought his wife along to our seminar last night as his own accountability partner. I confess that I was jealous as this good lady sat through 3 hours of me talking about intermarket analysis, option levels , flash crashes and a trading routine; all for her husband so he could involve her as his accountability partner. A true  labour of love ! Here was a man prepared to be honest with his trading, himself, and his family. I am confident for him. He has made a good start to being accountable. What accountability do you have? How are you going to get it? I have a number of traders who I invite to contact me and let me know about their progress. Why? Simply because the articulation of our trading can sometimes be the first step to addressing, changing and ultimately overcoming our challenges. All without the trolls, weirdo's and closest psychopaths who like to jump out of the shadows behind the privacy of their keyboards and a wifi protected world. Tomorrow, is lesson 4 and I hope not to have any more technological problems then !  ForexLive

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BASICS | EDUCATION FROM BROKERS Wed 19 Jun

Apply "the secret" to forex trading success

What's "the secret" behind successful traders? The Forex market is the largest trading network in the world with $1.8 trillion dollars being exchanged every day. There are dozens of different currencies traded but the big players to focus on are all traded with the US dollar and include:  EUR (Euro), GBP (British pound), JPY (Japanese yen), CHF (Swiss franc), AUD (Australian dollar), NZD (New Zealand dollar), and the CAN (Canadian dollar).  Each of these currencies is exchanged with the currency of other nations at different exchange rates-which are always in a state of flux because the market trades around the clock (Sunday through Friday). The volatility and sheer size of the market means that there is ample fluctuation to produce big profits-and losses. The challenge for the investor, as always, is to predict which direction the rates of currency pairs will fluctuate.  The beginning point in any investment strategy is determining what type of analysis will be used to help guide enter and exit decisions. Investors who use fundamental analysis look at a nation's interest rates and other economic indicators when deciding to enter or exit a position.  Fundamental investors tend to trade based upon news releases and economic data from the nations involved in the currency pair.  Briefly, technical analysis involves the interpretation of price performance and chart patterns-all historical data.  Some technical indicators used in this type of analysis include: Moving averages including Simple & ExponentialBreakout PointsLines of Support & Resistance Technical traders do not believe that the past necessarily predicts the future-but that long- and short-term trends can be identified and exploited to help guide current decisions on entry and exit points on positions.  Technical traders try to identify current trends in the Forex market to determine entry and exit points.  If they are correct, they can ride a trend (in either direction) for a profit until an exit point is reached (when the trend is ending). The most successful traders on the Forex tend to look for long-term trends and favor technical analysis. Fundamental traders have to enter and exit positions very quickly in order to capitalize in price fluctuations caused by news events (interest rate changes, release of economic data, etc.) and are therefore more vulnerable due to excessive trading.  If there truly was "a secret" to trading success on the Forex, the top investors all tend to agree on the following: Choose currency pairs involving U.S. dollar (has volume to produce the price fluctuations necessary for big profits and the liquidity to enter/exit positions at will)Find currency pair through backtesting that has most profit potential (pip movement) and least volatility through use of technical analysisAfter determining trends, set stops and exit points for both protection and maximum profitabilityReview charts once per day (overtrading and day trading can hurt your portfolio)Remain patient and exit positions once technical decision point has been reached If there really is a secret to trading success on the Forex it has to be patience. Trading strategies are never perfect because the market will never be predictable 100% of the time. There will be times when any strategy fails and stop points are reached before profits are realized. Continuous back testing, remaining patient, and setting stops are the true secrets of Forex success. This article was submitted by UBCFX. ForexLive

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MARKET WISDOM | BASICS Wed 19 Jun

5 trading mistakes to avoid: Mistake #2 The Spectator's Guilt

I'm just posting this up on behalf of Giles, all credit goes to him for this series 5 trading mistakes to avoid: Mistake #1 Over-leveraging On a recent weekend I spent the afternoon watching a dramatisation of Charles Dicken's novel, Little Dorrit. Writing in the mid 19th Century Charles Dickens spoke of an age old problem; namely that of Speculator's Guilt. The lesson that 'Speculator's guilt' provides can be learnt in one of two ways. The easy way or the hard way. The easy way is to identify it and avoid it, while the hard way is to experience it and vow never to repeat it. The novel Little Dorrit revolves around the key theme of financial impropriety in 19th Century London. In the book there is a financier called Mr Merdle and he is known as the 'phenomena of the age', a financial 'genius' who is trumpeted and adored for his financial acumen. His fund is large and grows at a phenomenal rate. In fact, his fame grows so large, that investors from a variety of sources flock to give all their income to the 'man of the age'. Of course, my trading buddies here know how the rest of this story goes. Mr Merdle becomes overstretched. He makes some errors and, in a bid to hide them, he uses funds from one fund to finance another until it all comes crashing down. (A kind of Ponsi scheme light). The result of course is that many, many people lose all their money.  Then, in a gently probing manner, Dickens explores the question, who is to blame? Is it Mr Merdle for his fraud (yes, of course). Is it the individual firms who invested all their money in Mr Merdle's fund? (Yes, of course). Is it the people who convinced others to invest on the soundness of the venture? (Arguably,at least partly). And so here we have a myriad of varying parties who all share what can be summarised as, 'Speculator's Guilt'. The interesting thing that Dickens draws out is that there is something peculiarly intoxicating about backing one sure fire winner that beguiles all sense. The risking it all for one throw of the dice that is attractive. One hit and I am done. One trade and I solve my financial tight spot. Not only a 'get rich' desire, but a solve most of my present problems in one go. One trade and we can buy that house, go to that school, clear that debt, make that phenomenal return etc etc.  We saw this in January 2015 when the Swiss National Bank removed their floor on the EUR/CHF pair. EUR/CHF fell 40% in minutes and with it more money than I care to think. Fund crashed, brokers went bust, individuals lost a life changing amount of money. For some people the experience made them. For others it broke them. However all of them stood humbled before the intoxicating power of Speculator's Guilt.  So, learn this lesson and don't repeat it:There is no sure fire winner in financial trading, despite what people may say. The more people stress that this is 'the investment to make', be the more alert. Never bet it all on one shot, ever. Even if you think you can rebuild it all again, others around you may not want to hang around and wait. You can lose close family relationships by risking it all with Speculator's Guilt. Watch little Dorrit and imbibe this lesson through a decent narrative. By the way, if you just watch for it's financial lesson, it has a decent love story thrown in (to keep the Mrs happy) , some unforgettable characters, and a financial story that you can enjoy which others may not be even aware is being taught. e.g. it's not like asking your family to watch Bloomberg news. My good lady can take me talking shop for a maximum of about 90 seconds. ;-). I might share this post with her and see if she comments! Thank you Mr Dickens for teaching us this lesson of 'Speculator's Guilt'. Learn it boys and girls, or repeat it. The choice, as they say, is ours to make. ForexLive

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BASICS Wed 19 Jun

Here's what happens when buyers > sellers

A quick one on a real basic in markets. All sorts of markets.  Not financial markets - imagine your favourite pop singer. She is outing on a concert. There are 'x' number of tickets. And they are quickly all bought up. Leaving potential buyers empty handed. So scalpers offer tickets they have bought at higher prices. And they have no problem selling at high prices. Warren Buffet often advises companies that have excess capital sitting around to buy back shares if they don't have anything else to do with the cash. And guess what, prices go up.     So today, Nomura shares are trading +10%. The company announced a buyback. More buyers. And exacerbating impact in financial markets is good information - the sellers of Nomura shares realise there is a chunk to be bought , so they raise their askngi price. Price goes up. This is not rocket science.  ForexLive

TRADING PSYCHOLOGY Tue 18 Jun

5 trading mistakes to avoid: Mistake#1 over leveraging

A 5 part series During this week I am in Dubai teaching a course on FX trading and I thought this would be a good time to have a series. imaginatively titled, 5 trading mistakes to avoid. So, over the course of the next 5 days there will be a short mini series covering the following five topics:  Mistake #1 Over leveragingMistake #2 Speculator's GuiltMistake #3 Not being accountableMistake #4 Over tradingMistake #5 Revenge trading So, today we will begin with our first lesson looking at the danger of over leveraging.  Trading Mistake #1 Over leveraging The misuse of leverage is the single biggest killer of traders. It is intoxicating, plays to the snake-oil salesmen who want to convince you that you can be a millionaire in a month if you use it, and is readily available. However, it is also the single fastest killer of aspiring retail FX traders trading accounts and so makes it to my number 1 spot of trading mistakes to avoid.   A powerful weapon in the wrong hands  Every now and then you hear of a disaster that happens because an item of equipment is too powerful for its user.  I remember reading a very sad case of a person who was firing a very powerful automatic weapon on a shooting range in the US.The re-coil from the weapon was so strong that the inexperienced person sadly ended up shooting themselves by accident. It was a tragic mistake to put such a powerful weapon in a inexperienced person's hands without proper training. The misuse of leverage can be sometimes compared to this, a weapon that can end up destroying you.  The good news is that it doesn't have to be this way. So, some may ask, what actually is leverage? What is leverage?  Leverage is simply the ability to trade a position sizes larger than your account size. Think of your account size vs your account size.If you have a 10,000 USD size account then trading without leverage will involve trading a lot size that is equivalent to your account size. So, if your account size is 10000 USD then trading without leverage will involve trading a mini lot of 0.10. See screenshot below for an example of a non-leveraged trade on a 10,000 USD account. The more leverage you use, the harder it is to trade with a clear head If you use too much leverage you will find it hard to not interfere with your trades. You will make more and more emotional decisions and experience deep, and rapid swings in your equity curve. Are you struggling with your trading at the moment? Then it may be possible that over leveraging is either causing your trading mistakes, or making them worse. Beware the danger of over leveraging. With some brokers offering leverage at levels of 1:50, 1:100 and  1:200+, the temptation to trade with borrowed money is huge. However, that leverage comes at a price and it may be the cost of your trading account if you leave it unchecked. I personally advocate trading without leverage, especially for the newbie trader,  and only using a small amount of leverage in specific situations. Tomorrow's article will be on a lesson I learnt from a Dicken's novel and it is titled: Mistake #2 Speculator's Guilt. ForexLive

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MARKET WISDOM | EDUCATION FROM BROKERS Mon 10 Jun

The tips for trading in ranges

How to make the best of a situation where markets are ranging What if the market lacks a trader's main friend, a trend? When the price is moving sideways, trend trading strategies won't do you any good. At the same time, that doesn't mean that you should twiddle your thumbs. The solution is to use special strategies that give you an edge in range trading. First of all, it's important to understand the logic of a range bound market. It's actually quite simple: neither bulls nor bears are able to move the market in their favor by much, so the price consolidates. The period of consolidation may occur after a trend move. In this case, it will be related to profit taking. At the same time, the price may start fluctuating in a wider range due to fundamental, i.e. economic reasons. This can happen when the future is particularly uncertain and market players see contrasting scenarios, both of which are quite probable, so traders are reluctant to make longer-term bets. As a result, the price settles down within a horizontal range. A range trader bets that it will remain there for some time. The process of range trading may be broken into several steps. Step 1. Locate the borders of the range, i.e. the levels of support and resistance that prevent the price from going lower or higher. The previous highs of the price chart should be located in the same area. You should also be able to say the same thing about the preceding lows. Notice that as the market is not perfect, we are talking about areas here. In other words, don't expect all highs to be right at the same horizontal level. The most important thing is that the market shouldn't make higher highs and lows or lower highs and lows because these are the distinguishing features of an uptrend or a downtrend respectively. You can also use the help of Bollinger bands: this indicator provides dynamic support and resistance corridor for the price.  Step 2. The obvious logic of trend trading is that you sell when the price is at the top of the range and buy when it's near the bottom. That's necessary, but not enough for making good entries. To increase the probability of success, use oscillators. Technical indicators of this type show whether the asset in question is overbought or oversold. If the price is near resistance and the indicator sends an "overbought" signal, it's time to think about a sell trade. When the price is at support and the indicator says that the market is "oversold", consider a buy trade. Among the indicators of this sort, we like the Stochastic Oscillator the most as it's visually clearer and easier to interpret.  If you spot a reversal candlestick pattern near the borders of the range, consider yourself lucky: the odds of successful range trade will become higher. A failed attempt to break out of the range is also a sign that the price will likely move to the middle/opposite border of the range. Step 3. At this point, you can make your trade. Don't forget about proper risk management. The natural place for a Take Profit is the opposite border of the range. We also recommend putting a TP not exactly at it but several pips closer to your entry point. This way the probability that the price reaches your target will be greater. The Stop Loss may equal to about half of the range size or less.      Finally, we should mention that it's better to avoid range trading when volatility is high. Think carefully if you see important releases in the economic calendar as they can lead to a break out of a range. In addition, remember that the knowledge of fundamentals will increase your chances of getting profit, so check economic articles to see what's happening at the market and why the price isn't trending. This article was submitted by FBS. ForexLive

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MARKET WISDOM | EDUCATION FROM BROKERS Wed 5 Jun

The science of day trading

A look at day trading and how to go about it Day or intraday trading is one of the trading styles. It implies that you hold a trade open for a couple of hours on average and close it before the end of the day. The general approach to day trading is different from the shorter-term scalping and the longer-term position trading. In particular, day trading is a good option for you if you like market analysis and are willing to devote time to plan and monitor your trade during the day. All in all, this style is rather balanced in terms of the amounts of patience and emotional resilience you need to possess to do the job well. Let's find out what things you should pay special attention to when you do day trading. The mere definition of this term leaves the door open for various approaches and strategies. Here are the options you have when you day trade: Trend trading. You can catch a rebound from support or a turn down from resistance in line with the overall trend thus increasing the probability of success. Get your hands on multi-time frame analysis (choose timeframes from D1 to M30), basic trend indicators and oscillators as well as some graphical tools like Fibonacci. Don't forget to draw trendlines: this is the simplest step and yet it should definitely be there for you. The mentioned things will help you find the moment when the trend resumes and join in for a short ride on board.Counter trend trading. The price is not always in the pro-trend mode when you open your chart to day trade. As a result, apart from waiting for a trend setup, it's possible to trade on a correction. Make sure you master reversal candlestick patterns, oscillators and different techniques that will help you find support/resistance levels and pick those of them that are really important.Breakout trading. If you pursue this approach, you focus on the most important levels of the price and initiate a trade when the price moves beyond them. The knowledge of s&r levels we mentioned in the previous paragraph will also come in at hand. In addition, you will need to know how to distinguish a real breakout from a false one. Finally, as intraday breakouts are often related to the news, you will need to stay aware of the fundamental picture and monitor economic calendar.   Notice that each approach requires disciplined risk management with some differences in each case. For example, breakout trading will require tighter stops and bigger reward relative to risk. There are many technical indicators and tools that will turn out to be helpful during day trading. ATR (Average True Range) will show the size of a typical price movement on a timeframe and alert you to the increasing volatility. Moving Averages will offer indispensable dynamic support and resistance levels (apply 200-, 100- and 50-period SMA for that purpose). Pivot points and Fibonacci will help you place the position of the price within a trend or relative to the previous price swing. Oscillators will let you know when the market is overbought/oversold/diverges from an indicator so that you could make a decision not to pursue the current move or trade against it. Here are some further tips we can offer: Choose high-liquidity instruments. Major currency pairs often represents the best solution. Don't rush into a trade or trade only for the sake of doing something. There will always be plenty of opportunities to make money, so don't give in to the fear of missing out. Mind the fact that each day won't be like the previous one. Remember that the market's behavior may differ from usual on the day of a bank holiday. Friday evening isn't a great time to start day trading either. Although trading sessions as such are not so visible on Forex, many currencies will still be more active during particular times when other markets of those regions are active. When the volatility is constantly low (the price doesn't move more than 30 pips a day), consider choosing another asset for trading. Have realistic expectations. You won't get a monthly profit for one day, so don't even ponder at this thought. Define your strategy and create a trading plan. Manage the risks and never add to losing trades. Beware of news. Remember that it's quite risky to place trades before or right after the important news releases as the market may behave in the unruly fashion. News trading requires experience and specific strategies. To make a conclusion, the majority of retail Forex traders practice day trading. This is also probably the most natural trading style for beginners. Pick the strategy you like most and bear in mind the recommendations of this article. We wish you lots of profitable trades! This article was submitted by FBS. ForexLive

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