Forex Education -


Automated wealth forex signals

Are forex signals reliable? Unless you are already a full-time trader, or unable to access a computer 24 hours a day, it's difficult to trade forex on a part-time basis. 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. Forex trading signals usually operate on a mathematical formula and when parameters are met, a signal is sent out via e-mail or phone.  Once the signal is received, it's up to the user to decide whether or not to take the signal. There are a lot of mixed reviews on forex signal service providers.  To be truthful most signal services work, it's the individual that fails to follow the system.  Even though you are not deciding when it's a good time to buy or sell, your emotions can still get in the way if you are coming off of a losing streak.  It is however possible to weed out a lot of the losing signals if you are able to identify the overall trend. Some companies claim to make 20% per month using automated trading systems.  I'll be the first to say that these systems do exist; it's just a matter of testing the different trading software's out there to see which ones work and which ones do not. When seeking out a reliable source of forex signals be sure that their data is back tested and the company has a proven track record.  Most systems will offer a trail period that enables you to test the system before committing to their service completely.  Prices for these systems can range anywhere from $15 to $500 per month depending on the quality of the signals. If a novice trader is lucky enough to find a personal forex trader that manages a small group of people and their money this can sometimes be even more profitable then the large forex signal service providers. However, finding reliable forex traders and trusting them with your funds are hard to come by. In my personal opinion, there is nothing wrong with using forex signal providers given you do not have time to trade for yourself. However, taking a bit of time to learn how the forex market reacts to news and events will greatly enhance you trading profits. This article was submitted by UBCFX. ForexLive

Ways to grow a small trading account

Trading tips for beginners Not everyone is able to start trading with a big account. In fact, if you are a beginner, it's certainly better for you not to risk a big amount of money right away. At the same time, smaller accounts do require a special approach. In this article, we will provide some recommendations on how to trade with small accounts with the maximum efficiency, so that a small account eventually turns into a big one. What is a small account? There's no exact definition of a small account. We are likely talking about the cent and the micro account types. Initial deposit here starts from $1 and $5 respectively. Given the fact that the smallest order volume on Forex is 0.01 that corresponds to 1,000 units of a base currency, it's not really hard to do the math and calculate the minimum amount of money you need to start trading. To do that, consider the leverage you will use as well as the percent of the capital you are ready to risk in one trade and the number of open positions you want to be able to have at one time. Notice that if you are not sure about the calculations, you can always make some risk-free trades on a demo account or get a welcome bonus from the broker. These options will let you test not only the mechanics of trading but also the quality of the company's service.      Problems of small accounts The jokes about size are not really funny, and yet the nature of problems you can face while trading with a small account indeed comes from the fact that you don't have a lot of funds at your disposal. This, in turn, means the absence of a big buffer against mistakes or unexpected losses. As a result, with a small account, it's necessary to be especially vigilant about managing risks. You will have to calculate the acceptable position size, use stop-loss orders and watch your risk/reward ratio and not just open a trade with arbitrary parameters. The biggest problem of small accounts is that smaller positions mean that profit would be smaller than the one you could get if you traded with bigger sums of money. In addition, you won't be able to make many simultaneous trades. As a result, even if your trades are successful, s small account will grow much slower than the big one. This can be a major psychological challenge for a trader: after all, who doesn't want to get more money fast? The fact that you put a lot of effort into your trading and it doesn't pay off big time may be very disturbing. Recommendations for trading with small accounts First of all, it's necessary to calm down and ensure that your mindset is positive. Everything has to start somewhere and a small account is not a bad thing to begin your trading career. After all, practice has shown that trading with small accounts can be as successful as trading with big accounts. Get comfort from the fact that with a smaller account you won't risk your financial well-being and yet you will be able to gain the invaluable trading experience, develop patience, discipline, and all other qualities that are good for a trader while making money in the process. If you have realistic expectations and look at everything rationally, you will be able to concentrate on the benefits of trading with a small account. That doesn't mean, of course, that you shouldn't aim for bigger things. Although this is surely entirely your decision to make, we would like to point out that there's a sense not to withdraw profit you get from a small account. After all, there's no other good way to make this account bigger, except, of course, investing more money of your own. At the same time, we don't recommend you to increase your typical position size every time your account gets bigger. Increase the size of your trades only when you are most definitely ready for that and do it gradually. This way you will be able to avoid rash steps while maintaining the sense that you are in control of your money and actions. Another tip is not to set daily profit goals: the market's situation is different every day, and you can't be sure that every day will offer you equal opportunities (you can actually be pretty sure in the opposite thing). The necessity of meeting a daily target will put you under useless pressure. You can set goals and track your progress and motivation but choose a bigger scale for that. In addition, try not to compare your performance with the results of others. Focus on what you are doing and on becoming a better version of your trading self. Next, a small account implies that you should be very active. Try to keep more capital at work: if you have free margin, look for more trade ideas. However, it's very important that in your quest for the quantity you don't cut corners on the quality. Do you remember that we have ascertained earlier that there would be less room for mistakes? Well, it means that you should be picky about the trades you make and go with those that have the highest probability of success. Here much depends on your trading system and methods of market analysts. In any case, make sure that you filter out bad signals, have confirmations from several tools of technical analysis and stay psychologically comfortable with every trade. When the price arrives to your target, don't be too greedy and take profit: even if you suddenly want more, no one prevents you from analyzing the market once again and making another trade.  All in all, if you follow these recommendations, trading with a small account will teach you everything you will need to know for managing bigger sums of money. Of course, you won't make billions with a small account, but you will be able to practice and achieve decent results. Never regret the fact that you could have opened a bigger trade. Everything in life could be better, bigger, brighter and so on. Praise yourself for your success and move forward with steady steps - this is the most reliable way to have a big account someday. This article was submitted by FBS.

How to trade double tops and bottoms

A look at a key technical analysis pattern from SimpleFX In many cases you can easily identify a trend reversal using a simple double tops or double bottoms pattern. In this post I will explain you how to do it. Here's the next episode of SimpleFX CFD Academy tutorials for beginner traders. Of course, the signals you (and all other experienced trades) learn to recognize in practice can go the other way. It's a question of probability. If you are confident in your chart signals interpretation, you will be able to see when something extraordinary happens. Especially cryptocurrencies, but the most traded Forex pairs as well, are exposed to market manipulation. You could see it at the beginning of April when allegedly $100,000,000 was enough to move the largest cryptocurrency 20% up, and start a bullish trend on Bitcoin and other altcoins. Most of the times you won't be able to read this kind of events from the chart. The big actors who want to make money include the basic patterns into their scheme of playing the small traders. This is just another reason why you have to know the basic patterns. Don't miss today's lesson where I'll write about a pretty straightforward double top formation and double bottom formation. Double tops and double bottoms are variations to support and resistance trading. They are technical analysis ABC, simple patterns to spot. Recognizing a double top pattern This trading formation occurs when the market is trending up. As always during a bullish trend, you get retracements (temporary price declines when some of the investors sell their assets to make a profit) after which the market should go to the new heights. However, if the retracement happens before breaking the old resistance level, this may be the beginning of a double top chart pattern. Take a look at the example below. Here's a GBPCHF price action on a 5-minute chart.  Image: SimpleFX WebTrader As you can see, the price moves down once again before reaching the previous heights. At this point, you may suspect a double top, but if you don't want to take too much risk (which may be a good strategy for beginners), you could wait for a confirmation. In this case, it does come when the price breaks through the local support level. The double top pattern showed up, and I place an order assuming that the price will go down at least the amount equal to the difference between the local high and low market by my horizontal lines. I'll go by the book and make a SELL order here. Image: SimpleFX WebTrader Let's take a look if it worked for me here... It did. Not only the price dropped substantially during the next two and a half hours, but also the pattern helped me predict a trend reversal. Image: SimpleFX WebTrader In this case, the double top formation and the confirmation of the pattern proved to be a clear signal and used created an attractive opportunity for profit. Taking advantage of a double bottom chart pattern Since the double bottom formation is just a mirror reflection of a double top one, to make things more attractive, let's take a look at the stock chart and use candlesticks this time. Let's take a look at the pattern on the chart of Tilray Inc., a popular among SimpleFX traders stock on the Nasdaq. Once again I chose the same timeframe, where each candle represents five minutes worth of trading. At the moment shown below, we are in a downtrend. Some retracements happen, then we have a rally that starts above the last support level. This may be a sign of trend reversal. Image: SimpleFX WebTrader Once again, let's wait for confirmation. Will the rally break the local resistance line? We may open a BUY order now, but it's much safer to wait for a confirmation. Let's see, what happens next. Image: SimpleFX WebTrader The chart broke the resistance. I decide to open a long position assuming that the price will go up at least the difference market by the two horizontal lines. Image: SimpleFX WebTrader This time it worked, too. In the next period, I managed to make a 2,89% profit, before closing my position. Of course, these are just examples, and you may point to many historical examples where the pattern didn't work. It's always the case when trading the patterns. You need to be aware that other traders use them, but also that big influential players may want to act against them. As usual, the devil is in the details. When trading chart patterns, it's crucial to adjust your stop loss levels accordingly. In the Tilray example above I set it at the lower support level, had I done it tighter, I would have been knocked out of my position during the "third bottom." On the other hand, placing it that low made a possible loss bigger, and if I applied maximum leverage, this could mean a substantial risk. Give the double top and double bottom pattern a try. See how it works on your favorite instruments. Try tempering with different stop loss and take profit levels, and develop a successful trading strategy. Good luck. This article was submitted by SimpleFX.

Why year-end markets are full of opportunity (and danger)

Timing is everything There are certain times in the markets that present risks and opportunities. In the market, different times have different characteristics. This is true on a day to day basis. For example, at the end of the US and before the Asian session the market becomes particularly illiquid and flash crashes can move the market hundreds of points on very little. This is a vulnerability that occurs at certain times. In a similar way, the end of the month and end of financial years have influences on different currencies too. This article will focus on year-end markets and both the risks and opportunities that lie within them. ForexLive Buying gold on the last day of the year One of the best ways to end the year is to consider buying Gold at the end of December in anticipation of the strong pattern of buying Gold, which takes place with a surprising regularity, in the month of January. Over the last few years this seasonal pattern has shown particular strength. If you include the months for February and March too there has only been negative returns once, in 2013. This year presented a really good opportunity to take advantage of this pattern as there were also strong fundamental reasons to buy Gold. The concern over the US-China trade war accelerated as President Trump became more and more vocal in his combative stance. The market feared that a hostile trade war between the US and China, which constitute around 40% of the entire world's GDP, would spark a global slowdown in growth. The result was that Gold was bought as a safe haven currency into year-end as US equities plummeted. Cryptocurrencies had also declined during the year as an alternative safe haven and Gold technicals looked good with a close above the highs of $1244. It was a great year start for Gold as usual. Japanese financial year end in March At the end of the Japanese financial year, which is at the end of March, many Japanese firms look to consolidate the years profits. As Japanese firms move their profits they bring them back home by buying the Japanese Yen. These Yen flows are typically seen in the last couple of weeks into March and end around three days before the end of the month. One of the best times to see these Yen flows coming into the market is around the London Fix. The London Fix starts at around 1600GMT each weekday and this is when a number of FX transactions occur out of London. The characteristic of these transactions at this fixing timing is that they are not run by speculators, but they are normal businesses who are having their money exchanged for purchases and employers etc. In this instance there can be an uptick in JPY buying as Japanese firms repatriate their profits. This JPY repatriation is not necessarily an easy phenomenon to trade, but it still serves to offer some explanation for strange JPY moves into Japanese year end and traders should be particularly aware of trading any JPY pair in the last two weeks of March around the London fix. The January effect There are strong tax and psychological reasons that mean a number of stocks show what is known as 'the January effect'. This is simply reference to a widely anticipated cyclical pattern in stock markets that occurs for a number of reasons. Sometimes, investors are simply closing their profits for the year and some investment firms are wanting to ensure they book their year-end profits and so they close their positions going into November and December. There is also a tax incentive and losing trades can be closed at year end to offset any tax implications of winning trades already booked. The impact seems to be seen most acutely in small caps. One study conducted by the firm Salomon Smith and Barney between 1972 and 2002 found that the stocks of the Russell 2000 index outperformed stocks in the 1000 index during the month of January. The interesting thing to note was that the outperformance was around 0.82%, but the stocks underperformed during the rest of the year. The usefulness of this fact has been questioned by some due to the necessary transaction costs in trying to capitalize on it. However, possessing strong fundamental reasons to purchase a stock at this time means that you potentially benefit from a year-end tail wind. Year-end USD demand starts in November At the end of the year there is demand for USD and typically speaking November is good month for broad USD strength. Over the last 5 years the Bloomberg Dollar Index (BBDXY) has increased +1.6% during November and that increases to +1.8% if you go back over the last 10 years. The conventional wisdom is that USD buying takes place in December, whereas there is greater evidence of USD buying in the month of November as opposed to December. The year-end oil effect Oil has a very strong year-end effect and it tends to have a period of depreciation at the end of the year.  In the month of October Oil prices have fallen 13 times and that general pattern of weakness has often flowed through to the months of November and December. By contrast, the months of February through to April are typically strong seasonal times for Oil. Therefore, traders should be particularly alert as we approach year end for fundamental reasons to short Oil as a strong seasonal pattern may give you a tail wind. Similarly, although this article is about year-end markets, it is worth pointing out that February should be considered for potential long US Oil positions. This year, that trade has already played out well for the month of February as OPEC cut their oil production levels, Venezuelan and Iran sanctions further hit supply and US oil rigs numbers steadily fell. It proved to be an excellent example of a strong seasonal pattern reinforced by good fundamentals. So, there you have it, year-end markets offer opportunities and risks, so look out for these characteristics for the end of 2019. This article was written by the ADSS Research Team.  

Forex trading: Understanding account types and differences

Instaforex: See what different account options are available to FX traders  There are a number of different account types available in the FX sphere and this article will run you through some of the most popular account options there are and outline some of the key advantages and disadvantages. The first account type we will discuss is the entry point account that all traders begin with; the demo account. Demo account, the entry account for all traders A demo account is a brilliant way to start trading and is offered by virtually all brokers. This is a demo or 'virtual' account that gives you a nearly identical experience of trading, but without the risk of losing capital, Advantages Trade with liberty: The absence of capital risk means that you can trade with freedom. You can allow trades to develop exactly the way you want them and practice following Forgiving of mistakes: If you lose your demo account, you can just re-set it and start again. All capital risk is artificial and without consequences to your income or lifestyle. Disadvantages Easy to trade incorrectly: You can misuse a demo account by not treating it as a demo. The whole point of a demo account is to trade it with liberty and freedom. Trading it like a real account will not allow you to practice the necessary skills you need for your longer-term trading development.  Advantageous spreads: Sometimes a demo account will give you unrealistic spreads and fills. Real market conditions may be radically different to the artificial demo account environment. Mini trading account A mini trading account allows you to start investing in trading Forex with a small personal investment up to about $500. You can then use leverage, with some brokers offering high levels of leverage, which would enable a trader to access a large trade size relative to the capital in their account. Here are some of the advantages and disadvantages of the mini account. Advantages Small capital at risk: the key advantage of this type of account is its accessibility. Many traders are easily able to afford this account and the use of leverage means that, for the experienced trader, some money can still be made on a comparatively small initial outlay. Low risk: This is an excellent option for beginner traders who would like to try and graduate from a demo account. A mini account offers a great first step to graduate from a demo account and begin to experience the emotions involved with a live account Risk management: The skills needed to manage risk on a large account can be practiced here on the mini account. The reality is that if you can manage your risk responsibly on a small account then you can do exactly the same on a larger account Disadvantages Limited gains: Although an excellent entry into the forex trading world, you are not going to be able to make a living trading a mini account. Standard trading account The most common trading account which goes from around $1000 up to around $10000. Different brokers require different capital requirements in order to open a standard account. Again, let's go through the different advantages and disadvantages of this account Advantages Potential for genuine gain: The larger deposit size, coupled with the use of leverage does allow for a potential larger gain. More services from the broker: The greater commission generated from the standard trading account means that the broker is motivated to keep their client trading successfully with them. A number of brokers will offer additional services for standard account holders. They may include, but are not limited to, a provision of an educational service, a dedicated account manager, access to professional FX services and a cash bonus deposit bonus. Disadvantages Potential for significant loss: However, the use of leverage and larger capital requirements means that this is only suitable for experienced traders. Trading takes time and rushing it will end in some kind of disaster, sooner or later. Larger capital requirements:  Minimum capital requirements in opening a standard FX account varies from broker to broker. Expect minimum requirements to sit somewhere between $2000 - $10000. Managed trading accounts This is a trading account where you provide the capital requirements, but another trader, or robot, executes the trades. There is an increasingly varied way of doing this from social trading platforms, to professional FX traders and in-house broker services which link other traders to your account automatically. Once again there are pros and cons of using a managed service. Here are some of the key advantages and disadvantages Advantages Potential for profitability: If you are unable to trade profitably, having someone who can trade for you can mean that you are making, rather than losing, money in your account. Get away from the screen: Trading can be absorbing, and time consuming, Having someone else trade for you means that you gain freedom to do something else Disadvantages The price of freedom: You will obviously have to pay a premium to have someone else manage your account. This could be paying via a monthly subscription, a profit share basis or some other commission structure, either way, it is a luxury you will have to pay for Placing your trust in someone else: Ultimately, whether it is a man or a machine, you will be putting your trust in something other than yourself. This can mean that the good trade you can see may not be taken. It also means that you may incur large losses due to human or machine error. It can be hard to accept losses that comes this way and some people prefer to have their own control over their account at all times. A couple of closing points Metatrader 4, Metatrader 5, and web trading Some accounts offer access to MT4 or MT5 accounts. The main difference between MT4 and MT5 accounts is that the MT5 platform has a wider range of instruments, including currencies, but also including stock CFD's. Web trading options can be good, but you need to check that platform is reliable. MT4 has been around for years and has been proven over time. Different spread options Some brokers will allow you to pay commission in different ways, as suits your trading style. So, for example, you may have the option of a fixed spread. This means that you know in advance the cost of trading a particular currency or instrument. The cost is fixed for each trade you take. By contrast, a variable spread option will give you a variety of prices throughout a trading day. The price available to the broker is constantly changing, so a variable spread reflects that change. A raw spread option would be where you pay the minimum spread, but you pay a round commission on the trade. So, it could be something like, $5 per round commission plus the raw market spread. Which is best? It depends on your trading style, trading volume and time you trade. If you trade during busy market times then a variable spread would be good for you. If you only ever trade in the quiet Asian session then a fixed spread will probably be the best way to go. This article was submitted by Instaforex.

Do you need a trading strategy?

It is important to have a game plan when you trade If you read up on Forex trading, you will certainly come across a recommendation to have a trading strategy. However, the details of this advice often seem rather vague. In this article, we tried to gather the most important things you need to know about Forex trading strategies. We hope that these insights will turn out to be of use for you. In essence, a trading strategy is a set of rules for market entry and exit. It is presumed that with a strategy you have a ready-to-use plan of action. You need to check whether the market situation fits the conditions outlined in the strategy and, if it is indeed so, open a trade. ForexLive Should you really live by the rules? Such an approach has a couple of obvious merits. Firstly, if you abide by the rules zealously, the destructive emotions (fear, greed, insecurity, etc.) get removed from the list of your daily bugbears. It happens as you shift the responsibility to the shoulders of the inanimate strategy. Secondly, with a strategy, you certainly reduce the time spent on market analysis as the area you have to cover by it significantly narrows. So, is a trading strategy a way out for lazy people who want some carefree trading experience? That is not really so. Almost any source about trading strategy will undoubtedly tell you that there's no "Holy Grail" that will allow you to relax and enjoy the ride. All the strategies you can find on the Internet have various degrees of imperfection. Finding the winning strategy As a result, to pick out a strategy that - 1. fits your personality; 2. has a decent success rate, - you will need to do a rather big, time-consuming and, put simply, impressive job. To complete it, you will have to possess all kinds of knowledge about the world of trading. That alone will require plenty of effort on your part. Moreover, any strategy you find or come up with has to be backtested on historic data. This can be done either manually or automatically. In addition, the market is like a living creature: it evolves with time. As a result, even if you managed to find yourself a strategy that satisfies you at one point, you won't be able to allow yourself to rest on the laurels. Constant vigilance should become your motto. You will need to monitor the performance of your strategy and adjust it from time to time. So, what's the takeaway from above? It's like this: it's good to have some sort of trading strategy because it will provide you with a framework of dealing with the market and help you control your emotions. If you don't get obsessed with the idea to find a simple solution, you will be fine. What steps should you take to choose a trading strategy or to create one of your own? Step 1. Give truthful answers to these questions: how much time are you willing to spend on trading? How long do you hold a typical trade (i.e. are you a scalper, a day trader, a medium-term trader or a long-term trader)? At this point, you should develop an understanding of the timeframes you will use. Step 2. Decide which instruments you will trade and which market conditions you will focus on. Will you be a classic trend trader? Are you willing to make counter-trend bets or trade in ranges? Do you want to tool your strategy to breakout trading specifically? A strategy that is good for trend trading can show a weak result when the market is in a range, so you will need to choose different kinds of indicators for each market condition. Step 3. Choose your toolkit. Each technical indicator has its purpose. No good will come out of using the indicators for the wrong tasks or combining two indicators with similar functions together in one strategy. In addition, no indicator is perfect so the goal is to reduce the impact of their weak spots and find a way to filter out entry signals. You will need to know how the indicators work both for seeing the flaws and strengths of the existing strategies and for designing your own one. For example, the Stochastic Oscillator goes well together with Moving Averages, Heiken Ashi, or Alligator. It goes without saying that you need to study the price action (candlestick patterns, chart patterns, trendlines) as well: it also produces signals and hints. Step 4. Think of whether you will incorporate fundamentals in your strategy and, if so, in what way. Step 5. Define the setup (required conditions) and trigger (entry rule) of your strategy. In short, the setup represents preconditions for your trade. It can consist of one or more filters that let you know that the market's "weather" has become favorable. A trigger is a signal itself that highlights a particular entry level. Step 6. Set the strict risk management parameters: risk/reward ratio, position size. The common ratio between potential loss and profit is 1:3. The basic rule of trading is like this: risk no more than 1-2% of deposit for 1 trade. Choose exit rules - make a rule for Take Profit and Stop Loss orders. A good exit is as important as a good entry. Step 7. Write down the rules of your strategy. Even if you are sure that you remember all the steps of your strategy, it is important to have them on paper, so that you don't hesitate when it is time to trade. Step 8. Backtest your strategy on a demo account. Make a good effort: this will create a base for your success. If there are mistakes, you will be able to correct them without losing money. Step 9. Start using your strategy on a live account: don't digress from your rules but keep learning and thinking about how to make your strategy even better. Once again, we encourage you not to underestimate the importance of learning and the procedures mentioned above: they will improve your performance. Good luck in your trading! This article was submitted by FBS.

Understanding the difference between M/M and Y/Y data

Learn how to familiarize yourself with the time periods in data reports Economic reports are given in a number of different formats. Many economic data releases are reported in a month on month format (m/m) and also in a year on year format as well (y/y). A y/y reading might be represented by the characters, YoY. Similarly, a m/m reading may also be represented by the format MoM. Regardless of the format of the report, they both mean the same thing. In many instances, both m/m and y/y readings are reported as percentages which allows for easy reporting and comparisons. At first, these conventions can be confusing, so this article is designed to help explain them and point out the key differences between the readings and, most importantly, how they help investors get a handle on the key data. m/m or MoM data The m/m readings are changes in data with respect to the previous month. So, for example, on Friday March, 9 German January factory orders showed a m/m reading of -2.6% vs. a prior reading of +0.9% m/m. This meant that the factory orders for January were down -2.6% on December's figures. As such, this indicated a m/m contraction. For simplicity, the chart below illustrates this trend: m/m data and a few things to be aware of One of the most important things to mention is that m/m readings are vulnerable to a number of variables. Is there a major holiday in a month? Take Christmas, Thanksgiving, and lunar New Years for example. When these events occur, they can impact m/m readings. Similarly, one-off events can impact m/m readings. In the last football World Cup, UK retail sales were positively impacted as England made it through to the Semi-finals of the World Cup. Many new televisions were bought, more food and drink and, as a result, retail sales enjoyed a spike in the report. In a similar way, m/m readings can also be impacted by natural disasters and other one-of disasters. Other less dramatic variables can be things such as days in the month and months when people typically take holidays. All of these types of factors mean that m/m readings can vary considerably from month to month. This is why m/m figures are often reported with the more stable y/y figures. y/y or YoY data The y/y readings are changes in data over the course of one year in comparison with the previous year. So, as an example, in June 2018 Japanese preliminary machine tool orders reported +11.4% y/y reading vs +14.9% prior y/y reading. This means that the data, at this point in time, shows only a +11.4% y/y increase as opposed to the previous year's increase of 14.9%. See the chart below. Calculating y/y data with a working example To calculate year on year growth you perform the following calculation. Let's simplify this with a fictional example by comparing the sales of a watch company. Say a company sells 200 watches in one year and 220 watches in the following year. How do we calculate the growth rate? You can calculate this as follows: 1. Take away last year's sales from the most recent number e.g. 220 - 200 = +20 The company sold 20 more watches in the present year 2. Then divide that number of 20 by the previous sales and multiple by 100 to get a percentage. 20/200 x 100 = 10% So, in the listed example we can see that there is a year on year growth rate of +10%. y/y data and a few things to be aware of If a company experiences a period of negative growth over one year then the next period that reports strong growth may be more an emphasis on the period of weakness than a particular period of strength. The worse the prior year, the better the present year will seem. Therefore, it is always prudent to be aware that if a y/y reading is reported that appears very strong, just check what has happened in the previous year. However, y/y analysis does generally help to smooth out the inherent volatility that you get through reporting m/m data. This is probably the biggest advantage of y/y data; all the ups and downs of m/m reporting (one-of events, seasonality, holidays etc.) are balanced out allowing for simpler comparisons. A final word on Q/Q data While covering m/m and y/y data it is also worth covering q/q data. This stands for quarter-over-quarter and these figures compare the previous financial quarter. Each year is broken down into four quarters and the first quarter of the year is referred to as Q1. There are a number of reports that are broken down into m/m and y/y readings. However, some very important indicators, like Gross Domestic Product (GDP) are broken down into quarters. In terms of volatility q/q data will be more volatile than y/y figures, yet less volatile than m/m readings. So, there you have it, a quick rundown on understanding the difference between m/m readings and y/y readings. This article was submitted by the ADSS Research Team.

How to trade an election 101

Everything you need to know about trading before, during, and after an election Trading an election can be a very profitable pursuit for the informed trader. Unsurprisingly, political elections are eagerly followed by market participants as they try to position themselves as early as possible for any shifts that may be ahead. To the uninformed it may seem little more than a coin toss to try and trade the outcome of an election. After all, you may correctly reason, no-one has a crystal ball to gaze into the future with.  However, trading an election is actually more nuanced than simply trying to trade the outcome of the event. In fact, there are at least three key points in any election and all three can offer distinct trading opportunities.  Those opportunities present themselves before, during, and after the election announcement. Trading before an election ForexLive The first tradable aspect of an election is its announcement. This news can be read as either bearish or bullish for the currency and it becomes pretty clear quite quickly what the reaction of the market will be.  A good recent example is when Theresa May, the British Prime Minister, announced a snap election on April 18 2017. The Pound quickly gained in value, breaking overhead daily resistance and finishing the day with a 2%+ rise. The reason for the Pound's rise was because it was thought that Theresa May would gain a further conservative majority in the House of Commons. This was thought to strengthen the conservatives' hands for any upcoming Brexit negotiations and potential legislation. The election was due to be held on the 8th of June and the Pound remained bid into the election date. If you had picked up this news early on April 18 during the London session you could have bought and held the Pound for a decent profit. (See chart below). One of the key aspects to this trade working so effectively was that it was a 'surprise announcement'. The general rule of thumb is this: the greater the surprise, the greater the market reaction.  There is another hidden trade that emerges in the 'before the election' section and that is as influential polls are released. A political poll is viewed as a key indicator for the outcome of any election result, so a shift in the poll numbers will result in a shift in price too. These polls being announced provide tradable headlines on an intraday basis. A good example of this was seen out of New Zealand in September 2017 just after 0600GMT when New Zealand's national party was reported to have increased its lead over the Labour opposition. The result was a thirty-point spike that canny traders could have taken advantage of.Trading the election resultAs the 2017 UK election results came in the first exit poll showed an ominous sign: the conservatives had failed to even win a majority, and there was going to be a hung parliament. As more results came in the exit poll was confirmed and the GBP instantly sold off.Theresa May had miscalculated and could only now form a majority by annexing the DUP party from Northern Ireland. The market now realized that Brexit negotiations were going to be a lot harder than they were prior to the election. It was an incredible home goal and a move that badly back fired for Theresa May.It was obvious that the GBP would sell off and you can see in the chart below that as the regional results came in overnight the GBP/USD pair sold off into the next couple of sessions.Trading the reaction to the electionThe other key area for traders to profit from is the market's reaction after the election results have been announced. This was illustrated by the US elections when Donald Trump's US election win was announced in November 2016.  There was an extremely volatile reaction in the USD/JPY. It dropped several hundred points on the announcement initially. This was because it was feared that Trump's presidency would be antagonistic to China and his protectionist policies would produce a riskier global environment. This was a fear that was partially realized as we now know fast forwarding to the present day.  However, as the European session got underway USD/JPY reversed and the USD/JPY pair, which had nearly fallen to 101 at a key daily support level, ended up closing the session at over 105. That was a huge move. The key driver for the USD/JPY strength had been that the expectations for the Federal Reserve to hike rates had gone from around 40% to over 70%. The market suddenly saw that Trump's corporate tax cuts and US business friendly policies and infrastructure investment would result in a positive US dollar environment. The price rallied all the way to 118 before taking any sort of a pullback in price. This was a pro-longed move that could have been traded for a few weeks.Taking necessary precautions when trading an electionTrading an election is definitely a worthwhile pursuit for the forex trader to venture into. However, it should be noted that volatility can be extreme during such times and the use of leverage should be limited due to the heightened risk. It should be noted though that elections also provide excellent trading opportunities and do not need to be feared. In the USD/JPY example the initial market reaction was reversed as the market digested Trump's win, so you need to be aware that even market expectations can be wrong. Don't marry your positions and keep an open mind and, more importantly, a stop in place. European Union elections are due shortly in May 2019, so you could perhaps try using some of these strategies outlined in this piece. This article was submitted by the ADSS Research Team.  

How bank trade recommendations work

What are the keys to understanding how bank trade recommendations work With so many trade recommendations available online from a variety of different banks how do they work and, more importantly, how can you make then work for you? Bank trades are often based upon monetary policy of central banks The currency markets don't just move at random. They move for a reason. Every developed nation has a central bank that has a core duty to ensure currency stability and that the interest rates of their nations are correctly set. Contrary to what some people might think, central banks want to inform the market about their intentions. They do this in order to ensure that price remains stable and under control and so as to avoid large volatile swings in price. A volatile currency is bad for domestic businesses as they import and export goods, so central banks release information in order to assist traders in pricing their currency. The vast majority of bank trade recommendations work by studying central bank's forward guidance and making it clear which direction they think the currency will go in. So, for example, at the time of writing 8 April, 2019, Barclays opened a EUR/USD short position from 1.1310 after the ECB was dovish concerning future rate guidance on March 7. Barclays said that, 'our short EUR/USD recommendation by the manifestation of many of the factors that represent a nearly complete reversal of the developments that boosted EUR/USD from its cycle low at the end of 2016 to 1.20'. The trade was opened as a direct response to the ECB's dovish shift in monetary policy. Use bank recommendations by comparing multiple sources The single most useful aspect of trade recommendations is the collective resources they bring to you. In having a continuous stream of sentiment interpretation and trade recommendations from many different sources you have a very good idea of what different players are thinking and how they are placing their orders. It is particularly interesting and illuminating to compare conflicting views. For example, let's say you get one trade recommendation to go long on the USD/JPY and another one to short USD/JPY, you can read into the detail and see the reasoning for them.  Whose argument best stacks up with the facts? Have they both considered the same key points, or has one recommendation been guilty of confirmation bias and simply ignored all contradictory data? You might like to read bank recommendations to see if you are missing any key fundamental data in your analysis. Sometimes, you will find a factor mentioned that you have overlooked. Use bank recommendations to gain insightful information You will also find that you can glean decent information by reading a variety of sources. You will come across multiple factors, some of which you would not have considered before Use bank recommendations to recognize key fundamental shifts Some trade recommendations are given after key central bank decisions and statements. The trade suggestion may highlight that shift to you and mean that you start to develop a bias for that market, long or short. Use bank recommendations to recognize key technical levels Some trade recommendations come out simply because price is at a major turning point. So, it could be because price is at a key weekly horizontal resistance and support level or a fib level. Often by looking at the trade recommendation you may be alerted to price being at a key inflection point in the market. Then any significant fundamental news that comes in, while price is at the inflection point, will give you excellent technical places for putting your stop. Don't miss key shifts in price Holding multiple factors together, across multiple currencies, can be a challenging task for even the most seasoned of analysts and traders. The chances of missing some key data is possible even for them. How much more likely are you to miss key data points and sentiment shifts if you have limited access to the markets. Say, for instance, you are swing trading and accessing your trades around a full-time job. By reading bank trade recommendations you will be alerted to any gaps in your knowledge that you can then follow up. They are interesting It is always a nice curiosity to look at a bank trade. How are they entering, where is their stop? When are they taking profit? In a way the trades can also critique your own view. Maybe you are long NZD/USD, but you read a bank is recommending a short NZD/USD? Well, ultimately this will sharpen your trading process. It is always very satisfying when you can see a recommended trade and you know the reason why there are wrong. Considering different points can be a great help in formulating your own trading plans, as well as stimulating and focusing your own analysis. They can betray a trader's lack of conviction Well, one of the reasons that people will want to follow trade recommendations will be due to the belief that the authority sharing the recommendation is 'well informed'. It is this belief that leads some to trust the authority more than their own decision-making process. Did you favorite respected analyst make a trade call? Perhaps a bank's name that you know are calling for a long on the USD/JPY pair. They have got to be right, haven't they? They are the authority after all. This reason is simply evidence that someone is not ready to be trading. Unsure of their own decisions, they need someone else to give them conviction to trade. So, reasons for not following trade recommendations include an abdication of personal responsibility/conviction. They can be hiding malicious influences Have you heard of pump and dump? This is the well-known market phenomena where people will 'talk up' an asset to simply sell it at a profit. Tell the world that such and such is the next big thing to buy, wait for the price to rise (pump) and then, sell at a profit (dump). The world's hysteria is their profit. It happens a lot.  Some trade recommendations are only opportunistic wolves seeking easy prey. Don't become their victim, avoid the 'secret' or 'must buy' stock you have never heard of.  Even some 'respectable' sources have been known to engage in this behavior. In the currency world this can be a little more transparent for the informed trader since currencies are driven by central banks which publish their monetary policy. It is hard for a bank to claim inside knowledge of a central bank's future policy, and if they do indicate a 'special' or 'unique' knowledge beyond good analysis, then let the buyer beware. This article was submitted by the ADSS research team.  ForexLive


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