The Canadian dollar tumble in the forex market, early in the week, and yields declined after the shift to a trade deficit in February, which supported Governor Poloz’s cautious view of Canada’s growth outlook. The currency pair USD/CAD surged higher, as the 2-year has pulled back to 3-basis points following the data.
Canadian statistics reported that Canada ran a $1.0 billion Canadian dollar deficit in February following a downwardly revised $0.4 billion surplus in January which was $0.8 billion Canadian dollars. The shift to a deficit was contrary to expectations for a modest trimming of the surplus. Exports values plunged 2.4%, with declines widespread across sectors. Exports excluding energy products were also 2.4% lower. Canada is an export driven economy, which means that this decline subtracted from growth.
Import values improved 0.6% in February, although 7 out of 11 sectors saw declines. A pick-up in special transactions trade, motor vehicles and parts, and farming and fishing products drove the gain in total imports. The trade surplus with the U.S. widened to $4.5 billion from 4.4 billion Canadian dollars. The shift from a deficit following 3-consecutive surpluses in the trade balance, underscores the cautious approach that has been taken by the Bank of Canada. Export uncertainty was one of Governor Poloz’s key talking points last week when defending his cautious view.
To make matters worse for USD/CAD bears in the forex market, the U.S. trade deficit narrowed 9.6% to -$43.6 billion in February after widening 8.8% to -$48.2 billion which was revised from -$48.5 billion in January. Imports dropped 1.8% after January’s 2.3% jump, breaking a string of 4 straight monthly gains. Exports were up 0.2% following a prior 0.8% increase which was revised from 0.6%.
interest rate effects may have been “undermeasured,” according to an SF Fed paper on Monetary Policy Medicine: Large Effects from Small Doses, which used a “randomized trials” methodology akin to medical research. Trying to control for exchange rates (including floating and pegged), the paper demonstrates that “even a modest tightening cycle can have a substantial restraining effect on both inflation and economic activity.” This result could give some policymakers pause in terms of their rate hike agenda.
The first round of economic data in the U.S., for the month of March was mixed, and seemed to barely affect the forex market. U.S. ISM manufacturing index slid 0.5 points to 57.2 in March, not as bad as forecast, after rising 1.7 points to 57.7 in February. This breaks a string of six straight monthly gains. But, the components were mixed. The employment component rose to 58.9 after dipping to 54.2 previously. New orders fell to 64.5 from 65.1, while new export orders climbed to 59.0 from 55.0. Prices paid increased to 70.5 from 68.0 and is the highest since mid-2011.
Additionally, the U.S. March Market manufacturing index declined to 53.3, following a 54.2 print in February, down from the preliminary reading of 53.4. It compares to 51.5 for March 2016. This is a third straight month of decline and is the lowest reading since September’s 51.5. The employment component declined to the lowest since August.
One of the most thrilling parts of investing in stocks is watching it rapidly move up and down over time. The prices are always changing and it’s as if you’re magically watching your money grow, and deteriorate before your very own eyes.
There’s no worse feeling than losing money you’ve invested in stocks. One second you’re up a dollar, the next you’re down two. It’s as if you just watched your money disappear into thin air.
Learning how to trade in a volatile market can pay off.
What Is A Volatile Market?
A volatile market is a market in which the stocks fluctuate rapidly, constantly going up and down, and are overall unpredictable. A volatile market can be caused by a number of factors such as news reports, tips from respected analysts, and earning results.
An unopened gold mine was testing for gold and found an area that could potentially contain a surplus of gold. This type of news would send the stock soaring.
A few days later, they received reports that the government will not approve of the goldmine because the location is on Native American land. Well, this would send it falling right back down.
Creating Your Investment Plan
You need to create a plan. Don’t just walk into it expecting to make a fortune and then cash out.
When creating a plan for a volatile market, there are many things to consider:
Start off by researching the company and their financial condition.
Decide how much you are willing to lose, how much you want to profit and be realistic.
Finally, the biggest piece of advice I could give for creating an investment plan is to trust the system, not your emotions.
Steps To Take To Avoid Risk
When learning how to trade in a volatile market, the main thing to understand is that there is risk. You need to understand it, you need to face it. There are a few ways in which you can avoid many of the risks, but you cannot completely avoid it.
If the market is falling, don’t be the hero who tries to catch it at its lowest. It may continue to fall, and all you can do about it is sit by and watch your money fade away. You never know when the stock will bottom out. Remember, the market changes itself, you don’t change it.
Dollar Cost Averaging (DCA)
Dollar cost averaging is when you set a fixed amount of money to invest into a given stock, usually, on a weekly to monthly basis. DCA is a great choice if you are uncertain on when to buy a stock, or if you don’t want to invest all at once.
The good part about dollar cost averaging is that if you lose money, you have a fixed price and you don’t care quite as much. And if you make money, you get a good slice of the pie and you can decide whether you want to invest more.
If you want to play it safe, your best bet is to use limit orders. Limit ordering is a simple tactic that can be used on almost every online trading platform.
Limit ordering is when you put a set price to buy the stock (start limit order), and a set price to sell the stock (stop limit order). This reduces the risk of buying into a plummeting trade deal by allowing you to buy in as the market starts to trend in a direction. Once the market hits the stop limit order you set it at, it will automatically be sold.
Online trading of the currency markets experienced a surprise on Thursday as the ECB delivered a thoughtful decision that set the stage for tapering of bond purchases while delivering a larger than expected stimulus package. The EUR/USD whipsawed first moving higher but as the market realized the extent of the dovish package, the currency pair tumbled. While the market had prices in an extension of QE for 6-months, few believed that the extension would reach 9-months with a decline in the purchases from 80 billion per month to 60-billion a month. The markets would have stumbled with a tapering of QE and an extension of 6-months, which is why the ECB was clever in its approach.
Draghi left rates unchanged, as expected and the extended QE program settled on a compromise with monthly purchases scaled back, but the overall time frame of the program extended by 9 months rather than the expected.
The ECB announced a further extension of the QE program pushing the total program amounts to asset purchases of 540 billion Euros. This is more than the 480 billion a 6 months’ extension at EUR 80 billion per months would have amounted to and the ECB actually left the door to a further increase of monthly purchases volumes and the overall program length open, depending on actual developments.
This does give the ECB added flexibility as Brexit negotiations start in earnest and with a longer program and the option to lift purchases Draghi’s main message was that the ECB will remain active in markets for the foreseeable future. The ECB President was very keen to stress that a tapering in the sense that purchases are being gradually scaled back to zero. The program extension of 9 months and the ECB stressing that purchases won’t end abruptly it is already clear that there will be another follow up program when the new QE extension ends in December 2017 and that the central bank will continue to remain active in markets and influence interest rates well into 2018.
To achieve this objective, without violating the no-bail out clause and move away from the self-imposed rule to keep the distribution of purchases across countries the framework for eligible assets has been tweaked as well. The minimum duration for bonds was cut to just 1 year from 2 years and at the same time, the ECB now can buy bonds yielding below the deposit rate of -0.4%.
All this even though growth is ticking along and in fact broadening, unemployment is coming down faster than expected and inflation is picking up. The ECB’s new set of staff projections see GDP growth this year still at 1.7%, while the forecast for 2017 was lifted to 1.7% from 1.6% seen back in September. The forecast for 2018 was left unchanged at 1.6% and the new forecast for 2018 is also 1.6%. At the same time inflation is seen rising to 1.3% next year, 1.5% in 2018 and 1.7% in 2019, although while this already seems close to 2% Draghi was at pains to stress in the press conference.
There is a plethora of trading applications but one thing that surprises me is the fact that not enough have been made to be worked with on Apple computers. I’m not sure if it has something to do with the cost that will be incurred building trading platforms for Mac OS. Still, the best trading platform for Mac remains MT4. Maybe there are no APIs or SDKs. Who knows. But we as forex traders, irrespective of the computers we have, should trade.
There are a few options to trading on a Mac. The best option for me, as a Mac User so far has been to install a virtual machine. In my opinion the most suitable virtual machine application for Mac is Parallels. With Parallels, you can install a windows system and then have your MT4 trading platform on the virtual machine. Everything works nice and smoothly as it would on a real windows machine. No doubt about that. Downside is that Parallels is not free. But there’s a free virtual machine system from Oracle called VirtualBox which works flawlessly as well.
The only reason I prefer Parallels is that it gives me the ability to integrate a windows operating system into my Mac OS. What I mean by that is the ability that I have to seamlessly copy and paste or even share networks and disks across operating systems. If you’re just wanting to trade an MT4 platform, VirtualBox will be enough for you. And that’ll be the only thing you’ll need.
Alternatives to MT4
MT4 is a very popular trading platform with a lot of useful features. So what if you don’t want to trade on a virtual machine? What are the other options. Web Trading. Some brokers these days give clients the possibility to trade using a web terminal. With my observation, I have come to realise that if a broker doesn’t have a web trading terminal, they in some way have a trading platform built with Java that will run on Mac systems. Trading using the web terminal is not bad. I have tried it before and can attest to that. Dukascopy has JForex, Exness has a perfect web trading platform, Oanda have another that work natively with Mac and the list goes on.
There’s also a native MT4 platform for iOS that you can install on an iPhone or iPad and it works quiet well too when you’re on the go. I’m writing this post in a bus and below you can find my MT4 app on my iPhone.
There’s no excuse for Apple fans not to trade comfortably and make money. The are unlimited options. Go for it!
The days prior to the US Election on November 8, 2016 had been tense. Here is the United States of America, a country whose currency is a big player in the forex market, is presented with two candidates. One with no political experience, the other branded as a liar and a criminal. Hard choice. But as a believer of fundamental analysis, I knew it was time to study the ideologies and background of these two presidential candidates; look for opportunities this might present. So time-consuming and boring as it might have seemed, I watched all three presidential debates. The rest is now history.
After studying the market and the influence the candidates can have on the market, I set aside a $10,000 account to implement the strategy that I have brainstormed. At the time of writing this, this is the state of my account:
I am not regretting I hadn’t deposited $20,000 or $40,000. At this moment I am chuffed to have been able to pull this off in a day. Most important thing here is what I learned and how I thought through to make this vision a reality.
Let’s break it down. 26 trades placed with a profit factor of 19.36. A massive 1061 pips amassed! This proves why you shouldn’t take fundamental analysis for granted. My best trade was $2,452.70 and a worst trade of -$552.58. With a total of 26 lots traded, trading a lot each time.
OK. So How Was It Done?
We have two candidates, a Democrat and a Republican. The Democrats have the reins now so Clinton winning would mean continuation of current administrative policies. Donald J Trump winning would mean the opposite of whatever is set in place by Barack Obama. Trump is eager to repeal most, if not all, of what the Obama Administration have set in place.
I stayed up all night (residing in Europe) just to watch how the result roll in in real time. Using tools like Twitter and BuzzFeed which provided live feeds of results as they were release. Based on this and some fact I had learned earlier about how the stock bounces a day after the election days. I was sure that there was going to be something similar with the US Dollar. A V-shaped recovery pattern.
The reaction of stock markets as far as my investigation prior to the election was that, stocks rise with Hillary Clinton and fall with Donald Trump. This is actually quite easy to realise considering historic data and the ideologies of their respective parties. Simply, Donald Trump and his party offer an anti-trade, populistic stance and an economic plan where the numbers don’t add up, presenting a lot of uncertainties. On the other hand, the economic policies of Hillary Clinton don’t sound outlandish. But as stated above already, her winning would mean a continuation of current policies. This coupled with the Presidential Election Cycle Theory, are what made me decide the USD will go down as Mr Trump wins. But there’s something more to this.
As the results trickled in slowing with Trump leading widely midway, this behaviour of the USD became prevalent:
But do you remember the V-shaped recovery pattern that has been repeating itself after each election day? You do. You can sie the V-shape in the image above as well. Home run!
Later I rode along with the volatility just for the fun of it. Of course there’s a whole lot more to this. I won’t make this post too long. Feel free to subscribe to for my 5-Day Email Lessons on “How I made my first $10,000 Trading Forex”.
I wish you the same success.
Forex Broker Regulation exists to make sure clients are protected and that the brokers don’t do just anything they want with clients’ money. Some Forex brokers don’t have a license. You don’t want to be doing business with these kind of brokers.
The easiest, obvious ways to check Forex broker regulation are to:
Ask them directly
Most Forex brokers these days have a live chat system available. To find if your broker is regulated, the best would be to ask them directly through their live chat. However, some brokers won’t be available to chat on weekends and it may happen that you need this information fast to decide on something else. In that case the next option would be to:
Check their website
You can peruse their site to find such information. Usually this kind of information is found in the footer (at the bottom) of your broker’s website. You have to be careful with this one though, because most sly brokers will state or make a reference to some regulation, but if you take time to read the fine print, you might realise that they are not at all regulated. They may write that the follow some principles and guidelines of a regulation. But this doesn’t that the broker is under a regulation. Most people don’t read fine prints so some brokers take advantage of this. You need to make sure you read through all the text that your Forex broker publishes about their regulation.
Check external references
Checking external references for details about Forex brokers might be the best option here. One good source I know of is Forex Church. On the top right-hand corner of this table you can see a button that says “Advanced Search”. You could put in the parameters to see if you’ll find your broker there. Or double check if your broker appears in the list of regulations that your broker claim to be under, assuming you asked them earlier in a live chat.
On Friday, 7th October, 2016, something interesting happened to the GBP. Something unusual if you will. Like the GBP has not had enough plunging after BREXIT, it nosedived to the lowest in 31 years. There was yet another fat-finger error.
If you were trading any pair with GBP as the base currency, you might have noticed the sudden dive as shown below:
What is a Fat-Finger Error in Forex?
This is what we call a Fat-Finger Error. A fat-finger error is a keyboard input error in the financial markets such as the stock market or foreign exchange market whereby an order to buy or sell is placed of far greater size than intended, for the wrong stock or contract, at the wrong price, or with any number of other input errors. These errors are caused mostly by humans but sometimes could be caused by a rogue computer algorithm.
The pound sterling on this day fell by 6% just after 7PM in New York. I had just placed a short order on the GBP with no Take Profit set. So this time I missed out big time on this one. There was no news around the time of this incident, hence the reason fat-finger error is the culprit here. But thinking of it, if it was really a fat-finger error, the convention is that the counterparts agree to clean things up, remove it from history as if nothing happened. This yet hasn’t happened. Not sure why. So it could mean this may not have been a fat-finger error after all.
There are some other theories however. Some think someone deliberately tried to move the market sharply to take advantage of low liquidity, others think it’s options expiry, which happens on Fridays might have caused this strange behaviour of the GBP.
Forex is not a single entity. It’s a collection of trading systems across the globe and there’s no single data source so it’s very hard to track such events.
Fat-Finger Error Effect on Trading
Though there was a quick bounce back, the GBP hasn’t fully recovered from this. Traders have a reason to be happy because this might be a sign that the GBP will continue on it’s weak path. GBP has been weak for the past ten days since Theresa May addressed the Conservative conference. Goldman Sachs has already predicted a 5% further decline of the pound within the next 3 months. All fingers are pointing to one action: Going bearish, especially for long-term traders.
From this event we can learn two things: Stop Losses/Take Profits are important and we as traders should practice taking advantage of them. And the fact that the pound sterling will keep diving deeper.
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Usually when people talk about fundamental analysis the next topic you might hear about is technical analysis. But I have realised a lot of traders mix things up when it comes to news trading and fundamental analysis. Most traders confuse the two to be the same thing. They consider news trading to be a subset of fundamental analysis. You might get away with this disorientation. Now let’s clear the bewilderment.
What is News Trading
News trading is a technique to trade currencies and equities on the financial markets. Basically, it involves when something unusual happens; when an event that doesn’t happen everyday occurs.
When events that concern finances are announced out of the blue, there’s a news release that presents an opportunity to make or lose money. A good, recent example is Brexit that occurred somewhere in June 2016. Brexit is not an everyday event. In fact it’s happened just once. It caused the GBPUSD pair to fall to a record low. Those who sold GPB-XXX pair (like me) made a lot of profits. I made about $30,000 on a $5,000 account on this day alone. This is what news trading is all about and it’s very different from what many people mistakenly see as or as part of fundamental analysis.
Elon Musk musk tweeted about a new product line and Tesla’s shares jumped 4%, that’s about $1 billion of Tesla’s market capitalisation. Again, this is not your average event of the day. Investors would “trade the news” right after seeing this tweet.
In essence news trading is taking advantage (or trying to) of random events that move markets to place trades and make money. The events that are announced are not based on previous figures and is something traders don’t expect. Fundamental analysis on the other hand, is different.
What is Fundamental Analysis
Fundamental analysis involves factors that affect the economy of a particular country or a business’s financial statements. Such factors may include interest rates, production, earnings, employment, GDP, housing, management, manufacturing, political and economic reports. These factors are usually data that are documented and mostly have some kind of historical statistics.
Data in fundamentals have previous data that you can look back on to make a comparison to track whether the economy is doing well or falling short. This is what sets fundamental analysis apart from news trading.
Fundamental analysis in itself is a broad topic which I may look to talk about in subsequent posts.
Some events that we can consider as fundamentals are stuff such as the NFP, GDP estimates and monthly budget statements of states. In short, almost any event you can find on an economic calendar can be considered as a fundamental factor in forex trading.
Confusing news trading and fundamental analysis hopefully is a thing of the past and I hope you’ll now be able to focus exactly on one thing depending on your goals to achieve the success that you deserve.
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The thought of trading fundamentals seriously had been a dilemma for me for a long time when I started trading forex about a decade ago. I have seen and read a lot of debates on fundamental analysis versus technical analysis. The arguments got me confused pretty quickly. In my other articles, I wrote how we just can’t do away without all the three kinds of analysis. To be as profitable as possible we need to incorporate all forms of analysis. But the degree to which we employ each kind of analysis is very is key.
The question as to whether or not fundamental analysis is a waste of time or worth it clearly depends on one most important thing: The kind of trader you are or style you’re executing at a given time. One trader might rely mostly on technical analysis while the other might solely be dependent on sentimental analysis.
So to what kind of traders is fundamental analysis most important to? Position traders. Who are they anyway. Position traders are the kind of investors who place trades and hold onto them for a couple of months to even a year or years. If you’re this kind of trader then we can’t say fundamental analysis is a waste of time for you. If you happen to be a scalper or a day trader, fundamental analysis won’t (or rather shouldn’t) be as relevant to you as they would be to position traders. With that being said, it doesn’t mean day traders should completely ignore fundamental factors.
What kind of trader one is would determine what kind of analysis is most important to them. Traders who hold positions for very long pay more attention to fundamental analysis. Those who scalp and day trade (should) pay more attention to technical analysis. Both kind of traders (the successful ones) acknowledge all the kinds of analysis to some degree.
This post was inspired by one guy who said he had observed that “high impact” events on the economic calendar in most cases had little to no effect on price action or significant movement of the market towards one direction. And I think he got things a bit wrong here. Because news trading and fundamental analysis are not the same thing. Observing economic calendars and release of economic data to trade thinking it’s fundamental analysis is self-deception. Which is why I’m writing my next post “Fundamental Analysis vs News Trading” to clear the blurry lines between the two.
Fundamental analysis is not a complete waste of time depending on what kind of trading you’re doing and sure worth it if you’re a position trader or tend to hold position for a long time. I am not a position trader. The reason is I love price action and like to follow along and gather pips during bearish and bullish movements in the market. Volatility turns me on. There’s always something to do, something to analyse. These are things that have kept me in the game a pro trader. I have gathered a lot of fundamental analysis skills over the years that have helped me tremendously. I advise you do the same and not completely ignore it.
Hopefully I cleared a few things up for you. You can follow me on Twitter or like my page on Facebook to stay up to date. Don’t forget to share too if you can.
Have you ever thought of ways of overcoming fear in forex trading? Well if you haven’t, please read on.
Let’s take some time to analyse what “fear” is. We know it’s some kind of emotion, but what really is it. As Wikipedia puts it:
Fear in human beings may occur in response to a specific stimulus occurring in the present, or in anticipation or expectation of a future threat perceived as a risk.
The keywords here are stimulus, perception and risk. Now that we know what fear is, let me ask you one simple question: Have you ever feared trading? If you haven’t it means you’re still on a demo account. We all probably have. In this article, I’m going to try to tackle a few ways we can overcome fear when trading forex.
Don’t Trade More Than You can Afford to Lose
Fear in forex trading is a trader’s response to the perception of losing money. No one wants to lose money, but we as traders want to make money. So how do we eliminate fear? If you look at the definition of “fear” above, you’ll notice the keyword “risk”. This just means one thing; that to eliminate fear we HAVE to be ready to take risks. Taking risks means we’re accepting the fact that we can sometimes actually lose some, if not all of our trading capital. That’s why I always say that in forex, never ever try to risk more than you can afford to lose. If I earn say, $20,000 every month from whatever source, personally, I can comfortably afford to lose $5,000 without crying. With that said, I wouldn’t trade more than $3,000 each month. So if you take the first step of actually trading less than you can afford to lose, you’re making an important step to becoming a successful trader.
Start a F*cking Trading Journal!
So with one thing out of the way, let’s try to consider the remaining options of overcoming fear when trading the foreign exchange market. Forex is not gambling. Those who treat it as such will lose eventually. So to eliminate fear, one more thing we can do is to actually be sure of our trades. When you’re entering a trade, ask yourself: “Do I have a signal?”. After getting the signal, ask yourself again, “Do I have two or more signals supporting my first signal?” If you answer yes to these questions and place a trade, would you have a reason to be afraid of the trade going against you? You won’t! But if you happen to be afraid even after answering in the affirmative to those questions, then it means you don’t have a trading strategy, and even if you do have a trading strategy, then it means you don’t trust it enough. And why don’t you trust you own strategy? It’s because your strategy is not mature, it has not been tested. So what do you do in this case, build a strategy, test it for a lease a year, NOT on a demo account but on a real account with about $1000 (assuming you earn $20,000 from the scenario I sited earlier). I have said this in most of my articles that trading demo is OK but only if you want to test or learn about some MT4 tools or how your trading platform works. Building a strategy will require real money (though minimal amount) to work to make sure your emotions, which are also part of a strategy, are tested!
In essence, the above suggested ways would be my go-to ways to overcome fear when trading forex. You first trade as little money as possible, and while you’re at it, you build a strategy. You can just get a diary and log all your trading activities in it. But your logs should be detailed. You can record things such as wins and losses, time, what events were occurring at the time of trade, which signals you observed, what indicators you used and how you observed them among others. Doing this with as little money for say, a year will be enough to have taken you through all the events that influence the forex market. The following year, you’ll actually be ready to face the same events again by just consulting your logs. And that’s the basis of building a successful strategy that you can trust and follow to eliminate fear.
I would share more tips if I had time but if you like this piece of information, please share them and feel free to post your views and experiences in the comments sections. I’m running a mentorship program with one-on-one live calls via Skype. If you’re interested in taking part, feel free to send me an email: pips @ 24forexsecrets . com (of course without spaces).
All the best 🙂