Weekly Economic & Political Timeline 25 to 29th January, 2016.

From the Daily Forex. 

The coming week ahead is likely to see further strong market movements, even more so than the relatively volatile week we have just had in the market. This is because the key calendar even in the key global currency is due on Wednesday with the FOMC Statement, and we are also going to get major central bank actions regarding the Japanese Yen on Friday and the New Zealand Dollar on Wednesday.

There is also a fair amount of wider USD economic data due, although not very much from other currencies.

U.S. Dollar

This is going to be a busy and important week for the Greenback due mostly to the FOMC Statement and Federal Funds Rate due on Wednesday. That same day will see the release of Crude Oil Inventories. The dollar’s week will actually being on Tuesday with CB Consumer Confidence data due. Thursday will see the release of Core Durable Goods Orders and Unemployment Claims data. The week ends on Friday with Advance GDP data.

Japanese Yen

There is nothing due concerning the Yen until Friday but it is an event of high importance: the monthly Monetary Policy Statement and Outlook Report from the Bank of Japan will be released, followed by the usual press conference.

New Zealand Dollar

There is nothing due concerning the Kiwi except on Wednesday but it is an event of high importance: the monthly RBNZ Statement and Official Cash Rate will be released by the Reserve Bank of New Zealand.

Euro

Monday will see the release of German IFO Business Climate data, as well as some public remarks from the President of the ECB although that is not expected to move any markets. There is then nothing scheduled until Friday when there will be a release of the CPI Flash Estimate.

British Pound

It will be a fairly quiet week for the British Pound. On Tuesday the Governor of the Bank of England will be testifying before Parliament. Thursday will see a release of Preliminary GDP data.

Canadian Dollar

This week should be a quiet one for the Loonie, with nothing due until Friday’s release of GDP data.

Australian Dollar

Tuesday is a public holiday in Australia. The only item due for the Aussie this week is the release of CPI data scheduled for Wednesday.

HAPPY TRADING.

EMALBANS FX.

Money Management

A practical and disciplined money management plan is essential for profitable trading. Traders who do not take this requirement seriously probably have low Trader IQs and are merely gambling.

Objectively review the discretionary components of your Money Management plan.
• How much capital can you risk, and by risk we mean afford to lose?
• What margin percentage of your usable account balance do you risk on each trade?
• What leverage ratio do you apply to the margin?
• How much profit do you expect to make?
• Calculate your profit goal, as an annualised return on your account balance - is it realistic?

Only about 2% of Forex traders achieve an annual return exceeding 100%, an extraordinary result by any rational expectation.

Capital
The funds you use to trade Forex are at considerable risk. The extent of your risk depends on your choices; i.e., the broker you choose and the trades you make. Only risk money you can afford to lose when trading Forex.

That said, not having sufficient capital is a significant reason for such high self directed trader attrition rates. An under capitalised account dramatically reduces the probability of success, making it extremely difficult to implement prudent money management.

This is an approximate guide for the recommended capital to open various Forex accounts.
    • Standard Account              $50,000 to $100,000+
    • Mini Account                       $5,000 to $20,000+
    • Micro Account                     $1,000 to $5,000

Be patient. Rather than rushing to open an undercapitalised account wait and accumulate the maximum possible capital you can risk.

Equity
Adding the used margin to the available, or useable, margin determines account equity. When there are no open positions the Account Balance, Equity and Available Margin are the same.

Margin
Initial Margin is the amount put at risk to collateralise a trade and is expressed as a percentage of the trade’s total value. The initial, or used, margin is the security deducted from an account, and is often leveraged. Brokers usually aggregate initial margins to fund their own trading.

What remains is the available, or usable, margin. This fluctuates with a trade’s value. When the remaining margin falls below the broker’s acceptable margin requirements open positions are liquidated by a margin call.

Please carefully read broker’s margin policies, and ensure you fully understand the different margin terms, especially the margin call policies. Where a broker has a margin policy of 1% a leverage ratio of 100-1 is available, 2% equates to leverage of 50-1, 2.5% to 25-1, 5% to 20-1, and so on.

We recommend Self Directed Trader margin of 1% to 5%, subject to the leverage chosen, positions open, and market conditions.

Leverage
One compelling reason for the rapid expansion of online Forex trading is the high leverage offered by many brokers. The National Futures Association defines Leverage as: “The ability to control large dollar amounts of a commodity with a comparatively small amount of capital.”

Leverage is expressed as a ratio, e.g. 10-1, and is unquestionably an appealing notion. We open a $1,000 account with a Forex broker offering 500-1 leverage, and willing to instantly lend us $499,000. Voila! We now have a $500,000 trading bank, and can make 100% return on our capital with only a $1,000 profit. Sounds easy enough. Consider this, you will lose 100% of your capital with a $1,000 loss, and that may only take a relatively modest market move or retracement against your position. Trading with these levels of leverage reveals a very low Trader IQ as it dramatically increase the risk of loss. Those using such strategies are known in some brokerage circles as wood ducks – easy prey.

Leverage is a useful tool for those who know how and when to use it. That means judiciously, after you begin to consistently take trading profits. Think of leverage as a scalpel, not a chain saw. And remember, with most brokers you can change the leverage for different trades to reflect your confidence of success.

Most professional Forex traders use leverage between 2-1 and 5-1. Self Directed Traders may claim this is unrealistic for those with small accounts, and some may want to use leverage up to 50-1 in conjunction with a sensibly low margin. This is not totally unreasonable, however, the smaller the capital the greater the need to protect it. 

Let us serve you, join us today at Emalbans Fx.Happy Trading

Glimpsing the Forex World

The Internet is replete with data for those seeking information on the technical and fundamental factors that impact the Forex education and training, broker choices, and signal services. A good resource list of Forex service providers is available online. 

Magnitude
In June 2012 CLS settled Forex payment instructions with a gross average daily value of US$5.12 trillion. Huge numbers, though of course leveraged to varying degrees.

Brokers
Impulsive, self-destructive direct traders fuel the profits of online Forex brokers. Those of us who have witnessed the introduction and proliferation of retail Forex trading have seen numerous churn and burn shops come and go; some remain and continue to grow.

Forex brokers receive good and bad reviews. A broker may score high ratings on some sites and lower on another. There are sites where no broker rates over 50%, supposed review web sites that are owned by brokers, and the inevitable fake reviews generated by self-interested parties. Sound confusing, that is exactly what the retail brokerage market has become, and the Caveat Emptor warning must be heeded. You need to be guided, you need to consult us at Emalbans Fx.
Conflicting reviews and scams apart, the real issue is how to make a relatively informed choice when choosing a Forex broker. A good place to start is your Internet search engine and review sites. Incidentally, there are less transparent sites purporting to answer this question that describe the exact features of particular firms, and conveniently provide links to them.

The fact is, we cannot know how a broker will deal with us until we have opened an active account. Many make the error of thinking brokers with the highest Internet profile will provide the best service and attention. Substantial advertising budgets are not necessarily indicative of a broker’s ethics or efficiency. Even big brand associations can lead the unwary astray.

Market makers and broker dealing desks may actually trade against your position. Stop hunting price spikes, persistent data glitches, unfilled orders/slippage, and suddenly widening spreads during high liquidity sessions, are a few of the practices used by such predators. Brokers who claim to have no intervening trading desks may also engage in sharp practices in the dedicated pursuit of your money.

First and foremost, even though you may look at reviews as part of your research, do your own due diligence. Make a concerted effort to verify the broker is legitimate, regulated and reputable.

As a general rule we prefer ECN brokers, though we stress there are reasonable alternatives.

Trading Platforms
Most Forex platforms, or Order Management Systems, will efficiently process your order with a varying degree of sophistication. At any given time a few become popular and tend to be dominant. Where possible familiarize yourself with the broker’s trading platform before opening a live account, with the explicit understanding that trial trading is not a facsimile of the real thing, It is merely an opportunity to understand the particular platform's processes and protocols. To practice and build confidence in how to execute and modify orders. Trades are often incorrectly entered because of careless keystrokes and lack of attention to basic trade execution procedures. Always check your trade before you place it - instrument, amount, and order. 

Charts
The chart is an essential trading aid. It displays the market’s past, present, and possibly hints at its future. 

Technical Tools 
Studies that once cost large sums are now freely available on the charts provided by most brokers. Each of these trading tools may be useful, however, in most instances covering a chart with a maze of overlays and studies serves no useful purpose. Again, it is a matter of sensible research and personal preference.

Quotes
When you execute a Forex trade you are effectively buying the base currency, the first one in the cross, and selling the quoted currency, the second in the cross. The currency pair or cross is the instrument you are trading. When you buy the instrument you pay the ask price: when you sell you pay the bid price.

You do not have to delve too deeply to read stories of chart quotes and executed prices differing, especially in volatile markets. Stories are far from rare of the same trade being stopped out or not filled by one broker, yet not closed or filled by another. The issue of slippage is a matter between you and your broker.

A stock exchange quote emanates from a specific central source; the Forex is not a centralised market. A Forex dealer’s charts reflect a variety of price sources, and sometimes motivations. Accordingly, prices may vary, sometime quite significantly, because your broker’s third party charts display indicative price, not necessarily the broker's executable price.

So-called live streaming Forex prices, provided by firms like Reuters, play a critical role in the Forex price discovery process. In a way these streaming prices are an aggregated indication of current Forex quotes. At source prices are often manually entered and thus subject to human error, and at several points of distribution they may be manipulated.

Indicative prices signify or imply current Forex quotes and past fluctuations. Virtually all reputable charts will reflect the same trends and be quite closely aligned, nonetheless, they indicate a past bid/ask price, not necessarily a broker’s execution price, though they can be identical, or nearly so.

The more sources used the greater the accuracy of the price - EUR:USD, USD:JPY and other majors' crosses are widely traded and reported, and tend to be closely aligned across charts. Similarly, quotes tend to be more precise during the relevant sessions, e.g. the EUR, GBP and CHF during the London session, the JPY, AUD and NZD during the Asia/Pacific session.

The Spread
An obvious conclusion is that the lower the spread the lower the cost to trade. There are brokers who offer raw spreads and charge various commissions, so it is not necessarily that simple.

Some brokers offer fluctuating spreads, others fixed. Both appeal to traders for different reasons. The former because it may be a more transparent picture of current market liquidity and volatility, the latter because traders know what the spread will be, supposedly irrespective of liquidity and volatility.

HAPPY TRADING.