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![]() | Hi guys, submitted by getmrmarket to Forex [link] [comments] I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert. I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning. When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions. The first topic is Risk Management and we'll cover it in three parts Part I
Why it mattersThe first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.”You have to keep it before you grow it. Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around. The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices. Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners. Capital and position sizingThe first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose.Position sizing is what ensures that a losing streak does not take you out of the market. A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples. So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000. We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be? We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator". https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14 So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital. You should be using this calculator (or something similar) on every single trade so that you know your risk. Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later. The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work. As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you. Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints. For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly: https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you. Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown. It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance. Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k. Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money. Do not let this happen to you. Use position sizing discipline to protect yourself. Kelly CriterionIf you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number?The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round. This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet. Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin. Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips. Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds. Applying the formula to forex trading looks like this: Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically. If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss. So that’s 0.3 - (1 - 0.3) / 3 = 6.6%. Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit! With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not. Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account. Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see. This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders. Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
How to use stop losses sensiblyStop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them.A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter. The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’. This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK. Why are stop losses so important? Well, there is no other way to manage risk with certainty. You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter. Learning to take a loss and move on rationally is a key lesson for new traders. A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not. Bruce Kovner, founder of the hedge fund Caxton Associates There is an old saying amongst bank traders which is “losers average losers”. It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong. Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops. Picking a clear levelWhere you leave your stop loss is key.Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible. If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200. The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up. Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD. https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802 If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend. So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level. There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section. There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high. https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81 Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument. Here are some guidelines that can help:
For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market. Coming up in part IIEDIT: part II hereLetting stops breathe When to change a stop Entering and exiting winning positions Risk:reward ratios Risk-adjusted returns Coming up in part IIISqueezes and other risksMarket positioning Bet correlation Crap trades, timeouts and monthly limits *** Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer. |
![]() | Thanks to everyone who responded to the previous pieces on risk management. We ended up with nearly 2,000 upvotes and I'm delighted so many of you found it useful. submitted by getmrmarket to Forex [link] [comments] This time we're going to focus on a new area: reacting to and trading around news and fundamental developments. A lot of people get this totally wrong and the main reason is that they trade the news at face value, without considering what the market had already priced in. If you've ever seen what you consider to be "good" or "better than forecast" news come out and yet been confused as the pair did nothing or moved in the opposite direction to expected, read on... We are going to do this in two parts. Part I
IntroductionKnowing how to use and benefit from the economic calendar is key for all traders - not just news traders.In this chapter we are going to take a practical look at how to use the economic calendar. We are also going to look at how to interpret news using second order thinking. The key concept is learning what has already been ‘priced in’ by the market so we can estimate how the market price might react to the new information. Why use an economic calendarThe economic calendar contains all the scheduled economic releases for that day and week. Even if you purely trade based on technical analysis, you still must know what is in store. https://preview.redd.it/20xdiq6gq4k51.png?width=1200&format=png&auto=webp&s=6cd47186db1039be7df4d7ad6782de36da48f1db Why? Three main reasons. Firstly, releases can help provide direction. They create trends. For example if GBPUSD has been fluctuating aimlessly within a range and suddenly the Bank of England starts raising rates you better believe the British Pound will start to move. Big news events often start long-term trends which you can trade around. Secondly, a lot of the volatility occurs around these events. This is because these events give the market new information. Prior to a big scheduled release like the US Non Farm Payrolls you might find no one wants to take a big position. After it is released the market may move violently and potentially not just in a single direction - often prices may overshoot and come back down. Even without a trend this volatility provides lots of trading opportunities for the day trader. https://preview.redd.it/u17iwbhiq4k51.png?width=1200&format=png&auto=webp&s=98ea8ed154c9468cb62037668c38e7387f2435af Finally, these releases can change trends. Going into a huge release because of a technical indicator makes little sense. Everything could reverse and stop you out in a moment. You need to be aware of which events are likely to influence the positions you have on so you can decide whether to keep the positions or flatten exposure before the binary event for which you have no edge. Most traders will therefore ‘scan’ the calendar for the week ahead, noting what the big events are and when they will occur. Then you can focus on each day at a time. Reading the economic calendarMost calendars show events cut by trading day. Helpfully they adjust the time of each release to your own timezone. For example we can see that the Bank of Japan Interest Rate decision is happening at 4am local time for this particular London-based trader. https://preview.redd.it/lmx0q9qoq4k51.jpg?width=1200&format=pjpg&auto=webp&s=c6e9e1533b1ba236e51296de8db3be55dfa78ba1 Note that some events do not happen at a specific time. Think of a Central Banker’s speech for example - this can go on for an hour. It is not like an economic statistic that gets released at a precise time. Clicking the finger emoji will open up additional information on each event. Event importanceHow do you define importance? Well, some events are always unimportant. With the greatest of respect to Italian farmers, nobody cares about mundane releases like Italian farm productivity figures.Other events always seem to be important. That means, markets consistently react to them and prices move. Interest rate decisions are an example of consistently high importance events. So the Medium and High can be thought of as guides to how much each event typically affects markets. They are not perfect guides, however, as different events are more or less important depending on the circumstances. For example, imagine the UK economy was undergoing a consumer-led recovery. The Central Bank has said it would raise interest rates (making GBPUSD move higher) if they feel the consumer is confident. Consumer confidence data would suddenly become an extremely important event. At other times, when the Central Bank has not said it is focused on the consumer, this release might be near irrelevant. Knowing what's priced inNext to each piece of economic data you can normally see three figures. Actual, Forecast, and Previous.
Once you understand that markets move based on the news vs expectations, you will be less confused by price action around events This is a common misunderstanding. Say everyone is expecting ‘great’ economic data and it comes out as ‘good’. Does the price go up? You might think it should. After all, the economic data was good. However, everyone expected it to be great and it was just … good. The great release was ‘priced in’ by the market already. Most likely the price will be disappointed and go down. By priced in we simply mean that the market expected it and already bought or sold. The information was already in the price before the announcement. Incidentally the official forecasts can be pretty stale and might not accurately capture what active traders in the market expect. See the following example. An example of pricing inFor example, let’s say the market is focused on the number of Tesla deliveries. Analysts think it’ll be 100,000 this quarter. But Elon Musk tweets something that hints he’s really, really, really looking forward to the analyst call. Tesla’s price ticks higher after the tweet as traders put on positions, reflecting the sentiment that Tesla is likely to massively beat the 100,000. (This example is not a real one - it just serves to illustrate the concept.) Tesla deliveries are up hugely vs last quarter ... but they are disappointing vs market expectations ... what do you think will happen to the stock? On the day it turns out Tesla hit 101,000. A better than the officially forecasted result - sure - but only marginally. Way below what readers of Musk's twitter account might have thought. Disappointed traders may sell their longs and close out the positions. The stock might go down on ‘good’ results because the market had priced in something even better. (This example is not a real one - it just serves to illustrate the concept.) SurveysIt can be a little hard to know what the market really expects. Often the published forecasts are stale and do not reflect what actual traders and investors are looking for.One of the most effective ways is a simple survey of investors. Something like a Twitter poll like this one from CNBC is freely available and not a bad barometer. CNBC, Bloomberg and other business TV stations often have polls on their Twitter accounts that let you know what others are expecting Interest rates decisionsWe know that interest rates heavily affect currency prices.For major interest rate decisions there’s a great tool on the CME’s website that you can use. See the link for a demo This gives you a % probability of each interest rate level, implied by traded prices in the bond futures market. For example, in the case above the market thinks there’s a 20% chance the Fed will cut rates to 75-100bp. Obviously this is far more accurate than analyst estimates because it uses actual bond prices where market participants are directly taking risk and placing bets. It basically looks at what interest rate traders are willing to lend at just before/after the date of the central bank meeting to imply the odds that the market ascribes to a change on that date. Always try to estimate what the market has priced in. That way you have some context for whether the release really was better or worse than expected. Second order thinkingYou have to know what the market expects to try and guess how it’ll react. This is referred to by Howard Marks of Oaktree as second-level thinking. His explanation is so clear I am going to quote extensively.It really is hard to improve on this clarity of thought: First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority). All the first-level thinker needs is an opinion about the future, as in “The outlook for the company is favorable, meaning the stock will go up.” Second-level thinking is deep, complex and convoluted. Howard Marks He explains first-level thinking: The first-level thinker simply looks for the highest quality company, the best product, the fastest earnings growth or the lowest p/e ratio. He’s ignorant of the very existence of a second level at which to think, and of the need to pursue it. Howard Marks The above describes the guy who sees a 101,000 result and buys Tesla stock because - hey, this beat expectations. Marks goes on to describe second-level thinking: The second-level thinker goes through a much more complex process when thinking about buying an asset. Is it good? Do others think it’s as good as I think it is? Is it really as good as I think it is? Is it as good as others think it is? Is it as good as others think others think it is? How will it change? How do others think it will change? How is it priced given: its current condition; how do I think its conditions will change; how others think it will change; and how others think others think it will change? And that’s just the beginning. No, this isn’t easy. Howard Marks In this version of events you are always thinking about the market’s response to Tesla results. What do you think they’ll announce? What has the market priced in? Is Musk reliable? Are the people who bought because of his tweet likely to hold on if he disappoints or exit immediately? If it goes up at which price will they take profit? How big a number is now considered ‘wow’ by the market? As Marks says: not easy. However, you need to start getting into the habit of thinking like this if you want to beat the market. You can make gameplans in advance for various scenarios. Here are some examples from Marks to illustrate the difference between first order and second order thinking. Some further examples Trying to react fast to headlines is impossible in today’s market of ultra fast computers. You will never win on speed. Therefore you have to out-think the average participant. Coming up in part IINow that we have a basic understanding of concepts such as expectations and what the market has priced in, we can look at some interesting trading techniques and tools.Part II
*** Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer. |
![]() | Thanks for all the upvotes and comments on the previous pieces: submitted by getmrmarket to Forex [link] [comments] From the first half of the news trading note we learned some ways to estimate what is priced in by the market. We learned that we are trading any gap in market expectations rather than the result itself. A good result when the market expected a fantastic result is disappointing! We also looked at second order thinking. After all that, I hope the reaction of prices to events is starting to make more sense to you. Before you understand the core concepts of pricing in and second order thinking, price reactions to events can seem mystifying at times We'll add one thought-provoking quote. Keynes (that rare economist who also managed institutional money) offered this analogy. He compared selecting investments to a beauty contest in which newspaper readers would write in with their votes and win a prize if their votes most closely matched the six most popularly selected women across all readers: It is not a case of choosing those (faces) which, to the best of one’s judgment, are really the prettiest, nor even those which average opinions genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. Trading is no different. You are trying to anticipate how other traders will react to news and how that will move prices. Perhaps you disagree with their reaction. Still, if you can anticipate what it will be you would be sensible to act upon it. Don't forget: meanwhile they are also trying to anticipate what you and everyone else will do. Part II
Preparing for quantitative and qualitative releasesThe majority of releases are quantitative. All that means is there’s some number. Like unemployment figures or GDP.Historic results provide interesting context. We are looking below the Australian unemployment rate which is released monthly. If you plot it out a few years back you can spot a clear trend, which got massively reversed. Knowing this trend gives you additional information when the figure is released. In the same way prices can trend so do economic data. A great resource that's totally free to use This makes sense: if for example things are getting steadily better in the economy you’d expect to see unemployment steadily going down. Knowing the trend and how much noise there is in the data gives you an informational edge over lazy traders. For example, when we see the spike above 6% on the above you’d instantly know it was crazy and a huge trading opportunity since a) the fluctuations month on month are normally tiny and b) it is a huge reversal of the long-term trend. Would all the other AUDUSD traders know and react proportionately? If not and yet they still trade, their laziness may be an opportunity for more informed traders to make some money. Tradingeconomics.com offers really high quality analysis. You can see all the major indicators for each country. Clicking them brings up their history as well as an explanation of what they show. For example, here’s German Consumer Confidence. Helpful context There are also qualitative events. Normally these are speeches by Central Bankers. There are whole blogs dedicated to closely reading such texts and looking for subtle changes in direction or opinion on the economy. Stuff like how often does the phrase "in a good place" come up when the Chair of the Fed speaks. It is pretty dry stuff. Yet these are leading indicators of how each member may vote to set interest rates. Ed Yardeni is the go-to guy on central banks. Data surprise indexThe other thing you might look at is something investment banks produce for their customers. A data surprise index. I am not sure if these are available in retail land - there's no reason they shouldn't be but the economic calendars online are very basic.You’ll remember we talked about data not being good or bad of itself but good or bad relative to what was expected. These indices measure this difference. If results are consistently better than analysts expect then you’ll see a positive number. If they are consistently worse than analysts expect a negative number. You can see they tend to swing from positive to negative. Mean reversion at its best! Data surprise indices measure how much better or worse data came in vs forecast There are many theories for this but in general people consider that analysts herd around the consensus. They are scared to be outliers and look ‘wrong’ or ‘stupid’ so they instead place estimates close to the pack of their peers. When economic conditions change they may therefore be slow to update. When they are wrong consistently - say too bearish - they eventually flip the other way and become too bullish. These charts can be interesting to give you an idea of how the recent data releases have been versus market expectations. You may try to spot the turning points in macroeconomic data that drive long term currency prices and trends. Using recent events to predict future reactionsThe market reaction function is the most important thing on an economic calendar in many ways. It means: what will happen to the price if the data is better or worse than the market expects?That seems easy to answer but it is not. Consider the example of consumer confidence we had earlier.
One clue is to look at what happened to the price of risk assets at the last event. For example, let’s say we looked at unemployment and it came in a lot worse than forecast last month. What happened to the S&P back then? 2% drop last time on a 'worse than expected' number ... so it it is 'better than expected' best guess is we rally 2% higher So this tells us that - at least for our most recent event - the S&P moved 2% lower on a far worse than expected number. This gives us some guidance as to what it might do next time and the direction. Bad number = lower S&P. For a huge surprise 2% is the size of move we’d expect. Again - this is a real limitation of online calendars. They should show next to the historic results (expected/actual) the reaction of various instruments. Buy the rumour, sell the factA final example of an unpredictable reaction relates to the old rule of ‘Buy the rumour, sell the fact.’ This captures the tendency for markets to anticipate events and then reverse when they occur. Buy the rumour, sell the fact In short: people take profit and close their positions when what they expected to happen is confirmed. So we have to decide which driver is most important to the market at any point in time. You obviously cannot ask every participant. The best way to do it is to look at what happened recently. Look at the price action during recent releases and you will get a feel for how much the market moves and in which direction. Trimming or taking off positionsOne thing to note is that events sometimes give smart participants information about positioning. This is because many traders take off or reduce positions ahead of big news events for risk management purposes.Imagine we see GBPUSD rises in the hour before GDP release. That probably indicates the market is short and has taken off / flattened its positions. The price action before an event can tell you about speculative positioning If GDP is merely in line with expectations those same people are likely to add back their positions. They avoided a potential banana skin. This is why sometimes the market moves on an event that seemingly was bang on consensus. But you have learned something. The speculative market is short and may prove vulnerable to a squeeze. Two kinds of reversalsFairly often you’ll see the market move in one direction on a release then turn around and go the other way.These are known as reversals. Traders will often ‘fade’ a move, meaning bet against it and expect it to reverse. Logical reversalsSometimes this happens when the data looks good at first glance but the details don’t support it.For example, say the headline is very bullish on German manufacturing numbers but then a minute later it becomes clear the company who releases the data has changed methodology or believes the number is driven by a one-off event. Or maybe the headline number is positive but buried in the detail there is a very negative revision to previous numbers. Fading the initial spike is one way to trade news. Try looking at what the price action is one minute after the event and thirty minutes afterwards on historic releases. Crazy reversalsSome reversals don't make sense Sometimes a reversal happens for seemingly no fundamental reason. Say you get clearly positive news that is better than anyone expects. There are no caveats to the positive number. Yet the price briefly spikes up and then falls hard. What on earth? This is a pure supply and demand thing. Even on bullish news the market cannot sustain a rally. The market is telling you it wants to sell this asset. Try not to get in its way. Some key releasesAs we have already discussed, different releases are important at different times. However, we’ll look at some consistently important ones in this final section.Interest rates decisionsThese can sometimes be unscheduled. However, normally the decisions are announced monthly. The exact process varies for each central bank. Typically there’s a headline decision e.g. maintain 0.75% rate.You may also see “minutes” of the meeting in which the decision was reached and a vote tally e.g. 7 for maintain, 2 for lower rates. These are always top-tier data releases and have capacity to move the currency a lot. A hawkish central bank (higher rates) will tend to move a currency higher whilst a dovish central bank (lower rates) will tend to move a currency lower. A central banker speaking is always a big event Non farm payrollsThese are released once per month. This is another top-tier release that will move all USD pairs as well as equities.There are three numbers:
In general a positive response should move the USD higher but check recent price action. Other countries each have their own unemployment data releases but this is the single most important release. SurveysThere are various types of surveys: consumer confidence; house price expectations; purchasing managers index etc.Each one basically asks a group of people if they expect to make more purchases or activity in their area of expertise to rise. There are so many we won’t go into each one here. A really useful tool is the tradingeconomics.com economic indicators for each country. You can see all the major indicators and an explanation of each plus the historic results. GDPGross Domestic Product is another big release. It is a measure of how much a country’s economy is growing.In general the market focuses more on ‘advance’ GDP forecasts more than ‘final’ numbers, which are often released at the same time. This is because the final figures are accurate but by the time they come around the market has already seen all the inputs. The advance figure tends to be less accurate but incorporates new information that the market may not have known before the release. In general a strong GDP number is good for the domestic currency. InflationCountries tend to release measures of inflation (increase in prices) each month. These releases are important mainly because they may influence the future decisions of the central bank, when setting the interest rate.See the FX fundamentals section for more details. Industrial dataThings like factory orders or or inventory levels. These can provide a leading indicator of the strength of the economy.These numbers can be extremely volatile. This is because a one-off large order can drive the numbers well outside usual levels. Pay careful attention to previous releases so you have a sense of how noisy each release is and what kind of moves might be expected. CommentsOften there is really good stuff in the comments/replies. Check out 'squitstoomuch' for some excellent observations on why some news sources are noisy but early (think: Twitter, ZeroHedge). The Softbank story is a good recent example: was in ZeroHedge a day before the FT but the market moved on the FT. Also an interesting comment on mistakes, which definitely happen on breaking news, and can cause massive reversals. |
![]() | Forex Signals - TOP Best Services. Checked!To invest in the financial markets, we must acquire good tools that help us carry out our operations in the best possible way. In this sense, we always talk about the importance of brokers, however, signal systems must also be taken into account.The platforms that offer signals to invest in forex provide us with alerts that will help us in a significant way to be able to carry out successful operations. For this reason, we are going to tell you about the importance of these alerts in relation to the trading we carry out, because, without a doubt, this type of system will provide us with very good information to invest at the right time and in the best assets in the different markets. financial Within this context, we will focus on Forex signals, since it is the most important market in the world, since in it, multiple transactions are carried out on a daily basis, hence the importance of having an alert system that offers us all the necessary data to invest in currencies. Also, as we all already know, cryptocurrencies have become a very popular alternative to investing in traditional currencies. Therefore, some trading services/tools have emerged that help us to carry out successful operations in this particular market. In the following points, we will detail everything you need to know to start operating in the financial markets using trading signals: what are signals, how do they work, because they are a very powerful help, etc. Let's go there! What are Forex Trading Signals?https://preview.redd.it/vjdnt1qrpny51.jpg?width=640&format=pjpg&auto=webp&s=bc541fc996701e5b4dd940abed610b59456a5625Before explaining the importance of Forex signals, let's start by making a small note so that we know what exactly these alerts are. Thus, we will know that the signals on the currency market are received by traders to know all the information that concerns Forex, both for assets and for the market itself. These alerts allow us to know the movements that occur in the Forex market and the changes that occur in the different currency pairs. But the great advantage that this type of system gives us is that they provide us with the necessary information, to know when is the right time to carry out our investments. In other words, through these signals, we will know the opportunities that are presented in the market and we will be able to carry out operations that can become quite profitable.Profitability is precisely another of the fundamental aspects that must be taken into account when we talk about Forex signals since the vast majority of these alerts offer fairly reliable data on assets. Similarly, these signals can also provide us with recommendations or advice to make our operations more successful. »Purpose: predict movements to carry out Profitable OperationsIn short, Forex signal systems aim to predict the behavior that the different assets that are in the market will present and this is achieved thanks to new technologies, the creation of specialized software, and of course, the work of financial experts.In addition, it must also be borne in mind that the reliability of these alerts largely lies in the fact that they are prepared by financial professionals. So they turn out to be a perfect tool so that our investments can bring us a greater number of benefits. The best signal services todayWe are going to tell you about the 3 main alert system services that we currently have on the market. There are many more, but I can assure these are not scams and are reliable. Of course, not 100% of trades will be a winner, so please make sure you apply proper money management and risk management system.1. 1000pipbuilder (top choice)Fast track your success and follow the high-performance Forex signals from 1000pip Builder. These Forex signals are rated 5 stars on Investing.com, so you can follow every signal with confidence. All signals are sent by a professional trader with over 10 years investment experience. This is a unique opportunity to see with your own eyes how a professional Forex trader trades the markets.The 1000pip Builder Membership is ordinarily a signal service for Forex trading. You will get all the facts you need to successfully comply with the trading signals, set your stop loss and take earnings as well as additional techniques and techniques! You will get easy to use trading indicators for Forex Trades, including your entry, stop loss and take profit. Overall, the earnings target per months is 350 Pips, depending on your funding this can be a high profit per month! (In fact, there is by no means a guarantee, but the past months had been all between 600 – 1000 Pips). >>>Know more about 1000pipbuilder Your 1000pip builder membership gives you all in hand you want to start trading Forex with success. Read the directions and wait for the first signals. You can trade them inside your demo account first, so you can take a look at the performance before you make investments real money! Features:
https://preview.redd.it/zjc10xx6ony51.png?width=668&format=png&auto=webp&s=9b0eac95f8b584dc0cdb62503e851d7036c0232b VISIT 1000ipbuilder here 2. DDMarketsDigital Derivatives Markets (DDMarkets) have been providing trade alert offerings since May 2014 - fully documenting their change ideas in an open and transparent manner.September 2020 performance report for DD Markets. Their manner is simple: carry out extensive research, share their evaluation and then deliver a trading sign when triggered. Once issued, daily updates on the trade are despatched to members via email. It's essential to note that DDMarkets do not tolerate floating in an open drawdown in an effort to earnings at any cost - a common method used by less professional providers to 'fudge' performance statistics. Verified Statistics: Not independently verified. Price: plans from $74.40 per month. Year Founded: 2014 Suitable for Beginners: Yes, (includes handy to follow trade analysis) VISIT ------- 3. JKonFXIf you are looking or a forex signal service with a reliable (and profitable) music record you can't go previous Joel Kruger and the team at JKonFX.Trading performance file for JKonFX. Joel has delivered a reputable +59.18% journal performance for 2016, imparting real-time technical and fundamental insights, in an extremely obvious manner, to their 30,000+ subscriber base. Considered a low-frequency trader, alerts are only a small phase of the overall JKonFX subscription. If you're searching for hundreds of signals, you may want to consider other options. Verified Statistics: Not independently verified. Price: plans from $30 per month. Year Founded: 2014 Suitable for Beginners: Yes, (includes convenient to follow videos updates). VISIT The importance of signals to invest in ForexOnce we have known what Forex signals are, we must comment on the importance of these alerts in relation to our operations.As we have already told you in the previous paragraph, having a system of signals to be able to invest is quite advantageous, since, through these alerts, we will obtain quality information so that our operations end up being a true success. »Use of signals for beginners and expertsIn this sense, we have to say that one of the main advantages of Forex signals is that they can be used by both beginners and trading professionals.As many as others can benefit from using a trading signal system because the more information and resources we have in our hands. The greater probability of success we will have. Let's see how beginners and experts can take advantage of alerts:
»Trading automationWhen we dedicate ourselves to working in the financial world, none of us can spend 24 hours in front of the computer waiting to perform the perfect operation, it is impossible.That is why Forex signals are important, because, in order to carry out our investments, all we will have to do is wait for those signals to arrive, be attentive to all the alerts we receive, and thus, operate at the right time according to the opportunities that have arisen. It is fantastic to have a tool like this one that makes our work easier in this regard. »Carry out profitable Forex operationsThese signals are also important, because the vast majority of them are usually quite profitable, for this reason, we must get an alert system that provides us with accurate information so that our operations can bring us great benefits.But in addition, these Forex signals have an added value and that is that they are very easy to understand, therefore, we will have a very useful tool at hand that will not be complicated and will end up being a very beneficial weapon for us. »Decision support analysisA system of currency market signals is also very important because it will help us to make our subsequent decisions.We cannot forget that, to carry out any type of operation in this market, previously, we must meditate well and know the exact moment when we will know that our investments are going to bring us profits . Therefore, all the information provided by these alerts will be a fantastic basis for future operations that we are going to carry out. »Trading Signals made by professionalsFinally, we have to recall the idea that these signals are made by the best professionals. Financial experts who know perfectly how to analyze the movements that occur in the market and changes in prices.Hence the importance of alerts, since they are very reliable and are presented as a necessary tool to operate in Forex and that our operations are as profitable as possible. What should a signal provider be like?https://preview.redd.it/j0ne51jypny51.png?width=640&format=png&auto=webp&s=5578ff4c42bd63d5b6950fc6401a5be94b97aa7fAs you have seen, Forex signal systems are really important for our operations to bring us many benefits. For this reason, at present, there are multiple platforms that offer us these financial services so that investing in currencies is very simple and fast. Before telling you about the main services that we currently have available in the market, it is recommended that you know what are the main characteristics that a good signal provider should have, so that, at the time of your choice, you are clear that you have selected one of the best systems. »Must send us information on the main currency pairsIn this sense, one of the first things we have to comment on is that a good signal provider, at a minimum, must send us alerts that offer us information about the 6 main currencies, in this case, we refer to the euro, dollar, The pound, the yen, the Swiss franc, and the Canadian dollar.Of course, the data you provide us will be related to the pairs that make up all these currencies. Although we can also find systems that offer us information about other minorities, but as we have said, at a minimum, we must know these 6. »Trading tools to operate betterLikewise, signal providers must also provide us with a large number of tools so that we can learn more about the Forex market.We refer, for example, to technical analysis above all, which will help us to develop our own strategies to be able to operate in this market.These analyzes are always prepared by professionals and study, mainly, the assets that we have available to invest. »Different Forex signals reception channelsThey must also make available to us different ways through which they will send us the Forex signals, the usual thing is that we can acquire them through the platform's website, or by a text message and even through our email.In addition, it is recommended that the signal system we choose sends us a large number of alerts throughout the day, in order to have a wide range of possibilities. »Free account and customer serviceOther aspects that we must take into account to choose a good signal provider is whether we have the option of receiving, for a limited time, alerts for free or the profitability of the signals they emit to us.Similarly, a final aspect that we must emphasize is that a good signal system must also have excellent customer service, which is available to us 24 hours a day and that we can contact them at through an email, a phone number, or a live chat, for greater immediacy. Well, having said all this, in our last section we are going to tell you which are the best services currently on the market. That is, the most suitable Forex signal platforms to be able to work with them and carry out good operations. In this case, we will talk about ForexPro Signals, 365 Signals and Binary Signals. Forex Signals Reddit: conclusionTo be able to invest properly in the Forex market, it is convenient that we get a signal system that provides us with all the necessary information about this market. It must be remembered that Forex is a very volatile market and therefore, many movements tend to occur quickly.Asset prices can change in a matter of seconds, hence the importance of having a system that helps us analyze the market and thus know, what is the right time for us to start operating. Therefore, although there are currently many signal systems that can offer us good services, the three that we have mentioned above are the ones that are best valued by users, which is why they are the best signal providers that we can choose to carry out. our investments. Most of these alerts are quite profitable and in addition, these systems usually emit a large number of signals per day with full guarantees. For all this, SignalsForexPro, Signals365, or SignalsBinary are presented as fundamental tools so that we can obtain a greater number of benefits when we carry out our operations in the currency market. |
Four steps to making your first trade in forex. Now that you know a little more about forex, we’ll take a closer look at how to make your first trade. Before you trade you need to follow a few steps. 1. Select a currency pair. When trading forex you are exchanging the value of one currency for another. In other words, you will always buy one currency while selling another at the same time ... There are many economic indicators that can be used to evaluate forex fundamentals. These indicators can be an invaluable resource for any currency trader. Understanding the fundamentals of the largest global economies and their impact on the currency market is complicated. For this reason, FX Leaders has dedicated an entire section to teach you how to use fundamental analysis in your forex trading. In this article, you will learn trading methods based on fundamental analysis, helping you understand the connection between the real economy and ... Fundamental analysis therefore calls for a deep analysis of the forex market before making a trade. The Economic Calendar. The economic calendar which is offered by many forex brokers is a very important tool traders use before making or leaving a trade. The calendar shows the schedule of economic events that are expected to happen in the financial market. The calendar has 5 important ... Understanding the fundamentals of the largest global economies and their impact on the currency market is complicated. For this reason, FX Leaders has dedicated an entire section to teach you how to use fundamental analysis in your forex trading. In this article, you will learn trading methods based on fundamental analysis, helping you understand the connection between the real economy and ... Many traders will use both fundamental and technical methods to determine when and where to place trades, but they also tend to favor one over the other. However, if you would like to use only fundamental analysis, there are a variety of sources to base your opinion. Central Banks. Central banks are likely one of the most volatile sources for fundamental trading. The list of actions they can ... Although most Forex traders use technical analysis to place their trades, more sophisticated and successful traders tend to increase their success rate by using fundamental analysis in their trading. You can find out more about fundamental analysis in this article and learn how to conduct and apply it for more profitable trading. Advertisement. Enroll to our Forex Academy and take your trading ...
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