Forex Trading for Beginners

Forex trading for beginners

Forex trading can be an exciting and lucrative activity, but it can also be tough, especially for beginners. Newcomers underestimate the important of financial education, tend to have unrealistic expectations, and struggle to control their emotions, pushing them to act irrationally and impair their overall performance.

What is the Forex market?

The Foreign Exchange market, also called the Forex or the FX market, is an over-the-counter market where the world’s money is exchanged. Many players trade the Forex market, such as institutional investors, central banks, multinationals, and commercial banks, among others.

As a retail trader, you can access this market with a Forex and CFD broker and make money by buying or selling currency pairs. Currencies are always quoted in pairs – for instance, in the EUR/USD currency pair, the EUR is the “base” currency, while the USD is the “quoted” currency. The quoted currency is always the equivalent of one base currency. If the EUR/USD exchange rate is worth 1.1222, then you will get $1.1222 for €1.

In our example, we can see that the EUR/USD has 4 decimals. This is typical of most currency pairs, except those that involve the JPY, which only display 2 decimals. When a currency pair moves up or down, the change is measured in “Pips”, which is a one-digit movement in the last decimal of a currency pair. When the EUR/USD moves from $1.1222 to $1.1223, the EUR/USD has increased by one “Pip”.

When you look at a currency pair quotation on your broker’s platform, you will see two prices: a selling price on the left (bid price), and a buying price on the right (ask price). The difference between both prices is called the “spread”. This “spread” is pocketed by the broker, and is one of the main ways in which they make money.

The Bank for International Settlements declared in its last triennial survey that the daily average trading volume of the Forex market reached more than 5 trillion US Dollars. It also shows that, due to this huge volume, the Forex market is the most liquid market in the world. Liquidity refers to how easy it is for traders to open and close their trading positions without affecting the price of the underlying asset. Liquidity is a good indication of how active a market is.

The concept of liquidity also works hand-in-hand with volatility, which measures the way in which market prices change. Volatility is something to be welcomed, as it is volatility that gives traders the opportunity to make profits, especially for short-term traders like scalpers and day traders.

What are the different trading styles?

As a Forex trader, there are different trading methods you can use, with the main styles being:

  • Day trading
  • Scalping
  • Swing trading

Day trading and scalping are two of the most aggressive and active trading styles. In both cases, all trading positions will be closed before the end of the trading session. Where these 2 styles differ is in trade frequency – scalping is about taking advantage of very small price changes, often buying and selling within a few seconds or minutes, while day traders may hold a position for up to several hours. While day trading and scalping are very short-term trading methods, swing trading is longer-term, with positions held up to several weeks.

Depending on the trading style you choose, you will use different types of orders. For instance, “market” orders will be used by scalpers more so than by swing traders, as these orders offer the best available price for you to enter or exit the market instantly.

For day trading or swing trading, “limit entry” orders will be more useful, are they allow traders to enter the market at a pre-determined price (“buy limit” orders are for when you want to open a “long” position, and “sell limit” if you want to open a “short” position).

As Forex trading is often offered with leverage, potential profits are magnified, along with potential losses. For this reason, it’s important to use stop-loss orders to limit your losses if the market goes against you. One of the best ways to mitigate your risk is to trade with the trend.

How important is the trend in Forex trading?

The trend is at the heart of one of the most popular techniques for trading the Forex markets – technical analysis. This strategy follows 3 assumptions: prices discount everything, history tends to repeat itself, and prices move in trends.

Therefore, when a given currency pair exchange rate moves, the market trends. While most traders think that prices can only go up or down, Charles Dow’s theory asserts that there are in fact 3 trends in the market: up, down and “sideways”.

According to Dow, you need to analysis highs and lows to be able to determine a trend. An uptrend is formed by higher highs and higher lows, while a downward trend is formed by lower highs and lower lowers. When neither the “bulls” (buying investors) nor the “bears” (selling investors) have control of the market, prices evolve within a lateral consolidation, also called a “range”.

Dow’s theory shows that each trend is formed by 3 other trends: a “primary”, a “secondary” and a “minor” trend. A primary trend usually lasts more

than a year and describes a bullish or a bearish market. Within the primary trend, the secondary trend usually goes against the main trend – it represents a corrective movement, or a “pullback”, lasting between 3 weeks and 3 months. Finally, a minor trend represents the noise of a market within the secondary trend, usually lasting less than 3 weeks.

How can candlestick analysis can help you fine-tune your entry and exit timing?

Candlestick analysis is a Japanese type of chart analysis that goes back to the 18th century. It is still one of the most popular ways to read charts today. Candlesticks are used to make better trading decisions by analyzing prices through the “body” and “wicks” of candles to decide when and where to enter or exit the markets.

A bullish candle usually has a white or green body, while a bearish candle will usually be black or red. Candles describe market participant psychology through their wicks (also called “shadows”), which show the volatility and the intensity of the movement through the highest and lowest level reached. The longer a candle, the more intense the buying/selling pressure. Conversely, the shorter the candlestick, the more indecisive the market.

Candlestick analysis is quite an effective way to analyze the markets, as it helps traders spot great trading opportunities through the visualization of “continuation”, “indecision” and “reversal” patterns in the charts.

Final words

The FX market is quite popular among newcomers, and has never been easier to access. If you use leverage and margin trading wisely, you can make a lot of money trading currencies. Learning the basics of Forex trading isn’t overly complicated. Deciding what kind of trader you are, based on your personality, and building your trading strategy accordingly, however, is a different story.

The more you know about Forex and trading, the better you will trade. So, be patient, dedicated, and committed to keep learning about trading and improving your strategy. Eventually, you will develop the skills to be profitable in Forex trading over the long-term.

Globalism and The Economy

Is the US still the world’s leading superpower?

While the strong global economic growth of the late 19th and early 20th centuries was driven in part by the two first phases of industrialization and the transport revolution in Western Europe, successive wars on the old continent have weakened growth and European countries. Since then, globalization has given a boost to global growth, while propelling the United States to global superpower status.

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What is globalization?

Globalization is all about commercial interaction between different parts of the world. These flows can be exchanges of goods, capital, services, people or information. This was all made possible by the improvement of the means of communication (NICT), the containerization revolution, the very low cost of maritime transport, the increasing liberalization of trade (GATT and then WTO in 1995) and the deregulation of financial flows between countries.

Since the 1990s, globalization has accelerated, with the fall of the USSR, the rise of the Internet, the creation of the World Trade Organization (WTO, 1995) and regional free trade agreements such as NAFTA all contributing to this acceleration.

With the First World War, the United States quickly became the world’s leading economic centre

In 1945, the US held ⅔ of the world’s gold stock and accounted for 50% of global production. The new world economic order was organized by the US (IMF and IBRD in Bretton Woods in 1944, GATT in 1947), and their currency – the American dollar, or USD – became the currency of international trade. Wall Street in New York became the economic and financial heart of the world.

What made the United States a unique superpower?

The American democratic, capitalist and liberal model, as well as the American way of life, spread to the non-communist world, with the Marshall Plan (1947) and the development of multinational companies.

By the end of the 20th century, the emergence of mass media and the Internet revolution gave Americans the opportunity to influence the entire world even more.

With the development of mass consumption that began in the 1950s, many American products arrived on other markets. Some products are now an integral part of the lives of many Europeans, Asians and South Americans, such as the Visa card, sportswear such as Nike, soft drinks such as Coca-Cola, fast food such as McDonald’s, as well as American music, cinema, universities, etc.

This undeniable cultural influence, called “soft power”, is a huge source of influence for the US across the world. This “soft power” indirectly influences and positively shapes the view of the USA in the eyes of other countries. This power makes adoption of the American point of view much more palatable to other countries, all without the need for force or threat.

In addition to “soft power”, there is also “hard power”, characterized by economic hegemony, technological progress (information technology, nuclear, space conquest) and first-rate military and diplomatic power, which make it possible to impose the will and power of the United States on the rest of the world by force or intimidation.Earth from space

The US – the powerful (and criticized) nation at the heart of globalization

The American system arouses as much wonder as questions/criticism in regards to their management of the social crisis and poverty, political extremism, weak environmental protection measures, etc. It could be argued that American influence has declined in recent years, although the country remains a first-rate power that dominates many sectors of activity.

First of all, we can see heightened criticism of the American hegemony, even if anti-Americanism is not exactly a new phenomenon. Several countries (Russia and China foremost among them) and political currents reject the American model, while US involvement in foreign wars are subject to the harshest criticism.

The United States is also experiencing an increasing number of economic competitors, such as from the European Union and the BRICS countries (Brazil, Russia, India, China and South Africa). The subprime crisis in 2007 also eroded the power of the US, both immediately following the crisis, and in the years since.

China became the world’s leading economic power ahead of the United States in 2014, after 142 years of “American rule” according to IMF figures. The increased debt burden and evidence of the United States’ dependence on foreign capital (particularly Chinese capital) is also a factor that challenges US supremacy.

How has the election of Trump altered the future of globalization?

The surprise election of Donald Trump as the 45th American president invites a re-evaluation of the future of the global economic order. Movement of goods, money, and people across international borders have all certainly changed since Trump’s election, as “resistance to globalization” was one of his prominent policy themes during his election campaign, with particular emphasis on the US-China relationship.

China and the United States have an extensive – but tense – economic partnership, often triggering periods of conflict, such as the current situation. Trade tensions have significantly increased since 2018, when Trump first sought to limit Chinese economic influence with tariffs.

Trump’s plan to reduce his country’s dependence on China focuses on increasing taxes on their imported products, so American products are favored locally and purchased instead. Of course, China reacted by increasing taxes on American imported products. These trade tensions and tariffs could cut global output by 0.5% in 2020, according to the IMF. Consequently, the organization cut its global growth forecast.

”There are growing concerns over the impact of the current trade tensions. The risk is that the most recent US-China tariffs could further reduce investment, productivity, and growth,” said IMF chair Christine Lagarde.

Trump’s wish to implement US protectionist policies will have one important consequence for the country: as the USA turns inward on worldwide economic integration, this will certainly have an impact on global stocks and flows. Knock-on effects to this policy, such as retaliation from countries like China, canceled contracts with American companies and suppliers, and countries that seek to imitate Trump’s anti-globalization agenda (like Greece and Hungary), may also all lead to significant consequences for the global economy.

What consequences on the global economy can be expected if the trade war escalates?

As noted by the European Central Bank in its analysis on Implications of rising trade tensions for the global economy, the impact of an escalation of trade tensions could be felt in different ways.

”In the case of a generalized global increase in tariffs, higher import prices could increase firms’ production costs and reduce households’ purchasing power, particularly if domestic and imported goods cannot be substituted for each other easily. This could affect consumption, investment and employment. Moreover, an escalation of trade tensions would fuel economic uncertainty, leading consumers to delay expenditure and businesses to postpone investment,” declared the ECB.

How to take advantage of the changes in our interconnected global economy? 

”In response to higher uncertainty, financial investors could also reduce their exposure to equities, reduce credit supply and require higher compensation for risk,” added the European organization.

It’s worth mentioning that ”through close financial linkages, heightened uncertainty could spill over more broadly, adding to volatility in global financial markets”, which can create great trading opportunities for investors.

Thankfully, there are plenty of available instruments that can turn a profit in any market condition. You can short an Index, diversify into a new, more promising, geography or just bet on volatility. The main things to watch for when seeking such exposure is that your broker is regulated and the scope of instruments it can provide. It doesn’t hurt when a broker has a robust, efficient and reliable trading platform, such as Multibank Group.

Times of great uncertainty breed great opportunities, investors and traders can make the most of the potential changes in the world order by focusing on the most promising region, or business sector.

Bottom-Line

The United States remains one of the world’s largest economies. It is a major power that excels in many areas, with an influence that is exercised both with hard power (economic, military and diplomatic power) and soft power (cultural influence).

However, the country faces many challenges, challenges that threaten to erode its role as a superpower, such as the emergence of significant economic competition from other countries, and their recent policy shift to economic isolationism.

Highly integrated into globalization, the recent decisions of the United States regarding greater protectionism, and the hard retreat from globalization wanted by Trump, affect the world economic order and global trade flows.

The current global climate is well encapsulated by Harvard Business Review – ”the myth of a borderless world has come crashing down. Traditional pillars of open markets – the United States and the UK – are wobbling, and China is positioning itself as globalization’s staunchest defender”…


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Should You Own Crypto-Currencies or Invest in Them?

The recent spike in cryptocurrencies prices and trading volume suggests an increasing interest from investors who want to take part in this monetary revolution. This revolution started 10 years ago with the launch of the Bitcoin (BTC), the first, biggest and most important cryptocurrency, which has gained more than 114% since the beginning of January at the time of writing.

Source: Coinmarketcap.com

The two most popular ways to take advantage of the crypto-currency market is to

  • Buy coins through an exchange
  • Trade cryptos via a CFD broker. Each way has its own advantages and disadvantages.

To decide which method is the best for you, you should first think about and develop your investment strategy. Owning cryptos (long term horizons) or trading them (short-term horizons) do not offer the same level of protection, fee scheme, payment methods, withdrawal methods, etc.

Let’s discover what differentiate them.

What does owning cryptocurrencies imply?

Owning cryptocurrencies is great if you want to use them to shop or to transfer money anywhere at any time quickly (faster than with normal bank transfers), at a lower cost and with a higher degree of anonymity than with traditional wire transfers.

To own crypto-currencies, you first need to find an exchange you can trust, one that’s available in your country, and that offers a payment method for buying cryptocurrencies with fiat currencies (American/Australian/Canadian Dollars, Euros, Sterling…).

Once you’ve bought your virtual currencies, you have to put them into a “wallet”, a program that can contain them. Most exchanges have their own “wallet” that clients can use, but it is widely recommended that you use a wallet that only you have access to and fully control.

There are different types of wallets, they can be gathered into two main groups: “cold” and “hot” wallets. The main difference is whether or not they are connected to the Internet. While “hot” wallets are connected to the net, “cold” wallets are not.

Cryptocurrency buyers and owners are often seen as soft and easy targets for hackers, as virtual currencies transactions are final, there is no anti-fraud protection, nor is it possible to reverse the charges offered by financial institutions in case of problems, as explained by IBM X-Force senior cyber threat researcher John Kuhn to NBC News. Cold storage is thus usually a more effective solution to protect your funds, as it limits the risk of hacks. The two most popular cold wallets are physical hardware wallets, such as external hard drives, and paper wallets.

Why trading currencies can be a safer and cheaper option to take advantage of the crypto-market volatility

When held on digital services, cryptocurrencies are vulnerable to cyber-thieves. Hackers usually target crypto exchanges to drain their crypto wallets (hence the reason why you shouldn’t keep your cryptos online in an exchange). In addition, as the crypto-sphere is quite new, it isn’t a regulated industry.

For this reason, using derivative financial products like CFDs (Contract For Difference) through a regulated broker can be an interesting option for you to make a profit from the crypto-market.

A CFD is a financial contract you enter into with the broker you’re using. This contract allows you to benefit from a rise (or fall) in the price of an asset, as you will exchange the difference between the opening and the closing price of your trading positions with your broker.

An important aspect of CFDs is that you never actually own the underlying asset. So, you won’t own any coins when trading CFDs on cryptos – you will simply take advantage of their price fluctuations.

Of course, using CFDs is only a good option if you want to take advantage of short-term crypto-currencies price movements, because it is a leveraged financial product that relies on margin trading. It means that as a CFD trader, you only need to put aside a part of the total value of your position to open it – this is called the margin. This technique therefore increases your market exposure.

Conclusion: owning vs. trading crypto-currencies

Are you not sure about whether you should own or trade cryptocurrencies? Think first about your financial needs, goals, and horizons.

In addition to being able to transfer money and use cryptocurrencies to shop whenever you want, owning virtual currencies can also be compared to longer-term investments. Having coins in your wallet means that you can hold your virtual currencies until you want to sell them at a higher price later on in the future. In the meantime, you won’t pay fees for holding them.

Trading crypto-currencies via leveraged products like CFDs means that you do not own any coins, you’re just taking advantage of the crypto market volatility instead. So, trading crypto-currencies is a short-term investment strategy, where you are using price changes to make a quick profit without holding the underlying asset.

So, ask yourself: would you consider yourself as an investor or a speculator?

While both seek maximum profit, an investor doesn’t have the same trading strategy, level of risk aversion and objectives as a speculator. In any case, the key to successful investing of any kind is to use the right platform for your needs.

Exchanges appear to be riskier than CFD brokers, who are regulated and offer protections to retail traders. Brokers can be useful for you to be able to apply your short-term trading strategy and appropriate money management rules in a responsive and regulated trading environment, while strengthening your financial knowledge.

With a regulated, reliable and safe broker, like Skilling, you can make your money grow while taking advantage of protections offered to retail traders. Regulated brokers in Europe, for instance, are part of a fund recovery program that can protect trader funds in case of bankruptcy. The European Securities and Markets Authority (ESMA) also imposes some restrictions on CFDs, such as a limited leverage effect (2:1 for cryptocurrencies), a 50% margin close out rule, and a negative balance protection.

What are the Different Types of CFD brokers?

CFDs are relatively new financial derivatives that have become increasingly appreciated among investors, especially in the Forex market. But as with any other activity, to be successful while trading CFDs, you need to have the right set of tools – the most important one being your broker.

Of all the different CFD brokers available, almost all fall within 2 overall categories – ECNs and Market-Makers. While a novice user may not notice much of a difference between them, the behind-the-scenes mechanics are substantially different. These differences have a significant impact on you, the trader, whether you realize it or not.

What are the differences between an ECN broker and a Market Maker, and which one is best for your trading style? Let’s jump right in.

What is a CFD and how does it work?

CFDs, which stands for Contract For Difference, are financial contracts you have with your broker to exchange the difference between the opening and the closing price of a trading position.

When you trade CFDs, you do not own the underlying asset you’re investing in, as you are only getting (or paying) the difference in price between the value of your contract when you opened it and when you closed it.

CFDs are leveraged financial products, allowing you to use margin trading to profit from increased market exposure. Every time you want to open a trading position, you have to put aside a fraction of the total value of this position as collateral – this is the margin.

As a result, you are able to invest more money than what you possess in your trading account. Consequently, as leverage amplifies price movements in all directions, they can be risky – you might make larger profits, but you could also lose just as much.

In addition to leverage, one of the biggest advantages you have, when you trade CFDs, is that you can benefit from rising as well as falling markets, which means that you can earn money regardless of the market direction.

Why are CFDs popular in the Forex market?

The Forex market is the market dedicated to currencies. It is one of the most liquid and active financial markets in the world, and it is open 24-hours a day, 5 days a week. It is also the largest financial market, with US$ 5.1 trillion exchanged every day.

If you decide to trade the Forex market with CFDs, you can do so by borrowing capital from your broker to place a trade. This is called margin trading.

Trading CFDs on Forex currency pairs is very popular, as it is an ideal market for leverage and margin trading due to its high liquidity, as you can enter and exit the market quite easily with small slippage. Of course, leverage can be offered on many different markets, but leverage, as applied to the Forex market, is generally much higher than any other trading instrument.

Because CFDs are very risky leveraged products that are linked to speculation, they are not allowed everywhere. For instance, there are forbidden for US residents, but they generally are permitted in many other countries.

In Europe, the European Securities and Markets Authority is the deciding authority on the rules brokers need to follow when it comes to trading CFDs. Recently, the organization decided “to strengthen restrictions on the marketing, distribution or sale of contracts for differences to retail clients”.

Forex Brokers Regulations also varies in different parts around the world, as it is a fast-growing OTC market.

What are the different types of CFD brokers?

A “No Dealing Desk” Forex broker usually provides direct access to the interbank market and can either be an STP or an ECN broker (or a mix of both).

This type of broker only sends trading orders directly to liquidity providers, which means that it doesn’t bear the risks of its clients internally. They only act as an intermediary between trader orders and the liquidity providers available.

ECN, which stands for “Electronic Communication Network”, describes the broker type that is connected to an electronic trading system in which many buying and selling orders from different large liquidity providers compete. Therefore, an ECN broker only connects different market participants together, so then they can trade with each other.

STP stands for “Straight-Through-Processing” and describes a broker that does not execute trader orders. They only carry out trading operations, without human intervention (No Dealing Desk – NDD) to external liquidity providers connected to the interbank market.

Dealing Desk (DD) – Market Maker

A Dealing Desk Forex broker is a Market Maker, which means that they don’t offer liquidity provider prices, as they are the ones providing liquidity for its traders by offering their own prices. It is for this reason that they are called market makers, as they “create” the market for their clients. This means that they are the ones setting the bid and ask prices of any financial instruments offered.

A Dealing Desk broker is very often the counterparty of their traders’ positions, as they do not directly trade, or hedge their clients’ position, with their liquidity providers. Therefore, a Dealing Desk broker has to pay for profitable client trades with their own money. If a client makes a winning trade, the broker loses money – and vice-versa.

How do CFD brokers make money?

A No Dealing Desk CFD broker earns money on the trading volume of their clients, as it receives a commission on all trades, and/or a markup on the spread (the difference between the buying and the selling price). Most of the time, these spreads are variable spreads, which fluctuate depending on the market conditions.

A Dealing Desk CFD broker usually gets money from spreads, as well as client losses. Spreads offered by market makers are usually fixed spreads.

The most important thing for a No Dealing Desk broker to provide is the best trading conditions for their clients – that way, their clients are more successful, they trade more, and everybody earns more money. It is for this reason that most traders prefer to use an ECN or STP broker, as they find them more reliable and profitable.

As a market maker broker earns money from their traders losing money, it is often seen as less transparent, as they have the ability (and motivation) to manipulate prices. Revenue is usually higher for a Market Maker than for an ECN/STP broker, given the same trading volumes.

Bottom line

CFDs are complex financial products that are not suitable for everyone, as leverage can trigger big losses. But, leverage also means that you can make huge gains on the financial markets by using volatility to your advantage.

CFDs are generally a good fit if you’re a short-term trader (like a scalper or a day trader), and if you have time to spend in front of the markets. Most importantly, to trade CFDs you need to have a high tolerance for risk – especially if you’re trading the Forex market, as it’s a very volatile market.

To better protect your trading capital, always use tight money and risk management rules when trading CFDs on the FX market. Equip yourself with the right suite of trading tools by selecting the right broker for your trading needs.

Regardless of whether you choose a dealing or a non-dealing desk broker, both can be perfectly reliable. Trading with No Dealing Desk broker, like SimpleFX, is likely to be a better choice, both for avoiding the conflict of interest inherent in the Market Maker model, and for partnering with a broker whose interests are aligned with yours.

To find the best broker for your trading needs, be sure to:

  • Establish your preferred trading style and your requirements first
  • Make sure your broker is regulated and licensed (in the more regional markets the better)
  • Be sure that the broker’s client support is knowledgeable and easy to access
  • Open a demo account first to know if the trading platform is going to be a good fit for your trading strategy
  • Check out trading conditions:
  1. Costs
  2. Fees
  3. Spreads
  4. Minimum/maximum deposit
  5. Margin requirements
  6. Financial assets
  7. Trading platforms
  8. Type of trading accounts offered

Forex Brokers Regulations

One of the biggest risks when using Forex brokers that aren’t under regulatory supervision is that they don’t have to conform to any established standards, and so unethical – or even illegal – behavior cannot be ruled out. Worse, should something happen, there is often no way to take legal action against them.

Forex broker regulations are thus essential – they ensure that you’re trading with a broker that adheres to standard business norms, acts in your best interests, and offers some manner of financial protection.

Selecting the right broker starts by checking that it is truly licensed, regulated and authorized where you live. In addition to a broker’s regulatory status, you need to know which regulatory body it belongs to, as they do not all follow the same kind of regulations or offer the same type of financial protection.


Regulations by Geography


Regulators around the world have tightened regulations to protect traders in recent years, with increased oversight from regulatory bodies such as the SEC in the US, the FSA in the UK and the CySEC in Europe. Typically, Forex brokers are required to deal with top-tier financial institutions and liquidity providers, as well as to keep their client funds in separate accounts. FX brokers also need to meet certain other criteria, such as capital and fiscal requirements.

In Europe

In light of the vast number of Forex & CFD brokers that are regulated by European regulatory bodies, we’ll start our overview from there.

There are many local regulatory bodies in the European Union, such as:

  • Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in Germany,
  • Swiss Financial Market Supervisory Authority (FINMA) in Switzerland,
  • Finanstilsynet (FSA) in Denmark,
  • Autorité des Marchés Financiers (AMF) in France,
  • Comisión Nacional de Mercado de Valores (CNMV) in Spain,
  • Financial Market Authority (FMA) in Austria,
  • Comissão do Mercado de Valores Mobiliários (CMVM) in Portugal,
  • Malta Financial Services Authority (MFSA) in Malta.

Members of the European Union, under the supervision of the MiFID directive – which we talk about later – are allowed to “passport” an authorization received from a European regulatory body, to be allowed to operate legally within the European Union (EU) as well as within the European Economic Area (EEA).

One of the most attractive regions in Europe to set up a forex company is Cyprus, due to its advantageous fiscal and tax structure.

So, if a financial company decides to set up shop in Cyprus, it will be registered, licensed, authorized and operate under the Cyprus Securities and Exchanged Commission (CySEC), which monitors the financial markets with the support of the European regulatory authorities and the European Commission to protect traders.

But this company would also be able to legally offer its financial services in other countries in the EU and the EEA, and it will be registered in every local European regulatory body.

To be a CySEC Forex broker, as of April 2019 a financial firm must follow certain rules, such as*:

  • An initial share capital of at least €200,000,
  • At least €750,000 in operating capital,
  • Submit regular financial statements, as well as yearly audit reports through certified independent third-party auditors,
  • Ensure the protection of clients funds by holding them in segregated accounts, and using top tier 1 banks and quality liquidity providers,
  • Adhere to the Investor Compensation Fund (ICF), which means that in case of bankruptcy, each client can recover up to €20,000.

To verify the authenticity of a CySEC regulated broker, always look for the 5 digit CySEC License Number (CIF) on the broker’s website:

Tickmill Group Licences and Regulationsulations
https://tickmill.com/about/licence-and-regulations/

Then verify the license on the CySEC website and make sure that the domain on CySEC website is the broker’s one:

Cyprus Securities and Exchange Commission
https://www.cysec.gov.cy/en-GB/entities/investment-firms/cypriot/74706/

Legislative Frameworks

MiFID II

Brokers following MiFID, the European Markets in financial instruments directive implemented in 2007 by the European Commission, must follow several rules:

  • Warn their clients about risks involved and categorize them (retail investors vs. professional investors),
  • Display their prices,
  • And act honestly towards their customers.

However, transparency in the financial markets did not improve following the establishment of MiFID, with the 2007-2008 financial crisis highlighting the lack of liquidity, settlement and delivery defaults, as well as the circumvention of the transparency principle through highly secret platforms, known as “dark pools”.

In light of these issues, the European Commission considered a revision of this regulation. MiFID II, which went into effect last year, thus aimed to address the grey areas in fast-growing OTC markets, particularly for derivative products. The direction also wants to work for better investor protection by ensuring that consumers have a clear understanding of the financial products in which they invest.

For instance, it is now necessary for a broker to assess a future client’s knowledge and risk profile before doing business with them. It is, therefore, a question of selling the right financial product to the right customer. To do this, a broker usually asks future clients a few questions about their personal and financial situations, but also about their knowledge of the financial markets and trading.

Brokers must also comply with procedures to be sure they know their clients and where the money used for trading comes from – Know Your Customer (KYC) and Anti-money laundering (AML) procedures.

To sum up, this new directive is supposed to enhance the transparency of regulated platforms, as well as of the financial markets, improving trader protection through better business conduct.

The European Securities and Markets Authority (ESMA)

Because of high leverage and margin trading, retail investors have lost a lot of money over the years on the Forex market trading CFDs.

The European Securities and Markets Authority (ESMA) recently decided to strengthen “restrictions on the marketing, distribution or sale of contracts for differences (CFDs) to retail clients”.

The restrictions for retail investors include:

  • A leverage limit of 30:1 for major currency pairs, 20:1 for non-major currency pairs, and 2:1 for cryptocurrencies,
  • 50% margin closeout rule,
  • Negative balance protection,
  • Restriction about the incentives offered by brokers to trade CFDs,
  • Standardization of a risk warning showing the average retail investor’s percentage of losses on CFDs accounts.

On March 27th 2019, the ESMA decided to renew these restrictions on CFDs for another 3 months from May 1st, 2019.

As the UK is still in the European Union until at least April 12th, this means that UK firms must comply with ESMA’s decisions and measures until then. However, the FCA Forex regulation could change, as it declared that it “expects to consult on whether to apply these measures on a permanent basis to UK firms providing CFDs to retail clients.”

The ESMA is constantly publishing updates linked to the Brexit situation and the recognition of UK central counterparties (CCPs) like LCH Limited, ICE Clear Europe Limited and LME Clear Limited, and Central Securities Depository (CSD) like Euroclear UK and Ireland Limited.

In the UK

According to the BIS Triennial Central Bank Survey 2016, the UK hosts the most important sales desk in the world, via its trading hub in London. It alone processes 36.9% of global OTC Forex turnover.

In order to prevent broker scams, financial malpractice or other types of fraud affecting traders, there are 2 important financial regulatory bodies in the UK, the FCA and the PRA.

To be able to undertake financial services activities in the UK, a broker needs to be authorized by the Financial Conduct Authority (FCA). This national regulatory body ensures consumer protection while guaranteeing the integrity of the financial markets in the UK

The Prudential Regulation Authority (PRA), which belongs to the Bank of England, helps in developing ethical and professional standards to protect the financial firms it is responsible for, so that in the case of a failing financial firm, there is no real impact to the financial markets or the taxpayers.

Of course, these institutions work with other bodies, such as the Financial Ombudsman Service, the Money Advice Service, the Payment System Regulator, and the Financial Services Compensation Scheme among others.

To be an FCA Forex broker, a broker should adhere to strict guidelines, such as:

  • Having at least £1,000,000 in operating capital,
  • Submitting audit reports and financial statements,
  • Ensuring the protection of client financial funds with the Financial Services Compensation Scheme (FSCS). This scheme is about protecting clients in case of bankruptcy of insolvency. If an investment firm failed between January 2010 and Mar 31st 2019, a client can ask for £50,000. If it failed after April 1st, you could be compensated up to £85,000.

In the USA

With 19.5% of global OTC FX turnover, the United States is the world’s 2nd most important sales desk. To regulate the Forex markets, and other derivative and OTC markets, there are 2 main regulatory bodies, the NFA and the CFTC, who work together.

The National Futures Association (NFA) helps investors to be more protected. The NFA also works to ensure its members respect their regulatory responsibilities for better market integrity, fighting scams and fraud through best financial practices.

The NFA also works with the Commodity Futures Trading Commission (CFTC). Together, they fight systemic risk, and ensure traders of the quality and reliability of Forex firms regulated by them.

In 2010, the CFTC issued regulations. Among those, the leverage used by retail trades was limited to:

  • 1:50 for major currency pairs,
  • and 1:20 for all other pairs.

To be an NFA and CFTC FX broker, a broker must follow the below rules:

  • Follow safe and transparent best market practices:
    • hire knowledgeable and professional staff,
    • use real facts and numbers in advertising and promotional materials without misleading traders,
    • submit reports and financial statements that are later on published on the NFA website,
    • follow the FIFO rule (first in, first out),
    • never open positions against its clients,
    • never allow hedging for traders,
    • offer a leverage effect of 50:1 maximum,
  • Keep client funds in segregated accounts,
  • Have at least $20,000,000 in operating capital.

In Australia

The Australian Securities & Investments Commission (ASIC) is the main regulatory body supervising the securities and investment market in Australia. It works with various regulators and organisations in protecting consumers and investors.

For instance, ASIC works with the Australian Prudential Regulations Authority (APRA), which supervises financial institutions to maintain the safety of financial institutions.

To be able to conduct financial service activities in Australia, brokers are required to have an Australian Financial Services (AFS) licence. As an ASIC Forex broker, certain criteria must be followed:

  • At least AUD 1,000,000 in operating capital,
  • A representative office in Australia,
  • Must comply with the organizational competence obligation in s912A(1)(e) of the Corporations Act 2001 (Corporations Act),
  • Adhere to a professional indemnity (PI) insurance cover,
  • Total financial transparency, with the submission of periodic audit reports,
  • Work with tier-1 banks, keeping client funds in segregated accounts.

In South Africa

Regulation in the financial sector in South Africa was maintained by the Financial Service Board (FSB) but it is now in the hands of the Financial Sector Conduct Authority (FSCA). The core mission of these regulatory bodies is to protect investors from losing money through scams and fraud thanks to a safer, more transparent and reputable trading environment.

The FSCA is quite new. It was created in April 2018, as “the start of a new, more holistic and intensive approach to regulating the conduct of financial institutions operating in South Africa – focusing on how they treat financial customers and on how they support the efficiency and integrity of the financial markets”.

Conclusion

The Forex market is one of the most volatile markets in the world. This highly leveraged market is also an unregulated market, with no real international regulatory body that monitors currency trading world-wide.

However, we’ve seen that there are national regulatory authorities that are working on protecting Forex investors. In addition, a Foreign Exchange Working Group (FXWG) was created in 2015 to provide global good practices for the FX market. In May 2017, this group published an FX Global Code to provide a set of guidelines to promote market integrity and protect traders against large losses, scams or other financial manipulation.

It is therefore essential that before investing real money on the Forex market with a specific broker, you check its regulated status.

In Europe, for instance, you can make sure the broker you want to make business with is regulated and authorized to provide investment services by an EU regulator on the ESMA website. In addition, each country’s regulatory body keeps a record of all the firms it regulates.

The ESMA also keeps a list of companies (or persons) that offer (or are suspected to offer) services without proper authorization. More details about these companies/persons can be found on the websites of the regulators. There is also the International Organization of Securities Commissions (IOSCO) website, which ggathers alerts and warnings from the IOSCO’s members in its “Investor Alerts Portal”.

Choosing a broker that is regulated in one place is good, but it’s always best to pick one that is regulated in several countries. For instance, Tickmill is registered in three different places – firstly, as a Securities Dealer by the Seychelles Financial Services Authority (with the FCA via Tickmill Ltd), secondly, by the UK FCA via Tickmill UK Ltd, and thirdly, by the CySEC as a CIF limited company, via Tickmill Europe Ltd.

What is ECN Trading and What are its Advantages?

Forex trading doesn’t take place on a regulated exchange (like shares or other assets do), as it occurs between buyers and sellers from anywhere in the world, through an over-the-counter (OTC) market. To be able to access this market, you need to use a broker.

As this market is not centralized, you’ll quickly realize that you can access different exchange rates and trading conditions, depending on the broker you use.

For this reason, choosing the right broker for your trading style is essential in becoming a successful Forex trader.

It’s important to note that even if there are many brokers out there offering similar products and services, there are a few things you should check before deciding which one to use, to be sure you’ll be giving yourself the best chance to succeed.

Of course, the first thing you need to be sure of is that you’re trading with a regulated broker.

For instance, the broker MultiBank Group is registered with 7 different regulators, including Spain, Germany (BaFin), Austria, Australia (ASIC) and the UAE. In addition to being heavily regulated, MultiBank follows strict rules and obligations regarding client funds and security. For instance, MultiBank uses fully segregated client accounts and offers negative balance protection to its clients.

Besides checking out the regulatory status of your broker, you also need to be sure it offers the right kinds of trading platforms and trading accounts for your trading style – not to mention other details such as trading conditions, spreads, minimum deposit, payment methods, main currency of the account, and the availability of the technical support.

Another very important thing to consider when choosing a broker is what type of broker that they are, as they are different kinds – predominately, Market Makers and ECNs.

Market Maker vs. ECN broker

Understanding the definition of a Market Maker is pretty straightforward – it’s a broker that “makes the markets” by setting the bid and the ask prices via its own systems. Then, they display these prices via their platforms, so that investors can open and close trading positions.

Usually, a Market Maker broker will not hedge its client positions with other liquidity providers like an ECN broker would do. Instead, what Market Markets do is they pay winning client positions out of their own accounts. It also means that when a client has a winning trading position, a Market Maker broker loses.

An ECN broker stands for Electronic Communication Network (ECN). This type of broker provides its traders with direct access to other market participants via interbank trading prices. This network allows buyers and sellers in the exchange to find a counterparty of their trading positions.

By using different liquidity providers, an ECN broker is able to allow prices from these providers to compete in the same auction, which usually means that traders get better prices and cheaper trading conditions. Moreover, by using an ECN broker, traders usually trade in a more efficient and transparent environment.

Usually, the way an ECN broker makes money is with the trading volume of its clients, charging a commission on each position.

Why you should trade with an ECN broker?

An ECN broker doesn’t trade against its clients

An ECN broker is only the intermediary between your buying and selling orders, matching you up with different market participants.

Hence, an ECN broker doesn’t bet against you, which means that it never takes the other side of your trading positions.

This trading model ensures you that there is no conflict of interest, as an ECN broker gets a commission whether you make or lose money.

Using an ECN broker limits price manipulation, increases transparency and provides better trading conditions

As an ECN broker doesn’t “make the market” by creating its own quotes, it is harder for it to manipulate prices, simply because it uses prices from different liquidity providers.

With an ECN broker, you have access to real-live, current information, as well as more accurate prices history, hence why it is more difficult for this type of broker to manipulate prices.

Displaying prices from official sources transparently in the ECN broker’s trading platforms makes it easier for you to trade instantly, with tighter spreads than other types of brokers. Moreover, you usually get lower fees and commissions, as well as immediate confirmations.

Another benefit of accessing real quotes is that you avoid “re-quotes”, which can have a negative impact on your overall trading performance. This usually happens when your trading order is rejected because of the change in the price of the asset you want to invest in. Then, the broker offers you a “re-quote” of the given asset (which rarely works out in your favor).

Bottom-Line

As you can see, using an ECN broker allows you to trade more efficiently and profitably, thanks to better trading conditions and better trading execution. With increased transparency and no conflict of interest, ECN brokers like MultiBank are the most reliable and safe way to trade.

The Importance of Education in the World of Finance

According to the OECD (Organisation for Economic Co-Operation and Development), “recent developments have made financial education and awareness increasingly important for financial well-being”. On the topic of when one should start acquiring a financial education, one of the organization’s top recommendations was that “financial education should start at school, for people to be educated as early as possible.”

However, this is rarely the case…

In an interview published on the business news website CNBC, famous investor Warren Buffet declared that the biggest mistake parents make when it comes to teaching their kids about money is to “wait until their kids are in their teens before starting to talk about managing money when they could be starting when their kids are in preschool.”

For adults, one of the biggest challenges regarding their financial education is to face up to the fact that they’re not as financially literate as they think they are.

There is almost always a gap between what you think you know and what you actually know

Research conducted for the OECD showed that the global level of financial literacy is low, even amongst developed countries. The most worrying factor was that when people were asked to assess their level of financial knowledge, most marked themselves much higher than the level that they scored in the study.

This research is concerning for 2 reasons – firstly and most obviously, financial literacy across the globe is low. Secondly, as most people think they already know enough about finance, they don’t think they need to pursue further knowledge in the topic, thus keeping them locked into their poor level of financial understanding.

According to the Council for Economic Education, more than 1 in 6 students in the U.S. don’t reach the baseline level of proficiency in financial literacy, and nearly 1 in 4 millennials in the country spend more than they earn.

Education

Financial education is thus important for financial wellbeing

Poor financial decisions can have a large and long-lasting impact – on not only your life, but the lives of people who depend on you, such as your family.

The first step to achieving financial wellbeing and financial literacy is to understand personal finances and basic economics – subjects that are admittedly dry for most people.

The first step is to understand your own money. What is your financial situation?

For instance, you should know:

  • How to set a budget
  • How to get your budget back on track if you do not follow it
  • Where your money comes from
  • What your expenses are
  • How much you can save
  • Where you can cut back on expenses
  • If you can pay back your loans and debts
  • Etc.

Financial education is also important for pursuing a career in Finance

Beyond improving your personal life, financial education is also necessary if you want to work within the financial services industry, or trade for a living.

Let’s look at an example.

Most traders make the same mistakes over and over again, leading them to lose money over the long run. Why is that?

Many will say that it’s because of trading psychology and the incapacity of the trader to control their emotions and learn from mistakes.

But, above all, these traders are unprepared and lack discipline, as they do not realize to what extend unpreparedness and lax discipline costs them. A well-educated trader, on the other hand, knows full-well that preparedness and discipline are the cornerstones of good trading.

Sometimes people think that just because they read a handful of books and watch a few financial documentaries, they are ready to trade. Nothing could be further from the truth.

Imagine you need surgery. Would you think that you’re ready to do it yourself because you read a book about medicine? No! You would ask an experienced surgeon to do it because he has spent years learning how to do so.

It’s exactly the same with investing! While the stacks aren’t as high as surgery, you should prepare to spend some time to delve into the subject. Take some trading courses, read books, get some experience with a demo account before starting to invest real money in the markets.

Trading Platform

How can a summer school help you increase your financial knowledge?

Whether it’s to support your career goals, or to be more aware of what you need to know about your personal finances to make more informed decisions, a summer school is a great way to set you on the right path.

A good summer school can provide you with a variety of modules on a specific topic to enhance your knowledge of the area, as well as provide great exposure to the field of study you want to learn more about. In any case, it’s a unique learning experience!

Thomas Whale from Oxford Summer School explains: “Attending a summer school is an excellent place for entrepreneurial-minded young people who can see an opportunity to improve a skill or learn something new that will benefit them in a real-world scenario, whether for work or play.”

Whether you choose to go to summer school, or you prefer to take the self-education route via books/online courses and other means, you should make learning about finance a priority – the earlier you start, the better.

GBP trading opportunities arising from the Brexit situation

But before we have a closer look to what could happen to the GBP after this vote, let’s review how important it is for you to be aware of what’s going on globally to be a more successful Forex trader. So, let’s jump right in.

The importance of macroeconomics in Forex decisions

As a Forex trader, it’s crucial for you to understand why and how events from all around the world can immediately impact exchange rates.

After all, the Forex market is a global marketplace, whose participants come from every corner of the planet. Forex activity is a globalized activity, one that reflects how inter-connected our world is. That’s why macroeconomics and global events play an even greater role now than ever in Forex trading. Because they help determine a country’s economic health, which influences trader perceptions of any given country and ultimately their views on the value of the related currency.

The global events with the highest impact on the Forex market are typically political events, economic releases, as well as war and natural disasters.

Political Events

The political landscape of a country definitely plays a major role in determining a country’s economic outlook (and consequently how the value of its currency is perceived).

Let’s come back to the Brexit vote that took place in June 2016.

The outcome of this vote was such a surprise – even the bookmakers had predicted that “Remainers” would win – that the British Pound quickly plunged to its lowest level since 1985.

Why? Because the country’s economic outlook was suddenly very uncertain after the UK voted to leave the EU bloc – not to mention the resulting political instability, with David Cameron resigning in the wake of the vote result. Such uncertainty invariably triggers higher volatility within the markets.

Another political event with big ramifications is changes of the ruling political power, especially those with substantially different ideas to the previous party. Fiscal and monetary policies from a new ruling party will be among the most influential decisions in the forex market. A government can, for instance, decide to increase government spending, or on the other hand tighten spending, which will impact the economic outlook – either boosting the value of a currency or weighing down on it. As the central bank is the institution controlling the money supply, its decisions will have a direct impact on a country’s currency.

Another important political event is an unexpected election. Whether they occur following a scandal or are triggered by a leader resigning, the result is generally political turmoil, which impacts the stability of the business sector, thus triggering negative knock-on effects for that country’s currency.

Forex traders do not like uncertainty and instability!

Economic Releases

In the fast-paced Forex marketplace, economic reports and releases are important to follow how the economic outlook of a country is evolving.

Currency pair volatility is especially influenced by growth, inflation, employment and business/consumer confidence/spending figures, as well as interest rate decisions from a country’s central bank.

  • The GDP is the most comprehensive report to evaluate a country’s economic performance and future outlook, as it measures the output of goods/services produced by a country. If the GDP figures are positive, then traders will be more willing to invest in this country, which will support the currency.
  • Inflation is an important indicator, as it signals lower purchasing power, which can negatively impact the value of a currency. On the other hand, higher inflation could lead central banks to increase interest rates to curb inflation levels, which supports concerned currency values.
  • Employment and business/consumer confidence and spending figures can also give insightful clues about the current and expected economic health of a country.

While it’s impossible to take into consideration the unexpected when you trade the Forex market, you should always be an informed trader, one that knows about global events and the economic calendar to make more informed trading decisions.

Thus, the potential impact of political instability, international trade relationships, economic figures and reports, strikes, wars and natural disasters should be part of your comprehensive trading analysis and strategy as a primary indicator to gauge the economic strength of a country, and thus its currency.

You should always stay up to date with market news

As you’ve probably grasped by now, to be successful in the Forex market you need to be aware of what’s going on in the world.

Not only that, it will help you to anticipate potential higher volatility that could affect your trading positions – avoiding it when required, but also using it to your advantage.

Indeed, volatility is what offers traders the best opportunities to make money! You just need to learn how to effectively leverage volatility with trading tools that also help you minimize downside risk. You could, for instance, change your leverage level, reduce your position sizes and adjust your targeted prices.

A reliable professional broker usually helps you get better trading results by providing advanced trading and money management tools. FXPRIMUS, for instance, offers an economic calendar, trading signals and daily market alerts to allow its trading community to always be aware of what’s going on the markets. It helps its traders to make actionable trades, with higher probability of success.

Now that you know how exactly political and economic news affect the Forex market, let’s come back to today’s vote.

What happens after today’s vote on Theresa May’s Brexit deal?

The original vote, due on Dec. 11th, was postponed, as PM Theresa May realized that she would very likely face rejection if the vote was held at that time. She decided to get more insurance from the EU regarding the “Irish backstop”, before submitting her Brexit deal to the British MPs.

Now, Parliament is back to vote, but the situation doesn’t seem to have changed much and the clock is ticking as Brexit day is due on March 29th, 2019.

The most likely scenario is that her deal will be rejected, which could hit the pound and the other British assets hard, depending on how many MPs reject the deal:

  1. If the deal is rejected by a small margin, then the pound might slide a bit, while U.K. stocks might take a bit of a tumble. May should then return to Brussels to renegotiate or get more specifications about certain aspects of the deal, especially regarding the Irish backstop, before coming back to Parliament.
  2. If the deal is rejected by a large majority, then several scenarios can be expected. In any case, the pound and U.K. stocks are both very likely to plunge. Jeremy Corbyn could very well trigger a vote of no confidence, which could potentially lead to a general election, a Labor government and still no Brexit deal. In this event, the uncertainty about Brexit will be at its highest, which will strongly weigh on British assets. Under such a scenario, momentum for a second referendum may start to gather steam, which could very well be favorable for the GBP if people decide to stay in the EU.
  3. Finally – though more unlikely – the U.K. could also revoke or delay Article 50, which could support GBP prices, as it would postpone Brexit day leaving the U.K. and the EU more time to negotiate.

As you can see, there are several potential outcomes traders can expect today for the GBP, depending on how things go for the deal, the prime minister and her party, as well as the country.

The two currency pairs that will probably have the highest trading volume today are the GBP/USD and the EUR/GBP. Don’t forget that other financial assets will be impacted by today’s decision, such as the value of the British index – the FTSE 100, and the stocks included in this index.

To take advantage of these potential big market movements on the pound, the FTSE 100 and its individual stocks, you can use different types of financial instruments. Trading around this high-impact event can be done with FXPRIMUS, which offers great trading conditions on the Forex market as well as on CFDs on FTSE 100.

The Bottom-Line

The way currency values evolve greatly depends on economic and political factors that influence the economic outlook of a country. Knowing which factors to monitor while trading will help you get an advantage in the competitive and fast-changing world of Forex.

Today’s vote will obviously have a considerable impact on the pound and other British financial assets, so expect higher volatility on the British market – use wise money and risk management tools and follow the news!

Copy-trading: Pros and Cons of Automated Trading

What is Automated trading?

Novice traders that wish to enter the markets without having a deep understanding of trading, or without putting in a lot of time and effort to develop a profitable trading strategy, often use copy-trading strategies, particularly if they can find a reliable platform like DupliTrade.

After all, it’s not easy to find the right trading strategy, one that is going to provide consistent results in any given market cycle. Testing and refining such a strategy can be a long process and should involve back and forward testing over multiple time-frames to verify that your strategy is robust enough to make profits in a number of different market conditions. If you can find someone that has worked on this process and that is now offering a profitable strategy over time to copy, why wouldn’t you follow this person and copy his trades?

According to DupliTrade – a leading marketplace for trading strategy providers – this innovative way of trading allows you “to automate your trading by duplicating expert traders’ activity according to your selected duplication setup”.

The main advantage to copy-trading is the ability to follow and duplicate successful and profitable traders that have proven track records and battle-tested trading strategies.

With copy-trading, you do not need to deal with trading stress, or to be sitting at your trading desk following the markets for hours – your trading account is copying the trading positions of a profitable master account that you would have previously selected.

Copy-trading is especially useful for newbies in the markets, but it is also used by many experienced traders that understand copy-trading and want to take advantage of following and copying leading traders, or fund managers.

One of the most important steps in copy-trading is to select the strategy your trading account is going to follow. DupliTrade’s strategy providers give a lot of information about the general activity of the account, with full statistical data and additional information you might require to select the proper audited strategies displayed, and most of the strategy providers follow a semi-automated or automated trading method.

How Can You Trade with Automated Trading?

Automated trading is all about using a trading system that limits (or even eliminates) human intervention in the process of buying and selling financial assets.

The first thing you need to do is determine the range of factors your strategy will follow:

  • Market direction
  • Position size
  • Risk management rules
  • Money management rules
  • Technical indicators

Copy-trading

One of the biggest risks when putting together a systematic trading strategy is choosing parameters that aren’t viable in the long run. Here are a few things to think about:

Pros of Automated Trading

1# It removes the emotions from the trading decision process

By using a systematic trading method, you’re able to reduce human intervention, and you can consequently avoid being influenced by your own emotions, which can negatively impact trading performance.

2# It allows you to trade around the clock

As you’re using computer models and programs to implement your automated trading strategy based on a pre-determined criterion, your system never sleeps. You can, therefore, make money on markets that are not in your time-zone, or when you’re doing things other than trading.

3# It allows you not to spend hours in front of the markets every day

Even though creating a profitable trading method takes time and energy, an automated trading strategy reduces the amount of daily work you need to dedicate to trading, which means that you can make money while having a 9-5 job, or doing other things you enjoy doing.

4# It allows you to accelerate order execution

Computer programs used for trading are a great way to accelerate order entry speed, especially in fast-changing trading environments, which are often hard to follow.

Once your automated strategy opens an order, all the other associated orders are also in the system, such as stop-loss and take-profit orders, which can make a difference when markets move very quickly.

Cons of Automated Trading

1# There is no possibility to make discretionary choices or to adapt the set-ups without your input

Obviously, automated trading is the opposite of discretionary trading, meaning that there is no ability to make discretionary choices. What this means is that you will not be able to decide when to enter (or exit) the market based on your analysis of the current market conditions and the news available.

So, if market conditions evolve outside of your initial analyses, your trading strategy may not be equipped to deal with it. For example, some trading methods are very successful in rangy markets, but they poorly perform in trendy markets.

2# You’re 100% dependant on technology and the system you’ve created

Even though one of the biggest advantages of systematic trading is that it removes human emotion in the trading decision process, thus making your decisions more rational, it also means that you are entirely relying on technology, which has its own host of problems (Internet connection cut, network crash, computer/server problems, etc.).

Bottom-line

Automated trading can help you free up time to dedicate to the things you like while making money on the markets, especially if you’re following expert investors through copy-trading platforms.

Copy trading will allow you to copy the actions of successful professional traders in real-time on your trading account. You won’t need to do anything; everything is automatically done for you.

In the end, the question you need to ask yourself is “how much time can you (or do you want to) spend on your trading on a daily basis?”.

Are We at the End of the Economic Cycle?

What happened in 2018?

The Federal Reserve increased the cost of money in the U.S. by raising short-term interest rates, and it is still planning 2 rate hikes in 2019, as U.S. inflation is now sitting near its 2% target for the first time in years.

A strong U.S. economy – not to mention a rather hawkish American monetary policy – supported the greenback in 2018, affecting, in turn, many emerging market currencies, especially those of developing economies with large debts in USD.

Some analysts, such as the Goldman Sachs research team, still think that the Central Bank hasn’t sufficiently taken into consideration the downside risks associated with trade tensions and the global economic slowdown in its forecast.

According to the World Bank: “Global growth is expected to edge down over the next two years, as global slack dissipates, trade and investment moderate, and financing conditions tighten.”

In 2018, the trade order was disrupted, threatening global trade relations and global economic growth. American protectionism measures, especially towards China, have altered the balance of economic powers, increasing geopolitical and economic risks.

In Europe, things were not better.

Prime Minister Theresa May will not bring her Brexit deal back to parliament before mid-January, which doesn’t leave much time for the exit deal to be approved before the official date of the UK’s departure on March 29th, 2019.

The European Commission is still struggling with many countries’ 2019 spending plans, while France has had to deal with the yellow vest anti-government movement since last November, which has frequently degenerated into violence.

2019 – A Transition Year?

While the U.S. is currently enjoying their longest expansion phase in decades – with some American indices experiencing their longest winning streak ever this year – several economic indicators are now predicting higher market volatility ahead, as well as a potential end to the current economic cycle.

An economic cycle is part of the natural fluctuations of any given economy, with “expansion” and “contraction” phases. Usually, every economic cycle has 4 stages – “expansion”, “peak”, “contraction” and “trough” – where growth, employment, consumer spending, and inflation strongly vary, impacting the financial markets.

As we seem to be in the very late stages of an economic expansion phase, traders should focus on a few factors that could, together, signal a turning point:

  • Higher market volatility (especially measured by the VIX, or the fear index)
  • Anti-growth protectionism measures and their impact on trade opportunities (consequences of the Brexit and the trade war between China and the U.S. for instance)
  • Inverted yield curve (short-term rates being higher than long-term rates)

An inverted yield curve has made the headlines this year

Of course, we’ve heard a lot about trade wars and market volatility this year, but traders and economists have closely monitored the evolution of the yield curve this year, as an inverted yield curve, also called negative yield curve, is considered as a predictor of economic recession.

This type of yield curve has almost always led to a recession of 12 to 18 months later, and it is considered an accurate forecast of a potential turning point in the economic cycle.

Normally, shorter maturities are supposed to have a lower yield than longer maturities, as investors usually ask for a premium in exchange for investing their money for longer periods.

With an inverted yield curve, however, investors are expecting lower interest rates in the short-term (which usually happens in a low growth environment), increasing the demand for longer-term bonds, which pushes their yields down.

Are We at the End of the Economic Cycle?

Predicting the future path of economic growth, as well as whether or not we might be entering into a recession, is always a tough exercise, as there are many variables involved.

Many financial and economic metrics about the U.S. economy are showing “late cycle signals”. However, which traders should take into consideration when rebalancing their portfolios?

Here are the 5 most important issues to watch for in 2019:

  • Trade relations
  • Market instability, higher volatility, and uncertainty
  • Global growth
  • The pace of the Federal Reserve rate hikes and the yield curve
  • Political decisions or movements

When deciding whether or not to enter the markets, traders should think about their risk-tolerance and their time-horizon first.

This is especially true in such uncertain and volatile times, where we might be about to enter another stage of the economic cycle, which will also impact the stock market cycles and trigger volatility.

Higher market volatility means that there are more trading opportunities traders can profit from to enhance their trading performance using a reliable and trustworthy broker, like OlympTrade, who can provide the right trading instruments with the appropriate money and risk management tools to protect investor funds.

What’s the Current Status of Weed Stocks?

The legal cannabis industry is attracting more and more investors that wish to diversify their portfolios. Global spending on cannabis reaching more than $9 billion in 2017, and is expected to grow to more than $32 billion by 2022, according to ArcView Market Research and BDS Analytics.

Canada became the first developed country in North America to allow the recreational use of marijuana for adults on mid-October 2018, and there are 33 legal medical marijuana states (and DC) and 10 legal recreational marijuana states (and DC) in the USA this year, according to ProCon.org.

Investors hope that other countries around the world will follow suit and legalize the use of recreational marijuana, pushing global production capacity and consumption higher, supporting weed stock prices.

Weed Stocks – Should investors be prepared for a bubble ready to burst?

Ahead of this historical event in Canada, weed stocks were flying high, similar to a ‘gold-rush’ on the hope that this legalization will inspire other countries around the world to follow suit, and in turn, support global weed production and consumption in the upcoming years, as well as encourage more investment in the industry. Many companies in unrelated sectors are suddenly seeing this new expanding market as a way to diversify their offering and be part of what many consider to be the “next big thing”.

For instance, this year the company Constellation Brands, which owns Corona and Modelo Beers, heavily invested in Canopy Growth Corp, one of the largest publicly traded pot stocks, which is up more than 43% year-to-date. When the alcoholic beverage giant bought 104.5 million shares worth $4 billion in Canopy Growth Corp., it settled the biggest deal in the marijuana industry so far, solidifying its presence in this booming industry. While Constellation Brands is currently dealing with dragging revenues, the company hopes to offset them with new products such as cannabis-infused drinks.

The buzz around weed stocks and future legalization has been supporting prices for the last couple of years, but some investors fear that this buzz is leading to a stock price bubble that will soon burst, due to the speculative nature of the industry. Weed stocks are not for conservative investors – they are a new kind of investment, with a unique set of risks, and can be atypically volatile for a range of different reasons.

First, let’s not forget that most stocks are only available through OTC (Over-The-Counter) markets rather than through largely regulated stock exchanges, which means that investors must face trading risks associated with OTC products: counterparty risk, market risk, liquidity risk, etc.

Secondly, the dynamics of this industry are fast-changing, similarly to crypto coins as it was last year with Bitcoin, Ethereum, Ripple and other coins – many investors do not fully understand the challenges that these companies have to face in the future, nor what to look for it, or expect from, related weed-businesses. The uncertain legal status of marijuana is another variable – there’s no way of knowing when (or even whether) more countries will follow Canada’s example. In addition, the issue of legality within the USA is still far from settled, with a significant number of Republicans (such as the recently departed Attorney General Jeff Sessions) still against legalization, despite a majority of voters in favor across both parties.

Finally, many investors are jumping into this market due to unreliable psychological biases, such as the well-known FOMO (Fear Of Missing Out), and not because they know what to look for in marijuana companies (growth strategy, solid financial situation, profitability, etc.)

How Can You Earn From Weed Stocks?

If weed stocks fit your trading profile, then you need to pay attention to a couple of things before investing in this industry.

First, you need to understand that there are different types of cannabis products within two main categories: 1) medical marijuana, and 2) recreational marijuana. There are also 2 main chemical components, CBD and THC, each with different properties.

Medical marijuana requires a prescription from a professional and authorized healthcare provider and has a high concentration of Cannabidiol (or CBD), which is the chemical that does not produce any psychoactive effects. Recreational marijuana does not need any medical justification and contains more Tetrahydrocannabinol, or THC, which is the chemical that produces the “high”.

As you have different types of marijuana, you also have different types of weed companies in the industry: the pure-players (growers and producers) and non-pure players (bio-techs, supply providers, packaging makers) that focus on different parts of this business.

You also need to understand the risks involved with marijuana companies. Naturally, there is the ever-present legal and political risk, as buying and selling marijuana remains illegal in many countries. In the U.S.A., selling marijuana is illegal at the federal level, and dealing with marijuana-related businesses can be very risky for banks and other kinds of financial institutions, as the financial sector has very strict restrictions. Raising money and gaining access to checking accounts can be difficult for companies that want to be part of this industry.

Finally, there is a certain complexity in the dynamics in this industry that might make it difficult to assess the current value of a company and its prospects for the future. To get around this, you should try to learn about the management team, the company’s current products/services, its strategy to expand its activities or gain more market share, the competitive advantage of the company, its profitability, and financial health, its current and future investments, etc.

Bottom-Line

Week stocks have a wide array of trading opportunities, but you need to be ready for a bumpy road – the marijuana marketplace has a long way to go before it stabilizes, with significant legal and political hurdles to overcome – although of course, the volatility of this market is where all the opportunity lies!

To be better prepared for this kind of risky investment, always use a regulated and reliable broker, like ICMarkets, as it will ensure that you’re trading in a secure environment with the best trading conditions. You will also benefit from a robust trading platform with various money management tools to help you better control and mitigate your risk.

The Full Guide to Day Trading Using MetaTrader 5 (MT5)

Now that you’ve decided that day trading is the right trading style for you, you need to be sure you’re trading in the best trading environment. All you need is a reliable, robust, and fast trading platform, like MetaTrader 5 (MT5).

Through its official website, the currencies, indices, stocks and commodities broker LBLV offers its clients a better way to trade the financial markets through robust trading platforms like MT5.

The goal of a day trader is to profit from intraday movements of trends on different financial assets with trading positions being open from a few minutes to a few hours – so timing is everything!

Consequently, being a successful day trader requires a powerful trading platform with advanced trading functions – mathematical, technical, as well as fundamental analysis tools to determine better entry and exit points and achieve more precise timing.

How to Start Trading with MetaTrader 5 (MT5)

Day traders love to use the multi-asset platform MetaTrader 5, as it’s “the fastest, efficient and cost-effective trading platforms in the world” allowing them to trade in the best trading conditions.

With reliable and secure brokers, like the licensed LBLV broker, you can open a demo account on MT5 following a few simple steps, allowing you to discover the trading platform and its unique features.

Once on the platform, you’ll see all the key elements of the simple and user-friendly interface to facilitate your daily trading routine.

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All commands are accessible from the main menu bar, which includes the following tabs: file, view, insert, charts, option, and help. These functions help you to settle your charts with indicators, other analytical tools, and various platform settings to create your own personalized trading environment.

Below the main menu, you can find different built-in toolbars that will duplicate some of the commands and functions you can find in the main menu. The toolbars are customizable, allowing you to change chart timeframes, chart types (line chart, bar chart, candle chart…) and more.

On the left of the chart, you can also see the Market Watch section, where prices of selected financial assets such as  EUR/USD, GBP/USD, gold and crude oil are displayed. This section can also provide other information, such as details and specifications of financial contracts, as well as one-click trading options.

Below your chart(s), you’ll find a toolbox section where you can follow the evolution of your open trading positions, as well as your pending trading orders, and modify them when needed (stop-loss, take-profit, limit prices, etc.). This multifunctional window can also be used to access other information that can be useful to your trading, such as account history, alerts, news, internal mailbox, expert journals, and much more.

Easy, right?

As you can see, MetaTrader 5 interface is quite simple to use and provides all necessary trading tools and information to start trading the markets. There are different menus, toolbars, as well as service windows within a single highly customizable and convenient user interface that will simplify your trading.

Do you want to place your first order? It’s easy! Follow these simple steps.

1) Once you’ve selected your financial instrument, right click on it in the Market Watch window.

2) Select “New Order”.

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3) Then, decide which type of order you want to execute: a pending order or an instant or market order.

Instant order

If you select an instant order, you need to determine:

  • the size of your position (volume),
  • the levels of your stop-loss and take-profit.

Then, click on “Sell” or “Buy” depending on your preferred scenario and your order will be processed at the next available price.

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Pending order

If you select a pending order, you need to determine:

  • the type of order you want to place (Buy/Sell limit, Buy/Sell stop, Buy stop/Sell stop limit),
  • the price at which you want your order to be placed,
  • the size of your position (volume),
  • the levels of your stop-loss and take-profit.

Then, click on “Place”.

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As soon as your order has been executed, it will appear at the bottom of your interface.

Are You Into Automated Trading Or Copy-Trading?

Not a problem! MetaTrader 5 (MT5) has all the features you need!

LBLV describes MT5 as a “multi-asset platform offering exceptional trading possibilities and technical analysis tools, as well as enabling the use of automated trading systems (trading robots) and copy trading”.

So, this all-in-one platform for trading the currency, stock and futures markets can also be used by day traders who like to automate their trading strategies, or who prefer to duplicate trading strategies from the most successful traders around the world.

Day Trading Using MetaTrader 5 (MT5) 

As you’ve seen, MT5 is a great trading platform for day traders who want to take their trading to the next level. Before you start using it, be sure to fully understand how it works and how you can customize your MT5 trading environment to improve your trading process.

A few things to consider:

  • Only trade with money you can afford to lose – as trading is a very risky – but rewarding, activity – you want to be sure that you’re only trading with money you do not need to live.
  • Constantly work on your financial & economical knowledge – as understanding how financial markets and trading work is essential in your success.
  • Apply a consistent trading strategy & respect money management rules – as you can’t make money if you don’t implement a trading routine, follow your trading method and respect your money management parameters.

How New Traders Use the PAMM System to Earn While They Learn

Have you always wanted to invest in the markets, but you’re not quite sure how to go about it?

A PAMM account might be exactly what you’re looking for. A PAAM account allows you to earn money by following successful traders while learning how to develop your own winning trading strategy over time.

What Is A PAMM System?

PAMM, which stands for Percentage Allocation Management Module, is a great way to invest in the markets if you don’t have time, or if you’re not yet confident enough to trade yourself.

This kind of trading service is based on copy trading, allowing you (as well as other traders) to have a trading account connected to a “Master” account, which manages multiple trading accounts.

The PAMM Master account gathers the total sum of the deposits of all customers (or followers) and all trading positions carried out by the Master account are proportionally reflected in the follower trading accounts, which means that all profits (and losses) are also proportionally distributed to the managed accounts (or followers).

The relationship between a follower and the PAMM manager describes the agreement they have regarding profit/loss distribution, as well as the performance fees, the master commission, the minimum performance constraint, assignment commission, early revocation penalty, minimum capital required, etc.

These criteria are called the “offer parameters” and must be accepted by followers if they want to take part in the PAAM.

How Can You Take Advantage Of a PAMM System?

With current bank interest rates and other so-called safe financial instruments being quite low (especially in Europe), more and more investors are looking for higher return types of investments.

But making consistent money on the markets isn’t as easy as it may sound. It’s a very stressful activity, one that requires patience, dedication, commitment, trading knowledge, and time to analyze the market and properly implement your trading strategy.

For these reasons, many investors aren’t yet ready to trade the markets, but they’re ready to use PAMM account services to gain access to the markets and generate money to achieve their financial goals while learning how to become a successful and profitable trader.

Consequently, PAMM services are great for beginners, as it helps connect experienced and successful traders to people interested in the financial market, but who are not sure how to invest their money yet. 

What should you look for in a broker offering PAMM Services?

One of the most important aspects to take into consideration when deciding which kind of PAMM services you will use is 1) the reliability of the PAMM broker, 2) how easy it is for you to withdraw money, and 3) how detailed the statistics available to you are in choosing the Master account to follow.

Use a regulated and licensed broker

FXPRIMUS, a regulated broker based in Cyprus, offers high quality and robust PAMM services, which is an offering of Primus Markets INTL Limited and Primus Africa (Pty) Ltd, member Companies of the FXPRIMUS Group.

Be sure that your fund is protected and that you can easily withdraw money

According to FXPRIMUS, their PAMM Service comes with “full transparency in terms of performance and fees, with full flexibility to deposit and withdrawal as you see fit”.

To ensure the safety of investors, customer deposits should be kept in their own trading accounts; so then they are the only ones who are able to make deposits/withdrawals.

Analyze the available statistics to select the best Master account for you

FXPRIMUS gives you a lot of information and important statistics about Master performance, so then you can choose the best accounts to follow depending on your risk aversion, your trading profile and your financial goals.

General information will include the type of trading account, when it has been created, its currency, its number of followers, etc. while advanced statistics will help you understand better how well a given account is performing and how risky it is: gain, average win/loss, exposure level, drawdown, profit factor, expectancy, Sharpe ratio, etc.

Bottom-Line

PAAM accounts are the best way for you to take advantage of an automatized profit/loss distribution according to the money manager trading strategies you choose to follow. It means that you can get exposure to the markets without any deep trading knowledge.

Using PAAM services also means that your money can be professionally managed thanks to a proven trading strategy with money management rules. Right now, you do not need to work hard on your trading strategy, nor worry about how long it is going to take to create a profitable one.

You simply have to choose the Master account that seems profitable enough for you according to your risk profile, picking one that has a solid track-record that generates results over time.

While your account makes money, you can take advantage of your own time. Your account is in safe hands, so you can focus on learning how markets work and how to trade them, as well as how to develop your own trading strategy and trade the markets once you’re ready.