Something Interesting in Financial Video July 2016 - page 3
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An Introduction to ECNs
This video provides an introduction to electronic communications networks (ECNs), systems that allow buyers and sellers of stocks to trade directly without an intermediary.
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Most forex traders participate in the forex market with forex brokers. There are mainly two types of forex brokers: market makers and electronic communications networks (ECNs). In this article we want to introduce the latter type of brokers, the ecn forex broker.
What is an ECN forex broker?
ECN forex broker is a financial expert that provides the clients with direct access to other forex participants in the currency market by using electronic communications networks (ECNs). Unlike market makers, which always trade against their clients to make profit, an ECN forex broker only creates opportunities of trading between forex traders.
How does an ECN forex broker work?
The ECN forex brokers provide a medium by passing on the prices for different market participants such as banks, market makers and other traders in the market. Then the best bid/ask quotes will be displayed on the trading platforms based on these prices. ECN forex brokers also serve as counterparties to forex transactions, but it is a settlement that they operate on instead of pricing basis. While fixed spreads are offered by some market makers, spreads of currency pairs can be very different, determined by the trading activities of the currency pair. In active trading periods, sometimes you cannot get ECN spread at all, especially in those very liquid currency pairs such as the majors (EUR/USD, GBP/USD, USD/JPY, USD/CHF) and some currency crosses.
Pros and cons of the ECN forex broker
The ECN forex broker has both advantages and disadvantages. The pros and cons of the ECN forex broker are as follows.
The pros of the ECN forex broker can be presented in following aspects.
Traders can usually get better bid/ask prices for they are derived from multiple sources.
At certain time traders may trade on prices with no spread or with only very little spread.
Genuine ECN forex broker will pass on the orders to a bank or other trading participants on the opposite side of the transaction instead of trading against the traders.
It is very likely that the prices on the ECN forex broker are more volatile.
Traders can take on the role of market traders to other traders on the ECNs since they can offer a price between bid and ask.
The cons of the ECN forex broker can be presented in following aspects.
Many ECN forex brokers do not provide integrated charting or new feeds.
Some trading platforms are not so easy for traders to use or operate.
Since there are variable spreads between the bid and the ask prices, it may be difficult to calculate stop-loss and breakeven points in pips in advance.
Forex traders are obligated to pay commissions for each transaction.
It is obvious that there are both pros and cons of an ECN forex broker. Traders have to take many factors into consideration when choosing a forex broker.
Forum on trading, automated trading systems and testing trading strategies
Indicators: Parabolic SAR
Sergey Golubev, 2013.08.08 14:13
Metatrader Parabolic SAR Settings - A Simple SAR Trading SystemForex traders focus on the Parabolic SAR key points of reference, which are the “switchover” points above and below the “candlestick” formations. As with any technical indicator, a Parabolic SAR chart will never be 100% correct in the signals that it presents, but the signals are consistent enough to give a forex trader an “edge”. Skill in interpreting and understanding SAR signals must be developed over time. In the example below, let’s develop a simple trading system based on Parabolic SAR signals and alerts.
The following trading system is for educational purposes only. Technical analysis takes previous pricing behavior and attempts to forecast future prices, but, as we have all heard before, past results are no guarantee of future performance. With that disclaimer in mind, the “red” circles on the above chart illustrate optimal entry and exit points, and the “green” circles indicate false SAR signals accompanied by weak ADX readings.
A simple trading system would then be:
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Steps “2” and “3” represent prudent risk and money management principles that should be employed. This simple trading system would have yielded a profitable trade of 70 “pips”, but do remember that the past is no guarantee for the future.Determine your entry point after the SAR switchover for an uptrend accompanied by a strong ADX reading;
Execute a “Buy” order for no more than 2% to 3% of your account;
Place a stop-loss order at 20 “pips” below your entry point;
Determine your exit point when the SAR switches over at the end of the trend.
Forum on trading, automated trading systems and testing trading strategies
PriceChannel Parabolic system
Sergey Golubev, 2013.03.22 14:04
PriceChannel Parabolic system
PriceChannel Parabolic system basic edition
Latest version of the system with latest EAs to download
How to trade
The settingas for EAs: optimization and backtesting
Trading examples
Metaquotes demo
GoMarkets broker, initial deposit is 1,000
Alpari UK broker initial deposit is 1,000
RoboForex broker initial deposit is 1,000
How to Use Parabolic SAR
Crude oil can be effected by political tensions and people's views on the economy; it is a very volatile market and can easily move 200 to 400 points a day. It is as such one of the more volatile markets out there.
How to Trade the GDP Number
A lesson on what traders of the stock, futures, and forex markets look for when the Gross Domestic Product (GDP) Number is released.
As we have learned in previous lessons there are many components of the US Economy which can affect overall economic growth and inflation expectations. Some of the major examples here are how many people are employed in the economy vs. unemployed, how much the housing market is growing in different parts of the country, and at what rate the prices for different products in the economy are seeing increases.
As all of these things are so important to the economy and therefore to the markets, there are no shortage of economic reports which are released to try and help people gauge how things are going with different pieces of the economy. It is important for us as traders to understand the major reports here as even if we are trading off of technicals, understanding what is happening in the market from a fundamental standpoint can help establish a longer term bias for trading. In the short term an understanding of these numbers will also help to assess the erratic and sometimes extreme movements which can occur after economic releases.
The granddaddy of all economic reports is the release of the Gross Domestic Product (GDP) number for the economy. The Gross Domestic Product for the US or any other country is the final value of all the goods and services produced in that economy. Essentially what you get after calculating GDP by adding up the value of all goods and services produced in the economy is a measure of the size of the overall economy. It is for this reason that market participants will watch the GDP number closely as the rate of growth in this number represents the rate of growth in the overall economy.
As a side note here, GDP also allows a comparison to be made of the sizes of different economies from around the world, as well as their growth rates. To give you an idea of just how large the US Economy is, 2007 GDP for the United States was estimated at 13.7 Trillion dollars. This is in comparison to the next largest economy in the world, Japan which has a GDP of under 5 Trillion Dollars.
Quarterly estimates of GDP are released each month with Advance Estimates which are incomplete and subject to further revision being released near the end of the first month after the end of the quarter being reported. In the second month after the end of the quarter being reported preliminary numbers (which basically means more accurate than advanced) normally are released and then finally the final GDP number is released at the end of the 3rd month after the end of the quarter being reported on.
Traders are going to focus heavily on the growth rate released in the Advanced number and markets will also move on any significant revisions made in the preliminary and final GDP numbers.
In addition to looking at the growth or lack thereof in the overall GDP number, traders will also look at the growth or lack there of in the different components that make up the number. As GDP represents the value of everything in an Economy you can imagine the amount of data that goes into compiling the number, much of which is published for market participants to view. By looking at the different pieces which make up GDP we can get a good picture of what is happening not only with the overall economy but with all the different components of the economy which are reported on to come up with the final number. .
Now we could spend many lessons going over all the data that is in this report. The goal here however is to build a framework for understanding the major components so we as traders can understand what is going on when the market reacts to certain pieces of the report and will recognize when to dig deeper for more information on what is happening in a certain sector. The broad categories that it is important to have an understanding of are:
1. Personal Consumption Expenditures -- as over 65% of the US economy is made up of this category, what the individual consumer is doing ie the growth or lack thereof in their consumption, as well as on what goods and services they are spending their money on is heavily focused on.
2. Private Investment - This includes purchases of things such as computers, equipment and inventories (known as fixed assets) by businesses, purchases of homes by individuals, and of businesses investing in inventories of goods to sell. These are all obviously important things, as how much businesses are investing is a good indication of how they feel about future growth prospects, and how much growth the housing market is experiencing is also an important component of the economy.
3. Government Spending -- this includes pretty much everything the government spends money on besides social programs.
4. Exports -- Imports -- an important number which shows how wide the gap is between how much the country exports and how much it imports.
What the GDP number is going to give you a feel for is how much each of the above grew for the quarter and what their overall contribution to the economy was. The above numbers will then be broken down into more detailed numbers which go into compiling the final number for the above 4 categories.
A short video introducing traders to the subject of currency correlations.
Currency Correlations, Part II
The second video in a two-part series on currency correlations.