Something Interesting in Financial Video August 2016 - page 2

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A Trader's Introduction to the Euro, Part III

There are literally thousands of economic numbers released in the Eurozone however, like we covered in module 3 of this course, those that affect the current account (trade flows) or interest rates (capital flows) are going to have the greatest potential to move the currency. All of the indicators which we cover in module 8 of our basics of trading course, have a counterpart in the EU. Most of the time they are also named the same, and as they show the same things, traders can expect the market to react accordingly. The only thing to keep in mind here is that the economic climate in the United States vs. the Eurozone will differ at times, so traders and therefore the market may react differently to the same number out of the EU than they do out of the US.

The second thing that it is important to understand about EU economic releases, is the different mandate of the European Central Bank, versus the Federal Reserve. Where the Federal Reserve has a dual mandate of maximizing employment and maintaining price stability, the ECB's mandate is solely to maintain price stability. With this in mind, the ECB is normally seen as more hawkish than the federal reserve, meaning they are more likely to hold steady or raise interest rates when economic data show price increases, and less likely to cut interest rates as quickly as the fed when growth in the Eurozone slows.


 
Moving Average Forecasting: What You Need to Know

How do you spot developing investment trends? "Moving Average Forecasting" articulates three key steps for risk-averse investors. As part of the Strategic Investor Spotlight Series, "Moving Average Forecasting" teaches you how to opportunistically identify important financial market trend signals.


 

Trading the News: Existing Home Sales

Released at 8:30 am EST in the fourth week of the month, the existing home sales report is designed to cover the number of existing homes closed during the previous month, and the average sales prices by region of the country.

There are 3 important numbers released in the Existing Home Sales Report which are:

  • Aggregate number of homes sold
  • Median Selling Prices
  • Months Supply which represents that inventory of unsold homes on the market and gives insight into what to expect in the future from the first two numbers.
Like most indicators the number is provided raw and with seasonal adjustments to account for changes in the weather which can have a large effect on the number of homes sold in a particular month.

In addition to the obvious importance to the stock of homebuilders, home supply stores etc the existing home sales number is also considered a leading economic indicator, as increases and decreases in the number of homes sold tend to lead economic activity in general by several months.

When housing sales are strong and prices are rising homeowners which represent a large part of the economy show increases in equity in their houses which can be spent through home equity loans or used to upgrade to a larger home, all important drivers of economic activity.

As with the other leading economic indicators we have looked at, this indicator will be looked at even more closely when the economy is thought to be at a turning point, and market volatility can be particular large as a result.

 

Who Really Controls the Forex Market?

At the center or first level of the market is something known as the Interbank market. While technically any bank is part of the Interbank market, when an FX Trader speaks of the interbank market he or she is really talking about the 10 or so largest banks that make markets in FX. These institutions make up over 75% of the over $3 Trillion dollars in FX Traded on any given day.

There are two primary factors which separate institutions with direct interbank access from everyone else which are:

1. Access to the tightest prices. We will learn more about transaction costs in later lessons however for now simply understand that for every 1 Million in currency traded those who have direct access to the Interbank market save approximately $100 per trade or more over the next level of participants.

2. Access to the best liquidity. As with any other market there is a certain amount of liquidity or amount that can be traded at any one price. If more than what is available at the current price is traded, then the price adjusts until additional liquidity enters the market. As the forex market is over the counter, liquidity is spread out among different providers, with the banks comprising the interbank market having access to the greatest amount of liquidity and then declining levels of liquidity available at different levels moving away from the Interbank market.

In contrast to individuals who make a deposit into their account to trade, institutions trading in the interbank market trade via credit lines. In order to get a credit line from a top bank to trade foreign exchange you must be a very large and very financially stable institution, as bankruptcy would mean the firm that gave you the credit line gets stuck with your trades.

The next level of participants are the hedge funds, brokerage firms, and smaller banks who are not quite large enough to have direct access to the Interbank market. As we just discussed the difference here is that the transaction costs for the trade are a bit higher and the liquidity available is a bit lower than at the Interbank level.

The next level of participants has traditionally been corporations and smaller financial institutions who do make foreign exchange trades, but not enough to warrant the better pricing

As you can see here, traditionally as the market participant got smaller and less sophisticated the transaction costs they paid to trade became larger and the liquidity that was available to them got smaller and smaller. In a lot of cases this is still true today, as anyone who has ever exchanged currencies at the airport when traveling knows.

To give you an idea of just how large a difference there is between participants in the Interbank market and an individual trading currencies for travel, Interbank market participants pay approximately $.0001 to exchange Euros for Dollars where Individuals in the airport can pay $.05 or more. This may not seem like much of a difference but think about it this way: On $10,000 that is $1 that the Interbank participant pays and $500 that the individual pays.

The landscape for the individual trader has changed drastically since the internet has gone mainstream however, in many ways leveling the playing field and putting the individual trader along side large financial institutions in terms of access to pricing and liquidity.


 

Scalping

All the ins and outs on scalping the Forex market. May Chris dives into the world of Scalping where he explains in great detail how this style of trading can be accomplished in the Forex market. This live webinar not only clarifies how a trader can scalp but also provides every Forex trader with a great guidance and extra tips.


 

Technical Analysis Indicator MACD part one

Most technical analysis indicators are lagging. Let show you how to use MACD properly and its Leading indicator values.


 
Technical Analysis Indicator MACD part two

Part two of the three part series on MACD


 

Technical Analysis Indicator MACD part three

The final wrap up in the three part series on MACD


 

Using MACD to Determine Buy and Sell Points


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