13 / 07 / 2018 | Market News

Meet Ethereum

Bitcoin, Ethereum, Litecoin, Ripple are words that have been added to our vocabulary in the last two years. The names of the most famous cryptocurrencies in the world are making the headlines of the financial news media, sometimes for the profit that their owners make and other times for their price drops. Bitcoin is leading the rest of the cryptocurrencies in terms of gains and fame, but some of the newer cryptocurrencies have started covering the distance with the pioneer.

What is Ethereum?
Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract (scripting) functionality.  Ether is a cryptocurrency whose blockchain is generated by the Ethereum platform. Ether can be transferred between accounts and used to compensate participant mining nodes for computations performed.

There are two accounts available through Ethereum: externally owned accounts and contract accounts. Ethereum allows developers to deploy all kinds of decentralized apps. Even though Bitcoin remains the most popular cryptocurrency, some economists speculate that the Ethereum’s growth has the potential to overtake Bitcoin in terms of usage in the future.

The story behind Ethereum
Vitalik Buterin is the programmer that designed Ethereum. Buterin had argued that Bitcoin needed a scripting language for application development. Failing to gain agreement, he proposed the development of a new platform with a more general scripting language. The Ethereum’s founder said in an interview that “I thought the people of the Bitcoin community weren’t approaching the problem in the right way. I thought they were going after individual applications; they were trying to kind of explicitly support each case in a sort of Swiss Army knife protocol.”

In 2014, the crowdsourcing campaign that Vitalik Buterin and other co-founders launched raised more than $18mn and since then Ethereum has grown rapidly with hundreds of developers working on the project. However, a theft of over $50mn in Ether by anonymous hackers in 2016 raised questions over the security of funds and caused a split in the Ethereum community resulting into two separate blockchains, the Ethereum Classic (ETC) and the Ethereum (ETH).

Differences between Ethereum and Bitcoin
  • The number of Bitcoin is capped at 21 million ever to be produced but Ethereum is not capped to any specific quantity. Researchers have estimated that more than 90 million tokens will be mined by 2021 while the majority of Bitcoins already have been mined.
  • They use different security protocols. Ethereum uses a “proof of stake” system. The Bitcoin uses a “proof of work” system.
  • Ethereum offers several methods of exchange including Ether (cryptocurrency), smart contracts and the Ethereum Virtual Machine (EVM).
  • The computers that run the Bitcoin platform are called miners and receive a reward for facilitating and verifying transactions. On the contrary, the Ethereum platform doesn’t offer rewards but allows miners to receive a transaction fee.
Trading Cryptocurrency CFDs on STO
Using the STO Crypto Account, our clients are able to trade Cryptocurrency Contracts for Difference (CFDs) with competitive trading conditions. STO clients can trade CFDs on three of most important cryptocurrencies such as Bitcoin, Litecoin and Ethereum.
 
Trading Forex and CFDs (Contracts for Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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12 / 07 / 2018 | Market News

US-China trade war escalates

Global financial markets were rattled on Wednesday July 11th 2018 after the United States (US) administration decided to escalate the trade war with China. The two largest economies in the world have become tangled in a trade conflict in the last few months since the US President Donald Trump declared his intention to reverse the situation regarding the trade deficit with the US trade partners. 

On Tuesday July 10th the US administration delivered another blow to the country’s trade relationship with China when it issued a list of thousands of Chinese imports the administration wants to hit with the new tariffs, including hundreds of food products as well as tobacco, chemicals, coal, steel and aluminium. The US Trade Representative Robert Lighthizer, answering reporters’ questions, said that his country was acting because China hadn’t acknowledged all previous warning. 

More specifically, Robert Lighthizer noted that “for more than a year, Donald Trump’s administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition. We have been very clear and detailed regarding the specific changes China should undertake. Unfortunately, China has not changed its behavior- behaviour that puts the future of the US economy at risk.” 

The news shocked the global financial markets that saw the US President Donald Trump taking the trade dispute to the point of no return as Bloomberg’s reporters wrote in their report on July 11th 2018. The famous financial media outlet noted that the new tariffs could force the Chinese administration to retaliate with dangerous consequences. The report focused on the problematic position of the Chinese President Xi Jinping towards his political comrades who ask for immediate action. 

“He’s already imposed retaliatory duties targeting Trump’s base including Iowa soybeans and Kentucky bourbon. Yet, matching the latest U.S. barrage would force China to either levy much higher tariffs or take more disruptive steps like cancelling purchase orders, encouraging consumer boycotts and putting up regulatory hurdles. Not only does that risk provoking Trump to follow through on threats to tax virtually all Chinese products, it could unleash nationalist sentiment on both sides that fuels a deeper struggle for geopolitical dominance,” is a quote from the Bloomberg report. 

Analysts at Nomura, which is one of the largest financial services provider headquartered in Asia, believe that China may move against the US to counterbalance the heavy tariffs imposed on its products. “We expected some response in the wake of China’s reaction to the first round of US tariff increases. However, the release of this list, only four days after the first round of tariffs took effect, indicates that trade protectionism may escalate beyond the initial round of tariffs imposed last week. The new list, targeting $200bn with a 10% tariff, is almost equally split between capital and consumer goods. Thus, if these tariffs do indeed take effect, there would likely be a larger impact on consumers than in the initial round,” Nomura’s economists noted. 

Rabobank’s research team published its report on the US tariffs on July 10th 2018 commenting that the US-China trade war is escalating adding that China probably won’t be able to impose equal tariffs because it doesn’t import an equal volume of products from the US. “Covered are low-tech goods as well as high-tech items squarely aimed at slowing China’s march to ‘2025’ industrial supremacy. If we see these duties kick in, nearly half of all Chinese exports will be under tariffs. China has immediately responded that it will “fight fire with fire” – and yet it can’t put USD200bn of tariffs in place as it doesn’t buy USD200bn more of US goods!”

STO and trading the US Dollar

The US Dollar against the Euro, the US Dollar against the British Pound and the US Dollar against the Japanese Yen are just three of the major currency pairs that you can trade with on the STO platform. STO provides its clients with all the necessary educational material such as webinars to help them with preparing the suitable trading strategy. 

Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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11 / 07 / 2018 | Market News

US CPI inflation likely to have risen in June 2018

On Thursday July 12th  2018 the United States Department of Labour Statistics is going to publish data regarding the US Consumer Price Index (CPI) and the core CPI inflation during June 2018. The CPI is an indicator used to measure the rate at which the prices of goods and services bought by households rise or fall, which is the rate of inflation, referred to as the CPI inflation. The CPI inflation figure is taken into consideration by the US Federal Reserve (Fed) board when it evaluates its monetary policy.

Economists polled by the Wall Street Journal (WSJ) on July 3rd 2018 said they expect the data to show that the US CPI inflation rose to 2.9% in June 2018, on an annualised basis. The CPI inflation stood at 2.8% in May 2018. On a month-to-month basis, they anticipate that CPI inflation increased by 0.2% matching May’s 2018 reading. The US Bureau of Labour Statistics is also going to release data regarding the core CPI inflation. According to the majority of economists polled by the WSJ, core CPI inflation will likely tick higher, coming in at 2.3% on an annualised basis. The reading is expected to be slightly higher than the 2.2% figure recorded in May 2018. The core CPI inflation measures the price movements by the comparison between the retail prices of a representative shopping basket of goods and services. In order to measure the core CPI inflation, analysts are excluding the prices of volatile products such as food and energy to capture an accurate calculation. 

The 2.8% CPI inflation figure recorded by the US Department of Labour Statistics in May 2018 was the highest reading since February 2012. The report that accompanied the data said that rising prices for gasoline and shelter led the inflation rate upwards. More specific analysts noted that “the indexes for gasoline and shelter were the largest factors in the seasonally adjusted increase in the all items index, as they were in April 2018. The gasoline index increased 1.7%, more than offsetting declines in some of the other energy component indexes and led to a 0.9% rise in the energy index.” 

Nomura, which is one of the largest financial services group headquartered in Asia, released a report on July 9th 2018 regarding the US CPI inflation. Economists at Nomura suggested that core CPI inflation increased by 0.2% on a month-to-month basis in June 2018, slightly above the 0.17% pace in May 2018, but essentially the same as its six-month average. Regarding the US headline inflation rate in June 2018, Nomura’s analysts noted that “the US June headline CPI to rise by 0.2% (0.212%) m-o-m, pushing up its 12-month change to 2.9% (2.94%) from 2.80% previously. Some of the negative payback from unusually large increases of certain components in May, such as prescription drug and lodging-away-from-home prices, will likely be offset by higher airline fares and a smaller decline in used vehicle prices.”

STO and the US Dollar

The US Dollar against the Euro, the US Dollar against the British Pound and the US Dollar against the Japanese Yen are just three of the major currency pairs that you can trade with on the STO platform. STO provides its clients with all the necessary educational material such as webinars to help them with preparing a suitable trading strategy. 

Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
...
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06 / 07 / 2018 | Market News

All you need to know about financial derivatives

Financial products are defined as instruments that help people save or invest as well as getting insurance or getting a mortgage. These are issued by various financial institutions such as banks, stock brokerages, insurance providers, credit card agencies and government sponsored entities. Financial products are categorised in terms of their type or underlying asset class, volatility, risk and return.
 
A derivative is a type of a financial product. A derivative is financial security with a value that is reliant upon or derived from an underlying asset or group of assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.
 
Derivatives are complicated financial instruments. They can be great tools for leveraging a trader’s portfolio and give a lot of flexibility to traders that would like to change strategies depending on the market’s moves. Traders use derivatives to hedge, speculate or increase their leverage, with the available number of instruments continuously growing. However, derivatives and the fluctuations of their prices could be quite dangerous for traders which means that it’s crucial that traders know the risks derivatives can pose for their portfolios.
 
Advantages of derivatives
 
• All transactions related to derivatives take place in the future. It provides individuals with better opportunities because an individual who would like to short some stock for long time can do it only in futures or options. This means that the biggest benefit of this is that it gives numerous options to an investor or trader to execute all sorts of strategies.
• In derivatives market people can make large transactions with small amounts of capital and therefore it gives the benefit of leverage. This enables people who have less  money to enter the market.
• Intraday traders get the benefit of liquidity as these contracts are very liquid and also the costs, such as basis expense and brokerage, are less as compared to the cash market.
• Financial engineering is an entire field based off of derivatives. They make it possible to create complex investment strategies that investors can use to their advantage.
 
Disadvantages of derivatives
 
• Most derivatives are traded on the open market. This is problematic for traders and investors because securities fluctuate in value. Due to this volatility, it is possible for them to lose their entire value overnight if the market moves against their interests. 
• Derivatives are also very difficult to value because they are based off other securities. Since it’s already difficult to price the value of a share of stock, it becomes much more difficult to price a derivative based on that stock accurately.
• Possibly one of the most important reasons derivatives are risky for investors is that they have a specified contract life. After they expire, they become worthless. If your trading strategy doesn’t work out within the specified time frame, you may have to face substantial capital losses.
 
Trading with STO
 
STO has set as a goal to offer an optimal trading experience to its clients. STO pays special attention to its clients’ education by arranging educational courses such as webinars and providing its clients with the latest market news reports. STO account owners are able to trade on the most active shares in the US, German and Italian stock markets. 
 
Trading Forex and CFDs (Contracts for Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
...
read more
05 / 07 / 2018 | Market News

US Nonfarm Payrolls report in the spotlight

On Friday 6th July 2018, market analysts will focus on one of the most important monthly economic data releases coming from the United States (US). On that day the US Department of Labour will publish data regarding Nonfarm Payrolls in June 2018. The same department will release data associated with the average hourly earnings and the unemployment rate in June 2018. 

These financial data reports are important for global market analysts as the US is one of the largest economies in the world. Nonfarm Payrolls data is released by the US Department of Labour and represents the number of new jobs created during the previous month, in all non-agricultural business. New farm employees are excluded due to the seasonality of their profession. NFPs are regarded as an important indicator of economic conditions because they move closely in line with the overall economy. 

Economists anticipate a drop in the NFPs figure. More specifically, they expect the data to show that 193,000 new jobs were added to the US economy during June 2018. In May 2018, according to data published on June 1st 2018, NFPs impressed the markets coming in at 223,000. The figure beat market expectations of 189,000, following April’s 2018 downwardly revised 159,000. The reading was the highest recorded since February 2018. The accompanying report for May 2018, published by the US Department of Labour, mentioned that employment had grown in the manufacturing, healthcare and mining sectors.

Analysts at National Bank Finance (NBF) suggest that the most important piece of news coming from the US will be the NFPs report. In their report, published on July 2nd 2018, they noted that jobless claims remained near a 50-year low in June 2018, hinting at a very low rate of layoffs. “Still, hiring may have been limited by the shrinking number of qualified workers available. Taking both of these elements into consideration, we anticipate a 190K print. Meanwhile, the unemployment rate may stay put at 3.8% if, as we believe, employment gains in the household survey are offset by an increase in the participation rate,” NBF’s analysts noted in the report.

Average Hourly Earnings

The US Department of Labour is going to release data regarding the average hourly earnings in June 2018. Economists forecast that the average hourly earnings increased by 2.8%, on an annualised basis. If the forecast is confirmed, the figure will be 0.1% higher than May’s 2018 reading. On a month-to-month basis, average hourly earnings are expected to have risen by 0.3%, matching May’s 2018 figure. Average hourly earnings are important because the US Federal Reserve takes them into consideration when the Federal Open Market Committee (FOMC) convenes to decide on interest rates. 

Unemployment Rate

The unemployment rate in the US is the last major data release on July 6th 2018. Economists are suggesting that the unemployment rate remained stable at 3.8% in June 2018, matching the figure recorded on May 2018. The 3.8% figure recorded in May 2018 surpassed analysts’ expectations and it was the lowest unemployment rate recorded since April 2000.

STO and trading the US Dollar

The US Dollar against the Euro, the US Dollar against the British Pound and the US Dollar against the Japanese Yen are just three of the major currency pairs that you can trade with on the STO platform. STO provides its clients with all the necessary educational material such as webinars to help them with preparing the suitable trading strategy. 

Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose. 
...
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04 / 07 / 2018 | Market News

The secrets of position trading

The quantity of offered financial products has significantly increased in recent years. Their nature also has become more complicated. Products such as derivatives, which are financial securities with values that are reliant upon an underlying asset or group of assets, have become popular among traders who believe that they might make a profit from them.

The evolution of the markets has led to the creation of specific categories in which traders have split according to their needs, strategies and targets. One of the strategies that some traders are accustomed to is position trading. 

What is position trading?

Position trading is a speculative style where a trader is most interested in longer term price moves in the market. Position traders usually take only a handful of major positions over the course of a year. However, they do trade around those positions in an active way from time to time. A position trader seeks opportunities that can last from a few months to a year or longer.

The types of trading that last for longer time periods require traders to have a thorough knowledge of the global financial markets and an in-depth knowledge of fundamental factors that can influence prices over the long term. Position traders often use a mix of technical and fundamental analysis to form their trading strategies and have the necessary time to perform thorough evaluations of the financial instruments and the assets they want to trade with.

Position traders evaluate multi-month and yearly market trends which could already be present, or they just emerge and attract attention. Position traders prefer to follow market trends as much as they can and for as long as possible. In general position traders belong to the most experienced traders since they have the necessary knowledge background and available capital to hold their positions, even if the market moves against their interests. 

Position trading appeals to traders because it doesn’t require too much time to make the right moves and reduces the need for constant observation of the market. Position traders do an initial search and choose the assets they want to trade with. Then, they take a decision to enter the trade and all they have to do is keeping an eye on their trading moves, however not so close as day or swing traders. Position traders monitor their positions occasionally without worrying about small price fluctuations which could affect the strategies of the other types of traders. 

The main risk of position trading is that minor fluctuations, which are commonly ignored, can turn into a trend reversal and result in a significant loss of capital for traders. The risks could be averted if traders utilize stop loss or trailing stop orders. Another factor that position traders should take into consideration is the availability of capital since they would have to lock it up for an extended period of time. 

Trading with STO

STO has set as a goal to offer an optimal trading experience to its clients. STO pays special attention to its clients’ educational needs by arranging educational courses such as webinars and providing its clients with the latest market news reports. STO account owners are able to trade on the most active shares in the US, German and Italian stock markets. 

Trading Forex and Contracts for Difference (CFDs), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
...
read more
03 / 07 / 2018 | Market News

Blockchain technology and trading

A blockchain is a distributed public ledger that uses cryptography to ensure the record is practically immutable. The idea was created by a programmer, allegedly Satoshi Nakamoto, and it's the technology that makes peer-to-peer cryptocurrency transfers possible without the need for banks or other types of institutions to verify transactions.

Benefits of blockchain technology

The new blockchain technology is used not only by the financial industry but by many types of industries to change the traditional models which had been morphed in recent decades. The World Wide Web and the evolution of mobile devices which can be used everywhere and anytime to access information created new needs for entrepreneurs and their clients. The global financial crisis that erupted in 2008-2009 changed the way that central banks across the world were implementing their monetary strategies.

Technology connoisseurs and programmers scrambled to find ways that would allow them to bypass the problems deriving from the change of the central banks’ strategies which had sometimes high cost for simple depositors and firms. The collaboration proved fruitful with the invention of blockchain technology which has the following advantages:

Transparency 

The use of blockchain technology makes every type of transaction more transparent than before. Thanks to blockchain technology, every participant in the network share the same documents instead of individual copies. Sharing the documents means that to get them updated all participants should agree on that. 

Increased Traceability

Complex supply chains can be quite problematic for firms with large volumes of products. As a result, tracing the course of a product was difficult until recently. Blockchain technology could change all that with the innovation that it has to offer. Exchanges of goods are recorded on the blockchain, making it easy to show where an asset came from, who bought and who sold it in various time periods. The possibility of fraud could also be reduced since there are available the necessary historical data which could verify the authenticity of any product. 

Enhanced Security

Blockchain is regarded as one of the most secure among all record-keeping systems. Users should agree on making a trade before recording it and after the transaction is approved, it will get encrypted. Every piece of information is stored across an extensive network of computers, which makes very difficult for hackers to attempt to compromise them. In a time that financial services and institutions find it hard to keep data safe, blockchain technology comes to fill in the blank with low costs. 

Institutions start to use blockchain

Nasdaq is leading the way among the world’s top exchanges to adopt blockchain. “The potential to enable stock exchanges to significantly reduce the cost, complexity, and increase the speed of trading and settlement processes in a secure manner, has the biggest names in the industry exploring blockchain technology. The path to its adoption will require resolving issues such as scalability, common standards, regulation, and legislation,” was noted in a report published by Nasdaq’s analysts in November 2017. 

Nasdaq has teamed up with leading Swedish bank SEB to test a mutual-fund trading platform that will run on blockchain, and which is intended to speed up and simplify several processes. But this is not the only blockchain project in which Nasdaq has participated during 2017. At the start of the year, for instance, it had completed the testing phase of using blockchain to run proxy voting on its Estonian stock exchange, the Tallinn Stock Exchange, Estonia’s only regulated secondary securities market.

Trading Cryptocurrency CFDs on STO

Using the STO Crypto Account, our clients are able to trade Cryptocurrency Contracts for Difference (CFDs) with competitive trading conditions. STO clients can trade CFDs on three of most important cryptocurrencies such as Bitcoin, Litecoin and Ethereum. 

Trading Forex and CFDs (Contracts for Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
...
read more
02 / 07 / 2018 | Market News

How do investment advisors work?

An investment advisor is a person that makes investment recommendations or conducts asset and securities’ analysis in return for a fee. Investment advisors work as professionals within the financial industry by providing guidance to clients in exchange for specific fees which are agreed through a contract. Sometimes, investment advisors are allowed to act on the behalf of their clients without having to obtain formal permission prior to executing an action. However, the authority regarding this matter must be formally provided by the client.
 
Most investment advisors charge either a flat fee for their services or a percentage of the assets being managed. In general, there are limited conflicts of interest between investment advisors and their clients, because the experts will earn more if the clients' profits increase as a result of their advice. 
Investment advisors and financial planners may come from many different educational and professional backgrounds. Before hiring a financial professional, clients should do a thorough search and check their credentials. 
 
Investment advisors
 
An investment advisor works with clients to determine what are the best investments for their portfolio. To do this, they must have a complete understanding of the clients’ financial situation, investment goals and risk tolerance. Investment advisors will assess the full existing portfolio and develop a recommended investment strategy based on their clients’ goals. 
 
Investment advisors will tell their clients what types of assets or instruments to invest in, such as stocks or mutual funds. They will advise on the risks associated with each type of investment and the expected rate of return. In addition, they will let investors know what types of taxable income their investments will generate and how to make investments as tax efficient as possible.
 
Investment advisors are experts in understanding the markets and the fluctuations in asset prices. Their job is to analyse market movements and find the best investment options for each client’s unique goals. If potential clients have decently sized portfolios and are seeking long-term investment growth, it may be worth taking advantage of an investment advisor’s expertise. Investment advisors are also helpful in negotiating complicated transactions because of their broad background in many aspects of securities, including deal structuring, project finance, and brokerage.
 
Differences between investment advisors and financial planners
 
Financial planning is defined as “the process of determining whether and how an individual can meet life goals through the proper management of financial resources.” Most financial planners are investment advisors, but not all investment advisors are financial planners. Some financial planners assess every aspect of a client’s financial life—including saving, investments, insurance, taxes, retirement, and estate planning—and help develop a detailed strategy for meeting all their financial goals.
 
Determining which one you need requires careful thinking. In order to help you in getting the rights answers which will help you achieve your targets, you should take into consideration the following 3 factors: 
 
1. Write down your financial goals
2. Write out your money strategy
3. Analyse your investment portfolio and determine if it is appropriate for your goals, age, and circumstances 
 
STO and Investo
 
Our consolidated experience in portfolio management helped us develop an investment strategy for STO clients called “Investo”. Our “Investo” strategy is suitable for individuals who seek long-term investment goals, and who want to trade Forex and CFDs but lack the advanced knowledge of a professional portfolio manager or the necessary time to trade. Trading CFDs requires the potential investor to have sufficient knowledge and experience to understand the nature and the risks involved in trading CFD and the management of his/her portfolio of leveraged derivative products. 
 
Trading Forex and CFDs (Contracts for Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
...
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29 / 06 / 2018 | Market News

Fundamental Analysis 29.06.2018 – Market Outlook

EUR jump after EU leaders reached an agreement on how to deal with migrants. The countries agreed to set up “controlled centers” to process migrants' asylum claims. Those deemed eligible for asylum would then be distributed among member states that offer to take migrants. The key point is that it’s all voluntary:  countries are required neither to set up these centers nor to take any migrants. That’s a major concession to the Eastern European countries. The EU will also look into establishing "regional disembarkation platforms" to process migrants outside of Europe, a major demand of several countries, including Austria, which takes over the EU Presidency. The agreement takes a lot of the pressure off not just the EU as a whole but specifically off German Chancellor Angela Merkel, who was under intense pressure from her interior minister to do something to stem migration. The agreement probably means no further worries about her coalition falling apart. It could therefore be positive for the euro.

CAD jumped as oil gained further and the odds of a rate hike at the 11 July Bank of Canada meeting rose sharply. The market now sees a 68% chance, up from 55% at the beginning of the week. Following a speech yesterday, Bank of Canada (BoC) Governor Stephen Poloz told reporters expects to continue raising interest rates in spite of mounting trade tensions because inflation has alrady hit the BoC’s 2% target. This is Poloz’ last public appearance before the meeting and so it’s his last word.


“We’ve said clearly that, given where the economy is, we’re in a situation where the economy will warrant higher interest rates,” he said, while also emphasizing that this would be a “gradual process.” He also played down the impact of trade threats. “We’re data dependent, not headline dependent,” Poloz said. “We’re not going to make policy on the basis of political rhetoric or any of that.” The conclusion is unambiguous:  Canada is likely to continue hiking rates. This could support CAD going forward.


How high could Canadian rates go? A simple Taylor Rule estimate would put them at 4.75%, vs the current 1.25% level. That would mean 350 bps of tightening to come – quite a change! But as you can see, the Taylor Rule has pretty consistently given too high an estimate of actual BoC rates.


The swaps market is pricing in about 82 bps of further tightening – two rate hikes and a 50-50 chance of a third.


By this way of calculation, Canada has among the most scope for tightening over the next three years among the major currencies – this should keep the currency underpinned, so long as oil holds up and the North American Free Trade Agreement (NAFTA) dispute doesn’t derail the economy.


Meanwhile, JPY was the worst performing major currency, proving that Japanese economic statistics have almost no impact on the currency market at all. The Tokyo Consumer Price Index (CPI) beat expectations, both at the headline level (+0.6% yoy vs +0.4% expected, +0.4% previous) and core (+0.4% yoy, +0.3% expected, +0.2% previous). The job-offers-to-applicants ratio unexpectedly rose and the unemployment rate unexpectedly fell to a 26-year low. All those figures should boost hopes that wage rises will accelerate and inflation will pick up, which should be good for the currency. Moreover, industrial production fell less than expected. Finally, the Bank of Japan reduced its bond purchases for the third time this month as it continued its “stealth taper,” another move that could be positive for the currency.

Nonetheless, JPY fell sharply. Nor can the decline be attributed solely to the usual JPY-stocks correlation, because the stock market was up only 0.25%. It shows that JPY is dominated nowadays by overall risk sentiment, not Japanese economics. As you can see from the graph, although USD/JPY (the orange line) was moving higher already along with the improved tone in global risk, it jumped up along with EUR/USD (the white line) when the news about the EU agreement on migrants was announced, even though of course that has nothing to do with Japan.
USD was also lower despite a higher stock market and higher US bond yields.

Today’s market

Today is the second day of the EU Summit. With the talks on migrants out of the way, It is expected to focus more about Brexit. At a working dinner last night, UK Prime Minister (PM) Theresa May argued that the EU’s rules on sharing information with countries outside the bloc would prevent Britain from working with the EU on security. EU members see complaints like this as just part of Britain’s attempt to pick and choose which parts of Europe it wants to belong to, and are generally met with disdain. EU leaders arriving at the meeting yesterday Thursday 28th of June 2018 had nothing good to say about Britain:  Ireland Prime Minister (PM) Leo Varadkar said it was “unlikely but possible” that the two sides would be unable to reach an agreement on post-Brexit relations and Britain would just crash out of the EU.

As for the data, we start off with German unemployment. The data are expected to show a continued decline in unemployment, however at a steadily declining pace and well below trend. Meanwhile the unemployment rate (or claims rate, in Germany) is forecast to be unchanged. In short, it’s forecast to show the improvement in the employment situation is gradually tapering off. That’s not a good sign when the incumbent government is already struggling. Moreover, there’s nothing to make people fear migrants more than a tepid job market. This could be negative for EUR.



Bank of England mortgage approvals are expected to be down slightly (-0.4%). However, UK Finance mortgage approvals, which were released on Tuesday 26th of June 2018, showed a stronger-than-expected rise of 2.4% (+0.3% expected). The two series move in the same direction 85% of the time, so we could get a positive surprise that might be positive for GBP.


The third and final revision of UK Q1 Gross Domestic Product (GDP) will be released. No change is expected.

EU consumer prices (CPI) are forecast to rise at a slightly faster pace at the headline level, but a slightly slower pace at the core level. Which one matters? Which one does the European Central Bank (ECB) use? Just Tuesday 26th of June 2018, the ECB published a report, “Measures of underlying inflation for the euro area.” It noted that the ECB’s formal target was stated in terms of headline, but unfortunately they also monitor a wide number of other measures (see table from the report).


In fact, when we do a regression analysis of the surprise in the data against the subsequent movement of EUR/USD, we find that neither series is particularly significant, and even worse, the sign for the headline figure is backwards – that is, EUR/USD tends to rise when the headline figure surprises on the downside. This doesn’t make sense. The sign for the core figure is at least correct and EUR/USD tends to rise (i.e, the euro strengthens) when inflation is faster than expected.


The lack of a significant market reaction may be because by the time the EU-wide CPI is released, we’ve already gotten the German, French Spanish and Italian CPIs. With these four, we can predict the EU-wide CPI with slightly over 99% accuracy. Thus it may not matter at all by the time the figure is released.

Next out is a more significant inflation figure – probably the most important figure of the week:  the US personal consumption expenditure (PCE) deflators. As the ECB’s table shows, this – not CPI – is what the Federal Reserve System (Fed) uses as an inflation target. The table says the Fed uses the “total PCE deflator,” but it’s widely assumed that they use the core measure. In any event, the headline figure is forecast to vault past the 2% target, while the core measure is expected to inch its way closer to it. Given that the Fed has more than achieved its employment target, it only has to hit its inflation target to declare “misssion accomplished.” That would pave the way for further rate hikes back to a theoretically neutral level and therefore could be positive for the dollar.


The US personal income and personal spending figures, which grab most of the headlines, aren’t as significant for the FX market as the PCE deflators, which come out at the same time. In any event, both incomes and spending are expected to be up a solid 0.4% mom, which should enable consumer activity to expand steadily this quarter.


The Bank of Canada’s quarterly business survey does have a number attached to it – the “business outlook indicator,” as well as a variety of other indices – but there are no forecasts available. This important survey is like a cross between the Fed’s Beige Book and Japan’s tankan.

The Fundamental Analysis is provided by Marshall Gittler who is an external service provider of Claws and Horns (Cyprus) Limited, an independent analytical company. Any views and opinions expressed are explicitly those of the writer. Any information contained in the article, is believed to be reliable, and has not been verified by STO and is not guaranteed to be accurate. References to specific products, are for illustrative purposes only and are not a form of solicitation, recommendation or investment advice. Past performance is not a guarantee of future performance.
 
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29 / 06 / 2018 | Market News

The 3 types of traders

Markets have changed radically in recent years with the introduction of new products and trading rules. Despite the market evolution, some basic principles have remained the same and can be easily identified in all aspects of financial activities. The market laws of supply and demand which shape prices are still there, affecting the way the market functions. 

However, the evolution of the markets has led to the creation of certain categories in which traders have split according to their needs, strategies and targets. This article aims at giving you a general description of each trader segment and may help you decide which would match your style and needs. 

Day Trader

According to economists, “day trading” is the kind of trading in which individuals are buying and selling financial instruments, such as stocks, currencies, options within the same trading day with the goal of profiting from small price fluctuations. Day trading involves significant risks which the potential trader should learn about and build a suitable strategy that will allow him to avoid the consequences. 

Day traders who would like to gain from their trading strategies should have a thorough knowledge of the market. Day trading is a speedy process and the amount of money being used for buying shares can be quite large. That’s why day traders should know which stocks to trade in, when to enter a trade and when to exit it. Another factor that plays an important role in day trading as well as in any type of trading is the knowledge of using online trading tools and choosing the right online trading platform which has all the necessary requirements. 

Day trading involves making profit by differentiating between bid prices and asking prices. People who indulge in day trading aim for a speedy turnover rate on one or multiple trades. This tactic allows them to gain more profit from small swings in asset values if the market moves in their favour. If the market conditions are against them, it is possible that they will record losses, taking a toll on their portfolio. 

Swing Trader

Swing trading is among the most popular forms of trading, used by traders who search for medium-term opportunities and are familiar with the various forms of technical analysis. Swing traders use technical analysis to look for stocks with short-term price momentum. The main difference of day trading with swing trading is that day trading positions last less than 24 hours while swing trading positions often last from two to seven days, and on some occasions, may last as long as 14 days. 

The swing traders’ objective is to identify a trend and attempt to gain with swing trading within that trend. For this reason, knowing how to use the technical analysis is imperative for swing traders since they have to study and analyse the fluctuations of an instrument’s price. Understanding the advantages of the data coming from the technical analysis, swing traders can execute the appropriate trading strategy. 

Although swing traders often go with the main trend of an instrument, some of them prefer to go against it and trade the counter trend instead. This trading strategy is called “fading”. Fading is a contrarian trading strategy used to trade against the prevailing trend. This strategy involves increased risk so inexperienced traders and those starting out should carefully consider the risks involved and investigate all other types of trading strategies before proceeding with fading. 

Position Trader

Position traders are the complete opposite of day traders. In contrary with day traders whose positions last for less than 24 hours, position traders hold positions with a long-term target. This time period could be weeks, months or even years. While day and swing traders aim to benefit from short fluctuations on the instruments’ prices, position traders give less attention to news updates that could affect prices short-term. 

Position traders often use a mix of technical and fundamental analysis to form their trading strategies and have the necessary time to perform thorough evaluations of the instruments and the assets they want to trade with. Position traders also tend to keep a much smaller number of trades in their portfolio when compared with day and swing traders. 

STO and traders

STO offers its clients 5 diverse account types to trade with. STO provides traders with educational material which will walk them through multiple solutions, depending on each trading strategy. STO is the trading name of AFX Markets Ltd, licensed and regulated by the FCA (Financial Conduct Authority), and AFX Capital Markets Ltd licensed and regulated by the CySEC (Cyprus Securities and Exchange Commission). 

Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
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Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64.62% of retail investor accounts lose money when trading CFDs with AFX Capital Markets Ltd. 62.75% of retail investor accounts lose money when trading CFDs with AFX Markets Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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