Which Trading Platform?

Where there is muck there’s brass and I guess that’s applicable to trading platforms too.

Looking beyond the bells and whistles of the most commonly deployed trading platforms used by traders in the market today and instead perusing over some of the recent reviews and it becomes fairly apparent that traders are overall disappointed with what is available. Admittedly bad news travels faster than good news, particularly in the globally interconnected world. Obviously, nobody is jumping with joy when they see money slip through their fingers, more so professional traders. But you would be side stepping the issue to assume that these reviews/complaints are just about traders who are sore losers, blaming the trading software for their losses. After all, when you get numerous traders complaining about the same problems with the same software trading platforms offered by their brokers, then we could assume that there might be something in it.

Let’s start with FXCM, which happens to be the world’s leading FOREX online trading and Contract for Difference (CFD) broker. Generally speaking the reviews for FXCM are sadly in the dumps. While many traders would agree that on the surface FXCM is excellent. The broker has friendly staff that are customer orientated. They tend to provide good quality educational resources and the paper trading demo platform is well designed, clearly laid out and excellent to use. Most traders have reported no real issues with funding their account, or moving funds out of their trading accounts. Moreover, there didn’t seem to be any problems with the trading platform, no unexplained slippage while buying and selling. However, the problem arises where it really matters, in the price dealings. There is a general consensus amongst traders that a movement against your position usually moves faster than price movements in your favor. 

FXCM get quotes from a number of banks, but some traders have complained that they are offered rates least favorable to them. Instead the broker takes the most favorable rate and the difference between the most and least favorable rate represent their profit, making it easy for FXCM to cream the profits from traders. Apparently only 23 percent of trades are profitable with FXCM. 

Other complaints from traders concerning FXCM platform is that executing orders tends to be frustrated during heavy volume trading hours, which often leaves traders unable to lock in their profits or cut their losses during a fast market. In some instances the software platform frustratingly froze when trying to execute orders. A number of traders have complained about seeing price gravitate towards their stop losses, then mysteriously spiking up. One trader complained that sometimes FXCM can actually hit his stop losses from as much as 20 price interest points (PIPS), which measures the amount of change in the exchange rate for a currency pair. Other complaints concerning the FXCM platform include, in some instances, inaccurate charts. The FX rates don’t always correspond to the true market exchanges rates, instead quotes using FXCM platform tend to favor the broker at the expense of the trader. Another complaint was the lengthy time it takes to open an account after funds have been sent. In one case a trader sent 25,000 USD into his trading account from a joint account, so the funds were not accepted, nor were they sent back to him after two weeks had elapsed. 

But by far the broker with the worse review was the Danish Bank, Saxo Bank. The help desk was rated rude, unhelpful and arrogant by most traders. Many traders reported strange things happening with their stop losses and margins. “What they do with stops, is they wait and see if the price bounces up, and then they trigger the stop,” claimed one trader. But while operating a “bucket shop,” doing pseudo-brokerage is illegal in many states in the US it is perfectly legal in the EU. An Information Technology professional, who specifically develops software systems for banks, decided to put the Saxo Bank software to the test. This insider made some interesting revelations. He argued that his motive for trading was purely to test the system, not to make a profit. However, whatever strategy he applied just didn’t work. He believed it had nothing to do with his trading strategy; instead it was the software that was programmed deliberately to work against him. He claimed that the software was engineered to “intelligently” wipe out balances from traders’ accounts, through either lost connections, screen jam, not enough margin, price moves against his position until the trader changes his bet or panics. Furthermore, he added that Saxo Bank has a different approache for different types of clients, which is determined when the applicant declares his profession and trading experience at the time when he opens the account with them. Indeed, there are a number of lawsuits against Saxo Bank and their license is now under threat.

CMC Capital markets was also heavily criticized for similar problems, frozen screens, running stops, wide margins and dealing prices not reflecting the real market. Furthermore, their next generation software has also been given the thumbs down. Referring to the next generation software platform, one trader said, “It allows them to tinker with the 'rules' more easily - they'll change spreads and margin requirements suddenly.”

They are also starting to charge "Price data feed" for shares on 01 Dec 2012. 

However, the trading platform with the best review was Finexo, which was set up in 2003 by veterans of the global financial industry and is one of world’s fastest growing online Forex brokers. Generally traders are happy with the platform fast executions and excellent customer service.

It is no surprise that Finexo is one of the fastest growing online brokers in the world. Indeed, what research is suggesting is that the market is crying out for decent software trading platforms. But just as choosing the right execution broker, which deploys a fair platform to execute trades online is important for traders so too is having at your disposal a comprehensive analysts and trading package. WinWay TradingExpert Pro, was developed by a successful trader, Darren Winters, for specifically traders in mind. The trading software package contains a complete array of analysis tools, thereby sharpening your trading decisions, making them timelier; more decisive, quicker and right on the money. Certainly, the WinWay Trading package software, combine with a fair play online execution broker, are critical partners to making your trades more profitable.

Forex Economic Calendar - Outlook for 26th - 30th May

Monday May 26 the week starts with UK Nationwide House Prices (year on year to May). Mortgage data is used to give a current level of prices. This is a useful gauge for traders to determine the costs of homes in the UK and the state of the housing market, which in turn can also give us a clue to some important macro economic factors, such as the rate of inflation and unemployment. There’s a positive correlation between the health of the housing market and employment. The rationale, being that higher prices, in keeping with the laws of supply and demand, acts as a signal to constructors to increase their activities. Bearing in mind that construction is labor intensive we can then deduce that a buoyant housing market could also have a positive impact on employment. Moreover, if construction is incentivized, through higher housing prices this could also increase the demand for building materials, bricks, cement, copper(electric wiring), steal, wood, ceramics, piping etc. 

However, because there is a time lag, between the demand for dwellings and the time it takes for constructors to build them, if supply doesn’t respond quickly enough to the buoyant demand for properties this could also exert pressure on housing prices. Indeed, there are some concerns from the Bank of England that the availability of relatively cheap

 credit and the Government’s help to buy scheme may be creating another housing bubble.

So if UK housing prices come in at above expectations, we may start seeing a new trend in UK interest rate rises, which could be implemented by the Bank of England with the intended goal of cooling the property market. The extent to which these potential rate rises could occur would most likely depend on the strength of the UK’s economic recovery in the coming months ahead.

 Assuming the figure comes in high and the Bank of England decides to raise interest rates, the impact on the FOREX market would be fairly predictable; hot money would flood into sterling, in search of higher rates of return. In short, this could lead to an appreciation in UK sterling, as traders sell other denominated currencies, such as Euros, dollars, yen and then buy sterling. Equally, foreign currencies that have been exchanged for sterling could also depreciate. However, the extent to which we see these movements in the FOREX market depends on whether the market has already anticipated higher than expected UK housing prices and the corresponding interest rate rise that could ensue. A sterling Vs dollar chart showing resistance and support levels could be useful in determining whether potential interest rate hikes have already been factored into sterling’s price.

Onto the euro land, Germany retail sales is out on Tuesday (month on month figure), May 27. This data measures the monthly changes of sales in the German retail sector. From the data we can determine the state of the German consumer. It’s also a good indicator to estimate changes in German GDP, bearing in mind that consumption makes up a large proportion of German growth. High retail sales may spur on consumption and economic growth.  Since Germany is the main player in the euro zone, German figures could have some impact on the market. The headline figure is expressed in percentage change in the value of sales. If the figure is positive it would be an indication that economy is ticking over nicely, which could result in a corresponding appreciation in the euro and an equal depreciation in other

currencies.  But it is worth noting that German retail sales decreased 0.7% m/m in March. This trend may continue bearing in mind that there are some pressures on real wages. 

Swiss Gross Domestic Product (GDP) measurement year on year figure is also out on Tuesday. GDP is the value of all final goods and services produced within the nation's borders. However, this figure is unlikely to be a big mover on the Forex market.

US Durable goods data will also be published on Tuesday, which is a relatively market sensitive data. Durable goods are those expected to last for more than three years for example, cars, televisions, white goods and they usually require large investments or financing. An increase in durable goods data is interpreted as an increase in optimism in the economy. A positive durable goods data from the US could provide tail winds for the dollar. 

On Wednesday May 28 German Unemployment figures and euro zone confidence data will be released.  The euro zone confidence data is an overall gauge of sentiment toward the economy in the Euro-zone. The index is a composite of most of the sector specific surveys done by the European Commission. A high or rising level of Economic Confidence indicates healthy levels of purchasing, business spending, and investment.  An upbeat economic outlook indicates a strengthening of the economy and with that the Euro.    

On Thursday May 29, traders will be eagerly waiting for the second estimate, based on more complete data, for the first quarter  US GDP figures . GDP from across the pond have a high impact on the financial markets. Positive GDP figures could propel the dollar against a basket of other foreign currencies. Uk consumer confidence index will also be released on Thursday.

Finally, the week closes, Friday May 30 with US Michigan Confidence for May. This relates to US consumer confidence regarding personal finances, business conditions and purchasing power based on hundreds of telephone surveys conducted by the University of Michigan.

There could also be unforeseen future events that may influence the forex market in any given week, natural disasters, geo-political events, terrorist attacks etc. These black swan events are virtually impossible to predict. The aim for the trader is to engineer a maximum tolerance to risk in his trades, to use a combination of tools to assess whether the market sensitive event has already been factored into the currency. Moreover, to use his training/experience and tools to determine buy and sell signals. For those top at this game the rewards are huge.

Darren Winters

Currency Markets for week beginning 19 May 2014

To kick off the week let's take a look at the Euro dollar and Sterling dollar currency pairings, and take a view on where they may be going. Let's start with the Euro - EUR/USD.

The weekly chart below shows a clear uptrend dating back to around August 2013. For a currency that was deemed to be in crisis 18 months ago, the Euro is holding up better than expected over the longer timeframe.

EUR/USD Weekly chart

If we drop to a daily chart the picture is more range bound, we've been going sideways since March. There was a sharp dip on May 8 when Mario Draghi, the president of the European Central Bank, suggested that monetary policy might be loosened to stop prices falling, and also to combat low inflation. The euro has continued to fall since then - an overall 200 points from 1.39 to 1.37. The general consensus seems to be that the currency is a little too strong at the moment, which weakens exports and has inflation way below the level Mr. Draghi would like it to be at 0.7%. The target figure is just below 2%.

EUR/USD Daily Chart

There is a rough support level at around 1.3670, (see the continuous blue line above), which was tested last Thursday, but only temporarily breached before bouncing back. That breach on May 15 was down to lower than anticipated Eurozone economic data. The region grew 0.2% as opposed to the expected 0.4%. This gives even more credence to the possibility of the ECB acting in June to adjust monetary policy, which could see a further fall. From an intraday trading perspective the 4 hour and 1 hour charts are also range bound, but the 15 minute chart is showing some momentum.

What's on the economic calendar for the Euro this week?

Tomorrow (Tuesday 20th) we'll get data for the producer price index early in the day. The industrial sales index figures come out two hours later, at 9am.

Then on Wednesday current account data for transactions in and out of the Eurozone is released at 8am. A high positive figure should be a bullish signal, though this is not flagged as a high impact event.

On Thursday we'll see a Business climate report at 7.45am, showing the current state of French business conditions. At 8.30am the German Purchasing Managers Index report comes out, followed at 9am by the same PMI data for the Eurozone as a whole.

On Friday you'll see some GDP and business climate data from Germany, with Retail Sales, wage inflation and trade balance data from Italy. And also remember that the elections for the European parliament are happening this week.

None of the economic indicators above are seen as big ticket events, but nonetheless, it's worth keeping an eye out to see what impact they have. The outlook for the Euro going into June though looks decidedly bearish, especially if Mr. Draghi acts on the hints he's so far given us.

Moving on to Sterling now - GBP/USD

The weekly chart shows a strong uptrend for Cable, perhaps that should be no surprise as the UK is touted as the fastest growing economy in Europe this year. Yes, it dropped a bit last week, but is showing signs of a revival today.

GBP/USD weekly chart

 

If you're a purely technical trader this is an uptrend to die for on the weekly timeframe. And it's quite well reflected at the daily level, below. There's a support level around 1.6750, which has been tested and bounced off.

GBP/USD daily chart

 

If you drop down to the lower timeframes it's been a bit range bound, but with a slight spike up early this afternoon. But there's quite a lot coming up for Sterling on the economic calendar this week, and they're events that could trigger some significant movement.

Tomorrow sees the Consumer Price Index being released at 9.30am. This is basically an indicator of inflation and purchasing trends, and could have a market impact. At the same time we'll see Producer Price Index and Retail Price Index reports.

On Wednesday it hots up even more, with the official Bank of England decision on what will happen to interest rates being released. I would expect rates to remain unchanged, but if that's not the case watch out!

Then on Thursday at 9.30am we have GDP data coming out, another potential high impact event. Although the UK is experiencing recovery, and employment figures are looking better, productivity hasn't been rising at a proportionate rate. So this could be significant data.

It's a quiet day for Sterling on Friday. Again, we have the European elections this week, and if UKIP does well the markets will no doubt react, which way of course is another question. But right now the outlook for sterling looks bullish.  

The longer term outlook suggests that if support holds at around 1.6660 (next level of support below the one I've drawn above), that Sterling will continue to be bullish. With economic growth forecast at around 3.8% this year and continuing into 2015, the rising momentum could take us to around 1.73, though some opinion sees the market as overbought, which tempers this estimate.

Darren Winters 19/05/14

Choosing a Market to Trade

Trading the markets is, potentially, a great way to grow your capital, as long as you learn how to invest properly and have a good system to manage your risk whilst maximising your profits.  An individual setting out to do so needs to :-

1.    Know the market that they wish to trade.

2.    Understand how to determine the opportunities available through technical analysis.

3.    Have the funds with which to do so and know that this could be lost without any danger to their current or future lifestyle

4.    Know how to control risk.

5.    Have a plan.

Considering these five points will help to determine the market to trade so let us take each one in turn.

If the individual has been a successful investor in a particular market then, on the face of it, they are in a strong position to be able to trade it.  However if their investing was long term, as measured in years, they will need to have a different approach when trading as the information needed and the psyche involved are quite different.  It may be better to choose a market that they are not familiar with as they are less likely to be influenced by long term thinking getting in the way. If they choose to go with the market they understand then ready access to information about the market will be essential as will be the time to read and analyse it.  If the market chosen is equities then company announcements and economic statistics relating to the wider economy as well as the specific company must be readily accessed. Shorter term traders will need the information to be in a timely fashion because markets react very quickly to anything that influences the perception of value.

Choosing a market that they are not familiar with, however, then requires a good knowledge of technical analysis.  True technical analysts can trade any market that they have the data of price and volume for. It is also entirely possible to trade markets without a deep understanding of technical analysis. Indeed too much knowledge by way of indicators that seek to further analyse the raw data can get in the way and make a simple decision very complicated, confused and wrong. By with the right training technical analysis can be a very powerful way to trade.

Some markets are more volatile than others but all represent a high level of risk so that the market chosen may be determined by the level of risk and funds available to the potential trader.  Commodities and Foreign exchange markets tend to be very volatile and may represent the higher risk markets.  Sometimes the trader will need high minimum stakes which makes it impossible to manage risk efficiently without having large initial levels of funds.

Managing risk is absolutely essential for anyone to be a successful trader.  This involves two elements in the managing of the trader’s funds.  First of all they must limit the amount that they risk on any one trade so that they cannot be wiped out by one rogue trade.  Trading involves many lost trades and, usually, fewer winning trades for most traders.  So the approach is to ensure that the expected gain exceeds the potential loss on each trade by a significant margin. Losses should be limited by the use of a stop loss on every trade.  The margin or deposit required will be based on the risk that the trade represents and the amount that is to be traded per unit.  All of these are considerations in choosing the market to trade as they may be beyond the sensible use of the funds available. They do, however, allow the trader to ‘fall asleep’.

So what markets are available to be traded? The equity market in the UK and overseas, foreign exchange, commodities are all available and are widely used. 

In the equity market there is a choice of individual companies and indices.  It is possible to gain exposure to specialist areas with the use of ETFs (exchange traded funds) which can offer exposure to global areas such as Asia, Emerging Markets, Europe, America and others. 

ETFs can also be used to gain exposure to commodities such as particular metals eg nickel or copper or the precious metals of gold and silver.  Exposure to soft commodities such as wheat, coffee and soya etc. can also be gained in this way.  Commodities whether they be soft or hard are the subject of many influences that are often hard to predict and can be very volatile as a result.

The foreign exchange market is the largest market in the world with some $4trillion dollars traded every day.  It is the market that is most closely associated with the pure form of technical analysis because of the large amount traded each day.  Even so, as the trade is in currency pairs it is the major currencies that best fit as smaller currencies are less widely traded and be more likely to be ‘surprisingly’ volatile.  Individuals that are new to trading will often pick this market as it usually offers opportunities every day and the choice from a list of major currencies is considerably smaller than the choice within the equity market.  The spreads (difference between the buying and selling price) are generally smaller than they are in other markets and prices are volatile enough to be able to make a profit (or loss) each day in each currency pair.

Ukraine’s impact on the stock market

The people of Ukraine have been going through a torrid time recently, with the escalating crisis continuing, but now the global world could be hit also with global markets being plunged into turmoil because of the crisis. There has been a spike in oil and natural gas prices that could reach into consumers’ wallet, just when the European economy was starting to pick up.

Despite these worrying revelations, and the fear that conflict could ensue in the East, analysts believe that there is little risk of global financial contagion or of major blow back to Western economies.

“If this turns into an outright war, it will be a different story,” said Holger Schmieding, the chief economist at the private bank Berenberg in London. He also went on to state: “More likely it will remain a Cold War-style standoff, and if that’s the case the economic damage for the West and the global economy will be limited.”

All this reassurance is not enough for some though, with many investors still feeling unsettled. This is on top of having been already shaken up about emerging-market economies. The main impact was obviously on Russian and Ukrainian markets, with the Moscow Micex index dropping 10.8 percent. The Ruble fell to a record low against the dollar, and there was concerns spreading to currencies in localised countries such as Poland, Turkey, and Hungary.

The concerning figures prompted the Russian central bank to announce a “temporary” 1.5 percentage point rise in its benchmark interest rate target, up to 7 percent. The central bank released a statement in conjunction with the change: “The decision is aimed at preventing the risks for inflation and financial stability arising from the recent increase in financial market volatility.”

Developed markets have also shown worrying signs since the outbreak of tensions also, with companies in exposure to Ukraine and Russia taking the hardest hit. The Euro Stoxx 50 index of European blue chips closed down 3 percent, and the Dow Jones industrial average lost 153.68 points, the equivalent to 0.9 percent. The NASDAQ composite index dropped 30.82 points, or 0.7 percent, to 4,277.30. These figures certainly prove that as long as tensions are still bubbling in the East, then companies in connection with that region are likely to suffer.

Investors have since moved into traditionally safer assets like US bonds and the Japanese currency. Elsewhere, European banking shares were altered by the situation, led by a 9.6 percent decline in Raiffeisen Bank International. This is huge in the world of banking as the Austrian lender is one of the Western leaders most exposed to Ukraine. Generally though, the fallout to the banking sector will be limited somewhat, due to the financial crisis in 2009, where many Western banks pulled back from Ukraine and Russian lenders.