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6 Tips to Improve Forex Trading

Like many other financial markets, the forex market has experienced a huge turmoil in recent months, following the Covid-19 global events. This situation brought a lot of interest to the market, with experienced traders trying to leverage their knowledge to take advantage of the situation and new traders looking to enter the market.

Like many other financial markets, the forex market has experienced a huge turmoil in recent months, following the Covid-19 global events. This situation brought a lot of interest to the market, with experienced traders trying to leverage their knowledge to take advantage of the situation and new traders looking to enter the market.

This article tries to offer both new and seasoned traders with some trading tips to improve their forex trading activity.

1. Work only with Regulated Brokers

Regulatory authorities ensure that brokers are fair, transparent, and protect the funds and privacy of their traders.

Some of the major regulators in the financial industry include CySEC in Cyprus, FCA in the UK and FSCA in South Africa. When a broker is regulated by one of these regulators, they ensure fair and ethical business behaviour.

2. Choose your Trading Option Wisely

To be involved in the forex market you can choose standard spot/cash transactions but you can also use other trading options that allow more flexibility. Choosing the right vehicle for forex trading can make a substantial difference in a trader’s performance, so choose wisely while considering your needs, trading goals and risk appetite. Here are some popular options:

ETFs – Exchange-traded funds (ETFs) are investment instruments consisting of a collection of securities. They allow diversification without the requirement of placing trades on individual currencies.

Futures – Currency futures are contracts between buyers and sellers to buy or sell a specific amount of currency at a specified price on a future date without owning the actual currency.

Options – Options are similar to futures as they allow traders to trade on the price of a currency without owning the actual asset. Options differ from futures by giving buyers the right or “option” to buy or sell the asset at a specific price on the date that the option contract expires.

CFDs – Contracts for difference (CFDs) are a popular form of derivative trading that is available over the counter. They allow trading on the rising or falling prices of currencies without owning the underlying assets.

3. Follow Economic/Political News

Since the value of a country’s currency is closely tied to the economic and political situation of that country, it is very important to follow financial, political and general events, news and central banks decisions related to the country and other related global economies.

4. Use Expert Analysis and Tools

The internet is a huge source of information and expert advice, and it’s always a good idea to look at what experts are saying and the way they analyze the situation before making any trading decisions.

Some online brokers feature on their website a special market analysis section that contains articles with market overview and outlook, economic events coverage and analysis, economic forecasts, trading strategies, and other topics, all of which can help an investor make more informed decisions.

Some brokers also offer a Trading Central section which offers analysis tools like trading indicators, preferred trading strategies, pivot price points, support and resistance levels and more.

5. Use a Demo Account

Many online brokers offer a demo account for new users that allows them to get used to trading before trading for real money. Besides being a great way to become familiar with all the features, using a demo account gives traders a feel for how their strategies will play out in a real trading environment.

Demo accounts also help experienced traders test their techniques in volatile and/or novel conditions. Since most demo accounts look exactly like live accounts, this makes them a useful tool for traders of all levels.

6. Use Margin Trading Wisely and Responsibly

Margin trading is the practice of obtaining credit from a broker in order to place larger trades. While this technique can magnify profits, it can also create massive losses.

With this dynamic in mind, it is typically advised to keep margin activity at a manageable level, while taking into account your risk appetite and your ability to withstand considerable losses.

Final Word

While the tips in this article will help traders upgrade their forex trading activity, they don’t guarantee profits. That’s why it is always important to trade with caution and only with money you are willing to risk.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the risk of losing your money.

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Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

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Daily Financial News

Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

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Financial News

Africa’s first Fairtrade certified gold co-operative offers hope to gold miners living in poverty

Syanyonja Artisan Miners’ Alliance (SAMA) has become the first artisanal small scale mining co-operative in Africa to become Fairtrade certified, bringing much needed hope to impoverished communities who risk their lives to mine the rich gold seam that runs around Lake Victoria.

SAMA is one of nine previously informal groups from Uganda, Kenya and Tanzania which has benefitted from a pilot project launched by Fairtrade in 2013. This innovative program aims to extend the benefits of Fairtrade gold to artisanal miners across East Africa.

In that short time, SAMA has undergone training in business and entrepreneurship, as well as safe use of mercury, internal control systems, labour rights and better working conditions, health and safety and more. Previously, daily contact with toxic chemicals used to process gold meant members risked disease, premature births and even death.  Fairtrade gold was first launched in 2011, and SAMA now joins Fairtrade certified gold mines MACDESA, AURELSA and SOTRAMI in Peru.

The co-operative produces just 5 kg gold per year, but nevertheless has the potential to significantly benefit many people in the local community through better conditions through certification. It is expected that Fairtrade and organizations like Cred Jewellery will support the miners, ensuring their gold can be refined and made available to jewellers in the UK and other markets.

Gonzaga Mungai, Gold Manager at Fairtrade Africa said: “This is a truly momentous and historical achievement and the realisation of a dream that is many years in the making. Gold production is an important source of income for people in rural economies. Congratulations to SAMA, it sets a precedent which shows that if groups like this can achieve certification, then it can work for others right across the African continent.”

The Fairtrade Gold Standard encourages better practice and changes to come in line with international regulation around the production and trade of so-called ‘conflict minerals’. Under the Standard, miners are required to:

  • Uphold a human rights policy preventing war crimes, bribery, money laundering and child labour
  • Clearly represent where the minerals were mined
  • Minimise the risks of conflict minerals through robust risk assessments and collaboration across supply chains
  • Report to buyers and trading partners regarding the risks of conflict minerals

Now in its second phase, the programme will focus on supporting other mining groups in the region to access affordable loans and explore a phased approach to accessing the Fairtrade market, allowing more mining co-operatives across Africa to participate in the programme.

Gonzaga added: “Sourcing African metals from smallscale miners in the Great Lakes Region is the responsible thing to do. For a long time companies have avoided buying gold from this region, with devastating consequences for impoverished communities who were already struggling. It has driven trade deeper underground, as unscrupulous buyers pay lower prices and launder illegal gold into legitimate supply chains. That’s why we have chosen to work with these groups to help them earn more from their gold within a robust compliance system that offers social, environmental, and economic protections.”

The Fairtrade gold programme offers a small but scalable solution to sustainable sourcing of gold from the region in line with Section 1502 of the Dodd-Frank Act in the US, OECD Due Diligence Guidance and recent EU Supply-Chain Due Diligence proposals which could come into effect in 2016. This means that up to 880,000 EU firms that use tin, tungsten, tantalum and gold in manufacturing consumer products could be obliged to provide information on steps they have taken to identify and address risks in their supply chains for so-called ‘conflict minerals’.

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