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Rolls-Royce share price: where next as JP Morgan gives grim outlook?

Rolls-Royce was the biggest loser on the FTSE 100on Tuesday, with the stock falling 12% amid a dismal outlook, with the company looking to raise £2 billion via disposals after recording a major half-year loss in August.

  • Rolls-Royce’s share price expected to fall by more than 50%, says JP Morgan
  • The engine maker’s free cash flow is under renewed pressure
  • Stronger pound weighs on Rolls-Royce and other UK exporters

Rolls-Royce was the biggest loser on the FTSE 100on Tuesday, with the stock falling 12% amid a dismal outlook, with the company looking to raise £2 billion via disposals after recording a major half-year loss in August.

Rolls-Royce reported a pre-tax loss of £5.3 billion in the six months to June 30, including £1.1 billion in write-offs and impairments, a £2.6 billion loss on foreign exchange hedging contracts, along with restructuring costs of £366 million.

‘The Covid-19 pandemic has significantly affected our 2020 performance, with an unprecedented impact on the civil aviation sector with flights grounded across the world,’ Rolls-Royce CEO Warren East said in a statement.

However, the stock rebounded 6% on Wednesday, only for it to see much of those gains lost as the session played out, with the engine maker trading at 210p per share at the time of publication.

JP Morgan offers distressing outlook for Rolls-Royce

To make matters worse, analysts at JP Morgan downgraded their price target for the stock from 90p to 80p per share, implying a potential downside of -62%.

The US-based investment bank blamed the price target cut on the engine maker’s cash flow coming under renewed pressure, with the company forced to downgrade its 2021 free cash flow guidance by €300 million to €1 billion.

Analysts at JP Morgan also expressed concerns about Rolls-Royce’s ability to continue operating due to the severely challenging market conditions and that sentiment seems to be shared by some of the company’s key shareholders, with activist investor ValueAct disposing of all its shares.

Stronger pound adds to Rolls-Royce woes

Sterling continues to push higher this week, with investors seemingly ignoring the fact that Brexit talks between London and Brussels are at a impasse and the prospect of a no-deal exit appears increasingly likely.

However, the stronger pound is less to do with the economic strength of the UK economy and more about the weakness of the US dollar, which suffered another blow after the US Federal Reserve’s Richard Clarida said that a cap on Treasury yields could materialise in the near future.

‘With the Fed laying out a new environment where even a sharp rise in inflation will not stifle their huge stimulus efforts, traders are clearly preparing for a drawn out period of easing as continued by the protracted dollar decline,’ Josh Mahony, senior market analyst at IG, said.

GBP/USD: technical analysis

Dollar strength continued to weigh here as well for GBP/USD, pushing the price back from its latest high, according to Chris Beauchamp, chief market analyst at IG.

‘While the price has dropped below the 50-hour simple moving average (SMA) of $1.3384, it has moved momentum indicators back towards oversold readings, providing the potential for a new higher low and an eventual push higher,’ he said.

‘Further declines bring $1.325 into view, particularly as no-deal Brexit headlines make a return.’

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Demo Trading

Don’t Have Money to Open a Reasonable Forex Live Account? Don’t Worry

Don’t Have Money to Open a Reasonable Forex Live Account? Don’t Worry

This is one of the questions I am usually asked. There are so many traders who have been learning and practising for several months or even years. Now, they are ready to open a live account and start trading with real money. But the problem is, they don’t have enough money to open a live account with a true ECN/STP broker.

As you know, 0.1 lot is the minimum lot size that true ECN/STP brokerssupport. The reason is that the true and real liquidity providers don’t support smaller lot sizes (micro lots), and, as true ECN/STP brokers are directly connected to liquidity providers, they transfer the orders directly to them, and if the orders lots sizes are lower than what liquidity providers support, they reject the orders.

Therefore, when you want to open a live account with a true ECN/STP broker, your account size has to be large enough to handle the minimum of 0.1 position. For example, if you open a $1000 account, and you locate a trade setup that needs a 100 pips stop loss, then the risk of taking this trade setup will be about $100 which is 10% of your account. Taking a 10% risk is too much, specially when you are a new live Forex trader. If you want to take a 3% risk with this trade setup, then your account balance has to be about $3,400 at least. But the problem is, some traders cannot afford to open a $3,400 account. I know some good and serious traders who have learned and practised enough and are now ready to start live trading, but cannot open even a $500 account.

Before talking about the real solution, I’d like to explain why you should not open a small live account with a true ECN/STP broker. Many of them allow you to open even a $500 account. But as 0.1 lot is the minimum lot size you can take, then you will have to take too much risk, and so, you can easily wipe out your account. Not only you will not be able to grow your small account, but you will easily lose that money. So, it is wasting of money to open a too small account that cannot handle the risk.

This is true that I always say you should start with an as small as possible live account, but I don’t mean a too small account that cannot handle the minimum risk you have to take. Your account has to be as small as possible, but it has to be big enough to handle the minimum possible risk.

The other thing is that, if you see a broker claims to be a true ECN/STP broker, but it offers micro-lots (0.01) too, it can have two meanings:

  1. It is not a true ECN/STP broker and it is market maker.
  2. It has ECN/STP and market maker system at the same time, and they put the small accounts in market maker system, and large accounts on ECN/STP, because it is usually the novice traders who open small accounts and most of them wipe out their accounts very easily. So, the broker wants to earn all the money that small account holders lose.

So, opening a too small account with a false ECN/STP broker, or a true ECN/STP that offers micro-lots is not the solution.

The last thing I’d like to tell you before talking about the real solution is that when you see you cannot open a live account with a reasonable account size with a true ECN/STP broker, you may decide to open a small account with a true ECN/STP, but instead of trading the long time frames that usually need wide stop loss orders, you decided to trade short time frames to have tighter stop losses to risk less. For example, while a 100 pips stop loss equals a 10% risk for a $1000 account, a trade setup with a 30 pips stop loss will have a 3% risk for such an account. And you can locate such trade setups on shorter time frames only. You can never take a position with a 30 pips stop loss on the daily or weekly chart.

Theoretically, trading the shorter time frames looks like a good solution. But it is terrible in reality. Trading the shorter time frames will be nothing but wasting of a lot of time and money. Before you come to this conclusion, you will waste and wipe out several accounts. You will stop trading short time frames after having a terrible back and neck pain (because you have to sit at the computer for several hours per day to trade the short time frames).

So, trading the short time frames is not a good solution. Forget about it: Forex Scalping Facts And Fictions

What if you borrow money from the others, trade with it, and pay it back when you made some profit? What if you ask the others like family members and friends to invest with you and allow you to manage their funds, so that you can open a big account with their money?

That is the most stupid thing a trader can do. Never even think about it. Even if someone, like your wife or parents offered you some money to help you open a big enough live account, you must refuse it immediately. The reason is that trading with the others’ funds creates some different kinds of emotions that prevent you from thinking and deciding properly. Therefore, you will make terrible mistakes and you will lose the money definitely. What will be left for you is the shame that will remain forever. You will feel guilty because of losing the others’ money. Never even think about it. It needs several years of successful and professional live trading to be able to manage the others funds and account. You will have a long way to reach that level. Even, 99.99% of the too professional and experienced traders don’t agree to trade with the others’ funds.

So, forget about this terrible solution too.

What Is the Real Solution?

There is a great and hassle free solution for this small problem. Yes, this is a very small problem from my point of view. It is not even a problem. It is an opportunity. Indeed, you are lucky if you don’t have enough money to open a reasonable live account with a true ECN/STP broker. It is a chance for you to keep on demo trading and mastering your trading system even more.

As long as you don’t have enough money to open a reasonable live account, you should keep on demo trading and practising your trading system, and saving money at the same time. No matter how long it takes. There is no rush. Keep on demo trading and saving money. When you have enough money, you can open a reasonable live account while you have already banked a lot of experience through demo trading. You are much luckier than the others, because you start live trading when you have already mastered your trading system perfectly, whereas many others who have enough money, start live trading when they are not ready for it. So they lose a lot and usually many of them give up on Forex trading.

As you see, sometimes having money is bad luck. Sometimes it is lucky to have no enough money.

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Demo Trading

Use Demo, Do NOT Over Abuse It

Use Demo, Do NOT Over Abuse It

All  psychologists say that every person needs to know itself and to know his or her own level of patience and anxiety levels, and that practice is a good way to do. But do not abuse it. I think it works in the same way with the Forex demo accounts. Too much demo really sucks and will never prepare you for the real trading. Trading demo too much time won’t make you a better trader but a better loser. Once you know how to use the tools on your trading platform and you have the basis of the trading, close the demo and get on real money. You don’t need six months for that. Think it in this way: if an average human life is 70 years, no one needs more than one single year to learn how to walk. Here are a few tips for you:

  • Even if you are on real money now, you can still use the demo to test a new strategy (strongly recommend to be your own strategy and not someone else’s) or you can use the demo to test how a new instrument acts. For example when Bitcoin was launched, the demo account was a better choice than the real money account, to see how BTCUSD is trading.
  • If you like the automatic trading, you can use the demo to test the EA you just bought or maybe build one yourself.
  • When you start to trade on demo, at least ask your broker to make the demo as big as your future real money account. Is really useful to trade 50000$ on demo while you will only deposit 1000$ when opening the real account.
  • Even if you trade on a demo account, – meaning simulated market conditions – I suggest making realistic assumptions. Use a margin of one up to five pips when you place your entry, stop losses or take profit orders as in the real market conditions quite often happens to see them executed at a different value than what your set ups – especially for entry orders.
  • The simulated trading environment does provide a trader with the opportunity to get used to the software he will be using or with his broker’s trading conditions. Use the demo account only for this purpose and do not try to build a reputation by linking the account on websites as www.myfxbook.com or www.fxstats.com because no one cares how good you are on demo.
  • Least but not the last, try to avoid the demo accounts with unlimited use. If you can’t stop to trade on demo your broker will, by denying you the access to the demo and inviting you to open the real money account.

the Demo accounts are there for you to get started and actually understand if the broker you have chosen is the right one for you. but it is also like when you play a game on your mobile and you play against someone who bought his levels , no matter how good you are his tools will kick your ass every time. forex works much in the same way . in the end you can simulate only so much before it becomes redundant.

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Demo Trading

The Importance of Demo Trading and Your Demo Account

The Importance of Demo Trading and Your Demo Account

I see that some traders believe that demo trading is not a good practice because you know that you are trading with the demo money, and so you don’t trade with discipline. They believe demo trading causes the novice traders not to learn to trade with discipline, and this will be ended to failure finally. When you know you are not trading with your real money, then you don’t care to lose, and so you can make all the possible mistakes, like taking positions with any trade setup (either weak or strong) you see, taking positions while there is no trade setup, over-trading and… . It will be a disaster if these bad actions become a habit in you.

This is true only when you are not a serious learner and you are practicing Forex just to see what it is. So you open a demo account and you take some positions to see how it works. You don’t care if you lose.

However, when you are serious to become a professional and full time-trader, and when you want to make a living through trading, then you should behave completely different.

Before you open a demo account and start demo trading, first you should learn everything you need to know. I have explained this in details here: Do You Think You Are on The Right Track to Become a Profitable Trader?

First complete your knowledge and then start demo trading. Spend enough time to follow the videos and articles I have listed in the above article. If you start demo trading while you are not ready yet, you will only make yourself confused, frustrated and disappointed. Forex makes money. Do not let your mistakes make you think that you can not make money through Forex.

Now let’s say you have learned everything you need to learn, and now you are ready to gain experience through demo-trading. This is a very important stage that if you don’t pass properly, you will not become successful with live trading.

Aren’t you here to make money through forex trading finally? If the answer is yes, then you should pass all the stages very carefully and patiently, otherwise you will not get any good result. I can not emphasize on this more. It is very important.

Make sure to read the below articles carefully:

  1. How To Become a Successful Forex Trader
  2. Are You Still Looking for the Forex Holy Grail?
  3. Do You Think You Are on The Right Track to Become a Profitable Trader?

There are a few things about demo-trading I have to emphasize on:

1. Take the demo trading as serious as possible. Forget that it is the demo money and nothing happens if you lose. You can blow up your live account as easy as you blow up a demo account. So, when you open a demo account, forget that it is a “demo” account. Treat it as a live account and your real money. Do you like to lose money with your live account so easily? If not, then do not lose with your demo account so easily too.

The discipline you need for Forex trading is something that you have to “build” in yourself. You have to “build” it on your own. And demo-trading is the foundation of your “Discipline Building”. If you trade carelessly with your demo account, you will do the same with your live account too. If you take positions with your demo account while there is no strong trade setup, you will do the same with your live account too. If you over-trade with your demo account, it becomes a habit, and you will do the same with your live account too. If you…

Conversely, if you forget that you are “demo” trading, and you take your demo account as serious as your live account and real money, and you wait for the strong setups only, and you do not over-trade and you don’t take too much risk, and you set the stop loss and target properly, and you care about the losses as you care about losing with your real money, then the discipline you need to have to make money through Forex trading, will be built and matured in you, and you will be successful with your live account definitely.

2. Make sure to keep on demo trading and not to open a live account, as long as you have not been able to repeat your success with your demo account.

Does it make sense to open a live account and trade with the real money while you have not become able to make money with the demo account yet? If it doesn’t make sense, why are you trading with a live account then? You think live trading is different? It is not. When you lose with the demo account, you lose with the live account too. If you are not knowledgeable, experienced and disciplined enough to make profit with the demo account, you will not make profit with the live account too.

You will always have time to open a live account and start live trading. Don’t do it when you are not ready yet.

3. Your demo account size has to be the same as your live account size. I mean if you are supposed to open a $1000 live account in future, then practice with a $1000 demo account too, and do not open a $100,000 demo account for example. This helps you behave with your demo account exactly as your live account. This helps you take your demo account serious.

Keep in your mind that your demo account has to be treated exactly as your live account. Although you open a demo account for free, but it is not “free” in reality. You are spending your time on it. You are building your experience and discipline with it. So not only it is not free, but it is too expensive and valuable. It is the “foundation” of your business.

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