Expert Opinion

Existing Home Sales: Another Lackluster Release?

2010-03-18T19:45:00.000Z

By David Goodboy

The Event:

At 10:00 AM EST on Tuesday, March 23rd, the National Association of Realtors (NAR) releases its monthly existing home sales figure.

Description:

Existing Home Sales is the number of existing residential buildings sold during the previous month. It does not include new construction. The figure is annualized which means the number is the monthly figure times 12. The currency theory behind this figure being important is that existing home sales trigger additional spending by the consumer for a host of products and services surrounding the home purchase. This spending increases economic activity which in turn spurs the economy lifting the domestic currency.

Trader Take:

After a several day move higher on Euro strength, the EUR/USD pair has slipped back downward. Close to looking like a continuation of the down trend the USD is gaining power. If the pair drops below the critical 1.3500 range, the downtrend will be back in full effect. This release is forecast to be 5.01m which is down 0.04 from the last existing home sales figure. I believe this estimate will be inline with the actual figure thus any reaction should be muted. This market is defined by the potential interest rate increase in the U.S. presently. Any other data will play second fiddle until a potential surprise increase prior to the April 28th FOMC meeting.

David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.

HOW TO TRADE: THE TIGHT ROPE OF MANAGING EXPOSURE

2010-03-18T19:31:00.000Z

by Richard Olsen, Founder at Oanda and Olsen Associates.

The biggest danger for any trader is excessive exposure. An unexpected price spike can then trigger a margin call that wipes out all the profits generated over months of hard effort. This is the most frequent reason why traders lose money. How can we prevent this from happening? What do we have to know?
Diversification
As there is no such thing as perfect foresight and an unexpected price spike can occur at any time, a trader should always diversify his risk and trade not just one, but two or three ideas at the same time. It is through diversification that he can improve his risk profile – when one trading idea is in the profit, the other runs a loss and vice versa. Overall his performance is smoother and more importantly, this approach reduces the pressure to perform. The trader is then more relaxed and less emotional in managing the exposure of his trades.
How to realize profits?
Whatever the underlying trading ideas are, the method for converting an idea into a realized profit is always quite similar. First, the trader should define a budget in terms of assets that he intends to commit to the trading idea. It is best to divide the budget into targeted position size and additional capacity that he intends to use in case that the market turns against him. I advise that the targeted position size should be only one third of the overall budget of the trading idea – a large two thirds are additional capacity that is kept in reserve. When he opens his position based on his trading idea, he should split the initial trade into three tranches, because there is no way to know the optimal timing for an opening a trade, so it is better to diversify this risk into three opening trades.
How to manage a trade?
In the blog on why butterflies cause cascading margin calls I explained that a trader needs to be on the continuous lookout for unforeseen events that can trigger a cascade of margin calls. When this happens, any trade can turn into a losing position, where the entry price is so far from the current price level that the profit target is out of reach.
Improving price average to turn losing position into a profit
A losing position can be turned into a winning trade by turning the negative development into a positive and take advantage of the new price level to add to the existing position thus improving the price average of the whole position. In doing so, the trader shortens the distance between price average and current price thus increasing the likelihood of a price bounce that is sufficiently large to turn his position into a profit.
Why are price rebounds bound to occur?
In liquid financial markets up to 98% of all the trading is based on speculative positions and the hedging of those positions. These positions being speculative are temporary and any opening trade will need to be closed. When the closing trade happens, this has the effect of inducing a price reversal. Due to the duality of the opening and closing trade the price movements are never fully one sided. At some stage, sooner or later, positions will be closed and then the price rebounds occur.
A trader can use these reversals to turn a losing trade into a winning position. The method of increasing the position size to turn a losing trade into a winning position has, however, big drawbacks, which the trader has to be fully aware off.
Smoke and mirrors
Human beings do not find it easy to correctly identify price extremes. They typically interpret relatively small price moves as extremes, where in actual effect the moves are only moderately larger than average. This deficiency is even more pronounced when a trader faces mounting losses. When under pressure, the trader’s internal clock ticks faster and he poles the market price at a higher frequency. Time will seem to flow more slowly, minutes will feel like hours and days like weeks. Under these circumstances, the trader’s natural instinct is to time his trades in terms of his internal clock, but this is wrong. Unaware he will focus on smaller-scale price movements that are out of step with his overall trading strategy. He will decide to increase his bet too early. There might be a bounce back, but this will not be enough for him to exit his position with a profit. If the price resumes its slide, the trader will accumulate losses even faster than before because of the larger position.
A trader needs to take into account that his sense of timing is skewed when under pressure: he needs to lean back and slow his natural instinct and wait for a price overshoot that is in sync with his regular trading frequency. Patience is of essence.
Reducing position size
If a trader has increased his position size to improve the average price of his position, he has to reduce the size of his position at the next opportunity, when the price rebounds. This is important because he has to free up margin capital, so that he can increase his position, when the price falls back again. By carefully managing the position size during the ups and downs in the price, he earns incremental profit that turns a losing position into a winning trade.
Trader deep freeze
The biggest danger for a trader is the so-called ‘deep freeze’ mode: a trader, who is close to a margin call, freezes up and does not have the mental energy to take decisions and blindly hopes for a price rebound. He can be lucky once, twice or three times, but not on an ongoing basis. Similar to a mouse that is hunted by a cat and cannot move for fright, the same happens to the trader. It is important to preempt this situation. The trader has to set himself a stop loss, where he will get out of his position, whatever may happen. Ideally, the stop loss is never triggered and he is able to maneuver out of any unrealized loss by increasing and decreasing his position size in response to the local highs and lows of the market. In case he fails, he has to have a stop loss strategy in place that limits his overall risk. It is all too easy to close one’s eyes and hope for the best.

Playing with Currency Options

2010-03-08T15:28:00.000Z

By Ryan O'Keefe

Historically I’ve focused on trading the spot currency market, but I’ve begun playing around with options on currency exchange trade funds. The ETFs I’m practicing with are offered by Rydex Investments under the brand CurrencyShares. These ETFs hold the underlying spot currency, and derive their value from the spot price. For example, today the CurrencyShares Euro ETF (FXE) closed at $136 per share, while the spot price closed around $1.3618 on my daily candle. Notice the decimal shift to derive the share price. I thought I’d walk through an example trade for today’s post.

As usual, my trade plan begins with a support or resistance trading opportunity. In this example I’m using the CurrencyShares Canadian Dollar ETF (FXC) shown in the chart above. You can click the chart for a larger image. The ETF holds a spot position in the named currency, therefore you can translate spot strategies to an exchange based strategy through these ETFs. You could also use support and resistance on the FXC chart alone, but I like to correlate the ETFs to the spot market. Since FXC holds a trust of Canadian dollars, a trader who is bullish USD/CAD would take a bearish bias against FXC because they are betting against the Canadian dollar. Using the charts, a trader might decide USD/CAD is trading within support. If they decide to commit themselves to a bullish USD position, the trade could be expressed by going long USD/CAD, short FXC, or executing an option strategy on FXC. Let’s look at the pros and cons of each trade strategy.

Going Long USD/CAD

If the trader buys USD/CAD they are committed to the market until either they take profit, or they are stopped out. In this example, the appropriate stop loss is below $1.02. If the trader bought USD/CAD right now, a stop loss of at least 100 pips would be appropriate. Assuming they trade one $10,000 mini lot, the total risk would equal $100 using 100:1 leverage. Additionally, the stop loss would offer no protection from volatility. If the USD/CAD moves lower before it moves higher the trader may be stopped out on what ultimately was the correct position. If the trader is stopped out, and enters the trade again the risk has been doubled.

Shorting FXC

Alternatively the trader could short FXC, however it may be tough to find shares to borrow in order to short. The trader would ideally place a stop loss above supply which exposes the same volatility risk as the spot trade suffers from.

Buying a Put Option

When you buy a put option, you are betting the value of the underlying issue will decline. The strike price declared in the option is effectively the price at which you will be able to short when you exercise the option. The trader will pay a premium when the option is written (opened) which effectively is their maximum loss on the position. For example, I can purchase an FXC put option with a strike price of $96 for a premium of $95.00. This premium is equivalent to a 95 pip stop loss in the spot market on one mini contract, but represents the maximum loss the option will suffer. Even if the market moves 100 points against me, my option is still valid until expiration unlike a stop loss. Ideally, the price of FXC will fall giving my option greater value than a break even price of $95.05 when I exercise it. The best part is this option will expire on April 10th giving the market 39 days to work itself out before the option must be exercised. Unlike a stop loss, the risk is paid up front and you have 39 days to make a profit regardless of what price does between now and then.

There are other advantages to the option we can discuss in a future post. I’ll keep you updated on this example trade as we get closer to expiration.

Best of luck,

Ryan

FXDD Malta receives approval to start EU operations

2010-02-16T14:09:00.001Z

By The Malta Independent

FXDD Malta, a provider of online Forex trading, has announced it has been granted licensing by the Malta Financial Services Authority to operate a Category 3 Investment Services company.
FXDD Malta will provide Forex dealing services to retail and institutional clients.
“FXDD Malta will be at the forefront of the retail Forex industry,” said Lubomir Kaneti, a director of FXDD Malta.

The Rise of Retail Foreign Exchange

2010-02-16T13:41:00.001Z

By Betsy Waters

Investing in the foreign exchange (FX) used to be the exclusive preserve of an elite group of hedge funds, investment banks and multinational corporations. These institutions guarded their turf fiercely and no wonder. Between 1990 and 2006, FX investments returned 9% a year, more than either bonds or equities over the same period.

But for individual investors, the FX market has been effectively off-limits: minimum trades were as much as $1 million, and there were a myriad of complex legal documents to review and sign, as well as extensive credit checks that were required before a bank would consider trading with you.

Over the past ten years or so this has all changed. Thanks to the advent and growth of the Internet, online trading systems – which give ordinary investors direct access to the currency markets - it is now possible for the retail investment community to easily and quickly trade on the international FX markets from any internet capable PC.

And investors don't have to have large sums of capital to get involved. It is possible to set up an account and start trading with an initial investment of as little as $5000.

Crucially, individuals can also now obtain all the data they need to trade FX at negligible cost and are able to trade at the same speed as banks and hedge funds using this platform. They are able to get streaming real-time executable prices and access to up-to-the-minute research to help ensure they have sufficient information they need to make an educated and sound investment decision.

But the question does arise; why should investors look to FX as an asset class, and how can currency add value to an investment portfolio?

One of the most important reasons to consider investing in FX is that it has a track record of generating positive returns on a consistent basis. Research conducted by Deutsche Bank shows that FX Investments returned 11 per cent a year on an annualized basis between 1980 and 2006 with 21 positive returns and five negative return years.

In addition, unlike individual bonds and shares, FX returns are not directly correlated to the world's equity markets and fixed income markets. As most investors know stocks or stock indices, even when varied by country or industry, tend to move in synch. This may become increasingly important in the months and years to come if, as some people believe, the world economy slows and the value of traditional assets such as shares and property falls. Of course, FX is not the only asset class to offer this benefit: commodities and private equity funds also offer the same "diversification" benefits, but FX is probably the least well known of the three.

It also has an unusual dynamic not shared by other asset classes, namely that a significant proportion of its trades are executed to hedge risks and not to generate profits. These two characteristics create regular trading opportunities for investors who have the technology to keep in touch with market-changing events and react to them.

In terms of trading strategies in the currency markets the three most widely known are the carry trade, valuation trade and momentum trade.

Of the three, the carry trade is the most widely known. A carry trade is where an investor borrows low-yielding currencies and buys high-yielding ones. This approach has seen considerable publicity in recent months, with the low interest rate environment in Japan seeing investors borrow Japanese yen and buy higher yielding currencies such as the New Zealand or Australian dollar. While the Japanese housewife is seen as the main instigator of this phenomenon, its practice is considerable wider, and reflects the growth of online/retail FX as an investment opportunity.

While less well known, the momentum and valuation trades are no less important. Currencies appear to trend over time, which suggests to momentum traders that using past prices may be useful when investing in currencies. This is largely due to the existence of irrational traders (such as institutions that are trading FX in order to hedge their positions not to generate an investment profit). Other factors are the possibility that prices provide information about non-fundamental currency determinants or that prices may adjust slowly to new information.

For valuation trades, in the long-run, currencies tend to move back to their fair value based on Purchasing Power Parity (PPP). However, in the short to medium term, currencies can deviate from their PPP values due to trade, information and other costs. This allows traders to potentially profit from currencies as they revert back to their fair values over the long run.

From an asset allocation perspective, investors know that deciding what proportion of risk should be allocated to a given asset class is not a precise science. However, as a generalization, it appears that while adding FX to a portfolio of bonds and equities can increase the average annual returns, the biggest benefit appears to be in reducing volatility of returns and periods of draw downs.

But it is important for investors to remember that in the asset allocation process, returns are not the only criteria; correlation between asset classes is also an important consideration. On that front, recent research has shown that since 1980, equities and bonds have had a 26% correlation in monthly returns. In contrast to this, the correlations of any of the individual FX strategies or the combined one to bonds and equities range from -25% to +7%. In all cases, they are smaller than those between equities and bonds.

This demonstrates that FX has a tendency to be negatively correlated with bonds and marginally positively correlated to equities and can be legitimately considered an important asset allocation tool for investors. It also has the added advantage of direct access to a liquid trading market 24 hours of every business day.

Betsy Waters is Global Director of dbFX, Deutsche Bank's state of the art online retail trading platform. Betsy oversees sales and trading for dbFX’s retail client base. Prior to joining Deutsche Bank, Ms. Waters worked at Goldman Sachs and Citibank covering Foreign Exchange sales to banks and international corporations. She has over 20 years' experience in sales and trading for FX markets.

Euro Zone – Greecing the Skids?

2010-02-11T13:35:00.000Z

by Jerry Furst

Ripple Effects of Confidence and Lack There Of

Trichet and the ECB are scrambling to help contain the Greece crisis inside the Euro Zone. The alternative is that the IMF might get involved - putting the Euro at a confidence deficit that might ripple across both sides of Europe and the Atlantic - and the Pacific as well…

Paper Money in Question?

Marc Faber - The other Dr Doom – is reported to have said on Bloomberg’s Asia Confidential “when Greece is bailed out it will be another indication that paper money” will come more in question. Faber went on to say that the severe drop in the Euro in the past weeks may be overdone and thinks a rebound is possible. He also postulated that if Greece is forced out or leaves the Euro it could make the remaining Euro countries stronger…. Who knows….?

Premier Czech Retail Broker, Patria Direct, Launches Patria Forex with FXCM

2010-02-10T19:22:00.001Z

London and Prague, 9 February 2010—FXCM Holdings LLC, a leader in the retail forex business, today announces that Patria Direct, a leading retail securities dealer headquartered in the Czech Republic, will provide forex and CFD trading through a platform built, customised, and serviced by FXCM’s in-house developers. The collaboration combines FXCM’s established technology with Patria’s expertise in capital markets and professional, customer-focused service.
Patria Direct required a solid platform with fast execution, and chose FXCM’s No Dealing Desk technology to provide clients the opportunity to trade forex with transparent pricing, fair execution and tight bid/ask spreads. Patria aims to become the leading forex and CFD provider in the Czech and Slovak Republics.
Using FXCM’s award winning platform (named Best Retail FX Platform by FX Week’s 2009 e-FX Awards), clients of Patria Forex will have access to a wide range of forex pairs, including USD/CZK and EUR/CZK, as well as popular CFDs on equity indices and commodities.
Individuals interested in learning more about Patria Forex are welcome to visit www.patria-forex.cz, and to contact the Patria Forex team at info@patria-forex.cz, or at +420 221 424 221.
The launch of Patria Forex is a perfect fit with Patria’s aim to increase its product range, and with FXCM’s focus on expanding its geographic presence. FXCM expects to have branches or white label partners in most major European markets by the middle of 2010.
Patria Direct is fully licensed by the Czech National Bank for trading domestic and international securities. As a result of this cooperation, Czech and Slovak forex traders can trade with the same FXCM technology they may have used before, but with a local market leader under local regulation.
“Patria Forex is an excellent means of broadening our offerings, particularly to active traders,” said Oldřich Pavlovský, Managing Director of Patria Direct. “Cooperation with FXCM ensures top quality trading conditions for our clients, so overall it is a superb match with both our firm-wide standards and long-term strategy.”
“Patria’s selection is further evidence of the growing appeal of FXCM’s business model and technology,” said Drew Niv, CEO of FXCM. “We are very pleased to be cooperating with such a well-regarded institution.”

What Forex Traders Should Know About Overnight Index Swaps

2010-02-10T13:57:00.000Z

By S. Wade Hansen

Why Should You Care About The OIS?

Overnight Index Swaps (OIS) are not exactly a topic that comes up a lot in dinner-party conversation. In fact, it is probably not a term that comes up in a lot of conversations about the financial markets.

However, it is an important concept to understand because the OIS plays a vital roll in a market indicator that many economists and analysts watch every day to determine the health of the credit markets — the LIBOR OIS spread.

Overnight Index Swaps

Overnight Index Swaps are instruments that allow financial institutions to swap the interest rates they are paying without having to refinance or change the terms of the loans they have taken from other financial institutions. Typically, when two financial institutions create an overnight index swap, one of the institutions is swapping an overnight interest rate and the other institution is swapping a fixed short term interest rate. This may sound a bit strange, but here is how it works.

Imagine Institution #1 has a $10 million loan that it is paying interest on, and the interest is calculated based on the overnight rate. Institution #2, on the other hand, has a $10 million loan that it is paying interest on, but the interest on this loan is based on a fixed, short term rate of 2 percent. As it turns out, institution #1 would much rather be paying a fixed interest rate on its loan, and institution #2 would much rather be paying a variable interest rate — based on the overnight rate on its loan — but neither institution wants to go out and get a new loan and they can't renegotiate the terms of their current loans. In this case, these two institutions could create an overnight index swap with each other.

To set up the swap, both institutions would agree to continue servicing their loans, but at the end of a specified time period — one month, three months and so on — whoever ends up paying less interest will make up the difference to the other institution. For example, if institution #1 ends up paying an average interest rate of 1.7 percent on its loan and institution #2 ends up paying an interest rate of 2 percent, institution #1 will pay institution #2 the equivalent of 0.3 percent (2.0 - 1.7 = 0.3) because, according to their agreement, they swapped interest rates. Of course, if institution #1 ends up paying an average interest rate of 2.2 percent on its loan and institution #2 ends up paying an interest rate of 2 percent, institution #2 will pay institution #1 the equivalent of 0.2 percent (2.2 - 2.0 = 0.2) because, according to their agreement, they swapped interest rates.

Overnight Index Swap Rates

The overnight index swap market is quite large, and the movements in this market can provide a lot of information for economists and analysts who are trying to understand what is happening in the global financial markets. One of the key pieces of information analysts watch is the interest rate the institutions that have loans with variable interest rates are paying.

The question is, how do you determine what rate to use when each institution is paying a slightly different rate based on what time of day they have to determine their payment. You see, the overnight rate in constantly changing, and you will pay a different interest rate at 6:00 a.m. than you will pay at 11:00 a.m. To resolve this issue, an overnight index swap rate is calculated each day. This rate is based on the average interest rate institutions with loans based on the overnight rate have paid for that day.

What Does the Overnight Index Swap Rate Tell Us?

By itself, the overnight index swap rate doesn't tell us much — other than what the overnight rate is. However, when you combine the overnight index swap rate with another indicator, like LIBOR, and create a spread like the LIBOR OIS spread, you can get a glimpse into the health of the global credit markets.

S. Wade Hansen is a founder of LearningMarkets.com and PFXGlobal.com. He is also the co-author ofProfiting With Forex, a popular currency investing book. His commentary is featured on financial sites across the web.

CFTC rules could be blow to retail currency traders

2010-02-09T19:15:00.000Z

By Vivianne Rodrigues and Fred Katayama

NEW YORK, Feb 09 (Reuters) - Rules proposed by the regulator of U.S. futures markets to fight fraud in foreign currency trades are too restrictive for retail trading firms and could dramatically cut into the growing business, dealers said.

The Commodity Futures Trading Commission was given clearer authority last month, in farm legislation passed by Congress in 2008, to go after foreign currency (forex) trading scams being pulled off in the unregulated over-the-counter market.

Thousands of small retail investors have flocked to the forex markets after the credit boom, lured by the potential of better returns than offered by stocks and bonds. But many retail investors are unaware of a growing number of scams in the industry and of the high risk of trading currencies on margin -- a key feature in forex trading.

"It's a prudential measure to avoid a particular section of the client base from over-leveraging itself," said Steven Pearson, senior director of currency strategy at Bank of America Merrill Lynch.

Pearson added that the regulation is "somewhat consistent" with similar measures taken in Japan.

But to retail forex dealers, some of the proposed rulings are too restrictive and may jeopardize growth in the industry. As a result, they said, they may have to scale back operations in the United States, sending millions of dollars in trades and hundreds of jobs abroad.

"It's a real issue here -- we are talking of losses in jobs, tax revenues and competitiveness," said Joseph Trevisani, chief market analyst at FX Solutions, a forex dealer, in Saddle River, New Jersey.

FX Solutions is part of FXDC, a coalition of nine large retail forex dealers lobbying against some of the CFTC proposals.

The contentious point is the CFTC's ruling to limit the leverage available to retail customers on forex transactions at a ratio of 10-to-1, down from about 100-to-1.

With the new ratio investors would have to invest a larger amount to place trades of the same size, which would result in a smaller return or loss.

At the same time, it would make the U.S. forex market less accessible to individual and smaller investors, the dealers said.

"Efforts to promote transparency and prevent fraud are more than welcome, but I can't really see the connection between fraud and customers' leverage," said Trevisani at FX Solutions.

A 10-to-1 margin is still high when compared with average stock trading margins at 2-to-1 but a far cry from leverage of as much as 500-to-1 allowed in the U.K.

"Going to 10-to-1 from 100-to-1 almost reads like a typo. It's very low and very random," said Glenn Stevens, chief executive officer at Gain Capital Group, an independent provider of foreign exchange services.

Stevens said the ratio is out of step with international industry averages and would force the trades to move overseas.

The retail forex market in the U.S. generates about $1 billion in revenue per year, according to industry estimates. That figure, as well as trading volume, has been increasing more than 20 percent a year, as small investors tap the loosely regulated $3.2 trillion-a-day currency market.

GROWTH POTENTIAL

"The U.S. forex market has a tremendous potential, and we would like to expand that portion of our business here," said Andrey Vedikhin, chief executive at the London-based Alpari Group, which trades about $60 billion a year for institutions and individuals.

"But now we'll have to take a wait-and-see approach as the landscape for the industry may change considerably in coming months," he added.

According to Alpari calculations, the cash amount required to trade one standard lot of 100,000 in the euro/dollar pair would jump to $14,285.00 from about $1,428.50, based on recent spot prices.

Retail investors can open accounts and start trading with as little as $100 and the average size of most accounts stand between $2,500 and $3,000, according to industry estimates.

Currency trading returns have the potential to outperform lower yielding securities, such as bonds and even stocks, but volatility in the forex market is high. And unlike stock traders who often face rules on short-selling -- a bet that share prices will fall -- forex investors can easily go long or short currencies.

The CFTC is also proposing that persons who solicit orders, exercise discretionary trading authority and operate investment pools be required to register.

The rules "are important steps in implementing the additional consumer protections," CFTC Chairman Gary Gensler said in January.

CFTC officials were not available for comment. The agency will take public comments on the proposed regulations until mid-March.

(Additional reporting by Nick Olivari in New York and Tom Doggett in Washington; Editing byPadraic Cassidy)

Swing Trading the Forex Market

2010-02-09T13:52:00.000Z

By David Goodboy

The Forex market is custom made for swing trading. Swing trading is my favorite and most effective method of Forex trading. Swing trading has all the advantageous of both day trading and trend trading without the inherent flaws of both methods.

Day trading is a great risk management tool, as you never hold a position over night; however, this fact also severely limits your profits. Trend trading allows you to capture long term moves, but often suffers severe drawdowns while you wait for the anticipated trend to continue. Swing trading is the perfect compromise between the two trading methods. Its goal is to locate short term trends, ride them without regard to timeframe, and quickly exit when the move ends.

The 24-hour nature of the Forex market makes it a perfect match for swing trading. Different traders have different definitions for Swing Trading. There is no right or wrong here, but for the purposes of this article, I define Forex Swing trading as any trade held over a day, but less than 2 weeks.

The tools I use for swing trading are 15-minute, 60-minute and daily candlestick charts. I keep the charts relatively clean of indicators except for Bollinger Bands and a 20-period SMA. One can swing trade technically, fundamentally or use a combination of both. This article will explain and give an example of each of the 3 swing trading methods. Let's start out with Technical:

Technical swing trading method--- This is perhaps the most well known method to today's Forex swing trader. All the major retail dealers have extensive education on Technical Analysis and often offer a nice suite of TA tools. I like using 20-period SMA crossovers on 60 minutes candlestick charts as my technical entry method of choice. It's a very simple yet effective method to catch nice swings in the market. I wait for a change in short term trend to begin as evidenced by the 20-period SMA. Then I wait for one full hour candle to develop under or over the SMA in the direction of the apparent trend change, this is the entry signal. I buy at market, after the hour candle forms under or over the 20-period SMA confirming a change in my opinion. The idea is to ride the move until another hour candle closes above or below the SMA in the opposite direction.

Fundamental swing trading method--- The Forex market is driven by fundamentals such as economic announcements/number releases, central bank meetings, intervention, and a host of other events. The most popular event is the NFP or Non Farm Payroll report for the EUR/USD. This announcement occurs at 8:30 AM EST. on the first Friday of every month. The EUR/USD moves an average of 124 PIPS very quickly based on this information.

Most traders try to catch the move, and there is tons of gamesmanship taking place just prior by dealers and traders. It is very difficult to correctly call the move, and it moves so fast, that any mistake can be costly. I use this fundamental event as a way to enter a swing trade but not in the traditional way. I wait until the move is over, normally about 15 minutes, and then fade the move in the opposite direction. My experience has been that the market will slowly move back to its short term trend after the spike cause by the NFP report settles down. The NFP often creates a very good entry price for a several day swing trade. I love this set up and trade it often.

There are also a combination of fundamental and Technical tactics that are highly effective in the Forex market. I will touch upon them in future articles. This brief article described swing trading as an effective method of Forex trading and provided examples of a technical and fundamental swing trading method.

Good Luck!

David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.

BANK OF CHINA CLEARED TO TRANSACT RETAIL FOREX ONLINE

2010-02-08T19:12:00.000Z

BEIJING, Feb 09, 2010 (AsiaPulse via COMTEX) --

The Bank of China (BoC; SSE:601988) announced on Sunday that it had been approved to launch retail foreign exchange sale and purchase business via online banking from the State Administration of Foreign Exchange (SAFE), becoming the first bank approved to carry out such business.

The BoC is currently piloting the business in Guangdong province and Shanghai, and will nationally promote it afterwards.

Clients can conduct foreign exchange sales and purchases via online banking as long as they have opened passbooks of time deposits accounts or debit cards, and have registered for online banking.

The BoC's foreign exchange sale and purchase business now encompasses nine foreign currencies, including the British pound, Hong Kong dollar, US dollar, Japanese yen, Canadian dollar, Australian dollar, the euro, Swiss francs, and the Singapore dollar.

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NFA permanently bars Colorado firm CFS Capital Management LLC and sanctions its principals

2010-02-07T19:06:00.000Z

Chicago - National Futures Association (NFA) has accepted CFS Capital Management LLC's (CFS) settlement offer to permanently withdraw from NFA membership. CFS is a Commodity Trading Advisor located in Lakewood, Colorado. Andrew G. Elrod, a principal of CFS, was also ordered to permanently withdraw from NFA membership with no findings that he committed the allegations as charged in an NFA Complaint. Brian G. Elrod, president of CFS and a listed principal, was barred from NFA membership for a period of five years. The Decision, issued by an NFA Hearing Panel, is based on the Complaint filed in June 2009 and a settlement offer submitted by CFS, Andrew Elrod and Brian Elrod.

The Panel found that CFS and Brian Elrod misused customer funds, submitted false and misleading material to NFA and failed to supervise the firm's futures and foreign currency exchange (forex) operations. Additionally, the Panel found that CFS and Brian Elrod used fraudulent and misleading promotional material and that CFS failed to follow the terms of the firm's disclosure document and management agreement.

Brian Elrod must also pay a fine of $30,000 in the event he reapplies for NFA membership after the five-year bar.

The complete text of the Complaint and Decision can be found on NFA's website (www.nfa.futures.org).

NFA is the premier independent provider of innovative and efficient regulatory programs that safeguard the integrity of the futures markets.

US Equity Markets and Gold Deflate as Dollar and VIX Spikes

2010-02-05T23:28:00.001Z

The day started out with the BOE and the ECB held interest rates steady at 0.5% and 1.0% respectively. Sovereign risk continues to weigh on the markets as Spain and now Portugal are joining Greece with warning signs of a greater global risk.

The number of Americans filing for unemployment benefits for the first time otherwise stated as Initial Jobless claims exceeded the consensus range of 440k-475k coming in at 480K new jobless.

This is the 4th rise in the past 4 weeks flying in the happy face of economists trying to state that the recession is over – and putting more credence in those who doubt the GDP strength of 5.7% reported in January.

Monthly Retail Forex Volume report for January, 2010 – $109 billion daily traded volume

2010-02-04T23:40:00.000Z

By Michael Greenberg, Forex Magnates

This is the first online retail forex volume survey report for 2010. Last report was released in August and estimated $118 Billion in daily traded volume.
Many things happened since and I made a few important changes in the current survey:
First and foremost I removed Gaitame – Japan’s largest broker from the list mainly because Japanese Forex market is by far the biggest forex market in the world and deserves its own survey.

How to measure FX trading risk? (updated to show 10:1 leverage impact)

2010-02-02T23:35:00.000Z

By ForexDatasource
The measure of trade risk lends itself to a lot of confusion, even before the CFTC introduced its controversial 10:1 leverage max.
If someone says that they are risking 5% of their account, what exactly are they saying? How do they measure that 5%. Chances are, they are underestimating risk they have taken on. This is my guide to identify the three real trading risks to an account: anticipated risk, margin call risk, and unanticipated risk (the CFTC proposal deals mostly with the margin call risk).
To illustrate things, let's assume that a trader has $5000 in his account and puts on a 5 mini lot trade selling EURUSD. We will try to answer the question: “how much is at risk on this account?”
Anticipated Risk:
Prudent traders use stop losses for every trade that they make on a live account. Provided that EURUSD prices trade in a linear fashion (without price gaps), a stop loss is an effective way to control and measure risk.
Let’s use as an example a 20 pip stop loss with the previous account information that we had. Each EURUSD pip on a mini account is worth $1 ($10 per pip on a standard account). To estimate the potential loss in the 5 lot trade above, we will do the following calculation:
Pip value x Number of pips x Number of lots traded = $ At risk
$1 x 20 x 5 = $ 100
In our example, a 20 pip stop loss on a 5 mini lot EURUSD trade is equivalent to $100 or 2% of the account.
How to reduce risk? Trade less lots or set a tighter stop loss. The problem with setting a tight stop loss is that the odds of the SL getting triggered are very high. The more often they are triggered, the less likely a novice trader is likely to set SL and the more likely to have a really big loss.
A talented trader will not debate whether to set a stop loss or not, but rather will spend a little time to calculate the appropriate size of the SL. Setting the size of a stop loss is one of the biggest skills that a talented trader will develop. The size of the stop loss will vary depending on various factors, such as a sound assessment of potential profit, the type of strategy, the currency pair, and supporting indicators that measure potential movement against a position.
As a general rule of thumb, I like to set my stop losses with a 2:1 or 3:1 ratio of reward to risk. In other words, if I risk 20 pips I will expect that the position will realistically offer to pay me 40 pips to 60 pips.
Margin Call Risk:
Individuals who trade without stop losses stand to lose a major portion or the whole account when a margin call is triggered. Some individuals mistakenly measure their trade risk by the size of their trade or the collateral kept on margin. Using trade size to measure risk, the account at 100:1 is risking 10% ($500 margin/$5000 starting balance).
It is wise to ask your broker to tell you how its margin call policy operates. Ask them at what margin level your open trades will start to be closed. Ask them at what level you can no longer enter into new trades. Ask them what trades would be closed during a margin call situation (positive trades, losing trades, random closing).
I will use the following margin call policy example: A broker starts to closes losing trades a 50% margin level, and prevents new trades from being opened when the margin level has dropped below 100%.
Back to our example where a trader has placed a SELL EURUSD 5 mini lot trade with a $5000 account. This time, we do not set a stop loss. The margin call risk on this account at 100:1 leverage is displayed in the table below. Just as a reference, a 5 mini lot position is equivalent to a $50,000 notional contract.
- 20 pips Bal: $5000 Equity: $4900 Margin Required: $500 Margin Level : 990%
-100 pips Bal: $5000 Equity: $4000 Margin Required: $500 Margin Level : 800%
-500 pips Bal: $5000 Equity: $2500 Margin Required: $500 Margin Level: 500%
-900 pips Bal: $5000 Equity:$ 500 Margin Required: $500 Margin Level: 100%
-950 pips Bal: $5000 Equity:$ 250 Margin Required: $500 Margin Level: 50%
Ending balance after trade is closed: $250
And the margin call risk on the same account at 10:1 maximum leverage would look like this:
ZIP.
You could not enter a 5 mini lot position with 10:1 leverage, because it would require you post $5000 in collateral – equivalent to 100% of your account.
Let’s assume that you decide to enter a 2.5 mini lot position at 10:1 (equivalent to $25,000 contract).
- 20 pips Bal: $5000 Equity: $4950 Margin Required: $2500 Margin Level : 198%
- 100 pips Bal: $5000 Equity: $4750 Margin Required: $2500 Margin Level : 180%
- 500 pips Bal: $5000 Equity: $3750 Margin Required: $2500 Margin Level: 150%
-1000 pips Bal: $5000 Equity:$2500 Margin Required: $2500 Margin Level: 100%
-1500 pips Bal: $5000 Equity:$1250 Margin Required: $2500 Margin Level: 50%
Ending balance after trade is closed: $1250
By the way, this second table is used to illustrate the impact of the major change in maximum leverage that the CFTC is proposing.
Our argument against this change is this: traders with sound trading techniques who have small account sizes (under $5000) may continue to be profitable, but not at a level where they can sustain their livelihood as day-traders. If they were using their trading account as cash cows (invest $5000 to get $2500/mo) a 10:1 leverage would force them to boost their trading capital to $50,000 to achieve the same level of earning power and margin level buffer as they did under 100:1.
Unanticipated Risk:
Connectivity. Many traders completely ignore this risk. It happens when you assume too much. You assume that a stop loss is stored in the trade server of your broker, when in reality it is stored in your computer. If your computer is off and your SL level trades, well . . . you will taken out of your trade at possibly a very different price than what you thought it would be.
The same connectivity problem may happen if you experience an internet/power outage or computer malfunction right as you were trying to enter into a trade or were closing a trade or making changes to an open trade. The cautious thing to do is to call your broker and make sure that a trade you intended to open/edit/delete has been recorded as you wanted to. Another hint, take the name of the person who helped you, log the time of the call. You never know when a ghost trade will come back to haunt you.
In case it is not already apparent, a single trade where you assume too much and is created by connectivity issues can completely whip out your account if it goes against you.
Price gaps. These are my personal nightmares. You have a normal, sensible position, with a stop loss in place, and out of the blue, some oil exporting country goes to war or the president of some major country gets shot by terrorists. What happens next is that your whole account is at risk. Your stop loss will almost invariably be triggered, but at a very different price than what you thought it would be.
These “once in a blue-moon” type of events can either paralyze you from trading at all, or you can learn to live with the fact that they could happen on very rare occasions when you may or may not have an open position that is affected. I still opt to trade, but I watch news closely and never leave trades open over weekends.
Technical glitches. There is a fair amount of technical glitches that can and do occur from the time when you press buy/sell and the time when you close a trade. These glitches I refer to are typically in the brokerage side. Brokers usually have prevision in client agreements protecting them against such problems with their own internet service providers (ISP) or their liquidity providers. By glitches I mean situations where trade allocations are mishandled in a money manager account, or when charts freeze, or stop losses are not triggered on time. Although such glitches do not typically threaten your whole account, they can amount to a good portion of your account. The best solution here is to know where to find and how to read the trade log of your trading platform, and how to mount a credible argument to the broker to refund some/all of the loss due to the technical glitch.
Perverse use of technology. Perverse uses of technology refer to times when losses take place as a result of some broker using their control over technology to maximize their profitability at the expense of the client: stop hunting and abusive slippage are the two most notorious forms of unanticipated losses due to perverse use of technology. Best solution here: use the www.forexdatasource.com Broker Research section to evaluate what thousands of traders say about the execution and service from brokers you use or are considering using.
SUMMARY:
There are three ways in which risk can be measured. The first type uses the potential stop loss level to determine how much you could lose in an account if prices behave normally. The second type of risk becomes relevant if you measure risk the wrong way or do not use stop losses. The third type of risk is unexpected and significant, but there are ways to mitigate them.

Cognotec Goes Down; Integral Goes For Its Clients Base

2010-02-01T23:31:00.000Z

by Francesc Riverola

Receiver appointed at Cognotec – 40 jobs threatened
By Siliconrepublic.com
The financial software company launched by Brian MacCaba Cognotec has appointed a receiver and it is understood that 40 jobs in Ireland may go if the company fails to find a buyer.
The maker of foreign exchange system software has substantial contracts in place but is experiencing cash flow difficulties.

Cognotec is going down
By Forex Magnates
What used to be the biggest promise in the Forex software platform development field is for years now considered a sinking ship. A few days ago the worst fears were confirmed when it was announced that Cognotec is heading into a receivership. Barclays Bank which is owed millions by Cognotec appointed Dublin’s KPMG as a receiver.

Integral Offers Trade-up Opportunity for Cognotec Customers
By Business Wire
Integral Development Corporation (www.integral.com), a leading provider of FX trading solutions and services, today announced for Cognotec’s customers that have been negatively affected by the ongoing disruptions at Cognotec, an opportunity to trade up. As part of the initiative, Integral offers free access to its systems for a limited time.

Deutsche Bank Believes Retail Forex To Continue To Grow In Popularity In 2010

2010-02-01T15:14:00.001Z

dbFX sees strong growth in customer numbers in 2009
Jan 29, 2010 – dbFX, the online margin foreign exchange (FX) trading platform of Deutsche Bank, saw customer numbers increase by almost 40 per cent in 2009, as retail traders continue to look to diversify their portfolios by investing in FX.
dbFX believes this growth in the retail FX market will continue in 2010 for five key reasons:

1. Significant advantages of FX as a trading asset class
2. Ever improving technology
3. Transferable skills from other asset classes
4. The rise of automated trading
5. Growth of Managed Accounts

US Retail Forex Market Lacks From Greater Consistency

2010-01-30T14:48:00.000Z

By Sarah N. Lynch Of DOW JONES NEWSWIRES

U.S. regulators are stepping up oversight efforts of the retail foreign exchange market, but a lack of uniformity could give some firms a competitive advantage.

The U.S. Commodity Futures Trading Commission and the Financial Industry Regulatory Authority, the self-regulatory body for securities brokers, have both floated proposals that have triggered opposition from the retail forex industry. The proposals aim to protect investors by forcing them to post more collateral to cover potential losses.

The CFTC's proposal would cap the amount of leverage certain dealer firms can extend to customers to a 10-to-1 ratio and force dealers to abide.

CFTC Proposal. Andrei Pehar Creates The TradersAlliance To Protect Traders Rights

2010-01-29T11:52:00.002Z

by Francesc Riverola

The CFTC leverage issue has made people stand up; the TradersAlliance is alive – Andrei Pehar
FXstreet.com (Barcelona) – Despite the fact that the CFTC proposal to limit leverage to 10:1 is not the main problem in the new proposed regulation, this rule has made traders stand up and think about their market, according to Andrei Pehar, Senior Technical Analyst at fxKnight.com. Independent traders have created the TradersAlliance.org forum to protect retail traders’ interests in front of brokers, fraud and regulators.

CFTC Proposal. Dirk Du Toit Expands On His Controversial View About Leverage

2010-01-29T11:48:00.002Z

by Francesc Riverola

We have asked Dirk du Toit if he could expand on his controversial view that leverage is the primary issue at stake in response to the argument that in the case of investment banks during 2008 it was rather the sub-prime mortgages that caused these firms to fail, or to need government bailouts.

He responded as follows:

“The point that I make is that too high leverage is bad for anybody, especially beginner traders in the spot forex market. I have referred to these investment banks’ leverage at the time of their demise due to the fact that they were “the masters of the universe”, armies of professionals who know what they were doing.

Those aren’t the only examples. It is also true that AIG, once the worlds largest insurance company, was bailed out for $85 billion and they did not deal in subprime mortgages but wrote insurance (CDS’) on all sorts of derivative pro ducts (many based on a mixture of prime and sub-prime mortgages). Further examples where leverage caused masters of universe to fail are:

1. The hedge fund “Armanath” which wrote off a cool $6 billion (that’s a “b”) on one trade in natural gas.

2. The classic case is that of Long term Capital Management, for four years the envy of Wall Street from 1994, who lost it all and almost took the whole financial system with them in 1998. They were leveraged around 30:1 when the trouble in the sovereign bond markets started and when they finally reached the tipping point they were leveraged 55:1. All of this is very well documented and I have also wrote about it in my book Bird Watching in Lion Country - Forex Trading Explained. They had two Nobel price winners and an army of quants and very vry experienced traders.

Once you are too highly leveraged, irrespective what underlying instrument your are invested in, speculating with, or trading you open yourself up for big problems under several conditions. For example, if you are leveraged 30:1 an adverse market move of 3% will basically wipe you out. We all know, especially from the turbulence during H2 2008 that the retail forex market can make 3% moves in a London morning or New York afternoon. Large organisations trade many instruments and many markets, therefore they are always well diversified, the most important risk management principle ever devised. Retail forex traders, under the ridiculous illusion of control their intra day technical analysis gives them take highly leveraged positions in one instrument at one price and then compound their problems by placing a stop 20 pips away. (I.e 20 pips from their entry point they suddenly want to do the opposite trade of the initial “great trade” they thoght was so special that they can bet their whole “house” on it. Lunacy.)

In these mega scenarios the situation of high leverage and a sudden illiquid (frozen) market became the killer mix because these companies couldn’t off load their positions.

The question is, is this relevant for retail forex traders? The answer is a resounding yes, very much! Take economic data releases for instance. By now the retail traders begin to understand that spreads widen during economic data releases and following the releases prices are all over the place. Why? Because of illiquidity. That’s why prices jump up and down, why there is slippage and no fills, why market makers can rightfully argue “the market never traded at such-and-such a price”.

The principle is this: if you have a low leveraged position this momentary chaos basically doesn’t influence you, but if you have a high leveraged speculative position this momentary chaos can cause your account severe harm, cause you to complain at the CFTC about your broker, running your stops and slipping your pips. The CFTC / NFA must spend enormous resources on these frivolous complaints by people with $300 accounts who as a consistent feature of their trading push leverage above any levels of decency and generally cause chaos in the regulatory environment with their resultant claims and blames about their brokers.

The bottom line is then that while I must not be seen as supportive of the invasion of trader’s privacy the reasons behind the move is supported by overwhelming examples of how the misuse of leverage is problematic for the whole system. I stand by this statement I have made before: If you can’t make money trading with no / low leverage you certainly are not going to make money with high leverage. Drop your leverage and focus on your trading. ”

Thanks Dirk!

Francesc

Forex Trading Over ECN Brokers To Grow 90% The Next Few Years Says Andrey Vedikhin CEO of Alpari UK

2010-01-28T11:42:00.002Z

by Francesc Riverola

Hi everyone

A few weeks ago, we heard rumors that the Alpari Group would be offering a proprietary ECN to Forex traders in 2011. To clarify things, we thought it best to put ourselves in contact with the Alpari Group and ask them.

Here you have my interview of Andrey Vedikhin, CEO of Alpari UK and co-founder of the Alpari Group.

I want to thank Andrey and The Alpari Group for their wonderful collaboration.

I hope you’ll enjoy it.

Francesc

The Alpari Group will be offering its proprietary ECN to FX traders in 2011…

1. Why this change in your trading business model? Do you expect to increase your market share in this fast moving and competitive Forex environment?

We have noticed that the expectations of retails clients are changing rapidly. While approximately only five percent trade via ECNs today, we expect this to grow to over 90 percent within the next few years. Currently, not all retail traders can avail themselves of the benefits of ECN trading, due, for example, to the high minimum-trade size requirement. However, ECN trading will become more accessible in the future, as small trades will automatically be aggregated into larger ones. The benefits of ECN trading, including transparency, deep liquidity, market depth and NDD execution, will become available to everybody. Naturally, we will be adapting our business model as we spearhead these fast moving developments.

2. What advantages will your customers get from having an ECN feed in MetaTrader?

They will profit from deeper liquidity, better pricing straight from the banks, ultra-fast Non Dealing Desk execution and no re-quotes. ECN trading is far more transparent for the trader, and they avoid the conflict of interest that existed with the traditional dealer-broker model.

3. How are you going to deal with the typical ECN downsides, such as steep spikes and frequent slippage?

We are already implementing filtering mechanisms to counter problems with bank feeds producing steep spikes. However, frequent slippage does occur, mainly in times of tight liquidity, so our approach to tackling slippage is to significantly increase our liquidity pool through more tier-1 and tier-2 banks as well as from all working client orders.

4. In 2010 MT5 should be available too. Are you planning to switch to MetaTrader 5 or will you offer both MT4 and MT5? What advantages will your customers get who switch to MT5?

We plan to support both MetaTrader 4 and MetaTrader 5. From our perspective, offering the MetaTrader 5 platform will just entail another separate server, as well as a bridge between MetaTrader 5 and our liquidity pool. Adding MetaTrader 5 to our offering in 2010 will give our clients even more choice. From the traders’ standpoint, it is quite different from MetaTrader 4 in that it offers a more powerful programming language, allowing for more complex strategies. Furthermore, MetaTrader 5 is very scalable, and will show the full market depth, providing more transparency.

5. Is the Alpari Group team working to increase and improve the range of on-line trading products and services provided through your trading platforms?

We are constantly striving to improve our products and services. For example, during the first half of 2009, 99.6 percent of Forex and precious metals orders were executed automatically. However, within the next few months, our ground-breaking NDD execution technology will ensure all orders are automated, which will further reduce execution time. In January 2010, we launched the MetaTrader 4 platform on our Pro account, featuring STP, tighter spreads and very competitive commissions. This new offer makes use of our in-house MetaTrader 4 Bridge and is available to everyone, not just institutional traders. In order to better serve our international clients, we are not only planning to open new offices, but are also will working towards offering more trading platforms (MT5, ECN) and products (CFDs).

6. How are the new NFA regulations affecting your business model? Have you seen many customers moving their account to Alpari (UK) or other Alpari branches?

We have recently noticed that a lot of non-US citizens have moved their accounts to the Alpari (UK). However, unlike a few other trading providers, we have not used the legal loophole to bulk-transfer all our US clients to our UK-based company; we consider that to be deeply unethical. Overall, the stricter NFA regulations only affected our business in July 2009, when net deposits decreased slightly. Since August however, net deposits started climbing again and business returned to normal.

7. How do you see regulation changes in the US and Switzerland affecting the retail Forex Industry as a whole?

Companies in the US now face a big disadvantage due to the regulatory amendments and many clients are trying to move to brokers in other regulatory regimes. However, Alpari US is confident that less competition will increase their client base and trading volumes.

In Switzerland, we expect the key players to apply for a banking license and many smaller brokers will move to other offshore countries. This development favors London-based brokers such as Alpari (UK) because more traders will move their accounts to the FSA-regulated brokers, where they are protected by the Financial Services Compensation Scheme; subject to the nature of their claim and status, they receive a high level of funds protection. FSA regulated brokers also offer segregation of funds, whereby client funds are kept completely separate from company funds, safeguarding them in the case of a company going bankrupt.

Also, is in the news that Alpari Group has launched an institutional trading platform, Alpari Direct Pro powered by Currenex.

Other firms in the past have tried to implement Currenex and expand from predominantly retail to a retail/institutional clientèle, often with mixed results:

1. Which features would you highlight of this new platform?

Our new institutional trading platform, Alpari Direct Pro, provides deeper interbank liquidity, full market depth (more transparency), 100% Non Dealing Desk execution, Straight-Through-Processing and complex order types.

2. Who are your most direct competitors in this arena?

In this arena, our most direct UK based competitors would be London Capital Group and GFT.

3. What will the Alpari Group offer the institutional trader that they aren’t currently getting elsewhere?

Apart from our customized Alpari Direct Pro platform, we offer institutional traders with a professional version of MT4 through our in-house STP bridge, and, once MT5 is launched, the MT5 bridge. Both platforms also support many Expert Advisors. These are simple automated trading strategies written for MetaTrader, and are becoming increasing popular. Furthermore, we are offering institutional pricing, NDD execution and faster execution times. All trading will be 100% automated, and we will welcome all traders, including scalpers and winners.

4. How will the Alpari Group set itself apart from other firms currently using Currenex?

Naturally, the essential technology, liquidity and order types are very similar across the board. We are setting ourselves apart from our competitors by incentivising our clients with aggressive marketing promotions such as an competitive commission structure.

5. How difficult will it be for the Alpari Group’s clients to migrate from MetaTrader 4 to Alpari Direct or to Alpari Direct Pro? Will this migration be mandatory or will it be possible to keep using MetaTrader 4 (for example via API or bridge)?

While we expect most of our clients to stay with MT4 or MT5, we will not be forcing anyone to trade with one specific platform or insist they migrate from one to another. Our advanced trading technology is not tied to one specific platform, and the bridge between MetaTrader and our multiple liquidity providers is a good example of how to make the benefits of the best trading technology available to all our clients, no matter what platform they prefer to trade on.

In essence, whether we are dealing with a micro or professional trader, our goal is to make e-Forex trading accessible to everyone.

ECB Upsets FOMC with Announcement of their Own

2010-01-27T17:05:00.001Z

by Jerry Furst

Trichet out does Bernanke?
The European Central Bank (ECB) announced that they are ending the emergency “swap line facilities” that were put in place during the “dizzy dayze” of the financial meltdown.
This came out at 2:15 - Just at the same moment as the FOMC was due to announce their interest rate decision and give hints of forward looking monetary policy.

Fed Policy: No Change - Wait and See Starts
In a 9-1 decision the Federal Reserve kept rates steady as they see “economic activity continuing to strengthen” and they believe that “the deterioration ion the labor market is abating”. The Fed also stated that the TAF – Troubled Asset Facilities - will be winding down and that they need to monitor how the economy responds as the stimulus and emergency lines are pulled back.

Banks target high-frequency forex strains

2010-01-27T15:43:00.002Z

By Jennifer Hughes, Financial Times

Banks are looking to cut back-office costs and trading risk with a new currency trading service that aims to deal with strains on their systems thrown up by an explosion in high-frequency, low-value trades.
The system - a joint venture between ICAP, the interdealer broker, and CLS, the foreign exchange settlement system - is designed to aggregate smaller trades into single bigger tickets before passing them into CLS for settlement.

New York Outpaces London In Forex Volume Recovery

2010-01-27T15:36:00.001Z

By Bradley Davis and Katie Martin Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–Foreign-exchange trading volume is growing faster in New York than in London, according to data released Monday, although the U.K. capital remains by far the leader in currency trade.

The data, compiled semiannually by central banks from the major foreign exchange trading centers around the world, show trading in currencies picked up steam globally as the economic recovery took hold.

London saw average daily volumes of $1.549 trillion in currencies traded in October, a 14% rise on April 2009, the month of the previous survey, according to the Bank of England. This figure includes spot trading as well as futures, options and other derivatives. In the U.S., currency trading recorded average daily volumes of $675 billion in October, up 28% from April, according to the Foreign Exchange Committee of the New York Federal Reserve.

Jury Finds Currency Trading Firm Operator Guilty

2010-01-27T11:39:00.000Z

By San Diego Business Journal

A Solana Beach man who ran a foreign currency trading firm, Universal Money Traders, was found guilty of eight counts of mail fraud, six counts of wire fraud and one count of filing a false tax return by a federal jury Jan. 26, the U.S. attorney’s office said.

According to federal prosecutors, Mark Todd Hauze, 51, used sales agents, a Web site and other means to solicit more than $10 million from investors from 2002 to 2005. Prosecutors said Hauze and UMT induced investors by promises of getting 30 percent annual returns, with guaranteed stop-loss provisions that limited a client’s potential loss to 15 percent of each $2,000 trading position.

In reality, UMT didn’t use guaranteed stop-loss mechanisms, and regularly reported bogus trading results and false account balances to clients, prosecutors said.

The false reports caused investors to assume their balances were growing when Hauze was actually taking their funds, much of it for his own use, prosecutors said.

The guilty verdicts follow a two-week trial. Hauze faces a maximum penalty of about 20 years at his sentencing scheduled for April 19 before Judge Thomas Whelan.

— Mike Allen