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Strategies for Successful Trading Decisions – Going Short or Long

The Forex market is quickly becoming the focus of attention for millions of new entrants as a result of its unique advantages. A large number of people have learnt how to make clever investment choices in order to take advantage of the market. Two strategies in Forex are going long and going short – once you understand these two strategies you will be able to make important decisions in order to be profitable. The two main strategies will be examined below.

Going Short

This trading strategy is when the base currency is sold in order to buy it at a later stage when the price begins to fall, resulting in a return from the transaction. For example, if the current GBP/USD is 1.5345 meaning we pay 1.5345 Dollars for one Pound Sterling, and we have $1000 dollars, we would sell the Dollars in order to purchase the Pound Sterling. This is carried out when the cost is expected to fall again in a short period of time. When the price GBP/USD falls to 1.5350, this means that more Dollars can be purchased with the same amount of Pounds that were obtained at the start. The additional dollars can be kept as profit which were earned by considering the dollar as the base currency.

Risk in Short Position

As with all financial markets, forex involves the same amount of risk. If the prices go in the exact opposite direction than originally expected, there will be a loss instead of a profit. For example, if the GBP/USD goes to 1.5340, you would not even get the same amount of Dollars that you sold initially. This strategy is only profitable if prices drop.

Going Long

In the Forex Market, going long refers to buying of currencies with the intention of reselling them later when the price increases. If you notice an increasing trend of a currency for a long period of time, then buying would be the correct option and keeping the trade open until the price reaches its maximum point before reversing. For example, if GBP/USD is showing an increasing trend for the past few hours or days and the current price is 1.5400, then you can sell the Dollars to purchase the Pounds and wait for the prices to get to the desired level. When the price gets to 1.5500 you could sell as that earns you more Dollars than your initial investment.

Risk in Long Position

There is the risk of the price falling once you have purchased the currency. In this situation, your loss would equal the difference in the price at the point which you bought the currency and the price at which you are selling it. Regardless of the investment in the Forex market, it is essential to know the market trend and the economic conditions of the base currency.

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Advantages of Forex trading

Forex is an acronym for Foreign Exchange Markets. Forex is also represented by the symbol FX which is a familiar term among investors, bankers and stock brokers across the world. The Foreign Exchange Market or currency market is a global, decentralized market for trading of currencies. The principal participants in the FX market are major international banks.

Financial centers around the world offer buyers and sellers a convenient platform for trading in currencies. In addition, the FX market operates on several levels.

The unique advantages of FX trading.

24 hour market
FX trading operates on a 24/7 basis except for weekends. Trading around the world begins when the markets open in Australia on Sunday evening and closes when markets end at New York Stock Exchange on Friday evening.

High Liquidity
Liquidity is when you can easily change an asset into cash with minimum price fluctuations. In the forex market, transactions can easily be carried out by moving huge lots of foreign currencies in and out of the market with least price fluctuations.

Low transaction cost
The cost for a transaction is added with the price i.e. the buying price of the currency. This is known as a spread – the difference between the buying price and the selling price.

Leverage
The leveraging factor is the ability to trade more money in the market than that which is actually available on the trader’s account. Forex brokers allow traders to make profits on the leveraging factor. If you are allowed to trade on a leverage factor of 50:1 ratio it means you can trade for $50 with $1 capital available on your account.  You can control a trade volume of $50,000 with just $1000 worth of capital.

In order to be able to buy and sell foreign currencies, you need to open a Forex trading account online. For every FX currency you buy, your account will be credited with the same amount. For every FX transaction you carry out in terms of selling, the corresponding currency will be debited from your online Forex Account. The profits you gain will be wired directly into your account through PayPal.

Profit potential from rising and falling markets
You can trade freely in the market as far as your potential goes. If you believe that the price of a currency will increase, you can buy it or go long. Increased currency price indicates you can sell it at the  increased price. You can make up for huge profits by trading on volumes. However, if you believe that the currency value is going to fall, you can sell it or go short.

Seasoned stock traders can make huge amount of profits and even become overnight millionaires. On the other hand, if you desire huge amount of profits and start trading without following the tricks of the trade you can also end up losing a lot of money. Therefore, you should always be cautious while you are operating in the Forex market or stock market.

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Avoid the pitfalls of forex trading robots

Forex trading robots have become a popular tool in the personal forex market. They’re often attractively priced and are marketed as ‘Expert Advisors’ that can operate on many of the favoured trading platforms. However, an increasing number of traders have been left disappointed with the purchase of their automated forex trading program that ends up performing well below expectations, which leaves them feeling cheated and even results in claims of fraud.

Sold on profits

Anybody with a product to sell will focus on the product’s most attractive features to get you to buy it, and that is especially true about automated trading products. Often, they’re presented as offering the path to financial freedom and being easy to use; claims that are backed up by historical trading profits and glowing testimonials from seemingly satisfied users. In reality, the evidence of their success is just a small sample of trading when the software enjoyed a profitable spell and leaves out the less impressive other periods which more accurately reflect its true capabilities and how it performs for most of the traders who buy it.

The disclaimer makes it alright

Every forex trading robot is sold with a disclaimer (sometimes well hidden) that denies any responsibility for how it will perform in the future. The words may be different each time, but the message always amounts to the same thing: there’s no guarantee this software will trade profitably based on its historical performance and is there to protect the vendor from potential fraud claims.

Get a refund but not your money back

In an effort to placate customers who were unhappy with their trading robot purchase, many vendors would simply offer a refund. But while the purchase price of the forex trading software would eventually end up back in their bank account, the money they lost using it was gone.

Trawl through any online trading forum and it won’t be long before you come across a thread full of unhappy traders who feel they’ve been misled by false advertising about forex trading robots that fail to deliver profits.

Traders who purchased the forex trading software through Clickbank tend to have an easier time getting a refund. Legitimate claims made by the purchaser within the 60-day / eight-week period are usually dealt with quickly and efficiently.

While it is not recommended that traders purchase a forex trading robot, if you do so, make the purchase using Clickbank and thoroughly test the software during the risk-free trial period to minimise the financial impact if the trading results prove to be disappointing.

Too good to be true

The saying goes: if it’s too good to be true, it probably isn’t. Genuine innovation has made our lives easier and better, but if trading software was capable of delivering the results vendors claim it can – and for such a small investment – why do banks continue to pay their forex traders six figure salaries?

The simple truth is that it isn’t possible for trading software to deliver positive results on a consistent basis. Successful forex trading can be learned and is highly profitable, but it requires skills and judgement that simply can’t be replicated by software.

[FXB trading]

Multi Account Manager Solution

PAMM / MAM is designed exclusively for Money Managers and clients who are looking for professionals to manage their funds. We developed PAMM / MAM for professional traders that use MetaTrader 4 platform, and simultaneously manage multiple accounts.

At FXB Trading, we consider it a priority to find solutions to problems before they appear. This is the reason why we provide the PAMM / MAM software for Money Managers.

Features of the PAMM / MAM Solution

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Forex coaching pays dividends

Trading forex is a bit like driving, if you don’t get a few lessons from someone who knows what they’re doing you’ll probably crash. A good forex trading coach will help you become a profitable trader far sooner than if you dive into trading without proper training.

A good trading coach, much like a good driving instructor, is aware of the mistakes a novice is likely to make and is able to steer you around or away from them and can explain why a certain course of action or choice is the better option. Much like driving, most of us want to learn so that we can use it safely, frequently and of course successfully. Driving without caution or at high speeds, without understanding the dangers, mirrors unprofitable or high risk trading and inherently increases the chance of losing money.

Once you’ve accepted that coaching is the best way to start the next step is choosing which coach is right for you. In most situations where you need an expert, your natural instinct is to gravitate to the best available. This is where most people run into their first hurdle, as the industry is littered with so-called ‘forex gurus’ but who are not even professional traders.

A recommendation from someone you know and trust is always a good place to start, but if no-one you know can advise you on coaching for forex trading there are some things to look out for which will help you make an informed choice.

‘Try before you buy’ is a good way to get a better idea of the quality of the training a forex coach is able to provide, so it makes sense to look into some of the free training advice your potential coach might offer on their website.

If the coach you’re looking at doesn’t offer any advice for free and is simply trying to sell you a product that makes some grand promises based on past performance it is best to stay clear.

Another simple test to carry out is to discover if you are dealing with a real person. A forex coach who features in his or her own videos and uses their real name is more likely to be a genuine trader with something useful to offer. Try out the phone number, email or any other contact information provided and check out if they are really on the other end of that communication line. If they are present it means they’re also accountable and that is a sure sign they are confident in what they’re offering.

People who constantly seek out new learning tend to be more successful than those who settle on what they know and plod a familiar path. Coaching provides an ongoing learning process, even for those who are already at the top of their own mountain. When Rafael Nadal achieved Number 1 status in the tennis world the first thing he did was increase his coaching staff.

It’s one thing to learn something, learning to apply that knowledge is the next step then learning from your own experiences is yet another. This applies as much to forex as it does to all walks in life that require special skill or knowledge. Forex coaching provides the opportunity for continuous learning, regardless of how long you’ve been trading, and is an essential component of long-term success.

One-on-one training has been shown to increase the rate someone learns by 70%-80% and there is no quicker way to learn how to make consistent profits in forex trading.

5 reasons why coaching will make you a better trader:

1. Our natural instincts teach us to learn from our mistakes and novice traders naturally employ this trial and error method. However, this results in a novice taking longer to learn how to trade profitably, sometimes years, and in that time they are likely to have picked up some bad habits. A trading coach will challenge the way you think and your trading paradigm, the trading coach will also identify your bad habits and help you replace them with profitable strategies.

2. Nobody likes being told they’ve done something wrong and it’s one of the reasons some traders resist the idea of training. But throughout our lives the biggest and most important lessons we learn is through the mistakes we make, not our successes. A good trading coach will be able to offer constructive criticism and teach you how to learn from mistakes.

3. Some, if not most, people who start out in forex dream of achieving huge wealth and overnight success. Forex trading is about creating a plan with realistic weekly, monthly and yearly goals that get a trader to a target. Having a target without a plan is simply dreaming. A forex coach will help you establish realistic and achievable goals that will ensure you reach your target.

4. A common problem novice traders face is becoming overwhelmed with irrelevant information. A trading coach will help you to focus on the information that matters and how to stay focussed on the information and avoid wasting time on details that can steer a trader away from their targets.

5. Another common problem that afflicts traders is when they get stuck on a certain level of knowledge. It can be hard for a trader to recognise this in themselves which is why having a coach is vital as they will see it and know how to get a trader to move forwards again.

In short, a good coach will tell you what you need to hear when you don’t, and see what you need to see when you can’t. A good coach will help you achieve your goals.

In the past coaching was seen as something that only professional athletes used, but successful traders have realised the benefits of forex coaching. In the long term it saves a trader time and money and eventually proves to be a worthwhile investment for the future

[FXB trading]

 

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The FXB Trading Affiliate Program is a fantastic opportunity for affiliates who wish to earn a competitive CPA on every qualifying referral.

 

To aid your marketing efforts the FXB Trading Affiliate Program offers access to cutting edge creative and generous acquisition promotions to help you produce the results you want and increase your affiliate income.

 

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[FXB trading]

Profit from North Korea crisis

The North Korean crisis has been preoccupying the minds of investors for a few months now. Back in April, North Korean leader Kim Jong-un ordered missiles to be fired over neighbouring Japan. The ensuing market instability prompted varied reactions from investors.

The risk averse headed for the safe haven markets, while others tried to capitalise on market volatility.

Today, the picture for investors has changed significantly.

As you read this (September 18) world stocks are at an all-time high. Investors have regained their appetite for trading in risky assets. Currency trading appears unaffected by events on the Korean Peninsula.

MARKETS BREATHE SIGH OF RELIEF

The markets have breathed a collective sigh of relief and for traders, with the risk of a nuclear war averted, North Korea has drifted to the back of their minds – for the time being.

The note of caution is sounded because it’s far from being a settled issue, and major powers are already drawn in.

On Sunday (September 17) US President Donald Trump appeared to mock Kim Jong-un.

“I spoke with President Moon of South Korea last night,” the US president wrote. “Asked him how Rocket Man is doing. Long gas lines forming in North Korea. Too bad!”

Despite the rhetoric employed by Trump and the US administration that “fire and fury” would be the US reaction to Kim Jong-un’s continued missile firing, their preference, so far, has been to see economic sanctions imposed on North Korea.

SANCTIONS SO FAR

The United Nations Security Council passed sanctions against North Korea. In turn, Kim Jong-un responded by firing another intermediate-range ballistic missile that flew over Japan and a promise that more tests were on the way.

These sanctions seem to be taking effect on the country, hence the reference to “Long gas lines”, if not Kim Jong-un himself.

A notable side effect to the crisis has been its effect on US/China relations which saw US Treasury Secretary Steve Mnuchin threaten a trade war with China if it didn’t uphold its sanctions against North Korea.

The markets would react with far more volatility if this were to transpire, and you can be sure investors will be paying special attention to US/China relations as the North Korean crisis unfolds.

ASIAN MARKETS SOARING

But, for now, it seems investors have become desensitised to the North Korean issue. As long as Kim Jong-un holds back from declaring all-out war and US/China trade relations remain intact, the market seems to have decided that trading shouldn’t be affected.

Stock markets in Asia are at their highest level in a decade (Monday, September 18) and this positivity is mirrored in markets around the world.

However, if fears about war increase again, look out for its effect on the value of the USD.

Historically, the USD’s value plummets when there is trouble on the Korean Peninsula. Going back to 2010, when tensions were provoked by South Korea, the value of the USD dropped significantly against other major currencies.

Both the US and North Korea show no intention of backing down, so an escalation is still possible. In the short term, this would most likely see the value of USD increase, as it’s a war North Korea can’t win. But war in the region would inevitably see South Korea and Japan being sucked in and result in collateral damage to those nations. They are both trading partners with the US and this could end up having a negative effect on the value of the USD

[FXB trading]

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German Elections: Will Merkel hold on to power?

 

Elections in economically powerful countries like Germany have always provided an opportunity traders can take advantage of, because of the market volatility that preceded them.

 

The uncertainty that surrounds an election result creates turbulence in the markets, which are exactly the conditions traders need to make bigger profits on their trades.

 

If recent history has taught us anything, it is to expect the unexpected when the German Election takes place on Sunday 24th September – regardless of what exit polls and the media are reporting will happen.

 

EXIT POLLS ARE LESS RELIABLE THAN BEFORE

 

Opinion polls have consistently predicted that Angela Merkel will secure a fourth consecutive election victory for her Christian Democratic Union (CDU) party and their sister party the Christian Social Union (CSU).

 

However, exit polls are not as reliable as they once were. Britons were expected to vote against Brexit and Hilary Clinton was considered a more likely US President than Donald Trump.

 

The pulse of the voter is far more difficult to anticipate, and more susceptible to change. 

 

The impact of social media and other, less predictable influencers, can have a significant effect on the opinions and perceptions of voters, especially in those critical last few days before the election itself takes place.

 

No outcome is certain until the last votes have been cast.

 

MARKETS BECOME MORE VOLATILE AROUND ELECTIONS

 

This uncertainty creates volatility in the markets, which tends to become more pronounced as the polling date approaches and even more so if the outcome is in the balance.

 

That volatility is magnified when an unexpected outcome is declared, as when Britons voted in favour of Brexit.

 

This is why the German election offers the potential to make some money.

 

In the immediate aftermath of the Brexit vote Sterling (GBP) plunged to its lowest level since 1985, and two years later it has yet to recover.

 

Another unexpected result in Germany would trigger another period of market turbulence.

 

Traders are already calculating how to react depending on the outcome. This is an opportunity to make significant profits – it’s a question of picking up on the right indicators.

 

HOW WILL GERMANS VOTE?

 

On the face of it German voters have less reason to produce a surprise result. The country is economically strong and thriving. But recent statements and actions by Merkel, such as her decision to welcome over one million refugees into Germany came in for heavy criticism and resulted in her personal popularity dropping to its lowest in years.

 

How much of an influence will this have on voters come the election?

 

Merkel’s record as Chancellor is impressive. She has successfully navigated the recession that has affected most of Europe. But their manufacturing might has never been in doubt, Germany was always better prepared than its European neighbours to come through the economic crisis in good shape and without its people suffering any great hardship as has been witnessed in other countries.

 

If the economy isn’t a significant factor affecting voting then other matters could be more prominent in voters’ minds. Germany’s role in a fragmenting Europe, or its support of military campaigns abroad against Isis and the retaliations it has provoked in France, the UK and Spain may persuade votes that a change in policy is needed.

 

COALITION IS THE ONLY CERTAINTY

 

Despite being the dominant party, Germany’s electoral system has required Merkel’s party to form coalitions in all three of the CDU/CSU’s successes. If anything is certain about the forthcoming election it is that it will be another coalition government that takes power.

 

In 2013, the previous coalition government failed to gain the necessary majority of seats needed to maintain power. Coalition partner, the Free Democratic Party (FDP), attracted less than 5% of the vote which resulted in a coalition being formed with the Social Democratic Party (SDP). It was referred to as “a grand coalition”. But this may not be repeated given the fall-out between the respective leaders – Martin Schulz of the SDP and Merkel – over the issue of immigration.

 

Schulz is considered Merkel’s biggest challenger as Chancellor. The SDP are expected to achieve around 25% of the vote according to the latest opinion polls, making them the CDU/CSU’s biggest competitors.

 

Schulz’s popularity has strengthened following his stint as President of the European Parliament and he is liked by a significant number of the country’s voters.

 

If Schulz was to overcome Merkel on September 24 it would send shock waves around the world, the markets are likely to go through another period of instability and the Euro (EUR) might be affected in the same way Sterling (GBP) was affected by Brexit.

 

If Schulz garnered a greater portion of the vote, but not enough to replace Merkel, it could still increase his influence on policy making. Assuming the coalition remained intact, the Euro (EUR) is likely to strengthen as Schulz is in favour of strengthening the EU.

 

Some will certainly feel backing the Euro (EUR) makes a lot of sense as the election approaches. Schulz’s heavy criticism of Brexit (he called for the UK to re-run the referendum) could have further ramifications for Sterling (GBP). The prediction by one prominent global investment bank that Sterling (GBP) will be valued on a par with the euro by the end of 2017 would seem far more likely.

 

Merkel has been far more diplomatic to the UK following Brexit and promoted the benefits of Germany and the UK maintaining a strong economic partnership. Following through on this stance will raise optimism that Sterling (GBP) will rally.

 

CREATING COALITIONS DISRUPTS THE MARKETS

 

In the days before the elections prominent European indices, notably Germany’s DAXX and the wider European indices such as STOXX 50, expect increased volatility. This will be magnified or return to stability dependent on the outcome of the September 24 vote.

 

However, if a revised coalition is created, this might also prompt increased volatility.

 

After the last German election it took around three months for the new coalition to be sworn in. Equity markets fluctuated between periods of increased volatility and inaction during that period, depending on how coalition negotiations were perceived to be going.

 

The Euro (EUR) was similarly affected until the outcome was confirmed.

 

Staying up-to-date with the events leading up to the elections and observing the effects they have on the markets will give an insight on how the markets will react as we approach September 24.

 

Clearly, we shouldn’t be surprised if another ‘shock’ result came about. But whatever the eventual result the opportunity lies in judging how the market is reacting every step of the way and taking full advantage of the opportunities as they arise.

[FXB trading]

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Don’t write off Sterling prematurely
 
Last June’s post-Brexit vote sent GBP values plummeting against EUR and pretty much every international currency as the market tried to price in the negative implications for the UK economy.

As unexpected as the vote to leave was, the market reaction – perhaps overreaction – was entirely predictable. The vote was preceded and followed by a raft of analyst predictions of a weak GBP amid fears Britain’s economy would grow more slowly outside of the EU.

However, amid the eye-catching headlines, pro-Brexit economists said that leaving the EU would cause a shallow downturn at first but would end up boosting the UK economy in years to come.

GBP RECOVERS DESPITE GLOOMY PREDICTIONS

Despite difficult Brexit negotiations and the continued uncertainty surrounding the UK’s relationships with the EU going forward, GBP’s subsequent recovery says plenty about its historical importance and longevity and that needs to be factored in when predicting its future value.

GBP’s is the oldest actively traded currency on the foreign exchange market, it’s also one of the most popular currencies traded on forex as a result that London is one of the biggest trading hubs in the world.

Political uncertainty and war has triggered volatility in GBP’s value over the years, but it has always stood the test of time and has been relied upon as a global safe haven for investors.

History seems to be repeating itself.

BARCLAYS FORESAW GBP RECOVERING

Back in March this year Barclays, one of the UK’s most prominent financial institutions, wrote to their clients to say they could see GBP recovering against both EUR and USD.

On September 17, 2017 HSBC admitted it was wrong to predict a deep dive in the value of GBP this year. The banking giant had previously said GBP would end the year at $1.20 and around parity with EUR, their bearish currency analysts have now revised their forecasts to $1.35 and €1.12.

The difference is that GBP is now behaving like a normal, cyclical currency and moving after things like data events. It is now less susceptible to Brexit developments.

The Bank of England’s (BoE) announcement that a first interest rate rise in a decade sent GBP to its highest level since the day after the Brexit vote. The BoE said rising inflation and stronger household spending merited an increase in the coming months.

UK ECONOMY LOOKING AT NEW MARKETS

BoE Governor Mark Carney, in remarks prepared for Washington today (September 19), said a long period of inflationary pressure on the UK was expected as it reorients its economy toward new markets and away from the EU.

In the immediate aftermath of the Brexit vote and GBP’s dramatic fall in value Carney said he was happy with Sterling’s level and wasn’t averse to a further depreciation. He explained that a weaker GBP was an important reason why the economic effects of the vote to leave the EU would be less than gloomier pre-referendum predictions suggested.

In other words, a weaker GBP was helping to limit damage to the British economy during the Brexit process. The natural reaction to ‘weakness’ is that it is to think of it in negative terms. However, certain situations warrant a weakened currency valuation. UK produce became cheaper, this stimulates demand, and helps cushion the wider economy from turmoil.

The UK lessened the damage of global financial crisis in 2008 in a similar way.

ECONOMIC GROWTH AND STRONGER GBP PREDICTED

While the long-term ramifications of the Brexit are unknown Brexit supporters have consistently argued that it will result in greater potential economic growth and appreciation of GBP through a reduction of government spending and the establishment of trade alliances independent of EU regulation.

Carney describes Brexit as a unique example of deglobalisation and while the economic effects of Brexit are subject to “tremendous uncertainty” it will mean lower immigration to the UK which will potentially boost domestic wage growth while new barriers to trade would lead to higher prices for goods and services.

While the long-term future of GBP’s value looks safe, unpredictability is a possibility in the short-term.

GBP WEAKENS IN 2018?

Upon revising their GBP valuations HSBC added that 2018 is likely to see Sterling weaken again. Their economists feel that politics will have a greater influence on GBP’s value as the deadline to Brexit nears. They offer a worst-case scenario where no Brexit deal is agreed and the UK economy starts to slow as a result of BoE interest rises.

HSBC concluded that GBP would drop “well below” $1.20 and around €1.05. But as they were forced to admit yesterday, they might be wrong.

There’s little doubt business fears are rising.

More than 100 companies, including Ford, GE and IBM, wrote to Britain’s top Brexit negotiator and his EU counterpart on Sunday urging the two sides to agree a transitional period of up to three years so that they could make investment and employment decisions.

Britain’s Prime Minister Theresa May is hoping some momentum will be sparked by her speech when she visits Italy on Friday (September 22). It will a key address designed to set out Britain’s latest position. Talks will resume the following Monday and it remains to be seen how they will develop and how investors react to any developments. One thing for sure is that it will be a thrilling journey for GBP.

[FXB trading]

Forex Rollover/Swaps explained
A forex rollover/swap is the interest paid or earned for holding any trading position open overnight. It is essential to consider the following elements of rollover/swap charges:

• Rollover/swaps are charged on the client’s live trading account only on the positions kept open until the next forex trading day.
• The rollover process begins at the end of day, precisely at 23:59 server time.
• There is a possibility that some currency pairs may have negative rollover/swap rates on both sides (Long/Short).
• When the rollover/swap rates are in points, the forex trading platform changes them automatically into the base currency of the account.
• The rollover/swaps are calculated and applied on every trading night. On Wednesday night rollover/swaps are charged at triple rate.
• The rollover/swap rates are subject to change. Please refer to the Market Watch panel in our MetaTrader 4 for the most up-to-date rollover/swap rates
  

[FXB trading]

 

Water will be a more valuable commodity than oil
 
Water will become a traded commodity, like oil, gold and silver, it’s just a matter of time.

70% of earth may be covered by it, but less than 1% of it is readily available freshwater, which makes it a scarce resource.

It’s value to human life is unquestioned – oil, gold and silver we can live without – we die without water.

The problem for Wall Street and the major international markets is that in addition to overcoming the difficulty of attaching a price to something so essential to our lives, for it to become a traded commodity it also needs to fulfil three criteria: standardised/interchangeable, tradeable and deliverable.

WATER IS MORE EXPENSIVE THAN OIL TO TRANSPORT

Water is always made up of H₂O, but the levels of minerals and metals it also contains depends on the location it is drawn from thus making it difficult to standardise.

Its tradability is dependent on location. There are parts of the world have so much of it their biggest problem is flooding. In others it’s a scarcity and they suffer droughts.

Water is also costly to transport – it costs more to pipe water than it does to pipe oil.

So how can it be said with any certainty that it will become a tradable commodity?

Jean-Louis Chaussade, the chief executive of French utility Suez, recently told the Financial Times that he believed water will become more valuable than oil because of the increased demand from people, industry and agriculture.

DEMAND FOR WATER IS INCREASING BEYOND SUPPLY CAPABILITIES

The United Nations has projected that by 2035, 40% of the world’s population will live with water scarcity. This puts companies in competition with people and farming for supplies.

Local governments around the world are refusing to allow industries to take water from underground to operate which is forcing them to turn to desalination plants or waste water recycling to meet needs.

Instinct tells us that it’s correct to give priority to people and agriculture to the supply of water over industry. But it clouds the issue of government’s inability to manage the provision of water efficiently, and how lack of investment in state-run infrastructure has led to the supply problem and why local government now create barriers for its use by industry.

Converting water into a tradable commodity will result in it being managed more efficiently as a resource. The misuse and over exploitation of the past would be prevented by assigning it a value.

This thinking prompted Fortune magazine to describe water as the commodity that will determine the wealth of nations in the 21st century, in the same way that oil did in the 20th century.

The counter-argument to treating water as a commodity is that it’s a basic human right, and the fear that the world’s poor stand to become worse off as social equality will traded in for economic efficiency.

Trading water rights is already happening in Australia, and to a lesser extent in the western US. The more this happens, the more it becomes accepted and eventually becomes part of the mainstream.

GOVERNMENTS WILL STRUGGLE TO MEET FUTURE DEMAND

The need for fresh, clean water will only increase – by 2050, 55% more water will be needed than supplied today –  and government are unlikely to be able to meet that demand because of the massive investment needed to improve supply management.

Markets can play an important role in providing future water security by helping to fund improvement to water infrastructure. The creation of a futures market to trade water would help to create a baseline pricing mechanism against which regional water tariffs could be fairly set.

There is another fear that water scarcity could eventually see water-rich countries (Brazil, Russia, the US and Canada) form into a group similar to the Organisation of Petroleum Exporting Countries (Opec) despite the current transportation issues inherent in moving water.  But if serious investment isn’t made into infrastructure – $22 trillion over the next 20 years to maintain current supply levels according to some estimates – then the problem of water shortage will become even more acute.

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Why Choose the MetaTrader 5 Trading Platform

Successful traders from around the world have chosen the MetaTrader 5 (MT5) platform for trading Forex, exchange instruments, futures, and CFDs. MetaTrader 5 is an effective, multi-functional platform that provides everything you need to trade the financial markets. MT5 platform can be used by advanced traders as well as beginners since it can be expanded to incorporate additional programs and instruments.

The platform offers advanced financial trading functions as well as superior tools for technical and fundamental analysis. MetaTrader 5 can also trade automatically by using trading robots and trading signals. It is a trading platform that is capable of processing different financial instruments with a wide range of trading activity. Traders may use a wide selection of pre-installed technical indicators and graphical objects to analyse the markets.

The MetaTrader 5 trading system offers an advanced Market Depth feature (with a tick chart and Time & Sales information), a separate accounting of orders and trades, the support of all types of trading orders and execution modes. It also allows you to chart assets at 21 different time frames and gives you the ability to have up to 100 charts open at any given time. With the One Click Trading function and the Market Depth option, users can buy and sell currency pairs, equities, futures and CFDs with just one click. More advantages of MT5 include a user-friendly interface, larger icons, and a wider range of timeframes.

The MetaTrader 5 Web platform allows you to start trading from any browser and operating system. You can analyze quotes of financial instruments, perform trading operations, and access the history of your trades from any computer or laptop powered by Windows, MacOS or Linux. As well as high flexibility, the web trading platform offers maximum data protection, while all transmitted information is securely encrypted. The web platform also supports an additional enhanced protection method through the use of two-factor authentication.

MetaTrader 5 is the best choice for the modern trader as successful trading begins with a powerful and multi-functional trading platform.

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Learn to read between the lines to make better trades

So, you’ve got the trading bug. You’ve made your first profits – albeit modest – by making safe trades. 

There are riskier trading strategies that can earn bigger profits. You know about them, you’ve been warned about them, and you’re not interested because the downside is too great. 

So how do top traders end up making so much more money? 

It’s not by taking bigger risks. 

Profitable traders earn more because they’re better at predicting and understanding how markets react to news and economic data. They read between the lines of the constant stream of information that is available on trading platforms to make more profitable judgements. 

The best traders use information to make a trade before the trend becomes visible to others. 

For profitable traders, breaking news stories and economic data is information to be deciphered into factors that can affect the market. 

It’s not easy. If it was everyone would do it. But it’s far from impossible, and can be learned. 

Understanding economic performance and what affects it is an area that profitable traders excel. 

What follows are examples that demonstrate the importance of being able to translate data and news into something meaningful. 

Example 1. Gross Domestic Product (GDP) is one of the key indicators used to gauge how a country’s economy is performing. 

During the last recession in the US economy’s GDP was $14.3 trillion (2008), $14.2 trillion (2009) and $14.6 trillion (2010). 

During one of the worst economic periods in recent history the US economy was actually flattish and ever-so-slightly growing. 

But it felt much, much worse and to most people it probably felt like it was shrinking. 

So why the disparity between perception and the economic indicator? 

The answer is that America has been accustomed to growth. Since 1945 the US economy had averaged 3.3% growth per year. 

Small changes in GDP can have a huge impact in stock market values. 4% feels like a boom and is reflected in consumer sentiment. 2% growth feels like a recession and flat conjures up bleak, black and white newsreel from the 1930s. 

Any GDP figures above the 3.3% average triggers investors to pull their money out of safe havens, employers start hiring and consumers start buying. Anything less than the 3.3% average triggers negative reactions. 

Example 2. How should you react when Apple, IBM or Microsoft post successful quarterly, half-year or yearly results? 

These are companies with combined revenues that run into the hundreds of billions of dollars. So, clearly, they are important. But a far more significant indicator of economic health is the success of startups, not the giant corporations. 

The Kauffman Foundation, the US’s top entrepreneurial think tank, revealed that the most important contributor to a nation’s economic growth is the number of startups that generate billion-dollar revenues within 20 years. 

They suggest that the US needs between 75-125 billion-dollar startups per year to maintain economic growth. 

Example 3. GDP is a widely used by economists to measure economic progress, but it falls short of incorporating the impact the economy is having on average citizens and the day-to-day realities of life. 

The Genuine Progress Indicator (GPI) was created in 1995 by the Redefining Progress think tank as an alternative measure to GDP and tries to reveal a perspective on a nation’s economic prosperity. 

GPI and GDP calculations are based on the same personal consumption data, but GPI is adjusted by applying monetary values to non-monetary aspects of the economy. 

Many GPI factors have a direct impact on people’s quality of life, while traditional economic focus is more strictly on making money. 

So far, it has been adopted except in Canada and some smaller European nations. But it has been reviewed by the scientific community and recognised for its validity at gauging the public’s consciousness, which is critical for understanding how an economy feels to consumers. 

There are also some popular economic ‘myths’ involving government that need to be debunked to clarify their relevance and impact. 

‘Increased government spending helps the economy grow.’ All monies that a government injects into the economy must first be taxed or borrowed. It doesn’t create new income or increase production it simply moves money to another part of the economy. 

‘Government spending makes people more productive.’ This can often have the opposite effect, and can make an economy worse. For example, there are some welfare programmes that encourage recipients to rely on government handouts rather than work. However, spending on infrastructure improvements can reduce transport costs which can then increase productivity and help the economy. 

‘Governments should bail out faltering industries to revive the economy.’ Again, the opposite is largely true. Bailouts effectively reward reckless spending and encourage more of the same in the future. However, government leaders are sensitive to bad headlines, for instance when a high-profile company closure will result in widespread job losses. Politically, it makes sense to save those jobs with a bail out, but not economically, especially if they are not followed up with measures to improve how that organisation runs its finances in the future. 

‘Tax cuts only reward the rich.’ Strategically programmed tax cuts stimulate economic growth by encouraging work, savings and investment. In the US high tax rates were reduced during the 1920s, 1960s and 1980s. Economic growth and increased investment followed. The economy grew 59% from 1921 to 1929, 42% from 1961 to 1968 and 34% from 1982 to 1989. 

The populist headline that usually follows high end tax cuts is that the government are simply helping the rich get richer. To an extent this is true, but they also create more jobs, help people to save for their children’s education and increase earnings in general. 

The real point is that the ‘rich’ got rich because they are better at making money than other people and are far better at using money than most governments. 

Some traders are better than others because they are better at understanding economic data and news and its implications. 

And now you know how to become a better trader. 

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It’s going to get volatile sooner or later

 

Strap yourselves in, the markets are going on a rollercoaster ride. And depending on your appetite for risk you should prepare your portfolios accordingly.

 

If you want to protect what you have, the sign posts to the safe havens haven’t changed and are easy to read.

 

If you want to try and ride the volatility and believe you have the know-how to profit from it, then take a deep breath and start reading between the lines of news stories. There’s no roadmap for this because the outcome is far from certain.

 

The ongoing chess match between two superpowers has reached a critical point, and control of the Arab states is set to be redefined according to whose plans play out the most successfully with Syria as the focal point.

 

From 2012, former US President Barack Obama argued that the US shouldn’t intervene in Syria’s civil war, wary of the anti-US atmosphere resulting from conflicts in Iraq and Afghanistan.

 

Russian President Vladimir Putin stepped in and directed the Syrian conflict in favor of Russia, Iran and the Assad regime at the expense of the US and its Arab, Israeli and Turkish allies.

 

Perhaps it was payback for Washington meddling in Serbia and Bosnia in the 1990s.

 

Turkey, a long time US ally, now seems to be aligning themselves closer to Russia. The King of Saudi Arabia has just made the first ever state visit to Russia in a prologue to billions of dollars’ worth of deals between the two nations.

 

If Russia continue unchecked they’ll have a greater influence on the Middle East than the US, and that’s a situation the Americans cannot allow to happen – they’ll have to react – and that’s the big unknown. How they react and the outcomes that result are going to cause volatility in the markets.

 

So how does a trader prepare – or take advantage – of this upcoming situation?

 

Expect the currency markets and the price of oil to experience the highest levels of volatility in the wake of an escalation of conflict in the Middle East – especially in European stock markets. But other commodities will also experience volatility.

 

Significant movement in the VIX (Volatility Index) – also known as the fear index – reflects the market participants perception about the market’s future volatility.

 

The safe havens, like Gold and other precious metals, tend to do well during periods of extreme volatility.

 

It’s no coincidence that Russia has been stockpiling gold for years, and despite official figures no-one really knows how much they are holding because they’ve also been mining gold at a far greater intensity in recent years.

 

Gold is the insurance policy countries take out when currencies are set to fall, China has also followed Russia’s lead on gold and this could be very significant if the US dollar loses its status as the leading reserve currency.

 

Those hoping that Cryptocurrencies can step into the breach and restore calm to volatile currency markets need to bear in mind that their very existence is still precarious. If it doesn’t yet have the backing of the central banks it’s hard to envisage a reality where it is taken up in a significant enough volume to be able to provide buoyancy to free-falling currencies. This could explain why China has blocked Cryptocurrencies – perhaps it has designs to take over from the USD as the leading reserve currency.

 

As ever, the financial institutions will play a significant role in how the markets react.

 

New money has been pumped into economies at unprecedented levels in recent years in an effort to promote sustainable growth. But at the same time world debt has increased to a point where a significant crash is no longer being talked about in terms of ‘when’ and not ‘if’.

 

Why? Because world debt has increased to a point where it can no longer be paid off. It’s at $65 trillion and climbing.

 

If you were to ask a real estate agent to put a value on the value of all the land in the world today, based on current market values, it wouldn’t come anywhere near the figure of debt that countries have accumulated.

 

And what happens when what you own is worth less than what you owe and you can’t pay it back? The bank forecloses.

 

This will translate into an economic crash of proportions that have not been witnessed before. Years of depression will follow, as global economies effectively press the reset button to bring debt back to manageable proportions.

 

It’s time to prepare for the volatility, it’s coming.