FXB Trading Articles

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The financial advice you wish you’d received at 18

We’ve all experienced moments when we wished we’d been better informed and able to avoid a tough situation involving money. Fortunately, this financial advice will help you make better decisions whatever your age and especially if you have a family

Good financial advice is priceless, and the sooner you get it and apply it the better off in life you’ll be.

Today’s 18-year-olds who are preparing to go to university do so knowing that they are going to rack up a sizeable amount of debt by the time they graduate.

Has anyone sat down with them and fully explained the impact debt has on their life?

The benefits of getting a good education are echoed everywhere but strangely young people get little formal financial advice. Aside from their parents, who aren’t always the best at giving financial advice, they learn by experience.

The internet offers lots of financial advice in return for a couple of clicks but it’s mostly confusing and contradictory.

The financial challenges faced today make being engaged with the world of money more important than ever. Job security is something we reference in history books. Banks are a very different entity to what they once were. The world is evolving at a far greater pace and these changes are impacting people more quickly than ever before.

Top 10 financial advice tips

1. Be a saver not a debtor

Few people truly understand debt and its implications. The first real exposure to debt in life is usually the aforementioned student loan. However, they aren’t a true reflection of debt. It’s actually more like a graduate tax. The amount is paid off over 30 years and how much you repay depends on how much you earn. If you earn less than £21,000 a year, you don’t pay back a penny. According to analysis by the Institute for Fiscal Studies, more than two-thirds of graduates will never repay their entire student loan which hopefully makes you think a bit more carefully about what you choose to study. This is explained more fully in point 3.

Saving, especially savings which earn interest, seems to be like an endangered species to people under a certain age. If you have kids open a savings account today, instead of presents (or as well as) ask gift givers to make a deposit into their account and let that snowball gain momentum. By the time they’re 18, you will have already opened up so many more options for them even if going to university isn’t on the agenda. While your savings will be your fall-back position in case something unexpected comes along which requires immediate funding. As for debt it’s not all bad. If the debt you take on leads to an additional income that covers your debt payment it’s a good thing. However, any other debt should be avoided if possible.

2. The sooner in life you learn the value of money the better

Getting a job at an early age might be one of the best things a parent can do for a child because there’s nothing like having to work to make you appreciate the real value of money. The less you earn and the harder the work, the better this lesson becomes.

3. Make yourself valuable

Gaining knowledge is great, but having skills generates a salary. Whatever you choose to learn, make sure you understand its value in the market place and how much potential employers value it. The best education is the one that combines your natural talents with knowledge and makes you sought after. Being better than others at doing something naturally increases your value. And if you’re also doing what you love you’re as close to finding the meaning of life as anyone usually gets. This applies to more than the education you get in school or university. Some people just aren’t cut out for academia, but that doesn’t mean they not smart or can’t benefit from education. Getting financially educated will also make you more valuable. However, this will be explored later.

For more detail : The financial advice you wish you’d received at 18

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Gold and its relationship with terrorism

In recent times, gold prices have fluctuated significantly. From 2008-2013, gold prices increased by approximately 200% and reached an all-time high figure of $531.98 per 10 grams. Since then, it has been experiencing a decreasing trend with the current price being $430.28 per 10 grams. The unprecedented rise was mainly due to the global economic recession, which resulted in investment in gold instead of other failing financial instruments. In the context of gold prices, it is important to understand the basic forces which naturally or artificially control its prices.

Effect of global market indices and Oil prices

The global indices are known to have a significant effect on the gold prices worldwide. From December 2013, when the US NASDAQ rose by 10%, France’s CAC rose by 4.4%, Germany’s DAX rose by 2.78%, and Brazil’s Bovespa rose by 13%, the attractiveness of gold as a safe investment has declined. This has also contributed in generating a 5% decrease in global prices to $1,218/- troy ounce. When interest rates rise, the yields on bonds and other money market options also rise. That makes them more attractive to investors in comparison to gold. In addition, it is believed that its price is also affected by the price of oil to a large extent. Higher oil prices reflect slow growth and so investors are driven to find alternative sources of investment like precious metals.

Financial terrorism and the gold market

Contrary to widespread belief, it is important to understand that the price of gold is not determined in the markets where it is bought and sold physically. It is in fact in paper futures markets where trade speculators place their bets on prices. The big hedge funds trade the various gold futures. When they buy, they pre-assign a ‘stop-loss’ order within their computer programs. The purpose of this stop-loss order is to sell at that specific price automatically.

On the other hand, the bullion banks have total access to the computers and can see all the ‘stop-loss’ points set by the hedge fund companies. As a part of their strategy, these bullion banks purposely dump in large contracts by selling futures in a large amount, with the intention of shorting gold. The purpose is to force the market low enough to auto-trigger the stop-loss orders to be executed.

For more detail : Gold and its relationship with terrorism

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Learn how to trade currency

Guidelines to Learn How to Trade Currency in the Forex Market

Foreign exchange is now the largest currency market that offers a platform to trade in all kinds of currencies in forms of pairs. If you plan on learning how to trade currency in the Forex market, then you must learn the pairing of currencies in the foreign exchange market. It is essential that you learn the fundamental principles underlying the trade of currencies in the foreign exchange in order to get the maximum returns from the investments that you make in the Forex trade.

Learn How to Trade Currency in Pairs

In Forex market, investors have to deal in the pairs of currencies in order to carry out transactions. For example, if there is a pair of Euro and Dollar you have to pay the price of one currency in these pairs. If the current ratio of the Euro to Dollar is 1.4520 then it means that you have to pay 1.4520 dollars to buy one Euro. This is how currencies are exchanged in the Forex market. Similarly, all other currencies are offered in the form of pairs with other compatible currencies. If you want to buy any currency, then you will have to pay the price in the other currency from the same pair.

For more detail : Learn how to trade currency

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Foreign exchange trading platforms

Many salaried individuals are now investing their money in Forex trade in order to increase their monthly income. They invest in Forex as it offers an absolute platform to make money with small amounts. However, you have to be very cautious as trading may reduce your capital if you do not monitor trends regularly. There are a large number of foreign exchange trading platforms available in order to conduct Forex trade.

Important factors related to foreign exchange trading platforms:

There are important factors to consider before choosing a forex platform:

• Is it free to use? Does it offer any additional features if it charges a fee?

• Which technical indicators does it offer?

• Interface for the orders and types of orders that are made available to all.

• Does it support back testing the strategies?

• Has it API for the additional programming?

For more detail : Foreign exchange trading platforms

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Successful foreign currency trading

In order to successfully implement a foreign currency trading strategy, you must be able to assess trends so that you can determine whether it’s a good idea to trade or not.

When choosing the currency pairs to trade in, you should take time to read the historical information as well as evaluate pricing charts so that you can follow trends in forex exchange rates.

How to determine and use forex exchange rates

Many forex traders prefer not to carry out a lot of research. This is where forex software is useful as it only requires past data to evaluate forex exchange rates, and give recommendations about buying and selling of different trade indicators.

The software creates these trade indicators after examining the progress in the forex exchange rates in a certain period of time. The trading software is programmed to identify any defined trend in the exchange rates as the prices change.

Are forex exchange rates reliable?

At a national and global level, foreign currency is one of the biggest and most volatile markets in the economy. This is because prices can fall or rise in minutes. Therefore, it is very important to acquire a trading account that will allow you to track and monitor forex exchange rates in real time.

Trading in out-dated exchange rates is usually not advisable because they have a higher risk of losing and taking traders away from their planned profit margins.

Real-time forex exchange rates or historical data?

Historical and real-time data is significant for all forex traders, and have a big role to play in ensuring that the trading strategy becomes successful.

Historical data records changes in pricing of a particular currency over the past few months, or even years. This is really important during the creation of a trading strategy and inputting data into the trading software. The more data there is, the more likely it is for the software to identify the actual trends.

When the actual trades are placed, real-time forex rates should be used to avoid paying too much to buy currency or closing the trades at a loss due to slippage.

For more detail : Successful foreign currency trading

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Online trading platforms and stock exchanges

The stock exchange market is one of the most liquid markets in today’s economic environment. Trading on these markets is one of the most important activities nationally and globally as it is an effective way in which companies can increase capital with minimum loss. It also gives traders the opportunity to earn profits.

Traders can choose to use one or both of the available channels to trade in stocks. These are online trading platforms and stock exchanges.

The similarities and differences between online trading platforms and stock exchanges are outlined below:

Charging of commission

The two methods have similarities because stock exchanges always charge a commission on every stock traded through them.

The same is true for online trading platforms because online brokers will also charge a commission on the traded stocks. Sometimes this is hidden in the costs, but in spite of what is usually said, they may not charge a lower rate than the stock exchanges. These rates vary from one online broker to another and sometimes may be higher than those in traditional stock exchanges.

Capital gains tax

Governments usually impose a stamp duty in form of a capital gains tax on any stock that is traded on the stock market.

Regardless of the platform, whether it is stock exchanges or online platforms, the trading of shares will attract this tax.

Level of competence required

Although there is no minimum requirement regarding trading experience needed to trade in any of these markets, it should be a guide in deciding which platform to use.

For beginners, it is a good idea to start with stock exchanges since the advice and experience of stockbrokers will make them more able to judge markets and make the right move.

For more experienced traders, getting into online platforms and the stock exchange is a good way of diversifying the places they invest their cash or sell their shares.

For more detail : Online trading platforms and stock exchanges

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Automated forex system trading

What is the advantage of automated forex system trading?

Forex trading now offers millions of people with an automated Forex system trading so that traders can employ a pre-programmed trading system for their Forex trade. There are many advantages to these automated trading systems in Forex market. However, it is essential to understand how it works before using an automated trading system.

Idea of automated forex system trading

An automated Forex system trading is the trading in Forex market that is performed on the basis of computerized programs. These programs are developed on the basis of best strategies for trading. This program can be developed according to the trading approach. This would be a customized automated trading in Forex market, but you can also get the pre-programmed automated systems that can be installed on the computer. These automated systems can run on the basis of robotic Forex trading. In addition to this, these programs can also be created on the basis of signal based trading.

For more detail : Automated forex system trading

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Factors causing foreign exchange volume growth

The foreign exchange market is now regarded as the largest market in the world. The success of the market is because it deals in the only asset in the world that has complete market liquidity: money.

The foreign exchange market deals in the trading of currency. This involves buying one currency and exchanging it for another.

The value of currencies relative to each other is constantly fluctuating. It allows people to gain a profit by buying a currency during a period of stability. Then they sell it if the value of the currency rises.

The Dollar is often considered to be the most stable currency. However, this once highly regarded currency seems to be experiencing a downward trend.

Reasons for depreciation of the Dollar

Several factors have resulted in the depreciation of the American dollar after an unexpected foreign exchange volume growth of currencies exchanged in the market.

Recently, America has made certain economic and political moves that many countries considered to be hostile. In addition, America’s political strategies have had the opposite effect in certain countries where it was trying to gain political power. An example of this is America’s involvement in the lifting of sanctions against Iran. America’s under the table economic war against Iran has always been linked to nuclear weapons. The United States used its powerful economy and its status as the world’s major cultural exporter to leverage Iran’s abolition of its developing nuclear program.

The effect on the Iranian economy

The economic sanctions imposed by America and the other permanent members of the UN security council (UK, France, Russia and China, Germany) affected the Iranian economy.

The consequence was a huge depreciation of the Iranian currency, the Rial. This resulted in Iranians changing their Rials into dollars in order to retain the value of the money they had earned.

For more detail : Factors causing foreign exchange volume growth

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Why most traders do not succeed in forex trading?

Making profits through stocks and shares is not an easy job. Inadequate trading methods, lack of confidence, patience and discipline can lead to a lack of success in the stock market. A trader should really know the tricks of trading. Inexperienced traders, who lack insight, risk all their money in one stock without planning before investing. Planning is a necessary standard in the stock market as complex trading techniques and lack of planning will contribute to the failure of the trader; therefore, successful traders always develop a plan.

Lazy traders will definitely fail

Without significant planning a trader will fail. Many traders are too lazy to develop a successful trading plan as it requires a lot of effort. Effort is necessary for success in the stock market, not just luck. Traders who are too confident and lazy are always in a hurry to chance their luck, which results in failure.

Too much trading

Most of the traders have an addiction to the stock market and invest too much money. In the process of trying to win more and more money, greedy traders can lose a significant amount of money. Good traders should not act like gamblers as trading in Forex is more skilful than gambling at the casino.

Avoiding demo trading

Demo trading is compulsory before actually trading. Traders who are too confident and greedy do not understand the significance of demo trading. Demo trading should be done over an adequate period of time so that a good knowledge of market trends and trading techniques can be obtained. You can get a good idea about how you will perform in real trading through demo trading. In most cases, it is found that traders who cannot earn profits in demo trading cannot earn profits in real trading either.

For more detail : Why most traders do not succeed in forex trading?

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CFDs in the forex market

The forex market is the platform that provides investors with many opportunities to earn money without putting many resources into it. Many people attempt to use their own ideas in this trade and try their luck. In order to understand the concept of CFDs (Contract for Difference) in the forex market, you have to understand short and long positions.

Long and short positions

When the price of a currency increases and one party decides to buy it to get a return, then it takes a long position. However, when the price of a currency decreases and investors decide to sell it to retain the actual amount that they invested, then it is called the short position.

What are CFDs in the forex market?

In the forex market, people trade two currencies on the basis of their expected value at a given time. They do not have to buy or sell the currency at that time. Only a contract is made with a maturity period on it.

For more detail : CFDs in the forex market

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Did the markets miss what happened in Vegas?

Vegas starts to come to terms with shooting but the markets remain unaffected despite 50 lost lives

Over 50 innocent lives were lost in Vegas in another act of random violence, shocking everyone except the markets.

The market reaction to the deadliest shooting in modern US history? Predictably, gun stocks have soared while the value of MGM shares (the company that own the hotel chain) have plummeted.

But for Wall Street and the other markets it’s almost like it never happened.

But imagine yourself, if you can, in America’s playground today. What would you be doing?

How many people are out and about enjoying what makes Vegas what it is?

Would you still want to party in Vegas?

How many have decided to end their visit early and go home?

Have others have decided to cancel their trip to Sin City?

How much money that would have been spent in Vegas today and in the coming weeks is going to stay at home. Probably billions, but that disturbance to the economy is being treated like a scraped knee.

In Catalunya, violence during the referendum for independence from Spain saw 850 people injured. It also had a direct effect on the value of the Euro. It’s likely to have an ongoing influence on Euro/Dollar trading as the aftermath and implications of the Catalan vote are factored in.

It could be argued that the two events shouldn’t be compared. It’s a valid argument until the memory is cast back to how the markets reacted to the 9/11 attacks.

Every event that significantly affects the flow of money has an effect on the markets. It’s like taking some of the oxygen out of the air – it’s going to get harder to breathe.

For more detail : Did the markets miss what happened in Vegas?

[Fx Mental]

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It’s prime time to trade Netflix shares

Netflix share price has risen 59% already this year and is expected to rise even further after the company posts its third quarter earnings figures

If you’re already a Netflix (NFLX) subscriber you probably don’t need too much convincing about how good it is and will appreciate why analysts are predicting that its share price is set to rise even higher, despite the fact that it has already grown 59% this year as it teases the $200 per share mark.

You will notice from the chart that Netflix share price has a tendency to reach a peak as quarterly earnings figures are announced followed by a drop before picking up on its overall upward trend.  

If you’re not a Netflix subscriber then you’re one of the reasons why these analysts expect its share price to keep on rising. They expect that you soon will be. Streaming is the present and the future.

It’s a service that meets the entertainment needs of our increasingly demanding lives. And once you’ve subscribed it’s hard to live without.

Think of it as having unlimited access to one of those old video stores that you used to rent DVDs from. Only with Netflix you never need to leave your home to get your viewing entertainment and you watch what you want, when you want and as many times as you want.

Premium service

Opt for the premium service and you can also view the content simultaneously from another screen, tablet or smartphone. That way you enjoy your favourite show while other members of your family watch what they want.

Most importantly, Netflix offers some of the best shows and movies around in an app that’s very easy to use. So far, they’ve produced hits like “House of Cards”, “Orange is the New Black”, “Narcos”, “Peaky Blinders” and “The Killing”.  

Last week Netflix announced a price rise which immediately boosted stock prices. And they are not worried about losing subscribers because it’s still value for money. By comparison, the monthly subscription for the premium service costs about the same as a cinema ticket.

Third quarter growth expected

Wall Street firm UBS has told its clients that Netflix will report Q3 subscriber growth. This has been achieved without the addition of any compelling new content.

However, new content is being rolled out in the fourth quarter. They’re releasing new seasons of “Stranger Things” and the “The Crown” – two of the network’s most popular shows.

For more detail : It’s prime time to trade Netflix shares

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Buckle up Tesla share price ride is going to be bumpy

Tesla share price has risen on expectations electric cars will dominate automobile sales in the future and high demand for its models. But damaging news reports have concerned the markets and might affect the company’s short term value

This looks like the time for traders to bet against Tesla (TSLA) shares in the short term as the market reacts to reports that Model 3 electric vehicle (EV) deliveries are going to be delayed with news stories about escalating production costs, production line issues and lay-offs throwing doubt on the company’s ability to turn a significant profit on its new model.

The chart above shows that after steep rise of 68% throughout the year the share price is showing signs of volatility.

Barclays were among the first to advise their clients to short Tesla. Their analyst Brian Johnson suggesting a $210 price target – well below the $340 consensus on Wall Street.

Barclays feel Tesla’s November 19 announcement about truck production will be decisive in swaying investor confidence in the company.

Tesla production projections

Tesla are projecting production targets of several million per year in the near future. Telsa also expects significant progress in other business opportunities like battery storage.

On the back of these projections some analysts have been uber-bullish about Tesla. Morgan Stanley’s Adam Jonas (widely followed on Wall Street) has raised his 12-month price target from $317 to $379.

Jonas is basing his outlook on a long-term perspective.

Traditional manufacturers will also produce electric vehicles

Traditional manufacturers, like General Motors, have revealed plans to roll out their own EVs. This has raised fears about Tesla’s ability to handle competition.

However, Tesla have already made a huge investment in infrastructure for EVs. Over $8 billion has been spent on service centres, stores, galleries and the world’s largest battery factory. There has also been proprietary investment in superchargers and destination chargers globally. And this is where Tesla have a significant advantage over traditional manufactures.

In the short-term, negative news stories are having a negative impact on the share price. Reports that Model 3 parts are being made by hand, job losses and missed production targets don’t go down well.

For more detail : Buckle up Tesla share price ride is going to be bumpy

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Strategies for successful forex trading

Are you already a trader who is involved in the forex business and would like to increase your knowledge of the financial markets in order to become a more skilled trader? Or maybe you have just started forex trading and require all the relevant information about forex? Whatever the situation may be, it is your opportunity to start implementing what you have in mind. You can earn a large amount of money using these new trading strategies. You just need to monitor several forex indicators, and the rest is simple.

Successful strategies

You do not need to monitor the events in the market all the time. You can effectively manage the events while simultaneously enjoying trading using these forex trading strategies. Certainly, several traders have already tried to employ them and have achieved great results in the process.

These recent strategies have been devised after thorough forex market research This is based on intensive analysis of the patterns and estimating the specific number of indicators that are responsible for given processes and changes that influence the market. These indicators are the basis of any successful Forex trading.

Let’s move towards achieving goals

1. Have you been unsuccessful in forex trading? Or maybe you are a beginner who has heard a lot about making money through forex trading but don’t know how? We can help you to overcome these difficulties.

2. We advise you to forget all bad experiences in order to move ahead and start planning the future. We can develop new strategies to help you.

For more detail : Strategies for successful forex trading

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Starbucks might be about to surprise Wall Street

For years Starbucks’ shares have mirrored the company’s phenomenal success. However, recently the coffee giant has come under attack from McDonalds and other fast food giants as well as indie coffee shops. This has been reflected in the value of their share price.

After reaching a peak price of $64.87 in June, Starbucks’ shares are down 1.41% overall this year. However, Starbucks has expanded into new territories and brought greater convenience to its clients with the use of innovation. This has prompted some analysts to predict that the coffee-making giant will surprise Wall Street when it releases its fourth-quarter earnings on November 2.

Starbucks experienced tremendous growth between 2011 and 2016 with sales growth above 5%. It all changed in the third quarter of 2016 when sales growth was just 4% while for the first time transaction growth was flat. For the next quarter, sales growth remained below 5% while transaction growth was negative (-1%).

Competition

Starbucks’ growth has been affected by competition from indie coffee shops and traditional fast food giants who have widened their menus to capture some of the coffee drinking market.

Indie coffee shops are opening everywhere and have taken away the trend-focused millennials market. In contrast, the price-focused crowd is going to McDonalds for their coffee.

Changing consumer preferences have had a big influence on Starbucks’ recent performance. The competition has expanded their menu options and physical store locations to better reach a wider customer base. Therefore, consumers have been drawn away from Starbucks which has resulted in the slow down of sales growth.

As a result, Starbucks has embarked on a three-pronged response to the threats.

Response to competition

Mobile app

The first is Starbucks’ mobile ordering and pay app which boosted sales last quarter. Mobile payments now account for 30% of Starbucks transactions in US stores, up from 29% in Q2 and 27% in Q1.

High-end roasteries

Starbucks is concerned that it could lose its edge to independent coffee shops. Therefore, as the second part of its response, Starbucks has invested in opening high-end roasteries to maintain its upscale reputation. It intends to open 20 to 30 Roasteries, which are tourist-friendly mega-locations roasting coffee in-house and serving expensive drinks.

For more detail : Starbucks might be about to surprise Wall Street

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Australia’s economy is going down and under

Australia’s economy has enjoyed 26 years of growth but it’s about to come to an abrupt end. It will be triggered by the bursting of its property bubble and falling revenues from its main export commodities iron ore and coal

Australia recently recorded its 104th consecutive quarter of growth without a recession, breaking the record set by the Netherlands. It prompted Australia’s federal Treasurer Scott Morrison to claim that the economy was in “surprisingly good shape”. His statement is reminiscent of that old joke. How can you tell if a politician is lying? His lips are moving.

Australia’s economy is not in good shape. Its growth has been built on demand for commodities like coal and steel from China and investment in an over-inflated property market. These dual dependencies are about to be brutally exposed.

The exact timing and full impact of Australia’s economic tailspin is unknown. However, the precise date and exact magnitude are unnecessary to take advantage of the collapse as a trader. The circumstances that make an economic crash inevitable are already in place and it is far better to be five months early rather than five minutes late for an opportunity like this.

Financial meltdown

The inevitability of Australia’s financial meltdown is in part due to an external factor which it has no control over: China.

Societe Generale’s China economist Wei Yao recently said: “Chinese banks are looking down the barrel of a staggering $1.7 trillion worth of losses”. Hyaman Capital’s Kyle Bass calls China a “$34 trillion experiment” which is “exploding”, where Chinese bank losses “could exceed 400% of the US banking losses incurred during the sub-prime crisis”.

Simply put, if China’s economy bends Australia’s will buckle.

Falling demand

Australia’s biggest export is iron ore and frequently the country’s main driver of a trade surplus and GDP growth with 81% of its iron ore exports going to China. However, demand for iron ore in China is falling because 50% of it comes from property development which in 2017 is under stress as prices level off and credit dries up. Critically, the price of iron ore has fallen 60% over the last 6 years.

Australia’s second biggest export is coal with supply increasing to 388Mt in 2016 from 261Mt in 2008. Unfortunately, its value has crumbled over that same period dropping from $54.7 billion to $34 billion. Worse still is the fact that Japan and China are Australia’s biggest customers, and both are scaling back their use of it, with China recently committing to ending all coal imports in the near future.

Perhaps the most damning statistic for Australia’s mining industry is that between 2015-16 $179billion in revenue cost $171 billion which represents a paltry 3.9% margin. It explains why mining has dropped from 19% of GDP to just 6.8% and will continue to fall.

For more detail : Australia’s economy is going down and under

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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. Understanding how markets behave will help you to make better trades. There are riskier trading strategies that can earn bigger profits but the risks are too great.

What do top traders do?

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

It’s not by taking bigger risks but by learning to read between the lines to make better trades.

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 is 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. It’s actually far from impossible and can be learned. Understanding economic performance and what affects it is an area where profitable traders excel.

The examples below 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, the 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 very slightly growing. However, it felt a lot worse and to most people, it probably felt like it was shrinking.

So why was there a 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 on 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.

For more detail : Learn to read between the lines to make better trades

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Catalunya independence bid plunges Spain into crisis

Madrid‘s attempts to quell momentum in the bid for independence in Catalunya by triggering Article 155 has resulted in Spain’s biggest political crisis in decades and is set to have repercussions for EU

The Catalan parliament‘s declaration of independence from Spain is set to wreak political turmoil in the country and is sure to have far-reaching repercussions for Europe.

In response, Madrid passed measures to take direct control over the region and called for regional elections for December 21.

On Sunday Spain’s prime minister, Mariano Rajoy, sacked Catalan president, Carles Puigdemont, who now faces up to 30 years in jail for his role in the regional parliament’s declaration of independence.

The Catalan parliament vote came after Rajoy sought senate approval for the government’s request to impose direct rule on Catalunya.

Over the weekend hundreds of thousands of people took to the streets of Barcelona to call for unity.

The Euro plunged as news of the declaration broke, the single currency held near three-month lows versus the dollar.

Markets react

Madrid’s blue-chip index the Ibex 35 was down 1.9% in afternoon trading, with all but two of its constituents falling.

Banks based in Catalunya were among the biggest losers, with Banco de Sabadell down 6% and CaixaBank down 4.6%. IAG, the parent company of British Airways and Iberia, was the biggest single faller in Madrid, down by over 6%.

Investors also sold Spain’s government bonds, sending the yields on benchmark 10-year debt up by 5 basis points to 1.603%.

The European Commission has been under pressure to mediate in the row given its destabilising effect on EU unity. It has ruled out the possibility that an independent Catalunya could become part of the EU.

Domino effect throughout Europe?

The EU is in a phase where unity and economic viability is a priority. However, the Catalunya crisis may trigger a domino effect throughout Europe.

Just days ago, referendums in the northern Italian regions of Lombardy and Veneto voted 95% in favour of transferring more powers from the central government to the regional institutions.

The result prompted a more conciliatory response from Rome. It said it was ready to begin discussions on greater autonomy for both the regions.

The economic impact on the EU will also be a worry. The effect of Spain’s rift with Catalunya could surpass Brexit’s affect on Europe.

For more detail : Catalunya independence bid plunges Spain into crisis

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Virtual trading and the global economy

We have seen the rise of virtual trading in the twenty-first century, which is a world that exists entirely on the internet. This has had an effect on the global economy. Bitcoin has now become a widely used currency, especially in China, the economic powerhouse. However, the lack of physical form makes it completely different to what money should be.

A long time ago, the value of money was worth exactly what it was made of. The value of gold coins depended on the amount of gold in circulation. Nowadays, most money is printed on paper, which does not have that much value. Therefore, the government can print as much money as it wants as long as it has the cheap materials needed to print the money.

Bitcoin transactions

Bitcoin is the next step in this worrying trend regarding the creation money. They have no physical form, and they cost almost nothing to create. However, using this currency is very convenient. Online transactions can be carried out using a currency which is suitable for expediting simple financial transactions.

China has become a common user of Bitcoin, and its population uses it for purchases from abroad. The widespread use of Bitcoin in China has resulted in it becoming noted as a large factor in China’s overall economy. A sudden, unexpected drop in the value of Bitcoin has resulted in a slowing down of China’s economy; a negative trend in China’s economy will definitely have an effect on the global economy as a whole.

Most Bitcoin transactions used Yuan, the Chinese currency. When China’s economy suddenly slowed down, the value of Bitcoin began to fall as there wasn’t a large demand for it as before. As a consequence, many Chinese consumers who bought items using Bitcoin owned a currency that was worth less; this discouraged consumers from buying from abroad as they just couldn’t afford it anymore.

The fall in imports requested from China was critical, and it sent shockwaves all over the financial world. The decrease in value of the Bitcoin has decreased trade, and this has resulted in a certain slow down of the global economy. Many businesses dealt with Chinese customers entirely because they were able to purchase their items using Bitcoins.

For more detail : Virtual trading and the global economy