Forex Blog

Soon the New 2008 Year will come and I just want to wish you a happy Forex/CFD/Stocks trading in the next year. Earn more than you’ve got in 2007, learn new strategies and open new opportunities on the Forex market! Never stop at what you’ve already mastered and you will find your own financial freedom!

OK, the New Year is coming close and as this year is ending it’s about time to try to forecast the future of the Forex market (and some other factors that influence Forex) for the year 2008. My last forecast (for 2007) didn’t get its own post on this blog, but I must admit that it was a disastrous attempt - I thought that dollar will start to grow and it lost more than 10% against euro, I also predicted for the oil to remain below $65/barrel and it got beyond $90/barrel.

By posting my forecast to this blog I can be sure that I will be able to compare actual results with my thoughts exactly as they were. And maybe it will help some long-term traders too.

So here it is, 2008 forecast:

EUR/USD - ~4% down to about 1.4100.
GBP/USD - ~4.3% down to about 1.9100.
USD/JPY - ~9.6% down to about 101.50.
EUR/JPY - ~10% down to about 148.80.

Oil - it’s hard for me to predict this one, but judging from the outlook on growing dollar, it should remain in the $80-$120/barrel boundaries for the whole 2008. Yeah, that’s a huge range, but oil is really volatile.

Interest rates:
Fed is more likely to lower the interest rate by 1%-1.5% next year (2.75%-3.25% by the end of the year).
ECB will most probably be lowering the rates or holding them around the same level - 5-5.5% by the end of the year.
BoE will certainly cut - 3.75%-4.0% by the end of the year.
Only Bank of Japan looks bullish on the interest rates to me - 1%-1.5% by the end of 2008.

Anyway, this is just a Forex trader’s forecast, so don’t rely on it much. It would be also interesting to see your forecasts. Feel free to leave one in the comments.

EUR/USD trend: hold.
GBP/USD trend: hold.
USD/JPY trend: hold.
EUR/JPY trend: hold.

EUR/USD continued to rally today after four unprecedented days of growth, making it the full bullish week for this currency pair with the every trading day session ending in favor of euro. Even holidays with their low financial trading volume couldn’t save USD from losing 2% against EUR.

Chicago PMI (Chicago Business Barometer) rose to astonishing 56.6 in December after being only 52.9 in November. The average forecast for this indicator was around 52.0. So, it should definitely improve current dollar’s stance.

U.S. Department of Housing and Urban Development released the report on November new home sales, showing a large downward gap between the October and current values - 9%. New residential sales were at 647,000, while October’s value (revised down from 728,000) was 711,000. Analysts expected a lesser drop to 715,000.

Despite the holidays period has already came to the U.S. and European markets, EUR/USD is rallying up fast for the second day in a row now. And if today there is plenty of fundamental news that can push euro up by almost 100 pips against U.S. dollar, yesterday’s bullish candle has no such reasons.

Today, the employment market of U.S. showed that it is suffering because of the subprime lending crisis too, initial jobless claims continue to grow - 349k against 340k expected, previous week value was also revised up from 346k to 348k.

November durable goods orders hadn’t met the hopes of the analysts that expected 2.2% growth, it was reported at 0.1% - though, still better than the October’s decline by 0.4%.

December Consumer confidence index reported by Conference Board was the only good indicator which came out in United States today - it grew up from 87.8 to 88.6.

Crude oil inventories fell during the week ending December 21 by 3.3 million barrels. And now Department of Energy says that at 293.6 million barrels they are in lower half of the average range for this time of year.

Jeff MacKenzee, the account manager of the eToro partners team agreed to answer some of my questions regarding eToro’s innovative Forex trading platform. eToro is known for brining to the on-line Forex market trading some untraditional types of Forex trading. eToro platform doesn’t look like any other and can be easily understood by someone who never read about Forex or charting. More information about eToro is available here.

eToro is a relatively new Forex trading platform, what long-term goal do you set for yourself as a trading platform?

eToro’s goal was to create a visually engaging interactive platform based on real-time financial information and transactions, while translating the financial information into several real-time intuitive visual representations and allowing traders to execute multiple financial transactions in an easy “one click” interface.

As the on-line Forex brokerage market looks more like oversaturated now, how do you feel about your future? Was it hard to enter this market? What were your main principles to start providing retail Forex trading services?

eToro provides its traders with the most professional tools, surrounded by a friendly interface. eToro is currently offering advanced trading options like stop loss and take profit, enabling people who have little understanding of trading methods to learn what exactly those options are, and how to take advantage of them. The platform also stands out in the market with its community feature, allowing traders to interact with other traders, share advice and even compete for prizes. In addition, eToro is offering some of the lowest spreads on the market, as low as 2 pips on EUR/JPY for example.

You have developed a custom and very original trading platform for your clients. Why did you choose this way and not offered some generic trading platform, like MetaTrader?

eToro’s advantage is in its simplicity. eToro is the only forex platform that deals with the mental element of entering a new and unknown territory, that most inexperienced traders get when they first have a look at other forex platforms. The user friendly interface allows millions of people around the world to start trading and learn what Forex is, using simple graphics instead of complex charts.

Seeing as your platform doesn’t offer powerful tools for market analysis and trades execution, would it be justified to say that you as a Forex platform aim on the newbie traders rather than professionals?

Professional traders might find eToro extremely useful, eToro offers some of the lowest spreads on the market and unlike other platforms it does not limit scalping. Professional traders know they can enjoy that combination and generate large profits. The newbie will certainly find eToro to be the easiest platform to start trading on and will enjoy the practice mode where he can trade with demo money with no real financial risks until he feels more experienced to try trading with as little as $50 of real money.

Currently you are offering a variety of payment methods to fund the trader’s account, like wire transfer, credit card and PayPal. Do you plan adding more options to deposit/withdraw money?

eToro currently supports Wire transfer, Credit card, Paypal and Western union. Should there be a demand of any other means of payment we will gladly consider it.

Especially in the light of some types of trading offered in eToro platform, do you think that Forex trading is some sort of gambling? Or do you prefer to present Forex as a form of active investing?

Forex is the largest financial market in the world, which according to the The Bank of International Settlements carries a trade volume of $3.2 trillion per day. Yet very few people actually trade that market because they are hardly any places in which one can learn how the Forex world works. eToro presents the movements in a more appealing manner, while explaining to the traders why things happen. Moreover, eToro’s news ticker lets the traders know when important announces are expected, and warns for volatility. All of those actions are intended to make people understand that Forex is far from gambling and that there is a reason why, for example, a change in interest rates in the United States will also cause changes in EUR/USD rates.

eToro brought innovative approach to the quite old-fashioned Forex trading market. Do you plan any new features for your trading platform, or do you think that it is it already overloaded with them?

eToro is constantly improving its platform and launches newer versions, The possibilities are endless. eToro is working in 2 levels in order to improve the platform: financial improvements, like the recently integrated stop loss and take profit; platform improvements, offering the traders new trading methods on top of the ones currently available.

eToro is regularly holding different traders’ contests and competitions. Are they popular among your clients? Do you plan keep them as the regular events? If so, will you be increasing the prize funds?

eToro introduces social elements such as chat features and championships, the idea is to create a trading community that will allow traders to share ideas and ask questions regarding the trades. The trading championship is very popular among traders, and championship leaders often share their trading methods and tips in order to teach the other traders how to trade successfully.

The user support is one of the basic and most important parts of the Forex brokerage. As far as I know traders often leave different on-line brokers just because of their lack of a quality support. How do you approach the user support problem?

eToro has a large support group that is dedicated to assist our traders either via phone, email, or live chat. The support staff is qualified and trained to help with technical issues regarding the program itself, and of course any questions regarding trades, deposits and withdrawals.

What form of market analysis would you recommend to your clients? Do you offer any educational materials on Forex market to them?

The eToro forum has a dedicated section for forex education, For example - the admin posted a list of the major announcements and their effect on the markets, referring them to the calendar on www.forexfactory.com in order to help them prepare for market volatility.

What is, in your opinion, the main quality the Forex trader should possess to succeed in trading? Is the Forex trading really for everyone?

In our opinion, it is needed to break the “circle of silence” that surrounds Forex trading. Forex is indeed complicated - but as the phrase (attributed to Albert Einstein) goes - “any scientist who couldn’t explain to an eight-year-old what he was doing was a charlatan”.Most traders tend to say that they can’t explain how to trade Forex because it is too complicated, we at eToro think that even the Forex world can be explained using a fun and intuitive platform.

eToro is a new player on the on-line Forex market, it still has to gain traders’ confidence and the loyalty of its customers. But in every business industry the leading positions always have been conquered with innovations and extraordinary approach to the traditional methods. So maybe eToro has some interesting future? If you have any comments on this interview or ideas for the future interviews you can leave a comment here, or via the contact form.

OK, CFD trading is a bit offtopic for the Forex blog, but as many Forex brokers also offer CFD trading services and it is in a lot way similar to Forex trading (high leverage, MetaTrader platform, no dividends), I thought that it would be interesting to share my results for 2007.

I’ve decided to use standard demo account of $10,000 solely for CFD trading in January 11, 2007 with the condition to close all positions before the end of the year and see the results. I’ve closed the last position last Friday, before entering the low liquidity market pre-Christmas period.

Unsurprisingly, the minority of the losing positions outweighed the majority of winning ones. As I was a total newbie to CFD at that moment, my first several positions were badly thought out and planned. So here are the stats:

Total Positions: 26
Profitable Positions: 14
Losing Positions: 12
Total Profit: -$800.10
Total Profit, %: -8%
Average Profitable Position: $417.86
Average Losing Position: -$554.17

Most profitable symbols: #t (AT&T), #mcd (McDonalds), #ibm (IBM).
Most losing symbols: #aig (American International Group), #c (Citigroup), #jpm (JP Morgan Chase).

And yes, all the trades were long (I think there is no point to go into long-term short positions in the bullish stock market). No surprise here - the biggest losers are related to the financial sector, which experienced a very bad year; biggest winners are from IT and consumer’s sectors that wasn’t disturbed by the subprime lending slump.

When I opened positions I’ve used the financial ratings from the various on-line agencies as well as my own vision of the company’s future (that usually proved wrong resulting in the major part of my losers). Stop-loss was usually set to some psychological support level (also wrong, technical support levels with lower loss level proved to be better), take-profit was set the recommended target level or slightly below (in most cases it worked fine).

After six months of CFD trading I started to understand my mistakes and tried to improve my strategy. So I’ve came up with these important “cornerstones” of leveraged CFD trading:

1. Use Alpha and Beta parameters as the indicator of the stock potential (I’ve used the ones from MarketEdge.com).
2. Don’t buy a symbol if some major financial institution states some real reasons against it, or if it has a rating below A.
3. Stop-loss shouldn’t be greater than your take-profit.
4. Close positions that are in a negative zone for more than a month - it’s better to free up some margin to buy a better symbol, there are plenty of them.

I will be trading CFDs for the whole next year too and I will probably start a separate real trading account specifically for such trades. I hope my 2007 experience will help me to gain at least as much as the raw S&P 500 index in 2008.

The Automated Trading Championship 2007, which was started by the MetaQuotes Software Corp. (the company that made MetaTrader trading platform), ended yesterday and the winners have been announced:

Participant Better earned the first prize of $40,000 with his outstanding neural network expert advisor, which has turned $10,000 into $130,475.45 in 12 trading weeks. Too bad this has been done on demo account, not real :-). A very interesting result with almost 150% distance from the second place. Unfortunately his expert advisor won’t be available to the public, as he refuses to sell or reveal it.

Second prize is going to user wackena, who made $55,042.10 out of $10,000 - a lot less than Better’s EA, but still a very convincing result - 450% in over 3 months. The prize for wackena is $25,000.

Third position belongs to user with the nickname Pegasmaster. His expert advisor earned him $15,000 prize, making $39,945.81 balance during the competition.

My own attempt at this championship made it to the 179th place with $6,684.44 balance left - making it a big loser expert advisor. I had no time not only to forward testing it before championship start, but also to backtest it on some accurate data. Anyway I’ve tried and probably in the next championship I will end up with at least a bit better result :-).

Congratulations to the winners and better luck to all who will participate in the next year’s contest!

EUR/USD trend: hold.
GBP/USD trend: hold.
USD/JPY trend: hold.
EUR/JPY trend: hold.

EUR/USD played back fully the yesterday’s decline, but still ended the last week before the holiday period with a small loss. Forex market will be open despite of any holidays, but the price volatility will be low and no major movements can be expected.

November personal income and spendings report turned out to be better than it was for October and not the least reason for it lies in the pre-holiday sales period. Personal income growth of 0.4% failed to meet the 0.5% expectation, but personal spendings grew up 1.1% which is a lot better than 0.7% forecast. Core PCE inflation, as forecast showed, remained at the same level as in October - 0.2%.

Michigan sentiment index for December was revised from 74.5 to 75.5, which is still below the previous the October’s 76.1 value. The consensus among the analysts was that the value be left at 74.5.

Overall, these news are positive for dollar, that might make FOMC think twice before lowering the interest rates further.