News & analysis
Welcome to TradeFred’s news & analysis page. Here you will find the latest market commentary, company information and insights into the world of online Forex and CFD trading.
Welcome to TradeFred’s news & analysis page. Here you will find the latest market commentary, company information and insights into the world of online Forex and CFD trading.
Welcome to the latest edition of TradeFred’s weekend roundup, our look at the major news events that took place while the markets were closed. This week’s instalment covers the implementation of the USA’s oil sanctions, the latest on Brexit negotiations and much more besides.
The United States confirmed it would temporarily allow eight countries to continue importing Iranian Oil after its sanctions come into effect on Monday. The decision was announced by Secretary of State Mike Pompeo, who declined to name the jurisdictions involved.
US President Donald Trump announced earlier this year that he was pulling out of the 2015 nuclear deal and re-imposing sanctions on Tehran. The move was likely designed to curb Iran’s nuclear ambitions and halt its support for militia in Syria, Yemen and other parts of the Middle East.
Turkey’s Energy Minister revealed his country was one of the jurisdictions to be granted a temporary reprieve, while Iraqi officials confirmed the same applied for their nation – as long as it does not pay Iran in US Dollars. An unnamed source said India and South Korea were also on the list.
Mr Pompeo said the waivers had been granted because the jurisdictions had “demonstrated significant reductions in their crude oil and cooperation on many other fronts.” He added that the ultimate goal was to stop exports from Iran completely.
In response, Iran’s Supreme Leader claimed the world was united against the US President’s policies. Supreme Leader Ayatollah Ali Khamenei. He said: “America’s goal has been to re-establish the domination it had (before 1979) but it has failed. America has been defeated by the Islamic Republic over the past 40 years.”
Meanwhile, both Democrats and Republicans continued to campaign heavily as the US midterm elections edge closer. Former President Barack Obama warned against the use of rhetoric that inspired fear, while Donald Trump spoke heavily on immigration.
Finally, electric carmaker Tesla confirmed that the US Securities and Exchange Commission (SEC) has issued it with a subpoena over forecasts the company made about production of its Model 3 car last year. The regulator is examining whether investors had been misled over the targets, which were not hit on time.
Both SEC and the US Department of Justice are said to be investigating whether Tesla gave misleading information to the markets. The company wrote: “To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred.”
The Brexit negotiations were back in the spotlight over the weekend, with a newspaper article claiming that an all-UK customs agreement had been made that would finally alleviate the problematic issue of the British-Irish border. The report said that Theresa May’s cabinet would be discussing the plans on Tuesday and it was hoped enough progress would be made for the EU to announce a special summit on Friday.
However, Mrs May’s office has dismissed the plans as “speculation”, claiming she had been “clear” that good progress was being made. A spokesman confirmed her stance that “95% of the withdrawal agreement is now settled and negotiations are ongoing.”
The Sunday Times newspaper has claimed that more than 70 leading names in business have joined the call for a public vote on the final divorce terms. Companies are said to be extremely worried the UK will either crash out of the economic bloc without securing an agreement, or a deal would be struck that limits their access to the continent’s markets.
According to the newspaper, the business leaders said in a letter the country was “now facing either a blindfold or a destructive hard Brexit,” claiming either scenario would “further depress investment”. It continued: “They will be bad for business and bad for working people. Given that neither was on the ballot in 2016, we believe the ultimate choice should be handed back to the public with a People’s Vote.”
The Brexit department claimed it was confident a deal would be reached that worked for businesses and reaffirmed the government’s opposition to a second vote.
Meanwhile, German Chancellor Angela Merkel faced more difficulty over the weekend, as her Christian Democrats (CDU) party argued over what to do when she steps down as chair. The discussions involved whether to take up a more conservative agenda after years of moving more to the centre of politics.
Health Minister Jens Spahn, who is one of the candidates to replace Mrs Merkel, said the party had “watered down” its profile over the last few years. Its Deputy Chair Armin Laschet warned against the move, saying it should stick to its current course.
Both members of Mrs Merkel’s grand coalition were due to meet to discuss their future, with support for the Social Democrats (SPD) hitting a record low.
In other news, Italy’s Deputy Prime Minister said that the agreement made between his 5 Star Movement and the League must be adhered to. Luigi Di Maio made the statement after a government official raised doubts about one the document’s key pledges.
The leader of the League Matteo Salvini denied there was a disagreement between the two parties, claiming he was “very happy” with the legislation that had already been created and what was still to come.
Iran has again called on the EU to support the country in the face of Monday’s oil sanctions. The country’s state news agency said Tehran’s Foreign Minister spoke with his counterparts from Germany, Sweden and Denmark, plus the European Union’s foreign policy chief to come up with measures to limit the effect of the sanctions.
The officials were said to have “highlighted the importance of the finance ministers’ commitment to Europe’s financial mechanism to save the Iran nuclear deal and said the mechanism will be operational in the coming days.”
India has said it and other oil buyers will benefit from the waiver granted by the US that temporarily allows them to buy Iranian oil after the sanctions hit. Oil Minister Dharmendra Pradhan praised the work of Prime Minister Narendra Modi in highlighting the impact a complete ban would have on the economy.
Meanwhile, China has confirmed it would provide economic aid to Pakistan after a meeting over the weekend. Last month, Pakistan received $6 billion from Saudi Arabia and still plans to ask for a bailout from the International Monetary Fund (IMF) to try and avert a balance of payments crisis.
The country’s foreign reserves have plummeted by 42% since the start of the year, down to $8 billion – less than two months of import cover. Pakistan’s new leader Imran Khan told Chinese President Xi Jinping he had inherited “a very difficult economic situation”.
China’s Vice Foreign Minister Kong Xuanyou said: “During the visit the two sides have made it clear in principle that the Chinese government will provide necessary support and assistance to Pakistan in tiding over the current economic difficulties. As for specific measures to be taken, the relevant authorities of the two sides will have detailed discussions.”
Finally, Australia’s Trade Minister travelled to China to try and ease political tensions between the two countries. Simon Birmingham was there to attend the China International Import Expo (CIIE), which is said to be an attempt by Beijing to alleviate foreign concern about the country’s trade practices.
The relationship between the two nations had soured over Australia accusing China of trying to meddle in its media, universities and policies. It also banned Huawei Technologies Co Ltd from suppling equipment for a 5G mobile network. This is despite Beijing still being the country’s top goods and services trading partner.
There was once a time when Forex trading was reserved solely for large multinational corporations and the super-rich. This all changed with the creation of online exchanges, which enabled retail traders to join the elite and experience the world of investment for themselves.
Most online brokers, such as TradeFred, will let you open an account with a small initial deposit so you can start your investment journey without risking too much capital. It also gives you a good opportunity to learn the basics and develop your strategy.
A common issue for most traders is how to turn that small investment into a larger sum of money and keep growing their balance from there. With this in mind, we have come up with a few points to consider. While of course we cannot guarantee success, following these rules should give you a better chance of making more informed decisions.
The first point for discussion is why you should bother with a small balance in the first place. As the saying goes, you have to speculate to accumulate – so do you not have to spend big to win big?
A simple answer to that is no. Starting with a small account balance will force you to practice discipline and money management – skills that will not only help you maximise any profits you make, but also minimise your losses.
By using these techniques alongside your own knowledge and skill, you should slowly be able to build up your account balance to become a lot more healthy than your initial investment. Of course, you will need a lot of patience to achieve this, but it is important to recognise that successful Forex trading is not about making lots of money fast. Instead you need to be prudent with your funds and know when and how to make your move.
Another reason to start small is the fact that you are limiting the amount of capital you are putting at risk. While you should have already devised your trading strategy with a free demo account beforehand, nothing can truly recreate the pressures associated with putting your own money on the line. Having a small balance will therefore alleviate some of the stress and allow you to focus on the basics.
Starting with a small account balance means you will have to be very selective with your trades. Rather than spread your money far and wide, it is better to wait for the right opportunity to come along and use your skill to get in and out of the trade at the perfect moment.
Most beginner traders will end up losing their money because they feel they need to constantly be involved in the markets and try to “force” profits. By failing to understand the necessity for patience and discipline, they will instead believe that constant investment is the right way to be in control – not realising that the more you try to control Forex, the more it will actually control you.
In contrast, the more you practice patience and money management, the more your confidence will grow as you see your account balance increase. When this happens, you will realise that your discipline has paid off and will be more likely to continue this approach in the future.
This may seem like a strange point at first, seeing as though the majority of people get into Forex trading in the hope of making money. If you are investing with a small account balance, however, profits and earnings cannot be your initial goals.
Instead, you will need to be motivated by honing your skills and adopting proper trading processes such as the aforementioned patience and discipline, but also following your investment strategy to the letter. By focusing on your method of trading, you can learn the key attributes for success that are important for all investors – no matter the size of their account balance.
You should also remember that not all of your trades will be profitable, which is where risk reduction comes into play. If you do end up losing money, it is important not to have the mindset of recovering your losses at all costs – as this will only lead to you making poor decisions and putting even more of your capital in danger. You should instead look at the reasons why you made a loss and see what you can learn from your trade to try and prevent a similar thing happening again.
Sometimes Forex trading will feel a lot like you are taking one step forward and two steps back, perhaps making you a little impatient. If you are investing with a small account balance, this could be even more frustrating as you believe you will never end up building your account.
It is therefore important to recognise whatever progress you make, no matter how small. Even if you come out with a $50 profit each month, you are still making money. All the while, you will be picking up the necessary discipline and experience to in time open bigger positions and perhaps achieve higher profits – but only when you feel the time is right.
Consistently making a profit, even a small one, will also build up your confidence and keep you on the path to becoming a good trader. This is extremely important, as you should always be 100% sure of yourself with every investment you make.
Most new Forex traders will start their investment journey with the mindset of wanting to make a lot of money. Instead, however, they should focus on how they are going to achieve it. By doing this, you will be more inclined to learn how to trade properly and develop a successful strategy.
Rather than trade as though you need to make money, think like the professionals would do and pretend you already have a large account balance. Then the focus will shift from constantly having to turn a profit, to protecting the funds you have and building your account over time.
By changing your mindset from the money to processes, you will learn all the necessary skills adopted by professional traders. As we said before, profits should not be the main motivator – as you should instead focus on the things that will keep you trading for as long as possible.
If you are constantly chasing profits, you will become more likely to make rash decisions, which will ultimately cause you to crash out of the markets completely. You should instead think and act like a pro, as these qualities will ensure that even if you do end up making a loss, you will still be able to live to fight another day.
Successful Forex trading is all about learning how to invest. Without this knowledge, you will never be able to consistently make a profit – so all the money in the world will be no help to you whatsoever. Start small, understand the basics, and you will give you the best possible chance of achieving your goals.
The British Pound jumped higher against other major currencies on Thursday on reports that embattled Prime Minister Theresa May has secured her first major Brexit deal. This follows months of uncertainty that has sent Sterling on a rollercoaster ride – making it extremely volatile for investors.
According to the Times newspaper, UK and EU negotiators have agreed that British financial services companies will continue to have access to European markets after Brexit. Government sources claimed that an accord had been reached on all aspects of a future partnership, including the exchange of data.
The news will be a welcome boost to Mrs May, who is still facing a potential rebellion from hard-line Eurosceptics within her Conservative party. She could also struggle getting her Brexit plans through Parliament, assuming a deal is completed with the EU in the first place. Currently, there is still no guarantee on that, with ‘no-deal’ preparations said to be continuing.
Sterling was currently 0.97% higher against the USD as of 09:30 GMT at 1.2889. It was also performing better than the Euro and Japanese Yen, increasing by 0.39% and 1.01% respectively.
Investors’ attention will now turn to the Bank of England’s (BoE) monetary policy statement later on Thursday. Britain’s central bank is widely expected to hold steady on interest rates, while leaving plans to raise borrowing costs in “suspended animation.”
Analysts do not expect any activity from the bank until at least May, after the UK has left the economic bloc. Of course, it may have to intervene earlier if Britain crashes out without a deal. Traders have been warned that they cannot expect the BoE to rescue the Pound at the moment, as it has been clear the outlook for the British economy is intrinsically linked to a successful Brexit.
Meanwhile, a poll by Reuters expects Sterling to jump by 5.5% versus the Greenback if a divorce deal is reached. Economists believed the Pound would rise to $1.35 if negotiations prove fruitful, with three-quarters of those polled predicting an agreement will be made.
It was not all good news, however, as the same poll predicted Sterling would slide by more than 6% if the UK crashes out without a deal. In this scenario, the Pound is expected to tumble down to around $1.20.
Cryptocurrency prices are on the up, despite reports that the UK’s finance regulator is considering whether to clamp down on the sale of derivatives. According to the Financial Times newspaper, the Financial Conduct Authority (FCA) will launch a consultation next year to decide if the assets should be banned.
Unlike spot-market trading on cryptocurrencies, the sale of assets such as options, CFDs and futures currently falls within the FCA’s remit and requires its official authorisation. The regulator is also reportedly planning a parallel consultation on whether to extend its reach further into cryptos themselves, as well as infrastructure providers such as exchanges and wallet services.
The FCA released a statement, making clear that “in its view, cryptoassets have no intrinsic value and investors should therefore be prepared to lose all the value they have put in.” It added that the assets as a whole could pose “potential future threats to stability”.
The news comes as a new report published by the Cryptoassets Taskforce – a body that includes representatives from the FCA, the UK Treasury and the Bank of England – warned that leveraged crypto-based derivatives carried more risk that spot market trading. It said they could “cause losses that go beyond the initial investment” and impose additional fees.
Some commentators offered muted praise that the UK’s regulator was taking a proactive stance on the subject of cryptocurrencies. However, the Chairman of CryptoUK, Iqbal Gandham, stressed that “it is important that new rules are proportionate and do not put up excessive barriers, including for retail investors.”
Despite the potential legal hurdles, major cryptocurrency prices were largely higher on Tuesday. Bitcoin was darting between positive and negative territory, currently up slightly by 0.045% as of 12:03 GMT. The most popular digital token was priced at $6,316.96 a rise of $3.04.
Ethereum looked more steady at $196.26, a rise of $0.57 or 0.291%. Meanwhile, Ripple and Litecoin were also higher at $0.45 and $49.19 respectively.
Safe haven assets received a boost on Tuesday, as simmering trade tensions threatened to boil over once more. US President Donald Trump has stoked fears by claiming he has billions of dollars’ worth of new tariffs ready if no deal is agreed between his administration and China.
Mr Trump said: “I think that we will make a great deal with China and it has to be great, because they've drained our country. And I have $267 billion [in tariffs] waiting to go if we can't make a deal.”
The news caused Gold future prices to inch up to $1,229.30 per troy ounce by 04:30 GMT on the New York Mercantile Exchange, a rise of 0.1%. The precious metal is widely considered to be a beacon of safety in times of market turmoil.
In contrast, more volatile assets such as stocks struggled, with Wall Street closing in the red. The Dow Jones Industrial Average plunged more than 200 points, wiping out a 350-point gain earlier in the trading session. Meanwhile, the S&P 500 fell by 0.6%.
The Chinese Yuan also suffered in early trade on Tuesday, sinking to a near two-year low. It inched closer to the key level of 7.000 CNY per US Dollar, while the USD/CNY pair moved higher to 6.9699 by 03:30 GMT, a rise of 0.2%.
CNY has been under continuing pressure in recent months and has dropped by 9% since April. Chinese media said this week that its currency is unlikely to weaken beyond the 7.000 USD mark.
Both the US and Chinese presidents are expected to be in attendance at next month’s G20 summit in Buenos Aires where they could arrange to meet. Mr Trump claimed he was ready to make a deal now, but that China was not. He did not elaborate further.
For their part, the Chinese government has said that communications have been ongoing at all levels to try and find a solution. Its Foreign Ministry spokesman, Lu Kang, said: “If the United States is not willing to promote win-win cooperation with China then China is fully confident in being able to continue with its reforms and develop itself.”
President Trump has long-threatened to slap additional levies on all remaining Chinese imports into the US, if Beijing does not meet his demands for reform. He has insisted that China makes sweeping changes to its trade practices, technology transfer and industrial subsidy policies.
Welcome to the latest instalment of TradeFred’s weekend roundup, our look back at the most important news stories that took place while the markets were closed. This week’s edition covers the latest on America’s threat to quite the INF treaty, more troubles for Angela Merkel and much more.
US Defence Secretary Jim Mattis has tried to calm the fears of America’s European allies by continuing dialogue over an important arms treaty. Earlier this month, President Donald Trump threatened to withdraw from the Intermediate-Range Nuclear Forces (INF) agreement with Russia, claiming Moscow had repeatedly broken the pact.
The treaty has been in place since 1987, when it was signed by the last leader of the Soviet Union Mikhail Gorbachev and then-US President Ronald Reagan. Some European leaders are worried that a breakdown in the pact could mean a return to “Cold War times”.
Speaking to reporters, Mr Mattis said: “We are in consultations with our European counterparts, I was speaking about it the day before with the German defence minister, and so as I said the consultations continue.” He added that he expected there to be some sort of “culminating point” In December, when several NATO ministers are due to meet in Brussels.
Meanwhile, Russian Foreign Minister Sergei Lavrov said his country was cooperating with a list of questions and concerns the Americans had over the treaty. He added that the queries had been passed to the relevant departments and answers were being prepared.
In other news, Mr Mattis confirmed that his Chinese counterpart would be arriving in the US next week to discuss military relations – despite the fact the two nations are currently embroiled in a bitter trade dispute. He said: “Strategic competition does not imply hostility. I have met with my counterpart in Beijing a month ago, I met with him again in Singapore a week ago, he is coming to Washington next week to continue our discussion.”
Finally, Tesla’s maverick CEO Elon Musk has been at it again, saying the tweet about taking the company private was “worth it”. He announced that funding had been secured for the deal and valued the business at $420 a share – a move that drew the ire of investors and the US Securities and Exchange Commission (SEC).
After an investigation, SEC fined Musk and Tesla $20 million each and told the entrepreneur he must step down as chairman. However, he is still able to remain as the company’s CEO.
German Chancellor Angela Merkel’s leadership woes showed no sign of abating over the weekend, as her governing coalition suffered heavy defeats in a local election. Her CDU party and her partners the SPD each polled 10% on the previous ballot in the Hesse state.
The result caused the SDP’s leader to call the current government “unacceptable” and urge the CDU to agree to a “clear, binding roadmap” ahead of the scheduled coalition review next year. Andrea Nahles said she would then use this meeting to “check whether this government is still the right place for us”.
Some commentators believe the coalition could break up sooner rather than later, effectively bringing down Mrs Merkel. The SPD has been in freefall in recent votes, with many within the party blaming their alliance for their current woes.
Meanwhile, French Finance Minister Bruno Le Maire warned that the Eurozone is not yet prepared to deal with another economic crisis. He made the comments while discussing the potential fallout from Italy’s controversial budget, which was rejected by the European Commission last week.
Mr Le Maire claimed there would be no risk of contagion from Rome’s budget crisis, despite some officials worrying the standoff would delay badly-needed EU reforms. Other leaders do not appear to be overly worried of the situation, with Austrian Finance Minister Hartwig Loeger saying he was confident that the current problem would not spark the sort of sovereign debt crisis that engulfed Greece.
Rome’s Economy Minister also waded into the situation, claiming the spread between 10-year Italian and German sovereign bonds was “damaging”, but said his country’s banks would be fine. Giovanni Tria admitted the spread has more than doubled since March, but was due to political uncertainties and not the controversial budget plans.
Finally, the British Chancellor said he would be able to steady the economy in the event of a no-deal Brexit. He claimed he had the fiscal reserves that would let him intervene if talks between the EU and UK broke down.
China’s industrial firms suffered a slowdown in profit growth for the fourth consecutive month in September. Figures showed that profits rose by 4.1% year-on-year last month, up to 545.5 billion Yuan. This was less than half the pace in August and the slowest since March.
Earnings have been under pressure thanks to a slowdown in production and sales, declining price growth and limited credit sources. The escalating US-Chinese trade war is also adding to the pressure.
Meanwhile, Iran has shuffled its economic team ahead of looming US sanctions. The restrictions were caused by President Donald Trump’s decision to pull out of a multinational nuclear deal – a move that could seriously harm Tehran’s oil exports.
Iranian President Hassan Rouhani claimed America was isolating itself amongst its allies, saying: “It does not happen often that the US makes a decision and its traditional allies abandon it.” European countries had criticised Mr Trump from pulling out of the accord and have been planning extra economic measures to offset the impact of the sanctions on the country’s economy.
Finally, right-wing Congressman Jair Bolsonaro has claimed victory in Brazil’s presidential election. The former army captain secured 55.2% of the vote, against his rival’s 44.8%. His supporters claimed he would bring much-needed change to the country, while critics pointed to his praise of Brazil’s former dictatorship and comments on race and women.
Online photo-sharing app Snapchat is still struggling to hold on to users after its deeply unpopular redesign. Latest figures show that the platform lost five million customers over the last six months, dropping from 191 million earlier in the year, down to 186 million in September.
This marked the second successive quarterly drop for the company, which faces stiff competition from the likes of Facebook and Instagram. The news caused its Snap’s share price to slip 11% in extended trade, making an overall drop of more than 60% since its IPO.
Chief Executive Evan Spiegel told investors: “We are focusing our time and resources to expand our community, increase engagement, and improve monetisation. We have a significant opportunity to grow and broaden our global community over the long term.”
It was not all doom and gloom for the beleaguered app, however, with Thursday’s earnings result showing better-than-expected revenue figures that hit $298 million. Losses had also been reduced by around 30%.
Snap’s struggles were mirrored by other top tech firms, with Google’s parent company Alphabet losing 4.7%. The internet giant’s third-quarter revenue figures missed market expectations, although it did post higher profits that were higher than predicted.
Amazon also fell, this time by 85%, as it announced that its quarterly net sales fell short of the expected $57.1 billion. The online retail giant managed to bring in $56.58 billion, up from the $43.74 billion achieved a year earlier.
The contagion soon spread to other tech giants, with Netflix losing 3% after a hours and Facebook losing 2.3%. The social network is due to issue its own earnings figures on October 30th. Meanwhile, Apple dropped by 1.6%.
Even healthy revenue and profits figures was not enough to shield some companies from the downturn, with Twitter losing 2.5% after trading finished. The firm had earlier surged by 15%, its biggest one-day gain for year, after releasing data that comfortably beat Wall Street’s expectations.
Online Forex and CFD trading is a global phenomenon that is worth trillions of dollars a day. Its popularity has grown substantially with the rise of retail traders, everyday people who take up investing as a way to garner additional income.
This rise to prominence has helped perpetuate a number of misconceptions that could prove damaging to new investors. In this blog, we will explore some of the more common myths and help you understand the facts and not the fiction.
Of all the misconceptions about online investment, this one is by far the most harmful. Many people will take up Forex trading thinking it is a ‘get rich quick’ scheme and they will easily be able to make a profit. The reality, however, is much different.
To succeed in Forex trading takes knowledge, skill and determination. If you do not put the effort and time into educating yourself and understanding how the markets work, the likelihood of success will be very slim.
Be sure to start your investment journey with a demo account, so you can take the time to thoroughly understand the basics and plan your trading strategy. Only when you feel confident in your abilities should you consider risking your capital.
Forex trading used to be reserved solely for corporations and international banks. However, the rise of electronic trading and online brokerages, such as TradeFred, has made investment possible to smaller-scale traders.
It is now possible to trade with just a small minimum deposit and hone your skills, without risking too much of your capital. While investing with smaller amounts will perhaps not result in as much profit as larger figures, it is the perfect place to start as it will teach you essential skills such as money management that will help you later down the line.
When you have proved your ability to make a profit from your investment, you could then perhaps go on to invest more money. However, you should only do this if you are financially comfortable and are totally confident in your skills. You should never trade with more than you can afford to lose.
Successful trading is much more than a simple numbers game. While of course it would be beneficial to make a profit more times than you lose, it is by no means an essential part of online investment.
Instead, you should focus on maximising your profits while simultaneously minimising your losses. By doing this, you can reduce the impact an unsuccessful trade and reap the benefits when the market goes the same way as you predicted.
Let us say that you made 50 trades and profited from just 20 of them. However, you were shrewd enough to make sure that you lost $200 from your unsuccessful positions but managed to make $1,000 from your successful trades. This would mean you would still end up with an overall profit of $800.
Proper money management is one of the keys to Forex success and should be observed from the moment you start trading. By knowing when to be aggressive and when to be conservative with the market, you can ensure that you are maximising your profit potential, while minimising the risk to your capital.
Many people believe that online investment is exactly the same as going into a casino or placing bets with a bookmaker. While it is undeniable that Forex trading is speculative in nature, since your capital would be at risk – there is also a large amount of skill and understanding that is required for success.
It is entirely possible to make a blind gamble on the Forex markets, with no thought or knowledge whatsoever. However, doing this would be a sure-fire way of losing your investment and cutting short your trading career.
Unlike conventional gambling, you can greatly enhance your chances of success in the Forex market by investing in your education and taking the time to learn how to trade. By making more informed investment decisions and knowing when to maximise profits and cut losses, you can put the odds firmly in your favour.
The final myth on this list is not actually untrue at all. While increasing your leverage amount can indeed yield higher profits if the market goes the way you predicted, that is by no means the end to the story.
Leverage is widely described as a double-edged sword for traders, as it can have dramatic effects whether you are successful or unsuccessful with your positions. Although it has the power to enhance your profits, it will also exacerbate your losses if the markets turn against you.
As with most things, you only really learn about the positives of leverage, while the negative aspect is usually ignored. It is for this reason why we have classified the point as a myth. If used unwisely, leverage can have a seriously detrimental impact on your capital, so it must be utilised with extreme caution.
Global stock markets are a sea of red, as a series of negative headlines sent investors heading for safety. Continued Saudi isolation, fears of a global trade war, trouble with Brexit negotiations and concerns over the Italian budget have all been cited as causes of the turmoil.
Asian shares slumped as traders, initially buoyed by the previous two-day rally, decided to take their profits and move on. South Korea’s KOSPI and Hong Kong’s Hang Seng were badly hit, each losing 3%. Japan’s Nikkei did not fare much better, as it dropped by 2.7%.
Losses in the life insurance and technology sectors led Chinese stocks lower, despite previous optimism about Beijing’s attempts to kick-start its flagging economy. At the close of trading, the Shanghai Composite fell by 2.26%, while the SZSE Component lost 2.24%.
With most Asian indices slumping by more than 2%, the ASX offered a slight improvement – despite still slipping into the red. Australia’s benchmark fell by just 1.1%, making it the best-performing index of an otherwise gloomy session.
The contagion appears to have spread across to Europe, with all major stock markets opening in the red. Germany’s DAX is especially having a torrid time, down by 2.56% as of 09:34 GMT. Meanwhile, the UK’s FTSE100 and France’s CAC40 are 1.20% and 1.80% lower respectively.
More bad news could soon be on the horizon as well, with Turkey’s President Erdogan promising to reveal the “naked truth” about the death of Jamal Khashoggi. A critic of the Saudi government, the journalist was killed while visiting the country’s consulate in Istanbul.
These revelations could heap further pressure on Riyadh, with a number of countries already threatening to cancel expensive arms and defence contracts. A number of prominent business figures have also pulled out of Saudi’s Future Investment Initiative conference – an event dubbed as “Davos in the desert”.
Meanwhile, investors are also awaiting the EU’s official response to Italy’s controversial budget plans. Rome shocked the markets by announcing it intends to triple its deficit next year, while seemingly defying the European Commission by insisting it will not be deterred from its plans.
Brexit is also threatening to cause chaos, as British Prime Minister Theresa May attempts to bring her ruling Conservative party together – despite widespread rumours of a vote of no confidence in her leadership. Although the divorce deal is said to be “95% done”, the major sticking point of what to do with the UK and Irish border remains.
Some companies in Japan have also reported weaker earnings than expected. With some starting to blame the ongoing trade war between the US and China as a catalyst, the markets will be hoping that a solution can be found before the situation gets much worse.
Welcome to this week’s edition of TradeFred’s weekend roundup, our look back at the most important news stories that took place when the markets were closed. This latest instalment covers updates on the next US-North Korea summit, a possible new edition to the EU and the continuing saga involving Saudi Arabia – plus much more besides.
US President Donald Trump and his North Korean counterpart Kim Jong Un are likely to meet again early in the new year – according to Washington officials. The two sides have been in constant contact since their historic meeting in Singapore in June.
After the meeting, North Korea committed to a programme of denuclearisation in return for a lifting on sanctions, although many are sceptical on the level of progress that has so far been made. Pyongyang is said to be unhappy that its efforts so far have not been rewarded, although it is still enjoying better relations with its neighbours in the South.
US Secretary of State, Mike Pompeo, said he hoped to soon “make another big step forward to nuclearization” by meeting his North Korean counterpart in the next couple of weeks. Pyongyang seemed happy with this but warned Washington not to take an approach “with two faces” by touting progress but leaving sanctions in place. It urged America to “act with the elementary give-and-take principle”.
Meanwhile, President Trump has warned that the US would leave a Cold War-era treaty that would eliminate nuclear missiles from Europe – blaming Russia for violating the pact. The agreement ensured the elimination of short and intermediate-range nuclear and conventional missiles by both Moscow and Washington.
Speaking to reporters, Mr Trump said: “Russia has not, unfortunately, honoured the agreement so we’re going to terminate the agreement and we’re going to pull out.” The announcement was criticised by Moscow, with its Deputy Foreign Minister saying the move would be “very dangerous” and lead to a “military-technical” retaliation. Former Russian leader Mikhail Gorbachev, who negotiated the deal with then-US President Ronald Reagan, claimed the decision would be a “mistake”.
In other news, US Treasury Secretary, Steven Mnuchin, dismissed suggestions that Oil prices would rise in response to his country’s sanctions on Iran. He claimed that the market had already priced in the move, despite claims from Tehran that its Oil exports could fall by two-thirds and threaten the market.
As the UK prepares to leave, the EU could end up welcoming a new member in the form of Macedonia. This comes after the country’s parliament approved changing its name to the Republic of North Macedonia, clearing one of the last remaining roadblocks to its ascension to join NATO and the European Union.
The decision still has to be ratified by the Greek parliament, which has so far resisted Macedonia’s efforts to join the two international groups. Athens has argued that the name “Macedonia” implied territorial claims to a province in Greece that shares the same name.
Despite reluctance from within his own government, Greek Prime Minister Alexis Tsipras welcomed the name change – a move that could de-escalate decades of tensions between the two countries.
Greece itself had a reason to celebrate of the weekend, with the announcement that the EU has approved the country’s first post-bailout draft budget without the implementation of pension cuts. Athens finally emerged from the bailout programme in August following its financial crash and called this new development a great success.
The enforced pension cuts had been extremely unpopular when they were announced as part of enforced austerity measures. Athens has apparently convinced the EU that Greece would be able to achieve its surplus targets without them – claiming its budget surplus would be at 3.56% of GDP next year, with economic growth picking up to 2.5%.
Meanwhile, the row over Italy’s budget plans continues to rumble on – with the country expecting the EU to reject its current proposals and ask them to be resubmitted. This would be an unprecedented situation and is one that has greatly affected the value of Italian bonds.
Rome shocked the EU commission and the wider market by announcing plans to raise its budget deficit to 2.4% of domestic output next year – tripling the goal set by the previous administration. The move was labelled a breach of the economic bloc’s fiscal rules and sparked a series of heated discussions between Italy and Brussels.
Finally, a rumoured 700,000 people took to the streets of London over the weekend to demand a second “People’s Vote” referendum on Brexit. Prime Minister Theresa May has so far rejected attempts to hold the vote, despite growing disquiet over her “Chequers” plans from both the EU and rebels in her own Conservative Party.
Mrs May has tried to play down the threat to her leadership by claiming the Brexit deal is “95% done”, despite an ongoing dispute over what to do with a future border between the UK and the Republic of Ireland. However, she has reportedly been told she is drinking “at the last chance saloon” by Conservative rebels, who have warned her that she has just 72 hours to save her job.
All eyes continue to be on Riyadh, after Saudi Arabia finally admitted that journalist Jamal Khashoggi had been killed in the country’s consulate in Turkey. The regime had previously denied involvement in his disappearance, claiming he had left the building alive.
Members of the international community have called on the Saudis to provide facts to support their new admission, before the claims could be considered credible. A joint statement from the UK, France and Germany said: “There remains an urgent need for clarification of exactly what happened ... beyond the hypotheses that have been raised so far in the Saudi investigation. Nothing can justify this killing and we condemn it in the strongest possible terms.”
Germany has gone one step further by announcing it would not export arms to Riyadh while the current uncertainty remains. This is in stark contrast to US President Donald Trump, who claimed it would be counterproductive to cancel a similar deal between his country and the Saudis.
Meanwhile, the fallout from Australia’s ousting of former Prime Minister Malcolm Turnbull continues, as new leader Scott Morrison faces the possibility of a hung parliament. With the count from a crucial by-election still ongoing, the ruling Liberal party could see its coalition government needing the support of independent politicians to survive the next few months.
The by-election was triggered by Mr Turnbull’s resignation from parliament following his ousting. Early counts showed a swing against the ruling party, with voters apparently expressing their frustration with the way the Liberals had dumped the former Prime Minister.
Finally, the Chinese government has professed its support for private businesses, claiming that the role of entrepreneurs is “unquestionable”. In a letter, President Xi Jinping said that any attempts to weaken the private economy is wrong.
The news comes as Beijing suffered its weakest year-on-year quarterly GDP results since the height of the global financial crisis. Growth figures came in at 6.5% for the third quarter of 2018, lower than the 6.6% that was expected.
China is having a hard time dealing with the fallout from its ongoing trade war with the United States, which has seen a sell-off on domestic stock markets and a deep decline in the Yuan versus the US Dollar.
Welcome to the latest instalment of TradeFred’s weekend roundup, our look back at the most important news events that took place while the markets were closed. This week’s edition focuses on the apparent thawing between US-Turkish relations, the fallout from the missing Saudi journalist, renewed scrutiny of Italy and much more.
US President Donald Trump has indicated that there could be a breakthrough in relations between America and Turkey following the release of pastor Andrew Brunson. The disagreement had been rumbling for months, heaping pressure on the already-struggling Turkish economy and Lira currency.
Hosting Mr Brunson at the White House, President Trump said this development would be a “tremendous” step forward in improving relations. The two NATO allies have also been at odds over US support for Kurdish fighters in Syria, the jailing of an executive at a Turkish state bank and Ankara’s plans to purchase a Russian defence system.
Meanwhile, the President has claimed the US would be “punishing itself” if it cancelled arms deals with Saudi Arabia. The comments came following the disappearance of journalist Jamal Khashoggi, a prominent critic of the Saudi regime.
Mr Khashoggi was last seen entering the Saudi consulate in Istanbul, with the Turkish authorities claiming he had been deliberately killed inside the building. President Trump’s comments came after it was announced the US had won a $110 billion military order from Riyadh.
The US leader said: “If they don’t buy it from us, they’re going to buy it from Russia or they’re going to buy it from China. Think of that, $110 billion. All they’re going to do is give it to other countries, and I think that would be very foolish.” He added there would be other “very powerful, very strong” measures his administration could take, but did not indicate what they might be.
In other news, the Federal Reserve’s current monetary policy has been described as “basically good” for the global economy. The praise came from Bank of Japan Governor Haruhiko Kuroda, who added that the Fed’s approach to normalise its strategy was a sign the US economy was in good shape. The Fed has been criticised in recent months by President Donald Trump, who is opposed to the continuing rise in interest rates.
Finally, US Oil and Gas production is slowly returning to normal following the devastation caused by Hurricane Michael. Statistics released on Saturday by an offshore regulator revealed that Oil output in the Gulf of Mexico was down by just 19%, while Natural Gas was 10% lower.
Italy has been warned that it must abide with the EU’s budget rules and resolve its current dispute with Brussels. The comments came from the First Deputy Management Director at the International Monetary Fund (IMF), who also warned that the disagreement could delay plans to make the Eurozone more resilient to external factors.
David Lipton said: “We hope that the further deepening of the monetary union will not be hindered. We consider the completion of the Capital and Banking Union to be very important.” The Italian government spooked the EU and investors alike by announcing a deficit target of 2.4% of economic output for 2019. The move would treble the previous goal and has prompted heavy criticism from the European Commission.
Meanwhile, Rome’s Deputy Prime Minister Luigi Di Maio has ruled out taking the country out of the single currency. The leader of the 5-Star Movement blamed the opposition Democratic Party for trying to “scare people” by claiming the government wanted to leave the Eurozone.
Mr Di Maio said: “No-one need fear an exit from the euro or from the European Union, there is no danger and no intention because that isn’t what the Italians asked of us at the election.” The comments came despite his party and fellow coalition member the League campaigning on an anti-Euro platform.
In other news, German Chancellor Angela Merkel’s grip on power appears to be weakening further as her sister party suffered its worst election result in 68 years. The junior Christian Social Union (CSU) lost its absolute majority following a regional ballot in Bavaria.
The CSU won just 37.3% of the vote, with the Greens coming in second by doubling its share of the electorate to 17.8%. The far-right Alternative for Germany (AfD) secured 11%, entering the state assembly for the very first time.
Political commentators claim the fallout could increase speculation over the future of Merkel’s leadership, which has come under intense pressure in recent months.
Finally, discussions between the UK and EU over Brexit broke down on Sunday, with the issue of the British-Irish border still unresolved. There are no further plans to meet before Wednesday’s European summit.
South Korean President Moon Jae-in has called on the US and international community to recognise efforts by the North to abandon its nuclear programme. He claimed his northern counterpart Kim Jong Un was sincere in his efforts to denuclearise the country.
Mr Moon said: “This year I have discussed in depth with Kim for hours. These meetings have convinced me that he has taken the strategic decision to abandon his nuclear weapons.” He added that Pyongyang felt “frustrated by the international community’s continuing mistrust.”
The South Korean leader called on governments to respond to the North’s efforts and “assure” the regime that it took the right decision in agreeing to disarm.
In other news, China’s central bank Governor said there was still plenty of room for manoeuvre to adjust interest rates and other monetary policies. Yi Gang made the comments amid continuing uncertainty regarding the trade relationship between his country and the US.
Mr Yi said China would comfortably reach its full-year target of 6.5% growth in 2018, with the possibility of overshooting. He added that the central bank was preparing for a host of risk factors, including a possible worst-case scenario.
Finally, Japanese central bank Governor Haruhiko Kuroda has delivered his strongest warning yet that the world economy is facing its toughest challenges to date. He claimed that escalating trade tensions, out of control debt and turbulence for emerging markets is posing a huge risk to economic prosperity.
Mr Kuroda said policymakers should continue negotiations with a “renewed recognition on the importance of free trade,” and warned that the current path of protectionism would be detrimental to business confidence and global growth.
The GBP/USD pair has been boosted by a series of Brexit headlines, as the UK and the European Union head towards next week’s crunch talks at the EU Summit. On October 17th, the EU27 leaders will meet to discuss Britain’s exit from the economic bloc, migration and internal security.
With the recent positive rhetoric emanating from all sides, the past week has been unusually upbeat for embattled UK Prime Minister Theresa May. However, a little wind has been taken out of her and Sterling’s sails on the news that the Democratic Unionist Party (DUP) has threatened to take serious action if it remains unhappy with the government’s Brexit plans.
Mrs May’s Conservatives rely on the DUP’s support via their ‘confidence and supply’ agreement to prop up her administration following her disastrous general election last year. Elsewhere, hardline Eurosceptics have also voiced their displeasure about the current Brexit agenda.
The Pound could find itself back in a bullish position if the outcome of next week’s summit points towards an orderly Brexit, with the 1.3500 handle potentially attracting long traders. Conversely, anything that suggests the UK will crash out of the Union could be catastrophic for Sterling, meaning Cable traders are definitely in for a bumpy ride over the coming days.
Meanwhile, Wall Street suffered a huge correction yesterday, following the International Monetary Fund’s (IMF) decision to downgrade world growth. Routs in China’s markets, the possibility of real inflation and higher bond yields – plus the ongoing trade war have all been blamed for the choppy conditions.
With whispers of a recession coming across the airwaves, the spread between short and long-term US Treasury yields has been flattening. As a consequence, the resolve of USD bulls is starting to be tested for the first time in a while.