Market news & insights

When digging deeper into issues relating to trading precious metals you may come across the idea of using gold to silver ratios as part of decision-making. This brief article explores what this means both in terms of definition and potential implications for traders. What is the Gold-Silver Ratio?

The direction and degree of movement in the two key precious metals occurs “in synch” i.e. when one moves so does the other similarly. However, the exact rate of this movement over a period may differ, and it is this that attracts the attention of some precious metal investors. The gold-silver ratio is simply the amount of silver it takes to purchase one ounce of gold.

If the spot price of gold is $1403 with silver at $15.3, the approximate ratio is 92:1. When considering this information, the respective prices of each are considered irrelevant; it is this ratio that attracts some attention for the most avid of precious metals investors. Rather, it is a potential indicator as to which precious metal is more likely to yield a greater return if taking a “long” position (or vice versa).

Historically throughout the 20th Century, this ratio has been reported at an average of 47:1, so theoretically the current ratio is low for silver value than traditionally has been the case. There does not appear to be a strict defined range what is normal and what is high or low, but some consensus internationally suggests that between 40-70 could be a normal range, and outside of this can be considered either high or low, and so may correct according to a movement back within the ‘normal’ range. Theoretically, the implications of this are when making a choice to trade either gold or silver, if this ratio is high then it would suggest that silver CFDs may have more positive % move potential, and if low, then gold may be more worthy of your choice.

It is also noteworthy that generally, when one explores research on this topic, that it is for possible use by those taking longer term positions (i.e. using daily/weekly charts for decision making) rather than short-term price fluctuations you may see on an intraday chart. The reality in your trading As previously stated, this seems to be something of interest to the major “gold bugs”, and there is widespread variance in thinking on this topic. The inference by some is that fluctuations in the ratio may help in the choice as to whether long term gold or silver.

So, as with much that is “out there” this may in part inform trading decision making at any level, the onus as to whether this has relevance in your practical trading of course rests with you. Our aim of this article was to put the concept out there so you can do your own research and make the choice as to relevance for you and as importantly how you may integrate it with other factors you use in your entry and exit decisions. We often discuss commodity CFDs as part of the ‘Market Watch’ section of the FREE weekly GO Markets Inner Circle webinars.

If you are interested in joining us as we look at the market and of course provide on-going education go to https://www.gomarkets.com/au/inner-circle and join us.

To begin the week, I thought we'd do something a little bit different. We have taken the current ten-year challenge sweeping social media and tried to apply it to a brief technical analysis summary of the major FX pairs. Where were they trading in early 2009?

And where are they now? Judging by the list below, it would seem gold wins the gold medal regarding overall performance. The following summaries will delve further into each trading pair.

EURUSD Even though current price action is trading just above the 200 MA suggesting the longer-term trend is bullish, the price action since 2009 provides more significant evidence of a strong downtrend in place, most notably the lower highs witnessed in 2009, 2011, 2014 and last year respectively. Following the rather dull consolidative period between 2015 to 2017, the Euro-Dollar pair has shown a new lease of life and has found the 1.25 level to play a significant role once again. At current levels though, the danger here is that we could slip back into the familiar rangebound territory if the supportive structure seen at 1.14 fails to contain sellers going forward.

The highlighted head and shoulders pattern might be a precursor to a EURUSD reversal back towards the 1.05 lows. GBPUSD Surprisingly, only a 5% difference in value since this time ten years ago. We see mostly rangebound moves since 2009, with the Brexit catalyst in 2016 providing fuel for an extended step down in price.

The recovery from 2017 to the beginning of 2018 may give a clue to future movements within the pair. Notice how the price has respected the 200 MA in recent years, it would appear the region of 1.35 could be a potential barrier if tested, resulting in a continuation of the longer-term downtrend. In this scenario, the previous 1.20 support is a target worth considering.

USDJPY In 2009 the Dollar-Yen pairing appeared somewhat heavy towards the downside. However, we've seen a steady recovery since the 2012 lows, and a validated bullish trendline is currently in play. In December last year, price attempted a sharp move down to 104 levels but was quickly rejected, resulting in further Dollar strength.

Key areas to note are the Fibonacci retracements of the 2015 high including the 50% level which has provided strong support around 100.00 and the 23.6% retracement at 113.80 which continues to act as tough resistance. Perhaps we'll see another rally north to re-test 113.80 longer-term, especially when RSI (Relative Strength Index) levels are looking oversold. AUDUSD Like a boomerang that's been thrown and come back, the Aussie has returned to where it began in 2009 following some large swings higher.

Currently, in a residual downtrend, it's difficult to see where this pair may up longer-term, but the key takeaway over the last decade would be the importance of the 0.70 zone regarding support and resistance levels. USDCAD It is also a case of 'Back To The Future' for the Loonie. Despite some significant price moves over time, current levels are almost identical to those seen this time ten years ago.

Technically still within a longer-term uptrend, price action has maintained a presence around the 200 MA and has produced a textbook series of higher highs and lower lows since mid-2017. It is also worth pointing out that the 50% retracement level near the 1.20 mark has provided strong support for the pair in both 2015 and 2017. The future outlook appears to be indecisive moves heading sideways.

USDCHF Not too much change for the Swissie either since 2009. Following the SNB crisis in 2015, price action has been practically non-existent with 1.03 acting as somewhat of a ceiling slowly squeezing the price into submission. We could either see a massive breakout after this extended consolidation phase or perhaps more of the same longer-term.

NZDUSD An impressive 36% gain since 2009. Longer-term we have settled around the 50% Fibonacci retracement level of the Jun 2014 high. Current levels also coincide with the 200 Moving Average which price action has failed to break above in recent years convincingly.

There is still a slight bias to the downside, and the previous support level of 0.62 could be a potential target should the Kiwi Dollar continue to grind lower. XAUUSD An impressive price rise in the last decade for the precious metal, and similar to Kiwi Dollar, current price action is sitting around the 50% Fibonacci retracement level from the August 2011 high. The overall longer-term trend has been sideways since 2013 with no clear directional bias in sight.

The only thing worth noting here is the current RSI situation which appears overbought and could spell some bearish activity in the weeks and months ahead. This article is written by a GO Markets Analyst and is based on their independent analysis. They remain fully responsible for the views expressed as well as any remaining error or omissions.

Trading Forex and Derivatives carries a high level of risk. For more resource on Forex trading check out our Forex Trading For Beginners introduction, Forex Trading Courses, open a Forex Demo Account or open a live Forex Trading Account. Sources: Go Markets MetaTrader, Google, Datawrapper, Tradingview.

GDP Dominance The United States dominates the world when it comes to having the largest economy by Gross Domestic Product (GDP), however, there are countries around the world which are showing major signs of economic growth and expected to overtake current world economic leaders, such as the United States and the United Kingdom. As mentioned above, the United States has the largest GDP in the world at around $19 trillion, followed by China and Japan at $11 and $4 trillion respectively according to the figures for 2017. However, looking to the future there are some economies that are expected to expand dramatically, and we can take a look at them in this article.

China Capital: Beijing Population: 1.4 billion (18.% of the world total) Official language: Standard Chinese Currency: Renminbi (CNY) Summary Even though the Chinese economy is already the second largest in the world, it is expected to grow even further over the next decade. China’s GDP has grown from around $4.5 trillion in 2008 to $12.2 trillion last year, a 166% increase over the last 9 years. And according to PricewaterhouseCoopers (PwC), one of world’s biggest professional service companies, China’s GDP is expected to grow to $38 trillion by 2030, making it the largest economy in the world.

India Capital: New Delhi Population: 1.3 billion (17% of the world total) Official language: Hindi Currency: Indian Rupee (INR) Summary India’s economy was 6th largest in the world at $2.5 trillion. Since 2008, Asia’s 3rd largest economy has expanded by around 110% from $1.1 to $2.5 trillion. It is expected to grow further to $19.5 trillion, according to PwC overtaking the United Kingdom, Germany, and Japan – making it the third largest economy in the world by 2030.

Indonesia Capital: Jakarta Population: 266 million (3.5% of the world total) Official language: Indonesian Currency: Indonesian Rupiah (IDR) Summary The Indonesian economy is currently 16th largest in the world at just over $1 trillion. It has nearly doubled since 2008. The South East Asian countries economy is projected to expand to around $5.4 trillion making it world’s 5th largest economy by 2030 overtaking United Kingdom and Germany.

Brazil Capital: Brasilia Population: 210 million (2.8% of the world total) Official language: Portuguese Currency: Brazilian Real (BRL) Summary Brazil is currently the world’s 8th largest economy at $2 trillion GDP in 2017. South America’s largest economy has experienced a steady growth since 2008 when it’s GDP was at $1.6 trillion. Brazil is expected to overtake countries like France and the United Kingdom by 2030 when its economy is projected to expand to around $4.4 trillion.

Mexico Capital: Mexico City Population: 130 million (1.7% of the world total) Official language: Spanish Currency: Mexican Peso (MXN) Summary Mexico’s economy has expanded by around 3% since 2008 and is currently the world’s 15th largest economy. However, its economy is expected to grow drastically over the coming years to around $3.6 trillion according to the projection making it the 9th largest economy in the world by 2030. By Klāvs Valters ( Market Analyst) This article is written by a GO Markets Analyst and is based on their independent analysis.

They remain fully responsible for the views expressed as well as any remaining error or omissions. Trading Forex and Derivatives carries a high level of risk. Sources: PwC, World Bank and Google Maps

Trading Share CFDs gives you exposure to the movement of underlying shares. There are a few issues that are specific to Share CFDs and differ from for example trading Forex or commodity CFDS. One of these issues is that of company dividends.

This article aims to clarify the potential impact of dividends of the CFD trader. How do dividends work? One of the attractive things as a shareholder is the receipt of company dividends.

Many Australian companies pay such dividends twice a year, calculated at X cents/per share multiplied by the number of shares held. The key date in respect of dividend entitlement is the ex-dividend date, with eligibility for the dividend being dependent upon you holding a position in that share before trading commencing on the “ex-dividend” date. These dates, and the dividend amount per share, are pre-determined by the company and are made available in the public domain (usually confirmed in company reports) and are available across many financial websites.

Also, important to understand is this dividend is “priced in” to the share already the underlying share price is expected to open at closing price minus the dividend paid (of course there are other factors pre-open e.g., economic news overnight, which will also impact but in this article we are focusing on the dividend impact). Hence if the dividend per share is 20c then we would expect the underlying share to open 20 cents lower. CFDs and dividends As a CFD trader, you do not own the underlying asset (in this case the shares), rather you have a contract based on the movement of such and hence you will not be able to receive any benefits of “franking credits’ for tax purposes.

However, there is an adjustment made on your CFD account position relating to dividend. Whether this adjustment is shown as a credit or a debit will be dependent on the direction of your trade. Long trades will attract a credit and short trades a debit adjustment.

A dividend trading strategy There are some traders of shares, options and CFDs that look to develop a specific trading strategy for dividends and CFDs. Generally, this involves entering a long position prior to the ex-dividend date and subsequently selling afterwards looking for either a small drop less than the dividend adjustment or a recovery or greater move higher than the price prior to the ex-dividend date. Theoretically, the reverse could also be the case in that a short trade is entered, with the perception that many will sell after the ex-dividend date, once a dividend has been received, to the extent that this drop will exceed the dividend adjusted debit to the CFD position.

In either case, if you are considering these somewhat advanced strategies, logically you have tested a system which not only identifies potential situations but guides your entry and exit timing and decision-making. Further discussion on this may be included in a further article. We trust that has clarified the dividend treatment of Share CFDs and of course please contact our team with any further questions you may have, or if learning to trade share CFDs could be for you.

There are few long-term successful traders that at some stage have not suffered a major capital drawdown on their account at some stage. For whatever the reason the major factor as to whether you continue and get back to “winning ways” or continue to see further drawdowns is what you do next. Unfortunately, there are “traps” that such a set of circumstances can lead to, your aim, if this should happen to you is to avoid these.

This article aims to outline these to assist in developing awareness and assist in your “what happens next” thinking and actions. Trap 1 – Abdicate responsibility It is a natural human response when things go wrong to look for someone/something to blame. This is far easier emotionally to deal with than admitting that you have behaved, through actions, in a way that has contributed to a negative outcome.

Although it may be true that certain market conditions, or “trump tweets”, or economic announcements may all contribute to a significant market price movement, the majority of major capital drawdowns in reality occur over a number of trades and of course you have made the choice to trade and as if not more importantly when to exit any trades you have taken. The reality is of course, that unless you accept 100% that trading action is YOUR choice and that YOU are responsible for your trading results then you are unlikely to move forward and may indeed see further capital drawdowns on your trading account. Accepting this reality, gives you the drive to avoid the other potential traps and put the right things in place to reduce the likelihood of it happening again.

Trap 2 – Fail to explore WHY it happened? Beyond accepting responsibility one of your first tasks is to examine potential and subsequently actual factors that may have contributed. Commonly these can all come under the following: a.

You didn’t know what you were doing due to a knowledge gap b. You didn’t have an evidence-based (i.e. you have tested it and refined accordingly) specific comprehensive trading plan that guided your actions c. You didn’t follow your trading plan d.

Your trading system is comprehensive and sufficiently specific but doesn’t work and needs reviewed i.e. a new set of entry/exit criteria The temptation is, and many traders will go straight to ‘d’ of the above, but again arguably there is an element of “finger pointing” rather than taking responsibility. The reality is that of the four factors above the latter is the most unlikely cause. Being honest in your review is critical.

Such an honest review will give you clear guidance on which factor(s) you should focus on working on. Trap 3 – ‘Revenge’ trading Although this is a term bandied around frequently, let us delve beyond the ‘beermat psychology’ and look a little closer at what this may mean. In essence, the underlying emotional motivation is to get back to where you were before in terms of your account capital.

Commonly this thinking is backed by “desperation”, subsequently influencing actions that often bear little resemblance to good trading practice. In action, you may see: • Taking trades when there is no clear set up • Partial or complete ignoring of any trading plan • Inappropriate actions further trades go against you (e.g. finding reasons to stay in future trades when there is an exit) • Trading higher position sizing that you previously had • Trading each small market move, taking a reverse position even on a trend pause. • Looking to trade tighter and tighter timeframes These of course may significantly contribute to further losses as this emotional rather than system- based trading takes a stronger and stronger hold on your actions. Logically, the following may be more appropriate: • Give yourself some breathing space to properly review …STOP trading while you complete this (As described above) • Although easy to say and not so easy to accept the reality is that your account capital is what it is now, not what it was.

There was, for many in this situation, a time in your trading where whatever your capital level, your aim was to increase whatever that level was and put actions in place to give yourself the best chance of that happening. Ultimately, even if you strayed from this, developing consistency in appropriate trading plan actions and measurement are accepted by most traders as the way to make this happen over time. So, you need to press the “RESET button”, accept it as it is, and have the goal that through returning to that good trading practice consistently, and filling the gaps you need to.

Making this your goal rather than a dollar figure, may give yourself the chance to build capital not just to its previous level but beyond. Let it go! And do the right things from here I guess is the bottom-line message.

Trap 4 – Position size according to your previous rather than current account level This final trap for discussion in this article may seem obvious on the surface, but may either be a symptom of the previous point or something that is overlooked (unless of course inappropriate position sizing was one of the root causes of a major drawdown which you will discover in your review). It is crucial, and hence why we make special reference to it here, that you have a set risk level, usually expressed as a % of your account capital. This will differ from trader to trader but is comply between the 1-3% level as an example.

This determines lot/contract size (dependent on what you are trading) for any individual trade and combined with “stop loss” placement is a critical part of your risk management now and going forward. You need to recalculate what this is for you with reference to your NEW account size and factor this into your decision making, even if this means you are trading smaller amounts for now. In summary, major trading drawdowns are upsetting, and although not common often create additional ‘traps’ which may worsen what has happened to your trading capital.

And finally... Although perhaps of little consolation that many, many traders who now have sustained success, will have gone through this like you, the difference between what happens next and for your trading account in years to come, to your account is likely to be as a result of what you do next. You have choices to make but avoiding the above four traps described may perhaps assist in ultimately getting to where you want to be with your trading going forward.

Look, we get it… the thought of making money from the financial markets is appealing to the newcomer (and even experienced trader). Appealing enough to invest some time (often a great deal) and some money (often a great deal). At this stage, it is “interesting” (even exciting), but NOT committed.

You may even have been told it is easy if you do x,y,z or use this magical indicator, by the plethora of “gurus” simple clambering to relieve you of even more of your cash for that magical “holy grail” of approaches. We are still at ‘interesting’ not committed. The interest or motivation that drives you to this point is clear, you may even have begun to plan in your mind how you are going to spend your winnings, work less, live the dream.

Intangible, far-off pipe dreams are easy to contemplate and the market is going to pay for it!. We can imagine ourselves as some heroic ninja trader magically just making it happen (and some do magically create results on a ‘doesn’t really matter’ demo account). YES!

Still, this is still just ‘interesting’ not yet committed. However, when we commit to the daily practice of trying to put in place those micro-make-it-happen steps… this dream begins to fade. It’s replaced by the cold realization that there is some work… some hard work to be done.

That’s not what you subscribed to with that early interest is it, it should be easy to make money, shouldn’t it? What most traders do... Rather than engaging (volition) in this hard work, we choose to try to short-cut.

This has two logical outcomes: 1. Firstly, it continues to maintain our interest..no more. 2. Secondly, it is unlikely to make us any money trading.

We jump from program to program, indicator to indicator, vehicle to vehicle, read multiple articles, participate in forums, and yet the two logical outcomes above from our “interest” are still the case. There is no real point in banging on about psychology this and discipline that, we could point you in the direction of “7 things you can do to alter your trading results”, put ten other game-changing articles in front of you but nothing may change. That is, nothing will change unless you are prepared, that’s REALLY prepared, absolutely COMMITTED to making it happen..simple!

You could learn and have the system and tools to have sustainably great results, measure aspects of your trading so you can work out what might be going on with your behaviour, and yet even these may make no difference to the majority of the trading population. So, what is the difference between the “norm” who wish they had on-going positive trading results and the others who really do? Quite simply it is the level of commitment they are prepared to put in.

It moves beyond just interested. Are you ready to take this step? So, what do we mean by commitment?

Commitment is not: 1. Knowing some stuff 2. Doing some stuff 3.

Believing some stuff can happen “Some” is NOT good enough! Pe riod! Commitment is: 1.

Seeking out knowledge that will make a difference and learning it to the point where it becomes an integral part of you as a trader and the systems you develop and actually use. 2. Doing ALL of the right things on a consistent basis 3. Developing a passionate belief that something good could happen in your trading is replaced by the certainty that you can have sustained results that only evidence can provide.

So let’s cut to the chase..how committed are you? It easy to evaluate, just look at your behaviours… 1. Are you seeking out real learning that can make a difference in what you are doing or taking the short cut in the information you have (or can have access) to, and trying to replace that with a different indicator, strategy etc? 2.

Are you doing the right things ALWAYS or just when things go well (or not so well) – which starts of course by learning what the right things are? 3. Pssst! Here is a secret…You will never find the evidence to create that certainty that will keep you “safe” in those trickier market times unless you actually invest the commitment to measure what is happening and make sure these are the right things to measure (and this is not just trade profit/loss!).

There are few things more motivating than being able to provide some evidence of success. So how does what are currently doing stand up when you look at those three behaviours? The real trading EDGE We have heard all of the excuses, all of the reasons, every “my homework was eaten by the dog” story that it is possible to hear.

The reality is that trading success thing is within you and the level to which you are prepared to commit. The striving for a “trading edge”, which we will define as having an advantage over other market participants, is yours for the taking but only if you start by taking that interest and trade-changing commitment. It all starts with accepting what you are doing now..be honest… Removing all of the reasons “why not”, looking at your behaviour and ask yourself are you really committed?

We can do my part, give those who are committed the support, the learning programmes (see ‘First Steps’, ‘Next Steps’ and ‘Inner Circle’) that aim to fill gaps in knowledge, but with the “C-word”, which is your part, that is when good things can happen in your trading. So, Let’s finish with a mission (as it is these that are at the basis of making sure your commitment has the right focus) So ask the following questions and, of course, commit to following through on the following: 1. What can you learn that you don’t/partially know that could make the difference?

List your top three and seek out the answers (YES! We can help see ) 2. What are you not doing now that you know would contribute to your trading, even if it seems hard to start?

It may be to develop a COMPREHENSIVE trading plan, starting a journal etc. 3. What are you going to measure that may offer some evidence that you can REALLY do this! One last bit of good news…you CAN make the choice NOW whether you stay interested or becoming committed.

That the easy bit and your first vital step. Trade safe and exercise your choice to commit.