市場新聞與洞察

It has been an eventful week over in the United States this week. Some of the major companies, including Microsoft, Apple, Facebook, and Tesla announced their latest earnings. The Federal Reserve kept their interest rates unchanged at 0.25%.

We also saw the US GDP expand by 4% in Q4 of 2020. However, these were not the most talked-about events this week. Major hedge-funds on Wall Street were left with huge losses after it bet against a struggling American gaming company GameStop by short-selling its shares.

What is short-selling? Short-selling is when an investor speculates that a stock or security will fall in price in the future. The investor borrows the stock or security from a broker and immediately sells it with the hope of buying it back at a lower price.

Gains from short selling are limited as a stock can only go to 0. The losses do not have a cap as there is no limit as to how high a stock’s price may jump. What happened?

The ''short'' bet did not pay off for the big players on Wall Street after amateur traders rallied together on social media sites to take on the hedge-funds and pump the price of gaming retailer GameStop to new levels. The share price of the GameStop has surged by over 1,550% this year alone after trading at $17 at the beginning of January. The stock ended the trading day at the $193 level on Thursday, rising up to the $261 level in post-market hours.

The White House said it was ''monitoring'' the latest price surge in GameStop and other stocks. Hedge-funds and others that bet against GameStop have collectively lost more than $5bn, according to data analytics company S3. Source: TradingView It is an interesting time on Wall Street and it is definitely worth keeping an eye on the future developments moving forward.

One of the must-watch economic events this week will be the Bank of Canada interest rate decision. The decision is scheduled to be announced on Wednesday at 14:00 PM London time. It will be the first meeting since the new United States–Mexico–Canada Agreement (USMCA).

The bank has increased its interest rates four times since July of last year, so will there be another hike? Why Is The Announcement Important? A bank interest rate is a rate at which a countries central bank lends money to local banks.

The interest rate is charged by nations central or federal bank on loans advances to control the money supply in the economy and the banking sector. The Bank of Canada has an inflation target of 1% to 2% (currently 2.8%), and the interest rates are changed accordingly to meet the target. Therefore, the Bank of Canada’s and other central bank rate decisions can have a significant impact on the financial markets.

Expectations In a recent speech, Stephen Poloz, the Governor of Bank of Canada said he continues to believe gradually increasing interest rates is the right approach. According to the latest forecasts, it is highly anticipated that the Bank of Canada will raise its interest rates in the upcoming meeting from 1.5% to 1.75%, potentially a fifth rate hike since July 2017. "We expect the Bank to hike this month, in addition to hiking four more times in 2019, as the BoC’s measure of core inflation touched 2.0% for the first time since 2012 in August and is facing increased capacity constraints," said Daniel Hui, an analyst at J.P. Morgan. "This [October] hike was already well anticipated by markets even before the USMCA breakthrough (80% priced before, 90%+ priced now), so it is the forward-looking rhetoric that might imply future pace and terminal rate that is more important for markets to monitor," says Hui.

All eyes will be on the decision on Wednesday. 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: Go Markets MT4, Google, Datawrapper

Many traders utilise shares or options amongst their investment strategies either for income or capital growth. One key factor that such traders may consider in their choice of specific markets to trade is liquidity, with a higher trading volume impacting positively on the ability to get in and out of trades at a fair price. Others may find the choice to trade specific companies or sectors not as well represented in their local market.

For many therefore, the breadth of choice and liquidity may make this market the preferred market to trade. Like any type of trading, sustainable results require a depth of knowledge and commitment to trading an individual tried and tested system. This system should include in depth reference to risk management throughout.

However, due to the choice of market, a trader can make regular profit and yet lose this (and potentially more) through the currency risks associated with trading in US dollars rather than, for example, their base currency of Australian dollars or GB pounds. Holding a significant position in US shares or options means that many traders have exposure to positions in tens of thousands in USD. So what is the currency risk?

The reality is that profits can be ‘used up’, or losses can be compounded, by adverse currency movements. The reason for this is simple. Let’s assume that your currency is AUD and it is transferred into USD for trading purposes.

The exchange value when converted back to the original currency at some time in the future will be dependent not only on trading results but on the movement of AUD versus USD. While your money is in your account in USD, weakness in AUD will mean a greater worth in AUD when converted back, whereas a lesser conversion worth will result if there is AUD strength while your money is sitting is USD. Let’s give an example...

See below a daily chart of AUD/USD for the last 3 years. Note the price from the end of January 2018 at a level of 0.8134. The price at Nov 2019 was at 0.6776 so a difference of 0.1358 So, an investment to fund a trading account of AUD$30,000 would have equalled an original USD value of $24,402.

With the movement in the currency alone over this period (assuming no movement in share price) the value of the account when transferred back into AUD would have risen to $36,007.59 or in other words a 20.03% increase. So, in this case the underlying currency movement was of benefit. However, if this positive currency outcome is the case when there is USD strength (when your trading capital is in USD), with the same AUDUSD currency movement in the other direction, the loss could be 20.03%.

This would mean that you would have had to profit by this 20.03% in your trades simply to breakeven. This WAS the case if you look at a chart from the beginning of Jan 2016 to Aug 2017. More than this of course, if you have lost $6007.59 on a similar price move in the other direction, broke even on your trades during that period, so your equivalent AUD value is $23,992.41, your trading return would have to be now 25% profit to recover the original capital level simple because of currency movement.

Bear in mind, of course we have chosen only a $30,000 example, some of you may have considerably more than this in the market (and so considerably more currency risk) than the example we have given. Risk management of your hedge Although you are entering a low margin requirement Forex position due to the leverage associated with Forex, we cannot understate the importance of a full understanding of the implications of this. Should the AUD move lower still (as we explained above in looking at what has happened since January 2018), the value of your hedge may move significantly.

If we look at using the analogy of an insurance policy in trying to explain the concept, the maximum risk is the initial “premium” paid in this case. However, with any Forex position there is obviously the risk of losing more than your original investment. Additionally, you are trading your shares/options in a different account and hence there must be the ability to money manage between the two accounts.

Our team can guide you further on these important issues. One last thing… Although we cannot advise when it is right for you, if at all, to put in a currency hedge, it is worthwhile raising the question about what the current AUDUSD chart is telling you now technically. Additionally, with the potential for further US rate cuts, and if you believe there will be some resolution to trade tariff wars between the US and China, both events have the potential to strengthen AUD (and so weaken your USD capital).

If invested in USD based trading for some time you have benefitted, logically, it is not unreasonable to consider whether it is worth ‘locking’ some of this in. So, what can you do? Your choices are twofold. 1.

Allow your invested trading capital to be subjected to the risks associated with underlying currency movements or, 2. Hedge the currency risks with a non-expiring Forex position. If option “2” looks attractive, the reality is you can: • Mitigate the risk through consideration of a Forex hedge. • Attempt to optimise your hedge by timing its placement and exit i.e. use technical landmarks, to decide when to get in and out of a hedge. (Please note: a hedge is for insurance purpose and so although there may be merit in timing entry and exit, we are not suggesting you trade in and out of a hedge on a regular basis).

Learn how to reduce the risk We are happy not only to show you how but guide you step by step in how to set this up. There are a couple of practical issues you would need to have in place to manage this well but again we can go through these to enable you to make the right decision for you. If you think this might be for you, then simply connect with us at [email protected] and we will arrange for one of our account team to discuss a currency hedge that may be a fit for you.

The Buraeu of Labor Statistics have released the latest jobs report for April. Let’s take a look at the latest numbers. The total non-farm payroll employment increased by 263,000 the U.S.

Bureau of Labor Statistics reported today, beating the forecast of 190,000. Biggest job gains were in professional and business services, construction, health care, and social assistance. Professional and business services added 76,000 Construction added 33,000 Employment in health grew by 27,000 Social assistance added 26,000 The unemployment rate fell to its lowest level since December 1969 to 3.6% beating the forecast of 3.8%.

The number of unemployed persons decreased by 387,000 to 5.8 million. The average hourly earnings remained unchanged at 3.2%, below the forecast of 3.3%. USDCAD – Hourly USDJPY – Hourly The next US jobs report is on 7th June.

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: Go Markets MT4, Google, Datawrapper,

Irrespective of what vehicle you are choosing to trade (Forex, CFDs, share CFDs ), position sizing is a crucial part of your trading risk management. It is position sizing, along with effective exit strategies, that have an undoubted major impact on your trading results both now and going forward. At a basic level, the following are part of a position sizing system: a.

Identify a tolerable risk level per trade based on your account size (often 1-3%) meaning you aim to keep any loss sustained within this tolerable limit. b. Using any stop level for specific trades and your tolerable limit to work out how many lots/contacts you can enter to achieve this goal. c. Ensuring you are not inadvertently over-positioning in one market idea (e.g. broad-based USD strength or weakness, by entering multiple trades across currency pairs/ commodity CFDs that will multiply the impact of USD movement).

But what then? How do we explore refining our position sizing to potential optimise results? Here are two initial ideas for potential testing… Idea 1 – Position sizing according to volatility When exploring using volatility for any trading decision it is not just the level but potentially, more importantly, the direction of the volatility i.e. increasing/decreasing.

Volatility is often seen as a reflection of market certainty but perhaps consider volatility as a measure of the likelihood that an asset e.g. Fx pair, is more likely to move away from its current position (and that can be either positively or negatively of course). Logically, therefore, increasing volatility in either direction could represent an increase in risk (and of course visa versa).

Consequently, it is not unreasonable to consider altering your tolerable risk level according to this. So, for example, if your standard is 2% of account capital on any one trade, if you were to implement this as an idea, increasing volatility could mean a decrease in risk level to 1% and decrease to 3%. The challenge, of course, is to determine a method through which you can determine this change.

The ATR is a volatility measure commonly used and would be a potential tool that can assist. Of course, the other aspect is to choose the timeframe to measure this variable. Logically, the shortest timeframe should be the timeframe you are trading but there may be wisdom in looking at longer-term timeframes also.

Idea 2 – Ensure that trail stops account for your tolerable risk level. Arguably a common mistake made by many traders is to view trades on their P/L and make decisions on the fact they are “up” on the deal and as long as the trade is closed before getting back to breakeven then they have a win. An alternative and logically an advanced approach is your net worth in the market is where it is right NOW and hence any pullback in any position is a “loss” from your current place.

This is the rationale behind trailing a stop in an attempt to still have access to the further upside (“letting your profits run”) whilst capping any pullback to a new an improved level to that of your initial stop. There are many ways of trailing a stop e.g. retracement, price/MA cross but again would it not make sense to use your tolerable risk level as part of your trail stop equation. So lets see, for example, use an account size of $10,000 and you are trading a 2% maximum risk level to set your initial stop.

This means that your contract/lot size is based on your technical stop and $200. You have a position that is now up to $350 if you were to adopt this approach when you trail your stop you should ensure that it is placed at a level that would mean that the worst scenario would be that you would close the position at $150 profit. There are of course other advanced position sizing techniques you could test which will be the topic of an upcoming Inner Circle session.

Make sure that you are part of this through registering for these sessions so you can jump on board with this advanced trading education group to access the topics applicable to your trading development. In the meantime, we would be delighted, as always, to hear from you, so if you are using an advanced position sizing technique it would be great to hear from you at [email protected]

Trading Volume: General principles Many experienced traders (even those using a simple system will incorporate volume as part of their entry (common) and/or exit (less common) system. It is essential (as with any indicator) that you understand the role volume can and cannot play with suggestions of what is happening to market sentiment. So generally speaking, trading volume may offer some guidance as to whether market participants are changing sentiment towards the pricing of an asset, and if there is a price move, whether it may have a higher probability in continuing in that trend direction.

Many would consider it more “leading” than the majority of other indicators. Indeed, VSA (volume Spread Analysis) which is based on this principle is an approach used by many. In simple terms, a price move (either way) with higher traded volume is thought to be more robust in terms of trend continuation.

Whereas Lower volume with a price suggests market uncertainty or no interest. Trend reversal and retracement A trend reversal is, as the name suggests, sentiment moving from an established upwards trend to, a new trend forming in the opposite direction e.g. upwards to downwards trend (or visa versa). The risk of remaining in a trade that is reversing is loss of potential profit in that position if one delays exit.

A trend retracement, is a temporary pull back in price prior to continuation of that change in the same direction, often termed a trend pause). The risk of exiting a trade on a retracement is that you are missing out of the additional profit from a subsequent trend continuation move. This differentiation is important when the trader is considering an exit from a specific position.

For example, recognition a reversal from a uptrend to downtrend early would be beneficial when in a long trade. Whereas should the price move be a retracement then to continue to hold that position may prove to have a better outcome as the price subsequently moves higher. The challenge, of course, Is that ability to differentiate and identify through the use of technical “clues” what may be happening to market sentiment.

Is volume the “clue”? If one accepts the premise that level of volume is an indicator in terms of the potential strength of a price move, then can this be a “clue” as to whether the more likely outcome is reversal or retracement? See below for an hourly chart of USDJPY.

We have labelled the confirmed start of trend after a double top type of chart pattern through to the end of the trend and subsequent reversal. Note the lower volume of the two retracements (shown in blue highlight) and the subsequent higher volume as the trend ultimately reversed. In terms of trading actions logically one could consider the following: • Retracements may be a signal to trail a stop loss to the base of the retracement. • Increasing volume may be a signal to exit directly in anticipation of a confirmed reversal.

The Forex Volume Challenge? As many readers will be trading Forex it would remiss of us not to discuss the specific issue briefly with the volume seen on an MT4 platform. With shares (and the volume shown on Share CFD charts for example), the number of traded positions is managed and reported by the central exchanges (e.g.

ASX, NYSE). However, with FX there is no central exchange so the volume you see reflects the trades going through relevant liquidity providers. Additionally, Forex volume on MT4 measures a record of ticks rather than the number of lots traded.

One tick measures a single price change. As a price moves up and down this “tick volume” alters within the specific chart period. On the MT5 platform there is a option to choose so called “real volume” and yet it should still be borne in mind that compared to a stock exchange which theoretically shows all trades from the whole exchange this is not the case with Forex.

Hence, some may question as to whether the measured chart volume with Forex is sufficiently valid on which to make decisions (although theoretically the principle remains the same). The reality… Whatever your thoughts on this, arguably you could question the validity of any indicator. So, ultimately you use the same process for testing and subsequently potentially adding any indicator you may be considering the use of in your individual decision making i.e. back-test to justify a forward test and on evidence decide whether, and how to add volume to your trading decisions.

You challenge is to do the testing, and plant your flag as to whether you are to utilise this in your trading.