Press review - page 238

Sergey Golubev
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Sergey Golubev  

Forum on trading, automated trading systems and testing trading strategies

Press review

newdigital, 2013.07.01 07:19

Just next educational article about ECN and so on - Market Makers Vs. Electronic Communications Networks

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The foreign exchange market (forex or FX) is an unregulated global market in which trading does not occur on an exchange and does not have a physical address of doing business. Unlike equities, which are traded through exchanges worldwide, such as the New York Stock Exchange or the London Stock Exchange, foreign exchange transactions take place over-the-counter (OTC) between agreeable buyers and sellers from all over the world. This network of market participants is not centralized, therefore, the exchange rate of any currency pair at any one time can vary from one broker to another.

How Market Makers Work

Market makers "make" or set both the bid and the ask prices on their systems and display them publicly on their quote screens. They stand prepared to make transactions at these prices with their customers, who range from banks to retail forex traders. In doing this, market makers provide some liquidity to the market. As counterparties to each forex transaction in terms of pricing, market makers must take the opposite side of your trade. In other words, whenever you sell, they must buy from you, and vice versa.

The exchange rates that market makers set, are based on their own best interests. On paper, the way they generate profits for the company through their market-making activities, is with the spread that is charged to their customers. The spread is the difference between the bid and the ask price, and is often fixed by each market maker. Usually, spreads are kept fairly reasonable as a result of the stiff competition between numerous market makers. As counterparties, many of them will then try to hedge, or cover, your order by passing it on to someone else. There are also times in which market makers may decide to hold your order and trade against you.

There are two main types of market makers: retail and institutional. Institutional market makers can be banks or other large corporations that usually offer a bid/ask quote to other banks, institutions, ECNs or even retail market makers. Retail market makers are usually companies dedicated to offering retail forex trading services to individual traders.

Pros:

  • The trading platform usually comes with free charting software and news feeds. (For related reading, see Forex: Demo Before You Dive In.)
  • Some of them have more user-friendly trading platforms.
  • Currency price movements can be less volatile, compared to currency prices quoted on ECNs, although this can be a disadvantage to scalpers.


Cons:

  • Market makers can present a clear conflict of interest in order execution, because they may trade against you.
  • They may display worse bid/ask prices than what you could get from another market maker or ECN.
  • It is possible for market makers to manipulate currency prices to run their customers' stops or not let customers' trades reach profit objectives. Market makers may also move their currency quotes 10 to 15 pips away from other market rates.
  • A huge amount of slippage can occur when news is released. Market makers' quote display and order placing systems may also "freeze" during times of high market volatility.
  • Many market makers frown on scalping practices and have a tendency to put scalpers on "manual execution," which means their orders may not get filled at the prices they want.


How ECNs Work

ECNs pass on prices from multiple market participants, such as banks and market makers, as well as other traders connected to the ECN, and display the best bid/ask quotes on their trading platforms based on these prices. ECN-type brokers also serve as counterparties to forex transactions, but they operate on a settlement, rather than pricing basis. Unlike fixed spreads, which are offered by some market makers, spreads of currency pairs vary on ECNs, depending on the pair's trading activities. During very active trading periods, you can sometimes get no ECN spread at all, particularly in very liquid currency pairs such as the majors (EUR/USD, USD/JPY, GBP/USD and USD/CHF) and some currency crosses.

Electronic networks make money by charging customers a fixed commission for each transaction. Authentic ECNs do not play any role in making or setting prices, therefore, the risks of price manipulation are reduced for retail traders. (For more insight, see Direct Access Trading Systems.)

Just like with market makers, there are also two main types of ECNs: retail and institutional. Institutional ECNs relay the best bid/ask from many institutional market makers such as banks, to other banks and institutions such as hedge funds or large corporations. Retail ECNs, on the other hand, offer quotes from a few banks and other traders on the ECN to the retail trader.

Pros:

  • You can usually get better bid/ask prices because they are derived from several sources.
  • It is possible to trade on prices that have very little or no spread at certain times.
  • Genuine ECN brokers will not trade against you, as they will pass on your orders to a bank or another customer on the opposite side of the transaction.
  • Prices may be more volatile, which will be better for scalping purposes.
  • Since you are able to offer a price between the bid and ask, you can take on the role as a market maker to other traders on the ECN.


Cons:

  • Many of them do not offer integrated charting and news feeds.
  • Their trading platforms tend to be less user-friendly.
  • It may be more difficult to calculate stop-loss and breakeven points in pips in advance, because of variable spreads between the bid and the ask prices.
  • Traders have to pay commissions for each transaction.


The Bottom Line

The type of broker that you use can significantly impact your trading performance. If a broker does not execute your trades in a timely fashion at the price you want, what could have been a good trading opportunity can quickly turn into an unexpected loss; therefore, it is important that you carefully weigh the pros and cons of each broker before deciding which one to trade through.


Sergey Golubev
Moderator
113476
Sergey Golubev  
Forex Weekly Outlook October 20-24

The US dollar was on the back foot against most currencies as volatility spiked and big moves provided opportunity and risk. US housing and inflation data, A rate decision in Canada and UK GDP are the lead events on our FX calendar. Here is an outlook on the major events for this week.

Weak US retail sales sent stock markets down and triggered a sell off of the dollar. The best jobless claims in 14 years and some other OK figures could not lift the greenback, especially after FOMC member Bullard suggested to continue QE on lower inflation expectations. Weakness in other regions didn’t really help the greenback. In the euro-zone, German business confidence went negative, the German government cut forecasts and yields spike in peripheral bond markets as if it were 2012. In the UK, inflation is at a 5 year low and not all unemployment figures shine. The crash in oil prices contributed to 5 year high for USD/CAD but this didn’t last too long. The kiwi enjoyed a rise in milk prices. The yen enjoyed the risk off environment. All in all, currencies made big moves.
  1. US inflation data: Wednesday, 12:30. U.S. consumer prices declined for the first time in nearly 1-1/2 years in August, dropping 0.2%, following a 0.1% rise in July. Meanwhile, Core prices remained unchanged in August indicating muted inflation pressures. Economists expected CPI to remain unchanged while core CPI to rise 0.2%. If this trend continues the Fed may postpone the intended rate hike. CPI is expected to remain unchanged, while core CPI is predicted to gain 0.2%.
  2. Canadian rate decision: Wednesday, 14:00. The Bank of Canada maintained the interest rate at 1% at the last BOC meeting held in September. BOC Governor Stephen Poloz said exports are gaining traction posting the biggest merchandise trade surplus in almost six years, which is a positive sign for the coming months, however business investment remains rather muted. Poloz declined to comment on whether he would raise rates before the U.S. Federal Reserve. Rat s are expected to remain at 1.0%.
  3. Glenn Stevens speaks: Wednesday, 9:00. RBA Governor Glenn Stevens is scheduled to speak in Sydney Limits. He may talk about the need to cool down bank lending to the housing market. Investment finance reached double-digit rates, nearly half the flow of new approvals. Stevens talks about the need to intervene by using macro-prudential tools such as limiting the proportion of a property’s value that could be borrowed and extra stress tests on banks. Mr Stevens said the right type of risk-taking is good provided it’s clear who bears it. The economy needs an efficient allocation of savings, liquidity services provided to the community, payment services to be provided and and risk to be priced properly for those who wish to bear it.
  4. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits plunged to a 14-year low last week, reaching 264,000 from 287,000 posted in the week before. The four-week moving average of claims, continued to improve falling 4,250 to 283,500, also the lowest level since 2000.The US economy continues to move ahead with growth rate expectations of 3% in the third quarter. A rise of 269,000 is forecasted this week.
  5. UK GDP data: Friday 8:30. UK growth data in the second quarter showed the economy has emerged from six years of muted growth and returned to its pre-crisis peak. Gross domestic product (GDP) expanded by 0.8% in the second quarter following the same rise in the first quarter. On an annual basis, growth was 3.1% higher than measured in the same period last year. The upward trend in the UK economy raises expectations for a rate hike but Governor Mark Carney recently suggested it would be tied to improved data on wage growth to prevent damaging consumer spending and domestic growth. UK economy is expected to expand by 0.7% in the third quarter.
  6. US New Home Sales: Friday, 14:00. US new-home sales surged in August to the highest level in more than six years, reaching an annualized pace of 504,000 from 412,000 in July. The one-month surge was the biggest since January 1992 indicating the housing recovery is gaining traction. Economists expected a much smaller figure of 432.000. Purchases increased in three of four U.S. regions, led by a 50% expansion in the West. US new-home sales is expected to reach an annual growth rate of 473,000.
Sergey Golubev
Moderator
113476
Sergey Golubev  
USD/CAD forecast for the week of October 20, 2014, Technical Analysis

The USD/CAD pair rose during the course of the week, but found enough resistance at the 1.14 level to turn things back around and form a shooting star. However, the previous two weeks formed hammers, so we feel that the market is essentially going to consolidate in this general vicinity. We do not anticipate any type of selling to occur, so therefore we are going to step on the sidelines in order to avoid a lot of the potential volatility and grinding type of action that we are going to see.



Sergey Golubev
Moderator
113476
Sergey Golubev  
EUR/USD forecast for the week of October 20, 2014, Technical Analysis

The EUR/USD pair broke out during the course of the week, climbing above the 1.28 handle. However, we could not keep the gains from that move, and we turned back around to form a massive shooting star. That shooting star suggests that the market is going to drop down to the 1.25 level yet again, and as a result we think that ultimately this market will break down below that level and head to the 1.20 level given enough time. On the other hand, if we can break above the 1.30 level, we would be buyers.

Sergey Golubev
Moderator
113476
Sergey Golubev  
Weekly outlook: October 20 - 24

The dollar gained ground against the euro and the yen on Friday as upbeat U.S. economic reports eased concerns over the outlook for the recovery, after a week of volatile trading, fuelled by fears over a slowdown in global growth.

USD/JPY was up 0.53% to 106.88 late Friday, while EUR/USD slid 0.38% to 1.2759.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.33% to 85.31, but still ended the week lower, its second consecutive weekly decline.

The greenback was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that housing starts rose more than expected last month, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The dollar fell against the other major currencies on Wednesday, touching a one month low against the yen and a three week trough against the euro amid a selloff sparked by fears that slower global growth would act as a drag on the U.S. economy.

Dovish comments by central bank officials on Friday also helped ease investor jitters over slowing growth in major economies.

Bank of England chief economist Andy Haldane that rates could remain lower for longer and warned that global economic conditions have worsened.

On Thursday, European Central Bank official Ewald Nowotny said the bank still has leeway for more action to address slowing inflation in the euro area and added that quantitative easing would start as soon as December.

The dollar was also higher against the Swiss franc on Friday, with USD/CHF rising 0.37% to 0.9459. The pound was little changed, with GBP/USD at 1.6092 in late trade.

In the week ahead, China and the U.K. are to release preliminary data on third quarter economic growth, while the euro zone is to release preliminary data on private sector activity.

The U.S. is to release data on consumer inflation, as well as reports on both existing and new home sales.

Monday, October 20
  • Germany’s Bundesbank is to publish its monthly report.
  • Canada is to release data on wholesale sales.
Tuesday, October 21
  • The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.
  • China is to release what will be closely watched data on third quarter gross domestic product and separate reports on industrial production and fixed asset investment.
  • Switzerland is to report on the trade balance, the difference in value between imports and exports.
  • The U.K. is to produce data on public sector borrowing.
  • The U.S. is to release private sector data on existing home sales.
Wednesday, October 22
  • Japan is to release a report on the trade balance.
  • Australia is to publish data on consumer price inflation, which comprises the majority of overall inflation.
  • The BoE is to release the minutes of its latest policy meeting.
  • Canada is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
  • The U.S. is to produce data on consumer prices.
  • Later in the day, the Bank of Canada is to announce its overnight rate and publish its rate statement. The announcement is to be followed by a regularly scheduled press conference.
Thursday, October 23
  • RBA Governor Glenn Stevens is to speak at an event in Sydney; his comments will be closely watched.
  • New Zealand is to release data on consumer prices.
  • Australia is to publish private sector data on business confidence.
  • China is to release the preliminary reading of its HSBC manufacturing index.
  • The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
  • The U.K. is to report on retail sales and also release private sector data on mortgage approvals and industrial order expectations.
  • The U.S. is to publish its weekly report on initial jobless claims.
Friday, October 24
  • New Zealand is to release data on the trade balance.
  • The Gfk think tank is to release its report on German business climate.
  • The U.K. is to release preliminary data on third quarter GDP growth.
  • The U.S. is to round up the week with a report on new home sales.
Sergey Golubev
Moderator
113476
Sergey Golubev  
USD/CAD weekly outlook: October 20 - 24

The U.S. dollar posted modest gains against the Canadian dollar on Friday after data showed that U.S. consumer sentiment improved unexpectedly this month, while Canadian consumer prices were in line with the central bank’s target.

USD/CAD was up 0.17% to 1.1274 in late trade, not far from session highs of 1.1284.

The pair is likely to find support at around the 1.12 level and resistance at about 1.1312.

The greenback was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that U.S. housing starts rose more than expected in September, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The Canadian dollar had a subdued reaction after official data showed that the country’s consumer price index rose 2.0% year-over-year in September after rising 2.1% in August.

The data indicated that the Bank of Canada will stick to its neutral stance on interest rates at its upcoming policy meeting on Wednesday.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.33% to 85.31 late Friday, but still ended the week lower, its second consecutive weekly decline.

The greenback rose to five year peaks against its Canadian cousin on Wednesday as fears that slower global growth would act as a drag on the U.S. economy fuelled a broad-based selloff in riskier assets.

In the coming week, Investors will be looking ahead to Wednesday’s rate statement by the BoC, with the bank expected to leave rates on hold at 1.0%. Canada is also to release data on retail sales.

The U.S. is to release data on consumer inflation, as well as reports on both existing and new home sales.

Monday, October 20
  • Canada is to release data on wholesale sales.
Tuesday, October 21
  • The U.S. is to release private sector data on existing home sales.
Wednesday, October 22
  • Canada is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
  • The U.S. is to produce data on consumer prices.
  • Later in the day, the BoC is to announce its overnight rate and publish its rate statement. The announcement is to be followed by a regularly scheduled press conference.
Thursday, October 23
  • The U.S. is to publish its weekly report on initial jobless claims.
Friday, October 24
  • The U.S. is to round up the week with a report on new home sales.
Sergey Golubev
Moderator
113476
Sergey Golubev  
EUR/USD weekly outlook: October 20 - 24

The euro fell against the dollar on Friday as the greenback was boosted by data showing that U.S. consumer sentiment unexpectedly improved this month.

EUR/USD was down 0.38% to 1.2759 in late trade, not far from session lows of 1.2745.

The pair is likely to find support at around 1.2625 and resistance at 1.2843, Thursday’s high.

The greenback was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that housing starts rose more than expected last month, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The dollar fell against the other major currencies on Wednesday, touching a three-week trough against the euro amid a selloff sparked by fears that slower global growth would act as a drag on the U.S. economy.

Germany’s government cut its forecast for economic growth for this year and next on Tuesday, after recent data pointed to weakness in exports and industrial output.

The euro area’s largest economy now expects growth of 1.2% this year down from 1.8% previously and growth of 1.3% in 2015, down from 2%.

On Thursday, European Central Bank official Ewald Nowotny said the bank still has leeway for more action to address slowing inflation in the euro area, but added that the euro zone economy did not need emergency measures.

In recent months the ECB has cut interest rates to record lows, extended new four-year loans to banks and announced a plan to purchase asset-backed securities, a form of quantitative easing, in a bid to shore up the ailing euro area economy.

Elsewhere, the single currency edged higher against the yen on Friday, with EUR/JPY easing up 0.15% to 136.38 in late trade, off Thursday’s 11-month lows of 134.12.

In the week ahead, the euro zone is to release preliminary data on private sector activity. The U.S. is to release data on consumer inflation, as well as reports on both existing and new home sales.

Monday, October 20

  • Germany’s Bundesbank is to publish its monthly report.
Tuesday, October 21
  • The U.S. is to release private sector data on existing home sales.
Wednesday, October 22
  • The U.S. is to produce data on consumer price inflation, which accounts for the majority of overall inflation.
Thursday, October 23
  • The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
  • The U.S. is to publish its weekly report on initial jobless claims.
Friday, October 24
  • The Gfk think tank is to release its report on German business climate.
  • The U.S. is to round up the week with a report on new home sales.
Sergey Golubev
Moderator
113476
Sergey Golubev  

EUR/USD Technical Analysis: Short Trade Entry Sought (based on dailyfx article)

  • EUR/USD Technical Strategy: Flat
  • Support: 1.2750, 1.2619, 1.2500
  • Resistance:1.2852, 1.3070, 1.3246



The Euro moved higher against the US Dollar as expected after prices produced a bullish Piercing Line candlestick pattern. Near-term resistance is at 1.2852, the 23.6% Fibonacci retracement, with a break above that on a daily closing basis exposing the 38.2% level at 1.3070. Alternatively, a reversal below the October 13 close at 1.2750 opens the door for a test of the October 1 close at 1.2619.

Sergey Golubev
Moderator
113476
Sergey Golubev  

AUDIO - Weekend Edition with Prof. Patrick Barron

Merlin Rothfeld, John O’Donnell and Patrick Barron talk about several key issues facing our markets including fractional reserve banking and the European Union. Professor Barron points to his article about the demise of the euro, and discusses how the breakup could lead to a new world reserve currency.


Sergey Golubev
Moderator
113476
Sergey Golubev  
2014-10-21 02:00 GMT (or 04:00 MQ MT5 time) | [CNY - GDP]

if actual > forecast (or actual data) = good for currency (for CNY in our case)

[CNY - GDP] = Change in the inflation-adjusted value of all goods and services produced by the economy.

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China GDP Rises 7.3% On Year In Q3

China's gross domestic product expanded 7.3 percent on year in the third quarter of 2014, the government said on Tuesday - topping expectations for an increase of 7.2 percent but slowing from 7.5 percent in Q2.

On an annualized quarterly basis, GDP was up 1.9 percent - also beating forecasts for 1.8 percent and down from 2.0 percent in the previous three months.

The government also said that industrial production climbed 8.0 percent on year in September, beating expectations for 7.5 percent and up from 6.9 percent in August.

Retail sales climbed an annual 11.6 percent, just shy of forecasts for 11.7 percent and down from 11.9 percent in the previous three months.

Fixed asset investment jumped 16.1 percent on year, also missing expectations for 16.3 percent and down from 16.5 percent in the three months prior.