Press review - page 622

[Sergey Golubev]

How Forex Brokers Make Money (based on the article) 

When trading Forex, most people don’t think about how brokers make their money. However, this is a fundamental thing to understand before depositing, as you should understand where money flows throughout the system. Nobody cares about your account more than you do, so keep that in mind when figuring out who you should trust. In this article, I’ll take a look at how Forex brokers make money, and what their role is in facilitating liquidity.

Understanding how Forex brokers make their money can help you choose the right broker. Most brokers have a handful of charges that they use to profit from their clients. Getting familiar with these options will help you know where your money is going.

The main source of income are broker fees

Some Forex brokers will charge a commission per trade, while others will charge the spread between the bid/ask prices. The main way that Forex brokers make money is by keeping the spread or charging a set fee per round turn. Some brokers even charge both, but that’s becoming less common these days as the commoditization of the business demands lower pricing. Unfortunately, some less than scrupulous Forex brokers have previously mentioned that they have commission free trades, but what they typically do is charge more in the spread to make up the difference.

Sometimes the spread is fixed, sometimes it is variable. In a variable spread liquidity pool, the amount of the spread will depend on how many orders are out there. When there is a major announcement such as the Nonfarm Payroll Numbers coming out of the United States, the spread will typically widen. Because of this, in a volatile market you may end up paying more in spread than you anticipate. This is the major advantage for a fixed spread, because at least you’ll know what you’re going to be charged to facilitate buying and selling.

Alternate sources of income

Some Forex brokers will charge extra for “bells and whistles” when it comes to customer service and education. For example, some will offer signals, some will offer in-depth analysis, and some will even offer private educational classes and webinars for those who are willing to pay more or have a larger account. That being said, if you understand trading and proper money management techniques, these things are very rarely needed.

Another way that some Forex brokers will make money is in financing the “loan”. Remember, when you buy or short a currency with margin, you are in fact taking out a loan. This can get a bit dicey and complicated, but suffice to say the FX broker with large amounts of orders can get paid interest in the true Interbank market, something that you will not be participating in. Despite what people tell you, as a retail trader you get nowhere near the true Interbank market, because orders need to be much larger to function in that arena. Typically the Forex broker will work with the liquidity provider that shops up these orders in smaller chunks, allowing people to trade back and forth. The true Interbank market is made up of the largest banks in the world, who cannot be bothered with a small trade that is worth $500 (for example).

Some myths

Some of the prevailing myths that endure for many years is that brokers are out there “stop loss hunting”, meaning that they are moving the prices on their servers to wipe out a bunch of traders in one shot. This is because the marketplace was previously full of unscrupulous dealers that would do such things. As a general rule, if you stick with a regulated broker, you won’t run into this issue.

Another myth is that brokers are traders themselves. In all honesty, they very rarely are. They are simply filling orders for traders. In fact, you’d be surprised how little somebody running a Forex desk for a brokerage knows about actual trading. They worry about order flow, system analysis, statistical analysis, and that everybody gets what they asked for in an ordered manner.

It’s also thought that Forex brokers go out of their way to take money from the clients. Nothing could be further from the truth. This is because most client accounts are closer to $1000 in value than they are $10,000. Despite the advertisements that you see of people in the Caribbean on a beach, or perhaps getting off of their private jet, most retail Forex traders do not have that much money in their account. Statistically speaking, most Forex traders will lose a large percentage of their account within 90 days, so the Forex broker doesn’t need to cheat them. This is especially true when a Forex broker is well-capitalized. For example, brokers in the United States need to have a minimum of $20 million in the bank. The purpose of this capital requirement is to absorb losses for traders, and to have the ability to pay when that trader cashes out. This makes the counterparty risk very low. Unfortunately, there are Forex brokers out there that used to be capitalized with as little as $10000, making them an accident just waiting to happen. Once you understand how Forex brokers make money, you’ll also understand the need for using a regulated broker, and you’ll be in a stronger position to trade the markets safely and intelligently.

[Sergey Golubev]

Gold (XAU/USD) and Silver (XAG/US) - weekly rally to the bullish reversal (based on the article)

• "Gold was heading for its smallest monthly trading range since July 1996 at only 2.07% from low to high, but yesterday’s move edged gold out of the range. Nevertheless, it’s still been an unusually tight set of trading conditions, and with gold pushing down out of the range we should be in for vol expansion. If things start to real heat up and gold sinks below last month’s low, there isn’t anything solid until near 1120, the December 2016 low. In the near-term, the bottom portion of the recent range in the vicinity of 1187/90 should cap a bounce if the breakdown is to remain valid."
• "Silver is of course not looking to healthy either, but is showing some relative strength compared to its yellow counterpart. Even as such, it still doesn’t look very healthy with a bear-flag forming following a failure to hold above the August low. Look for it to undercut the monthly low here soon. Big support arrives not far below at the December 2015 low of 13.65."

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The chart was made on Metatrader 5 using HWAFM tool pattern tool from this post

[Sergey Golubev]

2020 Prediction: The number of Wall Street firms predicting this date is staggering (based on the article)

• "Bloomberg’s Joe Wisenthal has collected a few predictions, such as one from Moody’s Analytics chief economist Mark Zandi, who said 2020 will be the economic “inflection point,” and Société Générale’s economic team, who said the likelihood of a 2020 recession has risen due to, among other things, a tight labor market and higher borrowing costs."
• "Even former Federal Reserve Chairman Ben Bernanke is getting in on the act, saying a boom “is going to hit the economy in a big way this year and next year. Then in 2020, Wile E. Coyote is going to go off the cliff.”"
• "This all sounds scary, but the stock market doesn’t care—it’s been too busy surging to new highs!"
• "Stocks’ 10% year-to-date gain means that, if this trend continues, we’ll see a 13% total return for the S&P 500 for all of 2018. That’s far from the kind of market Wall Street seems to be panicking about."

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The chart was made on Metatrader 5 using HWAFM tool pattern tool from this post

[Sergey Golubev]

Australian Dollar Looks To RBA (based on the article)

• "The Australian Dollar has lacked interest rate support compared to its big US brother for all of 2018, and that trend looks set to continue judging by another docile inflation print on Monday."
• "The Melbourne Institute’s monthly gauge showed a 0.3% rise on the month in September, for a 2.1% annualized gain. Admittedly that monthly rise was stronger than Augusts 0.1% uptick, but the yearly figure was unchanged. Moreover the ‘trimmed mean’ measure showed inflation up just 1.8% on the year. The Reserve Bank of Australia will give its October interest rate decision on Tuesday. It is expected to keep the Official Cash Rate at its now-venerable 1.50% record low once again."
• "The Australian economy is not doing at all badly on many counts, notably overall growth and job creation. However, inflation remains stickily low, only having crept back into the RBA’s target band in this year’s second quarter -for the first time in over a year. Official inflation is running at 2.1%, the same rate as the Melbourne Institute’s current measure."

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The chart was made on MT5 with standard indicators of Metatrader 5 together with the following custom indicators:

• MaksiGen_Range_Move MTF - indicator for MetaTrader 5 
• Fibo Bar MT5 - indicator for MetaTrader 5 
• Double Smoothed Stochastic - indicator for MetaTrader 5

[Sergey Golubev]

Bitcoin In Positive Gains In Q3, And Ripple Won (based on the article)

• "The most important fact is that the closing price of Bitcoin for the third quarter at $6,643 was higher than the opening price of the quarter ($6,313). This gives a very clear indication that the price may have lost some battles, but it has won the war over the period of the third quarter. The 3.34% quarterly gain for Bitcoin could have been a lot more significant, but that’s only if the fundamentals were more favourable. The approval of the Bitcoin ETF, for example, would have been a key event in favor of its price."
• "The most outstanding event in the crypto-markets in Q3 was Ripple taking the second position in terms of market cap, even if it was short-lived. But what is not short-lived is the fact that Ethereum classic has moved out of the top five coins in the market cap list. Which coin has taken its place? Yes, you have guessed it correctly. It is EOS. Its community is gathering up a lot of momentum, which is why it moved up to the top five coins by market cap. Having said this, it is worth noting that the quarterly performance of the coin was disappointing, down nearly -29.82% in the third quarter."

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The chart was made on weekly timeframe with Ichimoku market condition setup (MT5) from this post (free to download for indicators and template) as well as the following indicators from CodeBase:

• MaksiGen_Range_Move MTF - indicator for MetaTrader 5
• Price prediction by Nearest Neighbor found by a weighted correlation coefficient - indicator for MetaTrader 5

[Sergey Golubev]

USD/JPY - breaks to 11-Month Highs (based on the article)

• "Retail trader data shows 34.9% of traders are net-long with the ratio of traders short to long at 1.87 to 1. In fact, traders have remained net-short since Sep 13 when USDJPY traded near 111.628; price has moved 2.1% higher since then. The number of traders net-long is 5.0% higher than yesterday and 10.3% lower from last week, while the number of traders net-short is 9.7% higher than yesterday and 32.5% higher from last week."
• "We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDJPY prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDJPY-bullish contrarian trading bias."

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Charts were made on MT5 with Brainwashing system/AscTrend system (MT5) from this thread (free to download) together with following indicators:

• MaksiGen_Range_Move MTF - indicator for MetaTrader 5
• ASCtrend - indicator for MetaTrader 5
• Ichimoku Cloud - indicator for MetaTrader 5
• Vortex - indicator for MetaTrader 5

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Same systems for MT4/MT5:

The beginning

1. ASCTrend system, the beginning, part #1
2. ASCTrend system, the beginning, part #2
3. ASCTrend system, the beginning, part #3
4. ASCTrend system, the beginning, part #4 
5. Digital ASCTrend (Digital Filters with ASCTrend system combined).
6. LabTrend (LabTrend indicators, LabTrendZigZag, templates, Labtrend EAs) - the thread

After 

1. The main AscTrend thread is this one.
2. Asctrend indicator in depth 
3. ASCTREND SYSTEM summary (good EAs included) 
4. Brainwashing system/AscTrend system (MT5) - the thread 

[Sergey Golubev]

DAX Index - ranging near and below Senkou Span levers for possible daily bullish reversal (based on the article)

• "The area around 12100 put a floor in on a couple of occasions, once in June and then again in August, before giving way in September. Despite the trade lower and back higher through this area this month, it could still be impactful soon. A test and hold will bring in the possibility of a not only a higher low from earlier in the month, but could also forge out a right shoulder of an inverse head-and-shoulders pattern. The June trend-line is near the neckline, which if the pattern is to be validated both will need to be broken."
• "Another scenario is for price to get jammed up between the June trend-line and 12100 before making a break one way or the other. Both of these are just scenarios, but in any case, there is support (12100) and resistance (June t-line) to contend with for the time-being."
• "From a tactical standpoint, for now, we are trading between support and resistance, and as such it makes for a tricky spot. But soon we should have better clarity on which way the market may want to resolve itself."

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The chart was made on weekly timeframe with Ichimoku market condition setup (MT5) from this post (free to download for indicators and template) as well as the following indicators from CodeBase:

• MaksiGen_Range_Move MTF - indicator for MetaTrader 5

[Sergey Golubev]

Crude Oil and Natural Gas (based on the article)

Crude Oil - "It appears the current Elliott Wave count for crude oil is wave (c) of circle ‘y’. With circle wave ‘y’ being a zigzag pattern, that means wave (c) is a terminal wave. Therefore, when this current wave finalizes, a large reversal may be at hand. The two day price chart shows some overhead supply and resistance forming near 77.31 and 80. Back in June 2012, crude oil prices were supported at 77.31. This level has subsequently broken and therefore, 77.31 may act like resistance moving forward."

Natural Gas - "The bearish Elliot wave pattern we are following is that of a large complex correction that began from the 2016 price high (left side of the chart above). As the name states, this pattern is complex and may turn lower from levels just above current prices. At 3.28, wave (y) is equal in length to wave (w) so it may be a near term pivot level. Around 3.40, the blue resistance line crosses so it may provide resistance to natural gas prices too. The challenge with this wave count is the visual structure. The form of the waves are not an ideal shape of a (w)-(x)-(y) pattern."

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The chart was made on Metatrader 5 using HWAFM tool pattern tool from this post.

[Sergey Golubev]

U.S. Nonfarm Payrolls: What will the data look like on Friday (based on the article)

• "The fact is that the U.S. weekly jobless claims data has dropped to the lowest level since 1969. According to the ADP research institute, American business added the most workers in seven months and all this is happening in the midst of the so-called trade war. So, the only number which can make the Fed leavened their rosy remarks on the economy further will be the US-NFP number."
• "In simple words, at 185K the expectations for the U.S. NFP number are sky high. Speculators are even hoping for a number above 200K. But, the two most important numbers that traders will be looking at are the average hourly earnings number and the underemployment number. The last one is an indicator that represents the people who have given up looking for a job, in other words, slack in the labour market. Jerome Powell has already declared the special attention he pays to the average hourly earnings number. The expectation for the average hourly earnings m/m is 0.5%, while the previous reading was at 0.4%. The underemployment number printed a reading of 7.4% and if this number comes at 7.1%, it will be immensely positive for the dollar."

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The chart was made on MT5 with Brainwashing system/AscTrend system (MT5) from this thread (free to download) together with following indicators:

• MaksiGen_Range_Move MTF - indicator for MetaTrader 5
• ColorSchaffTriXTrendCycle - indicator for MetaTrader 5

Same system for MT4:

1. Brainwashing. Trades: manually and using EAs (MT4)
2. Brainwashing EAs - the thread (MT4)
3. Brainwashing: system setup for trading manually and for EAs (MT4) - the thread 
4. Brainwashing: system development (MT4) - the thread

[Sergey Golubev]

GOLD (XAU/USD) - weekly ranging in bearish zone (based on the article)

• "Retail trader data shows 83.7% of traders are net-long with the ratio of traders long to short at 5.15 to 1. The number of traders net-long is 5.8% higher than yesterday and 6.0% lower from last week, while the number of traders net-short is 15.7% lower than yesterday and 19.6% higher from last week."
• "We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Spot Gold trading bias."

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Charts were made on MT5 with Brainwashing system/AscTrend system (MT5) from this thread (free to download) together with following indicators:

• MaksiGen_Range_Move MTF - indicator for MetaTrader 5
• ASCtrend - indicator for MetaTrader 5
• Ichimoku Cloud - indicator for MetaTrader 5
• Vortex - indicator for MetaTrader 5

==========

Same systems for MT4/MT5:

The beginning

1. ASCTrend system, the beginning, part #1
2. ASCTrend system, the beginning, part #2
3. ASCTrend system, the beginning, part #3
4. ASCTrend system, the beginning, part #4 
5. Digital ASCTrend (Digital Filters with ASCTrend system combined).
6. LabTrend (LabTrend indicators, LabTrendZigZag, templates, Labtrend EAs) - the thread

After 

1. The main AscTrend thread is this one.
2. Asctrend indicator in depth 
3. ASCTREND SYSTEM summary (good EAs included) 
4. Brainwashing system/AscTrend system (MT5) - the thread