Forex rebates on every trade - win or lose!

pth - its a nice pair to trade on the pullback at the moment. I feel that in the last year or so I have become too fixated on cable. There are alot of things( including some indices)that are trending very well at the moment. Spent the last couple months(in between skiing etc) learning to use fibonacci on pullbacks, and applied to strongly trending fx or whatever its starting to work well for me! It has certainly added another way to trade and am starting to take aslightly longer timeframe to trade in. I think its called "planning the trade, then trading the plan" - for me it helps to take the emotion out of trading. I set my stoplosses, and put in my targets, and then get on with looking for the next trade rather than watching every tick of one trade.
USD/CAD( AUD) has trended well for over a month, big question is for how much longer. Sell the rallies and buy the drops!

I have been spending some time trying to find the best value online broker for Forex.

I have accounts with ETrade and IGMarkets at the moment.

ETrade hugs the actual market price but the spreads are wide, where as IGMarkets skew the price but the spreads are narrow.

This afternoon I had my two accounts and demo versions of FXCM and EFX Group running for a comparison.

FXCM seemed to hug the market but the spreads are somewhat wider than IGMarkets.

EFX Group came out the best. Following the market price on the majors like glue. Although they charge $5 per $100,000 traded the spreads on EURUSD GBPUSD were often zero and pairs like EURCHF USDCAD were often down to 1 pip and sometimes zero.

Will the live platform in practice give the zero spreads - I shall see !

Unless anybody knows better, until I can fund a Dukascopy Interbank account, it's the best I can find.

Cheers qwento - I'll take a look at EFX.


Which will crack first - the pound or the dollar?

By John Stepek, MoneyWeek
April 25 2007

The $2 pound is back. It took a while - in fact, the pound hasn't been at these dizzy heights in about 26 years, but at last we can snatch up all the 50p dollars we want, high-tail it to the States, and gorge ourselves on bargains.
But how long will it last for and why have we hit this level again after all this time? There is no easy answer to either of those questions but lets have a go at it anyway.

There are lots of reasons behind sterling breaching the $2 mark. Most obviously, inflation just took off in a very visible way in the UK (though of course, as regular readers know, it's been on the way up for a long time). Bank of England governor Mervyn Kings letter to the chancellor seems to have finally brought the Citys attention to the fact that inflation is a problem in this country, which means that the market now expects further interest rate rises.

Meanwhile, the housing market is still roaring away while economic growth figures have been strong enough to keep a smile on even Gordon Browns face.

Diverging interest rates
On the other hand, despite persistent inflationary fears in the US, the market generally still expects the next move to be a rate cut over there, particularly in light of the crumbling housing market. This may be wrong there are similar inflationary forces such as rising food prices and more costly energy bills in the US - but its expectation that counts in this case.

Currently, the base rate in both countries is 5.25%. However, rates in the UK look set to climb, while in the US they look set to fall. That means that carry traders (who borrow money in a low interest rate currency like Japanese yen, and make money by investing in a higher interest rate currency) are more interested in buying sterling where they can get a higher yield on their money, than dollars.

So it seems to make sense that sterling is rising so strongly against the dollar.

But of course, there's more to it than that. If you look at the UK and the US, they in fact have an awful lot in common with one another - and not much of it is good.

All sorts of debt
Consumer debt is a huge issue in both countries the US consumer seems to have cracked first, with overenthusiastic lending to bad credit risks eating away at the countrys housing market. But the UK consumer also looks very vulnerable a 1.3 trillion debt mountain is not what you want to be sitting on while interest rates are rising.

Not only that, but public borrowing on both the US and the UK is also huge. As Martin Hutchinson points out on Breakingviews, over time, the current account position should matter most. The current account basically measures how much money is coming into a country, and how much is going out. Just like a typical household, if a country runs at a deficit for too long, people start to worry about how it will make good on its debts, and stop buying its currency, driving the currency lower.

The US deficit racks up at about 6% of GDP. To put that into perspective, most economists reckon that at about 4% or so youre starting to get into banana republic territory. Meanwhile, the UK also has a significant deficit last year the current account deficit was 43.4 billion, the largest on record, and equal to 3.4% of GDP.

Foreign investment and financial services
What props America up is the willingness of foreigners to fund its massive deficit by buying dollars. Basically, countries like Japan and China buy lots of dollars to keep their own currencies weak, enabling American consumers to keep buying their exports. As for the UK, whats propping our deficit up is the global boom in financial services, which centres largely on London (much to the chagrin of its rivals in New York).

Neither of these situations can last forever. If US interest rates do head lower, and the dollar keeps weakening, foreigners will not want to keep buying dollars. That would send the US currency even lower.

But the same goes for the global financial boom. The merger and acquisition frenzy, the private equity boom, the hedge fund industry all have been propped up by low interest rates, which has driven a flow of cheap money looking for a home. With global interest rates rising, that flood of money could well dry up which is bad news for the financial services boom.

So in reality, both sterling and the dollar look vulnerable, and it's a tough call as to which will crack first.

Alternatives
But if that's the case, then where should you be investing your money? Well, at MoneyWeek, we're keen on Japan, where the economy looks like it should recover. By buying Japanese stocks, you can gain some exposure to the yen, which is historically low against the dollar at the moment. Alternatively, you could look at Germany - the euro is strong, but interest rates keep rising, and the Germany economy is recovering very well.

But currencies are volatile, and while we like both Japan and Germany's economic prospects, we wouldn't be betting on the money they print. If you're looking for a solid bet in a world of unstable paper money, you need to go back to a tried and tested currency that has lasted millennia without being destroyed by rampant inflation - gold.

Glittering gold
The yellow metal traditionally rises as the dollar weakens, and is also good at protecting your wealth from inflation. Many experts believe that everyone should have about 10% of their portfolio invested in gold, and there are many ways to gain exposure. One of the easiest (and more convenient than buying physical gold) is to invest via a financial instrument that tracks the price of gold Lyxor Gold Bullion Securities (GBS) is one such security listed on the London Stock Exchange.

This is the first time that I've been able to access the damn interweb thingie for a week, as the transition from Pipex to Sky has been a total nightmare. I've currently got just one laptop wired into my router in the hall as that seems to be the only telephone socket in the house which is capable of supporting broadband. Unfortunately, all of the PC's in the house are wired to my office about 30' away. Strange that the telephone socket in my office was capable of supporting Pipex broadband, but not Sky!!!

I now need to go to PC World to see if I can buy a man with a hammer, some cable clips and a length of cable.

I did read in the Torygraph that the Pound had hit $2. Is it true?

Nah Hilary, don't know where that info came from. It's well under $2 at the moment :-)

Re your broadband problems, in a nutshell I would guess the problem is where the telephone line comes into your house. The higher the broadband speed the better the wiring needs to be in your house. I'd say the best thing is to get the outside telephone line to come into the master socket in your office then run all the telephone extensions from there.

Not taking any new positions here as I don't feel the long position has as much going for it . Was thinking about a short from 2.0050 this am but knew I was going to be busy. If only, eh...

Hil, I wondered where you'd gone. Allegedly, the Pound did pass the $2 mark, but seems to have subsided somewhat this morning. It's probably missing you.

SC

'Fraid I was short this morning from 52, but decided that I wasn't that confident and closed flat. Opened another shortly thereafter and closed that for 10 pips.

If only eh?

pth

Yup, if only!! edit - 10 is better than none and definitely better than minus.

Time to start re-drawing some of the charts after today; YEN and CABLE are still holding, but GOLD has certainly gone out of the window, although that particular commodity may have found support on a Daily rising support trend line. But judging by the way it's fallen off a cliff today could well fall further to 660, probably strengthening the $ in the process.

pth

Tried to catch that falling knife, lost 30 points :-(
Anyway, tomorrow's another day - but how I wish I'd had the courage of my convictions because I could see cable didn't look strong this morning.

US Dollar softer in Sydney

Calendar update as three GIFs again -- apologies to all for the naff "purchase" above the day in a couple of places on the left -- I've ordered a full licence for this GIF conversion software, but it hasn't turned up in my email as I went to press.

Cheers Dezza :)

Went to press what?

MM - the calendar is great, many thanks (on a Friday night too, what service !).

Blimey, Japs have got an easy week !

WAS MY ACCOUNT TARGETED BY IG INDEX?

During the course of yesterday's solid rise in the USD/YEN I rather foolishly attempted to catch a few falling knives, which resulted in my holding of 9 short CFD contracts at roughly 5 per pip (I mention the cost because it may be relevant).

I decided that rather than close and take a substantial loss, to await developments today and see what effect the USA GDP figs would have. At 1330 it was clear from my trading screen Cable and the Euro were accelerating upwards, but the USD/YEN pair remained totally static. Fortunately I was talking to a fellow trader who kept me appraised of the situation once I had mentioned my stubborn pair. Whilst phoning IG I logged out and back in again and after 30 seconds or so, my screen updated and I was able to close all my positions for a significant overall profit, I didn't need to speak to IG after all.

Once the dust had settled I phoned IG asking what had happened to my trading platform, I was initially informed that their USD/YEN data feed had developed a fault. I asked for the name of their data feed provider to verify their claim. Following a period on hold I was then informed that the fault had been an internal IT error, not an external data feed problem!

Now I'm not sure if I am being paranoid, but I find it extremely odd that the only stock / currency affected on my platform was the one I stood to make a hefty profit or a hefty loss. Coupled with their change of story I remain perturbed. Were it not for my fellow trader keeping me updated I am sure I would have missed my opportunity.

Did any other FXers who trade with IG notice the same problem with their platform during the 1330 period?

If not it would seem to lend some credibility that IG did mess with my account.

Grateful for any response.

pth

pth:

I can't comment on the specifics of your issue with IG, so I'll leave that to others. However, I have quite a lot of experience in dealing with the technical and software engineering issues of market data feeds and so on -- most of it rather sad.

It's quite plausible that IG had a problem with a specific FX instrument such as USD/JPY. It is equally plausible -- quite common, in fact -- that IG's IT people didn't understand the real cause of the problem at the time or simply misreported it to you.

I fully understand your incipient paranoia in this case, but I suspect that the real answer is much more mundane.

Incidentally, I have to say that MoneyAM is one of the most clued-up organizations that I've come across when it comes to dealing with this sort of problem and the resultant customer issues.

Regards, MM

Ever wondered 'What Is Money ? Where does it come from ?'

An interesting animated cartoon reveals all :

Money As Bebt

Some other Forex related links you may find of interest :

Action Forex
Forex Factory
Daily FX
FxStreet Forums
Forex Bastards
Using COT Report To Forecast FX Movements
Fx Bootcamp Videos
How To Calculate Pip Value
Pip Calculator
US Key Economic Indicators

A bit of fun :

Every Breath Bernanke Takes
Vocation Vocation Vocation

mg .... replying to your post of a few days back ..... 20700 is the ultimate target and it was most certainly not anticipated that it would be hit in the immediate future ..... however, unlike my shares which i trade, rarely keeping any for more than 6 months and often a lot less than that, i (our company) watch $ long term movement and expectation quite carefully as we always have surplus $ income ..... on a month/month basis we will sometimes hedge our known surplus and sometimes not, much depending on volatility at the time and pure gut feeling .... i don't recollect the company having got it seriously wrong in a very very long time.

MM

Many thanks for the reply. Must say I am a little more relaxed about the issue now, although at the time I was somewhat agitated. I will keep a close eye on proceedings in future, but considering moving to a different broker anyway.

pth

MM,

Just a thought re the calendar.

The page setup for the XLS file is such that it prints by default as a percentage of normal size. This could be the reason that you end up with 3 separate GIF's.

Have you tried altering the page setup so that it scales to 1 page wide and tall on the largest size paper (Legal) before you print the GIF?

I had exactly the same problem going the XLS>PDF>JPG route.