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Top 10 Tips on Forex Trading

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Top 10 Tips on Forex Trading 3

Forex is one of the world’s biggest trading opportunities. The foreign exchange market is expected to be worth more than $110 billion this year, making it a tremendous opportunity for retail investors, particularly those interested in social trading.  eToro’s OpenBook social network is among those providing live updates on other traders’ trading activity (strategies, positions and profits) enabling investors to see, interact with and copy the best financial traders.

Top 10 Tips on Forex Trading 4

If you want to take advantage of the benefits social trading has to offer you’ll need to know how to spot which traders to follow and copy. These are our top 10 tips to help you do just that.

1.      Find the right risk level
If you want to succeed as an online trader then you’ll need to develop a trading plan. This requires determining the right risk-reward ratio for you as well the length of time you want to trade over – short term or long term. Once you have this figured out you’ll need to decide on the amount of leverage to use in trades, which is the key decider of trade risk. If you are interested in long term trading at low risk then you’ll want to use a low leverage level in your trades, if you want first trading and fast returns then a higher leverage level will be more appropriate for you.

2.      Organize traders by their risk level
If you’re looking for other traders whose trading style and behaviour matches your own then you should seek to identify traders through their approach to risk and the length of trades which they execute. The best short term traders, e.g. one week traders, tend to open high risk trades whereas the best long term traders, e.g. one year traders, tend to open high risk trades.

3.      Focus on the assets you want to trade
In social trading it’s possible to restrict your choice of financial experts to traders who are trading the assets which you enjoy trading e.g. Gold or the Japanese Yen. If you’re searching for a pro trader to be your “guru” you can limit your search to traders trading these same assets. Alternatively, you can simply trust in the wisdom of your chosen guru trader and follow their trading decisions, regardless of which assets they choose to trade.

4.      Investigate your guru’s following
Gurus who can boast a greater number of followers are more likely to offer consistently high performance than those with a smaller base of followers. Make sure you investigate your guru’s record extensively before committing to following and copying them. You can do this by examining the number of followers the guru has as well as their individual success rates.

5.      Examine your guru’s trade portfolio
It’s important to keep a check on the trading strategy of your preferred guru(s). Just because a traders adopts a long term trading strategy it does not mean that they can be considered a low risk trader. You should check the type of assets a trader is trading and seek to ensure that their portfolio is sufficiently diversified, a trader invested in just one asset can ultimately prove to be high risk.

6.      Compare and contrast market leaders to keep a check on your gurus
A great tip for keeping tabs on your guru’s trading choices s to keep comparing how they match up against other traders who made similar investments at around the same time. That way you make sure that they are actually outperforming the competition.

7.      Investigate your guru’s P&L
Keep a close check on your chosen gurus’ profit and loss rates and their general trading performance. Make sure to check multiple time periods, up to one year so you can see how consistent their success really is. By researching in this way you can work out where their strengths as a trader lie, which will tell you a lot about when and how much of your funds you should trust to investing in them.

8.      Pick a guru with local insight
“Go with what you know” is often good advice in life. By picking guru traders who speak your language and live close to you, you are more likely to understand the online trading decisions they’re making which can be a big help. Also, picking a guru who lives in your time zone should make it easier for you to keep tabs on their trading decisions. Another good strategy tip is to pick a guru who has particular insight into the assets you are most interested in trading e.g. a trader living in Japan is likely to have more knowledge of the Japanese yen than traders living in other parts of the world.

 9.      Find out how communicative your guru is
Before settling on a guru it’s good to see just how much effort they make to communicate with followers. A guru who is making more effort to interact with followers is likely to be a better choice than one who has limited interested in sharing their trading tips.

 10.  Spread your risk by investing in multiple gurus
Investing in a variety of different gurus rather than focusing on just one is a good way to diversify your investment portfolio and spread the risks in your trading. Choosing at least 5 different gurus to invest in is a good way for investors new to social trading to get started because it prevents catastrophic losses from one guru’s mistakes from obliterating your account balance.

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Afreximbank’s African Commodity Index declines moderately in Q3-2020

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Afreximbank’s African Commodity Index declines moderately in Q3-2020 5

African Export-Import Bank (Afreximbank) has released the Afreximbank African Commodity Index (AACI) for Q3-2020. The AACI is a trade-weighted index designed to track the price performance of 13 different commodities of interest to Africa and the Bank on a quarterly basis. In its Q3-2020 reading, the composite index fell marginally by 1% quarter-on-quarter (q/q), mainly on account of a pull-back in the energy sub-index. In comparison, the agricultural commodities sub-index rose to become the top performer in the quarter, outstripping gains in base and precious metals.

The recurrence of adverse commodity terms of trade shocks has been the bane of African economies, and in tracking the movements in commodity prices the AACI highlights areas requiring pre-emptive measures by the Bank, its key stakeholders and policymakers in its member countries, as well as global institutions interested in the African market, to effectively mitigate risks associated with commodity price volatility.

An overview of the AACI for Q3-2020 indicates that on a quarterly basis

  • The energy sub-index fell by 8% due largely to a sharp drop in oil prices as Chinese demand waned and Saudi Arabia cut its pricing;
  • The agricultural commodities sub-index rose 13% due in part to suboptimal weather conditions in major producing countries. But within that index
    • Sugar prices gained on expectations of firm import demand from China and fears that Thailand’s crop could shrink in 2021 following a drought;
    • Cocoa futures enjoyed a pre-election premium in Ghana and Côte d’Ivoire, despite the looming risk of bumper harvests in the 2020/21 season and the decline in the price of cocoa butter;
    • Cotton rose to its highest level since February 2020 due to the threat of storm Sally on the US cotton harvest, coupled with poor field conditions in the US;
    • Coffee rose 10% as La Nina weather conditions in Vietnam, the world’s largest producer of Robusta coffee, raised the possibility of a shortage in exports.
  • Base metals sub-index rose 9% due to several factors including ongoing supply concerns for copper in Chile and Peru and strong demand in China, especially as the State Grid boosted spending to improve the power network;
  • Precious metals sub-index, the best performer year-to-date, rose 7% in the quarter as the demand for haven bullion continued in the face of persistent economic challenges triggered by COVID-19 and heightening geopolitical tensions. In addition, Gold enjoyed record inflows into gold-backed exchange traded funds (ETFs) which offset major weaknesses in jewellery demand.

Regarding the outlook for commodity prices, the AACI highlights the generally conservative market sentiment with consensus forecasts predicting prices to stay within a tight range in the near term with the exception of Crude oil, Coffee, Crude Palm Oil, Cobalt and Sugar.

Dr Hippolyte Fofack, Chief Economist at Afreximbank, said:

“Commodity prices in Q3-2020 have largely been impacted by COVID-19. The pandemic has exposed global demand shifts that have seen the oil industry incur backlogs and agricultural commodity prices dwindle in the first half of the year. The outlook for 2021 is positive however conservative the markets still are. We hope to see an increase in global demand within Q1 and Q2 – 2021 buoyed by the relaxation of most COVID-19 disruptions and restrictions.’’

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Beyond cost containment: Outsourced trading as the new norm

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Beyond cost containment: Outsourced trading as the new norm 6

By Gary Paulin is Global Head of Integrated Trading Solutions at Northern Trust.

Outsourcing, initially of the back office, and subsequently of the middle office, has been a feature of the asset management industry for some years. More recently, in the third wave of outsourcing, managers began to outsource non-core front office functions, and the pace of change has grown rapidly to the extent that the industry has passed the tipping point of this transition.

For example, in our survey taken during Q1 2020 of 300 heads of investment operations from global asset management firms with assets ranging from $10 billion to $500 billion, 85% of respondents said they were already outsourcing their trading capability or were interested in doing so within the next two years.

What started as simply a cost-efficiency endeavour has evolved. The outsourced trading model has moved from being a largely defensive strategy – a response to cost pressures – to a proactive move that can de-risk and streamline operations and enhance governance and operational resiliency while also responding to very real and relentless margin progression.

In short, outsourced trading is increasingly viewed as a more optimal state for asset managers, and as the timing of the Northern Trust survey shows, this turn in thinking predates the onset of the Covid-19 pandemic. The pandemic in our view is an accelerant of change, but not the catalyst. We can see its origins more than a year ago, well before the economic cataclysm and office shutdowns of 2020.

Recent years have seen increased deal flow in the asset management industry, along with significant restructurings and increased investment in technology, as firms sought to gain scale, cut fixed costs and automate functions. These are classic responses to margin pressure, which has persisted even during the recent bull market in equities.

In fact, the drivers of change are global and go far beyond simple margin pressure. They include aspects of competition, the ability to leverage economies of scale, business resilience, changing economic models, variable costs, demographics, technology and regulation – drivers no longer hidden under the veil of strong markets. Critically, this past year has marked a significant change in the economics of the industry, as margins for many asset managers fell despite assets under management going up.

Margins are not expected to fall in a bull market like that of 2019 – when the S&P 500 gained over 28% – yet according to investment market analysts this, for many, is what happened. The long-held assumption that strong market returns correlate with asset manager financial performance broke down. Strong markets failed to mask the structural drivers underneath and, we believe, this was the tipping point for the industry.

As economics change so must operations. The pandemic brought new urgency – and opportunity – for managers to undertake an internal review of their whole office. The question at the bottom of such a review is whether a range of front office functions, historically perceived to be core to a successful asset management operation, actually deliver value. If not, these functions must be considered a cost and susceptible to outsourcing to a more cost-efficient platform. Meanwhile, the extended work from home protocols of 2020 have undermined some of the core objections to outsourcing, such as the assumption that portfolio managers need to work in close physical proximity to their trading desk.

Beyond the value/cost equation, however, there is increasing recognition that front office outsourcing – whether whole or in part – is directly beneficial. For example, outsourcing to a global service provider has enabled a range of firms to expand their investment horizons internationally without concern about governance issues as apply to passing overnight trading to third-party brokers who will almost certainly be under the same pandemic pressure as all the rest of us. Other firms have seized the opportunity of moving to a variable pay-as-you-go cost dealing structure to offer a broader slate of investment strategies or to develop their inhouse research capabilities.

These and other opportunities are new, and underline our view that front office outsourcing leads to an optimal state for investment managers; one where the playing field is levelled enabling medium and smaller firms to compete on the basis of pure alpha with large scale players.

But today, it is not just the smaller or medium managers who are outsourcing front office functions; many of the ‘big players’ are also in active transition. Why? Because the benefits of outsourcing apply to the whole asset management industry, but a hyper-scale manager requires a hyper-scale global service provider to work with. These used not to exist, now they do and both sides are riding the wave.

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Factors That Affect the Direction of the Stock Market

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Factors That Affect the Direction of the Stock Market 7

A stock price represents the value of a particular stock of a particular entity, asset or another financial instrument. It is calculated by calculating the price per share of the stock at a particular price and period in time.

There are various factors that affect the direction of the stock market. These factors include interest rates and inflation rates as well as the state of the economy. If one of these factors is not in the favor of the stock market, then it could bring about a downfall of its value.

The stock prices are also affected by various stock indexes, which provide information on a particular company or industry. It helps to analyze the trends of the stock market and makes better decisions when buying and selling.

However, there are some major factors that can influence the performance of the stock market. One such factor is the state of the economy. The state of the economy refers to how well the economy is doing economically. If there is an economic decline in a particular country, then the state of the economy would be affected and the stock market would also take a hit.

Economic conditions can also affect the performance of the stock markets. For example, if the state of the economy is poor and the population is experiencing unemployment, then the economy will suffer and the stock prices will definitely take a hit.

Political turmoil can also bring about a negative effect on the stock markets because it affects the economic conditions and the way people relate to the government. When there is a lack of confidence in the state of the economy and people tend to sell off their stock at cheaper prices, the stocks of the company would suffer.

Another important factor that influences the direction of the stock market is the change in the global economy. It has been proven that the changes in the global economy are very large and it can affect the direction of the stock market in a major way. For example, during the global recession in 2020, the stock prices of many companies suffered a great deal and so did the profits of the company.

The most important thing that determines the direction of the stock market is the state of the economy and the state of the country in which the stock market is based. It is therefore, very important to invest in the stock market as a company that is in good condition. This is because it will help in ensuring the stability in the economy.

The price of the stock market is also affected by the political stability of the country in which the stock market is based. If there is a rise in the political instability, then the price of the stocks would surely go up. However, when the political stability improves, the prices of the stocks will definitely fall.

The factors that affect the direction of the stock market include the conditions in which the economy is doing. It is therefore, very important to have a good understanding of how the economic conditions in a certain country are progressing. This will help in making better investments.

There are certain countries that are very stable and these countries have a very high demand for the stocks of other countries. This means that people from those countries will invest in stocks of countries that are in good condition, and these investments will yield profits for them.

There are also certain countries that have very bad economic conditions and these countries have a very low demand for the stocks of other countries. These countries are also in need of investments and these investments will yield huge losses for them. Therefore, investing in these countries is not advised because these stocks will yield zero returns.

The stock markets are not stable unless there are good economic conditions prevailing in a country. This means that one has to know the economic condition of the country in order to make investments. Investing in the stock market is the best way to do this because investing will always yield returns, as long as the country in which one is investing is stable.

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