A place for redditors to discuss quantitative trading, statistical methods, econometrics, programming, implementation, automated strategies, and bounce ideas off each other for constructive criticism. Feel free to submit papers/links of things you find interesting.
Trading Forex doesn't have to be complicated. In fact, it's best to keep things as simple as possible. That's why price action trading was a great fit for me and is becoming more popular every day. This community exists to discuss Forex price action trading to include, price action strategies, key market levels, trade setups or anything else related to price action trading. Feel free to join the conversation!
I don't understand why people say it's impossible to become rich in short time with forex. Let's assume we have a strategy that has a winrate of 50% with a r of 1:1.25 (not so strong or impossible, right?). We are daytrading it and we can open 60 operations per month. We risk 2% (a conservative approach) per trade of initial capital of the year, starting with 5000. With these numbers we are gaining 15% each month, let's lower that down to 10% because yes. Within a year we can make 120% of initial capital! Let's lower that down to 100% because, again, yes. After 8 years we would be more than millionaire. If we could bring up that r to 1:1.5 we would be millionaire in 5 years (and billionaire in 12!!!!). I don't understand why this is wrong, why people keep saying that trading isn't the Holy Grail. 1:1.25, 50% winrate is the lowest working strategy I could imagine and still would be extraordinary even though I've lowered that down even more. What's wrong with this? What am I missing? P.s I'm backtesting a strategy that is doing 45% winrate with 1:2 r and 80+ possible operations per month. I feel like I'm going to eat golden nuggets in few years! Please roast me!
From the forex content I have seen, the gains and swings seem pretty small and slow when compared to volatile stocks. My question is why forex? Why not scalp/candle trade/swing trade stocks? (Not an attack on the forex community, I am just curious as to what information I might be missing)
How to carry funds while travelling abroad is a common question asked by travellers! You can read articles comparing Forex card, Cash, Traveller’s Cheque, Credit and Debit card, that provide enough understanding on how currency works on an international trip. Some explain in detail with respect to the cost and some with reference to convenience. But again, however you look at it, a Forex Card is the most convenient and safest way to carry money. Planning an international trip involves finding the best airline tickets, hotel bookings and places to visit and see. So, a little heed to the benefits of prepaid forex card or multi-currency card may offer much food for thought. Here are a few reasons why a Forex Card is the most inexpensive way to carry money while travelling abroad. https://preview.redd.it/ewdyjesxx9m21.png?width=1400&format=png&auto=webp&s=e7147f1c0a036acae811044267bfcfc7061a35f5
Forex Cards offer better exchange rates while loading currencies on your account than buying foreign currency as cash. Providing Forex Cards is the most economical option for banks.
By default, Forex Cards are loaded with foreign currency at locked-in exchange rates. Thus making it a safe option during fluctuation of currency value in the forex market. If you add 2000 USD in your Forex Card, the value in it will still remain 2000 USD regardless of any inconsistency in INR-USD currency exchange rate.
Forex cards are enabled with a chip and pin technology to safeguard the money in them. If in case a Forex Card is stolen or lost, it can be blocked at once and the balance in it will be frozen. And once the original is blocked, the secondary Forex Card can be activated and the frozen funds will be transferred to it.
Forex Cards can be used to carry multiple foreign currencies at the same time, anywhere across the globe. For example, banks such as Axis, issue Forex Cards that allow you to load up to 16 mainstream currencies such.
Umarkets is an emerging global market leader in financial trading. We provide traders with the most up to date trading information.Forex (FOReign EXchange) is the interbank market, where currencies are the main commodity. Online currency trading, globally, is no different from currency exchange in any bank: a trader buys currency at a certain price, waits for its change and sells the currency at a new, higher price. The difference in price when buying and selling is the trader’s profit.Forex trading is the most popular way of online trading. Trading on the stock exchange has acquired such vogue, firstly, because a trader does not need large investments to start trading. It is enough to start with a deposit of $500, gradually increasing it in order to develop trading. Thanks to the leverage provided by the broker, a trader can open large deals with even a relatively small initial deposit, which gives maximum opportunities for profit. https://preview.redd.it/90ldygepe3121.jpg?width=180&format=pjpg&auto=webp&s=e9edb23ac634c4735c4071642e0cd20913b46989
How Fed Funds Rate Works (and Why Forex Traders Should Care)
The aim of this post is to show how the current federal funds rate operation differs from its pre-crisis model and how it is important to Forex traders.
When things were simple (before 2008), the Federal Reserve set its target federal funds rate (FFR) as a single number and made sure that the effective federal funds rate (EFFR) is at the target level by performing open market operations (OMO). Those OMO normally included repurchase agreements (repo or RP) to temporarily increase the reserves supply in the federal funds market (FFM) (and thus reduce the demand and the EFFR) and reverse repurchase agreements (RRP) to temporarily decrease the supply of reserves and drive the EFFR up. It worked very well because the total size of bank reserves was rather small ($15 billion) in pre-crisis times.
Nowadays, when the Fed is holding $2.27 trillion in reserve balances (as of March 27, 2017), the old scheme would not fare so well. There is no scarcity of reserve balances at all. To create it, the Fed would need to sell a big share of its securities to shrink the total reserves to manageable size. But that would create some problems — it would drive down the prices of those securities and would launch a series of unpredictable market feedback loops. Instead, what the Fed is doing since 2008 is setting a target FFR as a range between two interest rates. For example, it is 0.75%-1.00% as of today while the EFFR, measured as volume-weighted median, was at 0.91% during the last 3 days.
The Fed makes sure that the FFM respects the target bounds by setting the interest on excess reserves (IOER) to the top boundary rate. When 95% of the reserve balances are the excess balances (balances exceeding the required level), the IOER rate paid by the Fed to the banks for holding these reserves serves as the ceiling for the rate corridor. It may sound counter-intuitive, because IOER would have been a floor level if only the FFM was composed only of the banks. However, it is not the case. The government-sponsored enterprises (GSE), such as Fannie Mae, Freddie Mac, and Federal Home Loan Banks, comprise the bulk of the FFM. GSEs do not earn IOER on reserve balances kept at the Fed. This creates an arbitrage opportunity for banks to borrow from GSEs and allocate the funds with the Fed to earn IOER. Consequently, the interest rate of GSE's loans to banks should be below IOER.
And how about the floor of the rate range (the 0.75% part of today's target range)? It is enforced by the Fed through the OMO called overnight repurchase agreement (ON RRP). With it, the Fed can drain some reserves from the system by borrowing cash from market participants, giving them securities as a collateral. Since not only banks can earn interest on their funds with ON RRP (GSEs can also do it), this sets the de facto lower boundary for the EFFR. Who would lend at a lower rate if they can choose to get at least this rate from the risk-less loan to the Fed? One important feature of the current system is that the EFFR does not cling to the upper side of the rate range (IOER) but hovers below it, falling down to near the ON RRP rate during the final day of the month. The reason for the former is that the banks pay higher FDIC insurance fees when they borrow more. And the reason for the latter is that the banks need to follow the Basel requirements, which limit their leverage, but are calculated based on the end-of-month balance sheet.
As a result, we can see the EFFR fluctuating between ON RRP and IOER — well within the boundaries of the Fed's target FFR. The short-term interest rates (represented by the 3-month Treasury bills) roughly follow the EFFR, which means that the interest rates get propagated beyond the FFM. Note the EFFR spiking down on each last day of the month: EFFR inside target FFR range with 3-month Treasury Bill rate for comparison
Relation to Forex
So why should Forex traders care about this? Because effective federal funds rate and the Fed's ability to uphold it are even more important for the US dollar than the target rate set by the Federal Open Market Committee at its meetings. It is the higher EFFR that would stimulate banks buying more USD to park it either with the Fed or with the GSEs. It is the lower EFFR that would let banks to use the USD as a carry trade short side. Now you see that any significant news concerning GSE regulations, Basel III requirements, or FDIC insurance fee policies could have tremendous influence on the USD rate based on how such news could affect the EFFR. As a currency trader, you have to be up-to-date with the expectations of the FFM participants regarding those three components. I recommend the following resources to stay up-to-date with those topics:
Umarketsis an emerging global market leader in financial trading. We provide traders with the most up to date trading information.Forex (FOReign EXchange) is the interbank market, where currencies are the main commodity. Online currency trading, globally, is no different from currency exchange in any bank: a trader buys currency at a certain price, waits for its change and sells the currency at a new, higher price. The difference in price when buying and selling is the trader’s profit.Forex trading is the most popular way of online trading. Trading on the stock exchange has acquired such vogue, firstly, because a trader does not need large investments to start trading. It is enough to start with a deposit of $500, gradually increasing it in order to develop trading. Thanks to the leverage provided by the broker, a trader can open large deals with even a relatively small initial deposit, which gives maximum opportunities for profit. https://preview.redd.it/57i44iy9s1121.jpg?width=180&format=pjpg&auto=webp&s=5e7145dd61f00f02ac97de217b6ac2ea78aa22f9
Are you a forex trader and struggling? Well, then this post will very much relates to you and any forex trader out there. Regardless if you trade futures, stocks or forex, most traders simply lose money whilst trading. So aren’t you curious why this is a fact? Starting in the early 90’s with stock trading I still remember the first winning trades but it was more luck than anything else. As most beginners I gained some profit but it had nothing to do with knowledge. Statistics show that over 80% of all forex traders ends up with a loss and quit. Especially new traders struggle a lot to become profitable. So this post is created to give you important insight in why forex trading is not an easy game. A thorough look will hopefully give you tools to prevent from losing. Read more
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