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Gold Silver Ratio Print
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Wednesday, 19 December 2018 18:15

Today is the Day & The Case for the Gold Silver Ratio

 

Will Christmas come early for the Donald? Will he get his demand of lower interest rates from Father Christmas Powell? Today is the day that could see a major reversal, or just the same old, same old.

A quick re-cap. The fed have made a couple of 0.25%, or 25 basis point, increases to the Fed funds interest rate this year. Signalled by the Fed, the market is fully expecting Wednesday the 19th December will bring the rate to 2.5%.

But. At his last announcement Fed chair Jerome Powell talked about rates which were just below the Neutral rate. Markets seem to have taken this to mean that today's rate increase, if it happens, will bring it to neutral, so no more rate increase will be signalled into 2019. Add in the Donald's insistence that any rate hike now is insane, we wait to see if it actually happens.

Either way, US dollar traders are in for some excitement and that just might include the precious metals and stock markets.

The case for Gold

This time last year all eyes were on BitCoin and the other 1400 or so Crypto's. These were the new Gold the hype merchants told us. Yes, the similarities were there all right. Gold has rocketed higher several times in a buyers frenzy to get in on the act. What makes it move?

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What's the Yield Curve Invertion? Print
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What's meant by the Inverting Yield Curve?

 

The blogosphere is full of the impending collapse of the Dow with some pundits talking of 14,000 in 2019, a modest 10,000 points lower. Right or wrong, the fuel that has kept stock markets forever bubbling, an endless wall of money and a strong economy, will eventually end. Is the yield curve telling us the economy is about to fall of a cliff?

Normality

Government and corporate bonds are issued with different maturities. The standard US bond is the 30 year, but there are many different maturities, typically 3, 5 and 10 year, etc. Some run for just a few months to maturity, whilst some whacky corporate bonds have been issued with maturities way out at 100 years!

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The UK's Crown Jewel Print
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The UK's Crown Jewel

The Jewel in the UK's crown is, and has been for the last four+ decades, the City of London. City bankers and banking can do no wrong, as we discovered in 2007/8. Banking and finance delivering the largest tax yield of any sector of British industry.

The City of London is a dominant centre in world and European finance. If Europe really wanted to cause a problem for the UK leaving the club of 27, quashing a deal on financial cross border services is where they could do most damage.

Last Thursday a rumour gathered momentum.

Leaks dripped out from the 'secret' meetings with Brussels. The City could continue to operate as before across the Eurozone. It was later denied, of course, but the rumour was enough to collapse the EURGBP, reversing two weeks of Euro gains in just four days.

Last Thursday was the time to reverse the a-b-c trade and ride the EURGBP down for another 150+ pips.

 
Another 150 pips.... Print
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Another 150 pips - Was last Thursday the day we've been waiting for?

 

None of us need reminding of the relentless grind of Brexit headlines which have been battering the Pound and the EURGBP exchange rate over the last few months.

Traders also had other things on their minds, with the Euro tumbling through late September and October. It was those Italians in revolt who dared to ignore edicts from their European masters.

The headlines in September suggested a Brexit deal was no more than days away and the Pound gave us a tradable 180 pip run against the Euro in a fortnight. Everything looked rosy....

Then the carpet was tugged away by Barnier and crew. Theresa was sent away with nothing but a red face and more homework to do on the Irish border.

That set up the next move as the Euro ran up against the Pound in the opposite direction. An a-b-c move, good for another 150+ pips....

 
How to be a professional trader Print
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How to be a professional trader

The world we inhabit is dominated by the 80-20 principle.

Vilfredo Pareto changed the way we looked at many things, specifically micro-economics which he linked to social factors which went on to become popularised in recent years. Pareto observed the "law of the vital few". Approximately 80% of the effects come from 20% of the causes.

Nowhere is this more apparent than a glance at the small print at the bottom of every spreading betting website. They are now required to publish how many clients lose - you guessed it, around 80% of their customers lose money.

So, what of the remaining 20% or so?

There are is no shortage of horror stories from the 80%. Many have been there. This article describes the spiral into despair which results from marketing hype and personal hubris, the Superman effect, following modest successes. 

Reality? A recent research report from Psyquation indicated that fewer than 20% become profitable after two years and only 1.2% are successful enough to make trading their career. Sobering stuff for those new to the game, but is it gambling? Thanks go to long term investor Gary Scott for the article below:

Trading and Investing is gambling.

Until we admit this, we cannot invest like the pros. However, once we recognize that every investment is a bet, can we become a professional investor instead of a stock and bond gambler?
The fact is professional gamblers are not really gamblers. They are investing pros who cash in on the imbalances of gamblers. They invest in bets instead of stocks and bonds.

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From the blog

It's not Rocket Science

  Just some detective work as a discretionary trader. It's not slavishly following a 'cast in stone' algorithmic style, the type of system that only considers a never changing set of criteria that is much better traded by a computer than a human.

Detective work takes a look at the chart to find those clues that just might build a case to put on a trade.

One of our recent Traders Class trades was the New Zealand vs Japanese Yen. The evidence started with a classical charting pattern, a Double Top.

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