EarnForex.com Monthly Newsletter
| | | | Welcome to the latest issue of EarnForex.com newsletter — May 2016. In this issue of EarnForex.com newsletter, I will remind you about the most important Forex-related events of the last month and will also show you the list of the site's latest updates. | | EDITORIAL: ROI and Drawdown in Forex | | Some traders get confused about very basic concepts of trade accounting. I cannot blame them as I had stumbled on similar problems during my first years in Forex. Here are some explanations and definitions that will help with those concepts. ROI — Return On Investment is a total profit obtained during the trading period divided by the starting balance. It is the general profitability of your trading system. For example, if you start with $1,000 and earn $100 during January, your ROI for the month would be 10%. Then, if you earn $100 more in February, your monthly ROI would go down to 9.1% ($100 / $1,100), but your year-to-date ROI would be 20% ($200 / $1,000). Next month, you could lose $50, showing a negative monthly ROI of -4.2% (-$50 / $1,200) but a positive year-to-date ROI of 15%. So, for ROI calculation, it is really important to take into account starting balance, period, and profit. Drawdown — a drop in account equity or balance: - Absolute drawdown is the maximum decline of the balance compared to the starting level. E.g., you start with $1,000, lose $100 in your first trade, then gain $150. Your absolute drawdown is $100.
- Maximum drawdown is the maximum decline of the balance compared to some peak high of the balance. E.g., you start with $1,000, lose $100, then gain $150, then gain $200 more, then lose $120. Your maximum drawdown is $120 because the balance went down from the peak of $1,250 to $1,130.
- Relative drawdown is the maximum percentage drop of the balance compared to a previous peak. Look at the example for maximum drawdown, the relative drawdown there is 10% — from $1,000 to $900 after initial loss, because $120 loss on $1,250 is lower — only 9.6%.
Now you know what ROI and various types of drawdown mean and how to calculate them properly. These basics will help you to better understand the performance of your strategy and assess the viability of other strategies. | | Overview of the major currency pairs' performance in April | | EUR/USD — recovered after bottoming out in the second half of the month. It was at the maximum at 1.1464 on April 12, at its minimum at 1.1218 on April 22, finishing the month at 1.1451. GBP/USD — rallied following a few days of decline in the beginning of April. The highest monthly rate was at 1.4670 on April 29, while the lowest — at 1.4005 on April 6. GBP/USD finished April trading at 1.4614. USD/JPY — fell, then recovered, then fell much lower. The pair rose to as high as 112.58 on April 1, reaching a bottom at 106.27 on April 29 and closing the month with the 106.29 rate. EUR/JPY — traded similarly to USD/JPY but with a less dramatic fall in the end. The monthly high was at 128.16 on April 1, the monthly low — at 121.67 on April 29. Trading ended at 121.72 for this currency pair. GBP/JPY — the shape of the chart was similar to other JPY pairs but the final decline did not go below the first one. The maximum level for this pair was 162.80 on April 27, while the minimum — 151.64 on April 7. The month's trading ended at 155.33 for GBP/JPY. | | Fundamental background of the past month | | Interest rate changes in April | | Hungary | 1.20% | -0.15% | 1.05% | | Republic of India | 7.75% | -0.75% | 7.00% | | Turkey | 10.50% | -0.50% | 10.00% | You can see the current interest rates by the world's central banks in our interest rate table. | | Top 5 Forex brokers of the last month | | One new Forex book has been published on EarnForex.com since the last issue of the newsletter: You can always browse the previously uploaded books. | | One new Forex article has been published on EarnForex.com since the last issue of the newsletter: You can always browse the previously uploaded articles. | | One new Forex broker has been added to EarnForex.com since the last issue of the newsletter: - TradeWiseFX — an offshore broker from Saint Vincent and the Grenadines with classic and ECN account types. Both are based on MetaTrader 4 platform and have $25 minimum size.
You can always view our full list of Forex brokers. | | There were the following important Forex industry news since the last issue of the newsletter: - NFA filed a legal complaint against ZuluTrade (a leading copytrading technology provider) for failure to uphold to the financial requirements, failure to implement anti-money laundering program, and failure to supervise adequately the firm's employees, agents, and operations.
- ForexClub became one of the first Forex companies licensed by the National Bank of Belarus.
- AMarets and AvaTrade added Skrill payment options to their deposit and withdrawal methods.
- Hirose Financial UK and CMC Markets launched binary options trading service.
| | Until the next newsletter issue! | | That is all for the May issue of the EarnForex.com newsletter. If you have questions, comments or just want to see something else in the next monthly issue, please let us know. | | |
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