EarnForex.com Monthly Newsletter
| | | | Welcome to the latest issue of EarnForex.com newsletter — December 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: Are All Pips Created Equal? | | New traders learn what a pip is during their first days in Forex. Soon after that, they learn to account their wins and losses in pips rather than money. It has an obvious advantage because it allows comparing trades of varying volumes. But eventually, they stumble on some non-standard trading instrument, like XAU/USD (gold) or XAG/USD (silver), and start wondering how to compare or add up those pips with the usual pips from EUR/USD or USD/JPY? In fact, even pips on major currency pairs (such as EUR/USD, GBP/USD, USD/CHF, etc.) are quite different. For example, the value of one pip on USD/CHF, USD/JPY, and EUR/USD is not the same. It fluctuates with the exchange rates on USD/CHF and USD/JPY while it is always fixed at $10 per standard lot on EUR/USD. One solution would be to assign different weights to pips based on their value. So, for example, if EUR/USD pips are $10 each, and USD/JPY pips are $9.80, the latter can be normalized to 0.98 of the former. If one pip on Gold costs $1 then such pips would be normalized as 0.1 to EUR/USD pips. You would still have to deal with the changing pip values somehow, for example by averaging. Unfortunately, normalization using pip value is not ideal. So, even though the pip value of EUR/USD and GBP/USD is the same, earning or losing the same amount of pips in EUR/USD and in GBP/USD is not the same because the pairs have different average daily ranges (it is wider for GBP/USD). The second solution is not to use pips to compare trading in different pairs at all. To calculate overall gains and losses across multiple trading instruments and to compare their performance, you could use percentage profit/loss values. Sadly, this method does not account for risk taken on each trade to end up with the given percentage gain or loss. The last method is the most sophisticated one and accounts for all the drawbacks of the previous ones. Using R-multiples allows for smart performance tracking across all the trading instruments, no matter size and risk. R-multiple have been introduced by Van K. Tharp in his book Trade Your Way to Financial Freedom. The concept is very simple. To calculate an R-multiple gain or loss for each trade, you divide its profit by its original risk value. For example, if you risked 100 pips to earn 200 pips in EUR/USD, your R-multiple result for the trade is 2R. If you lost 150 pips in oil trade that had initial stop-loss of 100 pips, your R-multiple result is -1.5R. R-multiples on any pair can be summed together to calculate the overall performance. | | Overview of the major currency pairs' performance in November | | EUR/USD — was in a sharp downtrend followed by a short period of consolidation. It was at the maximum at 1.1299 on November 9, at its minimum at 1.0518 on November 24, finishing the month at 1.0588. GBP/USD — rose in a rather steady uptrend in November. The highest monthly rate was at 1.2673 on November 11, while the lowest — at 1.2204 on November 1. GBP/USD finished November trading at 1.2501. USD/JPY — was in a record-breaking rally during the month. The pair rose to as high as 114.53 on November 30, reaching a bottom at 101.18 on November 9 and closing the month with the 114.45 rate. EUR/JPY — traded similarly to USD/JPY but did not gain as much as that one. The monthly high was at 121.30 on November 30, the monthly low — at 113.71 on November 9. Trading ended at 121.16 for this currency pair. GBP/JPY — soared almost to pre-Brexit levels in November. The maximum level for this pair was 143.24 on November 30, while the minimum — 126.48 on November 3. The month's trading ended at 143.10 for GBP/JPY. | | Fundamental background of the past month | | The most important event for the US dollar (and perhaps for the Forex market in general) in November was the surprise victory of Donald Trump in the US presidential elections. While initially the currency sank as such an outcome was considered to be dollar-negative, the greenback recovered very quickly and even started a rally that lasted for 10 consecutive trading sessions. The currency entered a consolidation mode by the end of the month, but dollar bulls remain optimistic as they wait for the December policy meeting of the Federal Reserve. Markets consider that an interest rate hike during the gathering is all but guaranteed. The euro, on the other hand, demonstrated a terrible performance against most currencies as Mario Draghi, President of the European Central Bank, showed willingness to preserve monetary stimulus. The Japanese yen performed even worse, falling more than 9% against the US dollar in November, following Trump's victory. The Bank of Japan is also likely to keep monetary stimulus (or even expand it) as the projected date for achieving the target 2% inflation was being pushed back. And indeed, the latest inflation data showed that deflation continued to persist, meaning that the BoJ measures to reignite price growth have been unsuccessful so far. Meanwhile, the Great Britain pound showed an admirable performance, outperforming even the dollar. The currency got a boost at the start of November from the High Court ruling that the government needs parliamentary approval to initiate an exit from the European Union. Furthermore, the currency received a support from hopes that Britain will be able to avoid the so-called "hard" Brexit, keeping access to the single European market. The Canadian dollar was firm as well, mostly due to the hopes that the Organization of Petroleum Exporting Countries would agree to cut crude oil production to support prices for the commodity. Prices indeed skyrocketed after the OPEC reached an agreement, dragging the Canadian currency along with them to the upside. The Australian dollar was hurt by the Donald Trump's victory in the presidential race as market participants were concerned about the impact of the Trump's presidency on US trade agreements. The currency received some support from the huge rally of iron ore prices by the end of the month. The New Zealand dollar did not fare well too. Besides the general worries about the impact of Trump's victory on the international trade, the currency was also hurt by the interest rate cut from the Reserve Bank of New Zealand. As it had been expected, gold tanked (falling below $1,200) after the surprise outcome of the US elections. Expectations of monetary tightening from the Fed were hurting the metal as well. | | Interest rate changes in November | | Mexico | 4.75% | +0.50% | 5.25% | | New Zealand | 2.00% | -0.25% | 1.75% | | Turkey | 8.25% | +0.25% | 8.50% | 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 | | No new MetaTrader indicators have been added to EarnForex.com since the last issue of the newsletter, but two indicators received a major update: You can always view the previously uploaded Forex indicators. | | 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 VPS provider has been added to EarnForex.com since the last issue of the newsletter: - SocialVPS — an Indonesian VPS with servers in Europe and the USA; lowest hosting plan is $5.74/month.
You can always browse the previously added VPS companies. | | Four new Forex brokers have been added to EarnForex.com since the last issue of the newsletter: - Whaleclub — a Bitcoin trading platform focusing on cryptocurrencies but also offering leveraged trading in nine currency pairs, some commodities, stocks, and indices. They allow trading starting from $1 and provide 1:100 leverage on Forex and 1:10 leverage on Bitcoin trading.
- LQDFX — an unregulated offshore company (Marshall Islands) with focus on STP Forex trading. Micro accounts start at $20 and feature 1:500 leverage, while high-volume VIP accounts are available from $25,000 and offer extremely low fixed spreads (with commission) at 1:100 leverage.
- TegasFX — an offshore broker (Vanuatu) with MT4 and FIX API trading accounts. The minimum is $200 for MT4 and $20,000 for FIX. Leverage can be as high as 1:200.
- CFDTimes — another unregulated offshore broker (St. Vincent and Grenadines). Accepts a plethora of payment methods (including Bitcoin) and offers Classic, ECN, and VIP accounts. The Classic ones start at $500.
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: - One of the most popular European Forex regulator, CySEC, has issued a ban on bonuses and limited the maximum leverage 1:50. The affected companies have to comply no later than January 30, 2017.
- In a similar move, the British Financial Conduct Authority (FCA) has banned all bonus and promotion offers related to CFDs (includes spot Forex trading and spread betting). Moreover, leverage for new traders (less than 1 year of experience) should be capped at 1:25 while the maximum of 1:50 should be applied on leverage for all traders.
- NFA has reduced maximum leverage on pairs involving GBP (1:20), MXN (1:12.5), JPY (1:25), and NZD (1:33) for US Forex brokers. The regulator also has increased the maximum leverage for CHF pairs from 1:20 to 1:33.
- ThinkForex broker is now known as ThinkMarkets.
| | Until the next newsletter issue! | | That is all for the December 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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