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MadMarketScientist
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Everything posted by MadMarketScientist
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The Producer Price Index (PPI) is also known as Producer Inflation. This is a very important report as the rate of producer inflation directly affects the rate at which consumers will buy goods, affects consumer sentiment towards the economy and impact consumer spending. The PPI is actually a collection of indexes that mirrors price changes at three stages of production: industry stage, processing-stage based and commodity-based stages. An increase in PPI is generally viewed as bullish for the currency in view, while a decrease in PPI is generally viewed as bearish. This is because of the expectation that this will have on interest rates as fixed by the central banks. However, the effect that the PPI value has on the currency has to be put in context of the prevailing situation of the country in focus before being traded.
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NASDAQ is the second largest exchange in the world in terms of market capitalization. NASDAQ is mainly used to track what are known as the technology stocks. This is where you will find stocks such as Google, Apple, Microsoft, etc. NASDAQ was originally the acronym for National Association for Security Dealers Stock Quotations, but NASDAQ is now the adopted name of the exchange. NASDAQ has three levels of dealings. Traders can trade the individual stocks on the NASDAQ exchange, or can be traded as a stock CFD on broker platforms.
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Market makers operate dealing desks that serve as intermediaries between the liquidity providers and the traders. By the virtue of this operation, market makers can be said to boost liquidity in the market because they are prepared to buy or sell from traders who do not have large capital, thus boosting liquidity levels. Market makers can then pass on these orders to the liquidity providers. Usually, market makers mark up the prices given to traders; that is the primary source of their profits. However, many market makers have been implicated in unethical price manipulations such as stop hunting. But their role in the markets is what makes it possible for traders with small capital to participate in the market.
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MACD is used to spot price divergences at tops and bottoms. It is composed of two lines (MACCD line and signal line) and a histogram. When the MACD line is above the signal line, the histogram is positive (crosses above 0 into positive territory) and this is a buy signal. When the MACD line crosses below the signal line, the histogram is negative (crosses below 0 and into negative territory) and this is a sell signal. On its own, the MACD does not give reliable signals and it must be combined with other indicators to produce a reliable signal.
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A liquid market is one where traders are prepared to buy and sell a financial asset in the market. It can also be used to describe a situation where there is plenty of tradable cash made available by the various market players to trade the markets. It can also be used to describe a state where there are many traders available to buy and sell instruments. As such, it makes trade executions faster as there are always ready buyers and sellers. Cost of transactions is also lower in a liquid market. This explains why the EUR/USD pair which is the most traded pair in the forex market has spreads which are as low as 0.8 pips with some brokers, but less traded currency pairs like the EUR/SEK have spreads of up to 50 pips.
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The composition of the Federal Open Market Committee is as follows: the 7 members of the Federal Reserve Board of Governors, and 5 of the 12 Federal Reserve Bank Presidents. The FOMC is headed by the Chairman of the Federal Reserve Board (Ben Bernanke presently). The FOMC sets interest rates either directly by altering the discount rate (the rate at which the Federal Reserve lends to banks) or through the use of open market operations (by purchasing and selling government securities).
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The Federal Reserve Board is made up of 7 members who oversee the 12 Federal Reserve Banks, establishes monetary policy such as interest rates, and monitors the economic health of the United States. Together with 5 presidents of the 12 Reserve banks, they constitute the Federal Open Market Committee (FOMC).
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E-Mini contracts are available to trade different futures contracts, especially the contracts of the stock index futures such as the NASDAQ100, S&P500 and Russell 2000. The e-mini S&P500 futures contract is 20% of the size of the full S&P futures contract. This means that the e-mini contract of the S&P500 is $50 per pip. The advantages of the e-mini contracts are that they provide greater liquidity and are more affordable to the trader. In addition, e-mini contracts can be traded round-the-clock by traders since they are traded electronically. This is in contrast to the full futures contracts which are traded using the open outcry system on the floor of the Chicago Mercantile Exchange, which can only be done during the official trading hours.
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The key element in trade executions done by ECN is that it brings market participants together without a dealing desk or market maker functioning as an intermediary. This allows traders to get the most transparent pricing possible. It requires the existence of plenty of liquidity; as a result, traders can only have access to ECN trading if they have account balances that start from $50,000 and above. In addition, spreads are not fixed as dealers jostle to offer competitive pricing, and the direct nature of trading operations in an ECN system also means that orders are executed speedily and without re-quotes.
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The discount rate is one of the tools used by the central bank of a country to set the interest rates of a country. Commercial banks borrow money from the central bank periodically to enable them meet up their financial obligations and perform their banking operations. They pay an interest on this money and this is known as the discount rate. Banks now lend this money to other financial institutions and also to customers at rates that are slightly marked up from the discount rate. If the central bank increases the discount rate, this will in turn force banks to increase the rates at which they lend to customers and also to other financial institutions. Similarly, if the central bank reduces the discount rate, there will be simultaneous reductions in the commercial lending rates and fund rates.
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Discount brokers are different from full-service brokers in that they scale down the services provided to customers. They do not provide advisory or research services, and leave trade executions in the hands of the customer by providing trading platforms. As such, they are able to pass on the reduced cost of operations to clients by reducing the cost of trading.
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This order is sometimes known as the “Good for Day” (GFD) order. This is in contrast to a Good till Cancelled (GTC) order which stays active even after the trading day until the order is fulfilled. A day order is used by intraday traders who take positions on underlying assets based on the analysis of the market for the day. It is the order to use if a trader is not sure of what the conditions in the market will be in the immediate future. So in order not to expose the trading account to unpredictable risk, the trader can use the day order.
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In the options market, there are two parties to a deal: the trader and the dealer. If a trader purchases an option, that option has to be exercised on a particular day not exceeding three months. This will involve the exchange of the commodity and the cash settlement. So the date of maturity will refer here to the date at which the obligations to that contract are settled between the dealer and the trader.
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Daily trading limits can occur as a result of the inherent behavior of the underlying asset, or they can be fixed artificially by the regulatory authorities by setting a price floor and a price ceiling. Some stock exchanges like the Nigerian Stock Exchange operate a daily trading limit where the maximum rise or fall of an underlying asset is pegged at 5%. This is an example of an artificially induced daily trading limit. Some currencies tend to trade within a range. The Hong Kong Dollar and Singaporean Dollar is an example, but again this is a function of the actions of the central banks of these countries. Intraday traders are usually advised to trade with caution on assets that have daily trading limits as the restrictions on the daily movements of the underlying assets restrict profitability on intraday trades.
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Credit ratings are done to determine one's ability to meet debt obligations. This is done by a critical examination of the financial history of the company or government in view. Credit ratings range from the highest rating of AAA (sometimes called Triple A in business news reports) to the lowest rating of D. These terminologies have become commonplace as the focus of the financial world has zeroed in on the crisis in the Eurozone with emphasis on Greece, Italy and Spain. These countries have suffered downgrades recently as a result of problems with meeting their debt obligations.
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It is a measure of price movements by a comparison between the retail prices of a representative shopping basket of goods and services. The CPI directly impacts purchasing behavior of consumers and affects consumer spending, which in turn will affect the profitability of companies that manufacture consumer goods and those companies that service the manufacturers. Generally speaking, a high CPI reading is seen as bullish for the currency in view, while a low reading is seen as bearish for the currency in view.
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Sometimes, a trader may make a mistake in placing an order. He may click “buy” when he actually meant to sell (and vice versa) or he may use a lot size that he actually did not mean to. In these circumstances, a trader has a short window of opportunity (in seconds) to cancel the order by clicking the “Cancel” order on their trading platform. Most of the time, the order will have already sailed through and if this is the case, the cancel order is ineffective.
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The Canadian Dollar is also known as the “loonie”. It came into existence as the currency of Canada in the 1850s to replace the Canadian Pound in order to reflect the increased trade relationship between Canada and its southern neighbor (the US) and also break off from the clutches of British colonialism. The CAD is the abbreviation of the Canadian Dollar that reflects the standard currency nomenclature that uses the 2 letters from the country of origin and the 3rd letter from the name of the currency.
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The ADX indicator is a trend indicator. The ADX indicator has three lines: the main indicator line, the +D1 line and the –D1 line. The +D1 and –D1 lines are the signal lines, and crosses of these lines indicate signals with which to take positions. If the +D1 line crosses the –D1 line upwards, a Buy signal is generated. If the +D1 line crosses below the –D1 line, a sell signal is generated. The ADX line itself has readings which fluctuate between 0 and 100. If the ADX line is >40, the signal/trend is strong. If the ADX is <20, then the trend is weak or the market is ranging.
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Signatures are reserved for contributing members of the forum ... usually around 200 posts. thanks MMS -
The Close of a Bar is Meaningless
MadMarketScientist replied to joshdance's topic in Technical Analysis
Hi yom, The forum is mostly self-moderated by the members to prevent spammers, etc. New member posts are also moderated for this purpose. thanks, MMS -
Introduce Yourself Here - Don't Be Shy!!
MadMarketScientist replied to trading4life's topic in Beginners Forum
If you are on the other side of my trade, you are my enemy! :rofl: MMS -
A pullback coming! MMS
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In the early days of online trading, traders were forced to manually adjust their stop loss levels in order to protect any profits made in the market, while following the market to maximize profits. With the advent of the trailing stop tool, a trader can wait for the market to become profitable, then activate the trailing stop tool, setting it to a pre-determined trailing distance. This protects the profits in the trade by staying still when the market moves against the trader, and continuing to trail the market when it moves in the trader’s favour. If the market moves against the trader to get to the trailing stop, the trailing stop now functions as a stop loss to close the trade but this time, in profit.
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Support is probably one of the most used terms that a trader MUST encounter every trading day. In reality, support levels are not just one fixed price level, but rather a zone. The more times a support level is tested without being broken, the stronger the support. If a support is tested repeatedly several times, at some point the price will either reverse totally or break through the support level if the downward trigger is strong).