Mason Dean Capital FOREX Blog

Mason Dean Capital FOREX Blog

How far can the Dollar fall?

How far can the Dollar fall?

The US dollar

The US dollar is on the back foot, with EUR/USD touching 108 and USD/JPY breaking support.

Here is their view, courtesy of eFXnews:

President Trump’s travel ban – and his associated decision to fire the acting Attorney General – dominates sentiment and remains good for Treasuries, the yen (and gold), but bad for bonds and the dollar. How long will market sentiment to be affected? How far can the dollar and yields fall on this?

I’m not sure serious analysis is possible, and I don’t trust my gut instincts on something as far from the usual state of affairs, but my bias is still that we’ll get back to the Trump economic program, and the implications for Fed policy, before too long. More prosaically, markets will focus on the US jobs data due Friday.

So how to trade?

We still want to fade this bout of Yen weakness too, with the BoJ holding policy and still anchoring yields. This till leaves me looking fondly at long EUR/JPY as an idea, even if we still think it is 2 1/2 months too early for that trade really.

Courtesy of ForexCrunch.com

Dealing Desk Vs. Non Dealing Desk

 Dealing Desk Vs. Non Dealing Desk

 

 Dealing Desk Vs. Non Dealing Desk is always an ongoing debate in the FOREX world.

There are many misconceptions that are derived from this conversation for which we will address in this article. First of all, lets outline the definitions


Dealing Desk (Market Makers)

Dealing Desks (Market Makers) have the following characteristics:

- The spreads are fixed

- Orders are filled on a discretionary basis

- The trade is filled by the broker taking the opposite side of the trade

Non Dealing Desk  

Non Dealing Desks are split between Straight through Processing and ECN (Electronic Communication Network).

STP - Straight Thru Processing

STP - Straight Thru Processing include the following characteristics:

- Variable spreads

- connects client and LP (Liquidity Provider)

- Quote are from LP

ECN

ECN = Electronic Communication Network and is a computer network that disseminates orders entered by market makers to third parties and permits the orders to be executed against in whole or in part. The most popular product traded through ECNs are stocks and FOREX

ECN provide:

Variable spreads or commission fees

A bridge between client and LP as well as other traders

Price quotes derived from LPs and other ECN Members

Depth of market available

Misconceptions

Misconceptions include:

(1) ECNs are STP

ECN is different than STP as Straight Thru Processing (STP) brokers simply place your trade order to the next counterparty which can be all of the three types of brokers: ECN, Market Maker or again STP.

 

(2) FOREX Brokers are out to get the client by stop hunting and that client losses go right into the broker's bank account. This is the LARGEST misperception. The market maker broker (For instance Gain Capital) takes all its clients positions and form a large single net position which is then taken in or out of the pocket or hedged with other counterparty.

 

It is the recommendations of Mason Dean Capital to use a market maker such as Gain Capital for all retail FOREX trading.

 

 

 

 

 

 

The Trump Effect

The Trump Effect

Now that the election is over and Trump will be president in 15 days, we can focus on the implications of a Trump presidency. Donald Trump aims to shake up the US political establishment, which could potentially have a large effect on market volatility.

During 2017, the key economic policies set forth by Trump will have an impact on various key financial markets such as US Dollar, Euro, Yen, Pound and other important currencies as well as stocks, commodities and bond markets in the event of victory.

 

Dollar Effect

"Trump has repeatedly stated in public his position that the US Federal Reserve and Fed Chair Janet Yellen have been politically-motivated in keeping interest rates low. He has essentially accused the Fed of attempting to create false appearances of a healthy economy and stock market to embellish the Obama Administration. Trump has deemed the rising US equity markets as a “false stock market” that has been propped up by an overly accommodative Fed. This stance against what he sees as politically-driven dovishness provides a hint that if Trump gains the highest office in the land, he may be keen on instituting a more hawkish Fed. In that scenario, the possibility of higher interest rates going forward could lead to a stronger US dollar. In addition, Trump’s rhetoric on international trade issues has deemed his policy position as heavily protectionist. At least initially, this stance could lead to a further boost for the USD, especially against emerging market currencies like the Mexican peso and Chinese yuan." by James Chen 

Benefits for a CTA to go through an IB

IB and CTA Relationshps

IB and CTA relationships are important to understand in terms of the potential benefits to both parties concerned.

The number one benefit for the CTA is the Introducing broker's resource to a pool of existing customers and their ability to pass on these customers to the CTA. This alone is a good justification for the CTA to form a relationship with the IB and therefore a viable mutual relationship. The CTA increases their customer base and the IB is able to generate more commissions.

Business Extension

Business extension is a distinctive reward and a reason why It is wise for the CTA to consider an established Introducing broker. When a CTA partners with an IB it expands their reach and sphere of influence.  The IB is about the closest thing for the CTA to opening up a new office. This recognition of expanding influence is a two-way street as well.  When treating Introducing Brokers as an extension of the CTA Business,the IB's Development team will work harder for the CTA more so than any other broker they have an agreement with.

Free IB consultancy

Free IB consultancy for the CTA is possible throughout the entire business life cycle, This is especially helpful within the initial set up phase as it can be a daunting experience handling all of the NFA general compliance hurdles. The introducing broker can assist on all matters including, but not limited to:

 

      General procedures

      Software Platform technical help        

      Business Set up 

      Customer on boarding 

      Help with navigating through the whole process from inception to NFA approval

DDOC Assistance 

Personalized customer service

      Personalized customer service is achieved once the CTA is up and running and the introducing broker is able to stream line back office operations. This means that the CTA is able to better concentrate and focus solely on trading. This is made possible by saving time via::

 

      No 800 number and multiple departments to deal with - i.e. direct access to the IB

      All calls and emails answered more promptly as it is in the IB's best interest

      Saving time by allowing the IB to take care of any issue/s that arise.  

 

Access to reliable and proven resources

 

      Access to reliable and proven resources is a great benefit to the CTA. Most IBs have access to many valuable services that could be useful to the CTA. These services range as follows:

 

      Compliance consultancy services

      Custom Algorithm services 

      Accounting and Bookkeeping

      Performance tablets

      Legal Counsel

      CPA (CTA Specialist)

      IT Services - for data analytics 

 

 

Commission Rebates

Commission Rebates can be a big plus for obvious reasons. In certain circumstances IBs are able to offer a commission rebate back to the CTA. Since the IB is compensated each time their client makes a round turn trade, some IBs, especially those with a large enough client base, will offer their CTAs a rebate on every trade they make.

Many CTAs use this trade rebate as an instrument to preserve their capital, and others look at it as a way to tighten the spread. Regardless of what angle the CTA  look at from, it’s free money to receive on every trade.

 

Top Ten Tradings Tips

Yes, FOREX/Currency trading can be very risky especially if not exercising proper risk management and money management. Substantial losses can occur. A beginner trader must especially be very careful when trading these markets. 

In order to control/ower risk, there are certain controls a trader MUST use. Please review the following important trading tips below:

  1. Do not over trade or use too much leverage 

  2. Never loose more than 1-2% of your account balance on one trade 

  3. Always use an automated stop loss 

  4. Try to avoid trading during a major news event (Always check the economic calendar first) 

  5. Start out with a demo account in order to get used to live market conditions 

  6. Always have a trading plan BEFORE placing a trade. (Plan the trade and trade the plan) 

  7. Be patient and never be too anxious to get into the market. There are always opportunities every day 

  8. Learn what your personal trading is based on your own personality and stick to it. Do not copy some one else's style 

  9. Always perform both technical and fundamental analysis to gather a bigger picture of the market 

  10. Exercise proper money management and concentrate more on capital preservation rather than maximizing profit 


Welcome to the MDC FOREX educational blog.

Dear Fellow Trader,


For those thinking about starting off in the exciting world of FOREX trading please take note of the information below as it will drastically help you reduce your risk. Having said this, It is important to know that this does not mean you are guaranteed to start making money out the gate but will at least help you open your eyes to the pitfalls.


Just like anything in life, when entering into a new venture, education is paramount to your success. The more information you have, the more likely you are to succeed. FOREX is the largest market on earth surpassing 4.5 Trillion traded daily (according to the Bank of International Settlements). Therefore, it is an extremely liquid market that allow high amounts of leverage. However, over the recent years, the US has restricted leverage down to 50:1 (down from 200:1). This is a good thing as it is a terrible idea to use 200:1 leverage. One of the main reasons why Lehman Brothers collapsed is because they were 44:1 leveraged. Leverage is great when markets are in your favor but only takes ONE catastrophic event to wipe you out (even if you are a multi Billion dollar investment bank as Lehman Bros.).


Mason Dean Capital have a genuine passion and interest in educating their traders in order that their customers can stay alive in the market and trade a lot safer and smarter.


To get started with this educational series, Mason Dean Capital have compiled a few tips for you to get started. Please subscribe and follow the blog posts to keep updated with important news, tips and educational material. You can also check the educational portion of the Mason Dean Capital web site.


FOREX EDUCATIONAL TIPS

Forex Education Tips. Below are five quick tips to get you started.  In the upcoming series, there will be plenty more of tips and tricks.

1. The FX market offers 50:1 in the US. Here at Mason Dean Capital, we do not recommend exposure of more than 10:1 Maximum. In fact, we recommend only using around 7 or 8:1 leverage. I.e. with a $10,000 account do not trade more than $100,000 in currency at any one time.

2. Long Term Vs. Short Term.

There are multiple options for how long to hold a trade from both spectrums of short term and long term, I,e, you have High Frequency trading, Day trading, swing trading, long term trading etc etc. However, for purposes of this tip, I have broken down into two main philosophies in trading – Long term and short term. Some traders will swear that long term trading is the way to go and others will promise you that short term is a much better approach. I have personally spoke to ex-Goldman Sachs traders who have been very successful with longer term trading as well as high profile hedge fund managers who have had success short term trading. So do you trade long term or short term? The best advice I like to give, is to first educate yourself in both styles and then pick the method that best suits your personality. It is important to not get confused which direction to go with but instead learn as much as possible on the pros and cons and methodology behind each approach.

3. Plan you trade and trade you plan!

 No matter what, once you are ready to start trading, you have to have a plan of action set in place. It is a cliché but very true to say that if you fail to plan then you plan to fail. ALWAYS have a strategy in place before executing a trade. This means an initial entry point, take profit price as well as an idea of where you are looking to exit with a loss. Once you have these parameters then you are in a position to act mechanically and it helps to eliminate the emotional part of trading. I.e. entering the market on a hunch or a whim and then using emotion to drive you decision. This is a recipe for disaster! ALWAYS Plan your trade!

4. Do NOT execute a trade unless you have checked your news calendar. There is nothing worse than entering a trade, seeing some profit to start building and then all of a sudden seeing your position tank out of the blue due to a significant news announcement relating to the currency pair you are trading. Therefore, make sure you do not trade during any news event. A good site to go to would be http://www.myfxbook.com/forex-economic-calendar. This will show you exactly what date and time the announcement is going to be made. I recommend NOT trading during any “High” impact news event.

5. Try using a trailing stop whenever possible. For example, you have a target profit price in mind and then shortly after you enter a trade, the market starts to move significantly in your favor. Before you know it not only has the market now on your profit target it has now passed it. This is a good time to set you trailing stop right at the price you had originally had in mind to set. The trailing stop pips could be set at say 10 pips. Therefore, the profit target will move automatically in your favor as the market moves in your favor. This method is an excellent way in capitalizing as much as possible for your profit. For more information on trailing stops, please contact info@masondeancapital.com

We hope these tips will at least give you a little nudge in the right direction.

Happy Trading!


Mason Dean Capital FX Markets

http://masondeancapital.com