What is Volatility and How to Use It on Forex

Author : Victor Gryazin

Dear Clients and Partners,

In this article, we’ll talk about a term called volatility. It’s a very important parameter of the financial instrument price, which is used for forecasts and trading.

What is volatility?

Financial markets never stand still, they are constantly moving. To understand this, just look at the chart of any financial instrument – prices are either rising or falling and quite often trading sideways. For assessing the market activity and price dynamics, there is an indicator called volatility.

Volatility is a range of movements of the financial instrument price over a certain period of time (day, week, month, etc.). In other words, volatility shows how high or low the financial instrument price may rise or fall in a definite time. Volatility can be calculated in percentage or points (the minimum value of price movements)

The stock market is believed to be one of the most volatile and changes in prices of different companies are often measured in percentage. For example, if a stock cost $100 at the beginning of a trading session and added (or lost) $10 during the day, then its volatility equals 10%. Stocks of large companies usually have daily volatility of about 5-10%, mid-caps and low-liquid stocks – 20%, 50%, or even more than 100%.

On the Forex market, price dynamics of currency pairs are less significant in percentage terms but it’s due to the trading volumes, which are also much lower. The volatility of currency pairs is usually measured in pips. For example, USD/JPY is considered to be moderately volatile and usually passes 50-70 pips a day, while GBP/JPY is more volatile and its average daily range is between 100 and 150 pips.

How to use volatility in trading?

First of all, volatility is used for assessing opportunities to trade any given financial instrument. Traders make money on price movements, that‘s why instruments with high volatility are more preferable for trading. The more actively a financial instrument moves, the more opportunities traders have to make a profit on this movement.

Long-term investors are more careful with volatility because they usually trade without Stop orders, while high volatility implies high risks. As a result, they prefer a balanced approach, when they choose an instrument with moderate volatility but which has a powerful fundamental or technical background for long-term movements.

On exchanges, one may directly trade volatility by means of futures and options. For that, a lot of different volatility indices were developed with VIX being one of the most famous. This index is calculated based on the US stock index S&P 500. VIX is sometimes called the “fear index” – at the time of panic it rises and at the time of calmness – vice versa.cur

Indicators for trading using volatility

For calculating and using volatility in trading, a lot of technical indicators were created. Let’s check three of them, which are quite popular with traders.

ATR (Average True Range)

ATR indicator is famous for assessing volatility, which was created in 1978 by J. Welles Wilder). The major goal of ATR is to calculate the current volatility of a financial instrument. Volatility in pips is calculated by averaging out the highest and lowest values of the price over a specified period of time.

The ATR indicator is built in a separate window below the price chart and consists of one major line, which shows only positive values starting from 0. Average True Range shows changes in volatility, it will equally grow when volatility rises in both ascending and descending trends. The higher the market volatility, the bigger the indicator value.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

How to Trade With the "Cutting Pips" Strategy

Author : Andrey Goilov

Dear Clients and Partners,

Today we will look at the “Cutting Pips” short-term trading strategy which applies such indicators as Bollinger Bands, the Relative Strength Index, and the Average Directional Index. It’s meant to work on the major currency pairs EUR/USD, GBP/USD, AUD/USD, and USD/CAD on the M5 chart.

This article addresses the features of the strategy and how to use three scalping indicators at a time. We will explain the rules for opening positions and the options for setting Stop Loss and Take Profit.

Description of the “Cutting Pips” strategy indicators

Only EMA indicators with different periods should be added to the chart. Traders usually use this tool to determine the trend on the market - if the price is above the EMA line, then the trend is bullish and a buy is anticipated. If the price is under the EMA line, then it is a bearish trend and you are supposed to sell.

The very crossing of the lines of the indicator will also give a signal to open positions, if the EMA with a smaller period crosses the EMA with a larger period downwards - it is a signal for the development of the downward movement. If there is a crossing of EMA with a smaller period and EMA with a larger period from the bottom upwards - it is a signal for an upward movement.

Often, even a test of the EMA line signals an imminent breakaway from it and the continuation of the existing trend. In our case, 38 lines of the EMA indicator will form support and resistance areas on the chart, the test of which the price will be a signal to open a position.

How to open a buy position on an EMA scalping strategy

• Bollinger Bands (BB) – this indicator forms a band on the price chart, within which the quotes stay for 95% of the time, according to the indicator’s developer. When the price breaks out of this range, it signals that it may reverse and move in the opposite direction. This characteristic of the indicator is also applied in the “Cutting Pips” strategy: the price must test one of the extreme bands to form the first signal for opening a trade

• Relative Strength Index (RSI) – this is a momentum indicator used to measure the strength or rate of a change in the price movement to analyse overbought or oversold conditions. When the indicator rises above the level of 70, it signals that the asset is overbought and its price might soon be declining. When the RSI value falls below the level of 30, it is a signal that the asset is oversold, and its price might soon be increasing. According to the “Cutting Pips” strategy, the indicator values should be above 70 when selling and below 30 when buying

• Average Directional Index (ADX) – this helps determine a trend in the market and its strength, but it does not show the direction of the price movement. The indicator ranges from 0 to 100. It is believed that if the ADX value is in the range of 0-25, the market does not have a prevailing trend, while values greater than 25 signal a trend. When trading the “Cutting Pips” strategy, the ADX values should be below 30, which will be the last signal to open a trade

How to set the “Cutting Pips” strategy indicators

To set the indicators on the popular trading platforms МetaTrader 4 and МetaTrader 5, follow these steps:

1. Open the terminal and log in to your account.

2. Select the chart of your desired financial instrument.

3. From the Main Menu, go to – Insert – Indicators – Trend, and then select the Bollinger Bands.

4. Click OK to close the settings window.

5. From the Main Menu, go to – Insert – Indicators – Oscillators, and then select the Relative Strength Index.

6. In the pop-up settings window, select period 7.

7. Click OK to apply the parameters and close the settings window.

8. From the Main Menu, go to – Insert – Indicators – Oscillators, and then select the Average Directional Index.

9. Click OK to close the settings window.

As a result, the chart will show all three indicators – Bollinger Bands, the Relative Strength Index, and the Average Directional Index.

How to buy with the “Cutting Pips” strategy

On the M5 chart, the price is testing the lower band of the Bollinger Bands or falling below it. Given that prices should remain within the range between the indicator’s upper and lower bands for 95% of the time, it can be assumed that the price is likely to exit the range by chance and soon show a reversal

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

What Is Quantitative Easing and How Does It Influence Currency Rates?

Author : Andrey Goilov

Dear Clients and Partners,

Quantitative Easing is an instrument used by Central banks to add money directly to the country’s economy. QE does not imply printing a lot of physically existing money, rather, this is a process that creates non-cash funds.

As the next step, the Central bank buys bonds in the private sector. This is also called “buying the government debt”. As a result, the profitability of these bonds decreases, while the overall money supply in the economy grows, in contrast.

The logic is simple: when private companies have more money, they can produce more goods and services. The more services and goods there are in the market, the more money consumers will spend on them, pouring the money into the economy. This is How QE helps the economy develop.

Mind that some analysts under QE mean simple asset buying by the Central bank. Remember here that the goal of QE is to increase spending and investments in the economy by creating non-cash funds.

Let us figure out why Central banks use QE at all, how it works, and how an investor can profit from it.

What is QE necessary for?

Clearly, Central banks do not use this measure all the time. QE is a reply to the economic situation in the country that forms under the influence of global trouble; it can also be solving particular problems. For example, it might be aimed at holding inflation and the growth of prices for goods and servicing at a low and, most importantly, stable level.

Another instrument for reaching such a goal is decreasing the key interest rate in the country’s economy. It also supports the development of the economy in times of global crises or recessions.

Low interest rates let private companies and enterprises get cheap loans, inspiring them to spend the loaned money and invest in the development of their business. For physical persons, this works the same way – in, say, mortgages.

However, there is a certain limit to interest rates, so that they cannot be lower than this level. Hence, Central banks use QE when lowering the rate becomes unreasonable and even harmful.

How does QE work?

The rates of state bonds directly influence other interest rates in the country’s economy. If the CB buys a lot of bonds, the interest rates (profitability) of the latter fall, which, in turn, brings down loan rates. We can conclude that QE makes loans cheaper for the private sector, stimulating their spending.

However, this is not all the potential of this measure: QE can also support the economy by the potential growth of prices for various financial assets.

For example, the Central bank buys bonds for 1 million USD from the pension fund, so the fund gets real money instead of bonds. The fund will hardly just keep in on its accounts; instead, it can invest in various financial instruments such as stocks of large companies that can yield much larger profits. Thanks to this, stock markets also grow: when more investors want to buy certain stocks, the price for the latter ones also grows actively.

Next, we have a more direct correlation: when stock prices grow, the capital of their investors also increases; they now have more money to spend, and their spending stimulates economic activity in the country.

Summing up: buying bonds decreases loan rates and supports the stock market. People and companies have more money to spend and thus spend more, supporting the economy.

However, if the private sector just saves the money it has got from the CB, QE will simply not work.

How does QE influence the currency of the country?

At first glance, QE looks like a perfect way to escape an economic crisis threatening the country. However, it entails several potential risks, one being the weakening of the national currency.

An increase in money supply can lead to the devaluation of the national currency against other world currencies – especially those of such countries where the CB does not carry out QE. Things are again logical: money supply increases noticeably, hence, its price in the world market drops. As a rule, the devaluation happens at the start of QE, while closer to the end of the program, the currency can grow significantly.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

Bringing Up Positive Attitude towards Trading

Author : Timofey Zuev

Dear Clients and Partners,

In this article, we will discuss developing a positive attitude toward trading. This method is known as a solution-focused approach and is currently the quickest way of acquiring a positive attitude. It was described by a famous psychologist working with traders – Brett Steenbarger.

The advantage of the solution-focused approach is the technique of solving the problems much faster than usual. Also, I want to emphasize the simplicity of the method – you can apply it on your own. It is so appreciated by traders because they know the value of time.

How problems emerge

The method is based on the idea that problems are generated by a person’s mind, and we look at ourselves through them. Let us discuss an example.

A trader who works intraday had several losing days in a row. They failed to follow their money management rules and thus lost all the profit made for several weeks. Before they made the last losing trade, they had slept badly which made them feel even worse and break their trading discipline. They promised themselves that they would sleep well that night but a too large emotional load prevented them from it. In the morning, after a cup of coffee, they made their mind never to repeat their previous mistakes; however, they were afraid of entering the market lest they make a wrong step. They again thought that it was due to their bad sleep and decided to have a good rest. Nonetheless, that evening, their mistakes and missed opportunities kept nagging on them, hence they failed to sleep well again. Then they decided that they suffered from insomnia and started looking for treatment.

However, from the point of the solution-focused approach, the problem was not the trader’s insomnia but their impression that they could not sleep. Such conclusions you make on your own form a negative thinking style, and you start acting based on the label you have put on yourself. As soon as the trader decides that they are a bad expert, or suffer from depression or insomnia, they start interpreting all events and acting from this point of view.

In our example, the trader destroyed their own sleep which immediately deteriorated their work. When they noticed their problem with trading, they blamed insomnia for this; and since then, even if they slept badly once, they will regard it as confirmation of their illness and explain their losses by this fact.

This way a person becomes more and more confident in their problem. A usual course of negative events that earlier was interpreted as normal is now taken as a problem. This leads to emotional distress that further aggravates the situation.

As for traders, such a situation is no surprise for them: they have long known the times of constant profits or losses. Even knowing the statistical probability of such a “coincidence”, they, nonetheless, interpret it as a train of fortunes or misfortunes. Being sure of either option, they change their trading style respectively, changing the size of orders or deciding on excessive risks that they would not afford otherwise. Such violation of their own rules leads to a decrease in the deposit in the end.

The devotees of the solution-focused approach are sure that many human problems do not actually exist but are created by people’s minds. This is just a side effect of the process of looking for the sense of some event. Say, a sequence of random events may be regarded as a chain or intertwined patterns, which makes you think there is a problem while in reality, nothing has changed, and life remains on its usual course. People, traders in particular, are prone to inventing all sorts of problems in the chaos of life.

Why many self-improvement methods never work

In trading, market players use large leverage and admit that they need to be a step ahead of the market to succeed. Also, they know that emotional problems may lead to a violation of the trade discipline and bring significant losses. Naturally, traders get interested in various self-improvement methods and psychological techniques for balancing your mind.

We all know how numerous such techniques and methods are; however, from the point of the approach in question, ordinary methods only aggravate the problem. Let us figure out why it happens.

Back to what we have written above. The trader suffering from insomnia may decide to get rid of it by a doctor’s advice or on their own by some relaxing methods or pills. These methods are good, but it might happen that they will not only solve the problem but only aggravate it.

Using the method in trading

In trading, the method may be used as follows. The trader analyzes the trades made during a certain period: a week (for short-term trading), month, year, etc. Profitable and losing trades are equally scrutinized. For profitable trades, the question is: what exactly did I do right? Remember the steps you figure out (write them down, pin to a wall at your workplace), and feel free to use in trading. The idea is to form a successful working mode based on your own previous experience.

Start every workday by recalling these empirical rules. Make demo-trades or plan your work based on your rules. Practice makes perfect, and soon you will use your rules automatically.

Concentrating on the actions that yield success will improve your results and help to avoid make-belief problems.

The “problem chain” according to the method

1. Most problems emerge due to a sequence of undesirable events, or just one such event might happen but it will be so major that it attracts the trader’s complete attention.

2. Such an event or their sequence might be absolutely random but people tend to interpret them as something meaningful and find the reasons for their appearance.

3. Upon finding the problem, the trader puts all effort into solving it.

4. Such a course of action only makes a person more sure that the problem does exist; the attempts to solve it only aggravates the problem – this is called a vicious circle.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

RoboForex Wins Prestigious Award for R MobileTrader Mobile App

Dear Clients and Partners,

We are proud to announce that RoboForex has received a new award from the international expert community, “GFA - B2B 2023”. Our mobile application, R MobileTrader, has been honoured with the "Best Mobile Trading App" title!

R MobileTrader has surpassed competitors' apps in the industry based on the following key criteria:

• Uninterrupted connectivity between clients and the market

• User-friendliness

• Number of trading management tools

We are grateful to the jury and our users who voted for us!

Trade on the award-winning platform – R MobileTrader

Download the application

Sincerely,
The RoboForex team

Basket Trading: Using Interrelations Between Trading Instruments

Author : Victor Gryazin

Dear Clients and Partners,

In this overview, we will discuss such as trading method as “Basket Trading”. It helps to diversify risks and create a market-neutral trading strategy.

What is Basket Trading?

Basket Trading is a method of trading that uses not just one instrument but a whole bunch (“basket”) of them. For example, instead of trading a single currency, you focus on a set of currencies. Or, instead of trading stocks of one company, you trade a portfolio of several companies in a certain sector.

The most popular way of creating a basket (portfolio) of instruments is finding a group of underpriced instruments, counting on their subsequent growth. The instruments can be stocks, currency pairs, ETFs, etc. A bright example is the portfolio of legendary Warren Buffett: he invests in the most promising stocks.

Basket Trading presumes trading one or several baskets of interrelated instruments. The peculiarity of this method is that it helps to diversify risks and create a market-neutral portfolio that helps you make money regardless of the market conditions and a certain trend. Let us discuss some strategies of Basket Trading.

How to do Basket Trading?

There are two main strategies of Basket Trading: investment (trendy) and market-neutral (arbitrary).

Investment strategy

This is a trend strategy that uses a basket of instruments. It is good for various investment ideas and helps to diversify risks. Instead of investing in one asset, we proportionally divide our capital among several instruments. As a rule, such instruments are interrelated and have similar characteristics.

In the stock market, this means investing in several similar companies instead of just one. For example, you expect stocks in the healthcare sector to grow supported by the fight with the coronavirus. Instead of investing in just one famous company, it will be wiser to put your money in several companies in the sector. This will help to avoid corporate risks – the stocks of one company might get stuck due to some inner reasons while the rest are likely to live up to your expectations.

In the currency market, this means trading several currency pairs, not just one. For example, fundamental analysis tells you that the US dollar will be declining in the nearest future. Instead of selling the dollar in just one currency pair (say, with the euro), you can use a basket of several currencies. For example, EURUSD, GBPUSD, AUDUSD (and more) simultaneously. As a result, you decrease the risks of investing in just one currency pair.

Market-neutral strategy

This strategy suggests buying and selling several interrelated instruments at once. The idea of the strategy is to track the difference in the prices of correlating instruments and use deviations of the price from the average to open positions in opposite directions. The hope is that after the deviation, the price will go back to average, bringing you a profit.

In the stock market, you can sell the stocks of several companies that have already shown decent growth and simultaneously buy a corresponding number of the stocks of companies from the same sector that have just started to grow. You expect the stocks that have leaped up will stabilize or even correct a bit while those that are just at the start will catch up; thus you will take the aggregate profit when the price difference of these two baskets decreases.

In the currency market, this can be a basket of opposite positions in currency pairs. For example, if the pound has gone down significantly in pairs with other currencies but is expected to grow, you can buy GBPUSD and sell EURUSD and AUDUSD in proportions, corresponding to the price and volatility of the pairs. This makes the positions market-neutral towards the USD.

Advantages and drawbacks of Basket Trading

Like other trading methods, Basket Trading has its advantages and drawbacks.

Advantages

• Diversification of risks. When we use a basket of instruments, we become less dependent on the dynamics of each of them. If your forecasts are correct, “successful” stocks will pull in tow the “unlucky” ones.

• The use of market-neutral strategies based on the correlation of the assets you use – they are less sensitive to changes in market trends.

• It is suitable for a wide range of assets and markets (Forex, stock, commodities, etc.).

Drawbacks

• The method is complicated as you have to keep an eye on several instruments at once.

• Risk increases when something extraordinary happens in the market. Statistical laws and interrelations that worked for you before might cause losses when conditions change.

• You need to use some special software (scripts, expert advisors, indicators).

Read more at R Blog - RoboForex

Sincerely,
The RoboForex team

RoboForex: upcoming changes to the trading schedule in view of Independence Day

Dear Clients and Partners,

We are informing you that changes will be made to the trading schedule due to Independence Day in the US.

This schedule is for informational purposes only and may be subject to further change.

MetaTrader 4 / MetaTrader 5 platforms

Schedule for trading on Metals (XAUUSD and XAGUSD), CFDs on US Indices (US30Cash, US500Cash, and USTECHCash), the Japanese index J225Cash, and CFDs on oil (Brent and WTI)

• 3 July 2023 – trading stops at 7:40 PM server time

• 4 July 2023 – trading stops at 7:40 PM server time

• 5 July 2023 – trading as usual

Schedule for trading on CFDs on US stocks and CFDs on US Futures

• 3 July 2023 – trading stops at 8:00 PM server time

• 4 July 2023 – no trading

• 5 July 2023 – trading as usual

R StocksTrader platform

Schedule for trading on US stocks and ETFs

• 3 July 2023 – trading stops at 8:00 PM server time

• 4 July 2023 – no trading

• 5 July 2023 – trading as usual

Schedule for trading on CFDs on US stocks, ETFs and US Futures

• 3 July 2023 – trading stops at 8:00 PM server time

• 4 July 2023 – no trading

• 5 July 2023 – trading as usual

Schedule for trading on CFDs on US indices (US500, US30, and NAS100) and the Japanese index JPY225

• 3 July 2023 – trading stops at 7:40 PM server time

• 4 July 2023 – trading stops at 7:40 PM server time

• 5 July 2023 – trading as usual

Schedule for trading on Metals (XAUUSD and XAGUSD) and CFDs on oil (WTI.oil, BRENT.oil)

• 3 July 2023 – trading stops at 7:40 PM server time

• 4 July 2023 – trading stops at 7:40 PM server time

• 5 July 2023 – trading as usual

cTrader platform

Schedule for trading on Metals (XAUUSD and XAGUSD)

• 3 July 2023 – trading stops at 7:40 PM server time

• 4 July 2023 – trading stops at 7:40 PM server time

• 5 July 2023 - trading as usual (close Only)

Please take note of the above trading schedule changes when planning your trading activity.

Sincerely,
The RoboForex team

Mentoring in Trading: Why People Do It, and How to Choose a Tutor?

Author : Vadim Kovalenko

Dear Clients and Partners,

Mentoring has become quite popular these years. In the center of this movement we can encounter experts that for some fee help other people make a career, develop skills, and avoid typical mistakes in certain branches of knowledge.

The advantage of this method of education is that the student can get knowledge filled with practical skills. In trading, these services are also popular. With it, some managers started off as experts and even opened schools of trading and investments.

However, beginners are wondering how to choose a mentor. People take different ways of doing it: some find a mentor at once, some start off with self-education. In the latter case, fees are charged by the market in the form of losses that traders experience for mistakes. This article is devoted to the details of mentoring in trading: why experts for it and how a beginner should choose a tutor.

Why should an experienced trader teach someone

When a beginner starts looking for a mentor, they encounter ads of many traders who, in their turn, demonstrate impressive results and sums with many zeros. A question appears: why do they need to teach someone else and take more eyes for this? To my mind, there are several reasons:

1. New source of income
If a trader charges fees for learning, this means they want a compensation for their time and effort they could spend on trading. Hence, such lessons cannot be cheap. Moreover, this way managers can make money on attracting people — their students — to partnership programs of brokers. This is how traders make money on their trading. Most often, students become investors and increase the capital of their manager.

2. Vanity
Human qualities are also their in traders, and many of them crave for social recognition. They enjoy happy feedback from former students. Some managers just enjoy the process of teaching.

3. Enthusiasm
There are categories of people who are eager to be useful for the society. Such experts are few, but enthusiasm can also drive people into mentoring

I will single out special cases when people cannot trade successfully for psychological reasons. Excitement, lack of mental balance, emotional unstability are the reasons for negative trading history. Howevee, they have pedagogical experience, experience, and knowledge. On the other hand, such traders are hard to distinguish from frauds that seek likes and subscribers in social networks.

How to choose a mentor?

Understanding the motives that drive traders into teaching, let us find out how to choose a good mentor.

Firstly, make up your mind about your goals. Do you need to learn the basics or make your trading better? In the first case, when you need the basics, there is no reason for seeking help of an experienced trader. On the Net, there are plenty of free materials that can help you find your way through the main notions and categories. Then you can practice on a demo account, then switch to a cent account, and then decide on your trading style depending on your character. Thus you will get some experience, positive or not.

Choosing a mentor, check for not only their results but also the type of their trading system. If you are psychologically uncomfortable with scalping, there is no reason for learning from a scalper as you will have no result.

Price and length of learning

The price of your learning will depend on the expertize of your trader. I advise you against courses cheaper than 150 USD for group learning. As I wrote above, the manager will try to compensate for the time they spent on the students. Moreover, the price will be influenced by the number of successful students and the profitability of their trading.

As for the length of learning, you will need no less than 3 months. Get ready for the way to be long. Optimum length is 6 months.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

How to Trade USD/ZAR

Author : Andrey Goilov

Dear Clients and Partners,

USD/ZAR — US dollar vs South African rand — is quite an exotic currency pair, not really popular among traders. Trading this asset has certain peculiarities and internal laws.

Some say that, compared to other pairs, this one is less liquid. However, on the D1 of USD/ZAR one could see a lengthy uptrend from the end of 2011 till the beginning of 2016. That time the quotations rose from 6.40 to 17.97, then declined several times in the form of corrections, and then started growing again.

At the very first glance you can see that USD/ZAR is capable of strong movements. And not only ascending ones that prevail but also lengthy declines. Do you want to know right now how to trade this currency pair, making use of all its characteristics? Let me tell you.

Trading characteristics of the currency pair

The pair reflects the relation of the US dollar to the South African rand. When I was preparing this article, you could buy a bit more than 15 ZAR for 1 USD. The growth of the pair means that the dollar is becoming stronger, and falling means that the rand is growing.

Trading characteristics:

• Trading time. The pair trades 24 hours a day on weekdays. Volatile movements take place during the European session.

• Volatility. Assessed by the ATR, it reaches 230 points a day on average. Minimal ATR levels were reached in the middle of 2021 and maximal — in July 2020. The difference is quite noticeable — the low was 180 points and the high was 380 points, all these during one year.

• Spread. It is quite low, reaching about 0.8 points at the calm market.

How to trade USD/ZAR

The currency pair can be traded by indicators, levels, and graphic patterns.

Trading by indicators

The pair is trendy, so a combination of Moving Averages will yield good results. You can choose tactics from the article “Top-7 Forex Trading Strategies in 2022” If you want something unique, add to the chart an EMA (95) and Bollinger Bands. Use an H4 chart.

Buying rules

• The price has secured above EMA (95) – this indicates a bullish trend.

• The price tests the lower border of the Bollinger Bands indicator that shows the lows.

• Place a Take Profit at the upper border of Bollinger Bands.

• The Stop Loss will be two times smaller than the TP.

Selling rules

• The price has secured below EMA (95) – this indicates a bearish trend.

• The price tests the upper border of the Bollinger Bands indicator that shows the highs.

• Place a Take Profit at the lower border of Bollinger Bands.

• The Stop Loss will be two times smaller than the TP.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

How to Use EIA Oil Report in Trading

Author : Victor Gryazin

Dear Clients and Partners,

This overview is devoted to the weekly EIA report about the situation in the oil market that influences the quotations of black gold quite a lot. Many traders keep a close eye on this publication and use the information in trading.

What is the EIA report

Energy Information Administration (that EIA stands for) is a department of the US Ministry of Energy created in 1977. It is responsible for objective collection of energy data, analysis, and economic forecasts. The department regularly publishes various reports on the topics around energy. Among them, there are reports on energy carriers reserves, demand for them, and prices.

The United States are not only the largest consumer of oil (consuming about 20% of global oil) but also the leading oil producer. The supply and demand balance in the USA gives a rough idea of the oil market on the whole. Traders, investors, and other market participants follow attentively oil statistics from the USA. Publication of these data is quite often followed by serious market volatility.

One of the most popular EIA reports is the weekly report on the state of the oil market called This Week In Petroleum. This report is published every Wednesday and contains comments on changes in oil reserves, demand, and other parameters of crude oil and oil products. If there are some unexpected major changes about crude oil and petroleum in the report, the market might react dramatically.

Which info is there in the report?

Investors and oil traders study the EIA report very carefully to use the data for forecasting the behaviour of prices for energy carriers. Analysts from energy companies also use the report to collect data that help them develop long-term business strategies.

The information published in the EIA report:

• Domestic Production: production level of the previous week in the US. This is prelim estimation that can be mended later.

• Percent Operable Utilization: if refineries work at their most, this might indicate increased demand for oil products.

• Crude Oil Inventories: this is the most important part of the report that represents the changes in oil reserves in the US.

• Total Motor Gasoline Stocks: obviously, this represents changes in gasoline stocks. This parameter is seasonal: in summer, demand for gasoline grows, which might be reflected in a decrease in the stocks.

• Distillate Fuel Oil Stocks: represents changes in the stocks of crude oil products.

• Crude Oil Import: represents – obviously – changes in the import of oil in the US. An increase in the import can sometimes lead to the growth of oil inventories.

• Crude Oil Export: represents the dynamics of oil export from the US. This parameter has been growing since a couple of years ago.

The key parameter is Crude Oil Inventories. If the report represents a higher parameter than had been expected, this means the demand is weak, and oil quotations become stressed out. A decrease in oil inventories means that the demand has got higher than the supply and helps oil prices grow. Crude Oil Inventories in the US are published weekly on the Economic Calendar.

How to use the report in trading

Oil quotations are influenced by a whole bunch of data, including the EIA report. And as long as the report influences the quotations, investors and traders use it in their work. Investors prefer long-term strategies and traders – short-term ones.

Long-term trading

For planning long-term trading which means holding an open position for weeks or months, traders analyse the reports over a certain period.

For example, they can check for a downtrend or uptrend in oil inventories over several weeks or serious deviations from the average over several years.

Though weekly EIA reports provide data important for understanding oil supply and demand balance in the US, investors also have to be attentive to the international situation.

Short-term trading

Trading strategies used for short-term trading on changes in oil reserves in the US have little differences to the general principles of trading news. When the data is published, short-term momentum movements of the quotations emerge, and they can be used for trading.

The direction of trading is chosen based on the current market situation, the technical picture, and data published in the report. Use tech analysis to detect the trend and draw the nearest support and resistance levels.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

RoboForex adds additional MT4 trading servers for its clients

Dear Clients and Partners,

RoboForex launched three new dedicated servers (RoboForex-Pro-5, RoboForex-ECN-3, and RoboForex-ProCent-8) for the MetaTrader 4 platform. This improvement will help to enhance the stability and performance of our trading servers.

The new servers are available for clients with Pro, ECN, and Cent Affiliate account types.

Pro

The most popular account type at RoboForex with optimal trading conditions for traders with different experience levels.

• Floating spread - from 1.3 pips

• Leverage - up to 1:2000

• Trading instruments - more than 100

• No commission for the trading volume

ECN

An account type for experienced traders which combines the tightest spreads, high execution speed, and competitive trading conditions.

• Tight spreads - from 0 pips

• Leverage - up to 1:500

• Trading instruments - more than 100

• Commission for the trading volume - from 5 USD

Cent Affiliate is a special type of account which is suitable for partners who provide their clients with certain services. More information is available here.

Open an account
and start trading with competitive conditions

Full details of accounts >

Sincerely,
The RoboForex team

Drawdown: What is It and How to Escape It?

Author : Dmitriy Gurkovskiy

Dear Clients and Partners,

Such sonorous terms as Margin Call and Stop Out must be known to anyone who deals with trading. Each person has come to know it in their way: some got acquainted with them practically, forcefully closing their losing positions, some - theoretically, studying the basics of trading.

If you have not heard these terms yet, a short lecture will, perhaps, make you think well about the consequences of unreasonable and excessively emotional trading.

Margin Call is a notification from your broker, in which they require to additionally replenish your security deposit.

If after a Margin call the trader does not deposit heir account, and the losses keep growing, then after the price reaches a certain level, the Stop Out procedure will be launched. This means the broker will close some or all open positions on the account. However, Margin Call and Stop Out are not as disastrous as the trader's actions that lead to them.

One such action might be connected to unthoughtful trading operations based on no strategy or tactics, without risk and money management. An example of such actions can be trading the whole capital both in periods of high volatility and a calm market. In such times, the trader is more of a gambler, hoping for a quick gain.

What is a drawdown?

A drawdown is a decrease in the balance and equity on the trading account; to put it simpler, a drawdown is a loss. Drawdowns can be of two types: floating and fixed.

Floating and fixed drawdown

Floating drawdown is an aggregate loss of all open positions. Here, we highlight that the trades we are talking about are still open.

For example, the trader opened a position, and then the market situation started developing counter the forecasts, so the trade yielded a loss. This loss will constitute the floating drawdown.

Also, such a drawdown is called floating or temporary because a day or two later the situation might change either for better or for worse.

Reasons for drawdowns

I will keep repeating that bad trading can be explained by the wrong choice of a strategy and a lack of risk management and money management. However, even if the trader has all these elements of trading, they might be betrayed by their psychology and/or personal discipline.

The mistakes will be revealed by increases in the trading volume, unreasonable and chaotic buying and selling, locking and using the Martingale. Of course, all this might work, but it will not be systematic.

If you have drawdowns too often, you should think something like: "Am I trading the right way?". I mean, you can plan your profit and losses if your trading system is in harmony with the market and your money management helps you escape drawdowns quickly and accumulate profit.

If your trading account does get in a drawdown, first and foremost, you have to accept it. Any trader has got a drawdown sometime, and its presence on the account is virtually normal, the question is in its size.

How to escape a drawdown?

So, we are now nearing the part which is the reason for you to have started reading this. Again, a drawdown of an account is a natural situation you will hardly avoid. However, it can always be optimized, and its influence on the account - minimized. All this is rather easy to do: you need to follow the rules of money and risk management and your strategy. For most people, my words will seem banal. This is because not all readers have a strict financial plan, a trading strategy, risk and money management systems. So, the first step out of the drawdown will be adding the aforementioned to your trading.

There is a law: the deeper the drawdown, the longer it will take you to get out of it. If the trader was unlucky to lose 50% of the deposit in 2-3 trades, it is unlikely they will restore the capital in an equally short time.

On the Internet, you can find lots of information counter averaging, locking, and using the Martingale; however, advocates of these methods are also there. Not wishing to start an argument, I will say that both averaging and locking may do the trader lots of good if they know the tricks.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team