Global Macro Trading and the Benefits of Diversification

by Brevan Soros
Most long time investors have heard that diversification is the only free lunch on Wall Street. If you have used a financial advisor to pick your investments for you, you may have been told you were diversified but the way it usually works out your diversification is weak at best and in some cases is almost non existent. Obviously you just need to learn the proper way to diversify.

The typical planner will have you put some of your money in domestic stocks, some in foreign stocks, and then place some money in bonds. If that is all you are doing you are not getting nearly the benefit you could be getting and in reality you are barely diversified at all.

Proper diversification will invest your money in several different asset classes as well as diversify in different trading strategies. Global macro traders have known this for years and consequently as a group have had positive returns over the last ten years.

The world of global macro trading will have you looking at several different asset classes such as domestic stocks, foreign stocks, Treasury bonds, investment grade corporate bonds, junk bonds, foreign government bonds, foreign corporate bonds, commodities, real estate, and currencies. In fact some traders will get even more diversified by investing in collectibles, private equity, venture capital, etc. Basically anything that has different economic drivers is worth looking at as for a potential investment as it diversifies your risk.

As traders and investors we should all be looking for the best risk to reward scenarios out there instead of just being involved. If you are doing that then it helps to look at multiple markets so that you can always be putting money at risk in an intelligent manner.

Of course as alluded to earlier we can diversify in more than one way. Cast your net wide and put money is several asset classes but you can also diversify by looking at different trading horizons. For instance if you can manage multiple strategies in the same asset class then do that, if you cant hire an outside manager that can. For instance you can put money with an uncorrelated commodity trading advisor and then put money with a long term trend following commodity trading advisor. By doing this you are catching short term and long term movements in commodities. You can do the same types of things with other asset classes.

By diversifying both wide and deep you will be able to capture alpha or returns in a more consistent manner. Will you make money every day, week, month, or even year? There are no guarantees but properly diversified you will almost always outperform stock market indexes, especially on a risk adjusted basis.

If you are a relatively active investor you can achieve positive returns in multiple asset classes yourself by building market beating models in different markets. Yes, you can and indeed should use bottoms up research but in the spirit of being efficient with your time you should automate as much as possible so that you are able to be a more efficient global macro trader and miss fewer of the potential opportunities that occur in different markets

source: http://barex.biz/2009/global-macro-trading-and-the-benefits-of-diversification/

Who is the Best Forex Broker

If you are Forex trading, you must have an online or over the phone broker to help you execute your trade. With modern technology we have seen a massive amount of new forex brokers emerge, so it can be a difficult process to find the best Forex Broker in the market. As today all the forex brokers are looking for your business, so they all have special offers and promotions and sometimes it is to attract you. However a great offer doesn’t make them a great broker.

So how can you find the best broker amongst all the choices?

As choosing the right online broker is an important as selecting a winning trade.

Finding a referral is normally the best way to find the best Forex Broker.

How often do you hear, I didn’t get filled at the right levels, lots of slippage, and the list goes on. We hear all the time, and having listening and giving information to more than 50,000 clients in past 5 years, this is certainly a critical aspect of trading.

So here are some rules that you need to use when looking for a Best Forex Broker.

Due Dilligence:

Here is little bit of a due diligence guide, what are the things you have to check? What are you supposed to consider before settling for an online stock broker?

1) Check what their brokerage rate is. Note that for every transaction you make you are charged a fee, which is deducted from your account.

2) Beside the brokerage rates, another thing you must check is the account fees. Make sure that you carefully study the contract agreement before signing so that you don’t sign your own obituary. Make sure that there are no hidden charges. All fees that you will pay must be clearly written on the contract note.

3) The third thing you need to check is whether the online broker can be contacted directly through phone. What are the fees are there any extra fees? This is crucical what about if your not in front of the computer and you want to sell.

4) Finally, what are the account fees can I use credit cards, deposit immediately, bpay etc. These are all things that make your trading life so much simpler.

Recently the CFD FX REPORT has researched all of these brokers and has come up with who they believe to be the best forex broker in the market so feel free to visit them. They also offer a host of free education lessons to help you become a more successful trader

source: http://www.blogmix.info/2009/04/who-is-the-best-forex-broker/

Knowing the Risks of Forex Trading

by fxreport
Every single investment comes with some level of risk. We have all seen the odd bank go under which has quiet often being seen as a ’safe’ investment. While forex trading there is the risk of loss in trading off-exchange forex contracts can be substantial. It can sometimes be greater than the initial investment when guaranteed stop losses are not in place.

As shown above if you are considering trading foreign currency trading there is that element of high level of risk and may not be suitable for all customers. If you cannot take a loss, do yourself a favor and don’t TRADE, as no matter how brilliant of a trader you are you cannot pick the market 100% of the time.

Money Management:

If you have a solid money management plan in place this can help to reduce the risk of forex trading. So when you start trading you should only use funds to speculate in forex trading that you are prepared to loss, or any type of highly speculative investment for that matter, are funds that represent risk capital fore example funds you can afford to lose without affecting your financial situation. So the day to day money that you require to live on, don’t trade with that. There are other reasons why forex trading may or may not be an appropriate investment for you, and they are highlighted below.

This can be a volatile market and it can move against you very quickly. Also remember you are trading with leverage, in some cases up to 400:1 so make sure you use leverage that you are comfortable with.

You have just blown the stack, lost it all that how fast this market can move.

When you start trading, you are required to open the account with a deposit of money (often referred to as a security deposit or margin, which is what you leverage agains) with your forex dealer. This will then allow you to order or simple terms buy or sell an off-exchange forex contract. Above we showed with the leverage (up to 400:1), a relatively small amount of money can enable you to hold a forex position worth many times the account value. So $1000 can be leverage up to $400,000 so it doesn’t take much of movement to lose the initial $1000. The smaller the deposits in relation to the underlying value of the contract, the greater the leverage. If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire deposit. This is why using a broker that offers guaranteed stops is paramount. THIS MUST BE ONE OF YOUR TRADING RULES: NO EXCEPTION.

Now there is also the flip side to Forex Trading, if you get the trade direction correct it can result in major gains. Maybe this is why we all love Forex Trading.

Now if you have a great trade and make great profits from forex trading, do not get overconfident. If you become over confident it can be dangerous. Also make sure that you do not overtrade remember the currency market is open 156 hours per week, so don’t panic if you miss one trade. If you exit a trade you should not automatically re enter a trade.

Make sure that when you are trading that you have your rules, stick them, follow them. The forex market is doesn’t work on a popularity basis, so need to ask family and friends their opinion on the trade it will only confuse things.

Forex trading can be very rewarding but make sure you go in with your eyes open, as 90% of traders will go broke, mainly through the above reasons. It is always advisable to get some level of knowledge before you start out in the market. There are a host of forex education courses available. The CFD FX Report has recently reviewed a lot of them, and on our homepage is a company that we believe to be outstanding. A lot of students have come out making over 300 pips per week.

Please though do not spend thousands of dollars on these courses as quiet often they don’t guarantee success and a course of a few hundred dollars such as the course above is normally better.

As we have discussed in the article the most important steps you can make as a trader is education. As you are responsible for creating your own wealth so to continue learning and for more free education lessons please visit the CFD FX REPORT they will be able to satisfy all your education requirements. Also they can help you find the Best Forex Broker and CFD Brokers in the market. Visit them today. Education is knowledge and knowledge helps create wealth.

source: http://www.blogmix.info/2009/04/knowing-the-risks-of-forex-trading/

Cramer's Stop Trading! So Long, Stress Test

Cramer says so long to the bank stress test which won't be needed anymore now that Wells Fargo is changing the rules and proving that there is at least one good bank out there. Cramer identified JP Morgan Chase as another good bank which may be able to take over the better portions of weaker banks and sell bad segments to the Federal government. Wells Fargo reached a record $3 billion in earnings for the quarter with $100 billion in mortgages so far this year and a backlog of $100 billion. Cramer thinks Wells should be trading at an 11 or 12 multiple and should reach $26. Other proof that the tone of the markets is changing is in Textron's 50% rise and strong performances by Whirlpool, Fortune Brands and Black and Decker.

source: http://seekingalpha.com/article/128815-cramer-s-stop-trading-so-long-stress-test-4-9-09

Asia steps up push towards huge free-trade zone

PATTAYA, Thailand (AFP) — Sixteen Asian nations will step up investigations into establishing a giant free-trade zone stretching from China to Australia, according to documents obtained by AFP on Friday.

The documents, to be issued during a weekend summit in the Thai resort town of Pattaya, said that 16 Asian leaders will throw their support behind efforts to deepen and expand trade ties and reject protectionist measures.

Leaders of the 10-member Association of Southeast Asian Nations (ASEAN) will meet their counterparts from China, Japan and South Korea on Saturday.

On Sunday they will be joined by leaders of Australia, India and New Zealand under the banner of the East Asia Summit, a grouping which represents half the world's population.

A draft of the statement to be issued at the end of Saturday's talks said leaders will ask their economic ministers to "explore ways and means to increase regional trade."

The leaders said an East Asia-wide free-trade zone -- covering ASEAN as well as China, Japan and South Korea -- would enhance the free flow of goods, people and capital.

"In this regard, they tasked the economic ministers to submit the final report of the second phase feasibility study" into the pan-Asia trade zone during their next summit in October, the document said.

The study is aimed at establishing how the region's existing web of free-trade agreements can be linked together into a more comprehensive region-wide pact.

Free trade and a rejection of protectionism is also a major plank in the leaders' statement to be issued on Sunday by the larger 16-nation grouping.

A draft of that document said the leaders will agree to further open up their markets and look forward to seeing their ministers' recommendations on the pan-Asia free-trade zone during the October talks.

"As a further sign of their commitment they pledged to minimise the trade-distorting impact of their fiscal stimulus measures and industry support policies," it said.

ASEAN has signed free-trade pacts with most of its trading partners, but it is pushing for a larger Asia-wide zone where both tariff and non-tariff barriers are torn down.

"It's time to look at how we bring all these bilateral free-trade agreements together," said S. Pushpanathan, ASEAN deputy secretary-general in charge of economic affairs.

The feasibility studies were already in their second phase and were "very comprehensive and detailed," he told AFP.

"We will take a staged approach," Pushpanathan said, signalling that establishing the massive trade zone would not be easy. "It will all depend on the studies."

Economists say that a network of smaller accords could be a foundation to build on for a bigger free-trade area.

But some analysts have warned that dividing the world into trade blocs could undermine multilateral talks under the World Trade Organisation.

source: http://www.google.com/hostednews/afp/article/ALeqM5gNDjtuWRgNwg4NGSIEdlSwNb0bzA

USD/CHF Weekly Outlook

After dipping to 1.1239 initially last wee, USD/CHF's rise from 1.1158 resumed and rose to as high as 1.1622. From a short term angle, initial bias remains on the upside this week as long as 1.1426 minor support holds. As discussed before, we're maintaining the view that correction from 1.1963 has completed at 1.1158. Break of 61.8% retracement of 1.1963 to 1.1158 at 1.1655 will add much credence to this case and bring retest of 1.1963 high. On the downside, however, below 1.1426 will flip intraday bias back to the downside and argues that price actions from 1.1158 might merely be corrective in nature. In other words, fall from 1.1963 is still in progress.

In the bigger picture, USD/CHF pulled back after completing an impulsive five wave rally from 1.0366 to 1.1964. Subsequent correction might have completed after drawing support from 50% retracement of 1.0366 to 1.1963 at 1.1165. Break of 1.1963 will confirm that whole rise from 1.0366 has resumed for retest of 1.2229 high. On the downside, though, below 1.1158 will indicate that fall from 1.1963 is still in progress but even in such case, downside is still expected to be contained above 1.0864 support and bring rise resumption. However, note that sustained break of 1.0864 will dampen this view and will turn focus to 1.0366 low.

In the longer term picture, a long term bottom is no doubt in place at 0.9634 with bullish convergence condition in daily MACD. USD/CHF failed to take out 55 months EMA again (now at 1.1972) and reversed again and thus giving no confirmation of long term reversal yet. Though, sustained trading above there will affirm the bullish case that long term trend in USD/CHF has reversed. Further break of 1.3283 will confirm underlying upside momentum and open up the possibility for retesting 1.8305 (00 high).

source: http://www.actionforex.com/action-insight/usdchf-outlook/usd%10chf-weekly-outlook-2009041184614/

Bank Failure - Cape Fear Bank

By Chuck

Cape Fear Bank of Wilmington, NC has been closed and the FDIC was named receiver.

Cape Fear Bank, Wilmington, North Carolina, was closed today by the North Carolina Office of Commissioner of Banks, which then appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Federal Savings and Loan Association of Charleston (First Federal), Charleston, South Carolina, to assume all of the deposits of Cape Fear Bank.

Cape Fear Bank’s eight offices will reopen on Monday as branches of First Federal. Depositors of Cape Fear Bank will automatically become depositors of First Federal. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until First Federal can fully integrate the deposit records of Cape Fear Bank.

Over the weekend, depositors of Cape Fear Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of March 31, 2009, Cape Fear Bank had total assets of approximately $492 million and total deposits of $403 million. In addition to assuming all of the deposits of the failed bank, First Federal agreed to purchase approximately $468 million in assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and First Federal entered into a loss-share transaction on approximately $395 million of Cape Fear Bank’s assets. First Federal will share with the FDIC in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers as they will maintain a banking relationship.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-866-806-6128. The phone number will be operational this evening until 9:00 p.m., EDT; on Saturday from 9:00 a.m. to 6:00 p.m., EDT; on Sunday from noon to 6:00 p.m., EDT; and thereafter from 8:00 a.m. to 8:00 p.m., EDT. Interested parties can also visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/capefear.html.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $131 million. First Federal’s acquisition of all deposits was the “least costly” resolution for the FDIC’s Deposit Insurance Fund compared to alternatives. Cape Fear Bank is the twenty-second bank to fail in the nation this year. The last bank to fail in North Carolina was Crown National Bank, Charlotte, on May 20, 1993.

source: http://blog.rebeltraders.net/2009/04/11/bank-failure-cape-fear-bank/