Pound trades high despite Brexit worries

Pound is trading high taking benefit of US dollar weakness.  Just like all other major currency pairs, the cable also seem to benefited from the dollar weakness while also taking the advantage of BOE policymakers’ optimism. While doing so, the currency pair ignores recent Brexit-negative headlines as the greenback remains under pressure.

European Commission (EU) President Ursula von der Leyen remains firm on her Northern Ireland (NI) protocol commitment as all 27 members of the bloc has agreed to keep the term intact after the latest EU summit, which ended on early Tuesday in Asia. She said “It is important to reiterate that the protocol is the only possible solution to ensure peace and stability in Northern Ireland while protecting the integrity of the European Union single market.” “If we see problems today we should not forget that they do not come from the protocol but result from Brexit, that is the reason why the problems are there.”

The upbeat mood of UK scientists as well as the Bank of England (BOE) policymakers has helped the sterling. The British doctors confirmed finding Indian strain of the covid and backed the unlock plans. Bank of England policy makers pushed back against concerns that the U.K.’s rapid economic rebound from the pandemic will lead to a damaging wave of inflation.

Governor Andrew Bailey said in testimony to lawmakers Monday said that “The expected acceleration in prices this year will likely be temporary.” One of the member, said inflation will later return to the central bank’s 2% target as growth slows. While most economists agree, financial markets are betting that the central bank will raise interest rates as early as next year, implying that investors expect the recovery to gain enough momentum to force the BOE’s hand. Monday’s comments come after data showed U.K. inflation more than doubled in April to 1.5%

On the other hand, The US dollar remained under pressure, as expectations that the Fed might tighten monetary policy have largely dissipated. Several Fed policymakers have urged the Fed to discuss tapering QE in the coming months, but the market appears to have accepted the Fed’s message that inflation is transitory and that the US economy is still in need of massive stimulus through its QE programme.

GBP/USD 4 Hour Chart:

Support: 1.4120 (S1), 1.4085 (S2), 1.4059 (S3).

Resistance: 1.4181 (R1), 1.4207 (R2), 1.4241 (R3).

Amidst all the catalysts favoring the pound against the weaker dollar despite Brexit woes, we expect a bullish trend for GBP/USD.

Can you get rich by trading forex?

The answer for this question is sort of subjective rather than the replying it as objective as Yes/No. We can say yes but conditions apply.

The Forex market is enormous. With $6.6 trillion traded on the currency exchange market worldwide every day, you’d think it would be easy to get rich by trading Forex ?

With 90% failure rate for new Forex traders, will this odd work against you? How do you become one of the elusive 10% of retail traders who make handsome money with forex ?

In this article we will help you understand on how to get in to that 10% of traders.

Consider the following points before you start trading:

Leverage

Leverage in forex trading magnifies the potential gains associated with making profit in a trade but at the same time it also magnifies the mirror losses as well.

Due to this nature of leverage, it attracts traders with a hope of maximised profits but it should be noted that it comes with a high degree of risk for significantly sized losses.

Volatility of the Market

While comparing the stock market to the foreign exchange market, the volatility of currency prices is much more. Sudden, unexpected and unpredictable events can alter the market from top to bottom and cause significant changes to currency prices. This is true of other markets as well, the forex market is particularly prone to unforeseen changes.

Trading System/Platform

Making the right i.e when to buy and sell is one thing, but even if your calls are spot on–be them long or short trading—you are limited in your ability to profit or by the trading platform at your disposal.

System failures and malfunctions are not unheard of amongst forex traders which is so unfortunate. Whether this is due to system overloading, loss of electricity or a single computer crashing, if you’re unable to close a trade you’re unable to cash in when the timing is right. Even minor delays can prove costly and give you huge losses if a transaction doesn’t go through in time.

Even traders with stop-losses, which are designed to limit the amount lost by automatically selling when the price drops to a specific point, can be held back by the intensity and swiftness of the volatility in the forex market.

Holding On To Losses

Many forex traders make losses through trading because they hold on to losing positions for too long.. Often the willing to avoid making even a small loss causes traders to err and hold on to the losing trade for even longer. This, of course, results in a more substantial loss and can often be higher than the investment put in initially.

Experienced and large traders operate in the opposite way: they offset their small losses with sizable gains wherever and whenever possible.

Institutional Investors get Asymmetric Trader Information

Often the massive institutions have rigorous and highly sophisticated trading systems put in place to give them a competitive edge on information relating to world currencies.

Often this information and their sources are not available to a regular retail trader. This asymmetric information only compounds the risk of making a loss. As a crude and limited analogy, it would be like playing Poker against someone who has a pretty good idea what the next cards are.

The principles that govern success in the forex trading

Wherever you are trading from across the world, the principles that govern success in the forex trading are similar and they are as follow :

Trading is art.

People trade forex to make money but forex trading is not like making money. You must understand the way of making money with the positions you are opening and the reasons behind it. You should be patient while trading. Trade for 2 or 3 months on a demo account. If you make success on a demo account, you can open a real account and start real trading.

Suppose if you don’t have success on a demo account then something is wrong. Perhaps your strategy does not respect money management rules. Or something else you are doing wrong. After you see the mistake you can correct it and after that restart trading on a demo account until you get recurring success.

Practice until you feel you have learned enough then move on to live trading.  

Start Small

A frequent advice every experienced trader gives is that everyone ought to recognize that forex trading is not a shortcut to immediate wealth. While there are people who are lucky enough to make it big with their first trade, for 99% of traders, it takes time. It will not matter how skilled you may be, you should always start small.

Once you start live trading, do not immediately begin trading 400,000 dollars on a 10,000 dollars’ account. Chances are, you will probably lose 20% of your account in a matter of weeks.

Always start small and increase your leverage with time. That is the foundation of making it big in forex trading.

Get yourself committed in learning

Everyone is a sum of the knowledge they have, and in the same way it is for forex that will determine how successful you are. The thing about forex trading is that it is not constant, it changes every single day. The factors that affect the falling and rising of a particular currency are continually shifting.

Thus it is necessary that you get committed in learning more, and to keep yourself updated in the industry if you are to remain competitive. At the moment, traders who initially embraced cryptocurrencies and machine learning are raking in money merely because they noticed an oncoming change and were quick to adapt and learn. The trick to forex trading success is always to be open to learning more. Never stop learning.

Do Your own Research and grasp the Advantage of the Tools Available

In the today’s world, there are enormous tools that help a trader. The main trick is in identifying which device is right for you. It could be Fibonacci tool, a tool which will help to find good chance for an entry in trading or SSI, a tool that tells you the traders who are short vs. those who are long on a specific currency pair.

The tool could also be copy trading or social trading; a tool that allows you to learn from and copy more experienced traders. In essence, the tools available are so many. Thus make adequate research, combine that with what you have learned and pick a tool you are convinced will make you a better trader.

Success stories – Getting Rich by forex trading is possible

  • George Soros is one of the legends in forex trading. Note that Soros started as a clerk who through hard work founded his own company. His new worth is $ 860 crores , as of 2021 .
  • Stanley Druckenmiller, former chairman and president of Duquesne Capital, which he founded in 1981 is another trader whose aggressive and consistent tactics prove to be highly successful and lucrative. 
  • Bruce Kovner,  Chairman of CAM Capital and Founder and Chairman of Caxton Associates, is a 75-year old trader who began forex trading at the age of 32. Kovner developed profitable trading strategies that helped him become a billionaire, with a net worth of $660 crores as of 2021.
  • Bill Lipschutz is another legend in the field of forex trading. Interestingly, he earned a fortune in the initial stages but made a bad decision and lost it all. Yet, he didn’t give up; in 1985, he earned $300 million in a single year. His net worth was $1 Million – $5 Million in 2020.
  • Another famous figure is Paul Rotter, the Flipper. He is a real scalping jackal, a trader who made $65-78 million each year for a whole decade. Note that scalping is a risky technique that requires a lot of expertise, time, and resources. 

 

Kindly note : Forex Trading is not a Get-Rich-Quick Scheme

Forex trading is a skill that takes a lot of time to learn. Skilled traders can and do make money in this field. However, like any other occupation or career, success doesn’t just happen overnight.

Forex trading isn’t a piece of cake (as some people would like you to believe). Think about it, if it was, everyone trading would already be millionaires.

The truth is that Ninety percent of traders lose money, largely due to lack of planning, training, discipline, not having a trading edge and having poor money management rules and even expert traders with years of experience still encounter periodic losses.

Keep it in your mind that there is no shortcut for trading forex. It is a long term process and takes time. There is no substitute for hard work, deliberate practice, and diligence.

Final Words :

To become rich is most people’s dream and so it’s unsurprising that this is one of the most common questions among new forex traders who want to know their odds of becoming rich by trading forex.

The short answer is this – yes, you can get rich if you trade forex. However, you have to understand that forex trading is not some get-rich-quick scheme. As already said Forex trading (short for foreign exchange trading) and currency trading is a skill, and like most skills, it takes time, patience, diligence, and experience to learn and refine.

Practices trading on Winstone Prime demo account until you find a method that you know well, and can comfortably execute objectively. Find the way that works for you.  All the Best!!

Fed’s dovish move pressurizes greenback

Japan has planned to extend virus emergency in Tokyo, 8 other areas beyond may 31st deadline according to the recent news.

Japan declared a state of emergency in three more prefectures which were hit hard by the COVID-19 pandemic, Prime Minister Yoshihide Suga’s a surprise move that reflects growing concern about the spread of the coronavirus. The latest declaration came as Japan confronts with increase in the infectious virus strain just 10 weeks before the Tokyo Olympics are due to start on July 23.

Elsewhere, Johnson & Johnson applied for approval of COVID-19 vaccine use in Japan. This was followed after the approval on Friday for Moderna and AstraZeneca, which will add to the Pfizer vaccine in the country. That said, the government did say that it will not initially roll out the AstraZeneca vaccine as it weighs whether to place age restrictions on the doses administered amid reports of rare blood clot cases overseas

On the other hand, Dollar is trading low  as investors pared earlier bets the U.S. Federal Reserve may soon be ready to taper its stimulus.

Minutes from the Fed’s April policy meeting released last week showed a sizable minority of policymakers wanted to discuss tapering bond purchase.

Fed Chairman Jerome Powell’s repeated warnings that it is not the time to discuss a reduction in quantitative monetary easing which has led many investors to believe it will be months before the central bank actually sharpens policy.

“Inflation figures have been pretty strong but retail sales may be starting to slow down. And the economic outlook hinges on fiscal policy, which is still uncertain,” said Shinichiro Kadota, senior currency strategist at Barclays.

The White House told on Friday it had pared down its infrastructure bill to $1.7 trillion from $2.25 trillion, with cuts to investments in broadband and roads and bridges, but Republicans dismissed the changes as insufficient for a deal.

USD/JPY 4 Hour Chart:

Support: 108.70 (S1), 108.46 (S2), 108.31 (S3).

Resistance: 109.10 (R1), 109.25 (R2), 109.49 (R3).

As the US dollar is trading low due to dovish fed. We expect a bearish trend for USD/JPY.

XAU/USD Weekly Forecast (24th May 2021 – 28th May 2021)

Fundamental view:

Gold has rallied significantly during the last week and reached towards the $1800 level. Because of the absence of the significant macroeconomic data releases and fundamental developments, the risk-positive market environment posted a barrier for the dollar to find demand at the start of the week. On the next day Tuesday, the benchmark 10-year US Treasury bond yield lost nearly 1% and made the greenback to continue to lose interest. Meanwhile The FOMC’s publication revealed that a couple of Fed policymakers raised risks of inflation building to unwanted levels before providing sufficient evidence to induce a policy reaction. 

On Friday, the data from the US showed that the economic activity in the private sector continued to expand at a robust pace in May with the IHS Markit’s Manufacturing and Services PMIs reaching new series highs. This publication highlighted a increase in input prices and assisted the greenback at the last day  and it also limited the yellow metal’s upside.

The major economic events deciding the movement of the pair in the next week are Fed Governor Brainard Speech at May 24, CB Consumer Confidence Index at May 25, EIA Crude Oil Stocks Change at May 26, GDP quarterly report, Core Durable Goods Orders monthly report at May 27 and Michigan Consumer Sentiment at May 28 for US. 

XAU/USD Weekly outlook:

Technical View:

Last week’s high was 2.35% higher than the previous week. Maintaining high at 1890.1 and low at 1852.1 showed a movement of 380 pips.

In the upcoming week we expect XAU/USD to show a bullish trend.  The Instrument is trading above the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 1897.0 may open a clean path towards 1912.5 and may take a way up to 1935.0. Should 1859.0 prove to be unreliable support, the XAUUSD may sink downwards 1836.5 and 1821.0 respectively. In H4 chart diamond pattern breakout favors prospects of a bullish trend. Also to be noted Bullish engulfing formation exerts the expectation of uptrend for the pair.

Preference
Buy: 1882.2 target at 1911.5 and stop loss at 1854.8

 

Alternate Scenario
Sell: 1854.8 target at 1822.4 and stop loss at 1882.3