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[Vlad RF]

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

 

[Vlad RF]

RoboForex: upcoming changes to the trading schedule in view of the holidays in the US and the UK

Dear Clients and Partners,​

We are informing you of the changes to the trading schedule due to the Memorial Day celebration in the US and the Late May Spring Bank Holiday in the UK.

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

MetaTrader 4 / MetaTrader 5 platforms

Schedule for trading on CFDs on the US indices (US30Cash, US500Cash, USTECHCash) and the Japanese index JP225Cash

• 29 May 2023 – trading stops at 7:40 PM server time
• 30 May 2023 – trading as usual

Schedule for trading on Metals (XAUUSD, XAGUSD) and CFDs on Oil (Brent, WTI)

• 29 May 2023 – trading stops at 7:40 PM server time
• 30 May 2023 – trading as usual

Schedule for trading on CFDs on US stocks

• 29 May 2023 – no trading
• 30 May 2023 – trading as usual

R StocksTrader platform

Schedule for trading on US Stocks and ETFs

• 29 May 2023 – no trading
• 30 May 2023 – trading as usual

Schedule for trading on CFDs on US Stocks and ETFs

• 29 May 2023 – no trading
• 30 May 2023 – trading as usual

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

• 29 May 2023 – trading stops at 7:40 PM server time
• 30 May 2023 – trading as usual

Schedule for trading on CFDs on the UK100 index

• 29 May 2023 – no trading
• 30 May 2023 – no trading
• 31 May 2023 – trading as usual

Schedule for trading on CFDs on UK Stocks

• 29 May 2023 – no trading
• 30 May 2023 – no trading
• 31 May 2023 – trading as usual

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

• 29 May 2023 – trading stops at 7:40 PM server time
• 30 May 2023 – trading as usual

cTrader platform

Schedule for trading on Metals (XAUUSD, XAGUSD)

• 29 May 2023 – trading stops at 7:40 PM server time
• 30 May 2023 – trading as usual

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

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

Sincerely,
The RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, the ContestFX project will continue, as usual, with the following competitions:

The 146th competition of "Demo Forex" is reaching its end.
The 415th competition of "Week with CFD" has just started.
The 549th competition of "Trade Day" will start on 31.05.2023 at 12:00.
The 463rd competition of "KingSize MT5" will start on 01.06.2023 at 20:00.

You can participate in our contests after completing a simple registration, and our winners who receive prize money can use those funds to perform trading operations in the Forex market instead of investing their own savings.

We're looking forward to your joining in and wish you good luck!

Sincerely,
RoboForex Contest

 

[Vlad RF]

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

 

[Vlad RF]

Why Buffett Keeps Buying Oil and Gas Stocks

Author : Eugene Savitsky

Dear Clients and Partners,​

Berkshire Hathaway (NYSE: BRK.B) bought shares of Occidental Petroleum Corporation (NYSE: OXY) again in the first quarter of 2023. Recall that Warren Buffett’s fund has been investing in this company for the fifth consecutive quarter. Following the deal, Occidental Petroleum Corporation is the sixth largest company by investment volume in the fund’s portfolio. In addition, Berkshire Hathaway acquired shares of Chevron Corporation (NYSE: CVX), which is also involved in the oil and gas sector.

Today, we will explain why the Oracle of Omaha is investing in these companies at a time when green energy is gaining popularity and attracting more and more investments, while the oil and gas sector is receiving much less. We will look at the energy sector and analyse how demand for conventional energy sources has declined, given that more environmentally friendly and efficient alternatives exist.

The most popular energy sources

According to BP Statistical Review of World Energy and Our World in Data, global energy consumption increased by 15.3% from 2010 to 2021 inclusive, up from 152.96 to 176.43 TWh (terawatt per hour).

Energy consumption in 2010

• Oil – 31.3%, 47.89 TWh
• Coal – 27.4%, 41.99 TWh
• Gas – 20.65%, 31.58 TWh
• Firewood – 7.62%, 11.66 TWh
• Water power – 6.2%, 9.518 TWh
• Nuclear energy – 4.82%, 7.37 TWh
• Renewable energy – 1.9%, 2.92 TWh

Trends in global coal demand

Of the energy sources listed above, coal is one of the oldest and least environmentally friendly. In addition, more efficient alternatives have emerged with time. Given this, it can be assumed that demand for coal should have decreased. But according to the International Energy Agency (IEA), global coal consumption is increasing. It was 70,160 PJ (Petajoule) in 1978 and rose to 157,164 PJ by 2020.

Note that coal consumption in China has increased markedly since 2002. At the same time, coal production in the country has risen rapidly, up from 1.04 billion to 3.69 billion tonnes over the last 30 years. In addition, the development of new coal mines continues in the country.

Why is the demand for coal growing?

Hydrocarbons and nuclear energy, which are more environmentally friendly, did not eliminate the use of coal but added to the list of energy sources. This was probably due to the growth of world GDP and the population of the planet. These factors boosted the global demand for energy.

According to World Bank national accounts data and OECD National Accounts data files, from 1960 to 2021 inclusive, global GDP has grown from 10.9 trillion to 86.8 trillion USD.

Investments in the oil industry

If global GDP continues to rise, there will be a need to keep oil production at current levels in the future. This will help avoid a shortage of oil as energy consumption rises.

To maintain production capacity, it is necessary to invest in the development of new fields to avoid depletion of current reserves and keep up with demand. But amid the trend for renewable energy sources, funding for new oil developments has declined over the past few years.

According to OPEC Secretary General Haitham Al Ghais, the oil and gas sector requires investments of 500 billion USD a year, while the incoming amount is much less. Based on the IEA data, the amount invested in the oil and gas sector is at the level of 366 billion USD per year, which is 24% less than the 2018 amount.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, a RoboForex project called ContestFX offers you the following competitions:

The 147th competition of "Demo Forex" and the 416th competition of "Week with CFD" have just started.
The 550th competition of "Trade Day" will start on 07.06.2023 at 12:00.
The 464th competition of "KingSize MT5" will start on 08.06.2023 at 20:00.

We'd like to remind you that you can start trading in the Forex market without investing your own savings - all you need is to be a winner of any of our demo contests and receive prize funds in your real trading account.

Do not miss your chance!

Sincerely,
RoboForex Contest

 

[Vlad RF]

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

 

[Vlad RF]

RoboForex informs about the end of support for the cTrader platform

Dear Clients,​

This is to inform you that RoboForex has decided to cease servicing cTrader accounts. This decision is made following the company's strategy of developing its in-house multi-asset platform, R StocksTrader.

In this regard, we kindly ask you to transfer the funds from your cTrader accounts to the MetaTrader 4/5 or R StocksTrader platforms.

The cTrader platform will be closing down according to the following schedule:

• 7 June 2023 - termination of registration of new cTrader accounts.
• 21 June 2023 - switching of trading to the “Close only” mode.
• 7 August 2023 - closing of the remaining positions, and termination of cTrader accounts deposits.
• 8 August 2023 - automatic transfer of balances to MetaTrader 4/5 and R StocksTrader accounts.

We hope that the above schedule will enable you to prepare in advance for closing your cTrader accounts and withdrawing your funds in a timely manner.

If you have any questions, please contact the RoboForex Customer Support in any way convenient for you.

Sincerely,
The RoboForex team

 

[RoboForex Contest]

Dear traders,

This week, the ContestFX project will continue with the following competitions:

The 147th competition of "Demo Forex" has been running since last Monday.
The 417th competition of "Week with CFD" has just started.
The 551st competition of "Trade Day" will start on 14.06.2023 at 12:00.
The 465th competition of "KingSize MT5" will start on 15.06.2023 at 20:00.

To take part in our demo contests, you need to go through a short registration procedure just once, and then any of the competitions you like will be available to you in just a couple of mouse clicks.

We're looking forward to your joining in and wish you good luck!

Sincerely,
RoboForex Contest

 

[Vlad RF]

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