BLOG

Want to join the MyFXMentor Team? See trades taken by our top trading analysts, join our live trading chatroom, and access our strategy library! Simply contact us on bookings@myfxmentor.com

// MY FAVORITE BROKERS

// SOCIAL MEDIA PROFILES

Risk disclaimer: The information presented on our blog are for educational and entertainment purposes only. Nothing on this website serves as investment advice or recommendations. Trading is risky and you can lose more than your initial investment. MyFxMentor cannot be held responsible for any decisions visitors make. Please consult a financial advisor before making any investment decisions. Risk disclaimer.

Lerato Masigo 8/4/19 Lerato Masigo 8/4/19

What Is NFP And Why Is It Widely Watched By Investors

The Nonfarm Payrolls (NFP) are among the biggest market movers in the Forex markets, together with central bank events or interest rate decisions. Although their impact seems to be decreasing over the last few months.

At the first Friday of every month, the U.S. Bureau of Labor Statistics releases the numbers for new job creation in the US – along with other labor market data. The data includes all paid workers, excluding government employees, private households, non-profit organisations and the farming industry.

It’s an important indicator for how well the US economy is doing and investors watch this report closely. Surprises and major changes in the released numbers can lead to significant price movements. In this article, we show you why it’s so important to understand the implications of this release, how to interpret the numbers and how to trade NFP in general.

US+nfp_20150828135654-636325346355173512.jpg

There are three parts and news releases for each NFP day:

1) The NFP numbers: how many new jobs have been created/lost

2) The unemployment rate: the overall unemployment rate

3) The hourly wages: how much workers are earning on average

The NFP provides information about the US labor market, how well the economy is doing and what the future holds: if the economy is not doing so well, companies don’t hire as many new people and might even fire some of their employees. Subsequently, those people lose income and can’t spend their money on things which reduces the overall revenue and general consumer spending and slows down the economy further.

On the other hand, when the economy is doing well, companies hire new employees who now have more money available and can use their additional income to buy ‘things’ and boost the economy, further increasing the need for companies to hire more people to meet the demand.

The hourly wages are the final piece of that puzzle because they show the purchasing power of those jobs.

Positive NFP numbers are good for the economy and, thus, investors will buy US-Dollars, anticipating a stronger economy in the future. A worse than expected NFP often leads to a falling US-Dollar as investors sell their US-Dollars.

If you are interested in understanding more on NFP and how to trade NFP - sign up for one of our forex trading courses with one of our successful mentors. You will get really great forex trading content and mentorship like no other.

Happy Trading

Want to join the MyFXMentor Team? See trades taken by our top trading analysts, join our live trading chatroom, and access our strategy library! Simply contact us on bookings@myfxmentor.com

// MY FAVORITE BROKERS

// SOCIAL MEDIA PROFILES

Lerato Masigo 7/21/19 Lerato Masigo 7/21/19

The Road to Financial Success: Lessons from George Soros

George Soros is famously known as the man who “broke the Bank of England.” He earned this title in 1992, when he made more than a billion dollars shorting the pound sterling. As the manager of the Quantum Endowment Hedge Fund with more than $27 billion in assets under management, he is deemed a legend of trading and investment and there are many things we can learn from him.

George Soros has a net worth of $8,3 billion, making him one of the wealthiest individuals in the world, according to Forbes. Interestingly, he earned the entirety of his fortune without any initial capital or fund.

Just like all masters of their business do, Soros has his own philosophy and perspective regarding financial markets and investment. Below I cite some of his greatest quotes and the meaning behind each of these sayings.

Markets are Unpredictable – Seize Opportunities

“The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.”

According to Soros, the markets tend to be biased and one can hardly predict when, where, and how prices will move. What is important here is to be prepared for every scenario that can take place and capitalise on the opportunities that may arise.

Trade with a Proper Risk Reward Ratio

So how you can succeed in the markets in this case? Here is another quote from Mr. Soros:

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right, and how much you lose when you’re wrong.”

What is important to emphasise here is that you can make money in trading even if you do not win the majority of your trades. How? Through proper risk management and risk reward. It’s really as simple as that. Employing a risk-reward ratio in your trading involves setting up your trades in such a way, so that you make for example twice the amount that you have risked (or even more); this system along with proper risk management will reward you over the course of time.

Keep it Elegant and Simple

Interestingly, Soros is mainly known as a short-term speculator. In practice, this means taking highly leveraged trading positions on the direction of the underlying markets. And here is the philosophic background for it:

“The market is a mathematical hypothesis. The best solutions to it are the elegant and the simple.”

The moral of keeping things simple in life generally pays off, and investing is no exception to this. Soros has built his financial empire by abiding by this rule. Obviously, a simple, clear and effective trading strategy certainly outdoes a complex system that does not work.

Markets Tend to Fluctuate – Study Them Well

At the same time, the nature of markets is not to be overlooked. This is Soros’ perspective on this:

“I put forward a pretty general theory that financial markets are intrinsically unstable. That we really have a false picture when we think about markets tending towards equilibrium.”

Soros advocates that markets do not tend towards equilibrium, on the contrary, they are subject to fluctuations and periodic crises. Equilibrium is merely a false assumption when looking at markets. This means that a good investor should have a good understanding of risk.

Risk Properly

“Risk taking is painful. Either you are willing to bear the pain yourself or you try to pass it on to others. Anyone who is in a risk-taking business but cannot face the consequences is no good. There is nothing like danger to focus the mind, and I do need the excitement connected with taking risks to think clearly. It is an essential part of my thinking ability. Risk taking is, to me, an essential ingredient in thinking clearly.”

if you don’t enjoy taking risks, specifically financial risks, you can hardly survive as a trader. Risk helps focus the mind he says, in a similar way, I feel like I am keener and more aware of the market when I have money at risk. But there is a fine line between being focused and being over-involved and over-trading. Risk can make you stay focused, but you don’t want to spend all your time watching the charts.

Moreover, you must really love this ‘game’ to thrive at it. Some people are just not mentally cut out to take financial risks and be able to operate effectively in the market with their money on the line.

Investment Requires Rational Thinking

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”

To thrive in trading, you should be emotionally detached from it and simply base your decisions on sound judgement, consistency and discipline.

These are just some of Soros’ greatest quotes that point to his unique way of thinking and well-developed business mindset. I hope you got a great deal of inspiration and make good use of his ideas in your own trading.

Happy Trading

Want to join the MyFXMentor Team? See trades taken by our top trading analysts, join our live trading chatroom, and access our strategy library! Simply contact us on bookings@myfxmentor.com

// MY FAVORITE BROKERS

// SOCIAL MEDIA PROFILES

Lerato Masigo 7/7/19 Lerato Masigo 7/7/19

What is Currency Correlations? And How To Use It In Forex Trading

What is Currency Correlations? And How to Use It In Forex Trading

Trading Forex requires great knowledge of technical indicators and fundamental events. Although most traders tend to focus on one of the aforementioned approaches, today, more and more attention is being paid to proper trading psychology and risk management.

Currency correlation is strongly connected with risk management, and can help you to better understand the market when trading. Understanding of the correlation between currency pairs can help you avoid overtrading.

What is Currency Correlation?

It is simply a measure of how similarly one currency pair moves in comparison to another. When pairs move in the same direction, they have a positive correlation. If they move in the opposite direction, we observe a negative correlation between them. A perfect correlation occurs when pairs move in the same direction, which is extremely rare. Additionally, we say that correlation is high when pairs move in almost the same direction.

Just as an example, let's say that the EURUSD goes up 500 pips in a month.

During that same month, let's say that the GBPUSD goes up 1,000 pips. We are not too concerned about how many pips the pairs moved but how similar the moves were. If the prices went straight up, then they are highly correlated.

If the EURUSD went straight up and the GBPUSD stayed in a range then shot up, they would be less correlated. When they move in the same direction at the same time, up in this case, they are positively correlated.

Negative correlation is when one pair goes up and the other goes down. In this example, if the EURUSD went up at approximately the same time the GBPUSD was going down and to a similar degree, then there would be a high degree of negative correlation.

How does this us help as traders? If there is a high negative or positive correlation, there may be times when one pair moves before the other highly correlated pair and can serve as a forecast or a confirmation of a move in the pair we are trading. In addition, you might want to stay away from taking trades that are two highly correlated because that increases your risk that the same move will affect all your trades in a similar fashion.

Correlation Trading Tips

Bear in mind that correlations do change, and past performance is not always a guaranteed indicator of future correlations. However, this information can be used to develop your own currency correlation strategy, to minimise your portfolio's exposure. Here are some tips to consider:

Avoid positions that cancel each other out: If you see two currency pairs that move in opposite directions nearly all of the time, you should realise that holding long positions in both of those currencies mitigates any potential gain that could be had.
Diversify with minimal risk: By investing in two currency pairs that are almost always positively correlated, one can mitigate risks over time, while maintaining a positive directional view.
Hedge exposure: Losses can be minimised by hedging two currency pairs that hold a near-perfect negative correlation. The reasoning here is simple. If you hold a position with a currency pair that loses value, the opposing currency (which has a negative correlation to that pair) will likely gain, albeit with a lower final value. While such a strategy won't completely mitigate losses, those losses will very likely be reduced.

There are many tools which you can utilise through metatrader which can help you with currency correlations, we at myfxmentor use a currency strength meter which we have created on Metatrader as an EA. If you are interested in understanding more on the advantages of using currency correlations and currency meters, feel free to contact us on info@myfxmentor.com

Happy Trading

Want to join the MyFXMentor Team? See trades taken by our top trading analysts, join our live trading chatroom, and access our strategy library! Simply contact us on bookings@myfxmentor.com

// MY FAVORITE BROKERS

// SOCIAL MEDIA PROFILES