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[Vlad RF]

How to Use Personal Income and Personal Spending in Forex

Author : Victor Gryazin

Dear Clients and Partners,​

This overview is devoted to two macroeconomic indicators — Personal Income and Personal Spending —and their influence on the currency market.

What is Personal Income

Personal Income represents monthly changes in the income of physical persons. This indicator assesses in percent the changes of the aggregate income of people in the country over a reporting month compared to the previous month. For calculations, income from several sources is used:

• Wage/salary
• Bonuses
• Income from owning real estate
• Income from holding financial assets
• Income from enterprises

In the USA, Personal Income is calculated and published by the Bureau of Economic Analysis (BEA), alongside Personal Spending.

Monthly changes of personal income is one of the key macroeconomic indicators that the BEA uses for assessing business activity in the country. Personal Income changes are published monthly in the Economic Calendar.

What is Personal Spending

Personal Spending demonstrates monthly changes in expenses of physical persons. It assesses in percent how aggregate expenses of people in the country have changed over the reporting month compared to the previous one. This includes all main expenses of the population:

• Spending on services
• Spending on durable and not goods
• Spending on banking transactions, commission fees, etc.

This indicator is also calculated monthly and published by the BEA alongside Personal Income. Consumer expenses are part of the GDP, hence, PS helps forecast its growth. Also, it is one of inflation growth indicators. Changing Personal Spending is published monthly in the Economic Calendar.

How do these indicators influence the currency market?

For analyzing the influence on the economy of a country, Personal Income and Personal Spending are used together. If the actual data turn out to be dramatically different from the forecast, volatility in the currency market can increase.

On average, these indicators change within 1-2%. Unexpected growth or decline by 3% or more can influence the rate of the US dollar against other currencies.

Both indicators normally have a moderate influence on currency rates. The influence will be most prominent if they grow or fall simultaneously.

If the price dynamics are of different directions — one indicator grows, the second one falls — market reaction can be ambiguous. Let us see how the market can react to simultaneous growth or falling of the indicators.

Growth

Confident growth of Personal Income and Personal Spending makes the USD become stronger. Such growth can heat up consumer market, support the growth of the GDP and speeding up of inflation.

As a result, to hold back overheating of the economy and decrease inflation, the Fed can raise the interest rate. Expectations of this possible increase in the interest rate attracts investors who buy the dollar.

Falling

Steep falling of both indices can make the USD fall against other currencies as well. Decreasing Personal Income and Spending demonstrates some unfortunate trends in the economy, which result in a decline of the GDP and inflation.

Later on, the Fed can liven up and support the economy by various stimulation measures and a decrease in the interest rate (if possible). On these expectations, investors will be selling the dollar.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, the ContestFX project provides you the opportunity to take part in the following competitions:

The 149th competition of "Demo Forex" is gaining momentum.
The 426h competition of "Week with CFD" has just started.
The 560th competition of "Trade Day" will start on 16.08.2023 at 12:00.
The 474th competition of "KingSize MT5" will start on 17.08.2023 at 20:00.

If the fortunate smiles upon you and makes you a winner of our contests, you'll receive prize money in your real trading account and then you can use this money to trade in the Forex market instead of investing your own savings.

Don't miss your chance to be one of the winners!

Sincerely,
RoboForex Contest

 

[Vlad RF]

Explaining the Meaning of a Swap on Forex: Examples of Use

Author : Victor Gryazin

Dear Clients and Partners,​

In this article, we will discuss the use of swap on Forex. Swaps can influence the dynamics of currency pairs significantly and form long-term trends on the market.

What is a swap and how it works?

A swap on Forex is an operation of money depositing or withdrawal for moving an open position to the next day. On Forex, a marginal system of trading is used, which allows using loaned money in the form of large leverage. Thus, when a position is moved to the next day, the rules of interbank crediting come into force.

Swaps on Forex directly depend on the interest rates of Central banks for each currency. In might be said that the currency in the pair that is bought is deposited while the currency that is sold is loaned. The bigger the difference between the rates of the currencies in the pair - the bigger the swap. Depending on whether we are buying or selling a currency pair, a swap will be deposited on or withdrawn from our account:

• A positive swap is a swap that is deposited on the trader's account for each transfer of an open position. It emerges from buying a currency with a high interest rate against a currency with a low rate. For example, for selling USD/MXN, a positive swap will be deposited on your account. We sell the dollar with a low rate (of 0.25%) and buy the Mexican peso with a high rate (of 6.5%).
• A negative swap is a swap withdrawn from the trader's account for each transfer of an open position. It emerges from buying a currency with a low interest rate against one with a high interest rate. For example, for buying USD/ZAR, a negative swap will be withdrawn daily. We buy the dollar with a low rate (of 0.25%) and sell the African (RSA) rand with a high rate (of 5.25%).

The size of swaps depends on the difference between the rates of the currencies and the conditions on which your broker works with crediting organizations. Thus, the size of swaps for the same pairs may differ significantly depending on the broker. In the case of currency pairs having more or less equal interest rates, both the swaps for buys and sells may be negative.

The swap for a currency pair is deposited/withdrawn every day (normally, at midnight server time). There is one peculiarity: Wednesday night, the swap is tripled, while Friday night, when the position is transferred to Monday, the swap remains single. This is since the position opened on Wednesday the valuation date (the date when the trade conditions are fulfilled) is Friday.

If you plan to hold your position for a rather long time, it will be wise to evaluate the influence of swaps on your position. Study the information on the website of your broker company carefully. In a popular trading terminal MetaTrader 4, to see the size of swaps, right-click the currency pair in the MarketReview window and choose the menu line "Contract specification".

How to make money on swaps?

Thanks to the difference between the interest rates, swaps allow receiving extra profit and can even form long-term trends on the market. The strategy based on using positive swaps is called Carry trade. The idea of the strategy is in holding positions with a positive swap for as long as possible.

To get maximal swaps, we choose a currency pair with a large difference between the interest rates of the currencies it contains. Buying the currency with a high interest rate against the one with a low interest rate, you can every day receive a good positive swap for holding this position.

Carry trade works well when things go smoothly on the market, stock indices grow stably. Investors have no reason for worrying, so the enjoy the opportunity to make money investing in the high-yielding currencies of developing markets. Investing in profitable currencies may form a long-term market trend.

There was a time (before the crisis of 2008) when it was popular to buy GBP/JPY as an instrument of carry trade. The British pound is one of the leading world currencies and had quite a high interest rate of 5.0% at that time. The Japanese yen is a low-yielding currency and has had an interest rate of 0.0% for a long time.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

USD Forecast: Analysing the Trends of 2023 and Future Prospects

Author : Victor Gryazin

Dear Clients and Partners,​

At present, the United States Dollar (USD) stands as the most highly sought-after currency in the global economy, also serving as a reserve asset for international trade and finance. In this article, we will examine the key factors influencing USD trends, analyse growth prospects in the current environment, and delve into expert projections for the immediate future.

Understanding the USD

The USD (United States Dollar) is the official currency of the United States of America and functions as a global reserve currency in international trade and financial markets. The US dollar is represented by the symbol $ or US$ to distinguish it from other currencies with similar names. The Federal Reserve System, functioning as the central bank of the US, holds the authority to issue currency.

The USD's status as the world reserve currency was officially established at the United Nations Monetary and Financial Conference in 1944. In the same year, the Bretton Woods currency system was approved, which was based on equating USD to gold and limiting the emission of money within the bounds of its own international reserves. A fixed rate of 35 USD per troy ounce of gold was set.

However, the rapid expansion of the dollar supply exceeded the capacity of its own gold and foreign currency reserves, leading the US to abandon the Bretton Woods agreement. In 1976, developed countries adopted the Jamaican Monetary System, under which currency exchange rates are determined by the market rather than governments. The new rules allowed the Fed to print as many dollars as necessary. At present, the dollar's value is governed by market mechanisms.

Today, the US stands as a leader in the global economy, with the US dollar regarded as the benchmark currency and the most widely used asset in transactions worldwide. It also functions as the official currency in many territories beyond the US, while numerous other countries use it alongside their own as an unofficial currency.

Key factors influencing the USD

The US dollar, as the most traded currency in the world, is influenced by several factors, including economic and political ones. Among the most significant is the current monetary policy of the US Federal Reserve System (FRS), the central bank of the US. Decisions regarding interest rate changes significantly influence the value of the US dollar.

The Bureau of Labour Statistics publishes data on unemployment and nonfarm payrolls (Nonfarm Payrolls), typically on the first Friday of each month. Traders closely monitor this data, as it can dramatically increase the volatility of the US dollar and, of course, affect currency pairs in which it takes part.

Recent trends impacting the USD

The US Federal Reserve has recently been actively combating inflation by tightening its monetary policy. Since 2022, the interest rate has been gradually raised from 0.25% to 5.5% – the highest in 22 years. The rate hike cycle has had a noticeable impact on USD quotes, which have managed to significantly strengthen against numerous global currencies during this time.

Recent statements from Jerome Powell, the head of the regulator, suggest that the Fed is preparing to conclude the interest rate hike cycle. Experts are forecasting a maximum of two more rate hikes in 2023. Subsequently, the rate is expected to remain steady for a specific duration, and there is even the possibility of a decline if economic conditions call for it.

The policy of raising rates is putting significant pressure on the US economy. High inflation and slowing economic growth, combined with concerns about the sustainability of the banking sector, could contribute to the conditions for the onset of a recession – a significant and prolonged economic growth slowdown.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, the RoboForex company's project called ContestFX is waiting for you in the following competitions:

The 149th competition of "Demo Forex" has gained "cruising" speed.
The 427th competition of "Week with CFD" has kicked off today.
The 561st competition of "Trade Day" will start on 23.08.2023 at 12:00.
The 475th competition of "KingSize MT5" will start on 24.08.2023 at 20:00.

To take part in our contests, all you need to do is to go through a simple 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]

Top 3 Stocks From the S&P 500 List with the Highest Dividend Yields in 2023

Author : Eugene Savitsky

Dear Clients and Partners,​

In June 2022, the annual inflation in the US reached 9.1%, a level not witnessed by Americans since the 1980s. The Federal Reserve System (Fed) began swiftly increasing the interest rate, leading to a reduction in inflation to 3% by August 2023. While this value still exceeds the regulator's target by 1%, it can be acknowledged that the efforts of Jerome Powell, the head of the Fed, have proven effective.

Nevertheless, it is crucial to note that even a 3% inflation rate will yearly erode the purchasing power of money. One of the tools capable of generating returns equal to or surpassing the inflation rate is stocks. There are two ways to profit from this asset class: firstly, through the appreciation in the stock value, and secondly, through dividend payments.

Identifying a company whose stock value will significantly increase is notably more challenging than finding a company that offers substantial dividends. Today, we will delve into three issuers that are part of the S&P 500 list and pay dividends exceeding the inflation rate, namely Pioneer Natural Resources Company (NYSE: PXD), Coterra Energy Inc. (NYSE: CTRA), and Diamondback Energy Inc. (NYSE: FANG).

Criteria for selecting companies with the highest dividend yields

1. Dividend Yield: This signifies the ratio of the annual dividend per share to its cost, expressed as a percentage. It serves to assess the attractiveness of a security in terms of receiving passive income from owning it – higher percentage values denote enhanced attractiveness.

2. Debt Load: A minimal or absent debt load indicates that the company's profits are ample both for business development investments and dividend disbursements. This can be gauged through the Long-Term Debt/Equity ratio.

This ratio mirrors the issuer's financial risk and leverage degree, revealing its reliance on borrowed funds. A lower ratio indicates a better scenario, as it implies the company relies more on its equity capital rather than borrowed funds. The optimal Long-Term Debt/Equity ratio varies by industry and business specifics, but a ratio of 0.5 generally indicates financial stability.

1. Pioneer Natural Resources Company

• Dividend yield – 10.18% per annum
• LT Debt/Eq ratio – 0.23
• Founded in – 1997
• Included in the S&P 500 – 2008
• Registered in – the US
• Headquarters – Irving, Texas
• Market capitalisation – 54.5 billion USD

Pioneer Natural Resources Company is engaged in hydrocarbon exploration and production and is one of the largest independent oil and gas companies in the US in terms of reserves and production.

Due to the decline in oil prices, Pioneer Natural Resources Company’s net profit for Q2 2023 decreased by 53% to 1.1 billion USD compared to the corresponding period last year, and earnings per share dropped 47% to 4.42 USD.

Pioneer Natural Resources Company pays two types of dividends: fixed and variable. Based on the Q2 results, the fixed dividend amounted to 1.25 USD per share, and the variable one was 0.59 USD.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

Demonstration and Real Accounts: Psychological Differences

Author : Timofey Zuev

Dear Clients and Partners,​

It is no secret that trading results on real and demo accounts always differ, the former results usually being worse. In other words, if you succeed in trading on a demo account, you should always make allowance for the real situation. Some details of the execution of real trade orders, which were not visible on the demo accounts, may lead to this difference; however, such details are not significant enough to lead to serious deviations of the results.

Working on a demo account, the trader has already chosen the timeframe, the instruments, the volume of the opening positions, the instruments of analysis, the levels of entrance and exit — all trading principles and approaches. Yes, the trader is ready to start working with real money, as, in essence, trading on a demo account is in no way different to the real one. However, the one exception here is the real psychological readiness of the trader. The devil is in the different attitude to trading demo money and the trader's own money.

Difference between real and demo trading

1. The trader treats their demo account with ease because they know that they can open another one with new starting capital any moment. As usual, there are lots of explanations to the failures on the previous account, among which one of the most popular one is: the price made a reversal when I was absent from the computer, so I could do nothing.

There is yet another category of traders who open a new account upon receiving a loss on the previous one — they just like it to begin trading from a profitable trade, and no other way. However weird it is, but they do not even realize that it will not be possible on a real account, as they will not be forgetting losses there with such ease.

It would be much wiser to allow for a limited number of paid demo accounts. In this case it is unlikely that traders were so light-minded.

2. Trading strategy is better visible on a demo account. Why? Because there is nothing easier than receive a planned Stop Loss so long that the money is not real. And nothing easier than wait for a Take Profit with the whirlpool of ideas of what you could buy on that money if you closed the position now. There is no need to change the volume of the position during trading on a demo account, as there is no fear of another loss or a decrease of the profit. That is why the trader can execute their trading plan without altering and impulsive correcting.

Reasons for losing the deposit

The reasons for losing the deposit are mostly psychological, including:

Greed. Upon reaching their goal, the trader cannot brace themselves and keeps trading, willing to earn more or make the sum tidy. They may go even further and try to make enough profit for both life and trading

Proceeding to the next goal without reaching the first one. If the trader starts receiving stable profit, their vigilance fades, and they relaxes, believing in their professionalism. Their appetite grows accordingly, so the trader thinks: what do I need a bike for if I can earn for a car? However, they are likely to get none: goals are to be chosen and reached subsequently.

Reinvesting. Reinvesting itself is good for it helps increase the working capital and the profit by increasing the volume of trades. However, this method should be used with much care. Just a part of the profit should be left for growing the deposit, no the whole of it. Why? Because a series of losses or an unstable profit may follow, and the trader, willing to increase the deposit (if it is small) or get more profit (if the deposit is large), is likely to lose all that they have earned. As a result, they will get back to the starting point.

Summary

I would like to mention that, working on a demo account, the trader will not feel the influence of these factors. Call it the charm of money.

Real and demo accounts have a too big difference, and the transition requires psychological adapting. One way to make the transition to real trading easier is using cent accounts. It is advised to have the same volume on the cent account as it is planned to open the main account with.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, the ContestFX project, as usual, is waiting for you in the following contests:

The 149th competition of "Demo Forex" is approaching the final stage.
The 428th competition of "Week with CFD" has just started.
The 562nd competition of "Trade Day" will start on 30.08.2023 at 12:00.
The 476th competition of "KingSize MT5" will start on 31.08.2023 at 20:00.

Let us remind you that upon winning any of our demo competitions, you'll receive prize funds to your real account which you can use for trading in the Forex market instead of your own savings.

Good luck to all traders!

Sincerely,
RoboForex Contest

 

[Vlad RF]

Economic Indicators - The Basis for Forex Trading Strategy

Author : Timofey Zuev

Dear Clients and Partners,​

Let us have a look at the main economic indicators and their influence at the currency rates. The knowledge and understanding of these indicators are the basics of fundamental analysis and forecasting of price movements.

Interest Rate

Interest rate is an efficient instrument of credit and monetary policy of the state. Increasing interest rates, Central banks regulate demand for loans, reducing it, which decreases the expenses of people and impedes economic development. This measure is meant, first and foremost, for reducing the inflation rate and for prevention of overproduction of goods.
Decreasing interest rates leads to an increase in demand for loans, enhancing economic development.

The size of the interest rate is the basis for other economic parameters — rates of state and corporate bonds, credit rates for individuals and legal entities, etc. Central banks do not frequently change interest rates: this is a major market event, and all market players track such changes very carefully.

Gross Domestic Product (GDP)

The GDP is generalized data about the sum of the added value, produced by all producers in the country during a set period of time. The GDP surplus demonstrates the economic development of the country, its speed. Stable growth of the GDP is characteristic of stable economic development and also strengthening of the national currency, while a slowdown of the GDP growth means problems with the country's economy. The market reaction on the news about the GDP, the initial as well as corrected, is rather active and usually leads to serious movements of currency rates.

A report on the GDP is a wide analysis of all sectors of a country's economy. That is why different market players pick up the paragraphs that are of interest to them and make conclusions about the state of development of this or that country.

Consumer Price Index (CPI)

Consumer price index (CPI) is the main indicator of inflation in the country. For its calculation, the prices of the consumer goods basket during a certain period of time are used. In each country, the set of goods in the basket is different and is formed on the basis of statistical data. Such goods may be food, everyday objects, services, etc.

The prices for food and energy sources are the most volatile, so along with the CPI a so-called Core CPI is calculated, the latter including this category of goods from the consumer goods basket.

The CPI data is normally published on the tenth workday of each month as the percentage of the changes that have happened. In other words, what is published is the information by how many percent the current values have changed in comparison with the previous ones. The news about a change of a CPI value by just 0.2% leads to rather strong fluctuations of currency rates.

Producer Price Index (PPI)

Producer price index (or PPI) is an indicator of the price changes for the goods produced by national producers. The index includes the price for the raw materials, produced in the country and imported, on the intermediate products, on the finished products. The index includes all stages of goods production, as well as all spheres of production and agriculture. The difference from the CPI is that it does not include services and provides the analysis of price changes only at the level of primary wholesale trade.

Along with the PPI, the Core PPI data is also published; it does not include the prices for the goods of food and energy industries due to their high volatility. The PPI is published monthly on the tenth workday simultaneously with the CPI.

Trade Balance

Trade Balance, or International Trade, is the difference between the sum of export of goods and services and the sum of the import.

It influences exchange rates directly and reveals the competitiveness of the goods and serves, produced in the county, on the international market. Favorable trade balance (the situation when export surpluses import) signifies inflow of capital into the country, production development and, on the whole, has a positive influence on the economy.

Conversely, a deficit of trade balance, i.e. the situation when import surpluses export, signals low development of production, a lack of competitiveness of the national goods and is a generally negative factor for the country. This leads to the growth of the national debt as well as has a negative influence upon the exchange rate of the national currency, because its supply increases due to the necessity to buy more currency of the exporting state.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

RoboForex: upcoming changes to the trading schedule in view of the Labor Day holiday in the US

Dear Clients and Partners,​

We are informing you of the upcoming adjustments to the trading schedule due to the Labor Day holiday in the US.

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

MetaTrader 4 / MetaTrader 5 platforms

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

• 4 September 2023 – trading stops at 7:45 PM server time
• 5 September 2023 – trading as usual

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

• 4 September 2023 – trading stops at 7:45 PM server time
• 5 September 2023 – trading as usual

Schedule for trading on CFDs on US stocks

• 4 September 2023 – no trading
• 5 September 2023 – trading as usual

Schedule for trading on CFDs on US futures

• 4 September 2023 – trading stops at 8:00 PM server time
• 5 September 2023 – trading as usual

R StocksTrader platform

Schedule for trading on US stocks and ETFs

• 4 September 2023 – no trading
• 5 September 2023 – trading as usual

Schedule for trading on CFDs on US stocks and ETFs

• 4 September 2023 – no trading
• 5 September 2023 – trading as usual

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

• 4 September 2023 – trading stops at 7:45 PM server time
• 5 September 2023 – trading as usual

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

• 4 September 2023 – trading stops at 7:45 PM server time
• 5 September 2023 – trading as usual

Schedule for trading on CFDs on US futures

• 4 September 2023 – trading stops at 8:00 PM server time
• 5 September 2023 – trading as usual

Please take note of the above amendments to the trading schedule as you plan your trading activity.

Sincerely,
The RoboForex team