Initially, the value of goods was expressed in terms of other goods, i.e. an economy based on barter between individual market participants. The obvious limitations of such a system encouraged establishing more generally accepted means of exchange at a fairly early stage in history, to set a common benchmark of value. In different economies, everything from teeth to feathers to pretty stones has served this purpose, but soon metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value.Originally, coins were simply minted from the preferred metal, but in stable political regimes the introduction of a paper form of governmental IOUs (I owe you) gained acceptance during the Middle Ages. Such IOUs, often introduced more successfully through force than persuasion were the basis of modern currencies.Before World War I, most central banks supported their currencies with convertibility to gold. Although paper money could always be exchanged for gold, in reality this did not occur often, fostering the sometimes disastrous notion that there was not necessarily a need for full cover in the central reserves of the government.At times, the ballooning supply of paper money without gold cover led to devastating inflation and resulting political instability. To protect local national interests, foreign exchange controls were increasingly introduced to prevent market forces from punishing monetary irresponsibility.In the latter stages of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US dollar. Other international institutions such as the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as the emerging victors of WW2 searched for a way to avoid the destabilising monetary crises which led to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD35/oz and fixing the other main currencies to the dollar - and was intended to be permanent.The Bretton Woods system came under increasing pressure as national economies moved in different directions during the sixties. A number of realignments kept the system alive for a long time, but eventually Bretton Woods collapsed in the early seventies following president Nixon's suspension of the gold convertibility in August 1971. The dollar was no longer suitable as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.The following decades have seen foreign exchange trading develop into the largest global market by far. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.But the idea of fixed exchange rates has by no means died. The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when pent-up economic pressures forced devaluations of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro in 2001.The lack of sustainability in fixed foreign exchange rates gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates, in particular in South America, looking very vulnerable.But while commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have found a new playground. The size of foreign exchange markets now dwarfs any other investment market by a large factor. It is estimated that more than USD 3,000 billion is traded every day, far more than the world's stock and bond markets combined.
Captive Insurance Premium Deductibility
We came across an article on insurance agents E&O (errors & omissions, or professional liability) with some misleading information. The article, which unfortunately is not available on the web, states that receipt of a subpoena is a claim under an insurance agents E&O policy, and therefore should be reported to your E&O insurer.Unfortunately, the article is misleading. The receipt of a subpoena by itself does not constitute a claim under most insurance agents E&O policies. However, you probably should report it under your E&O policy in an abundance of caution, and to have the benefit of expert advice before complying.Why does a subpoena not necessarily trigger an E&O claim? All definitions of claim in insurance agents E&O policies are similar (but not the same), so we randomly picked one:Claim means a demand for monetary damages arising out of a professional service made against the insured...The key wording is the demand for monetary damages. A subpoena is not a demand for monetary damages, and would therefore not trigger a claim under this policy. However, most policies also provide for some mechanism to report an incident which might lead to a claim, and here is one example:...an event about which an insured obtains knowledge which might result in a claim is reported in writing to us…What a subpoena might trigger is a realization that there is the potential for a demand for monetary damages at a later date. But not always. Here is one real-life example where the subpoena did not trigger a claim:An insured reported a claim to its insurer. After its investigation, the insurer denied coverage for the claim for material misrepresentation in the application. The insured brought a claim against the insurer alleging bad faith, and the insurer subpoenaed the agency which placed the account. The agency checked their files, and concluded that there was no error on their part and that the file was well documented. The agency went first to its own counsel to review the matter and obtain advice, and then immediately requested an indemnification from the insurer for any ensuing litigation. The insurer agreed, and then the agency reported the situation to its own E&O insurer.The E&O insurer was pleased because there was no demand against its insured, the agency (ie no formal claim), and an indemnification was in place. And the agency was protected by the indemnification.
Note that each situation is different, and legal counsel is critical in assessing alternative strategies.
As we pointed out in prior posts (see here, & here on D&O), the insurance market continues its competitive ways – no hardening in sight. Despite deteriorating industry results, the market will not tighten until there is adequate economic incentive (ie pain) for insurers as a group to decline to write business at current prices. In fact, we still see insurers aggressively pursuing new business and new segments. Some of the best insurers are showing excellent underwriting results company-wide, and many insurers are satisfied with underwriting results in some of their key lines of business. The Mercator Risk Services perspective on the insurance market is well represented in three recent articles. According to one article (see here), competition is slowing somewhat in the umbrella and excess liability market.Right now, we’re seeing stability with respect to rate change…A year ago, we were looking at a market that was declining 10- or 12 percent.And the EPL market continues to be soft (see article here).While some are expecting a hardmarket around the corner, the current employment practices liability insurance market is moderately soft… Despite the external factors negatively impacting the EPLI market, significant competition remains. The result is numerous choices, broader coverage and some pricing pressure.The third article (see here) notes that we are not in a hard market now because the pain was not equally distributed and the pain has not lasted long enough, and concludes:While the underlying fundamentals of the market point to a continuation of the current soft market conditions, rate decreases have slowed throughout the early part of this year and may result in a "soft landing" where pricing begins to flatten out as the market finds its footing. The exceptions are, as noted, CAT property and D&O. …Short of further shocks to the market, from either catastrophic losses or further weakening of the economy, the general soft market conditions should continue through at least 2010.
Forex News and Events:
00:00 SEK G20 Finance Ministers meet (to 25 September)
00:00 EUR FRB of Chicago President Evans speaks on asset price exuberance and macro prudential regulation
00:00 EUR Republic: CNB interest rate announcement, % Sep 1.25
07:15 EUR Manufacturing confidence, index Sep -18 exp
08:00 GBP Germany: IFO business climate, index Sep 92.0 exp
08:00 USD Germany: IFO current assessment, index Sep 88.0 exp
08:00 USD Germany: IFO business expectations, index Sep 96.5 exp
12:15 MXN BoE MPC member Spencer Dale speaks in Exeter
12:30 Initial jobless claims, thous (4wk ma) 19-Sep 545 (563) exp
14:00 USD Existing home sales, mn Aug 5.33 exp
14:00 EUR Bi-weekly CPI, % 2w/2w H1 Sep 0.39 exp
14:30 JPY Israel: BoI interest rate announcement, % Sep 0.75 exp
14:45 Chicago Fed President Evan (FOMC voter) gives opening remarks at the Chicago Fed banking conference
17:00 ECB Executive Board member Stark speaks
23:50 BoJ minutes of August 10-11 MPC published
The Risk Today:
EurUsd The short term battle between 1.4684 and 1.4876 has been making things a little messy on the in traday picture, especially with the Fed meeting last night. However, a look at the 4 hour chart and one can see clearly that the RSI divergence play has continued to trade like a dream as it trends lower in perfect order. Those brave enough to follow this theme by shorting last night are sitting pretty this morning with a full figure on the P&L. 1.4684 has given the pair support overnight so the range bound action all around this resistance zone is likely to remain choppy as the battle between bulls and bears continues. The RSI reading here will remain key. Watch for a break below 40 on the 4 hour chart to confirm impending weakness and an increased chance of the pair to break lower. To the upside, be vigilant for a break of the RSI downtrend which could trigger stops for the big divergence players. A move higher in the price back to the major resistance at 1.4850 / 75 with an RSI continuing downwards will simply provide the shorts with yet another opportunity to add to their position. The stops above that level must be getting rather large to say the least.
GbpUsd We said on Tuesday that any move to 1.6435 would provide a great short entry and we have been fortunate enough to see the pair reach that level before contiuning its move through the head and shoulders formation, dropping this morning to sub 1.6200. The neckline of the internal shoulders sits at 1.6078 and a break there will likely send the pair spiralling to the major neckline at 1.5947. The scary thing for UK importers is that this move so far has been all about GBP weakness rather than USD strength. Add a small dose of deflation talk to this market and the pain will intensify. Updates on this picture throughout the day upon request.
UsdJpy We said on Tuesday that 92.50 would likely cap the pair despite it being outside of the 6 week downtrend and after one touch of the level the pair has resumed its downtrend to retetst the lows at 90.20. The picture does not look great for the bulls as the 4 hourly RSI has more room to go before becoming oversold. Expect 90.20 to provide some intraday bounces as some short covering occurs but ultimately there is a strong chance that the level breaks. For those searching a short entry point, the downtrend now comes in at 91.20 and 91.70 / 80 is the first significant resistance. A break below 90.20 targets 89.71 and 88.60 thereafter.
UsdChf "The trend is your friend......until its about to end" .....never has it been so true as with USD CHF for the last month but one should always remember the second half of the sentence. Complete mirror image of the EUR USD on a 4 hour chart with positive divergence for the last couple of days. The pair printed a low last night of 1.0186 which is close enough to the target of 1.0150 and after a 6 figure run on the pair, expect large shorts to be scaling back. There may be another flush out in USD but with the Fed's worryingly continual usage of the phrase "muted inflation" (which to me is their way of preparing people for deflation) then risk reward against further USD weakness is diminishing. Intraday shorts can again be expected at 1.0300/30 but will they have enough firepower to battle with some potential mass short covering? Probably not.
| Resistance and Support:
| |||||||||||||||||||||||||||||||||||||
The Risk Today:
GbpUsd We said on Tuesday that any move to 1.6435 would provide a great short entry and we have been fortunate enough to see the pair reach that level before contiuning its move through the head and shoulders formation, dropping this morning to sub 1.6200. The neckline of the internal shoulders sits at 1.6078 and a break there will likely send the pair spiralling to the major neckline at 1.5947. The scary thing for UK importers is that this move so far has been all about GBP weakness rather than USD strength. Add a small dose of deflation talk to this market and the pain will intensify. Updates on this picture throughout the day upon request.
UsdJpy We said on Tuesday that 92.50 would likely cap the pair despite it being outside of the 6 week downtrend and after one touch of the level the pair has resumed its downtrend to retetst the lows at 90.20. The picture does not look great for the bulls as the 4 hourly RSI has more room to go before becoming oversold. Expect 90.20 to provide some intraday bounces as some short covering occurs but ultimately there is a strong chance that the level breaks. For those searching a short entry point, the downtrend now comes in at 91.20 and 91.70 / 80 is the first significant resistance. A break below 90.20 targets 89.71 and 88.60 thereafter.
UsdChf "The trend is your friend......until its about to end" .....never has it been so true as with USD CHF for the last month but one should always remember the second half of the sentence. Complete mirror image of the EUR USD on a 4 hour chart with positive divergence for the last couple of days. The pair printed a low last night of 1.0186 which is close enough to the target of 1.0150 and after a 6 figure run on the pair, expect large shorts to be scaling back. There may be another flush out in USD but with the Fed's worryingly continual usage of the phrase "muted inflation" (which to me is their way of preparing people for deflation) then risk reward against further USD weakness is diminishing. Intraday shorts can again be expected at 1.0300/30 but will they have enough firepower to battle with some potential mass short covering? Probably not.
| Resistance and Support:
| |||||||||||||||||||||||||||||||||||||
Whyforex and Foreign Currency Trading
The largest financial market in the world, Foreign Exchange market, Forex or FX market, all the terms are used to describe the business of trading of the world's various currencies, with more than $2 trillion changing hands every day. Being an international foreign exchange market, Forex is a market where money is sold and bought freely. FOREX was launched in the 1970s, to become the biggest liquid financial market today, dealing in more than hundred times the daily trading on the New York Stock Exchange.
FOREX is a perfect market to invest in, as it is free from any external control and free competition. Mostly, all Forex trading are tentative and unlike the stock market trading, the Forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. The trading takes place between the two dealers, either over the telephone or through Internet, all over the world. The major trading centers are the ones at Sydney, London, Frankfurt, Tokyo and New York, making Forex a 24-hour market.
Forex Trading requires the employing fundamental as well as technical analyses. These analysis help a trader to foresee and determine the development in the price trends of currencies, based on which, he attempts to predict market changes and make profits. Fundamental analysis can be said to use techniques to analyze the value of a state’s currency with the help of its economic indicators, quality markets and political events and associations. Political stability also influences the exchange rate at Forex. Its not just that Forex Trading is intutive, rather its technical
While Technical analysis engages the study of patterns of price trends and movements, making it easier for the trader to predict the path of the future developments in the Forex market. The primary data for a technical analysis are values, be it the highest or the lowest values, the price of opening and closing in a definite period of time, and the amount of transactions taking place. Any factor, be it economic, political or psychological, having little or some influence on the value or the price, has already been measured by the market to be included in the price. We offer some very useful Tips for New Forex Traders.
The CFTC has witnessed increasing numbers, and a growing complexity, of financial investment opportunities in recent years, including a sharp rise in foreign currency (forex) trading scams.The Commodity Futures Modernization Act of 2000 (CFMA) made clear that the CFTC has jurisdiction and authority to investigate and take legal action to close down a wide assortment of unregulated firms offering or selling foreign currency futures and options contracts to the general public. The CFTC also has jurisdiction to investigate and prosecute foreign currency fraud occuring in its registered firms and their affiliates. The CFTC issued an advisory in 2001 that discussed these CFMA amendments to the Commodity Exchange Act (CEA), 7 USC 1, et seq.The Division of Trading and Markets (now Division of Clearing and Intermediary Oversight, or DCIO) issued an advisory in 2002 concerning foreign currency trading by retail customers (PDF). The advisory affirms that off-exchange trading of foreign currency futures and options contracts with retail customers by a counterparty that is not a regulated financial entity as set forth in the CFMA is unlawful. The advisory further states that, if there is a lawful counterparty to the transaction, such as a person registered as a futures commission merchant, the persons acting as intermediaries to such a transaction, that is, in the manner of an introducing broker, commodity trading advisor or commodity pool operator, would not need to register under the CEA if that is their only involvement in futures or option transactions.DCIO issued an additional advisory in 2007 concerning foreign currency trading by retail customers (PDF). The DCIO Advisory addresses the following issues: (1) registration requirements for associated persons of firms registered as introducing brokers (IBs), commodity trading advisors, and commodity pool operators that are involved in forex transactions; (2) the permissibility of certain unregistered affiliates of a futures commission merchant (FCM) to act as proper counterparties in forex transactions; (3) claims that forex customer funds are segregated; (4) introducing entities acting as FCMs; (5) the applicability of the IB guarantee agreement to forex transactions and prohibiting guaranteed IBs from introducing forex transactions to an FCM that is not its guarantor FCM; (6) prohibiting forex account statements of an FCM’s unregistered affiliate from being included in the FCM’s account statements to its customers; and (7) prohibiting retail customers from acting as counterparties to each other in forex transactions.
FOREX INFORMATION
E-Global Trade & Finance — Forex Broker with Liberty Reserve
Today I’ve added another Forex broker to the site — E-Global Forex. It’s not a new broker (they’ve been on-line since 2007) and they also have a rather popular IB company working for them — Forex4you (which has some additional features compared to E-Global). Apart from the standard Forex trading accounts that start from $100, E-Global offers cent accounts that have only $20 minimum and allow trading with positions as small as 10 base currency units (0.0001 lots). It’s a broker with MetaTrader 4 platform. Other highlights of this broker include:
- Sharia-compliant accounts on request
- Leverage from 1:10 to 1:500
- Small yearly interest on account balance (applied monthly)
- Regulated on BVI but offices based in Cyprus
- Deposit via Liberty Reserve, credit card and wire transfer
- Forex, CFD, gold and oil trading
Do You Use Paid Forex Software?
I stated my point of view on the paid Forex robots and other software in my previous post (Paid Forex Robots — Why I Avoid Them?). But I know that the Forex robots advertised throughout the Internet are very popular nowadays. So, I’d like to know what’s the opinion and experience of my dear readers and site visitors on this matter. I’d also like to ask those traders, that reply positively below, to write in the comments what specific paid expert advisors they have used. Of course, I also want to ask not to spam the affiliate links here as they will be deleted.
Loading ...Symmetrical Triangle Chart Pattern on CHF/JPY
Almost a month has passed since the last time I’ve posted the chart pattern analysis here. Today I offer a rather clear symmetrical triangle pattern on CHF/JPY chart at a weekly timeframe. The apex of the triangle is still quite far in time and the early breakouts could probably be false, but a full breakout after 3–4 weeks may signal a good bullish or bearish trading opportunity. The bullish breakout is more probable since the symmetrical triangle is a continuation pattern. Click the image below to see the full-size chart:
Paid Forex Robots — Why I Avoid Them?
Why to avoid paid Forex robots or expert advisors? There are several reasons but most obvious one is quite simple — they don’t work as advertised. First, let’s get straight with the definitions — Forex robots are the same as the automated expert advisors, they are some trading strategies (sometimes advanced, sometimes not) embedded into a program code, which is most often intended for the MetaTrader 4 platform. There are many free expert advisors available on the popular Forex sites and forums and there are also many paid ones that are sold on-line. The price of such paid Forex robots may vary from as low as $20 for CaspianEA to as high as $499 for Dragonpips, while the average price seems to be near $100.When it comes to the free expert advisors they are usually quite raw, require some optimization and tuning from time to time and work with minimal profit (even the best of them). As for the paid Forex software, it’s usually advertised as something complete — a ready-to-use product that will get updates for free from the author; it’s also advertised with an unbelievable level of profitability with more than 100% gain per month. So, what’s the problem with the paid Forex trading robots?
- The most obvious question that arises when you see a Forex robot advertisement that promises huge returns in small time is why doesn’t the author of this robot use it for his own Forex account? Really, why rely on some on-line sales at $100 per piece with all the troubles connected with setting up a site for selling, an affiliate program, user support, etc. If you can just turn on this “money-making machine”? And if you are using it for trading and earn huge amounts of money from it daily, why bother selling the software? Want to share your success? Just let the traders download it for free! When I find a good EA that’s, in my opinion, capable of being profitable I share it for free on EarnForex.com; other honest traders I know do the same. So, if you are using a robot and it’s profitable, you already earn enough not to worry about selling it, and if you are selling a robot as a money-maker and not using it yourself, then that looks like a hypocrisy.
- Verifying the profitability and the possible drawdowns of the paid expert advisors is very difficult, almost impossible. The advertisements display nice charts with the exponential curves of balance, suggesting a lot of potential profit from using the robot. But the problem is that all these test reports and statistics can be easily forged to showed any desired result. Some Forex robot-sellers use sites similar to mt4stats.com to demonstrate the profitability of their EAs. And while this is really a good tool, it has some disadvantages, including soft demo account conditions with almost no requotes or serious slippage, fast quote changes, “market blackouts”, etc. At least many of the advertised Forex robots have some sort of money back guarantee declared, but I am not sure if these claims have something to do with the reality, anyway, it’s almost impossible to rightly estimate the usefulness of the EA in a 30-day period.
- The whole Forex software industry is getting quite ugly lately. Quite a few paid Forex robots are advertised aggressively via rather generous affiliate schemes, which results in tons of spam over the forums, YouTube, e-mail and other parts of the Internet. Of course, it’s not the creators of the software who spam the web, but the affiliate marketers (and probably not the best of them) but that’s still a problem for the whole Forex industry. The ads often contain semi-false claims, wishful thinking and even outright lies, which is very dangerous for all the potential Forex traders. New traders may fall for such ads easily, resulting in a future disappointment in the currency market. People that don’t know about Forex might think that it’s some kind of get-rich-quick scheme (which, of course, it’s not) or some other scam. So, in my opinion, the paid Forex robot market is currently set up in such a way that it hurts the reputation of the whole Forex trading industry greatly.
That’s what I think about the paid Forex robots. That’s why you don’t see any ads for them on EarnForex.com. Of course, I might be wrong in my judging and you are free to believe otherwise. But the above should be a warning to the newbie traders, while I am quite confident that the experienced Forex traders are already wise enough to see what’s good or bad for them.
