Italian Technocrat Fears Uprisings And Protests In Italy Once Austerity Measures Begin To Bite
Unelected technocratic Italian Prime Minister Mario Monti has made a plea for more “help” before convening talks in Berlin with German Chancellor Angela Merkel today, warning that his austerity measures could trigger anti-European protests in Italy without signs of progress.
Monti pushed through incredibly severe austerity budget cuts demanded by the European Union in return for rescue;
I am demanding heavy sacrifices from Italians. I can only do this if concrete advantages become visible. If not a protest against Europe will develop in Italy, including against Germany, which is seen as the ringleader of EU intolerance, and against the European Central Bank. Germany and France can’t solve Europe’s problems alone. We are a strong, a proud country, and basically we have an effective economy. You know, I’ve always worked for an Italy that resembles Germany as much as possible.
International Monetary Fund Managing Director Christine Lagarde will meet with President Nicolas Sarkozy today. The former French finance minister met with German Chancellor Angela Merkel in Berlin yesterday as pressure grows to complete the Greek debt ‘swap’ needed to put a rescue plan in place.
Italian Prime Minister Mario Monti meets with the German leader today, and Sarkozy and Merkel will both travel to Rome on Jan. 20 for negotiations with the Italian government before the next European Union summit in Brussels on Jan. 30.
Banks are hoarding the European Central Bank’s record 489 billion-euro ($625 billion) injection into the banking system, thwarting attempts by policy makers to avert a credit crunch in the region. Almost all of the money loaned to 523 euro-area lenders last month was placed back on deposit at the Frankfurt-based central bank instead of into the financial system, according to estimates by Barclays Capital based on ECB data. Banks will use most of the money from the three-year loans to meet their refinancing needs for this year and next.
Barclays Capital estimates firms used 296 billion euros of the Dec. 21 three-year loans to replace maturing shorter-term ECB borrowings. This left only 193 billion euros of additional money for the financial system. Overnight deposits with the ECB have climbed by 219 billion euros since the loans to a record 482 billion euros, suggesting the central bank funds hasn’t reached customers.
Germany, Europe’s largest economy, grew by 3% last year, as expected – down from 3.7% growth in 2010, the strongest since reunification two decades ago (and compared with a sharp 5.1% contraction in 2009).
Export growth slowed to 8.2% from 13.7% in 2010, private consumption picked up, growing by 1.5%, up from 0.6%, according to the Federal Statistics Office. Consumers went spent more as unemployment fell, with the jobless rate hitting the lowest level in December since the country was reunified. However, the German economy shrank by 0.25% quarter-on-quarter in the final three months of last year.
Europe’s persistent debt crisis kept the single currency and global stocks under pressure on Wednesday, threatening to overshadow a slight improvement in the economic outlook that has driven a solid rally in world equity markets in the first two weeks of the new year.
European shares hit a one-week closing high on Tuesday, whilst U.S. stocks reached a five-month peak, after an upbeat forecast by aluminium company Alcoa about the demand outlook for the metal and amid rising hopes of a policy easing in China. Alcoa traditionally is a prime share for displaying overall sentiment and fundamental good reasoning behind the sentiment.
However, concerns regarding the prospects of Europe extricating itself from its deep-rooted debt problems are set to return to centre stage today with a debt sale from Germany and Italian and Spanish auctions later in the week, this caused Asian shares to retreat from early session highs.
Market Overview
Due to the fears over European funding costs, gold hit a four-week high of $1,646.56 an ounce, before easing slightly to $1,643, investors once again were lured to its safe haven safety.
Brent crude initially slipped below $113 on Wednesday in early trading as the worries over Europe’s debt crisis and expectations of a rise in oil inventories in the United States for the third straight week overshadowed concerns of supply disruption from Iran and Nigeria.
European stocks fluctuated after the biggest gain in three weeks as Germany prepared to sell 4 billion euros of debt. Asian shares rose while U.S. index futures were little changed.
The Stoxx Europe 600 Index rose less than 0.1 percent to 250.89 at 9:30 a.m. in London, after earlier falling 0.3 percent. The gauge has advanced 2.6 percent this year as economic reports around the world added to optimism the global economy can withstand the euro area’s debt crisis. The MSCI Asia Pacific Index added 0.3 percent today, while Standard & Poor’s 500 Index futures gained less than 0.1 percent.
Market snapshot at 10:00 am GMT (UK time)
The Nikkei closed up 0.30%, the Hang Seng closed up 0.78% and the CSI closed down 0.48%. the ASX 200 closed up 0.85%. The Singapore index the STI closed up 1.0% although down 15.40% year on year. With a weather eye on the bond auctions later today and various press conferences to come from European leaders and the IMF European bourses are understandably skittish in the first part of the morning session. The STOXX 50 is up 0.05%, the FTSE is down 0.17%, the CAC is up 0.16% and the DAX is down 0.1%. The Portugal PSI 20 is down 0.73% and down 26.31% year on year. Ice Brent crude has moved up from earlier morning losses and is now priced at $113.56 up 28c a barrel and Comex gold is priced at $1646 up $14:50 an ounce. The SPX equity index future is currently up 0.09% suggesting a flat NY session opening.
Economic calendar data releases that could affect sentiment in the afternoon session
12:00 US – MBA Mortgage Applications W/e 06 Jan
19:00 US – Fed’s Beige Book January
The beige book report is titled ‘Summary of Commentary on Current Economic Conditions by Federal Reserve District’, more commonly known as the Beige Book.
The Beige Book is published in advance of every FOMC meeting and is used to update members of the committee with the latest economic changes. The report allows investors to see what information the FOMC members will be basing their decisions on, the information is unlikely to be more than two weeks old. The Beige Book does not offer insight into the FOMC members’ thoughts on the economy, it simply states facts regarding the economy in various regions of the US. Moreover, the information in the report is not quantitative, it’s anecdotal and descriptive.
Source: FX Central Clearing Ltd, (FXCC BLOG)
http://blog.fxcc.com/italian-technocrat-fears-uprisings-and-protests-in-italy/
FXCC Blog Updated: Either Use Stops When Forex Trading Or Give The Market A Signed Blank Cheque
I’ve discussed the subject of stops before, as part of the money management technique, in a trader’s overall business plan, stops are an essential ingredient. Fact; the second you trade without stops is the same second you’ve compromised the money management aspect of your trading plan. How can any trader be risking a defined percentage of their account if they don’t protect their potential loss with a stop?
The next new trade I take I can only absolutely guarantee one thing, I know how much I can potentially lose, generally no more than 1% of my account. Without a stop I could lose it all, I could go further and to extremes; without a stop I could receive a margin call. With each trend trade I take I look for the HH or LL indicating the ‘turning point’, the initial stop averages out at 200 pips. Over time I’ve developed the habit of selecting this stop for all my trades, I then ‘micro adjust’ the stop to find the exact HH or LL.
My average loss per trade however is significantly less than the 200 or the micro adjusted stop, I’ve just recalculated the figures and a losing trend trade loses me on average 109 pips, that’s measured over the last 19 losing trades taken last year (2011) which included my most recent biggest losers. The largest loss was 211 pips and the smallest loss 36 pips. However, there’s no temptation to reduce the stop to the average loss size, as this would incur increased losses as many trades can be circa 100 pips offside for days but still ultimately be winners.
I take a very positive view of my stop placement and here’s why it’s the crucial issue and critical success factor; my stop is rarely breached. Only two of my losing nineteen trades were closed due to the stop loss being hit and both would have incurred bigger losses (circa 300+ pips), had they not been in place. The stops in fact saved me circa 2% account balance. Now none of us are perfect, none of us infallible, the two recent trades stopped out happened during Xmas shopping with my youngest. It was “sod’s law” at work as we term it in the UK. The one day off from trading I have in months and the market moves against me dramatically.
I’d have reversed direction on one of the trades had I been available, whilst in the region of 150 pips down, and entered the new trends on both currency pairs earlier. So all things considered the shopping trip, meal at Burger King and watching Sherlock Holmes was an expensive day out! But here’s the real issue, I was able to take the day out knowing that my stops (across all my trades) were in place, they were executed perfectly and protected my balance from further attrition, they had done ‘exactly what was said on the tin’.
Not using stop losses is financial suicide, unless you’re investing like Warren Buffet, were a stop loss obviously mightn’t make sense, but when the BoJ calls up Warren Buffet and asks him to sell a few hundred billion Yen on their behalf you really don’t want to be long in Yen without a stop-loss…
As part of my research for FXCC I often browse trading forums, I like to take the temperature of forex traders, to see what current trends are (not currency trends, more behavioural trends). I’m often left speechless by the ‘advice’ offered up, by far the most incredulous I discovered recently was the suggestion that stops are out of vogue and that if intraday trading or scalping then apparently “stops are useless”. Other notable remarks were;
” I scalp, I don’t have time to use stops”
“The market doesn’t surprise me that many times, so what’s the point.”
But here’s a sage like remark from an old trading friend of yesteryear;
“Trading in the old-fashioned bucket shop had some decided advantages over speculating in a reputable broker’s office. For one thing, the automatic closing out of your trade when the margin reached the exhaustion point was the best kind of stop-loss order.” – Jesse Livermore
Back to the original preceding remarks and the first on scalping, surely all scalpers should use stops, how else could you scalp other than on a ‘fire and forget’ system? What would a scalper (using the currently accepted use of the term) be aiming for, perhaps ten pips, then surely a ten pip stop loss is the right mechanism? As for not requiring stops because the market is mostly “stable and unsurprising” ranges can be fairly predictable, in as much as the average range of a currency may be a certain percent per day, perhaps it’s 0.5%. But no one can possibly predict (with any degree of certainty) when market movements will happen beyond the open/close times of certain markets.
All trades should have stops, even if it is only as a disaster back up. If you usually exit using discretion when a trade goes roughly 20 pips against you, then why not set a stop loss at perhaps at 40 pips? This is there only as a backup, if you trade long enough you will have inevitably experience a power outage, internet loss, broker platform crash, etc. You will be glad about this stop some day. Stop-loss orders have other fringe benefit other than those often highlighted. They can also prevent you from waiting “just that little bit longer” to see if price will come back in your favour. Most of us know to never move a SL which is protecting your account and pain threshold.
To finish, the term stop loss can be regarded as too rigid a term. Many traders have several definitions and uses of stop losses and there’s no reason a trader who exercises disciplined money management should not implement and combine several uses;
Safety net stop (disaster scenario power goes out)
Mental stop (because you always monitor open trades)
Break even stop
Trailing stop
Fixed stop (never move it)
Stop out (margin is below requirement of you broker)
In a trading environment where most lose (only 20% of retail trades are winning trades) it’s incredibly frustrating to witness comments regarding no stop loss trading. The FX market is no different to any other trading market and successful traders would not ditch the one trading tool that every single sophisticated article written about trading has always implored traders to absolutely use. Experienced and consistently successful traders use stop-losses, they never let bad trades build up on them or get hit with margin calls. If you don’t pull the plug on a trade then your broker might. It’s up to you to decide who you want to be in control of your money.
Source: FX Central Clearing Ltd, (FXCC BLOG)
http://blog.fxcc.com/either-use-stops-when-forex-trading-or-give-the-market-a-signed-blank-cheque/
No comments:
Post a Comment