Slick Excuses

It's excuses time at Wall Street. Yesterday oil nearly hit $140 per barrel, but then retreated. No one knew why that happened, so people invented a new excuse: options expiration. Options may drag oil to a round number, like $140, but there is also some economic reason, and oil went down to about $135.

Today's data includes the PPI, an important gauge of inflation. PPI is more volatile than CPI, but eventually wholesalers affect retailers, which eventually affect consumers. There is no way to escape it. Rising oil and food prices affect the entire economy, which in turn affects the forex market.

EUR/USD was unstable yesterday, rising and falling with no clear patterns. Forex Tracer still managed to pull a small profit out of that, but not as big as usual.

Have a great day,
Nadav

nadavs

The Week Ahead: Third Week of June

The week opened with a sharp rise on the EUR/USD (Forex Tracer decided to take a short position and eventually profited). The dollar went down against most major currencies.

The week ahead has many interesting reports, and an interesting one is the PPI, Producer Price Index. Usually this data comes before the CPI, and it is a good indicator for it. This month's PPI is expected to rise 1%, a huge increase compared to last month's 0.2%. This is a bad sign for the economy, and it usually signals that the CPI will also rise beyond expectations.

Since this is the third week of the month, this Friday is the day when options on Wall Street expire. This means mostly boring and flat trading for the day.

Good luck trading this week,
Nadav

nadavs

Forex Leverage: a Two-Edged Sword

As every forex broker says with pride, in the forex market you can leverage your money and make enourmous earnings. As attractive as it sounds, leverage also has a dark side, losses.

Leverage is just the ability to trade with more money than you have. If you have a leverage of 1:100, you can open a trade of $100,000 with $1,000. When the pair moves, you earn or lose 100 times this move. If the exchange rate goes just 1% in your favor, you double your money.

However, leverage is not perfect. Just like it makes profits big, it also magnifies losses. Just as a 1% move in your favor will double your investment, a move of 1% against you will erase it quickly. If the leverage is higher, and some brokers go as high as 1:500, your losses will be eliminated much faster.

When you trade or use a automated forex trading system, make sure to properly adjust your desired leverage. Don't make it too small, because you'll miss out some good opportunities. However, don't set it too high, or your losses will be greatly magnified.

Have a great trading week,
Nadav

nadavs