Solutions In Sight? By Mike Conlon

This morning markets are rallying as the Euro zone moves one step closer toward a solution to the debt crisis that has been plaguing them and the global markets in general. The Greek Finance Minister came out and said that an agreement on debt is “attainable” and the ECB seems ready to deal as well.

News in the US today has the Republicans largely going through the political motions of introducing a bill on the debt ceiling debate that will be vetoed by the President if it passes the House, but rumors of a “secret meeting” taking place have raised hopes that a compromise can be reached.

The global markets are in need of some sort of stability as these crises have left Central banks around the globe in limbo as they need to allow these situations to play out before they can potentially raise interest rates to cool off their own expanding economies. At least that’s the thought in Australia and Canada as the release of the minutes from the RBA rate policy meeting and the BOC interest rate decision confirm.

Rounding out the morning are US Housing Starts and Building Permits figures which are likely to beat expectations as the bar has been lowered so much after last month’s dismal reports. So the markets are in risk-taking mode this morning, with global stocks higher, as well as oil and gold.

In the forex market:

Aussie (AUD): The Aussie is mostly higher on risk appetite as the minutes from the RBA rate policy meeting confirmed that the RBA was in “wait and see” mode with regard to the Euro debt and US debt ceiling crises. Inflation is a mild concern but does not outweigh the overall risk to global economic stability.

Kiwi (NZD): The Kiwi is also higher this morning on risk appetite and the carry-over effects of the CPI data that was reported earlier this week. The RBNZ may want to “normalize” rate policy to slow down inflation.

Loonie (CAD): The Loonie is also higher this morning as oil is trading higher despite the fact that the market expects the BOC to leave interest rates unchanged this morning at 1%. The reasoning behind this is similar to that of the RBA, but the market is expecting at least 2 quarter point rate hikes before the end of the year, the first of which could come at the September meeting. (Click chart to enlarge)

Euro (EUR): The Euro is also trading up despite the weaker than expected ZEW economic survey figures that were reported earlier this morning. The big news is that Euro zone ministers are moving closer to finding a solution to the debt crisis, as the ECB has indicated it may be more “flexible”. Yields on a Spanish bond offering soared from just 1 month ago. (Click chart to enlarge)

Pound (GBP): With no news on the docket, the Pound is drifting higher ahead of tomorrow’s release of the BOE rate policy meeting minutes.

Swissie (CHF): The Swissie is lower across the board as demand for safe-havens has decreased due to increased risk appetite. Gold is also trading slightly lower, though still above $1600.

Dollar (USD): The Dollar Index is falling this morning after much better than expected Housing Starts and Building Permits figures showed that the housing market may not be dead just yet. Improving economic data may mitigate fears of QE3, but we’re not out of the woods yet.

Yen (JPY): The Yen is mostly lower on risk themes and department store sales came in better than expected, showing signs that domestic demand may be improving as a result of the devastating natural disasters.

It’s not over until it’s over, as the saying goes, and these words couldn’t ring more true with regard to the Euro debt crisis and the US debt ceiling debate. While markets may believe that solutions are near, risk still abounds.

Meanwhile, just to update, the BOC did indeed leave rates unchanged, but the hawkish tone could mean a rate hike at September’s meeting.

Until that time, watch the economic data to see signs of economic improvement globally and whether or not Central bankers will be able to address their own domestic economies.

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TWO ACCURATE FOREX SIGNAL STRATEGIES

FX Wave Rider Forex Signals ($10,000 minimum portfolio)



Top Trend FX Forex Signals ($10,000 minimum portfolio)

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CySEC-Regulated MetaTrader Broker — IronFX

IronFX is the latest addition in the Forex broker list on EarnForex.com. It’s a Cypriot broker that offers FX trading via MetaTrader and Web Trader platforms. This broker is regulated by the Cyprus Securities and Exchange Commission. Although, the minimum account size isn’t very low — $500, other trading conditions are quite favorable: flexible leverage (up to 1:500), rather low spreads and micro-Forex. It’s also a good broker if you want to trade in some markets other than Forex. More features of IronFX:

* Moneybookers payment system accepted.
* Free mobile trading applications.
* US residents can’t join.
* Cash rebates for traders.
* Accounts with no overnight interest are available.

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RTATC2011 — Day 6 — Position/Order Volume Limits

The modification of the EA to make it multi-currency was a tough job and resulted in a heavily modified code of my MT5 expert advisor. Today, I’d like to turn my head to a less complicated yet very important issue — proper position sizing in the ATC EAs.

The Problem

The ATC 2011 rules state:

The minimum trading amount is 0.01 lots, and the maximum is 5 lots, with an increase by 0.01 lot on every order.
…
The maximum combined amount of positions and pending orders’ lots, regardless of the direction on one symbol, is 15. Stop-losses and take-profits are not taken into account.

This means that it won’t be possible to trade with positions greater than 15 lots. It’s quite bad if one wanted to use an aggressive position sizing strategy and increase orders volume indefinitely. When the EA reaches 15 standard lots limit, the build-up of the balance no longer will be exponential, even for a very profitable strategy. Another issue is that the position bigger than 5 lots need to be opened and closed with more than one order (fortunately, stop-loss and take-profit orders are exempt from this rule). For example, if you wish to open 12 lots long on EUR/USD, you have to send two orders to buy 5 lots each and then one order to buy 2 lots. If you wish to close a position of 12 lots, you have to send two orders to sell 5 lots and then one order to sell 2 lots (of course, you could use 3 equal orders 4 lots each, but that’d be quite an exotic method :) ).

The Solution

There are two basic ways to avoid breaking the above-mentioned rules. The first one is to implement your own Buy/Sell procedures for position opening and closing. The second one is to modify the standard MQL library Trade.mqh, which supplies quite powerful PositionOpen() and PositionClose() functions.

I’ve chosen the second way. A coder from MQL5.com forums had shared his version of the modified Trade class for ATC and I’ve modified it to work properly with my EA. The initial version had some errors (it didn’t prevent big orders from sending when no position for the pair was open). If you are anxious to see this modified library, you can scroll down to the Downloads part of this post. The modified lines are marked with “//////////////////////////////” comment.

Results

Obviously, such trading volume limitation has a potential to reduce the performance of the profitable EA. After all, even if there’s enough free margin in the account to open a bigger position, the expert advisor will have to limit the position size with 15 standard lots. If the profit of the previous version of my candidate EA (multi-currency one) was $247,461.84 during the 6-month (2011-01-01-2011-07-01) backtest, the latest version (the one that implements the position sizing limits) showed only $206,618.68 profit for the same period. Nevertheless, it’s still a nice result for me, though it may be too low to achieve anything significant during the Automated Trading Championship this year.

Downloads

The whole package of files required to run this expert advisor can be downloaded for free. It contains the EA file, the custom indicator it uses and the modified Trade library that follows the rules of ATC 2011 position sizing:

* Test EA + Variable Lots + Z-Score Optimization + Multi-Currency + Position Sizing

You can also download the backtest report of this EA:

* Multi-Currency with Position Sizing Limits — Backtest Results

In the next issue of the RTATC2011 series, we’ll talk about getting the EA to work in the ATC 2011 trading conditions, with all its requotes, delays, slippages, etc.

You can read the first entry in the RTATC2011 journal to get some basic idea of what’s going on here.

P.S.: 2 months and 9 days left for registration in ATC 2011. 994 participants registered so far. Only 6 participants left to 1,000! Yay!

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Weakening US Economy Can’t Help EUR/USD Stop Decline

EUR/USD fell today for the second day as Fitch Rating downgraded Greece’s credit rating yesterday, increasing worries about the debt crisis in Europe. The current performance of the currency pair is result of a weak euro, not a strong dollar. The US currency isn’t supported by fundamentals as virtually all economic reports today were negative. EUR/USD currently trades near 1.4122.

CPI fell 0.2% in June, following the advance by 0.2% in May. Analysts expected a drop by 0.1%. The major factor in the decline was the drop of the gasoline index. (Event A on the chart.)

NY Empire State Index was at -3.8 in July, showing that conditions for New York manufacturers deteriorated for the second straight month. The index was above the June value of -7.8, but below the predicted figure of 4.5. (Event A on the chart.)

Industrial production and capacity utilization in June was below forecasts. Industrial production increased 0.2% after falling 0.1% in May, while forecast promised a 0.4% growth. Capacity utilization remained unchanged at 76.7 percent, even though forecast promised an increase to 77.0%. (Event B on the chart.)

Michigan Sentiment Index dropped from 71.5 to 63.8, compared to the expected reading of 72.5. (Event C on the chart.)

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EES FX ECN — USA Forex Broker

EES FX ECN is an NFA-regulated Forex company based in the United States. Its description was added to the list of brokers on my site today. Apart from being a MetaTrader currency trading broker, EES FX also offers various technological solutions to Forex traders. As a broker they aren’t bad for a US company. Although the leverage is capped at 1:50, no easy on-line payment systems are accepted and only Forex instruments (50 pairs) are available for trading, their spreads can attract big traders. The average spread on EUR/USD is about 1.1 pips and can be as low as 0.2 pip. Other features of this broker include:

* PAMM system for investors and fund managers.
* $500 minimum account size + micro-Forex trading.
* Funds are held in a segregated account (Citibank).
* 5% of profit is taken by EES FX as a commission.

EES FX

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