Aug 24

A new tax proposed by European leaders is threading the status of London as a hub for trading in global FX markets.

The tax is spearheaded by Frances Sarkozy and Germany’s Merkel. The tax will be charged on every financial transactions, this will have an effect on the cost of the trade thus affecting profits.

The market hasn’t welcomed the decision and large financial institutions are adamant that if this bill is passed they will find new jurisdictions with more attractive tax conditions.

London is home to more than one-third of the worlds daily FX volumes. Most large banking organisations have trading desks in London. London has conquered the broker/ dealer industry post NFA tightening of spot FX regulations. Most large US brokers transferred their base to take advantage of  flexible trading conditions.

The Tobin tax was introduced in Sweden in the late 80′s. It had detrimental effects on the overall financial climate. 60% of the 11 most actively traded Swedish shares migrated to London and over 50% of Swedish equities had moved to London by 1990. The bill was scrapped within 5 years.

FX markets are announcing record volumes, price, liquidity and technology have been the key drivers. This bill could hamper growth in the words most traded asset class.

Aug 2

1. Stops Should be Technically Relevant
Stop loss levels should not be arbitrary – just because you’re willing to lose a maximum of 2% of your equity doesn’t mean that a 2% stop loss is a good idea. Instead, your stops should be technically relevant.

Place stops at price levels that represent a maximum deviation from the technical pattern you’re trading, not some random loss you’re limiting yourself too.

This can coincide with the maximum risk you’re willing to take; but doesn’t have to.

 

2. Stop Outs Should Be Material
Way too often, I see cases of traders who do a good job of honoring their stops (and closing their positions), only to leave money on the table when the trade rebounds.

The problem is that they’re being too strict with their stops. Remember, support prices are not absolute levels – a Forex pair can easily move a few pips below the support level set as a stop without being a “failed” pattern just yet.

You should see support / resistance as a price range instead of just an exact price level.

 

3. Stops Should Hold You Accountable
If you’re having trouble pulling the trigger when it’s time to sell a stop out, you need to be accountable to your stop loss orders.
One of the easiest ways to do that is to be explicit about them: consider posting your trading levels on a public forum like a blog or Twitter.

A more private solution is to keep a trading journal that clearly defines your stop loss price for any position. This requires you to review (and hold yourself accountable for) your trades that fell below those levels.