Collaboration

Risk taking has outperformed risk aversion for the past 6 days.  EUR/JPY has traded higher each day and stocks have followed along.  One would have to wonder if that performance would not be even better if it were not for the Monday afternoon late-to-the-party downgrade from Moody’s on Greece. 

This downgrade just happened to come after a few well-regarded advisors over this past weekend said that the 1t Euro lifeline to Greece was not enough and that Greece will eventually be forced to default.  Now we know.  The roadmap for trading and investing successfully is not always very well laid out.  Luckily we have China to thank for their resolve, right? 

Or so I think.  In case you missed it on Tuesday morning, in China the Foreign Ministry spokesman Qin Gang told the US to stop politicizing the Yuan exchange rate and let China decide on the issue of its flexibility!  That is fairly strong stuff from China.  They are probably becoming a bit impatient with the US on the lack of an economic recovery.  The Wall Street Journal even mentioned on Tuesday that Fed members were quietly weighing options on what to do if the economy gets worse.  It looks as if we have gone from removing extraordinary accommodation to maybe even more extraordinary measures.

Still neither the Fed nor Moody’s nor China is the cause for the recent shift in risk-taking of late.  The real reason may be individual currency traders.  Yes, currency traders.  If you live in Japan you have had to endure through a zero interest rate policy (ZIRP) for quite a long time now.  Japan knows this all too well; China knows; Treasury Secretary Geithner knows this and surely doesn’t want it to happen here.  Yet the ZIRP has endured in Japan, forcing investors to seek yield in other countries, meaning selling the Yen and investing elsewhere.

Reports out of Japan show that Japanese investors sold off 10% of their euro holdings in May.  It is always hard to get exact volume figures in foreign exchange because it is primarily an interbank market and not traded via exchanges but locally they believe that retail investors account for 25% to maybe 50% of all Forex trade in Tokyo.  The 10% repatriation was in May but since those figures have been tallied EUR/JPY has risen by 4.5% off its multi-month lows of 108 and risk taking has benefitted globally.

If Japan had 20% interest rates would they be investing so much internationally?  Nope.  But they do not and it looks as if they have some smart currency traders.  Currensee is the place to meet currency traders from around the globe.  Listen to what others have to say, share ideas and follow the flows.  There is no better time to get started than the present.

This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

1 Comment

It is no secret that the vast majority of mutual funds underperform their benchmarks. This is one reason why hedge funds grew like weeds over the last decade as many managers wanted to showcase their talents at going both long and short. Despite a volatile decade, many hedge funds have found stock picking to be harder than they first thought. Sadly, the ones that are hurt the most by this are investors.

Right now index funds have become a popular alternative, as a passively managed product should at least equal the benchmark. Still, we live in an era where the Dow Jones seems to always be hovering 10,000, the Nikkei cannot hold onto an upward trend and the European equity indices seem to be caught in the middle. Researchers at Dimensional Fund Advisors have released a study that shows the top performing 25% of stocks are responsible for all the gains in the stock market from 1980 to 2008. That means that 75% of stocks lose money. Since industry regulations mandate that a mutual fund has to be highly diversified, it is no wonder that mutual funds underperform. Have I mentioned that these funds charge fees to manage your money as well?

For those that have an interest in seeing their investments grow it is time to look outside the traditional investment box.

How about investing in currencies? The universe of currencies is small compared to that of equities. The chance that the euro, pound, yen or the US dollar goes to zero is small – very small. Just look at the woes in Europe - and realize that the euro is still worth more than the US dollar - and you get the picture. Transparency, liquidity and other important factors are all extremely high. Fees should be relatively small (swap points and other factors, which will depend on your broker) and you are your own manager.

Hesitant? Then take a look at your mutual fund holdings and tell me be about each company that you own. Not sure where that holdings list is? You shouldn’t be afraid of doing a little homework and investing in foreign exchange.

In terms of looking for information and strategic ideas, you should start at Currensee. Here there are investors and traders who show their trades, strategies and returns. Build a team and share ideas. Take a look at the ‘Strategy’ section, where you can see profitable and not-so-profitable trading ideas. In the ‘Community’ section, you can filter through these strategies to help you find one that matches your style.

Will the problems in the Euro Zone continue and help the US dollar gain versus the euro or has the euro hit bottom? Both the Australian and Canadian dollars are near parity to the US dollar, but can this continue? The yen has made sizable gains against most all currencies over the past few years, yet it has major fiscal problems. To say that there will be sizable moves ahead in the currency markets is an understatement.

You could always place more money in a mutual fund, most of which underperform, or you could manage your own money, learn the world of foreign exchange and look for returns in the world’s largest market.

This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

What is the hardest part of trading?  For traders new to foreign exchange it may be finding the right currency pair to trade.  For others it may be figuring out which time horizon to trade or learning which economic indicators have the ability to make markets move in rapid fire fashion.  Even for experienced traders that are used to hitting the “mine” and “yours” buttons it may be the technology needed which may require VPS access.  For me it has been the transition from running models in Excel with DDE feeds to learning MT4 and developing code.

Even with all those potential obstacles trading the Forex markets does offer opportunity and reward.  I’m not trying to sound like a commercial there but any market that has seen its top traded security, EUR/USD in this case, trade up more than 20% in 6 months with generally little risk of that security going to zero offers some value.  Yes there have been some emerging market currencies that have caused major pain for investors but the Forex market wasn’t alone in suffering trading and investing losses in those instances.

One of the beautiful offerings on Currensee is the “Strategy” section.  Here traders that opt to offer their strategy, and many do, show the strategy they use.  Not only is the strategy description offered but their performance is broken out by currency pair and other behavioral metrics such as the average duration of a trade is displayed.

Where else will you find such valuable insight?  You can have this work two ways for you as well.  Especially if you are inquiring about a strategy that you may want to use and want to see if someone else is already using it.  For example what if you think that "trading the (economic) numbers” is a useful strategy.  Or how about “chart pattern recognition."  There certainly are no guarantees that the trader using the strategy is making the right decision every time but certainly this is a valuable warehouse of information.

Let’s take an example.  Have you traded “Cable” or the “Loonie” before?  That is GBP/USD and USD/CAD respectively.  In my experience Cable tends to be a very choppy currency.  It doesn’t move from 1.50 to 1.60 in a straight line very often, its more like a major zigzag formation between the 2 figures.  Some counter-intuitive thinking may be needed every once in a while.  The strategy “CB Counter Trend” shows an accumulated 614.14% gain by the trader that posted this strategy.  Its description says that it is a “a counter trend system” using 5 minute charts and their target is 20 pips per trade.  For more details on this particular strategy please visit the Strategy section.

I have not used this exact system myself but it sounds perfect for GBP/USD and some other pairs.  Of course this isn’t the only strategy that shows merit and from my account there are over 160 strategies that post returns and even more strategies that showcase their description.

If you are looking for strategies and more trading ideas then you may want to visit the Strategy section on Currensee.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

TechCrunch reported today about an interesting new iPhone app they came across in the App Store. It's an official app made by the National Association of Securities Dealers Automated Quotations (NASDAQ), the American stock exchange. In the words of TechCrunch writer, MG Siegler, "That itself is interesting, but perhaps even more interesting is a key functionality of the app is to highlight tweets about various NASDAQ stocks."

The app is called NASDAQ Portfolio Manager and, according to TechCrunch, it's pretty slick. In addition to providing all the real-time quotes and data you'd expect, it also has some pretty cool charting features and, IMHO, the most interesting part of the whole app is that it has a special view that integrates all the latest tweets about that stock, coming in from StockTwits. If you don't know about StockTwits and you're a Forex trader, you need to check it out. The service is organized in "streams" and they recently launched a Forex stream, where you can see all the latest Forex tweets. A Forex tweet is denoted with $Currency pair (i.e. $USDJPY), and what's even cooler is that you can sort the Forex stream by pair. Say you're only interested in tweets about USD/JPY, click on the pair and just see that stream. We use StockTwits with our @Currensee Twitter stream to connect with influential Forex traders from around the world. Many new Currensee members find us on Twitter and connect with other Twitter members on Currensee.

This new NASDAQ app shows the innovation that comes when you blend social data with traditional data. The ability to look at a chart and a price and blend that with what other people are doing right now provides unique new insights and gives traders new decision-making tools. It's reinforcing to see an institution like NASDAQ push the limits on data. I'm happy to be in such good company. :)

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

This is one of an occasional series of guest posts by John Forman, Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.

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One of the complaints I hear fairly frequently about trading, especially for those who do it actively on a short-term basis, is how lonely it can be and how easily one can feel they are going it alone. Trading, after all, is in many ways a very individual pursuit for folks in the retail trading realm.

Things are different on the trading desks of banks and institutions. If you haven't seen the trading floor of a place like Goldman Sachs then think about rows of desks with traders sitting side-by-side. They are generally grouped by market so that information and ideas can easily flow back and forth between the traders, analysts, and salespeople (the latter are responsible for customer-facing activities). Even in places that are smaller operations where there aren't the big trading rooms, like many hedge funds, interaction and exchange between and among the various participants is built in. In other words, no trader operates in isolation.

I personally don't work for a company which actually does trading. We instead focus on market intelligence. The bottom line, though, is that we provide the readers of our analysis and commentary with stuff which is aimed to be actionable. Even here we are set up in a trading room type of environment to facilitate information and idea exchange. I cover forex, but I'm surrounded by bond market analysts and frequently talk with them about things impacting both our markets.

Now individual traders not trading from prop shops and the like don't have the ability to sit in a room full of other traders and have that kind of interaction. Up to this point they have been restricted to exchanges in chat rooms and on forums, but that comes with considerable drawbacks, not the least of which is the inability to know if others are legit. With the introduction of Currensee, however, forex traders now have the ability to interact with each other in a real collaborative way, knowing exactly what the others in their group are doing.

You can work together
Some folks will no doubt be thinking they don't really want to know what others are doing or thinking. I can appreciate that view as I have long found that reading other people's commentary muddles my own analysis. That said, however, I have also found that in some cases I have meshed really well with someone else in terms of technical trading and between us we came up with really good trading ideas.

The trick in developing a good trading collaboration is finding people who compliment your style of trading. Obviously they have to trade what you do in the timeframe you trade. Someone focused on day trading EUR/USD isn't going to do much for someone who swing trades the JPY pairs. Beyond that, though, intermixing different ways of approaching the market can be very rewarding.

For example, you may be very good at fundamental analysis but not so great with technicals. Working with someone who has that complementary skill set could produce a very profitable relationship.

Also, some folks are fantastic market analysts. They can tell you exactly where the market is going on a consistent basis. Maybe they have a problem sticking to a trading plan, though. If they were joined with people who are very disciplined, but not so strong with finding good trading ideas they could developing a good partnership.

Plus the learning
And of course there's the educational angle in all this. It should be obvious to everyone how much more quickly one can develop their trading abilities by watching others in action. It could be as simple as picking up a new way of trading based on Bollinger Bands or price action. Maybe it's the placement of stops. Perhaps it's a way of playing the market in a shorter or longer time frame. There's always something new to learn in the markets for those looking to do so.

Think of collaborative trading as being like a school study group. You each bring something different to the table in terms of knowledge, perspective, and experience. That feeds into the learning of everyone in the group.

So don't be shy!
Get in there and find out what trading collaboratively is all about. Take advantage of the tools and methods of interaction Currensee offers now and will be offering in the future. Make new friends and meet fellow traders from around the world. The more you do that the better your chances will be of finding someone (or several of them) with whom you can talk about the markets and trading and work together toward better trading for you both.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

1 Comment

Ring the bell…The Currensee trader network is open for all Forex traders to join!

Today, we announced that our Currensee trader network – the first-ever Forex trading social network – is open to the public. For those of you who have been following our journey, you know that we spent eight months in our invitation-only private beta stage. Here in startup land, eight months seems to fly by more like eight weeks, especially when you are building the types of technology and collaboration features that take mere mortals years to build.

As I thought back to where we started, it seems like forever-ago that we invited 25 brave beta testers to try out our new idea for a trader social network. Our founders, Asaf and Avi, had a strong vision – they wanted to build a place where Forex traders could collaborate based on real trades and real data – but it’s hard to cook up a social network with only 25 people.  So we started inviting more, a few hand-picked Forex traders at a time.  And we started adding features and tuning our performance and analytics. We were lucky to have loyal and vocal members who spoke up when things weren’t working they way they expected or when they had a feature idea or suggestion they wanted to share. The product became more and more robust and more and more traders starting requesting invitations.

The Currensee team kept cranking out new features, programs, promotions, controversial videos and other Forex trader goodies. And, in just eight months, things are very different than they were on that chilly day back in February.  We have almost a thousand people trading together. We have an innovative product that combines the fun of a social network with the unique insights of strategies, performance and sentiment data…all based on the trader network. We started with members from two countries and supporting two brokers. In just eight short months, we have members from over 64 countries and support close to 40 brokers.

On behalf of the Currensee team, I want to thank all of our private beta members that joined before there was even a real product. We could not have come this far so quickly without your help and dedication to making Currensee a special place for Forex traders.

Today we leave the invitation-only private beta behind us and throw the doors open to the world.  We invite you to join our unique trader network and see for yourself what makes Currensee the place to trade together.

When my friends ask me about what makes Currensee so great, I always talk about the open collaboration we bring to the world of Forex. That we’re changing the game by giving all types of Forex traders the ability to connect with one another, see live trades and positions and share strategies, ideas, victories and their losses. We call it transparency and Trading Together is how we make it happen.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

1 Comment

All that glitters is not gold.  Although gold has been pretty glittery against the dollar lately, there's been some interesting discussion on Currensee about the Australian Dollar, too.  It started with Craig noting that the AUD looks strong against the US Dollar and asking for comments.

The AUD/USD discussion begins

Barak jumped in with some good technical notes on the overnight interest rate and observed that "0.9000 is a psychological level as well as a technical resistance level" which made me check the Community Historical Volatility widget...

Community Historical Volatility on the AUD/USD

...that shows us some entry and support points on the AUD/USD pair based on the Currensee community's actions, which we can also see in the Market Watch:

Market Watch on the AUD/USD

Which shows that the community is split 50/50 long and short on the AUD/USD pair, but there's more volume long and at least for the moment, the short money is winning.

Log in to Currensee to add your thoughts to the discussion and check the social indicators.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

3 Comments

What do these three Forex experts have in common? Not much. That's what makes it so interesting when you can corral these guys and ask them about juicy topics like the outlook for USD/JPY, the G-20 and the emotion of trading.

Jamie Coleman Shaun Downey Boris Schlossberg

This week, I had the pleasure of moderating a panel with Jamie Coleman from FXLive, Shaun Downey from iTraders and Boris Schlossberg from GFT. We picked a controversial topic - Forex Sentiment & Volume - two pieces of the puzzle that keep Forex traders searching for tips and tricks to the secret sauce. It started out with an interesting poll that really highlighted the entire issue. Before the webinar, we polled our experts on their outlook for the USD/JPY - long, short or hold. We also polled the hundreds of webinar attendees with the same question. Then, we looked at what the Currensee social trading network was doing on that pair at that time. The results?

Everyone had different opinions. The experts said long, the audience said short and the Currensee network was long but those who were short were actually winning on their trades. So what's a trader to do? The experts had a great debate on the merits of sentiment and the wisdom of the crowds. They agreed that how wise the crowd is depends a lot on which crowd you're talking about.

We then moved on and talked about volume and asked the traders how they look at volume. We'll post a clip from this discussion later on, but for now it should suffice to say there were some differing opinions on the value - or even the existence - of this measurement in Forex markets.

We even covered the price of gold, a question Boris hates, and the G-20, the one place where everyone pretty much agreed that the dollar will remain the world reserve currency for some period of time (phew). We had very interactive Q&A, including an interesting question on Forex collaboration. A trader asked the panelists about whether they collaborate on trades and if it works. Boris quickly jumped in and discussed his approach with trading partner, Kathy Lien. He talked about how they make all of their trade decisions together and stick by the decisions they make - good, bad or ugly. He shared the power of working together to come up with smart trading ideas and how Forex trading is changing with access to new information and tools. We couldn't have ended the session on a higher note.

Another Currensee Expert Panel is in the works for November. If you have questions you'd like ask, topics you'd like us to consider or panelists you think would be great to add, please submit a comment here and let us know. Have a listen to the experts. I hope you learn a few new things, I certainly did.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

2 Comments

This is the first in an occasional series of guest posts by John Forman, Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading.  John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.  John is the former Content Editor, and current Advisor, for Trade2Win, a trader support web site with over 150,000 members, where he interacts regularly with active traders from across the globe. He is also a regular speaker to college finance student groups and helps finance faculty integrate trading elements in to university course offerings.

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The Commodity Futures Trading Commission (CFTC) produces, on a weekly basis, something known as the Commitment of Traders (COT) report. The COT report breaks down the futures (and options) open interest as of Tuesday each week in terms of what positions are being held by the different categories of traders. Traders have been using this information for many years to see what the smart money (and dumb money) is doing in the markets. (For more information on the COT, including current and historical reports, visit http://www.cftc.gov/marketreports/commitmentsoftraders/index.htm)

Consider the following table and graphic from a recent COT report on the E-Mini S&P 500 futures (courtesy http://www.commitmentoftraders.com).

forman1

The chart at the bottom shows the last five weeks worth of raw position figures for Large Speculators (hedge funds, etc.), Commercials (hedgers, etc.), and Small Speculators (retail folks) in terms of how many contracts they are long and short, and the relative balance between the two (the "Bullish" column indicates the % of outstanding contracts that are longs). If we look at the Small Spec section, we can see that as of August 25th the group was 55% long, but in the intervening weeks they have become  more and more negative to the point of now being 57% short (100% - 43%).

On the graph we can see the positioning of all three groups in the bars, plus the cumulative open interest plotted as the line (right scale). What is plotted for the positions is the net long or short. So for example, the most recent blue bar representing the Large Specs is at +113,761. That's 420,038 long contracts minus 306,277 short contracts. The taller the bar the larger the net difference between longs and shorts.

Why is this information useful?

Because even at just the top level of analysis it can tell you when interest is moving in and out of a market. The greater the total open interest, the more participation there is. Drilling down a bit further, the more group-specific data can be very useful in tipping off potential turning points.

For example, at least over the last few years (and potentially further back), the Small Specs have been wrong about the direction of the S&P 500, as a group, most of the time. We need only to look at the graph above to see how the yellow bars representing the positioning of Small Specs have been negative almost exclusively since late January. They were at their most negative right about the time the stock market bottomed out in March and aside from a little blip they have stayed net short all through the big rally.

In other words, it's not a precise thing, but watching the positioning of Small Specs in the E-mini S&P 500 futures can tell you a lot about where the market is going, namely, in the opposite direction of how they are positioned. This may sound cynical and mean, but that's what the data indicates.

If we look at the COT data for the British Pound futures (equivalent to GBP/USD) we can see the Small Specs struggle to get it right there too. They were long the pound during the latter part of 2008 and into April of 2009 when the market was putting in its lows, then got short just before it took off to the upside. Most recently, the Small Specs got long just as GBP/USD started its big drop.

chart

Taking it to the next level with Social Indicators

One of the items in development at Currensee is what's known as Social Indicators (SIs). This is information based on the trading patterns and positioning of the members of the Currensee network of traders. Basically, we are talking about what in COT terms would be considered Small Specs. As we've seen already, knowing what the trading collective is up to can be valuable information. The SIs, though, go much deeper that just net position information.

Think of it like being able to drill down within the COT data and seeing how people trading different timeframes and styles are positioned. And think of it as being able to see what the proven successful traders are doing as opposed to those who have yet to establish a positive performance record.

You can see how there might be some value of that info, right?

In the weeks and months to come there will be a lot of work done on the SIs to see how the patterns present themselves – to understand the data and how it can be used. As more and more traders become part of the community we anticipate the SIs will be able to present an increasingly useful set of metrics upon which decisions can be made.

Keep watch for further updates in the weeks to come.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.