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¿What is Trading?
Trading is a frequent buying and selling of financial instruments with the view to making short-term profits. For this purpose, people who trade or “traders” perform one of the two transactions, depending on whether they believe the price of the instrument traded will go up or down:
a) Buy – if they believe the price of the financial instrument will go up.
b) Sell – if they believe the price of the financial instrument will go down.
The most popular instruments for trading are stocks, currencies, commodities, and indices.
Trading transactions are usually short-term and are carried out on electronic platforms that regulated brokers offer. To trade, all you need is to have a computer, internet, and register with the broker that best suits your needs.
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EURUSD: what’s next and why do CPI numbers matter
EURUSD has been moving sideways for the past 3 weeks, not really knowing where to go. The short-term direction is likely to be revealed this week, as Europe (Germany and Italy) and US are unveiling their Consumer Price Index (CPI) monthly and yearly readings tomorrow, and France and Spain doing the same on this coming Fri. The CPI remains the core measure of inflation, and so, depending on whether actuals come above or below expectations and, most importantly above or below last month’s numbers, they are likely to set the tone for the next round of interest rate decisions for both EUR and USD in the next ECB’s monetary policy meeting on the 8th of Sep 2022 (for EUR) and next Fed’s monetary policy meeting on the 21st of Sep 2022 (for USD), respectively.
Lower than expected July YoY CPI reading and lower than last months (June) YoY CPI reading: in Germany – 7.5% expected in July and 7.6% actual in June; in France – 6.1% actual in June (no expected number reported in July) is bullish (good) for the EUR. Conversely, lower than expected in July – 8.7% – and lower than June’s – 9.1% – YoY CPI reading is bullish (good) for the USD.
*The opinion expressed in this article does not constitute a trading advice and is of the author alone.
ECB raises key interest rate for the first time in 11 years: what’s next for EUR vs the USD
European Central Bank (ECB) raised its key interest rate by 0.5% (from -0.5% to 0.00%) – a first rate hike in 11 years. This expectedly, as we published before, pushed the EUR up against the dollar.
The question is what happens next?
Well, key euro interest rate of 0.00%, despite the 0.5% rate hike today, is still very low if we compare it with dollar’s key interest rate (called federal funds rate) of 1.75%. A reminder that Federal Reserve(Fed) raised the dollar key interest rate by 0.75% in their last meeting on the 14-15 th of June from 1% to the current 1.75%.
Why is this important? The key interest rate essentially determines the risk-free return of holding your cash in respective currency in the bank account. So very roughly speaking, if you were to deposit euros into a savings account, your annual payout on those savings would be close to 0.
Whereas, if you were to do that with US dollars, your annual payout would be in the ballpark of 1.75% on the dollars you deposited. This creates greater demand among investors to hold dollars, so investors buy more dollars, sell other currencies, including the euro, which in turn strengthens the dollar and weakens the euro.
So what’s going to happen to EUR against the USD in the short term? The next Fed’s meeting is on the 26-27 of July, where they are expected to further raise the dollar key interest rate by 0.5-0.75%, which would increase the overall rate to 2.25-2.5%. What’s the likely response going to be? Selling of more euros and buying more dollars. These parallel rate hikes by different central banks are often called interest rates wars, as banks try to shore up their currencies to attract capital. So in the short term, we expected a stronger dollar and weaker euro.
The currency value is of course not only affected by interest rates. There are other factors, such as overall currency supply in circulation, but interest rates have a significant impact on the currency value, so until the euro catches up it’s hard to see the path forward for a strong euro.
*The opinion expressed in this article does not constitute a trading advice and is of the author alone.
eToro has lowered the minimum investment amounts for some of its instruments as follows:
- Stocks and ETF: $10
- Stocks and ETFs derivatives: $10
- Digital currencies: $10
- Currencies: $1,000
- Commodities: $1,000
- Indexes: $1,000
¿Do you want to learn how to benefit from stock market crashes?
XTB offers a free guide to survive stock market crashes. The webinar includes information on:
- Protect your account: How to protect your account and minimize the impact of falls on your portfolio.
- Take advantage of opportunities: Discover strategies to benefit when the market falls.
- Investing in Volatility: Learn how the so-called “fear index” or VIX works.
Access the webinar for free here
¿How to buy stocks without commision?
Nowadays, you do not need to go to a bank or call a broker to buy or sell stocks online. All you need to do is open a trading account with one of the brokers who provide this service, such as eToro and XTB.
eToro offers all its clients the possibility of buying and selling stocks and ETFs (non – derivatives) without commissions. There are no investment or time limits, so eToro´s clients can buy as many stocks as they want and hold them as long as they wish. Another eToro´s advantage is that it offers the possibility to purchase a fraction of a stock from USD 50, which means you do not need to buy one full stock, but you can start investing slowly.
XTB also offers its clients the possibility to buy stocks and ETFs, without commission. The minimum investment amount is USD 100. XTB also provides an excellent free education section to help beginners understand the financial markets and start trading
For more information on how to buy stocks without commissions, please click here.
Popular stocks
Currencies
Trading or investing in different financial instruments (currencies, stocks, indices, commodities, and exchange-traded-funds) today is very easy. The cost and requirements to open a trading account with retail brokers today are very low.
The biggest challenge is not how and where to trade or invest, but how to trade or invest profitably. Majority of beginner traders or investors over invest or spread themselves out across too many instruments. This is why it is essential that before trading with your own money, you practice using demo accounts to understand how trading works in practice and maximize the chances of obtaining good returns.
In this post, we show you some of the free courses that regulated brokers offer, and we show you some of the steps that can help you start trading now
¿What is Tradingview?
Tradingview provides a platform with simple and interactive charts that allow technical analysis of financial assets using different indicators and information in real-time. Tradingview is not a broker, but its platform can be integrated with various brokers so that you can trade online directly with your broker while using the charts provided by Tradingview. Among the brokers that are integrated with Tradingview are OANDA, FXCM, Saxo, Alor Broker, TradeStation, and many more.
Sign up here and receive a $30 bonus on your annual plan or a $10 bonus on your monthly plan.
