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10/06/21 10:53
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EUR/USD had a look lower but is treading water for now; while the ascending trend has been broken, it might resume and there are bullish bearish and perspectives for EUR/USD. Which will prevail? Source: Bloomberg Forex Shares EUR/USD Market trend Euro United States dollar Daniel McCarthy | Strategist, | Publication date: Tuesday 06 June 2023 EUR/USD has recovered from the 10-week low seen last week at 1.0635. This was only a fraction below the 78.6% Fibonacci Retracement of the move from 1.0516 to 1.1096 at 1.0640. This may see the 1.0635 – 40 area set up as a potential support zone ahead of the prior lows at 1.0525, 1.0516, 1.0483 and 1.0443. The longer-term 200- and 260-day simple moving averages (SMA) are in among the cluster of lows between 1.0443 to 1.0525 and might lend support. Since breaking below the trend line established from a series of lows seen between September and November last year, the price has remained below the 10-, 21-, 34, 55- and 100-day SMAs. This could suggest that short and medium-term bearish momentum might be intact. On the flip side, the price remains above the 200- and 260-day SMAs, which may suggest the underlying longer-term bullish trend is yet to be undone. A break above the trend line axis has the potential to reinstate the ascending trend. It currently dissects with the 34-day SMA near 1.0875. The 34-day SMA has just broken below the 55-day SMA, creating a Death Cross. Similarly, the 21-day SMA has also created a Death Cross by crossing below the 100-day SMA. A Death Cross is a potential signal for an evolving bearish trend. In April and May, a series of highs were seen in the 1.1075 – 95 area and this might offer a resistance zone. In the bigger picture, a clean take out of these levels may confirm the resumption of the ascending trend. These tops created an extension of a Double Top formation that heralded the sell-off last month. It should be noted though that past performance is not indicative of future results. The neckline from this formation is at 1.0942 and it might offer resistance. The price action on Monday saw a Spinning Top Candlestick emerge which may indicate indecision in the market for EUR/USD direction, potentially setting up a range trading type environment. As laid out above, there are mixed signals in EUR/USD for now. As always, sound risk management is the foundation for trading. Source: TradingView This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. -
Beginners' guide to fundamental analysis Use fundamental analysis to identify markets that are under- or over-priced, by looking at the economic and financial factors which affect their value. Learn about fundamental analysis and how to use it in your trading. Source: Bloomberg Shares Fundamental analysis Investment Price Value investing Profit Callum Cliffe | Financial writer, London What is fundamental analysis? Fundamental analysis is a means of measuring a company’s actual or ‘intrinsic’ value by assessing economic and financial factors, such as a balance sheet, macroeconomic indicators and management forecasts. Most companies’ share prices will not always reflect their intrinsic value, as market prices are driven by rational elements – such as a company’s ability to generate revenue and profits – as well as irrational factors, such as market sentiment towards a company and media perception. Fundamental analysis is used to estimate the intrinsic value of a stock, ignoring short-term trends and investor enthusiasm, to determine the true price that a company should be trading at. Once you know the intrinsic value of a stock, you can compare it to the market price. You’ll then be able to tell whether a company is undervalued or overvalued – giving you an indication of whether to buy or sell the asset. For example, if a stock was overpriced, it could decline at some point in the future and if the stock was undervalued, you could take a position early and profit if the market value changes to reflect the intrinsic value. Fundamental analysis vs technical analysis Technical analysis is concerned with the historical price movements of an asset. So, you’d need knowledge of chart patterns and what each pattern might mean for the future price movements of a stock. Learn about 16 candlestick patterns all traders should know Fundamental analysis, on the other hand, requires an in-depth knowledge of your chosen market and sector so that you can quickly and accurately identify viable companies based on news reports, financial statements or changes in company leadership. Different types of fundamental analysis Fundamental analysis’s primary goal is to estimate the intrinsic value of a company, or the value at which the price should tend to over time. This can be achieved using several methodologies, which are often divided in two categories: quantitative and qualitative analysis. Quantitative fundamental analysis methods look at a company’s viability as an investment in numerical metrics, such as profit and loss statements, cash flow statement and market share. A trader would use these metrics to assess how the company is being run, and whether it is capable of yielding a profit. It is with this analysis that the trader might decide to open or close a position, depending on how profitable they perceive the company to be. Then there’s qualitative fundamental analysis which assesses factors that affect the character or quality of the company, such as brand recognition, senior management or customer satisfaction. On the whole, fundamental analysis is focused on qualitative analysis. Popular qualitative analysis methods include: Top-down or bottom-up approach Porter’s five forces SWOT analysis Economic moats Top-down or bottom-up approach To use a top-down approach, you’d look at global macroeconomic metrics – including gross domestic product (GDP), unemployment rates, inflation, and interest rates – to identify favourable countries and regions. Once the list is narrowed for the top performing countries, you’d identify stand-out industries within those economies, which will also involve analysis the number of companies, average net profit margin and price elasticity. Finally, you’d refine the remaining list to include only the best businesses in those sectors, in terms of price-to-earnings (P/E) ratio, profit and loss and other metrics. The bottom-up model follows an opposite filtering order, going from analysing individual companies and then widening your search to include relevant studies on the sector and country or region they are in.The bottom-up model follows an opposite filtering order, going from analysing individual companies and then widening your search to include relevant studies on the sector and country or region they are in. Porter’s five forces Michael Porter developed a framework that analyses the intensity of competition within an industry, which you can use to understand the likelihood of a company's long-term profitability. It is based on five key variables: Barriers to entry – the threats facing new companies, such as setting up costs Threat of substitution – how likely it is that a consumer could switch products easily Bargaining power of suppliers – the number of supplies available decreases the power of each supplier to make demands Bargaining power of customers – the high cost of switching supplier and low competition decreases the power of consumers who have few alternatives Competitive rivalry – intense rivalries can drive brand loyalty and encourage strategic concentration SWOT analysis SWOT analysis is a method that’s focused on identifying a company’s strengths, weaknesses, opportunities and any threats. Strengths and weaknesses are internal attributes of the organisation – such as talent or brand reputation – while opportunities and threats are based on the external environment, for example a country’s legislation or how fast the industry is growing. This type of analysis is designed to facilitate a purely fact-driven assessment of an organisation, avoiding any emotional and inaccurate decision making. It can help guide you toward businesses that are more likely to have long-term success in their industry. Economic moats The term economic moats was first coined by Warren Buffett, as a way of describing a business´ ability to maintain a competitive advantage over its opponents over time. The metaphor of a medieval castle is used to solidify the idea of protecting a firm’s profits from outsiders. Investors should look for businesses that currently have, and will be able to maintain, a competitive advantage. This allows the company to outperform the market over the long term, and hopefully secure you a profit. The main ways of creating an economic moat are: How to use fundamental analysis You can use fundamental analysis to identify buy and sell signals in the market of your choice. If your fundament analysis indicates the asset is undervalued compared to its intrinsic value, you could opt to buy the market – and if it was overvalued, you might see it as an opportunity to go short. The way you use fundamental analysis will depend on your style of investing and your trading goals. Value investing Value investing seeks to identify potentially undervalued companies. Key metrics that are used include a low price-to-book or P/E ratio, economic moats and a high dividend yield. Value investors look to buy comparatively cheap companies with secure long-term prospects. Benjamin Graham is considered by many as the father of the value investing and wrote the iconic book ‘The Intelligent Investor’. He believed that in their search for undervalued companies, a value investor will prioritise the quality of the business over the market price. As summarised by Graham’s famous student, Warren Buffett, ‘It's far better to buy a wonderful company at a fair price, than to buy a fair company at a wonderful price’. This investment style is generally intertwined with contrarian investing, as they both argue that going against the crowd or prevailing sentiment at the time (buy when everyone is selling, sell when everyone is buying) tends to offer positive rewards. Growth investing Growth investing was developed by Thomas Price and popularised by Philip Fisher with his book ‘Common Stocks and Uncommon profits’. It focuses on companies with a high growth potential even if share price appears expensive in terms of metrics. Instead of investing in an already established company, the investor will take a risk on companies that have the potential to continue growing at a higher-than-average rate. Growth companies are found predominantly in the technology or pharma sectors. GARP investing A growth at a reasonable price (GARP) strategy blends aspects of both value and growth investing, with investors seeking companies with exponential growth but at a competitive price. Popularised by investment manager Peter Lynch, and developed with his book ‘One Up on Wall Street’, it uses a financial ratio called price-to-earnings growth (PEG) as its main way to identify attractive companies. Once a company is analysed, it is divided into one of six different categories based on growth potential: slow, stalwart, fast, cyclicals, turnarounds and asset plays. A concrete metric is given to each, helping to identify growth shares that are trading at a reasonable price. Lynch also uses subjective criteria such as the customer’s satisfaction. As an example, he claims that his best investment in Taco Bell was driven by the fact that ‘he like their sandwiches’. Pros and cons of fundamental analysis Pros of fundamental analysis Fundamental analysis helps traders and investors to gather the right information to make rational decisions about what position to take. By basing these decisions on financial data, there is limited room for personal biases. Rather than establishing entry and exit points, fundamental analysis seeks to understand the value of an asset, so that traders can take a much longer-term view of the market. Once the trader has determined a numerical value for the asset, they can compare it to the current market price to assess whether the asset is over- or under-valued. The aim is to then profit from the market correction. Cons of fundamental analysis Fundamental analysis can be time consuming, it requires multiple areas of analysis, which can make the process extremely complicated. As fundamental analysis takes a much longer-term view of the market, the results of the findings are not suitable for quick decisions. Traders looking to create a methodology for entering and exiting trades in the short term might be better suited to technical analysis. It is also important to consider the best and the worst-case scenario. While fundamental analysis provides a more well-rounded view of the market, it is possible for negative economic, political or legislative changes to surprise markets.
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Charting the Markets: 06 June Dow and Nasdaq 100 look to move higher but Hang Seng struggles. EUR/USD volatility diminishes while AUD/USD rallies on RBA rate hike and USD/JPY slips. And Brent crude oil slips while gold and silver stabilise. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 06 June 2023 This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
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Question
Nickodemus
Hi,
Is there a way to set a max daily loss in automated trading with PRT ProOrder? i.e. Automate the strategy, but kill it each day if cumulative daily losses hit % of equity.
Also, struggling to work out how to set a position size based on % of available equity?
Any help would be greatly appreciated - the 'programming' seems very limited in it's functions compared with the likes of Pine. (Or maybe i'm just being ignorant...)
Many thanks
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