The markets in 2018: CFD and Forex trading

  • By Author

  • October 4, 2018
  • 9:04 pm BST

2018 has seen a surge in market trends, trading tools and overall potential in the industry. Forex trading is now available 24/5 (excluding weekends). It begins in Australia, moving all the way to the US to end the market day. This means that traders can trade from any location and at any time of the day with advanced options in platforms, such as the new MetaTrader 5 platform. With more people beginning to learn how to trade CFDs, Forex and other markets, it’s crucial for traders new and experienced alike to understand the main features of this trading year and how it can affect the markets.

In with MT5, out with MT4

The trading industry is slowing but surely integrating the use of the MetaTrader 5 platform over MetaTrader 4, which will eventually fade out. While MT4 has been the go-to platform over the past several years and is still the most popular platform among brokers, MT5 is being increasingly added as an option by many brokers recently.

Fed rate hikes and treasuries

Philadelphia Fed President Patrick Harker has predicted two interest rate increases will occur in 2018. This is good news considering that three rate hikes were previously predicted for the year. The norm of looking at 12-month Treasuries is equal to the cash rate and should see the market cash rate double in percentage.

How risk-on affects the AUD

A risk-on situation in the markets usually causes increased buying of AUD because the prices of commodities see an increase during this time. When this happens, stock prices also rise, causing more positive swaps in AUD pairs. In the opposite situation during a risk-off environment, the JPY demand will increase. As a result, AUD/JPY is the best currency pair when equities experience either bullish or bearish trends. This makes the AUD/JPY vs ASX200 a wise correlation in these circumstances.

Oil prices

Over the past few years, the price of oil has gradually increased after OPEC announced a reduction in production. As this occurs, a decrease takes place in the USD/CAD currency pair because of the strong relationship the Canadian economy has with their exports.

Using the Yen to determine risks

A risk-off environment has a positive effect on the JPY because stocks begin to drop, causing an increase in the selling of riskier assets. The strength of the JPY can be determined by correlations such as a 100% risk-off environment, an increase in gold, a decrease in equities and commodities, and the strengthening of the JPY.

Regulations, negotiations and presidential elections

Additional events and releases that will affect the markets include new regulations on cryptocurrency like Bitcoin regarding its status as an official currency. The GBP runs the risk of fluctuations and volatility as Brexit negotiations continue to progress. Vladimir Putin winning the Russian presidential election in March of 2018 also affected the price of the USD/RUB currency pair.

The constant back-and-forth between the US and China regarding trade agreements has had one of the most significant influences on the markets in 2018. This is especially true because of the manipulation of the Yuan by the Chinese Central Bank.

Strategies for the year

The year may be nearly over, but it is never too late to rethink your trading strategies to adapt to potential movements. Currency pairs like EUR/USD, GBP/USD and USD/JPY hold much potential for the remainder of the year. Indicators like volume and simple moving average (SMA) are key for trade signals and should be monitored daily. It will prove extremely effective to make use of the MT4/5 Supreme Edition function on the platforms. It is also essential to make use of economic calendars to monitor news and events that can affect the markets. Finally, be sure to implement risk management tools like the volatility protection settings (VPS) on your platform.