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BETWEEN THE TRADING
FLOOR
AND THE
FINAL
SCORE...
The battle for the forex markets has begun issue 11 SEPT 2011 £3.95
Celebrity Traders: KEVIN KEEGAN & ROBBIe SAVAGE
HOW TO COPE WITH VOLATILITY
US ELECTION 2012: MARKET IMPACTs?
CITY GUIDE: BERLIN
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Š Citigroup, Inc., 2011. All rights reserved. Citi, Citi and Arc Design and CitiFX Pro are trademarks and service marks of Citigroup Inc. and used and/or registered throughout the world. Trading foreign exchange involves a high degree of risk. CitiFX Pro offers trading on margin. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should ensure that you understand the risks and can withstand the losses and that you seek advice from your advisors as appropriate, please see www.citifxpro.com for further details. This information is directed only at persons in the UK who qualify as Professional Clients (as defined in the rules of the Financial Services Authority) and CitiFX Pro is only available to Professional Clients in the UK. Classification as a Professional Client may require an assessment of the person’s experience and knowledge (in rolling spot or similar instruments or markets). CitiFX Pro is a service offered to you by Citibank International plc which is authorized and regulated by the Financial Services Authority. Registered Office: Canada Square, Canary Wharf, London E14 5LB. VAT registration number GB 429 625 629. The main business of Citibank International plc is banking and securities business. It is entered on the FSA register under number 122342. * See www.citifxpro.com for details of our premium account pricing.
We are a global leader in FX trading Citi has a legacy of over 100 years in the FX markets. During this period, we have served leading corporations, hedge funds and other investors, banks and governments. CitiFX Pro is available to professional individual traders and small to mid-sized institutions. Trading with CitiFX Pro means you have a direct relationship with a leading FX brand, institutional grade research and commentary, special events with CitiFX strategists, tight spreads & more.
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THE OPEN | WELCOME
EDITOR’S LETTER Summer lovin’…not so much Is it really September already? Well then that’s the summer over I guess, so thanks for all the memories. I can’t actually remember any of those long, hot, hazy days we’ve all enjoyed in seasons past at the moment, but I’m sure they’ll come back to me at some point. There are few things I can recall though. My personal highlights of the latest instalment of the great British heat wave included a fake stag weekend (it’s a long story) to Newcastle, where it rained a lot. Another day was spent at The Open Golf Championship, which returned to my hometown for the first time in eight years but was extremely wet, and my first Glastonbury festival, where the weather was…well I think you get the picture. Throw into the mix the fact that for the past three months we’ve been incredibly busy at The Exchange, which is always a good thing but has kept us all tied to our desks for weeks, and it’s no surprise that I’m pining for just a few more days of sunshine in the month ahead. And it’s not as if we haven’t earned it. As I’m sure every man and his dog has already told you the weather this summer was the worst it’s been since 1993 (so I’ll repeat it for your pleasure just one more time). The buzz word in the markets last month was volatility, which in turn resulted in one of two things. Heavy price swings means money moving all over the place, so for traders who managed to ride the crest of a trend or two it’s been an incredibly profitable few weeks. But, for everyone with a trading account in the black this month there was at least one caught out by the sinking FTSE. It’s been something of a cold month in more than one sense for many. Forget that, it’s time to look ahead then I hear you cry. I couldn’t agree more, and there’s no better place to start than with this month’s magazine issue. As well as the usual dose of fundamental market analysis you can get up to speed with the best forex providers in the market from the UK and US, read our review of the revamped Playboy Club and pick up tips on how to make a profit betting on the US Open and Rugby World Cup.
4 | THE EXCHANGE | September 2011
Away from the markets the biggest plus at this time of year, in our office at any case, is that the football season is well and truly underway. The transfer market is closed until January, meaning we can get on with the business of actually playing some games for the first time since May. I’ve made no secret of my Manchester United roots (which are spiritual, if not geographical), and made a promise in a blog a few weeks ago to lay off the old enemy (if you’re 24 and started really getting into football in the late 90s) Arsenal. I wasn’t sure I’d be able to do it, but right now I feel like it would be the equivalent of bullying a small child if I made I a comment on last week’s result, which is a shame because victory over the Gunners is usually the highlight of my football calendar. Seriously, watching Arsenal go down 8-2 was almost as depressing for me as it was for the Gooners I was watching the game with. If Wenger can’t resurrect his troops to something near to an acceptable standard I’ll have no choice but to stop following my second team; whoever’s playing Arsenal. Good luck with Yossi Benayoun by the way, Arsene. He couldn’t even get a squad number at Chelsea, but I’m sure he’ll be dynamite for you. Ok that is the last dig, for definite. Anyway that’s enough from me, I hope you enjoy the issue and have a profitable month in the markets. I’ll just be praying for a bit of sunshine.
ALEX HAMMOND EDITOR
EDITOR Alex Hammond ART DIRECTOR ALEJANDRO GUERRA-PALACIOS Writers & CONTRIBUTORS SANDY JADEJA Jonathan AssIA DECLAN FALLON KEN FISHER RICHARD PARRY MARK SOUTHERN ANDREI TRATSEUSKI Michael Hewson Peter Webb ZOE FIDDES SIMON SMITH GREG MICHALOWSKI ATIF LATIF SVETOSLAV GEORGIEV KELLY BREWER STACEY WRIGHT VICTORIA POWER DIGITAL CONTENT & MARKETING ANDREW CAPEL Public Relations Mark Southern Polygon PR SOCIAL MEDIA MANAGER Simon wiltshire SUBSCRIPTIONS subscription@theexchangemagazine.com
PUBLISHED BY The exchange
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ISSN: 20472625
© 2011. The Magazine is published by The Exchange. All rights reserved. The publishers declare that any publication of any advertisement does not carry their endorsement or sponsorship of the advertiser or their products or services unless so indicated. Contributions are invited and, whether or not accepted, submissions will be returned only if accompanied by a stamped addressed envelope. No responsibility can be taken for drawings, photographs or literary contributions during transmission or while in the Managing Editor’s hands. Proof of receipt is no guarantee of appearance. In the absence of an agreement, the copyright of all contributions, literary, photographic or artistic belongs to the The Exchange. This publication (or any part thereof) may not be reproduced, transmitted or stored in print or electronic format (including, but not limited to, any online service, database or part of the internet), or in any other format in any media whatsoever, without the prior written permission of The Exchange. The Exchange accept no liability for the accuracy of the contents or any other opinions expressed herein.
Forex & CFD Trading. Worldwide.
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CONTENTS
28 20
contents
the open
the spread
FEATURED
the close
12 Ups & Downs 14 Book Club 16 Five good minutes with... 20 Celebrity Traders: Kevin Keegan & Robbie Savage 24 Trader TV
28 The FX War
58
6 | THE EXCHANGE | September 2011
the long
36 The Swiss Franc Factor 38 Sovereign Debt Market 40 Ken Fisher 42 Less popular currency pairs 44 Getting started in forex 46 Trading through volatility 48 Looking for a guiding light 50 Anticipating a trend 52 Chart wonk 54 Measuring Volatility 56 Market Update 58 Sports spread betting
64 Restaurants 66 The Playboy Club 70 City Guide: Berlin 74 Weekends 76 Sweet Suite 78 Five Best
82 Flights 84 Who’s Who 86 Glossary 90 Killa Villa
66
TRADING THE EURO IS EASY? BULL .
Forex is tough. It takes skill to avoid being gored by the unpredictable. Can you handle volatility when it charges?
isforexhard.com
Trading off-exchange foreign exchange on margin carries a high level of risk and is not suitable for all investors. Running of the Bulls, Pamplona, Spain
Your rightful place Becoming a Club Wembley member will give you guaranteed access to world-class events* until 2018, in the finest seats within Wembley Stadium. You can also experience the exclusivity of the Club Wembley concourse with a variety of restaurants and bars for you and your guests. To guarantee you’re here to enjoy our next big event call Harry Tyndall on 020 8795 9781 or email harry.tyndall@wembleystadium.com
*Subject to licence agreement. Concerts are options events. Matches that form part of a tournament where The FA are not the owner such as the Olympics Games, the Rugby World Cup or The UEFA Champions League Final are not included.
The greatest views from the greatest stadium Club Wembley is the finest way to enjoy all the action at one of the world’s greatest stadiums. Choose the right seat for your business needs from commanding corner views to fantastic half-way line seats or even the exclusivity of your own Corporate Box. A Club Wembley seat licence is the only way to guarantee access to the best events until 2018* including: • • • • • •
All England Senior home games The Football League Cup Final The FA Cup Final Both FA Cup Semi-Finals The FA Community Shield The Rugby League Challenge Cup Final
In addition, members have first option to purchase tickets or hospitality packages for other world class sporting events and concerts*. This year’s events calendar sees the return of the 5th NFL International Series^ game at Wembley Stadium in October, with the Tampa Bay Buccaneers hosting the Chicago Bears, and the UEFA Champions League Final* is set to return in 2013.
Working hard for your business
The ultimate stadium. The ultimate club.
As competition to maintain professional partnerships and win new business continues to grow, the need to establish lasting relationships with clients becomes increasingly important. Corporate hospitality has long been seen as an ideal opportunity to nurture these relationships.
Club Wembley offers more than just the best seats in the house for the greatest events, there a number of additional benefits available to members.
Club Wembley is a powerful and rewarding way to entertain guests. It builds loyalty with existing clients and makes potential clients feel valued as well as making staff and colleagues feel rewarded. Members have access to the exclusive Club Wembley concourse which offers a kilometre of restaurants and bars. Choose from the formality of The Venue and Arc Restaurants which offer traditional cuisine to The Venue and Arc Brasseries which offer a more informal atmosphere with a contemporary hot and cold buffet. For a light snack, the Champagne and Seafood bars offer a more relaxed environment. To make the journey to the Stadium easier, all Club Wembley members have use of the complimentary train service which brings passengers into Wembley Stadium station. Tickets are available for London Marylebone, Beaconsfield, Bicester North, Warwick Parkway and Birmingham Moor Street.
• Club Wembley Connections gives members access to a range of exclusive offers and discounts with top name brands plus access to a whole host of tickets and hospitality outside of Wembley Stadium including the Barclays ATP World Tour Finals, London Bierfest, Wimbledon and so much more... • Exclusive opportunities to attend a variety of exclusive Member Events including golf days, networking events and and post-match conferences**.
Interested? Find out more... Contact Harry Tyndall on 020 8795 9781 or harry.tyndall@wembleystadium.com for more information about Club Wembley or to arrange a meeting.
Of course, it doesn’t have to be all work and no play. Club Wembley is also an ideal setting for spending valuable time with friends and family. Whoever you decide to bring with you to Club Wembley will always remember their experience at this exciting venue. ^Subject to availability *Excluding the FIFA World Cup Finals tournament; the UEFA European Championship Finals tournament; the Olympic Games; any association football match staged at the Stadium where The FA or the Football League is not the owner. We will however try to secure tickets for these excluded bid events where possible. ** Member events are subject to availability and may change year on year. Places will be limited to each event. Details of these events will be communicated to Club Wembley members with prior notice. Club Wembley reserves the right to change or withdraw member events at anytime.
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SPREAD BETS | CFDs | FOREX / gftuk.com / +44 (0) 20 7170 0770 GFT Global Markets UK Ltd. is authorised and regulated by the Financial Services Authority.
LET’S GET GOING
OPEN THE
IN THE OPEN UPS AND DOWNS BOOK CLUB FIVE GOOD MINUTES WITH... CELEBRITY TRADER TRADER TV
Bulls & Bears on the Box
Manchester United to float stake in club on Singapore market In a move that has surprised many of the club´s supporters, Manchester United announced last month that it is to sell off a stake in the club , in the most part to pay off their gross debts of £515m. The Glazer family, who took control of the club in 2005 on the back of huge bank borrowing, removed the club from the LSE but will now be looking to sell of a minority stake off through the Singapore Stock Exchange.
It was initially hoped that the share offering of between 25% and 30%, which could raise up to £600m for the Glazers, would be completed in as little as four months, but this now looks unlikely, with the SG stating that the procedure could take up to two years. As well as United’s debt issue, analysts have seen the Singapore listing as an aggressive move by the club to create an even bolder presence in Asia.
September 2011 | THE EXCHANGE | 11
THE OPEN | UPS AND DOWNS
UPS&DOWNS
From news stories to trading issues, a round-up of the things that have caught our eye this month
Send us your news, views, and unprintable gossip at: editor@theexchangemagazine.com
Market closed, but was £485m invested or lost?
China manufacturing expands for first time on four months Manufacturing in China expanded for the first time since April last month, despite a slowdown in a number of its key markets. In contrast to expectations China’s Purchasing Managers Index (PMI) increased by 0.2 in August, from 50.7 to 50.9 the China Federation of Logistics and Purchasing (CFLP) reported, although it also said it expects harder times and uncertainties in the near future. China is still the world’s largest exporter, however it is now having to cope with the fact that demand for exports in its key markets in
12 | THE EXCHANGE | September 2011
the US and Europe has declined significantly as economic growth in much of the Western World continues to slow down. The knock-on effect of this reduction of exports will be an inevitable slowing down of growth in China as well. An increase in the cost of raw materials is also having an impact on supply costs, and many analysts now predict that, in conjunction with falling demand, this will be the determining factor in the continued deterioration in growth of the Chinese economy.
In the financial sector we’re used to having access to the markets 24 hours a day, 365 days a year. For others though, including the powers that be at England’s biggest football clubs, the markets are much more limited. The transfer window officially closed on 31st August, closing the door on what had been one of the busiest sending periods in British football in recent memory. Premier League clubs alone spent £485m in the summer transfer window, business analysts Deloitte have reported, £120m more than the same period last year. Where the money will come from to cover such an outlay is a question for the Premier League’s money men to ponder, but the only question football fans are interested in is “was the money well spent?” The answer, of course, is that only time will tell. Arsenal, Chelsea, Manchester City, Liverpool and Manchester United have spent over £50m apiece in the last three months, but it will be results on the pitch that will be the deciding factor as to whether the finance has been well invested or simply poured down the proverbial drain. The Manchester clubs, armed with new recruits including Ashley Young, Phil Jones and Sergio Aguero, are currently looking like the class acts of the field. But with nine months to go there’s a lot of football to be played before we’ll know whose money has talked and whose has walked into the sunset, for this year at least.
THE OPEN | UPS AND DOWNS
New season of Forex Championship kicks off Amateur traders and complete novices are looking forward to being able to trade like the big boys this month, as September sees the highly anticipated return of the Forex Championship for a fourth year. The foreign exchange trading competition, in which entrants trade virtual money but can win money prizes every month and at the end of the season depends on their trading results, begins on 1st September, although accounts can be registered after this date. The Forex Championship is the largest
Trading Contest in the Forex brokerage industry, with the volume of transactions exceeding €3.5bn in the competition last season, and €264,000 being handed out in monthly prizes. Over €1m was also distributed via the tournament’s MILES system, giving players free margin on real accounts at forex broker RTFX who manage the event. RTFX are also claiming many new features and improvements on last year’s tournaments, meaning that this year looks set to be the biggest and best Forex Championship to date.
Irish spread betting firm hit with fine after investigation regulations breached An Irish financial spread betting firm once based in Dublin has been fined €40,000 by the Central Bank after it was determined that it had inadequately implemented rules aimed at protecting consumers. Pan Index Ltd, which closed in July 2011after failing to make a significant impact in the UK markets, was found to have breached European regulations relating to the level of customer care it supplied to new account applicants. It failed to ask potential clients about their knowledge and experience of the spread betting and CFD markets, which regulations dictates all spread betting companies must do when assessing whether services being sought by the potential client are approproriate. The regulation breaches were detected during an inspection carried out by the Central Bank in March earlier this year. Although the fine doesn’t appear to directly affect the spread betting consumers in the UK It is currently unclear how this judgement will influence other more prevalent spread betting companies in the UK.
FSA fines Swift Trade £8m for multiple accounts of market abuse The Financial Services Authority has slapped a Canadian company Swift Trade with fines worth £8m for manipulating the London Stock Exchange for its own benefit. Swift Trade is now a dissolved business and a tribunal will now assess whether the FSA fine is to be upheld, but the regulator has insisted the record fine is appropriate due to the seriousness of the offence. Swift Trade had been placing tens of thousands of orders to give “false and misleading impression of supply and demand”, which
was in clear contravention of market regulations. It is believed Swift Trade made £1.75m from manipulating prices on the LSE between January 2007 and January 2008. Suspicions were raised by the FSA as early as 2007, but once these became public Swift Trade simply refined its trading patterns in an attempt to evade detection of its flouting of market restrictions. The decision to fine the company was made in May this year, but due to court orders and proceedings the details were only released last month.
September 2011 | THE EXCHANGE | 13
THE OPEN | BOOK CLUB
The Exchange Book Club The thinking trader’s answer to Oprah
Each month the Exchange takes you through the trading literature you’ll need to amass the ultimate spread betting library. This month: Steve Ward’s High Performance Trading, Spread Betting the Forex Markets by David Jones and The Naked Trader’s Guide to Spread Betting by Robbie Burns High Performance Trading In 2005, sports and performance psychology coach Steve Ward received an invitation from an unexpected quarter: a major trading institution in London. Up to that point he had only worked with elite athletes, sports teams and corporate clients, teaching key techniques for operating at top performance under mental pressure. He then found himself on a trading floor in the heart of the City, tasked with helping traders to improve their profitability. The two worlds turned out to be surprisingly similar. Over the next year, Ward led the traders through a course that focused on maximising performance by reducing psychological weaknesses and bolstering discipline and resilience. With the traders making strong advances by the end of the year, he went on to work with other financial institutions across the globe. He even began trading himself. The results of all this work are now available in his well-regarded book High Performance Trading, which brings together 35 core psychological strategies for successful trading. The book is structured around the three key stages of trading: preparation, execution and evaluation. For each, the author introduces a range of techniques to help minimise unhelpful trading behaviour and maximise effective actions. Appropriately, the book has a strong practical dimension, with exercises and examples throughout, and the advice is all reassuringly concrete – so whilst the subject matter is often psychological, things never descend into psychobabble. Successful traders know that an effective trading strategy is only one half of the battle. There couldn’t be a more helpful handbook for those who want to get on top of the other: the mental game of the markets. 14 | THE EXCHANGE | September 2011
Spread Betting the Forex Markets: An expert guide to spread betting the foreign exchange markets Spread betting and the foreign exchange markets are areas of finance that have increasingly piqued the interest of traders in recent years. Developments in technology and the improved access private traders have gained to the financial markets in the past decade have made spread betting and forex extremely hot topics. In this lucid and instructive practical guide, IG Index’s David Jones explains the basics of spread betting, outlines the essentials you need to know to trade the forex exchange market, and shows how you can use spread betting to trade forex. The topic of risk is also covered extensively; Jones explains that it is critical to take risk seriously from the off if you are to trade this market successfully. In the latter section of the book Jones provides real value for readers, as he develops trading strategies for use in the forex markets. These are approaches that you can put into practice straightaway using spread betting and at a level of risk that suits your own particular circumstances. If you are a beginner to forex trading this book will provide you with an expert introduction – helping you to succeed by avoiding the most common pitfalls of this highly volatile but fascinating market.
The Naked Trader’s Guide to Spread Betting The Naked Trader is the highly successful everyman’s guide to trading the stock markets, written by Robbie Burns, a former journalist turned private trader who has made more than £1million on his own in the markets. Much of what made it so successful can be found in his recent sequel: The Naked Trader’s Guide to Spread Betting. For anyone already au fait with their trading, of course, some of the nuts and bolts that it goes over can be happily skipped. The rest remains compelling: a selection of well-thought-out strategies, backed up with numerous examples; plenty of practical advice on risk management; and some memorably grisly true trading tales. The book skips over charts, taking a resolutely fundamental approach. This may not be to the liking of some, but Burns is an eloquent evangelist for his common-sense methods – detailing at length how to make money from a range of market situations. All this and a nice light tone (with cartoons and amusing details dotted throughout) makes it the perfect introductory guide to spread betting – ideal for a funny and sometimes provocative refresher or to give to anyone who’s ever asked you to explain just what spread betting is.
Central Markets Media Room
Play the markets with insight Introducing the new Central Markets Media Room. Essential market commentary and data from our Chief Market Strategist, Richard Perry We are pleased to inform you that we have now launched the Central Markets Media Room. Within the room you can download market reports, press articles and also watch the latest television interviews with our Chief Market Strategist, Richard Perry. The Media Room is fully accessible for all Central Markets clients and investors and it is invaluable to those who wish to gain a broader perspective of the finacial markets whenever they wish. Everyone can visit the media room and have access to a selection of reports. To gain access to the complete suite of information you must register your details. What Central Markets can offer you: •
Access an archive of Richard Perrys TV interviews and market commentary
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Register online for the latest of our free no obligation reports.
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+44 (0) 207 265 7900 | www.centralmarkets.co.uk
Risk Warning: The value of investments can go down as well as up and you may not necessarily get back the amount you invested. Contracts for difference (cfds) and fx are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary and only speculate with money you can afford to lose. Authorised and Regulated by the Financial Services Authority - No 473312
THE OPEN | FIVE GOOD MINUTES
Five Good Minutes With… Gary Tilkin, President & CEO, GFT How long have you been in the forex industry and how has it changed over that time?
What is the profile of the protoype GFT retail
GFT was founded in 1997 as one of the first brokerage firms in the United States to offer online forex trading, but by then I’d already been trading futures and currencies for nearly 20 years. As technology has progressed, so has this industry, across continents and the ever-shortening distance between the markets and the consumer. There’s never been a time in history where the markets were this convenient to access.
There really isn’t one. Since every trader is different, it would be quite limiting to appeal to just one type. Instead, GFT strives to serve traders of all types: first time traders to advanced, casual speculators to full time traders.
trader, or is there not one?
Can we expect any technological developments from GFT in the near future? GFT is always looking for ways to remain competitive in the marketplace. Not just in our pricing, but also our technology. We’re working on several new product offerings and automated trading platforms. We’re also working on several automation initiatives to revolutionise our application and funding processes. Look for these to debut in the UK market this year.
Where does GFT currently fit into the UK retail forex market? GFT is a global leader in online currency trading and currently offers spread betting, CFD and spot Fx retail products to our customers in the UK, and those in surrounding countries who paper through our London office. Our pricing is competitive - as low as 0.8 for currencies, 0.3 index points for CFDs - and on-par with or better than other UK-based dealers. This is a great market with some great traders and looking ahead, we’re excited about some new offerings that are just around the corner for this region.
What distinguishes GFT from other forex trading platforms? The pride of GFT has always been our awardwinning DealBook® suite of software. The desktop platform DealBook® 360 is mostknown for its robust charting and completely customisable interface. We also have a web-based and mobile application, so you can take the markets with you virtually anywhere. GFT is known among savvy traders as having some of the best execution in the business during both quiet and volatile times, coupled with 24/7 service. GFT customers know that they can reach us 24/7 with any trading or software questions that might arise.
16 | THE EXCHANGE | September 2011
“GFT is known among savvy traders as having some of the best execution in the business during both quiet and volatile times, coupled with 24/7 service”
Are the markets currently conducive to profitable FX trading? The very nature of the markets can be summed up in one word – Volatile. And any time there are market movements, there are opportunities. But volatility does not always mean opportunity. Traders must be careful to fully understand and be prepared for the risks involved. With enough analysis, education, and a good trading plan, a smart trader can learn to make the most of this volatility.