Stocks start the week on the front foot as Cypriot resolution draws closer

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European indices picked up the torch from their Asian counterparts to start the week in the green this morning, after weekend negotiations saw a deal agreed to avoid the collapse of the Cypriot banking system. Full details of the agreed terms remain sketchy, but it appears likely that savers with less than E100k on deposit will be protected – though the fact that such a decision had to be made at all shows how far we have fallen…

 

Financials have responded positively to the bailout deal, and leading the UK blue chip index early on are Aberdeen Asset Management who announced a big bump in assets under management – up 10% since the end of 2012 as inflows of new client money hit £3.5bn in the last two months. JP Morgan have taken a positive view of the stock’s medium term prospects, recommending that their clients take an overweight position with a price target of 532p.

 

Also edging higher are sector peers Schroders, up around 3% after being upgraded to ‘Buy’ at both Canaccord and RBC Capital Markets as the brokers take a bullish view of the fund manager’s Cazenove acquisition. Both firms site a 2400p price target.

 

Engineers Kentz are also forging their way higher as traders send the share better bid on news of improved full year revenues that fed a strong rise in pre-tax profits. CEO Christian Brown commented that the future outlook for the firm continues to be positive, with a strong order book heading into 2013.

 

Continuing their phenomenal recovery are travel group Thomas Cook, who see their stock over 6% higher on positive comments from JP Morgan, who added their weight to the recent rally with a 140p near-term price target. Given the 500% rally in the last five months, there is a feeling amongst some that the horse may already be out of the stable door…

 

A quiet day on the macro calendar may give way to afternoon speculation over the exact terms of the Cypriot package, though pre-market numbers from Dollar General may focus the minds of traders with an interest in the retail space.

 

For further information on trading shares, indices or other financial products visit CMC Markets CFDs

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CFD Trading Tips: How to Achieve Market Success

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CFD’s (contracts for difference) stand as one of the most popular derivative products on the financial market, primarily because they enable traders to profit within volatile and variable environments. Used to speculate on a number of underlying financial instruments, CFD’s give traders the opportunity to take both long and short positions in the market according to their needs.

While trading CFD’s is renowned as a flexible and potentially lucrative method of investment, however, it also poses significant risk. If you wish to trade CFD’s as a way of seeking an advantage in changeable markets such as the foreign exchange, then it is necessary to build a core base of knowledge and develop a viable strategy.

Trading CFD’s: 3 Points to Bear in Mind

Before striking the delicate balance between risk and reward as a CFD trader, however, there are several key considerations to keep in mind. Consider the following: –

Establish Achievable and Considered Trading Goals

Before you commit money towards the delicate art of CFD trading, it is crucial that you develop a set of clearly defined and achievable goals. This not only helps you to determine a viable amount of starting capital and an understanding of how best to use it, but it also plots a path along which you can scale your efforts as you begin to gain financial returns. The majority of successful CFD traders have been content simply to remain in profit during the first year of trading, before using heir hard earned experience and long term goals to steadily improve their performance. This is especially important if you intend to forge a career as a CFD trader, and hope to achieve an acceptable annual remuneration.

Take Control of your CFD Leverage

The potential for a margin based return is something that generally appeals to traders, as this leverage enables them to generate profit far in excess of their initial outlay. This also brings inherent risk, however, as it is also possible to incur losses far beyond your financial means. Controlling such powerful leverage is critical if you are to succeed when trading CFD’s, as sudden market shifts can leave you vulnerable and exposed to hostile conditions. If you continue to increase your position out of proportion to your capital base, for example, then you can easily lose far more than you can realistically afford. To negate this, ensure that you start small and keep your level of exposure in line with the tangible wealth that you have at your disposal.

Use CFD Stops to Minimize Risk

Regardless of your trading strategy and level of risk aversion, it is important to minimise your potential losses when investing in CFD’s. Even cautious investors can find themselves cut adrift in a volatile market space, especially if they fail to implement stop losses on their trading account. Stop losses can help you to retain a higher degree of your capital when trading, as they automatically trigger the sale of a security once it reaches a predetermined price. With this in mind, take care to ensure that every individual trade has a well defined CFD stop assigned to it. In addition to offsetting risk, stop losses also remove a great deal of human emotion from your trades and allow you to execute more financially sound transactions.

The Last Word

While CFD trading can be rewarding, it is also an exercise that remains fraught with risk and the potential for loss. As a general rule, it is important that you strive to learn about the art and the market in which you intend to operate, while also developing a core strategy and risk management process. As a starting point, you may wish to make use of free resources on the Internet to build your understanding, visiting pages such as www.alpari.co.uk/en/cfd-trading.html with a view to refining your trading technique.

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March to be Volatile for USD

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On March 1st mandated government spending cuts due to failure to reach a consensus on spending are scheduled to take effect. These will culminate on the 27th of March when the US Governments spending authority expires. Action prior to that is not expected.

Presuming this ‘Congressional Sequester’ will end like the fiscal cliff issues of 2012 may be a big mistake. The political climate is not favouring that outcome. With no major elections scheduled for 2 years congress is expected to use the mandates for political cover and allow the cuts to happen. The cuts will occur according to most experts and congress will use the following chaos to force the cuts of their choosing.

Futures Trading in currencies will be effected as well as standard Forex and a careful analysis of key indicators you are using in your trading strategies is a must. The volatile market their will provide ample opportunities to profit from fluctuations in the USD against major currencies for those willing to test the waters.

Traditional thinking would suggest spending cuts will result in slowing of the US Economy and possible recession. While recession in the US would indicate a weakening dollar it must be considered that any recession in the US economy will dampen other global economies as well off. This may offset some of the decline.

A stronger USD may result if believed the spending cuts are needed for a long term positive effect on the economy. The strength of the dollar increasing as a result of reducing debt levels in the US is a possible mid to long term outcome.

Further supporting this idea is that the government will not be able to put together a spending or incentive plan to support the economy without spending authority. An artificial influx of new monies into the economy while being favourable to stocks often acts to weaken the USD. The mandated discipline may be looked upon favourably in the global economy. With the Federal Prime Rate is already hovering at .25%- .75% it is not possible to reduce it further. An increase in rate would however signal serious inflation concerns with a dramatic effect on the value of USD.

If you choose to take a position with the USD in the coming weeks volatility is obvious. Taking advantage of this volatility can be done with a price action strategy and using your Forex platform for automatic price point trades for timely profit taking and to reduce losses in excess of tolerances. Traditional indicators may be skewed by reactionary changes in currencies due to political and media reports.

The US Stock market risks are more predictable. Consumer confidence is already dropping on the media coverage of the upcoming weeks. The short term increase in consumer spending traditional for February and March during the US tax season is lower than normal due to this drop in confidence. The lower consumer spending when combined with drastic reductions in Government spending are expected to hit the stock markets hard as quarterly results are announced.

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