The United States / China Trade War and Forex Trading

The Trade War Explained

Even before Donald Trump became president of the United States, he held the believe that China manipulated its’ own currency for economic advantage. Whether the believe was actually true is another matter.  But being the president of the United States, Donald Trump’s administration has embarked on a trade war with the Peoples Republic of China.

The 2018 trade war started with a single safeguard by the United States on washing machines and solar cell panels in January. This safeguard has pick up speed escalating into a full scale tariff war. At the core is President Trumps’ belief that trade deficits with countries around the world are hurting the U.S. economy and in particular manufacturing.

The reaction by China is a tit-for-tat response by imposing tariffs on $250 billion worth of Chinese imports. Tariffs were imposed especially on US agricultural goods.

The trade war has increased global economic uncertainty while the USD is strengthening against all major currencies, not least of which is the Chinese yuan. The effect is that US exports become more expensive and thus less attractive. True to his nature has President Trump tweeted that the Chinese and Europeans are manipulating their currencies to hurt the US. The Feral Reserve was also not spared. The Fed’s interest rate increase pushed up the exchange value of the Dollar.

The Trump administration has targeted China, the 27-member European Union and neighbors Mexico and Canada with trade tariffs. Despite a warning by President Trump to these countries not to retaliate in kind to US tariffs, the affected countries did just that.

China took some sting out of the US tariff sting by allowing its currency, the yuan to slide 9% against the dollar. This is the lowest level in several years making Chinese exports much cheaper. For the Chinese yuan to fall that far was a conscious decision, because Beijing still largely controls the value of its currency and could have intervened to stop the slide. In some ways the move to weaken the yuan was quite easy as the currency had steadily gained in value the prior year, providing some room to fall without causing too much damage.

Now, with Trump’s tariffs set to escalate even further, there are fears that China could just let the yuan fall as it did this summer, essentially unleashing a currency devaluation that would further ramp up bilateral tensions.

In late September, the United States levied 10 percent tariffs on $200 billion worth of Chinese goods, and the tariff is scheduled to rise to 25 percent in January. Trump has also threatened additional tariffs on $267 billion worth of Chinese products, adding up to essentially everything the country ships to the United States.

What happens to currencies when tariffs are imposed?

When a country imposes tariffs on another country, doubt is created on the imposed country’s economic outlook and raises the likely outcome of a retaliatory tariff decision. When there are doubts on the economic outlook of a country, investors are more likely to pull their capital from the country and that could lead to currency declines.

A decline in currencies normally lead to price instability and enhanced volatility.

Trade Forex with the Chinese Yuan

The currency of the People’s Republic of China is known as the Renminbi (directly translated as the People’s Currency) with the actual bank notes and coins themselves being called the Chinese Yuan. This is similar to the UK currency being known as Sterling, with the notes and coins being referred to as the Pound. The symbol used for the Yuan is ¥, and there are three Forex codes connected with this currency: RMB, CNY and CNH (which refers to the offshore tradable currency). The Chinese Yuan is used across the People’s Republic of China but not in Macau or Hong Kong (although it is sometimes accepted in these two regions), and it is not accepted as legal tender in Taiwan.

The rate of the CNY is set by the central bank, the People’s Bank of China, and it has a narrow band of variation, basing its value against several international currencies. The Yuan was originally pegged to the US Dollar, and this has been the case off and on over the last few years, with the most recent de-pegging occurring in 2010.

CNY/USD Explained

The currency pair CNY/USD is becoming increasingly popular with all kinds of investors due to the rise in interest in the Chinese economy. This pairing refers to the Chinese Renminbi currency and the US Dollar.

The Yuan is now the ninth most-traded currency worldwide. Each Yuan is made of 10 Jiao, and each Jiao consists of 120 Fen.

The CNY/USD pair is an exotic currency pairing because there is less trading of this pair when compared to the Cross and Major pairs, there is less market liquidity, which leads to a higher cost of trading.

There are several advantages to choosing to trade the exotic CNY/USD pair:

  •  Predictability – As there is a lower trading volume and slower trading pace in the CNY/USD market, price action can be predicted more easily, making long-term trades a possibility.
  • Fewer traders – CNY/USD transactions have a higher cost than that of major pairs, and when combined with the lower exposure of this pairing to the global Forex trade community, it means that speculators and casual investors are excluded from the market. This results in fewer traders.
  • Opportunities for diversification – The CNY to USD trade usually attracts more experienced investors wishing to develop a more diverse portfolio of investments. The CNY/USD market enables them to try a more unusual market, which may bring a greater profit should the trade work out successfully.
  • Challenging opportunities – As the CNY/USD market is quite unique, it represents a more challenging opportunity for experienced Forex traders, which enables them to create their own strategies and formulas in order to achieve a higher level of trading success.

 Forex Brokers in China

With more than a billion population and fin-tech industry on the rise, the world’s second-largest economy is a country with huge forex market potential. Nonetheless, China is in fact one of the most frustrating jurisdictions in the world for retail forex brokerages.

 

The reason for this is the policy of the Chinese government, which doesn’t seem too keen on the forex industry, to put it mildly. There was a ban on advertising of forex trading and related services on Baidu, the largest search engine operator in China. It was lifted, however there are still a number of impediments to forex brokers in the country, such as the unclear license application procedure, problems with cross-border payments, as well as a leverage cap of 1:20, to name a few.

The previous paragraph needs to be seen in the light of the fact that first forex retail license has been allocated on the 19th November 2018 to a Hong Kong brokerage named Guo Tai Jun. The broker is now allowed to enter the interbank forex trading market and carry out “spot FX, futures and swap currency trading operations.”

More importantly, people in mainland China will now be able to trade with Guo Tai Jun without needing to have a Hong Kong bank account with HKD in it.

There are foreign forex brokers in China. There have been concerns about the Chinese authorities shutting down non-Chinese FX brokers after they banned crypto currency trading in the country. Yet, it appears that the brokers licensed by reputable financial agencies such as the FCA in the UK or ASIC in Australia, are out of trouble, especially if they have physical offices in the country

Yet another option for foreign brokerages who wish to operate in China is through a joint venture with a partner that is 100% Chinese owned.

Can you make a living trading Forex?

Can you make a living trading Forex?

Introduction

One of the most repeated questions asked regarding Forex trading is: ”Can a person make a
career out of trading Forex?”

This question is asked not only by persons outside the realm of trading, but also by persons
who have completed some form of training and are now wandering into Forex trading. No
doubt is this a difficult question to answer. There are many people outside Forex trading who
will answer in the negative given the perceptions that do exist of Forex trading.

The short answer to this question is simply: “Yes you can”. But like most things in life, this is not
clear cut and in black and white. The answer needs to be qualified to enable those persons who
are considering a career in Forex to make an informed decision.

Forex as a Career and Business

The first item to be aware of is the fact that if a person wants to change from a paying
profession to become a Forex trader is the fact that to succeed Forex needs to be seen as a
business and not as a part time hobby.

And like any other business will the Forex business require funding; starting capital to fund your
business and open a live trading account. Being under-funded will not result in a living wage
with Forex. The amount required to operate as a full-time trader will differ between individuals.
As a rule of thumb, to effectively manage the risk on every trade, a decent amount of money is
required in order to trade a large enough position size to make enough money to support the
trader while at the same time not risking too much of the account balance.

Part time trading for extra income is relatively easy at the early stages of a trading career. But
the period of part time trading should be utilized to learn to trade with consistency rather than
accumulating wealth. Even the part time trader who has a large sum of money available should
focus on getting consistent results. A profitable track record and self confidence will follow in
the wake of consistency. Not focusing on the mechanics of successful trading will eventually
lead to losses.

It is also possible, like with any business, that things can go horrible wrong. To counter this
possibility, the independent trader is advised to have reserve cash at hand to cover for such an
eventuality of running out of trading funds.

Tools required to become an independent trader

An independent trader requires a set of tools to become a trader of note. The following
paragraphs will highlight some of the requirements.

Educations and Training

It is important to obtain the very best education and training before considering a career in
Forex trading. The market is constantly changing, and trading skills always need to be updated.
Forex training and education is required to familiarize the novice trader with all the concepts
and terminologies. In the high risk Forex market not only the concepts and terminologies, but
also the art of trading strategies and Forex maneuvers need to be mastered. Forex education
and training should possibly enhance with the guidance of a professional mentor.

Forex education and training needs to become a life-style. However, education and training are
no guarantee for success, but will move the odds to be more favorable.

Reliable Forex Broker

Forex brokers are firms that provide currency traders with access to a trading platform that
allows them to buy and sell foreign currencies. A currency trading broker, also known as a retail
forex broker, or forex broker, handles a very small portion of the volume of the overall foreign
exchange market. Currency traders use these brokers to access the 24-hour currency market.
Before trading, a forex broker will require customers to deposit money into their account as
collateral. However, through leverage, customers can trade larger amounts than what is
deposited in their account.

Most major forex brokers will allow prospective clients to use a practice account so that they
can get a good understanding of what the system is like.

MT4 Trading Platform

The MT4 platform has become a market standard and there is a good reason for that. It is the
most advanced and trustworthy Forex trading platform available on the market, and even with
its complex and advanced features, the user interface is friendly and intuitive, making it an
attractive option for new and experienced Forex traders alike.

Doing the right things in Forex Trading

Perusing a career as Forex trader requires that the right things being done correctly. Trading
the Forex market does not only depend on being sufficiently funded and the attendance of a
training course. They are very important considerations, but other items required for successful
trading include the following:

  • The learning and mastery of an effective trading strategy with which the trader is
    comfortable
  •  Designing a tangible and working forex trading plan where items such as the following are being spelled out:
    • The risk to reward scenario
    • Forex position sizing
    • Stop-Loss distance
    • Entry and Exit strategy
  • Setting up a trading journal to create a track record
  • Adhering to careful money management principles

Psychological Factors

Forex trading is the one place where human attributes and stressful psychological factors play a
crucial role.

Trading Forex is stressful at its’ best. The market is highly volatile, ever changing and what
worked yesterday does not apply today. Forex trading is the place where fear, hope, greed,
excitement, elation and depression meet.

The person attempting to trade Forex who has little self-discipline and not in control of his/her
emotions has little chance of becoming successful in Forex trading.

All Forex traders makes mistakes and loses money. It is the nature of the beast. We all have to
live with it. The successful trader learns from it and is better prepared for the next round.

Is a career in Forex trading possible?

The conditional answer to the question has been given. A well-funded account, attendance of a
quality training course and an understanding of the risks involved, the spirit of
entrepreneurship and the preparedness to work hard in a disciplined manner will set winners
apart from the losers.

More Information on our Website:
http://www.c2wealth.co.za
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Certainty in Uncertain Times : Forex

Certainty in Uncertain Times

Background

In the times we are living we are faced with change and uncertainty. Change and uncertainty
are the only constants in our lives.
The world is in a constant mode of change. Never had the saying ”you cannot step into thesame river twice” so much meaning. For both the river and the person has changed since first

stepping into the river. The river has a few drops of water less and the person is slightly older.The items that gave us certainty in the past does not seem to be holding true anymore. We were encouraged to excel at school in academics and sports for those items would bring us to a better life. Now being away from school we find that that reality is different from what our parents and teachers told us. We are unable to find a job despite acquiring a qualification. And if and when we do manage to find a job it is often not what we want to do. The remuneration associated with a job is sometimes hardly sufficient to survive on.

Focus

We have learned that the old ways are no longer applicable in the world we are living in. To
adapt a laissez-faire attitude and let life runs its course will bring us no closer to a solution. We
have to change with the times and in our uncertainty create our own certainty.
Easier said than done you may point out. True, nothing in this life has ever been easy. But doing
absolutely nothing to change our position is fatal. We will be relegated to a position of
inferiority and we will be dependent on hand-outs. Hand-outs and dependency are not a
dignified life, not for anybody.
We must find a solution where we no longer are dependent on the hand-outs of others. Be that
the government, the churches or the community who are providing. In finding a solution we
must do a mind shift away from the old and trusted ways, for the old and trusted ways are no
longer to be trusted. We must find in the new world we are living in a solution that will give us
back our dignity and make us the movers and shakers of the world.
In the new world we are living in there are many “new ways” that we could adopt to move us to
a newer plain. In the next paragraph we are discussing one of the new ways that has the
potential to lead us to a better life.

Focus

Sometimes a solution is staring us in the face, but we do not recognize the solution. We may
have heard of it, but our view is contaminated with the prejudice that others provide.
Sometimes we are scarred to put the solution to the test for what will happen if the solution
works? Psychologically we are sometimes trapped in negative thought, for the negative thought
has become our comfort zone. Moving out of our comfort zone brings change and uncertainty.

One such a solution we would like to present has been tainted with a lot of negativity, some of
which is true. This solution is called Forex trading.
There is negativity associated with Forex trading has some truth for many people have lost
money on the Forex market. Some of the reason is situated in the fact that there are many
scams in the market place. One needs to be careful with whom you sign up as your broker.
Another reason is that people enter the market without proper training. It was found that
persons new to the Forex market who did some self-study course has the biggest potential to
lose money. Forex trading is a serious business and need to be treated as such. Forex also is no
get rich quickly scheme. It takes dedication, focus and self-discipline to become a successful
trader. Which is another reason why some people fail with the Forex market.
But what is also a proven fact is the potential that Forex has to deliver a practical solution to the
dedicated trader to became independent and maintain a sustainable income. People who
attend a training course where they are taught on a practical manner and receive support post
the training have a chance to move to a better life. The training course must provide insight and
practice in all the trading tools – analysis, the setting up and monitoring of trades, the closing of
trades, risk management and money management. The training must also address the influence
of psychology in training.

Forex as Business

To establish a Forex business you need to have a laptop, reliable internet connection, about R1
000,00 to open your account and patience and perseverance. There is no need to register a
business with the authorities.

Conclusion

You should consider Forex as an alternative career to make yourself independent and grow a
business for yourself. Forex has the potential to provide you with stability amidst an
ever-changing and uncertain world. Forex can provide you with certainty in this uncertain world.
Trading with self-discipline, focused on a daily task, repeating positive actions and finding a
reason to trade brings about certainty in uncertain times.
Forex has the potential to provide you with certainty in an uncertain world.