On Wednesday, the Dow Jones Industrial Average fell by 0.20% as increasing Treasury yields and surging oil prices weighed on investor sentiment, with the S&P 500 approaching a critical support level. The energy sector outperformed, while concerns about inflation and disappointing economic data continued to impact the market. The US dollar strengthened, driven by a contrast in economic data between the United States and the Eurozone, posing challenges for EUR/USD speculators. The USD/JPY pair approached a significant level, with implications for foreign exchange interventions, while sterling and the Australian dollar faced their own challenges. Upcoming economic data releases are expected to maintain market volatility.

Stock Market Updates

The Dow Jones Industrial Average experienced further losses, falling 0.20% on Wednesday, largely due to increased Treasury yields and rising oil prices, which negatively impacted investor sentiment. The Dow closed at 33,550.27, shedding 68.61 points, despite briefly surging by 112.77 points earlier in the session. On the other hand, the S&P 500 showed marginal gains of 0.02%, closing at 4,274.51, while the Nasdaq Composite ended the session 0.22% higher at 13,092.85. The increase in Treasury yields and a 3% spike in U.S. crude oil futures to $93.68 per barrel were key factors contributing to the market’s downward trajectory. The energy sector emerged as the best performer, rising by 2.5%, with notable companies like Marathon Oil and Devon Energy both posting gains of over 4%.

The recent market turbulence can be attributed to concerns regarding inflation, as rising rates and disappointing economic data have weighed on investor sentiment. The S&P 500 slipped below the crucial 4,300 level for the first time since June, and the Dow recorded its most significant one-day loss since March, closing below its 200-day moving average for the first time since May. September, known as a seasonally weak month for stocks, has seen the S&P 500 down by 5%, the Dow down by more than 3%, and the Nasdaq performing the worst, with a loss exceeding 6% for the month. Investors anticipate continued volatility in the coming weeks but remain hopeful for strong buying opportunities leading up to the year-end, particularly in October.

Data by Bloomberg

On Wednesday, across all sectors, the market saw a minimal increase of 0.02%. Energy performed exceptionally well with a substantial gain of 2.51%, while Industrials and Communication Services showed moderate increases of 0.76% and 0.54%, respectively. Information Technology also saw a slight gain of 0.17%. On the flip side, several sectors experienced declines, with Utilities being the most impacted, showing a significant decrease of 1.93%. Real Estate, Consumer Staples, and Health Care also had notable declines of 0.83%, 0.77%, and 0.50%, respectively. Financials and Consumer Discretionary had smaller losses of 0.20% and 0.38%, respectively.

Currency Market Updates

The US dollar showed significant strength in the currency market, with the dollar index surging by 0.55% on Wednesday. This increase was driven by the EUR/USD pair falling by 0.75% below the 1.0500 mark and approaching the 2023 low of 1.0482. The dollar’s gains were primarily attributed to a contrast between better-than-expected economic data from the United States and rising concerns of a recession in the Eurozone, compelling short positions on the dollar to seek cover. Notably, Eurozone money supply contracted at a historic rate in August, with loans to households and businesses falling well short of forecasts. Additionally, deteriorating German consumer sentiment raised doubts about a recovery this year. The USD’s recent gains, totaling approximately 7% against the euro since July, are likely to be concerning for speculators who entered long positions earlier in the year, as the EUR/USD pair hovers near its 2023 low.

In the meantime, the USD/JPY pair is approaching the significant level of 150, which many speculate the Japanese Ministry of Finance might defend, either through verbal interventions or actual foreign exchange interventions. Surpassing 150 could lead to a defense of the 32-year peak reached last year at 151.94 on EBS, potentially signaling an overdue correction. The trajectory of 10-year Treasury yields in the United States, which rose by 7 basis points to levels not seen since 2007, is crucial for USD/JPY. While US yields surge, 10-year Japanese Government Bond (JGB) yields remain at a much lower level of around 0.75%, setting the stage for further developments in this currency pair. This currency market update also revealed that sterling fell by 0.35% due to concerns about the Bank of England’s ability to combat inflation effectively, with the pound inching closer to the 2023 low of 1.1805 after an almost 8% decline from its July highs. Other notable movements in the market include the Australian dollar (AUD/USD) falling by 0.9% due to risk aversion related to issues in China and limited expectations of an interest rate hike by the Reserve Bank of Australia (RBA). The US dollar also made gains against the Norwegian krone (USD/NOK) by 0.56% in response to rising crude oil prices, particularly as Brent crude approached the $100 mark. The market anticipates more economic data releases on Thursday, including German Consumer Price Index (CPI), US jobless claims, Q2 GDP revisions, and pending home sales, with a heavier slate of releases scheduled for Friday.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Hits 2023 Lows, ECB’s Focus on Inflation, and USD Strength Dominates Markets

The EUR/USD has experienced a seven-day decline, plummeting to its lowest point since January, falling below 1.0500. The prevailing market sentiment is bearish, with no correction in sight, and the European Central Bank (ECB) closely watching upcoming inflation data from Spain and Germany. ECB members’ comments have had minimal impact, as the bank awaits crucial inflation figures this week. Spain expects a rebound in consumer inflation, while Germany anticipates a sharp decline in CPI. The US Dollar continues to strengthen, reaching new highs with the US Dollar Index nearing 107.00. Despite declining equities, US Treasury yields remain high, and economic data, including Durable Goods Orders and Jobless Claims, is closely monitored.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD moved lower on Wednesday and created downward pressure on the lower band of the Bollinger Bands. This movement suggests the possibility of further losses in EUR/USD. The Relative Strength Index (RSI) is currently at 24, indicating a bearish bias for the EUR/USD.

Resistance: 1.0547, 1.0605

Support: 1.0488, 1.0440

XAU/USD (4 Hours)

XAU/USD Slumps Below $1,880 as Dollar Surges Amidst U.S. Funding and Rate Hike Concerns

Spot Gold’s decline deepened as it slipped below the $1,880 threshold, driven by a strengthening U.S. Dollar in a risk-averse climate, while financial markets closely monitored developments in the United States, where a federal shutdown loomed due to political disagreements over funding. Simultaneously, global stock markets extended their bearish trends on concerns that central banks might prolong higher interest rates, elevating the risk of economic downturns. Government bond yields spiked, with the 10-year Treasury note hitting a 15-year high at 4.59%, and the 2-year note offering 5.11%, nearing levels not seen since the Federal Reserve’s monetary policy announcement.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved lower on Wednesday, creating downward pressure on the lower band of the Bollinger Bands. Currently, the price is hovering just above the lower band, suggesting a potential further decline for XAU/USD. The Relative Strength Index (RSI) is currently at 15, signifying a bearish bias for the XAU/USD pair.

Resistance: $1,885, $1,902

Support: $1,866, $1,846

Economic Data

Dear Client,

New contracts will automatically be rolled over as follows:

Please note:

• The rollover will be automatic, and any existing open positions will remain open.

• Positions that are open on the expiration date will be adjusted via a rollover charge or credit to reflect the price difference between the expiring and new contracts.

• To avoid CFD rollovers, clients can choose to close any open CFD positions prior to the expiration date.

• Please ensure that all take-profit and stop-loss settings are adjusted before the rollover occurs.

• All internal transfers for accounts under the same name will be prohibited during the first and last 30 minutes of the trading hours on the rollover dates.

If you’d like more information, please don’t hesitate to contact [email protected].

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

In the world of trading, where fortunes can change in the blink of an eye, traders often face challenges as intricate as Spider-Man’s adventures. Whether it’s Peter Parker, Miles Morales or any other iteration of Spider-Man, the beloved web-slinger constantly faces new obstacles in the form of supervillains and his own personal trials.

Similarly, traders who are just starting out typically face their fair share of potential pitfalls. Here are 4 common mistakes that Spider-Man would almost certainly frown upon:

1) Ignoring Warning Signals 

Just like Spider-Man relies on his Spidey-sense to avoid danger, traders have their own version of it in the form of warning signals. These signals help traders steer clear of potential trouble before making trading decisions.

By keeping a close watch on market movements, traders can identify short-term trends that might indicate whether the price of an asset will rise or fall. This forms the basis for technical analysis, a key tool in any trader’s arsenal.

Together with fundamental analysis, which revolves around underlying figures such as a company’s profits and losses, traders hence have a full array of tools to make informed decisions about their trades.

Using modern trading platforms, such as the ones provided by VT Markets, traders can set alerts—and even automatic orders—that trigger based on given market conditions. This gives them an easy, yet powerful, way to capitalise on new opportunities and avoid potential dangers in the market.

With this pseudo Spidey-sense in place, any trader can make it vastly easier to trade with an informed perspective, increasing their chances of success.

2) Falling into Analysis Paralysis 

If Spider-Man were your trading mentor, he’d emphasise the critical value of swift decision-making. In his world, split-second choices mean the difference between saving lives and disaster. In the trading realm, timely decisions are equally paramount.

To avoid the trap of “analysis paralysis,” where excessive contemplation hampers decision-making, remember that getting started is often the best first step. Traders who spend all their time looking for the perfect, “unbeatable” trade might find themselves letting a whole list of potential opportunities slip by.

Of course, this is not to say that traders should recklessly dive headlong into every trade. Just like Spider-man, you should assess the situation before leaping into action. The secret is finding the sweet spot between astute analysis and resolute action in your trading journey.

3) Adhering to One Strategy 

Spider-Man’s world is known for its diverse rogues’ gallery, an eclectic mix of villains ranging from the quirky Spot to formidable foes like Doc Ock and Rhino. What sets Spider-Man apart is his ability to adapt to this spectrum of adversaries, finding unique solutions for each.

However, some traders miss the mark when it comes to channelling Spider-Man’s versatility. They tend to stick rigidly to a single strategy that has worked in the past. While there is definitely value in consistency, failing to adjust and adapt can be detrimental in the unpredictable trading world. Not every strategy is a one-size-fits-all solution.

Just as Spider-Man regularly faces unforeseen foes, the market can change unexpectedly, rendering your tried-and-true strategies ineffective. Hence, it’s imperative to modify your strategies when the situation demands it. In trading, as in superheroics, adaptability is often the key to success.

4) Neglecting Key Technical Tools

Think back to the iconic moment in Spider-Man 2 when Tobey Maguire’s Spider-Man temporarily lost his web-slinging abilities. It left him questioning his identity as Spider-Man because, as we all know, Spider-Man without his webs is, well, not quite Spider-Man.

If Spider-Man were to impart wisdom to your trading journey today, he’d likely caution against a similar pitfall—neglecting your most essential tools, akin to sidelining his web-shooters.

For traders, these vital tools take every shape and form: charts, graphs, and indicators; but also communities, news articles, and new trading innovations like VTrade. These aren’t optional extras; they form the bedrock of your trading identity. Just as Spider-Man’s web-slinging defines his heroics, your mastery of technical tools shapes your trading success.

Don’t shy away from becoming intimately familiar with your essentials. Dive deep into their intricacies, and learn how to wield them with finesse. As Spidey knows too well: Great power comes with great responsibility. Embrace every tool at your disposal, and you could soon find yourself swinging into success just like your friendly neighbourhood superhero.

Avoid these common trading mistakes. Open an account with VT Markets and web-sling your way to better trading decisions. 

On Tuesday, the stock market experienced a significant decline, with the Dow Jones Industrial Average falling by 388.00 points, marking its worst day since March. The S&P 500 and Nasdaq Composite also saw notable drops, and Amazon’s shares fell 4% due to an antitrust lawsuit. This decline is part of a broader trend in September, with the Nasdaq down nearly 7%, influenced by factors such as the Federal Reserve’s indication of fewer rate cuts and ongoing uncertainty. In the currency market, the US dollar surged, reaching a ten-month high, driven by a retreat in other currencies and hawkish comments from Fed officials. The article also highlights the impact on currencies like the British pound and the Japanese yen.

Stock Market Updates

The stock market experienced a significant decline as the Dow Jones Industrial Average fell by 388.00 points, or 1.14%, to close at 33,618.88. This marked the worst day for the Dow since March, and the index closed below its 200-day moving average for the first time since May. The S&P 500 also saw a 1.47% decrease, closing below 4,300 for the first time since June 9, while the Nasdaq Composite dropped by 1.57% to 13,063.61. Amazon’s shares took a hit, falling 4%, following an antitrust lawsuit filed by the Federal Trade Commission, alleging that the online retailer keeps prices artificially high and harms its competitors. Additionally, disappointing data emerged, as August new home sales missed expectations and the Conference Board’s consumer confidence index fell, contributing to the overall bearish sentiment in the market.

The stock market’s losses for the month are accumulating, with the Nasdaq Composite down nearly 7% in September, and the S&P 500 and Dow both experiencing declines of more than 5% and 3%, respectively. This downward trend has been influenced by factors such as the Federal Reserve’s indication of fewer rate cuts in the coming year, leading to a rise in bond yields not seen since 2007. Investors remain cautious, given the uncertainty about the economy, the Fed’s actions, and the value of the dollar. Meanwhile, lawmakers in Washington are negotiating to prevent a government shutdown that could occur as early as October 1 if a spending bill agreement is not reached. Despite these challenges, October, historically known as a “jinx month” for market crashes, is also considered a potential “bear killer,” according to the “Stock Trader’s Almanac,” providing opportunities for investors in the midst of seasonal market volatility.

Data by Bloomberg

On Tuesday, across all sectors, the market experienced a decline of 1.47%. Notably, Utilities were hit the hardest with a significant decrease of 3.05%, while Consumer Discretionary also saw a substantial drop of 2.03%. The Information Technology and Real Estate sectors both had losses of 1.78%, and most other sectors saw negative trends ranging from -0.50% in Energy to -1.52% in Industrials. Financials and Communication Services also suffered losses of -1.34%, while Health Care and Consumer Staples had slightly smaller declines of -0.86% and -0.90% respectively. Materials fell by 1.45% on this day.

Currency Market Updates

In recent currency market developments, the US dollar experienced a notable surge, with the dollar index rising by 0.24%, marking its highest point in nearly ten months. This uptrend was driven by a retreat in currencies like sterling, the Australian dollar, and the euro, while USD/JPY held steady, partly due to the threat of intervention by the Ministry of Finance and a preference for the safe-haven yen amidst risk-off sentiments. Notably, there was an initial pullback in Treasury yields, but this decline was reversed, leading to a fresh six-month low for the EUR/USD pair during the New York session. Despite weaker-than-expected US consumer sentiment and new home sales, the rebound in US yields persisted, largely driven by hawkish comments from officials like Minneapolis Federal Reserve Bank President Neel Kashkari and Chicago Fed President Austan Goolsbee. Additionally, concerns about Italy’s fiscal plans led to an increase in 10-year BTP-bund yield spreads, further impacting the euro’s performance.

Furthermore, the British pound weakened by 0.43% in response to the recent hawkish stance of the Federal Reserve, combined with indications from the Bank of England that rate hikes might be on hold, despite inflation levels remaining significantly above the 2% target. In terms of technical levels, Cable (GBP/USD) approached critical Fibonacci support levels. On the other hand, USD/JPY witnessed fluctuations and achieved new 2023 highs, only to be influenced by daily Japanese government warnings about potential FX intervention to counter excessive yen weakness. The 150 level is seen as a potential line in the sand for the Ministry of Finance, although traders appear inclined to continue buying dips unless disappointing US data leads to a halt in the rise of Treasury yields over Japanese Government Bond (JGB) yields. Amidst these dynamics, the US dollar exhibited strength against most high-beta currencies, and the USD/CNY pair experienced a marginal decline. Looking ahead, the US data calendar remains relatively light until Friday when personal income, spending, and core PCE data are expected, provided there is no government shutdown, with other releases including the Chicago PMI and Michigan sentiment for September, as well as eurozone CPI data.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Decline Continues Amid Strengthening US Dollar and Risk Aversion

The EUR/USD pair faced continued declines and struggled to maintain levels above 1.0600, primarily driven by the robust performance of the US Dollar in various markets. The US Dollar index achieved its highest daily close in months, surpassing 106.10, supported by elevated US yields. Despite weaker-than-expected US economic data, the dollar remained resilient. Wall Street experienced a decline in equity prices, further bolstering the Dollar’s surge. Upcoming reports on German and Spanish inflation data, as well as the Core Personal Consumption Expenditure Index from the US, are eagerly anticipated by market participants as potential market movers.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD moved lower on Tuesday and created downward pressure on the lower band of the Bollinger Bands. This movement suggests the possibility of further losses in EUR/USD. The Relative Strength Index (RSI) is currently at 32, indicating a bearish bias for the EUR/USD.

Resistance: 1.0588, 1.0620

Support: 1.0541, 1.0517

XAU/USD (4 Hours)

XAU/USD Dive as US Dollar Soars Amidst Growing Economic Concerns

In a sharp decline, spot gold (XAU/USD) fell to $1,900.83, marking its lowest point in nearly two weeks. This slide was driven by a surge in the US Dollar, triggered by mounting apprehension in the financial markets due to central banks’ commitment to keeping rates higher for longer and disappointing economic data from the United States. The US CB Consumer Confidence Index extended its decline, indicating potential recession signs, while New Home Sales saw a substantial drop. Federal Reserve Bank President Neel Kashkari’s remarks added to the uncertainty, with investors worried about prolonged monetary tightening. This confluence of factors kept gold at the lower end of its monthly range, while Wall Street experienced a sell-off and 10-year Treasury note yields reached levels not seen since 2007.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved lower on Tuesday, creating downward pressure on the lower band of the Bollinger Bands. Currently, the price is hovering just above the lower band, suggesting a potential further decline for XAU/USD. The Relative Strength Index (RSI) is currently at 27, signifying a bearish bias for the XAU/USD pair.

Resistance: $1,908, $1,915

Support: $1,893, $1,885

Economic Data

Welcome to the world of Forex trading, a dynamic marketplace where currencies are bought and sold. This market offers incredible potential for profit, but it’s crucial to understand and manage the risks that come with it. 

Read more about the nature of risks and emotional discipline techniques in our previous article. In this guide, we’ll explore practical risk management strategies to help non-professional traders like you navigate the Forex market and make informed trading decisions. 

Stop Loss and Take Profit Orders 

In the fascinating world of Forex trading, mastering risk management isn’t just a good practice—it’s a game-changer. Let’s talk about two powerful allies in this domain: stop loss and take profit orders. 

These tools are like your trading buddies, keeping you safe from sudden market changes and helping you stay on track. For anyone starting out in Forex and wanting to succeed, knowing how to use these tools is really important. 

Stop Loss Orders 

A stop loss order is a protective tool used in Forex trading to minimise potential losses by automatically closing a trade when the market moves against your position. It serves as a buffer against unexpected market shifts, providing traders with a predefined exit strategy to limit their downside. 

Let’s say you enter a trade to buy EUR/USD at 1.2000. You set a stop loss order at 1.1950. If the market price drops and reaches 1.1950, your trade will automatically close, limiting your loss to 50 pips. 

Take Profit Orders 

A take profit order is a predefined price level at which you choose to close a portion or the entire trade to secure profits. This structured approach enables you to lock in gains, maintaining discipline in your trading strategy by closing the trade at a predetermined profit level and ensuring you secure profits before the market potentially reverses. 

Continuing with the EUR/USD trade, if you set a take profit order at 1.2050, and the market price reaches this level, your trade will automatically close, securing a profit of 50 pips. 

Setting Realistic Levels 

When setting stop loss and take profit levels, consider a comprehensive analysis of the market, historical price data, and your risk appetite. It’s akin to planning your bike ride route based on your fitness level and preferences. Assess the market conditions, recent trends, and your trading goals to determine optimal levels. 

Risk-Reward Ratio 

The risk-reward ratio is a fundamental metric used in trading to measure the potential profit in relation to the potential loss for a specific trade. 

Maintaining an advantageous risk-reward ratio is paramount, ensuring that the potential reward significantly outweighs the potential risk. This balance is key to bolstering the overall profitability of your trades. 

The risk-reward ratio is calculated by dividing the potential profit by the potential loss for a trade: 

Risk-Reward Ratio = Potential Profit / Potential Loss 

Let’s say you are willing to risk $100 on a trade in the hopes of making a potential profit of $300. In this scenario, your risk-reward ratio would be 1:3. This implies that for every $1 you risk, your potential reward is $3. 

A favorable risk-reward ratio helps you assess whether a trade is worth pursuing. For instance, a ratio of 1:3 indicates that you are aiming for a reward three times greater than your risk. This can guide your trade decisions and contribute to a more successful trading strategy over time. 

Diversification 

Diversification, in the context of Forex trading, means spreading your investments across various currency pairs or assets. This approach is aimed at reducing risk and promoting a more balanced investment portfolio. 

Diversification offers a twofold advantage. Firstly, it helps to mitigate the impact of a downturn in a single currency pair. Secondly, it ensures your portfolio is not overly reliant on one particular asset, providing stability in varying market conditions. 

Picture diversification like building a well-rounded meal. Just as you’d include a mix of proteins, vegetables, and grains for a balanced diet, diversifying your investment portfolio involves including different currency pairs to create a balanced financial “meal.” This strategic approach aims to minimise the overall risk and maximise potential returns. 

By spreading your trades across different currency pairs, you avoid overconcentration in a single pair. Think of it as not putting all your eggs in one basket. This way, if one currency pair experiences an adverse movement, it won’t drastically impact your entire portfolio, allowing for more consistent and sustainable trading outcomes. 

Using Economic Calendars 

Economic calendars are valuable tools that offer crucial information about upcoming economic events and indicators that could impact the financial markets. 

Leveraging the data from economic calendars allows traders to make informed decisions and adjust their trading strategy in anticipation of significant market movements driven by economic events. 

Imagine you’re planning a cross-country road trip. Before you hit the road, you’d naturally check the traffic conditions, right? Similarly, in trading, economic calendars like the one provided by VT Markets serve as your traffic report for the Forex market. 

They provide advanced knowledge about economic events, helping you navigate the market more effectively. By considering the economic calendar data, you can make informed decisions about when to enter or exit trades, thereby reducing the risk of being caught off-guard by unexpected market volatility. 

Demo Trading 

A demo trading account is a simulated trading environment that allows you to practice trading using virtual funds. The primary purpose of a demo account is to familiarise yourself with the mechanics of the market and the trading platform without risking your actual capital. 

Demo trading offers a multitude of benefits. Firstly, it provides a risk-free environment for refining your risk management skills. Secondly, it allows you to experiment with different trading strategies, helping you identify what works best for you. Lastly, it can boost your confidence as you witness your virtual trades succeeding, offering a valuable learning experience. 

A demo account with VT Markets offers traders a completely risk-free opportunity to hone their skills and test strategies before engaging in live trading. With virtual funds at your disposal, you can gain valuable hands-on experience in a secure environment. To open your demo account with VT Markets and embark on your risk-free trading journey, simply tap on this link: Open Demo Account with VT Markets. 

Risk Management Tools 

Risk management tools, including position sizing calculators, play a crucial role in the trading world. These tools aid in determining appropriate position sizes for your trades based on various factors like risk tolerance, account balance, and trade specifics. 

Making the most of these tools involves using them strategically to align your position sizes with your risk tolerance and trading objectives. It’s about finding the right balance that allows for potential profits while mitigating potential losses. 

A position size calculator helps traders decide the appropriate trade size considering factors like risk tolerance, account balance, and stop-loss levels. By inputting these parameters, it ensures trades align with their risk strategy, facilitating informed and responsible trading decisions. 

In conclusion, mastering risk management in Forex trading is a journey that requires discipline, knowledge, and continuous learning. By understanding and implementing the strategies outlined in this guide, you’ll be better equipped to navigate the Forex market while preserving and growing your investment. Always remember, successful trading is not about avoiding risks entirely, but managing them wisely to achieve your financial goals. Happy trading! 

Summary: 

• _{Key risk management strategies for non-professional traders include stop loss and take profit orders.} 
• _{Stop loss orders automatically close a trade to limit losses when the market moves against the position. Take profit orders allow traders to secure profits by closing a trade at a predetermined price level.} 
• _{The risk-reward ratio is crucial, ensuring that potential rewards outweigh potential risks in a trade.} 
• _{Diversification involves spreading investments across various currency pairs to reduce risk and create a balanced portfolio.} 
• _{Economic calendars provide information about upcoming economic events and can help traders make informed decisions.} 
• _{Demo trading allows practicing trading without risking real capital, helping traders refine skills and test strategies.} 
• _{Risk management tools, including position size calculators, help align trade sizes with risk tolerance and objectives.} 

Picture yourself back in the late ’90s, a time when the Internet was just beginning to change the world. Investors were caught in a whirlwind of excitement, dreaming of fortunes to be made. Fast forward to today, and a new sensation is sweeping the investment world: Artificial Intelligence, or AI. 

Much like the dot-com bubble that saw investors captivated by the internet’s promises, AI is now stealing the spotlight. What’s fuelling this AI frenzy? Innovations like ChatGPT, OpenAI’s chatbot, and the skyrocketing stocks of tech giants like Meta Platforms and Nvidia. 

But amidst this whirlwind of excitement, there’s a whisper of caution. Some are saying that AI might be in a “baby bubble.” Bank of America is raising the alarm, warning that if the Federal Reserve makes a particular mistake, this AI investment craze could burst in a fashion reminiscent of the dot-com era. 

Just as the dot-com bubble rode high on easy money and came crashing down with rate hikes, the same script could unfold with AI. 

In this context, the importance of understanding economic bubbles becomes crystal clear. Whether in technology, housing, or any other sector, these bubbles all share common traits: enthusiasm, speculation, and the potential for boom or bust. 

Recognising the signs and knowing when to tread carefully is essential for investors looking to ride these waves of excitement while safeguarding their financial future. 

Understanding Financial Bubbles 

Financial bubbles are like wild surges of optimism and enthusiasm that flood through different parts of the economy, sending prices soaring to dizzying heights. These bubbles can pop up in various domains, from real estate and the stock market to cryptocurrencies. To understand them better, let’s explore some real-life examples: 

Tulip Mania Bubble: In 17th-century Netherlands, “Tulip Mania” saw tulip bulbs become a craze. People believed these bulbs could be lucrative investments. Tulip prices skyrocketed to extraordinary levels, with some bulbs costing as much as houses. When the bubble burst, tulip bulb prices plummeted, leaving investors with worthless assets and financial losses. 

The Dot-Com Bubble: Think back to the late 1990s when the internet was all the rage. Companies with “dot-com” in their names saw their stock prices skyrocket, driven by wild speculation. But eventually, the bubble burst, and many of these companies went bankrupt. 

A financial bubble occurs when the prices of assets, such as real estate or stocks, significantly exceed their intrinsic or fundamental value due to excessive buying and investor enthusiasm. It’s a bit like a party that gets too crowded. 

However, these bubbles are not sustainable, and they eventually burst, leading to a sharp decline in asset prices, which can result in financial challenges for overexposed investors. 

Why Do Bubbles Burst? 

Imagine a party that’s been going on for hours, and everyone’s having a great time. Eventually, though, it has to end. Economic bubbles are similar—they can’t last indefinitely. 

Let’s explore the triggers that can bring these bubbles to a dramatic close: 

• _{Interest Rate Hikes: Central banks, like the Federal Reserve in the United States, have a significant role in managing the economy. They can raise interest rates to control inflation or cool down an overheated economy. When interest rates go up, borrowing money becomes more expensive.} 
• _{Regulatory Changes: Governments and financial authorities can introduce new rules and regulations that affect the behaviour of investors and market participants. These changes can have a profound impact on the dynamics of a bubble.} 
• _{Investor Panic: Just like partygoers leaving when the fun is over, investors can rush for the exit when they doubt a bubble’s sustainability. This mass selling floods the market, driving prices down. Fear and uncertainty worsen the selling pressure, creating a self-perpetuating cycle as falling prices trigger margin calls, forcing leveraged investors to sell even more.} 

These triggers can burst a bubble, and the aftermath can vary from one bubble to another. Some bubbles deflate gradually, while others can burst suddenly and dramatically, leading to significant financial repercussions for those caught in the frenzy. 

The Lifecycle of Financial Bubbles 

Let’s follow the financial bubble evolution from the very beginning to the end. Its understanding is essential for investors looking to protect themselves from the downside of phenomenon. 

The mechanism of a financial bubble typically follows a pattern: 

1. Initial Optimism: It begins with a positive economic or financial development that sparks optimism among investors. This could be a new technology, a booming industry, or favorable economic conditions. 

2. Increased Investment: As optimism grows, more investors start pouring their money into the asset class associated with the optimism. This increased demand drives up prices. 

3. Herd Mentality: As prices rise, more investors join the bandwagon, driven by the fear of missing out (FOMO). This herd mentality further inflates prices. 

4. Speculation: Speculators, who are not necessarily interested in the fundamentals of the asset but are looking to profit from price increases, become a significant force in the market. Their activity amplifies price movements. 

5. Media Hype: Media coverage often fuels the frenzy, with positive stories and excessive optimism, attracting even more investors. 

6. Excessive Borrowing: Many investors borrow money to invest in the rising market, further increasing demand and prices. 

7. Peak Prices: Prices reach unsustainable levels, far exceeding the asset’s intrinsic value or earnings potential. 

8. Warning Signs: Some informed investors and analysts begin to voice concerns about overvaluation, but these warnings often go unheeded. 

9. Market Correction or Trigger: Something triggers a shift in sentiment or a realisation that prices are too high. It could be an economic event, a change in interest rates, or simply a collective realisation that prices are unsustainable. 

10. Sell-off: Investors rush to sell their assets to lock in profits, and panic can set in as prices rapidly decline. 

11. Bubble Bursts: The bubble bursts, and prices plummet, often causing significant financial losses for those who bought at the peak. 

12. Economic Impact: The bursting of a financial bubble can have broader economic consequences, affecting consumer confidence, investment, and financial stability. 

The specific triggers and characteristics of financial bubbles can vary, but this general mechanism highlights the key stages that typically occur during a bubble’s lifecycle. 

The Kinds of Financial Bubbles 

Economic bubbles aren’t confined to the stock market. They can manifest in various sectors: 

Stock Market Bubbles: Dot-Com Bubble 

In the late 1990s, internet-related companies saw their stock prices skyrocket. Investors believed the internet would change everything, and they poured money into these companies. However, when the bubble burst, many of these companies went bankrupt, and investors lost fortunes. It’s like buying a ticket for a hot new band without realising they might be a one-hit wonder. 

Real Estate Bubbles: 2008 Housing Bubble 

In the mid-2000s, the U.S. housing market was on fire. People were buying homes at inflated prices, often with mortgages they couldn’t afford. When the bubble burst, home values plummeted, leading to the 2008 financial crisis. It’s like signing up for a mortgage you can’t handle because everyone else is doing it. 

Commodity Bubbles: Mid-2000s Oil Price Spike 

Remember when gas prices skyrocketed seemingly overnight? That was a commodity bubble. People believed oil prices would keep rising, so they bought and hoarded oil. When reality set in, prices crashed, leaving many feeling like they had overpaid at the pump. 

Credit Bubbles: Subprime Mortgage Crisis (2007-2008) 

Banks were lending to people who couldn’t afford to buy homes. These risky loans were bundled together and sold as investments. When people couldn’t pay their mortgages, it triggered a crisis that rippled through the entire financial system. It’s like borrowing money you know you can never repay. 

In conclusion, understanding economic bubbles is like knowing when it’s time to leave the party before it’s too late. These waves of enthusiasm can be thrilling, but they can also lead to financial disaster. So, stay informed reading VT Markets’ Daily market analysis, be cautious, and don’t let the excitement of a bubble carry you away. It’s a skill that can help protect your financial future. 

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

Dear Client,

To provide a favorable trading environment to our clients, VT Markets will modify the trading setting of some US Shares on MT5 on October 2nd, 2023:

1. Open Pre-market trading session: 14:05-16:30.

2. Applicable Shares: TSLA, NVIDIA, NFLX, META, GOOG, AMAZON, AAPL, ALIBABA, MSFT, SHOP, BOEING, IBM, BAIDU, JPM, EXXON, INTEL, TSM, MCD, ORCL, DISNEY

3. Applicable Platform: MT5

To provide a better trading environment with lower risk, we will be adjusting the leverage of positions on the above Shares as follows:

1. The leverage of positions opened during 14:05-16:30 and 22:45-23:00 will be 1:5. When the position enters 16:30, the leverage will be changed to the original leverage, and remain the same until the position is closed.

2. The used margin will be recalculated when the position’s leverage is modified.

3. The leverage of positions opened during 16:30-22:45 will remain the original one.

Notes: The data above are only for reference. The actual execution data should be subject to the numbers on MT5.

Friendly reminders:

1. All the other specifications of the mentioned Shares stay the same.

2. Compared to the main trading session, the risks of pre-market trading include wider spreads, lower liquidity and higher volatility

3. The above time is in server time, GMT+3.

If you’d like more information, please don’t hesitate to contact [email protected]

On Monday, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average rebounded, breaking a four-day losing streak, with the 10-year Treasury yield reaching its highest level since 2007. Dow Inc. led gains, spurred by an upgrade from JPMorgan, while energy sectors thrived, notably with Amazon’s $4 billion investment in an AI firm. Despite September’s challenges, including signals of higher interest rates and a strengthening U.S. dollar, the energy sector emerged as the top performer. Investors kept a close watch on developments in Washington, with Moody’s warning of the “credit negative” impact of a government shutdown. In the currency market, the U.S. dollar strengthened, while the euro struggled due to bearish sentiments from central banks and weaker German economic data. Other currency pairs experienced fluctuations driven by rising Treasury yields and central bank policies. The outlook remained uncertain, with a keen eye on upcoming economic data and concerns about a potential government shutdown.

Stock Market Updates

In the stock market update, the S&P 500 showed resilience as it gained 0.4% to reach 4,337.44, marking a positive start to the final week of September. The Nasdaq Composite also closed higher, rising by 0.45% to 13,271.32, while the Dow Jones Industrial Average added 43.04 points (0.13%) to close at 34,006.88. This positive momentum broke a four-day losing streak for all three major indices. Notably, the 10-year Treasury yield increased by 10 basis points to 4.542%, its highest level since 2007. Despite the bond market movements, stocks demonstrated strength, with Dow Inc. as the top-performing stock, surging 1.7% following an upgrade from JPMorgan. Energy led the gains in eight of the 11 S&P 500 sectors, with Amazon announcing plans to invest up to $4 billion in an artificial intelligence firm, Anthropic. Investors cited technical support at the 4,300 level and anticipation of rejoining the artificial intelligence (AI) boom trade as factors supporting the market’s robust performance.

Throughout September, the stock market faced challenges, including signals from the Federal Reserve about prolonged higher interest rates, resulting in increased bond yields. These challenges also included a rally in crude oil prices and a strengthening U.S. dollar during the seasonally weaker trading month. The energy sector was the top performer in September, showing a gain of over 2%. The S&P 500 declined by nearly 4% this month, potentially heading for its second consecutive losing month and its most challenging month since December. The Nasdaq Composite, primarily composed of growth stocks, experienced a 5.4% decline in September, marking its largest monthly loss since December. In contrast, the Dow experienced a more modest 2% decline this month. Investors remained watchful of developments related to a budget resolution in Washington, as lawmakers exhibited limited progress on a deal to fund the U.S. government for the remainder of the fiscal year. Moody’s Investors Service warned that a government shutdown would have a “credit negative” impact on the U.S. economy.

Data by Bloomberg

On Monday, across all sectors, the market saw a positive gain of 0.40%. The energy sector experienced the most significant increase with a rise of 1.28%, followed by materials at 0.80%, consumer discretionary at 0.67%, and health care at 0.54%. Information technology and industrial sectors gained 0.47% and 0.46%, respectively, while communication services and financials saw more modest gains of 0.38% and 0.15%. However, the real estate and utilities sectors declined, with decreases of -0.17% and -0.20%, respectively. Consumer staples experienced the most significant decline at -0.43%.

Currency Market Updates

The currency market updates reveal a strengthening US dollar, which reached new highs in 2023 as the dollar index rose by 0.32%. This surge was partly driven by the Federal Reserve’s commitment to maintain higher interest rates for an extended period. On the other side, the euro struggled as EUR/USD fell by 0.46%, breaking key support levels. This decline was influenced by bearish sentiment from both the Fed and the European Central Bank (ECB) and weaker German economic data. The outlook for the eurozone suggests limited potential for rate hikes in the current cycle. Additionally, the US dollar’s strong performance was driven by favorable economic data and concerns about yield spreads between US Treasuries and German Bunds.

In the broader market, USD/JPY saw a 0.28% increase, mainly due to rising Treasury yields. Meanwhile, the Bank of Japan (BoJ) appeared to maintain its ultra-loose monetary policy, though it expressed concerns about FX moves and intervention risks. Sterling fell by 0.2% as the Bank of England (BoE) put an end to its consecutive rate hikes, following the hawkish stance of the Federal Reserve. The USD/CNH pair rose by 0.23%, influenced by concerns about the property sector and increased bond yields globally. The upcoming release of US consumer confidence and housing data will be closely watched, along with concerns about a potential US government shutdown, which Moody’s has warned could have a “credit negative” impact.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Hits Lowest Since March Amidst Euro’s Decline and ECB’s Inflation Control Efforts

The EUR/USD pair broke below 1.0630, plummeting to 1.0574, marking its lowest point since March. This decline represents the Euro’s fifth consecutive daily loss, primarily due to a strong US Dollar and European Central Bank (ECB) President Christine Lagarde’s commitment to maintaining elevated interest rates for inflation control. Meanwhile, the US Dollar Index reached levels above 106.00, supported by higher US Treasury yields, reaching its highest point since March. US economic data released showed mixed results, with attention turning to housing prices, consumer confidence, and New Home Sales in the upcoming schedule.

Chart EURUSD by TradingView

According to technical analysis, the EUR/USD moved in high volatility on Monday and was able to reach the lower band of the Bollinger Bands. This movement suggests the possibility of further lower movement. The Relative Strength Index (RSI) is currently at 31, indicating that the EUR/USD is in bearish sentiment.

Resistance: 1.0635, 1.0687

Support: 1.0565, 1.0523

XAU/USD (4 Hours)

XAU/USD Faces Selling Pressure Above $1,900 Amid Stronger USD and Rising Treasury Yields

Gold is struggling to maintain its value above $1,900 as it faces selling pressure during the early Asian session. The stronger US Dollar, with the Dollar Index reaching its highest level since November, and rising Treasury yields have contributed to this downward pressure. Technical indicators favor a bearish outlook for XAU/USD, with support at $1,915 and a potential downtrend if it breaks lower. The recent strength of the US Dollar, supported by a strong US economy and elevated Treasury yields, continues to impact the price of Gold as market participants await key US consumer inflation data.

Chart XAUUSD by TradingView

According to technical analysis, XAU/USD moved lower on Monday and was able to move near the lower band of the Bollinger bands. Currently, the price is moving slightly above the lower band showing a potential of moving back higher. The Relative Strength Index (RSI) is currently at 38, indicating that the XAU/USD pair is in a neutral stance with a slight bear bias.

Resistance: $1,920, $1,930

Support: $1,913, $1,903

Economic Data