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Stock Trader Sara Goldstein on Developing an Expertise

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Sara Goldstein clearly remembers the cold day in January 2015 when the Swiss National Bank suddenly dropped its cap on the franc sending the safe-haven currency soaring against the Euro. In minutes, the Swiss Franc rose nearly 30% against the Euro. The move bankrupt some stock traders caught on the wrong side of the trade. “There are different types of volatile days. There are the ones you can predict, like a Fed rate decision, and the ones you can’t. The Swiss Franc decision caught a lot of people off guard,” she observes.

London-based Goldstein, Head of Premium Clients – Trading at IG, says days with unexpected volatility are among her favorite. “It’s very intense. You’ve got to be alert and on your game so you’re ready for anything that’s thrown at you. That’s kind of the job this is,” observes the stock trader.

Goldstein broke into finance almost nine years ago when a university friend in the industry told her about the high-energy world of trading. Today she manages a book of more than 100 high-net worth clients, who trade often and everything from foreign exchange to cryptos, commodities and small cap stocks.

Intensity rules Goldstein’s days. Before the London Stock Exchange even opens, Goldstein has written and distributed a morning rundown to clients summarizing the overnight moves in Asia and the US, talked with analysts and often taken a few client calls. “It’s about being as prepared as you can. Knowing which clients are going to call, which ones are going to trade and what bad news could be putting clients’ accounts in trouble,” she says.

Most of Goldstein’s clients focus on European small cap equities trades and she has developed an expertise in the area and a nose for growth opportunities.

We spoke to Goldstein about how she developed her trading expertise.

Q: How did a degree in economics prepare you for equities trading?

A: Not much at all. Adam Smith’s division of labor pin theory from 100 years ago doesn’t help you digest Lloyd’s banking results. I really enjoyed economics but wasn’t sure what I wanted to do. A friend worked in the industry told me what she did and I thought, why not give that a go?

Q: Talk about early experiences as a trader

A: When I joined IG in the graduate rotation program, I was one of the only women on the trading floor. This will sound funny, but if you went to the loo, there was never a queue because no one was there. At the same time, if you needed a hair brush you were in trouble because there was no one to ask! That’s changed over the last eight years. I’ve seen a lot more women coming into the industry. IG’s philosophy is about empowering people for financial freedom and women are a part of that.

Q: Do you see differences in the way men and women trade?

A: This is something people have tried to analyze for years. Is it an education thing? Does it go back to what girls study vs boys? Is it about risk? In terms of differences—I don’t have enough females clients to answer the question. But there’s certainly a difference in the number of women that trade versus men, and it would be lovely to see more join the market.

Q: What markets most interest you?

A: I prefer shares. I like to look at a company, see what they do and assess their value: what P/E ratio they trade on; how much cash and debt they’re carrying and so on. I’m not a technical trader. I don’t know how you can predict what the price of cable (the forex term to refer to an exchange between British pounds and U.S. dollars) is going to be in the next 30 seconds. Equities is something I’ve grown into, starting by reading news stories on individual stocks. At the same time, I was trained in economics, so I do look at the wider markets.

Q: Are there key distinctions between stock trading vs commodities, for instance?

A: From a trading and execution point of view, we have so much liquidity at IG that many of our products—indices, foreign exchange, commodities—can be traded online. There’s no need to call an execution dealer like me, unless you’re dealing in significant size. And that’s where it becomes interesting. Someone gives you a big order and wants to buy a huge volume in a stock that’s illiquid, you have to find that volume, and know how to trade it without moving the price.

A lot of my clients trade very small cap stocks, driven by market makers, those who provide liquidity and make the pricing. You can’t just put your order up on an exchange like you would for shares in Apple or a FTSE 100 stock. It’s very much like a game of poker. The market makers control the price; you want to know what flow and volume they have. They want to know what you’re holding and where you sit, so it becomes a game to try to get clients a good price and a good fill.

I find it most exciting and I do it daily. You’ll see two prices on the screen; a bid and an offer price. You’ll see different market makers on the offer. But you don’t always know that they actually are the best offer. The market maker might just be trying to get an order to make us show our hand. It’s a strange market and quite fun.

Q: How do you keep an eye on dozens of dynamic small cap stocks?

A: It’s impossible to stare at your screen all day looking at 40, 50 markets for price moves. I set price and news alerts, which will tell me when something’s happened. For instance, if a stock moves more than 5 or 10 percent, it will ping me and I can jump in to investigate the movement. Why has it happened? Is it rational or logical? Do I need to call my clients about it? Do I need to trade off it? I am pretty hot on news and price alerts

Q: Some people might feel stressed out about hearing unexpected pings all day—how do you manage your emotions?

A: People in the office know me as feisty. I have a bit of a tongue, and can occasionally be heard yelling across the floor. I think that controlling emotion comes down to being organized. You get flustered, panicked and act irrationally when you’re not prepared. If you assure yourself that you know what you’re doing, then in those times of heightened emotion when the market is incredibly volatile, that confidence will enable you to stay calm, keep focused, trade and get the job done. Saying that, the odd swear word helps.

Using stops and limits won’t take the emotion out of how you trade, but it will certainly help you to control and manage your risk. I think losing that control of your risk is where a lot of emotion comes from. Losing control is when you panic and make errors. If you’ve got control of your risk management, your less likely to act recklessly or on impulse – which is probably one of the worst things you can do when the market starts to get volatile.

Q: Who do you look to for inspiration?

This is controversial, but I don’t like following other traders. I think there are people you can admire, but if you’re going to place a trade because someone else said they placed a trade you’re never going to be successful. You need to make your own decisions. You never know why or when someone placed a trade (and more importantly at what price!). A good example is Gamestop and the frenzy around Wall Street Bets. While a lot of people made a lot of money, there were also those who joined the bandwagon late and had huge losses. Blindly following someone is a pretty lazy way to trade and will always end in tears.

Learn about other women traders at DailyFX’s Women in Finance content hub.





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Gold Prices Eye 5-Year Treasury Auction as FOMC, PCE Approach

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Gold, XAU/USD, FOMC, Treasury Auction, Yields, Technical Outlook – Talking Points

  • Gold prices gain overnight on haven flows as Wall Street volatility persists
  • Strong 2-year Treasury auction helped push yields lower, 5-year auction eyed
  • XAU/USD establishes support at former area of major resistance as prices rise

Gold prices held firm overnight despite a US Dollar that was charged on safe-haven flows amid a volatile New York trading session. US stocks managed to close in the green after a late-day rally, marking an impressive intraday turnaround. The broad risk aversion and volatility was the likely driver for bullion prices.

A healthy amount of buying in the Treasury market also helped gold by pushing yields lower across the short-end of the curve, while longer-dated yields trimmed losses as stocks rebounded. Bullion is sensitive to Treasury yields, as the metal is a non-interest-bearing asset. Treasury rates have risen sharply since early December, boosted by increasingly hawkish Federal Reserve rate hike bets.

However, those rate hike bets may have become too aggressive. An overnight auction of $54 billion in 2-year Treasury notes was met with strong demand on Monday in the United States. The auction saw the highest demand seen since early 2020. That suggests the hawkish bets calling for nearly four Fed rate hikes in 2022 may be overdone. This is a good sign for gold as higher demand for bonds raises the price. Bond yields fall when prices rise.

Bullion traders have a busy week ahead, with the Federal Reserve’s policy decision set to cross the wires on Wednesday. Federal Reserve Chair Jerome Powell may push back on some of the aggressive market pricing on rates during the post-FOMC press conference. Markets are currently pricing in nearly 100 basis points of hiking, which is likely more than the Fed is comfortable with currently despite the recent hawkish shift among even more dovish board members.

Later this week, the Fed’s preferred inflation metric, the personal consumption expenditures price index (PCE), is slated to drop. Analysts expect a reading of 4.8% year-on-year in the core segment of the price index for December. That would represent a small increase from November. It would also be prudent to keep an eye on the 5-year note Treasury auction tonight to help gauge overall bond demand. Another strong auction could help drive down rates on the shorter end of the curve. That would likely bode well for gold prices.

Gold Technical Forecast

Gold prices rose from a newly establish level of support, which served as resistance numerous times going back to July 2021. The next target for bulls is likely the November high at 1877.15. The RSI oscillator is in neutral territory, while MACD strengthens. Prices may require a bit more consolidation before the next big push higher. Alternatively, a move lower would aim for a quick show of support from the former resistance level.

Gold Daily Chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter





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GBP/USD remains depressed near two-week low, around 1.3535 area post-UK PMIs

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  • GBP/USD continued losing ground for the third successive day on Monday.
  • UK political crisis, dismal UK PMIs continued weighing on the British pound.
  • Modest USD strength further contributed to the downtick to a two-week low.

The GBP/USD pair remained depressed through the early part of the European session and was last seen trading near a two-week low, around the 1.3535 region post-UK PMIs.

The pair extended its recent pullback from the vicinity of mid-1.3700s, or a two-month high and witnessed some selling for the third successive day on Monday. This also marked the sixth day of a negative move in the previous seven and was sponsored by a combination of factors.

Growing demands for Prime Minister Boris Johnson’s resignation over a series of lockdown parties in Downing Street continued undermining the British pound. Apart from this, the emergence of some US dollar buying further contributed to the offered tone surrounding the GBP/USD pair.

On the economic data front, the flash version of the UK PMIs fell short of market expectations and showed that expansion in both the manufacturing and the services sectors slowed notably in January. The data did little to impress bulls or lend any support to the GBP/USD pair.

That said, increasing bets for additional rate hikes by the Bank of England held back traders from placing aggressive bearish bets around sterling. On the other hand, a fresh leg down in the US Treasury bond yields capped the USD gains and helped limit losses for the GBP/USD pair.

Investors also seemed reluctant and preferred to wait on the sidelines ahead of the key central bank event risk – the outcome of a two-day FOMC policy meeting on Wednesday. This makes it prudent to wait for a strong follow-through selling before positioning for any further decline.

Moving ahead, market participants now look forward to the release of the flash US PMI prints, due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and produce some trading opportunities around the GBP/USD pair.

Technical levels to watch

 



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NZD/USD Gains as APAC Trading Kicks Off a Busy Week for Markets

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New Zealand Dollar, NZD/USD, Economic Data, Event Risks, Technical Outlook – Talking Points

  • New Zealand Dollar is up slightly, but risk-on stance may be weak after poor AU PMI data
  • Week ahead may be volatile, with high-impact events in the Asia-Pacific and the US
  • NZD/USD up slightly, but bears may attack the December low at 0.6699 on a bout of weakness

Monday’s Asia-Pacific Outlook

The New Zealand Dollar is marching higher against the US Dollar in early Asia-Pacific trade, indicating that risk aversion seen last week may be subsiding. However, poor PMI data out of Australia this morning shows that the Covid Omicron variant is having a very real effect on demand within the Aussie economy. That hit was coupled with a drop in business confidence despite another round of lockdowns through most of Australia.

Later today, Japan will release its own set of PMI data for January from Jibun Bank. The Japanese Yen is weaker this morning versus its major FX peers, as the tone looks to be “risk on” despite the downbeat Aussie PMI print. Singapore is set to report December inflation data, with analysts expecting the year-over-year rate to cross the wires at 3.75%, according to a Bloomberg survey.

This week will bring several potentially high-impact events across the wires that may shift market sentiment. Australia’s fourth-quarter inflation rate is due out Tuesday when the headline figure is expected to drop at 3.2% y/y. That would be up from 3.0% y/y in Q1. New Zealand is next up to bat on inflation data, with Q4 data seen dropping at 5.6% y/y on Wednesday. The Kiwi economy has experienced a higher rate of inflation versus its cross-Tasman counterpart, which may account for the more aggressive RBNZ response as compared to the RBA thus far.

Outside of the Asia-Pacific region, the United States will see the first Federal Open Market Committee (FOMC) policy decision of the year. The central bank is expected to stand pat on its benchmark rate, and in fact, Chair Powell may temper market expectations, that currently show nearly four 25 basis point hikes priced in for 2022. That may pressure the US Dollar. The Fed’s preferred inflation metric, the core PCE price index, will follow later this week.

NZD/USD Technical Forecast

NZD/USD is up slightly this morning following a brutal 1.25% loss last week. The recent bearish action has dragged prices down near the December low at 0.6699, which was the 2021 low. Bears may attempt to take advantage of any weakness and pierce below the level. That would likely open the door for additional weakness. Alternatively, a move higher will target the 78.6% Fibonacci retracement as possible resistance.

NZD/USD Daily Chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter





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