Weekly Review and OpenBook Roundup

(eToro Blog) According to Mario Draghi, the head of the ECB, the central bank will begin to make Outright Monetary Transactions within the secondary sovereign debt market to ensure the Euro’s survival provided that certain criteria, namely the activation of the E.U.’s rescue mechanisms (the EFSF and the ESM) are met. The goal of the OMT, as the bond purchase scheme is also known as, will be to address what Draghi deems as “severe distortions in the government bond markets.”

For the first time in three weeks, Wall Street ended with an up week, finally, with investors satisfied with the European Central Bank’s announcement of an unlimited bond purchase scheme. Both the NASDAQ and the SPX500 gained more than 2% on the week, while the DJ30 gained 1.6%, all posting new multi-year highs. Investors are hopeful that the Federal Reserve Bank will also be announcing some stimulus after they meet later this week, and if realized, equity traders could help give Wall Street yet another winning week.

Will Ben Bernanke and the Fed live up to investors’ expectations? Given the disappointingly poor private sector labor data from last Friday, and news earlier in the week that manufacturing activity unexpectedly fell last month, the probability has grown, and financial markets are already pricing in QE3.

There was one bright spot in the U.S. economy; Case-Shiller reported that home prices and sales were up in certain key states while the National Association of Realtors reported that turnover was quickening as supplies dwindled. The housing sector, along with the employment sector, has been stubbornly sluggish over the past many months and clearly on the Fed’s radar.

Given that increasing probability of QE3, the U.S. Dollar has found itself under pressure relative to major currencies, especially the Euro, Yen and Pound Sterling. Gold bulls enjoyed the mini rally which followed the labor report, with the per ounce price rising to $1,740.50 an ounce, a gain of more than 2%. Investors will be anxious to see if the Fed does indeed announce another injection which will further bolster gold prices which are priced in the U.S. Dollar.

The Social Trading Community at eToro

This week, we look at OpenBook trader dalbarran from Venezuela who joins the ranks of leaders on the 3-month ranking board, with realized equity in excess of 300% over that period. Notably, the trader, who has 318 followers and 41 copiers, has a relatively low max drawdown (-13.5%) and max exposure (28.9%) relative to other leaders with a similar equity gain. The trader also has a profitable weeks percentile of 72.7%, among the highest in the same group.

Over the past few months, the trader has allocated the majority of his portfolio to the EUR/USD pair, primarily going short but a few recent long positions had yielded some decent returns. The trader also had traded the GBP/USD, the EUR/GBP, the AUD/USD and the NZD/USD currency pairs, as well as shorted gold. Most recently, the trader closed a short position in the AUD/USD for a gain of 11% and a long prior to that with a 32% gain. In between he was caught off guard by news from the Swiss National Bank which weakened the Swiss Franc; the trader’s single long position in the USD/CHF closed at its SL of 101.46%. Nonetheless, his copiers appreciate his good money management skills which are no accident; according to the trader, “I see Forex as an investment, not as a betting system so I always look forward to my learning about this market and earn some. Persistence and perseverance are the keys to success.”

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