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Today I'll share some economic analysis on the CPI report and what to look for in order to tell if inflation will get worse. Lastly, I'll cover some ways that you can make an investment play on inflation.

September CPI Report

The Consumer Price Index report for September 2021 was published on October 12, 2021. Prices increased for urban consumers by 0.4 percent in September on a seasonally adjusted basis. This is slightly higher than August which came in at 0.3 percent. On a 12 month basis, the CPI is up 5.4% from September 2020.

CPI's impact on Inflation

Largest Price Increases

Energy

You have likely seen your gas prices so I don't need to tell you that prices are up, but it's worth noting how much. All major energy indexes are up this month. The entire energy index increased by 24.8% on a12 month seasonally adjusted basis. Gasoline is up 42.1% and Natural Gas is up 20.6% over the same period. Electricity also increased by 5.2%.

CPI's impact on Inflation

Food

The index for food was up 4.5% over the past 12 months. The largest movers in the food index were meat products. Meat, fish, poultry, and eggs increased 10.5% and the index for beef is up 12.6% in the last year.

CPI's impact on Inflation

Will Inflation Get Worse?

We've all heard someone in the last few months say something to the effect of : "40% of all dollars were printed in the last year" with an ominous reference to potential inflation. This is more or less correct as the US government has printed a ton of new dollars, but printing more money doesn't directly lead to inflation. If we look at the velocity theory of money we can understand why. The velocity of money is essentially a way of measuring how fast money changes hands, given the price level, GDP and money supply.

Rearranging this, we can see that the speed at which money changes hands is a function of the price of goods, the GDP and the Money supply. Price levels and GDP haven't shifted much, but the M money supply increased a lot. This means that the Velocity of money should be low. And velocity is very low.

This means that inflation hasn't hit us hard yet.. If inflation really starts to pick up, the velocity of money should see a noticeable increase as more dollars start to change hands to pay for the increased price of goods. This is demand inflation. Prices have increased in specific areas, but we have yet to see large scale inflation.

Case Against Inflation

The Federal reserve has shown that it is hesitant to drastically increase interest rates from their near 0 levels, and are more than willing to increase the amount of assets on it's books. As a result the the amount of dollars in the system increases. Under normal circumstances, low interest rates and an increase in the money supply increases the demand for goods and services. But we haven't seen this. Why?

Individuals and businesses have thus far used PPE loans and government stimulus to pay off debts and cover their bases during the pandemic. Since these individuals and businesses can pay for the goods and services that they need, they don't demand more. There is no pressure for a demand shock at this time. The money generated by Fed is sitting idle in bank accounts, investments and institutions.

We are currently in a supply shock in the U.S., increasing in the price of select goods, but we haven't seen a drastic increase in demand or a change in velocity of money. This doesn't eliminate the possibility of future inflation though. That money is still in the system, and we could still be sitting on a powder keg.

Making an Investment Play on Inflation

Currently, I am looking at stocks and asset classes that I think will rise in the event of inflation. Ill share my methodology for my search and give some stocks that I think fit into this criteria. Ill try and explain why I think some industries will do well and why others will not. This is not advice, I am only sharing my opinion and observations.

Methodology:

  1. Find stocks in an industry that can easily pass on price changes to their consumers. This means that when prices do increase, identify those companies that can change the price of their goods VERY fast and pass them onto consumers
  2. Find an industry that deal in inelastic goods or assets that are still demanded by consumers regardless of the price change, consumers will demand a similar amount of the good.
  3. Assets who's production is not slowed down by supply chain issues or price increases. By necessity, all industries are affected by supply chain problems. The key here is finding those that are affected the least.
  4. Make sure these stocks have solid fundamentals.

Things to Consider:

Oil and Natural Gas Producers: Natural gas is up in price by 20.6% and Fuel Oil is up 41.7% since last year. Winter is coming in the United States and Europe and the prices for these commodities are already increasing. Couple this with inflation and supply problems, producers will benefit immensely from this. These guys find the material, and sell it. they only get more money if the price of the commodity goes up and people still need to full up their gas tanks and heat. their homes. The risk is that shipping problems could cause issues.

$OXY, $APA,

Coffee Producers and Futures : America has an addiction to coffee, this is no secret. An article from yahoo finance, described how Caribou Coffee is buying tons of Coffee beans in anticipation of supply shortages. This commodity shows robust demand despite price increases. One difficulty I see with this is finding the right way to invest in this commodity. I'm trying to avoid companies like Starbucks, Nestle and Keurig that sell coffee directly to consumers as they may not be able to pass on as the price increase. It seems like that is the only option aside from directly purchasing futures. One possibility is $JO, which is an ETF that tracks monthly coffee futures contracts.

Things to Avoid

Refiners and Pipelines: Avoid these like the plague if oil and gas prices go up. These companies take a hit when prices increase because they cannot pass prices onto their consumers quickly, yet they still have to meet the demand of consumers to stay in business.

Beef and Pork: If inflation hits this sector Americans will substitute out the expensive red meats for cheaper alternatives like chicken. This is due to the fact that most Americans have a predetermined budget for grocery shopping and will maximize the amount of food they get.

For questions and comments, you can reach me at smstreb97@protonmail.com or through the A1Trading discord at smstreb97

Trading forex is like running your own business. It takes a lot of time, strategy, and dedication to see sustainable results. While there is no one way to be successful in trading, there are steps you can take to increase your likelihood. One way of becoming successful is develop a strong forex trading plan that leads to probable success. Here are 3 tips to help create a successful trading plan. Download our free forex trading plan template at the bottom of the page!

Tip #1 Risk Management is Key to Your Forex Trading Plan

The truth is, all traders will experience drawdown periods throughout their journey. The goal of a great trading plan is not to avoid ever taking losses because they will inevitably happen. Instead, your goal as a trader should be to maximize your profits and minimize your loses. Without risk management in your trading plan you will not survive drawdowns as they are bound to happen.

Need help with risk management? Check out our Ultimate Guide to Risk Management Mastery in Forex Trading here.

Tip #2 Learn to Be Emotionally Disciplined While Trading Forex

As we mentioned before, losses are inevitable but that doesn't mean they get any easier to accept. Losing money can be extremely taxing on your emotions. On the other hand, it's easy to get euphoric and over leverage your trades when you're taking profits.

The most important thing with drawdowns (or winning streaks) is to know how to respond. When in a drawdown, it is natural to want to recover your losses quickly. However, if you react in this way you may end up taking trades that don't line up with your strategy out of desperation and consequently losing even more money. On the other hand, when you're experiencing a winning streak it is important to not to feel invincible and take riskier trades that could result in you losing everything you just won.

Tip #3 Start Small

Start small, master your emotions. Understand that as a beginner it is likely that you will not be profitable. 

With the Proper Strategy, Risk Management and Trading Psychology, you can be successful in the forex market. However, these concepts take time so don't rush it.

Download the Free Trading Plan Template

Get access to our forex trading plan pdf

Using forex trading robots is an easy way to automate steps in your trading so you don't have to constantly be watching your charts. Using a forex trading robot like the Grandmaster Expert Advisor you can set your preferred parameters, have the bot watch charts that you're interested in and automatically enter trades based on your set parameters.

The Best Forex Trading Robot- The Grandmaster Forex Robot

The Grandmaster Forex Robot was developed by the founder of A1 Trading Company, Nick Syiek (also known as "Tradernick" on YouTube). Nick's motivation behind the Grandmaster EA is to create a system that builds and manages a position before taking profits if they come about. Additionally, the grandmaster is programmed with a focus on risk management.

The Forex Trading Robot is a grid based expert advisor built to adapt with market movements as per the operator’s set parameters. It is designed to work on the Metatrader 4 (MT4) platform only. The robot gives the user the option to set their own preferred grid, set their lot sizes, profit targets, and more.

The trading robot is NOT designed to be 100% automated and do all the work for you. However, it will help automate components of your trading to make your trading process less time consuming.

The Grandmaster Forex Trading Robot allows the user to customize parameters as they would like

Who should be using the Grandmaster Forex Robot?

How Does the Forex Trading Robot Work?

How You Can Use The Grandmaster to Automate your Trading

  • Buy or Sell: Using the botCanBuy and botCanSell variables traders can choose whether they are looking to buy or sell a specific pair
  • Lot size: Traders can choose what lot size to give the bot as well as if they would like the lot size to automatically multiple as the trade moves in a given direction
  • Grid Level in Distance in Points: Users can choose to program the grandmaster to add a small position every allotted points. In this case the pips was set to 2000 points. Therefore, the bot is set take a small position every 200 pips. (1 Pip=10 points)
  • Number of Levels: Choose how many different grid levels pending buy limits where the price will execute a buy if it hits that point.
  • Net Profit: Choose what profit you would like each trade to be at for the bot to automatically close out.
  • Max Drawdown: By turning this variable to true, you are telling your bot to stop out at the given max drawdown on your account.
The A1 Trading Forex Trading Robot allows the user to customize parameters as they would like

The Truth About Forex Trading Robots

Although forex trading robots are excellent tools to help automate components of your trading, the Grandmaster Forex Robot is NOT designed to be "set and forget". Unfortunately, forex trading robots are not a magical money machines and will require manual intervention from a trader who understands risk management and has an adequate understanding of trading.

In order to use the Grandmaster Forex Trading Robot you will need:

How to Get the Grandmaster Forex Trading Robot

Interested in trying out our forex trading robot? Purchase the Grandmaster Forex Robot here OR get the Grandmaster for FREE with your purchase of the Gold VIP Membership (along with 7 of our other awesome scanners, indicators, & bots!).

By the end of this article, you'll know how to use the currency strength meter in ways that will both save you time and help you find better trade setups!

What is a Currency Strength Meter?

The currency strength meter is a tool that helps trend traders determine what is moving in the foreign exchange market. Simply put, the currency strength meter acts as a currency heat map to show overall change in price. Instead of having to go chart to chart to find the best trends, the Currency Strength Meter will objectively tell you what currencies are strong and what currencies are weak.

The currency strength meter shows an overview of strongly trending pairs, sideways pairs and the direction of major pairs in different timeframes.
The currency strength meter shows an overview of strongly trending pairs, sideways pairs and the direction of major pairs in different timeframes.

How Does the Currency Strength Meter Work?

The currency strength meter uses a combination of price action, the relative strength index, and stochastic indicator. The tool will calculate and order the 8 major currency pairs from strongest to weakest (JPY, NZD, CHF, EUR, AUD, USD, CAD, & GBP). In addition, the strength meter will determine the best currency pairs for trend trading or range trading, and deliver them in real time to the user.

Further, the currency strength meter is configurable to any time frame. Therefore, users have the ability to use the tool from the 1 minute chart, all the way to the 1 month chart.

How to Use the Tool to Determine the Best Setups

Using the currency strength meter, traders can pay attention to the heavily trending markets to look for buying or selling opportunities. For example, if you pay attention the the image below you can tell that GBP/JPY is trending the strongest. This could offer an opportunity for pullback buys and setups on GBP/JPY pairs.

For traders who like trading sideways or choppy market environments, the "sideways pairs" section may help identify markets to trade. Traders could use this feature to easily find opportunities to sell across the tops or buy across the bottoms.

Using the Currency Strength Meter, traders can easily see the strongest trending pairs and see how major pairs are trending on different timeframes.

Additionally, the tool can be used to easily spot strong movements across different timeframes. In the image below, you can see that USDCAD is overall bullish on the monthly down to the 30 minute chart. This gives the user trade ideas to go look for based on the momentum scan.

The Currency Strength Meter will indicate which markets are trending the strongest and in which direction

Conclusion

The currency strength meter is perfect for trend traders who are looking for high probability opportunities. Whether you are looking to trade bullish markets, bearish markets or sideways trending markets this tool can help identify these trends so you don't to have to go looking for them! We have created a handfull of similar tools to help make your trading more efficient. Check out a list of our scanners, indicators and robots here. Looking to get your hands on this tool? Get more information:

Additional Resources:

10/1/2021

After a brutal month for crypto, stocks and gold in September, sentiment is beginning to change once again which could land us in another cycle of bullishness. But it's hard to decide where to put your money to get the best bang for your buck. Here are three ways you can tackle your investments this month:

  1. Buy the market that got beaten down the most

The US stock market fell well over 5% this month as the Fed kept sending us mixed signals as to whether or not they will taper or not this year. Global equities struggled as well which turned into a mostly risk-off sentiment. Bitcoin fell as low as 18% last month after fears of China's crackdown put more pressure on the coin. In my mind, it seemed that the turbulence in the stock markets were more justifiable than the sell off in crypto. We already knew China was banning mining and transactions, but price sold even further in September. So looking towards a big move to the upside in crypto could be the better play.

2. Go risk-off

Times are still highly uncertain and very unstable when it comes to monetary policy and market sentiment, which could lead you to believe that things will continue. This could be very true, and the economy could continue to suffer; we have seen several weeks in a row of missed jobless claims expectations and higher-than-expected inflation rates. If this persists, gold could start seeing more demand. Or if economic sentiment improves, the USD might see another rise from the expectations of tapering and raising rates.

3. Just buy everything (read below)

Some experts would argue that diversification is the best way to invest, and usually, I don't think so. However, price action in September took most everything down. So there could be a chance that everything improves; if we saw gold, crypto and stocks fall last month, then we might just see an improvement in all three markets. Two may recover less than the other, one may recover worse, but this sets you up for the best chances of at least one market rebounding well. US stock market goes up more often than not, gold goes through month-long swings in either direction, and crypto has the potential to give you thousand percent returns.

Either way, there's lots of ways to go about this other than these three suggestions, but I think it's important to consider these three way before you set your heart on going all in on one thing. Figure out which could be best for you and your investment strategy. And remember to practice good risk management!

Hey everybody, this is a breakdown of some of the macro trends around Gold and some of the pressures it is facing from inflation and the Fed's potential rate hikes.

Overview

As of 09/26/2021, the Gold Continuous Contract is down -0.75% this week, and -3.79% for the month. Gold is currently caught in a limbo between rising inflation and rate hikes from the Federal Reserve. Inflation is positively correlated with the price of Gold, but there isn't much inflation despite all the liquidity introduced by the Fed.

The Fed

Bank of America/Merrill Lynch theorizes that Chairmen Powell will announce that QE tapering on November 3rd. The first rate hike to occur in 3Q23 and continue on a quarterly basis. The Fed currently wants inflation as it will juice the economy. If inflation pushes beyond that zone, they may decide to increase rates. Short term inflation is a large concern because of supply line disruptions in the market. If the supply chain cannot meet the demand, then the prices of goods could kick off a bout of inflation that shoots us past the 'Troublesome Zone'.

The key variable is time. If inflation rapidly increases, the fed will move up their 3Q23 plan. If this occurs, the market could react by buying Gold to hedge against a sudden inflationary episode that grew out of the Fed’s control.

Gold Stocks are Undervalued

The Gold Mining sector is trading below the 10 year Net Asset Valuation, which indicates that the miners themselves are currently undervalued, particularly the Jr. mining stocks. If the price of gold were to swing in favor of the miners, there is more pressure to revert to the mean

A New Way to Track the Price of Gold?

After a little digging, I found a Bloomberg Index fund that tracks the price of Gold with incredible accuracy. The following chart shows the top 7 major market indices with the strongest correlation to gold.

SOURCE: World Gold Council

The index with the highest correlation is the Bloomberg Barclays Global Treasury Index, which is pegged to the Global bond market, excluding US bonds and other treasuries. Both foreign bonds and Gold have an inverse relationship with the dollar, but the BBG Global Index is useful for forecasting the overall trend of gold as it offers a less volatile perspective. Due to its high correlation to gold and it’s relatively low volatility, one can chart the overall direction of gold with near 70% correlation. This correlation holds back to 2015.

The benefit of having only a .70 correlation coefficient as opposed to 100% correlation, is that it allows us to see through the "static" of Gold's volatility. The best example is near the end of the chart: GLD moves up near 6.00%, but eventually corrects down to conform with the overall downtrend signal given by the index fund.

Is it possible to flip a small trading account in a short period of time? Yes, It is theoretically possible. Is it likely? Not really. Unfortunately, flipping a small amount of money in a short period is risky and usually won't go your way. While still possible, this method of trading is more like gambling than trading.

Let's pretend you have a $1,000 account:

Let's pretend you have $1,000 in your account that you would like to turn into $2000 in a matter of a year. A yearly return of 100% is an extremely hard number to reach for any trader. In order to increase your account by 100% in a year you would need to risk a substantial amount of your capital. This is where things get tricky. 

In most cases, one series of losses or one major loss can result in you blowing your $1000 account which is why we never recommend high risk trading like this. Of course, you may get lucky with some trades but it only takes one trade that doesn't go your way to completely erase your account.  

So let's go back and say your goal is a return of 20% per year. This is a much more realistic goal and truthfully is a really great return in a year. If you were able to make this return on your $1000 account after a year your account will have reached $1200. 

The Truth about Growing a Small Account

Unfortunately, it takes money to make money. This is especially true in forex. Making 20% on a $1,000 account is a lot different than making 20% on a $100,000 account. However, there are ways to grow your wealth in a safe way. 

Most people don't like to hear the truth about growing a small account. The truth is growing a small account will take time. The only way to safely grow your money is by risking small amounts and compounding your money over time. 

Speaking realistically, making 20% on a $1,000 account a year is not going to make a huge impact on your financial situation but that doesn't mean it won't in the future. Let's say in a few years you've managed to save and invest your money and now you have $10,000 in your account. In that time, you also learned the skills to trade and can now manage that money effectively. Using your learned skills and the money you've saved you can generate steady returns over time.

Psst! Don't know where to get started? Check out our free education page.

Forex gurus don't want you to know this:

We get a lot of backlash when we say that flipping an account in a short period of time is very unlikely. People like to argue that account flipping is easy because they know or follow someone who does it. Are they able to show you a third party track record to prove this? Chances are they will dance around this question but won't actually be able to prove anything. 

The secret that most "gurus" won't tell you about forex trading is most retail traders don't make any money in forex trading.  This is not to discourage you to trade. However, it is important to be realistic and understand that forex is not the secret to get rich quick. Being successful in trading will take patience and practice. Start on a demo account, save your money and only start trading with real money once you have found a strategy that works for you.

Key Takeaways

Learn how to join a small account the right way

So you're thinking of quitting your job and trading full-time, this is every trader's dream as nothing embodies freedom more than those who trade full-time. However, this type of independence isn't for everyone, so how are you meant to know when you're ready? From personal experience and through relations with other great traders, I've been able to narrow it down to a few points.

1. You Have Enough Capital

The capital you have is probably one of the most critical factors of going full-time in this game.

You must have enough capital in your account that whereby making at least 7%/month is more than double what your full-time job is paying you. And not only this, you must have enough money in the back where you can cover at least the next year or so of standard bills such as rent, utilities, and food, without having to think about withdrawing from your forex account possibly.

You must be prepared to have the capital to continue living an everyday life and be comfortable with a few account fluctuations every now and then and being prepared in case of losing streaks or large drawdowns.

There is no set amount you should have at least to go full-time as it all depends on personal circumstances, and the lifestyle you live. However, speaking for myself as an almost 19-year old university student living away from home in England, I would desire to have at least £35,000 in my trading account so that 7%/month is at least £2500 which will grow if compounded, and at least £25,000 in the bank to spend on necessities which would last me at least the next two years or so.

This is so that, if half-way through I realise I am not pulling in the best results trading full-time, I have enough time to find a good job and start getting paid well.

2. You've made Consistent Monthly Profits for the Past 2 Years, MINIMUM

You must have data in your journal that proves that you're able to make consistent monthly profits on your trading decisions for the last two years every month. Of course, a losing month here and there is fine, but overall per month, you must be making on average around 8-10% gains on your investment.

Just by throwing your work clothes in the wardrobe and earning money in bed by trading 24/7, it does not mean you will be any better at making trading decisions than you were trading part-time.

If you know you're not quite there yet at making consistent monthly profits, then the idea of trading full-time should probably be put on hold as there chances of you doing so as a full-time trader will most likely decrease.

3. You Have Other Responsibilities that will Distract Yourself From Trading

I believe trading does not need to be "full time" where you sit at your all day and take countless trades; it all depends on the type of trader you are.

I think most people would agree that swing trading is probably the best type of trading, as it allows time to catch the next full swing in markets. For this reason, I think having a job or some responsibility is a good thing as a distraction, to keep you away from the charts whilst the trade is open.

Sitting at your desk, 24/7 could lead to over-trading, and we all know what the usual consequence of that is.

That's why if you're planning on quitting your full-time job to pursue trading full-time, you should definitely have something else to do throughout the day and that can be literally anything!

This could range from being in charge of taking and collecting the kids to and from school, cooking for the family, cleaning the house, anything! Anything that can take your mind off the chart.

4. You Have a Real Passion for Trading

You must be clear with yourself about why you're taking the leap of faith and going full-time with your trading. Do you really believe this is what you're truly good at and it's got to a point where it's making you much more than your job? Or are you just trying to make some quick cash?

You must critically and honestly assess your skills, and I'd recommend you fix any issues you have with yourself before you give in that notice.

If you rely solely on your paycheck to pay your bills, mortgage, or your family's tuition fees, then strongly consider the consequences of removing that paycheck will do for you, have you been making enough, or even double than what you get paid to be responsible for this? You definitely don't want to put your lifestyle or your family's well-being on the line.

Quitting your job and going full-time is pretty severe, and there are plenty of risks involved not just in the monetary aspect. Take your time with your decision, and make sure you're ready financially, mentally, and emotionally.

A1 Trading Company

A1 Trading Company is a financial services and media business founded in Atlanta, USA.
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