Slippage is a common challenge faced by traders in financial markets,
where a difference arises between the expected price and the actual execution price due to market volatility.
Slippage refers to the difference between the expected price for executing a trade and the actual price at which it is executed.
This discrepancy occurs due to rapid market movements during the processing time of the order.
Slippage is commonly observed in low-liquidity markets or during periods of high market volatility
caused by economic news releases or unexpected events.
There are two main types of slippage:
Positive Slippage: When the actual price is better than the expected price, benefiting the trader.
Negative Slippage: When the actual price is worse than the expected price, leading to losses or reduced profits.
Factors Affecting Slippage
Market Liquidity: Low liquidity can result in fewer matching orders, increasing the likelihood of slippage.
Volatility: Rapid price movements create instability, raising the chances of slippage.
Type of Order Used: Market orders are more prone to slippage compared to limit orders.
Execution Time: Delays in order execution increase the risk of price changes.
Effects of Slippage on Trading
Reduced Profits: Negative slippage can shrink the expected profits from a trade.
Increased Losses: If a trade is near loss, negative slippage can worsen the outcome.
Psychological Impact: Frequent slippage can lead to frustration and diminished confidence among traders.
Advanced Strategies to Avoid Slippage
Using Trailing Stop Orders: These help adjust prices automatically in line with market movements.
Trading with Demo Accounts: Test new strategies without risk to understand the effects of slippage.
Utilizing Market Analysis: Keeping up with news and market trends helps identify the best times to trade.
Final Tips
While slippage is an unavoidable part of trading, understanding its causes
and working to mitigate its effects can make a significant difference in the success of your strategies.
Conscious trading and proper planning are key to avoiding the pitfalls of slippage.
Strong Performance Led by Tech Stocks The U.S. markets had a positive week, with the S&P 500 index recording its best weekly performance since November.
This was fueled by the rise of major tech stocks like Tesla and Nvidia.
Intel Corp’s stock also surged 9.2% following reports of a potential acquisition,
adding further positive momentum to the indices.
Optimism was further bolstered by discussions between President-elect Donald Trump and Chinese President Xi Jinping on trade,
TikTok, and fentanyl, key topics that could shape economic relations between the two largest economies.
Meanwhile, U.S. 10-year Treasury yields dropped by 15 basis points, providing additional market support.
Future Expectations
Promising Outlook for Stocks Post-Inauguration As Donald Trump prepares to take office as President of the United States,
investors are hopeful for policies that support economic growth, such as tax cuts and increased tariffs.
Despite challenges faced by stocks last month due to the Federal Reserve’s hawkish stance,
recent inflation data has revived expectations for interest rate cuts.
Historical market performance suggests potential gains following inauguration.
According to Jefferies’ analysis, the S&P 500 typically experiences an average rise of 3.7% in the three months following the event,
with gains reaching up to 9.5% over 12 months.
Supportive Policies
Positive Outlook Under Trump’s Leadership Trump’s protectionist policies are expected to shield U.S. stocks from major declines, according to Bank of America strategists.
Analysts predict that earnings growth of 9% this year could push the S&P 500 to record highs of 6,600 points by the year’s end.
Technology, utilities, financials, and consumer services sectors are seen as the most attractive for investors under these favorable conditions. Despite high valuations for U.S. equities,
the expansion of earnings momentum and supportive policies may sustain strong market performance.
Wall Street Breathes a Sigh of Relief After Positive Inflation Data: Wall Street experienced a wave of optimism after inflation data came in better than expected,
leading to a significant rise in stocks and a drop in bond yields.
This development has bolstered hopes that the Federal Reserve remains on track to continue cutting interest rates this year.
Stock indices managed to erase their 2025 losses, with the S&P 500 rising by approximately 2%,
marking its biggest jump since the U.S. elections in November.
Treasury bonds also posted notable gains, pushing 10-year yields down by 15 basis points,
alleviating concerns about yields potentially reaching 5% soon.
According to trading fund data from Bloomberg,
this was the best market response to a Consumer Price Index (CPI) release since late 2023.
Inflation Data Reshapes Market Expectations
December’s data showed that the U.S. Consumer Price Index increased slower than expected,
reviving expectations that the Federal Reserve could begin cutting rates sooner than anticipated.
Swap markets quickly moved to price in rate cuts by July fully.
This shift followed strong job data released the previous Friday,
which led some to believe that the Fed might delay any monetary easing until September or October.
Analysts also noted the possibility of rate hikes.
Steve Sosnick of Interactive Brokers commented,
“The market’s exaggerated anxiety led to a strong response to the recent inflation data.
Today’s gains reflect better-than-expected monthly core CPI numbers and highlight the tense sentiment dominating the markets.”
Tina Adatia from Goldman Sachs added that the latest CPI data may not be sufficient
to spark discussions about rate cuts in January.
Still, it strengthens the notion that the Fed’s rate-cutting cycle isn’t over yet.
Broad-Based Stock Gains and Renewed Risk Appetite
U.S. stock indices saw widespread gains, with the S&P 500 climbing 1.8%,
followed by a 2.3% rise in the Nasdaq 100. The Dow Jones Industrial Average added 1.7%.
Meanwhile, Bloomberg’s “Magnificent Seven” index
featuring Apple, Alphabet, Nvidia, Amazon, Meta, Microsoft, and Tesla—surged by 3.7%.
On another note, the VIX index, often called the market’s fear gauge,
fell to its lowest level this year, reflecting a decline in investor anxiety.
Heavily shorted stocks experienced strong recoveries,
with Goldman Sachs’ basket of underperforming tech stocks jumping 3.2%.
Meanwhile, stocks under significant short-selling pressure added 3.8% to their value.
In the cryptocurrency market, Bitcoin approached a record high of $100,000.
The 10-year Treasury yield fell to 4.64%, while Bloomberg’s spot dollar index dropped by 0.2%. Oil prices remained elevated despite a ceasefire agreement
between Israel and Hamas, providing a temporary halt to the conflict in Gaza.
Interest Rate Cut Probabilities
Some analysts believe that the recent inflation data could trigger short-covering activity.
John Kirchner of Janus Henderson Investors noted
that markets are now more comfortable with the diminishing likelihood of interest rate hikes.
Meanwhile, Krishna Guha of Evercore stated that the CPI reading
underscores how the market has overreacted to inflation stories this year,
boosting the likelihood of two rate cuts by the Federal Reserve this year, with a possible third cut in March.
Rajiv Sharma of Key Wealth remarked that the data might not
be sufficient to prompt the Fed to accelerate rate cuts,
as the strength of the labor market remains a key factor in decision-making.
Expectations for More Market Volatility
Despite the relative calm following the inflation data release,
analysts warned of potential market volatility as further economic data is published.
Seema Shah of Principal Asset Management noted that current inflation data
doesn’t provide enough support for an immediate rate cut but could
pave the way for such a move if inflation readings continue to improve.
Solita Marcelli of UBS predicted that U.S. equities would remain attractive for long-term investors,
adding that easing inflation would support corporate earnings growth.
Mark Hackett of Nationwide emphasized the upcoming earnings season,
suggesting positive surprises could provide additional market support.
Wall Street Breathes a Sigh of Relief After Positive Inflation Data
What Are Dividends? Dividends are a portion of a company’s net profits distributed to shareholders as a reward for their investments.
Companies use dividends to share their financial success with shareholders,
typically paying them in cash but sometimes distributing additional shares or other forms of payment.
Cash Dividends: The most common form, where shareholders receive a cash amount directly credited to their accounts.
Stock Dividends: Paid in the form of additional shares, granting shareholders a percentage of their current holdings.
Stock Buybacks: An indirect method of distributing dividends, where the company repurchases some of its shares from the market.
Distribution Mechanism
The dividend distribution process begins with a decision by the company’s board of directors,
determining the portion of net profits allocated for dividends. Two key dates are then announced:
Dividend Declaration Date: The day the company intends to distribute dividends and their value.
Ex-Dividend Date: The date by which shareholders must be registered to qualify for the dividend.
Importance of Dividends
Attracting Investors: Companies that consistently pay dividends appeal more to investors seeking steady income.
Financial Performance Indicator: Dividends reflect a company’s financial health, signaling stability and long-term profitability.
Reinvestment Opportunity: Some shareholders prefer to reinvest dividends by purchasing additional shares,
thereby enhancing the value of their investments.
Risks and Challenges
Impact on Liquidity: Large dividend payouts may strain the company’s liquidity, reducing its ability to expand or invest.
Market Volatility: Dividends that fail to meet market expectations can lead to a drop in share prices.
Conclusion Dividends are a primary means of rewarding shareholders and building trust in a company.
However, investors must consider a company’s dividend policy and understand its impact on
their investments before making financial decisions.
Asian Stocks Rise and Dollar Declines Amid Gradual Tariff Implementation News Asian markets experienced a wave of optimism following reports of a gradual approach to U.S. tariff implementation,
positively impacting regional stocks and the dollar.
Asian Market Optimism Due to Gradual Tariff Plan Asian markets rose significantly after reports that President-elect Donald Trump’s economic team discussed a gradual
approach to implementing tariffs. This step aims to mitigate the impact of accelerated inflation.
The dollar index recorded its first decline in six days,
with the New Zealand dollar emerging as the top performer among G10 currencies.
Stocks in Sydney and South Korea rose, and markets in China and Hong Kong also showed notable gains. The regional MSCI index posted tangible gains,
while U.S. futures extended their slight advances following the rise in the S&P 500 index.
Frederic Neumann, Chief Economist for Asia at HSBC,
remarked that the gradual implementation could give Asian exporters time to adjust their strategies but emphasized
that tariffs would remain a burden on trade.
Bond Movements
Divergence in Bonds and U.S. Markets In Japan, the yield on 40-year bonds reached its highest level since their introduction in 2007
amid a global sell-off in bonds and expectations of future rate hikes by the Bank of Japan. Conversely,
Japanese stocks fell after the holiday break, while the U.S. 10-year Treasury yield dipped slightly.
In the U.S. markets, the S&P 500 rose by 0.2%, while the Nasdaq 100 dropped by 0.3%. The Dow Jones Industrial Average gained 0.9%.
China Stability
Stability in Chinese Markets and Inflation Outlook China’s securities regulator announced plans to stabilize the market by 2025.
Discussions also continue about Elon Musk potentially acquiring the U.S. operations of TikTok.
Inflation Outlook
In the U.S., forecasts indicate a slight slowdown in core inflation,
which could support a more cautious Federal Reserve approach to interest rate cuts.
Consumer Price Index (CPI) data is expected to show relative stability, reinforcing robust holiday season spending.
Chris Larkin of E*Trade suggested that weaker-than-expected inflation data might ease recession fears
while strong earnings could add further support.
Oil prices fell slightly after hitting a five-month high in the previous session.
Trading Indices with Evest: Your Gateway to Global Markets: Trading indices globally is one of the most popular investment tools.
It allows investors to track the performance of significant markets and benefit from their trends.
Instead of purchasing individual stocks, trading stock indices allows you to invest in the performance of a group of companies,
reducing risks and enhancing diversification.
With the Evest platform, you can quickly enter the trading world, whether you are a beginner or an experienced trader.
Traditional indices reflect the performance of a selected group of stocks in a specific market.
These indices are measured based on the performance of the listed stocks,
providing an overview of the economic state of the market or sector.
Examples of some global stock indices:
FTSE 100 (United Kingdom): Represents the performance of the top 100 companies on the London Stock Exchange.
CAC 40 (France): Reflects the performance of 40 major companies in France, making it a key benchmark for the French market.
SPX 500 (United States): The S&P 500 includes 500 major U.S. companies, making it a significant indicator of the U.S. economy.
NIKKEI 225 (Japan): It comprises the top 225 companies listed on the Tokyo Stock Exchange and mirrors Japan’s economy.
What Are Future Indices?
Future indices are derivative contracts based on the future performance of a specific index.
These contracts are used to speculate on the index’s future value or to hedge against market fluctuations.
Examples of some future indices:
NASDAQ: Allows trading on the future performance of NASDAQ, including that of major tech companies.
SP500: Facilitates trading contracts based on the future performance of the S&P 500.
ICE USD: Provides opportunities to trade on the performance of the U.S. dollar against other currencies or commodities.
The Difference Between Traditional and Future Indices
Aspect
Traditional Indices
Future Indices
Underlying Asset
Based on the actual value of the index.
Based on the future value of the index.
Expiry
No expiry; positions can be opened or closed anytime.
Have a specific expiry date.
Purpose
Suitable for long-term investment or short-term trading.
It is ideal for hedging or speculating on future movements.
Leverage
Offers moderate leverage.
Provides higher leverage, increasing risks and rewards.
Flexibility
More flexible for intraday and long-term trading.
Requires adherence to contract terms and expiration dates.
How to Trade Indices with Evest
The Evest platform provides a seamless and comprehensive trading experience for traditional and future indices. Follow these steps:
Create an Account: Register on the Evest platform and fill in your personal information.
Choose Your Index: Select the index you wish to trade from the options (traditional or future).
Analyze the Market: Use advanced tools offered by Evest to analyze market performance and predict trends.
Open Your Trade: Choose to open a buy or sell position based on your analysis.
Manage Risks: Utilize stop-loss and take-profit tools to safeguard your investments.
Monitor Performance: Track your positions in real-time and adjust your strategy if necessary.
Why Choose Evest?
Global Indices Trading: Access significant markets, including Europe, the United States, and Asia.
Advanced Tools: Offers advanced charts and technical analysis tools.
Comprehensive Support: A 24/7 support team and integrated educational materials.
Competitive Conditions: Enjoy low spreads and fast execution.
Start trading global indices with Evest today and seize the opportunities of international markets to achieve your financial goals!
Trading Indices with Evest: Your Gateway to Global Markets
Limited Cuts and New Shifts in Central Bank Policies
2025 is expected to witness limited global interest rate cuts, accompanied by significant shifts in
central bank policies due to economic and inflationary pressures.
Impact of Trump Administration Policies on U.S. Inflation and Monetary Policy
The Trump administration’s policies are expected to significantly influence inflation rates in the U.S.,
putting pressure on the Federal Reserve’s ability to address economic challenges.
Projections indicate limited interest rate cuts, with final rates reaching higher levels than previously anticipated.
Meanwhile, major central banks like the Bank of England and the European Central Bank face similar challenges,
whereas the Bank of Japan appears to be the sole institution likely to continue raising interest rates.
Forecasts by Financial Institutions on Monetary Policies
Federal Reserve
Apollo Global Management: Expects interest rates to drop to around 4% by the end of 2025, at a slower pace than market expectations.
AXA Investment Managers: Predicts a temporary halt in rate cuts at 4.25%, with a resumption in the second half of 2026.
Bank of America: Anticipates two additional rate cuts in the first half of 2025, reducing global average rates from 5% to 4%.
European Central Bank (ECB) and Bank of England (BoE)
Capital Economics: Projects the ECB to lower rates to 1.5% by the end of 2025,
while the UK base rate could peak at 3.75% before gradually declining.
Deutsche Bank: Foresees European rates dropping to 1.5%, citing ongoing economic pressures and slow growth.
Bank of Japan (BoJ)
Invesco: The BoJ is an outlier, with expectations of raising rates to 1% by the end of 2025.
JPMorgan: Anticipates stricter monetary policies from the BoJ, driven by domestic factors such as wage growth.
Impact of Global Fiscal and Economic Policies
Reports highlight the influence of fiscal policy changes, such as U.S. tariffs and tax cuts, on monetary policy trajectories worldwide.
European economies may experience a weakening euro against the dollar as the ECB continues easing measures.
In China, policymakers are focusing on stabilizing growth amidst trade challenges with the U.S.
Conclusion
The year 2025 marks a turning point for global monetary policy, as central banks cautiously reduce interest rates.
While economic challenges persist, local and international strategies will determine the balance between supporting growth
and controlling inflation.
The Bank of Japan stands out with its continued tightening approach compared to other major central banks.
Limited Cuts and New Shifts in Central Bank Policies
Financial market risks pose a major challenge to investors, as they range from price volatility
and credit risks to liquidity issues and unforeseen events.
Market risks refer to changes in the value of financial assets due to market fluctuations. These risks include:
Equity Risk: The decline in the value of stocks due to changes in the stock market.
Interest Rate Risk: The impact of interest rate changes on bonds or other investments.
Currency Risk: The volatility of exchange rates affecting international investments.
2. Credit Risks
Credit risks arise when there is a likelihood that a counterparty (such as companies or governments)
fails to fulfill its financial obligations, leading to losses for investors or lenders.
3. Liquidity Risks
Liquidity risks occur when an investor cannot sell assets quickly or easily due to a lack of buyers or market volatility,
resulting in significant losses.
4. Operational Risks
Operational risks include failures in systems, processes, technology, or human resources within financial firms.
These risks can result in financial losses or reputational damage.
5. Legal and Regulatory Risks
Legal and regulatory risks emerge when changes in laws or regulations impact businesses or investments,
such as increased taxes or the imposition of new restrictions.
6. Force Majeure Risks
These risks stem from unexpected events like natural disasters, global economic crises,
or political turmoil, which significantly impact financial markets.
7. Inflation Risks
Inflation risks occur when the purchasing power of money decreases due to persistently rising prices,
reducing the real returns on investments.
This type of risk particularly affects bonds and fixed-income investments.
8. Reputational Risks
A negative reputation of a company or financial institution can affect its market value and investor confidence.
Such risks may arise from financial scandals or operational mistakes that erode trust.
9. Geopolitical Risks
Political events like wars, government changes, or international sanctions can disrupt financial markets,
impacting asset values and investments.
10. Technological Risks
In the era of advanced technology, sudden changes in technology or cyberattacks can significantly impact companies
and financial markets, causing unexpected losses.
Importance of Understanding Market Risks
Understanding financial market risks is essential for investors as it helps them make informed investment decisions.
Knowing the various types of risks can reduce the likelihood of losses and improve long-term returns.
Tips for Managing Market Risks
Regular Portfolio Reviews: Analyze your investment performance regularly to ensure goals are met and risks are minimized.
Cautious Investing During Volatility: Avoid making hasty investment decisions during periods of instability.
Financial Consultation: Consulting with investment experts can help build a solid strategy for managing risks.
How to Manage Financial Market Risks
To manage these risks, the following measures can be taken:
Diversify Your Portfolio: Minimize the impact of market fluctuations by spreading investments across various assets.
Use Financial Instruments: Tools like futures contracts or options can help hedge against risks.
Stay Informed: Follow news and economic analyses to anticipate potential market changes.
Set Loss Limits: Implement effective loss management and liquidity strategies.
Understanding and effectively managing different types of risks contributes to financial stability and reduces potential losses.
Microsoft Announces $3 Billion AI Investment in India: On Tuesday, Microsoft CEO Satya Nadella announced that the company plans to invest $3 billion
in India over the next two years to enhance cloud infrastructure, artificial intelligence (AI), and training.
Microsoft Announces $3 Billion AI Investment in India
On Tuesday, Microsoft CEO Satya Nadella revealed the company’s plan
to invest $3 billion in India over the next two years to strengthen cloud infrastructure, artificial intelligence, and training programs.
This investment comes amid increasing competition in the AI market in India,
which has become a key destination for major tech companies due to its vast population and promising tech talent.
Nadella highlighted that the investment will include establishing new data centers,
emphasizing that India is quickly emerging as a leader in AI innovation, opening new avenues for development across the country.
This announcement follows less than a week after Microsoft President Brad Smith
stated that the company plans to invest $80 billion globally in AI this year,
focusing on building data centers and advancing technological infrastructure.
The AI sector in India has garnered significant attention from global companies.
Senior officials from Nividia and Meta recently visited the country, underscoring India’s growing stature as a hub for technological development.
Factory Orders in Germany Record Biggest Contraction in 3 Months
Data from Germany’s Federal Statistical Office (Destatis) on Wednesday showed a continued contraction in factory orders,
with a 5.4% decline in November compared to October.
This marks the largest monthly drop in three months and is significantly
worse than market expectations of a slight 0.3% decline after a 1.5% contraction in October.
Factory orders fell by 1.7% in November compared to last year’s month, following a 5.7% growth in October.
This reflects ongoing pressures on the industrial sector in the Eurozone’s largest economy.
Eurozone Producer Prices Record Annual Decline and Monthly Increase Due to Energy Prices
Data released by Eurostat on Wednesday indicated that producer prices
in the Eurozone’s industrial sector recorded a 1.2% annual decline in November, compared to a 3.3% drop in October.
Every month, producer prices rose by 1.6% in November after a 0.4% increase in October,
primarily driven by a 5.4% surge in energy prices. In contrast, durable consumer goods prices fell by 0.2%,
while non-durable goods prices remained unchanged.
The data also showed that energy prices in the Eurozone dropped by 5.3% year-over-year,
while intermediate goods prices fell by 0.3%, offsetting the impact of rising prices in other categories.
On a country level, Slovakia recorded the most significant annual drop in industrial producer prices at 18.7%,
followed by Luxembourg at 6.6% and France at 5.2%.
These figures highlight ongoing economic pressures in the Eurozone,
with significant energy price volatility affecting overall pricing trends in the industrial sector.
Microsoft Announces $3 Billion AI Investment in India
Profit taking is the process of selling financial assets, such as stocks, cryptocurrencies, or other investments,
after they have experienced a significant increase in value.
Through this process, investors aim to secure their gains and avoid potential risks resulting from market fluctuations
or a future drop in asset prices.
There are several reasons why investors may choose to take profits, including:
Protecting Gains: If an asset’s value rises significantly in a short period,
the investor may decide to sell it to avoid losing the earned profits in case market conditions change.
Portfolio Reallocation: Some investors use profit-taking as an opportunity to redistribute their funds into other assets with better potential or lower risks.
Need for Liquidity: In some cases, an immediate need for cash drives the sale of assets to realize profits.
When to Take Profits
The timing of profit-taking depends on the investor’s strategy and financial goals.
It is generally recommended to rely on market analysis, acceptable risk levels,
and personal investment plans. Investors should avoid making decisions based solely on emotions or short-term market fluctuations.
Profit taking is a crucial step in successful investment management,
helping to achieve financial stability and develop an investment portfolio in a calculated manner.
How to Take Profits Wisely
Profit-taking is not simply about selling assets randomly when their value increases.
It should be done based on a clear and well-thought-out strategy. Here are some tips for taking profits wisely:
Set Goals in Advance: Before investing, determine the level you want to reach to achieve your profits.
Once the asset hits this level, sell it.
Use Pre-set Sell Orders: On some trading platforms, you can set pre-determined sell orders
(Stop Loss or Take Profit) to ensure automatic profit-taking when the target price is reached.
Diversify Assets: After taking profits, avoid putting all your money into one investment.
Diversify your portfolio to reduce risks and increase chances for future gains.
Risks of Delaying Profit Taking
Delaying profit-taking may lead to losing the achieved profits if asset values drop suddenly. Key risks include:
Market Volatility: Economic or political news may cause rapid and unexpected declines in asset values.
Overconfidence: Some investors believe prices will continue rising, leading to delayed selling, only to be surprised by sharp price drops.
Lack of a Clear Plan: The absence of a clear profit-taking strategy exposes investors to emotional decisions that may negatively impact their investments.
Difference Between Profit Taking and Exiting Investment
It is essential to differentiate between profit-taking and fully exiting an investment.
Partial Profit Taking: Involves selling part of the assets while retaining the rest to benefit from potential future increases.
Full Exit: Occurs when selling all assets, often due to a change in investment strategy or a need for liquidity.
Is Profit Taking Suitable for All Investors
Profit taking is a suitable option for many investors, but it may not be necessary for everyone.
Short-term Investors: Require frequent profit-taking due to their reliance on daily market fluctuations.
Long-term Investors: May prefer holding onto their assets for longer periods to achieve larger gains,
focusing on overall returns over the long term.
Conclusion
Profit taking is a fundamental process in investment management.
Its success relies on careful planning and decisions based on sound analysis.
By following well-crafted strategies and avoiding emotional decisions,
investors can maximize the benefits of their investments while minimizing potential risks.
