Unlike during the last few years, analysts are no longer talking about (forex reserve) diversification. It was once widely predicted that the Euro would rival the Dollar for a place in the portfolios of foreign Central Banks. As expected, preferences are now shifting back in favor of the Dollar and to a lesser extent, the Yen. The Pound and Swiss Franc may have a small role, as will the “New” Euro. Over the short-term, however, Central Banks (and investors) will continue to eschew the Euro, if only due to sheer uncertainty.

Given that everything is relative in forex, investors and Central Banks only have so many options when it comes to choosing which currencies in which to denominate their portfolios. Thus, it’s understandable that a sudden crisis in the EU would buoy the Dollar. At the same time, it’s not exactly a good bet that the US isn’t destined to suffer a similar fate.

Due to extremely low short-term interest rates, most investors have been willing to accept low returns when lending to the US (by buying Treasury Securities, and indirectly by simply holding Dollars). At some point, both short-term interest rates and the rate of inflation will rise, and investors will have to re-examine their risk/reward schemes. My suspicion is that investors will demand higher yields in exchange for lending to the US.

Just like with Greece, a US fiscal crisis would probably emerge suddenly. While the US government pays lip service to the notion of balancing its budget and reducing its sovereign debt, even the most optimistic projections show a budget deficit for the next 10 years. Beyond that, the retirement of the baby boom generation and their “entitlement” payment will make it nearly impossible for the US to operate a budget surplus.

In short, the only hope is for the US economy to grow faster than the national debt. If the US economy grows at 4% per year, for example, it will have to run a budget deficit less than 4% of GDP in order to reduce its relative level of debt. On the surface, this seems like a reasonable possibility, but given trends over the last three decades (covering periods of both recession and economic boom), it doesn’t seem likely.

This is not new information. Doomsday theorists have been predicting the bankruptcy of the US for two centuries. Don’t mistake me for doing the same. Rather, I only wish to point out how ironic it is that the Dollar’s fiscal conditions are comparable (and in some ways worse) than some of the problem countries that investors are currently focusing on.

Then again, forex is relative. Some analysts have suggested that the new reserve currency will be gold, oil, and other commodities. Unfortunately, there isn’t nearly enough (liquid) supply of these materials to occupy more than a small portion of reserves. Under the current system, then, investors are pretty much stuck with the Dollar. At this point, betting to the contrary is tantamount to betting on the complete collapse of the modern financial system. A reasonable bet, perhaps, but you can forgive investors for being hesitant to embrace it.

Please, name your best advantages – those that make InstaForex different from hundreds other on-line Forex brokers.

The secret of InstaForex competitive ability amid other on-line Forex brokers lies not even in the availability of particular unique market advantages, which no-one or only a short number of brokers have, but in the fact that our company offers its clients absolutely all the best services existing on present-day Forex market. In addition to a full range of currency instruments and the most favorable conditions on the market we can put forward segregated and VIP-accounts, PAMM-system, a line of contests and campaigns with a prize fund over $350,000 annually, etc.

Why don’t you offer a web-based platform to the traders? What’s your proposed solution to the traders that often have to trade from public places or from computers that don’t allow any new software installation?

A web-interface cannot satisfy the requirements of more than 99% of traders. As a rule, it is used only for balance control, since such functions as application of the EAs are not available in it. An option of balance check can be accessed in the Client Cabinet. Nevertheless, working to satisfy the needs of 100% traders we are not excluding the possibility of a web-platform establishment. Though, we do not consider it to be of exceptional importance.

What are your plans regarding the regulation? It looks like more and more Forex traders start to pay attention to the broker’s regulation. Are you going to get registered in U.S. by NFA or CFTC in the future?

At the moment this issue is under discussion, though as the information is our commercial secret, we can not reveal it. Just to mention, we will never co-operate with the regulating organizations of ”Mikki Maus Authority”-type (citing a reliable international lawyer specializing in this subject); like Mauritius, which issues fictitious documents being just a piece of paper without legitimacy in any developed country.

Do you plan adding a full support for PayPal payments – both for deposit and withdrawal? What problems arise with PayPal payments’ support?

The system PayPal makes restrictions for the Russian merchants – they only are allowed to send funds. This question is being worked at; the negotiations with PayPal are in progress. We clearly understand that this payment system is very popular among the western clients.

Recently you’ve introduced 1:1000 leverage to your customers. It looks to be a rather high and dangerous leverage. Do your traders use it? Was it aimed on traders with the extremely low deposits?

We do not consider a $1,000 deposits as high, that is why we limited the leverage of 1:1000 by this sum. Further, we have a leverage of 1:600, which is also higher than most brokers have.

InstaForex is known for offering many Forex contests, promotions and bonuses to traders. Do you plan to offer them continuously or use them as a one-time promotional campaign?

All campaigns, contests and bonuses offered by InstaForex are established with a long-term prospect. The contests and campaigns are a good instrument of a client attraction, that is why one can hardly imagine a large broker without them. On this basis, we will not decrease the tempo of this direction development. Moreover, we are constantly expanding a line of contests and campaigns and the volume of the annual prize fund is over $350,000.

InstaForex was named #1 broker in Asia recently. How did you manage to do that and why in Asia?

The award Best Broker- Asia according to a reliable British financial publication World Finance is first of all a result of enormous work completed by our team in more than 2 years. We have really done a great job not only to enter the market and get a good position but also to be among the leaders of Forex brokerage. Referring to Asia, this region became a breakthrough for us. It is of no secret that Asian financial market is already growing for many years. So, most of our services, instruments and technologies have found a lion’s share of consumers in Asia. This does not mean that we are absent in other regions. We are developing in Europe, Middle East, Russia and even Africa actively enough.

There are many representatives of InstaForex on various Forex forums. At the same time, there are many complaints (in on-line reviews) that the support questions and withdrawal requests aren’t answered on time. Wouldn’t it be more useful to the company and to the traders to hire more people to work with the clients instead of building up these “forum embassies”?

Let us make the situation clear: “forum embassies” are created because one of the companies uses blackmailing against us – a constant attack from the anonymous nicks. The same people were making DOS attacks versus us in 2008, and they can artificially increase votes in any ratings. If you pay attention to the companies listed in the rating with most votes you can realize who we are hinting to.

As for the claims, we have many clients and the number of claims is corresponding. Even 0.1% of 140,000 is already 140 people. Though, the majority will agree that 0.1% is a little percent.

If we take as an example the most popular Forex companies in Russia, there is also much negative information about them on Russian forums. However, this does not mean that these companies work badly; it only means they have a lot of clients.

What are your plans regarding the new MetaTrader 5 platform? Are you going to start offering it to your clients soon? Will you use it along with MetaTrader 4 or it will substitute the previous version?

Taking into account that a programming language is being changed, we will have to provide our users a possibility to operate the former platform. It is likely to be offered to clients along with MT5 for an extended period of time.

In your opinion, is Forex a gambling? What makes so many people think that it’s some kind of gambling and that Forex brokers are casinos?

(For some reason this question was left unanswered by InstaForex.)

CFTC proposed a limitation on the currency trading leverage of 1:10. You aren’t regulated by CFTC, but what’s your opinion in this decision? How will it influence the global Forex business?

We consider logical many of the US regulating organizations initiatives. However, we are interested in providing a wide choice to our clients, that is why we will continue to offer locking positions and a leverage of 1:1000.

What new features are planned for InstaForex in the near future, if it’s not a secret, of course?

We would not really like to show our cards, it is better to list the services initiated recently. To begin with, we should mention the initiation of PAMM-system. Now our clients are able to trade and invest in the accounts of other managing traders. The establishment of InstaClub system may also seem interesting; thanks to it members of the club can receive various privileges, for example, additional bonuses and concessional participation in the contests. Moreover, we have introduced cent accounts, implemented technical security of trading accounts of the bank level, started two new contests for demo-account holders etc. InstaForex keeps advancing for its clients, constantly improving trading conditions and the quality of service.

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Read the rest of Interview with InstaForex (44 words)

MetaTrader 4 platform with ECN execution – FXOpen.

Posted on Forex blog.

If you aren’t acquainted with concept of the self-learning EAs or statistical trading systems, please read the following posts:

• Statistical Forex Systems
• Statistical Forex System — Example MT4 Expert Advisor

In short, the self-learning EA “learns” from the market and places the positions according to his previous “knowledge” about the market. The presented EA — RowLearnerCorrectedFinal, uses OHLC (Open, High, Low, Close) data of the 6 previous bars and the resulting outcome of the latest bar (drop, rise, or flat) as the primary knowledge about market. The OHLC data is also normalized by subtracting the current Open level to make the ”knowledge” more independent from the actual market levels. To decide the direction of the positions, the EA finds the lowest average Euclidean distance between the current market state and all the remembered states. It also has a money management system implemented (quite aggressive, left from the championship). You can download RowLearnerCorrectedFinal (or zipped) for free.

The expert advisor is available only for MetaTrader 4, because I still have a lot of issues with the MetaTrader 5 order handling. Because it’s not profitable, I didn’t add it to the list of MT4 EAs on my site.

How to use it:

1. Download and copy to your MetaTrader’s /experts/ folder.
2. You’ll need to create a map-file with the market “knowledge” for EA.
3. Open the EA in MQL Editor and comment out lines 59 and 87–106.
4. Compile it.
5. Run it in a strategy tester on EUR/USD, H1, Open prices only, any period (the longer is the better).
6. “rl.txt” file will be created inside /tester/files/ folder of your MetaTrader.
7. Copy it to /experts/files/ folder.
8. Open the EA in MQL Editor and uncomment lines 59 and 87–106.
9. Compile it.
10. You can now attach it to EUR/USD H1 chart. It will trade and continue learning. On deinitialization it will save its data to ”rl.txt” located in your /experts/files/ folder.

There are three known problems with this Forex expert advisor that make its use unprofitable:

1. Basing the market knowledge on the OHLC patterns of the previous bars proved to be ineffective.
2. If the market significantly changes its behavior compared to the period of learning, the EA fails to trade profitably.
3. If the range of prices changes significantly, the previous data proves to be pretty useless.

Possible ways to improve this self-learning MT4 EA:

1. Find better market parameters to store as the EA’s knowledge (Heiken-Ashi, various pivots, indicator values, etc.)
2. Provide better learning pattern — not just buy, sell or hold if the Close-Open difference of the next candle after the pattern was inside/outside a certain range of pips.
3. Find better coefficient system to weight the older data compared to the newer.
4. Add more maps with different data that can’t be compared with the data stored in the primary map (for example, a separate map for Volume data).
5. Use other distance measuring method instead of Euclidean (Mahalanobis, Manhattan, Chebyshev, Minkowski, etc.)
6. Find a different way of applying the distance — using the average distance, using the shortest distance, using the median distance, etc.

You can freely modify, upgrade and use the pieces of code from this EA as long as you leave the credit to the original author (me) inside the MQL file. If you manage to get something worthy out of it, please let me know.
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Read the rest of Self-Learning Forex Expert Advisor (18 words)

MetaTrader 4 platform with ECN execution – FXOpen.

Posted on Forex blog.