Profit Targets

     Profit targets are a risk management method that many traders use. While setting profit targets can be a more conservative risk management method, many traders enjoy using profit targets because they are easy to implement, and they help a trader to remain disciplined in their trading. There are several ways to set profit targets and incorporate them into your daily trading.

     Possibly the simplest way to set profit targets is to set a dollar amount. A trader would set a profit target as a dollar amount and incorporate this amount into their trading strategy. Let's say we are trading the E-mini S&P 500, and we decide to set a $150 profit target for ourselves. Since one point is worth $50, we would get out of the market once we had had three winning trades in a row, or once our trading profits (with losses and wins taken into consideration) had reached $150. This profit target helps us get out of the market with a conservative profit, and makes sure we do not expose ourselves to unnecessary risk or potentially giving back profits.

     Traders can also set profit targets by using a percentage price. Setting a percent price, however, also means that you would need to set a stop loss. If you are unfamiliar with stop losses, this method might not be the best for you. A swing trader who sets a percentage price might set their stop loss at 2% and their profit target at 3% of price. This means that the trader would exit the market if their loss was reached and exit the market if their profit target was reached. Setting profit targets this way is beneficial because it helps the trader to know when to close a position so that it does not go against them if they hang onto it for too long.

     Profit targets can also be set based on support and resistance in a market. If you were to see the market moving up and you expected to encounter resistance in a certain area, you could set your profit target just below the resistance. This method would allow you to take profits out of the market as the market moved up to resistance.

     A trader could also implement a trailing stop to set their profit target. This method has become very popular with many traders. A trailing stop adjusts based on moves in the market. A trader adjusts the stop loss with the trailing market in order to allow a stop to move higher when the market is moving up, and lower when the market is moving down. This approach allows a trader to lock in profits once that trailing stop is hit.

     Profit targets are a great way to manage your risk in trading. Many traders feel that if they set a profit target they will be missing out on potential profits or opportunities. In some cases, perhaps this could be the result of setting a profit target. However, more often than not a profit target will save a trader from staying in a market too long and losing profits they had already accumulated. I highly recommend profit targets to any trader who is serious about making money with trading. 
 
 
 
 

     How safe is your ATM?

     While a breach is unlikely, it’s not unheard of – especially if you’re getting cash at a convenience store. But there are things you can do to protect yourself.

     When hackers infiltrated Citibank ATMs at 7-Eleven stores, they revived the fear of everyone looking to get out a few bucks for a Slurpee –  is using this machine safe?

     Experts say the answer is that an ATM’s safety depends on where it is. If it’s at a bank, an ATM is somewhat safer than it is in a public place, such as a ballpark, a train station or a convenience store. “You should never use ATM machines at convenience stores if you can help it because those are much more susceptible to tampering,” added Avivah Litan, a security analyst with the Gartner research firm.

     While consumers can’t do much when hackers break into back-end computers that approve cash withdrawals in order to steal PIN codes – such as happened during last year’s Citi ATM breach – the odds are slim that it will happen to you. “It is possible to install malicious software on a banking server to capture an encrypted pin as it passes through, but it is extremely rare,” according to Margot Mohsberg, a spokeswoman for the American Bankers Association.

      Hackers steal $2M from Citi ATMs. There are other methods of getting scammed at the ATM, however, that are both popular and preventable. Most often, thieves use a method called skimming, which means they insert a device into the card slot on an ATM that steals your data right off your card’s magnetic strip.

     When it comes to skimming, non-bank ATMs are far more susceptible, putting you at greater risk. There’s less of a chance of skimming at your bank’s local branch, because the bank is videotaping and maintaining that ATM, than at the ones in a convenience store that are maintained by a third party, said Ellen Cannon, managing editor at bankrate.com.

     “There are thefts constantly,” said Cannon.

     To further decrease your odds of getting victimized, Cannon also suggests changing your PIN number regularly and using different PINs for different accounts. Also, when shopping, opt for credit over debit. Chances are your credit card has 100% fraud liability, whereas your debit card may not.

     “Basically, avoid using your PIN as much as possible,” Litan recommends. Despite industry standards that call for protecting PINs with strong encryption, that doesn’t always happen, so to stay on the safe side, keep transactions that require you to enter your PIN to a minimum.

     And when it comes to online activity, never use your PIN under any circumstances. “There’s no online use of PINs,” Litan said, and any prompt to do so is just a scam. Ultimately, the best thing you can do is check your account frequently and report any suspicious activity immediately.

     Beyond that, there’s really not much else consumers can do, according to Thomas Fox, community outreach director of Cambridge Credit Corp., a nonprofit credit counseling agency based in Agawam, Mass. “It falls to the bank to employ new ways to deter hackers.”

     But if you are a victim of theft, keep in mind that while it is a hassle, it is not necessarily a hardship. “The bottom line is that consumers are not responsible for any fraudulent activity on their account,” Mohsberg said. 
 

     Rising reserves of unused oil put strain on storage

     By: Richard Spencer

     Rotterdam, Europe's biggest port, is running out of room for more oil, US reserves are at a 19-year record and tankers are being used as floating storage off Britain's south coast, even though OPEC is reducing production.

     "From a commodities point of view, world trade is appalling and the demand is just not there," said Ahmad Abdallah, commodities analyst at Gavekal, the economics consultancy.

     "All inventories are rising - they are bursting at their seams."

     Oil prices rose to a five-week high last week above $53 a barrel in line with the recent bull run on the world's equity markets. Yet despite an OPEC decision last November to cut output by a record 4.2m barrels a day, a move which began to come into effect in February, the fall in demand has been even more striking.

     Goldman Sachs estimated last week that global storage capacity could be exhausted by June. Government figures in the US, the world's biggest oil consumer, put reserves at 375m barrels, rising by 4m barrels in one week in April alone. One estimate said that in addition 100m barrels were currently being stored in tankers at sea across the world – some of these are visible in Lyme Bay off the coast of Dorset and Devon.

     Mr Abdallah said official estimates of oil usage for this year had been based on more optimistic assumptions than economic reality. An average of analysts' predictions reckons on a reduction in demand of 1.5m barrels a day for 2009 over last year, while the International Energy Agency is predicting a fall of 2.5m barrels, but an estimate based purely on current economic growth figures would put the overall decline at 3m.

     He said it was a similar story in other commodities, with companies building up inventories while prices were cheap. "I can't see demand picking up for the rest of this year," he said. "Even if it picks up next year it is going to be from a very weak base."

     Goldman Sachs set a price target 10pc lower than at present, at about $45, for July, while Peter Voser, chief financial officer for Royal Dutch Shell, told reporters last week that it was "difficult to see an uptick in the oil or gas price" in the next 12 to 18 months. The weak demand for oil will add fuel to the arguments of those who argue the current bull run on the equity markets is a classic fools' rally.

     "The further (the oil price) rises, the more sceptical you become," said Mark Pervan, head of commodities research at ANZ.

     "We are operating in a global recession and oil markets are a proxy for global growth." 

     The Problem with Threads

     By: Edward A. Lee

     Threads are a seemingly straightforward adaptation of the dominant sequential model of computation to concurrent systems. Languages require little or no syntactic changes to support threads, and operating systems and architectures have evolved to efficiently support them.

     Many technologists are pushing for increased use of multithreading in software in order to take advantage of the predicted increases in parallelism in computer architectures. In this paper, I argue that this is not a good idea. Although threads seem to be a small step from sequential computation, in fact, they represent a huge step. They discard the most essential and appealing properties of sequential computation: understandability, predictability, and determinism.

     Threads, as a model of computation, are wildly nondeterministic, and the job of the programmer becomes one of pruning that nondeterminism. Although many research techniques improve the model by offering more effective pruning, I argue that this is approaching the problem backwards. Rather than pruning nondeterminism, we should build from essentially deterministic, composable components.

     Nondeterminism should be explicitly and judiciously introduced where needed, rather than removed where not needed. The consequences of this principle are profound. I argue for the development of concurrent coordination languages based on sound, composable formalisms. I believe that such languages will yield much more reliable, and more concurrent programs. 
 

     Appraising the European Central Bank

     Hard talk, soft policy

     The ECB has run as loose a monetary policy as other central banks have. It is just rather more coy about it

     THE global economy has stopped sinking and central bankers are pausing for breath. As The Economist went to press on July 2nd, the European Central Bank (ECB) was expected to keep its main “refi” interest rate unchanged, at 1%. The ECB’s rate-setting council has been chary of cutting rates closer to zero as policymakers elsewhere have done. Its reluctance to do more has attracted criticism, only some of it fair.

     The focus on policy rates may put the ECB in a bad light but these are no longer a reliable guide to the overall monetary-policy stance. If you look at market rates the policy stance in the euro area is as loose as anywhere else, because of stimulus decisions taken at the height of the financial crisis. In October the ECB decided it would offer banks as much cash as they wanted, at a fixed interest rate (the refi rate) and against a wider range of security than usual, for up to six months. It also scheduled extra three-month and six-month refinancing operations, so that banks could come more often to the central-bank well.

     In May the ECB council agreed to extend the offer of fixed-rate cash to one year. At the first 12-month refinancing operation on June 24th, euro-zone banks borrowed a staggering €442 billion ($620 billion). With so much cash splashing around, the charge that banks make for overnight loans has stayed well below the refi rate, with some occasional spikes (see chart). Since the €442 billion cash injection, overnight interest rates in the euro zone have fallen to a record low of 0.3%, below those in Britain and scarcely higher than in America. Indeed banks can now borrow more cheaply in euros than in pounds for either three, six or 12 months.

     Before the crisis, the ECB would aim to keep overnight interest rates close to the refi rate. Since it moved to unlimited fixed-rate funding, the central bank has been content to allow the overnight rate to drift much lower than the policy rate. In effect, the bank now has a target range for short-term rates: the upper bound is the 1% refi rate and the lower bound is the rate the central bank pays on banks’ deposits with it, currently 0.25%. The deposit rate has been a better guide to the policy stance than the refi rate has. ECB-watchers and markets understand this, even though it has not been spelt out in so many words by Jean-Claude Trichet, the ECB’s president.

     Why be so coy? One concern is that by playing up the fight against recession, the ECB could appear to have lost sight of inflation. Keeping the totemic refi rate above zero may be seen as necessary to prevent inflation expectations from drifting up. There may also be a reluctance to admit that such a gushing provision of liquidity has altered the policy stance. Since the start of the crisis in August 2007, the ECB has insisted the two are separate. “They are bold on liquidity because they don’t see it as mainstream monetary policy,” says Charles Wyplosz of the Graduate Institute in Geneva. Yet the terms of its refinancing for banks have clearly led to looser monetary conditions.

     Another reason for obfuscation is to mask differences among rate-setters. Monetary-policy hawks can reassure themselves that the policy rate is not too low. Doves are happy that effective interest rates are nearer to zero. And Mr Trichet can claim there is a “consensus”. The terms of the truce make it easier to reverse policy when the time comes. By restricting its liquidity support, the ECB will be able to guide overnight interest rates towards 1% without having to alter its policy rate.

     Because the ECB has had one eye on the exit since the start of the crisis it has earned plaudits from those who think the Federal Reserve has been incautious. That judgment is too kind to the ECB, which could afford to have scruples about the medium term because other central banks were taking more care of the present. It is also unfair on the Fed, which had to stand in place of America’s collapsed shadow-banking system. When the economy was in most danger, the ECB could have cut rates more quickly. “If the ECB had been more proactive, the recession would have been less bad,” says Marco Annunziata of UniCredit. The striving for consensus militated against bolder action.

     Another criticism is that the ECB has not done more to ease credit conditions by buying government and corporate bonds outright, as the Bank of England and the Fed have done. Its scheme to purchase up to €60 billion of the safest bank bonds, launched this month, is modest by comparison. Mr Trichet believes that focus makes sense, as euro-zone businesses and homebuyers rely more on banks than capital markets for credit. In America, capital markets matter more, so the Fed had to get its hands dirtier by buying commercial paper and mortgage-backed securities.

     The ECB is also loth to soil its hands with public debt, though banks flush with central-bank cash are keen buyers of such low-risk assets. If this is monetisation at a remove, so be it. The central bank keeps its independence from government and does not have to worry about selling bonds back into the market once the interest-rate cycle turns. “If you want to stay clean, the exit strategy is easier,” says Thomas Mayer of Deutsche Bank.

     But offering ample liquidity support to banks gets you only so far. By buying assets, the Fed allows American banks to shed them, freeing scarce capital for fresh lending. As losses mount in the euro zone, capital may trump liquidity in determining credit growth. Lending to the private sector slowed to 1.8% in the year to May, an all-time low. Until credit starts to revive, the ECB cannot think about tightening policy. It may yet have to be bolder.  

     Buttonwood

     Caveat creditor

     A new economic era is dawning

     SOMETIMES you can have too much news. There was so much financial turmoil in the autumn that it was hard to keep up with events. In retrospect it is clear that a change in the economic backdrop akin to the demise of the Bretton Woods system in the early 1970s has taken place. Investors will be dealing with the aftermath for decades to come.

     From the mid-1980s onwards the answer to big financial setbacks appeared to be simple. Central banks would cut interest rates and, eventually, the stockmarket would recover. It worked after Black Monday (the day in October 1987 when the Dow Jones Industrial Average fell by 23%) and the Asian crisis of 1997-98. It did not rescue shares after the dotcom bust but the easing led to the housing boom and the underpricing of risk in credit markets.

     Easing monetary policy was pretty popular. It lowered borrowing costs for companies and homebuyers. To the extent that savers earned lower returns on their deposit accounts, they were usually compensated by a rebound in the value of their equity holdings.

     Indeed, monetary easing appeared to be costless. When policymakers cut interest rates in the 1960s and 1970s they often ignited inflationary pressures. Not so in the 1990s. Whether that was down to the brilliance of central banks or the deflationary pressures emanating from China and India is still a matter of debate.

     This time around conventional monetary policy has not been enough. The authorities have also had to resort to quantitative easing, using the balance-sheets of central banks to ensure the funding of clearing banks and to keep the lid on bond yields. And there has been a huge dollop of fiscal easing. Some countries’ budget deficits have soared to 10% of GDP.

     The fiscal packages have proved rather less popular than monetary easing. Initially they were seen as bail-outs for greedy bankers. But the focus of criticism has shifted to the deterioration of government finances and the potential for higher future taxes, borrowing costs and inflation.

     An eerie parallel seems to be at work. There was a time, back in the 1950s and 1960s, when Keynesian stimulus packages were seen as costless. Governments thought they could fine-tune their economies out of recession. Eventually it was realised that the ultimate result of too much stimulus was higher inflation and excessive government involvement in the economy. Keynesian demand management was abandoned in favour of the monetary approach. The past couple of years have demonstrated that the use of monetary policy had its costs too, not in consumer inflation but in rising debt levels and growing asset bubbles.

     The authorities never even considered allowing the financial crisis to continue unhindered. The damage to the economy would have been too great. But the costs of this latest round of government action will be big. Investors will have it in mind during the next boom that governments will rescue the largest banks, slash rates, intervene in the markets and run huge deficits. In other words the moral-hazard problem will be even greater.

     Before we get there, however, the authorities will have to work out an exit strategy. Past cycles have shown that the tightening phase, after a long period of low rates, can be very dangerous. Bond markets were savaged in 1994 when the Federal Reserve started to raise rates from 3%. What will bond markets do if central banks also unload the holdings acquired during the crisis? And how will stockmarkets perform if interest rates and taxes are being raised at the same time?

     Given these risks, the new era will surely be a lot more fragile than the one that prevailed in the 1980s and 1990s. There is simply more scope for policymakers to go wrong.

     In addition, the global financial system has lost its anchor. When Bretton Woods broke down and the last link to gold was severed, there was in theory nothing to stop governments from creating money. It took independent central banks, armed with inflation targets, to reassure creditors. But now central banks have shown they have another priority apart from controlling inflation: bailing out the banks.