Traders Insight Magazine

BRINGING YOU MARKET ANALYSIS FROM OUR TRADERS

3 TIPS FOR REMOTE TRADING Get the tips begin, p. 19

EXCLUSIVE: MARKETS FALL AND RECESSION FEARS RISE IN THE FIRST QUARTER OF 2020

TRADER'S HOME SETUP

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TRADER'S INSIGHT

CONTENTS PAGE 3 - Contributors PAGE 5 & 6 - Markets fall and Recession fears Rise in the First Quarter of 2020 PAGE 8-10 - From Green to Gold: the Fight for the Strongest Safe Haven PAGE 11 - Top three habits of a successful prop trader PAGE 14 - 17 - USD suffers largest weekly loss since the financial crisis PAGE 19 - Three top tips for trading whilst in isolation PAGE 20 - 24 - Fund Management on Ethereum PAGE 25 - About Alphachain & Contact Details

CONTRIBUTORS ADAM HAEEMS CEO, ALPHACHAIN CAPITAL

Adam began studying Finance at Surrey University before being offered a scholarship to study at Cambridge University on the Master of Finance programme at Judge Business School. After his studies he began his career on the fixed income futures trading desk at Bank of America Merrill Lynch in London before moving onto a $1bn global macro hedge fund.

GAVIN PANNU HEAD OF TRADING ACADEMY

Gavin is an experienced trader of a multi strategy fund. He is a certified market technician with both the STA and IFTA organisation and has worked with trading companies and brokers as a Senior Market Analyst and Mentor. He has been a regular contributor to financial publications.

THIS MONTH'S CONTRIBUTORS DESMOND ADEOSUN JUNIOR TRADER

Junior FX Trader at Alphachain Capital with a Mathematics and Economics (BSc) degree. Possesses a strong focus in technical analysis and prefers to trade in line with the fundamental theme.

MATTHEW WISE JUNIOR TRADER

Junior FX Prop Trader at Alphachain Capital with a MSc Finance at the University of Edinburgh. Possesses a strong background in creating statistical and financial models.

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MARKETS FALL AND RECESSION FEARS RISE IN THE FIRST QUARTER OF 2020 GAVIN PANNU As the Coronavirus remained the focus through the month of March and in the first quarter of 2020, we now look towards the new month of April as a fresh quarter begins.

The economic effects of the coronavirus are set to deepen as the forecasted peak in cases is set to take place in the month of April for the Eurozone and also the start for other regions.

Policymakers around the world have increased stimulus packages to confront the halt in economic activity. In the US, more than a $2 trillion fiscal package has been passed by Congress and signed by President Trump.

The most recent unemployment data has jumped to record highs. In the UK and Eurozone, large stimulus packages have been ensured especially in encouraging businesses to hold on to staff.

Overall, fiscal stimulus has reassured consumers and businesses in the short term but in a prolonged healthcare crisis, this may be short-lived.

It is already forecasted by institutional banks the GDP growth in the second quarter will be significantly lower and the unemployment rate is set to rise at an astonishing pace by midyear.

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It is likely early GDP data will underestimate the overall weakness in activity and this is largely due to the panic buying and hoarding by consumers in the recent month.

The most important indicator will be jobless claims and household employment surveys as a leading indicator to what to expect.

As economic activity comes to a standstill especially in the hospitality, tourism and travel industry, we expect a large number of businesses will furloughed workers especially with the grants being offered by Governments.

The depth and duration of the market downturn and its path to recovery is difficult to determine with the uncertainty surrounding the Covid-19.

The risk of a recession is high with US markets fallen below 20% and the UK market declining by more than 25%.

As global Central Banks have cut rates in this quarter over 110 times with most major Central Banks are close to zero rates along with many restarting quantitative easing, it seems they have already used most of their tools with little reaction from asset prices and market participants in the current monetary stance.

With so much uncertainty, our recommendation is to reduce risk and to add confirmation to your trades based on confluence of indicators.

It will depend on the course of this virus whether we see a V shaped recovery or a global depression.

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FROM GREEN TO GOLD: THE FIGHT FOR THE STRONGEST SAFE HAVEN MATTHEW WISE

During times of extreme market downturn, investors typically flock to safe haven assets in order to offset their losses in equity markets.

However, the price action of the traditional safe havens in response to the recent Coronavirus pandemic has called their status into question.

At the beginning of the Coronavirus outbreak, gold behaved as expected with spot prices reaching as high as $1,703.26– an increase of 13% YoY. As the pandemic escalated, equity markets spiralled downwards on fears of a global shutdown and imminent economic recession.

However, instead of appreciating on the market uncertainty, gold tumbled 14.7% to a low of $1450.98. This was triggered in part by investors being forced to sell any liquid asset at hand in order to meet margin calls. In addition, the collapse of international trade halted demand in India and China, who together account for 58% of global gold demand.

However the most notable reason for this was that during this market downturn, gold simply played second to the dollar as investors flocked to the safest way to protect their money.

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Traditionally the second principal safe haven, the US dollar, moves antagonistically with gold since gold is a dollardenominated commodity.

In essence, as the dollar strengthens, gold becomes more expensive to foreign buyers, reducing demand and therefore, its price.

The result is that these two assets have traditionally fought to be the strongest safe haven at the expense of the other.

The preference of market participants can be inferred simply by the direction of XAU USD, which was the case in the first market downturn.

However, gold’s recent 13.1% rally starting on 20th March, which erased almost all of last week’s losses, occurred with only a 3.5% movement in the DXY. In addition, the rally occurred amidst three days of consecutive gains in US stocks, with the first featuring a 13% gain in the Dow Jones on its best day since 1933 and third launching the index into a technical bull market. This unusual movement of gold has caused many analysts to de-link gold with its safe haven status.

One explanation lies in gold’s role as an inflation hedge. Its rally followed the announcement of the Fed’s unprecedented $2tr fiscal policy stimulus and unlimited QE programme. Although it helps to soothe out the liquidity squeeze which many companies are facing, a very real cost of unlimited QE is the possibility of longer term inflation.

Gold traders are already pricing this in and the metal surged Wednesday on the BoE’s hinting that there is more scope for further increases in money supply.

For over 50 years the gold and the dollar have fought for the title of the principal safe haven.

However, the recent pandemic has highlighted cracks in their traditional relationship, and provides some insight as to how traders perceive the unprecedented QE measures.

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Outlook on Gold Long term: BULLISH • Market fear to increase as coronavirus pandemic worsens and recession nears.

• Poor economic data including unprecedented unemployment insurance applications.

• Strangled supply chains show no signs of improvement as refineries are forced to close and international trade at a standstill. This limits sellers’ capacity to deliver the metal.

• Gold to benefit with long term QE due to high money supply and long-term inflation.

• Rising demand for real store of value with a question mark over crypto’s safe haven status • Gold’s de-linking from dollar • Up-graded targets to $1,800 and $2000 by Morgan Stanley and TD Securities Short Term: BULLISH • Gold found immediate support at $1615 handle, 200-SMA and 0.618 fib retracement from Friday morning’s rally. Rejected with high volume.

• Bulls to look for pullback to recent $1640 high and potential break to upside of $1658.

• Bears to wait for break of 200 SMA and $1615 handle, with support likely to be found at $1596.

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Take Complete Responsibility

top three habits of a successful prop trader

A successful trader knows every action he takes, every decision he makes,heis responsible for that action. You will never meet a successful trader who is looking to blame someone else, or something else for the consequences of his results. Whenyou accept 100%, no questions asked responsibility for all your actions youare more likely to learn and improve yourtrading.

You are willing to accept you are going to make mistakes, but more importantly, you are going to learn and never repeat those mistakes. This is a vital component of any winning trader.

They wouldn't be trading any other way.

Manytraders try to copy the latest hot fad in trading. But thatstyle of trading will not suit everyoneand you could be constantly changing your system.

Have a System that fits you

Plan a Trade and Trade a Plan

Every successful trader, investor,money managerhas a system that fits them. Some are long term, some mechanical, some intuitive, day traders, arbitrage, value, momentum.The system itselfis not the important factor. Isthe system in line with yourunique personality.The system does not matter. Value investors like Warren Buffet who made billions from the stock marketwith a computer on his desk. Day traderslike Paul Tudor Jonestaking home over $80 million per annum in profits. What do they have in common? As you can see it's not the system but they operate a style of trading that they are bothprefer and excel in.

No trader will last long if he doesn't plan every trade. Also it is important there is absolutely no point in making a plan for a trade if you are not disciplined enough to follow it. A plan should cater for every eventuality. As Richard Dennis said, “Don’t worry about where the prices are going. Worry about what you are going to do when they get there."Once you put a trading position,you cannotcontrol the price. Do notworryabout what could happen and concentrate on you trigger points and what you will do when these points are violated. By doing this your trading becomes very systematic and stress free.

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USD SUFFERS LARGEST WEEKLY LOSS SINCE THE FINANCIAL CRISIS DESMOND ADEOSUN USDJPY Brief The USDJPY has experienced some selling pressure over the past week as the USD had its largest weekly loss against a basket of currencies since the financial crisis; falling over 3.90%. As investors seek a safe haven reserves, the Japanese Yen recovered some losses against the greenback as prices dipped back below 110.00.

With trillions of dollars being allocated for stimulus packages to combat Covid-19 and the supply of USD being restored at most major Central banks, the USD could be set for a further decline in the weeks ahead.

Fundamental outlook Whilst markets will continue to analyse and digest the effects of the coronavirus, there are a few key data releases this week that will be in focus, potentially giving forward guidance for the currency pairs as the year progresses.

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USDCAD

Brief

With the number of Coronavirus cases in the US surpassing 100,000; making it the nation with the highest number of confirmed cases and Canada trying to stay afloat amidst the tumbling oil prices both economies have taken a beating during this panic driven period. The global demand for oil is set to decline by 20% in the next quarter and with oil prices at levels last seen in 2002, many oil centred economies are likely to bear the brunt of it all.

Fundamental Outlook

Canadian economists and investors will be looking to analyse the economic effects of the global pandemic with readings set to be released in the form of the monthly GDP trade balance figures. Should figures come out extremely worse than expected, we could see a reignition in bearish sentiment for the Canadian Dollar.

Markets will be pricing in a large increase in employment figures as organisations and businesses have had no choice but to cut jobs amidst the strain on bottom lines and profit margins.

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In addition to this, purchasing managers are expecting the Non-Manufacturing PMI figures to drop below 50.0 into contractionary territory. With entire industries on the brink of collapse namely Airlines, it is no surprise that the forecasted readings are looking pessimistic. Investors and traders will also be watching out for consumer confidence and look to analyse the current consumer sentiment during these turbulent times.

Technical Overview  Daily Chart Price has illustrated a V-shaped recovery most recently with bears stepping back into the market around 111.50.

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EURGBP  Brief  GBP made large gains in the past week after gaining 1% on the Euro, both currencies have come under pressure as their central banks look to manage and fight against the economic impacts of the virus.

Amidst all of this, EU and UK post Brexit negotiations have been abandoned as both parties look to tackle a common enemy. The past week has seen the UK complete its first week of tighter movement restrictions as countries around the globe impose nationwide lockdowns in order to limit the spread.

This week sees data releases in the form of the Current Account and Final services PMI figures for sterling with forecast readings set to expect a further decline into contractionary territory.

Daily Chart The Euro steamed ahead against Sterling before reaching a ceiling at 0.9500, after which bears stepped in and pushed prices back below 0.9000.

With the strong bullish trend not being able to hold, bears have continued to add bearish pressure to this pair as price currently sits above 0.8900. Having broken below the 50 period EMA, a break below 0.8900 could see further selling pressure down to 0.8735.

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Tip 1.

It starts the night before, failing to prepare is preparing to fail as they say. This is so true.

Organise and plan what you want to do the next morning the night before. This could be from having your clothes ready, pre-making your breakfast to writing your to-do list. You need to have everything ready to go. The less barriers to the tasks you set yourself from waking up to sitting at your trading desk, the more likely you will be up early and ready to trade the markets daily.

Tip 2.

Your morning prep work is the most important time for you to achieve trading success. I don’t know a single trader who does not have a premarket checklist.

Once you are at your trading desk in the morning, then what do you do to gain the insight you require to understand the current theme, overnight changes, macro data being released and news developments. You need to keep a time limit to this, you don’t want to spend the entire morning do this as you won’t take a trade and leads to analysis paralysis.

Three top tips for trading whilst in isolation You don’t want to do too little of this as you may miss an important aspect moving markets and miss an opportunity. I would say between 30-60 minutes is adequate to capture enough information so you can move on to analysing markets and timing your entry points.

Tip 3.

I want you to procrastinate. You often hear how to avoid procrastinating. A method I often use is timed procrastination. Have a daily schedule which includes short blocks of your time to procrastinate throughout the day and this will help you to avoid procrastinating at the wrong time where you could miss those trading opportunities. Aim to have these blocks during the times you often don’t trade which you can see in your trading journal.Try these 3 tips and see if it benefits you trading from home.

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FUND MANAGEMENT ON ETHEREUM ADAM HAEEMS

Creating a more transparent, trusted and accessible investment universe.

Fund managers play an important role in the global financial system.

By allocating capital to a fund manager, you are effectively outsourcing investment decisions to a investment professional who, in theory, has the resources and knowledge to be able to manage your capital far better than you could.

Fund managers usually have teams of highly educated analysts that have spent many years and often substantial fortunes studying highly quantitative subjects at some of the best universities in the world.

This gives us some peace of mind knowing that our money is safe, being managed by intelligent, hard-achieving, ambitious people whose incentives are usually aligned with ours, thanks to the performance fee structure.

Hedge funds have often been among the more exciting firms in the investment world, being romanticised and played-up in Hollywood and the media for many years. Back when I was at university, working for a hedge fund was one of the most sought-after careers that only a few people were ever lucky enough to experience.

The hedge funds were considered places where highly quantitative people worked, working on innovative complex leveraged strategies which could often result in impressive returns for the firm, their investors, and often good bonuses for the staff.

How are hedge funds different?

Hedge funds are considered far more risky than traditional asset managers due to the complexity of their strategies. They are able to short-sell, trade complex derivatives, use a high amount of leverage and take positions in some esoteric alternative asset classes. This allows them a great degree of flexibility in creating innovative strategies in order to provide the best returns possible to their investors.

Some of the most notable hedge funds in the world include Renaissance Technologies and Bridgewater Associates. Renaissance’s Medallion Fund returned an average annual return of 66% since 1988, 39% after fees. An impressive annual return for anyone.

This all sounds great, however there are several issues associated with the hedge fund industry which have been around for some time:

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1. Lack of Transparency Hedge funds keep details of their strategy mostly hidden away from the public and even their investors. However, after scandals such as Amaranth Advisors where investors lost over 60% of their capital, the need for transparency in this industry is greater now than ever. The lack of transparency means that investors cannot actually see what the manager is doing with their money, giving the manager free reign. This presents some issues for a potential investor: Unable to assess if the manager is diverging away from the stated strategy.

Unable to assess if the manager has a large position in any indivdual asset which the investor might want to hedge against.

Unable to assess if the manager is inappropriately using derivatives or leverage.

Unable to make fully informed decision making by being unable to monitor performance and assess risks.

2. Inaccessible Hedge funds are exclusively accessible to High-Net Worth Individuals (HNVI) or large investment institutions. Retail investors are not able to invest in hedge funds due to regulatory restrictions, they are assumed not to be ‘financially sophisticated’ enough to understand the complex strategies they undertake. Obviously this is not a fair assumption and prevents many financially sophisticated individuals from participating in some of the impressive returns the hedge fund industry has to offer.

3. Security of Funds As we saw with the Bernie Madoff scandal, security of client funds can also be a concern.

When you hand over your funds to a hedge fund you have little visibility on what the manager does with your funds. Securities fraud is a real risk as history has shown.

How can ethereum (DeFi) help?

The hedge fund industry is long overdue for change. We have seen technological progress remove market inefficiencies across all industries, yet the hedge fund structure has mostly resisted change. The natural evolution of the hedge fund industry is to create a more transparent, trusted and accessible investible universe for all. With the growth of DeFi (decentralised finance) on the ethereum network, this has presented many opportunities for progressive and innovative managers looking to lead the change in the industry.

By migrating fund management onto the ethereum blockchain we can overcome many of the problems that have been associated with the archaic hedge fund industry.

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1. Transparency a) Assets Under Management (AUM). By putting assets on-chain, the AUM of funds can be seen transparently on the blockchain. This makes it very difficult to misrepresent AUM to new potential investors and misreport AUM on documentation. All assets of the fund can be visible on-chain for all investors to see. b) Current Exposure and Risks. Positions that the fund takes can be seen on-chain too. This enables investors to assess the risks the fund is currently taking, and hold them to account if they are deemed to divert away from the agreed strategy with which they raised capital.

While some hedge funds would worry about competitors trying to mimic their strategies by watching their trades on-chain, the positives from openness and transparency should win far more confidence from investors when considering a new manager to manage their capital. c) Verifiable Track Record — This transparency allows investors greater insight into the activities of the fund manager to help them make an informed decision to invest. As trades are made on-chain, there is a verificable and immutable track record that develops overtime which cannot be forged.

2. Security One of the greatest benefits of fund management on-chain is that the funds can be ‘selfcustodied’. This means that the managers do not have access to the funds and do not custody them on behalf of the investor, nor does any other entity. The investors hold the value of their investment stake in their own ethereum wallets via minted ERC20 tokens.

The investors are the only people who can get access their orginal investment via the wallet with which they invested.

How does this work?

When an investor allocates capital to a new fund manager on-chain, the assets are sent to a secure smart contract vault which then issues the investors ERC20 tokens that are linked to the Net-Asset-Value (NAV) of that specific fund. The investor receives the relevant number of ERC20 tokens that are of equivalent value to the amount invested. These ERC20 tokens can be freely traded on any decentralised venue or directly with other investors and/or traders. The investor holds these tokens in their own wallets, the value of which changes based on the value of their investment in the fund over time. What’s more, the fund manager has no access to these underlying assets in the smart contract vault.

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Transaction showing an investment into the fund and issuance of ERC20 token ‘ETAS’ The added security by investing in funds on-chain means: There is very little risk of the manager being able to hide any mis-managment of your invested funds.

There is very little risk from him/her from being able to run away with all the funds assets as they have no access to the invested funds.

The investor always holds onto the tradable assets which represents their stake in the fund in liquid form. Again, less trust is needed with manager of the fund.

3. Liquidity As the ERC20 tokens are freely tradable on any crypto venue which supports ERC20 tokens, investors stake in a fund can easily be sold to another investor/trader or instantly redeemed with the fund manager at anytime. This is a stark contrast to the traditional fund management industry, where in the US the average redemption period is quarterly (every 3 months)

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What are some of the challenges?

Available Assets The biggest challenge currently is the lack of investible assets on-chain. While the world of DeFi is growing at a rapid rate, we are yet to see some of the traditional assets in ERC20 form that would enable some traditional asset managers to migrate over on-chain. Assets such as commodities, currencies, equities, derivatives etc. That being said, there is lots of work going on in the community and it will not be long before we see start to see these assets on-chain. The guys over a Synthetix Exchange are working on just this as are a couple of others.

2. Security of Code As many of these business being built on the ethereum blockchain are new, some of their smart contract code has not had suffucient time to be thoroughly tested or audited. This may result in issues arising for those businesses that have unknowingly left vulnerabilities open for others to abuse. Insurance products from firms such as Nexus Mutual help to limit this risk. As the market matures hopefully these vulnerabilities should be less common.

Conclusion The hedge fund industry has been married to its inefficienices for many years now, servicing only the wealthiest while maintaining opaque operations requiring an unreasonable level of trust with the manager of your capital. Issues such as lack of transparency, inaccessibility and security of funds have led to huge global scandals which have often made it to mainstream media. As we’ve seen across all industries technological innovation paves the way for greater efficiency improvements and better terms for customers/investors. Managing investment funds on ethereum brings about improvements including: Transparency of size of AUM Transparency of risks and exposures Verifiable and immutable track record on-chain Vastly improved security of funds Investors have more control over their capital Much greater liquidity terms for investors Challenges remain moving all types of asset management on-chain due to the lack of assets represented on-chain via ERC20 tokens and the imature nature of some of the smart contract code.The time for change in the investment management industry is here thanks to Ethereum. A more open, accessible and secure investible universe for investors is now possible. As the space grows we will begin to see more synthetic assets on-chain allowing more different types of strategies to be deployed, including shorting and leveraged strategies. https://www.tokensets.com/set/etas-1 https://www.tokensets.com/set/eta-1 24

ABOUT ALPHACHAIN Alphachain Capital is a proprietary trading firm founded with a vision of combining strategy, innovation and technology to succeed in today’s global markets. Alphachain Academy focuses on the development of our new traders for our prop firm. For aspiring and novice traders, the Alphachain Academy's programmes have been designed to develop, select and grow a new generation of talented prop traders from a variety of backgrounds who wish to trade cryptocurrency or FX markets. For established traders we offer state of the art infrastructure, investment capital and a collaborative trading environment nurturing success.

Web: https://www.alphachain.academy/ Phone: +44 20 7097 1715 Email: info@alphachain.co.uk Office: 25 Clarendon Road, Redhill, Surrey, RH1 1QZ Disclaimer: Trading in any financial products whether with or without margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. Trading involves risk. Losses can exceed deposits. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. All information in this publication is for education only and should not be seen as advice or a trading signal.

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