Year: 2019

How to Buy Preferred Stock – The Tricky Road Is Now Simpler
3 min read

by Guy Avtalyon

KEY POINTS
- Preferred stocks are hybrid security. Let’s say, something between bonds and common stocks.
- The preferred stocks are riskier than bonds but less than common stocks
- Pay attention to THIS! Don’t buy a preferred stock issue at or near par value.
I know you’re probably thinking now to buy preferred stock and where to find them? Truth is it isn’t so easy to find them, so let me help you a bit.

I’ll give you the additional data that you can’t find ANYWHERE else.

First of all, preferred stocks are hybrid security. Let’s say, something between bonds and common stocks. You have to know that they are riskier than bonds but provide higher payments. And that is exactly what we want – higher returns, right?

By holding preferred stocks, you will receive regular fixed dividends. The procedure of buying them is the same as it is with common stocks. Firstly, you have to choose your broker. The thing you have to check is that your broker has a good and reliable list of preferred stocks. So, check the range of it before any commitment. Well, you will need some personal research on preferred stocks to pick the right one or several from the list of shares your accessible through your broker. Take your time, they are worth your effort.

Now, you have to recognize preferred stocks that match your interest. Evaluate the companies you have info that will work well in the future. Keep in mind that preferred stocks are long-term investments.

You can trade them on the stock market in the same way you would do it with common stocks.

Just like bonds, preferred stocks have credit rating and that is also needed to be checked.

Where can you get this info?

From a corporate credit rating bureau. Based on the data you receive from the bureau you will know if investing in preferred stocks is a good choice for you.

But there is one tricky part that shouldn’t terrify you.

You will see that credit rating for this kind of stocks is lower than it is for bonds. That comes due to their risky nature. As you can see at the beginning of this article, the preferred stocks are riskier than bonds but less than common stocks.

Let’s go straight to the point. How to buy preferred stocks, where you can find them?

You have to read balance sheets. In the stockholders’ equity section, you will notice the amount obtained from issuing preferred stock.

In the income statement, you will find the annual preferred dividends report.

Analyze issuing companies completely. Put your feelings about some company away. You are not investing based on your feelings. You have to do that based on your investing goals and risk tolerance. You will need a strong understanding of how a company’s stock works before you make a decision.

Read the stock’s prospectus. It is easy to find them online.

Preferred stocks offer a bit more than common stocks or bonds.

Actually, preferred stocks bring great deals. For example, yields average is 6.1%. It is much above the high-yielding sectors of the market, for example utility stocks and real estate investment trusts.

Where to find preferred stocks?

Try to find them among banks, and different financial companies, since they issue more than 80% of preferred stocks. Also, you can find them in telecommunications, health care, energy or similar companies.

Companies usually issue these stocks at $25 per share. That is par value. When investors start trading them, the price will go up or down. It is due to the interest rates. Just like bonds. When the interest rates climb the price of preferred stocks will fall. And vice versa.

In regular market conditions, preferred stocks should be better than high-quality bonds. They have to provide you steady income. And taxes below those for bonds interest.

How to buy a preferred stock simply?

Look here! A necessary starting point is an online broker that provides screening tools. Companies ordinarily give a grace period before they can redeem shares. It is usually 5 years after they issue preferred stocks. Besides that, a company may recall its shares at any time. So, keep a close eye on the call date.
Check all dates carefully to be sure you have at least 18 months before a company can repurchase shares.

I don’t know if you’ll buy it today or in a month or year. But I want you to know this!

Experience tells that preferred stocks under $23 are riskier, but if they are over $28 the yield could be too low. Moreover, if it is over $28 the potential loss could be bigger if the stock is called at $25 per share. A perfect yield should be between 5% and 7%, say experts. If the yield is higher, the potential risk is bigger.

Pay attention to THIS!

Don’t buy a preferred stock issue at or near par value.
1st October 2019
Preferred Stock Advantages Explained

Take advantage of owning these stocks, they are paying guaranteed dividends, but the owner doesn’t have the voting rights

By Guy Avtalyon

Preferred stock signifies an ownership stake in some companies. It is like a share of common stock but less volatile.
But there are more advantages to hold preferred stocks. For example, they are prioritized when it comes to dividends or bankruptcy. But by owning this stock you will not have the same voting rights as owner of common stock. Actually, you will not have them.

Preferred stock is similar to bonds. See, with preferred shares, you will have a fixed dividend in continuity. And you can easily calculate the dividend yield. All you have to do is to divide an amount of dividend in the currency by the current price of the stock. Yield is the effective interest rate you earn when you buy a share of the preferred stock.

Let’s do some math.

Assume a preferred stock has an annual dividend of $6 per share and is trading at $120 per share. So, the yield is $6 divided by $120 which is 0.05. Multiply by 100 to turn to the percentage. The yield is 5%.

6/120 = 0.05

0.05 x 100 = 5

This is regularly based on the standard value ere a preferred stock is sold. It’s generally determined as a percentage of the current market price after the trade starts. This is a difference from a common stock. Common stock has variable dividends that are published by the board of directors and it is never guaranteed. Moreover, a lot of companies don’t pay out to common stocks.

The added difference is that this kind of stock has a par value. It is in correlation with the interest rate. If the interest rate increases, the value of preferred stock drops. Also, when the interest rate decreases, the value of this stock will grow. You will not find a similar situation with common stock since its value is determined by supply and demand in the market.

Why buy preferred stock?

Investors frequently buy preferred stock for the income the dividends give. The dividends for them are higher than those issued for common stock. And the other benefit is notable. If the company has to miss out on a dividend it collects, it still must pay preferred stock dividends before any common stock dividends come to the schedule. That is why they carry less risk than common stock. Preferred stock owners must be paid before common stockholders if the company failed or in case of bankruptcy.

When evaluating the investment potential of preferred stock, it is most important to compare the dividend yield to the yields of the company’s bonds. You will find that preferred stocks often work similarly to bonds.
Preferred stock is a good choice for investors who don’t want to take a big risk. Moreover, it is less volatile than common stock and provides a better flow of dividends.

How to buy preferred stock?

The process is the same as you buy any stock. You can use a broker’s service, doesn’t really matter if it is a discount broker or full-service broker. The main point is that the company has to be publicly-traded, of course. But before you start finding a preferred stock to buy, you must know why should you do that. Why don’t you buy that company’s common stock?
When buying common stock, you’re actually buying a part of ownership in the company. You’ll have voting right as one of the co-owners. On the other hand, if you buy a preferred stock you’ll almost never get voting right.

They have regular dividends payments

When you buy preferred stock, you’ll get regular dividends payments. That is opposite from the owner of common stock that doesn’t have guaranteed dividends. Even a case that the company stops to pay dividends, your unpaid dividends are still yours and once, when the company decides to continue these payments, you’ll receive them.
The other advantage of buying preferred stocks is that your investment will be repaid in full even if the company goes bankrupt.
The owner of common stocks will get nothing instead.

One thing more is present here.

Those stocks give more options to investors. Let’s explain this. Numerous preferred shares are callable. This means the issuer can purchase them at any time. Investors have a true chance for these shares to be called back at a redemption rate. It can be a notable bonus over their purchase price. The market for preferred shares usually assumes callbacks and prices may be bid up respectively.

And we must point out one disadvantage again. Its shareholders regularly do not have voting rights as the owners of common stock. It may be a problem for some investors.

30th September 2019
Trade War Spillover In The Stock Markets

3 min read

The U.S. Treasury announced in a Saturday statement that the administration “is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time.” Following this news, Dow Jones futures grew a bit on Sunday evening, the same happened with S&P 500 futures and Nasdaq futures.

Only one day before, Bloomberg reported the Trump administration is thinking about limiting the exposure of US investment to China. Such a decision would have an impact on public pension funds’ exposure to China’s market and limitation for Chinese companies in main stock indexes.

The information about delisting Chinese stocks from U.S. exchanges frightened investors. The consequences of the trade war spillover were that Alibaba stock dropped 5.1%, slipping through its 50-day and 200-day moving averages. JD.com stock dropped 6% to a bit over its 200-day. Two Chinese IPOs, Pinduoduo slipped 4.2% and Huya stock 9.4% due to trade war spillover. New Oriental Education stock, dropped 6.55%, which is under its 50-day line.

Beijing described possible limitations on U.S. investments in China “the latest attempt at a decoupling,” published in Global Times on Sunday. All reports of Chinese state-owned media stated that the delisting Chinese companies from US stock exchanges would have deep impact on both, Chinese and US economies.

Don’t miss this: Trading With Success – A FULL guide for beginners

Monica Crowley’s, U.S. Treasury assistant secretary for public affairs, stated this weekend that US administration is not thinking to block Chinese companies: “We welcome investment in the United States.”

The trade war between the US and China lasts almost one year. The next round of discussions will be held one week after China’s National Holiday, 70th anniversary of the founding of the People’s Republic of China on October 1.

The Chinese economy is the second-largest in the world. Its progress in the field of artificial intelligence and chips is notable. Also, robotics, 5G, energy storage could lead China to be the most powerful in advanced technologies.

What to watch in the stock market in the week ahead?

The next few days will produce some earnings releases, which could give some individual stocks moving.

Costco

Market Cap $125.758B

Its earnings report appear this week. It looks that Costco had benefit throughout the quarter. The analysts estimated they have earnings of around $2.54 per share. Last year it was $2.36. So, the expectations are a 7.6% increase.

Costco will reveal its results on Thursday. The investors are expecting to see good news. This warehouse retailing giant has enjoyed a nice increase in customer traffic lately. In the fiscal fourth quarter, it grew 6% in the U.S. market and over its global sales.

Stitch Fix

Market Cap $1.85B

This company’s earnings release will be revealed on October 1.

Its stock has dropped more than half of its value during the past 12 months. But this online service that gives clothing services has built solid annual income growth in the past 3 years.

Client numbers rose 16.6% in the fiscal third quarter. This is, of course, assuming Stitch Fix keeps its pricing in check. The analysts estimate is calling for $0.04 per share this week. Good news for shareholders.

Constellation Brands

Market Cap $39.511B

The company’s earnings release will be public on October 3.

The company has succeeded to keep a very constant sales trend within an alcohol industry. In the last 5 years, Constellation Brands has grown its earnings from sales. Its investment in Canopy Growth was a weak move since the Canopy didn’t show some good results this year. But the company’s beer segment may show better condition. For now, that is the best part of Constellation Brands’ business.

30th September 2019
Chinese Stocks May Get Delisted From the US Market

2 min read

By Guy Avtalyon

Bloomberg published Friday that the Trump administration is analyzing to severely limit U.S. financial flows to China. They are considering to restrict the ability of federal pension funds to invest in Chinese companies. Also, severer requirements that could cause Chinese companies to delist from U.S. stock exchanges are on the table.

According to the U.S.-China Economic and Security Review Commission, 156 Chinese companies are listed on the US stock exchanges. Their entire market capitalization is above than $1 trillion.

U.S. stock markets are burning on this news.

Among Chinese companies that might be delisted are Alibaba Group, Baidu, Nio, JD.com, Tencent Holdings.

Last market reports show that Alibaba and other Chinese stocks fell on reports White House. Even though it isn’t clear what particular actions the administration considers. The Times states that White House wants to block “longstanding loopholes that have allowed Chinese companies with links to its government to take advantage of America’s financial rules to solicit funds from American investors without proper disclosure.”

Shares of Alibaba and other Chinese companies fell Friday after reports the White House is studying plans to restrict U.S. investments in China.

The stocks traded on the Nasdaq, Alibaba fell more than 5% in the last trading day last week, Baidu and JD.com fell 3.6% and 6%, NIO 13%, Huya had fallen 12%, Baidu fell 4%.

The iShares China Large-Cap ETF, fore example, China Construction Bank, and Tencent Holdings are members among others, also dropped by 1.2%.

This is actually disturbing

Capital Hill hawks want to limit US investors’ portfolio flows into China. That would have huge consequences for billions of dollars in investment in major indexes.

The options in considerations are: delisting Chinese companies from US stock exchanges and restricting Americans’ exposure to the Chinese market. Precise methods are still unknown and the plan has to be approved by President Trump. But he gave the green light to the study, as an unofficial source said.

The other step of Trump administration could be to restrict the Chinese companies included in stock indexes. Even if managed by US companies. Many Chinese companies were added to major indexes over past years and a lot of investors have access to them.

For example, Chinese companies have been added into the MSCI Inc.’s indexes since last year. Bloomberg Barclays started adding Chinese bonds to its leading Global Aggregate Bond Index in April this year.

In reply to the news, Nasdaq stated, “One critical quality of our capital markets is that we provide non-discriminatory and fair access to all eligible companies. The statutory obligation of all U.S. equity exchanges to do so creates a vibrant market that provides diverse investment opportunities for U.S. investors.”

Bottom line

The US administration is doing everything to untangle the US economically from China. Many analysts thought this move would be one that might be taken by China as part of negotiations to put more advantages on their side in this Trade War.
The decision to delist China stock from the US markets is an unusual shift. It might be too dangerous for investors to be in Chinese stocks now.

29th September 2019
How to Identify Market Trends

6 min read

By Guy Avtalyon

Being able to identify stock market trends is a crucial part of your investments and trading. How many times have you heard that the market is trending? Numerous. But did you have the ability to recognize the signs before the market move in some direction?

So, when we say the market is trending we are talking about market moving in one of two directions. When the market is moving up it is Bullish, but when it moves down it is a Bearish trend. There is some misunderstanding toward trends. Let’s say this way, never fight against market trends. That will take you to losses. Rather catch the flow to manage your risk-reward.

It is so important to have ways to identify market trends. Markets can also move within a ‘range’, and they don’t need to be recognized as Bullish or Bearish, rather they are falling sideways. So, you can see we have three possible market directions. Ability to recognize when a market is probably moving out of a trend will also help you.

Assume you are trading while the market is in a Bullish trend. So your focus would be on buying the position. But suddenly the market starts to change and your edge disappears.

It is absolutely scary when you are looking at those changes at your charts. But there are several things that will provide you to know how to identify market trends.

First, let’s make clear what the trends are you looking at.

This is very important. You have to determine the time frame you are looking at. Why is this so important? Assume you are looking at a daily time frame and the market is in a bullish trend. Suddenly, the market moves up. Where is the problem? Your 10 minutes chart shows the bearish trend! Yes, but you must have a bigger picture. The market may be in bullish trend the whole day but in those 10 minutes, it is bearish because it is falling.

That is the nature of markets. They will never go only up or only down.

That’s why the timeframe you are looking at is very important. Just like in sport. Your favorite basketball team is in permanent progress to the top of the table. In the market, it is a bullish trend. But suddenly, your team has a match against some outsider and they lost the game (which usually happen to my favorite team). That is a bearish trend in the market.
<

How to Identify Market Trends

Identifying the trend is essential. But you have to be able to associate that trend with your trading. For example, you recognize a market as bullish on the daily timeframe. What is the possible move? Just wait until it comes back within support levels that you expected to be the span where the buyers will continue the trend. Than start to look at the 1-hour timeframe to buy positions. That is how you may adjust your trades with the market trend.

You can identify market trends by applying different kinds of technical analysis. You can use trendlines and technical indicators. But trendlines are the most effective method of verifying that a trend breathes.

Identifying the trends will help you to avoid wrong buy/sell signals. One thing is important to know, the trending indicator will operate better in trending markets, while oscillators are better in sideways trends. Which one to use may define your success rate.

Recognizing Trends

The trends are an overall direction that a particular financial market is moving. To analyze trend you have to use technical analysis to determine direction. Just connect by using trendline all the highs and lows in your charts.

So, let’s see what kind of trends we have:

Uptrend

The uptrend is when you can inline low points sloping upward. The main characteristic of uptrend is higher highs and higher lows.

Downtrend

Connect a series of chart high points sloping downward, and you will have a downtrend. A downtrend is always defined by lower highs and lower lows.

These graphs are simple images in order to have a clear picture. Trendline should be drawn on the candlestick chart. But in any case, to be able to start a trend line you will need at least two points in the market. You may draw the trendline only when the second swing high or low is identified.

Speaking about the candlestick chart, you will see that the majority of trend lines overlap the high or low of a candle. The point is to get the maximum touches without cutting the body of a candle. If the trend line cut the body of a candle you may be sure it is a violation.

Identifying Market Trends

Draw triangles on market swings.

We already mentioned the market swing points. I am free to say that probably the most obvious way to identify a market trend is to follow them. You can do it by drawing triangles.

We already know that higher highs and higher lows relate to a Bullish trend and lower highs and lower to a Bearish trend. By drawing triangles over important market swings you will spot when this is occurring. This helps also to inform you when the market

It will also keep you alert to when the market finish trending and moves into a range, or the trend goes reverses.

Also, you may use the Bill Williams fractals indicator.

It is an excellent tool to identify market trends. This indicator is helpful to spot the market swings. When the arrows are upward that is the high of the swing, when the arrows pointing downwards it is low of swing.

Upward pointing arrows indicate the high of a swing, downward pointing arrows indicate the low of a swing. This is a simple tool that will show you if the market is in a trend. Moreover in what direction, or if it is in a range.

Moving average as help on how to identify market trends

The moving average is one of the most popular methods to identify market trends. When the market is beyond the level of the moving average, it is Bullish. If under, it is Bearish. But this method has some disadvantages. It depends on the period you are looking at.

One moving average can miss out on great parts of trends so you will end up struggling against the trend. It is always smart to apply two moving averages. One has to be slower the other faster. And, when the faster one is above slower the market is bullish when it is below the market is bearish.

Use trend lines

That’s why we had to explain the trend lines. Trend lines are a great tool to identify a market trend. Also, they will highlight potential trading zones inside the trend. The market is in trend when it respects the trend line.

When the market breaks the trend line it is moving out of the trend into a range, or into a trend reversal.

Bottom line

Markets consist of many different varieties of trends. How to identify market trends will principally define the success or downfall of your investing. No matter if you are a long or short-term investor.

27th September 2019
BTC Price Will Surge Again

2 min read

Yes, the Bitcoin prices displaying a massive drop on Tuesday. Well, there is good news too. Crypto investors continue bullish! So the BTC price will surge again.

As BTC recorded a huge fall and fell about 13%, investors and traders persist optimistically. They expect the bull market to recover quickly.

Bitcoin price made a sharp drop yesterday (September 25) falling almost 16%. The daily open was at $9,691 but recorded a new low at $8,164. The price support was broken at $9,090 leaving the area that it has been trading in since June.

In doing so, price broke strong support at $9,090 and exited the area that it has been trading in since June. Bitcoin’s price action continues bearish under this scope.

But nothing is finished. Today’s chart (at the time of writing) shows some uptrend. A small one but still.

The larger picture reveals regular price action with prior corrections.

You wouldn’t like to miss this: MONETIZING BITCOIN

Traders-Paradise wrote about the second-largest German exchange in Stuttgart which started Bitcoin trading. Also, Bakkt starts and SoFi, a finance management firm is launching a crypto trading platform.

Are people still micro wise? Well, not all thankfully. BTC price will surge again.

The BTC/USD pair is trading at the $8,407 after hitting a low at $8,125. In the past two days, the price has passed below the SMA200. Dangerous? Yes, but the typical race for Bitcoin. For unexperienced in Bitcoin, the bullish momentum will continue as long as the daily close is above the long term average. The indicator stays on the bullish side of the indicator. You can check it.

BTC/USD needs strong support levels, instead, it may fall even more since BTC/USD had another heavily bearish day on Wednesday. The disturbing element is that the daily confluence indicator doesn’t show any support levels until $8,100.

But even if it goes lower its still a good entry for longs. It is expected the volume further fails on a macro scale. But the price may consolidate if the trading starts again.

Bitcoin’s price is a distraction from the value. Everyone was yelling about Bitcoin’s drop past two days. What is about today? It has recovered.

Don’t judge based on hash rate data. It is an estimation. It isn’t exactness. Until traders start to trade it again the price of Bitcoin may stay on the low level. The point is, Bitcoin may drop slightly more in the next few weeks, with frequent ups and downs but to the end of the year, it may surge again, and more than anyone can expect. That’s the nature of Bitcoin and the beauty of the game

26th September 2019
European ETFs: Invest in the World’s Biggest Regional Economy

by Guy Avtalyon

European ETFs give a large diversification in mutual funds and with a bit of the fee. If you buy one security as a foreign investor you will have exposure to a lot of firms in the EU. Why Europe is interesting for investors? First of all, some of the biggest companies are located in Europe. So, it is a great opportunity for foreign investors to invest in EU ETFs. The European Union factors about 20% of the world GDP, therefore it looks like one of the most valuable investment targets in the world.

Benefits of Investing in European ETFs

Europe is one of the best-shielded business areas around the globe. To be honest, there are still some risks after the crisis in 2009. The companies in Eastern Europe have better growth potential than Western Europe. Anyway, having EU ETFs in your investment portfolio is a great choice and I’ll try to explain why that is.

First of all, in Europe are some of the most successful companies. For example, a lot of US investors are very interested in them. Moreover, Europe is consists of several areas. That makes European ETFs very good for diversifying a stock portfolio without the risk which developing markets may give. The added quality is that the EU is honestly low-risk. Just compare it with Asia, for example.

Many investors are now attempting to enter the European Union market through mergers and acquisitions. Also, by investing in its main businesses. The EU is, in fact, welcoming foreign investment.

Here is full information that will help investors about investing in European Union.

Risks of investing

Of course, there are some risks involved.

The main risk is that the members of the EU are very connected and dependent on each other. At first glance, nothing is bad with that but if a crisis occurs it will spillover among them, and business in the union may fall down like a house of cards. As I mentioned above, Wester Europe economies have slower growth and they may seem less attractive for investing. Especially for investors who want more risky investments.

Where to find: Top European ETFs

MSCI European ETF (NYSE: VGK)

Vanguard is available in Europe. Its European funds are based in Ireland. Vanguard allows non-residents to buy their ETFs/funds through a broker. So you can not directly do it through them. Vanguard’s ETF is a good option but it involves currency exchange. You can simply open an account with any broker with access to the NYSE ARCA. That is the stock exchange where Vanguard ETFs trade. The rest is simple, buy it just like with any other international stock.

iShares MSCI United Kingdom ETF (EWU)

A lot of investors favor “tracker” funds. They allow you low-cost investments. But not all tracker funds are low cost. Moreover, the fund charge is not all you pay, you will have to pay the broker or fund platform too. The good news is that as your portfolio grows the broker will charge you less on a sliding scale.

SPDR DJ Euro STOXX 50 ETF (NYSE: FEZ)

FEZ includes the 50 biggest EU companies but the large-caps from countries that don’t use the euro, including the UK, Switzerland, and Sweden, are not included. But, FEZ’s portfolio includes companies from France and Germany. As a difference from other EU funds, it does not hedge euro exposure.

European ETFs provide the most comfortable approach to get exposure to European markets and the easiest access to invest in Europe. In comparison to buying foreign stocks directly, it is for sure.

Further, European ETFs are an excellent method to diversify your stock portfolio with low-risk investments. To be honest, I have to say that European ETFs will not suit every investor. Risk seeking investors wouldn’t like them, or for younger investors, European markets are not volatile enough. Yes, there is pretty much a lack of excitement.

26th September 2019
Trailing Stop Loss Definition and Examples

3 min read

The trailing stop loss may be practiced with stock, options, and futures exchanges that support regular stop-loss orders. It is a variety of stop-loss order. A trailing stop-loss order is executed when the price of the trading asset drops by the trailing value which can be expressed in percentage or currency amount.

For example, you might place a trailing stop order to sell your stock with a trailing stop loss of 4%. When the stock dropped 4% from its nearest high the trailing stop order will be executed.

For example, assume that ABC stock is in its uptrend and hits $100 per share. If you placed a trailing stop loss of 4% it would be triggered when the price drops to $96 or below. Hence, your trailing stop loss at 96%, the sell order at $96 would be a market order. Instead, you can set a trailing stop limit which would provide you to gain a specified price placed in advance.

Also, instead of placing percentages you may enter a trailing stop loss in currency. It is more favorable. Let’s do some math.

Let’s say, ABC shares increase to $120, a $4 trailing stop would trigger at $116, which is a 3,3 % drop. If you entered a 4% trailing stop, it wouldn’t trigger until the shares fell 4% to $115.
\

The mistakes about using a trailing stop

A typical mistake is to set a trailing stop too close to the current price. For example, 1% or 2% trailing stop loss. Most stock prices are changing by at least a few cents per minute. If you set the trailing stop loss too tied to the entry it will be stopped out before any significant price moves occurred.

The best way is to set a trailing stop distance enough from the current price. If you keep in mind that that the market regularly fluctuates inside a 10 cent span, you would like to set it a bit far from that amount. But be aware, if you set it more from that range because it could happen that you never reach the placed point. The consequence is that the trailing stop could be invalidated and never executed.

The point of using the trailing stop loss is to get you out of the trade if there is a high possibility of the price changing and destroying your profit on your trade.

Trailing stops are useful because they secure in profit when the price moves in our beneficial. The disadvantage is that sometimes they get us out of a trade when the price isn’t really changing, but simply pulling back a little. A good option to a trailing stop loss is to apply a profit target, have that in your mind.

How to move a trailing stop loss

It is easy to find a lot of brokers that provide this type of orders. It’s up to you to choose how much space you want to in your trade. Think twice would you like to set it in percentages or currencies (you have both examples above). When you confirm the order it will move as the market moves because that is the nature of trailing stops: to move as the prices move. You can set it automatically or manually.

Bottom line

Traders use different systems to improve their profits and diminish the losses. One of these methods is the trailing stop order. It allows you to define the circumstances that will trigger an order to exit your position. It safeguards your trade against unexpected downturns.

No matter if you are trading stocks, bonds or whatever, you must have a solid exit strategy. Moreover, you must have it before you buy the position. We already wrote about emotional trading. A good exit strategy will allow you to diminish fears. Let’s say your exit strategy is to wait for the price of your stocks to drop by 15%. You’ll be able to avoid trading in a panic if your stocks drop by 10%. That is the main purpose of applying a trailing stops and other stop-loss orders, to give you a plan to realize your exit strategy.

Don’t miss this: Trading With Success – A FULL guide for beginners

25th September 2019
Boerse Stuttgart Exchange Has Started a Regulated Trading Bitcoin

Boerse Stuttgart exchange plans to add litecoin, ethereum, and XRP euro pairs to the end of this year – UPDATED

By Guy Avtalyon

Germany’s second-largest stock Boerse Stuttgart exchange (BSDEX) has started a regulated trading venue for digital assets, the company said. It is a fully regulated digital asset exchange under the German Banking Act, said the company in a statement. In the beginning, BSDEX will trade one pair, only the bitcoin-euro.

In late 2018, the company revealed that it wants to launch a fully regulated digital asset exchange. In the same announcement, BSDEX stated that institutional and retail investors from Germany will have the chance to trade, but later it will be opened for the investors in the whole EU. The trading will be accessible 24/7 like other exchanges on the globe.

According to CoinDesk, Boerse Stuttgart exchange plans to add litecoin, ethereum, and XRP euro pairs, besides Bitcoin, to the end of this year.

“The market in cryptocurrencies is worth billions, and more digital assets will emerge on the basis of blockchain,” CEO Dr. Dirk Sturz revealed in the statement. “Our goal is to build up the leading European trading venue for those assets.”

Boerse Stuttgart Exchange partnered with SolarisBank

“BSDEX will give retail and institutional investors direct access to digital assets and provide flexible and relatively low-cost trading. We believe blockchain is set to bring about significant changes in the financial industry, and we want to leverage its potential to create the trading venue of the future,” stated Peter Grosskopf, CTO at BSDEX.

About a year ago BSDEX announced it will launch the ICO platform and began to trade ETNs and litecoin.

No Brokers Needed

According to the press, the trading won’t need brokers. The traders will have access to the platform directly. That is nice, but they limited userbase and restricted trading options. For now, traders may set the market and limit orders, but ASAP the rest of the possibilities will be accessible.

“Earlier, BSDEX has launched Bison. Bison is a mobile app that lets users trade Bitcoin, Ethereum, Litecoin, and XRP for euros. BSDEX’s trading platform is a sign of its new strategy to open the path for the trading of tokenized assets,” the reports say.
This is important news for anyone who would like to invest or trade cryptocurrencies. A true step forward.
Our concern is restrictions and limitations. But let’s not be so suspicious. What about giving them a chance? It looks like a reasonable decision. But will keep an eye on it.

What we can say is that Bitcoin’s adoption continues. Nice venture.

LAST UPDATE

From 25 February 2020, new ETPs that track the inverse value of Bitcoin is available on the Boerse Stuttgart Exchange. It is still connected to the Euro.
This tracker product’s value represents the inverse performance of the Bitcoin as an underlying asset. Meaning, when the price of Bitcoin drops, the ETP increases, minus management fee for daily trade. The product is completely hedged with the underlying asset 1:1. The launch of the first inverse is presented as a natural extension to the existing unleveraged range of crypto ETPs. Boerse Stuttgart stated that it offers a bigger choice to investors. This choice lies in the possibility for investors to better manage the grown volatility and changes in the cryptocurrency markets.

24th September 2019
Negative Balance Protection

4 min read

by G. Gligorijevic

Negative balance protection signifies that you will not lose more than your deposited money. Or to put it simply, you won’t owe money to your broker. Sounds great, indeed. You will not end up with a cash debt on your account.

At first glance, this looks like a great thing. For example in spread betting, that lets traders take leveraged short-term bets on stocks could end in tremendous losses.

Here is one example.

Assume you put $10,000 to your account and want to buy stock. Let’s say the leverage is 5:1 which would provide you a position of $50,000. But, the market is really volatile those days and the price of your stock drops, for example, 8%. Remember, your leverage is 5:1, so this drop would make you a loss of 40%. It is $20,000 of lost. This lost would destroy your deposit of $10,000 and you have to pay back to your broker what you owe. Yes, this is an unpleasant situation but if you are trading with a broker who lets you negative balance protection, your loss would be exactly the amount you deposited, $10,000. Nothing more, nothing less.

It is a great thing for traders.

Negative balance protection is a proposal that brokers practice in order to protect their customers. This method guarantees that traders will not lose more than their deposit is if their account moves into negative as a result of their trading activity. This is a great reason to choose the broker that provides it. You will not owe the money to your broker if you made the wrong trading choice.

Yes, the brokers always have a margin call to protect. The truth is that this option isn’t the best choice when the market’s shift quickly and the stock prices are in high-speed movements. If the price moves too fast and moves beyond your margin call out level you may lose more than it is expected.

Negative balance protection in Forex

It protects your account balance never to falls under zero. How is possible for your Forex trading account to go under zero?

Don”t be worried. Your broker has protection, in the first place it is margin call. But, the same occurs as it is with stocks. When some incredible drastic move happens in the currency markets, your broker may not be able to close your trade immediately. Also, your stop-loss order will not be executed due to the high speed of the market movement.

Therefore, the price may run beyond your stop loss or margin call close out level. That may cause a larger loss that exceeds the size of your account balance. So, you would have a negative balance.

This is where negative balance protection comes to the scene. The broker can overlook or forgive your negative balance and lets your account to begin from zero again.

Why traders need this?

Forex and CFD markets are volatile. That makes traders unprotected in sudden price movements and gaps. When extreme price movements happen in open trade, this may have an important influence on the value of your open positions. It is particularly dangerous when your position is highly leveraged.

If you hold a leveraged long position, you would lose more than your initial deposit. And as I said before, this would put you in a position where you would have to pay your debt back to your broker.

Negative balance protection resets your account balances to zero.

Is there anything bad?

In short, yes.
When you enter the market you are dealing with some unresponsible people who don’t pay attention to the risk involved because their goal is to beat the market. Sic!
When you set negative balance protection heaven isn’t the limit. This safety net wouldn’t let you take additional risks just because you have the belief that you can make easy money. Stay in the safe zone, it is smarter and better for your trading account.
Also, if you put negative balance protection, you have to pay increased margin rates.

The history of negative balance protection

It grew more prominent after the Swiss franc crisis in 2011. That was when the Swiss National Bank (SNB) closed holding its currency against the EUR at a fixed currency rate. The Swiss franc rapidly soared against the EUR. The consequence was that numerous traders shorting the franc ended up with enormous negative balances losing more than they had deposited on their account.
The Swiss market had great losses and many traders ended up with the fear that their brokers would ask to get paid to cover their losses.
The brokers that provide the leverage are obliged to apply for negative balance protection on a per-account basis, thanks to ESMA regulation for the EU.

24th September 2019