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  • Bitcoin price fall – new yearly lows

    Bitcoin price fall – new yearly lows

    2 min read

    Anniversary to Bitcoin!

    Bitcoin price fall again. ‘Bitcoin Black Friday is a one-day event that brings together bitcoin merchants and bitcoin users.

    Merchants simply list their bitcoin exclusive deals, and users can check out all the deals in one place. This year, we’re focused on quality merchants that care about the bitcoin community states the Bitcoin Black Friday website. It says it will publish all the best deals from merchants on Friday, 23 November.Ā 

    Bitcoin price fall by around $2,000 over the last week. It marks the big losses in this year for the world’s leading cryptocurrency.

    The falling price of bitcoin in past days has led to some cryptocurrency analysts joking that bitcoin has gone on sale. Just in time for Black Friday.

    But it is anĀ opportunity for savvy investors. They understand that digital currencies are the future of money. They will be capitalizing on the lower prices in order to build their portfolios and shore-up their positions

    ā€œPrices might fall further over the next few days, but we can expect a long-term upward trajectory for the crypto sectorā€, said Nigel Green, founder,Ā and CEO of financial services firm deVere Group.

    The future of Bitcoin

    The cryptocurrency market has slowed over the past few months. However, Robert Sluymer and Tom Lee, both from market analysis firm, Fundstrat, also believe that this will change very shortly.

    Tom Lee is one of the most prominent cryptocurrency bulls out in the space right now. We all can see him on mainstream media sources covering topics related to the cryptocurrency industry.

    On Wednesday, Lee doubled down on his $25,000 prediction. He didn’t sound skeptical in his belief one bit.

    He noted: ‘The fully loaded cost of (to mine) Bitcoin next year, is going to be like $14,000, reflecting the difficulty’.

    Why he is holding strong on this prediction?

    He believes that traditional institutions, like banks, will begin to stack as they see ā€œlucrativeā€ business opportunities arise. Lee also believes that the regulatory climate around cryptocurrencies will only improve as cryptocurrencies reach higher levels of institutional and retail adoption.

    Robert Sluymer, also from Fundstrat, sees bitcoin bottoming.

    Sluymer pointed out the series of higher lows which the price of Bitcoin should hold at if the market stays in a bearish state.

    ‘We think Bitcoin is starting to bottom off some very key support around $7,000 and we think itā€™s going to start a recovery process here.’

    He repeated that he believes that Bitcoin is about to ā€œchallenge its downtrend,ā€ with Bitcoinā€™s price movement possibly turning to the upside if it breaks through the current downtrend levels.

    Bitcoin price is sitting at quite a low level.

    And it is similar to the levels seen before previous temporary movements to the upside seen earlier this year.

    Truth is that what we need is to see is the bitcoin actually breakout and move through the key levels. Sluymer noted that one of these key levels is at $7800, with Bitcoin struggling to surpass that level.

    Over the past days, Bitcoinā€™s range had tightened up and seemed like another wild move will take place. We are not quite sure in which direction. From one side, the market is eager and deserves a correction back to the $5K+ area. But on the other hand, there is still a lot of panic selling, and Bitcoin look like has to go lower.

    Some bitcoin exchanges are even offering bitcoin giveaways in an effort to entice people to their platforms.

    Crash but still hope

    Bitcoin has experienced five major corrections to date, and the recent bear market of 2018 is the smallest major correction to date.

    As seen in a table shared by a renowned trader and technical analyst Peter Brandt, bitcoin price fall of 79.7 percent in the past eleven months as its price declined from $19,500 to $4,035.

    Bitcoin price fall - new yearly lows
    In 2011, 2013, and 2015, Bitcoin recorded drops in the range of 82.6 percent to 94.3 percent, declining by 85.3 percent on average. For BTC to record an 85 percent loss from its all-time high, it would have to drop to $2,950. But, there still is strong support at the $4,000 support level. Even if BTC drops to $2,950, an 85 percent drop from its all-time high is only the average loss BTC recorded in the past four major corrections.

    The 79% decline in the price of bitcoin from $19,500 is mainly caused by a lack of liquidity in Bitcoin markets. Trading giant Susquehanna executive Bart Smith noted that there are no viable investment vehicles for a regular retail trader. That means it is still difficult to invest in the cryptocurrency market.

    The short-term price trend of cryptocurrencies does not accurately portray the last eleven months of positive developments in the cryptocurrency sector. For that reason, high profile investors like billionaire Tim Draper, Mike Novogratz, and Susquehanna executive Bart Smith are optimistic in the long-term trend of Bitcoin.

    It is too early to confirm that the cryptocurrency market has achieved a bottom and that bitcoin has stabilized in the low price range of $4,000 to $4,500.

    Depending on the short-term price trend of bitcoin throughout November, could trigger an accumulation period throughout the first quarter of 2019.

    Risk Disclosure (read carefully!)

  • How to Use Stop Loss Order?

    How to Use Stop Loss Order?

    Stop Loss Order and How to Use It
    Use stop-loss orders whenever you enter a trade to limit the risk and avoid a potentially great loss

    By Guy Avtalyon

    A stop loss order is an order to sell a security when it reaches a given price. Put simply, the stop-loss sell order is designed to limit an investor’s loss on a particular stock. Stop-loss orders appear in four classes. But some brokers may offer products that vary in their structure and complexity. Some classes are more commonly used than others and dealers do not typically offer all classes of stop-loss orders.

    To some degree, each type of this order poises protection against the risk of ā€œslippageā€ and the risk of an early exit from the position. Slippage points to the difference between the order level and the current trade price. It may be increased or decreased depending on the type of stop-loss order trader uses. All of these definitions fit the normal market conditions. Counterparties should ensure that they have an independent understanding of the parameters of normal market conditions. It is important for each currency market to effectively recognize risks during the abnormal market condition

    Why use Stop Loss Order

    When trading on an asset, investors are exposed to potentially high risk if the price moves towards a direction which is the opposite of the one they had anticipated. This could result in considerable losses in the investment unless action is taken to exit the non-profitable position as soon as possible. When the price moves in a direction that provides the current position profitable, a trader might want to close the position in the profits earned so far. But, the possibility of turning winning trades into losing positions is always present. Also, it could lead to abnormal losses. Stop Loss usually involving the prices at which a position was opened, and are frequently used by traders, as well as automated trading systems. Trading is almost exclusively conducted electronically through a computer.

    In addition to that, investors have replaced the broker with a platform for automated trading called algorithmic trading. There is a lot of proof that can confirm the increased algorithmic trades can decrease wrong price choices and reduce the balance of offer risk over different price levels of an asset correlated with the trades. These results show that algorithmic trading lowers the cost of trades and enhances the informativeness of quotes. Today more and more brokers use electronic trading platforms, and more individual investors opt for algorithmic trading. So this order is calculated for every trade in a few seconds.

    Take Profit

    Returns can be either absolute or relative. The price is within the price range x āˆˆ (L, b Ɨ L), or the investor, if x is the entering price, can simply set a constant I (proportional to the fluctuation we add), where xāˆ’I is the stop-loss price.

    The returns change over seasons and periods, according to the influences an asset undergoes as a result of outside or inside factors. The orders with stop loss and take profit, when activated, oppose the market trend (take profit) or intensify the movement (stop loss). They have great influence even over the liquidity during a flash crash. The use of stop-loss orders and take profit orders and the range of these orders reflect the risk-taking desire of the investor. Taking profit and stop-loss functions display the flexibility of profitability adjusted on each asset.

    The Stop Loss order protects the trader from holding a position that is not profitable for a long time. Contrary, that could result in big losses of capital. On the other hand, there is a distinction between the profitsā€™ enhancement and risk reduction. The Stop Loss order has an influence on the fall of prices. In forex, the variance in exchange rates is faster when the prices hit levels at which Stop Loss order is usually set. Secondly, the influence of the Stop Loss order is bigger than the effect of the take profit order. It also helps the fast changes in prices by creating an opposite trend. Thirdly, the impact of stop-loss orders has an extended duration than that of the take profit orders.

    How Stop Loss order works

    Stop-loss orders work based on a trigger price. We can recognize two types of stop-loss orders: stop-loss limit (SL) and stop-loss market (SLM) orders.

    SL orders consist of a price plus trigger price. When the trigger price is reached, your Stop Loss order is triggered and a limit order is will be sent to the market. The limit order executes between your price and trigger price range only.

    For example, you buy a stock at $100 and place a sell stop-loss order with the price at $98 and trigger a price of $98.50. When the price of the stock reaches or goes below $98.50, your stop-loss order is triggered. A sell limit order with a limit price of $98 is sent to the exchange order queue. Since a limit order is executed at the best available price. If the price of the stock is at $98 or above, your sell limit order of price $98 will execute.

    Is possible a stop-loss order not work?

    Of course, it is possible.

    A sell limit order is sent to the exchange only when the sell stop-loss order is triggered. When the price of $98.50 is triggered, a sell limit order with a price of $98 is sent to the exchange order queue. But if the price of the stock falls below $98 before your order reaches the queue? The sell limit order will stay open and your stop-loss order will not be executed yet. This possible scenario can be overcome by a stop loss market order.

    The stop-loss market order consists of a trigger price. When the trigger price is touched or passed, your stop-loss market order is triggered and a market order is sent to the exchange. The market order is executed at the market price.

    For example, you buy a stock at $100 and place a sell stop loss market order with a trigger price of $98.50. When the price of the stock reaches or goes below $98.50, your stop loss market order is triggered. A sell market order is sent to the exchange order queue and will execute at whatever is the available market price. The point is that a market order always goes through and your stop-loss order will be executed at any moment happens.

    Stop Los orders do they work?

    These orders can also be used to lock in a profit. Itā€™s important to understand that stop-loss orders are different from limit orders. Limit orders can be executed if you can buy, for example, stock at a specified price or more beneficial. What will happen when the markets are fast-moving. In that case, your stop-loss orders may not be filled precisely at the specified stop price level. But it will be filled reasonably close to the specified stop price. Traders should understand that in some extreme cases stop-loss orders may not provide much protection.

    The main goals of this order are to low the risk exposure and to make trading easier. Traders are urged to always use them whenever they enter a trade, in order to limit their risk and avoid a potentially catastrophic loss. Stop-loss orders help to make trading less risky when limiting the amount of capital at risk on any trade.

     

  • Cryptocurrency Market – How It Works

    Cryptocurrency Market – How It Works

    Cryptocurrency Market
    This market is in permanent growth, its volatility and unpredictable liquidity are a reality.

    By Guy Avtalyon

    The cryptocurrency market has been segmented into mining and transaction, based on the process. In the mining process, there is a greater necessity for hardware than it is a case in the transaction process. Therefore, the market for hardware for the mining process is larger than that for software. Furthermore, a miner can take part in this process with a small investment.

    Cryptocurrency is used for various applications, such as trading, remittance, and payment. These applications drive the market for cryptocurrencies.

    Trading the cryptocurrency market

    Cryptocurrency trading cover exchanging fiat currency with crypto. Also, it refers to exchanging, buying, and selling of cryptocurrencies. It meets some similarities of foreign exchange or forex wherein fiat currencies we can trade 24 hours a day. The number of cryptocurrencies has increased exponentially; currently, there are more than 1,500 cryptocurrencies available. Some of these coins can only be vested using major cryptocurrencies such as Bitcoin or Ethereum. To contribute to initial coin offerings (ICOs), one needs to perform trades or use a blockchain company’s services.

    A large number of players are investing in developing payment gateways and platforms for the payment process of their currencies. When a customer makes a purchase using a cryptocurrency as payment, the transaction often goes through the payment gateway at a fixed exchange rate. It automatically converts to traditionally recognized fiat currency so the merchant can avoid the volatility of the cryptocurrency markets. The payment through cryptocurrency has several advantages. Enhanced transactional security, protection from fraud, decentralized system, low fees, quick international transfers.

    Why invest in the cryptocurrency market?

    Volatility and unpredictable liquidity are a reality of the cryptocurrencies market. You could have made tons of money if you had invested in bitcoin earlier but you wouldā€™ve lost a lot of money if you had started investing in the last few months. Because when investing in cryptocurrencies, many traditional assumptions fall flat. Managing risk in financial markets is a well-established discipline. Whether investing in equities, bonds, or currencies usually practices protect market practitioners when they are buying, selling, or intimidating. Risks are typically aligned into different categories. Market risk, credit risk, and operational risk, and complex formula are used to determine how much capital should be kept in reserve to absorb losses. The historical progress in bitcoin has increased risk appetite both for existing and newer traders. It comes with the realization that even a small exposure to cryptocurrencies could turn out to be lucrative.

     

    The cryptocurrencies market is still developing. There are concerns about the potential for fraud and market manipulation. So, investors must take the necessary precautions. These individual risks are much more difficult to measure and manage when investing in cryptocurrencies.

    Institutional demand for digital currenciesĀ 

    So far, most institutional investors, including banks, insurance companies, pensions, and hedge funds, have avoided cryptocurrencies. But, that attitude is beginning to change and institutional investors will soon be entering the market in a major way.

    This year (2018) has been challenging for crypto investors. Global market capitalization fell amidst worries over fraud risk, escalating token issuance, and ever-shifting cyber-security threats.Ā Accusations of market manipulation and concerns around potential naked short selling are also doing little to lessen institutional investorsā€™ concerns about cryptocurrencies.

    The effect in the market

    Every big trader can exploit market illiquidity and shifting margin rules and contract limits at inexperienced cryptocurrencies exchanges. This causes a domino effect in the market and institutional investors rather stay away. The complexities and shy institutional uptake for the new cash-settled bitcoin futures products demonstrate that. But the industry must move towards a futures contract that is settled with proper warehousing standards.

    Counterparty risk and custody provisions are even bigger worries for institutional investors. Although cryptocurrency exchanges are significant new platforms, they have been largely designed by the younger generation of developers. Financial institutions care more about the return of capital rather than return on capital. They are wary of the professional indemnity behind these platforms. We believe that nowā€™s the right time for institutional investors to look seriously at making investments into cryptocurrencies. They should take part in the cryptocurrencies market.

    Cryptocurrency market – potentially unlimited upside

    The unpredictability of risk and the potential for high returns is the main characteristic of cryptocurrencies market. The most intelligent approach for new investors might be to hold a very small proportion of their portfolio in cryptocurrencies. This would give some exposure without excessive risk as the market continues to mature.

    By the end of 2017, a lot of portfolio managers had to explain to their clients why they had only achieved single-digit returns in traditional asset classes. At the same time, some crypto funds had earned up to 2,000 percent from volatility. This shows, there is a little downside from investing 1% of the portfolio in cryptocurrencies, but the potential upside is almost unlimited.

    The cryptocurrency market continues to attract new participants and liquidity should improve. This will take the time that’s the truth. Within a couple of years, cryptocurrencies will become a standard part of a diversified portfolio.

    The stock market has a rich and mature history. It has seen many bubbles, market crashes, and economic recoveries. The growth of the cryptocurrencies market continues. If traditional stock exchanges continue to keep away from cryptocurrencies, theyā€™ll miss out on a growing and profitable market.

    Finally, the financial crisis of 2008 Ā actually gave birth to Bitcoin.

  • Bitcoin Price Hits a New Low Level

    Bitcoin Price Hits a New Low Level

    2 min read

    Ā Bitcoin Hits New Low Value

    • Bitcoin is currently sitting in the volatility of the market, though it is hard to predict how investors will react to the recent events.

    The aggressive dump can be a result of panic selling caused by the breakout from the $5600. Many interpreted this as ā€œthe bottomā€. Since the price went below what many thought to be the bottom a panic selling would have triggered. The bitcoin’s lowest price in bear markets has been $5600.

    Right now the price of bitcoin is around $4,600, but yesterday BTC stumbled down to $4,237. Over the past 24 hours, the price of Bitcoin fell from $4,900 to $4,280, by more than 12.5% for the first time in 2018. Ripple (XRP) markets have been doing better than most but had dipped to a low of $0.41 per XRP. The XRP token was down 6.6%, and over 13.4% over the last seven days. XRP is now back up to $0.46 per token according to the most recent data. Ethereum (ETH) now commands the third position among the top 10 cryptos market capitalizations and is down 35% for the week. Currently, ETH is trading for $144 per coin and holds $14.8 billion market valuation. Lastly, stellar (XLM) has been pushed back to the fifth position and is trading for $0.21 this Tuesday. Stellar markets are down 23% for the week but briefly managed to take the fourth position among the top 10 market caps.

    Bitcoin Price Hits New Low Level

    Some media reported that the low trading volume of BTC in a period of an intense sell-off and free fall suggests a further decline to the low $4,000 region is likely, especially if the volume of BTC begins to increase in the days to come.

    Is bitcoin going to hit new low price?

    It is really possible the volume on Bitcoin could lead to a decline to a low range at $4,000. But what does it mean?

    The sell-off continues in the crypto universe as the main cryptocurrencies set new minimums.

    Economist Nouriel Roubini is known as “Dr. Doom” declares that the main central banksā€™ initiative to launch their blockchain based currencies will compromise the future of the current cryptocurrencies.

    The argument is reasonable from the perspective of the current situation but he forgets to put all the elements on the balances.

    Tomas Salles from fxstreet.com asked one very important question and gave the answer: ‘If someday the current financial system collapses in the face of unpayable debt, what security does it provide that the instrument is digital, reliable and decentralized? If that day arrives, I will prefer to get my paycheck in Bitcoins than in a currency that is worth less every day while the central banks raise rates in despair.’

    Will bitcoin recover?

    Bitcoin is currently sitting in the volatility of the market, though it is hard to predict how investors will react to the recent events.

    Analysts have suggested that 2018 will be the year of cryptocurrencies. Wall Street hedge fund firm Fundstratā€™s CEO Tom Lee has regularly predicted bitcoin to exceed expectations in 2018, with prices pushing past $25,000. Bitcoinā€™s famous volatility makes it impossible to predict, that’s the truth. And there are numerous factors that have an influence on the cryptocurrency market.

    The values of Bitcoin, Ripple, and other cryptocurrencies have been crashing lately, but one analyst is predicting a huge rise ahead for Bitcoin with a forecast for it to reach as high as $100,000 in 2018.

    Kay Van-Petersen, an analyst at Saxo Bank, said in December 2016 that bitcoin would reach $2,000 in 2017, a feat achieved in May. He now says bitcoin will be driven by a larger uptake of institutional investors and futures contracts.

    Bitcoin Price Hits New Low Level 2

    That might seem unlikely. But the analyst predicting Bitcoinā€™s 2018 surge has been right before. Toward the end of 2016, the Danish firm Saxo Bank released its annual list of ā€œOutrageous Predictionsā€ for the year ahead. In it, the bankā€™s analysts said that Bitcoin could easily triple in value in 2017. That prediction came true by the spring of 2017. Bitcoin went on to increase from around $9,000 to $18,000 in the course of the year.

    Why Bitcoin is swinging up and down?

    In 2017, Bitcoinā€™s value soared from $1,000 to just under $20,000. And was dropping down to around $13,000 by the end of the year. Since then, itā€™s value has risen and dropped sporadically from day to day. Ā And smaller cryptocurrencies like Ether and Ripple along with it too.

    If youā€™re new to cryptocurrencies, this kind of volatility can be strange. But if you take a closer look it starts to make sense.

    Individual owners have less power over the price of Bitcoin, and it creates stability since more people have a stake in the cryptocurrency. The other possibility is that government regulation could help stabilize Bitcoin. In the short term, that could cause its value to drop drastically as it happened in China and South Korea. But in the future, it could help calm down the speculation. Furthermore, regulation could dislodge the types of dark Bitcoin-related business that jeopardize the entire concept of cryptocurrencies.

    Cryptocurrency price will rise despite fears of a collapse

    Bitcoin has been the top-performing currency in the world in six of the past seven years.

    Bitcoin’s price will rise again, after the digital currency and its rivals saw values plummet. Crypto investors suggest cryptocurrencies could surge. Bitcoin is now tested and proven to the market. People now understand the blockchainā€™s abilities from outside issues. Bitcoin is gaining more confidence from users. The upside for bitcoin is virtually limitless.
    Or as someone twitted

    Ignore the noise, trust the code.

    Risk Disclosure (read carefully!)

  • Momentum trading

    Momentum trading

    3 min read

    Momentum trading

    • Momentum stocks are among the most exciting stocks to trade.

    Momentum trading refers to the tendency of stock prices to continue moving in the same direction for several months after an initial impulse. The most basic form of momentum is price momentum, where the initial impulse is simply a change in the price itself.

    Momentum has been defined as a force that sustains theĀ movement and increases the strength of that movement. This two-fold nature of momentum is seen in what traders and investors call ā€œmomentum stocksā€. A momentum stock is a stock that is trading in a sustained trend, either up or down, the strength of which is expected to increase over the near term.

    Momentum stocks are among the most exciting stocks to trade.

    Momentum trading is inherently challenging to explain within a traditional asset pricing model. Such a model requires that high average returns are simply compensation for some form of risk. But stocks that have risen recently, or have had positive earnings surprises. Hence, typically seem to have lower risk, not higher risk as would be required for risk to explain momentum.

    What is momentum trading?

    Momentum trading is a technique in which traders buy and sell according to the strength of recent price trends. Price momentum is similar to momentum in physics. The mass multiplied by velocity determines the likelihood that an object will continue on its path. In financial markets, however, momentum is determined by other factors.Ā  Like trading volume and theĀ rate of price changes. Momentum traders bet that an asset price that is moving strongly in a given direction. And it will continue to move in that direction until the trend loses strength.

    British economist and investor David Ricardo used momentum-based strategies successfully in trading. He was well known in this field. How he did it? He bought stocks with strong performing price trends. And then sold stocks whose prices were performing poorly. He characterized the method with the phrase: ā€œCut short your losses; let your profits run on.”

    Momentum trading can be classified into two categories:

    Relative momentum and absolute momentum.

    The Relative momentum strategy is where the performance of different securities within a particular asset class are compared against one another. Investors will favor buying strong performing securities and selling weak performing securities.

    The Absolute momentum strategy is where the behavior of the price of a security is compared against its previous performance in a historical time series.

    In currency trading, either relative or absolute momentum can be used. But you have to know that momentum trading strategies are more frequently associated with absolute momentum.

    How to employ momentum strategy?

    Momentum can be determined over longer periods of weeks or months, or within day-trading time frames of minutes or hours.

    The first step traders usually take is to regulate the direction of the trend in which they want to trade. The trader can use one of several momentum indicators. Then such trader may establish an entry point to buy (or sell) the asset they are trading. After that trader has to determine a profitable and reasonable exit point for a trade. The trade must be based on the projections. And previously observed levels of support and resistance within the market.

    Momentum trading 1
    Besides that, it is highly recommended to set stop-loss orders above or below their trade entry point. That depends on the direction of the trade. This is in order to avoid the possibility of an unexpected price-trend reversal and undesired losses.

    Momentum indicators

    A momentum indicator is a tool used for determining the momentum of a particular asset. They are graphics devices. Often in the form of oscillators. That can show how rapidly the price of a given asset is moving in a particular direction. Also to whether the price movement is probably to continue on its course.

    The idea behind the tool is that as an asset is traded, the rate of the price movement reaches aĀ maximum.Ā In the moment when the entrance of new investors or money into a particular trade nears its maximum. When there is less new investment available, the tendency after the maximum is for the price trend to devastate or reverse direction.

    Momentum trading 2
    The trader can determine the direction of momentum. The trader has to subtract a previous price out of a current price. That’s all. A positive result is a signal of positive momentum. The negative result is a signal of negative momentum.

    Momentum tools typically appear as rate-of-change (ROC) indicators, which divide the momentum result by an earlier price. Multiplying this total by 100, traders can find a percentage ROC to plot highs and lows in trends on a chart.Ā Say the ROC approaches one of these extremes. You can see an increasing chance the price trend will weaken and reverse directions.

    Other momentum tools

    Here are a few of the technical indicator tools that traders commonly use to track momentum. They may provide you to know whether itā€™s a good time to enter or exit a trade within a trend.

    Moving average: It can help to identify overall price trends and momentum. How to calculate the moving average? The trader should add the closing prices over a certain number of periods. And by dividing the result by the number of periods considered.

    Relative strength index (RSI): It measures the strength of the current price movement over recent periods. The aim is to show the probability if the current trend is strong. Of course, in comparison to previous performance.

    Stochastic oscillator: It compares the current price of an asset with its range over a defined period of time. What we can see when the trend lines in the oscillator reach oversold conditions? They indicate an upward price momentum is at hand. And when they reach overbought conditions they indicate that sinking price momentum is ahead.

    Moving average convergence divergence (MACD): It is an indicator that reveals both price momentum and possible price trend reversal points. When the lines are farther apart, momentum is strong. Therefore, when they are converging, momentum is slowing. That means the price is likely moving toward a reversal.

    There are also other indicators like theĀ commodity channel index (CCI), on balance volume (OBV), stochastic momentum index (SMI), average directional index (ADX), building block.

    Is momentum trading risky?

    Like any style of trading, momentum trading is risky. Itā€™s normal to be successful when prices follow on a trend. But the problem is that momentum traders can be caught off guard. It is happening when trends go into unexpected reversals. Hence, traders should remember a few things and adopt them:

    Technical analysis bases its projections of the probability of price movements on past price trends.

    Prices in the market can move in an unforeseen manner at any time due to unexpected news events. Moreover, because of fears and changes in sentiment in the market.

    The bottom line

    Momentum is a key concept that has proven valuable for determining the chances of a profitable trade. The trader may use measurements of momentum in the short and long term. They are useful in all types of trading strategies. Several technical trading tools are available to reveal the strength of trends. Also, whether a trade on a particular asset may be a good bet.

    Traders should know that momentum projections are calculated using measurements of past price trends. Actual momentum and price can change at any moment.Ā So, itā€™s important to take preventative measures, such as setting stop-losses.

    Risk Disclosure (read carefully!)

  • Bitcoin is the evil spawn?

    Bitcoin is the evil spawn?

    1 min read

    Bitcoin is the evil spawn?

    According to a report in the Financial Times, Ā Benoit CœurĆ©, a member of the Executive Board of the European Central Bank (ECB), has become one more member of the banking old guard to discredit Bitcoin.

    The executive spoke in Basel, Switzerland, yesterday.

    ā€œLightning may strike me for saying this in the Tower of Basel ā€” but Bitcoin was an extremely clever idea. Sadly, not every clever idea is a good idea.ā€

    CœurĆ© repeated the opinion of Mexican economist AgustĆ­n Carstens who said that Bitcoin shared characteristics with speculative bubbles, and Ponzi schemes, along with being a pending environmental catastrophe waiting to happen. Also, CœurĆ© dismissed the importance of a decentralized monetary system by stating that such thinking was ā€œevil spawn of the financial crisis.ā€

    How he recognized Bitcoin?

    He correctly recognized that the Bitcoin appeared following the 2008 financial crisis. But he avoided saying how an honest effort to free the world of the bad effects of a corrupt central banking system can be evil.

    EU statement on ‘ bitcoin the evil spawn’ came after Lagarde’s declaration for CBs to adopt Digital currencies!
    So, we can ask aĀ few questions.

    Are they scared and trying to encourage themselves? If Bitcoin is evil spawn and worthless, why do central banks even care? Who caused the last few recession?

    In a way, he accepted that “Central Banks are the devil”.

    Why?

    The French economist underlines that itā€™s unlikely a central bank will issue a digital currency within the next decade.

    The ECB officialā€™s stance is at odds with remarks from International Monetary Fund (IMF) managing director Christine Lagarde. Speaking at the Singapore Fintech Festival Nov. 14, Lagarde urged the international community to ā€œconsiderā€ endorsing central bank-issued digital currencies (CBDC). She claimed they ā€œcould satisfy public policy goals,ā€ specifically ā€œfinancial inclusion.ā€

    Coeureā€™s argument is also directly contrary to that of Stanley Yong, Chief Technical Officer (CTO) of IBMā€™s Blockchain for Financial Services. He stated this week that CBDCs are ā€œthe only wayā€ to reduce the ā€œkinds of risks that came about during the Lehman crisis of 2008,ā€ and could prevent a settlement system freeze and failure that affected financial systems across multiple countries during the Lehman fallout.

    Of course, it is understandable for leading bankers to reject Bitcoin publicly.

    CœurĆ©ā€™s ā€œevil spawnā€ is one in the line of those who are against the cryptocurrency.Ā  Do you remember what JPMorgan CEO Jamie Dimonā€™s said: famous ā€œfraudā€ blast! Investing legend Warren Buffett ā€™s said ā€œrat poison squaredā€, and Buffettā€™s buddy Charlie Mungerā€™s screamed cryptocurrency is ā€œscum-ball activityā€.

    What is their goal?

    They want this cryptocurrency thing to disappear. And they want us not thinking quite so critically about money and the way the banking system works.

    That’s the point!

    However, the true is that Bitcoin appeared and continues to function as intended.

    Or we may ask bankers about their history of using inflation to increase the inequality discrepancy.

    Risk Disclosure (read carefully!)

  • Margin Trading Definition

    Margin Trading Definition

    2 min read

    Margin Trading Definition
    Margin trading isn’t without risks involved, so pay more attention to it

    Margin trading is simply the process where investors buy more stocks than they can afford to. It also refers to intraday trading in India and various stockbrokers provide this service. It can increase your profits on the upside, but also expand your losses on the downside. Margin trading means buying and selling stocks or some other assets in one single session. This process requires a trader to guess the stock change in a particular session. It is an easy way of making a fast buck. It is now accessible to even small traders.

    What is margin trading?

    Margin trading is also called buying on margin. It is a method of buying shares that involves borrowing a part of the sum needed from the broker executing the transaction. The collateral for the loan is normally securities in the investor’s account. The trader has to deposit an initial amount of cash or securities into a margin account with the broker. And has to keep a minimum amount of cash or securities in the account as collateral. If the balance of a margin account falls below the minimum maintenance amount, the broker makes a margin call to the trader for the funds needed. Margin balances can be adapted to follow market values by adding or subtracting variation margins.

    What is buying on margin?

    Buying on margin gives the investor leverage as any capital appreciation or dividend income is on the total amount purchased. Even after the amount borrowed has been repaid to the broker, with interest, the investor could still be better off than if he/she had personally financed the purchase of a smaller amount of shares. That depends on how much the shares gain and how much they yield.Ā There are some risks with margin trading – if the shares fall in value, the investor suffers a capital loss while also facing potential margin calls from the broker.

    An example of margin trading

    Margin trading is meant for traders who are looking for a simple way to increase their earnings. And also, they have a reasonable level of risk appetite but do not have enough capital.
    Letā€™s say you are 100% bullish for theĀ big company and believe the stock is going to pick up. Ā You want to buy 1000 shares of that company and each share is priced at $200. You would need a capital amount of $200,000 to enter that position.
    Assuming you have $150,000 and want to borrow the rest of the capital. With margin trading, your broker can help you with the rest of the funds while charging you a specific interest percentage.

    How does margin trading work?

    The whole process is quite simple. Margin trading is legal buying stocks or other securities, but instead of your own money, you borrow it from your broker.
    Think about buying stock on margin as buying a house with a mortgage. A margin account provides you the financial support to buy more stocks than you can currently afford. For this purpose, the broker will lend you money to buy shares and keep some amount as collateral.
    If a trader wants to trade with a margin account, the first requirement will be to request a broker to open a margin account. This requires paying a specified amount of money upfront and in cash. That is so-called the minimum margin. If a trader has a losing bet and ends in losses, and fail to pay the debt, the broker will get it out from the margin account.
    When you open the margin account, you’ll have to pay an initial. This is a specific percentage of the total traded value and pre-determined by the broker. Before you start margin trading, you need to keep in mind these important steps.
    First, you need to secure the minimum margin (MM) through the trading session. The reason behind this: if the stock is very volatile, the price can fall more than you had expected.
    Second, the broker has the right to ask you to increase the amount of capital you have in your margin account. Also, the broker has the right to sell any of your securities if feels its own funds are at risk. The broker can even sue you if you don’t fulfill a margin call or if you are carrying a negative balance in your margin account.

    Margin trading if the stock price goes up

    This is the best outcome for you.Ā  Let’s do some math (I adore math).

    Say you bought 100 shares for $4000. But you had $2000 and broker loans $2000. If the price goes to $50 per share, your investment will be worth $5,000. Your outstanding margin loan will be $2,000. If you sell, the total proceeds will pay off the loan and leave you with $3,000. Because your initial investment was $2,000, your profit is a solid 50%. Your $2,000 principal amount generated a $1,000 profit. However, if you pay the entire $4,000 upfront without the margin loan your $4,000 investment will generate a profit of $1,000, or 25 percent. By using a margin, you could double the returns.

    The stock price fails to rise

    If the stock stays at the same price, you still have to pay interest on that margin loan. You are in a better situation if the stock pays dividends because that money can pay some of the costs of the margin loan if not all. In other words, dividends can help you pay off what you borrow from the broker.

    Margin Trading 1
    When the stock doesn’t change in price it is a neutral situation, but you’ll pay interest on your margin loan for each day. Margin trading can be a good plan for traditional investors if the stock pays a high dividend. Many times, a high-payed dividend, for example, $5,000 worth stock, can exceed the margin interest you have to pay. For example, if you had $2.500 and you borrowed the other $2,500, which is 50% of stock’s value. But you expect to receive $3.000 as a dividend, so you’re safe.

    Margin trading when the stock price goes down

    If the stock price drops, buying on margin could work against you. What if the price in our example goes to $38 per share?
    The market value of 100 shares will be $3.800. So, your capital will shrink to just $1,800 because you have to pay your $2,000 margin loan to your broker. This isn’t real trouble at this point, but you should be cautious.Ā The margin loan is 50% of your investment. If it goes lower, you may get the margin call. The broker will demand you to keep the ratio between the margin loan and the value of the securities the same as it was when he lends you money. That’s why margin trading can be very dangerous.

    How to maintain the balance in margin trading?

    When you buy stock on margin, you must maintain a balanced ratio of margin debt to equity of at least 50 percent. If the debt portion exceeds this limit, Ā youā€™ll be required to restore that ratio by depositing either more stock or more cash into your brokerage account. The additional stock you deposit can be from another account. If you canā€™t come up with more stock, other securities, or cash, you have to sell stock from the account and pay off the margin loan. For any trader, it means having a capital loss. For you also, because you lost money on your investment.

    The bottom line

    As you can see,Ā  the margin can increase your profits on the upside but also increase your losses on the downside. If your stock drops drastically, you can end up with a margin loan that exceeds the market value of the stock you used the loan to buy. In the bear market of 2000, for example, many people realized stock losses. The majority of these losses came as a consequence because traders did not manage properly the obligations associated with margin trading. To avoid this kind of problems you must have sufficient reserves of cash or marginable securities in your account.
    For example, buying dividend yields that exceed the margin interest rate could be the right choice so the stock could pay for its own margin loan. Just keep in mind to set up your stop-loss orders. Your goal is to make money, and paying interest could eat your profits.

     

  • What is a Trade and how to Trade

    What is Trade
    To understand what is theĀ trade we must have some historical and economic facts in our minds.

    By Guy Avtalyon

    What is trade? For some of you, this question may seem like nonsense. But, do we all know what is a trade for sure? So, let me explain this. Trade is a basic economic concept that involves the buying and selling of goods and services. Trading points to the buying and selling of securities, for example, buying and selling stock.
    Answer to this question could be: Trade is a transfer of goods or services in return for money, services or goods. In other words, trade refers to give and take. In the old days, trade took place with the exchange of goods without the exchange of money. With the invention of money, the trade appeared as an exchange of things for money.

    Trade is buying and selling on stock market transactions with the help of stock market brokerage houses. To trade in capital markets, one has to learn technical analysis first. Then apply those learned technical analysis concepts through paper-trading for a few weeks then open a trading account thru a broker and slow start the first real trade.

    Everybody knows what the term ā€œtradeā€ means. We are trading in our everyday life, while we may not even register that we have done so. Basically, everything we buy in a market is trading money for the goods we need.

    So, what is theĀ trade?

    The word ā€œtradeā€ simply means ā€œexchange one thing for anotherā€. We normally get this to be the changing of goods for money or in other words, simply buying something. The same principle is applied when we trade in the financial markets. Let’s say someone trades shares. What traders and investors are really doing is buying shares of some companies. When the value of the shares rises, they will make money if sell them at a higher price. This is trade. You buy something for one price and sell it again for another, hence making a profit or loss.

    Why traders trade

    Every single trader is buying the shares in the hope that the price will rise. But why would the value of the shares go up? The answer is simple: the value changes due to supply and demand, meaning the more demand there is for something, the more people are willing to pay for it.

    Trade is conducted not only for the sake of earning a profit; it also provides service to the consumers. Trade is an important social activity because society needs an uninterrupted supply of goods forever increasing and ever-changing but never-ending human wants. Trade exists from the beginning of human life and will obviously last as long as human life exists on the globe. It enhances the standard of living of consumers. Thus we can say, Ā answering the question of what is the trade, that trade is a very important social activity.

    The examples of what is a trade

    Trade is when two parties agree on the price of a financial instrument but they perceive it’s valued differently.

    For example, say, trader A wants to buy stock with the current market price of $800. So, when trader A buys a stock at $800 there is a seller trader B at the same price. Hence, both of them have an agreement at the price of $800. But the buyer, trader A values is higher than the seller, trader B at that point.

    Letā€™s say that suddenly the owner of another stock comes into the market and has even more stocks to sell. The supply of stocks has now increased dramatically. Now, it’s reasonable to expect the second trader will want to sell that stock at a lower price than the first one to attract the other traders to buy that stock. And such will be right. The other traders would reasonably want to buy at the lower price, why not. Let’s see what happened with the first trader. The first trader will lower the stock price also.
    Can you see how the sudden increase in supply has brought the price of the stocks down?
    When the asset’s price at which demand matches supply is known as the ā€œmarket priceā€. In other words, that is the price at which traders agree on both sides, sellers and buyers both.
    Trade is executed with the payment of money, the transaction of goods and services, or virtual currency.

    What is the trade of virtual currencies

    Those who want to trade cryptocurrency should start by picking a company with a good status that gives an exchange and wallet. The beginners should start by trading leading coins. Currently, we are referring to coins like Bitcoin (BTC) and Ethereum (ETH). In the future, this could change.

    Cryptocurrencies are still new to some people, so trading in this novelty can certainly generate good outcomes. But it is important that you know very well what any virtual currency gives and know the features of each coin. It is necessary for you to make trading informed decisions, evaluating carefully the risks/benefits of each coin. Using a reputable cryptocurrency exchange platform could support you in order to take the best possible of cryptocurrency trading.

    Virtual currencies

    Virtual currencies do not expose holders to foreign exchange risks and provide anonymity between trading partners. Ā Some online resellers provide buyers to conduct their transactions using virtual currencies. If you want to trade cryptos you can also find platforms that convert virtual currencies into gift cards. Virtual currencies are often popular with small businesses, because of the lack of processing fees.

    Trading cryptocurrency isn’t hard to start, but there are some basic aspects to understand before you start trading with a wallet-exchange.

    The main thing to note is that there are countless options for setting up wallets and trading currency.

    The bottom line

    When we ask what is theĀ trade we should have some historical and economic facts in our minds. The process of economic specialization and trade leads to much higher levels of production of goods and services. It is this process that creates and sustains the markets of the ā€œfree marketā€ system. The development of this system brought about the dramatic and revolutionary improvements in living standards that characterize the modern age.
    Free and open trade has fired competition, innovation, and economies. It allows individuals and businesses to take advantage of lower prices and increased choice. As a consequence, millions of people all over the world have overcome the restrictions of subsistence farming and severe poverty that defined the lives of most of humankind during history.

     

  • What Is Margin and How to Use

    What Is Margin and How to Use

    What is margin
    Trading on margin can be profitable but also, extremely risky.

    By Guy Avtalyon

    The simple answer on question what is margin could be: it is a loan from your brokerage to buy more stocks than you otherwise would be able to purchase using the amount of cash you have on hand.

    The dictionary defines margin as an extra amount of something (such as time or space) that can be used if needed. Two key things are important to us in that definition: extra and if needed.

    It is the difference between the full value of your position and the funds lent to you by a broker or leverage provider. It is an amount of money needed to open a leveraged trading position.

    There are two types: initial and maintenance margin. The initial is the deposit required to open the position, often called just the deposit. When you open your position, you might need to add more money if your trade starts to make a loss and your deposit is no longer enough to keep the position open. If this happens, your provider will place you on a margin call, and youā€™ll be required to top up the funds in your account. This additional capital is known as the maintenance margin.

    What is the margin?

    It is the deposit necessary to use leveraged products. Using leverage can provide you to get full market exposure by putting up just a fraction of a tradeā€™s full value. The amount of margin ordered will usually be presented as a percentage.

    All of the assets in your account, as well as your personal guarantee, are held as assurance that you will repay the debt. There is no matter what happens in the trading account itself. Even if the account blasts, you are obliged to pay. No payment plan. Or negotiating terms. If you don’t pay, the broker can tow you into court. You will start getting verdicts to confiscate your other holdings. Your destiny will depend on the mercy of a bankruptcy judge. Meanwhile, your credit score plummets. Well, not always but it can happen.

    What is the margin in Forex?

    It is one of the most important concepts of Forex trading. In Forex it is basically a good faith deposit that is needed to maintain open positions. It is not a fee or a transaction cost, but instead, a portion of your account equity set aside and assigned as a margin deposit.

     

    Trading on a margin can influence your trading experience both positively and negatively, with both profits and losses potentially. Your broker takes your deposit and then pools it with someone else’s margin Forex deposits. Brokers do this in order to be able to place trades within the whole interbank network.

    It is often expressed as a percentage of the full amount of the chosen position. The most Forex margin requirements are estimated to be around: 2%, 1%, 0.5%, 0.25%. You can calculate the maximum leverage you can use in your trading account.

    How does margin work?

    In the same way that a bank can lend you money if you have equity in your house, your brokerage firm can lend you money against the value of certain assets in your portfolio. The borrowed money is known as a margin loan. It can be used to purchase additional securities or to meet short-term financial needs.Ā 

    Each brokerage company can define, within certain guidelines, which stocks, bonds, and mutual funds are marginable. The list usually includes securities traded on the major stock exchanges. Hence, keep in mind that you can not borrow funds in retirement accounts or custodial accounts. Investors can use margin to purchase potentially double the amount of marginable stocks than they could use cash. Few investors borrow to that extreme. The more you borrow, the more risk you’ll take on. Margin uses the value of your marginable securities as collateral in your portfolio. If your portfolio goes up, your buying power increases. If your portfolio falls in value, your buying power decreases.

    Which securities can trade?

    Almost every security can be traded on margin. It may be stocks, futures, commodities, or currency. For the cash market, generally, brokers provide and charge nominal interest for the same. While for the Futures market, the exchange provides the margin and there is no interest charged. Every broker has a different margin policy.

    Short-term stock traders often use it in the hope of improving their stock market returns. But, it is usually avoided by long-term investors as over an extended period, a greater return would be necessary just to break even.

     

    Traders often target stocks with more volatile price swings. As they focus on shorter time spans than investors, short-term traders need to use margin to magnify the size of those price swings to try and make a profit.

    Trading is risky

    Frankly speaking, when someone asks what is margin, the first thought is – it is the risk. Because it can be a dangerous beast. Of course, it canā€™t ever turn a bad investment good, but it can turn a good investment bad. Simply piling margin onto an investment with a small return doesnā€™t transform it into a good idea. It has a darker side from a value perspective as well: it has the potential to turn a good investment into a bad one! It can limit your staying power and transform a temporary impairment into a permanent impairment of capital.

    A margin loan can be used to meet short-term lending needs not related to investing. Moreover, margin can also be used for investment purposes to magnify your profits as well as your losses.Ā 

    This strategy can be profitable when your stocks are going up. But, the increasing effect works the other way as well. Buying stock on margin is only successful if your stocks increase enough to pay back the loan with interest. Contrary, you could lose your major capital if your stocks go down too much. However, used wisely and prudently, a margin loan can be a valuable tool in the right circumstances. If you decide it is right for your investing strategy, consider starting slow and learning by experience.

  • Stock Options Everything You Need to Know

    Stock Options Everything You Need to Know

    Stock Options
    The stock options give the holder the right, but not the obligation, to buy (or sell) 100 shares on or before the options expiration date.

    By Guy Avtalyon

    Stock options are financial instruments. That can provide the investor with the flexibility need in almost any investment situation.

    Stock options are contracts that convey to its holder the right, but not the obligation, to buy or sell shares of the underlying security at a specified price on or before a given date. After this specified date, the option stops to exist. The seller of an option is, in turn, obligated to sell (or buy) the shares to the buyer of the option at the specified price upon the buyer’s request.

    The stock options give the holder the right, but not the obligation, to purchase (or sell) 100 shares of a particular underlying stock at a specified strike price on or before the option’s expiration date. The seller of the option is one who grants this right.

    You can recognize two kinds of stock options: American and European. American options are different from European options. The European options permit the holder to exercise the option only on the date of expiry.

    How do stock options work?

    All options are derivative instruments. That means that their prices are derived from the price of another security. More precisely, the underlying stock price will determine the options price, it is derived from the stock price.

    As an example, let’s say you purchase a call option on shares of Intel (Nasdaq: INTC) Ā with a strike price of $40 and an expiration date of April 16. This option gives you the right to purchase 100 shares of Intel at a price of $40 on or before April 16th. Of course, the right to do this will only be valuable if Intel is trading above $40 per share at that point in time.

    Every stock option represents a contract between a buyer and a seller. The seller has the obligation to either buy or sell stock to the buyer. Of course, at a specified price by a specified date. The buyer, on the other hand, has the right but not the obligation, to execute the transaction. On or before a specified date. If it isn’t in the best interest of the buyer to exercise the option when it expires, the buyer has no further obligations. The buyer has bought the option to execute a transaction in the future. Hence the name – option.

    What is underlying security?

    The particular stock on which an option contract is based is usually known as the underlying security. Stock options are categorized as derivative securities because their value is derived in part from the value and characteristics of the underlying security. A stock option contract’s unit of trade represents the number of shares of underlying stock which are covered by that option. The stock options unit of trade is 100 shares. This indicates that one option contract signifies the right to buy or sell 100 shares of the underlying asset.

    What is the strike price?

    The strike price, or exercise price, of stock options, is the specified share price at which the shares of stock can be bought or sold by the holder, or buyer, of the option contract. To exercise your option is to exercise your right to buy or sell the underlying shares at the specified strike price of the option.

    The strike price for an option is initially set at a price that is reasonably close to the current share price of the underlying security.

    What is the stock options contract?

    A stock options contract is defined by the following elements: type (put or call), style (American, European and Capped), underlying security, a unit of trade (number ofĀ shares), strike price, and expiration date. All stock options contracts that are of the same type and style and cover the same underlying security are referred to as a class of options. All stock options of the same class are referred to as an option series. They haveĀ the same unit of trade at the same strike price and expiration date

    Stock vs stock options

    The difference between stocks and stock options is that stocks give you a small piece of ownership in the company, while stock options are contracts that give you the right to buy or sell the stock at a definite price by a particular date. There are always two sides to every option transaction: a buyer and a seller. For every call or put option bought, there is always someone else who is selling it. Many traders think of a position in stock options as a stock surrogate that has a higher leverage and less required capital. They can be used to bet on the direction of a stock’s price, just like the stock itself. But stock options have different characteristics than stocks. Ā And there is a lot of terminologies that options traders must learn.

    What are Put and Call?

    A call is the option to buy the underlying stock at a predetermined price by a predetermined date. The buyer has the right I explained above. The seller of the call who is also known as the call “writer” is the one who has the obligation. If the call buyer decides to buy, the call writer is obliged to sell shares to the call buyer at the strike price.Ā A call option contract grants its holder the right to buy a certain but specified number of shares of the underlying stock. That right has to be executed at the settled strike price on or before the date of the expiry of the contract.

    For example, you bought a call option on ABC company with a strike price of $40, expiring in two months. That call buyer has the right to exercise that option, paying $40 per share, and receiving the shares. The writer of the call would have the obligation to deliver those shares and receive $40 for them.

    Put options are the options to sell the underlying stock at a predetermined strike price. Until a fixed expiry date. That put buyer has the right to sell shares at the strike price. And the put writer is obliged to buy at that price.

    Calls and puts, individual, or in combination, can provide different levels of leverage or protection to a portfolio.

    What are employee stock options?

    Many companies issue them for their employees. When used appropriately, these options can be worth a lot of money for you. With an employee stock options plan, you are offered the right to buy a specific number of shares of company stock.

    All employees’ options have a vesting date and the expiration date. It’s impossible to exercise these options before the vesting date or after the expiration date.
    You’ll recognize two types of stock options companies issue to employees:

    NQs ā€“ Non-Qualified Stock Options
    ISOs ā€“ Incentive Stock Options

    With a non-qualified type, taxes are taken from your gains after you exercise the options. However, keeping too much company stock is considered risky. For example, if the company has financial problems, your future financial security could be in danger.

    When long-term investors want to invest in a stock, they usually buy the stock at the current market price and pay full price for the stock. An alternative is to use stock options. Buying them allows you to leverage your purchases. Far more than is possible in even a margined stock purchase. In several investment situations, it might make sense to invest in stock options. Hence, rather than the underlying stock. Note, Ā the basic fact of stock options trading. You are highly leveraging your investment. And it means your investment risk is also substantially increased.