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  • What causes cryptocurrencies to plunge these two days? Is it temporary?

    What causes cryptocurrencies to plunge these two days? Is it temporary?

    2 min read

    What causes cryptocurrencies to plunge these two days? Is it temporary?

    Cryptocurrencies plunge in the past two days. Financial markets around the world saw big declines over Thursday and Friday. Over $6 billion of value was wiped off global cryptocurrency markets in 24 hours led by XRP and ethereum as prices of digital coins continued to fall.

    According to Coinmarketcap.com, the entire market capitalization or value of cryptocurrencies had plunged $6.72 billion in 24 hours as of about 11:32 a.m. HK/SIN time on Friday.

    On Thursday it was noticed that something is happening. A sharp sell-off across the board erased billions of dollars of value in a matter of hours.

    The cryptocurrencies plunge was led by XRP, which was trading at around 39.13 cents at 11.32 a.m. HK/SIN time, marking a 7.9 percent drop from the day before. It fell as low as 37.89 cents. Ethereum also fell to around $191.07, dropping 7.4 percent from the day before.

    But, bitcoin largely stabilized at around $6,278.61, falling just under 0.8 percent on the day.

    What happened?

    Bithumb, currently the largest cryptocurrency exchange in South Korea by trading volume, confirmed it has sold more than 38 percent of its total ownership to a blockchain consortium based in Singapore, for 400 billion won, or $350 million.

    According to CoinDesk Korea, Bithumb confirmed the deal was signed on Oct. 11 with BK Global Consortium. It is a blockchain investment firm formed by BK Global, a plastic surgery medical group in Singapore.

    Could it jeopardize the value of other cryptos?

    Well, we should consider other reasons for cryptocurrencies plunge too.

    Regulators across the world have been looking at how to deal with the growth of crypto assets with diverging views emerging. Countries like Switzerland and the United Arab Emirates are looking to become hubs for cryptocurrency businesses. While other nations like China have come down hard on the industry.

    The U.S. Securities and Exchange Commission (SEC) has expanded its crackdown on Initial Coin Offerings (ICOs), putting “hundreds” of projects at risk. This is according to a recent joint investigation by Yahoo Finance and Decrypt Media published Oct. 10. 

    The authors of the report, as the example, stressed that hundreds of crypto and blockchain startups that conducted token sales. They have eventually found that they had violated securities laws despite their endeavors to comply with regulations. 

    In response to SEC pressure, dozens of firms have reportedly “quietly agreed” to refund investors’ money and pay fines. Rather than attempt to reach legal compliance.

    A hearing before the US Senate Banking Committee is expected to feature heavy criticism of the crypto sector.

    For optimistic novices, those pitfalls and flaws were often glossed over. But with the bear market, the hearing may further sour retail sentiment. Two different viewpoints on the topic of cryptocurrency collided before a group of U.S senators on Thursday.

    Economist Nouriel Roubini: “Crypto is the mother and father of all scams …blockchain is the most overhyped technology ever and is no better than a glorified database,” Roubini said in his opening statement.

    But Van Valkenburgh said the committee that while blockchain and cryptocurrencies are not perfect or even fully complete at present. But they are a significant step in improving the financial situation for many.:

    “Bitcoin is the world’s first globally accessible public money. Is it perfect? No. Neither was email when it was invented in 1972. Bitcoin’s not the best money on every margin. It’s not yet accepted everywhere. It’s not used often to quote prices and it’s not a stable store of value. But it is working, and the fact that it works without intermediaries is amazing.” said Van Valkenburgh.

    The relationship between Tether and Bitfinex has come out with some interesting developments over the past few days.

    After showing signs of trouble, Noble Bank halted its services for Bitfinex and Tether. This led to a potential loss of trust in the exchange and a stablecoin leading to funding withdrawals. The past month saw a half of the Bitcoin deposited in the Bitfinex cold wallet flowing out.  And an additional 100 million USDT leaving circulation. Someone tried to sell millions of USDT for dollars on Kraken, depressing the price to $0.98.

    The Bitcoin mining economy is also at a crossroads.

    Competition and farm building peaked in the first half of 2018. It is possible that miners will attempt to sell BTC to recoup costs. In the past days, peak hashing power has coincided with falling rewards for existing miners.

    One possible reason is that Bitmain has activated ASIC Boost for its mining rigs, making it more difficult for other miners to obtain rewards.

    Philip Nunn said on Twitter:

    “As of June 2018, over 80% of #Bitcoin mining is performed by six mining pools and five of those six pools are managed by individuals or organizations located in China.So this is really worrying. And $BTC maximalists must look at this as a huge threat. China controlling BTC”

    But there are some optimistic words:

    “I’m surprised people think bitcoin can never reach its old highs. We have to remember today that not even 50 million wallets that use crypto today, but there are four and a half billion Visa cards, so you know this is the early stage for crypto, I don’t think $12,000 will be a problem in the future,” Fundstrat’s Tom Lee told CNBC last week.

    It is true the top three cryptocurrencies by market capitalization: bitcoin, ethereum, and XRP are all notably off their record high prices. They were hit at the end of last year and the beginning of 2018.

    Bottom line

    Many people in the cryptosphere love to speculate on just how high the prices of their favorite cryptocurrencies may rise. We have to say that does not matter because the cryptocurrency market is incredibly volatile, so cryptocurrencies can plunge.

    Only time will tell us who predicted correctly if anyone!

    The most important value of cryptocurrencies and assets are the future of transactions and value storage. And Bitcoin is leading this revolution. But this doesn’t make it easy to guarantee a specific price down the road.

    Risk Disclosure (read carefully!)

  • Carry trade and how does it work?

    Carry trade and how does it work?

    What is carry trade and how does it work?
    How to capture the difference between the rates

    By Guy Avtalyon

    In this post, I’m gonna explain what is carry trade, how to trade this strategy, how to use it in Forex trading.

    Niels Bohr, the famous Danish physicist, once joked that “prediction is very difficult, especially about the future.” No words could better express the difficulties associated with exchange rate forecasting. As anyone involved in the business of currency forecasting can attest, it can be a humbling experience.

    ‘Having endeavored to forecast exchange rates for more than half a century, I have understandably developed significant humility about my ability in this area.’ said Alan Greenspan, former U.S. Federal Reserve chairman. Some may think writing about the fortunes of the stock market is tricky, but try to observe currencies. That’s the challenge.

    What is a carry trade strategy

    A carry trade is a trading strategy in which a trader borrows money at a low -interest rate to trade the asset that is possible to generate a higher return. This strategy is very popular in forex trading.
    This strategy counts on relative stability in asset prices. You know how an unfavorable exchange rate movement can easily wipe out the returns from the difference in the underlying interest rate.

    This motivates some people to describe the carry trade as similar to picking up pennies in front of a fast-moving car.

    What is the goal of the carry trade

    The goal of this strategy is to make a profit from the interest rate differential. Sometimes that difference can be large. So adding leverage can literally tremendously multiply profits.

    In currency trading, a carry trade is a strategy in which a low-yielding currency (one with a low-interest rate) is sold. And the funds raised are using to purchase a high-yielding currency. The purpose of this type of trade is to profit on the interest rate differential of the two currencies. In this strategy, traders use leverage to dramatically increase the profits earned through the carry trades.

    Up to 2007 many traders borrowed in Japanese yen or Swiss francs. They were actually taking advantage of very low-interest rates in Japan and Switzerland and used the borrowed money to take long positions in other currencies that were backed by high-interest rates. For example, the Australian and New Zealand dollars and South African Rand were that currencies.

    BTW, Japan has kept low-interest rates for quite a long time now. Australia and New Zealand have one of the highest interest rates in the developed world! In 2011 interest rates in Australia were as high as 4.5 percent!

    Economists theories

    Economists have developed a wide range of theories to explain how exchange rates are determined. Most studies conclude that for short- and medium-term horizons, up to perhaps a few years, a random walk characterizes exchange rate movements. But still better than most fundamentals-based exchange rate models. That studies find that models that work well in one period fail in others. They also find that models that work for one set of exchange rates fail to work for others.

    A strategy that has attracted a lot of interest among international investors is the so-called foreign exchange (FX) carry trade.

    FX carry trades entail going long a basket of high- yielding currencies and simultaneously going short a basket of low-yielding currencies. The empirical evidence suggests that the excess returns on this strategy have been fairly attractive.

    Yet, investors need to be mindful that carry trades are prone to crash when market conditions become volatile. Hence, investors need to overlay simple carry trade strategies with well- thought- out risk management systems to help protect against downside risks.

    How does a carry trade work in Forex?

    Let’s assume that you went long on AUDJPY and kept the position open overnight until the next day. Basically you are buying AUD and selling JPY.

    What happens the next day is that your forex broker will either debit or credit you the overnight interest rate differential between the two currencies. This rolling over of your current position is the carry trade.

    Say, if the interest rate earned on AUD is 4.00% and JPY is 0.10%. Your profit from the interest rate differential is 3.9% per year! This is considered a positive carry trade. But there is also s negative carry trade. It happens when you, for example, buy JPY and sell AUD. So, you could end up with a negative interest rate differential.

    This example is based on 1:1 leverage and assumes exchange rates remain constant for the whole year. Try to imagine applying leverage.

    In the example above, if you had the leverage of 100:1, your return would now be 100 x 3.9% = 390% on just the interest rate differential!

    When are carry trades successful?

    We are still on the example of  AUDJPY. If the central bank in Australia were to raise interest rates, then you would make even more gains. Therefore, you have to be mindful of the economic conditions in Australia. If the Reserve Bank of Australia is optimistic about the economy, then they will likely raise rates.

    But, if the economy is slow and the RBA believes it needs to lower rates to stimulate the economy, then the AUDJPY as a carry trade would not be that successful. Meanwhile, if the AUDJPY exchange rate moved higher, in addition to higher interest rates, your long position on the pair would gain even more!

    What is a Law of one price in a carry trading

    The principle of “uncovered interest rate parity” states that the exchange rate of any two currencies should adjust in a way to exclude any chance of making a profit from an interest rate differential.

    Furthermore, the Law of One Price states that the real carry cost of an asset should be the same in each country, meaning doesn’t matter from where you’re trading forex.

    Carry trades can be greatly tough. Because the FX element of a cross-currency carry trade requires selling the low-interest-rate currency. But also, buying the high-interest-rate currency. In the core of the carry is the intention to make the exchange rate of the low-interest-rate currency fall relative to the other. If carry trades are enough large in volume they can remove any trend for exchange rates to equalize. That is exactly what generates profits in the longer run.

    This directs us to believe that carry trades work best when risk aversion is low and investors are willing to invest in high yielding (risk) currencies.

    You might be interested to find Leading Stock Exchanges In The World

     

  • Is Privacy Concern Behind Google+ Shutdown?

    Is Privacy Concern Behind Google+ Shutdown?

    Is Privacy Concern Behind Google+ Shutdown?

    By Guy Avtalyon

    This has already happened to social network users. Private data, which they thought were only private, became public.

    What happened with Google+?

    Google potentially exposed the private data of hundreds of thousands of users of the Google+ social network. But they opted not to disclose the issue this past spring. It was because of fears that doing so would draw regulatory scrutiny and cause reputational damage.

    On Monday the Alphabet Inc. unit announced a sweeping set of data privacy measures that include permanently shutting down all consumer functionality of Google+. This is one of Google’s biggest failures and the final nail in the coffin of a product that was launched in 2011 to challenge Facebook Inc.

    A problem appeared

    A software glitch in the social network site gave outside developers potential access to private Google+ profile data between 2015 and March 2018.

    When internal investigators discovered the problem, allegedly they fixed it.

    According to some reports, a memo prepared by Google’s legal and policy staff and shared with senior executives warned that disclosing the incident would likely trigger “immediate regulatory interest” and invite comparisons to Facebook’s leak of user information to data firm Cambridge Analytica.

    Chief Executive Sundar Pichai was briefed on the plan not to notify users after an internal committee had reached that decision.

    Google is down

    In its announcement on Monday the 8th of October, the company said it is curtailing the access it gives outside developers to user data on Android smartphones and Gmail.

    This incident, which hasn’t been previously reported, shows an attempt to avoid public supervision of how Google+ handles user information. We are living in a time when regulators and consumer privacy groups are in charge to hold tech giants accountable for the vast power they wield over the personal data of billions of people.

    “Whenever user data may have been affected, we go beyond our legal requirements and apply several criteria focused on our users in determining whether to provide notice,” a Google spokesman said in a statement. The company considered “whether we could accurately identify the users to inform, whether there was any evidence of misuse and whether there were any actions a developer or user could take in response,” he said: “None of these thresholds were met here.”

    Allegedly truth is that the company has no evidence that any outside developers put to wrong use the data but acknowledges it has no way of knowing for sure. The profile data that was exposed didn’t include phone numbers, email messages, timeline posts, direct messages or any other type of communication data, but everything else was there, front and center in front of third-party eyes, full names, email addresses, birth dates, gender, profile photos, places lived occupation and relationship status. Information users may not want available to a third party.

    Google’s user data is available to outside developers through public channels, application programming interfaces, or APIs. These tools require a user’s permission to access any information, but they can be abused by app developers to gain access to sensitive personal data.

    Google inside

    Inside Google is formed task force named Project Strobe. The task for more than 100 engineers, product managers, and lawyers, is to conduct a companywide audit of the company’s APIs.

    The silver lining in this situation may be that similar potential data breaches will not be happening in the feature. As the destiny of Google+ social network is to join another shutdown Google service, such as the Wave, over the coming 10-months wind-down period.

    The moral of this

    But the moral of this, yet another of this kind, story is that the developers of the social networks are entrusted with large amounts of personal and sensitive data of their customers.  And as such should put more effort into protecting them.

    Otherwise, out of concern for both privacy and security, many customers may decide that avoiding the nefarious actions of some potential criminals is more important than any benefit the services of the social network provides.

    The decision which may very well hurt the bottom line or market capitalization of any social network developer more than any potential detrimental regulatory decision or penalty.

  • Bitcoin goes high – How Much?

    Bitcoin goes high – How Much?

    2 min read

    Bitcoin goes high - How much?

    Bitcoin is the future, Fiat is past! 

    Why not start with these words? Popular VC Tim Draper said it. And we all know how good he is in his predictions. In 2014 with bitcoin at only $413, popular VC, Tim Draper predicted bitcoin to reach $10,000 in three years. This was fulfilled a month earlier. This prediction brought him a great reputation among crypto fans and followers. He also predicts a $100k Bitcoin in 2018, not categorically but anyway.  

    Let assume this growth happens at the same tempo as the 3-year journey to $10k.  But that’s precisely how Draper feels about Bitcoin prospects and he understands a lot about bitcoin’s foundation.

    WOW, then we’re in for six digits.

    Many of the investors are actually currently worried due to the high volatility in cryptocurrencies.

    Is there any reason for that?

    A cryptocurrency portfolio manager  Jeet Singh, stated at World Economic Forum in Davos, that the current volatility is completely normal when it comes to the cryptocurrencies field. He stated that it is normal for cryptocurrencies to fluctuate by 70% to 80% and that is the main reason why the current volatility does not worry him at all.

    Is there a fear of volatility?

    But, according to him, long-term investors need not fear the volatility at all. Because they are here to stay for a longer period of time, they would not have a problem to hold the cryptocurrencies for a longer period of time.

    Jeet Singh compared cryptocurrencies with current leading companies like Microsoft and Apple. In the beginning, their stocks were also volatile. But, as the companies develop their business model, the stocks not only rose but they become much more stable.

    Prediction 

    He further added that Bitcoin would reach as high as $ 50,000 this year. That means,  If the current price of Bitcoin being around just $ 10,000, that would be a fivefold increase once again.

    What is really happening on the markets?

    The world’s largest crypto brokerage Coinbase is reportedly close to finalizing a $500 million funding round at a valuation of $8 billion. And Binance has started to become more active in the investment sector, funding blockchain startups internationally.

    While major cryptocurrency exchanges like Coinbase, Binance, and BitMEX are seeing their businesses flourish with lucrative business models and high-profit margins, minor exchanges are struggling in the bear market.

    Bear market

    This week, the UK’s oldest exchange, Coinfloor, has slashed the number of its employees. After recording a decline in its revenues as a consequence of the drop in the daily trading volume of major cryptocurrencies.

    Also, the emergence of many cryptocurrency exchanges in the local market causes this.

    But Coinbase entered the local cryptocurrency exchange market of the UK. This has stagnated over the years due to the lack of infrastructure and user demand. It was eliminating exchange rates and appealing to local users that have been awaiting a reliable cryptocurrency exchange in the region.

     In South Korea, a cryptocurrency exchange backed by the country’s biggest commercial banks. Internet conglomerates, and technology corporations such as Upbit, Gopax, and Korbit have imposed dominance over the local market throughout the past two years.

    The fact that an exchange in the size of Coinfloor cannot sustain high-cost operations demonstrates that they need strong infrastructure and backing from major investors and conglomerates.

    On Monday, 8. October, practically all the top 100 cryptocurrencies are seeing reliable growth on the day.

    Ups and Downs 

    Bitcoin (BTC) has seen a strong boost, by press time growing almost 2 percent on the day to trade solidly above the $6,600 mark at $6,664.

    The breakthrough to a higher price point comes after several days of sideways trading. One crypto trader joked just a few days before, he said that bitcoin decided to be the ultimate stablecoin.

    That same day, a Bloomberg pointed up the top coin’s marked price stability, proclaiming that Bitcoin had “hit an inflection point with volatility at a 17-month low.” The flipside to such steadiness, the Bloomberg noted, is lower trading volumes, due to lower “speculative involvement.”

    On its weekly chart, Bitcoin is now just over one percent in the green, with monthly growth a strong 8 percent.
    Ethereum is around 0.6 percent in the red; monthly growth is close to 17 percent.

    Ripple had however tapered off throughout most of early October: the token remains a stark 14.5 percent in the red on its weekly chart. But on the monthly base, its gains are, an astonishing almost 70 percent.

    About other

    The remaining top ten coins on CoinMarketCap are all in the green, almost all-seeing between 2 and 4 percent growth: Cardano (ADA) is uprising almost 5%. Firmly in the green: EOS (EOS) is up close to 4 percent on the day at $5.92, Stellar (XLM) and Litecoin (LTC) both up just over 2 percent.

    Most of the investors are keeping away from the cryptocurrency boom for now. Many of them are just holding their holdings in order to find out whether the cryptocurrencies resume their uptrend or not.

    We may say it is still too doubtful for most of the investors to take a call.

    But the fact is, institutions are increasing their presence in the cryptocurrencies field. That would add value and credibility to the cryptocurrencies in the future. That’s why we can’t see further falling. The main point is that regulatory hurdles have to be sorted.

    After that, we all can be sure that the value of cryptocurrencies would again more.

    Risk Disclosure (read carefully!)

  • THE BUSINESS OF TACKLING CLIMATE CHANGE

    THE BUSINESS OF TACKLING CLIMATE CHANGE

    1 min read

    THE BUSINESS OF TACKLING CLIMATE CHANGE

    CLIMATE CHANGE IS ONE OF THE BIGGEST, IF NOT THE BIGGEST, ISSUES FACING THE PLANET TODAY. ITS SYMPTOMS ARE NUMEROUS AND CATASTROPHIC, AFFECTING PEOPLE – DISPROPORTIONATELY THOSE IN THE DEVELOPING WORLD, ANIMALS, AND ECOSYSTEMS. INCREASINGLY BUSINESSES SEE SUSTAINABILITY AS A COMMERCIAL IMPERATIVE, LINKED TO THEIR FUTURE SUCCESS. HOWEVER, MORE TRULY GREEN-MINDED BUSINESSES ARE NEEDED – BUSINESSES THAT ARE SUCCESSFUL BECAUSE OF THEIR GREEN IDEAS RATHER THAN IN SPITE OF THEM.

    The idea of Postcode Lottery Green Challenge was sparked from a comment made at the Postcode Lottery World Meeting in the Netherlands in 2006. Former President Bill Clinton spoke about the importance of supporting entrepreneurs who are battling against climate change. This stuck with the team here. Our Postcode Lotteries were already making ordinary people winners while providing much-needed income to charities and good causes in our home countries and around the world, but what about start-ups and entrepreneurs? Could we support these innovators throughout the world and their ideas to make it better? With those questions in mind, the Postcode Lottery Green Challenge was born. Worldwide competition for people with carbon emission-reducing ideas who need the funds and support to get their ideas off the ground.

    Now in its 12th year, Postcode Lottery Green Challenge is an international sustainable entrepreneurship competition. There is combined prize money of €1 million for the five best start-ups, of which the winner receives €500,000, to develop their businesses. As chair of the preliminary jury for this year’s challenge, I’ve had the pleasure of gaining an understanding of the 845 environmentally-minded start-ups that applied this year, as well as getting to know the entrepreneurs that have previously been successful.

    What is very clear to me is that it is not only about having the most revolutionary idea or finding a gap in the market, it’s about feasibility and scalability. A low-tech application can make just as big a difference and bring about lasting change.

    London-based start-up bio-bean has grown rapidly since winning Postcode Lottery Green Challenge, thanks to taking a simple but novel idea and executing it well. Based on its premise that there is no such thing as waste, only resources in the wrong place, bio-bean transforms waste coffee grounds into biofuel and biochemicals. Having won the competition in 2014, it started large-scale operations in 2015 and launched its first product in 2016, when the team also grew to over 40 people and research and development was broadened. This is a company that considers both environmental and financial sustainability as integral components to a business and has seen considerable success because of that.

    This year, another British start-up, LettUs Grow, has made it to the final of the global competition, which means it has won at least €100,000 which could be upped to the main prize of €500,000 if it wins. The team at LettUs Grow have designed an efficient irrigation and control technology for indoor farms using soil-free, aeroponic technology where the plant roots are suspended in a nutrient-dense mist. This will improve ‘vertical farming’ in cities; delivering higher crop yields and reducing production costs, as well as meaning we don’t need to follow our taste buds around the globe – it can be grown at the point of consumption. Their plan was to make a product which would allow people to grow their own salad from their kitchen, and it has developed from there.

    The other finalists include, The Great Bubble Barrier from the Netherlands, which has created an air bubble curtain to stop plastic from reaching the sea, the American start-up AlgiKnit, which makes fibres from kelp to transform the highly polluting textile industry into a circular economy, Estonian company Reverse Resources, which has developed a software platform for the clothing industry’s recycling process, and also from the Netherlands, AquaBattery, which has developed a sustainable energy storage system.

    Ideas such as these are the ones that are really going to change the world. Within our current society, individual actions are important and add up, but we need commercial options that will benefit people as well as the planet if we really want to move forward – it’s an exciting time for business.

    Read more HERE

    The original article was published on  https://www.markemlickprivateequity.com

    Risk Disclosure (read carefully!)

  • Profitable Forex Trading By Using Two Approaches

    Profitable Forex Trading By Using Two Approaches

    Profitable Forex Trading By Using Two Approaches
    Forex is short for foreign exchange, but the actual asset class we are referring to is currencies.

    By Guy Avtalyon


    If you want to be a profitable forex trader and have profitable forex trading, you have to follow some rules. You have to either win more often than you lose. The must is to win more on each trade than you lose.

    Or better yet; do both.

    Doing both is truly the hallmark of a professional trader. It can be very tricky though. As you are a new trader, it is probably best to focus on one approach. See where you can go from there.

    I want to show you the ins and outs of each approach and help you decide which method suits you the best.

    What is the relationship between the win rate and reward ratio in forex trading?

    Before everything, you have to understand the relationship between a trader’s win rate, their reward ratio, and profitability. Assuming a trader risks an average of 10 pips on a trade to make 10 pips of profit. They will need to get 50% of their trades right in order to breakeven. Only if they win more than 50% of their trades, then we can speak about profitable forex trading.

    What happens if you risk 10 pips to make 20?

    You are trader forex trading with a positive reward ratio and therefore you will not have to win as many trades to breakeven or turn a profit. The opposite is true for a trader who trades with a negative reward ratio e.g. risks 10 pips to make 5. Such a trader will have to win more than 50% of their trades to breakeven and even more to turn a profit. There is an inverse relationship between a trader’s win rate and reward ratio. The larger your reward ratio, the fewer trades you have to win, and the more trades you win, the less you need to win on each trade.

    What is profitable forex trading?

    Forex trading with a positive reward ratio is a good place to start as a beginner. Why?

    Because chances are if you are just starting out, you don’t quite yet have a talent for accurately predicting markets. Say your goal is to make twice as much as you are risking on a winning trade.  We have to do some math. If you have such a goal, then your breakeven rate drops all the way down from 50% to 33% and any wins above 33% are pure profit.

    If you aim for 3 units of risk (3R) on a profitable trade, your breakeven requirement drops even further to 25%.

    This advice is offered by market makers with educational background. This advice is reliable, but what they ignore to tell new traders is that it’s actually harder to make 2 x risk (2R) than it is to make 1 x risk (1R). Anyway, this approach is still a great place to start as a new trader, we just believe in an open and honest approach to forex education.

    What is forex trading with a positive win rate?

    Trying to score profitability via a positive win rate isn’t the best idea for new traders, because you are not yet experienced enough to get the market right more than half the time. Aiming for one unit of risk in profit has a higher chance of success than aiming for two. The other option is trading with a negative reward ratio, such as aiming for less than a single unit of risk on a profitable trade.

    But there is the problem with trading forex with a negative reward ratio: the more your reward ratio drops, the more trades you need to win to turn a profit. If for example, you only aim for half a unit of risk on a winning trade, your breakeven rate rises from 50% all the way up to 66.67%. Then again, there is a higher probability of profitable forex trading and success on trades with negative reward ratios.

    Automated systems and forex signals

    When looking at automated systems and forex signals, you often see systems that appear great because they are forex trading with extreme negative reward ratios. These systems will risk a hundred pips or more in order to make 5-10 pips. This can work for a long time, but eventually, volatility picks up and the stop losses start getting hit. Every stop-loss that triggers wipes out a bunch of winning trades and you start seeing sharp declines in the system’s equity curve. The characteristic of these systems is win rates above 90%. If you see a system with a win rate that high, look a little deeper. You’ll like to examine how exactly this unbelievable win rate happens.

    Currency is known as an “active trader” opportunity. This type of opportunity suits brokers. That means they earn more due to the agility that accompanies active trading but it is also promoted as leveraged trading. Hence it is easier for a forex trader to open an account with a little money than it is required for trading stocks.

    How to use forex trading as a hedge

    You can use currency trading to hedge your stock portfolio too.

    For instance, if some trader builds a stock portfolio in a country where there is potential for the stock to increase in value. But there is a downside risk in terms of the currency. For example, you might own the stock portfolio and short the dollar against another currency such as the Swiss franc or euro.

    This means, the portfolio value will increase, and the negative effect of the declining dollar will be neutralized. This is good for those investors outside the U.S. who will eventually repatriate profits back to their own currencies.
    With this profile in mind, this suits the best day trading or swing trading.

    The other strategy of trading currencies is to understand the fundamentals and long-term benefits.

    It is useful to a trader when a currency is trending in a specific direction. That means it offers a positive interest differential. Hence, it provides a return on the investment plus an appreciation in currency value.

    This forex trading strategy is a “carry trade.”

    Good timing is the essence of profitable trading. In both cases, as in all other trading activities, the trader must know their own personal attributes. In order not to violate good trading habits with bad and impulsive behavior patterns.

  • Alternative Investments Role in Diversified Investment

    Alternative Investments Role in Diversified Investment

    What is The Role of Alternative Investments in Diversified Investment
    Investors should pay attention to several issues when adding alternatives to their investment strategy.

    By Guy Avtalyon

    Alternative investments, which have been used by large institutions and foundations for quite some time, have become more mainstream in the last years. They are more popular among individual investors. Also, there are more available products, which makes investing in alternatives possible for an increasing number of investors.

    Alternative investments are a non-traditional approach to investing. They give the ability to invest in sectors and access to assets that traditional investments cannot provide. Investors should understand alternative investments as the potential to improve the overall risk-return ratio of your portfolio. Even a small allocation to alternatives may be reasonable and profitable now for more investors. Previously it wasn’t the case.

    However, the non-traditional approach and structure of these investments bring with them unique risks of which investors must be aware of.

    Alternative investments have a different approach

    Alternative investments use a different approach to investing than do traditional equity or fixed-income investments.
    This approach may require holding both long and short positions in securities. Also, it may require to hold private securities instead of publicly-traded investments. And there may be derivatives or hedging strategies as well. Also, investors that use alternatives have a goal to achieve a distinct level of total return. The other investors’ goal is the opposite, they usually pay more attention to relative performance versus an index.
    Alternative investments have the potential to magnify the risk but also returns of an investment portfolio. They can possibly improve diversification and reduce risk. This approach is more flexible, investors have a chance to invest in a more extensive set of investments, so the possibility of enhancing returns is obvious.

    Different risk

    Alternative investments have risks different from traditional investments. They are less liquid, especially in periods of high pressure in the markets. Also, they are more complex and less transparent. These characteristics make it difficult for inexperienced investors to understand and they are more subject to investment manager failure.

    The successful implementation of an alternative investment strategy relies largely on the investment manager’s experience and skill because of the wide range of investment opportunities.

    Satellite asset classes as Alternative Investments

    Satelite asset classes are very suitable for portfolio diversification. They cover everything that traditional investors and funds managers don’t even think about. They are more interested and specialized in asset classes such as real estate, commodities, any that can give high-yield fixed income. Satellites are non-traditional and have a low correlation with traditional assets. But their performances are driven by exposure which represents the similarity with traditional investments.

    Types of Alternative Investments

    We highlight several types of alternative investments but this list is more illustrative than exhaustive because new approaches are constantly being developed.

    Private equity

    Private equity is an investment strategy. Its goal is to take part in the growth of the private company. Hence, this strategy is long-term investments all in private securities generally and globally.
    Private equity investment strategy covers illiquid asset classes with potentially greater long-term capital appreciation. The diversification doesn’t include public markets.
    Only to higher-net-worth individuals use this strategy because it requires more investment experience, hence they are often accredited investor at high minimums and often has liquidity restrictions.

    Hedge funds

    The hedge funds are an alternative investment. They are designed to protect investment portfolios from market changes, so they will generate positive returns no matter if the markets are up or down.
    They could protect the investment from market risk by adding alternative investments to the portfolios to decrease loss and protect capital.
    The term “absolute return” is broadly used in connection with hedge funds. This explains how investment strategies are created to generate returns in any market condition. Actually, these funds are “hedging” the markets.

    Managed Futures

    An investment strategy that seeks to participate in trends in a large variety of global futures markets. Strategies include the use of the stock index, interest rate, currency, energy, and commodity futures. Many managed futures traders apply sophisticated software designed to invest in a disciplined, unemotional fashion, which often results in a lower correlation with traditional assets.

    Alternative investments – mutual funds

    These funds are not forced by traditional portfolio management systems. They have varying approaches, ranging from the absolute return, long/short equity, a broad mandate, or “go-anywhere” funds, and hedge fund-like strategies. Many of these funds also have a total return or an absolute return objective. They provide access to non-traditional investment. But they also provide investors daily liquidity at fair investment minimum.
    Alternative investments can be useful tools to improve the risk-return of an investment portfolio. They can increase diversification and reduce volatility, given low correlations to more traditional investments.

    Risks of Alternative Investments

    • Higher fees.  – Alternative investments can have higher fees. They may also charge additional management fees. While higher than traditional investments, these fees may or may not be excused when comparing returns net of fees.
    • More complicated.  – Alternative managers invest in a broad variety of investments, such as derivatives, and can use short selling. Understanding that can be difficult for many investors.
    • Less transparent.  – There can be limited to the underlying holdings of these investments. They use many tools that are not always the best choice for alternative investments. That makes a manager’s investment ability more difficult to assess. Also, some alternative investments are largely unregulated.
    • Less liquid. – This is due to holding illiquid investments that can restrict the investor’s ability to offset money invested. For example, some hedge funds do not allow redemptions over the first year of investing. Most of them will allow annual or quarterly redemptions. Moreover, private equity may not allow redemptions for more than seven years. Here is also exposure to a notable lack of liquidity in some trading environments.
    • Less tax-friendly. – Most alternative investment strategies aren’t focused on minimizing taxes.
    • May disappoint in strong up markets. – They use short sellings to generate absolute returns. That may deter some investors.
    • May not diversify risk in extreme down markets. – During the dislocation, the relationships of many different types of investments may increase notably. Investors hold that the more profits of alternatives is connected to the added risk.

    Is this suitable for every investor?

    Alternative investments can potentially magnify the overall risk-return of an investment portfolio. There are benefits but also risks in these non-traditional investment strategies. The most important is that investors have to be comfortable with alternatives when adding them to their investment strategy.
    It is important also to discuss alternative investments with a respectable financial advisor. If you choose this strategy you’ll first need to determine how suitable it is in relation to your current investment approach.

  • BANK OF CENTRAL BANKS WANTS TO STOP CREATION OF CRYPTO

    BANK OF CENTRAL BANKS WANTS TO STOP CREATION OF CRYPTO

    3 min read

    When Is The Right Time To Invest In Crypto?

    The rise of Bitcoin and the blockchain industry has been accompanied by criticism, just like any other emerging tech sector. Such criticism was heard during the dawn of the internet, and despite it, the internet is still alive and well today. Industry experts have offered different hot takes on the nature of cryptocurrency in general, calling it everything from a bubble to a Ponzi scheme.

    The latest well-known figure to criticize the cryptocurrency industry, however, is AgustĂ­n Carstens, head of the Bank for International Settlements, also known as the central bank for all central banks.

    BANK OF CENTRAL BANKS WANTS TO STOP CREATION OF CRYPTO

    According to Carstens in a recent interview, young people should stop trying to create money in the form of cryptocurrency.

    The Bank for International Settlements’ opinion on cryptocurrency may not gain any traction within the community because things have been improving for cryptocurrency. Banks and large corporations have been warming up to blockchain, the underpinning technology of most cryptocurrencies.

    Corporations like IBM have developed enterprise platforms and partnered with cryptocurrency platforms like Stellar to provide blockchain-based payment solutions. Several significant partnerships have also been made between cryptocurrency platforms and banks. Even with the fear of fraud and theft, banks realize that there is profit to be made from the industry and if their customers decide to trade, they may have no choice but to cooperate.

    During the interview, Agustín Carstens was asked if cryptocurrencies can be described as money. He replied by explicitly stating that cryptocurrencies are not money, rather they are a type of asset that can be invested in. By Carstens’ description, these digital assets can’t assume the functionality of money in the economy due to the way they are created.

    Mostly, cryptocurrencies are produced by a group of people who have either been appointed, elected or allowed to secure the network and receive new cryptocurrency in the form of block rewards. The most incentivized people in a cryptocurrency community are its miners. They make a profit when they create new assets and, in turn, deliver the needed security for the network.

    Carstens has stated that this is a bad model for money and simply does not maximize its usefulness. Money is supposed to be a great store of value, means of payment and unit of account. However, so far, digital assets like cryptocurrency have proven to fail badly at all three things.

    As for the hype surrounding the industry at the moment, mostly due to the peak prices achieved by major cryptocurrencies in 2017, Carstens believes that it is only happening as a result of the knowledge that a lot of money can be made on cryptocurrencies in a short period. He also called crypto assets a Ponzi scheme, bubble and environmental disaster due to the infrastructure needed to keep some of their networks running securely.

    Carstens alluded to the fact that he is sure that cryptocurrency will not have a happy ending. He compared digital assets to the renowned National Bank electronic payment system of Switzerland saying that cryptocurrencies may never exhibit that level of efficiency and trust.

    Central banks, on the other hand, have exhibited that level of trust, which is built on several years of efficient service, a level which Carstens is sure that digital asset networks will never achieve. This is why he believes that young people should be more focused on innovation and creative solutions to problems instead of trying to re-invent money.

    This is not the first time that Carstens has openly criticized Bitcoin and the cryptocurrency industry. In fact, he gave a talk on the topic at the Goethe University in Germany in early 2018, stating that central banks must work hard to stop the rise of cryptocurrency. This would ensure that the technology does not meddle with the finance industry and affect the financial stability of various world economies.

    He also spoke about the difficulties associated with working with Distributed Ledger Technologies (DLT) in central banks, including the lack of efficiency, the expensive costs, and the slow speeds. Prior to this, Mario Draghi, president of the European Central Bank, expressed his own opinion on cryptocurrencies calling them risky assets. He also stated that the European Central Bank is continuously working to identify threats and dangers that cryptocurrency may pose so that they are mitigated before any harm can be done.

    In addition to this, Carstens based the enthusiasm within the cryptocurrency industry on speculative mania and their use for illegal transactions. According to the BIS head, authorities are getting closer to finding ways to control and prevent the risks associated with digital asset use, stating that it is alarming that several banks have come up with bitcoin ATM’s where BTC can easily be bought or sold, an easy alternative to a Bitcoin exchange.

    As long as the most prominent use case for cryptocurrencies lies in illegal payments, central banks cannot merge the technology with that of the banking sector, to avoid financial disaster. This is similar to the opinion shared by the U.S. Secret Service concerning the provision of regulations for cryptocurrencies, especially those that provide anonymity to users. These coins are usually misused for illegal transactions and present issues when tracing such payments.

    The BIS has taken this stance on the industry for a long time. In February 2018, they highlighted issues with the scalability model of cryptocurrencies, stating that those with more users and a more extensive network are more likely to break down before others. Again, the bank warned the public to avoid making any risky decisions concerning their investments within the space.

    According to the BIS annual report, due to the fragility, lack of stability and lack of scalability, trust can easily disappear from the network and its capabilities. Such networks are also subject to regular congestion as they grow larger. One example is the Ethereum network congestion that occurred subsequent to the launch of Cryptokitties. Other issues addressed include transaction fees and limits.

    FINAL THOUGHTS

    Many have argued that banks make money and are taking a hypocritical stand by telling others not to. The warning by Carstens will most likely not be taken seriously in light of the continuous flood of investors into the cryptocurrency space. Despite the volatility within the industry, cryptocurrency has come to be recognized as a way to invest and make a lot of money. As a result, demand for digital assets has increased over time and will continue to lead to an increase in supply, not the opposite scenario that Carstens is proposing.

    Despite the bold statements by Carstens, the cryptocurrency industry has seen improvement in the number of projects, investors and the amount of money raised through crowdfunding. Apart from the statements that tell young people to stop trying to make money, he raised some relevant points including the insecurity and expenses associated with running such networks. Another problem lies in the lack of stringent regulations within the industry to govern its many investment and trade practices.

    Carstens continues to be outspoken about the Bank of International Settlements lack of support for cryptocurrency as a whole. Other experts in various financial and technological fields also continue to show mixed opinions on the subject.

    However, the recurring themes are rooted in regulation, theft, illegal activities and profits. Hopefully, cryptocurrency will get to a middle ground that makes security provision for users, regulators, like central banks and even law enforcement, easier.

    The original article was published https://www.markemlickprivateequity.com/

    Risk Disclosure (read carefully!)

  • What is Diversified Investment

    What is Diversified Investment

    2 min read

    What is Diversified Investment

    Nothing more represents the term diversified investment than proverb “Don’t put all your eggs in one basket.” Instead, invest in many baskets and hold a substantially diversified portfolio based on your long-term asset allocation strategy.

    A diversified investment is exactly that.

    A diversified investment represents a portfolio of various assets that earn the highest return for the smallest risk. This kind of portfolio has a mixture of stocks, fixed income, and commodities. These assets react differently to the same economic occasions and because of that, diversification works. With diversified funds, you can access financial markets while spreading your investments across several asset classes and geographic regions. In this way, you reduce the impact of market fluctuations while maintaining an attractive potential performance.

    In a diversified portfolio, the assets don’t match each other. When one rises, the other falls. It drops down overall risk because some asset classes will benefit, no matter what the economy does. They equalize any losses of the other assets. There is also less risk because it’s difficult the entire portfolio would be destroyed by any single event. A diversified portfolio is the best protection against a financial crisis.

    How does Diversification work?

    Stocks do well when the economy grows. Investors want the highest returns, so they bid up to the price of stocks. They are willing to accept a greater risk because they are optimistic about the future.

    Bonds do well when the economy slows.

    Investors are more interested in protecting their holdings. They are willing to accept lower returns for that reduction of risk.

    What is Diversified Investment 1
    The prices of commodities vary with supply and demand. Commodities include wheat, oil, and gold. For example, wheat prices would rise if there is a drought that limits supply. Oil prices would fall if there is additional supply. As a result, commodities don’t follow the phases of the business cycle as closely as stocks and bonds.

    Diversification typically has low correlations to, or do not move in lockstep with, more traditional asset classes. As such, their inclusion in an investment portfolio tends to result in lower overall volatility.  Because they have a wider universe in which to invest (public and private) and do not have some of the same investment constraints (can short and hedge), alternative investments have the potential for higher long-term performance than traditional investments.

    Investing in diversified funds can, therefore, be an effective tool to:

    • Seek growth in your savings with a medium-term outlook and moderate risk
    • Benefit from exposure to several markets (equity, bonds) that is adjusted to match current conditions in order to both take advantage of market rallies and cushion against the impact of declines
    • Manage your portfolio simply with access to turnkey management: the manager adjusts the make-up of your portfolio over time.

    Where can you execute the diversified portfolio?

    A diversified portfolio should contain securities from the following six asset classes.

    Stocks. Different sized companies should be included. Company size is measured by its market capitalization. Therefore, include small-cap, mid-cap, and large-cap in any portfolio.

    Fixed income. The safest are savings bonds. These are guaranteed by the government. Municipal bonds are also very safe. You can also buy short-term bond funds and money market funds that invest in these safe securities. Corporate bonds provide a higher return with greater risk. The highest returns and risk come with junk bonds.

    Foreign stocks. These include companies from both developed and emerging markets. You can achieve greater diversification if you invest overseas. International investments can generate a higher return because emerging markets countries are growing faster. But they are riskier investments because these countries have fewer central bank safeguards in place, can be susceptible to political changes, and are less transparent.

    Foreign fixed income. These include both corporate and government issues. They provide protection from a currency decline. They are safer than foreign stocks.

    Commodities. This includes natural resources such as gold, oil, and real estate. Gold should be a part of any diversified investment because it’s the best hedge against a stock market crash. Research shows that gold prices rise dramatically for 15 days after the crash. This is why people invest in gold. Gold can be a good defense against inflation. It is also not correlated to assets such as stocks and bonds.

    Maybe you should include the equity in your home in your diversification strategy.

    If your equity goes up, you can sell other real estate investments in your portfolio. You might also consider to sell your home, take some profits, and move into a smaller house.
    What is Diversified Investment 2
    Most investment advisors don’t count the equity in your home as a real estate investment. They assume you will live there to the end of the time. They saw it as a consumable product, so that encouraged many homeowners to loan against the equity in their homes to buy consumable goods. When housing prices declined, they owed more than the house was worth. Many people walked away from their homes while others declared bankruptcy.

    Expected return

    Investors often focus too much on the expected return of their portfolio. While the expected return is important, you must also consider the amount of risk that you need to assume in order to achieve that expected return – the higher the expected return, the more risk you must take on to achieve it. When planning your investment strategy, it is important to be truthful with yourself in evaluating how much risk you can manage, and how long you are able to stay on the course through the ups and downs of the market rhythm. With other words, you should determine how much short-term volatility you are willing to accept.

    A little bit of history.

    An academic named Harry Markowitz introduced the research on what he called modern portfolio theory that people were able to understand diversification in an objective, mathematical sense. This research was so innovative and Markowitz earned a trip to Sweden to pick up a Nobel Prize.

    The bottom line

    In Shakespeare’s play, “The Merchant of Venice,” written more than 400 years ago, the character Antonio demonstrates his understanding of the concept. He says: “I thank my fortune for it – my ventures are not in one bottom trusted, nor to one place, nor is my whole estate upon the fortune of this present year.” That is a diversified investment.

    Risk Disclosure (read carefully!)