Category: How to Start Trading – Beginners

Investment prediction for 2019 – Traders Paradise prediction

The image is taken from depositphotos.com

By Guy Avtalyon

Investment prediction for 2019. is in front of you, so let’s start.

Investment prediction is a really tricky job. This year has been full of market volatility, climate disasters, personal data frauds, economic insecurity.

And now, in the end, we are waiting for a fresh start? Things never go in that direction. It looks that 2019 promises to be in a mess. That’s why Traders Paradise is trying to predict what will be real in the next year. And we find this, some other guys may find something different:

Bear market – is here

Nearly half the stocks in the S&P 500 index are in a bear market at the end of this year. They are down 20% from their highs.

The second-largest stock exchange in the world by market capitalization, NASDAQ, is officially in bear territory. If you don’t know yet how to trade- here’s our full guide.

All signs are pointing to more damage to the stocks.

Equity markets in more than 20 countries are in bear territory. Investors are worried about how bad it will be and how long it will last.

Bears are necessary and unavoidable cycles in markets and have been for centuries. But they are cruel. This will be a great theme in 2019. That is our investment prediction.

And each investor should be prepared and to diversify the portfolio.

Artificial Intelligence (AI)

One investment prediction, more.

Japanese tech company Groove X introduced a robot whose task is to make people happy. The “Lovot” uses artificial intelligence. It can mimic human empathy.

This cute robot represents the revolution of artificial intelligence. “Robot” can feel emotions and communicate with people. It is 3kg tall and 43cm tall, the optical camera helps it move. And can be our new friend for $5,300. Some cost us even more.

There’s a vertiginous line of AI applications on the table right now. We expect this term will be very popular in 2019 and the list will become larger.

Obviously you can find all sort of information on the internet about machine learning and AI, like these articles on Wikipedia for example, but the concept is quite simple: You run an algorithm (there are many) on the set of data, and once the algorithm is finished, the software will know how to run by itself on new sets of data, even if it’s never been seen.

There are 2 types of algorithm methods READ HERE

Socially Responsible Investing – Impact investing

Socially responsible, or ESG investing accounts for environmental, social, and governance factors. But does not necessarily result in worse performance. There are those that think ESG investing can outperform the markets, and there are those who strongly believe the contrary. There are specific examples that will back up both sides of the argument.

People are often asking us what is a social enterprise, and we are usually answering by asking “what is social investing?”. Sometimes the phrase is social impact investing; sometimes it just impacts investing.

Impact investing carries risk, that’s true. But also it generates great returns and impact. It is smart and moreover, profitable to invest in companies that actively have positive social or environmental influences. It is a step further than divesting from negative impacts. For example, allocate your investment portfolio away from fossil fuels. Instead, use your money to consciously tackle society’s challenges. And to make a financial return, of course.

Investors’ concerns

Investors sometimes ask how much return they will have to trade-off in order to make impact investments.

Firstly, there is no “impact see-saw”. Just because a business is creating a more positive impact, that does not mean they are creating a less financial return. Indeed, in many cases, because the impact is at the heart of the business model, the more impact they create, the more profit they make, and vice versa. Some research even suggested that impact-focused businesses are more sustainable and profitable in the long-term.

In any investment, there are different levels of risk and return and there are also different levels of impact. An impact investment may be riskier. It has high returns and high impact. Or, it could be less risky since it brings market-rate returns and significant social or environmental impact.

As with any investment, it depends on the business or the fund.

The statistic shows that 89% of investors making impact investments find these are meeting their return expectations, and 54% of investors are targeting market-rate or above market-rate returns.

There are many ways to get involved in impact investing. Crowdfunding has even helped retail investors, who have less risk capital, to get involved in this space.

Generally, our investment prediction that this kind of investment will be more popular in the next year.

Blockchain

Traders Paradise’s investment prediction is this will be one of the most popular terms in 2019.

Blockchain technology provides a way to make transactions and transfers online without the use of an intermediary. Instead of trusting a third party to keep the transaction history safe and accurate, blockchain technology lets you seal “pages” of transactions with a key code for security.

One of the most relevant reasons that many companies are adopting blockchain technology is efficiency. We can all realize how exchanges can become quicker. And simpler too, when they don’t have to go through a third party. It’s also beginning to move document authentication toward obsolescence, removing a step in the translational process.

How To Make Money With Blockchain Technology READ THIS TOO:

Blockchain technology can also make companies feel like their information is safer and more secure. In an age where hacking banks cannot always resist off attempts to attack people’s financial privacy. Therefore, blockchain technology is a way to feel a greater sense of control over transactions.

Short Selling

Many experienced investors think that short selling has an important part in the markets. It improves price discovery and rational capital allocation. At the same time, prevents financial bubbles and finding fraud.
Shorting is a trading strategy where traders are selling a borrowed stock with a belief that it will drop in value. So, they can buy it back later at a lower price. Academic research has shown the stocks of companies that complain about short-sellers tend to falter.

Investment prediction can be an ungrateful job

This term is already hot. Let’s show how much on the example of TESLA.

It is a stressful time to be an investor in Tesla, of course. On September 29th shares in the electric-car manufacturer soared by 17% after its boss, Elon Musk, settled fraud charges with America’s Securities and Exchange Commission (SEC). Just days later, on October 4th, a series of belligerent tweets by the firm ’s founder sent shares tumbling by more than 7%.

You might be interested Apple is charging its batteries with Tesla’s employees

The tweets in question were targeted at short-sellers, who aim to make money by selling borrowed shares and buying them back later at a lower price. With a quarter of its publicly traded shares lent out to facilitate short-sellers’ bets, Tesla is one of the most heavily shorted companies in America. Elon Musk has publicly feuded with short-sellers for years, calling them “haters”, “jerks” and “not super smart”. Research suggests that such insults are undeserved. Short-sellers are savvy investors who help to keep the market’s exuberance in check.

So, Traders Paradise believes that short-selling may continue in the next year. The bear market just started.

So, think about this investment prediction.

Unlike Amazon stock – which we truly believe will rise and get to new highs.

Our investment predictions are based on personal research and act as an observation about what we all can expect in the coming year. But we have to admit, nothing good. We hope we are wrong.

Anyway, we wish you a healthy, happy, and fruitful new year! You can have it!

30th December 2018
Market signal – HOW TO USE IT

1 min read

What is a market signal and how to use it?

The market signal is an unintentional or passive passage of information or indication between participants of a market.
For example, If a firm issues bonds it indirectly shows that it needs capital and also desires to retain control. Thus instead of equity capital, it prefers loan capital.

It is based on the technical indicators and usually is the sign for when to sell or buy a particular product.

It also brings the attention of users to the other options available, abnormal growth and short-term interests.

Using signals in volatile markets can help to point out opportunities to the investors and also will signal them if they disappear.

The market signal is indication or information passed passively or unintentionally between participants in a market.

For example, a firm issuing bond indirectly indicates that it needs capital. And that there are reasons for which it prefers loan capital over equity capital.

The reason can be the desire to retain control of the firm.

Every company doesn’t market in a static environment. The competitor and member of the outlet will make prediction and reaction to enterprises.

Their decisions process is a dynamic market mechanism. And based on rival actions or reactions.

The market signal is any activity of rival.

We want to understand rivals motive, intention and direct and indirect target news and competitive signals such as reduced price.

So, we have to understand the new product introduction and adopting new engineering technology.

The information delivers to the market mainly through the market signal.

If we identify, search, study and analyze the market signal, we take the strategic decision and contribute to analytical behavior trend. We also improve enterprise results.

For example, a well-reputed company can be judged by its income i.e. if its sales increases then its reputation in the market also increases.

Let’s take a look at the experts’ definition market signal.

In contract theory, signaling is the idea that one party (termed the agent) credibly conveys some information about itself to another party (the principal).

For example, examine Michael Spence’s job-market signaling model.

Potential employees send a signal about their ability level to the employer by acquiring education credentials.

The informational value of the credential comes from the fact that the employer believes the credential is positively correlated with having greater ability and difficult for low ability employees to obtain.

Thus the credential enables the employer to reliably distinguish low ability workers from high ability workers.

Signaling took root in the idea of asymmetric information, meaning a deviation from perfect information.

That says that in some economic transactions, inequalities in access to information upset the normal market for the exchange of goods and services.

Let’s suppose that two parties could get around the problem of asymmetric information.

How?

By having one party send a signal that would reveal some piece of relevant information to the other party.

That party would then interpret the signal and adjust her purchasing behavior accordingly. Usually by offering a higher price than if she had not received the signal.

There are, of course, many problems that these parties would immediately run into.

So we can say, the market signal is any action by a competitor that provides a direct or indirect indication of its intentions. Also, motives, goals, or internal situation.

A short note about George Lane (1921 – 2004).

He was a securities trader, author, educator, speaker, and technical analyst. Lane was part of a group of futures traders in Chicago.

He developed the stochastic oscillator (also known as “Lane’s stochastics”), which is one of the core indicators used today among technical analysts.

A March 2007 article quoted George Lane’s description of his famous indicator: “Stochastics measures the momentum of price.

If you visualize a rocket going up in the air – before it can turn down, it must slow down.

That’s the essence.

The market signal is developed by George Lane.

Momentum always changes direction before price.

This means as prices move down, the close of the day has a tendency to crowd the lower portion of the daily range.

Just before you get to the absolute price low, the market does not have as much push as it did. The closes no longer crowd the bottom of the daily range.

Therefore, Stochastics turns up at or before the final price low.

Lane was also President of Investment Educators Inc. in Watseka, Illinois. There he taught investors and financial professionals basic and advanced technical analysis methods.

He popularized the stochastic oscillator, a momentum indicator that uses support and resistance levels.

The term stochastic refers to the point of a current price in relation to its price range over a period of time.

This method attempts to predict price turning points by comparing the closing price of a security to its price range.

The 5-period stochastic oscillator in a daily timeframe is defined as follows:

%K = 100 * (Price – L5) / (H5 – L5)
%D = ((K1 + K2 + K3) / 3)

The H5 and L5 are the highest and lowest prices in the last 5 days respectively. While %D represents the 3-day moving average of %K (the last 3 values of %K).

Usually, this is a simple moving average, but can be an exponential moving average for a less standardized weighting for more recent values.

There is only one valid signal in working with %D alone — a divergence between %D and the analyzed security.

The market signal is an indicator that measures the relationship between an issue’s closing price and its price range over a predetermined period of time.

Risk Disclosure (read carefully!)

28th December 2018
The First Trade – How To Make It

2 min read

The first trade should be like a selection of a school.

You’ll need to decide on the kind of assets or securities you want to trade. After that, you’ll need to make is choosing the right broker or brokerage firm through which you’ll access the markets.

That’s very important because the broker you choose will have a direct influence on securities you’ll be able to trade. Also, on the tools, you’ll have at your disposal. On how much you’ll pay in fees. Hence, what final returns you can expect on your trades.

You have to find a broker that would charge relatively low fees and provide you with a full package of resources to make your trading experience easier.

And you have to choose the right strategy.

FEW WORDS ABOUT TRADING STRATEGIES

The main difference between trading and investments is that a trader seeks out market movements for profit.

On the other hand, an investor waits to profit from long-term price movements in the assets in their portfolio.

A trader will make tens or hundreds of trades within a week while an investor will buy and hold an asset for months or years.

The first step in creating your trading strategy is to have a trading plan.

The trading plan is like writing a business plan for some entrepreneur. A trading plan will help you to make a realistic decision in periods of rapid market movement when your emotions might lead you to make impulsive decisions.

The trading strategy should include specific goals such as: getting out of debt, retiring early, making your first million.
Also, your trading strategy should include your asset allocation and diversification moves.

As a beginner, you should not have more than 5% of your trading capital on any single trade. Make sure your trading strategy contains a mix of fundamental analysis of global events, like wars that impact oil prices.

But also technical analysis like trading rules based on price and volume transformations.

It is important because you can use this information to determine your entry into trades, your exit when the trade goes your way, and your escape when the trade goes against your plans.

For you, your best interest is to develop the disciple to incorporate stop/limit loss orders into every trade you place.

New traders can use technology to lower the entry barriers to trading by automating many of the activities.

THERE ARE SOME OF THEM:

* Trading bots – This is simply computer programs with instructions based on a predetermined set of market indicators and parameters.

You can use automated trading systems to trade stocks, options, futures, and foreign exchange products.

It is based on a predefined set of rules, which determine when to enter an order, when to exit a position and how much money to invest in each trading product.

Trading bots are especially helpful to beginner traders and sometimes, a bot can be an important market ally for reducing your losses.

* Stock screeners – That can help you filter the stocks in the market to narrow down potential winners before their big breaks.

It will help you identify top gainers and losers, stocks on turbo momentum, and stocks that are about to break out above resistance or break down below support lines.

* Social trading – This is simply a type of trading in which traders rely on user-generated financial content, collected from a variety of networks.

Social trading provides you the platform to be part of a community of successful traders and you can purify the wisdom of the crowd and make you able to make your own trading decisions.

The first trade isn’t like a first love, it is more about how to choose the best school

Always use a trading plan, don’t underestimating the importance of a trading journal, change trading strategy after every trade.

Test your trading skills on FREE DEMO ACCOUNT in a virtual environment before you start risking your own money.

Practice trading strategies so that when you’re ready to enter the real market, you’ve had the practice you need.

Risk Disclosure (read carefully!)

26th December 2018
Bear Market profit! How to Make the Profit on the Bear Market?

2 min read

The bear market is here. Now is the time to focus on how bad this bear market can be. But also, how can you make a profit during the Bear market period. The questions exploded, and negative consequences are extensive and serious. But it isn’t impossible to make the profit over the bear market.

The investors and advisers are still focused on holding stocks. That means they are not prepared for the destructive emotions that come from this panic-crash.

How they could be when is the time of the bear market and their goal is to make the profit?

Hopefully, the market does not drop.

But there is a considerable risk now. Maybe the best philosophy is to be prepared for a disaster than to count that the worst will not happen.

Yes, we know. The Bear markets are brutal when they hit. That know any stock investor who was invested in stocks during 1973–1975, 2000–2002, or 2008.

The very first fact is that fortunately, bear markets tend to be much shorter than bull markets. If you’re properly diversified your portfolio, you can get through this period. And not to have much damage.

How?

If you are an agile investor, bear markets can provide opportunities to boost your portfolio. It can lay the base for long-term wealth.

Here are some ways to make bear markets very profitable.

First of all, don’t let yourself down, even when the market is down. Stay calm and focused.

The big truth is that in the bear market, the stocks of all companies tend to go down. Where is the catch? How to make some profit from this?

Bad stocks tend to stay down. Yes?

But good stocks tend to recover and back on the growth path.

So, the strategy is clear.

If the stock of a profitable company goes down, that is a buying opportunity.

Remember this!

Let’s say a few words about the second opportunity during the Bear market.

You have to look at the dividends! A dividend comes from a company’s net income. It is an important fact. Contrary, the stock’s price is determined by buying and selling in the stock market.

Say the some company’s stock price goes down but the company is strong yet, still earning a profit, and still paying a dividend.

It is a good opportunity for those seeking dividend income.

If you are one of them, you have to buy.

A bear market comes in tough economic times. It reveals who has too much debt to deal with. But also, who is doing a good job of managing their debt.

We are talking about the bond rating.

In this circumstance, the bond rating becomes valuable. The bond rating is a picture of a company’s creditworthiness.

The ratings of AAA, AA, and A are considered kind of investment-grade. The lower ratings are Bs or Cs.

A rating of AAA is the highest rating. This mark signifies that the agency believes that the company has achieved the highest level of creditworthiness. Therefore, it is the least risky to invest in.

If you find a stock whose company has a bond rating of AAA, that is good to buy!

Using ETFs with your stocks can be a good way to add diversification and use a sector rotation approach. Different sectors perform well during different times of the slump and flow of the economic or business cycle.

Do you remember the rule: Never put all eggs in one basket.

So, rotate your sector.

Bear markets are tough for good stocks. But they’re brutal to bad stocks.

When a bad stock goes down, it often goes into a more critical decline. Because more and more investors look into it and discover the company’s shaky finances.

What you have to do?

Short it?

Going short is a risky way to bet on a stock going down. If you’re wrong and the stock goes up, you have the potential for unlimited losses.

A better way to speculate on a stock falling is to buy long-dated put options. That gives you the potential to profit if you’re right but limits your losses if you’re wrong.

During the bear market, you can make the profit by using the margin. It can be useful. Using the margin is wisely, it can be a powerful tool. The great tactic is o acquire dividend-paying stocks after they’ve corrected.

A margin is using borrowed funds from your broker to buy securities.

Keep in mind, you don’t like to use margin before the stock corrected or declined.

Using margin when the stock is high and it subsequently falls, can be dangerous. But using margin to buy the stock after a notable fall is less risky.

Buy call option if you want to make the profit during the bear market!

Well, it is about speculating, not investing. Remember, a call option is a derivative, and it has a finite shelf life; it can expire worthless if you’re not careful.

The good side of a call option is that it can be low-cost to buy. And it tends to be a very cheap vehicle at the bottom, when is a bear market. This is your chance!

If the stock price sink, but the company is in good condition, betting on a rebound can be profitable.

How can you still make the profit?

For example, you can write a covered call option. Also, you can write a put option to generate income.

But the most important is to stay calm when the bear market starts. That will provide you with more chances to make the profit.

If you don’t plan to retire ten years from now or even more, a bear market shouldn’t make you nervous.

Good stocks will survive bear markets. After that period, they’re ready for the next bull market.

So, try not to get quickly out of stock. If you want to make the profit on the bear market territory.

Just keep monitoring the company performance for growing sales and profits. If the company looks fine, then hang on. Keep collecting your dividend and hold the stock.

This bear market had a fairly recognizable trading picture. We had the opportunity to see it before.

So, be patient and take your advantages!

Risk Disclosure (read carefully!)

19th December 2018
Automated Trading Systems Can Increase Your Trading Profits
This is not something you can do over the weekend and let run happily ever after.

By Guy Avtalyon

People maybe get automated trading wrong. I’ll explain this. But first comes first.

Wouldn’t it be great to have a robot trade on your behalf and earn guaranteed profits? It’s everyone’s dream is to find the perfect computerized trading system for automated trading. The one which guarantees profits and requires little input from the trader themselves.

There are many automated trading systems available. But there are still a few burning questions that need to be answered.

First of all, what is the automated trading?

They are computer programs designed by expert developers to follow a given market algorithm, every minute of the day.

You should consider automation if you want to participate in the futures market but lack the time to monitor, formulate, and implement your own trading plan.

Automated Systems are programmed to look for trends, analyze market data, and apply specific mathematical/technical formulas which in turn generates signals: buy and sell orders – to go long or short.

The performance – whether hypothetical or live- is tracked in real-time and you can subscribe, activate, and deactivate any system at any time.

Automated Trading is comfortable

They are programs that place orders on behalf of the trader. A trader sets the essential condition for order placement based on technical analysis principles.

The system will place orders automatically based on the necessary conditions.

The automated trading system facilitates backtesting on a demo account which gives a fair idea of the efficiency of the strategy.
Nice!!!

But you need more about how an automated system can increase your trading profit.

In other words, can trading strategies that are automatically executed in financial markets be profitable?

The investment is a process, so automation is a logical conclusion. To be honest, auto-trade is like a driverless car. It can go fast or slow.

It all depends on the robustness of your design. People maybe get automated trading wrong. This is not something you can do over the weekend and let run happily ever after.

If you believe that manual trading is highly competitive and intense, then imagine sitting in a fast car without a steering wheel, accelerator or brake pedals.

So, why people fail?

The way to design a profitable trading system is counter-intuitive. It must be built to withstand erosion. People think of the best possible outcome when they design a strategy.

Wrong.

You can’t design and test drive snow tires in Sahara. There are some reasons for that, don’t you think?

You need to design automated strategies with failure in your mind. Always.

Take care of the bad scenarios and the good ones will take care of themselves.

That is not sexy, but you wouldn’t take some luxury car for a spin if you knew that brakes are porous?

When people think about failures, they think about stop losses or blow-ups. This is not the main issue, really.

The problem is transforming near misses into near losses.

Like you know, the market flip-flops all the time and does not care about your feelings.

The whole game is about:
1. a) moving the peak of profitable trades from small losses into small profits. In order to achieve a compounding system. That can only be achieved by having a solid exit policy
2. b) elongating the right tail: ride your winners and cut your losers short. Profits look big as long as losses look small
But as always, simple is not easy.

The privilege of simplicity is that it imposes itself, even to those who do not understand its sophistication.
Automated trading is a great tool to have in your trading toolkit.

We would say the hardest thing about it is codifying your strategy. Converting your strategy into code that a computer can interpret can be very difficult, but totally doable if you put your mind to it.

So if market conditions cause it to enter losing positions, it’s gonna enter losing positions, and quickly!

These losses can mount up so have proper risk management systems in place:

– Set a max drawdown limit that’ll kill the bot if it’s triggered
– Use stop losses on every trade

The strange thing is that it works and frankly speaking, no one would never be able to achieve the same results manually. You do not want to sit in front of a monitor and contemplate all the time.

Computer trades are like a psychopath.

It has no emotion and can do many more markets.

The algo makes better decisions quantified as a higher gain expectancy/trading edge than you would.

There is no question about it. It takes trades to makes money.

The mindset of an autotrader is different than a manual trader. You have to trust the system.

Once you auto trade, you have to let the machine take the trade even if your guts scream NO.

The good news is you can monitor multiple markets on your own time.

The machine keeps trading away and that is an incomparable feeling of freedom.

You can spend that time with your friends.

Isn’t it amazing?
17th December 2018
Position Trading

What are the benefits and disadvantages of this trading style? All explained.

By Guy Avtalyon

The position trading is an approach to trading in which the trader either buys or sells contracts and holds them for an extended period of time. It also refers to the longest term trading. You can have trades that last for several months to several years. This kind of Forex trading requires a good understanding of the fundamentals. Let’s say it isn’t for traders without patience. So, why is that?

What does Position trading require?

Patience. Fundamentals force the long-term trends of currency pairs. Hence, it is very important that every new trader understand how economic details can affect the domestic financial outlook. In this kind of trading, the trader has to hold the trade for a long time. Stop losses will be very large.

That indicates that the trader must have stable capital. Otherwise, the trader will get a margin.

What does taking a position trading mean?

Taking position trading means a position you take when you buy or sell securities. If you buy a stock, future or option, it refers to a Long Position

But if you sell-short a stock, future, or option, it is Short Position. In short, the word position describes your action and view on security/shares/futures, etc.

By taking the position in the stock is something you do to earn money from the stock market.

Very simple.

How to earn money in the stock market?

By purchasing a stock (called taking the position) and then selling that stock (closing the position).

Or by selling the stock (called taking the position) and then buying that stock (closing the position).

However, the duration of your position can fluctuate depending upon your strategy.

It could be for a few seconds, or a few minutes, or a few years, or 20 years. It depends on your personal psychology and goals you want to achieve.

What is the basic analysis of this trading method?

Read the charts or use some fundamental analysis before trading.

When you buy a particular stock always lookout for high volumes.

Of course, don’t buy all the shares at once. Buy it in installments. You have to buy at a lower price. So averaging can helps a lot and don’t forget to put stop loss.

Sometimes market swings beyond our expectations and things may not go well. In that case, you need to exit on time and always make a substantial profit and move on.

You are not married to the stock, so you can always buy it when it corrects.

What is position trading?

Let’s say it again, the position trading, also known as ‘trend trading’, can best be described as a ‘buy and hold’ method.

If you want to become a forex position trader you must be the independent brain. Sometime you must ignore popular views and make your own presumes like, to where the market is going.

You must understand fundamentals and have good vision into how they affect your currency pair in the long run. First of all, actually, you must have enough capital to withstand several hundred pips if the market goes against you.

Long-term Forex trading can net you several hundred to several thousands of pips. If you are too excited being up 50 pips and already want to exit your trade, examine moving to a shorter-term trading style.

You have to be very patient for this trading style.

For position trading, historical points of support and resistance are maybe more important than indicators. The most important is to draw straight horizontal lines and use different time frames. The longer the time frame, the more important level. For this trading style, once again, you must have enough starting capital, you must be patient.

So, what might entice you to try this style?

Firstly, position trading is very convenient for new traders. The speed isn’t as wild as day trading or swing trading. Hence, you have a bit more time to plan your activities and create a trading plan. On a wider level, position trading can also be more attractive in different types of markets.

For example: If you are in a bull market where there are strong emerging trends, it can be a good time to engage in position trading.

You will not see the result fast, it will take time. We are speaking about months and years, not hours or days.

16th December 2018
Trade Crypto And Stocks / Forex – How To Do That
4 min read
- If you understand how the financial markets are structured you can use the same skill and experience to profit in all three.
At first, we have to define the difference between crypto and Forex/Stock trading because you have to have theoretical knowledge.

– Crypto trading, or cryptocurrency trading, is simply the exchange of cryptocurrencies. Like in Forex, you can also buy and sell a cryptocurrency for another, like Bitcoin or altcoin for USD and Euro.

– The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices.

– Stocks trading is the buying and selling of company stock – or derivative products based on company stock – in the hope of making a profit.

Let’s go further!

HOW TO TRADE CRYPTO

Crypto shows bigger growth than stocks or forex. Honestly, all of these types of investment are risky.

While Bitcoin is not the only digital currency on the market, it is indeed the first and most popular one and stands as the digital gold within the industry. The technology behind cryptocurrency holds a large part of its value. The secure way to identify a transaction and the way to transfer funds.

If you want to trade cryptocurrency you need:
1) A cryptocurrency wallet (or two).
2) A cryptocurrency exchange (or two) to trade on.

There are only a few things to know about trading cryptocurrency.

Trading cryptocurrency is simple to start. Yeah, it’s easy.

But there are some essential aspects to understand before you start trading. And this is basic friendly advice to mull over. This not professional investment advice.

I’ll explain on the example of Bitcoin.

There are three ways you can trade Bitcoin:

1 Buy the underlying from an exchange or online cryptocurrency broker

For those who are willing to actively safeguard their Bitcoin, owning the underlying is clearly the way to go.

But prudent steps must be taken to mitigate the risk of Bitcoin theft or loss of private keys.

Diversifying holdings across wallet types, using two-factor authentication and strong passphrases, can be helpful.

2 Trade (buy/sell) a CFD (Contract for Difference) derivative and hold cash margin with an online forex broker or multi-asset broker.

Active traders looking to speculate on Bitcoin over the short or medium term can count that using an online forex broker will provide them with 24-hour trading. And potentially lower margin, and the ability to go either long or short.

So, it is good!

Because of counterparty risk, choosing a broker is just as important as finding one with the best trading tools or commission rates.

3 Buy a publicly listed security related to Bitcoin and hold shares with an online stockbroker.

For stock market investors, investing in Bitcoin indirectly through a listed security such as an ETF, ETP, or trust may be suitable for those looking at taking a passive position.

Active traders might find the limited trading hours and potential lack of volume a limiting factor that could hinder their trading.

Overall, using listed securities that invest, track, or hold Bitcoin can be a viable alternative to diversify away from the risks of margin trading. Or safeguarding private keys when buying the underlying.

HOW TO TRADE FOREX

Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world’s currencies trade.

You can trade currency based on what you think its value is. Like, for instance, you think a currency will increase in value, you can buy it. But, if you think it will decrease, you can sell it

All forex trades involve two currencies because you’re betting on the value of a currency against another. Think of EUR/USD, the most-traded currency pair in the world.

EUR, the first currency in the pair, is the base, and USD, the second, is the counter.

When you see a price quoted on your platform, that price is how much one euro is worth in US dollars. You always see two prices because one is the buy price and one is the sell.

The difference between the two is the spread. When you click to buy or sell, you are buying or selling the first currency in the pair.

Since the euro is first, and you think it will go up, you buy EUR/USD. If you think the euro will drop in value against the US dollar, you sell EUR/USD.

If prices are quoted to the hundredths of cents, how can you see any return on your investment when you trade forex? Leverage!

When you trade forex you’re borrowing the first currency in the pair to buy or sell the second currency.

To trade with leverage, you simply set aside the required margin for your trade size. If you’re trading 200:1 leverage, for example, you can trade $2,000 in the market while only setting aside $10 in the margin in your trading account.

However, leverage doesn’t just increase your profit potential. It can also increase your losses. If you are new to forex, you should always start trading with lower leverage ratios, until you feel comfortable in the market.

HOW TO TRADE STOCKS

Stock markets are places where buyers and sellers of shares meet and decide on a price to trade.

It is important to know that the corporations listed on stock markets do not buy and sell their own shares on a regular basis. When you buy a share of stock on the stock market, you are not buying it from the company, you are buying it from some other existing shareholder.

There are many stock exchanges, many of which are linked together electronically which means markets are more efficient.

The prices of shares on a stock market can be set in a number of ways, but most the most common way is through an auction process where buyers and sellers place bids and offer to buy or sell.

A bid is a price at which somebody wishes to buy, and an offer (or ask) is the price at which somebody wishes to sell. When the bid and ask coincide, a trade is made.

If there are many buyers and sellers at sequentially higher and lower prices, the market is said to have good depth.

Stocks are quoted by their ticker symbol, represented by between one and four capital letters. They are often loosely representative of the company name.

Let’s break down what is the market order!

A market order is simply an order that instructs the broker to buy or sell shares at the best available price. The market order does not guarantee the price you will get. But it does guarantee that you will get the number of shares that you want.

When an order is completed, it is said to be filled.

Stop orders are contingent on a certain price level being attained to activate the trade and your trade will be executed only when what you want to buy or sell reaches a particular price.

If you understand how the financial markets are structured you can use the same skill and experience to profit in all three.

In all three you have to buy low and sell high against the crowd.

There is no difference.

Risk Disclosure (read carefully!)
14th December 2018
Forex trading – Thank you internet!

Hello, world! So, each of us would yell when the Internet appeared! And the internet brought us forex. The rest is in this post.

By Guy Avtalyon

Let’s see what is Forex trading. Well, some can say that it is basic stuff and belongs to ancient times. Lucky you, if you are one of them. Opposed to the majority of forex participants, ordinary people don’t know what the ForEx exactly is.

So, let try to explain it. This article is for you who don’t know what Forex is.

A word – the internet. It is crucial. But, it isn’t quite true. In this endeavor, in trying to explain what is a forex, we should start from the beginning. If you have traveled, you probably already have a forex trading experience.

What? When? When you buy the currency of your destination country while paying with your own currency.

That is forex trading. The world of trading.

It is basically about Forex trading: Forex traders buy and sell currencies for profit or to protect investments. The forex market is the world’s largest financial market. And since trading is between market participants, there is no “open” or “close” of the market except on weekends.

Some opportunities present themselves to people who keep up with news and events, while others require patient analysis. You might like trading the major currency pair or even you might have knowledge about the exotic currencies.
Traders create their own power and decisions to their trading and, over time, build their own trading style.

That is one of the advantages of Forex. Even more, you can sit in front of your computer but, at the same time, you are present all over the world. The forex market, or simply the FX market is the most traded on the financial market in the world. Some like to think of the forex market as the “Big Kahuna” of financial markets. The forex market is, from a certain point of view, a crossroad for international capital. The intersection through which global commercial and investment flows must move.

This is the place where all international trade flows. Let’s break down the Forex trading!

What is Forex trading?

It is similar to your vacation pocket money. Forex trading always involves two currencies. The base currency is the one you are buying or selling, and its price is given in the quote currency:

Base currency/Quote currency

EUR/USD

1/1.136512

One Euro costs $1.136512 (the date is December 12, 2018, in my example).

This is the point where trading begins.

Let’s say that you believe the EUR will rise in value relative to the USD. You buy EUR 100,000, paying $136,512 from your trading account. And the EUR indeed rises a great deal, to 1.500000 at the end of the day. Therefore, when you close your position by selling the EUR 100,000, you receive $150,000 earning $13,488. What do you think?

This is impossible? Well, yes and no.

Is possible to earn a lot in Forex trading?

Of course, this kind of price jumping is pretty impossible. But smaller rises are very possible. Maybe not in the case above, but on some other currency. You might ask, where can you get $136,512 n the first place? The answer might be that you have $3,000 in your trading account and your broker enables you to borrow $100 for each US dollars in your account.

That is margin, 100:1. With this margin, you can enter forex positions with values of up to $300,000. But, what happens if the Euros didn’t rise? And instead, it fell to 1.050000 at the end of the day?

Therefore, when you close your position by selling the EUR 100,000, you receive $105,000. Well, you lost $31,512.

How to access to Forex market?

You access this market using a trading platform provided by a broker. Most of the investors can trade Forex with the proprietary platform Advanced Trader or with the popular MetaTrader 4 or 5. Or some other platform, as the broker can develop their own software.

When you have selected your trading platform, familiarize yourself with the available spreads and tools.

You’ll have to find some trustworthy broker that has a free demo account. That enables you to try everything using virtual money. Try the charts and indicators, and explore orders, which are automatic trades based on your expectations, used to open or close positions at predefined price points.

What to pay attention to in the Forex trading?

There is one thing you have to be aware of. We, in Traders Paradise, have some suggestions for you.

Trading Forex can be extremely risky. However, you can take precautions to try to minimize those risks and their impact. In forex, there are three important skills you must develop to help you manage your trading risk. That is: analyzing, anticipating, planning In the first place, you have to protect your account with stops, limits, and other order types.

There are a number of order types, such as the trailing stop, if/then, and order cancels.

Set the proper levels

Some could say that setting a stop is an art and they are probably right. But you need to be sure that your stop is set. So that your trade can handle smaller jumps and drops in price while protecting you from loss if the market doesn’t go your way. A stop that’s too tight could lead you to reenter the market. That could cause you to get stopped out again.

That may cause more damage to your account balance than if you entered a stop that was too wide or if you had no stop at all. You must know how to handle your emotions. Sometimes, your mindset at the time can cause more damage than research you didn’t do.

You are a trader, so try to stay objective and calm. Even if you have a losing trade, resist the urge to enter another trade outside of your trading plan. Never attempt to win your earnings back.

13th December 2018
How to Use Stop Loss Order?

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 “slippage” 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 ∈ (L, b × L), or the investor, if x is the entering price, can simply set a constant I (proportional to the fluctuation we add), where x−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 profits’ 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. It’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.

23rd November 2018
Momentum trading
3 min read
- 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 the movement and increases the strength of that movement. This two-fold nature of momentum is seen in what traders and investors call “momentum stocks”. 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. Like trading volume and the 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: “Cut 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.

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 a maximum. 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.

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. 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 it’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 the 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. It’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. So, it’s important to take preventative measures, such as setting stop-losses.

Risk Disclosure (read carefully!)
19th November 2018