Tag: Currency trading

  • Safe Haven Assets Where Investors Have Begun Piling Into

    Safe Haven Assets Where Investors Have Begun Piling Into

    safe-haven assets
    Safe-haven assets are a fundamental place to avoid economic downturns. They express the markets that can protect the investment from losses when the market falls.

    The safe-haven assets are investments that investors start piling into during intense market volatility and uncertainty. The main goal is to take a position into investments that are recognized as safe from losses. Even more, they have the capacity to rise in price while the bulk of other assets are declining value. 

    Safe-haven assets provide investors to limit their exposure to losses when market downturns and protect their capital invested. Like we have now when almost all markets plunged. When the markets enter tumultuous times like this one, the value of investments falls sharply. Investors are seeking assets that are not correlated to the markets. These kinds of assets are safe-haven assets.

    So, we can say that safe-haven assets are able to hold or grow in value during the market turbulence.

    Do anything to minimize the risk

    Risk is real if you want to invest in stock markets. But it isn’t necessary to be exposed to great risks if you can avoid it. The point is to minimize the risks all the time, during the life of your investment. But when the market is declining almost all assets become too risky. In order to protect their capital, investors leave their position in unsafe assets and start buying something safer.
    Safe-haven assets are those that don’t carry a high risk of loss. Historically that was cash, real estate, mutual funds, CDs, etc. You may ask, is gold a safe-haven asset? Gold as much as silver are historically used as a hedge against market or political uncertainty or the devaluation of a currency. But having in mind that gold coins have varied during the unstable political situations, it might be a wrong choice. Anyway, commodities are risky.

    Better pick s risk-free assets, such as sovereign debt instruments or hold gold and silver trough futures.

    What are safe-haven assets?

    Safe-haven assets are the necessary answer to economic downturns. They are the markets that can protect investors from losses when other assets and markets fall. How can they protect your investment portfolio?
    Safe-haven assets are holdings where investors and traders set their money to protect against major droppings. Safe-haven assets must allow protection from losses.

    But what are the characteristics of safe-haven assets?

    If you want trade safe-haven assets you must pay attention to liquidity. Such assets must have high liquidity. Why is this characteristic so important? Because that will provide you to enter and exit positions at a price you determine but without slippage. Further, safe-haven markets must have limited supply.  You don’t want the assets with a supply that passes their demand. It is more likely for such an asset to decrease in value. For example, gold has a deficit of supply, but higher value when demand increases. 

    True safe-haven assets have to hold a certain level of demand in the future. So you, as an investor, must believe in the assets’ future, you must be confident about it. For example, that is the reason why silver isn’t so good investment choice. Yes, it has many purposes now, but it can be replaced in the future by some other material. On the other side, you might recognize copper as safe-haven assets because of its importance that increases over time. Almost every day, science, the industry find new ways to use copper.

    Can you see where the essence of safe-haven assets? It is permanent. We cannot ever say that some temporary high valued asset belongs to the corpus of safe-haven assets. 

    Is gold the ultimate safe-haven asset?

    For many investors, gold is a safer asset to buy and hold, safer than cash, because it is a tangible asset. Further, no one can print more gold as it is possible with banknotes. This is important because it provides the value of gold not being changed in this way. From the historical point, gold served as insurance during unfavorable economic circumstances. Gold prices regularly rise when drastic events happen. Moreover, gold is negatively correlated to the US dollar. Meaning, when the dollar is strong it is costly to buy and hold. That drives gold prices lower. And vice versa. Investors know this. Whenever the US dollar was trading lower, they started piling into gold.

    What are other safe-havens?

    When the market records turbulent circumstances the value of most investments falls sharply. So, investors want to buy assets that are negatively correlated to the overall market. They are moving their investments into safe-haven assets.
    That can be defensive stocks, such as consumer goods, utility, biotechnology, healthcare. These stocks tend to resist the market’s downturn. People are buying food, drugs, they need health care and groceries.  Also, don’t think that real estate due to its lack of liquidity isn’t a safe-haven asset. The real estate has a constant income flow that can offset the liquidity. 

    Infrastructure is also safe-haven assets. So, even though the markets are going down there are plenty of ways to stay invested.

    Building a safe-haven assets portfolio will need some additional attention to optimizing returns. But the results may be quite surprising. But there are safe-haven currencies also. For example, the Japanese Yen (JPY) is seen as one of the most stable safe-haven currencies.

    Can we trade safe-haven assets?

    Of course, we can. So after we’ve recognized safe-havens assets, want to trade them. The question is how and when to trade them. The possibility isn’t questionable. Let’s say this way, a market downturn is likely to hit due to the factors you can recognize. 

    If you want to move a chunk of your portfolio into safer assets there are several things you have to consider.

    First of all, trading safe-haven stocks is practiced as a defensive tool. The aim is to overcome a declining economy as even defensive stocks may not generate a positive return. It’s true that the slow economy will let safe-haven stocks beat the market, but it doesn’t mean that you will profit.

    When trading safe-haven stocks examine the beta of stocks before investing. Beta points the relationship between the stock and the market. If the beta is 1, that means the stock price is fully correlated with the market, but when the beta is above 1, the stock is more volatile than the market, and finally, when the beta is closer to zero the correlation with the market is smaller. Knowing the beta of the stock will enable you to hedge against volatility. 

    The P/E ratio will show you if the safe-haven stocks are undervalued or overvalued. The safe-haven stocks are well-known for being undervalued.  Also, the stocks with high dividends, meaning greater than 6%, are a good pick for safe-haven stocks. At least, as much as the stock from a well-established company. Well-known brands or large-cap stocks will lose less in value than small-caps during the market downturns.

    All these factors are important and you have to evaluate them before picking your safe-haven assets and adjust your new holdings to your risk appetite.

    Currencies as safe-haven assets

    Some currencies are recognized as safe-havens. In periods when the market is extremely volatile, currency traders would like to move their cash into safe-haven currencies as protection. Those kinds of currencies are the Swiss franc, the euro, the Japanese yen, and the U.S. dollar.

    Forex traders have to pay attention to some currencies that might act differently to market shifts than others. Also, there is always a question of what currencies suit to be safe-havens. 

    Bottom line

    The “safe-haven” refers to financial assets that investors turn to protect their profit from periods of market turbulence.
    Safe-haven currencies, safe-haven stocks, gold, have historically preserved or increased their value during market downturns. They gave good protection against losses. Why shouldn’t they do such a thing for us now?

    One suggestion before doing anything in real: use our preferred trading platform virtual trading system and check the two formula pattern.

  • The Truth About Forex Trading

    The Truth About Forex Trading

    4 min read

    (Updated November 2021)

    Traders-Paradise got (and still get) a lot of emails with the questions: What is the truth about Forex trading? or Can you tell me the truth about Forex? or Tell me, please, is Forex profitable or it is a myth?

    Okay, people, it’s time to tell you things that nobody will ever tell in one place. 

    First of all, the vast websites you visited searching for the answer to the question above, are sites with some Forex offers. Doesn’t matter if it is a brokerage, exchanges, system, signal providers, strategies, platforms. They all have one common interest: to present you only THE BEST. Their goal is to sell you their products. There is nothing bad in their goals and intentions, but you must be aware that some things will always stay covered and hidden from you. Until you build your own experiences. 

    We are giving you the shortcuts because all of us were struggling while we were novices in Forex trading. Actually, our struggle begins before we enter the Forex trading. Just thinking, measuring, asking, searching is struggle itself. And, still, you will find several sites or people ready to tell you the truth about Forex trading. Just because there are some characteristics to trading that the majority will never like to talk about.

    And yes, those features of Forex trading are ugly. Some are evil and scary. But Traders-Paradise’s opinion is that we have to talk about everything, doesn’t matter if it is nice and affirmative or ugly and not-so-nice subjects.  

    We will share what we know to answer you what is the truth about Forex trading. 

    Just to give you a clear path to decide if Forex trading is for you or not. The benefits you already know, you can make a fortune trading Forex but we want to show you the other side of the same medal. One thing you must keep in your mind: none of us is going to tell you to give up. 

    Based on our personal experiences, the most common misconception is that you have to be some math geek if you want to trade Forex. Yes, it is beneficial if you can understand the math behind your trades but you don’t need to be genius for that. This has to be said, a lot of very successful traders never even started high education. Have you ever heard about some Forex trading college or university? Of course not. Because if you want to be a successful Forex trader you must have particular skills. You don’t need a diploma. Speaking about those skills, for the profitable Forex trader is more useful to be a strong personality, not to get panicked when trades go in an unexpected direction. If you are nervous and without self-confidence, then Forex trading isn’t for you.  

    Yes, numerous and complex trading strategies are out there. 

    The Truth About Forex Trading

    And indicators, charts. OMG, Forex is for Nikola Tesla, not for me! 

    Just stay calm! The ability of self-control is more important. Forex markets are endless tension. Your nerves are what is really in a count, not your math knowledge. 

    Traders-Paradise will reveal you a secret. The winning traders very often practice one trading system. They learned that system, tested it on some demo account for several months, started the real Forex trades and VOILA! Their result is verified, the system is working, they have profit, so why change anything?

    The other thing we would like to share with you is the fact that in Forex trading your entry and exit points are irrelevant. Sound like a blasphemy, right? Imagine us, we are laughing! Because it is the truth about Forex trading. How the mentioned points are important if you can place your trade while sitting in a restaurant with your friends or walking. All you have to do is to take your phone in your hand and start to trade, whenever you want. Sound crazy? 

    Wait, there are more!

    We have heard so many times that humans generally are not good at trading. 

    The truth is that some are better. 

    Being a successful trader doesn’t mean that someone is naturally predisposed for that. That isn’t something the mother will give you with a birth. 

    What you have to do is to start thinking that you have to fight with the market. Just like in flight or fight situation. Imagine that the market wants to still all the money you placed there. 

    What does your brain tell you? Flight! 

    No, never if the Forex trading is for you. Your brain should command you – FIGHT! While you are sitting in front of your computer, you have to be the fighter. Or you will gain the loss. Whoever loses a profit, gets a loss. (That is wise, we should spread this sentence all over the world.)

    When we are pushing the buttons to place our trades, actually we are pulling the triggers. On our brain’s command. And here is the trick. Our brains will send us variously commands. That’s why you must have a plan. It is a battlefield, you cannot just run around and shoot. That’s when you are afraid or you are disoriented. 

    To have winning trades you must have a logical plan while trading Forex. If you don’t, you are 100% losers.

    One of the biggest lies about Forex trading is that some traders keep 100% successful trades. 

    No one can ever guarantee 100% success rate, no person and no algorithmic application

    This truth about Forex trading you will find nowhere else: 

    Do you know how some brokers or signal providers, or strategy sellers want you to believe that they have a magic weapon for the markets? That’s a lie. They are lying to you. Trading isn’t so easy.

    It may take years until you be able to gain a permanent profit from trading. Our aim is not to frighten you, but this is the truth. You will need months and years of analysis, testing and error corrections to be professional traders.

    The biggest truth about Forex trading is that you don’t need superior software or multiple trading screen setups to be a prosperous trader. This is something that no one will tell you. Especially trading websites. All you need is a device with full access to some free charting app. 

    Remember, the most powerful tool in your trading armory is your brain, not trading software. Some very simple and cheap but user-friendly software can provide you more benefits than a robust one. Remember this. 

    Traders-Paradise revealed you the most hidden secrets about Forex trading and told you the whole truth and nothing but the truth.

    Happy trading from Traders-Paradise Team!

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  • Currency Trading Guide For Beginners

    Currency Trading Guide For Beginners

    3 min read

    Two Different Approaches to Profitable Forex Trading 3
    Currency trading, also foreign exchange or Forex trading, is the buying and selling of currencies. That is happening in foreign exchanges or in the foreign marketplace. The main goal is to make a profit.

    Often you can find it is called ‘speculative Forex trading.’

    The main difference between currency trading and other trading is the liquidity of the Forex market.

    When you participate in the forex market, in essence, you have to buy one currency and sell for another at the same time.
    This is called a currency pair.

    Each one is interpreted by three letters. The first two letters describe the name of the country. So, the third letter interprets the name of the currency.

    How can you make a currency trade?

    Base currencyCurrency trading: Currency pair

    Currency trading is regularly executed completely over brokers and market makers.

    If you want to trade in the Forex market you will depend on the brokers in order to execute a trade.

    The first thing you have to do is to pick a currency pair.

    If you make a mistake, it could lead to a losing trade.

    So, we recommend you to choose between seven major currencies. Honestly, you have to pick one of existing seven. It isn’t a big deal!

    But there some problem may arise.

    There are some traders who have difficulties pairing up currencies. Sorry, but we have to say that.

    Some others cannot recognize which pair will perform the best.

    As we said, there are 7 major currencies. And, they are most traded.

    You have no other choice than to trade them in pairs.

    Forex trading is profitable - Is it the truth?Currency trading: 7 major currencies

    The first mistake you may make is to pick your pair based on some country’s economy. Don’t do that because your profit will depend on your position while trading on particular currency pair.

    That means if you are willing to be a day trader or very active trader you will probably pick 4 or even all 7 pairs.

    On the other hand, if you prefer to be a long-term trader you would like to wait and see which pair perform the best. Such traders always want to catch the best opportunity and they rather wait than to hurry.

    Say, you are a conservative trader.

    What you have to know?

    Number one, the forex market is open for currency pairs’ trading 24 hours a day. From 6 PM on Sunday in New York, to 4 PM on Friday.

    Each day starts at the Sydney market open. It is 5 PM to 2 AM Eastern Standard Time. Then switches into the Asian market. Tokyo’s market is opened from 7 PM to 4 AM.

    That’s not the end. When the Asian market is near to be closed, the European markets are starting their session. It starts with London’s market opening from 3 am to the midday.

    The last session belongs to New York. It begins at 8 am to 5 pm.

    That represents one week of forex trading session.

    So, you can place your trade when and where you want. The Forex markets are opened 24/7.

    What you have to take care of when trade currencies?

    Following Lead Traders - Good Or Bad For You?Currency trading: make a profit

    Well, the first is its value. Currency price is changing fast and frequently. The reasons for that can be various. For example, Brexit is one of them. But sometimes, the market by its own nature will cause changes in currency prices.

    The fluctuation isn’t a bad thing, but when it comes with high frequency, you might not be able to determine the changes which could cause the loss.

    For example, the euro is strong. And countries from the EU would buy, let’s see, U.S. products. In order to meet payments, they have to change euros for US dollars.

    So, we have the following situation.

    If large amounts of euros are traded for U.S. dollars in a short time frame, it forces interest for the U.S. dollars. As a consequence, the U.S. dollars value increases. On the other side, the value of the euro related to the U.S. dollars decreases.

    The risk involved in currency trading

    Currency trading implies high leverage.

    It is very possible with small investments to gain a big amount of cash.

    Forex is not highly regulated. There are several sorts of trades not regulated at all. That can boost the risk of currency trading.
    If you are the beginner in currency trading you should start on some free demo platform. There is no risk involved.

    If you have a certain good result, and only IF, you should start with live currency trading.

    Don’t waste your money!

    risk disclosure

  • 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.