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Author Topic: Libertex was recognized as the best trading application and cryptocurrency broke  (Read 129901 times)

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Biden’s corporate tax hike plans could be back on track

It’s no secret that incoming US President Joe Biden needs funding for his highly ambitious campaign package. The cost of his infrastructure plan alone is estimated at around $2.3 trillion, but this is positively dwarfed by the projected $18 trillion needed over the next three decades for the Democrats’ Green New Deal. Even for the world’s biggest economy, that’s some serious cash, and it has to come from somewhere. Biden wasn’t done any favours by his predecessor either.

In 2017, Trump cut the corporate tax rate from 35% to 21%, thus significantly reducing the natural source of income for such projects. Faced with little other choice, the new president tried to drum up support for a tax increase just halfway back to where it was before Trump came to power. The internal resistance from both sides of the aisle in the House of Representatives was fierce, and it had looked as though Biden would be forced to put his plans on hold. But after some serious compromise, it now appears that the bill has not only risen from the dead but is even gaining global traction.

G20 to the rescue

The plan’s far-reaching and ambitious nature had originally given ammunition to its domestic detractors. But that’s all over now that the finance ministers of numerous G20 nations have spoken out in support of the proposal. One notable supporter is German Finance Minister Olaf Scholz, who had this to say: “I’m in high spirits that with this corporate taxation initiative, we’ll manage to put an end to the worldwide race to the bottom in taxation”. Meanwhile, Mr Scholz’s French counterpart, Bruno Le Maire, welcomed the fact that a “global agreement on international taxation is now within reach,” adding, “We must seize this historic opportunity”. This comes after the UK and France, frustrated by the lack of progress in negotiations, famously launched unilateral digital services taxes pending a worldwide consensus.

You can’t please everyone

Naturally, not every major economy is thrilled about establishing a global minimum tax rate for corporations. Ireland is one such example. As the country’s finance minister, Paschal Donohoe, put it: “The focus on a global minimum tax rate is a prospect that I do have reservations about… on what would be the impact of that on the competitiveness for smaller- and medium-sized economies that do have lower rates of corporate taxation and use that as part of their overall competitive model”. However, the necessity of global support for the new programme is obvious. If tax havens are allowed to continue to operate, businesses will simply relocate to these jurisdictions to avoid the programme’s impact. This is also why Biden is looking to close loopholes that see company bookkeepers generate complex ledgers of leases, loans and sales contracts to avoid US taxes. Removing the incentive to do so by standardising corporate taxes worldwide could just be a long-term solution that works.

Compromise and conquer

As we’ve already mentioned, Biden’s plans were initially met with serious opposition — not only from Republican senators and congresspeople but from within his own party, too. However, far from giving up on the project, the wily president has instead been on the offensive in an effort to win lawmakers over to his cause. The biggest battleground here is undoubtedly moderate-to-conservative Democrats, many of whom were truly conflicted by the proposed legislation. One prominent example would be Senator Joe Manchin, who has repeatedly expressed concerns over the need to remain competitive, most recently warning against “throw[ing] caution to the wind”. Mr Manchin has, however, stated that he would be willing to support a hike as high as 25%, a figure that seems much more psychologically acceptable for many previously still on the fence. Biden has listened to what his colleagues are saying and has since revised his target in line with this 25% figure, which might just be enough to get it through Congress.

Final thoughts

Whatever happens, it’s clear that things need to change when it comes to corporate taxation. Companies are making billions in profits and growing every year, yet they are now paying less tax proportionally than they were in the 1970s. Nobody can deny that this is an issue that simply must be tackled in a coordinated, supra-national fashion in today’s increasingly globalised world. Until there is a firm commitment to fair levels of corporation tax across the entire world, the ‘race to the bottom’, as it’s been termed, can never truly end. But, as the US Chamber of Commerce’s continued opposition to the proposals would suggest, the fallout for business is likely to be pretty significant. Many believe that it could even provoke some serious downward movements on the equities markets as the sobering reality of what this means for corporate earnings sinks in for investors.

How to play it

The good news for Libertex clients is this could spell a special opportunity to short the big three US indices (S&P 500, Dow Jones and Nasdaq) or even specific companies, with tech giants tipped to be hit particularly hard. Luckily, Libertex offers both long and short trading in a range of CFDs, spanning ETFs, indices and individual stocks. 

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The world’s biggest tech names join forces to fight crypto black hats

Nobody would disagree that cryptocurrencies have done wonders to empower millions of unbanked, politically repressed, and otherwise disadvantaged people across the world. Meanwhile, their underlying blockchain technology has revolutionised everything from international payments to personal data security, improving lives everywhere. However, as is usually the case, these benefits come with a price. Sometimes literally.

Despite all its good, crypto is also the currency of choice for many hackers and other virtual ne’er-do-wells. Their scams range from simple extortion to taking control of another person’s computer and using its processing power for mining. This latter activity is known as cryptojacking and was once a minor inconvenience. However, with the growing popularity of digital currencies, it has recently morphed into a serious issue costing individuals and businesses time, performance and money. Fortunately, IT juggernauts Intel and Microsoft have joined forces to find a solution to this costly conundrum once and for all!

Two heads are always better than one

To solve a complex problem like this, it’s always better to pool one’s knowledge and experience. This thinking ended up prompting Microsoft to combine its Defender for Endpoint suite with Intel’s Threat Detection Technology to produce a holistic countermeasure against cryptojacking. As a result, the latest Defender for Endpoint now incorporates Intel’s accelerated memory scanning capabilities to activate CPU-based crypto mining machine learning (ML) detection. Now, users will be able to protect themselves from a full spectrum of malware and ransomware, including the latest covert mining programmes — without compromising on experience. And since the software integrates ML, every thwarted attack makes it even more powerful to provide a kind of in-built future-proofing.

The core advantage of Intel’s TDT is that it’s able to go beyond the signature- and file-based techniques employed by its competitors. It uses silicon-level telemetry and functionality to enable the hardware platform to play an active role in threat defence against ‘above-the-OS’ attacks. Combined with Microsoft’s industry-standard software suite, users benefit from all of the functionality of Intel’s Threat Detection Technology in an easy-to-use, familiar interface. Best of all, the technology doesn’t require any additional investments, IT configuration or third-party installation. Both Microsoft Defender for Endpoint and Intel’s TDT integrated solution are natively compatible with Intel Core processors and the Intel vPro platform (6th Gen and above), millions of which are already on the market.


What this means for the companies’ fortunes

Naturally, such a game-changing technological breakthrough to respond to a real and present danger to both retail and business clients can only be good news for the companies involved. As such, we are very likely to see a sustained uptrend in the share prices of both Microsoft and Intel. We saw a spike earlier in the month, which we can read as an initial knee-jerk response to rumours about the development. Since then, Intel, undoubtedly the more volatile of the two, has corrected by around 10%. This is typical “buy the rumour, sell the news” behaviour. But given the profound significance of TDT and its projected dominance well into the future, we could look back on this current price of $57.74 as an absolute steal. While Microsoft is now considered by many as a blue-chip stock, a competitive advantage such as this could just as easily spark a period of extended growth, making it the ideal choice for the more risk-averse who still wish to profit from this landmark breakthrough.

Trade Intel and Microsoft with Libertex

If you were wondering how to get involved, we’re pleased to announce that Libertex offers long and short CFD positions in Microsoft and Intel. That way, you can invest your money in line with where you think these companies’ stocks are headed. Download our award-winning app now (if you haven’t already) and see for yourself why it has won both Best Trading App and Best Trading Platform for several years in a row. Integrating live trading signals, in-chart technical analysis and unrivalled ease-of-use, the Libertex trading app truly is one of a kind. Don’t let this opportunity pass you by. Join Libertex today and start trading for more!

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Decrypting crypto with Libertex

Cryptocurrencies have been around for well over a decade now, but it's safe to say they've only really been in the public eye since the first big crypto bubble of 2017-18. And even though a massive crash followed, the world started to take notice of digital assets, and the seeds were sown for the emergence of an entire industry. Fast forward to today, and we once again find ourselves at historic highs, practically dwarfing the previous peaks. The crucial difference this time around is that it isn't just crypto aficionados driving the growth but rather big institutional investors finally coming off the sidelines and welcoming digital currencies into the fold.

Traditional smart money isn't the only player in town now acknowledging the cryptocurrency revolution. Everyone from private corporations like Facebook to global central banks are taking steps to produce their digital assets. Not to mention the scores of established corporate players implementing architecture to help them utilise or facilitate crypto payments. In this context, it is no longer in doubt that the crypto revolution is real and not just another bubble. Given the now undeniably transformative nature of digital currencies and the blockchain, many companies' success (or failure) in various sectors will depend on how they respond to this paradigm shift. At the very least, this fork in the road represents a generational opportunity to leverage cryptocurrencies and their underlying architecture to grow their businesses exponentially over the coming years.

Keeping up with the times

Despite our history as a veteran Forex broker, we are utterly determined to make the absolute most of the coming mass crypto adoption. The logical way for a financial brokerage like us to enter the digital currencies market is to make it possible to trade them. In fact, Libertex has been offering such instruments for many years now, long before many of our other legacy competitors. Unlike other major CFD trading firms, we refuse to limit ourselves to only the big-name cryptocurrencies. Instead, we support both long and short positions in almost 70 different cryptocurrency pairs, spanning the most popular projects to even the most obscure altcoins. And while some platforms have sought to milk clients looking to trade these kinds of new-age assets, Libertex has laid a clear statement of intent by providing zero spreads and cutting our cryptocurrency commission by 50%.

Into the ether


This could be a very attractive proposition given the current hype surrounding Ethereum. While Bitcoin appears to have hit somewhat of a wall after correcting over 10% last month from its all-time highs above $63,000, Ethereum has nearly doubled in value. There's no denying that ETH currently has some serious momentum behind it, and all the analysis would suggest this is likely to continue. Much of Ethereum's popularity this year can be attributed to the boom in DeFi applications, which are based on the Ethereum blockchain and still in their infancy. As they continue to expand, interest in ETH can only be expected to increase commensurately.

Ride the crypto wave with Libertex

Beyond Ethereum, the entire market is booming. Even if BTC and Dogecoin have corrected significantly, other serious gainers in recent weeks include Bitcoin Cash (up 200%) and XRP (up 50%). What's driving the growth across the entire space? Demand, of course. Cryptocurrencies are what people want to trade, and that trend is only going to intensify in the years to come as more and more on-the-fencers follow institutional investors into digital assets.

That's why we at Libertex are committed to providing a varied basket of these assets to our customers in an easy-to-understand and familiar format. With Libertex, you can trade CFDs in cryptocurrencies in the same way as you've been trading Forex and equities for years with none of the learning curve associated with other specialised platforms. Unlike standard crypto exchanges, we also offer leverage to help you boost your potential gains even with a modest deposit. Create a Libertex account today to get access to all the biggest digital currencies and more in one intuitive and easy-to-navigate package!

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YOLO, financial markets and you

Ever since Canadian rapper Drake coined the phrase YOLO (“you only live once”) a decade ago. It’s become the battle cry of many young risk-takers when rationalising a move that others might consider rash. During the past year and a half, this mantra has evolved into an entire way of life, and we’re even hearing people talk of the “YOLO economy”. Simply put, this phenomenon refers to an increased willingness among those in their late 20s and early 30s to shun their well-paid but soul-sucking professions and start following their hearts. It could be as simple as taking a step down the career ladder in exchange for more time with loved ones or as extreme as quitting their job outright to start a business or focus on a passion project.

So, what’s the YOLO economy all about?

The implications of this new economic outlook are far-reaching and likely to continue long after we return to the ‘old normal’. As more and more individuals start using the savings they’ve been able to amass during lockdown to start a business or take a side gig full-time, this has the potential to create real economic growth far outstripping what any central bank asset-purchasing programme could hope to achieve. Naturally, a large number of these ventures will come to nothing, and their initiators will be back looking for another daily grind come next year. Still, this mass rejection of the 9-to-5 has been enough to force some prestigious firms to start offering additional perks like continued flexible working hours, lifestyle allowances, and extra holidays — all in the hope of dissuading their staff from throwing in the towel. Such radical changes to working arrangements will be virtually impossible to reverse, and so the legacy of the YOLO economy is all but assured for the foreseeable future.

Where the financial markets come in

For those millennials without a business brainchild or existing side gig, trading and investing has proven a lucrative and accessible method of embracing the age of YOLO over the last year or so. With a sharp increase in disposable income amid a near-total shutdown of the services industry and the introduction of government stimulus checks, the stock market crash really couldn’t have come at a better time for the new breed of millennial investor. And though we’re now at new all-time highs, many analysts believe there are still opportunities to be had in the markets. But the most important message of the times — one that leading financial broker Libertex endorses — is that investing shouldn’t be done rashly or due to FOMO; it should instead be a means to a clear and considered end. This is tricky since YOLO has typically been used as a justification for all kinds of half-baked actions. But if we really apply the idea behind the catchphrase, “you only live once” can be interpreted as not allowing fear of failure hold you back from making a life-changing decision that you know in your gut to be the right one for you.

Trade for more with Libertex

This philosophy, which Libertex has termed Trade for More, essentially invites people to think of the financial markets as a vehicle to achieve their heart’s desires. First, however, you need to determine what ‘more’ means to you. It could just be more money, or it could be more time at home with your family, more freedom to do the things you love, more life and less work, basically. Once you have a definite end-goal in mind, you can start tailoring your investing approach to facilitate the realisation of these dreams. It might seem a little daunting at first, but first designating what you want to get out of trading or investing makes it much easier to stick to the course while concretely gauging your success.

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America has printed really much money this year. As I know more than 25% of all exciting dollars were printed from the beginning of 2020. And many people started investing in different assets. And cryptocurrency in 2021 is pumping hard. I bought some etherium on the may dump for 1800$ and it is 2500$ today.  I am not selling because https://www.liteforex.com/blog/analysts-opinions/ethereum-price-prediction-forecast/ [nofollow] long term price prediction is optimistic. I hope I will sell for 10k
« Last Edit: June 16, 2021, 12:58:46 AM by GeezerviserBom »

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How to take your Forex trading to the next level

The Forex market is one of the most volatile and lucrative markets in the trading landscape. Worth an absolutely unfathomable $6.5+ trillion a day, it dwarfs its closest competitor (stocks) by a significant margin. Despite offering plenty of opportunity for shrewd traders, the risk of loss of capital is very real. Given the cut-throat competition — especially for day traders — you simply must use all the tools at your disposal if you're to turn a consistent profit.

Apart from a sound strategy, which is just a given, you'll also need to seize every single advantage available to gain the upper hand against those who would like to get their hands on your hard-earned deposit. "But how do I do that?" you might ask. Well, listen up because we're about to give you the rundown on perhaps the biggest ace you can have up your sleeve when trading the foreign exchange market.

Read the signs

As we've already said, volatility is the name of the game in Forex. Movements might be small, but they can end up costing you big, particularly when leverage is involved. Support and resistance levels are extremely difficult to predict in this market, which tends to lead to more speculation. This makes it very easy to pick the wrong direction and rack up huge losses in the process. For this reason, analytics is an absolute must. However, not many have the time and technical analysis skills to study the market closely enough to find perfect entry and exit points.

To be honest, even the professionals frequently get it wrong. To compound matters, the window of actionability is also extremely tight. It often requires lots of analysts working concurrently to produce something that is actually usable. In this context, it's easy to see how the deck is stacked in favour of larger institutional players. So, how can the average trader level the playing field? Well, the simple answer is trading signals.

What on Earth are trading signals?!

Trading signals take many forms, but typically they consist of news events or chart-based graphics. Their value lies in the fact that they tell us precisely what is happening in the market at a particular time and give us a clear direction of movement. They even specify suitable entry and exit points. Many even include details of any key factors liable to affect prices in the short term.

Because of the enormous volatility involved, effective use of signals is absolutely crucial to successful Forex trading. There are so many influencing factors, many of which are highly unpredictable — from worldwide supply and demand fluctuations all the way to global economic and political developments. As such, you simply must have a reliable and holistic signals service if you're to have any chance of keeping up with the foreign exchange market's ups and downs.

Manual or automatic?

No, we're not talking about cars. These are the two main types of Forex trading signals available. Let's take a quick look at what each type entails and some advantages and disadvantages of both.

Manual signals

Manual signals are created by traders or senior analysts with an in-depth knowledge of the market. They usually consist of easy-to-read bulletins or annotated charts. Typically, they are universally accessible and straightforward to understand and implement. The Libertex platform includes such signals on its regularly updated newsfeed for this asset class. To access them, Libertex traders just have to click the 'News and Signals' button at the top of the page (circled red in the image below):



Immediately after clicking, a new window will appear showing a long list of the latest signals from a variety of sources that are updated almost every other minute (see below):



Because real people prepare them, manual signals can offer a good way for beginners to take advantage of veteran market participants' skills and knowledge. Once you see a signal you like, all you need to do is click it, and it will open automatically. That looks something like this:



So far, so good. Unfortunately, the very human dimension that makes them so easy to use can also be their downfall from time to time. Sometimes, the information can be outdated or simply misinterpreted, which is why we don't recommend relying on manual signals alone. That's particularly true for longer-term positions or higher-leverage trading.

Automatic signals

While not quite as detailed and engaging, automatic signals are generally considered much more accurate, especially over shorter timeframes. These signals are generated by powerful software suites and require quite a bit more getting to grips with than their manual counterparts.

First of all, they need some sort of data input. This can come from the trader him/herself or a third-party signals provider. After processing is complete, the software will generate a simple buy or sell signal in line with the exact market conditions at the time of generation. As such, these are not only highly accurate; they're also much more precise in terms of their timeframe and buy/sell values.

Luckily for Libertex users, they have access to both automatic and manual signals to leverage the benefits of each. Libertex's automatic signals are super-easy to use as they come embedded into each individual instrument on the platform screen. Below is an example for GBPUSD:



As we can see, right there on the chart, we have the latest rating for the relevant instrument ("strong buy" in this case). If we click this, a box appears with the signal potential (5%) and signal probability (76%), enabling us to make a quick decision as to whether the signal fits our strategy/risk tolerance. We can even open a trade using it with the click of a button by hitting 'Use signal'. It really couldn't be easier. The platform even includes another handy metric, trader sentiment, just below the chart (circled red).

Summing up

Trading is known to be rife with uncertainty, but nowhere is this more acutely felt than in the Forex market. Even experts can make very costly mistakes without a helping hand. This is where trading signals come in. Apart from providing general information about the opportunities available in the current market situation, they also help traders mitigate many of the transaction- and leverage-related risks that can end up costing them so dearly. By providing clear entry and exit points, signals can help everyone from long-term investors to swing and day traders while also allowing for constant monitoring of positions for as long as they remain open.

However, to get the most out of signals, you really need to be using a combination of the two. That's why platforms such as Libertex that integrate both varieties are so powerful. Usually, services like this don't come cheap, and not every broker out there is providing its clients with this level of added value free of charge. So, if you'd like to take your Forex trading to the next level, why not create a Libertex account today? With unbeatable leverage (30:1 on currencies) and market-beating commission all wrapped up into an award-winning, ultra-user-friendly app, Libertex is a really good option to join the ranks of satisfied traders around the world!

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Branson’s maiden voyage: Libertex adds Virgin Galactic!​

Ever since the first manned missions to space almost three-quarters of a century ago, people everywhere have looked up at the night sky and dreamed of going up there themselves at one time or another in their lives. One such dreamer was the British billionaire Richard Branson, and thanks to him and his commercial aerospace company Virgin Galactic, this could now be a real possibility for many of us living today.

After decades in the making, Branson has finally snatched space travel from the coveted preserve of NASA’s elite astronauts. The world was waiting with bated breath for the launch of Virgin Galactic’s spaceplane VSS Unity, which successfully run its first suborbital flight on 11 July in the company’s highest-profile event since its creation in 2004. In addition to Branson, the debut flight crew consisted of various senior members of the Virgin Galactic team. Despite this only being a test mission, over 750 people are reported to have signed up for future VG flights, paying up to $250,000 apiece for the privilege.

However, Branson isn’t the only billionaire who’s set his sights on the great expanse above. Amazon founder Jeff Bezos and his space tourism company Blue Origin are also scheduled to run their own crewed flight 9 days later, on 20 July, the 52nd anniversary of the Apollo 11 Moon landings. Branson insists that there is no competition between the two celebrity CEOs and stresses that the commercial space flight market is big enough for multiple participants. Irrespective of who goes first, Bezos is still tipped to fly higher than Branson; the Amazon founder’s New Shepard vessel reached altitudes over 100 km in pre-flight testing.

Regardless of whether you’re Team Branson or Team Bezos, the potential boon for Virgin Galactic and Amazon is huge, with these companies’ share prices expected to explode over the coming weeks and months. Luckily for Libertex clients, we’ve added Virgin Galactic stock to our instrument offering just in time for you to take advantage of this momentous occasion. You’ll be able to buy or sell Virgin Galactic CFDs with the same multiplier opportunities and commission as other major shares from 12 July. Meanwhile, Amazon remains available as always, so you can either hedge your bets or go all-in on either Jeff or Richard.

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What does it take to be a Forex trader?

With all the buzz around stocks and cryptocurrencies, Forex trading has all but fallen out of favour of late. While there is certainly much to be gained in the equities and digital assets markets, traditional currencies definitely shouldn’t be overlooked. Forex is still the most lucrative financial market with its enormous daily turnover of close to $7 trillion, positively dwarfing other sectors. Currency trading can be challenging due to many external factors at play and the relatively low volatility of these instruments. But if you can master the specifics of this tricky marketplace, you can make an absolute killing. In this article, we’ll explore what you need to succeed as a Forex trader, covering some of the key behaviour patterns to adopt and major pitfalls to avoid.

Develop and follow a trading system

There’s a reason we put this one at the top of our list. Having a trading system is absolutely crucial if you want to have even the slightest chance of making a steady profit. The biggest enemy of any trader is emotion. When you have money in the market, you’re so much more susceptible to making silly, impulsive decisions that will likely end up costing you handsomely. That’s why it’s so crucial to develop a sound strategy and clear set of rules that you stick to no matter what your heart or gut is telling you in the heat of the moment.

First, your system should tell you under what conditions you ought to open a trade. This is usually informed by trading signals or technical analysis and depends on the current market situation. However, other factors like your maximum risk/reward level and what action to take if your trade starts losing money are up to you and you alone. Typically, successful traders avoid risking more than 2-10% of their total account balance on any one trade. This is a good general level to shoot for because it allows for a reasonable percentage of profit while also preserving your deposit for future opportunities in the event of a loss.

Use Stop Loss and Take Profit levels!

We really can’t stress this point enough. Having a strong and reliable trading system/strategy is all well and good, but if you don’t have clear guidelines for closing each individual trade, a winner can easily morph into a big loser in no time. That’s why it’s so important to sit down and think with a cool head what amount of profit is realistic and satisfactory for each individual position and what percentage loss would represent a true trend reversal from which there really is no coming back.

Of course, there is no hard and fast scientific rule for establishing stop losses and take profits, except that you must set them before opening the trade. You could choose to put your stop loss a couple of pips above the closest support, for instance, and then set your take profit a shade below the closest resistance. What you must absolutely avoid at all costs is the “wait and see” approach. If you don’t have fixed levels for closing your position, you will more than likely end up closing the trade on emotion. It doesn’t matter if this means closing at a profit or loss: your result will almost always be worse than if you have automated trigger prices for closing your trades.


Work-life balance

With the Forex market open more or less 24/7, it’s easy to fall into the trap of sitting in front of your computer hours on end for fear of missing out on a lucrative opportunity. Although you might well sleep through a highly profitable signal during the Asian session, you’ll almost certainly miss more overall by trying to trade every hour of the day. When dealing with an open-all-hours market like Forex or crypto, you simply have to accept that you can’t physically be there every single time opportunity comes a-knocking. If you try, not only will you risk burnout, you’ll also almost certainly be too fatigued to trade effectively and will probably end up losing more money than you otherwise would have.

That’s why it’s so vital to establish a schedule for yourself. You should treat currency trading like a job with fixed working hours. Wake up at 8:00 am, for example. Spend an hour getting up-to-date with all the latest news from the night before. Start actively trading about 9:00 when the European markets open and take breaks as and when needed. Then, trade as much of the Americas session as you wish, but try to limit the entire day’s work to less than 12 hours. After that, you have to get some rest. Luckily for European traders, the Asian session tends to be the quietest and least volatile, so you can sleep soundly without worrying too much about losing out on a huge opportunity.


Stress management

It might seem trite, but this is what separates the winner from the losers in trading. Contrary to popular belief, this isn’t just something you’re born with. You absolutely can and must work at it. It’s normal to feel a bit insecure or worried when you notice you’re losing money, but that’s why you have a strategy and rules you adhere to strictly no matter what. Some things that your trading system can’t prepare you for include not making as much profit as you anticipated. This can be especially challenging because you’re still making money and can be easily tricked into increasing your risk to make up the difference. Resist this urge at all costs! Your system is working, perhaps not as well as you’d hoped…but if it ain’t broke – don’t fix it.

Technical difficulties are another challenge that you’ll eventually have to deal with as a trader. Your computer could break at the worst possible moment, or your Internet connection could drop out just as you’re about to make the trade of a lifetime. When it happens — and it will happen — don’t panic. When you get back online, just make sure you don’t make any silly decisions. For example, if the signal has expired, don’t open the trade anyway. As hard as it might be, you must reboot your trading system and start from scratch. Failure to do so will cost you much more on average than the lost opportunity. Remember that.


Conclusion

As we’ve seen, Forex trading can be a powerful tool for wealth accumulation, provided you bear a few points in mind. Ultimately, success in currencies trading boils down to discipline. If you can keep your head and avoid deviations from your strategy, you should be able to turn a profit.

Once you have your trading system and mental approach locked down, all you need is a reliable platform on which to trade. One such option would be veteran Forex broker Libertex. With almost a quarter of a century of experience under its belt, Libertex is a name you can trust. Its multi-award-winning app is available for iOS, Android and web browsers and comes jam-packed with a range of in-app technical analysis and trading signals. Libertex offers long and short positions in all the majors and more, so you’re bound to find something to pique your interest. To register your very own Libertex account, complete the quick and easy sign-up procedure today.

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Crypto on the brink of huge reversal

Cryptocurrencies have been perhaps the biggest success story of 2020-2021, with monstrous gains being posted since Bitcoin’s local low of $5165 on 13 March last year. Institutional investors’ decision to finally take the crypto plunge saw a rally that made 2017-18 look like a drop in the ocean; prices for BTC and ETH skyrocketed over 1000% in a matter of months to reach dizzying heights this May of $63,538 and $4,179, respectively. Then came the inevitable correction. The major digital currencies lost over 50% of their value in the weeks that followed, prompting many to lose faith in this famously volatile asset class once again.

Well, technically…

But make no mistake, this was indeed just a correction, not a crash like the one seen in 2018. As such, the recent declines actually represent an excellent buying opportunity for any hodlers or swing traders out there. In fact, as of this week, it would appear that the tide is already shifting back to growth. Both Ethereum and Bitcoin are up almost 30% in the past week alone as the technicals appear to be announcing a nascent uptrend. Moreover, virtually all of the moving averages are signalling that most major cryptocurrencies are now a buy. Meanwhile, the RSI has now moved out of oversold territory, which would indicate that the new growth trend is taking hold.

Next stop on the road to Ethereum 2.0

As we switch our focus to the fundamentals now, we can see a number of positive factors liable to drive growth further. First and foremost, we have the much-anticipated Ethereum London hard fork, which is expected to go live on 4 August and forms part of the project’s roadmap towards the POS-based Ethereum 2.0.

The protocol update includes five Ethereum Improvement Proposals (EIPs), of which EIP 1559 and EIP 3554 are the most significant. EIP 1559 intends to make ETH less inflationary through the introduction of a revised fee structure. EIP 3554, on the other, is meant to gradually increase mining difficulty on the Ethereum network, thus laying the way for the migration to proof-of-stake. The expectation here is that ETH will experience a rapid appreciation in anticipation of a shift in the supply-demand dynamic due to a combination of harder mining and increased investor demand for a less inflationary ETH.

Bitcoin supply still suffering

Looking at Bitcoin, we see a similar picture of increased demand against reduced supply, though in this case, the causes are rather different. The reason for the reduced supply in Bitcoin has not been an increase in mining difficulty per se. Instead, it’s a knock-on effect of the Chinese government’s decision to outlaw cryptocurrency mining in the People’s Republic. Since the crackdown last month, Bitcoin mining capacity is estimated to have been slashed by over 35% in the short term. Of course, this will likely recover in the medium term, but it won’t be instantaneous.

In the meantime, demand for the original cryptocurrency is likely only to increase as the new crypto uptrend take holds. While this will be true for most major coins, any trend is typically more strongly expressed in Bitcoin, especially given the huge influx of Wall Street capital into the project over recent weeks and months.

Buy the dip with Libertex

With cryptocurrencies becoming increasingly mainstream, this current dip represents an excellent opportunity to throw your hat in the ring while Bitcoin and Ethereum prices are relatively low. And because Libertex offers both long and short positions in a wide range of digital assets, you can still try to benefit whichever way you think the crypto market is headed. Our generous leverage and CFD-based model mean that you can maximise your potential gains all without worrying about actually owning a given instrument.

Libertex’s multi-award-winning, highly intuitive app demystifies digital currencies for more traditional investors, providing them with useful technical analysis and actionable signals right in the platform. Best of all, Libertex allows you to keep all of your assets in one, easy-to-access location for unbeatable convenience. Download our app today and discover why so many people all over the world are making the switch to Libertex!

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The Currency Strength Meter: A Complete Guide

Every trader needs to define the direction of currency pairs and to remember that market movement is defined by the strength and weakness of the currencies that make up the pair.

So, how do we define the strength of a currency? There are different ways, one of which is fundamental analysis. However, it's not 100% accurate.

What provides a clearer insight into a currency is the currency strength meter. Read on to learn more about this lesser-known but interesting indicator.

Every trader needs to define the direction of currency pairs and to remember that market movement is defined by the strength and weakness of the currencies that make up the pair.

So, how do we define the strength of a currency? There are different ways, one of which is fundamental analysis. However, it's not 100% accurate.

What provides a clearer insight into a currency is the currency strength meter. Read on to learn more about this lesser-known but interesting indicator.

Currency Strength Meter: Definition

The currency strength meter is a general name given to the indicator that shows whether you're dealing with a strong or weak currency. This algorithm-based indicator relies on the exchange rates of various currency pairs to provide the degree of each currency's strength.

You might be familiar with the standard RSI indicator, Awesome Oscillator or MACD tool. But with the currency strength meter, it's more complicated because there's no standard tool. You can find different versions of it on the Internet and customise them to the platform you use.

To find the right version, you should apply several and see which one works best for you. Also, it's worth reading reviews on the indicators you want to use.

Because there's more than one version of the meter, you should know the differences. The more advanced types implement their own weightings and may include other indicators that measure a currency's strength. That helps to provide trading alerts. Simpler versions, on the other hand, don't use any weighting.

However, the main principle remains similar. To depict the strength or weakness of EUR, the indicator calculates the strength of the pairs that include the EUR (for instance, EUR/USD, EUR/GBP and EUR/JPY). After the calculations, we get the overall strength of the Euro.

The indicator is widely used on MetaTrader 4 (MT4) and MetaTrader 5 (MT5). You can also find it on any platform where custom indicators are supported or on the web.

What the Currency Strength Meter Looks Like

Usually, we provide a real-world example that shows you what the indicator looks like and how it works in the real market. It's more complicated with the currency strength meter since there are different variants of it.

The most common currency strength meter consists of lines that move around the zero level. Depending on the algorithms and parameters applied, the lines can have different colours and be smooth or rough.



Another type of currency strength meter is a correlation matrix. It highlights the strength of currencies on different timeframes.



How Does the Currency Strength Meter Work?

The main idea of any currency strength meter consists of the following points:

1. The indicator identifies the base currency.
2. Then it pairs the currency with all other currencies that are available for such action.
3. After that, the indicator measures the strength of each paired currency.
4. In the end, an average score is calculated.

The goal of using the indicator isn't to define a strong currency and start buying it but to identify whether the currency is strong or weak in a pair. For example, we have the EUR/USD pair. If it rises, it doesn't necessarily mean the Euro is strong; the US dollar may be weak.

As we said above, there are different versions of the indicator. Even though each can have a specific measuring system, a range of 0-10 is the most common. Usually, if the reading is closer to 10, the currency is stronger.

Let's look at how the line currency strength meter works.

The indicator consists of lines that depict currencies. These rules apply to any line version of the currency strength meter:

- The higher line depicts the stronger currency. The signal is stronger if the first line is above the zero line while the line of the other currency is below 0.
- If the line goes up, the currency gains momentum.
- If the line moves downwards, the currency weakens.



You can integrate a currency strength meter into your own strategies and trading style.

Currency Strength Meter in Action

Now that we have an idea of how the currency strength meter works, let's take an in-depth look at how to use it in real trading.

Usually, the indicator is used to either confirm a trend or its reversal. By applying it to a chart, you can define which of the currencies is the weak one and which is the strong one. That way, you'll know which currency pair to buy and which one to sell.

However, you should remember that the currency won't be equally strong or weak relative to other currencies in pairs.

Approach 1: Find the Strongest and the Weakest

This approach is best for beginners or if you don't want to overcomplicate your strategy. All you need to do is define the strongest currency and the weakest one and trade their pair.

For example, if AUD is the strongest and EUR is the weakest, you should sell the EUR/AUD pair. You'll simply trade in the trend's direction. The same approach can apply to the trend reversal if you see that the currency has reached extreme readings of strength or weakness.

Approach 2: Average Readings

Of course, it doesn't mean you can only trade if there are extremes in currency readings. However, this approach is riskier because the currency's strength doesn't have a determined limit as gold does, for instance. Thus, it means the currency can continue getting stronger or weaker, and you'll simply stay in a bad trade.

Currency Strength Meter: Limitations

Like any other technical tool, the forex strength meter has limitations that you should consider while trading.

No Guarantee

The currency strength meter doesn't give a 100% accurate understanding of the currency's strength or weakness.

When applying this technical indicator, traders believe that USD's strength or GBP's weakness means it's time to sell the GBP/USD pair. It's not quite like that: the currency strength meter simply provides additional confirmation. However, it's not a trigger for your trades.

A trader should also be careful when implementing the indicator on different timeframes. If the indicator shows that EUR is strong on the 1-hour timeframe, it doesn't mean the currency is strong on a monthly one.

Also, it's vital to follow the current market situation when you're actively trading. Strength or weakness can be a short-term occurrence caused by fundamental issues.

It Measures Strength Relative to Major Currencies

You know there are major currencies that are highly liquid and exotic currencies that are highly volatile and illiquid.

If you see USD is stronger than TRY, it doesn't mean it'll also be stronger than GBP or JPY, for instance. Don't make false conclusions: instead, measure the strength of the currency against major peers.

Higher Timeframes Are Better

Although the indicator can be applied to any timeframe, only higher periods provide a more accurate measurement of a currency's strength.

Too Many Versions

Another disadvantage of the currency strength meter is the wide variety of versions it has. It's challenging for a trader to figure out which one is the best version.

Using the Real Currency Strength Meter: Benefits

Despite the limitations we just discussed, the currency strength meter has many advantages, which is why it's used by traders worldwide.

Useful Currency Strength Meter

Although the indicator doesn't provide 100% accurate signals, it's useful when identifying a trade's direction. The indicator can provide an overview of a wide range of currencies.

Simplicity

The indicator is simple to use. All you need to do is apply the indicator, and it'll do all the calculations itself. Moreover, you don't need to change settings.

It Can Be Applied for Free

There are many versions of the indicator, and they're openly available on the web. So, you can simply find free versions and try them all.

It Saves You Time

The indicator allows investors to skip hours of fundamental analysis. Of course, it doesn't mean you should neglect fundamental analysis, but it does confirm trading ideas.

It Filters Currency Correlations

When trading multiple pairs, you should always remember that currencies can have a negative or positive correlation. The currency strength meter will show you whether currencies are both strong or weak. Even if you see that the currencies included in the pairs are both strong, the pairs usually move in opposite directions, so don't open the same trades.

Alerts of High-Risk Trades

The currency strength meter can prevent you from double risk. For instance, opening the same trade for negatively correlated pairs is a double risk. If you know that one of the currencies is strong and the other doesn't signal strength or weakness, you shouldn't open opposite trades for these pairs.

Tips for Traders: How to Use the Indicator to the Fullest

We'd like to share some tips that will allow you to use any version of the currency strength meter.

- Don't trade negatively correlated currencies in the same direction. This rule applies to correlation strategies when you shouldn't open trade in the same direction, knowing that pairs mostly move in opposite directions. The currency strength meter is a part of this rule. Even if you see that currencies included in the pairs are both strong, but the pairs usually move in opposite directions, don't open the same trades.
- Diversify. The currency strength meter can help you diversify your portfolio. You can open a trade with a currency that is losing its strength and open an opposite trade with a currency gaining momentum. This strategy doesn't give any guarantees against losses, but it can help limit them.

Currency Strength Meter: Is It Worth Using?

A currency strength meter is an interesting tool that can provide additional signals and valuable information on the market's direction. Although the indicator can't give 100% accurate signals, it can become a vital part of your strategy.

The main disadvantage of this indicator is the wide variety of its versions. Before you find your perfect option, you'll have to try many indicators. Fortunately, there are free versions.

So, to find your perfect tool, we recommend using a demo account like Libertex's, which can help you practice your strategies using the currency strength meter. The fact that this indicator is customised makes it possible to implement on any trading platform.

FAQ

Let's summarise what we've learned here.

How Do You Measure the Strength of a Currency?

There are many versions of the currency strength meter. But usually, they use a range between 0 and 10 to measure a currency's strength, with 10 indicating the strongest currency.

What Is the World's Weakest Currency?

There is no such thing as the world's weakest currency. Every currency can be strong or weak depending on the period and timeframe you use.

How Do You Know If a Currency Is Weak or Strong?

To figure out whether a currency is weak or strong, you can apply the currency strength meter.

How Do You Read Currency Pairs?

Let's consider an example. If the EUR/USD pair rises, it means EUR is stronger than USD, but it doesn't mean that USD per se is weak.

What Makes One Currency Stronger Than Another?

Currencies represent domestic economies. If the economy is strong and the political situation is stable, the currency will appreciate in value.

What Strengthens or Weakens a Currency?

Many factors can affect a currency's strength, including economic reports, news and supply and demand. All of these are vital forces that affect currencies.

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Leverage and Margin in Forex​

Leverage and margin are the terms each trader starts with. The concept is simple, so even a beginner trader can catch on fast. However, there are pitfalls that may affect traders' positions if they don't consider crucial points.

We summed up the useful information that will make your margin trading effective and prevent you from making mistakes that may cost a fortune.

Leverage: Should You Borrow From a Broker?​

The term leverage is quite simple and usually doesn't raise questions in traders' minds. Simply stated, leverage is a loan that a broker provides to traders so that they can increase their position size. However, you should remember that the loan is not for a precise term. You don't own the borrowed money and cannot use it to purchase an asset.

Here, we should mention the term 'lot size'. The standard lot size is $100,000. This means that if you want to trade one lot, you need to have $100,000. But what percentage of people have such a vast amount of money? Even if you choose smaller lot sizes — a mini lot of $10,000 or a micro lot of $1,000 — odds are you won't be able to provide the entire amount.

The lot size affects the amount you can make in profit. A standard lot allows you to earn $10 per pip. If you trade a mini lot, you can make $1 per pip; a micro lot will let you earn $0.10 per pip. So, it's clear why traders care so much about the lot size.

However, not everyone has $1,000. That's why brokers provide investors with leverage, which can be thought of as a loan. For example, you have $100, but even a micro lot is $1,000. So, a broker offers you 1:10 leverage. As a result, you have access to $1,000 and can open a position.

Each broker chooses a unique amount of leverage. The smallest one is 1:5, which means that your own money will be multiplied by 5. The largest leverage amount is 1:1000, meaning your funds will be multiplied by 1,000.

Leverage Trading: How It Works​

Put simply, leverage is the borrowed funds a broker provides to a trader. It looks like a bank loan but works differently. First, you don't have to pay the money back because you don't own it. Secondly, your risks rise significantly. This leads to the following questions: Why do brokers provide traders with money if they don't get it back or don't earn interest? Also, why do the traders' risks grow?

We're here to answer these questions. If we talk about a broker's profit, we should understand that every broker gets a commission for every trade you open. So, they benefit from you opening positions.

However, leverage is a two-way street. When it comes to risks, you should understand the following rule. Imagine you have $100,000, and you make $1,000 in profit. Here, your leverage equals 1:1, so your profit is 1%. If you have a 1:100 leverage, your profit will amount to 100%. Sounds good, doesn't it?

However, the situation is similar when it comes to losing positions. If you have 1:1 leverage, and you lose $1,000, your loss will be -1%. However, trading with leverage of 100 will lead to losing 100% of your funds. The prospect doesn't seem so attractive anymore. That's why some brokers limit the leverage they offer to their clients. For example, the maximum leverage Libertex offers (which it calls a 'multiplier') is 1:30 for retail clients and up to 1:600 for professional clients.

What AssetsCan Be Traded with Leverage?​

Leverage is used not in the forex market and beyond, covering different assets. For example, derivative investors apply for leverage to open larger trades. You can also trade CFDs for oil, gold and stocks via a broker using leverage. Below is a list of the securities most commonly traded using leverage:

- Currencies are the most popular assets for leverage trading. Every reliable broker offers leverage for currency pairs.
- CFDs are famous among traders because they provide the option to trade such attractive assets as gold, oil and stocks that can provide a significant return when profitable.
- Derivatives are also popular among traders. Leverage allows them to operate large positions with small expenses and sometimes even without any expenses at all.

How to Choose Forex Leverage Wisely​

We'd like to share simple rules to help you determine the perfect leverage that won't hurt your funds if you have a losing position.

- Step 1. Try different leverage ratios. The most effective way to minimise risks is to practice. It would be best if you remembered that higher risks accompany higher leverage. So, if you don't want to risk a lot, you should choose small ratios such as 1:5, 1:10. If you're confident in your knowledge and expertise, you can select higher levels.
- Step 2. Lower your risks. This is essential when it comes to trading. For this aim, you can use trailing and limit stops.
- Step 3. Determine the position size. The primary rule says a trader shouldn't risk more than 1-2% of each trading deposit.

Which Leverage Ratio Is Best for Forex Trading?​

There is no perfect leverage ratio. Otherwise, there wouldn't be such a wide range of them. We'll give you an example of a significant leverage amount and a small one. By comparing the results, you'll be able to determine the right ratio for you.

- Small leverage. Imagine you have a small leverage ratio, let's say 1:5. So, if you have $10,000, with this leverage amount, you'll have $50,000 to trade with. A mini lot allows you to earn $1 per pip. In our case, that would be $5 per 5 lots. Imagine you suffered a loss of 50 pips. That would be $250 or 2.5% of the position.
- Big leverage. In this scenario, we also have $10,000, but we want to increase our potential profit. So, we choose 1:50 leverage. As a result, we have $500,000. Now, we can trade five standard lots. However, one pip will now cost $10. Because we bought five lots, one pip will cost $50. Let's assume we lost 50 pips. Our loss will amount to $2,500. or 25% of our $10,000.

Margin: How to Connect with Leverage​

As you learn what leverage is, you should know about another term: margin. When we talked about leverage, we explored the question: "how can brokers provide such huge funds?"

It may seem risky to provide every trader with lots of money, but brokers know how to protect themselves using margin.

Margin is not a fee for a transaction; it's just a broker's insurance that you'll be able to operate open positions. The margin amount is held by the broker when you open a new position. A broker should have a guarantee that your balance won't fall below 0.

Imagine you have $100 and need 1:1000 leverage to open a one-lot position. Your $100 will be the margin, i.e., the minimum amount you need to open a trade and maintain it. Margin size depends on the number of lots and leverage you're using. The larger the leverage is, the smaller the margin you'll need to fill.

If leverage is expressed as a ratio, the margin is represented in terms of a percentage to the full position size. The margin size typically varies from 0.25% to as high as 2%.

Margin: How to Calculate​

To calculate the amount of margin required, you need to determine a percentage (or so-called margin requirement) of the position size (or notional value).

The required margin is calculated in relation to the base currency of the pair you're trading. It's worth noting that if the base currency is different from your account's currency, the margin amount will be converted to the account denomination.

- If the base currency and account currency are the same, to get the amount of the required margin, you need to multiply notional value (position size) by the margin requirement.
- If the base currency and account currency are different, to get the required margin, you need to multiply the notional value by the margin requirement. The result should be multiplied by the exchange rate between the base currency and the account currency.

Types of Margin​

Margin is always seen in MetaTrader. However, if you look at the image below, you'll see that there are different types of margin terms. Let's clarify each one.



- Required margin. This is a basic term meaning the amount needed to maintain your open position. Each open trade has its own required margin that will be held ahead of time. Let's consider an example. Imagine you open a trade for the EUR/USD pair. You want to trade one standard lot of $100,000. A broker requires a 2% margin. So, your required margin will be $2,000.
- Used margin. This is the sum of all the required margin of the open trades. This amount is not accessible to open new trades. In MetaTrader, this term will be expressed by one word: margin.
- Free margin. This term is placed in the trade window in MetaTrader. The idea is clear: free margin is the amount still available to open new trades.

Relationship Between Margin and Leverage

Simply stated, a margin account allows a trader to use leverage. To calculate leverage, you need to divide one by the margin requirement. For instance, if the required margin is 2%, the leverage will equal 50.

Inversely, to count the margin requirement, you need to divide one by the leverage ratio. For example, if your leverage is 1:100, the margin requirement will equal 1% because 1/100 is 0.01 or 1%.

Margin: Trading Example in Forex Market

Let's consider an example of margin trading. Imagine you're trading two currency pairs: USD/CAD and USD/JPY. You have $1,000, but you used a 1:10 leverage, so you have $10,000.

The first trade is a mini lot (i.e., $10,000) of USD/CAD. The margin is 2%. The required margin will equal $200. The second trade is a mini lot of USD/JPY. The margin is 3%. So, the required margin is $300. In the end, we have a used margin of $500.

What Is a Margin Call?

A margin call is the level at which a broker sends a warning to a trader that their margin has reached a dangerous point (40% or lower). A broker warns a trader to either close a trade to limit losses or add funds to stay in the market. A broker can but doesn't have to close the trader's positions.

Here, we should mention one more term: stop-out. This follows a margin call if a trader doesn't heed the first warning. The stop-out is at 50% or lower, which signals the margin has reached the minimum allowed amount. This is the point at which a broker will close the trader's deals without any notification to prevent the balance from reaching negative figures.

Benefits and Limitations of Leverage and Margin​

Both terms have their own advantages and disadvantages. Let's consider them to avoid mistakes.

Benefits:
- Big funds. The main advantage of leverage and margin is the opportunity to access larger funds than you have. As a result, you can open larger positions.
- More considerable profits. A larger position size provides an opportunity to gain more massive profits as lot size and pip value are interconnected.

Limitations:
- Larger losses. The main disadvantage of margin trading is the larger losses you can suffer when taking leverage.
- Illusion. Another limitation you may notice is the illusion of significant funds. You should always remember how much money you actually have.

How to Minimise Risks​

The limitations of margin and leverage directly relate to the risks you may encounter. So, larger losses and the illusion of significant funds are the risks that may affect your trades' effectiveness. To minimise them, you have several options.

- A reliable broker. As we mentioned above, there is a wide variety of leverage ratios. It looks attractive that you can multiply your funds by 1,000. Still, you should remember that your risks will surge dramatically. Choose a reliable broker, such as Libertex, that will limit the leverage ratio to only safe ones.
- Stop-loss. Although a broker uses a margin call and stop-out, we recommend you avoid such situations. To do so, use stop-loss orders. Count the amount you can risk before you place a trade. But remember what we discussed about wide and loose stop-losses. The risk-reward ratio should not be less than 1:2.
- Take profit. This type of order can allow you to fix your potential profit before a trade turns against you.
- Strategy. Before you place an order, you should know how much money you can trade, so choose your position size wisely. Try different leverage ratios to define the perfect one that suits the amount of money you have and the assets you want to trade.

Forex Margin and Securities Margin​

We previously talked about the forex margin. To make that concept clear, we need to discuss what a securities margin is.

The amount usually equals up to 50% of the asset price. Here, we can use the term "buying on margin." For example, if you buy stocks, you take a loan from a broker. It's considered a down payment and allows you to own the security you purchase.

When we talk about the forex margin, it's not borrowed money. And you don't purchase currencies to own them.

Conclusion

To conclude, margin and leverage are basic terms of forex trading. They allow a trader to open positions no matter what amount of money they have. This option is attractive, but traders should remember the risks they may face.

To know how to use leverage and margin, you should practise. It's wise to do so with the small leverages that Libertex provides. The perfect place to practise new techniques risk-free is our demo account.

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What are derivatives in finance?

Derivatives are a financial agreement that establishes a value through the value of an underlying asset. This means that they have no value of their own but depend on the asset to which they're linked.

Derivative contracts have existed since time immemorial, where they were used to maintain equilibrium in the exchange of goods or services on a global scale. Today, the market for derivative contracts is growing because they make trading and user transactions more accessible. With derivatives, traders don't need to worry about the complexity of various currencies and differences in national accounting systems that previously prevented transactions between users.

So, what is a financial derivative?

Financial derivatives, as mentioned above, are contracts that base their value on an underlying asset. With a derivative, the seller of the contract doesn't necessarily have to own the asset but can give the necessary money to the buyer for it to acquire it or give the buyer another derivative contract.

These financial derivatives are used to hedge investments and speculate. So, if a trader wants to speculate on a derivative, they can make profit if the price of their purchase is lower than the price of the underlying asset. For example: if you want to buy a futures contract (which we'll talk about later) for any asset that has a price of $1,000, and its price at the end of the contract increases to $1,100, you'll earn $100. In addition, you could also benefit from the fall in the sale price of the asset you've selected.

They can also be used as a hedge, i.e., to minimise the risks of a short-term trade where you could be affected by fluctuations in the price of the asset.

While there are many types of financial derivatives, the three most used are options, futures and swaps.

History

Derivatives aren't a new phenomenon in financial markets. According to some sources (mostly rumours), they appeared in the 25th-21st centuries B.C. Merchants from Babylon needed to equip their caravans, so they started to make agreements with creditors that allowed them to get loans. Repayment was influenced by how successful the delivery was. As a result, risks were distributed between parties. At the same time, the interest was much higher than the ordinary loan to cover losses in case the cargo was lost.

The next example of modern derivatives was found in 12th-century Europe. The economic upturn caused trade to develop, resulting in trade law being created at roughly the same time. A document called a lettre de faire served as a forward contract for the delivery of goods at a certain time.

At the beginning of the 17th century, options for tulip bulbs were traded in Amsterdam. By the 1630s, the first forward contracts appeared on the Royal Exchange in England.

Later on, derivatives were used in Japan. The history dates back to the 1650s when Japanese landlords received rent in the form of the rice harvest. However, their rent depended on weather conditions. Landlords started to use warehouses to keep rice and used rice coupons. Owners of coupons acquired specific amounts of rice at a certain date at a predetermined cost in the future. In turn, landlords received a stable income as rent payment.

In the 1930s, the modern put and call options became a commonplace feature on the London Stock Exchange.

By the 1960s, options trading for commodities and stocks became standard practice on American stock exchanges. The first forward contract was made at the Chicago Board of Trade on 13 March 1851, and in 1865, grain trading was formalised by the introduction of futures contracts. These contracts were standardised by determining the specific quality and quantity of goods and the time and place of delivery.

In 1972, the International Currency Market department was created at the Chicago Mercantile Exchange. It became the first specialised exchange platform for trading currency futures contracts. Before, only commodities were used for futures trading.

Later, in 1973, the Chicago Board Options Exchange was established. By the late 1970s, derivatives trading became common practice on all of the world's stock exchanges.

Trading Derivatives

The derivatives market is very large. It's believed that the market is valued at around $1.2 trillion due to the large number of derivatives available for assets such as currencies, stocks, bonds and commodities. Even in 2016, a figure was announced that pointed to the 25 billion contracts of derivatives traded, with Asia leading the way with 36% of the volume, North America with 34% and Europe with 20%.

Today, the derivatives market as a whole is divided into two smaller markets.

OTC: Over The Counter

Also known as non-exchange derivatives, these are contracts that are made directly and privately, i.e., they're not listed on any stock exchange. They're usually used by investment banks.

Exchange-Traded

These are quoted on stock exchanges and are used mostly by small investors. They're public, and the terms of the contract are predetermined.

Types of Financial Derivatives

Financial derivatives have marked important milestones throughout the global economy. Among the most popular are:

- Collateralised Debt Obligations (CDOs)
- Swaps and Credit Default Swaps (CDSs)
- Forwards

CDOs are financial instruments that are considered the main cause of the economic crisis that occurred in 2008 and which based their value on the repayment of the loans offered.

Swaps offer investors the possibility of exchanging assets or debts for another of similar value, managing to reduce the risks for the parties involved. The swaps resulted in the creation of CDSs, which were sold as insurance against the default of municipal bonds and which also contributed to the 2008 financial crisis.

Forwards are another type of OTC financial derivative and are used to buy or sell an asset at a previously agreed-upon value on a specific date in the future.

In addition, there are financial derivatives that are used to conduct decentralised trading in the network, that is, without an intermediary. The three most popular are the following.

CFDs

CFDs, or Contracts for Difference, allow you to buy or sell a certain number of units of a particular asset, depending on the decrease or rise in its value and thanks to its leverage. The gains (or losses) depend on the fluctuation of the asset's price. With CFDs, you can open long positions if you think the price will increase or short positions if you think it will decrease.

For example, suppose that the price of a stock is $100, and you decide to buy a thousand shares of it for a total of $100,000. If the price increases to $105, you'll earn $5000 since each share you bought will earn you an additional $5. That means your total profit will be $105,000.

Futures

Futures are used to exchange an underlying asset at a future date and at a predetermined price, which protects buyers from drastic changes in asset prices. These are used mostly to trade commodities.

For example, a cookie maker could buy sugar futures at a set price. In this way, if the price of sugar increases considerably, the manufacturer can afford to buy the necessary quantity a few months later.

Options

Options are contracts that are made between two parties and allow the owner to buy (call) or sell (put) assets at a specific price and at a specific date or before. They're most frequently used in stock trading.

With options, the buyer has the right to buy or sell the underlying asset, while the seller is obliged to buy or sell it at the agreed price if the buyer exercises their right.

For example: suppose that the shares of a telephone company are valued at $95 today. But next month, the company is launching a new device that will most likely increase the value of the shares. So, you acquire call options at $100 for three months, which are worth $5 for each one on the market. As a buyer, you can exercise your right to call in three months, so the seller must sell the shares at $100.

Advantages and Disadvantages of Derivative Trading

Operating with derivatives can mean big profits or big risks. That's why you should first acquire the necessary knowledge to trade them responsibly.

Among derivatives' main benefits are that they protect investors against losses while, at the same time, helping them profit through an asset's gains.

Unlike direct investments in stocks, derivatives allow you to make a profit quickly. In addition, you can create your own strategies so that you can use them to your advantage.

However, because the market is open, the values are constantly fluctuating, which entails numerous risks. One of them is that you can lose the entire value of your investment in a matter of minutes if its price falls considerably.

On the other hand, most contracts have a predetermined duration, so if your investment doesn't profit within the agreed time, your losses could be 100%.

Finally, the limited knowledge we have about derivatives is a big risk. Because a derivative's value depends on the value of its underlying asset, assigning an exact price becomes complicated. That makes them appealing to fraudsters who take advantage of the situation and operate against professional investors and beginners.

CFDs vs Futures and Options

CFDs, futures and options allow you to trade based on the variations in an asset's price. That is to say, when operating with derivatives, you don't buy or sell the asset itself. In addition, both kinds of derivatives allow you to trade with leverage, so you can make transactions with more money than you currently have. However, CFDs add flexibility by allowing leverage to be made with smaller amounts and with totally different assets.

To decide which kind of derivative to use, you must first know what you're looking for since each derivative has particular characteristics. For example, futures and options are ideal for opening long-term positions because their daily commissions are cheaper, and their opening rates are higher than those of CFDs.

On the other hand, CFDs are better suited to small and short positions. In addition to that, CFDs have greater liquidity and don't feature an expiry date, meaning you can close the position at any time. With futures and options, there may not be enough liquidity, and the cost to undo the position is very high.

Is It Worth Trading Futures or Options?

Previously, we talked about the differences between CFDs and futures and options. However, you should also take into account certain particularities between futures and options so that you can choose the one that best suits you.

When it comes to futures contracts, the buyer must pay the agreed-upon amount initially at the time the expiry date arrives, while, with options, the buyer can cancel the contract.

Therefore, operations with future contracts are much stricter and provide greater security. Options, on the other hand, are less rigid and will allow you to leave the operation if the circumstances warrant it.

Why Invest in Derivatives?

While it's true that these are volatile investments, derivatives can be an excellent option to get the most out of your portfolio.

Using financial derivatives, it's possible to speculate and take advantage of the variations presented by the prices of the underlying assets, but it's also possible to manage and reduce the risks that an investment brings with it.

When engaging in speculation, you can make a profit if the asset's purchase price is lower than the asset's price at the end of the futures contract.

On the other hand, when we talk about the use of derivatives to manage risks, the owner of an asset can protect his/her portfolio against a decrease in the value of the asset. If the asset's price increases, you can earn more money, but if the asset's price falls, you can earn or lose less money.

In turn, the increase in leverage is another excellent reason to use derivatives since you can trade with only $10 but open a position worth $100 or $1,000.

What Is an Example of a Derivative?

A convertible bond can be considered to be a derivative. The value of a convertible bond will depend on the value of the underlying asset, which makes it a derivative security.

What Are Derivatives and the Different Types?

A derivative is a financial instrument whose value is based on one or more underlying assets, for example, bonds, commodities and currencies. There are four types of derivatives: futures, swaps, options and forwards.

Why Do Companies Use Derivatives?

Derivatives are a perfect way to hedge portfolios and reduce risks. Moreover, they're easy to use and have a low cost.

What Are Derivatives in Simple Words?

A derivative is a contract that allows or obliges parties to perform certain actions concerning an underlying asset. Derivatives can be structured on a range of different assets, including futures, CFDs, commodities, etc.

What Are Derivatives Used For?

Derivatives are used to hedge investments. Another purpose is to speculate on future moves in the underlying asset.

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Everything You Need to Know About Technical Indicators

Traders are divided into two major groups, fundamental and technical, based on the types of analysis they use. Fundamental analysis relies on economic data and news, while technical analysis checks for signals using technical indicators.

A wide range of indicators provides traders with a vast number of signals. Nevertheless, it's crucial to know what indicator to apply in different market conditions. Here's a comprehensive guide that will help you quickly learn about all of the useful indicators and build a solid trading strategy.

Technical Indicator: Definition

Before we start, let's define what a technical indicator is. A technical indicator is a set of mathematical calculations that use historical price movements to predict future price direction.

Technical tools are famous among investors because they provide reliable signals about entry and exit points, the direction of the trend and its force. They ease the process of market analysis and help create the potential to make profit. You should know that indicators serve different aims and be aware of when and how to use them.

How Do Forex Indicators Work?

A technical indicator is a tool that calculates previous price movements. It can use prior open, close, high and low prices for a specific period of time to predict the price's future direction. Traders don't have to do any calculations, and the indicator is applied automatically.

Still, to read the indicator's signals, you need to practise a lot. Some technical tools provide several signals, and you should keep them in mind. It may sound complicated, but if you choose the indicators that best suit your trading strategy, you only need three to five of them.

It's worth mentioning that technical indicators can be used for different securities such as stocks, currencies and commodities. Moreover, most of them work perfectly well for stocks and currencies. Technical indicators have different settings you should know about to use them efficiently. Usually, they differ regarding the timeframe you trade on.

Most of the popular indicators are set by default in trading platforms, for instance, MetaTrader. You can place them on the chart in just several clicks.

Let's consider how to do this using MetaTrader 4. Click the 'Insert' window and choose 'Indicators'. After that, you can choose from trend indicators, oscillators, volumes and Bill William indicators. Each group includes different instruments.



Trading Indicators: Types

There are many types of technical instruments. However, we'd like to highlight three of them. Those are overlays, oscillators and Bill Williams indicators:

1. Overlays are applied directly to the chart. So, they interact with the price. Overlays are so-called trend indicators. Thus, you can see the current trend, its force and its direction.



2. Oscillators are another type of technical tool. The indicators usually appear below the price chart in a separate window. Oscillators provide perfect entry and exit points. However, they can also give signals about the trend direction and its strength.



3. Bill Williams Indicators. These indicators serve the same aims as the previous ones. For convenience, experts mark a group of indicators developed by Bill Williams, a famous trader who invented his own trading theory and six famous technical instruments. We'll discuss all of them later.

Trend Indicators

Trend indicators or overlays are used to define the direction and force of the current trend. "The trend is your friend." Ever heard this phrase? The trend is one of the most important patterns you should be able to determine on the chart. If you find a trend, you can be sure you'll find useful entry and exit points. There's a wide range of trend indicators, and we'll mention the most effective of them.

Moving Average

The Moving Average is a leading indicator. It's popular because of its simplicity and effectiveness. It's widely used to build other indicators; you'll notice it if you read the whole list of indicators. Many traders like it because it provides strong signals.

There are four types of moving averages that serve different aims, such as simple, smoothed, exponential and linear weighted. However, all of them have something in common: they use average prices that smooth out market fluctuations.

The indicator consists of one line, but traders usually use two to three lines with different settings to catch a signal. The Moving Average has two main functions: first, it determines the trend direction; second, it serves as a support level.

Bollinger Bands

This indicator has three lines and is based on the Moving Average indicator. It's a perfect measure of market volatility. When lines move apart from each other, market volatility is high. When they're close to each other, the market is consolidating.

Bollinger Bands help you find an entry point if the price rebounds off either the upper or lower band. The middle line can be used as a support level.

Ichimoku Kinko Hyo

It's one of the most complex indicators. Although it sounds complicated, it's not too difficult to read its signals. Ichimoku includes three lines and one cloud. This instrument shows the trend's direction, strength and momentum. Its lines can also be used as support and resistance levels. The Ichimoku indicator submits trade signals to open a long or short trade.

ADX

Unlike other technical instruments, ADXdetermines the strength of the trend but doesn't show its direction. Although it's a trend indicator, it's placed in a separate window below the price chart. The ADX consists of three lines: ADX, +DMI and –DMI and has several levels that are important to define the trend's force.

If the index is below 25, the trend is weak. If it consolidates between 25 and 50, the trend is strong. In the range between 50 and 75, the trend is robust. When ADX rises above 75, the trend is powerful. Besides the trend strength, you can get buy and sell signals with this indicator. When +DMI breaks above –DMI, it's time to buy. If the opposite happens, consider selling the asset.

Parabolic SAR

SAR means Stop and Reverse. This means that this tool can both determine the trend and signal when to close the trade. The indicator interacts with the price chart and is represented by dots, not lines. When dots are placed above the price, the trend is bearish. If dots are located below the price, the trend is bullish. The trend confirmation appears when there are at least three dots. It can also be used as a signal to buy or sell.

Standard Deviation

The indicator is used to measure the strength of volatility. It's placed in a separate window and has only one line. When the line rises significantly, it's a sign of high volatility. On the other hand, when the indicator fluctuations are low, volatility is low.

Oscillators

Oscillators are another big group of technical indicators that mostly helps find entry and exit points. They're momentum instruments whose signals are based on bouncing between specific levels. Let's look at the ones that will provide the most reliable signals.

MACD

The MACD or Moving Average Convergence Divergence is an oscillator calculated on two Exponential Moving Averages. The tool is used to determine trend reversal points that may become the perfect entry and exit point together with the strength of the trend. There are four main signals the indicator provides: divergence, overbought/oversold points, the signal line crossover and the zero-line crossover that show the trend's direction. It's one of the most straightforward indicators you can apply to any timeframe.

Relative Strength Index (RSI)

This oscillator shows changes in the price movement and signals when the market is overbought and oversold, thus giving perfect entry points. The indicator has two main levels: 30 and 70. When the RSI is above 70, the market is overbought. When it's below 30, the market is oversold. It's also possible to find a divergence between the indicator and the price to determine a trend reversal. The RSI and MACD are often applied together for more trustworthy signals. The standard setting for this indicator is a 14-day period.

Average True Range (ATR)

This oscillator shows how volatile the market is and the average volume of the trading range based on the timeframe. However, the oscillator doesn't show the direction of the trade. It just rises when the volatility is high, and the trend becomes more reliable and falls when volatility isn't significant.

Envelopes

This oscillator is commonly used to define the oversold and overbought market and price targets. It's based on two Moving Averages. Sometimes, envelopes are types of Bollinger Bands. Although the envelope indicator consists of only two lines, they form a channel within which the price moves. You can purchase and sell them according to the price movements within the channel.

Stochastic Oscillator

The stochastic oscillator resembles the RSI. It also shows overbought and oversold market points and a possible trend reversal. It has two levels: 20 and 80. The stochastic oscillator allows you to trade on divergence and has the rules as RSI lines. However, the indicator has two lines that provide additional buy/sell signals. This oscillator can be implemented on any timeframe.

Momentum

In general, momentum reflects the strength of the trend. Although indicators like the MACD, RSI and Stochastic Oscillator are used to gauge the momentum, momentum exists as its own specific indicator that shows the direction of the trend. When it's above 100, the trend is bullish. When it's below 100, the trend is bearish. You can use the indicator with the Moving Average, and the crossover may provide buy/sell signals.

Commodity Channel Index (CCI)

Like most of the indicators, CCI provides entry points, the trend strength and direction and periods of overbought/oversold conditions. It can also be used to find convergence/divergence. When applying the indicator, you should keep in mind the period you choose in your settings. The shorter the period is, the more fluctuated the indicator will be. So, if you need to smooth the market movements, you're better off choosing longer time periods. The most popular settings are 14 and 20.

Relative Vigor Index (RVI)

This is another indicator that gauges trend strength. The RVI is similar to the Stochastic Oscillator and has two main lines. Just as with MACD and RSI, RVI reflects convergence/divergence and overbought/oversold areas. Because there are two lines, their crossover will serve as a signal to buy or sell.

Bill Williams Indicators

The third famous group of symbols is Bill Williams Indicators. Although many traders have invented their own indicators, only Bill Williams' indicators are popular.

Acceleration/Deceleration (AD)

This tool is widely used to determine the price change. AD turns around before the price momentum changes. As a result, it can be used to forecast a price reversal. And although it looks the same as the Awesome Oscillator, its signals should be read differently. AD can provide signals related to the market reversal as long as there's an entry point.

Alligator

The alligator indicator is used to define the trend direction. It also helps filter signals leaving the range-bound market and has three lines. Based on other indicators, you can see that the lines' crossover provide buy/sell signals while their direction reflects the trend.

Awesome Oscillator

This tool gauges momentum and predicts price reversals and corrections. The Awesome Oscillator gives bearish and bullish signals and precisely determines the trend direction. That's why you can use it to enter the market and trade on the trend.

Fractals

Fractals are easily found on any price chart. However, to make traders' lives even easier, Bill Williams created this indicator to find entry points and stop-loss levels.

Gator Oscillator

This tool identifies when the market is trending and when it's consolidating. The Gator Oscillator shows periods of market volatility. It works well with the Alligator and almost resembles it.

Market Facilitation Index (MFI)

This tool gauges the strength and weakness of the price movement. The indicator shows the trend strength, so you'll know whether to trade it or not based on the moment when a new trend has chances of starting and when it's best to avoid entering the market.

Tips on How to Use Forex Indicators

Although there are many indicators, we gathered several tips that you can apply to any of them for efficient usage.

- Keep settings in mind. If you use MetaTrader, all of the indicators we mentioned above are automatically set. However, their settings should differ based on the timeframe you trade on. Otherwise, there's a risk of false signals.
- Combine indicators. One indicator is never enough. You're better off with at least three to five tools to check signals. To confirm the signal, we recommend using two to three indicators at once.
- Combine wisely. While we recommend combining indicators, you should do so wisely. Did you notice that some indicators are similar? If they are, don't use them to confirm a signal. Choose ones that serve the same aim but don't resemble each other.

Conclusion

To sum up, there's a wide range of forex indicators that can help you determine a trend and its strength, as well as find the perfect entry/exit points and support/resistance levels. However, you need to practise in order to find the tools that will match your trading strategy. It's better to do it using a free Libertex demo account. The whole range of indicators and real market conditions will help you build a strong strategy.

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What Is a Forex Momentum Indicator?

One of the most critical aspects of the market for traders is price movement. For this exact purpose, there are many technical indicators used in the forex market. The one we'll be discussing today, the momentum indicator, helps determine the price fluctuation in the market and identify trends and their strength.

For a better understanding of how to utilise the indicator, this article will tackle how it works and how it's used in forex trading.

Momentum Indicator: How It Works

To analyse a market on a technical level, a trader has to understand the prevailing trend: if it's present or not, if it's just starting or if it's already ending. In doing so, a trader also has to know and judge how strong the trend is. This is where momentum indicators are used.

The momentum indicator is a kind of forex technical indicator known as an oscillator, which is used to identify the speed and strength of a price movement and trends in the market.

The momentum indicator can be used as a tool to identify and measure the momentum of a specific currency pair. It compares the existing and current prices to previous prices within a certain period and measures the velocity of these changes. Traders also use it in determining overbought and oversold conditions in the market.

Traders use popular forex momentum indicators like the Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI) and Stochastic Oscillator. A single line usually represents the momentum indicator in a particular section of the chart.

How to Calculate Momentum Indicator

Since it's plotted as a single line on the chart, you must calculate the difference between the previous and current prices. There are various trading tools and software you can use to automatically calculate the momentum. But it's still best if you know how the calculation works.

A price's momentum is easy to determine since there are many versions of its formula you can use. However, the principle remains the same: you compare the current price and the previous price in a specific timeframe.

Let's go over the parameters and variables:

Let CP1 denote the current closing price, while the previous closing price from n periods ago is CPx. With this, the momentum indicator formula goes like this:

Momentum = (CP1/CPx)*100

Thus, you can determine whether the current price is better than the previous one and how fast the price is moving.



Based on this formula, we can observe the following:

- Since the value you get will be in percentage, we'll identify it based on percentage.
- If the obtained percentage is above 100, the current price is higher or more significant than its previous price. But when it's lower, it's the exact opposite: the current price is lower.
- The distance of the obtained percentage from 100 shows how fast the price movement is. For example, if you get 133%, you can say that it's moving up and increasing faster than a momentum with 130%.

Advantages and Disadvantages of a ForexMomentum Indicator

A momentum indicator has its benefits and drawbacks.

Advantages:

- It's easy to distinguish. Since momentum indicators are plotted as lines, you can easily interpret them without any complicated mathematical calculations. A momentum indicator shows the price movement and its strength no matter what direction it moves in.
- It has a flexible calculation. As shown in the previous section, you can quickly determine the momentum even when changing the price's past performance period.
- It can be used with other technical indicators. You can combine it with other indicators, especially those that show the price movement's direction.
- It's an efficient signal. It signals a change in trend, whether there's an increase or loss in the momentum.
- It can identify reversal points in the market. With a momentum indicator, a trader can spot where the market can reverse. This is done by observing the divergence of the price movement and momentum.

Disadvantages:

- It should be used with other indicators. Although this may seem like a pure advantage, it can also be a drawback because it means that the momentum indicator can't provide accurate signals or data all the time. It requires working with other indicators to do so.
- It's significantly influenced by time. Even if it deals with the movement of prices, the momentum indicator is more affected by time. It depends only on the periods where high and low instances are observed. It doesn't say anything about the magnitude of the change that can happen.
- It only shows several pieces of data. There isn't much information you can get by looking at this indicator on the chart, especially if the price is moving aggressively.
- It's a lagging indicator. Since you'll use past prices, there can be a delay before observing the chart's momentum indicator compared to other indicators.

A Guide to Using Momentum Indicator in Trading

Although it may seem complicated, using the indicator is quite simple and easy. You can follow the steps below to use it in trading.

Step 1 - Open Your Trading Account

Create a trading account and log in to the platform.



Step 2 - Display the Momentum Indicator

Use the available chart analysis settings and choose the momentum indicator. For most platforms, you can customise the indicator's colour and width.

Step 3 - Indicate Your Momentum Setting

Choosing the right momentum setting is essential. Select what timeframe you want and focus on a specific period. A separate window or an additional chart extension will display the momentum just beneath the price chart.



The most commonly used settings are 7, 14, and 21. Settings over the value of 21 are less sensitive, thus creating less noise and a smoother line on the chart. Values less than 10, however, are too sensitive and result in more market noise.

Step 4 - Observe and Read the Momentum Indicator

Look out for trend conditions on the chart. Here are some indications from the movement of momentum.

If momentum is above 0, and the price is increasing:
- The uptrend is accelerating.
- There's a strong upward trend that's likely to continue.

If momentum is above 0, and the price is decreasing:
- The trend is losing upward momentum and is a warning that the momentum is getting weaker.
- However, this doesn't mean that there will be a reversal.

If momentum is below 0, and the price is decreasing:
- The downtrend is accelerating.
- It's a strong trend that's likely to continue.

If momentum is below 0, and the price is increasing:
- The trend is losing downward momentum and is a warning that the momentum is getting weaker.
- However, this still doesn't mean that there will be a change in trend.

Step 5 - Pay Attention to Signals

You can take signals when the momentum crosses 0. When it crosses 0 upward, the indicator generates a buy signal, but when it crosses 0 downward, the momentum indicator generates a sell signal.

Step 6 - Use Supporting Technical Indicators

Since there are instances that not all generated signals are reliable all the time, it's best to use two indicators to generate more accurate signals.



Step 7 - Open Your Positions

After assessing the overall price movement, you can open either two types of positions: short or long. Let's say your momentum settings for the two indicators are 20 and 7.

You can open a long position when you confirm an uptrend with the momentum. You can do so by observing the movement of the two momentum indicators. If the momentum of 20 moves 0 upward, wait for the other momentum to cross 0 and continue to rise.

You can open a short position, on the other hand, if there's a confirmed downtrend on the chart. Observe if the momentum of 20 is moving under 0 since this will signify a downtrend. Then wait for the other momentum to cross downward and move below 0. When all of these happen, you can open a short trade.

More Efficient Ways of Using the Momentum Indicator

The best way to use a momentum indicator is in combination with other indicators. Here are the most efficient combinations you can use.

Momentum Indicator + Momentum Indicator

Traders use this combination as a way to confirm trends. When the second momentum confirms the prevailing trend in the first one, you can decide to open a long or short position.

Momentum Indicator + Volatility Indicator

This is a popular strategy used by many traders. This combination of momentum and volatility measures forms a squeeze forex momentum indicator.

Since the volatility indicator indicates the market's current volatility, the squeeze will be revealed and narrow down to a historically low level of volatility. Moreover, the squeeze momentum indicator will gauge the direction of the sudden movement that comes after the squeeze.

Momentum Indicator + Moving Average

This combination shows the momentum indicator and a trend-like indicator in one chart. The moving average line will appear and stretch across the momentum line upon completing the moving average settings. Based on this combination, trades can buy when the momentum crosses above the MA line and sell if the momentum indicator crosses below it.

The Best Momentum Indicator Trading Strategies

Momentum indicators are also beneficial in various trading strategies. Here's how the indicator is used in the most popular forex trading strategies.

The Momentum Indicator in Swing Trading

Swing trading is a strategy that utilises small price shifts in a more significant trend. It's based on the idea of price trends being rarely linear and focuses on the oscillations caused by bears and bulls.

With the momentum indicator, swing traders can trade within a shorter time frame. They can also hold their trades for as long as the momentum lasts.

The Momentum Indicator in Trend Trading

This significantly focuses and depends on trends. Since it's not easy to analyse the momentum in a particular direction, momentum indicators are used.

With momentum indicators, the magnitude of the recent price changes can be measured by trend traders and evaluate overbought or oversold conditions.

The Momentum Indicator in Intraday Trading

The timeframe greatly influences this. Since the goal of intraday traders is to trade as quickly as possible, the momentum indicators help them spot time frames in the market with a high volume. With this, they can buy and sell quickly and without interruption.

The Momentum Indicator in Scalping Trading

Scalping traders focus on trading off based on the small changes in prices. With a momentum indicator, traders can get signals of prices' actual movement quickly, even before it occurs.

Conclusion

Momentum indicators are good technical indicators. However, it works more accurately when combined with other indicators and trading strategies. The best way to fully grasp how to use this is to practice. To do that, you can open a Libertex demo account and practise trading using any momentum indicator without any risk.

 

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