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Author Topic: Libertex was recognized as the best trading application and cryptocurrency broke  (Read 129881 times)

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Euro and the US dollar reach parity for first time in two decades

It seemed almost a given that one euro would always be worth at least $1.10. In fact, from 2007 to 2014, the single currency averaged about $1.40 and even looked as though it would hit $1.60 in the wake of the Global Financial Crisis of 2007-2008. How the mighty have fallen since then! That's right. For the first time in twenty long years, the euro and US dollar are at parity. But the question remains: how did we get here, and what does this mean for traders and investors?

Why the euro?

Many have pointed to the pandemic as the catalyst behind the euro's downturn, and while it certainly did play a role in precipitating this last leg down to parity, the rot had already set in much earlier. The coronavirus pandemic and the inevitable supply chain ruptures and soft monetary policy that this engendered certainly did fan the flames of inflation. And in a world of dollar-denominated commodities, this naturally led to euro depreciation. But the pandemic was a global black swan that affected virtually every country and currency in the world, so why was the euro hit harder than the rest? The short answer is – it wasn't. The Japanese yen has taken just as much of a beating as has the British pound, with all three currencies down over 12% YTD.

Cause and effect

Now that we've established that it isn't so much a euro problem as an any-currency-but-the-dollar problem, we can start to properly examine the whys and wherefores. The real turning point for a majority of the majors was 2014. The damage from this eight-year downtrend now stands at close to a 30% drawdown, and there's no sign of a reversal anytime soon.

And, as usual, central bank policy has played a large part. While the US Federal Reserve has kept its funds rate above zero throughout the past decade, the European Central Bank (ECB) and Bank of Japan (BoJ) were in negative territory for several years. Of course, this makes it harder to react effectively to a crisis like the pandemic and limits possible stimulus measures while also complicating policy normalisation thereafter. While the Fed and Bank of England have been able to raise interest rates to 1.75% and 1.25%, respectively, the BoJ and ECB are still stuck below 0% as inflation runs rampant.

Global recession threatens

With all this talk about dollar gains, it's easy to lose sight of the fact that this is just as bad news for the US as it is for the EU. A strong dollar means US exports are more expensive and thus less competitive. Talk of European countries switching gas suppliers to the Henry Hub, for instance, is now completely nonsensical as this already high-priced option is now 12-15% dearer. Amid a growing energy crisis, fossil fuels in general just got a lot more expensive since oil, regardless of its origin, is traded in US dollars.

This, in turn, will pile even more pressure onto European manufacturing at the worst possible time. Indeed, the eurozone's biggest economy, Germany, recorded its first trade deficit in goods since 1991. As monetary tightening continues, which it simply must, the risk of both the US and Europe slipping into a recession grows.

So, where's the smart money?

Basically, anywhere but the euro and JPY. Seriously, though, the flight to safe-haven currencies like the US dollar and the Swiss franc is already well underway and only looks likely to intensify as the rate hikes keep coming. In fact, in a note last week, Deutsche Global Head of FX Research George Saravelos warned investors that the retreat to the dollar could become even more extreme if the Fed continues to tighten, pushing both the US and eurozone further into recession.

One would imagine that stocks should take a beating in this scenario, though they have managed to defy analysts' expectations up to now, with all conventional wisdom contradicting the recent market rallies. Beyond the dollar, however, another major beneficiary of capital flowing out of currencies and other risk assets would have to be gold and silver. The yellow metal is already up 12% YTD and could prove an excellent hedge against further inflation.

Trade the downs and the ups with Libertex

Libertex offers a wide range of CFDs, from Forex, commodities and stocks, to ETFs and crypto. Apart from the EUR/USD pair and the US Dollar Index, we also offer the ability to trade such underlying assets as gold, silver and oil/gas. And because Libertex allows both long and short positions, you can open a trade depending on where you think the market is headed.


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. Available for retail clients on the Libertex Trading Platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Binary trading vs CFD trading: What is the difference?

Contracts for difference (CFD) and binary options are some of the most popular trading instruments available to online traders.

To understand it, we must analyse in detail the two trading platforms and put them side by side to see what is what.

In this article, we'll briefly review the similarities between CFD trading and binary options trading, assess their differences, and, hopefully, draw a conclusion.

What Are CFDs and Binary Options?

Many beginner traders confuse these concepts. Therefore, first of all, we want to inform you briefly about each of these forms of trading in the stock market. So, what are CFDs and binary options?

CFDs (Contracts for Difference)

CFD means contracts for difference. In short, a CFD is an agreement between you and a broker to pay each other the difference between the price of an asset (such as gold, EUR/USD, Microsoft shares, etc.) at the time the contract is made and its subsequent price when it decides to terminate the contract, that is, close the transaction.

It means that you do not own the real asset, but you make a contract with the owner (in this case, the trading platform) to resolve the difference between you when the deal is over.

This opens the door to many opportunities, such as the fractional ownership of shares, short shares in assets that do not offer them and much more.

Binary Options

Binary options are often referred to as "yes or no" investments. If you believe that an asset will be quoted above a fixed price, you are predicting a "yes" and buying the binary option. If you believe that an asset will fall below a fixed price, you are forecasting "no" and selling the binary option.

There is a low barrier to entry. A binary option contract will not cost more than $100. You are not buying an underlying investment or even the option to buy an underlying investment. You are simply placing a bet on how the price of that investment will move.

These contracts always close at $0 or $100. You either win or lose. If it correctly predicts the movement of the price, it's on the winning side of the operation, and the person on the other side of the contract who incorrectly predicted the outcome is on the losing side. Your profits or losses can not exceed $100 in a single contract, which means that your exposure to risk is limited.

Limited, but far from not existing. You can negotiate multiple contracts to increase potential profits, but at the same time, the size of the possible losses increases.

To perform a binary option, you must follow three main steps:

- Decide on an asset or market to trade.
- Decide an expiry date or time for the option to close. Most trading platforms allow you to sort by expiry date, so you can see contracts that expire within the next hours or days. Most contracts will expire at the end of the trading week, except those linked to economic events.
- Decide if you want to buy or sell the binary option according to the exercise price and the expiry date. The exercise price is essentially a line in the sand. If you believe that the asset will be above the strike price when the contract expires, buy the binary option. If you believe that the asset will be below the strike price, sell the binary option.



Similarities between CFDs and Binary Options

CFDs and binary options are similar in the following ways:

- They are derivatives: it is not necessary to own the underlying asset to trade in the asset.
- They have short trading periods: for both binary options and CFDs, traders can select trading periods from one hour to a week, depending on their business objectives.
- Predicting the movement of prices: both trading instruments involve making predictions about the market prices of the underlying assets.

Differences between CFDs and Binary Options

Although CFDs and binary options have some similarities, these two trading instruments are also markedly different. The main differences include:

Risk Level

In binary options trading, the operator is usually aware of the possible loss or gain that will be incurred depending on the movement of the price of the underlying asset. However, with CFD operations, it is not possible to determine in advance what you can earn or lose with the fluctuation of market prices. This is because CFD transactions involve negotiating the difference between the entry and exit prices of the underlying asset.

Investment Amount

CFD transactions, unlike binary options trading, involve the payment of commissions and fees for each transaction you make. This is because CFDs are financed with borrowed money, so traders can trade with numerous underlying assets at a reduced price. Each broker has its own commission structure.

When it comes to binary options trading, traders are not required to pay fees or commissions in addition to the initial investment. No fees are paid, even if the operation ends without money, that is, even if you lose. In fact, many binary options brokers offer a return of between 10 and 15% of the money exchanges.

Instead of reimbursements, CFD traders can protect themselves against losses by "stopping" their own losses. But stopping losses can only be applied when losses are already imminent.

Range of Tradable Underlying Assets

CFD trading gives you access to a much broader set of bases that includes bonds, currencies, indices, etc. On the contrary, binary options trading requires the existence of an underlying asset; This currency and the average index can not be negotiated using binary options. If you are looking to access more bases to operate, CFDs offer a better option.



Conclusion: Do We Have a Winner?

Yes, of course, we have a winner: the trader! The trader is the final winner of this 'battle' between OB and CFD because, with this new CFD trend, we have more ways to participate in the market movements. We do not believe that one is better than the other; both come with advantages as well as risks. They have some differences, so operators will have to decide which style suits them best. If you are a trader who prefers a fast-paced strategy, then binary options are your game. If you do not want to worry about where to put your Stop Loss and Take Profit, once again, the binaries are for you.

On the other hand, if you are a patient operator that wants to keep good trading for longer, then CFDs are for you. Because in the end, the patience of the trader who chose this tool can be rewarded. But please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital

In the end, it's up to you if you want to invest a little time and learn a new way of trading or follow the known path.

If you decide to try the CFD trade, Libertex will be happy to offer you the most convenient conditions. Our CFD service covers a wide range of asset classes. Get more information about CFD operating costs. Also, for beginners, we are pleased to offer a demo account (https://libertex.com/blog/binary-trading-vs-cfd-trading-what-difference#modal-demo) through which you can practice CFD trading without taking any risk, which is always present in live trading.

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CFD trading vs futures contracts: What is the difference?

Contracts for differences and futures contracts are often a point of confusion for new traders, because in essence they appear to be reasonably similar products.

While "futures" are generally traded on a stock exchange and CFDs are more commonly traded directly with brokers, the main differences lie in the liquidity and financing of both instruments. CFD orders are more easily completed in practice and have lower entry barriers than "futures" contracts. Of course, both are derivatives, and both provide the same leverage benefits that are common to derivatives in general. A financial derivative is called this way because its value is based on an underlying asset. In case of CFDs and futures the underlying asset is usually a bond, an action, a commodity, etc. Due to the leverage that these tools involve, sometimes people tend to think that CFDs and Futures are risky. But if you approach trading as a business, you follow the processes, do not move away and do not allow your losses to increase. You get out of a losing position, whatever it is you are negotiating. The advantage of all this gear is that your profits multiply, and that is something that every trader wants.

How can you choose between exchanging CFDs and negotiating futures? A futures contract is an agreement to buy or sell the underlying asset at a fixed price on a certain date in the future, regardless of how the price changes in the meantime. The expiration dates apply to futures because this represents the date on which the asset must be delivered at the price agreed upon under the terms of the contract. Commodities, stocks and currencies are examples of markets that offer both CFD and futures operations. Since futures are interchangeable transactions, many traders or speculators who never intend to receive the delivery of the asset can buy and sell futures contracts to benefit from the movements of market prices. This can be done by taking the opposite position of an existing open position before the expiration date. This is known as compensation. On the contrary, a contract for difference does not have a future established price or a future date. It simply contracts to pay or receives the difference between the price of the underlying asset at the beginning of the contract and the price at which it ends when it decides to liquidate the contract and take profits/losses.

An important difference between the two is that futures trading takes place in a centralized open market where all participants can see exchanges, quotes and rates. Investors have a wider selection of instruments in the futures markets, so there are more opportunities to cover positions in relation to the broker, which is the counterpart of the business. In futures trading, the broker is simply an intermediary. In CFD operations, the broker is the effective counterpart of the transaction and quotes prices for both parties in the business. Some people argue that this means that they manipulate prices, but with the tremendous popularity of CFDs and the competition between brokers, in practice you will discover that this should not be a problem.



Spreads are also much higher in CFD transactions in relation to futures operations. However, the fees and commissions charged by companies are lower in CFD operations than in future operations. Both are leveraged products, but futures accounts require higher margins since transactions will be executed with a greater amount of capital.

What may be a problem with futures is the size of the contract that must be negotiated. The futures tend to be traded on the big exchanges and, in general, have large minimum commitments of market participants, since the contracts are designed to be used by investment banks and other institutions. For example, you can exchange five ounces of Platinum with less capital using CFD, while a single futures contract for Platinum represents 100 ounces of Platinum. In this sense, CFDs are much more flexible. Its flexibility also extends to the fact that you can find CFDs in virtually every market, including indexes, stocks, commodities, currencies, etc. Instead of having to have many accounts in different brokers if you want to vary your trading, you will find that you need one or at most two CFD accounts.

Another advantage of CFDs is that it is much easier to open an account to exchange them than to open an account for futures. In general, you can start trading with much less capital.

There are other considerations when choosing between CFD and futures contracts. As mentioned above, both take advantage of your money, which in practice means that your broker charges you interest. However, while with CFDs the interest is charged daily, with the futures, the price is included in the asset. As indicated, the competition for your company should ensure that the fee charged is reasonable, but this is something you should verify. Since CFDs are usually a commercial vehicle, and you do not buy them to keep them for long, the interest is usually not high enough to be a problem. In the same way there is the option to keep them for a little more time if the price needs to oscillate. When you change a future you may not have the luxury of having enough time for this to happen.

Knowing the nuances and the pros and cons of the different trading instruments is essential to build a solid portfolio, and while futures and CFDs have several notable similarities, it is important to remember that they are fundamentally different products that can be more readily available. closely to specific commercial scenarios.

We at Libertex hope you will find this article useful. We invite you to try CFD trading with a free demo account (https://libertex.com/blog/cfd-trading-vs-futures-contracts-what-difference#modal-demo), without any risk at all!Please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital

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Crypto thaw sends bears into hibernation

Ever since cryptocurrency prices went into freefall in late 2021, everybody from analysts to disgruntled investors has been speaking of a long, hard crypto winter, with some even calling it the end of digital currencies as we know them. But as anybody with more than six months of experience in this market can tell you, extreme boom and bust cycles kind of come with the territory. A decline of over 70% in a given stock's price over the space of a few weeks might well be viewed as a death knell for the underlying company, but that's just another day at the office for Bitcoin.

The original cryptocurrency has actually lost over 50% of its value seven times in total. It once even plummeted 99% from its local high. But each and every time, it came back stronger than ever. After reaching a low of $18,948 in June, BTC managed to gain almost 20% in the month of July and currently stands at a much healthier-looking $23,191. Now that Bitcoin is back on the right side of that key $20,000 support, the crypto bulls are coming out of the woodwork and gearing themselves up for another run. But is the winter really over, or could they be running right into a trap?

HODLers

The latest figures on BTC dormant for more than one year would suggest that accumulation is over, a phenomenon that has historically signalled the end of a bear market and the start of a new bull cycle. Independent crypto analyst Miles Johal identified a rounded top formation in HODLed Bitcoin, which appears to be close to completion. Past experience would suggest that prices will respond by rising once it does. It all boils down to the HODL Waves metric, which basically gives a breakdown of supply according to when each BTC last moved. Now, the majority of the total Bitcoin supply is accounted for by the one-year HODL wave. Why is this significant? Well, the data clearly show that the larger the share of Bitcoin that has been motionless for at least a year is, the closer BTC is to a macro bottom. In fact, we're already seeing BTC/USD regain lost ground and – once this 'rounded top' pattern finally comes full circle – history indicates that a sustained uptrend could well follow.

But what about record exchange outflows?

Bitcoin is indeed flowing rapidly out of exchanges and has been doing so for at least the past six months. According to the latest data from Glassnode, BTC in exchange-based wallets now only accounts for 12.6% of the total supply (2.4 million BTC), which represents a 4.6% decline since Bitcoin's March 2020 all-time high, when this figure stood at 3.15 million BTC.

While these outflows are somewhat correlated with declining crypto prices, that's only half the story. A significant number of market participants are actually leaving exchanges for security concerns. Following a series of high-profile busts of so-called 'safe bets' like crypto banks Celsius and Voyager — not to mention the infamous collapse of stablecoin Terra — the "not your keys, not your crypto" mentality is back in fashion once more. People are still interested in owning digital currencies; they just prefer to hold them in their own private wallets. Elsewhere, the rise of CFD trading with traditional CFD brokers such as Libertex has also offered another avenue for active traders to bet on crypto price changes without owning the underlying asset.

Trade crypto CFDs with Libertex

Libertex offers long or short positions in CFDs on all of the most popular digital currencies, including Bitcoin, Ethereum and Solana, as well as many other altcoins and tokens. And because Libertex offers CFDs on every other major asset class, you can keep all of your trades in one accessible location. For more information or to create your own trading account, visit www.libertex.com/signup!


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. Available for retail clients on the Libertex Trading Platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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What prospects do Canopy Growth shares have?

Canopy Growth Corporation (https://libertex.com/shares/weed) is one of the largest Canadian producers of cannabis, having specialised as a producer of cannabis for medical use. Originally known as Tweed Marijuana Inc., it changed its name to Canopy Growth Corporation in September 2015.

It controls over one-third of the Canadian cannabis market and has seven cannabis production facilities in nine countries around the world.

Cannabis was legalised for medical purposes in Canada in 2001, and, in June of 2018, the country's parliament passed a law permitting its use for personal consumption. As of mid-October, cannabis has been freely available for purchase in Canada.

Canopy Growth Corporation's shares — which are currently traded under the ticker symbol CGC on several stock exchanges, including the NYSE — received a huge boost following the introduction of this law. However, after October's sharp rise, when the share price almost hit $57, it dropped to $33.50.

Canopy Growth Corporation's shares were also strengthened by a $5 billion investment deal with American spirits producer Constellation Brands Inc., which owns the Corona beer brand. As a result, the US-based outfit increased its stake in Canopy Growth to 38%.

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Recession fears squeeze oil as gas takes centre stage

In times unmatched since the 1970s, Europe finds itself in the grip of the biggest energy crisis in recent memory. Since early last year, global oil prices have doubled, coal prices have nearly quadrupled, and European natural gas prices have increased almost seven-fold. This is inevitably prompting both businesses and consumers to tighten their belts, the effects of which are being felt in both Manufacturing and Services PMIs across the old continent.

Now, however, a combination of increased supply and lower industrial demand could actually end up pushing prices lower. But isn't that good news? In the short term, perhaps yes, but macroeconomically speaking…not so much. Wherever there's a crisis, though, traders and investors are sure to find an opportunity if they look hard enough. In this article, we'll examine the future trajectory of the energy market and try to identify the best way to play the current situation.

OPEC to the rescue?

For many, the increases in oil prices that have hit the average consumer hardest are viewed as artificially sustained. After all, there is more than enough easily accessible oil in the world. It simply isn't being released onto the market. While simple in its analysis, it is essentially true. OPEC had been under pressure to increase supply for several weeks following Biden's visit to the Kingdom of Saudi Arabia last month. However, not all of the cartel's members are quite as friendly to the Americans as Riyadh. Many of the group's member states are more than happy with higher prices and would prefer the commodity remain scarce. After much deliberation, OPEC finally agreed to a modest 100,000 bpd, which, while far from a panacea, will certainly go some way towards controlling prices into the autumn. Indeed, both Brent and US West Texas Intermediate immediately responded to the news by falling 0.2% to $97.22 and $91.71, respectively. With continued vocal pressure to ramp up production from the world's biggest superpower, we could thus reasonably expect a downtrend to ensue in the coming months.

Subdued demand worrying economists

While rising output has certainly helped to control prices, the cause of falling oil prices is by no means all supply side. Recent data show that US gasoline demand is currently lower than it was two years ago at the height of the pandemic lockdowns, with $120+ per barrel of oil keeping more drivers off the road than COVID-19. Meanwhile, electricity prices, which are directly correlated with gas and coal prices, have been rising exponentially.

Political instability in the East and the lack of viable alternatives have meant that European gas and electricity prices have run riot. Unlike oil, today's consumers are not able to 'opt out' of electricity use and, with the heating season fast approaching, they will similarly be forced to heat their homes regardless of the cost. Despite natural gas's lower susceptibility to demand-side pressure, many businesses are cutting back on power use on account of high prices, and this is leading to accelerated inflation and negative growth in many EU nations. If this trend continues into the autumn and winter, Europe could well be headed for a full-blown recession. In that case, one would expect a protracted downtrend to ensue.

Trade oil and gas CFDs with Libertex

With all of the political and economic instability in the world, nobody truly knows where the energy markets are headed in the short-to-medium term. But with Libertex, at least you'll have the possibility to trade energy CFDs long or short for maximum flexibility and diversification. Libertex offers a range of commodities CFDs from Brent, WTI and Light Sweet crude oil all the way to Henry Hub natural gas – not to mention a wide variety of related stock CFDs, including Exxon Mobil, Total and Gazprom. The choice is yours! Enjoy tight spreads and low commission while trading conveniently in our multi-award-winning app. For more information or to create your own account, visit www.libertex.com


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. Available for retail clients on the Libertex Trading Platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Euro closes below USD for first time since 2002

It wasn't too long ago that we wrote about EUR/USD reaching parity for the first time in two decades. Well, now the Fibre has hit another new low, recording its first daily close below 1:1 since 2002. In recent trading, the cross rate fell from a high of 1.0046 to a low of 0.9926 and is down by some 1% on the day ahead of the much-anticipated Jackson Hole Economic Symposium.

To make matters worse, many forex strategists believe this is just the beginning of a long bear market for the EU single currency and that we ought to prepare for further declines in the months ahead. So, what's behind the euro's terrible performance of late, and what are the implications for investors, traders and ordinary consumers?

Inflation, inflation, inflation

While it's true that the entire world is under inflationary pressure at present, no region has been harder hit than Europe. According to Eurostat, nearly half of the 19 countries in the eurozone have now reached double-digit annual inflation. The reasons for this are many, but chief among them is the lack of wriggle room the ECB left itself in terms of interest rates.

Having been near or below zero for the best part of the last decade, the European regulator was simply unable to react as hawkishly as the Fed and other world central banks when post-pandemic price pressure began to bite.

Local political instability and associated energy uncertainty have also played a significant role in rising prices. With electricity and other fuel sources up an average of 50%, there has been an unavoidable knock-on effect on manufacturing costs and, consequently, the price of finished goods.

The cash is always greener…

Another undeniable factor behind the Fibre's recent dip below parity is the extreme strength of the US dollar. Although the Federal Reserve does deserve some credit for its ambitious and timely rate hike programme, the source of the greenback's strength goes much deeper than monetary policy. Whatever anybody says, the US dollar is still the world's reserve currency, and, as such, it's considered a safe harbour during times of economic uncertainty.

Higher Treasury bond yields as a result of Fed rate increases obviously contribute to the dollar's attractiveness. Not to mention the fact that oil and many other currently highly valued commodities are denominated in US dollars. It's important to note, however, that a strong dollar is not especially desirable for Washington as it makes US exports more expensive. As many Fed representatives head into Jackson Hole calling for another 0.75-basis point hike in September, the possibility of American gas heating European homes this winter seems remote, to say the least.

So, where are we headed?

As Europe edges ever closer to recession and with the US not far behind, it's hard to predict where the EUR/USD will end up in the short- to medium-term. And some might well argue that it's the least of our worries. It's easy to forget that rising US interest rates don't just strengthen the dollar; they also mean higher mortgage payments for ordinary borrowers and reduced consumer spending. This is another important factor that is leading ECB policy makers to take a more tentative approach to Eurozone interest rates.

With a majority of Fed officials clearly dead set on continued hawkish policy, the Fibre is likely to continue on its downtrend in the coming months, though much will depend equally on the actions of both the European regulator and its US counterpart, as well as the external geopolitical and economic context in the region. Following Powell's Jackson Hole address this Wednesday, all eyes will now be on the European Central Bank as it prepares to release the minutes of its previous meeting on Thursday, 25 August.

Trade EUR/USD CFDs with Libertex

Wherever you think the world's major pairs will move in the short term, you always have the opportunity to take your choice with Libertex. Because Libertex offers both long and short CFD positions in the globe's biggest cross rates — including EUR/USD, GBP/USD and USD/JPY — you're sure to find a pair interesting for trading. For more information or to create your very own Libertex trading account, visit https://libertex.com/sign-up


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. Available for retail clients on the Libertex Trading Platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Different Trading Styles

The trading world is diverse, and features many different styles that can be applied in financial markets. Choosing a style that suits your personality, psychology and preferences is very important. To be successful, you'll need to prioritise a trading style based on your mentality and personality.

In this article, we'll discuss the trading styles you're likely to encounter. What typically separates styles is the amount of time spent on a single trade, the time of entry and, in some cases, the frequency. There are no strict rules regarding the timeframes that a particular trader should use. However, the table below provides average timeframes.

Choosing the trading style that best suits your personality can be a difficult task for new traders. If you're new to the subject (or even if you're an experienced trader) and still don't feel that you have found your style, the following are some of the personality traits compatible with the different trading styles. By choosing one that suits your personality, you'll have greater chances of becoming a profitable trader. But remember that trading is risky and profits are not guaranteed.



Intraday Trading

Most commonly practised among retailers in the Indian stock market, with intraday trading, positions are squared before the market closing hours. The philosophy of intraday trading is that exposure during the night is risky. Traders record gains or losses quickly and make multiple trades every day. It's convenient for people who care less about fundamentals or things that are considered important to be a successful long-term investor. For them, it's about managing their money, measuring the time for inputs and outputs and appropriately sizing their positions.

Whether you trade professionally or not, intraday trading involves taking additional leverage to generate potential returns. A word of caution: High leverage also implies higher risk.

It's also among the most aggressive trading styles. Day trading thrives thanks to high volatility as the number of opportunities increases. A successful day trader understands the importance of the coherence and power of compound returns in the short term. If consistency is maintained, the returns can potentially be compounded monthly or quarterly. Day trading is only suitable for those who can devote a sufficient amount of time to tracking the movements of the stock exchanges regularly. Be careful, due to the large number of transactions in one session, there is a high risk of capital loss

Swing Trading

The main difference between intraday and swing trading is the timeframe. Swing traders try to predict the short-term fluctuation of stock prices overnight. Positions can last from one day to a few weeks. The leverage used by swing traders is generally lower than in intraday trading. Due to the risk of the night, brokers in India charge SPAN+ exposure margins. In a way, it allows traders to better resist price movements at night and hold positions for longer, therefore, trying to get higher profits per trade. Most technical traders and chartists fall into this category. If you like to analyse the movements of short-term prices using technical analysis, this is your style of play.

Pure swing trading also involves a lot of money flow analysis. It's rewarding, and the price movements are more predictable. However, risk management should be more sophisticated. In this style, you should be able to ignore minor intraday fluctuations without worrying. However, most swing traders also perform intraday trades, so it's a style that can be merged. In any case, it's important to draw a line and focus on a particular trading style.

Swing trading exposes you to greater risks. Swing traders are involved in many markets at the same time. This can be a disadvantage and put too much capital at risk in the markets if the swing trading strategy fails to deliver.

Scalping

Scalping is a very fast trading style. Scalpers often operate at intervals of a few seconds and in opposite directions (i.e., they make long choices one minute but short the next). Scalping is more suitable for active traders who can make immediate decisions and act without hesitation. Impatient people are often the best scalpers because they expect their exchanges to become profitable immediately and decide to exit the business quickly if the results go against them.

To achieve a correct performance, it is necessary to spend a lot of time scalping. Very many transactions are performed every day by scalping. In each position, the scalper must keep a keen eye on his market developments, and cannot devote himself to other activities.

Scalping, therefore, requires a high capacity for concentration. By using a large leverage effect, the mind is in the right place to take a winning position. Note, large leverage is a risk of losing your capital

Position Trading

Position trading is the longest-term trading of all and often involves operations that last several years. Therefore, position trading tends to be suitable for more patient traders.

This is a type of trading style that ignores the small short-term fluctuations that swing traders fully focus on. Position trading implies less leverage than swing trading. The waiting time for each operation is higher since these traders anticipate a large structural movement in the future.

Synchronising the market isn't the top priority for this category of traders, as they are willing to survive the storm and wait a few months to see a large gain. Its approach is generally a hybrid of technical and fundamental aspects. To hold positions for a longer period, they feel they have to be sure of what is happening inside the asset they are betting on. They're looking for underlying stocks to earn more than 20% in the near future. Position traders can lean more towards investment in the long term.

Trend Trading

The objective here is to identify a trend and only trade in the same direction. Traditionally, trend traders have partnered with long-term fund managers. You can become a trend trader at any time as a trend of all timeframes.

Choose a Trading Style



Choosing a trading style requires flexibility to know when it's right for you, but it also requires consistency to continue with the correct one, even when it's not working optimally. One of the biggest mistakes new traders often make is changing trading styles at the first sign of problems. Constantly switching styles is a sure way to catch all the losing streaks. Once you're comfortable with a particular style, be faithful, and it could reward you for your long-term loyalty.

If you haven't chosen a suitable trading style yet or have already decided on it and want to see if it suits you, try to master your skills with a Libertex demo account (https://libertex.com/blog/different-types-trading#modal-demo). Open a demo account and practice your appropriate trading style without risk.

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Biggest movers of 2022: the hottest and nottest of the year so far

With the world economy in the grip of an inflationary crisis and teetering on the brink of recession, many risk assets have either declined steadily or found themselves stuck in a sideways loop for much of the past year. Since there’s little money to be made in motionless markets, traders and investors everywhere are naturally interested in which instruments have been able to buck the stagnatory trend in 2022 to post notable gains (or losses) over this period.

With this in mind, we decided to put together a shortlist of 2022’s biggest movers in either direction. Let’s look at a range of different asset classes to identify a selection of volatile but also liquid and sufficiently mainstream instruments.

ExxonMobil (XOM)

Our first pick is a stock, but it’s definitely not what you’d think of as a trendy or fashionable one. ExxonMobil might have only been incorporated in 1999, but it’s actually a direct descendant of JD Rockerfeller’s Standard Oil and ranks as one of the world’s Top 5 biggest oil companies. Anyone with a car will tell you that petrol prices have seen some of their largest ever increases over the past 6-12 months as political instability and price manipulation by oil-producing nations have made this staple fuel a luxury of late.

But while Brent oil has risen by around 45% YTD, ExxonMobil has managed to outperform its main product by some margin. In fact, XOM has been able to post gains of close to 55% since January 2022 – and it’s much, much easier to buy and sell than physical oil. With no end in sight to the fuel crisis and winter fast approaching, ExxonMobil could still have a way to go.

USD

This next instrument might seem like a bit of a tame choice, but anybody who has been studying the Forex market this year will have to admit that the US dollar’s performance has been nothing short of spectacular in 2022. A perfect storm of economic uncertainty, rising US Treasury bond yields and increased demand for dollar-denominated commodities have pushed the greenback so high that it has reached a historic parity level with the European single currency unseen since 2002.

This represents a 12% gain YTD against the euro in real terms, which might not seem spectacular, but for a fiat currency, that’s practically unheard of. To put things into perspective, this means that investors who went to cash in late 2021 would have been able to come out slightly ahead of inflation without actually doing anything! It just goes to show that USD really does deserve its status as a safe haven, perhaps the most liquid one there is.

Gas (Henry Hub)

We’ve already touched upon the volatility of energy commodities this year, so it’s only right we include one in this list, even if they are less popular than other instruments. Henry Hub Natural has absolutely blown oil out of the water, gaining almost 300% since January 2021 and nearly 100% since July to reach a current spot price of 9.75 (31/08/2022).

Many people associate natural gas with the winter season, and while home heating is definitely a major source of demand for the energy resource, it also has a quite significant year-round role in electricity generation. Indeed, a large portion of non-renewable electricity is now produced using natural gas as it is one of the greenest fossil fuel options available. With demand projected to increase over the coming months and no end to the supply-side problems in sight, the case for further price rises is a strong one.

Bitcoin (BTC)

Now that we’ve looked at some of the biggest gainers of 2022 so far, let’s move on to the largest losers. After all, when you have the option to go both long and short (as is the case with Libertex’s CFD offering), all that matters is movement. The direction is unimportant. Bitcoin dominated headlines in 2021 and was dubbed a generational opportunity in November when prices were within touching distance of $70,000.

A lot has changed since then…and that’s putting it mildly. The original currency has been in practical freefall since the final month of 2021 and is now down 70% from its all-time high. Many called the bubble last year, and this would have been an excellent earning opportunity for short sellers. The question now is: has Bitcoin found a bottom, and could current levels represent a favourable buying opportunity, or is there more downside ahead?

Netflix (NFLX)

We started on a stock and so thought it fitting to end on one, too. Despite sharing an asset class, however, these two equities couldn’t be more different. After shooting to fame as the quintessential entertainment streaming service, Netflix has become more than just a household name over its 25-year history. A predictable uptick in subscriptions during the global lockdowns, coupled with the company’s ambitious strategy of becoming one of the biggest movie studios in the US, saw this stock’s price explode in 2020-21 to reach a massive $690 ATH.

But as is often the case with unbridled passion and enthusiasm, the fall back to Earth was a rough one. As of today, Netflix has lost almost 70% since its November 2021 peak to a current level of $223.56. That said, it did fall as low as $175.50 and appears to have now consolidated above $200. Could this mean that the worst is behind the streaming giant? It certainly looks like a good long-term buy and hold at these prices, but its shorter-term trajectory is less clear.

Trade volatile CFDs with Libertex

Libertex is an online trading platform with a lot of years of experience under its belt. Because we allow our users to trade a vast array of CFD instruments, both long and short, Libertex clients are able to take potential advantage of any movement, whether positive or negative. With tight spreads and competitive commission rates, Libertex is constantly trying to give you that little bit extra. So, whether you think the market is headed up or down, with Libertex, you can trade both ways.

For more information or to create a trading account, visit https://libertex.com/signup


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. Available for retail clients on the Libertex Trading Platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Learn Technical Analysis with Libertex: Keltner Channel

Our technical analysis series is back with a brand-new indicator to sink our teeth into. Both long-term investors and short-term traders can potentially benefit from incorporating this useful analytical technique into their respective strategies. Technical analysis helps market participants find potentially optimal entry and exit points and is thus an invaluable item in any trader's or investor's toolkit. After looking at several volatility indicators, including the Average True Range (ATR), today we'll be moving onto perhaps the most powerful reversal indicator: the Keltner Channel.

What is a Keltner Channel?

Originally developed by market technician Chester Keltner in his 1960 book ‘How to Make Money in Commodities', Keltner Channels have been used by traders and investors ever since. Like the Bollinger Bands we looked at in the spring, the Keltner Channel is an envelope-based indicator. They both have an upper and lower boundary to help you identify potential “overbought and oversold” levels. Largely mirroring the Average True Range (ATR), these volatility-based bands are placed on either side of a given asset's price and can then be used to determine the trend's direction. The exponential moving average (EMA) of a Keltner Channel is usually 20-60 periods, though this can be modified by the user. A Keltner Channel's upper and lower bands are commonly set at two times the average true range (ATR) above and below the EMA.

Why do we use it?

Keltner Channels give traders a quick visual map of a security's average price and volatility, which they can then use to identify assets that have moved well outside of their normal ranges. An opportunity to trade the asset as it moves back into the trend zone could then materialise. On the contrary, if it maintains price action outside of the Keltner Channel, that could signal a trend change or "breakout," which would present a different set of trading possibilities depending on the direction of the pre-existing trend. Due to its short-to-medium-term applicability, the Keltner Channel is a favourite of swing traders and is a central feature of a number of associated strategies, such as the Trend Pullback or Breakout. Essentially, it's used to identify trade opportunities in swing action as prices move within an upper and lower band. As with the vast majority of other indicators, it's best used in combination with other reversal indicators for greater reliability.

The Trend Pullback Strategy

This strategy aims to buy during an uptrend when the price pulls back to the middle line. A stop loss should be placed about halfway between the middle and lower band, with a target near the upper band. If the price is constantly hitting your stop loss, you can move it a little closer to the lower band.

In a downtrend, the aim is to sell short as the price rallies to the middle line. This time your stop loss should be about halfway between the middle and upper band, with a target near the lower band. In case of frequent stop outs, move your stop loss a little closer to the upper band.

This strategy aims to exploit the trending tendency and generate trading signals with an approximate 0.5 risk-reward ratio since the Stop-Loss point is around half the length of the target price length. Not all pullbacks to the middle band should be traded. Sometimes a trend isn't present, in which case, this method isn't effective. If the price is moving back and forth, hitting the upper and lower band, then this method also won't be effective.

Last weekly Gold chart, with the Keltner Channel overlayed:



As we can see in the red circle, the price moves sharply towards the central Keltner band, and a short time later, a clear downtrend ensues.

The Breakout Strategy

The Keltner Channel breakout strategy looks for big moves that the Trend Pullback strategy might miss. It can be used near a major market opening as this is when the market makes its most radical movements.

The basic aim of the strategy is to buy if the price breaks above the upper band or sell short should it drop below the lower band in the first 30 minutes after the market opens. The middle band, meanwhile, is used as an exit signal.

The Breakout Strategy doesn't have a profit target per se. The wise potential move is to exit the trade whenever the middle band is touched, irrespective of whether they have made a profit or loss. As the market opening is a time of high volatility, there could well be multiple signals within the first 30 minutes of trading. However, if there's no big move following the first two channel breakouts, then there probably won't be any.

Take a look at this Google chart below to see how the Breakout Strategy works in practice:



If we focus on the morning of the 16th (15:00 GMT), we can see a sharp move above the top Keltner boundary within the first 30 minutes or less of trading. If we were to follow the strategy and buy here (red circle), we would have turned a reasonable profit. The price doesn't drop anywhere near the middle band all day, so assuming a quick sell before the close of trading, the green line represents our sell level.

If, however, we chose to hold the position overnight and sell the following morning, we would've actually ended up losing money (see the trough immediately after our proposed sell point). This highlights how fine the margins are with short-term trading: Even the slightest deviation from one's plan can be the difference between making a profit and registering a loss.

Never stop learning with Libertex

As with every other TA tool we've covered in this segment, we aren't suggesting that these strategies are a surefire way to profit. That said, it certainly never hurts to have useful moves like this in your playbook. As with any short-term trading strategy, risk management is key. All the indicators we've looked at thus far should be used together for the greatest accuracy, and you can do this risk-free by using your free Libertex Demo Account (https://libertex.com/#modal-demo) and practising your skills.


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. Available for retail clients on the Libertex Trading Platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Introduction to the valuation of stocks: how to choose the best valuation method

Investors often erroneously assume that a large company means it deserves a large investment. Finding solid companies is crucial in the investment process, but it's equally important to determine the value of these stocks.
Your goal as an investor should be to find wonderful businesses and invest in them at reasonable prices. If you avoid confusing a large company with being automatically worthy of a large investment, you'll already be ahead of many fellow investors. And that's where the valuation of stocks comes into play.

Valuation is the first step toward smart investing. When an investor tries to determine the value of stocks based on fundamental factors, it helps them make informed decisions about which stocks to buy or sell. Conversely, if a stock doesn't have fundamental value, investors find themselves adrift in a sea of random short-term price movements and visceral sensations.

For years, the financial establishment has promoted the misleading notion that the valuation process should be reserved for experts. But it's not an arcane science that only MBAs and CFAs can practise. With only basic maths skills and some diligence, any investor can determine the values of the best stocks.

Before you can assess a stock, you have to know what a share is. This part of the stock is not a magical creation that flows like the tide. Rather, it's the exact representation of partial ownership in a publicly listed company. For example, if XYZ Corp. has 1 million shares in circulation and you have a single and solitary share, that means you own one-millionth of the company.

Why would someone want to pay you for your millionth? There are quite a few reasons. There will always be someone else who wants one-millionth ownership in the company because they want one-millionth of the votes in a shareholders' meeting. Although the single share here is small in itself, if you combine that millionth with approximately 500,000 of your friends, you suddenly have a majority interest in the company. That means you can make it do all sorts of things, like paying dividends or merging with your company.

Companies also buy shares in other companies for all kinds of reasons. Whether it's via a direct acquisition, in which a company buys all of another company's shares, or a joint venture, in which the company normally buys enough from another company to win a seat on the board of directors, shares are always on sale. The share price translates into the company's worth. This information allows other companies, public or private, to make smart business decisions with clear and concise information about what the shares of another company could cost them.

A portion of the shares is a substitute for the company's shareholders' share in the revenues, profits, cash flow and capital. For an individual investor, however, this usually means worrying about the part of all the numbers that you can get in dividends for as long as the company authorises them. Partial ownership also entitles you to a portion of all dividends. If a company doesn't currently have a dividend yield, there is always the possibility that it may at some point in the future.

Stock Valuation: Basic Concepts



Companies have an intrinsic value based on the amount of free cash flow they can provide during their effective life. However, money in the future is worth less than money now due to inflation, so future free cash flows should be discounted at an appropriate rate.

The theory behind most stock valuation methods is that a company's value equals the total value of all future free cash flows. All future cash flows are discounted due to the decreased value of money over time. If you know all of a company's future cash flows and have an objective rate of return on your money, you can know the exact amount of money you should pay for that company.

However, stock valuation is not so easy in practice because we can only estimate future free cash flows. This valuation approach, therefore, is a mixture of art and science. If we know exactly how much cash flow would be generated, and if we have a known rate of return, we would know exactly what to pay for a dividend stock or any company with positive cash flows, regardless of whether it pays dividends or not. However, the inputs are only estimates and require a degree of skill and experience to be precise.

Three Major Stock Valuation Methods



Many valuation metrics are easily calculated, such as the benefit/price ratio, the price-to-sales ratio or the reserve price. But these numbers only have value in the context of some other form of stock valuation.

The three main stock valuation methods to evaluate a healthy dividend stock are explained below.

Discounted Cash Flow Analysis

The first method, discounted cash flow analysis, treats the company as a large free cash flow machine. We analyse the company as if we bought it all and kept it indefinitely for all of its future free cash flows. If we estimate the value of a company, we can compare it with the company's current market capitalisation to determine if it's worth buying or not. Alternatively, we can divide the total value by the total number of shares and compare this value with the real share price.

Dividend Discount Model

The second method, the dividend discount model, views an individual share as a small free cash flow machine. The dividends are the free cash flow since that is the cash investors receive. In the example of the entire company, a company could spend free cash flows in dividends, buy back shares, perform acquisitions or simply let them accumulate. The point is that investors have little control over what the company's management decides to do with its cash flows. A dividend, however, takes all this into account because the current dividend and the estimated growth of that dividend take into account the company's free cash flows and how management uses those free cash flows.

Multiple Profit Approach

The third method, sometimes called the multiple profit approach, can be used regardless of whether the company pays dividends. The investor estimates the future earnings over a certain amount of time — for example, 10 years — and then places a multiple of hypothetical gains in the estimated final earnings per share (EPS) value. Then, the accumulated dividends are taken into account, and the difference between the price of the current shares and the total hypothetical value at the end of the period is compared to calculate the expected rate of return.

If you want to make an educated estimate about whether a stock's price will go up but don't know how to calculate the valuation of the company's shares, don't be discouraged. Try our free demo account (https://libertex.com/blog/introduction-valuation-stocks-how-choose-best-valuation-method#modal-demo), where you can practice everything you want before moving on to trade and invest with real money.

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Top 5 undervalued stocks CFDs right now

During the pandemic, we saw some of the most vigorous equities growth since the 1920s. A great number of companies had their valuation treble, quadruple or increase even more over a period of mere weeks. The last 10 months, on the other hand, have been a bloodbath on the tech indices. Now, many of the darlings of 2021, having been brought back down to Earth with a bang, have lost up to and beyond 90% of their value since November 2021.

But wherever there is panic and confusion, there is also potential opportunity. As Baron Rothschild put it: "the time to buy is when there's blood in the streets". So, which quality assets are currently on sale, and where can we find them? Let's take a look at Libertex's Top 5 CFD Bargains of 2022 and see!

5. Salesforce

Our first nomination is a stock that made more than a few headlines during the pandemic boom. This cloud-based software company is known for providing customer relationship management software and applications focused on sales, customer service, marketing automation, analytics and app development. Of course, these areas were of special import during the lockdowns and the Work From Home revolution and that 'new normal' definitely contributed to the overexuberance that saw the company's share price double to over $300 in the space of a year. But now that it has crashed back by almost exactly 50% to $156.90, many people question whether this might be a bit too large of a correction for a firm at the forefront of their segment and with visibly strong macro tailwinds, such as the projected growth of distance working as a way of life and the trend towards automation of many sales roles in the future.

4. Netflix

This household name has successfully managed to cement its position as the world's go-to streaming service, which takes some serious doing. VOD was naturally another industry that benefited massively from the coronavirus pandemic, and perhaps the unbridled optimism of many buyers helped create a bubble that inevitably burst once reality set in. NFLX is currently down about 65% from its November 2021 all-time high and is trading at around $227 at the time of writing on September 9. Amid hot competition from the likes of Amazon Prime and Disney squeezing subscriptions, the original streaming service has invested huge capital into developing its own studio arm. With the associated influx of top-tier original content, Netflix will be able to reduce its royalties costs over the long-term while also being able to offer consumers exclusive movies and series that will likely boost membership figures over time. Gains are unlikely to be as spectacular as they were in 2020-21, but stable growth rarely is.

3. Tencent Holdings

Any list of knockdown stocks wouldn't be complete without at least one entrant from China. The world's second-biggest economy has suffered greatly both as a result of the zero-COVID policies of the country's leadership as well as from the knock-on effects of reduced global durable goods demand and rising raw materials costs. Tencent Holdings is generally referred to as 'The Chinese Google', but the 25-year-old tech giant is much more than just a copycat. Apart from its core QQ and WeChat social media apps, the company is involved in music streaming, web portals, e-commerce, technology, internet services, payment systems, smartphones and even gaming. This Hong Kong-based stock is now trading at HK$ 307, down from an all-time high of HK$757 in February 2021. That represents an almost 60% discount on this recent peak. In fact, Tencent is currently trading at a lower price than it was 5 years ago in September 2017. Considering how much growth it has experienced since then and how much room it has to expand in both China and the rest of Southeast Asia, many feel as though this current level is more than fair value for such a prolific and future-proof business.

2. Robinhood

Outside of the tech sector, there weren't many sectors that experienced a comparable level of growth over the pandemic period as trading and investing. Young people all over the world took their government stimulus checks and furlough payments and decided to put them to work for them. And where did most of them turn? Robinhood. So, when the online trading and investing platform finally went public in 2021, interest and hubris were so high that the quite high IPO price of $35 was quickly driven up to nearer $60. Over the ensuing months, however, the hype surrounding the company quickly faded, and many investors realised that the initial multi-billion-dollar valuation was probably a bit too ambitious. Then, tech stocks began to crash hard, and this saw millions of capital flow out of the platform over a short period. At its current price of $10.35 (over 80% down from its all-time high), Robinhood looks like a solid investment for the years ahead. After all, it remains the front-of-mind option for US-based retail investors, and that has to count for something.

1. Marathon Digital Holdings Inc.

It's unsurprising to see a crypto-themed instrument topping the list, given the huge declines in digital assets this year. But Marathon Digital Holdings is not any old cryptocurrency miner. With a market cap of $4.2 billion, the company accounts for over a quarter of the value of the entire crypto-mining industry. Marathon has pledged to have 23.3 EH/s hashrate capacity installed by early 2023, which would dwarf the planned 8.6 EH/s upgrade of its closest competitor, RIOT Blockchain. If we accept that cryptocurrencies and the blockchain are here to stay, then it's clear that Marathon Digital Holdings is a strong and stable miner play over the long term. As is the case with any market crash, the crypto bust has dragged down not only the chaff but also the wheat. After plummeting nearly 90% from its all-time highs, MARA currently sits at $13.26 but enjoyed two consecutive double-digit growth days last week. Some are calling this a sign that the reversal is already underway.


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. Available for retail clients on the Libertex Trading Platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Golden days of yore

For millennia, gold has been prized as a store of value. It was made into jewellery, ornaments, bars and coins, and until the mid-20th century, many of the world's biggest economies used it to back their national currencies. But why did and do we hold this yellow metal in such high esteem? Apart from being malleable and pretty to look at, the practical uses of gold and silver were only discovered well after the Industrial Revolution. Nonetheless, culture after culture has mined, hoarded and gone to war over it.

Nobody really knows exactly why gold and silver are considered so precious. They might well have little inherent value, but they have been able to match inflation throughout much of recorded human history, which is quite a feat in itself. This makes them a wise consideration for anyone looking to put together a balanced investment portfolio, particularly during times of economic uncertainty and high inflation, such as we are currently experiencing. The tricky bit is how to decide on a sound weighting for the specific financial environment and how to spot a trend reversal in time.

A short trip down memory lane

For many traders and investors at their peak today, the pain of the 2007-08 global financial crisis (GFC) is just as vivid now as it was at the time. We will all have seen how apparently safe-bet investments were wiped out over a very short period of time, causing unspeakable economic hardship for countless people.

However, there was one asset class that absolutely exploded in the wake of the GFC, and that was gold. As stocks and bonds burned, the yellow metal rose from $500 an ounce in early 2007 to a peak of $1800 in late 2011. Steady gains of 100% per year are thought of as unusual, even in revolutionary growth stocks, but it's a total anomaly for commodities. Having seen how well XAU/USD did in these recent crisis times, most investors and even some traders are convinced that their allocations should be increased during Black Swan events and periods of hyperinflation.

No time like the present

The pandemic and subsequent financial insecurity have now given us a more recent crisis against which to measure precious metals' performance, and the results of this analysis show the vital importance of wider context. Gold started 2020 at around $1550, while silver began the same year at just $18 an ounce. Both managed to make strong gains above 30% over the initial pandemic period but have now settled down to somewhere around 10% higher than their January 2020 levels.

Given the complete novelty of the coronavirus crisis, these sub-inflation increases appear extremely underwhelming. When we look a little closer, though, we see just how many factors are at play. In this crisis, the entire world stopped functioning, which inevitably meant less industrial demand for these metals. Second, ultra-low interest rates and active quantitative easing by central banks meant that stocks and crypto were much more attractive to a new breed of investors. Now, as interest rates rise, other 'safe havens' like US Treasury bonds and the US dollar itself are taking increasingly more capital away from 'unfashionable' precious metals.

Back to the future

As we have already touched upon, gold has traditionally performed exceptionally well during times of high inflation and economic uncertainty. However, the past year or two have been less than impressive, given the circumstances. Though the causes are multiple, interest rates have certainly played a role. The ultra-dovish climate leading into this crisis meant that, as the US Federal Reserve began sharply increasing interest rates, the dollar strengthened rapidly against virtually all the majors. Naturally, the US dollar is a safe harbour in itself and one that is much more liquid than gold or silver.

The view many investors took was that it is better to have USD on hand to buy more assets when prices crash than to park it all in precious metals, particularly when the greenback is more or less outperforming inflation for anyone outside the US. Yet, if inflation proves much less transitory than first believed, we could well see demand for gold increase steadily. Numerous pundits had predicted that the latest inflation data would show a significant retreat in price pressure. But now that this dream has been well and truly dashed, we could soon see stable inflows into gold and silver.

Trade CFDs on precious metals with Libertex

With many years of experience, Libertex is a broker with a historical pedigree. We offer a wide range of underlying CFD assets, including gold, silver and even several mining stocks. Because Libertex offers both short and long positions, you can have your choice, no matter which direction you think the market is headed. For more information or to register an account of your own, visit www.libertex.com/sign-up


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62.2% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. Available for retail clients on the Libertex Trading Platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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What Is Equity: A Complete Guide

Equity, also referred to as shareholder equity, is one of the most common terms in the financial markets that almost every investor or trader has come across at least once. But what does it mean? In simple words, equity trading is the process of buying and selling company shares on stock exchanges or over the counter (OTC), usually through a broker.

In this guide, we'll break down what equity is, provide you with a formula for calculating it yourself, describe various forms of equity and explain everything with examples. We will also dive deeper into equity trading, covering the most common trading instruments and outlining their peculiarities. So let's get started!

What Is Equity in Trading?

Equity is a financial asset that represents ownership in a company. When investors buy company shares, they become stockholders and take total ownership over them. It also means that equity investors can have voting rights and gain extra return on their investments through dividends or capital growth.

1. Dividends are periodic payments that are made to shareholders out of the profits of the company. For example, if a business generates $100 in profits per share, and the board of directors decides to declare a dividend of $0.50 per share, each shareholder would receive $0.50 for each share that they own. Dividend payments also depend on the size and economic state of a company. Generally speaking, large and well-established entities pay out higher dividends than small businesses with a more limited budget.
 
2. Capital growth is the increase in the value of the share over time. For example, if you purchase a stock for $10 per share, and its price increases to $12 per share, you have made a capital gain of $2 per share. Capital gains can be realised when the asset is sold or through the payment of a stock dividend.

However, it's important to note that the stock market sentiment can be not only positive, making prices go up, but also negative, resulting in the stock value dropping. Thus, just as with trading any financial instruments, such adverse price movements can lead to losing money.

How Does Shareholder Equity Work?

Shareholder equity, also known as stockholders' equity or stockholders' funds, is the portion of a company's stock that is owned by shareholders. It represents the residual value of a company's assets after liabilities are paid. Knowing how shareholder equity works can help you make informed investment decisions. So, let's have a closer look.

There are two possible ways a company can gain capital. It can issue debt through various liabilities or issue stock, thus creating shareholder equity. For example, if a company has $100 million in assets and $50 million in liabilities, it has $50 million in equity. Shareholder equity can be used to finance operations, buy assets or expand the business in general.

It's worth mentioning that equity can influence the price of the stock. For example, if a company announces plans to issue new shares, the stock price may decrease because the value of each share will be diluted. Conversely, if a company buys back its shares, the stock price may increase because there are fewer shares outstanding.

Shareholder equity combined with fundamental analysis can also be a helpful tool for understanding a company's financial health.

- Positive equity indicates that a company's assets are worth more than its liabilities. Such entities are considered to be financially sound and stable, implying less risk.
- Negative equity means that a company's liabilities exceed its assets. Such a business would be seen by traders as a significantly riskier investment.

How to Calculate Shareholders' Equity: Formula to Use

Shareholders' equity can be calculated by subtracting the portion of the assets that are owned by creditors from the total value of the assets. The ratio formula will look as follows:

Shareholders' Equity = Total Assets - Total Liabilities

What Are the Most Common Components of Equity

Shareholders' equity can be divided into subcategories. Some of them include common stock, retained earnings and treasury stock.

- Common stock represents the portion of the equity that is held by common shareholders.
- Retained earnings represent the portion of the equity that is held by the company itself instead of being paid out to shareholders as dividends. They can be used to finance expansion and improvement projects that can make a company more valuable and increase the price of its stock. In addition, retained earnings can provide a buffer against tough economic times, allowing a business to weather downturns without having to cut dividend payments.
- Treasury stock is shares of a company's stock that are bought back by the entity and held in its treasury. They are not outstanding shares, which means they cannot be traded or sold. The main reason companies buy back their stock is to increase the value of the remaining shares by reducing the number of shares available on the market. This often happens when a company believes its stock is undervalued and wants to invest in itself. Another reason for treasury stock repurchases is to have more control over voting rights within the company. By reducing the number of shares available, the existing shareholders have more power per vote.

Example of Shareholder Equity

To find out the number of total assets and total liabilities of a company, it's necessary to open its balance sheet. Let's take the example of Amazon.com, Inc. According to the company's 2021 balance sheet, its financials are as follows:

Total assets: $420,549
Total liabilities: $282,304

Thus, the shareholder equity will be:

Shareholder equity = $420,549 - $282,304 = $138,245

Common Types of Equity Investment Trading Instruments



Equity trading comes with different options of financial instruments traders may use. Some common of them include stocks, mutual funds, and exchange-traded funds (ETFs). Each of these has its own set of benefits and risks, so it's important to understand the differences before making any decisions.

1. Stocks represent ownership in a specific company. When you buy shares of stock, you become a partial owner of that business. As such, you are entitled to a portion of the company's profits (if any) and have the ability to vote on corporate matters. However, investing stocks implies high volatility, meaning that the asset value can go up or down rapidly. This makes them a risky investment, but one that can offer high rewards if timed correctly.
2. Mutual funds are another type of equity trading. Rather than owning shares in a single company, mutual fund investors own shares in a pool of companies. This diversification can help to mitigate some of the risk associated with stocks, but it also typically leads to lower returns.
3. ETFs are similar to mutual funds since they offer diversification and can help limit risks. However, just like stocks, this financial instrument provides equity traders with more flexibility in buying and selling.

Equities vs Stocks: What Is the Difference in Simple Words?

Equity simply refers to the value of ownership in a company. This can take the form of common, preferred or any type of security representing direct ownership. In contrast, stocks refer to the actual securities themselves. In other words, they are a type of equity. So when people talk about buying stocks, they are referring to buying equity in a company. However, the terms are often used interchangeably because they both represent ownership in a company.

Explanation of Options vs Equity Trading

Options and equity trading are two very different concepts. When trading equity, an investor buys and sells shares of a company on the stock market. When trading options, an investor is buying and selling the right to buy or sell a security at a specific price within a specific timeframe.

In contrast to equity trading, trading options come with lower risk limits. This is because you are not buying or selling the security itself but only the right to do so. Options are also considered more complex instruments than equities. There are a variety of different options and strategies that can be used to gain potential returns, and it can take considerable time to learn them. Equity trading, on the other hand, is relatively simpler. You buy shares of a company when you think they will go up in value and sell them when they do.

What Are Social Trading Equities?

Social trading is a method of investing in which traders share information and strategies with each other in order to make better investment decisions. This type of trading has become increasingly popular in recent years as it allows investors to benefit from the group's collective wisdom. In addition, social trading can help to reduce the high risk of losing money by allowing traders to learn from each other's mistakes.

Trading Equities vs Forex: What Is the Difference?

Both forex and equity trading involve buying and selling assets to make a profit, but there are some key differences between the two.

Forex trading is conducted on the foreign exchange market, where currency pairs are traded. Equity trading, on the other hand, takes place on stock exchanges and involves the buying and selling of stocks. Some common equity markets include the New York Stock Exchange (NYSE), the London Stock Exchange and the Nasdaq.

Another key difference is that forex pairs can be traded on a 24-hour basis, while equity trading takes place during regular business hours. Last but not least, the forex market is often considered to be more volatile than the equity market, which means that there is more potential for profits but also more risk.

Сash Equity Trading

Cash equity trading is another popular technique used on the stock market. It involves buying and selling larger shares of stock to make more significant returns from the changes in the stock prices. This strategy is mostly implemented by institutional investors rather than retail investors since it implies more capital outlay and higher risks.

Trading Leveraged Equity

Leveraged trading implies that an equity trader uses borrowed money to buy or sell securities. The purpose of using leverage is to increase the potential return of an investment. However, it's crucial to remember that it also increases the potential risk of loss.

Leveraged equity can be either long or short. A long trade implies that an investor buys securities expecting that their price will go up. A short leveraged equity trade is when an investor sells assets that he doesn't own in the hope that their price will go down so he can buy the securities back at a lower price and make a profit. To execute a leveraged trade, an equity trader must have a margin account with a brokerage firm.

One of the possible instruments allowing for leverage when trading equities is CFDs. They allow investors to trade equity without entering into direct ownership over it. Moreover, when trading CFDs, you open a leveraged position, meaning that you don't need to outlay the total position value; your broker will provide you with some capital to enter the trade.

It's crucial to remember that leverage is a double-edged sword. It can significantly magnify your profits and lead to drastic losses in your trading account. For example, if you open a position with 5:1 leverage and the asset increases in value by 10%, your account will increase in value by 50%. However, if the asset decreases in value by 10%, your account will decrease in value by 50%.

It's important to understand that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Therefore, once you decide to start CFD trading, make sure you have sufficient knowledge and skills in this sphere.

Other Forms of Equity



Private Equity

Private equity is a type of investment that involves the purchase of shares in a privately held company. Private equity traders typically hold these shares for some time and then sell them, often through an initial public offering (IPO). This form of equity can be a riskier investment, but it can also offer higher potential returns.

Home Equity

Home equity is the portion of a property's value that is owned by the homeowner. For example, if a home is worth $300,000 and the homeowner still owes $200,000 on the mortgage, they have $100,000 in home equity. Homeowners can sell their equity or use it as collateral for a loan which can be a useful way to finance home improvements or consolidate debt. However, it also comes with some risks. If the value of the property decreases, the borrower could end up owing more than the value of their home.

Brand Equity

Brand equity stands for the value of a company gained from its name recognition. Strong brand equity can give a company a competitive advantage, while weak brand equity can lead to decreased sales and market share. This type of equity can be measured through consumer surveys, focus groups, and other research methods.

Equity vs Return on Equity

When it comes to business, there are two ways to look at profitability: return on equity (ROE) and equity. ROE measures how much profit a company generates with the money shareholders have invested. Equity, on the other hand, is a company's net worth or the difference between its assets and liabilities.

How Can Investors Use Equity?

For most investors in the financial market, the equity market is a crucial concept. For example, an investor can evaluate a company and decide if a specific purchase price is too high or not. This can be done by using the shareholders' equity as a criterion to determine the fluctuation of an asset's value.

Moreover, if a company has historically traded at a specific price-to-book value of 1.5, an investor may be hesitant to pay a larger amount than that. However, if investors believe that the company's prospects have significantly improved, that may also change their perspective on it. Conversely, an investor may feel comfortable purchasing shares in a relatively weak business if the price is sufficiently low relative to its equity.

What Factors Affect the Cost of Equities?

According to the results of economic indicators, various factors may affect the cost of equities. Such factors can either be internal or external and can play a significant role in the shares' price. Most businesses compose yearly financial tables where they provide data about the results of their yearly activities. If there is a positive outcome and it is expected that the company will continue developing, this will have an equal impact on the shares' price.

Moreover, the future performance of the general economy is also a very important factor that can affect a stock's price. As with similar assets, the cost of equities will grow if there are favourable economic conditions. Conversely, if the financial situation deteriorates, the demand for equities will drop. This can be another factor, along with the market sentiment, that can affect the stock prices.

A very popular way that is used to measure the general performance of equities is considered to be the stock market index. Depending on the country, region, and industry, the indices may vary. For example, the FTSE 100 is an indicator used in Great Britain and monitors the performance of the 100 largest and most well-established companies in the UK, depending on their market capitalisation.

What Are the Risks of Equities?

As with all financial tools, buying or selling equities comes with risks, and some of them may lead to a partial or total loss of capital. For instance, it is considered less risky if a trader chooses to deal with equities that are connected with economically strong countries rather than those that come from developing ones. This is why strong and stable economies are considered less volatile and with higher market liquidity.

In some circumstances, wealthy investors may provide small businesses with venture capital. This can either help the company push its stock price higher, leading to profitable returns, or it may cause considerable risks and lead the business to perform poorly.

Some risks may be mitigated to a specific level, while others may be unavoidable. For instance, trading CFDs on equities or even spread betting can lead traders to maximise their losses. Despite that fact, understanding the meaning of trading on equity can help you wisely diversify your trading portfolio. Thus, any decisions should be made after in-depth research of a company's fundamentals.

Last but not least, choosing to invest in shares that belong to companies from different sectors or even geographical regions is a great way to diversify your portfolio. If, for instance, equities in a region or sector start to perform poorly, the shares that come from other sectors may stay unaffected. Such an example can be a global crash that can influence the general state of the economy.

Conclusion

Equity trading is a popular way to invest in the stock market because it offers the potential for high returns. However, it is considered a rather risky type of investment. If a company's stock price decreases, you could lose money rapidly from your investor account.

Therefore, if you decide to become an equity trader, make sure you have a clear understanding of how this instrument works, develop a robust trading strategy, find a secure and feature-rich trading platform, and continuously educate yourself on market trends and various technical and fundamental analysis tools.

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Fade in China

Not too long ago, market analysts and economists were seemingly unanimous in their belief that this century would ultimately belong to China. The country's massive territory, population and industrial might would simply be unmatchable, they said. Surely, then, this should translate to huge stock gains for the companies driving this economic conquest. If this past year is anything to go by, it would appear not to be the case.

Chinese citizens returned from the Golden Week holidays this week to find both mainland and Hong Kong stocks down even further in what has become a relentless creep to ever-lower lows. Indeed, the Shanghai Composite (SSE) is down almost 20% YTD, while the Hang Seng has fallen a whopping 30% over the same period. But what is causing this apparent race to the bottom, and what can traders and investors do to protect or even grow their capital during these uncertain times?

Zero COVID = zero growth

We've no doubt heard all manner of stories of horror and absurdity associated with what has become perhaps China's most maligned policy. The most recent of these came just last month as overzealous lockdown enforcers prevented Chendu residents from evacuating their high-rise apartment blocks amid a 6.8 magnitude earthquake. However, nowhere has the impact of this misguided mantra been felt more than in the country's economy. Far from on target to reach its 5.5% annual growth target, Chinese GDP actually contracted 2.6% in Q3 2022.

Meanwhile, youth unemployment reached 19.3% in June of this year as many businesses put off hiring for new entry-level positions until the coronavirus uncertainty subsides. Like in the West, the tourism and leisure sectors have been completely decimated by the frequent city-wide lockdowns, and even tech and manufacturing have suffered due to the lower consumption this economic pain has entailed. Baidu (BIDU), for instance, has seen its online marketing business shrink by 6.5%, with Alibaba (BABA) experiencing the same decline. As a result, both of these big-name stocks are down 27% and 38% YTD, respectively.

Flaring geopolitical tensions

Between naval exercises and official visits to Taiwan, US-Chinese relations have become rather strained of late. Though US Secretary of State Antony Blinken reassured Chinese foreign minister Wang Yi that the US's 'One China' policy has not changed, it's easy to see how Beijing might interpret recent actions by Washington as signals to the contrary. In an escalation to the US-led trade war being waged on China, early October saw excessively draconian export controls introduced that will prevent Chinese companies from accessing the latest chip-making tools and components. The stated aim of this policy is to prevent China from developing next-generation AI technologies, and some have already dubbed it "an act of economic war". Now, the US has been restricting the sale of certain components to the likes of SMIC (down almost 20% YTD) since 2020, but these new regulations have tightened the vice even further.

Given that Biden has not ruled out providing military aid to Taiwan should it choose to declare independence, we cannot dismiss the possibility of an all-out proxy war in the future. Indeed, in a phone call with President Biden, Xi Jinping made clear that "those who play with fire will perish by it".

Where do we go from here?

While things may look bleak from here, it's far from all doom and gloom for the world's second-largest economy. The recent performance of the country's biggest consumer tech firms may look terrible now, but the good news is that the potential upside for the likes of Alibaba, Baidu and Tencent is virtually limitless. At their current prices of $75, $103 and $32, respectively, the ADRs of these Asian giants are sitting at levels visited in the early-to-mid 2010s. While there are fears of delisting to contend with, all of these companies are major players in future industries like cloud computing and AI, which one feels will have to generate positive economic results at some point down the line.

Also, as powerful as US sanctions are, they are much less effective against China. After all, China has a domestic market of over one billion people and maintains good relations with another similarly sized market in India. Chip sanctions, in particular, have actually seen SMIC's business grow, not shrink, with demand rising from within China and developing nations to plug any gap left by the US. With all of this in mind, we could well look back on these stock prices as generational buying opportunities in a decade. Only time will tell.

Trade CFDs on Chinese stocks with Libertex

Libertex is a well-known broker that offers both long and short positions on such CFDs as Alibaba, Tencent, Baidu and the iShares China Large Cap ETF, so you can have your say wherever you think the Chinese market is headed. Libertex also offers a wide range of CFDs on commodities, currencies, options and even crypto if your interest in stocks is quite low. For more information or to create an account of your own, simply visit www.libertex.com


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 87.8% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

 

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