-
Libertex was recognized as the best trading application and cryptocurrency broker
We are pleased to announce, that the Libertex trading platform was recognized as the best trading application of 2017 and the best cryptocurrency broker version as per the Forex Awards.
"The Libertex recognition as the best trading application and cryptocurrency broker proves that 2.2 million traders made the right decision in choosing it to trade standard financial assets and for cryptocurrency trading", - said Igor Galkin, Forex Club Head of Sales
Libertex is a trading platform at the forefront of modern financial technology. Libertex users are able to make transactions with more than 180 financial assets. There are standard financial assets - stocks, indexes, energy contracts etc, and modern assets, such as cryptocurrencies and their cross-rates via Libertex. Professionals all over the world recognize Libertex as the leader in traditional and innovative financial asset trading.
One of the top financial magazines, Global Banking and Finance Review, recognized Libertex as the EES best trading application in 2016.
Forex Awards is an international rating company. Since 2010, it has been evaluating financial entities and trading platforms as well as applications.
-
12 new instruments are now available for trading via Libertex
The Libertex trading platform has provided its traders with an opportunity to trade 12 new instruments. New assets are intended for both traders, who are interested in earning on traditional instruments, and those who trade Cryprocurrency assets.
Now traders can operate with the following Cryprocurrencies:
• Cardano (ADAUSD) – token of an innovative platform created for the implementation of a Cryptocurrency economy and democratization of monetary turnover.
• NEM (XEMUSD) – the Cryptocurrency and the platform for data management on the basis of blockchain technology.
• Stellar (XLMUSD) – it is also not just a Cryptocurrency, but a platform for currency transactions.
• EOS (EOSUSD) – a token that is used in the blockchain architecture and intended for scaling decentralized applications, which is also the new project by Dan Larimer.
• TRON (TRXUSD) – the Cryptocurrency used by the decentralized platform in the TRON entertainment industry
• Stratis (STRATUSD) - the Cryptocurrency and the platform for the development of corporate applications.
Apart from this, 6 CFDs on stocks of Russian and other foreign companies are now available to traders:
• Aeroflot (AFLT) – one of the world´s oldest and the largest airline company in Russia.
• Novatek (NVTK) –Russian gas company.
• MTS (MTS) –Russian telecommunication company.
• Rosneft (ROSN) – Russian oil and gas company, being one of the world´s largest.
• Nornickel (GMKN) – one of the world´s largest producers of nickel and palladium.
• Netflix (NFLX) - American entertainment company, the provider of films and series to the main steaming multimedia.
The new instruments are available to traders via the Libertex terminal that was recognized to be the best trading application of 2017 and the best Cryprocurrency broker according to Forex Awards.
About Libertex
Libertex is a trading platform that is at the forefront of modern financial technologies. It allows performing transactions with more than 180 financial instruments. Both traditional financial assets, such as CFDs on stocks, indexes, energy carriers, etc. and innovative financial instruments - Cryptocurrencies, as well as Cryptocurrency cross rates are available for trading via the Libertex Exchange. Professionals all over the world recognize the leadership positions of Libertex, both in the traditional trading segment and in the field of innovative financial instrument trading.
In 2016 Libertex was recognized as the best trading application of 2016 in the EAEU, according to the Global Banking and the Finance Review, the leading financial magazines.
For more details please contact our press-service via [email protected]
-
Spotify and Dropbox available for trading via Libertex
The Libertex trading platform provides its traders with an opportunity to open trading positions in 2 new instruments - CFDs on Spotify (SPOT) and Dropbox (DBX) stocks.
New assets will appeal to those traders who are interested in opening up trading positions in promising technological instruments. Apart from this, these assets will help those traders who would like to diversify their portfolios and reduce trading risks.
The new instruments are available to traders via the Libertex terminal that was recognized to be the best trading application of 2017 and the best Cryprocurrency broker according to Forex Awards.
About Libertex
Libertex is a trading platform that is at the forefront of modern financial technologies. It allows performing transactions with more than 180 financial instruments. Both traditional financial assets, such as CFDs on stocks, indexes, energy carriers, etc. and innovative financial instruments - Cryptocurrencies, as well as Cryptocurrency cross rates are available for trading via the Libertex Exchange. Professionals all over the world recognize the leadership positions of Libertex, both in the traditional trading segment and in the field of innovative financial instrument trading.
In 2016 Libertex was recognized as the best trading application of 2016 in the EAEU, according to the Global Banking and the Finance Review, the leading financial magazines.
-
Colombian attacking midfielder, James Rodríguez, set to continue working with Libertex
James Rodríguez, the attacking midfielder of the Colombian national team and Bayern Munich, will continue working with Libertex, the best trading application in 2017 according to the Forex Awards.
"James is one of the most popular and successful football players in the world. His image is great for emphasizing the key advantages of the Libertex trading platform, which is used by more than 2.2 million people around the world," said Michael Geiger, CEO of Forex Club.
"Collaboration with James, who is taking part in the World Cup in 2018 in Russia with the Columbian national team, will help strengthen the position of the Libertex brand in all of the markets which our company covers" said Matt Krivoshein, Marketing Director of Forex Club Libertex.
James Rodríguez, in turn, noted: "To achieve success in professional football, you have to hone your skills every day and keep pushing forwards towards your goal. In the world of finance, the same rule applies and for that I’m happy to continue my association with Libertex.”
About James Rodríguez:
James Rodríguez is a Colombian footballer, who plays as an attacking midfielder for Bayern Munich and Colombia. He made his debut at the Colombian football club, "Envigado". In 2014, James won the FIFA Puskás Award, named after Ferenc Puskás, and was also the top goal scorer at the World Cup. He was also hailed as the man of the year in Colombia and the athlete of the year in America in 2014. James Rodríguez was part of the symbolic team of the 2014 FIFA World Cup. In 2017, Bayern Munich signed James on loan from Real Madrid for two seasons with the subsequent right of purchase.
About Libertex
Libertex is an international brand with a 20-year history of working in the financial market and the field of online trading. Libertex offers a wide array of financial tools and helps traders trade effectively in stocks, currencies, indices, commodities, gold, oil, and gas. The Libertex team supports more than 2.2 million customers from Latin America, Europe and Asia with first-class service. About 200 trading tools are available on Libertex. In 2016, Libertex was recognized as the best trading platform by the ForexEXPO Awards and the best trading application in the Eurasian Economic Union under the Global Banking and Finance Review. In 2017, the Forex Awards named Libertex the best trading application and cryptocurrency broker.
-
Maximum cryptocurrencies available in Libertex
Libertex trading platform announces that starting from May 23rd traders can perform operations with 14 new cryptocurrency CFD instruments and 2 new currency pairs. This means that Libertex has become one of the leading applications and trading platforms for EU traders in terms of amount of cryptocurrencies available.
Cryptocurrencies are one of the main trends in financial industry for the past couple of years. The demand for these assets grows significantly. We are happy to satisfy the demand of European traders for new innovative crypto-instruments launching them in our cutting edge Libertex platform.
New instruments list:
• BTGBTC (Bitcoin Gold / Bitcoin)
• BTGETH (BITCOIN GOLD / ETHEREUM)
• DSHBTC (DASHCOIN / BITCOIN)
• DSHETH (DASHCOIN / ETHEREUM)
• EOSETH (EOS/ETHEREUM)
• ETCETH (ETHEREUM CLASSIC / ETHEREUM)
• IOTETH (IOTA / ETHEREUM)
• LTCETH (LITECOIN / ETHEREUM)
• NEOBTC (NEO / BITCOIN)
• NEOETH (NEO / ETHEREUM)
• OMGETH (OMISEGO / ETHEREUM)
• QTMETH (QTUM / ETHEREUM)
• XMRETH (MONERO / ETHEREUM)
• ZECETH (ZCASH / ETHEREUM)
• USDZAR (US Dollar/ South African rand)
• USDTRY (US Dollar / Turkish lira)
Among the whole list of 40 cryptocurrency CFDs traders can find such as Ethereum, Ripple, Dash, IOTA and many others. One can find the whole list of new cryptocurrencies available at Libertex
-
European Markets Falling Facing G7 Issues
Last week was overall negative for the European stock markets, with nearly all major indices going down. Thus, UK's FTSE 100 lost 0.78% over the week, and was trading at 7681.07 by the end of the trading session Friday. France's major CAC40 was also in the red losing 0.42% and declining to 5450.22.
Meanwhile, Germany's DAX was short just 0.03%, trading at 12,766.55 Friday evening. Still, the overall trend was negative, and this can be because of the manufacturing orders decline. As such, April manufacturing orders in Germany came 1% lower, while the analysts were expecting a 0.30% growth. With manufacturing orders going down for four months in a row, and the export data, another major indicator for German economy, falling 0.3% short, too, the negative trend can be clearly visible.
Two largest banks in both Germany and the EU, Deutsche Bank and Commerzbank, were in the red on Friday, too. The shares fell by 2.1% and 1.8%, respectively, as Deutsche Bank Chair Paul Achleitner mentioned the potential merger of the two banks that are in competition with one another. Meanwhile, Lloyds, a major bank in the UK, lost 1.20% in market cap because of Standard Life share selloff. The insurance company itself also lost in price, its shares declining by 3.6%.
Infineon Technologies AG, the largest microchip producer in the EU, went up by 0.9% after good forecasts on the revenue and news on future massive investments in manufacturing. The analysts expect the revenue to grow by at least 10% next year, while before it was just 8%.
Siemens AG also managed to go up, by 0.3%. The German giant is merging with Alstom SA, headquartered in France, with respect to railway machinery. Last week, the companies announced the merger would be done only in 6 months, as the European Commission takes a lot of time to review it. Alstom SA shares also increased (by 0.7%) after this news came in.
Meanwhile, IBEX35 in Spain lost 0.04% and is trading at 9746.30. Italian FTSE MIB was not an exception either, losing 2.97% over the week and reaching 21,355.98.
The lower chamber of the Spanish parliament issued a vote of non-confidence to the Prime Minister Mariano Rajoy, who stepped down shortly after. This political crisis is a menace for the business and the Spanish economy that has been growing lately. As such, IBEX grew by 1.52% last week to reach 9914.40, but the political factors are very likely to get the index down, preventing it from growing more than 1% within the coming weeks.
In Italy, the markets are heavily influenced by the budget plan uncertainty, as the new government is being formed. The fiscal situation and policy in the country may become much worse at any time. FTSE MIB added 0.35% to its value, reaching 22,119.76, but, as in Spain, it may well reverse in the nearest future. Within the next two weeks, it is likely to trade between 22,150 and 22,090.
The major reason behind the selloff in the EU markets is the tense situation and investor sentiment ahead of the G7 summit in Canada. The relations between the EU and the US have very much worsened lately, and this did influence the local stock market. Meanwhile, Trump's hawkish tone of voice makes it much more difficult for the parties to reach an agreement. The EU governments are waiting for the White House leader to 'reload' the relations between the two parties and come to terms regarding economic and trade issues. The French President Emmanuel Macron said he would not sign the G7 agreement in case no agreement between the US and the EU had been achieved. Meanwhile, Donald Trump accused the EU and Canada of 'creating barriers' against the US.
Such negative news made the euro fall against the USD by 0.7%. The common currency is now trading at 1.17821. In the coming two weeks, while the German index is likely to enter the correction phase and reach 12,800, the euro may then continue falling against the USD by 0.5% to 1.2%. Donald Trump's policy looks quite consistent, which leaves a lot of room for the EUR to follow the negative scenario. As for the EU stock benchmarks, they may continue falling across the board, as Trump's policy still has some negative influence on the European markets, too, despite the overall positive tone of the final communique.
Iván Marchena, Libertex Analyst
-
The European Markets Are Staying Under the Pressure of Geopolitical Factors
The European stock market, which is still under the pressure of the developing trade conflict between China and the US, will continue to monitor the geopolitical situation, world oil prices and corporate news.
At the beginning of August, the government of the USA confirmed its plans to introduce import levy for Chinese goods and services of 200$ billion a year in total. In response, China declared that it is ready to introduce increased import levies up to 25% for 5207 names of goods from the USA with the delivery volume of about 60$ billion a year.
Alongside this, the USA have renewed the part of the sanctions against Iran. In its turn, the European Union has declared that it is going to block the implementation of these American sanctions in order to protect the interests of the EU companies.
In addition, the European traders will continue to monitor the publication of finance reports by the largest companies of this region. The reports that have been issued recently are ambiguous.
One more reference point for the European markets will be the world dynamics of the oil prices. Earlier it became known, that the US oil reserves have decreased by 6 million barrels in a week, whereas it was expected that they would decrease only by 3.1 million barrels. That being said, the petrol reserves have increased by 3.1 million barrels, and the distillation product reserves have increased by 1.8 million barrels.
The oil prices are also influenced by the change of the oil production forecast for the USA. The Energy Information Administration (EIA) of the US Department of Energy has cut the forecast of the US oil production in 2018 to 10.7 million barrels a day. In 2019 the EIA forecast of the US oil production is 11.7 million barrels, whereas before 11.8 million barrels were expected.
At the same time, the renewal of the sanctions against Iran is a positive factor for the oil prices, because the investor expect the decrease of the Iranian oil deliveries to the world markets. The rise of oil prices may lead to buying the stocks of such European companies as British BP and French Total.
Ivan Marchena, analyst at Libertex
-
Major ETFs and USDX are available in Libertex
Libertex trading platform adds 11 new contracts for difference (CFDs). Now one can trade major exchange-traded funds (ETF) and the dollar index USDX using Libertex cutting edge trading platform.
The contracts for the following ETFs are available in Libertex:
• SPDR S&P 500 ETF Trust
• iShares Latin America 40 ETF
• iShares MSCI Mexico ETF
• iShares MSCI Brazil ETF
• iShares Core U.S. Aggregate Bond ETF
• iShares China Large-Cap ETF
• iShares MSCI Germany ETF
• Vanguard FTSE Europe ETF
• iShares Core S&P Mid-Cap ETF
• iShares MSCI United Kingdom ETF
Michael Geiger, Libertex CEO, said: “Exchange-traded funds are among the most popular instruments on financial market as for institutional as for private investors. They are listed on world leading stock exchanges and let traders diversify their investment portfolios and enhance their effectiveness. We’ve included major ETFs into the list of our trading instruments following the growing demand for these top-tier assets.”
-
European Markets May Rise upon Putin and Merkel Meeting
The European stock markets may soar soon as the investors are waiting for some positive news after Germany's Angela Merkel meets the Russian leader Vladimir Putin. Meanwhile, the progress achieved on the trade issues between China and the US also holds out a hope of the global markets going up.
The Chinese government announced the new negotiations round will take place in late August. The parties previously tried to arrive to an agreement but have been yet unsuccessful. The investors hope now that this time the US and China will work something out.
Previously, China filed a legal action against the US to the WTO in order to make America lift the customs duties imposed on photocells and sun batteries manufactured in China.
The emerging markets fell considerably because of the situation in Turkey, but now they are recovering, too. Both the Turkish stock market and the lira dropped down drastically after the US imposed heavy customs duties on Turkish steel and aluminum. The Turkish government raised duties on various US goods in response.
The Turkish market, which has traditionally been a benchmark for other emerging markets, improved after Qatar announced it was ready to invest around $15B in Turkish economy. Besides, Germany is going to hold a meeting between the Turkish and German ministers of finance, where they are planning to discuss the economic issues of Turkey.
The European investors are meanwhile waiting for the meeting of Putin and Merkel, which is scheduled for Saturday.
Despite the overall positive atmosphere in the European stock markets, mining and oil production stocks are likely to remain under pressure, as the investors are wary of the possible US-China trade war consequences, that could include lower demand on metals and crude.
Iván Marchena, Libertex Analyst
-
US-China Trade Optimism Might Push European Markets Higher
The odds are quite good that European markets will see the 2 to 3% growth across key indices against the backdrop of expectations that the US-China trade conflict would finally be resolved.
European investors and traders anticipate the upcoming talks that will bring together at the negotiating table the team of representatives from the Chinese Commerce Ministry headed by Vice Minister of Commerce Wang Shouwen and their US Treasury counterparts led by the Treasury Under Secretary for International Affairs David Malpass.
Even though experts do not expect the talks to immediately trigger a breakthrough in the long-standing dispute, market participants believe that their resumption is a good sign by itself, hoping that the upcoming mid-level negotiations will set the stage for a higher-profile meeting between US President Donald Trump and Chinese President Xi Jinping in November. Currently, US and China are working to arrange the top-level meeting, but there’s no certainty yet about when it could occur. On November 6, 2018, the most of the US Congress elections will be held. So, probably, the renewed Trump-Xi talks timing will be adapted accordingly.
Another important development is that Turkish Treasury and Finance Minister Berat Albayrak and his French counterpart Bruno Le Maire will meet in late August in Paris to discuss the action to be taken to respond to the US sanctions against Turkey. Previously, the economic downturn in Turkey, where the lira plunged to its historical low, delivered a powerful blow to the European stock markets.
On the positive side, over the upcoming two months, French oil giant Total that previously officially left the US-sanctions-hit Iran could try to negotiate with the US authorities in order to be granted a special permit to further pursue its operations in the country.
Ivan Marchena, Libertex Analyst
-
European Indices to Be Headed Downward Amid Impending Global Uncertainties
After a short respite due to the US’ holding off the upward revision of taxes on cars imported from Europe, the key European indices will be facing pressures again due to geopolitical uncertainties. So we can expect that that the most important European stock market indicators will drop by 1 or 1.5%.
With the car tax boost postponed, European investors were more optimistic for a while. But then they are cognizant that the US will broach it again very soon. The US-China trade quandary is giving a negative cue to European investors. Even though China is trying to work through the differences, the efforts have so far been to almost no avail. The two countries have been cross-retaliating by raising import taxes even higher, and they fail to fix the conflict.
Given how things stand, market experts predict that China’s economy will be seeing a downturn as soon as in 2018 and 2019, which will hurt other economies. Even now, markets are apprehensive that the demand for the ‘black gold’ on the part of China could plunge and send the oil market prices downward globally, thus driving far-reaching negative implications to hurt the oil prices.
The US trade tensions with other countries have made the US Federal Reserve Service concerned, too. The Fed believes that the current US trade war with China and Europe and the policy moves it ignites are major catalysts for uncertainty and risks. Investors fear that the Fed’s stance on the interest rate revision will be affected by the developments of talks between all countries involved in the conflict. So it will be absolutely impossible to predict whether and when the key global currencies will grow or fall.
Ivan Marchena, Libertex Analyst (https://libertex.org/?utm_source=forum&utm_country=ru&utm_mediumtype=pr&utm_medium=link&utm_campaign=self)
-
European Markets Will Continue To Sag On the US Trade Tensions Fears
The US multinational trade conflict will remain at the center stage for the European investors in the shortest run. Even though things seem starting to look up with the US reaching progress on a trade agreement with Mexico, and with the US and Canada likely to close in on pact as well, the European stocks are still under intense pressure.
The news that US have bagged the trade deal with Mexico cannot but lift the mood of investors in Europe. Still many of them doubt if Canada will join the pact, even though there are heated speculations on the hopes that Canada would do so. Again, there doubts, too, about if the tensions between the US and China can be smoothed over, since China might be hit with tariffs on $200 billion worth of goods as soon as late September.
The EU authorities continue to expect that the harshest scenarios might play out and consider retaliatory action to take if US hits European car imports again with punitive tariffs.
Meanwhile, it's just another story when we look at the UK market with the Brexit news as the key determinant of where the British stock indices are headed. In the offing, the British pound is likely to strengthen, and the UK stock indices might grow, as the European Union is prepared to offer UK an unprecedented close relationship after it quits the EU.
Ivan Marchena, Libertex Analyst (https://libertex.org/?utm_source=forum&utm_country=ru&utm_mediumtype=pr&utm_medium=link&utm_campaign=self)
-
European Markets Still Anxious About the US Trade Conflict Developments
Despite the recently reached US-Mexico trade deal, the European markets will remain under pressure in the offing, as the US might levy a tax on European car imports.
Investors are awaiting the new pact to be signed within 90 days to replace the current NAFTA agreement. But then they have fears due to the US Donald President Donald Trump’s saying that the new pact will be signed with or without Canada.
Given the uncertainty, European investors still feel apprehensive that the European car imports might be hit by the US tax. What’s more is that traders are wary that tariffs would be imposed on $200 billion in Chinese imports in September.
We can expect that amid a geopolitical backdrop like that dollar will grow globally against other currencies, specifically, the euro.
Meanwhile, the global oil market is overwhelmed with sentiment shifts. In the medium term, the oil prices will be underpinned by the expectations of Iran’s oil supply cut due to the US sanctions. It is expected that Iran’s oil exports will drop by 1.5 million barrels a day as soon as September.
Previously, investors anticipated that Lybia’s oil supply would slump, as many deposits were affected by warfare. Yet now that the combat operations in the country have ended, Lybia’s oil exports were revived and topped 1 million barrels a day, which might curb the global oil prices’ growth.
Ivan Marchena, Libertex Analyst (https://libertex.org/)
-
European Markets Bracing Up for Possible New US Tariffs on Another $267 Billion Worth.
In the offing, the European markets are likely to be headed south, as US threatens to hit China with a new portion of import tariffs.
The US-China trade war remains on the front burner as the current market highlight, as Trump threatens tariffs on another $267 billion worth of Chinese goods on top of the previously imposed bunch of $250 billion. So far, $50-billion duties have been officially levied.
Another highlight is the progress of the Brexit talks that seem to have seen some positive developments, so cheering up the British pound. But the other side of the coin is that the strong pound hurts British exporters, as it drives down their USD-denominated profits.
European markets will be bolstered up to some extent by somewhat reinvigorated global oil markets with the Brent blend oil price gaining foothold at levels around $78 per barrel. In the medium-term, the oil prices are set to grow on fears of the impending Iran’s oil supply cut due to the U.S sanctions. Some major oil importers, specifically, India, Japan and South Korea are reducing Iranian crude imports to deal with the situation.
Things might be looking up for the German market, as Qatar is eyeing Germany with 10-billion-euro investment over the next five years. The investment is planned to release financing into the German automotive industry and information technology and banking sectors.
Ivan Marchena, Libertex Analyst
-
European Markets Are Hopeful That US-China Fresh Trade Talks Might See a Positive Progress.
European markets might grow a little in anticipation of a fresh round of trade talks between the US and China.
Previously, European traders felt rather downbeat, as they feared that a new portion of tariffs would be slapped on the Chinese imports to the US. But now investors have become hopeful that the US-China trade conflict will finally be resolved positively.
After China announced it would seek WTO permission to impose sanctions on the US, the news appeared that the two countries are getting ready for a fresh round of talks to tackle the trade issues between them.
European markets will also be underpinned by the growing oil prices that have neared $80 per barrel of Brent crude on apprehensions that Iranian oil supply might slump. The strong oil prices are likely to fuel the growth across the European oil and gas stocks that will be pushing higher the stock indices.
Meanwhile, the British investors are keeping an eye on the Brexit news. And even though the talks between the UK and the EU have been quite successful, traders still have quite a lot of fears in this regard, like that the UK food exports to EU may be stalled by no-deal Brexit. For instance, about 10% of the animal products exports from the UK will probably be stopped at the border due to the UK authority’s inability to get its product export certificates validated by other countries.
Ivan Marchena, Libertex Analyst
-
Pressure Won’t Loosen For European Stock Markets
As Long As US-China Trade Conflict Remains Unresolved
European traders will continue to be following alertly the US and China’s dealing with the trade dispute between them. Though the fresh round of discussions kicked off, and some progress has been seen, there is always a risk that either of the two battling countries might opt out of the talks.
So if the US eventually levies tariffs on $200 billion in Chinese goods, this will reverberate globally. Investors have been apprehensive that China might slash its oil demand on a global scale should the US-China trade war escalate.
Meanwhile, the EU economy has gained some equilibrium, which is evidenced by the improved ratings from the key international agencies. Specifically, Moody’s has affirmed European Union’s ‘AAA’ long-term rating, stable outlook, due to the resilience of the credit standing of the most of the EU's member states as a key driver. And S&P raised Cyprus’ sovereign credit ratings to ‘BBB-/A-3’ from ‘BB+/B’, also upgrading Portugal's sovereign credit rating outlook to positive from stable.
Of all Europe, the UK stands out in a somewhat negative way, as its economic outlook sparks Brexit-related fears that, apart from other drivers, are ignited by apprehensions that Germany’s banking sector’s No. 1 Deutsche Bank might move assets from London to Frankfurt after Britain’s planned exit from the European Union next year.
So we can expect that the European stock prices will prevalently be sliding until some positive outcomes occur in terms of the US-China negotiations.
Ivan Marchena, Libertex Analyst
-
European markets will assess the effect of the trade controversies aggravation between the United States and China
The European market participants will continue to assess the effect on the world economy and Europe itself of the new reciprocal customs duties of the United States and China.
New American duties on Chinese imports worth more than $200 billion shall come into force since January 24. Currently, these duties amount to 10%, and since January 1 they will be 25%. In response to American measures China will also impose import duties since September 24 on 5.2 thousand American items worth $60 billion.
Market participants expect that escalation of trade conflict between the United States and China could lead to a slump in the world oil prices due to decrease in Chinese demand for oil. However, expectations regarding reduction of oil supplies from Iran, which suffers from American economic sanctions, may somehow level such slump.
Besides, a question on possible introduction of 25% duties on imports of European cars from the United States remains open. As the conflict between the United States and China increases, the prospects for introduction of these trade measures against European cars are becoming more and more daunting.
However, indicators of the eurozone economy also give rise to concerns. Thus, according to IFO Economic Research Institute forecast, the region’s GDP growth in 2018 may reach 2%. Forecast for economic growth in the eurozone was aggravated because previously GDP growth had been expected at the rate of 2.3% as of the current year-end.
The current year-end inflation forecast amounts to 1.2%. According to the results of Q3 and Q4, the figure is expected to reach 1.2%, and in Q1 2019 - 1.3%.
The situation with Brexit will go on. Despite some progress in discussing the conditions of the United Kingdom exit from the European Union, many issues still remain unresolved.
Ivan Marchena, analyst, Libertex (https://app.libertex.org/)
-
Europe’s Markets to Be Headed Northwards As European Car Tariff Fears Become Less Intense
European investors feel quite upbeat now with the milder-than-feared scenario expected to play
out as far as the US-China trade conflict is concerned.
Investors were somewhat soothed, as US regulators have so far gone ahead with only 10-percent
tax on the Chinese imports, with 25-percent hike to become effective no earlier than January 1,
2019. China has mirrored the move.
The current situation also offers support to the European automotive sector equities, as Europe’s
car makers had feared of 25-percent tariffs to potentially be slapped on their US exports, but later
on they became less unnerved by the prospects.
Meanwhile, the optimism has been dampened by the fact that China and the US dropped the
talks around their trade war for the time being. And with the lay of the land like that, the new
tariffs might kick in even before January 1.
With the UK’s indices on the upward trajectory, the British pound has been even more downbeat
on top of its being continually weaker due to the enduring Brexit disagreements between the UK
and Brussels, as the former believes that the EU doesn’t actually consider its stand regarding the
deal’s conditions and is not ready to compromise. Moreover, UK insists that the EU’s Brexit-
related proposals are unacceptable.
On the positive side, things are looking up for France, as the oil giant Total has made a major
offshore UK gas discovery.
Other positive news is that Spain is seeing an economic upturn, with the country’s government
ready to make a voluntary early repayment of €3 billion towards its banking system stabilization
loan from the ESM. This is the ninth time Spain will make a voluntary early repayment of its
loan. Following the repayment, Spain’s outstanding debt to the ESM will stand at €23.7 billion.
Ivan Marchena, Libertex Analyst
-
European Markets Might Be Up As the EU Mends Its Trade Relationship with China
Europe’s markets might be up slightly after the Federal Reserve had raised interest rates up by 0.25 percentage points in a no-surprise move. Another thing that also came as no surprise was that the regulator foresees another hike before the end of the year. The Fed’s lifting the rate marked the end of the era of “accommodative” monetary policy.
What’s really important for the EU investors is that the Federal Reserve understands that the US trade wars are likely to hurt markets and to undermine the investors’ trust. Now the non-US traders expect that the US would do something to address its trade conflicts escalated around the globe. Specifically, after the US President Donald Trump and Japan Foreign Minister Shinzo Abe agreed to negotiate a new trade deal between the two countries as part of their trade discussions, the US might go ahead and set off discussions with the EU.
Still, stock markets are somewhat uneasy due to the US’ dropping its talks with China, as traders fear that the US might levy a tax on European car imports. European leaders had had some rounds of discussions with the Chinese officials, and they vowed to support free trade. The EU is set to defend the multilateral trading system and rejects sanctions and levies as external policy tools.
Importantly, ties between China and Germany might be deepened and enter a new phase, as the two countries will work together towards developing and reforming the WTO, and protecting the developing countries’ trade interests.
Another booster for the EU stock markets is oil with its prices marching upward. Despite some fluctuations, oil prices have neared multiyear highs, as traders apprehend the looming Iranian oil supply cuts, which might happen on the back of the US sanctions targeting Iran and hurting its oil exports. And a new round of sanctions is scheduled to go into effect in November, which will not be the end of the story, with Iran likely to be slapped with new restrictive action from the US later on. The US wants Iran's oil exports to drop to zero eventually.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
European Markets to Be Volatile Due to Italy Budget Turmoil
In the offing, European markets are to be quite volatile on the back of Italy’s budget crisis. Traders will be watchful awaiting the EU response following its clash with the country over budget.
Most likely, Brussels will try to put pressure on the Italian government so that it revises particular aspects of the budget that has earlier been approved amid challenges, with the budget deficit set at 2.4% of GDP though previously it was planned to be set it at 2% or less. Investors will also be on the lookout for how international rating agency will react to the budget deficit collision.
And then, European investors will take cue from the US’ mending its trade relationships globally, with the market to be bolstered by the United States and Canada finally reaching a new trade deal.
Meanwhile, the growing oil prices will be the near-term booster for Europe’s markets. The oil’s appreciation is driven by traders’ expectations that Iran oil supply will shrink in the wake of the new US sanctions to be imposed in November this year. Moreover, the US President Donald Trump threatens to slap new wave of sanctions on Iran after November and so bring the country’s oil exports to zero. Even now, China and India are cutting their imports of Iranian oil.
In the meantime, the EU has unveiled the ‘Special Purpose Vehicle’ (SPV) to facilitate legitimate financial transactions with Iran and allow European companies to continue trade with Iran.
Ivan Marchena, Libertex Analyst (https://app.libertex.org)
-
European Markets Might Rebound Slightly More Upbeat On Positive News About Italy’s Budget
In the days to come, Europe’s markets will be driven by hopes over Italy-EU budget resolution and the globally stronger oil prices.
While previously traders became somewhat mopey due to Italy’s budget deficit topping their earlier expectations, but now the sentiment seems to have improved to some extent.
Traders expect that Italy’s government will act to cut the deficit. Now the Italian leaders’ coalition promises to negotiate a move to bring the deficit to 1.8% of GDP in 2021. And we’ll know very soon if the revised budget is palatable to the EU, with the investors awaiting the European Commission’s reaction.
All in all, Italy is one of the EU’s weak points. The country’s debt-to-GDP ratio is second worst in Europe after Greece. Italy’s national debt figure has come to be the highest one of all time at €2.3 trillion.
Meanwhile, Europe’s oil stock prices will be pushed upward by the oil prices that are marching aggressively towards the 2014 autumn’s highs; and they are likely to be further propelled higher due to the feared US-sanction-battered Iran’s oil supply cut.
Specifically, French oil giant Total has announced that it sees no way to resume its operations in Iran amid the massive risks due to the US sanctions.
Also, the EU is creating the Special Purpose Vehicle to bypass the US sanctions and enable financial transactions with Iran. So Europe is likely to remain able to continue trade with the sanction-beleaguered country.
Ivan Marchena, https://app.libertex.org (https://app.libertex.org)
-
Forex Club Group has earned the VerifyMyTrade Execution Certification.
The VerifyMyTrade platform was launched by the Financial Commission (FinaCom PLC) to promote the forex market execution transparency.
The Financial Commission has reviewed 5,000 anonymized transactions executed by Forex Club clients to see if they meet the transaction execution standards, after which Forex Club Group was certified as compliant.
You can read about the Forex Club transactions audit outcomes here.
To see the full list of the companies audited by the Financial Commission please click here.
The certified brokers, traders and money managers will submit their data on a regular basis for their operations to be audited by the commission from time to time.
-
The EU Markets Will Continue To Face Pressures From Low Oil Prices And Negative Global Stock Markets Dynamics
In the coming days, European markets will continue to be battered as stock markets have been headed south globally and lower oil prices.
On top of the globally dominating trade wars, the US Federal Reserve’s announcing the end of the ‘accommodative’ monetary policy era triggered much higher yield on the US Treasuries propelling it to the 2011 highs. And surely with the US Treasury bonds doing as great as that, the higher-risk assets are attracting less interest across markets.
Traders are awaiting a new Fed rate hike to occur soon, as the US regulator said rates would be raised four times before 2019. Most US central bankers believe that the rate will be increased three times over 2019 and will reach 2.875% at average.
The EU’s markets will also be under pressure from the globally downbeat oil prices. Despite the expected sanctions-battered Iran’s oil supply cuts’ being a powerful medium-term driver, the oil market has a bunch of negative new to digest. Specifically, the US considers some exemptions to be offered to particular oil importers concerning Iran crude exports sanctions to be imposed in November this year. Sanctions may be eased for countries that have made it clear that they are set to reduce their oil imports from the country.
Meanwhile, European investors have never stopped being worried about the Brexit prospects like that if the UK exits the EU without reaching the deal and so with a zero transition period that will hurt the Irish economy and financial system dramatically. Moreover, many British companies would like to move their business to Ireland after the Brexit.
On the bright side, France celebrates the S&P’s affirming the country’s credit rating at “AA”, outlook stable. S&P believes that the France’s unemployment rate will go gradually down from 9.1% in 2018 to 8.6% in 2021, with inflation at 2% this year and lower further on to reach 1.6% over 2019-2020.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
The EU Stocks to be Headed South on Trade Spats and Political Collisions
European stocks are now under a certain pressure, as investors are wary about further European Central Bank’s monetary policy developments.
Traders expect that as Eurozone inflation rises, the regulator will continue to stick to the harsh monetary policy and will further raise rates. Investors share the fears of even greater global trade protectionism and financial market volatility that have been raised by ECB President Mario Draghi. Moreover, they are upset that the Quantitative Easing monthly net asset purchase will be halved to 15 billion euros in October and will be ended altogether by December 2018.
Another driver fuelling investors’ concerns is the lack of certainty about the US-China trade war prospects along with tenser relationship between Europe and Saudi Arabia. UK officials have begun drawing up a list of Saudi security and government officials who could potentially come under sanctions connected with the disappearance of famous dissident journalist Jamal Khashoggi, who has been missing since he entered the Saudi consulate in Istanbul. The US may come forward with similar sanctions. If this happens, Saudi Arabia global oil supply will be curbed dramatically, and so the oil prices will rise again.
Inside the Eurozone, investors never stopped being worried about the still unresolved and very important Brexit outcomes and conditions including how the Irish border fits into any Brexit deal.
Meanwhile, London and Brussels have little time left to agree a workable Brexit, as they need to reach the withdrawal agreement in November at latest. If they fail, the agreement will not be able to go through the ratification process by March 29, 2019 (the Brexit deadline), which could trigger the ‘hard’ Brexit that would cut off most UK ties with the EU including the agreements, arrangements and regulations it currently observes as a European Union member and cause uncertainty about the future relationship between the United Kingdom and the EU.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
The EU Majors’ Financial Figures, Italy Budget Crisis and Brexit Will Remain the European Stock Market Highlights
In the days to come, the EU stock market traders will be on the watch for the EU’s major’s financial figures that are currently being announced as well as for the Italy budget crisis updates and Brexit news.
Investors expect that Brussels will probably ask Italy to revise the country’s budget for 2019 and will reject the current version of the budget with the deficit set at 2.4% of GDP. In the meantime, another focus of interest for traders is Brexit. With the looming Brexit deadline of March 29, 2019, the UK needs to strike the withdrawal deal in November at latest so that it could go through the ratification process in time and take effect by the Brexit date. The no-deal Brexit is to be the ‘hard’ Brexit feared by investors.
On the positive side, the European market majors have recently announced their financial results that appear to be quite strong, which will underpin the EU stocks dynamics in the offing.
A negative thing is that the EU market-watchers apprehend a new rate hike by the US Federal Reserve that seems to believe that it makes sense to further raise rates amid the country’s strong economy according to the Fed minutes from its September meeting.
And again on the negative side, the US-China trade war tensions have never eased. Though the US Department of the Treasury has so far declined to label China as currency manipulator, the Treasury report says that China, along with five other countries, has currency practices that require close attention.
As the US-China trade quandary remains unresolved, the EU investors are wary that European car imports into the Unites States might be hit with higher tariffs. Meanwhile, as the car tariff hike threat appears to be less acute, the EU’s new light motor vehicles sales grew by 2.5% with 11.95 million new cars sold from January to September 2018.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
The European Markets Might Recover Somewhat Amid Globally Stronger Investment Environment
In the offing, the European stock indices might continue their growth, as the investment climate has become better globally.
Specifically, the financial scouts watching the European financial markets say that the traders feel upbeat because they anticipate the US-China trade war to be successfully resolved. Investors are now awaiting the meeting between the US President Donald Trump and China’s leader Xi Jinping that is planned to be held on October 29. The way how the China’s stock exchanges reacted was driven by the statements made by the governor of the People’s Bank of China (Xi Jinping). Should the meeting eventually happen, it will become the first rendezvous of the two leaders since the trade spat had exploded.
Furthermore, European investors expect that the Chinese government will offer support to the country’s business sector that is being hurt by the US-China trade contradictions. The governor of the People’s Bank of China has earlier announced to investors that they may remain appeased, as the regulator will undermine the country’s economy amid the current challenges.
On the negative side, the financial scouts are still wary about the Italy’s economic outlook, as the budget crisis faced has never been resolved. The European Commission is concerned about three things regarding the country’s budget, that is, how the national debt, the budget deficit and the economic growth will be managed. According to the EU regulations, a member country’s budget deficit may not be greater than 3% of its GDP. Meanwhile, Italy is the EU’s largest debtor after Greece with its debt-to-GDP ratio at 131.8%.
Another front burner issue for the EU is Brexit. Investors are hopeful that the UK will finally be able to reach the deal. Brussels and London need to work out the final Brexit agreement in November at latest so that the deal could go through the ratification process and become effective by the Brexit cutoff date. Should the withdrawal deal fail to be reached, this is likely to trigger the ‘hard’ Brexit. And that’s what investors actually apprehend.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
Europe’s Markets to be Dominated by Pessimism, as Global Exchanges Are Battered By the Negative Developments
The financial scouts expect that in the days to come, Europe’s markets will continue to be dominated by the surge of negative developments that has lately overpowered the major global markets. The sell-off hitting the EU markets was also fuelled by the weakening oil prices.
Lately, the bulk of the negative market news has come from the US, whose weak statistics and the looming new interest rate hike by the Federal Reserve make investors feel pessimistic. Moreover, the Fed has said that the US companies fear that they may be hurt by new Chinese import tariffs. The businesses now have to deal with higher commodity prices driven by the tariff rises, and so they plan to charge higher prices to their customers.
Another point of interest, according to the financial scouts, is that traders are awaiting the Italy’s budget crisis outcomes. Previously, the European Commission rejected the country’s draft budget and asked Rome to submit a new one within three weeks. Yet another negative driver is that investors are wary that a worst case Brexit scenario will play out. So it is likely that the post-Brexit transition period will be extended.
And finally, a major source of pressures for the EU markets is the global oil market uncertainties, with the investors too often overwhelmed by the sudden price hikes and slumps.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
European Markets to Be Volatile Amid the Massive Uneasiness
European markets will continue to be volatile, following suit of the mixed dynamics seen by the stock exchanges globally. But then, Europe’s markets have recently been much more moderately downbeat than the rest of the world’s markets.
For the EU markets, a key driver fuelling the uneasiness and insecurity is the US-China trade war outlook and how China’s economy’s prospects might be affected. As China’s industrial profits decreased after nine months of the current year, traders expect the country to face more economic challenges that might be triggered by the still unresolved US-China trade conflict. Though the People’s Bank of China has pledged policy support to the national economy that will be offered should the country be hurt by the challenges, investors understand that this would only allow the country’s to keep its economic performances at their current level.
Financial scouts note that investors are waiting for the S&P’s decision regarding Italy’s credit rating amid its budget standoff with Brussels. The country’s long-term credit rating by S&P has so far remained untouched at ‘BBB’. But now investors expect that Italy’s credit rating outlook might be downgraded to ‘negative’.
Yet another source of uncertainty is the global oil markets with its unstable prices showing mixed trade. What attracted the traders’ interest was that Iran’s top government officials say that the country’s oil exports will not fall below 1 million barrels per day on the looming new US sanctions.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
European Markets To Lag Behind the Rest of the Markets Globally On Unresolved EU Issues
In the nearest term, Europe’s markets are likely to be rather downbeat versus key global markets. The European indices might show negative dynamics after the previous period of their modest growth despite the mainly pessimistic environment.
As for the American and Asian investors, they are substantially optimistic mainly due to the robust financial figures reported by the major US companies. Furthermore, traders are now expecting that the US-China trade war might finally be resolved, as the US President Donald Trump said a “great deal” with China was around the corner.
Meanwhile, the European markets are more apt to be driven by the EU news with investors watching things like what will happen next regarding Brexit. Financial scouts say that even though no deal has been reached yet, some progress seems to be seen. The good news is that the British bank stocks’ performance might be bolstered by the fact that the UK banks will be able to operate soundly in the EU after Brexit happens.
On the negative side, Europe’s markets, together with any of the markets globally, will face pressures from the falling oil prices. Once there has been no reason to expect a possible oil supply shortage due to the Iranian oil exports cut on the back of the US sanctions, the oil prices were headed dramatically south, since traders are now confident that Libya and Saudi Arabia can supply enough oil to keep the market satiated. Thus, there are no fears anymore that the market might run short of oil.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
Financial Scouts Say Europe’s Traders Will Continue To Follow News About The US-China Trade Conflict, Brexit
Europe’s stock markets will continue to face some pressure due to the US-China standoff resolution uncertainty. EU traders will also keep track of the Brexit news and global oil market developments.
Trade differences between the US and China will remain the focus of interest for European investors. The news regarding the trade spat are quite contradictory, with the markets propelled upwards and downwards interchangeably every time a fresh piece of trade war news appears. However, some progress has been seen here, so traders are awaiting positive updates on this arena.
Brexit news looks similarly ambiguous. London and Brussels have little time ahead to agree, which fuels traders’ concerns, as they apprehend that a ‘hard’ Brexit will happen. Meanwhile, some headway has been seen here, too. Specifically, concessions have reportedly been secured from Brussels to keep the whole of the UK in a customs union in the wake of Britain’s withdrawal.
Another market experiencing a quite high volatility is the oil market, with the volatility driver being Washington’s new anti-Iran sanctions that came into force on November 5. Traders originally expected that new sanctions might drive oil supply shortage in the global market due to the apprehended Iranian oil exports cut. But in light of waivers given to some countries the oil undersupply seems unlikely to happen.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
Europe Worries About Oil and Waits for the U.S. Federal Reserve System to Decide on the Rates
European stock markets are feeling optimistic after the results of the U.S. midterm Congressional elections were announced. However, some uncertainties remain due to the Brexit terms and ambiguous trends in the global oil prices.
In the course of the U.S. midterm Congressional elections Democrats won the House of Representatives, but Republicans still control the Senate. The U.S. President Donald Trump is expected to meet with certain difficulties in implementing his initiatives, especially the trade ones. Thus, there is reason to hope that he will not be able to bring up new restrictions, particularly, ones affecting the importing of the European goods.
Financial scouts are certain that the global investors will direct their attention to the December meeting of the U.S. Federal Reserve System, at which it can decide on increasing the rate. Forecasts expect it to be raised to 2.25-2.5%. Investors also await news of the Brexit terms.
Uncertainties of the global oil market are a cause for unrest in Europe as well. New U.S. sanctions against Iran introduced on November 5, stipulate some countries to be temporarily exempt. Italy and Greece made it to the list of those exceptions in Europe.
However, the list turned out to be quite a complicated matter for the European investors. For example, Spain has been purchasing Iranian oil as well, but it failed to be included, while Italy was.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
EU Markets Cheered by the Draft Brexit Deal, But Investors Are Wary About Italy’s Economic Challenges
Europe’s markets are likely to be headed south as the US-China trade relationship has been stubbornly dominated by uncertainty, and also due to Italy’s economy quandary and overwhelmingly pessimistic oil market sentiment.
On the plus side, the European markets will be bolstered by the news that the EU divorce deal has been eventually reached. Despite the array of pessimistic forecasts, London and Brussels have successfully struck the Brexit withdrawal deal on all items discussed including the most touchy and contentious ones.
As far as the US-China trade spat is concerned, there has not been a hint of certainty about how and when it will be resolved. Still, investors are hopeful that the two opposing countries will get back to the negotiation table soon.
Meanwhile, Italy’s budget deficit has remained the front-burner concern for Europe, as Italy refuses to revise its draft budget for the next year including the country’s GDP growth rates and the budget deficit figures. Amid the budget turmoil, the Italian treasuries and government bonds yields are growing at an accelerated pace, which might trigger a full-blown debt crisis, as yet today, Italy is Europe’s second largest debtor after Greece.
In the French market, investors were upset by the US President Donald Trump’s bashing concerning France’s high wine import taxes curbing US wine sales in the country.
Financial scouts say that the markets are anxious globally. Oil prices change their direction every time fresh news appears, but in the medium run, traders fear that the oil supply may be excessive.
Ivan Marchena, Libertex Analyst (https://app.libertex.org/)
-
Europe’s Markets Anxiously Waiting for the Brexit News and Italy’s Budget Developments
European investors are waiting hopefully for further progress in the US-China trade dispute to happen after some positive developments have occurred along this avenue. On the negative side, markets will continue to face pressures due to Brexit uncertainties and Italy’s next-year’s budget issues that have still not been fully resolved, financial scouts note.
Meanwhile, investors keep hoping that US won’t slap new tariffs on the Chinese imports. China says it doesn’t want to fight a trade war with the United States, while the US pledges Washington “will not change course” on trade policy “until China changes its ways.”
European traders are also anxious to know what new Brexit moves are actually to be made now that London and Brussels have worked out a draft divorce deal, as the UK prepares to leave the European Union on March 29, 2019. After the draft deal has been pulled off, it needs the approval of UK MPs and each EU member state. And if it has not been approved before the Brexit day, ‘hard’ Brexit might be brought about with negative outcomes to possibly hurt the UK and the remaining EU members.
Yet another source of concern for investors is Italy’s 2019 budget turmoil with European Commission’s report on Italy's debt to be issued on upcoming Wednesday, November 21. Traders are wary that disciplinary procedure might be brought against Italy, if the country’s draft budget challenges its tax and budget commitments to the EU.
In France, the “yellow vest” protests against fuel price rises still continue. And though President Emmanuel Macron says he “hears the anger”, he seems to be set to keep taxing fuel.
Ivan Marchena, Libertex Analyst
-
Europe’s Markets to Remain Volatile as Investors Wait for the Italy Budget Impasse to be Resolved
Europe’s stock markets are awaiting the outcome of the Italy budget crisis. Most likely, we’ll have some certainty about what really happens in early December. Investors are somewhat worried about the situation, with market prices going both ways.
The Eurogroup is scheduled to meet on December 3 and will most likely discuss the issues faced. Italy’s government are hopeful that there will have a constructive dialogue with European Commission Head Jean-Claude Juncker. Still, investors fear that Italy may be disciplined with EDP measures to be imposed against it.
Meanwhile, traders never stopped watching the US-China trade war developments, with a U.S. government report appeared that accuses Beijing of stepping up efforts to steal technology via network hacks.
Also, investors are awaiting the outcomes of the upcoming meeting between Presidents Donald Trump and Xi Jinping at G20 Argentina 2018 summit in December. If traders understand that trade risks still remain high after the summit, they might reasonably have reason to doubt that the Federal Reserve will raise rates again as planned in its next meeting. So far, the Fed predicts the fourth hike before the year ends, likely coming in December.
Global oil markets are dominated by uncertainty, too, with the oil prices plummeting and then soaring again. Investors are awaiting the OPEC+ meeting in early December with the oil production cut likely to be endorsed to bolster prices. In the medium term, traders are wary that the oil market supply might be too high.
Ivan Marchena, Libertex Analyst
-
Europe’s Markets to Remain under Pressure, As Investors Await the G20 Summit and OPEC+ Meeting Outcomes
Europe’s investors’ eyes are on the G20 summit to be held from November 30 to December 1 in Argentina. Investors expect that some new arrangements might be worked out by the US and China that would hopefully help to break the trade impasse. The positive expectations are driven by the US President Donald Trump’s saying earlier that he intends to discuss the situation with the Chinese leader on the sidelines.
Another main focus for European traders is Brexit terms that remain a front-burner concern even though key agreements seem to have been reached between Brussels and London. Meanwhile, new setbacks might still occur. Previously, the sticking point had been a rift over Gibraltar, as Spain had contested the disputed territory’s status and threatened to veto the Brexit withdrawal agreement. But eventually the UK and Spain have struck a Brexit deal over Gibraltar.
On the positive side, the European indices might be underpinned by the euro weakening versus the US dollar, as investors become less attracted to high-risk assets including high-risk forex investments and now tend to prefer buying robust currencies like US dollar.
And on the negative front, oil prices continue to face pressures even though some OPEC members, primarily Saudi Arabia, have been sending out signals that the decision to curb oil production might be taken in the OPEC+ key meetings to be held in Vienna from December 5 to December 7.
Ivan Marchena, Libertex Analyst
-
What is financial scouting?
When referring to the term financial scouting, people mean the searchin for good trading opportunities in the financial market, done both quickly and professionally.
A financial scout or a financial scouting service sets out to find investment opportunities that fully meet a trader's needs, this being their primary task. Such investment opportunities may be both high- and low risk.
Want to know what is the difference between financial scouting and investment advisory? - Visit https://libertex.com/blog/what-financial-scouting
-
In Europe, All Eyes Are On the G20 Summit
European traders will keep close track of the G20 summit. They wait for potential important statements to be made regarding the global economic outlook, and for agreements to be reached to address the US-China trade war.
On the downside, investors are wary now that the US leader has promised to unleash tariffs on European car imports, so Europe’s carmakers feel downbeat.
Meanwhile, on the positive side, traders’ worries about possible fourth rate hike from the U.S. Federal Reserve were somewhat soothed. The Fed’s chairman Jerome H. Powell made a market-invigorating statement saying that the US economic outlook remains strong, but the Fed might consider a pause in its interest rate hikes next year to assess the impact of its credit tightening. Mr. Powell said the benchmark interest rate was “just below” the neutral level.
Financial scouts note that the two continuing main concerns for Europe are Brexit divorce conditions and the Italy budget standoff. According to new official figures, withdrawal from the European Union under the government’s plans could cut the UK’s GDP by up to 3.9% over the next 15 years, but leaving without a deal could deliver a 9.3% hit to GDP over the same period, says the analysis produced by departments across Whitehall.
Oil will be the focus of interest for the European investors as well, as they hope that the oil prices might be bolstered if OPEC+ members decide to cut the supply to curb the current glut in their meetings from December 5 to December 7.
Ivan Marchena, Libertex Analyst
-
Which opportunities does financial scouting bring?
When it comes to financial investments, being ahead of the others is a key to success. The drivers influencing the price are constantly changing. This makes it necessary to always monitor both micro and macroeconomics and act fast. As Leo Szilard, a famous scientist, once said, 'In order to succeed it is not necessary to be much cleverer than other people. All you have to do is be one day ahead of them.' This is the best phrase to describe financial scouting, the new service that enables faster trading and gains more profit.
Want to know more about financial scouting? - Visit Libertex.com!
-
Marijuana Stocks Falls into the Correction Territory
Major Canadian pot stocks were broadly lower, with some prices currently falling by as much as 5 to 6%. The sector has been into the correction territory after soaring in October on recreational cannabis sales rollout in Canada.
Now we see a big share price reversal versus the peak prices. The Sector’s leaders Canopy Growth Corp and Tilray Inc fell by about 50% versus their 12-month highs. And some other key names in the sector like Aurora Cannabis Inc plummeted even lower.
On the positive side, some good news appeared that, as financial scouts note, might refuel buying in the sector. Specifically, first-ever medical cannabis growing licenses were awarded to private businesses. And some more countries like the UK and Germany might possible make marijuana legal as well.
Another big positive news for the marijuana sector companies was that Canopy Growth and some other major cannabis producers have been on the Bloomberg’s 50 Stocks to Watch in 2019 list.
We can expect that given a lengthy correction after the bursting growth in October Canopy Growth (СGС) stocks may be down by $29-30 within the week, while Tilray might drop to $100-105, and Aurora Cannabis Inc, Aphria Inc. and Cronos Group might hit the lows at $4.5-$5, $6.5-$7, and $8.2-$8.5, respectively.
Ivan Marchena, Libertex Analyst
-
Europe’s Investors on the Sidelines, Eyes on Brexit and OPEC+ Meetings
European investors’ are waiting to know the Brexit talks outcome and the OPEC+ potential oil supply cut decision.
The G20 summit has yielded good news it brought a temporary truce between the U.S. and China, with the U.S. President Donald Trump and the Chinese leader Xi Jinping agreeing that China will not impose new tariffs on the U.S. car imports and so boosting Europe’s carmakers’ stocks.
Meanwhile, European traders are waiting for the Brexit situation to be finally resolved, with some doubts persisting over if the deal will be reached, with no-deal divorce still a real possibility.
After the G20 summit, all eyes are on the upcoming OPEC+ meetings over December 5-December 7, with the decision to cut the oil supply to hopefully be taken by the organization’s members to curb the oversupply that, as traders fear, might hamper the global oil demand for the next year.
The bad news was Qatar’s announcement of its quitting OPEC as part of the country’s long-term strategy for growing its international energy market presence with a focus on gas. Meanwhile, Russia and Saudi Arabia have agreed to extend the OPEC+ oil pact into next year. So now investors have to sit and wait for some certainty about the oil supply levels.
Ivan Marchena, Libertex Analyst
-
Europe’s Markets Will Be under Pressure as Traders Await Brexit Deal Decision and Italy’s Draft Budget Revision
For the time being, European investors await the outcome of the UK cabinet meeting to be held soon to see if the draft deal is approved. Meanwhile the UK Parliament continues its debate on the deal ahead of the December 11 vote. If the deal is rejected by the British MPs, the UK will have to leave the EU without a deal, which will hurt the country’s economy badly. So far, the deal is criticized both by the ruling party and opposition.
Traders are anticipating next steps European Commission is bound to make to expand euro use to limit the dominance of the dollar as the global reserve currency. Eurocommission believes that stronger euro will help boost the global financial system’s stability. The euro expansion proposals from Brussels will be considered at the EU leaders’ summit later this month.
Another thing that keeps all eyes on it is Italy’s budget, with the country to submit the new draft budget for 2019 to the European Commission that has rejected the previous draft. Italy’s government is currently contemplates the budget deficit reduction from 2.4% of national GDP as was previously proposed.
Yet another concern is France, with investors waiting for the fuel tax increase to be suspended amid increasingly violent “yellow vest” protests, with France’s President Emmanuel Macron’s reputation bitterly undermined after the three-week unrest.
As for the oil sector, financial scouts think that Europe’s investors’ sentiment will be significantly influenced by which way oil prices will go after the OPEC+ meetings where the oil supply cut decision will be taken (or rejected) by the members.
Ivan Marchena, Libertex Analyst
-
Libertex trading platform adds 5 CFDs on cannabis shares
Libertex has added five new contracts for difference (CFDs) to its trading platform. Starting from December 11th, 2018, traders using our cross-channel platform will be able to trade with the five hottest instruments, which represent the world’s most popular companies operating in the growing sphere of marijuana production and processing.
CFDs on the following shares are now available in Libertex:
• Tilray,
• Canopy Growth,
• Aphria,
• Cronos Group,
• Aurora Cannabis.
Libertex CEO Michael Geiger said: “Marijuana is fast growing sector in Canada and in the US after having recently been legalized for medical and recreational purposes. This has led to a speedy increase in the amount of companies that now grow weed or produce medical products from the plant. Now, an influx in traders seek ways to include these assets into their trading portfolio. We are pleased to be able to satisfy the demand for these financial instruments and add CFDs for the most interesting stocks within the Libertex trading platform.”
About Libertex:
Libertex is an international brand with more than twenty year experience in financial markets and online commerce. Libertex provides investors with access to trade stocks, currencies, indices, commodities, gold, oil, gas and many other financial instruments. The Libertex team has more than 2,200,000 customers in Latin America, Europe and Asia owing to its first-class service. The platform has more than 150 commercial instruments. In 2016, Libertex was recognized by the Forex EXPO Awards as the best trading platform; and Global Banking and Finance Review named it the best trading application in the EAEU. In 2017, the Forex Awards named Libertex the best trading application and cryptocurrency broker.
-
Europe’s Investors Still Anxious, Prices Highly Volatile
European stocks are still being struck by volatility, and investors continue to be anxious about the Huawei CFO’s arrest dimming US-China trade talks, which prompted the European Commission to express concerns about the risk of unauthorized data collection by Chinese technology companies in Europe.
Meanwhile, given the recent US economic statistics, traders believe that the Federal Reserve will likely be flexible on plans to ratchet up interest rates in 2019 after this year’s 3 hikes, with the rate raised first in March, then in June, and then in September. Still, a fourth rate hike is expected to happen, and the FOMC meeting on December 18-19 is the likely occasion. So far we don’t know the number of interest rate hikes the Fed has projected for 2019. Though 3 hikes were planned, the regulator might decide to reduce the number should the economy worsen.
The oil market was somewhat eased by the OPEC+ announcing the oil output to be cut next year, with the aggregate global oil supply to be reduced by 1.2 million bpd for 6 months starting January 2019 as agreed in the OPEC+ ministers’ meeting, with the OPEC countries to slow down their oil production by 800k bpd, and the supply from the non-OPEC countries to be cut by 400k bpd.
As news and expectations remain mixed, the European markets are likely to remain very volatile in the offing. Financial scouts are confident that traders will continue to feel uneasy about the global developments.
Ivan Marchena, Libertex Analyst
-
Pot Stocks’ Fall Continues, As Marijuana Market Corrects to Fair Levels
Cannabis stocks continue their fall as they move deeper into the bearish territory and farther away from the October peaks. After the boom coming on the back recreational marijuana legalization, the stocks now go back down to fair levels.
As marijuana market is massively driven by speculation with its stock prices overinflated, the current prices have been too far from real, with the stocks overbought. Many investors have painted too rosy a picture about the sector’s companies, expecting sales to skyrocket and yield super profits. In fact, many of cannabis producers failed to have a clear and effective business plans, and the expectations of the continuing blasting growth have never become a reality.
Meanwhile, some major cannabis growers like Canopy Growth and Tilray do better than the rest of the segment, even after quite significant segment-wide price sag occurring last week. That said, the two companies’ stock may be good enough to buy for the long-term. A good thing for Tilray, and a long-term catalyst for its stock, is that it might get an appreciable share of the US marijuana market as planned, if cannabis is legalized throughout the US. Meanwhile, Canopy’s strengths are its production scale and market size.
It is likely that the pot sector will continue to lose ground in the week to come. Canopy Growth (СGС) price is expected to drop to $25-$27, Tilray (TLRY) will be down at $95-$97, while Aurora Cannabis Inc (ACB) and Cronos Group (CRON) are to be priced $3.8-$4 and $9.8-$10, respectively. Aphria Inc. (APHA) stands out with its price really very volatile going 20% up or down intraday. And it looks like this will continue with the price to steadily range from $5 to $5.5.
Ivan Marchena, Libertex Analyst
-
Marijuana Stocks May Become More Upbeat On Major Investors’ Getting Attracted to the Pot Sector, Marijuana Growers’ International Expansion Plans
Canadian marijuana growers’ stocks’ fall was blunted by a bunch of positive news that bode well for the sector. The most important positive cue is that investors expect marijuana to be legalized throughout the whole country in the U.S. If this happens, this is likely to trigger a cannabis sector boom similar to the one that followed the legalization of the recreational marijuana in Canada. Though the pot sector has been spiraling downward for several months in a row after the boom.
Another really positive thing is that major investors are eyeing the sector. Illustratively, the California Public Employees' Retirement System (CalPERS) scoops up the sector’s stock, specifically, by investing into Tilray, Canadian marijuana producer and a global pioneer in cannabis production and distribution.
What’s more is that Tilray has announced the formation of its International Advisory Board that is an esteemed group of business and government leaders from countries where marijuana is legalized or moving for legalization, who will provide guidance to Tilray’s executive team and Board of Directors as the company pursues its aggressive global growth strategy.
Meanwhile, Canada’s Aurora Cannabis Inc made it clear that it is set to expand into the Mexico’s market by buying Farmacias Magistrales, a Mexican importer of raw materials containing THC.
Financial scouts expect that in the marijuana sector stock will grow appreciably in the days to come, with Tilray (TLRY) to go up to $76-$76.5, Aurora Cannabis (ACB) to climb to $6.5-$7, and Canopy Growth (CGC), Aphria (APHA) and Cronos Group (CRON) to go up to $32-$33, $6-6.5, and $11.5-$12, respectively.
Ivan Marchena, Libertex Analyst
-
Marijuana Stocks Resumed Fall After a Short-Lived Growth Spree
After the recent short-lived growth spree, Canada’s marijuana growers’ stocks fell back to reality, and so the downslide in the sector continued. Investors, who used to feel really upbeat as they anticipated marijuana to be legalized throughout all the U.S. states, now fear that this might not actually happen. Financial scouts believe that the greatest risk now faced by the pot sector is that marijuana sales may be banned under U.S. federal laws. And even though the ban is not really likely to be imposed, investors are slightly wary that it might be passed.
Meanwhile, the good news that might bolster Tilray stock was that the world’s largest brewer AB InBev and Tilray are teaming up to research cannabis-infused beverages through AB InBev’s Ontario-based subsidiary Labatt, with each partner to contribute up to $50 million to the joint venture. Previously, Tilray also announced an exclusive global distribution agreement for medical marijuana with pharmaceutical giant Novartis.
Still, with the stocks back into the bearish territory, we can expect the prices to sink. In the days to come, Canopy Growth (СGС) might slide down to $27.5, with Tilray (TLRY) likely drop to $70, while Aurora Cannabis Inc (ACB) Group and Aphria Inc. (APHA) are likely to slide down to $5, and Cronos might fall to $10.5.
Ivan Marchena, Libertex Analyst
-
Pot Stocks Might Be Up After the Christmas Recess
Canada’s cannabis stocks might grow appreciably after the Christmas trading break. Just before the holiday closing, the pot sector was feeling quite upbeat, with the Aphria Inc NYSE price notching up by a hefty 14% on December 24. The sector has caught the investors’ interest now for multiple reasons. One of them is that the U.S. stock market was brutally downbeat on Christmas Eve, having the worst pre-Christmas day on record. Investors’ being pessimistic about more conventional assets is due to the U.S. political gridlock, with the country’s President Donald Trump not willing to approve the 2019 spending bill without the Mexico border wall funding. As traders get disappointed about the classical investment instruments, they start eyeing more offbeat segments like cannabis and cryptocurrencies (where a pre-Christmas turbulent growth occurred as well). Another driver propelling the cannabis sector upward is the expectations that marijuana might soon become legal throughout the U.S. Should cannabis be legalized federally across the United States, marijuana growers will have a huge market for their produce. And given that the marijuana stocks have been pulled really far back from the October 2018 highs registered after recreational cannabis was legalized in Canada, there’s a really sizeable room for growth for the pot sector. We can expect that after the Christmas Recess in the U.S. Aurora Cannabis Inc (ACB) might grow to $5.5, while Canopy Growth Corp (CGC) might be up to $27, and Cronos Group Inc (CRON) and Aphria Inc (APHA) might climb up to $10.5 and $6, respectively.
Ivan Marchena, Libertex Analyst
-
Precious Metals, Marijuana Stocks May Be a Good Choice for Investors for 2019, Cryptocurrencies, Oil Futures To Be Very Volatile.
The upcoming year may bring a lot of unpredictability as far as the market outlook for classical assets is concerned. Stock markets and dollar will continue to face pressure due to the persisting global political tensions and uncertainties like the U.S.-China trade war that has still not been resolved, the oil oversupply fears, and the lack of clarity about further U.S. Federal Reserve stance on the interest rate.
Should the Fed be somewhat back to the accommodative policy and implement fewer rate hikes than planned earlier, the dollar might be headed south.
Meanwhile, more offbeat instruments like cryptocurrencies also do not look too strong and promising. The cryptocurrency market had slumped over 2018, with many bitcoin mining and cryptocurrency companies hurt badly by the downslide. This downward dynamics will probably continue in 2019, as there are no real cues for growth yet.
Marijuana stocks might be of interest to investors now as markets waits for cannabis to be legalized federally throughout the U.S. Should this happen, the post sector stocks will skyrocket.
Precious metals, too, remain a good choice for investors as a safe haven asset to invest into amid volatile market.
Ivan Marchena, analyst of Libertex
-
Europe’s Stocks Continue Growing On Weaker Euro
There are some odds for Europe’s stock indices to grow now that the Euro has weakened versus the U.S. dollar, and that investors are waiting for the outcomes of the U.S.-China trade talks.
The exporters’ stocks dynamics are fostered by the weakening EU currency, as companies’ dollar-denominated revenues grow accordingly. The Euro has slid downward on the not too upbeat Euro Area statistics. Financial scouts note that this market sentiment indicator has hit the lowest levels in December 2018 since January 2017.
Investors’ optimism is refuelled by the U.S.-China trade negotiations in Beijing with the U.S. President Donald Trump saying that the talks were “going very well” and “big progress” was being made. The U.S. leader said he hoped that the two countries would be able work out a long-term deal regarding all of the critical issues.
One more thing European investors are waiting to know is what will be the outcome of the UK House of Commons Brexit deal vote slated for January 14. Initially, the vote was scheduled for December 11, but then it was postponed by the UK Prime Minister Theresa May. Now Britain and the EU are racing towards B-day, with the UK to leave the European Union by March 29.
Ivan Marchena, Libertex Analyst
-
Financial Scouts: European Investors Apprehensive of the U.S. Government Shutdown, Possible China’s Economic Slowdown Impact
European stock markets continue facing pressures on the U.S. government shutdown and China’s economic outlook related wariness.
The current government shutdown is the longest in the U.S. history. The U.S. federal government has been in a partial shutdown since December 22, 2018 with a slew of key government agencies such as Department of State, Department of Justice and Department of Transportation affected due to the differences between the country’s President Donald Trump and Democrats over funding for the U.S.-Mexico border wall. With great many of the country’s main agencies’ employees not working, the U.S. economy is being hurt really badly, which reverberates onto the global economy overall.
What’s more is that Europe’s investors fear that China’s economy might face challenges, too, with the concerns fuelled by the country’s economic statistics being rather weak lately. The two most downbeat indicators here are the country’s imports and exports that are sliding down on a persisting U.S.-China trade war. And though both countries have made some steps in order to put an end to the situation that is toxic to all parties concerned, there’s still a long way to go until the dispute is finally resolved.
For Europe itself, Brexit remains a burning issue with no deal reached yet, while Britain is slated to leave the EU on March 29 either with or without a deal.
Ivan Marchena, Libertex Analyst
-
Marijuana Stocks Grow on Corporate News
Canada’s marijuana growers’ stocks traded in the U.S. markets are growing as they stabilize from a harsh correction. However, in the long run, the pot sector is likely to be affected by the U.S. internal political issues that will hurt the market across the board as well.
The U.S. is now seeing the longest government shutdown on record, with a great number of employees at the country’s key agencies not working since December 22, 2018, which is detrimental to the U.S. national economy and its overall stock market overall.
Contrastingly, Tilray (TLRY) stock grew appreciably, as Privateer Holdings that owns the majority of Tilray's outstanding shares, announced it had no plans to “register, sell or distribute” its holdings “during the first half of 2019”. Given that the stock surged higher and kept on going and going above its IPO price, but then finally were back under $100, and with the upcoming IPO lock-up expiration, investors previously feared that some of the cannabis grower’s stock holders might want to sell it.
Aphria (APHA) stock was hurt by the news that its CEO Vic Neufeld and co-founder Cole Cacciavillani will part ways with the company “over the coming months”, which was counterbalanced by the business’ strong figures as its earnings soared by more than 60%.
Meanwhile, Aurora Cannabis (ACB) was bolstered up as its sales were predicted to grow.
Financial scouts anticipate that, in the offing, Canopy Growth (СGС) and Tilray are likely to jump to $40-$41 and $98-$100, while Aurora Cannabis Inc (ACB), Aphria Inc. and Cronos Group (СRON) are soon to be priced at $7-$7.5, $7.5-$8, and $14-$15, respectively.
Ivan Marchena, Libertex Analyst
-
Cannabis Stocks’ Prices Grow on the Upbeat U.S. Cannabis Market Outlook
Canada’s cannabis growers’ stocks traded in the U.S. market have been marching vigorously up since 2018 Farm Bill had made hemp, and thus CBD oil, legal across all of the U.S. states.
This news was followed by Canopy Growth’s (CGC) announcement of its having received a license by the state of New York to grow and process hemp and being set to further spread its roots outside Canada, planning to invest somewhere between $100 million and $150 million into its New York-based operations.
Meanwhile, Aurora Cannabis’ CCO said the cannabis grower will unveil a plan to produce hemp-derived CBD for the U.S. market in the next few months.
Contrastingly, Tilray has stood out negatively, as it slid down by about 10% after the IPO lockup had expired. But on the positive side, Tilray will become the preferred supplier for CBD products for Authentic Brands, which might bolster up the cannabis sector’s heavyweight’s stock prices.
Financial scouts predict that the cannabis sector stocks are set to grow in the days to come, given the bright U.S. cannabis market outlook. Specifically, Canopy Growth and Tilray (TLRY) are likely to trade at $44-$45 and $78-$79, respectively. And Aurora Cannabis’, Aphria’s (APHA) and Сronos Group’s (CRON) stock’s respective prices are expected to range $7-$7.5, $7.5-$8, and $16-$17.
Ivan Marchena, Libertex Analyst
-
Signals Mixed for Europe’s Markets
Financial scouts note that European stock markets now face many incoming cues that are really mixed. The biggest current news on both sides of the spectrum is the Brexit uncertainty and the meaningful progress towards resolving the U.S.-China trade war.
So while the Brexit news make investors feel downbeat with Britain’s withdrawal date very close now and no deal approved yet, the U.S. and China seem to be mending their relationship after the spat. European investors are inspired by the news that the extra-high Chinese imports tariffs might be “reduced and removed”, which is a positive cue for European traders who had previously been worried that the U.S. might introduce new increased on car imports from Europe.
Also, traders in Europe are keeping track of the Davos World Economic Forum news, with some important announcements likely to be made there even though some of the key political figures and leaders like U.S. President Donald Trump and French President Emmanuel Macron are not going to Davos this year.
According to financial scouts, another thing that drives Europe’s markets is oil prices that demonstrate ambiguous dynamics. The medium-term positive driver here was the OPEC+ decision to cut the production that was passed in December 2018. So the decreased oil production eased investors’ concerns over possible oil oversupply.
Ivan Marchena, Libertex Analyst
-
European Market Sentiment to be Driven by Corporate Reporting Figures, U.S.-China Trade War Resolution Progress
European traders (and investors globally, too) are wary that global economy outlook for the years to come might be gloomy. All of the latest statistics updates flag an impending downturn with leading countries’ economic performances to slow down for the short term at least. This is true for the U.S., Asia, and Europe itself.
Hence, in Europe, all eyes on the U.S.-China trade conflict resolution developments, as the persisting trade spat is a major negative driver for all economies across the globe. But then, there have been some positive cues lately, like U.S. President Donald Trump’s upbeat tweets or comments, suggesting that the trade war may eventually be settled. Mr. Trump is confident that fair trade deal will be reached in one way or another.
Another focus of interest catching the European investors’ attention is the European Bank’s stand on the economic growth outlook both for Europe and globally. Recently, the ECB’s economic growth fears have risen in line with its peers’ economic sentiment pattern.
One more important driver that will shape the European stock market dynamics in the offing is the EU business majors’ quarterly reports that have started to be published. So far, the figures look not too good, making investors feel downbeat.
Ivan Marchena, Libertex Analyst
-
Cannabis Growers’ Stock to Continue Along the Upward Path on Investors’ Optimism
Canada’s cannabis producers’ stocks have continued to rise, as investors have been anticipating upbeat developments for the sector. Moreover, there is some really good news to propel particular growers’ stocks higher.
Canopy Growth (СGC) has been the sector’s top performer, as its stock had jumped up by more than 80 percent over the first three weeks of January and skyrocketed by 10 percent last Friday on news that major stock analysts had boosted their views on the cannabis company.
The news that really bolstered Canopy Growth stock was the grower’s management’s announcement of the company’s having received a license by the state of New York to grow and process hemp. Now the cannabis producer is set to invest somewhere between $100 million and $150 million into its New York-based “hemp industrial park” where cannabis research and production operations will be combined.
The good news for Tilray (TLRY) was the Canadian cannabis company’s unveiling the deal to buy Natura Naturals Holdings Inc, that is expected to close within the next 30 days.
Given the investors’ optimism, the cannabis stocks are likely to continue climbing to higher levels. The financial scouts forecast that Canopy Growth (СGС) might climb to $50, and Tilray might grow to $77, while Aurora Cannabis Inc (ACB), Aphria Inc. (APHA) and Cronos are predicted to be priced up to $7, $7.5 and $17-$18, respectively.
Ivan Marchena, Libertex Analyst
-
Cannabis producer stocks continue their rally
Increased investor confidence in the future of cannabis is helping shares in Canadian cannabis producers to sustain their rally, This is true of both the medicinal and recreational-use markets. Additionally, the US's legalisation of hemp has opened up this market to a number of major Canadian producers who see significant changes in US legislation on the horizon.
There was even more good news for Cronos Group with industry heavyweight Altria investing $1.8 billion in the company in return for a 45% stake.
Short-term market sentiment will be determined by the quarterly financial reports of Aurora Cannabis (ACB), Cronos Group and Tilray (TLRY), which are to be published within the next few weeks. Investors will be expecting these producers to report sharp sales growth as a result of the recent increase in market outlets. They will also want to hear about their respective 2019 strategies.
For these reasons, we can expect to see increased volatility in this sector and any remotely significant development could trigger a marked jump or abrupt drop in share prices.
Financial scouts are predicting unit share price rises for the major cannabis producers within the following ranges: Canopy Growth (CGC) - $50-50.5, Cronos Group (CRON) $24-25, and Aphria Inc. - $11-12. Meanwhile, they expect shares in Aurora Cannabis to hit the $8.5-9 mark, with Tilray rising as high as $84-85.
Ivan Marchena, Libertex Analyst
-
No discernible pattern to cannabis producer stock movements but general growth likely
Ambiguous news has meant there is no consistent pattern to cannabis producer share movements. For example, shares in Tilray (TLRY) are rising strongly after reports of a deal with Ohio-based Green Growth Brands that will see the Canadian company supply its US partner with CBD.
Aurora Cannabis Inc's (ACB) share price also increased significantly on news that its partner, Radient Technologies, had been granted a cannabis production license by the Canadian authorities. Following this announcement, the company's shares reached their highest level since the sector-wide boom we saw in November of the previous year.
Meanwhile, Canopy Growth Corp (CGC) is showing slightly lower share price growth, with Aphria Inc (APHA) firmly among the market minnows.
Financial scouts forecast that shares in cannabis producers could continue on their relative up-trend into the near future. Tilray's share price could grow to $80-80.5, while Aurora Cannabis Inc's might reach the $8.5-9 mark. Similarly, we could see Canopy Growth Corp hit $47.5-48, with shares in Aphria Inc and Cronos Group Inc (CRON) rising to $10.5-11 and $22-23 respectively.
Ivan Marchena, Libertex Analyst
-
Cannabis stocks down on US legalisation doubts
Shares in Canadian cannabis producers are falling amid reports that the New York Department of Health has banned the sale of cannabis in restaurants and bars. Investors now fear that the legalisation of recreational use cannabis in the US is far from certain. Furthermore, the latest figures out of Canada show that the total number of cannabis users did not change significantly following the country's legalisation of the drug in October of last year. The market did however receive some good news in the form of reports suggesting that Thailand is considering decriminalising cannabis. Shares in Canopy Growth Corp (CGC) are demonstrating the best growth in the sector, with investors anticipating the company's entry into the US market. If Canopy Growth succeeds in this ambition, it will most likely "pull up" the shares of some of the smaller players in this sector such as Aphria (APHA), Cronos Group (CRON) and Tilray (TLRY). The latest short-term forecasts from financial scouts predict industry-wide shares growth, with the major players' unit share prices rising to the following levels: Canopy Growth - $46, Tilray - $80, Aurora Canabis Inc (ACB) - $8, Aphria Inc. (APHA) - $10, and Cronos Group - $20.
Ivan Marchena, Libertex Analyst
-
European markets await new developments on Brexit and US-Chinese trade relations Optimism regarding a resolution to the trade conflict between the US and China could see European stock markets grow. In other news, market insiders have been demonstrating reduced appetite as stocks undergo somewhat of a correction. Investors are choosing to err on the side of caution until they hear the experts' verdict on the current US-China trade talks. The two countries now have just two weeks left in which to reach a decision before the new higher import tariffs come into effect on 1 March. In the meantime, President Donald Trump has already stated publicly that this 1 March deadline for the introduction of new US tariffs on Chinese products could be postponed in the event that a bilateral agreement is close. Such comments are naturally contributing to increased investor optimism across the world. There was some good news for the European markets, too, in the form of rumours claiming Trump is now prepared to sign off on Congress's budget compromise. The budget includes provisions for the construction of an 88-km-long fence along the US's southern border, allocating $1.4 billion to the project as opposed to the $5.7 originally demanded by Trump. Meanwhile, the issue of Brexit remains the main focus of European investors. The United Kingdom's planned departure from the European Union on 29 March is now just six weeks away and, with no final deal in place, investors appear very restless as they react sharply to any Brexit-related news.
-
Investors keeping close watch on US-China trade talks and United States' southern border
Investors in the Latin American stock markets are awaiting a decisive solution to the US-China trade conflict with bated breath.
For the time being, however, they remain cautious and are adopting a position of restrained optimism until the result of the talks becomes clear.
High level meetings between the sides are scheduled to take place as early as 21 February and will feature representatives including the Vice Premier of the State Council of the PRC.
Meanwhile, world oil prices are holding steady at their local maximums — which are high now that fears of a supply surplus have been assuaged — and this is benefiting the Latin American market.
The decision by the OPEC nations to reduce their output volumes coupled with the effect of US sanctions on Iran and Venezuela had a similar calming effect.
Elsewhere, financial scouts in Mexico are also carefully monitoring the situation along the US's southern border.
Trump had previously demanded that Congress allocate $5.7 billion dollars for the construction of the President's wall. When this was denied, a number of government departments refused to sign off on the budget for over a month, which resulted in a country-wide institutional shutdown.
In the end, the US Congress passed a budget which provided for just $1.4 billion in funding for a wall along the US-Mexico border. Trump responded by issuing a national emergency order to combat illegal immigration from Mexico and criminality on the US's southern border. This declaration means that the US President will now be able to access up to $8 billion in funds for his wall.
Vadim Kovalenko, Libertex Financial Scout
-
Quarterly reports fail to boost cannabis stocks
As the quarterly reporting season continues on, there is still no unified pattern to cannabis stocks' movements. Following the publication of reports by Canopy Growth (CGC) and Aurora Cannabis (ACB), the market is still waiting to see the Q1 financial results of one more key industry player in Tilray (TLRY). This particular reporting period is especially significant for investors since it represents the first full quarter during which the sale of cannabis was legal across Canada. Several market pundits have forecast Tilray's Q1 per share earnings at $0.14. Canopy's financial statement revealed an overall more positive picture with earnings up 300% to CAD 80 million, though it still didn't quite live up to analysts' expectations. Aurora, on the other hand, posted losses of over CAD 200 million — just one year after reporting profits of around CAD 7.7 million. The company attributed these losses to ineffective management. Financial scouts believe that the marked variation in financial results across the industry's biggest players will mean cannabis shares trade mixed over the short-to-medium term. During this time, we can expect to see shares in Canopy Growth and Aphria Inc. rise to $49-49.5 and $10 respectively, whereas shares in Tilray (TLRY) and Aurora Cannabis are likely to fall to $75 and $6.5 respectively. Meanwhile, Cronos (CRON) could see its share price hit $22.
Denis Povtorenko, Libertex Financial Scout
-
Cannabis stocks down on below average quarterly reports
Shares in Canadian cannabis producers are still falling as they attempt to regain the ground lost following some below average Q3 reports from several major industry players including Canopy Growth (CGC) and Tilray (TLRY).
Tilray's shares are losing slightly more than the industry average, but this is largely the work of a price correction in response to the significant jump seen after the company announced its plans to acquire world-leading hemp-based food products company Manitoba Harvest from Compass Group Diversified Holdings.
With an estimated value of $318 million (USD), the deal is scheduled to be completed within the next 30 days and would enable Tilray to offer a wider range of products to its customers in the US and Canada.
Financial scouts predict that cannabis stocks will continue their decline over the short-to-medium term, but could return to growth further down the line.
Over the coming days, we can expect Canopy Growth's unit share price to drop to $45, with Tilray's potentially slipping to $78.5. Meanwhile, Aurora Cannabis (ACB) is likely to slide to $6.5, with shares in Aphria Inc. (APHA) falling to $10. Finally, Cronos (CRON)'s share price looks set to drop to $22.
-
Libertex named Best Trading Application and Best Crypto Currencies' Broker for 2018
The results of this year's Forex Awards are in and we are delighted to announce that the Libertex trading platform has been named the Best Trading Application and Best Crypto Currencies' Broker of 2018.
In the words of Igor Galkin, Libertex Group's Head of Global Business Development and Sales: "For the second year in a row now, Libertex has managed to top the Best Trading Application and Best Crypto Currencies' Broker categories. This latest victory is proof that — if you're looking to make sound investments on the world markets — you can't go wrong with Libertex".
The Libertex trading platform is certified by the Financial Commission and was named Best Trading Terminal in the EEA at the Global Banking and Finance Awards 2016. Libertex is held in high regard by professional traders the world over and its recognition as the Best Trading Application and Best Crypto Currencies' Broker for 2017 and 2018 only serves to confirm this fact.
Libertex is an international brand with over 20 years of experience in financial markets and online trading. Since our founding in 1997, we have been helping our customers trade a variety of financial instruments, including CFDs, foreign currency, various indices, exchange commodities, gold, silver, oil, gas, and many more besides. Today, Libertex provides first-class service to over 2.2 million customers across the Americas, Europe and Asia.
The Libetex trading platform is a one-stop-shop that enables its users to trade across various segments of the financial market from traditional currencies, metals and energy resources, all the way to CFDs, crypto currencies, indices, ETFs and beyond. Libertex's straight-forward, user-friendly interface not only enables users to complete trades easily without worrying about stuff like spreads, margins and lots, it also comes complete with a powerful set of technical analysis tools. There are web-based, iOS and Android versions of the terminal available, so users can trade comfortably on any device they like. We even offer an desktop-installable version for both Windows and MacOS.
-
Geopolitics and possible Brexit deadline extension weighing on European markets
There is a whole host of negative factors weighing on the European stock markets at present. Of these, two of the most significant are the escalating tensions between India and Pakistan and the potential extension of the Brexit deadline.
The increasingly heated political climate in Asia is evidence that the region is in the grips of a new, previously overlooked crisis which could have serious, negative consequences for the world's financial markets. Another equally worrying concern among investors is the Britain's impending exit from the European Union. The UK government is currently debating measures to extend the Brexit deadline beyond the original 29 March departure date in the event that its latest deal proposal fails to receive parliamentary approval.
Meanwhile, investors are also following the US Federal Reserve's rhetoric for any clues as to the regulator's future monetary policy. In addition to this, they are also taking direction from the US representatives at the China-US trade talks, who are reported to have said that it is still too early to predict the results of the negotiations. These comments spelled the end of a recent period of increased optimism that a resolution to the ongoing trade conflict between the US and China was close at hand. As we narrow our focus to the region's individual countries and their domestic stock markets, we see several internal factors at play. For example, the Netherlands government's unexpected move to purchase shares in Air France-KLM has alarmed the French authorities, who are still waiting for the Dutch to provide proper clarification on the motivation behind the decision.
-
The shares in marijuana manufacturers still look mixed
The shares of the largest Canadian producers of marijuana continue to show mixed trends against the background of data about the cannabis legal and black market indicators for the country. The report that Aurora Cannabis Inc. (ACB) had closed a deal to acquire a company that produces medical marijuana in British Columbia in western Canada also impacted the market.
According to statistical data, the marijuana black market remained quite strong during the fourth quarter of 2018. Black market sales reached almost USD 900 million, while the legal market accounted for just over USD 300 million.
Shares of Aphria (APHA) are being bolstered by the news that the Canadian authorities have allowed the company to add additional production capacity. After this new production capacity is added, Aphria will be able to expand its manufacturing volume to up to 110,000 kilograms per year.
There is another notable piece of corporate news in the sector: Cronos Group (CRON) sold its stake in Whistler Medical Marijuana Corporation to Aurora Cannabis.
It is likely that shares in marijuana producing companies will continue to shift ambiguously in response to the combination of contradictory factors. Thus, shares in Aphria may rise to USD 11, whereas those in Cronos Group will drop to USD 20. Aurora Cannabis may drop in price to USD 7, and Canopy Growth (CGC) shares may appreciate to USD 46.
-
Stock prices of the largest Canadian cannabis producers are dropping after the unexpected news that Scott Gottlieb stepped down as the Head of US FDA.
After two years in this position, he is expected to resign already next month.
These news were absolutely unexpected and, as a consequence, has affected the producers of Cannabis in a negative way, especially due to the fact that Gottlieb was known for his supportive attitude towards the cannabis dealing market. Just last week, he announced that public discussions regarding regulatory issues for this market segment would take place in April.
We can now expect that stocks of Cannabis producers will react to this unexpected negative event, and in several days, could suffer even more significant losses.
As financial scouts predict, Canopy Growth (CGC) stocks might drop in price to USD 45.5 - 46; Tilray (TLRY) - to USD 74.5-75, Aurora Cannabis (ACB) – to USD 6.5-7, Aphria Inc (APHA) – to USD 9-9.5 and Cronos (CRON) – to USD 22.
-
European markets expected to fall on fears of a global economic slowdown
Europe's stock markets look set to remain subdued over the short-to-medium term on fears of a global economic slowdown and particularly poor economic indicators coming out of the Old Continent. The outlook only worsened following recent comments from the European Central Bank (ECB) as the regulator lowered its eurozone GDP growth forecasts for 2019 from 1.7% to 1.1%, also scaling down its 2020 projections from 1.7% to 1.6%. European stocks then took another hit following the publication of seriously weak Chinese exports data revealing an annualised fall of 20.7% for February. This comes after the previous month's numbers showed a 9.1% rise in January. Of course, these figures are a knock-on effect of the Asian giant's ongoing trade conflict with the USA.
The bad news continued for the European and world markets with poor labour market data from the US pointing to a deterioration of the economic situation in the country. All of the above factors explain why many investors are concerned about a potential slowdown in the global economy. Looking now to regional news, we received reports that the Sovereign Wealth Fund of Norway, which is responsible for managing the Nordic nation's assets, is set to sell its oil and gas shares under instructions from the country's Ministry of Finance. Meanwhile, Europe continues its wait for a definitive solution to the issue of Brexit.
-
Cannabis stocks continue to rise on reports of US legalisation plans
Libertex notes that shares in major Canadian cannabis producers are rising after politicians in New Jersey made public their plans to legalise recreational cannabis use for adults over the age of 21. It has also been suggested that US local authorities will be permitted to tax cannabis producers operating on their territory at a rate of 2% of the companies' total earnings.
There was another welcome development for the sector in the form of Harvest Health & Recreation's announcement that it is to acquire competitor Verano Holdings in a deal that will see the purchasing company gain a further 30 retail outlets and 7 production facilities. According to its own projections, Harvest Health expects to own 70 retail locations, 13 farms and 13 production facilities by the end of the year.
Our financial scouts are convinced that the recent wave of positive market news will be sufficient to buoy cannabis stocks over the short-to-medium term. Their predictions include share price increases for all the major producers, with Tilray (TLRY) set to rise to $72.5-73, Canopy Growth (CGC) to $47-47.5 and Aurora Cannabis (ACB) to $8-8.5. Meanwhile, they expect shares in Cronos Group (CRON) and Aphria Inc (APHA) to reach $21.5-22 and $10 respectively.
-
Correction sees cannabis stocks fall after rally on good corporate news runs course
Shares in most major Canadian cannabis producers are now undergoing a correction following moderate-to-strong growth in response to Hexo posting better Q2 earnings (up to $16.2 million).
As the company itself acknowledges, it owes a large part of this success to the significant rise in demand within the recreational cannabis sector as a whole. Just a day earlier, it was another positive development for Hexo that helped to buoy the market as the company announced plans to acquire Newstrike Brands Ltd. — a venture backed by former Canadian rock group The Tragically Hip — in a deal worth an estimated CAD 263 million (USD 198 million). Once it completes the acquisition, Hexo will gain close to 2 million square feet of additional production space.
Finally, the market received one last piece of good news this week in the form of Aurora Cannabis's (ACB) announcement that major investor Nelson Peltz had joined the company as a senior advisor.
In conclusion, it is likely that this downward correction will be sustained over the medium-to-short term, as is to be expected after such a sharp rise. With this in mind, we can expect shares in the big Canadian producers to continue on their current trajectory, with Aurora Cannabis tipped to fall to $8, Canopy Growh (CGC) to $45, Tilray (TLRY) to $72, Aphria to $12 and Cronos (CRON) to $20.
-
European investors are worried about Brexit and are pretty skeptical when it comes to FRS policy.
European stock markets are nervous about the further perspective of Great Britain leaving Eurozone. It is still not clear whether it will be a Brexit with arrangements or not and when it will take place.
Brexit without a deal might seriously impact not just the British economy, but the Economy of the EU in general and some of its countries in particular. For example, Spain has assessed that in a worst case scenario, Brexit will cost the Spanish economy 10 bln euros. The British Chamber of Commerce has already downgraded its GDP growth forecast for 2019 from previously expected 1,3% to 1,2% against the backdrop of the continuing uncertainty about Brexit.
Meanwhile, the fact that Great Britain and the EU have coordinated a draft of the possible future memorandum of understanding that stipulates the information exchange between the regulatory bodies of the parties in the case of Brexit without a deal still looks positive to investors. At the same time, market players still hope that the agreement between the parties will be reached. Right now the EU still has to announce its decision with regards to the proposal of the British prime minister Theresa May to postpone the Brexit date to the 30th of June.
Apart from the events in the region, European investors have also paid their attention to the rhetoric of FRS of the USA. Despite of the fact that the financial market on the USA has preserved its basic interest rate in March and doesn't promise any further increases in the nearest future, financial scouts still point out that market players preserve their skepticism about the further politics of FED.
-
Cannabis stocks could rally on good corporate news
Shares in Canada's biggest cannabis producing companies fell on Friday despite the market receiving several pieces of positive news.
Among these was the announcement by Canopy Growth (CGC) that it had acquired cannabis producer AgriNextUSA in a deal which Canopy's senior management believes will help the company expand its US business. This move comes shortly after another intra-sector acquisition saw the Canadian outfit add Colorado-based Ebbu to its portfolio.
Under the terms of the deal, AgriNextUSA's CEO will join the Canopy Growth team as its strategic advisor.
Then there was one final bit of good news for the market in the form of reports that Curaleaf has secured a deal that will see its products sold in hundreds of CVS Health stores across 10 US states.
Many financial scouts believe that these recent positive reports could bring a return to growth for stocks in this sector. Despite the recent decline, they are predicting unit share price increases for all major companies in this sector over the medium-to-short term, with Canopy Growth set to rise $47, Aurora Canabis (ACB) to $10 and Tilray (TLRY) to $71. Meanwhile, Aphria (APHA) is tipped to rise to $11, while Cronos (CRON) is seen up to $21.
-
European Investors are worried about the perspectives of global economic development and Brexit.
European stock markets will be under hard pressure due to investors being nervous about further perspectives for development of the European economy as well as of global economy in general. Such concerns became really serious after the Eurozone and USA economic statistics were published. A serious deterioration in terms of forecasts on further perspectives for the world economy were given by various institutions and organisations.
Another topic for active discussions and increased concerns of market players is still related to the dynamics of profitability of US treasury bonds. The recent movements of the profitability curve make the investors think that a recession might take place in the US economy during this year.
Apart from this, the trading participants prefer to hold back from risky investments awaiting for another round of trading negotiations between the USA and China, that are scheduled for the 28th of March. In the beginning of April representatives of China are also going to pay a return visit to Washington.
Besides all the above-mentioned facts, the worries with regards to the Brexit deal also influence investment sentiments negatively. After the European leaders postponed the date when Great Britain is supposed to leave the EU for several weeks beyond the 29th of March date, the question about the scenario of this process still remains open.
-
Cannabis stocks could rise on Cronos quarterly report
Shares in Canadian cannabis producers are trading mixed this Tuesday as the market awaits Cronos Group’s Q4 2018 report.
In the run-up to the release of Cronos’s final quarterly report for 2018, the company’s shares are rising and currently lead their sector, which would suggest that investors are anticipating positive results from the Canadian firm.
Still, the market’s growth has been somewhat restrained following reports that New Jersey has postponed a crucial vote on cannabis legalisation. The Garden State is at the forefront of the charge for legalisation in the US and is thus regarded as a barometer of the movement’s overall momentum.
Canopy Growth’s (CGC) shares are not faring particularly well this week despite the announcement that the company has been granted a license by the Canadian government to cultivate cannabis in the province of New Brunswick. The producer plans to grow approximately 5,000 kg of cannabis a year at this new facility, with the first harvest expected in just six months’ time.
Our financial scouts believe that future share movements in this sector will be largely determined by Cronos’s financial results. If they reveal strong indicators, then the company’s share price could reach $21-21.5, while Aphria’s (APHA) could rise to $10. Meanwhile, shares in Aurora Cannabis (ACB) could hit $10.5, with Canopy Growth and Tilray similarly rising to $44.5-45 and $68-68.5 respectively.
-
European investors still on edge
Despite European investors' hope for a quick resolution to the trade conflict between China and the US, the future of the global economy and Brexit are still weighing on their minds.
Most market participants are hoping that both sides can reach a final agreement to end the current stand off. According to rumours we are hearing on the market, the countries' representative made some serious progress at the most recent round of talks and a final agreement is now close at hand.
Meanwhile, investors have been seriously concerned about the future growth of the global economy following the release of weak economic data from both the US and the eurozone.
Italy's projected GDP growth for this yer has now been lowered from 0.9% to 0%.
It is predicted that this indicator will only enter positive growth in 2020, when it is seen up 0.4% against 2019.
In other news, European investors are waiting for further developments in relation to Brexit after British MPs voted, as many anticipated, to postpone the date of the UK's departure from the EU.
At the same time, the UK parliament was unable to find majority support for any of the eight Brexit options currently on the table.
-
Shares of cannabis producers rise after falling after Cronos reporting.
Shares of Canadian cannabis manufacturing companies on Friday mostly rose as part of the correction to a rather serious fall, which followed the publication of the quarterly report of the Cronos Group (CRON). The company's financial results for the reporting financial quarter were significantly worse than market expectations. So, in particular, the company unexpectedly reported a loss of $8.8 million, after which major analysts worsened their recommendations on these securities to “sell” from “hold”.
At the same time, after having somewhat digested this information, this segment of the market again shot upward as part of the correction. An additional reason for optimism was the Ernst & Young forecast that by 2025, every fifth Canadian adult will be using marijuana, spending an average of 1.7 thousand dollars a year for this purpose.
In turn, the company Tilray Inc. (TLRY) promised to strengthen its team by attracting experienced financial experts to prepare sound financial statements and strengthen internal financial control.
According to financial scouts, in the coming days, shares of Canadian cannabis producers will continue their upward trend. For example, Cronos shares could rise to $19, Tilray - up to $66.5, Canopy Growth (CGC) - up to $43-43.5, Aurora Cannabis (ACB) - up to $9, Aphria (APHA) - up to $9,5 dollars.
-
Shares of cannabis producers may rise on a possible ETF launch.
Shares of Canadian cannabis growers on Wednesday were mostly slightly lower in price, with the exception of Canopy Growth (CGC), which added about 1.6%.
At the same time, the sector’s stocks were able to grow a little on the positive news that a large investment fund from Toronto Evolve Funds Group, whose assets amount to more than $300 million, is going to launch an ETF for cannabis producers' shares.
However, the good news for Aurora Cannabis (ACB) could be the message that the company has started selling hemp oil to Germany and
plans to become one of the largest suppliers of raw materials outside North America.
Despite the fact that while shares of cannabis producers are mostly ignoring all this positive news, in the short term they still have good chances for growth.
For example, Canopy Growth stocks could climb to $44-44.5, Aurora Cannabis - up to $9.5, Aphria (APHA) - up to $10-10.5, Cronos (CRON) - up to $19, and Tilray shares (TLRY) - up to $64-64.5.
-
Shares of cannabis growers moved to consolidation
Shares of Canadian cannabis producers on Friday do not show a single dynamic against the backdrop of hopes for a possible easing of legislation in the United States. At the same time, it can be noted that the market took some breathing space after substantial growth in the first quarter, investors are waiting for any significant corporate news events, in this case there could be a chance to see a new rally in the market.
A document proposed by a number of US senators that proposes making some legislative exceptions for banks working with the cannabis industry provided welcome news for the market. The Association of American Bankers has already supported this project.
Additional support for Aurora Cannabis (ACB) securities came after the announcement that it hired investment banker Carey Squires to work on the company's global development. In addition, in Germany, Aurora Cannabis won 5 lots at auction for the production of medical cannabis. The same lot was won by the company's competitor - Aphria Inc. (APHA). Now companies can grow 200 kilograms of cannabis in these areas per year.
However, the unfavourable news for Canopy Growth (CGC) is the poor quarterly reporting by Constellation Brands, which previously invested $4 billion in Canopy,
According to forecast financial scouts, some consolidation will continue in this market segment in the near future. Aurora Cannabis shares could rise in price to 9.5 dollars, Tilray (TLRY) - up to 61.5 dollars, Aphria - up to 10.5 dollars. Paper Canopy Growth at the same time could be reduced in price to $43, and Cronos (CRON) - up to $18.
-
Libertex Launched Lyft Trading
Igor Galkin, Head of Global Business Development and Sales at Libertex Group, said, “Lyft held an IPO at the end of March, 2019. Its shares are one of the most interesting instruments of this season. We’re glad to offer our clients CFD for Lyft shares and open new trading opportunities for them.”
CFD on Lyft have a huge potential for effective trading because of two key reasons: first, they allow traders to diversify their trading strategies, and second, after the IPO they are quite volatile. Long-term investors can also find Lyft to be of interest, seeing as there is a good potential for share price growth.
Lyft shares will be available on the Libertex trading terminal starting April, 2019.
About Libertex:
Libertex is an international brand with a twenty year history in financial markets and online commerce. Libertex provides investors with access to trading stocks, currencies, indices, commodities, gold, oil, gas and many other financial instruments. The Libertex team has more than 2,200,000 customers in Latin America, Europe and Asia owing to its first-class service. Libertex has more than 150 commercial instruments. In 2016, Libertex was recognized by Forex EXPO Awards as the best trading platform; and Global Banking and Finance Review named it the best trading application in the EAEU. In 2017-2018 Libertex was announced as Best trading application and Best cryptocurrency broker by Forex Awards.
-
Shares of cannabis producing companies continue to soar on the back of Canopy Growth deal with American company.
Since Friday, shares of some of the largest Canadian cannabis producers are rising in price due to Canopy Growth (CGC) announcing an agreement on merging with American Acreage Holdings.
Canopy Growth received the right to purchase all shares of the American company for $ 3.4 billion as soon as selling and producing cannabis will be legalized in the US. The Canadian company has already made an advance of $ 300 million. As a result of this transaction, Canopy Growth will be able to begin full-scale operations in the American market at the nearest time.
Currently, the global market of legal production and sales of cannabis is estimated at $ 7.7 billion per year. As financial predicted by experts, by 2021 the market will grow up to $ 21 billion - an increase of 60% is expected. Thus, the company's access to new markets is a very good factor for its stock quotes’ growth.
It can be expected that in the near future, shares of the largest cannabis producers in Canada will show positive trends, playing back to the positive news about the Canopy Growth deal with the US company. Shares of Aphria (APHA) can rise in price up to 8-8.5 dollars, Aurora Cannabis (ACB) - up to 9.5 dollars, Cronos Group (СRON) - up to 16-16,5 dollars, Tilray Inc. (TLRY) - up to 49-49,5 dollars, and the Canopy Growth (CGC) itself - up to 45-45,5 dollars.
-
European investors concerned by global economic development prospects
Investors in Europe continue to scrutinise the financial statements of major US corporations amid growing concerns regarding the global economy’s future development prospects following weak economic data coming out of both Europe and Asia.
With trade talks with China looking set to resume over the week ahead, many investors are worried about the Asian giant’s long-term economic policy. As it looks to stimulate economic growth, fears of excess cash in the economy leading to a financial bubble will most likely see the People's Bank of China resist the urge to make further cuts to its reserve requirement ratio this year.
In other news, Britain’s departure from the European Union remains a hot topic for investors on the Old Continent as the latest Brexit plan negotiations end in deadlock. Elsewhere, European investors continue to monitor world oil price movements after the US announced its decision to scrap all exemptions from sanctions on importers of Iranian oil. However, financial scouts report that the commodity's price is being held in check by recent information claiming that the US has increased its oil reserves.
-
Cannabis stocks down on corporate news
According to Libertex's sources, shares in major Canadian cannabis producers are in decline after Valens GroWorks posted zero earnings for last quarter. Over the previous reporting period, the company in fact recorded losses of $6.4 million, which is almost double the figure reported a year ago. However, this situation was somewhat eased by reports that the company had signed a multi-year extraction services agreement with Hexo that would see the latter supply Valens GroWorks with an annual minimum of 30 tonnes of cannabis.
There was more positive news for the market, too, as an Alabama Senate committee approved a bill to permit patients over the age of 19 to purchase medical cannabis freely.
Financial scouts predict that cannabis stocks will likely continue on their current downtrend over the short term as they look to bounce back from Valens GroWorks's recent poor results. They forecast share price drops for all the major producers, with Canopy Growth (CGC) set to fall to $47.5-48 and Aurora Cannabis (ACB) to $8-9. Meanwhile, they see shares in Tilray (TLRY) down below $51, with Cronos (CRON) and Aphria (APHA) expected to slide to below $16 and $7 respectively.
-
Pinterest: the perfect picture for Libertex traders
Following the recent incorporation of Lyft to its platform, Libertex continues to expand the list of assets for its clients. Today, the Libertex trading platform announces the launch of CFDs (contracts for difference) for Pinterest (PINS), valued at $10 bn after the IPO that took place this April 17th, 2019.
The IPO price, initially set at a range of $15 to $17, quickly moved on to $19, proving the interest of investors since the very first hours, and it’s easy to understand why just having a look at some key facts about the company founded in 2010 by Ben Silbermann, a former Google employee, and Evan Sharp, ex designer at Facebook:
• 250 million users every month, of which 83% are women who make 80% of total volume of purchases.
• In the US, the site is used for purchasing goods more often than any other social media.
• It is a perspective platform both for advertising and retail business with its own solutions for e-commerce.
At present, the rate of increase in Pinterest revenues amounts to 60% and given the growth forecast for digital ad market, Pinterest may become a very alluring candidate for investments.
Sign up for free and be the first to buy Pinterest shares
About Libertex:
Libertex is an international brand with a twenty year history in financial markets and online commerce. Libertex provides investors with access to trading stocks, currencies, indices, commodities, gold, oil, gas and many other financial instruments. The Libertex team has more than 2,200,000 customers in Latin America, Europe and Asia owing to its first-class service. Libertex has more than 150 commercial instruments. In 2016, Libertex was recognized by Forex EXPO Awards as the best trading platform; and Global Banking and Finance Review named it the best trading application in the EAEU. In 2017-2018 Libertex was announced as Best trading application and Best cryptocurrency broker by Forex Awards.
-
Canadian cannabis stocks continue to grow on Tilray's financials
The majority of Canada's biggest cannabis producers experienced strong price growth this Wednesday after Tilray (TLRY) reported better than expected Q1 sales growth. According to its quarterly report, the company's sales totaled CAD 23 million, which constitutes a rise of 195% compared with a year ago.
In addition to the above, Tilray also announced that it plans to start purchasing cannabis from third-party producers but is yet to find a supplier capable of satisfying its quality requirements.
The market was unshaken even by Aurora Cannabis's (ACB) quarterly report, which revealed worse than expected Q1 sales. As the company itself noted, its net sales for that period totaled CAD 65.1 million, which represents a 20% increase on the previous quarter. Nevertheless, investors had expected that figure to be more in the region of CAD $68.7 million. Meanwhile, the company reported a net loss of CAD $160.2 million, which represents and improvement on last quarter.
Our financial scouts predict that Tilray's most recent quarterly report will give Canadian cannabis stocks the boost they need to continue their current growth. With this mind, they are forecasting share price increases for all the major producers, with Aurora Cannabis, Tilray and Canopy Growth (CGC) set to rise to $8.5-9, $49.5 and $46 respectively. Meanwhile, they see Aphria (APHA) and Cronos (CRON) up to $7.5 and "$15.5 respectively.
-
European markets weigh up May’s resignation.
European investors are still assessing the medium-to-short term implications of British PM Theresa May’s announcement that she will be stepping down come 7 June. The current favourite in the race for Number 10 is former Foreign Minister Boris Johnson. Market insiders believe that May’s resignation could help speed up the process of the government securing cross-party support for any final EU withdrawal plan. This comes at a time when the risk of a “no deal” Brexit is looming increasingly large with each day that passes. Elsewhere, European investors are also concerned that May's departure will make it difficult for the Bank of England to maintain its high base rate policy, thus increasing the likelihood of a reduction. Another key area of interest is the still-unresolved US-China trade conflict, which has only been intensifying of late. Despite US President Donald Trump's statement that the US's allegations of irregularities against Chinese company Huawei can be resolved by way of a trade deal, investors are still worried that the parties will be unable to reach any kind of agreement. The next meeting between the two countries' respective heads of state is set to take place as part of the G20 meeting in Japan next month. In regional corporate news, we have received reports that a Renault and Fiat Chrysler merger could be on the cards. In fact, the two companies are allegedly discussing the terms of the potential fifty-fifty merger as we speak.
-
European markets under negative pressure from all sides
The European stock markets are under intense pressure from a whole raft of negative factors, both internal and external. For instance, the prospects of a resolution to the US-China trade conflict remain hazy at best, which is negatively impacting the entire world economy. This comes after China made a statement that it would be prepared to limit rare earth metal exports to the US in response to US restrictions on Chinese exports. Another worry weighing on Europe's indices is Italy's budget. Investors fear that the European Commission might fine Italy 3.5 billion euros in light of its national debt situation. The EU has announced that it strongly recommends Italy reassess its budget stance, claiming that the country's decision to increase its deficit has only harmed the Mediterranean nation's economy, which now has the slowest growth rate in the region. And who could forget Brexit? Britain's departure from the EU still remains one of the biggest challenges facing the European markets. The issue has seen a political dogfight emerge in the UK in which the Brexit Party — which wants Brexit at any cost — seems to have come out on top. This comes as a number of political powers are predicting that a no deal Brexit would have serious negative consequences for both the British and EU economies.
-
European markets on track to continue growth pending anticipated rate cuts
Europe’s biggest markets are on course to continue their recent growth as central banks worldwide prepare to reduce interest rates. This comes after Germany adjusted its 2019 and 2020 economic growth forecasts downwards. Investors are now anticipating a 10 basis point rate cut from the ECB before the end of this year, with the US Federal Reserve expected to follow suite following a sharp slowdown in job growth during May. Factors likely to hold back European markets include investor cautiousness over the uncertainty surrounding the identity of the next British Prime Minister and the increasing probability of a “no deal” Brexit. Turning our focus to individual markets in the region, the situation on the French stock market will to a large extent be determined by corporate news. In recent weeks, investors’ attention has been firmly fixed on Renault as they await any new developments from the automaker. French Minister of Economy and Finance Bruno Le Maire has announced that the country is prepared to reduce its stake in Renault in a bid to shore up its alliance with Japanese car manufacturer Nissan. Renault is already party to an alliance agreement with Japanese firms Nissan and Mitsubishi, but the partnership has been under fire since the arrest last November of alliance chief Carlos Ghosn.
Andrey Voytkiv, Financial scout at Libertex.
-
Hexo’s worse-than-expected Q3 report pushes down cannabis stocks
Canadian cannabis stocks were down significantly on Friday after Hexo announced lower Q3 sales compared to last quarter.
According to the company’s own data, its gross cannabis sales totaled approximately $12 million, which represents a decline compared with Q2. This news was not well received by investors and it only served to intensify their concerns over the industry’s future prospects.
In light of this development, many are now doubtful of Hexo’s ability to reach their planned sales growth target of $400 million by 2020. Following its poor quarterly report, Hexo’s share price fell by 8%, driving down shares in other companies in the sector (with an average fall of 4-5%).
Our financial scouts’ short-term prediction is that the market will continue to reel from Hexo’s weak report, which means a further decline in Canadian cannabis stocks is on the cards.
With this in mind, they predict that shares in Canopy Growth (CGC) could fall to $41, with Aurora Cannabis (ACB) potentially sliding to $7. Meanwhile, they see Aphria (APHA), Tilray (TLRY) and Cronos (CRON) down to $6, $40 and $16 respectively.
Mitt Lemaev, financial scout at Libertex.
-
European investors await Fed rate decision
The upcoming two-day meeting of the US Federal Reserve is at the forefront of European investors’ minds this week amid strong expectation that the regulator will keep rates at their current level of 2.25-2.5%. Investors are also keen to hear the Fed’s rate forecast, with many predicting a majority of the bank’s board will argue in favour of a July reduction in light of the deteriorating world economy. Elsewhere, European markets are still weighing up the prospects of a no deal Brexit as the UK’s internal political turmoil continues. Former Foreign Minister and bookies’ favourite for PM Boris Johnson has stated that the UK will not pay the country’s 39 billion Brexit bill until the EU agrees to a deal that is acceptable to Britain. This comes after current PM Theresa May officially stepped down as leader of the Conservative Party. She has pledged to stay on as the country’s Prime Minister until her successor has been chosen. The name of the new head of government is expected to be made public at some point during the second half of July. In regional news, one positive development for European markets was the announcement from international ratings agency Fitch that it has affirmed France's Long-Term Foreign-Currency Issuer Default Rating (IDR) at “AA” with stable outlook. According to the agency, the country’s rating is supported by its big, strong and diversified economy, its robust, effective civil and social institutions, as well as its record of macroeconomic stability.
Andrey Voytkiv, Financial Scout at Libertex
-
Where to buy and sell Slack shares? The new instrument is now available in Libertex
Libertex just expanded its trading portfolio launching CFD (contracts for difference) for shares of Slack Inc. (WORK). This provides Libertex users with new trading opportunities.
Traders are not only able to use Slack as one of the most popular messengers worldwide, but they trade CFD on its shares too! Slack is an attractive instrument for both short term traders and long-term investors.
Slack made a direct listing at June 20th. Slack became the third “unicorn” company, after Lyft and Pinterest, that started offering its shares in the past months. All three companies are available at Libertex.
Trade Slack now with Libertex!
About Libertex:
Libertex is an international brand with a twenty year history in the financial markets and online commerce. Libertex provides investors with access to trading stocks, currencies, indices, commodities, gold, oil, gas and many other financial instruments. The Libertex team has more than 2,200,000 customers in Latin America, Europe and Asia owing to its first-class service. Libertex has more than 200 commercial instruments. In 2016, Libertex was recognized by the Forex EXPO Awards as the best trading platform; and the Global Banking and Finance Review named it the best trading application in the EAEU. In 2017-2018, Libertex was announced as Best trading application and Best cryptocurrency broker by Forex Awards...
-
Canadian cannabis stocks are set to rise
Canadian cannabis stocks are set to rise on positive news from Aleafia Health Inc. that it is about to finish paying off convertible bonds in the amount of $25 million.
This comes after shares in Canopy Growth (CGC) saw significant growth following reports that the company had come to an agreement to acquire Acreage Holdings Inc. Under the terms of the deal, Canopy will be able to take control of the company as soon as US federal laws on cannabis are relaxed. Acreage will continue to operate independently but will have access to Canopy's intellectual property, branding, product recipes and patents.
Nevertheless, there were also some negative developments for the market, with Governor of New Hampshire Chris Sununu vetoing a bill that would open up governmental medical cannabis to commercial enterprises. This bit of news came as a serious setback to entrepreneurs who were hoping to set up businesses were the bill to have been passed.
Our financial scouts believe that the Canadian cannabis market is likely to rebound from this recent positive corporate news wave. With this in mind, they see share price rises for all of the major producers in this sector, with Canopy Growth, Aurora Cannabis (ACB) and Tilray (TLRY) tipped to rise to $42-43, $8-8.5 and $47 respectively. Elsewhere, they predict Aphria (APHA) will rise to
-
Cannabis stocks up as Aurora Cannabis receives new licenses
Shares in major cannabis producers are largely up this Wednesday on news that market leader Aurora Cannabis (ACB) has been granted licenses for two new outdoor cultivation sites.
This comes after a period of decline for the sector following a disappointing quarterly report from Organigram. At a time when all the experts were predicting a 3 cent per share rise, the company posted a 7 cent per share loss and a net pre-tax income increase of 628% to CAD 24.75.
Nevertheless, Organigram's executive management is convinced that it will be able to improve its financials some time during the latter part of the year. Finally, we end our coverage of Organigram with information that the company is planning to add another 100 employees to its already 700-strong workforce.
In other news, Aurora Cannabis's share price rose following the announcement that it had been granted licenses by Health Canada for two new open-air cultivation facilities in Quebec and British Columbia. The company has stated that the new sites will be used for cultivation research to develop new technology, genetics and intellectual property for outdoor production. Aurora Cannabis went on to clarify that it deliberately selected open-air sites since this would enable it to research methods of cultivation for different climactic conditions.
According to our financial scouts, cannabis stocks should continue to rise for as long as this latest wave of positive market sentiment lasts. With this in mind, they see share price increases for all the major producers, with Canopy Growth (CGC) rising to $36.00 and Aurora Cannabis up to $8.00. Meanwhile, they predict that shares in Tilray (TLRY), Aphria (APHA) and Cronos (CRON) could jump to $45.00, $6.50 and $15.00 respectively.
-
Libertex, new Premium Plus Partner of Valencia CF
The trading sector multinational becomes the club's new sponsor until 2021
Valencia CF has reached an agreement with Libertex, a multinational financial scout in the trading sector and considered as the Best Trading Application of 2018, by which the financial company becomes the new Premium Plus Partner of Valencia CF until June 30, 2021.
The Libertex logo will now be visible on the back of both the game and training kits, as well as be present on advertising in the Mestalla stadium, the training grounds of Paterna, institutional events and in the digital media of the club: official app, www.valenciacf.com and social networks.
This way, Valencia CF becomes the best ally for Libertex in its objective of increasing its notoriety, both in Spain and internationally, with a special emphasis on the Latin American and Southeast Asian markets, in order to achieve an impact that reaches hundreds of millions of people when competing in the most prestigious competitions.
With this agreement, Libertex customers and Valencia CF fans will be able to benefit from promotions, exclusive offers, participate in meetings with players and many more opportunities to have a unique experience, both in their activity with Libertex and with Valencia CF.
President Anil Murthy is “very satisfied with the agreement reached with Libertex, another multinational company that joins Valencia CF to continue growing both locally and globally. Libertex is an example of a serious and solvent company in a very competitive market that wants to increase their position as a reference in its sector, the same way as Valencia CF has also looked for it throughout its history.”
Michael Geiger, CEO of Libertex, acknowledges that “Valencia CF is a top-level club internationally, with a long and successful history, with whom we share a common feeling in terms of emotions, passion and success stories. Valencia CF is the perfect partner to deliver our brand, our message and our services to potential customers to continue growing in the market. We believe it will be a great and ambitious season for both of us and we will support each other. ”
For his part, the General Manager of Libertex, Andrey Nikolaev, recognizes that “this partnership will allow us to offer benefits to our customers. Just by being a client, you will have the opportunity to live first-hand experiences with a historical club of LaLiga, the best league in the world.”
With more than 30 international awards, the most recent ones being the Best Cryptocurrency Broker and Best Trading Application of 2018 at the prestigious Forex Awards, the company created in 1997 has a portfolio of 2.2 million customers distributed in 110 countries, offering its users more than 240 trading assets with which to operate.
Libertex is considered one of the best web and mobile platforms to make secure purchases of various financial assets (stocks, currencies, indices and commodities). It offers its users an intuitive, simple and clear platform for both experts and beginners in the trading sector, providing training and creating didactic actions aimed at fans.
-
Libertex: outstanding new partner for Getafe CF
Libertex, the best trading application of 2018, is Getafe Club de Fútbol’s latest great signing. The online broker and the Madrid team have signed a sponsorship agreement that will show the Libertex brand on the blue team’s uniform, both in domestic competitions - LaLiga and Copa del Rey - and in the UEFA Europa League, a tournament that Getafe CF will be entering after achieving an admirable fifth place last season.
As an exclusive partner, the agreement will also include branding on the static and dynamic advertisements of the Coliseum Alfonso Pérez Stadium and the training grounds, along with presence in social networks, on the club’s website and during special events.
The alliance will also mean the expansion of the Libertex brand in Spanish and European markets, but also in Latin America and Southeast Asia, as it comes from one of the fittest squads in the best league in the world, who have a significant global impact.
Libertex customers and Getafe CF members can benefit from numerous promotions such as regular and VIP tickets, special promotions, meet and greet with players, exclusive offers and other opportunities to enjoy a unique experience.
Michael Geiger, CEO of Libertex, stated: “Getafe completed an outstanding season, proving they can reach ambitious goals. They’re a young yet aggressive club with purpose, always oriented towards growth, and those are values that Libertex also share. We strongly believe that our new partnership will allow us to connect in a more intense and effective way with a larger community of online traders all over the world. We all hope for a great season and are confident that Getafe will be a perfect partner.”
The General Manager of Libertex, Andrey Nikolaev, said: “Thanks to this deal, our clients will experience the emotion of LaLiga and UEFA Europa League in person. We are sure that a number of offers that we’ll present throughout the whole season will meet all of their expectations, we invite everyone to join us in this unique adventure.”
Ángel Torres, president of Getafe CF, had this to say: “We are very glad to welcome a brand like Libertex to the azulona family; from this moment, they are part of the family and we hope that this path that we begin will be most satisfactory for both entities.”
-
Cannabis stocks up on positive reporting
Shares in Canada's biggest cannabis producers are for the most part rising strongly following the publication of a sizable batch of quarterly reports by some of the sector's biggest names.
Last week, for instance, Innovative Industrial Properties posted positive Q2 results showing profit up 76.4% to $0.30 per share.
Cronos Group (CRON) is another company that has already released its quarterly results, exceeding analysts' predictions with sales revenue of CAD 10.2 million. This impressive sales growth has helped to increase investor confidence in Cronos which, in turn, has generated a share price increase for the company.
On 1 August we saw Aphria (APHA) announce spectacular Q4 results on 1 August. Meanwhile, another key player in the market, Canopy Growth (CGC), is planning to publish its Q1 2020 financial results at close of trade on 14 August.
However, this wave of positive news was somewhat dampened by news that KPMG was withdrawing its audit report of the company's 2018 results.
Nevertheless, our financial scouts believe that if the sector's biggest names can sustain this trend of positive reporting, cannabis stocks should continue their current growth over the short to medium term. With this in mind, they see Canopy Growth's share price up to $35.00, with Tilray rising to $47.00. Meanwhile, they predict Cronos, Aphria and Aurora Cannabis (ACB) will increase to reach $14-14.50, $7.50 and $7.50-8.00 respectively.
-
Cannabis stocks trading mixed on contradictory news
Canadian cannabis stocks are trading mixed this Wednesday in a trend that has persisted since the beginning of the week when CannTrust's share price lost a further 5% following another scandal, this time involving one of its Ontario stores. This comes after the Canadian authorities announced that a probe of CannTrust's operations had revealed that the company was cultivating cannabis in unlicensed rooms at its Pelham, Ontario site. In an effort to draw a line under this scandal, the company dismissed two members of its executive management team who, it is alleged, were aware of the violation but failed to take action to halt the unlicensed production activities.
Now the company is looking at a variety of potential solutions to the challenges it is facing including selling the business outright.
In other news, some cannabis stocks received a boost in the form of reports that US company MedMen has become a major supplier of cannabis to the Californian market, boasting 17 retail locations in the state.
Elsewhere, shares in Aurora Cannabis (ACB) fell after the company announced it had completed its $47.7 million acquisition of Hempco Food and Fibre Inc. Following the deal, Hempco will become part of the Canadian giant's Aurora Hemp arm whose focus will be the production of hemp-derived products.
Our financial scouts believe that, as long as the news atmosphere remains contradictory, the cannabis market will continue to trade mixed. As such, they see shares in Canopy Growth (CG) up to $28.00, with Aurora Cannabis and Aphria (APHA) also rising to $6.50 and $7.00 respectively. Meanwhile, they predict potential share price drops for Tilray (TLRY) and Cronos (CRON) to $28.50 and $11.50 respectively.
-
Cannabis stocks trading mixed on contradictory news
Canadian cannabis stocks are trading mixed this Wednesday in a trend that has persisted since the beginning of the week when CannTrust's share price lost a further 5% following another scandal, this time involving one of its Ontario stores. This comes after the Canadian authorities announced that a probe of CannTrust's operations had revealed that the company was cultivating cannabis in unlicensed rooms at its Pelham, Ontario site. In an effort to draw a line under this scandal, the company dismissed two members of its executive management team who, it is alleged, were aware of the violation but failed to take action to halt the unlicensed production activities.
Now the company is looking at a variety of potential solutions to the challenges it is facing including selling the business outright.
In other news, some cannabis stocks received a boost in the form of reports that US company MedMen has become a major supplier of cannabis to the Californian market, boasting 17 retail locations in the state.
Elsewhere, shares in Aurora Cannabis (ACB) fell after the company announced it had completed its $47.7 million acquisition of Hempco Food and Fibre Inc. Following the deal, Hempco will become part of the Canadian giant's Aurora Hemp arm whose focus will be the production of hemp-derived products.
Our financial scouts believe that, as long as the news atmosphere remains contradictory, the cannabis market will continue to trade mixed. As such, they see shares in Canopy Growth (CG) up to $28.00, with Aurora Cannabis and Aphria (APHA) also rising to $6.50 and $7.00 respectively. Meanwhile, they predict potential share price drops for Tilray (TLRY) and Cronos (CRON) to $28.50 and $11.50 respectively.
-
Cannabis stocks fall after recent growth on Tilray news
Shares in Canada's biggest cannabis producers were down significantly on Friday. This comes after a period of growth following Tilray's (TLRY) announcement that it had put pen to paper on its first contract to supply cannabis to the European market.
Under the terms of the deal, the company will begin supplying $3.3 million worth of products to the German distributor Cannamedical Pharma from autumn of this year.
Expansion into Europe forms an integral part of the Canadian producer's strategy to increase profits. Back in March, Tilray's management was already talking about shifting its focus towards the US and European markets in a bid to unlock greater growth prospects than the Canadian market could ever offer.
Following this news, Tilray's shares responded by jumping 10% before correcting sharply downwards.
Elsewhere in the market, shares in Canopy Growth (CGC) are still falling relatively rapidly in response to last week's dismal Q1 report, which revealed losses for the company of several billion dollars.
We can expect this current negative outlook to endure over short to medium term as Canadian cannabis stocks continue to correct downwards. With this in mind, we predict share price drops for Tilray, Canopy Growth and Cronos (CRON) to $28-28.50, $25.00 and $11.00 respectively. Meanwhile, we see Aurora Cannabis (ACB) down to $5.00, with Aphria (APHA) also sliding to $6.00.
-
Canadian cannabis stocks were trading mixed this Tuesday following three consecutive days of losses.
This comes as sector leader Canopy Growth Corp (CGC) is enjoying a period of renewed growth following an upgrade of its shares to neutral by Seaport Global's Brett Handley, with the industry authority commenting that the company's stock looks like a good investment after a series of quick sell-offs over the summer months.
In early July this year, we saw Canopy Growth's shares dumped by investors following the sacking of then CEO Bruce Linton on the initiative of the company's majority shareholder, Corona Constellation Brands Inc. The beverage giant had invested $4 billion in Canopy, but was disappointed by the Canadian company's financials. Constellation has stated that it expects to post a $54.3 million loss in its Q2 report related to its stake in the Canadian cannabis producer.
There was more positive news for the sector as Namaste Technologies announced that it had promoted Meni Morim from acting to permanent CEO of the company, also adding him to its board of directors.
According to our financial scouts, the Canadian cannabis market is likely to continue trading mixed over the short to medium term. As such, they predict Canopy Growth will rise to $25.50, with Aurora Cannabis (ACB) climbing to $6.50. Meanwhile, they see Tilray (TLRY), Aphria (APHA) and Cronos (CRON) all down to $28.00, $6.00 and $11.00 respectively.
-
Cannabis stocks trading mixed despite news of Tilray deal
Shares in Canada's major cannabis producers are trading mixed this Friday. Tilray (TLRY) appears to be the worst affected after Thursday's announcement of a CAD 110 million deal to buy head-shop chain Four20, which owns and operates six recreational cannabis stores in Alberta. It is hoped that the acquisition, which will see Tilray buy up all of Four20's issued and outstanding shares, will help the cannabis producer expand its presence within Canada. Tilray will pay CAD 70 million for the shares when the deal eventually goes through at the end of Q1 2020, followed by an additional CAD 40 million "subject to the achievement of certain milestones" by Four20.
Prior to this acquisition, Tilray completed another deal with Authentic Brands Group to supply this latter with CBD for use in products for sale in several major retail chains across the US and Canada.
Despite the positive response to reports of a new deal, the company shares continue to fall and could even drop to the $5.00 mark over the short to medium term. Meanwhile, we could see Canopy Growth (CGC) slide to around $24.00 per unit share, with Cronos Group (CRON) and Aphria (APHA) rising to $11.00 and $7.00 respectively.
-
Cannabis stocks up on sale by Aurora Cannabis of its Green Organic Dutchman holding
Shares in Canada's biggest cannabis producers were up this Friday following Aurora Cannabis's (ACB) decision to sell its 10% stake in Green Organic Dutchman. The deal was done for a price of $3.00 per share, i.e. around 15% lower than the stock's closing price. When the Canadian producer made its original investment in Green Organic Dutchman back in January 2018, it paid just $1.65 a share.
Then, it began selling its shares in October 2018 (for between $5.00-6.00), a programme which it has continued until now.
Elsewhere, the sector also received some negative news in the form of reports from US-based analysts, who estimate that the sector has declined 40-50% from its 2019 highs. The great sell-off began in response to delays in the approval of several mergers and acquisitions scheduled for 2019. This comes after the US Justice Department decided to take a much more aggressive stance in its investigation of any potential anti-trust violations. According to our financial scouts, despite analysts' negative market forecasts, Canadian cannabis stocks could still continue their recent rise. With this in mind, they predict share price increases for Canopy Growth (CGC), Aurora Cannabis (ACB) and Tilray (TLRY) to $27.00, $6-6.50 and $33.00 respectively. Meanwhile, they see Cronos (CRON) up to $12-12.50, with Aphria (APHA) also rising to reach the $7-7.50 mark.
-
European investors to take cue from positive Brexit developments
European investors are expected to remain optimistic over the short to medium term in light of the recent good news regarding the potential outcome of Brexit. Their confidence in the potential to avoid a no deal British departure from the EU has grown amid reports that Northern Ireland's biggest party is finally prepared to make some concessions to the European Union. Although the claims were quickly denied, this was nevertheless interpreted as a signal that there is still some hope of a UK-EU agreement.
Elsewhere, investors are anticipating a positive outcome from the October US-China trade talks, which they believe will finally bring about some sort of deal between the superpowers. And this optimism would appear justified following a fresh relaxation of trade policy from both sides. US President Donald Trump has already announced his willingness to consider a temporary trade agreement with China covering a wide scope of goods.
Trump's comments came after China announced that it was exempting several categories of agricultural products (including soy beans and pork) from the list of US goods subject to tariffs.
The markets received another boost in the form of a sharp uptick in oil prices. Global oil prices were up markedly following a drone attack on infrastructure belonging to KSA oil and gas company Saudi Aramco.
Meanwhile, the ongoing political turmoil in Hong Kong will likely restrain European investors from stronger market activity amid fresh clashes between protesters and their opponents.
-
European investors concerned over US and Chinese economic data
Over the short to medium term, European investors will be taking their lead from recent statistics indicating a slowdown in both the Chinese and US economies. The most likely cause of this current situation is the ongoing trade conflict between the two countries.
Perhaps the most significant development has been the sharp drop in China's manufacturing PMI to 52.8 over the month of October. This is a marked deterioration from September, when the index ended the month at 53.7. Nevertheless, it is still above its key psychological threshold of 50. This comes as most analysts are forecasting a slowdown in the country's services PMI to 53.6.
Meanwhile, the latest GDP data from the US tell a very similar story.
Previously, investor optimism had been maintained by the announcement by White House Principal Deputy Press Secretary Hogan Gidley that the US was still on track to sign the first part of the trade agreement with China despite the collapse of the planned meeting between President Donald Trump and PRC President Xi Jinping following the cancellation of the APEC summit in Chile. However, shortly after Gidley's statement, rumours surfaced suggesting that the agreement would not in fact be signed any time in the near future.
Market participants are also hotly anticipating any new Brexit developments. The EU has already agreed to delay the UK's departure for a further three months (until 31 January 2020), a proposition which British Prime Minister Boris Johnson has accepted, albeit reluctantly.
Elsewhere in the news, the FED's latest interest rates decision was largely anticipated and its effect on investor sentiment was thus minimal. The US regulator decided to cut its base rate to 1.5-1.75% from 1.75-2%. Going forward, investors will be waiting for the minutes of this meeting to be released in the hope that they will shed some light on the FED's future monetary policy direction.
-
Forex Club made a strategic partnership with Alfa-Bank
Forex Club, an internationally known leader of the online trading market, signed a mutually beneficial agreement with Alfa-Forex - Russian leader of forex trading which founder is one of the most well-known and respected banks in Russia - Alfa-Bank.
Due to the decision made by the Central Bank of Russian Federation from 27 December, 2018, Forex Club ceased onboarding clients as a broker on the Russian market. However those clients who are interested in proceeding with CFD trading are now encouraged to use MT-5 Alfa-Forex platform which guarantees high reliability and quality of service.
FX CLUB is one of the largest international groups of companies operating in the financial market. Today it consists of multiple entities, brokers, dealers, educational and IT-development centers which allow to operate globally and serve clients from 120 countries.
Founded in 1990, Alfa Banking Group is headquartered in Moscow, Russia. Alfa-Bank is a provider of foreign exchange services to institutional clients with a strategic focus in Russian Ruble and prices available 24/5 at tight spreads. It is regulated by the Central Bank of Russian Federation.
-
Libertex wins Best Trading Platform in the European CEO Awards 2020
Top financial and business news magazine European CEO has chosen Libertex as the Best Trading Platform of 2020, as part of the prestigious publication’s annual awards for innovation in business.
The highly coveted prize, handed to Libertex CMO Marios Chaillis in London, recognizes Libertex as the leading trading platform on the market today.
Nominated for its high quality product and outstanding client service, Libertex has been operating since 1997 and currently offers the most cutting-edge platform for trading on the financial market 24/7. The winning platform is available as a web terminal or smartphone app, and stands out for its user-friendly design, fast and easy trading experience for beginners and veterans alike, and the security of client funds.
(https://d.radikal.ru/d24/2002/ee/f6a5f37286c9.jpg) (https://radikal.ru)
Libertex ‘‘Proud to be recognized as world leader’’
Upon accepting the trophy, Marios Chaillis stated: “We couldn’t be happier to accept this award which acknowledges Libertex as the world leader among the wide range of trading platforms in the market. We are proud to be recognized for our constant effort to deliver the best trading experience to all of our clients, whether they are experienced traders or newcomers, who choose us as their guide to the exciting world of financial markets.”
The European CEO Awards aims to highlight outstanding companies that are pushing the envelope in the business world, and the executives whose hard work and vision make such progress possible. Prizes are awarded according to the following categories: trading, finance, business, consultancy and outsourcing, technology and lifestyle.
Over 30 international awards
With this new award from European CEO, Libertex adds yet another triumph to its ever-growing list of accolades. The company previously cleaned up at the 2018 Forex Awards, scooping both the Best Trading App and Best Crypto Broker prizes. After more than two decades of experience in the financial markets, Libertex’s collection of international awards surpasses 30!
Winners in the market and on the field
With more than 240 trading instruments and over 2.2 million satisfied clients in 120 countries, Libertex is proud to continue to receive acclaim from esteemed international organisations such as European CEO, and most importantly, its customers.
As well as offering top quality guidance to clients in the financial markets, Libertex is also a keen player in the sporting world as the Premium Plus Partner of Valencia CF and Getafe CF, top Spanish LaLiga football clubs, and lucky Libertex clients can enjoy the thrill of VIP accesses to the outstanding performances of these elite clubs in both the national championship and European competitions.
-
Libertex Group awarded ‘Best Trading Platform, 2020’
and ‘Best FX Broker, Europe, 2020’ by Forex Report
(https://c.radikal.ru/c13/2003/9d/7426bc5fc1bb.jpg) (https://radikal.ru)
Libertex Group is proud to announce that top financial magazine Forex Report has awarded them two of its prestigious prizes for excellence in the finance industry.
Nominated for the outstanding quality of its product and excellent customer service, Libertex provides technological platforms for trading on the financial market 24/7. The award-winning platform is available as a web terminal or smartphone app, and is consistently rated highly by both forex newcomers and veteran traders for its user-friendly interface, fast and responsive trading experience, and attention to security and client satisfaction.
Libertex CMO Marios Chaillis was happy to receive the awards from Forex Report, stating that: “At Libertex we are always striving for excellence in service to our clients and partners. We set out to build the best trading platform in the world and we are proud to be recognized by the experts at Forex Report. ”
About the Forex Report Awards
Forex Report is an industry-leading publication for financial professionals that serves as a hub for everything you need to know about the financial world. Each year, Forex Report’s team, in partnership with World Finance Banking Awards, recognizes the market leaders among brokers, traders, and technological innovators in the financial sector.
The judging panel, which welcomes recommendations from professionals in the market, takes into account product quality, community contribution and customer service to present the Forex Report Awards to nominees who ‘‘have made the FX community a better place to be.’
Proud holder of over 30 industry awards worldwide
Operating since 1997, Libertex Group is no stranger to accolades, and the veteran broker now adds another trophy to a well-stocked cabinet. The dual awards from Forex Report come not long after Libertex accepted the Best Trading Platform in the European CEO Awards 2020. Previously the company was awarded Best Trading App and Best Crypto Broker 2018 at the Forex Awards. After more than twenty years operating in the financial world, Libertex can boast over 30 international awards.
The killer app for all traders
With more than 240 trading instruments available and a design that’s easy to use for new and experienced traders alike, it’s easy to see how the Libertex app continues to receive awards throughout the years. The trusted broker of over 2.2 million happy clients in 120 countries, Libertex pledges to stay at the forefront of the highly competitive financial market.
Libertex also makes its mark in the football world as the Premium Plus Partner of Valencia CF and Getafe CF, top-tier Spanish LaLiga football clubs. Libertex clients have a chance to win VIP tickets to cheer on these elite clubs in both the national and European competitions.
For more information on Libertex, the company’s platform, features or awards, don’t hesitate to reach out to [email protected]
-
Libertex signs a strategic partnership with FPM Global family
(https://d.radikal.ru/d24/2003/09/522f04d77a9f.jpg) (https://radikal.ru)
Libertex is pleased to announce that it is now partnered with Financial Partners Marketing Global (fpm.global) to offer top level services for all its affiliate partners. The agreement, already in effect as of the time of press, will see Libertex affiliates benefit from FPM Global’s expertise in providing bespoke marketing solutions for the finance industry.
The top-tier trading platform for everyone
Libertex is a fast, user-friendly trading platform that enables users to trade on the financial market 24/7 on the web or via smartphone app. The broker offers over 230 financial instruments including stocks, shares currencies, indices, oil and gas, precious metals and more. With over 20 years of financial market and online-trading experience, Libertex has won over 30 international awards, including two accolades for Best Trading Platform from Forex Report and European CEO magazine in 2020.
FPM Global: marketing solutions for finance, forex, crypto
FPM Global is a new affiliate company formed by industry leaders, with a mission to bring the best in affiliate marketing to every kind of financial enterprise. FPM Global’s other partners include StormGain, a trading platform specialized in cryptocurrencies. Libertex, which also supports several cryptocurrencies among other financial assets, is pleased to offer the benefit of FPM Global’s expertise in all sectors of the financial market.
FPM Global and Libertex have confirmed that there will be a ‘seamless takeover’ for existing Libertex affiliates, who have been informed that their existing data, contracts and credentials will remain the same.
Both companies are proud to welcome current and potential affiliates to the FPM Global community. For interested parties, the details about Libertex’s affiliate partnerships can be found here, and information on Financial Marketing Partners Global’s affiliate payment plans here.
-
Bitcoin & co., what are they ultimately for? Invest in Bitcoin halving expectation
Eduardo Strecht Ricou, Libertex Senior Analyst
I am often asked if I have a favourable or unfavourable opinion regarding the world of cryptocurrencies. I answer them with a question: “Do you know what Bitcoin is for?”
They sometimes answer that they’re “not sure” what Bitcoin is for, but that they heard the neighbour screaming out the window that he had made money buying and selling Bitcoin.
What is Bitcoin? A new revolution in the technological world
I am not referring to artificial intelligence or robots, but yes, to the world of cryptocurrencies. Everyone has heard a lot about this type of active crypto, the most famous being Bitcoin, as well as others like Ripple.
Bitcoin was created to make payments over the internet in a faster, safer and cheaper way, in addition to being a decentralized means of payment.
Blockchain is the basis of all cryptocurrencies. Without blockchain, Bitcoin would not exist
The subject is a bit technical. Blockchain is basically a global data book that contains all the reliable records, since all transactions are validated before a new block is composed. It is said to be so safe that it was even nicknamed “trust protocol”, that is to say, the reason for decentralization, in other words, that no one regulates or controls it. It is expandable, simply validating the data and records that are protected by advanced cryptography, not allowing the source data to be removed, revised or modified.
As it is a new technology, there is still much to explore and develop. The time of transactions must decrease. The validation of data, the lack of supervision and regulation can be seen as very libertarian, as well as a great danger, because users aren’t endorsed or protected by any corporation, public entity or state in the event that something bad happens, such as a hack.
Bitcoin mining involves the use of different equipment and media
The crypto miner has a complex job ahead. For Bitcoin mining, machines and computers with a high capacity are needed. Consequently, the energy cost to keep the machines running all the time in order to obtain tokens is very high.
To mine Bitcoin, we need computers like the ASIC, more commonly known as Antminers, which offer a fairly high TH/s rate compared to graphics cards (GPUs). The first problem is its very high acquisition price, with an average cost of around $2,000. It is clear that technological advances and new solutions will reduce the cost of acquisition in the future, forcing the manufacturers of these pieces of equipment to improve their machines every day. All this for important events such as the one we are facing with Bitcoin, the halving.
In a nutshell, the halving process is nothing more than halving the value of Bitcoin.
What is the meaning of the halving of the Bitcoin block?
Halving decreases the number of new Bitcoins generated per block. This means that the supply of new bitcoins is less.
In trade, lower supply with stable demand generally leads to higher prices. Since halving reduces the supply of new bitcoins, and demand generally remains stable, halving has generally preceded some of Bitcoin's biggest hikes. In 2012 and 2016, we had two halvings. The idea was developed to have programmed currency issuance and decrease over time, and that is why the cut in the miners’ reward is applied.
Halving has an impact on bitcoin mining, and by cutting the reward for mined blocks in half, the profitability to maintain the equipment is affected due to the drop in miners’ income.
The processing power of the Bitcoin network will undoubtedly increase with the halving event and the arrival of new miners on the market, equipped with chips that can provide greater power and efficiency. This is something that we will see more frequently after 12 May, next halving date.
There is a hypothesis that miners and mining groups will disconnect their equipment due to the losses that the halving event would cause. However, as we already mentioned, this cut in the issuance of coins could cause a price increase, such that it manages to balance economic calculations. However, there is a fair bit of doubt about how long it will take for the Bitcoin price to rise.
Therefore, since I don’t consider Bitcoin to be an asset, I also don’t need to consider the traditional and common currency that allows me to buy a coffee in the morning, without having to worry about the sudden change in value in relation to the US dollar.
Bitcoin is more than everything in its romantic essence: a decentralized, fast and secure digital payment method accessible to everyone
As I explained above, the cost of the miner can be very high. Therefore, the commissions as a percentage of the value of Bitcoin is what will create the solution to trade in the unregulated system of Bitcoin, so that miners are rewarded for their crypto services. With the cost of energy entering the equation, it is necessary to have the equipment in continuous operation.
According to a study carried out by the Dutch bank ING, 211 kWh are consumed to validate a BTC transaction. Said consumption has the capacity to supply a home for one month; hence, the electric bills of those who mine BTC are very high.
So, if the miner keeps half of his Bitcoin in the halving, with the high energy costs and the maintenance of his machines for the processing of Tokens, only the miner will survive if the price of Bitcoin rises and rebalances the mining cost; although today you can mine Bitcoin in Cloud Mining. This allows you to execute the extraction process without requiring the use of so many resources. Cloud mining is simpler: with a home computer and internet, we can connect to the cloud and process the algorithms remotely without the need for a machine (hardware), since it is a third party that supplies the machine to us. But alas, it is not profitable, even if it the energy costs are reduced for the machines.
Traders and investors therefore have the opportunity to buy and sell Bitcoin, but be aware that the idea of listing Bitcoin greatly undermines its initial concept, the introduction of many speculators and the absence of more consistent news in the crypto world, brings a lot of noise and volatility to the cryptocurrency markets, removing the stability factor that is so necessary to a global currency for the exchange of goods and services on the planet.
After the crypto fever in 2018, we witnessed a correlation between Bitcoin and gold, from April to November 2019. The theory was that Bitcoin is just like gold. It does not have any yield or interest rates, and is used by large investors as an instrument for diversifying portfolios by risky assets. Some analysts have come to place Bitcoin as a protection instrument against turbulence in the financial markets.
What really happened in these last four months leads me to the conclusion that there is no correlation with gold, or with anything, for the simple reason that it is a digital currency, and what drives the price is more than just the news: if the Libra project goes ahead on Facebook and Bitcoin is dethroned. After the quarantine period, globalization will slow its pulse; will we return to regional and local trade? This would not be very positive for Bitcoin. The new needs created by the virus are increasingly launching us into the digital world. Will this be positive for Bitcoin?
There are some issues we may have to tackle in the uncertain months coming up ahead of us, as well as new solutions and inventions or opportunities.
But beware, Bitcoin is not the dollar, nor will it be in the coming years, and there are three reasons for this
The first: to relaunch the economy, the states and central banks must continue on a path of expansion and growth, and that implies the issuance of money, a lot of money.
The second reason is that in these last few months, the dollar was highly effective in solving merchandise payments with the planet practically all locked up at home.
The third reason is the very high volatility, although after the collapse in early March, Bitcoin managed to recover up to $7,500. That being said, I don’t see it taking off like gold. Seeing the dollar, by measurement of the dollar index (basket of six currencies against the dollar), with a very stable trend and reduced volatility, is more than essential in times of great turbulence in the financial markets, and when facing total uncertainty of the near future.
In short, I believe in the concept as an investor, it is very attractive for the future, but there are risks of price volatility, of being new, of being dethroned by the Facebook Libra, or of not being accepted and used on a large scale for the payment of goods and services. For the traders, it is very important to follow up on the news that has a great impact on the price of Bitcoin, just as the analysis of graphics helped us understand how the public reacted to Bitcoin at certain moments in the market.
Don’t miss the chance to buy Bitcoin now before the halving with Libertex.
-
:)
-
Tottenham Hotspur Announce Multi-Year Partnership With Libertex
Libertex has become the Official Trading Partner of Tottenham Hotspur.
Driven by their determination to be the best, this partnership will showcase the progressive outlooks and commitment to continued improvement that enables Libertex and Tottenham Hotspur to perform at the highest level in their respective fields. Since 1997, Libertex has been at the forefront of cutting-edge developments in the trading markets, with the company’s innovation rewarded with over 30 prestigious industry awards. In keeping with their club motto, ‘To Dare Is To Do’, Tottenham Hotspur adopts a similarly pioneering approach in the modern game, investing in the latest technological developments to help deliver on-pitch success, epitomised by their world renowned, state-of-the-art stadium.
Spurred on by their ‘Trade For More’ ethos, the partnership will allow Libertex to share their love of the game with over 2.2 million of its international clients, offering a host of unique and exciting rewards, including exclusive events and premium matchday experiences at the Tottenham Hotspur Stadium, when fans can safely return to stadia. Libertex will also have a presence across the club’s digital channels and LED perimeter advertising system on matchdays.
Marios Chailis, Chief Marketing Officer at Libertex said: “Libertex could not be happier to partner with a team whose values echo our own so perfectly. Through this multi-year partnership, we’re thrilled to join the worlds of football and trading in the form of many exciting benefits for our clients and look forward to cheering on Spurs when they return to the pitch.”
Tottenham Hotspur Head of Partnerships Fran Jones commented: “At Tottenham Hotspur, technology and innovation is key to everything we do and we are excited to partner with Libertex, an organisation that shares this commitment through its own products and services.
With a mission to make trading financial assets easy and accessible for everyone,
Libertex has long been a pioneer in the development of the forex market and is an influential organisation in the finance industry. The brand has grown to provide over 2.9 million clients across 120+ countries a variety of fast, user-friendly and reliable technology platforms.
For more information on how Libertex can help you Trade For More, visit their website https://libertex.com/sponsorship.
-
A whole generation was missing out on online trading. Then came the coronavirus
“2020 is my favourite year,” said no one ever. But for millennials, this year has been yet another blow in what’s been a generational rough patch of economic disruption that made itself felt most keenly in the 2008 financial crash. After entering the job market during the Great Recession and saddled with college debt, suffering low wages and a rising cost of living, the younger generation now has to reckon with a COVID-19-induced economic downturn without the safety net that previous, wealthier generations had built for themselves.
It’s no wonder that millennials and Gen Y were shy about stocks. To the average person, investing is only something to consider after padding one’s savings, paying off college debt, and saving up for real estate, something that is still in the distant future for many younger people. Brokers, for their part, continue to use their arcane jargon and dwell in the image of the greedy 1980s. They’re about as uncool as you can get to the socially conscious, digital-native, avocado-toast generation.
But these turbulent times could actually hold a silver lining for younger people. COVID-19 feels like a significant historical event that has made governments, banks, and individuals all reflect on people’s relationships to the economy. As tech-savvy youth increasingly become aware that their potential to save cash just isn’t going to cut it, they’re more willing to step out of their comfort zone and start trading. It’s clear that the current economic system isn’t going to get better anytime soon. The oldest millennials are nearly 40, with retirement becoming an increasingly pressing concern.
A recent survey from Money Under 30 revealed that 61% of millennials think now is a good time to invest, with a higher 70% interested in learning more about the stock market. Where did they get the capital to invest?
Well, if you’re among the lucky one in three (33.5%) millennials who just started working from home, the coronavirus may have actually increased your savings. Of the millennials working from home, 78% reported that their total expenses decreased, with money saved on transportation and eating out more than making up for increased home utility costs.
Curiously enough, one in five (20%) of under-30s surveyed confirmed that they are planning to start investing precisely because of the pandemic, with 72% of women interested in learning more about investing (or doubling down on existing investments), compared to 82% of men. And it’s about time they do because one of the most respected financial players has rolled out a trading platform that’s tailor-made to younger investors that are eager to learn the ropes.
“Trade for More”: playing the stock market for a better future
‘‘Younger people are increasingly aware that to build wealth, they need to take the initiative into their own hands. That’s the whole philosophy behind ‘Trade for More’,” said Libertex CMO Marios Chialis. “We asked ourselves, ‘are users really signing up to trade? Or are they looking to invest so that they can achieve what they want in life?’ Whether it’s saving for retirement, raising a family, getting on the property ladder or planning future travels, we empower new users with the tools and skills they need to get what they want out of life”.
The ongoing COVID-19 pandemic may be driving young people to stake their claim in the financial market, but it’s also led to a downturn in the world of sport and entertainment. All sports around the world, from hockey to football to ice-skating have been affected by the economic shock of cancelled games, postponed fixtures and empty stadiums without ticket sales.
The global sports juggernaut that is association football has suffered along with the rest. By 19 March, almost all 55 UEFA member associations had suspended activity, save for the Belarusian Premier League.
Even as the Bundesliga, La Liga, the Premier League, Serie A and the UEFA Champions League all returned over the summer, football continues to struggle, with a reduced number of matches, under-staffed teams taking the field, sanctions against teams that violate COVID-19 safety rules, and of course, empty seats and plummeting revenues. These days, clubs are looking for new ways to monetise — and by partnering with trading platforms, they’re seizing a unique opportunity to join their fans in chasing financial returns.
To channel the spirit of perseverance through adversity, Libertex — in addition to being Valencia CF sponsors — has teamed up with Tottenham Hostpur FC, the English Premier League superstar that boasts the motto Audere et facere, meaning ‘To dare is to do’. Through this partnership, Libertex clients can win various perks and goodies associated with the club.
Libertex’s mission to win over the young isn’t just about football perks, however. It takes training to play the game, and the finance company aims to woo millennials by offering what they need to get over their fears of indices and candle charts — education.
Ignorance fuels Gen Y’s fear of the stock market, making education more critical than ever
A lack of education has been a significant barrier between younger people and investing. It seems that millennials react to the stock market just as they would to an unexpected call to a landline phone (if they have one): with terror. Around 66% of American millennials surveyed by Ally Invest in 2018 claimed the stock market was intimidating and expressed concern about their ability to understand how to invest.
Gen Z (defined in the survey as ages 18-23) were even more fearful, with 69% reporting that they’re intimidated by financial markets. The reigning fear was that they would make a bad call and lose their investment. Almost three-quarters of the millennials who are afraid of losing money when they invest are women compared to about two-thirds of men.
The true terror affecting millennials was a lack of education. Although a generation with high levels of college education, ignorance of the stock market is holding them back. One-third (34%) of respondents had no trusted source of advice. Over one-quarter (27%) cited their biggest fear came from simply not knowing how to get started, and 19% are scared about the time it takes to learn how to invest properly.
But the coronavirus pandemic, and the stock market’s relative resilience compared to the regular economy, may have convinced millennials that the financial markets aren’t the scariest thing out there. From the survey results, as attitudes change, the online trading platforms that stand to win out will be the ones that emphasise education. In other words, the trading platforms that can inform young investors about the stock market in a straightforward, trustworthy, and time-effective way.
The best investment starts with knowledge
Even as the market rebounds at the prospect of a coronavirus vaccine, millennials with money on their mind should take 2020 as a wake-up call to seize the opportunities that trading affords. But before going all in, young traders would do well to consider starting with the platforms that offer a full suite of educational materials, demo accounts, and training media such as webinars and tutorials. After all, the first and most important thing to invest in is yourself.
-
Libertex adds yet another payment method
After much anticipation, Libertex is delighted to announce that it is adding PayPal to its already extensive list of payment options. Famed for its accessibility, convenience and security, PayPal will offer Libertex clients yet another quick, easy and secure method for funding their accounts and withdrawing profits.
Nowadays, there aren’t many people who don’t have a PayPal account or haven’t at least considered opening one. And you don’t have to look far to see why. Its ease of use and integrability is unrivalled. All you need is an e-mail address, and you can make and receive payments in a variety of currencies in just one click. Then, your balance can just as easily be converted into the currency of your choice and transferred directly to your personal bank account. The service’s appeal to consumers everywhere is one of the reasons Libertex has been so keen to support this deposit method…and now it does!
This momentous agreement with PayPal puts Libertex firmly among the leaders of the online trading market, and everybody involved really couldn’t be prouder of this fact. Now Libertex clients can add funds to their accounts and withdraw their profits via virtually every method imaginable. In addition to SEPA bank transfers and debit/credit card payments, Libertex has long supported Sofort, Trustly, Skrill and many other deposit methods. Despite this wealth of choice, it always felt as if there was one big hole that needed filling — but not anymore.
Speaking on this special occasion for the company, Libertex CEO Michael Geiger commented: “We truly couldn’t be happier to be able to offer our clients this new payment option. PayPal is a real household name whose user-friendly reputation precedes it. With the addition of this exciting method, we will be making depositing and withdrawing funds even easier and more convenient for our valued customers around the world.”
Just when you thought the news couldn’t get any better, there’s more. PayPal deposits will be completely free for Libertex users. That’s right! The broker won’t take any commission on funds added to your trading account using this latest supported payment option. The service is set to go live on 1 December, and the hope is that this will become a date to remember in Libertex’s history!
-
Thank you all for making this a year to remember
Despite all the negativity surrounding 2020, it has actually been a year of many landmark achievements for Libertex. But none of that would have been possible without all the tireless efforts of our hardworking staff and support from you, our loyal clients. And for this, we are truly grateful. Thank you all so much for keeping the faith and sticking with us during this challenging period.
In the dark days of this winter, none of us would have believed that the months ahead could be so bright for our brand. One could be forgiven for thinking that our title of the Best Trading Platform from European CEO Awards would be the highlight of the year. However, just a couple of weeks after that, we received a double whammy of accolades from Forex Report (Best Trading Platform and Best Broker Europe). Then, a month later, we were once again named Best Trading Platform, this time, at the World Finance Magazine’s 2020 Forex Awards.
While it’s always nice to have your hard work recognised, this year has been about more than just awards. We have also forged many powerful, forward-looking partnerships that we hope will prove enduring. These include strategic deals with FPM.global and FXCubic, charitable joint initiatives with Ukraine’s Change One Life and GlobalGiving, and even client-serving partnerships with major payment system providers like PayPal and PaySafe. But our crowning glory this year has to be our multi-season partnership with the titans of the English Premier League, Tottenham Hotspur. In line with our “Trade for More” philosophy, we are looking forward to providing our members with some unique experiences.
So, as this singular year draws to a close, we would like to wish you all the best for 2021. Here’s to hoping life returns to something more reminiscent of ‘normal’. But even if it doesn’t, we now know that we’re up to the challenge.
Seasons’ greetings and heartfelt thanks from everyone here at Libertex!
-
The Great Bitcoin Rush 2.0
Although Bitcoin has been around for over a decade now, it really only gained mass recognition about three years ago. After much sideward trading and slight incremental gains, the then-obscure digital asset made headlines after shooting up almost 2000% in less than 12 months. Along with the huge price rises, its daily trading volumes similarly took off, rising from $30-40M in early 2017 to nearly $5B at the end of that same year. As we know, the Bitcoin rocket eventually ran out of fuel and crashed back to Earth in spectacular fashion. Nevertheless, the aftereffects of this first great crypto boom were groundbreaking: a new breed of asset class was born, and an entire industry sprouted up around it.
After two years of relative quiet on the crypto markets, the pandemic saw BTC blast off once again. This run has dwarfed the last, and you could be forgiven for thinking an even bigger bust is just around the corner. However, this time things are very different. Retail investors and millennial enthusiasts aren’t driving this current growth; it’s big institutions finally adding a serious yet previously neglected asset class to their holdings. Indeed, regardless of the significantly higher price achieved in this boom, average daily trading volumes are actually quite a bit lower. That would suggest that this isn’t speculative bubble inflation, but rather sound and considered investment.
Should I sell it all and buy Bitcoin, then?
While it’s highly likely that we will see BTC up many multiples yet, it’s never wise to put all your eggs in one basket. The overwhelming consensus on Wall Street is that, yes, Bitcoin has been performing phenomenally of late and will likely continue to do so for years to come. However, it’s not some sort of magic instrument that is immune from the market’s ups and downs. When John Pierpont Morgan was asked how the market would perform over the years ahead, his immortal reply was as follows: “It will fluctuate”. When it comes to Bitcoin, this adage is especially true. And while it’s never wise to put all your money in a notoriously volatile asset, having exposure for the potential massive upside is a must.
Luckily for us, just this past month, Bitcoin has undergone a 10% correction and thus represents excellent value for new entrants to the market. Recent technical analysis predicted this kind of correction as a prelude to even more vigorous growth in the long term. As the chart below shows, BTC has broken its rising medium-to-long term uptrend and, with this recent retracement, the stage is set for even higher highs. What’s more, many experts believe that Bitcoin could soon replace gold as an anti-inflationary safe-haven asset. With the rampant money printing going on right now, we might well see a sharp increase in BTC demand and, consequently, the coin’s value.
(https://libertex.com/sites/default/files/inline-images/1_2.png)
Trading Bitcoin with Libertex
You no longer need to rely on unregulated cryptocurrency brokers or shady p2p exchanges to trade Bitcoin. Now that Libertex is offering BTC, you can buy the flagship digital currency with confidence and enjoy all of the security and convenience of trading with an established financial broker with over 20 years of experience.
With Libertex, you can create a balanced, diversified portfolio on an award-winning platform, with all of your various instruments conveniently accessible in one place. Register an account today and enjoy up to 50% off trading commission on transactions for Bitcoin and a whole host of other supported cryptocurrencies!
-
Cryptocurrencies in the spotlight again as institutions join the party
The current crypto hype has been nothing short of spectacular. We all watched in shock and awe back in early 2018 when prices shot up by orders of magnitude. Of course, this was followed by a massive bust that left many believing that the days of $20,000+ BTC would never be seen again. But lo and behold, they’re back! In fact, the original digital currency actually managed to double this figure during its latest run. The recent pullback aside, it doesn’t look likely to run out of steam anytime soon.
Of course, many are concerned that this could just be an even bigger bubble ready to pop at any moment, wiping away millions of dollars of paper wealth in an instant. But this time, things really are different. It isn’t overly optimistic speculators fueling the present boom but level-headed institutional investors finally accepting that digital currencies deserve a place in any well-balanced portfolio. With more and more crypto funds and ETFs popping up everywhere, this trend appears set to continue for some time yet. Not to mention the ever-rising popularity of cryptocurrencies among users of legacy trading platforms, such as Libertex, whose digital offering is expanding almost by the day.
Sold on crypto, but don’t know where to buy it?
Alright, we all know digital currencies are a must-have component of any future-proof portfolio, but there are still so many fraudsters and hidden pitfalls in this fledgeling marketplace. We get it: Nobody wants to risk getting scammed. That’s why choosing a reliable crypto broker is so important. Luckily for you, crypto’s ascent to fame means that many well-established and reliable brokerages are now providing digital assets alongside their bread-and-butter instruments like Forex and commodities.
One such platform is Libertex, whose crypto selection has grown exponentially over the past few years and now includes more than 50 different digital currency pairs/coins. Apart from giving you the confidence and peace of mind of working with a trustworthy company with over 20 years of experience under its belt, buying crypto from Libertex means you can store both your digital and conventional assets together in one, easy-to-access place.
How to purchase cryptocurrencies in Libertex
Buying your chosen coin really couldn’t be easier. Start by opening the app and clicking the ‘Cryptocurrencies’ tab on the instruments bar at the top of the page:
(https://libertex.com/sites/default/files/inline-images/1_0.jpg)
After that, a list of all available coins will appear on the left-hand side of the embedded chart, as seen here:
(https://libertex.com/sites/default/files/inline-images/2_0.jpg)
Once you see this screen, select a currency from the list by left-clicking its name to open its chart. Next, hit the blue ‘Open trade’ button in the top right-hand corner of the chart section, as shown below:
(https://libertex.com/sites/default/files/inline-images/3.png)
The trade window (shown below) should automatically open:
(https://libertex.com/sites/default/files/inline-images/4.jpg)
From here, it’s pretty self-explanatory. Simply enter the amount you wish to buy or sell in the ‘Trade amount’ field and then select your multiplier (leverage ratio) from the box below. The total commission rate will be visible before you pull the trigger, so you won’t have any surprises down the line. When you’re happy with all the parameters, just hit ‘Buy’ or ‘Sell’, and that’s it!
No more excuses
As you can see, the path to owning crypto isn’t quite as daunting as it might first seem. With Libertex, you can purchase (or sell) a wide variety of digital assets in seconds and, unlike with other cryptocurrency platforms, you can pay in normal fiat currency using your debit or credit card. Simples! Even better, you can also leverage your positions to maximise your potential gains even further.
So, what are you waiting for?! They say, there’s no time like the present… and that’s especially true when it comes to getting into digital currencies. Not least since the recent market-wide correction means that many blue-chip coins are currently on sale at knock-down prices. Don’t put it off any longer, create a Libertex account now and take the crypto plunge today!
-
Oil bulls on parad
After several false starts over the past few weeks and months, it appears as though the coronavirus crisis is finally coming to an end. Barring the odd rogue strain here and there, the response to widespread vaccination has been overwhelmingly positive; even the most beaten-down sectors are beginning to come back to life. Energy was one commodity hit extremely hard by the pandemic as demand for oil dropped off a cliff with the ensuing global shutdown. At its lowest ebb back in April, Brent actually fell to an 18-year low of less than $20 a barrel!
Naturally, this black swan event's impact was always going to be temporary and, once lockdowns were relaxed and OPEC production cut agreements finalised, we saw a rather quick recovery to $40. But, from then on, oil traded sideways for the best part of the rest of the year. Only after vaccines were approved did the tide really start to turn. With an overwhelming majority of the world's population still unvaccinated, the potential upside is still significant. In fact, Brent is only trading at around $60 a barrel, which is a good 40% from its local high of $86.04.
Demand forecasts looking up
Following an early hiccup due to underestimating the challenge of global vaccination, demand for oil is now growing steadily. The IEA has estimated a rise in demand to 96.64 million bpd this year, representing a 5.5 million bpd recovery YOY. Meanwhile, OPEC was even more optimistic in its own projections, revising its initial 95.89 million bpd estimate to 95.91 million, a 5.9 million bpd improvement from 2020 levels. As long as the cartel can stick to its production cut agreement, there's every reason that this should translate into higher prices for the energy resource — not least following Saudi Arabia's surprise decision to reduce its Feb-March crude production by a further 1 million bpd. Last month, Goldman Sachs predicted Brent at $65 by mid-2021, but it may amend its estimate upwards amid recent developments.
The API's take
The American Petroleum Institute (API) reported a 4.261-million-barrel draw in crude oil inventories in its report of 2 February 2021. While this was actually lower than the previous week's figure of -5.272M, it signifies the return to a positive pattern of consistent draws on reserves. This comes after a shock +2.562M surplus raised concerns in the third week of January. As long as this trend continues, the oil bulls will remain relatively upbeat about future prices. As such, US inventory figures will remain a closely watched metric over the coming weeks as many look with cautious optimism for confirmation of a recovery in oil demand.
Trade crude CFDs on Libertex
Even with all the fancy models, projections and analyses in the world, nobody truly knows where the market is headed. It would certainly seem that oil has finally put the worst behind it, but even the most spectacular of rallies can see short-term corrections to the downside. But if you think you have a good idea where prices are going, why not put your theory to the test?
Since Libertex offers both long and short CFDs in Brent, WTI and Light Sweet, you're guaranteed to find a crude oil instrument and trade direction to suit your personal preferences. Try our award-winning and intuitive platform today, and you'll never look back. Libertex is one of the most well-trusted names in the CFD trading industry and has been connecting ordinary people with the financial markets for over two decades. Create a Libertex account now if you haven't already and start trading oil CFDs with one of the best brokers around!
-
Stocks in choppy waters as mixed news abounds
After a raging bull market lasting the best part of 10 months, we finally saw the beginnings of a correction early this week as swathes of growth stocks slipped from their recent lofty heights. Many have been expecting this for some time, given the unreasonably astronomical valuations of some companies, particularly in the tech and EV sectors. And while these kinds of equities were worst-hit by the pullbacks, Monday’s declines were more or less felt across the board… with one notable exception.
Come fly with me
Contrary to the overarching trend, long-suffering cyclicals, such as aviation and leisure, have been going from strength to strength, with many airlines up between 15-20% in the past 7 days. This is largely understandable in light of the relative success of the worldwide vaccine rollout, which would seem to suggest that the summer holiday season will go ahead as usual this year. Moreover, considering how unduly suppressed these stocks have been over the last 12 months, it’s hard to imagine how they could go any lower. Indeed, many analysts expect these industries to receive a significant windfall once consumers are free to exercise all of their pent-up demand for travel services.
What goes up must come down
As touched upon above, the biggest losers early in the week were precisely those companies whose share prices had exploded of late. Tesla, for instance, is still down almost 10% from last Friday and over 20% from its late-January highs, but this only tells half the story. Despite these recent losses, the audacious automaker is actually up over 700% from its coronavirus-crash lows. Baidu — oft called the Chinese Google — is another stock that is down almost 20% from its all-time high recorded last month. Yet, once again, it is still sitting on a more-than-respectable 350% gain from its March 2020 minimum. This would seem to suggest what many already feel: this is nothing more than a minor correction on the path to even stronger growth ahead.
Don’t fear the yield
Indeed, at the index level, Monday’s losses were all but wiped out as early as the close of trade on Tuesday as the Nasdaq ended the day back above 13,500.00. But how did equities manage to turn the tide so quickly? That’s right: it was Powell to the rescue once again. The Fed chairman succeeded in soothing investors’ inflation concerns and reiterated the US regulator’s stimulus position, confirming that they would not be withdrawing economic support for some time to come. Many had been worried that current high short-term bond yields meant an increase in price pressure was around the corner, but Powell reassured markets that this was instead an indicator of growing confidence in the global economic recovery, prompting investors to ‘buy the dip’.
Grab a bargain with Libertex
Whether you’re a short-term trader or committed HODLR, the present low valuations of some of the biggest companies of the future represent a golden opportunity for profit. With Libertex’s CFDs, you can trade from changes in the share price of Tesla and Baidu without having to suffer the hassle associated with buying and owning actual stocks.
With nearly 25 years of experience connecting traders to the markets, Libertex is a name you can trust. What’s more, our award-winning app makes the whole process even easier and allows you to keep your entire portfolio in one convenient and easily accessible place. So, what are you waiting for? Create an account today and take advantage of the knock-down prices of some of the world’s best-quality growth companies now!
-
All that glitters ain’t gold
Amid all the commotion in the equities and cryptocurrency markets, the yellow metal has looked somewhat neglected of late. At the height of the coronavirus crisis, gold was the asset everyone wanted for its reputation as a store of value and inflation protector. But between the vaccine roll-out, higher US Treasury yields and central bank intervention, the quintessential safe haven has since fallen out of favour. Gold is now down almost 15% from its August 2020 highs, and many are worried that this could be just the beginning. But what if they’re wrong?
Digital gold vs the real McCoy
The eyes of much of the world have been fixed on the cryptocurrency space this past year… and with good reason. Bitcoin is up almost 1000% over the last 12 months, and Ethereum even more so. As such, the long-espoused opinion that these big-name digital currencies could be shaping up to replace gold as the go-to hedge is gaining some serious traction. While nobody knows what the future holds, it’s hard to see how this can happen while crypto remains so inherently volatile. An asset class with such a high alpha is certainly an attractive investment prospect for the risk-on investor but perhaps not the safest bet for storing value long-term. Once the hype surrounding digital assets subsides a little, one can’t help but think that both retail and institutional investors will look at the gold price and decide to increase their allocation in the commodity with thousands of years of experience under its belt.
Yield of dreams
One of the biggest shocks in recent weeks has been the sharp rise in government bond yields. For instance, 10-year Treasury notes are up almost 50% YTD, while their 30-year counterparts have risen by nearly 40% over the same period. Analysts have largely attributed this to increased optimism surrounding global vaccination efforts and the gradual opening of economies, which has, in turn, sent gold into a tailspin. But with central bank interest rates so low (and likely to remain so for the foreseeable future), such movement in an otherwise mostly stable instrument can’t be explained away by mere positive sentiment.
There’s a convincing view, albeit among a minority, that the T-bill yield spike is, in fact, a precursor of significant inflation on the horizon. While gold does, indeed, tend to exhibit an inverse correlation with government bond yields, its positive correlation with inflation is far more robust and historically better documented. In this light, it could be just the right time to take those handsome crypto profits and park them in gold — especially since the yellow metal is so attractively priced.
Cycle of life
As you’re probably aware, commodities aren’t at all like stocks. They don’t rise 400% in a month and then drop 50% over the next. This is because they have a real intrinsic value, and the businesses that use them in their products rely on a certain level of price stability. Nevertheless, they do go through cycles of elevated and depressed values. The general consensus among experts is that we are at the dawn of a commodities ‘super-cycle’ that will be driven by the global economic recovery, massive government spending and green energy policies. Indeed, JP Morgan wrote in their latest report that “a long-term boom across the commodities complex appears underway, and there could be big gains ahead for the entire sector”.
We are already seeing this prophecy come to fruition in other precious metals. Platinum, for instance, has rocketed nearly 100% in the past 12 months, while Palladium is up around 70% over the same period. With all other factors as they are, it looks like it’s only a matter of time before gold catches up to the pack.
Trade gold with Libertex
It’s normal to be concerned by the big swings in commodities, but don’t forget that, as a trader, volatility is your best friend. At the end of the day, it doesn’t really matter which way the market is moving as long as it is moving. With Libertex, you’ll always find a lucrative opportunity wherever you think Gold prices are headed. Since we offer both long and short positions on the yellow metal, you’re bound to find something to tickle your fancy. And if you want to maximise your potential gains, you can always take advantage of our generous leverage facility. Get online and register your very own Libertex account now. There are no lengthy verification procedures, and sign up only takes two ticks. Before you know it, you’ll be trading Gold with one of the most trusted brokers in the business!
-
Beyond the bubbles: Potential bargains amid a bullish bonanza
With all the recent commotion over green energy and electric vehicles, several other key future industries have looked somewhat neglected. Now, EVs and renewables are undoubtedly going to be huge areas of growth in the next 5-10 years, but what about robots, automation and the Internet of Things? It seems like a lot of us have been blinded by the bright lights of Tesla (TSLA) and Enphase Energy (ENPH), causing us to ignore perhaps the most lucrative sector of the coming decade: artificial intelligence or AI. Apart from the three massive future growth industries named above, artificial intelligence is also the driving force behind self-driving technology and smart power management, breakthroughs that are expected to revolutionise none other than EVs and green energy!
Despite being at the heart of nearly every cutting-edge tech sector you can think of, there are a surprisingly small number of pure AI equities to choose from. So, where can you put your money if you want to cash in on all this growth to come? Well, the best bet is to look for companies that are using artificial intelligence to create an exciting new product or service — or even improve an existing one. Lucky for us, there are plenty of those! Because of AI’s pervasive nature, these companies span a wide range of industries and markets, so it should be relatively easy to put together a nice, well-diversified portfolio. Without further ado, then, let’s take a look at some of the best places to hunt your winners.
Chips off the old block
What better way to expose yourself to the wider AI trend than investing in the hardware that makes it all possible? As this revolutionary technology gradually becomes an ever-present feature of our daily lives, the race to develop the fastest and most powerful chips will only intensify. While there will, of course, be winners and losers as in any race, it’s safe to say that industry leaders like Nvidia and Intel will not only survive but almost certainly thrive. Naturally, the upside is probably not going to be as earthshattering as if you were to pick a penny stock on its way to being the next big thing, but the risk level is definitely more palatable. A good compromise could be to consider some of the Chinese foundries that are predicted to begin producing viable chips for data centres, self-driving vehicles and cloud computing in the next couple of years. One company that looks like an attractive proposition is SMIC, the Asian giant’s biggest chipmaker, particularly after its glittering Star Market debut this month.
Head in the cloud
The concept of cloud computing has been around for a while now, but until recently, its main application was simple file storage. However, as increasingly complex systems migrate to the cloud, its potential as the beating heart of Web 3.0 is becoming increasingly apparent. Sooner than you might think, our whole lives will be in the cloud, instantly accessible from any device or location. The major players in this industry are undoubtedly Amazon (AMZN) and Alphabet (GOOGL). Not only do they have great proprietary solutions, but they are also actively buying stakes in — and even acquiring outright — many innovative private companies in this space. Like most US tech stocks, though, these two behemoths have pretty high valuations at the moment. It might be a good idea to look to their Chinese counterparts Alibaba and Baidu, which are pursuing cloud tech just as aggressively, but whose P/E ratios look much more attractive in light of Communist Party monopoly crackdowns.
Nobody knows you like AI do
Sometimes artificial intelligence can feel a little distant, but, actually, it’s already an integral part of all of our lives. Why do you think YouTube seems to know exactly what you’d like to watch next? How did that mutual friend of a friend you just met last weekend up in your “People you might know” list on Facebook? Or how is Netflix able to suggest shows and movies like they’ve known you your whole life? It’s the algorithm, stupid… and it knows you better than anyone! And this is just a drop in the ocean: nearly every consumer-focused app or digital service in existence will use AI to some extent in the future. Obviously, Facebook (FB), Netflix (NFLX) and YouTube’s parent company Alphabet are solid plays for any investor looking to ride the consumer AI wave, even if they’re a little expensive at present. But if you’re looking for a great deal, you might have better luck outside the US. Russian internet giant Yandex (YNDX) is currently trading at a more than fair valuation. Moreover, its extensive portfolio of AI-powered solutions — coupled with its access to rapidly growing Central Asian markets — make it a screaming buy. Another bargain stock is Tencent Holdings (TCEHY), which is down more than 10% amid CCP scrutiny.
Follow the smart money with Libertex
Whatever your thoughts on the future of AI equities, the fact that the technology itself is going to be a huge presence in everybody’s day-to-day life is more or less indisputable. It’s no surprise, then, that forward-looking funds are buying up big names in these sectors during this current pullback. But since Libertex offers both short and long positions on a range of AI stocks, we can help you get a piece of the action whether you think the market is overvalued or good value.
-
Human resilience: the lessons we took from the pandemic
Human resilience in the face of a public health risk and economic disaster does not mean that people haven't experienced difficulty or anguish.
The pain, sadness, and uncertainty of what awaits us were common denominators. These adversities in their lives led people to adopt a resilient attitude that allowed to carry out realistic plans and make complex decisions.
The explosion of innovative dynamics and technological knowledge in the face of such a challenge has been extraordinary. Science brought new vaccines in record time, with innovative technology opening new paths for health. The recombinant DNA technology in the immunisers developed by Pfizer in collaboration with BioNTech and Moderna is clearly the most innovative.
Human resilience is undoubtedly the takeaway of the year
In the context of financial markets, we are convinced that the emotions, feelings and cultural factors intrinsic to each society and generation have influenced the prices of financial assets in the markets throughout the pandemic, leading to a distortion between prices in the markets versus the real economy.
Emotions dominated the markets, which saw three phases. The first was the panic that caused the oil market to crash last year when the price for a barrel of oil reached negative values due to skyrocketing storage costs. This resulted in a price distortion in April 2020. As soon as people acquired information and compiled strategies to deal with the pandemic, oil prices stabilised at around $30 a barrel in the first phase. As more certainty emerged about how to deal with the pandemic and keep the economy running with social distancing restrictions, oil prices returned to pre-pandemic levels of around $60. More than anything, the initial movement in oil prices was the emotional action of panic.
The markets soon regained confidence thanks to the arrival of vaccines, on the one hand, and central banks and political powers, on the other, who signalled to markets that they were ready to withstand the economic and social crashes.
After fear and panic, greed seems to be taking over the financial markets, a sign of history repeating itself.
The price correction demonstrated between March and May 2020 attracted many new investors to the markets. Furthermore, reducing the cost of money (interest rates went to zero) worked like a catapult in the stock and bond markets. In markets less liquid than cryptocurrencies, this dynamic was more aggressive and accentuated. For instance, in the case of Tesla, the question emerges of whether new shareholders are or are not paying a very high premium in relation to the electric car sales expectations for the company.
High volatility means high uncertainty in the markets
Volatility remains very high. The Nasdaq 100 Volatility Index, which stood at 15 points in March 2019, rose to 45 points at the beginning of the pandemic. Today, it's trading at 30 points. If we analyse the first days of March 2020, we see a 9.48% drop on Tuesday, an increase of 12.25% the day before, and a 10.44% fall the Friday before that. In March 2021, the Nasdaq 100 is seeing a yoyo effect, although its changes this month are only -0.89%.
This tells that investors are taking short-term positions with high turnover, despite high volatility. The market is mostly in a sideways trend, waiting for a new event or confirmation.
Interest rates and the issuance of new Treasury bonds
The interest rates on US Treasury bonds generally give us clues of what's to come. The Treasury started selling bonds this week, a sign of the first significant struggle the Treasury faces to finance the $1.9 trillion stimulus package recently passed by Congress.
The CSI 300 index corrects for four days
In China, signs that the government may reduce the pace of monetary and fiscal stimulus have led the market to correct in the past four days, primarily due to the rapid increase in corporate debt in that country. This indicates that the deleveraging of the economy should be one of the year's priorities.
OECD reviews global growth forecast
With optimism about vaccination programmes, approval of the stimulus package in the United States and the possible resumption of economic activity globally, the OECD has revised its growth forecast from 4.2% in November 2020 to 5.6% in 2021.
What's next?
Some uncertainties in the financial markets are still to come. For one, we just rounded the corner on reopening the economy globally. However, financial markets are continuing to see very high volatility, which increases investment risks.
Issuing Treasury bills and the inflationary pressure on economies, combined with stock and bond markets being close to highs, are certainly determining factors as to whether the upward trend continues or a correction begins.
Here's a way to position. For short-term positions, reduce exposure to reduce risk. Because fundamentals are distorted, essentially adopt a technical strategy with a preference for positions in liquid assets, such as indices and large caps stocks. Also, be emotionally prepared for any sudden movement in the markets, be it a correction or a rally.
Investors should pay attention to inflation data and how interest rates on US Treasury bonds play out because these will dictate the near-term trend.
Libertex's technical analysis tools are there to complement this short-term strategy.
-
Central banks fashionably late to the party
The last 12 months have been a rollercoaster ride for digital currencies and their holders. Countless millionaires have been made, and these once-niche instruments have finally been welcomed into the fold by institutional investors. Understandably, the spotlight has been firmly focused on legacy assets like Bitcoin, Ethereum and Litecoin. But beyond the explosive growth of these well-known coins, there are even more momentous developments taking place in the crypto space. As demand for digital assets skyrockets from Wall Street to Main Street, global central banks are now looking to get in on the action, too.
There has been serious talk of Central Bank Digital Currencies (CBDCs) for nearly 3 years now, and virtually all of the world’s major regulators had been working towards launching their own versions with varying levels of zeal. Then came COVID-19, prompting a rapid acceleration of implementation efforts. Unsurprisingly, China is by far the most advanced CBDC project at present, having already run real-life tests of a range of digital currency electronic payment (DCEP) solutions in 2020. But China is not alone; early 2020 also saw the establishment of a cross-border working group representing five global reserve currencies (CAD, EUR, JPY, CHF and GBP) plus SEK.
US vs them
Not to be outdone by his counterparts around the world, Federal Reserve Chairman Jerome Powell made some uncharacteristically revealing comments about the United States’ CBDC project at a recent Congressional hearing. Powell went as far as to confirm that the Fed would aim to engage with the public on the digital dollar this year (2021), adding that it was up to Congress to give the US regulator the “legislative authorisation” for the project. The Fed chair made clear that the new CBDC would not be used to manipulate markets, underscoring the need to take great care with the design of the digital dollar to ensure that it doesn’t undermine the healthy functioning of the US financial system.
Everyone’s a winner
We have to face the facts that the call for digital alternatives to traditional fiat currencies is only likely to grow louder in the future as millennials and Gen Z begin to edge out older generations. The writing is on the wall: younger financial actors — with their ingrained culture of instant gratification — are simply not willing to wait several days for a payment to clear. What’s more, it gives disadvantaged, unbanked persons easier and safer access to money and can help fight the illegal activity that often goes hand in hand with digital currencies. But it isn’t just consumers who stand to benefit. As the IMF reports, the cost of managing and transferring cash is high, and CBDC technology can slash expenses while also accelerating the implementation of central bank monetary policy.
Getting ahead of the competition
Whatever we might think, central banks and sovereign issuers are not a total monopoly. Indeed, payment systems’ inefficiencies have prompted the rise of numerous fintech/BaaS providers such as Square and Adyen to fill the void left by existing infrastructure. Moreover, CBDCs themselves already have competition in privately issued stablecoins like Tether and potentially Libra. As Fed Governor Lael Brainard put it: “the introduction of Bitcoin and the subsequent emergence of stablecoins with potentially global reach have raised fundamental questions about legal and regulatory safeguards, financial stability, and the role of currency in society”. As such, these latest CBDC policy initiatives are absolutely necessary if central banks are to retain control over their own currencies in the crypto age.
Rebadged fiat or something new?
The only question that remains is whether these new currencies will be backed by anything. It’s plain to see that people’s confidence in fiat is waning as more and more wonder how long ever-lower interest rates and MMT can hold out. Many analysts have touted Bitcoin as a potential new “digital gold standard” for the global financial system of tomorrow. If this is true, we would need to see another massive increase in BTC’s value that would dwarf the booms of 2018 and 2020. Nobody knows what will ultimately come to pass, but one thing’s for sure: if Bitcoin is to become the global reserve, we could be in for a 10, 20 or even 30x moonshot in the years ahead!
-
Biden’s corporate tax hike plans could be back on track
It’s no secret that incoming US President Joe Biden needs funding for his highly ambitious campaign package. The cost of his infrastructure plan alone is estimated at around $2.3 trillion, but this is positively dwarfed by the projected $18 trillion needed over the next three decades for the Democrats’ Green New Deal. Even for the world’s biggest economy, that’s some serious cash, and it has to come from somewhere. Biden wasn’t done any favours by his predecessor either.
In 2017, Trump cut the corporate tax rate from 35% to 21%, thus significantly reducing the natural source of income for such projects. Faced with little other choice, the new president tried to drum up support for a tax increase just halfway back to where it was before Trump came to power. The internal resistance from both sides of the aisle in the House of Representatives was fierce, and it had looked as though Biden would be forced to put his plans on hold. But after some serious compromise, it now appears that the bill has not only risen from the dead but is even gaining global traction.
G20 to the rescue
The plan’s far-reaching and ambitious nature had originally given ammunition to its domestic detractors. But that’s all over now that the finance ministers of numerous G20 nations have spoken out in support of the proposal. One notable supporter is German Finance Minister Olaf Scholz, who had this to say: “I’m in high spirits that with this corporate taxation initiative, we’ll manage to put an end to the worldwide race to the bottom in taxation”. Meanwhile, Mr Scholz’s French counterpart, Bruno Le Maire, welcomed the fact that a “global agreement on international taxation is now within reach,” adding, “We must seize this historic opportunity”. This comes after the UK and France, frustrated by the lack of progress in negotiations, famously launched unilateral digital services taxes pending a worldwide consensus.
You can’t please everyone
Naturally, not every major economy is thrilled about establishing a global minimum tax rate for corporations. Ireland is one such example. As the country’s finance minister, Paschal Donohoe, put it: “The focus on a global minimum tax rate is a prospect that I do have reservations about… on what would be the impact of that on the competitiveness for smaller- and medium-sized economies that do have lower rates of corporate taxation and use that as part of their overall competitive model”. However, the necessity of global support for the new programme is obvious. If tax havens are allowed to continue to operate, businesses will simply relocate to these jurisdictions to avoid the programme’s impact. This is also why Biden is looking to close loopholes that see company bookkeepers generate complex ledgers of leases, loans and sales contracts to avoid US taxes. Removing the incentive to do so by standardising corporate taxes worldwide could just be a long-term solution that works.
Compromise and conquer
As we’ve already mentioned, Biden’s plans were initially met with serious opposition — not only from Republican senators and congresspeople but from within his own party, too. However, far from giving up on the project, the wily president has instead been on the offensive in an effort to win lawmakers over to his cause. The biggest battleground here is undoubtedly moderate-to-conservative Democrats, many of whom were truly conflicted by the proposed legislation. One prominent example would be Senator Joe Manchin, who has repeatedly expressed concerns over the need to remain competitive, most recently warning against “throw[ing] caution to the wind”. Mr Manchin has, however, stated that he would be willing to support a hike as high as 25%, a figure that seems much more psychologically acceptable for many previously still on the fence. Biden has listened to what his colleagues are saying and has since revised his target in line with this 25% figure, which might just be enough to get it through Congress.
Final thoughts
Whatever happens, it’s clear that things need to change when it comes to corporate taxation. Companies are making billions in profits and growing every year, yet they are now paying less tax proportionally than they were in the 1970s. Nobody can deny that this is an issue that simply must be tackled in a coordinated, supra-national fashion in today’s increasingly globalised world. Until there is a firm commitment to fair levels of corporation tax across the entire world, the ‘race to the bottom’, as it’s been termed, can never truly end. But, as the US Chamber of Commerce’s continued opposition to the proposals would suggest, the fallout for business is likely to be pretty significant. Many believe that it could even provoke some serious downward movements on the equities markets as the sobering reality of what this means for corporate earnings sinks in for investors.
How to play it
The good news for Libertex clients is this could spell a special opportunity to short the big three US indices (S&P 500, Dow Jones and Nasdaq) or even specific companies, with tech giants tipped to be hit particularly hard. Luckily, Libertex offers both long and short trading in a range of CFDs, spanning ETFs, indices and individual stocks.
-
The world’s biggest tech names join forces to fight crypto black hats
Nobody would disagree that cryptocurrencies have done wonders to empower millions of unbanked, politically repressed, and otherwise disadvantaged people across the world. Meanwhile, their underlying blockchain technology has revolutionised everything from international payments to personal data security, improving lives everywhere. However, as is usually the case, these benefits come with a price. Sometimes literally.
Despite all its good, crypto is also the currency of choice for many hackers and other virtual ne’er-do-wells. Their scams range from simple extortion to taking control of another person’s computer and using its processing power for mining. This latter activity is known as cryptojacking and was once a minor inconvenience. However, with the growing popularity of digital currencies, it has recently morphed into a serious issue costing individuals and businesses time, performance and money. Fortunately, IT juggernauts Intel and Microsoft have joined forces to find a solution to this costly conundrum once and for all!
Two heads are always better than one
To solve a complex problem like this, it’s always better to pool one’s knowledge and experience. This thinking ended up prompting Microsoft to combine its Defender for Endpoint suite with Intel’s Threat Detection Technology to produce a holistic countermeasure against cryptojacking. As a result, the latest Defender for Endpoint now incorporates Intel’s accelerated memory scanning capabilities to activate CPU-based crypto mining machine learning (ML) detection. Now, users will be able to protect themselves from a full spectrum of malware and ransomware, including the latest covert mining programmes — without compromising on experience. And since the software integrates ML, every thwarted attack makes it even more powerful to provide a kind of in-built future-proofing.
The core advantage of Intel’s TDT is that it’s able to go beyond the signature- and file-based techniques employed by its competitors. It uses silicon-level telemetry and functionality to enable the hardware platform to play an active role in threat defence against ‘above-the-OS’ attacks. Combined with Microsoft’s industry-standard software suite, users benefit from all of the functionality of Intel’s Threat Detection Technology in an easy-to-use, familiar interface. Best of all, the technology doesn’t require any additional investments, IT configuration or third-party installation. Both Microsoft Defender for Endpoint and Intel’s TDT integrated solution are natively compatible with Intel Core processors and the Intel vPro platform (6th Gen and above), millions of which are already on the market.
What this means for the companies’ fortunes
Naturally, such a game-changing technological breakthrough to respond to a real and present danger to both retail and business clients can only be good news for the companies involved. As such, we are very likely to see a sustained uptrend in the share prices of both Microsoft and Intel. We saw a spike earlier in the month, which we can read as an initial knee-jerk response to rumours about the development. Since then, Intel, undoubtedly the more volatile of the two, has corrected by around 10%. This is typical “buy the rumour, sell the news” behaviour. But given the profound significance of TDT and its projected dominance well into the future, we could look back on this current price of $57.74 as an absolute steal. While Microsoft is now considered by many as a blue-chip stock, a competitive advantage such as this could just as easily spark a period of extended growth, making it the ideal choice for the more risk-averse who still wish to profit from this landmark breakthrough.
Trade Intel and Microsoft with Libertex
If you were wondering how to get involved, we’re pleased to announce that Libertex offers long and short CFD positions in Microsoft and Intel. That way, you can invest your money in line with where you think these companies’ stocks are headed. Download our award-winning app now (if you haven’t already) and see for yourself why it has won both Best Trading App and Best Trading Platform for several years in a row. Integrating live trading signals, in-chart technical analysis and unrivalled ease-of-use, the Libertex trading app truly is one of a kind. Don’t let this opportunity pass you by. Join Libertex today and start trading for more!
-
Decrypting crypto with Libertex
Cryptocurrencies have been around for well over a decade now, but it's safe to say they've only really been in the public eye since the first big crypto bubble of 2017-18. And even though a massive crash followed, the world started to take notice of digital assets, and the seeds were sown for the emergence of an entire industry. Fast forward to today, and we once again find ourselves at historic highs, practically dwarfing the previous peaks. The crucial difference this time around is that it isn't just crypto aficionados driving the growth but rather big institutional investors finally coming off the sidelines and welcoming digital currencies into the fold.
Traditional smart money isn't the only player in town now acknowledging the cryptocurrency revolution. Everyone from private corporations like Facebook to global central banks are taking steps to produce their digital assets. Not to mention the scores of established corporate players implementing architecture to help them utilise or facilitate crypto payments. In this context, it is no longer in doubt that the crypto revolution is real and not just another bubble. Given the now undeniably transformative nature of digital currencies and the blockchain, many companies' success (or failure) in various sectors will depend on how they respond to this paradigm shift. At the very least, this fork in the road represents a generational opportunity to leverage cryptocurrencies and their underlying architecture to grow their businesses exponentially over the coming years.
Keeping up with the times
Despite our history as a veteran Forex broker, we are utterly determined to make the absolute most of the coming mass crypto adoption. The logical way for a financial brokerage like us to enter the digital currencies market is to make it possible to trade them. In fact, Libertex has been offering such instruments for many years now, long before many of our other legacy competitors. Unlike other major CFD trading firms, we refuse to limit ourselves to only the big-name cryptocurrencies. Instead, we support both long and short positions in almost 70 different cryptocurrency pairs, spanning the most popular projects to even the most obscure altcoins. And while some platforms have sought to milk clients looking to trade these kinds of new-age assets, Libertex has laid a clear statement of intent by providing zero spreads and cutting our cryptocurrency commission by 50%.
Into the ether
This could be a very attractive proposition given the current hype surrounding Ethereum. While Bitcoin appears to have hit somewhat of a wall after correcting over 10% last month from its all-time highs above $63,000, Ethereum has nearly doubled in value. There's no denying that ETH currently has some serious momentum behind it, and all the analysis would suggest this is likely to continue. Much of Ethereum's popularity this year can be attributed to the boom in DeFi applications, which are based on the Ethereum blockchain and still in their infancy. As they continue to expand, interest in ETH can only be expected to increase commensurately.
Ride the crypto wave with Libertex
Beyond Ethereum, the entire market is booming. Even if BTC and Dogecoin have corrected significantly, other serious gainers in recent weeks include Bitcoin Cash (up 200%) and XRP (up 50%). What's driving the growth across the entire space? Demand, of course. Cryptocurrencies are what people want to trade, and that trend is only going to intensify in the years to come as more and more on-the-fencers follow institutional investors into digital assets.
That's why we at Libertex are committed to providing a varied basket of these assets to our customers in an easy-to-understand and familiar format. With Libertex, you can trade CFDs in cryptocurrencies in the same way as you've been trading Forex and equities for years with none of the learning curve associated with other specialised platforms. Unlike standard crypto exchanges, we also offer leverage to help you boost your potential gains even with a modest deposit. Create a Libertex account today to get access to all the biggest digital currencies and more in one intuitive and easy-to-navigate package!
-
YOLO, financial markets and you
Ever since Canadian rapper Drake coined the phrase YOLO (“you only live once”) a decade ago. It’s become the battle cry of many young risk-takers when rationalising a move that others might consider rash. During the past year and a half, this mantra has evolved into an entire way of life, and we’re even hearing people talk of the “YOLO economy”. Simply put, this phenomenon refers to an increased willingness among those in their late 20s and early 30s to shun their well-paid but soul-sucking professions and start following their hearts. It could be as simple as taking a step down the career ladder in exchange for more time with loved ones or as extreme as quitting their job outright to start a business or focus on a passion project.
So, what’s the YOLO economy all about?
The implications of this new economic outlook are far-reaching and likely to continue long after we return to the ‘old normal’. As more and more individuals start using the savings they’ve been able to amass during lockdown to start a business or take a side gig full-time, this has the potential to create real economic growth far outstripping what any central bank asset-purchasing programme could hope to achieve. Naturally, a large number of these ventures will come to nothing, and their initiators will be back looking for another daily grind come next year. Still, this mass rejection of the 9-to-5 has been enough to force some prestigious firms to start offering additional perks like continued flexible working hours, lifestyle allowances, and extra holidays — all in the hope of dissuading their staff from throwing in the towel. Such radical changes to working arrangements will be virtually impossible to reverse, and so the legacy of the YOLO economy is all but assured for the foreseeable future.
Where the financial markets come in
For those millennials without a business brainchild or existing side gig, trading and investing has proven a lucrative and accessible method of embracing the age of YOLO over the last year or so. With a sharp increase in disposable income amid a near-total shutdown of the services industry and the introduction of government stimulus checks, the stock market crash really couldn’t have come at a better time for the new breed of millennial investor. And though we’re now at new all-time highs, many analysts believe there are still opportunities to be had in the markets. But the most important message of the times — one that leading financial broker Libertex endorses — is that investing shouldn’t be done rashly or due to FOMO; it should instead be a means to a clear and considered end. This is tricky since YOLO has typically been used as a justification for all kinds of half-baked actions. But if we really apply the idea behind the catchphrase, “you only live once” can be interpreted as not allowing fear of failure hold you back from making a life-changing decision that you know in your gut to be the right one for you.
Trade for more with Libertex
This philosophy, which Libertex has termed Trade for More, essentially invites people to think of the financial markets as a vehicle to achieve their heart’s desires. First, however, you need to determine what ‘more’ means to you. It could just be more money, or it could be more time at home with your family, more freedom to do the things you love, more life and less work, basically. Once you have a definite end-goal in mind, you can start tailoring your investing approach to facilitate the realisation of these dreams. It might seem a little daunting at first, but first designating what you want to get out of trading or investing makes it much easier to stick to the course while concretely gauging your success.
-
America has printed really much money this year. As I know more than 25% of all exciting dollars were printed from the beginning of 2020. And many people started investing in different assets. And cryptocurrency in 2021 is pumping hard. I bought some etherium on the may dump for 1800$ and it is 2500$ today. I am not selling because https://www.liteforex.com/blog/analysts-opinions/ethereum-price-prediction-forecast/ (https://www.liteforex.com/blog/analysts-opinions/ethereum-price-prediction-forecast/) long term price prediction is optimistic. I hope I will sell for 10k
-
How to take your Forex trading to the next level
The Forex market is one of the most volatile and lucrative markets in the trading landscape. Worth an absolutely unfathomable $6.5+ trillion a day, it dwarfs its closest competitor (stocks) by a significant margin. Despite offering plenty of opportunity for shrewd traders, the risk of loss of capital is very real. Given the cut-throat competition — especially for day traders — you simply must use all the tools at your disposal if you're to turn a consistent profit.
Apart from a sound strategy, which is just a given, you'll also need to seize every single advantage available to gain the upper hand against those who would like to get their hands on your hard-earned deposit. "But how do I do that?" you might ask. Well, listen up because we're about to give you the rundown on perhaps the biggest ace you can have up your sleeve when trading the foreign exchange market.
Read the signs
As we've already said, volatility is the name of the game in Forex. Movements might be small, but they can end up costing you big, particularly when leverage is involved. Support and resistance levels are extremely difficult to predict in this market, which tends to lead to more speculation. This makes it very easy to pick the wrong direction and rack up huge losses in the process. For this reason, analytics is an absolute must. However, not many have the time and technical analysis skills to study the market closely enough to find perfect entry and exit points.
To be honest, even the professionals frequently get it wrong. To compound matters, the window of actionability is also extremely tight. It often requires lots of analysts working concurrently to produce something that is actually usable. In this context, it's easy to see how the deck is stacked in favour of larger institutional players. So, how can the average trader level the playing field? Well, the simple answer is trading signals.
What on Earth are trading signals?!
Trading signals take many forms, but typically they consist of news events or chart-based graphics. Their value lies in the fact that they tell us precisely what is happening in the market at a particular time and give us a clear direction of movement. They even specify suitable entry and exit points. Many even include details of any key factors liable to affect prices in the short term.
Because of the enormous volatility involved, effective use of signals is absolutely crucial to successful Forex trading. There are so many influencing factors, many of which are highly unpredictable — from worldwide supply and demand fluctuations all the way to global economic and political developments. As such, you simply must have a reliable and holistic signals service if you're to have any chance of keeping up with the foreign exchange market's ups and downs.
Manual or automatic?
No, we're not talking about cars. These are the two main types of Forex trading signals available. Let's take a quick look at what each type entails and some advantages and disadvantages of both.
Manual signals
Manual signals are created by traders or senior analysts with an in-depth knowledge of the market. They usually consist of easy-to-read bulletins or annotated charts. Typically, they are universally accessible and straightforward to understand and implement. The Libertex platform includes such signals on its regularly updated newsfeed for this asset class. To access them, Libertex traders just have to click the 'News and Signals' button at the top of the page (circled red in the image below):
(https://libertex.com/sites/default/files/inline-images/im1.png)
Immediately after clicking, a new window will appear showing a long list of the latest signals from a variety of sources that are updated almost every other minute (see below):
(https://libertex.com/sites/default/files/inline-images/im2.png)
Because real people prepare them, manual signals can offer a good way for beginners to take advantage of veteran market participants' skills and knowledge. Once you see a signal you like, all you need to do is click it, and it will open automatically. That looks something like this:
(https://libertex.com/sites/default/files/inline-images/im3.png)
So far, so good. Unfortunately, the very human dimension that makes them so easy to use can also be their downfall from time to time. Sometimes, the information can be outdated or simply misinterpreted, which is why we don't recommend relying on manual signals alone. That's particularly true for longer-term positions or higher-leverage trading.
Automatic signals
While not quite as detailed and engaging, automatic signals are generally considered much more accurate, especially over shorter timeframes. These signals are generated by powerful software suites and require quite a bit more getting to grips with than their manual counterparts.
First of all, they need some sort of data input. This can come from the trader him/herself or a third-party signals provider. After processing is complete, the software will generate a simple buy or sell signal in line with the exact market conditions at the time of generation. As such, these are not only highly accurate; they're also much more precise in terms of their timeframe and buy/sell values.
Luckily for Libertex users, they have access to both automatic and manual signals to leverage the benefits of each. Libertex's automatic signals are super-easy to use as they come embedded into each individual instrument on the platform screen. Below is an example for GBPUSD:
(https://libertex.com/sites/default/files/inline-images/im4.png)
As we can see, right there on the chart, we have the latest rating for the relevant instrument ("strong buy" in this case). If we click this, a box appears with the signal potential (5%) and signal probability (76%), enabling us to make a quick decision as to whether the signal fits our strategy/risk tolerance. We can even open a trade using it with the click of a button by hitting 'Use signal'. It really couldn't be easier. The platform even includes another handy metric, trader sentiment, just below the chart (circled red).
Summing up
Trading is known to be rife with uncertainty, but nowhere is this more acutely felt than in the Forex market. Even experts can make very costly mistakes without a helping hand. This is where trading signals come in. Apart from providing general information about the opportunities available in the current market situation, they also help traders mitigate many of the transaction- and leverage-related risks that can end up costing them so dearly. By providing clear entry and exit points, signals can help everyone from long-term investors to swing and day traders while also allowing for constant monitoring of positions for as long as they remain open.
However, to get the most out of signals, you really need to be using a combination of the two. That's why platforms such as Libertex that integrate both varieties are so powerful. Usually, services like this don't come cheap, and not every broker out there is providing its clients with this level of added value free of charge. So, if you'd like to take your Forex trading to the next level, why not create a Libertex account today? With unbeatable leverage (30:1 on currencies) and market-beating commission all wrapped up into an award-winning, ultra-user-friendly app, Libertex is a really good option to join the ranks of satisfied traders around the world!
-
Branson’s maiden voyage: Libertex adds Virgin Galactic!
Ever since the first manned missions to space almost three-quarters of a century ago, people everywhere have looked up at the night sky and dreamed of going up there themselves at one time or another in their lives. One such dreamer was the British billionaire Richard Branson, and thanks to him and his commercial aerospace company Virgin Galactic, this could now be a real possibility for many of us living today.
After decades in the making, Branson has finally snatched space travel from the coveted preserve of NASA’s elite astronauts. The world was waiting with bated breath for the launch of Virgin Galactic’s spaceplane VSS Unity, which successfully run its first suborbital flight on 11 July in the company’s highest-profile event since its creation in 2004. In addition to Branson, the debut flight crew consisted of various senior members of the Virgin Galactic team. Despite this only being a test mission, over 750 people are reported to have signed up for future VG flights, paying up to $250,000 apiece for the privilege.
However, Branson isn’t the only billionaire who’s set his sights on the great expanse above. Amazon founder Jeff Bezos and his space tourism company Blue Origin are also scheduled to run their own crewed flight 9 days later, on 20 July, the 52nd anniversary of the Apollo 11 Moon landings. Branson insists that there is no competition between the two celebrity CEOs and stresses that the commercial space flight market is big enough for multiple participants. Irrespective of who goes first, Bezos is still tipped to fly higher than Branson; the Amazon founder’s New Shepard vessel reached altitudes over 100 km in pre-flight testing.
Regardless of whether you’re Team Branson or Team Bezos, the potential boon for Virgin Galactic and Amazon is huge, with these companies’ share prices expected to explode over the coming weeks and months. Luckily for Libertex clients, we’ve added Virgin Galactic stock to our instrument offering just in time for you to take advantage of this momentous occasion. You’ll be able to buy or sell Virgin Galactic CFDs with the same multiplier opportunities and commission as other major shares from 12 July. Meanwhile, Amazon remains available as always, so you can either hedge your bets or go all-in on either Jeff or Richard.
-
What does it take to be a Forex trader?
With all the buzz around stocks and cryptocurrencies, Forex trading has all but fallen out of favour of late. While there is certainly much to be gained in the equities and digital assets markets, traditional currencies definitely shouldn’t be overlooked. Forex is still the most lucrative financial market with its enormous daily turnover of close to $7 trillion, positively dwarfing other sectors. Currency trading can be challenging due to many external factors at play and the relatively low volatility of these instruments. But if you can master the specifics of this tricky marketplace, you can make an absolute killing. In this article, we’ll explore what you need to succeed as a Forex trader, covering some of the key behaviour patterns to adopt and major pitfalls to avoid.
Develop and follow a trading system
There’s a reason we put this one at the top of our list. Having a trading system is absolutely crucial if you want to have even the slightest chance of making a steady profit. The biggest enemy of any trader is emotion. When you have money in the market, you’re so much more susceptible to making silly, impulsive decisions that will likely end up costing you handsomely. That’s why it’s so crucial to develop a sound strategy and clear set of rules that you stick to no matter what your heart or gut is telling you in the heat of the moment.
First, your system should tell you under what conditions you ought to open a trade. This is usually informed by trading signals or technical analysis and depends on the current market situation. However, other factors like your maximum risk/reward level and what action to take if your trade starts losing money are up to you and you alone. Typically, successful traders avoid risking more than 2-10% of their total account balance on any one trade. This is a good general level to shoot for because it allows for a reasonable percentage of profit while also preserving your deposit for future opportunities in the event of a loss.
Use Stop Loss and Take Profit levels!
We really can’t stress this point enough. Having a strong and reliable trading system/strategy is all well and good, but if you don’t have clear guidelines for closing each individual trade, a winner can easily morph into a big loser in no time. That’s why it’s so important to sit down and think with a cool head what amount of profit is realistic and satisfactory for each individual position and what percentage loss would represent a true trend reversal from which there really is no coming back.
Of course, there is no hard and fast scientific rule for establishing stop losses and take profits, except that you must set them before opening the trade. You could choose to put your stop loss a couple of pips above the closest support, for instance, and then set your take profit a shade below the closest resistance. What you must absolutely avoid at all costs is the “wait and see” approach. If you don’t have fixed levels for closing your position, you will more than likely end up closing the trade on emotion. It doesn’t matter if this means closing at a profit or loss: your result will almost always be worse than if you have automated trigger prices for closing your trades.
Work-life balance
With the Forex market open more or less 24/7, it’s easy to fall into the trap of sitting in front of your computer hours on end for fear of missing out on a lucrative opportunity. Although you might well sleep through a highly profitable signal during the Asian session, you’ll almost certainly miss more overall by trying to trade every hour of the day. When dealing with an open-all-hours market like Forex or crypto, you simply have to accept that you can’t physically be there every single time opportunity comes a-knocking. If you try, not only will you risk burnout, you’ll also almost certainly be too fatigued to trade effectively and will probably end up losing more money than you otherwise would have.
That’s why it’s so vital to establish a schedule for yourself. You should treat currency trading like a job with fixed working hours. Wake up at 8:00 am, for example. Spend an hour getting up-to-date with all the latest news from the night before. Start actively trading about 9:00 when the European markets open and take breaks as and when needed. Then, trade as much of the Americas session as you wish, but try to limit the entire day’s work to less than 12 hours. After that, you have to get some rest. Luckily for European traders, the Asian session tends to be the quietest and least volatile, so you can sleep soundly without worrying too much about losing out on a huge opportunity.
Stress management
It might seem trite, but this is what separates the winner from the losers in trading. Contrary to popular belief, this isn’t just something you’re born with. You absolutely can and must work at it. It’s normal to feel a bit insecure or worried when you notice you’re losing money, but that’s why you have a strategy and rules you adhere to strictly no matter what. Some things that your trading system can’t prepare you for include not making as much profit as you anticipated. This can be especially challenging because you’re still making money and can be easily tricked into increasing your risk to make up the difference. Resist this urge at all costs! Your system is working, perhaps not as well as you’d hoped…but if it ain’t broke – don’t fix it.
Technical difficulties are another challenge that you’ll eventually have to deal with as a trader. Your computer could break at the worst possible moment, or your Internet connection could drop out just as you’re about to make the trade of a lifetime. When it happens — and it will happen — don’t panic. When you get back online, just make sure you don’t make any silly decisions. For example, if the signal has expired, don’t open the trade anyway. As hard as it might be, you must reboot your trading system and start from scratch. Failure to do so will cost you much more on average than the lost opportunity. Remember that.
Conclusion
As we’ve seen, Forex trading can be a powerful tool for wealth accumulation, provided you bear a few points in mind. Ultimately, success in currencies trading boils down to discipline. If you can keep your head and avoid deviations from your strategy, you should be able to turn a profit.
Once you have your trading system and mental approach locked down, all you need is a reliable platform on which to trade. One such option would be veteran Forex broker Libertex. With almost a quarter of a century of experience under its belt, Libertex is a name you can trust. Its multi-award-winning app is available for iOS, Android and web browsers and comes jam-packed with a range of in-app technical analysis and trading signals. Libertex offers long and short positions in all the majors and more, so you’re bound to find something to pique your interest. To register your very own Libertex account, complete the quick and easy sign-up procedure today.
-
Crypto on the brink of huge reversal
Cryptocurrencies have been perhaps the biggest success story of 2020-2021, with monstrous gains being posted since Bitcoin’s local low of $5165 on 13 March last year. Institutional investors’ decision to finally take the crypto plunge saw a rally that made 2017-18 look like a drop in the ocean; prices for BTC and ETH skyrocketed over 1000% in a matter of months to reach dizzying heights this May of $63,538 and $4,179, respectively. Then came the inevitable correction. The major digital currencies lost over 50% of their value in the weeks that followed, prompting many to lose faith in this famously volatile asset class once again.
Well, technically…
But make no mistake, this was indeed just a correction, not a crash like the one seen in 2018. As such, the recent declines actually represent an excellent buying opportunity for any hodlers or swing traders out there. In fact, as of this week, it would appear that the tide is already shifting back to growth. Both Ethereum and Bitcoin are up almost 30% in the past week alone as the technicals appear to be announcing a nascent uptrend. Moreover, virtually all of the moving averages are signalling that most major cryptocurrencies are now a buy. Meanwhile, the RSI has now moved out of oversold territory, which would indicate that the new growth trend is taking hold.
Next stop on the road to Ethereum 2.0
As we switch our focus to the fundamentals now, we can see a number of positive factors liable to drive growth further. First and foremost, we have the much-anticipated Ethereum London hard fork, which is expected to go live on 4 August and forms part of the project’s roadmap towards the POS-based Ethereum 2.0.
The protocol update includes five Ethereum Improvement Proposals (EIPs), of which EIP 1559 and EIP 3554 are the most significant. EIP 1559 intends to make ETH less inflationary through the introduction of a revised fee structure. EIP 3554, on the other, is meant to gradually increase mining difficulty on the Ethereum network, thus laying the way for the migration to proof-of-stake. The expectation here is that ETH will experience a rapid appreciation in anticipation of a shift in the supply-demand dynamic due to a combination of harder mining and increased investor demand for a less inflationary ETH.
Bitcoin supply still suffering
Looking at Bitcoin, we see a similar picture of increased demand against reduced supply, though in this case, the causes are rather different. The reason for the reduced supply in Bitcoin has not been an increase in mining difficulty per se. Instead, it’s a knock-on effect of the Chinese government’s decision to outlaw cryptocurrency mining in the People’s Republic. Since the crackdown last month, Bitcoin mining capacity is estimated to have been slashed by over 35% in the short term. Of course, this will likely recover in the medium term, but it won’t be instantaneous.
In the meantime, demand for the original cryptocurrency is likely only to increase as the new crypto uptrend take holds. While this will be true for most major coins, any trend is typically more strongly expressed in Bitcoin, especially given the huge influx of Wall Street capital into the project over recent weeks and months.
Buy the dip with Libertex
With cryptocurrencies becoming increasingly mainstream, this current dip represents an excellent opportunity to throw your hat in the ring while Bitcoin and Ethereum prices are relatively low. And because Libertex offers both long and short positions in a wide range of digital assets, you can still try to benefit whichever way you think the crypto market is headed. Our generous leverage and CFD-based model mean that you can maximise your potential gains all without worrying about actually owning a given instrument.
Libertex’s multi-award-winning, highly intuitive app demystifies digital currencies for more traditional investors, providing them with useful technical analysis and actionable signals right in the platform. Best of all, Libertex allows you to keep all of your assets in one, easy-to-access location for unbeatable convenience. Download our app today and discover why so many people all over the world are making the switch to Libertex!
-
??? ???
-
The Currency Strength Meter: A Complete Guide
Every trader needs to define the direction of currency pairs and to remember that market movement is defined by the strength and weakness of the currencies that make up the pair.
So, how do we define the strength of a currency? There are different ways, one of which is fundamental analysis. However, it's not 100% accurate.
What provides a clearer insight into a currency is the currency strength meter. Read on to learn more about this lesser-known but interesting indicator.
Every trader needs to define the direction of currency pairs and to remember that market movement is defined by the strength and weakness of the currencies that make up the pair.
So, how do we define the strength of a currency? There are different ways, one of which is fundamental analysis. However, it's not 100% accurate.
What provides a clearer insight into a currency is the currency strength meter. Read on to learn more about this lesser-known but interesting indicator.
Currency Strength Meter: Definition
The currency strength meter is a general name given to the indicator that shows whether you're dealing with a strong or weak currency. This algorithm-based indicator relies on the exchange rates of various currency pairs to provide the degree of each currency's strength.
You might be familiar with the standard RSI indicator, Awesome Oscillator or MACD tool. But with the currency strength meter, it's more complicated because there's no standard tool. You can find different versions of it on the Internet and customise them to the platform you use.
To find the right version, you should apply several and see which one works best for you. Also, it's worth reading reviews on the indicators you want to use.
Because there's more than one version of the meter, you should know the differences. The more advanced types implement their own weightings and may include other indicators that measure a currency's strength. That helps to provide trading alerts. Simpler versions, on the other hand, don't use any weighting.
However, the main principle remains similar. To depict the strength or weakness of EUR, the indicator calculates the strength of the pairs that include the EUR (for instance, EUR/USD, EUR/GBP and EUR/JPY). After the calculations, we get the overall strength of the Euro.
The indicator is widely used on MetaTrader 4 (MT4) and MetaTrader 5 (MT5). You can also find it on any platform where custom indicators are supported or on the web.
What the Currency Strength Meter Looks Like
Usually, we provide a real-world example that shows you what the indicator looks like and how it works in the real market. It's more complicated with the currency strength meter since there are different variants of it.
The most common currency strength meter consists of lines that move around the zero level. Depending on the algorithms and parameters applied, the lines can have different colours and be smooth or rough.
(https://carigold.com/forum/attachments/1-jpg.416041/)
Another type of currency strength meter is a correlation matrix. It highlights the strength of currencies on different timeframes.
(https://carigold.com/forum/attachments/2-jpg.416042/)
How Does the Currency Strength Meter Work?
The main idea of any currency strength meter consists of the following points:
1. The indicator identifies the base currency.
2. Then it pairs the currency with all other currencies that are available for such action.
3. After that, the indicator measures the strength of each paired currency.
4. In the end, an average score is calculated.
The goal of using the indicator isn't to define a strong currency and start buying it but to identify whether the currency is strong or weak in a pair. For example, we have the EUR/USD pair. If it rises, it doesn't necessarily mean the Euro is strong; the US dollar may be weak.
As we said above, there are different versions of the indicator. Even though each can have a specific measuring system, a range of 0-10 is the most common. Usually, if the reading is closer to 10, the currency is stronger.
Let's look at how the line currency strength meter works.
The indicator consists of lines that depict currencies. These rules apply to any line version of the currency strength meter:
- The higher line depicts the stronger currency. The signal is stronger if the first line is above the zero line while the line of the other currency is below 0.
- If the line goes up, the currency gains momentum.
- If the line moves downwards, the currency weakens.
(https://carigold.com/forum/attachments/3-jpg.416044/)
You can integrate a currency strength meter into your own strategies and trading style.
Currency Strength Meter in Action
Now that we have an idea of how the currency strength meter works, let's take an in-depth look at how to use it in real trading.
Usually, the indicator is used to either confirm a trend or its reversal. By applying it to a chart, you can define which of the currencies is the weak one and which is the strong one. That way, you'll know which currency pair to buy and which one to sell.
However, you should remember that the currency won't be equally strong or weak relative to other currencies in pairs.
Approach 1: Find the Strongest and the Weakest
This approach is best for beginners or if you don't want to overcomplicate your strategy. All you need to do is define the strongest currency and the weakest one and trade their pair.
For example, if AUD is the strongest and EUR is the weakest, you should sell the EUR/AUD pair. You'll simply trade in the trend's direction. The same approach can apply to the trend reversal if you see that the currency has reached extreme readings of strength or weakness.
Approach 2: Average Readings
Of course, it doesn't mean you can only trade if there are extremes in currency readings. However, this approach is riskier because the currency's strength doesn't have a determined limit as gold does, for instance. Thus, it means the currency can continue getting stronger or weaker, and you'll simply stay in a bad trade.
Currency Strength Meter: Limitations
Like any other technical tool, the forex strength meter has limitations that you should consider while trading.
No Guarantee
The currency strength meter doesn't give a 100% accurate understanding of the currency's strength or weakness.
When applying this technical indicator, traders believe that USD's strength or GBP's weakness means it's time to sell the GBP/USD pair. It's not quite like that: the currency strength meter simply provides additional confirmation. However, it's not a trigger for your trades.
A trader should also be careful when implementing the indicator on different timeframes. If the indicator shows that EUR is strong on the 1-hour timeframe, it doesn't mean the currency is strong on a monthly one.
Also, it's vital to follow the current market situation when you're actively trading. Strength or weakness can be a short-term occurrence caused by fundamental issues.
It Measures Strength Relative to Major Currencies
You know there are major currencies that are highly liquid and exotic currencies that are highly volatile and illiquid.
If you see USD is stronger than TRY, it doesn't mean it'll also be stronger than GBP or JPY, for instance. Don't make false conclusions: instead, measure the strength of the currency against major peers.
Higher Timeframes Are Better
Although the indicator can be applied to any timeframe, only higher periods provide a more accurate measurement of a currency's strength.
Too Many Versions
Another disadvantage of the currency strength meter is the wide variety of versions it has. It's challenging for a trader to figure out which one is the best version.
Using the Real Currency Strength Meter: Benefits
Despite the limitations we just discussed, the currency strength meter has many advantages, which is why it's used by traders worldwide.
Useful Currency Strength Meter
Although the indicator doesn't provide 100% accurate signals, it's useful when identifying a trade's direction. The indicator can provide an overview of a wide range of currencies.
Simplicity
The indicator is simple to use. All you need to do is apply the indicator, and it'll do all the calculations itself. Moreover, you don't need to change settings.
It Can Be Applied for Free
There are many versions of the indicator, and they're openly available on the web. So, you can simply find free versions and try them all.
It Saves You Time
The indicator allows investors to skip hours of fundamental analysis. Of course, it doesn't mean you should neglect fundamental analysis, but it does confirm trading ideas.
It Filters Currency Correlations
When trading multiple pairs, you should always remember that currencies can have a negative or positive correlation. The currency strength meter will show you whether currencies are both strong or weak. Even if you see that the currencies included in the pairs are both strong, the pairs usually move in opposite directions, so don't open the same trades.
Alerts of High-Risk Trades
The currency strength meter can prevent you from double risk. For instance, opening the same trade for negatively correlated pairs is a double risk. If you know that one of the currencies is strong and the other doesn't signal strength or weakness, you shouldn't open opposite trades for these pairs.
Tips for Traders: How to Use the Indicator to the Fullest
We'd like to share some tips that will allow you to use any version of the currency strength meter.
- Don't trade negatively correlated currencies in the same direction. This rule applies to correlation strategies when you shouldn't open trade in the same direction, knowing that pairs mostly move in opposite directions. The currency strength meter is a part of this rule. Even if you see that currencies included in the pairs are both strong, but the pairs usually move in opposite directions, don't open the same trades.
- Diversify. The currency strength meter can help you diversify your portfolio. You can open a trade with a currency that is losing its strength and open an opposite trade with a currency gaining momentum. This strategy doesn't give any guarantees against losses, but it can help limit them.
Currency Strength Meter: Is It Worth Using?
A currency strength meter is an interesting tool that can provide additional signals and valuable information on the market's direction. Although the indicator can't give 100% accurate signals, it can become a vital part of your strategy.
The main disadvantage of this indicator is the wide variety of its versions. Before you find your perfect option, you'll have to try many indicators. Fortunately, there are free versions.
So, to find your perfect tool, we recommend using a demo account like Libertex's, which can help you practice your strategies using the currency strength meter. The fact that this indicator is customised makes it possible to implement on any trading platform.
FAQ
Let's summarise what we've learned here.
How Do You Measure the Strength of a Currency?
There are many versions of the currency strength meter. But usually, they use a range between 0 and 10 to measure a currency's strength, with 10 indicating the strongest currency.
What Is the World's Weakest Currency?
There is no such thing as the world's weakest currency. Every currency can be strong or weak depending on the period and timeframe you use.
How Do You Know If a Currency Is Weak or Strong?
To figure out whether a currency is weak or strong, you can apply the currency strength meter.
How Do You Read Currency Pairs?
Let's consider an example. If the EUR/USD pair rises, it means EUR is stronger than USD, but it doesn't mean that USD per se is weak.
What Makes One Currency Stronger Than Another?
Currencies represent domestic economies. If the economy is strong and the political situation is stable, the currency will appreciate in value.
What Strengthens or Weakens a Currency?
Many factors can affect a currency's strength, including economic reports, news and supply and demand. All of these are vital forces that affect currencies.
-
Leverage and Margin in Forex
Leverage and margin are the terms each trader starts with. The concept is simple, so even a beginner trader can catch on fast. However, there are pitfalls that may affect traders' positions if they don't consider crucial points.
We summed up the useful information that will make your margin trading effective and prevent you from making mistakes that may cost a fortune.
Leverage: Should You Borrow From a Broker?
The term leverage is quite simple and usually doesn't raise questions in traders' minds. Simply stated, leverage is a loan that a broker provides to traders so that they can increase their position size. However, you should remember that the loan is not for a precise term. You don't own the borrowed money and cannot use it to purchase an asset.
Here, we should mention the term 'lot size'. The standard lot size is $100,000. This means that if you want to trade one lot, you need to have $100,000. But what percentage of people have such a vast amount of money? Even if you choose smaller lot sizes — a mini lot of $10,000 or a micro lot of $1,000 — odds are you won't be able to provide the entire amount.
The lot size affects the amount you can make in profit. A standard lot allows you to earn $10 per pip. If you trade a mini lot, you can make $1 per pip; a micro lot will let you earn $0.10 per pip. So, it's clear why traders care so much about the lot size.
However, not everyone has $1,000. That's why brokers provide investors with leverage, which can be thought of as a loan. For example, you have $100, but even a micro lot is $1,000. So, a broker offers you 1:10 leverage. As a result, you have access to $1,000 and can open a position.
Each broker chooses a unique amount of leverage. The smallest one is 1:5, which means that your own money will be multiplied by 5. The largest leverage amount is 1:1000, meaning your funds will be multiplied by 1,000.
Leverage Trading: How It Works
Put simply, leverage is the borrowed funds a broker provides to a trader. It looks like a bank loan but works differently. First, you don't have to pay the money back because you don't own it. Secondly, your risks rise significantly. This leads to the following questions: Why do brokers provide traders with money if they don't get it back or don't earn interest? Also, why do the traders' risks grow?
We're here to answer these questions. If we talk about a broker's profit, we should understand that every broker gets a commission for every trade you open. So, they benefit from you opening positions.
However, leverage is a two-way street. When it comes to risks, you should understand the following rule. Imagine you have $100,000, and you make $1,000 in profit. Here, your leverage equals 1:1, so your profit is 1%. If you have a 1:100 leverage, your profit will amount to 100%. Sounds good, doesn't it?
However, the situation is similar when it comes to losing positions. If you have 1:1 leverage, and you lose $1,000, your loss will be -1%. However, trading with leverage of 100 will lead to losing 100% of your funds. The prospect doesn't seem so attractive anymore. That's why some brokers limit the leverage they offer to their clients. For example, the maximum leverage Libertex offers (which it calls a 'multiplier') is 1:30 for retail clients and up to 1:600 for professional clients.
What AssetsCan Be Traded with Leverage?
Leverage is used not in the forex market and beyond, covering different assets. For example, derivative investors apply for leverage to open larger trades. You can also trade CFDs for oil, gold and stocks via a broker using leverage. Below is a list of the securities most commonly traded using leverage:
- Currencies are the most popular assets for leverage trading. Every reliable broker offers leverage for currency pairs.
- CFDs are famous among traders because they provide the option to trade such attractive assets as gold, oil and stocks that can provide a significant return when profitable.
- Derivatives are also popular among traders. Leverage allows them to operate large positions with small expenses and sometimes even without any expenses at all.
How to Choose Forex Leverage Wisely
We'd like to share simple rules to help you determine the perfect leverage that won't hurt your funds if you have a losing position.
- Step 1. Try different leverage ratios. The most effective way to minimise risks is to practice. It would be best if you remembered that higher risks accompany higher leverage. So, if you don't want to risk a lot, you should choose small ratios such as 1:5, 1:10. If you're confident in your knowledge and expertise, you can select higher levels.
- Step 2. Lower your risks. This is essential when it comes to trading. For this aim, you can use trailing and limit stops.
- Step 3. Determine the position size. The primary rule says a trader shouldn't risk more than 1-2% of each trading deposit.
Which Leverage Ratio Is Best for Forex Trading?
There is no perfect leverage ratio. Otherwise, there wouldn't be such a wide range of them. We'll give you an example of a significant leverage amount and a small one. By comparing the results, you'll be able to determine the right ratio for you.
- Small leverage. Imagine you have a small leverage ratio, let's say 1:5. So, if you have $10,000, with this leverage amount, you'll have $50,000 to trade with. A mini lot allows you to earn $1 per pip. In our case, that would be $5 per 5 lots. Imagine you suffered a loss of 50 pips. That would be $250 or 2.5% of the position.
- Big leverage. In this scenario, we also have $10,000, but we want to increase our potential profit. So, we choose 1:50 leverage. As a result, we have $500,000. Now, we can trade five standard lots. However, one pip will now cost $10. Because we bought five lots, one pip will cost $50. Let's assume we lost 50 pips. Our loss will amount to $2,500. or 25% of our $10,000.
Margin: How to Connect with Leverage
As you learn what leverage is, you should know about another term: margin. When we talked about leverage, we explored the question: "how can brokers provide such huge funds?"
It may seem risky to provide every trader with lots of money, but brokers know how to protect themselves using margin.
Margin is not a fee for a transaction; it's just a broker's insurance that you'll be able to operate open positions. The margin amount is held by the broker when you open a new position. A broker should have a guarantee that your balance won't fall below 0.
Imagine you have $100 and need 1:1000 leverage to open a one-lot position. Your $100 will be the margin, i.e., the minimum amount you need to open a trade and maintain it. Margin size depends on the number of lots and leverage you're using. The larger the leverage is, the smaller the margin you'll need to fill.
If leverage is expressed as a ratio, the margin is represented in terms of a percentage to the full position size. The margin size typically varies from 0.25% to as high as 2%.
Margin: How to Calculate
To calculate the amount of margin required, you need to determine a percentage (or so-called margin requirement) of the position size (or notional value).
The required margin is calculated in relation to the base currency of the pair you're trading. It's worth noting that if the base currency is different from your account's currency, the margin amount will be converted to the account denomination.
- If the base currency and account currency are the same, to get the amount of the required margin, you need to multiply notional value (position size) by the margin requirement.
- If the base currency and account currency are different, to get the required margin, you need to multiply the notional value by the margin requirement. The result should be multiplied by the exchange rate between the base currency and the account currency.
Types of Margin
Margin is always seen in MetaTrader. However, if you look at the image below, you'll see that there are different types of margin terms. Let's clarify each one.
(https://carigold.com/forum/attachments/2-jpg.417459/)
- Required margin. This is a basic term meaning the amount needed to maintain your open position. Each open trade has its own required margin that will be held ahead of time. Let's consider an example. Imagine you open a trade for the EUR/USD pair. You want to trade one standard lot of $100,000. A broker requires a 2% margin. So, your required margin will be $2,000.
- Used margin. This is the sum of all the required margin of the open trades. This amount is not accessible to open new trades. In MetaTrader, this term will be expressed by one word: margin.
- Free margin. This term is placed in the trade window in MetaTrader. The idea is clear: free margin is the amount still available to open new trades.
Relationship Between Margin and Leverage
Simply stated, a margin account allows a trader to use leverage. To calculate leverage, you need to divide one by the margin requirement. For instance, if the required margin is 2%, the leverage will equal 50.
Inversely, to count the margin requirement, you need to divide one by the leverage ratio. For example, if your leverage is 1:100, the margin requirement will equal 1% because 1/100 is 0.01 or 1%.
Margin: Trading Example in Forex Market
Let's consider an example of margin trading. Imagine you're trading two currency pairs: USD/CAD and USD/JPY. You have $1,000, but you used a 1:10 leverage, so you have $10,000.
The first trade is a mini lot (i.e., $10,000) of USD/CAD. The margin is 2%. The required margin will equal $200. The second trade is a mini lot of USD/JPY. The margin is 3%. So, the required margin is $300. In the end, we have a used margin of $500.
What Is a Margin Call?
A margin call is the level at which a broker sends a warning to a trader that their margin has reached a dangerous point (40% or lower). A broker warns a trader to either close a trade to limit losses or add funds to stay in the market. A broker can but doesn't have to close the trader's positions.
Here, we should mention one more term: stop-out. This follows a margin call if a trader doesn't heed the first warning. The stop-out is at 50% or lower, which signals the margin has reached the minimum allowed amount. This is the point at which a broker will close the trader's deals without any notification to prevent the balance from reaching negative figures.
Benefits and Limitations of Leverage and Margin
Both terms have their own advantages and disadvantages. Let's consider them to avoid mistakes.
Benefits:
- Big funds. The main advantage of leverage and margin is the opportunity to access larger funds than you have. As a result, you can open larger positions.
- More considerable profits. A larger position size provides an opportunity to gain more massive profits as lot size and pip value are interconnected.
Limitations:
- Larger losses. The main disadvantage of margin trading is the larger losses you can suffer when taking leverage.
- Illusion. Another limitation you may notice is the illusion of significant funds. You should always remember how much money you actually have.
How to Minimise Risks
The limitations of margin and leverage directly relate to the risks you may encounter. So, larger losses and the illusion of significant funds are the risks that may affect your trades' effectiveness. To minimise them, you have several options.
- A reliable broker. As we mentioned above, there is a wide variety of leverage ratios. It looks attractive that you can multiply your funds by 1,000. Still, you should remember that your risks will surge dramatically. Choose a reliable broker, such as Libertex, that will limit the leverage ratio to only safe ones.
- Stop-loss. Although a broker uses a margin call and stop-out, we recommend you avoid such situations. To do so, use stop-loss orders. Count the amount you can risk before you place a trade. But remember what we discussed about wide and loose stop-losses. The risk-reward ratio should not be less than 1:2.
- Take profit. This type of order can allow you to fix your potential profit before a trade turns against you.
- Strategy. Before you place an order, you should know how much money you can trade, so choose your position size wisely. Try different leverage ratios to define the perfect one that suits the amount of money you have and the assets you want to trade.
Forex Margin and Securities Margin
We previously talked about the forex margin. To make that concept clear, we need to discuss what a securities margin is.
The amount usually equals up to 50% of the asset price. Here, we can use the term "buying on margin." For example, if you buy stocks, you take a loan from a broker. It's considered a down payment and allows you to own the security you purchase.
When we talk about the forex margin, it's not borrowed money. And you don't purchase currencies to own them.
Conclusion
To conclude, margin and leverage are basic terms of forex trading. They allow a trader to open positions no matter what amount of money they have. This option is attractive, but traders should remember the risks they may face.
To know how to use leverage and margin, you should practise. It's wise to do so with the small leverages that Libertex provides. The perfect place to practise new techniques risk-free is our demo account.
-
What are derivatives in finance?
Derivatives are a financial agreement that establishes a value through the value of an underlying asset. This means that they have no value of their own but depend on the asset to which they're linked.
Derivative contracts have existed since time immemorial, where they were used to maintain equilibrium in the exchange of goods or services on a global scale. Today, the market for derivative contracts is growing because they make trading and user transactions more accessible. With derivatives, traders don't need to worry about the complexity of various currencies and differences in national accounting systems that previously prevented transactions between users.
So, what is a financial derivative?
Financial derivatives, as mentioned above, are contracts that base their value on an underlying asset. With a derivative, the seller of the contract doesn't necessarily have to own the asset but can give the necessary money to the buyer for it to acquire it or give the buyer another derivative contract.
These financial derivatives are used to hedge investments and speculate. So, if a trader wants to speculate on a derivative, they can make profit if the price of their purchase is lower than the price of the underlying asset. For example: if you want to buy a futures contract (which we'll talk about later) for any asset that has a price of $1,000, and its price at the end of the contract increases to $1,100, you'll earn $100. In addition, you could also benefit from the fall in the sale price of the asset you've selected.
They can also be used as a hedge, i.e., to minimise the risks of a short-term trade where you could be affected by fluctuations in the price of the asset.
While there are many types of financial derivatives, the three most used are options, futures and swaps.
History
Derivatives aren't a new phenomenon in financial markets. According to some sources (mostly rumours), they appeared in the 25th-21st centuries B.C. Merchants from Babylon needed to equip their caravans, so they started to make agreements with creditors that allowed them to get loans. Repayment was influenced by how successful the delivery was. As a result, risks were distributed between parties. At the same time, the interest was much higher than the ordinary loan to cover losses in case the cargo was lost.
The next example of modern derivatives was found in 12th-century Europe. The economic upturn caused trade to develop, resulting in trade law being created at roughly the same time. A document called a lettre de faire served as a forward contract for the delivery of goods at a certain time.
At the beginning of the 17th century, options for tulip bulbs were traded in Amsterdam. By the 1630s, the first forward contracts appeared on the Royal Exchange in England.
Later on, derivatives were used in Japan. The history dates back to the 1650s when Japanese landlords received rent in the form of the rice harvest. However, their rent depended on weather conditions. Landlords started to use warehouses to keep rice and used rice coupons. Owners of coupons acquired specific amounts of rice at a certain date at a predetermined cost in the future. In turn, landlords received a stable income as rent payment.
In the 1930s, the modern put and call options became a commonplace feature on the London Stock Exchange.
By the 1960s, options trading for commodities and stocks became standard practice on American stock exchanges. The first forward contract was made at the Chicago Board of Trade on 13 March 1851, and in 1865, grain trading was formalised by the introduction of futures contracts. These contracts were standardised by determining the specific quality and quantity of goods and the time and place of delivery.
In 1972, the International Currency Market department was created at the Chicago Mercantile Exchange. It became the first specialised exchange platform for trading currency futures contracts. Before, only commodities were used for futures trading.
Later, in 1973, the Chicago Board Options Exchange was established. By the late 1970s, derivatives trading became common practice on all of the world's stock exchanges.
Trading Derivatives
The derivatives market is very large. It's believed that the market is valued at around $1.2 trillion due to the large number of derivatives available for assets such as currencies, stocks, bonds and commodities. Even in 2016, a figure was announced that pointed to the 25 billion contracts of derivatives traded, with Asia leading the way with 36% of the volume, North America with 34% and Europe with 20%.
Today, the derivatives market as a whole is divided into two smaller markets.
OTC: Over The Counter
Also known as non-exchange derivatives, these are contracts that are made directly and privately, i.e., they're not listed on any stock exchange. They're usually used by investment banks.
Exchange-Traded
These are quoted on stock exchanges and are used mostly by small investors. They're public, and the terms of the contract are predetermined.
Types of Financial Derivatives
Financial derivatives have marked important milestones throughout the global economy. Among the most popular are:
- Collateralised Debt Obligations (CDOs)
- Swaps and Credit Default Swaps (CDSs)
- Forwards
CDOs are financial instruments that are considered the main cause of the economic crisis that occurred in 2008 and which based their value on the repayment of the loans offered.
Swaps offer investors the possibility of exchanging assets or debts for another of similar value, managing to reduce the risks for the parties involved. The swaps resulted in the creation of CDSs, which were sold as insurance against the default of municipal bonds and which also contributed to the 2008 financial crisis.
Forwards are another type of OTC financial derivative and are used to buy or sell an asset at a previously agreed-upon value on a specific date in the future.
In addition, there are financial derivatives that are used to conduct decentralised trading in the network, that is, without an intermediary. The three most popular are the following.
CFDs
CFDs, or Contracts for Difference, allow you to buy or sell a certain number of units of a particular asset, depending on the decrease or rise in its value and thanks to its leverage. The gains (or losses) depend on the fluctuation of the asset's price. With CFDs, you can open long positions if you think the price will increase or short positions if you think it will decrease.
For example, suppose that the price of a stock is $100, and you decide to buy a thousand shares of it for a total of $100,000. If the price increases to $105, you'll earn $5000 since each share you bought will earn you an additional $5. That means your total profit will be $105,000.
Futures
Futures are used to exchange an underlying asset at a future date and at a predetermined price, which protects buyers from drastic changes in asset prices. These are used mostly to trade commodities.
For example, a cookie maker could buy sugar futures at a set price. In this way, if the price of sugar increases considerably, the manufacturer can afford to buy the necessary quantity a few months later.
Options
Options are contracts that are made between two parties and allow the owner to buy (call) or sell (put) assets at a specific price and at a specific date or before. They're most frequently used in stock trading.
With options, the buyer has the right to buy or sell the underlying asset, while the seller is obliged to buy or sell it at the agreed price if the buyer exercises their right.
For example: suppose that the shares of a telephone company are valued at $95 today. But next month, the company is launching a new device that will most likely increase the value of the shares. So, you acquire call options at $100 for three months, which are worth $5 for each one on the market. As a buyer, you can exercise your right to call in three months, so the seller must sell the shares at $100.
Advantages and Disadvantages of Derivative Trading
Operating with derivatives can mean big profits or big risks. That's why you should first acquire the necessary knowledge to trade them responsibly.
Among derivatives' main benefits are that they protect investors against losses while, at the same time, helping them profit through an asset's gains.
Unlike direct investments in stocks, derivatives allow you to make a profit quickly. In addition, you can create your own strategies so that you can use them to your advantage.
However, because the market is open, the values are constantly fluctuating, which entails numerous risks. One of them is that you can lose the entire value of your investment in a matter of minutes if its price falls considerably.
On the other hand, most contracts have a predetermined duration, so if your investment doesn't profit within the agreed time, your losses could be 100%.
Finally, the limited knowledge we have about derivatives is a big risk. Because a derivative's value depends on the value of its underlying asset, assigning an exact price becomes complicated. That makes them appealing to fraudsters who take advantage of the situation and operate against professional investors and beginners.
CFDs vs Futures and Options
CFDs, futures and options allow you to trade based on the variations in an asset's price. That is to say, when operating with derivatives, you don't buy or sell the asset itself. In addition, both kinds of derivatives allow you to trade with leverage, so you can make transactions with more money than you currently have. However, CFDs add flexibility by allowing leverage to be made with smaller amounts and with totally different assets.
To decide which kind of derivative to use, you must first know what you're looking for since each derivative has particular characteristics. For example, futures and options are ideal for opening long-term positions because their daily commissions are cheaper, and their opening rates are higher than those of CFDs.
On the other hand, CFDs are better suited to small and short positions. In addition to that, CFDs have greater liquidity and don't feature an expiry date, meaning you can close the position at any time. With futures and options, there may not be enough liquidity, and the cost to undo the position is very high.
Is It Worth Trading Futures or Options?
Previously, we talked about the differences between CFDs and futures and options. However, you should also take into account certain particularities between futures and options so that you can choose the one that best suits you.
When it comes to futures contracts, the buyer must pay the agreed-upon amount initially at the time the expiry date arrives, while, with options, the buyer can cancel the contract.
Therefore, operations with future contracts are much stricter and provide greater security. Options, on the other hand, are less rigid and will allow you to leave the operation if the circumstances warrant it.
Why Invest in Derivatives?
While it's true that these are volatile investments, derivatives can be an excellent option to get the most out of your portfolio.
Using financial derivatives, it's possible to speculate and take advantage of the variations presented by the prices of the underlying assets, but it's also possible to manage and reduce the risks that an investment brings with it.
When engaging in speculation, you can make a profit if the asset's purchase price is lower than the asset's price at the end of the futures contract.
On the other hand, when we talk about the use of derivatives to manage risks, the owner of an asset can protect his/her portfolio against a decrease in the value of the asset. If the asset's price increases, you can earn more money, but if the asset's price falls, you can earn or lose less money.
In turn, the increase in leverage is another excellent reason to use derivatives since you can trade with only $10 but open a position worth $100 or $1,000.
What Is an Example of a Derivative?
A convertible bond can be considered to be a derivative. The value of a convertible bond will depend on the value of the underlying asset, which makes it a derivative security.
What Are Derivatives and the Different Types?
A derivative is a financial instrument whose value is based on one or more underlying assets, for example, bonds, commodities and currencies. There are four types of derivatives: futures, swaps, options and forwards.
Why Do Companies Use Derivatives?
Derivatives are a perfect way to hedge portfolios and reduce risks. Moreover, they're easy to use and have a low cost.
What Are Derivatives in Simple Words?
A derivative is a contract that allows or obliges parties to perform certain actions concerning an underlying asset. Derivatives can be structured on a range of different assets, including futures, CFDs, commodities, etc.
What Are Derivatives Used For?
Derivatives are used to hedge investments. Another purpose is to speculate on future moves in the underlying asset.
-
Everything You Need to Know About Technical Indicators
Traders are divided into two major groups, fundamental and technical, based on the types of analysis they use. Fundamental analysis relies on economic data and news, while technical analysis checks for signals using technical indicators.
A wide range of indicators provides traders with a vast number of signals. Nevertheless, it's crucial to know what indicator to apply in different market conditions. Here's a comprehensive guide that will help you quickly learn about all of the useful indicators and build a solid trading strategy.
Technical Indicator: Definition
Before we start, let's define what a technical indicator is. A technical indicator is a set of mathematical calculations that use historical price movements to predict future price direction.
Technical tools are famous among investors because they provide reliable signals about entry and exit points, the direction of the trend and its force. They ease the process of market analysis and help create the potential to make profit. You should know that indicators serve different aims and be aware of when and how to use them.
How Do Forex Indicators Work?
A technical indicator is a tool that calculates previous price movements. It can use prior open, close, high and low prices for a specific period of time to predict the price's future direction. Traders don't have to do any calculations, and the indicator is applied automatically.
Still, to read the indicator's signals, you need to practise a lot. Some technical tools provide several signals, and you should keep them in mind. It may sound complicated, but if you choose the indicators that best suit your trading strategy, you only need three to five of them.
It's worth mentioning that technical indicators can be used for different securities such as stocks, currencies and commodities. Moreover, most of them work perfectly well for stocks and currencies. Technical indicators have different settings you should know about to use them efficiently. Usually, they differ regarding the timeframe you trade on.
Most of the popular indicators are set by default in trading platforms, for instance, MetaTrader. You can place them on the chart in just several clicks.
Let's consider how to do this using MetaTrader 4. Click the 'Insert' window and choose 'Indicators'. After that, you can choose from trend indicators, oscillators, volumes and Bill William indicators. Each group includes different instruments.
(https://libertex.com/sites/default/files/inline-images/forex-indicators-1.jpg)
Trading Indicators: Types
There are many types of technical instruments. However, we'd like to highlight three of them. Those are overlays, oscillators and Bill Williams indicators:
1. Overlays are applied directly to the chart. So, they interact with the price. Overlays are so-called trend indicators. Thus, you can see the current trend, its force and its direction.
(https://libertex.com/sites/default/files/inline-images/forex-indicators-2.jpg)
2. Oscillators are another type of technical tool. The indicators usually appear below the price chart in a separate window. Oscillators provide perfect entry and exit points. However, they can also give signals about the trend direction and its strength.
(https://libertex.com/sites/default/files/inline-images/forex-indicators-3.jpg)
3. Bill Williams Indicators. These indicators serve the same aims as the previous ones. For convenience, experts mark a group of indicators developed by Bill Williams, a famous trader who invented his own trading theory and six famous technical instruments. We'll discuss all of them later.
Trend Indicators
Trend indicators or overlays are used to define the direction and force of the current trend. "The trend is your friend." Ever heard this phrase? The trend is one of the most important patterns you should be able to determine on the chart. If you find a trend, you can be sure you'll find useful entry and exit points. There's a wide range of trend indicators, and we'll mention the most effective of them.
Moving Average
The Moving Average is a leading indicator. It's popular because of its simplicity and effectiveness. It's widely used to build other indicators; you'll notice it if you read the whole list of indicators. Many traders like it because it provides strong signals.
There are four types of moving averages that serve different aims, such as simple, smoothed, exponential and linear weighted. However, all of them have something in common: they use average prices that smooth out market fluctuations.
The indicator consists of one line, but traders usually use two to three lines with different settings to catch a signal. The Moving Average has two main functions: first, it determines the trend direction; second, it serves as a support level.
Bollinger Bands
This indicator has three lines and is based on the Moving Average indicator. It's a perfect measure of market volatility. When lines move apart from each other, market volatility is high. When they're close to each other, the market is consolidating.
Bollinger Bands help you find an entry point if the price rebounds off either the upper or lower band. The middle line can be used as a support level.
Ichimoku Kinko Hyo
It's one of the most complex indicators. Although it sounds complicated, it's not too difficult to read its signals. Ichimoku includes three lines and one cloud. This instrument shows the trend's direction, strength and momentum. Its lines can also be used as support and resistance levels. The Ichimoku indicator submits trade signals to open a long or short trade.
ADX
Unlike other technical instruments, ADXdetermines the strength of the trend but doesn't show its direction. Although it's a trend indicator, it's placed in a separate window below the price chart. The ADX consists of three lines: ADX, +DMI and –DMI and has several levels that are important to define the trend's force.
If the index is below 25, the trend is weak. If it consolidates between 25 and 50, the trend is strong. In the range between 50 and 75, the trend is robust. When ADX rises above 75, the trend is powerful. Besides the trend strength, you can get buy and sell signals with this indicator. When +DMI breaks above –DMI, it's time to buy. If the opposite happens, consider selling the asset.
Parabolic SAR
SAR means Stop and Reverse. This means that this tool can both determine the trend and signal when to close the trade. The indicator interacts with the price chart and is represented by dots, not lines. When dots are placed above the price, the trend is bearish. If dots are located below the price, the trend is bullish. The trend confirmation appears when there are at least three dots. It can also be used as a signal to buy or sell.
Standard Deviation
The indicator is used to measure the strength of volatility. It's placed in a separate window and has only one line. When the line rises significantly, it's a sign of high volatility. On the other hand, when the indicator fluctuations are low, volatility is low.
Oscillators
Oscillators are another big group of technical indicators that mostly helps find entry and exit points. They're momentum instruments whose signals are based on bouncing between specific levels. Let's look at the ones that will provide the most reliable signals.
MACD
The MACD or Moving Average Convergence Divergence is an oscillator calculated on two Exponential Moving Averages. The tool is used to determine trend reversal points that may become the perfect entry and exit point together with the strength of the trend. There are four main signals the indicator provides: divergence, overbought/oversold points, the signal line crossover and the zero-line crossover that show the trend's direction. It's one of the most straightforward indicators you can apply to any timeframe.
Relative Strength Index (RSI)
This oscillator shows changes in the price movement and signals when the market is overbought and oversold, thus giving perfect entry points. The indicator has two main levels: 30 and 70. When the RSI is above 70, the market is overbought. When it's below 30, the market is oversold. It's also possible to find a divergence between the indicator and the price to determine a trend reversal. The RSI and MACD are often applied together for more trustworthy signals. The standard setting for this indicator is a 14-day period.
Average True Range (ATR)
This oscillator shows how volatile the market is and the average volume of the trading range based on the timeframe. However, the oscillator doesn't show the direction of the trade. It just rises when the volatility is high, and the trend becomes more reliable and falls when volatility isn't significant.
Envelopes
This oscillator is commonly used to define the oversold and overbought market and price targets. It's based on two Moving Averages. Sometimes, envelopes are types of Bollinger Bands. Although the envelope indicator consists of only two lines, they form a channel within which the price moves. You can purchase and sell them according to the price movements within the channel.
Stochastic Oscillator
The stochastic oscillator resembles the RSI. It also shows overbought and oversold market points and a possible trend reversal. It has two levels: 20 and 80. The stochastic oscillator allows you to trade on divergence and has the rules as RSI lines. However, the indicator has two lines that provide additional buy/sell signals. This oscillator can be implemented on any timeframe.
Momentum
In general, momentum reflects the strength of the trend. Although indicators like the MACD, RSI and Stochastic Oscillator are used to gauge the momentum, momentum exists as its own specific indicator that shows the direction of the trend. When it's above 100, the trend is bullish. When it's below 100, the trend is bearish. You can use the indicator with the Moving Average, and the crossover may provide buy/sell signals.
Commodity Channel Index (CCI)
Like most of the indicators, CCI provides entry points, the trend strength and direction and periods of overbought/oversold conditions. It can also be used to find convergence/divergence. When applying the indicator, you should keep in mind the period you choose in your settings. The shorter the period is, the more fluctuated the indicator will be. So, if you need to smooth the market movements, you're better off choosing longer time periods. The most popular settings are 14 and 20.
Relative Vigor Index (RVI)
This is another indicator that gauges trend strength. The RVI is similar to the Stochastic Oscillator and has two main lines. Just as with MACD and RSI, RVI reflects convergence/divergence and overbought/oversold areas. Because there are two lines, their crossover will serve as a signal to buy or sell.
Bill Williams Indicators
The third famous group of symbols is Bill Williams Indicators. Although many traders have invented their own indicators, only Bill Williams' indicators are popular.
Acceleration/Deceleration (AD)
This tool is widely used to determine the price change. AD turns around before the price momentum changes. As a result, it can be used to forecast a price reversal. And although it looks the same as the Awesome Oscillator, its signals should be read differently. AD can provide signals related to the market reversal as long as there's an entry point.
Alligator
The alligator indicator is used to define the trend direction. It also helps filter signals leaving the range-bound market and has three lines. Based on other indicators, you can see that the lines' crossover provide buy/sell signals while their direction reflects the trend.
Awesome Oscillator
This tool gauges momentum and predicts price reversals and corrections. The Awesome Oscillator gives bearish and bullish signals and precisely determines the trend direction. That's why you can use it to enter the market and trade on the trend.
Fractals
Fractals are easily found on any price chart. However, to make traders' lives even easier, Bill Williams created this indicator to find entry points and stop-loss levels.
Gator Oscillator
This tool identifies when the market is trending and when it's consolidating. The Gator Oscillator shows periods of market volatility. It works well with the Alligator and almost resembles it.
Market Facilitation Index (MFI)
This tool gauges the strength and weakness of the price movement. The indicator shows the trend strength, so you'll know whether to trade it or not based on the moment when a new trend has chances of starting and when it's best to avoid entering the market.
Tips on How to Use Forex Indicators
Although there are many indicators, we gathered several tips that you can apply to any of them for efficient usage.
- Keep settings in mind. If you use MetaTrader, all of the indicators we mentioned above are automatically set. However, their settings should differ based on the timeframe you trade on. Otherwise, there's a risk of false signals.
- Combine indicators. One indicator is never enough. You're better off with at least three to five tools to check signals. To confirm the signal, we recommend using two to three indicators at once.
- Combine wisely. While we recommend combining indicators, you should do so wisely. Did you notice that some indicators are similar? If they are, don't use them to confirm a signal. Choose ones that serve the same aim but don't resemble each other.
Conclusion
To sum up, there's a wide range of forex indicators that can help you determine a trend and its strength, as well as find the perfect entry/exit points and support/resistance levels. However, you need to practise in order to find the tools that will match your trading strategy. It's better to do it using a free Libertex demo account. The whole range of indicators and real market conditions will help you build a strong strategy.
-
What Is a Forex Momentum Indicator?
One of the most critical aspects of the market for traders is price movement. For this exact purpose, there are many technical indicators used in the forex market. The one we'll be discussing today, the momentum indicator, helps determine the price fluctuation in the market and identify trends and their strength.
For a better understanding of how to utilise the indicator, this article will tackle how it works and how it's used in forex trading.
Momentum Indicator: How It Works
To analyse a market on a technical level, a trader has to understand the prevailing trend: if it's present or not, if it's just starting or if it's already ending. In doing so, a trader also has to know and judge how strong the trend is. This is where momentum indicators are used.
The momentum indicator is a kind of forex technical indicator known as an oscillator, which is used to identify the speed and strength of a price movement and trends in the market.
The momentum indicator can be used as a tool to identify and measure the momentum of a specific currency pair. It compares the existing and current prices to previous prices within a certain period and measures the velocity of these changes. Traders also use it in determining overbought and oversold conditions in the market.
Traders use popular forex momentum indicators like the Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI) and Stochastic Oscillator. A single line usually represents the momentum indicator in a particular section of the chart.
How to Calculate Momentum Indicator
Since it's plotted as a single line on the chart, you must calculate the difference between the previous and current prices. There are various trading tools and software you can use to automatically calculate the momentum. But it's still best if you know how the calculation works.
A price's momentum is easy to determine since there are many versions of its formula you can use. However, the principle remains the same: you compare the current price and the previous price in a specific timeframe.
Let's go over the parameters and variables:
Let CP1 denote the current closing price, while the previous closing price from n periods ago is CPx. With this, the momentum indicator formula goes like this:
Momentum = (CP1/CPx)*100
Thus, you can determine whether the current price is better than the previous one and how fast the price is moving.
(https://carigold.com/forum/attachments/momentum-indicator-1-jpg.420662/)
Based on this formula, we can observe the following:
- Since the value you get will be in percentage, we'll identify it based on percentage.
- If the obtained percentage is above 100, the current price is higher or more significant than its previous price. But when it's lower, it's the exact opposite: the current price is lower.
- The distance of the obtained percentage from 100 shows how fast the price movement is. For example, if you get 133%, you can say that it's moving up and increasing faster than a momentum with 130%.
Advantages and Disadvantages of a ForexMomentum Indicator
A momentum indicator has its benefits and drawbacks.
Advantages:
- It's easy to distinguish. Since momentum indicators are plotted as lines, you can easily interpret them without any complicated mathematical calculations. A momentum indicator shows the price movement and its strength no matter what direction it moves in.
- It has a flexible calculation. As shown in the previous section, you can quickly determine the momentum even when changing the price's past performance period.
- It can be used with other technical indicators. You can combine it with other indicators, especially those that show the price movement's direction.
- It's an efficient signal. It signals a change in trend, whether there's an increase or loss in the momentum.
- It can identify reversal points in the market. With a momentum indicator, a trader can spot where the market can reverse. This is done by observing the divergence of the price movement and momentum.
Disadvantages:
- It should be used with other indicators. Although this may seem like a pure advantage, it can also be a drawback because it means that the momentum indicator can't provide accurate signals or data all the time. It requires working with other indicators to do so.
- It's significantly influenced by time. Even if it deals with the movement of prices, the momentum indicator is more affected by time. It depends only on the periods where high and low instances are observed. It doesn't say anything about the magnitude of the change that can happen.
- It only shows several pieces of data. There isn't much information you can get by looking at this indicator on the chart, especially if the price is moving aggressively.
- It's a lagging indicator. Since you'll use past prices, there can be a delay before observing the chart's momentum indicator compared to other indicators.
A Guide to Using Momentum Indicator in Trading
Although it may seem complicated, using the indicator is quite simple and easy. You can follow the steps below to use it in trading.
Step 1 - Open Your Trading Account
Create a trading account and log in to the platform.
(https://carigold.com/forum/attachments/momentum-indicator-2-jpg.420665/)
Step 2 - Display the Momentum Indicator
Use the available chart analysis settings and choose the momentum indicator. For most platforms, you can customise the indicator's colour and width.
Step 3 - Indicate Your Momentum Setting
Choosing the right momentum setting is essential. Select what timeframe you want and focus on a specific period. A separate window or an additional chart extension will display the momentum just beneath the price chart.
(https://carigold.com/forum/attachments/momentum-indicator-3-jpg.420666/)
The most commonly used settings are 7, 14, and 21. Settings over the value of 21 are less sensitive, thus creating less noise and a smoother line on the chart. Values less than 10, however, are too sensitive and result in more market noise.
Step 4 - Observe and Read the Momentum Indicator
Look out for trend conditions on the chart. Here are some indications from the movement of momentum.
If momentum is above 0, and the price is increasing:
- The uptrend is accelerating.
- There's a strong upward trend that's likely to continue.
If momentum is above 0, and the price is decreasing:
- The trend is losing upward momentum and is a warning that the momentum is getting weaker.
- However, this doesn't mean that there will be a reversal.
If momentum is below 0, and the price is decreasing:
- The downtrend is accelerating.
- It's a strong trend that's likely to continue.
If momentum is below 0, and the price is increasing:
- The trend is losing downward momentum and is a warning that the momentum is getting weaker.
- However, this still doesn't mean that there will be a change in trend.
Step 5 - Pay Attention to Signals
You can take signals when the momentum crosses 0. When it crosses 0 upward, the indicator generates a buy signal, but when it crosses 0 downward, the momentum indicator generates a sell signal.
Step 6 - Use Supporting Technical Indicators
Since there are instances that not all generated signals are reliable all the time, it's best to use two indicators to generate more accurate signals.
(https://carigold.com/forum/attachments/momentum-indicator-4-jpg.420667/)
Step 7 - Open Your Positions
After assessing the overall price movement, you can open either two types of positions: short or long. Let's say your momentum settings for the two indicators are 20 and 7.
You can open a long position when you confirm an uptrend with the momentum. You can do so by observing the movement of the two momentum indicators. If the momentum of 20 moves 0 upward, wait for the other momentum to cross 0 and continue to rise.
You can open a short position, on the other hand, if there's a confirmed downtrend on the chart. Observe if the momentum of 20 is moving under 0 since this will signify a downtrend. Then wait for the other momentum to cross downward and move below 0. When all of these happen, you can open a short trade.
More Efficient Ways of Using the Momentum Indicator
The best way to use a momentum indicator is in combination with other indicators. Here are the most efficient combinations you can use.
Momentum Indicator + Momentum Indicator
Traders use this combination as a way to confirm trends. When the second momentum confirms the prevailing trend in the first one, you can decide to open a long or short position.
Momentum Indicator + Volatility Indicator
This is a popular strategy used by many traders. This combination of momentum and volatility measures forms a squeeze forex momentum indicator.
Since the volatility indicator indicates the market's current volatility, the squeeze will be revealed and narrow down to a historically low level of volatility. Moreover, the squeeze momentum indicator will gauge the direction of the sudden movement that comes after the squeeze.
Momentum Indicator + Moving Average
This combination shows the momentum indicator and a trend-like indicator in one chart. The moving average line will appear and stretch across the momentum line upon completing the moving average settings. Based on this combination, trades can buy when the momentum crosses above the MA line and sell if the momentum indicator crosses below it.
The Best Momentum Indicator Trading Strategies
Momentum indicators are also beneficial in various trading strategies. Here's how the indicator is used in the most popular forex trading strategies.
The Momentum Indicator in Swing Trading
Swing trading is a strategy that utilises small price shifts in a more significant trend. It's based on the idea of price trends being rarely linear and focuses on the oscillations caused by bears and bulls.
With the momentum indicator, swing traders can trade within a shorter time frame. They can also hold their trades for as long as the momentum lasts.
The Momentum Indicator in Trend Trading
This significantly focuses and depends on trends. Since it's not easy to analyse the momentum in a particular direction, momentum indicators are used.
With momentum indicators, the magnitude of the recent price changes can be measured by trend traders and evaluate overbought or oversold conditions.
The Momentum Indicator in Intraday Trading
The timeframe greatly influences this. Since the goal of intraday traders is to trade as quickly as possible, the momentum indicators help them spot time frames in the market with a high volume. With this, they can buy and sell quickly and without interruption.
The Momentum Indicator in Scalping Trading
Scalping traders focus on trading off based on the small changes in prices. With a momentum indicator, traders can get signals of prices' actual movement quickly, even before it occurs.
Conclusion
Momentum indicators are good technical indicators. However, it works more accurately when combined with other indicators and trading strategies. The best way to fully grasp how to use this is to practice. To do that, you can open a Libertex demo account and practise trading using any momentum indicator without any risk.
-
What is a stock index?
A stock index is used to describe the performance of the stock market, or a specific part of it and to compare the returns on investments. In general, an index uses a weighted average of stock prices. The NASDAQ, S&P 500 and the Dow Jones Industrial Average are examples of stock indexes. In this article, we will tell you all about the indexes, as well as how to make money with them.
What Is an Index
Since it would be too difficult to track each and every one of the securities that are traded, we take a smaller sample of the market that is representative of the whole - similarly to the pollsters use surveys to measure the sentiment of the population. This smaller sample is called an index, which is a statistical measure of changes in a portfolio of stocks that represent a portion of the overall market.
Investors and other market participants use indexes to track the performance of the stock market. Ideally, a change in the price of an index represents an exactly proportional change in the stocks included in the index: if an index rises by 1%, for example, it means that the stocks that make up that index have also increased by an average of 1%.
Let's see how indexes work, using a simple example:
Suppose we created an index to track the price of a gallon of milk.
Milk consumption costs $2.00 per gallon.
The initial index value is 1.
- When milk costs $2.50, our index will be 1.25, which reflects a 25% increase in the price of milk.
- If the milk costs $2.25, the index is 1.15. The change of .10 reflects a 10% decrease in the price of milk.
If you were a milk distributor, you might find the milk index very useful. I would use it instead of going to the store every day to write down the prices of each competitor's milk and draw an average.
Stock indexes are used by traders, economists and academicians, but each one would use the information in a different way.
History of Index Creation
In 1896, Charles Dow - who along with his fellow journalist Edward Jones founded Dow Jones & Company - created the Dow Jones Industrial Average (DJIA), the second oldest stock exchange index in the world (the oldest is the Dow Jones Transportation Index, also created by Dow). At that time, the DJIA contained 12 listed industries, including General Electric, the only original constituent remaining in the index. Today, the Dow is a benchmark that tracks 30 of the largest and most influential companies in the United States and is one of the best-known indices in the world.
The original function of the indexes was to act as a barometer of the stock markets, offering observers a concrete measure of the appetite of investors or potential IPO prospects. They still do this, up to a point.
In the 1920s, however, the indices had evolved from barometers to benchmarks intended to measure market performance. In the 1960s, designed with the Capital Asset Pricing Model (CAPM) and with the capitalization weighting structure in mind, the indexes began to be used to describe the reference market, from which they could be compared the results of the active investment managers.
How Are the Indices Calculated
Before the digital era, calculating the price of a stock index had to be as simple as possible. The original DJIA was calculated using a simple average: add the prices of the 12 companies and divide that number by 12. These calculations made the index really not more than an average, but it served its purpose.
Today, the DJIA uses a different methodology called weighting based on price, where the components are weighted according to their prices. To calculate the index, the current prices of the 30 shares are added and then divided by what is known as the Divisor Dow, a number that is used to maintain the historical continuity of the index. This number is continuously adjusted to take into account changes in the market, such as equity divisions, spin-off and any changes in the Dow components. In 2008, for example, the value of the Divisor Dow was 0.125553. Today, it is 0.14602128057775.
Most indexes weigh companies according to market capitalization instead of price. If the market limit of a company is $1,000,000 and the value of all the shares in the index is $100,000,000, the company would be worth 1% of the index. The indices are continuously calculated to provide accurate reflections of the market throughout the trading session.
The Most Popular Indices
Dow Jones Industrial Average
(https://carigold.com/forum/attachments/262638260-jpg.421497/)
The Dow Jones Industrial Average (DJIA) is one of the oldest, best known and most used indices in the world. Includes the shares of 30 of the largest and most influential companies in the United States. The DJIA is what is known as a weighted price index. Originally it was calculated by adding the price per share of the shares of each company in the index and dividing this amount by the number of companies; that's why it's called average. Unfortunately, it is no longer so simple to calculate. Over the years, stock divisions, spin-offs and other events have caused changes in the divisor, which makes it a very small number (less than 0.2).
The DJIA represents about a quarter of the value of the entire US stock market. UU., But a percentage change in the Dow should not be interpreted as a definitive indication that the entire market has fallen by the same percentage. This is due to the function weighted by the price of the Dow. The basic problem is that a change of $1 in the price of a stock of $120 in the index will have a greater effect on the DJIA than a change of $1 in the price of a share of $20, although the shares of higher price may have changed only 0.8% and the other 5%.
A change in the Dow represents changes in investor expectations about the gains and risks of large companies included in the average. Because the general attitude toward large-cap stocks often differs from the attitude toward small cap stocks, international shares or technology stocks, the Dow should not be used to represent sentiment in other areas of the market. On the other hand, because the Dow is composed of some of the best known companies in the US. In the US, the large swings in this index generally correspond to the movement of the entire market, although not necessarily on the same scale.
S&P 500
The Standard & Poor's 500 index (commonly known as the S&P 500) is a larger and more diverse index than the DJIA. Composed of 500 of the most sold stocks in the United States, it represents approximately 80% of the total value of the US stock markets. In general, the S&P 500 index provides a good indication of the movement in the US market.
Because the S & P 500 index is weighted by the market (also called weighted capitalization), each share in the index is represented in proportion to its total market capitalization. In other words, if the total market value of the 500 companies in the S&P 500 falls by 10%, the value of the index is also reduced by 10%.
A 10% move in all stocks in the DJIA, on the other hand, would not necessarily cause a 10% change in the index. Many people believe that the market weighting used in the S&P 500 is a better measure of market movement because two portfolios can be compared more easily when changes are measured in percentages rather than dollar amounts.
The S&P 500 index includes companies in a variety of sectors, including energy, industry, information technology, healthcare, finance, and consumer goods.
Nasdaq Composite
(https://carigold.com/forum/attachments/169349093-jpg.421498/)
Most investors know that the Nasdaq is the exchange in which technology stocks are traded. The Nasdaq Composite Index is an index weighted by stock market capitalization of all stocks traded on the Nasdaq Stock Exchange. This index includes some companies that are not based in the US.
Although this index is known for its large share of technology stocks, the Nasdaq Composite also includes shares of the financial, industrial, insurance and transportation industries, among others. The Nasdaq Composite includes large and small companies but, unlike the Dow and the S&P 500, it also includes many speculative companies with small market capitalizations. Consequently, its movement generally indicates the performance of the technology industry, as well as the attitudes of investors towards more speculative actions.
DAX 30
DAX is a stock market index representing 30 of the largest and most liquid German companies listed on the Frankfurt Stock Exchange. The prices used to calculate the DAX index come from Xetra, an electronic commerce system. It is a capitalization-weighted index, so it essentially measures the performance of the 30 largest listed companies in Germany. Therefore, it is a strong indicator of the strength of the German economy and of investor sentiment towards German stocks.
The DAX was created in 1988 with a base index value of 1,000. DAX member companies represent approximately 75% of the aggregate market capital that is traded on the Frankfurt Stock Exchange.
It is the main European stock market index in the global market.
FTSE 100
The name FTSE 100 originates when it was owned 50/50 by the Financial Times and the London Stock Exchange (LSE), hence FT and SE produce FTSE. It also refers to its composition of 100 companies.
The FTSE 100 (more colloquially known as the Footsie) is an index composed of the 100 largest companies (by market capitalization) listed on the London Stock Exchange (LSE). They are often referred to as "frontline" companies, and the index is considered a good indication of the performance of the major companies listed in the United Kingdom.
Larger companies make up a larger portion of the index because it is weighted by market capitalization. The FTSE 100 is managed by the FTSE Group. It is calculated in real time, and when the market is open, it is updated and published every 15 seconds.
The FTSE 100 is often seen as an indicator of prosperity among UK rated companies and the economy in general. However, a large part of the companies included in this index are based in other countries.
Index CFD Trading
(https://carigold.com/forum/attachments/1172166808-jpg.421499/)
The CFD’s or Contracts for Difference are one of the fastest growing financial products in the current market. They offer traders the opportunity to negotiate all the stock indices of the world from a platform, while gaining access to incredible levels of leverage.
With the help of CFD indices, you can earn on the fluctuations of the indices in the same way as on the value of stocks or exchange rates.
When taking a CFD position, a trader is essentially in agreement to change the difference in the price of an index from one period of time to another. In other words, the CFD is an agreement between the buyer (you) and the Broker to exchange the difference between the current value of an index and its value at a future time. If you hold a long position and the difference is positive, the Broker pays you. If it is negative, you pay the Broker.
The price of the CFD index is directly related to the price of the related future. The price movement of the CFD Index tracks the movement of the related future.
The CFD trade in indexes provides an excellent way to speculate on the performance of each stock market in general, rather than selecting stocks and individual stocks. In fact, index CFDs are often considered less risky than individual stocks, as the risk is spreading across the market rather than in a single company.
We hope this article is useful for you. And we invite you to try to operate with Index CFD at this very moment by opening a free demo account at Libertex. In it you can practice CFD trading without risking anything. In addition, we recommend that you take a free online course.
-
What is a Pip in Forex
Maybe you've been in the middle of watching a movie trailer on YouTube, and out of nowhere this ad appears with a guy who tells you how to make money in Forex. The ad gets your attention and you decide to hear this guy out. Then, just as it is getting more and more interesting, the guy starts talking about 100 pips a day. The ad, which at first seemed to be interesting, suddenly confuses you.
So what is a pip in Forex?
A pip is an abbreviation for “point in percentage” and represents the smallest unit of change in the value of a currency pair. For most currencies, especially the majors, a pip represents the fourth decimal place in the exchange rate for the two currencies. However, this decimal place can vary for some currency pairs. For currency pairs that involve JPY, a pip is represented by the second decimal place.
(https://carigold.com/forum/attachments/1-png.422530/)
Let's take an example. Let's suppose you are a trader who is trading EUR/USD. You opened a long position when the exchange rate was 1.2712. You predicted that the price would go up, and after a few minutes the price moved to 1.2713 and you decided to close your trade. The price change here is 0.0001, which equals 1 pip.
(https://carigold.com/forum/attachments/2-jpg.422531/)
Let's take a look at a real market situation. Let's assume that you opened a long position when the price was 1.1438, as shown in the table below. You predicted that the price would go up, but the price is in fact going in the opposite direction. Now you decide to close the position when the exchange rate is 1.1431. So how much did you lose? You have lost the entire change in the value of the currency pair – 0.0007 – which equals 7 pips.
(https://carigold.com/forum/attachments/3-png.422532/)
What is a pipette?
The majority of trading platforms use pips as their smallest units of measurement for the change in value of a currency pair. However, the need for more accuracy has led to the introduction of a pipette, which is 1/10 of a pip. In this case, a pipette is represented by the fifth decimal place on your trading platform. When JPY is involved in the currency pair, a pipette is represented by the third decimal place.
(https://carigold.com/forum/attachments/4-png.422533/)
Let's use the previous example, but this time with a broker platform that allows the use of pipettes.
(https://carigold.com/forum/attachments/5-png.422534/)
In this example, you opened a long position when the exchange rate was 1.14387. You expected that the price would rise. Unfortunately, that was not the case. Instead, the price moved against your position. Now you decide to close your trade at 1.14312. You end up losing 0.00075, which equals 75 pipettes. I know that after looking at this example, you will appreciate the accuracy that pipettes provide. Pipettes provide the trader with a higher degree of accuracy than pips. In the previous example, the loss was 7 pips. But now we get a clearer picture with the more granular unit of measurement: 75 pipettes (7.5 pips).
The importance of pips in Forex Trading
You use pips to quantify how much you have won or lost on a particular trade. A small shift on the market could lead to huge profits, while on the other hand a big market move could result in just a small profit where both are measured in dollars. Thus, pips remain the only reliable way to quantify fluctuations on the market.
Value of pips
A pip value can be defined as the price attributed to a move by one pip on the foreign exchange market. When you have a long position and the price is moving in your favor, your open trade will increase in value. The open position behaves in a similar way when the price moves against you. The pip value will tell you how much the incremental profit is worth. To get this value, we need to calculate the pip value.
Since the value of a pip is very tiny, Forex is always traded in standard lots, mini lots and micro lots. A standard lot is 100,000 units of the base currency; a mini lot is 10,000 units, while a micro lot is 1,000 units of the base currency. We also have a nano lot, which is 100 units of the base currency. Below you can find a list of how the different lot sizes affect the value of a pip.
Lot size Units of base currency Volume Pip value in USD 1 standard lot 100,000 1.0 1 pip=$10 1 mini lot 10,000 0.1 1 pip=$1 1 micro lot 1,000 0.01 1 pip=$0.1 1 nano lot 100 0.001 1 pip=$0.01
(https://carigold.com/forum/attachments/6-png.422535/)
Calculation of the pip value and position size - with examples
As we have already described, the pip value shows how much a pip movement contributes to your profit or loss. The pip value is important, because it helps you to manage risk. For example, if you don't understand the pip value, how can you calculate the ideal position size? So, if you don't understand the concept of the pip value, it will be difficult for you as a trader to measure and manage your risk.
Let's assume that you have a trading account denominated in euros, and you would like to trade 1 standard lot ofEUR/USD at the exchange rate of 1.20. In the case of EUR/USD, 1 pip is the same as 0.0001.
Pip value = 0.0001/1.20*100,000 = 8.333 Euro
Pip value for accounts denominated in USD
Many trading accounts are denominated in US dollars. Whenever the USD is listed second in a currency pair and the account is denominated in US dollars, the pip value does not change.
In such a case, a standard lot has a pip value of $10; a mini lot has a pip value of $1; and a micro lot has a pip value of $0.1. This applies to each currency pair as long as the USD is listed second. Here are some examples: EUR/USD, AUD/USD, GBP/USD, NZD/USD.
If the USD is the base currency (listed first in the currency pair), simply use the formula that was mentioned above. Let's say that you are trading a standard lot of the currency pair USD/CAD. As you can see, the USD is listed first in this case. Assuming that the exchange rate of USD/CAD is 1.25, the pip value in US dollars would be 10/1.25 = $8. Below you can see how to calculate the pip value for mini lots and micro lots.
Pip value for standard lots = 10/ (USD/XXX)
Pip value for mini lots = 1/ (USD/XXX)
Pip value for micro lots = 0.1/ (USD/XXX)
Pip value for accounts not denominated in USD
Let's assume you have an account denominated in Canadian dollars. Each time you trade a currency pair with the Canadian dollar listed second, the pip value remains fixed. In such a case, a standard lot has a pip value of CAD$10; A mini lot has a pip value of CAD$1; and a micro lot has a pip value of CAD$0.1.
What happens if the Canadian dollar is listed first, like in the case of CAD/CHF? You get the pip value by dividing the fixed rates from above by the exchange rate. Let's assume the exchange rate of CAD/CHF is 0.8. So what is the pip value for a micro lot? It will be CAD$0.1/0.8 = CAD$0.125. You can do the same for standard lots and mini lots.
Pip value for standard lots = 10/ (CAD/XXX)
Pip value for mini lots = 1/ (CAD/XXX)
Pip value for micro lots = 0.1/ (CAD/XXX)
What if the currency pair now has CAD as the base currency and JPY as the quoted currency (CAD/JPY)? Let's show an example: Let's say the exchange rate for CAD/JPY is 90.00. What would be the pip value for a standard lot in this case?
We will use the formula discussed above, but will then multiply the result by 100.
Pip value for 1 standard lot of CAD/JPY = 10/ (CAD/XXX)*100
10/90*10= CAD$11.11
You can use this process for other currencies like EUR or even the Australian dollar.
The pip value for other currency pairs
Maybe you have an account denominated in USD, but you are trading a currency pair that does not include the US dollar. Maybe you have an account denominated in USD, but you have chosen to trade a currency pair like EUR/CHF or EUR/GBP.
Let's take the example EUR/CHF. The established rule is that if you have an account denominated in CHF and you are trading EUR/CHF, then the pip value is fixed (CHF 10 for standard lots, CHF 1 for mini lots and CHF 0.1 for micro lots)
In this case, let's assume that we calculate the pip value for a standard lot, which is fixed at CHF 10. So if my account were denominated in USD, I would get my pip value by dividing CHF10/(USD/CHF). This is the fixed value divided by the USD/CHF exchange rate. If the exchange rate of USD/CHF is, for example, 0.80, the pip value would be 10/0.80 = USD 12.50.
What would happen if you couldn’t find the rate for USD/CHF and instead found the rate for CHF/USD? What would you do in that situation?
You must take the inverse rate of CHF/USD to get the rate for USD/CHF. Let's say that you found that the rate for CHF/USD is 1.25. In that case, the inverse rate would be 1/1.25 = 0.80.
Changes in the pip value
In most cases, the base currency of your account will determine the pip value of the various currency pairs. If your account is denominated in USD and the currency has USD as the quoted currency (the one that is listed second in the currency pair), for example EUR/USD, then the pip value will be fixed as we discussed earlier. In such a case, a standard lot has a pip value of $10; a mini lot has a pip value of $1; and a micro lot has a pip value of $0.1.
A change in the pip value will only occur if the exchange rate of the US dollar were to move by more than 10%, while the USD is the base currency (for example, USD/CAD or USD/JPY) or the USD is not included in the currency pair (for example GBP/JPY). The account is denominated in USD.
A good example is when the exchange rate for USD/JPY fell from about 120 to a low of about 77 between 2008 and 2011. The rapid strengthening of the Yen caused the pip value for the currency pair to change. In this case, the movements on the market had a significantly greater effect on value as the pip value rose.
Based on the knowledge that we gained, let's see now what effect the change had on the pair's pip value. The exchange rate moved in this case from 120 to 77. Prior to 2008, the pip value for standard lots of USD/JPY on an account denominated in USD was $10/120 * 100 = 8,333. By 2011 the exchange rate moved to 77 and the pip value rose during the period to $10/77 * 100 = 12.98. Therefore, the market movements had a greater effect on value.
The relevance of pip values while hedging
Hedging involves the simultaneous purchase and sale of securities to reduce risk. Many traders see this as a risk-free position, as losses on the one hand are offset by profits on the other hand. However, this is not always the case. Hedging does entail a certain amount of risk, as wide spreads can eat into both positions, which can result in losses.
The widening of spreads mainly occurs in times of important global events, such as the moment when the Swiss National Bank scrapped the 1.20 francs per euro cap back in 2015. Brexit is another major global event, which may hurt your hedged trades.
During such times the spread fully depends on offers and demands. The spread can even be 100 pips wide. If that happens to both of your positions, the results may be devastating. If the currency pairs involved are illiquid, the spreads are likely to be even wider, which would lead to more losses for the hedged position.
What is a pip for CFDs?
Before we get to the point of discussing pips in CFDs, let's talk first about some important things. What is a CFD? A CFDis a contract that allows a trader to trade and to take advantage of the price movements of the underlying assets without actually owning them.
So are there pips in CFD trading? The term is not often used in CFD trading. Instead, there are terms like cents and pence.
Summary
As a result of reading this article, you should now understand that a pip is the smallest unit of price change that is meSPAM BANble for a currency pair. You also now know about the crucial role that the pip value plays in trading. In the course of your actual trading, you don't need to calculate the pip value by yourself, as there are some calculators to do this job for you. To learn more, you should register a demo account so that you can experience how the pip value may affect your profits.
-
Not a fossilised relic just yet
With the buzz around renewable energy and EVs following the announcement of Biden’s Green New Deal, oil and other traditional fossil fuels fell out of favour with investors – and this despite record low prices. Brent was trading at a more than twenty-year bottom of $9.12 at the height of the pandemic, but even by the US presidential election in November, it still hadn’t managed to rise above $40 a barrel. All the young Tesla and battery metal ETF investors laughed at the “silly boomers” buying into the United States Oil Fund LP, but they’re not laughing anymore. Brent oil currently sits at a 7 year high of $84.42, which represents a gain of more than 900% from last year’s lows. Indeed, the United States benchmark, WTI Crude, has gained 70 percent this year alone. It’s all part of a wider global energy crunch that is seeing prices pushed higher for all types of fuels, including natural gas and even coal.
As business all over the world return to normal, electricity demand is skyrocketing, and the low supply of key fuels, coupled with seasonal pressure, has led to a perfect storm on the energy market. Several Wall Street forecasters have stated that oil and gas prices are set to peak in the near future, while Goldman Sachs analysts have predicted that the per-barrel price could hold steady around $85 for a period of several years. Mecuria Energy Group Ltd., on the other hand, has suggested that we could see prices north of $100 a barrel this winter. There’s even a sizeable portion of traders who are betting on even greater increases. In fact, the most widely held option is one that pays out if oil tops $100 a barrel by the end of December. However, increasing numbers of options trades with strike prices as high as $200 by late 2022 have also been made lately. As senior market analyst Ed Moya put it: “Crude price volatility is here to stay as demand uncertainty remains elevated over the short-term” and options certainly are an excellent way to balance risk and reward during unpredictable times. Moya also added, however, that “given the relentless winning streak, oil prices are ripe for significant rounds of profit-taking,” which is undoubtedly true.
Gas and oil intertwined
To really understand what is driving oil prices higher, we also need to look at its less glamourous cousin, natural gas. Much of today’s non-green electricity is produced by gas-fired generators. However, Europe’s biggest supplier of natural gas, Russia, has been artificially restricting supply to the EU in a bid to fast track the approval of its new Nord Stream 2 pipeline. In fact, Gazprom PJSC’s gas exports to these key markets have dropped to their lowest level since 2014 for this time of year. This is yet another factor boosting oil prices as many European nations are forced to increase oil’s share in their respective energy mixes in order to meet post-pandemic demand for electricity. The effect of this has been even more pronounced in light of the reluctance of OPEC+ to ramp up production as the high prices suit the cartel’s member states perfectly. Obviously, this means physical gas and oil (Henry Hub, Brent, WTI Crude) are still good investments, but even larger gains could be made by owning individual companies that not only own large amounts of these commodities, but which also make large, regular profits from their sale. Gazprom is an excellent example of one such company, especially if the Nord Stream 2 pipeline receives regulatory approval in the short to medium term. The Russian gas giant is already up 120% in a year and is still excellent value with its 8.13 p/e ratio and generous 3.42% dividend.
Make your mind up!
So, which is it? Oil at $100, $200 by year end, or a steady $85 for the long haul? The short answer is: nobody really knows. The interesting thing about this energy crisis is that it is for the most part entirely in the hands of human beings. The supply shortfall would soon be nipped in the bud if OPEC+ would only increase its production at least to their pre-agreed targets. Similarly, the gas shortage in the EU would disappear in an instant if the EU gave Nord Stream 2 the green light to begin operations. In fact, some have said that, with China’s economy slowing down and the US recovery going through a rough patch just now, oil demand is not likely to rise significantly above its current level in the short term. Gas, on the other hand, could well continue to climb given the huge uptick in domestic heating-based demand that will doubtlessly flood in if the harsh, long winter that is expected comes to pass. Longer-term, the price climate is even harder to predict, but forecasts trend towards more price spikes until fossil fuels are phased out entirely. For instance, a recent report from the International Energy Agency found that in order for major world economies to become carbon neutral by 2050, oil use must peak no later than 2025. However, based on current investments, green power generation won’t be sufficient to supplant oil until 2035.
Know your options with Libertex
Libertex allows you to practice your trading skills with the hot instruments on the demo-account before investing real money. For example, you might decide to buy WTI Crude or Brent and a few shares in Gazprom in the hope of some short to medium-term gains, but then purchase an option that would allow you to sell oil at say $70 in late 2022 when prices have probably normalised. Then, if gas and oil do the unlikely and start to trend down, you can quickly close these long positions and strike out your option to cover part or all of your losses. Trading CFDs is risky due to the complexity of the instruments. Diversifying your trading in this way is available for all users thanks to the award-winning Libertex app.
You can control all your positions from one, user-friendly interface and set automatic pending orders to ensure nothing is left to chance. For more information or to register your very own account, visit Libertex.com today!
-
Spread Trading For Beginners – What is a Spread In Forex?
One of the key competitive assets of most brokers, in the Forex market, is the spread size for currency pairs. A spread determines future costs a trader will have to face, which makes it a valuable term to learn.
In order to comprehend what a spread is, imagine any trading operation – buying clothes for resale. The difference between the price originally paid and the money received is called profit or income. A spread works similarly, and it is brokers who receive income in this case.
What is a Spread and How Does it Work?
Spread is the difference between a Bid and the Ask prices of each currency from a currency pair. In fact, this is a direct initial loss for the trader, which should be covered in the process of further trading.
Let's give an example on the popular EUR/USD pair with a hypothetical quote of 1.1152/1.1156. From the difference in the currency value, it can be seen that the spread in this case for one lot is 4 pips. To compensate for this loss, you want the currency pair quotes to change in your favor by at least 4 pips. Once this happens, you will start receiving a profit.
(https://carigold.com/forum/attachments/spread-trading_1-jpg.424378/)
After making a transaction, you get a loss which equates to the spread. It happens because you acquired a currency pair at a price slightly higher than the market price (the gap between your price and the market price is already a broker's fee). Therefore, it becomes an inevitable compulsory commission.
How to Calculate Spread
Spread = Ask (the price a buyer is willing to pay) – Bid (the price at which a market maker is willing to buy). Once again, set in pips for convenient calculation.
For example, if the quote of the GBP/USD currency pair is, bid = 1.2920 and ask = 1.2923, then Spread = 1.2923-1.2920 = 0.003 USD or 3 pips.
Why Calculate the Cost of the Spread?
The calculation of the spread cost during the trading process is necessary for building proper trading strategies, primarily automated ones, and for technical analysis of the current situation. The spread cost in the amount of profit becomes more significant when the position stays open for less time and when the frequency of transactions in the trading system gets higher.
(https://carigold.com/forum/attachments/spread-trading_2-jpg.424381/)
Spread cost = Spread size*Lot size*Number of lots
Let’s estimate the spread cost from the example above. The lot size is $100,000.
0.0003*$100,000*5 = $150.
What Affects a Spread in Forex Trading
Liquidity
The greater the number of market participants engaged in trading in a currency pair, the closer the prices at the time of the transaction. The spread size usually does not exceed 3-5 pips in the most popular pairs, and when trading rarer currencies, for example, the Canadian dollar or the Swedish krona, this figure can reach 50 pips and higher.
Current market situation
Important economic news, statistical information and the market's panic-crash generate an instant and significant change. Generally, the situation depends on economic and political factors in different countries and the world community as a whole. Any news can significantly affect the rates of leading currencies. For example, when, on one hand, a large number of buying orders withdraw from the market and, on the other hand, selling orders lag, it leads to an increase in the spread.
Broker's policy
Most brokers limit and guarantee the maximum spread size for given currency pairs within their commission schedule. But remember that this is how they make a profit and there cannot be brokers with zero spread accounts without them charging a commission.
Types of a Spread
There are two types of spread: fixed and variable. Below we explain their difference, advantages and disadvantages.
Fixed Spread
A Fixed spread is a constant value regardless of currency fluctuations. This type is set on the most liquid currency pairs where average spread fluctuations are not significant. In some cases, a spread can be increased by a broker manually depending on the investment, economic and financial forecasts.
Most often, a fixed spread is set for EUR/USD, EUR/GBP, USD/JPY, and GBP/USD currency pairs.
Advantages
- Fixed spreads allow traders to rely on a strategy without worrying about unexpected variables.
- Trading with fixed spreads works as a cheaper option because it calls for smaller regulatory capital. It is best for beginner traders who can’t afford to invest a lot of money when just starting out.
- It provides the trader with the predictability of initial costs in each transaction.
Disadvantages
- It cannot be used during scalping.
- You are likely to get requotes because your broker won’t be able to change the spread to accommodate new market conditions.
Variable Spread
A variable spread is set by the broker within the lower limit and may fluctuate or be influenced by changes in the currency value.
With a variable/floating spread, its value depends on the current market situation, including the volatility level. The size of a spread increases due to significant price movements. Most currency pairs have a floating spread.
Advantages
- Traders don’t have to worry about requotes because the variation in the spread takes into account changes in the market.
- It provides better pricing by dealing with prices from different liquidity providers – this leads to more profitable pricing due to the competition.
Disadvantages
- Trading risks increase significantly since a spread may look profitable but reverse in the blink of an eye.
- A variable spread widens in accordance with increased liquidity and is actually only low during market inactivity.
- It may even trigger protective stops and limits unintentionally.
Spread Trading Strategies
Spread trading strategies in the classical sense (that is, the difference between the Bid and Ask prices of the same asset) do not exist. Some novice traders take an integral hedging strategy on a spread, but this is a slightly different example of trading, and we use the words “spread” in a different way.
Spread trade with integrated hedging
(https://carigold.com/forum/attachments/spread-trading_3-jpg.424383/)
Integral hedging on a spread is, first of all, a hedging strategy. The word “spread” here means a different definition and is rather a slang.
As part of this strategy, the trader chooses two interrelated assets and opens deals in opposite directions for them.
It can be, for example, EUR / USD and GBP / USD. On the first currency pair, you open a deal to buy, on the other – to sell. In this situation, you do not need to put stop-loss, since their installation can lead to additional losses. Protection against excessive risks arises from hedging.
If the main asset moves in the right direction, then at some point the trader buries the deal first for an additional one and then for the main instrument (when net profit appears on it).
The strategy of integral hedging on the spread was originally designed to trade shares of the stock market. There were fundamental prerequisites for this strategy: transactions were always opened to buy stocks of an industry leader (for example, McDonald's) and to sell shares of its main competitor (for example, KFC).
Next, there are two scenarios:
In a calm market, McDonald's shares will show about twice as much growth as KFC shares – this will be the profit of the trader.
In the event of a correction or a downturn in the market, the price of the shares of both companies will decrease, and the trader will close both deals to about zero.
Thanks to the CFD tool, the same transaction can be easily implemented in the Forex market.
Advantages
- Flexible system of protection against risks due to hedging.
- Stable profits in a calm market.
- Minimal losses (or lack thereof) in case of a market downturn.
Disadvantages
- Relatively low level of profit (10-20% per annum).
- The strategy is ineffective in the short term.
Conclusion
These are the basics of using spreads in trading, which will improve your trading skills. Having this expertise in your arsenal, apply it for your advantage to trade in Libertex. Even the most knowledgeable person won’t be able to trade well without a proper platform.
- Convenient interface and versatility. The Libertex platform was designed with the intention of keeping an already familiar basis but making access easier and more user-friendly. All assets are sorted by indicators of maximum growth and decline, which makes it possible to quickly find the right currency pairs.
- Improved graphical analysis. The tools for graphical analysis and a set of technical indicators surpass those available in the original MT4. Following the example of the original, there are three types of standard graphs in the working area.
- Best technical analysis. The set of standard indicators is significantly expanded with a total number of 43 (while even the biggest competitors have up to 30).
Learning new tricks is a step-by-step process, which takes some time and practice. Register a free Demo account to practice your strategy of choice!
-
Elon Musk making headlines for all the right reasons
It seems like Tesla founder and CEO Elon Musk is never out of the news these days. First, it was his EV company's meteoric stock market rise during the pandemic. Then, it was his commercial space travel firm SpaceX's involvement in the race to bring extra-terrestrial travel to the masses. Now, it's that Musk himself is the richest man who ever lived. Not only has he beaten out his rivals Jeff Bezos and Richard Branson when it comes to developing superior space exploration tech, but he is also now the undisputed victor in the Battle of the Billionaires, raking in over $25 billion in one day following a bumper deal penned with Hertz for 100,000 Tesla electric vehicles.
Musk's crypto affinity
One thing that truly sets Musk apart from Branson and Bezos is the former's rather vocal penchant for crypto. It's no secret that the Tesla chief exec has an enduring interest in the original cryptocurrency, Bitcoin. In fact, his proclamations got to the point that he was able to move the markets with a single tweet. First, his announcement in February that customers would be able to pay for Tesla products in BTC sent the coin on an upward trajectory. Then, his move to transition away from Bitcoin due to concerns about the environmental impact of its mining led to a 20% decline. This begs the question: if Elon holds so much influence over the fate of the biggest and most mainstream digital currency around, what level of power could he potentially have over, say, a relatively minor altcoin?
Canine coins for the win
Perhaps the most significant altcoin to which Elon Musk has been linked is Dogecoin. The Tesla creator has been a staunch and very vocal supporter of the meme currency. He recently stated that one reason for his interest in the project was the number of ordinary Tesla and SpaceX workers that own it, explaining that "it felt like the people's crypto". However, a token spin-off of Doge, known as Shiba Inu, was also able to cash in on the Musk effect, rising over 360% in the space of just seven days following a tweet about the Tesla owner's new dog of the same breed affectionately named Floki Frunkpuppy.
Shiba Inu has since managed to cement itself among the top 20 cryptocurrencies by market capitalisation, gaining over $15 billion in value. In fact, SHIB has even generated its own spin-off, Floki Inu, which is up an incredible 72,471.2% in just three months!
Should investors go all-in on SHIB?
It's never a good idea to put all your eggs in one basket, and this is especially true of financial markets. Most investors consider that risk-weighted diversification is truly the key to success. Though FOMO makes it hard to resist when investor hears a visionary like Elon Musk talking about specific investments, in the words of the man himself, "don't bet the farm on crypto".
Cryptocurrencies undoubtedly deserve a place in any forward-thinking portfolio, but just be sure to keep their percentage weighting within reasonable limits (10-20% is a good maximum). Obviously, the bulk of any crypto holdings should be in established projects like BTC and ETH, with a smaller portion allocated to favoured altcoins like Doge, for instance. In fact, in a recent tweet, Musk himself confirmed that these three are the only digital assets he actually owns. Of course, investors need not limit themselves and can certainly include SHIB if they wish. Just heed Musk's central message and minimise your capital risk exposure accordingly.
Libertex for your crypto needs
So, if you're looking to bring your portfolio into the 21st century and add a bit of crypto into the mix, look no further than Libertex. Libertex offers all the big names like Bitcoin, Ethereum and Litecoin, as well as many of the most attractive altcoins, such as Dogecoin, Chainlink and, yes, even Shiba Inu.
The best thing about trading digital assets with Libertex is that you don't need to have a separate account with a crypto exchange or wrap your head around cryptocurrency wallets and the like. All Libertex digital currencies are CFDs, like the majority of its other instruments. This means that you can manage an ultra-diversified portfolio spanning stocks, commodities, Forex and crypto, all from the comfort of the award-winning Libertex app.
-
What are Forex robots and do they really work?
Forex trading attracts a lot of people, and every one of them have their own unique approach. Some people feel comfortable when trading long-term, others find day trading or active scalping more interesting. Some people enjoy an automated process, others prefer to open each deal by themselves. Automated Forex Trading is carried out by Forex robots – special trading software which can be used without the help of the trader.
After you are done reading this article, you will have a clear understanding of what a Forex Robot is and how it works. You will also be able to identify whether or not it is effective for you, what the pros and cons are, and whether you should use such a program in Forex trading.
What is a Forex Robot?
A Forex Robot is a trading software which is installed on the trading platform. This program can independently open and close deals without a trader.
Each Forex robot is based on the trading system.
Usually, this system only gives signals to the trader, who then decides whether he should open a deal or not. If there is a bot based in such a system, it could take over traders functions and replace him.
How does a Forex Robot work?
(https://carigold.com/forum/attachments/1-jpg.425536/)
Let’s take a closer look at the principles of robot trading, using a simple trading strategy with one moving average. If a trade, based on this strategy, is conducted manually without using the auto trading program, then the process would look like this:
1. A moving average with a period of 10 is plotted on the chart. This moving chart will show the average price for the last 10 time frames.
2. The price moves more sharply than the moving average and crosses it periodically.
3. If the price crosses the moving average from the bottom up – it is a signal to open a buy trade.
4. If the price crosses the moving average from top to bottom – it is a signal to open a sell trade.
5. An open deal is closed when the system signals in the opposite direction. Thus, the trade will be carried out constantly and the direction of the transaction will be selected depending on the direction in which the price crossed the moving average.
This strategy is given only for the sake of an example, as it’s the simplest and clearest. However, because of its primitive nature, it would be ineffective in real trading and would give a large number of false signals.
In order to create a robot that trades on this system, you need to create a program that will take all circumstances into account. Even a novice programmer can easily complete this task.
It is a little more difficult to create a robot based on a fully-fledged trading system with 3-4 indicators and the separate conditions for exiting the transaction with the help of stop loss and take profit. However, both of these programs should be similar in principle, only the number of conditions and lines of code will change.
When the robot is ready, the only thing left is to add it to the trading terminal. It can be done quite simple using the platforms of the Meta Trader family – they provide special functionality for robot trading. After that, the only thing that remains is to press the start button, and the bot will start working (meaning opening and closing the deals based on the trading system embedded in it). You can stop trading with one single button.
As a rule, the trader can always interfere with the trading of the robot. For example, if a trader believes that it is time to close a deal, even though the terms of the trading system require it to stay open, he can close it. After, the robot will simply wait for the signal for the next trade to be opened and continue trading in normal mode. However, this possibility has both pros and cons. Although the trader may notice factors that are not available to the robot, his decisions can be affected by human emotions, which always harms the trade and worsens its result.
How Effective Are Forex Trading Robots
(https://carigold.com/forum/attachments/2-jpg.425539/)
It is hard to say whether Forex robots are effective or not. Every robot is based on a system, and system trading is the basis of success in Forex. However, it is not always enough to simply open and close deals on system signals to make a stable profit. Often, the trader is also required to conduct an additional analysis of the situation and make quick decisions, taking new factors into account – and the robot does not have this ability.
Indeed, patterns can be found in the financial markets. After studying these patterns, the analyst can create a system that will generate stable signals, and most of them will be profitable. That means that trading on such a system will bring more profit than losses, and the trader will be able to receive a stable income. You can make a robot that will also effectively trade and make a profit using this system.
A system that worked flawlessly yesterday could become unprofitable tomorrow. And since any system generates both true and false signals, it will not immediately become clear that the system has just stopped working. The robot, based on such a system, can continue trading for days and weeks and increase the loss of the trader until he realizes that this is not just a “black line”, but the final “death” of the system.
If the robot is launched quickly, then in theory, it may have time to bring enough profit that will cover the losses of its last days of trading, before it becomes clear that it is no longer effective. However, the market changes unpredictably, and sometimes a robot, which was based on a fresh system, will give more false signals than the right ones after just a couple of days of being created and implemented.
All of the above only applies to a situation where a trade, that is using a robot, analyses the market, creates systems, and writes software. Or if it’s all done by a team of professionals working together on a common project. If a trader buys a robot from third-party developers, chances of profitable trading with such a bot are minimal. Moreover, there are too many risks in such a scenario. First of all, only the creators know the true “age” of such a robot, but you have no idea of its expiration date. Additionally, most traders are not strong programmers, so it is unlikely that they will understand whether they’re buying a working tool, or an appealing fake that doesn’t contain real statistics.
Pros and cons of Forex robots
To assess the effectiveness of trading robots better, let’s consider their advantages and disadvantages. We will also compare them with manual trading.
(https://carigold.com/forum/attachments/3-png.425540/)
As you can see, all factors considered, robot trading is not as effective and convenient as manual trading.
Conclusion
(https://carigold.com/forum/attachments/4-jpg.425541/)
Trading with the help of Forex robots has its pros and cons, but the number of disadvantages exceeds the number of advantages. Although robots allow you to remove emotions from the equation and are able to process a large amount of information, their artificial intelligence is not enough to compete with human traders.
As a compromise, you can consider trading with expert advisors. This is a type of trading software. Its main difference from the robots is that it only gives signals to the trader, but does not make decisions and does not trade independently. In fact, the EA is a complex indicator that combines several formulas and gives the clearest and specific signals.
However, regardless of whether you are going to trade with the help of an expert advisor or decide to study the charts yourself, you will need a certain base of knowledge and skills. On the Internet, you can find enough information about Forex, binary and stock market trading. To practice and perfect your trading skills, consider using the Libertex trading platform. You can open a completely free demo account there. It has a user-friendly interface, which is designed for both expert traders and novices.
-
What Is Forex Hedging?
When you buy a car, you want to protect yourself against the possibility of accidents and substantial financial losses. It is the reason people purchase auto insurance. In the Forex market, hedging is the equivalent of that but only for your trades. The first example of financial hedging occurred in the 19th-century in agricultural futures markets. What does it look like now, and how can one use it properly? Let's analyze the ins and outs of hedging and what strategies you can implement to protect your funds from pricing fluctuations.
What Is Hedging and How Does It Work?
Hedging means investing in trades that will protect your funds from risky situations. Technically speaking, you would make offsetting trades in assets with negative correlations. It means that one asset decreases as the other increases, and vice versa. Put differently, one investment can be hedged by another trade in the opposite direction.
As we have said earlier, hedging works similarly to an insurance policy. However, it is not as easy as just renewing insurance once a year – it takes more skill and involvement to implement it in financial markets. But this method is an unspoken rule among different types of traders and investors. Individual traders, portfolio managers, and corporations all use hedging techniques to varying degrees.
Hedging is meant to reduce the risk of adverse price movements. Even though it can’t prevent feared events from happening, it prepares you to deal with the consequences better. The impact of an adverse event will be reduced, and your losses will be limited to a known amount.
What Is Hedging in Forex?
(https://carigold.com/forum/attachments/hedging_1-jpg.427672/)
A Forex trader can create a “hedge” using a variety of methods. You can open a partial hedging position to diffuse the impact from negative market moves to some extent. Alternatively, you can carry out a complete hedge to fully mitigate your portfolio’s exposure to fluctuating prices. You can also use different financial instruments, such as futures or options.
An important thing to note about risk reduction with hedging is that it also implies a decrease in profits. Naturally, risk management is not free. This technique does not earn you money but instead minimizes your losses. If your initial investment makes money, you will lose on the other investment that you hedge with. And the other way around – if the second investment brings profit, the initial one loses.
For example, let’s imagine you have the following open positions:
- One lot of EUR/USD (shorting)
- Two lots of GBP/CHF (shorting)
- Long one lot of USD/CHF (long position)
You have not been planning to close these trades, but you are sensing possible fluctuations with the U.S. dollar because of certain political events. Instead of closing your existing trades, you take on an additional position – selling USD/GBP. It reduces your risk since you:
- Sell U.S. dollars to buy pounds
- Have a long USD trade and short GBP.
If you want to entirely remove your exposure to the dollar by selling two lots of GBP/USD. However, it would affect your exposure to GBP, which could turn out to be positive. Your decision depends on your risk tolerance.
Advantages and Disadvantages of Hedging
(https://carigold.com/forum/attachments/hedging_2-jpg.427673/)
Just like any trading tactic, hedging comes with a set of benefits as well as some drawbacks. In some cases, it pays off, whereas in others, it doesn't make sense. Before you can make an informed decision, let's take a closer look at arguments in favor and against this method.
(https://carigold.com/forum/attachments/3-png.427674/)
Forex Hedging Strategies
All hedging strategies are designed to minimize risks of adverse price movements in one direction or another. However, every strategy approaches this issue differently. Here are some of the most common strategies that you can use in your trading activity.
Futures Contracts
Futures are one of the most commonly used derivatives when it comes to hedging, especially by companies or corporations, to minimize their risk exposure.
Let’s say there is an American-based company that is about to receive euros in several months. They can sell euro futures contracts on the exchange for the amount they are expected to receive. A U.S. company does not need euros, which is why the move is justified. Plus, the company may want to have a locked-in rate for the euros to protect itself from foreign exchange risk.
By the time the receipt day arrives, there might be two possible outcomes. If the euro drops in value, the company’s funds are protected since the transaction will be executed at the previous price. But if the euro appreciates, it will have lost on an opportunity to profit. So, before hedging, the company needs to decide which outcome is more important.
Forward Contracts
Another prominent hedging tool is forward contracts, which work very similarly to futures. The main differences are that forwards imply a private contract between parties rather than an exchange, and the contract is not standardized.
Let’s say company A buys AUD $10,000 for JPY from company B at a 74.9 rate, and the maturity date of the contract is by the end of the year. Some businesses, especially the growing ones, can't always predict and specify the time for settlement. Then they set up a flexible forward contract, which gives them the option of accessing a portion of the total value at any time before the final settlement date.
Company A may drawdown from the contract several times by the end of the year, in $2,000 installments. Despite currency fluctuations taking place within the year, the company will eventually buy 749,000 JPY for AUD $10,000 at the locked-in rate.
Direct Hedging
This strategy requires you to open two positions on the same currency pair in direct opposition to each other for the same period. You may have opened a long position on a pair, so you will need to enter a sporting trade for that asset.
Instead of exiting a position in fear of an adverse movement, you open another one and have two open positions at the same time. When strong market fluctuations die down, let's say after a postnews period, you can exit the hedging position.
For example, you have a long position on the AUD/USD currency pair and you expect a short-term drop in the value of the Australian dollar. In such a case, you can enter a short position on the same pair to offset your losses just in case.
Pair Hedging
With a pair hedge, you open two positions on different currency pairs. The first position should be on a pair that is rising, and the second one should be losing in value. These two positions automatically create a hedge since they are unlikely to be both losing.
To get into more details, these two opportunities should be almost identical and trading at irregular price points. Find currencies that are undervalued and overvalued to benefit from them moving closer to their fair pricing.
Make sure to find currencies that are in so-called "asset correlation", meaning they are considered to be in a close relationship or interdependent. For example, a Generalized Rule Induction (GRI) methodology indicates a correlation between Australian and Japan markets. So, whenever the currencies are moving in opposite directions, you can take advantage of that.
Tips for Forex Hedging
(https://carigold.com/forum/attachments/hedging_3-jpg.427675/)
As an extra help for traders interested in hedging their positions, here are some tips to prevent some widespread mistakes:
- Hedging is not for complete beginners – While it is a commendable initiative, traders need to be familiar with Forex in general and acquire sufficient experience to handle it
- Choose a broader pip range – If you don’t want to bear losses because of commissions, make bigger leaps than you would usually do
- Don’t push it – Hedging is a protective strategy so your moves should not be motivated by what could bring the most profit
- Evaluate your trades continuously – Rather than blindly going through your transactions, make multiple assessments throughout the process, and adjust your next steps
Conclusion
Overall, any trader, big or small, institutional or private, investing or speculative, will want to limit their risks on any financial market. Such a volatile market as Forex requires risk management techniques even more so. There are many hedging strategies you can use, and the choice ultimately depends on your trading preferences.
Unfortunately, no method can protect your profits at all times, so trading will always bear some degree of risk. Make sure to constantly learn about Forex and improve your skills to make sound decisions. If you want to experiment risk-free and practice in real market conditions, set up a Libertex demo account. Our platform also allows you to try out different strategies to find the right one for you and maximize your potential future success.
-
What Is EURO STOXX 50?
The EURO STOXX 50 Index is used to measure the current situation in the European economy. The calculation of this index takes into account 50 large companies in Europe. The selected companies are called "blue-chip", meaning they are well-established and financially sound. Similar to the Dow Jones 30 in the United States, it gives traders and investors information on the current trading opportunities.
What Is EURO STOXX 50?
The EURO STOXX 50 shows the share price performance of 50 companies with the highest capitalization. They account for 60% of the total cap in Europe, which is the majority of publicly available shares that are regularly traded. The companies cover 19 supersectors in 11 Eurozone countries.
STOXX Limited is a company that calculates stock indices. Indices they calculate are often used as financial instruments underlying financial products. Additionally, they are used to gauge risk.
Understanding EURO STOXX 50 Companies
(https://carigold.com/forum/attachments/1-jpg.428687/)
The constituents within the Euro STOXX 50 composition are stable, yet dynamically developing companies. Therefore, the list of companies is reviewed annually in September for any changes. The table below demonstrates a part of the up-to-date index composition.
(https://carigold.com/forum/attachments/2-png.428688/)
As has been said before, there are 19 supersectors as defined by the Industry Classification Benchmark (ICB). Companies are categorized depending on their primary source of revenue. Stocks are ranked based on the free-float market capitalization for each of the supersector. The largest stocks make the final selection list.
Factors Influencing the Euro STOXX 50 Index Price
The Euro STOXX 50 index is influenced by quite a lot of factors, both internal and external. These factors can cause the price to rise or fall, so any trader should keep an eye on them. It is mainly affected by:
- The economic indicators of the selected companies.
- Political and economic events in the Eurozone.
- Recent events with the Euro exchange rate movement.
- Monetary policy in the United States and other major market participants.
Advantages and Disadvantages of Euro STOXX 50
Working with Euro STOXX 50 can be a way even to increase your capital. The following factors increase your chances of profits:
- It is comprised of stocks with the highest liquidity and trading volume in European markets.
- Most of the companies in its composition are German and French enterprises, which are characterized by a stable economy.
- Includes many organizations within the industrial sector, which correspond to the most rapidly growing ones.
- It is more resistant to price drops compared to the stocks of individual companies.
- On the other hand, the index is not without its flaws.
- The index is affected by political events in the Eurozone.
- Severe performance deterioration (stock quotes) in even one enterprise in its composition often affects the entire index.
- Heavily dependent on currency rates.
EURO STOXX 50 CFD Trading
(https://carigold.com/forum/attachments/3-jpg.428689/)
The Euro STOXX 50 CFD (Contract for Difference) operations are operated through speculation or by investing. Like any stock market index, it allows you to opt for different CFD strategies offered by your trading platform of choice.
What Is CFD Trading?
CFDs deal with differences in prices of various underlying assets that are traded in financial markets. The contract helps you profit from differences between current asset value and its value at the end of the contract. Bear in mind that it does not imply ownership of the underlying asset itself.
Before CFDs, you needed a large capital to trade on international trading exchanges since the associated fees were extremely high. CFDs opened access to exchange-traded instruments to more people with different funds.
Advantages and Disadvantages of CFD EURO STOXX 50
When discussing CFD Euro STOXX 50 trading, it is worth highlighting what makes it more profitable and effective in comparison with some other assets. The advantages of this method include:
- By working with the EURO 50 index CFDs, you get to expand your portfolio to the European market (if allowed by local regulations).
- You can trade in either direction, choosing between short and long positions. You make a profit both from growth and fall in prices.
- You reduce your financial risks from future price changes.
Before giving preference to CFDs, each trader should also consider the negative aspects associated with this route. The main drawback is often the high spreads, which reduce income and increase losses.
Also, this type of trading makes it impossible to own the asset and receive dividends. However, it is not a big obstacle as the majority of market participants are more likely to obtain speculative profit rather than own the asset.
(https://carigold.com/forum/attachments/4-jpg.428690/)
EURO STOXX 50 CFD Trading Strategies
The Euro STOXX 50, as well as its constituents, are listed on the Frankfurt Stock Exchange. If you reside outside of Europe, you can work with this instrument in one of the following ways:
- Through a local broker registered in the eurozone or the USA.
- Through a foreign broker providing access to trade on this exchange.
The Euro STOXX 50 is often used for speculative trading and geopolitical investing since it’s a critical assessment of Europe’s market. Therefore, to speculate on changes in Europe’s economic situation, traders use:
- Bullish strategy – It is applicable at times when stock prices within the index have recently reached a peak and reversed. Remember to use stop loss to mitigate the risks.
- Bearish strategy – Use this strategy if the index price is relatively low, but the market news is favorable. The strategy fits long-tern as well as short-term trading.
Conclusion
The Euro STOXX 50 is one of the key indexes for the European Union stock market. Its calculation includes the main indicators of the current economic activity of the 50 selected largest companies. If you use this powerful indicator correctly, you can make good profits from changes in its dynamics.
The success of investing depends on the correct understanding of the asset you are working on and your predictions. But if you want to back your knowledge with practice, register a free Demo account on Libertex. Improve your skills and push yourself to become a better trader without risking real money.
-
Libertex launches new account type for committed investors: meet Libertex Invest
The number of new entrants into the equities market is soaring, but rather than aiming for short-term results, the new breed of market players is more interested in long term, low-risk capital growth. Libertex, a leading international firm offering tradeable CFDs for over 24 years, is now launching a new account type tailored specifically to the needs of today’s investors. Libertex Invest aims to provide investors with unmatched terms that offer an advantage to conservative but consistent activity in the financial markets, providing a range of benefits over the one-size-fits-all approach that still dominates the online trading industry at large.
What is Libertex Invest?
Libertex Invest is a brand-new account type offered on the multi-award winning Libertex trading platform designed especially for investors. Unlike Libertex’s standard trading accounts, this new option is geared towards people who are looking to make regular purchases of stocks over an extended period of time, with a view to building and maintaining a long-term portfolio. Now, at this point, you could be forgiven for wondering what makes Libertex Invest any better than a standard client account. However, here’s the best part: ZERO commission! No, you didn’t read that wrong; Libertex Invest clients won’t have any commission or account management fees eating away at their potential profits or dividends, which means they can reinvest them instead of giving them back to their broker.
How is Libertex Invest different from a standard Libertex trading account?
Obviously the biggest difference is the zero commission offered on all trades. For a full comparison of both Libertex account types, consult the table below:
(https://carigold.com/forum/attachments/1-png.429601/)
Real advantages for real investors
Thanks to Libertex, the days of responsible savers being punished with high commission and account inactivity fees are now over. With a Libertex Invest account, you are no longer paying huge amounts to your broker. You invest as much as you want each month and because Libertex Invest only offers real stocks with no multiplier, you have much greater control over your capital risk. It’s how money management should work – fast and free. Also, apart from there being no overt fees and charges, Libertex Invest ensures no SWAPS, margin calls or stop outs drain your cash. What’s more, your dividends are credited directly to your investment account balance right on time, so you decide what happens to them and no one else. So, don’t let fees and commissions eat away your budget; put it into better use instead with a Libertex Invest account.
How do I open a Libertex Invest account?
If you’re new to Libertex and are creating your very first account, Libertex Invest is now offered as a standalone option during registration (see below).
(https://carigold.com/forum/attachments/2-png.429602/)
Otherwise, for existing clients, the Libertex Invest account has now been added to the login screen from where you can register your account. Simply go to your profile and select the "Create Libertex Invest Account" option as shown on the screenshot below:
(https://carigold.com/forum/attachments/3-png.429603/)
So, whether you’re a new client or one of the Libertex faithful, why not take advantage of this excellent opportunity for commission-free investments? Even die-hard traders would do well to keep some of their portfolio in a lower-risk portfolio. With that in mind, either go to libertex.com or sign into the platform and register your own Libertex Invest account today. Expand your portfolio, invest in stocks commission-free with Libertex and... “Trade For More”!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% 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.
Jurisdictional limitations: Libertex Invest is only available in EEA countries.
-
Everything About Nikkei 225 – a Leading Japanese Stock Market Index
You may already know about the Dow Jones at the New York Stock Exchange or the FTSE at the London Stock Exchange. These indices are used to gauge the performance of a certain market sector and speculate on it rather than individual stocks. Similarly, the Nikkei 225 is an underlying index at the Tokyo Stock Exchange.
Nikkei Definition
Nikkei 225 is Japan’s most important index, which reflects business activity in the country. It contains 225 stocks from different companies traded on the Japanese Stock Exchange. The index itself displays the average arithmetic value of these stocks. It was introduced on September 7, 1950, meaning at that time, its value was published for the first time. It was named after a newspaper that calculated it.
There are different variations of the index: Nikkei 500, Nikkei Stock Index 300, and Nikkei All Stock Index. All of them display somewhat similar information, but the Nikkei 225 is still considered the leading, most widely used indicator.
The selection criteria are based on the price of the company’s stock rather than market capitalization, like in some other indices. Only the largest ones make it to the list of constituents. The higher-priced stocks have the largest influence on the index.
Understanding the Meaning of Nikkei
(https://carigold.com/forum/attachments/1-jpg.430298/)
The Nikkei 225 consists of stocks selected from top-performing blue-chip companies based in Japan. The main criteria for being selected are the price of the stock, liquidity, and sector balance. Also, the stock must be listed on the Tokyo Stock Exchange First Section.
The composition of the Nikkei 225 is subject to an annual reexamination – a Periodic Review. This takes place in October, where every company is checked to determine whether it fits the criteria. And the process of changing the list of constituents is called an Extraordinary Replacement.
(https://carigold.com/forum/attachments/2-png.430299/)
It is calculated based on the value of the 225 most liquid stocks of the Tokyo Stock Exchange. The formula was developed by the American company Dow Jones & Co., which differs from their European counterparts.
Factors Influencing the Nikkei 225 Index Price
It is commonly known that Nikkei 225 is extremely sensitive to not only local news and events but also those events occurring around the world. Traders who work with the Nikkei index should closely monitor:
- Japan’s macroeconomic indicators: inflation, deflation, unemployment rate, the number of new jobs, etc.
- Financial prosperity of individual companies included in the index
- The overall situation in foreign stock markets, but especially movement in the US market. If the Dow Jones index rises, Nikkei will react in a similar way
- World events, natural disasters, wars, political instability, and economic news The tight connection between the Japanese and American markets, particularly their main indexes, is attributed to Japan’s exports to the USA. Therefore, you should keep an eye on the dynamics of the S&P 500 and the Dollar Index as well as other US indicators.
Advantages and Disadvantages of Nikkei 225
The Nikkei 225 has specific differences that make it stand out from indices like FTSE or DAX. When contemplating whether you should invest in this instrument, keep in mind the following benefits:
- The simplicity of being a price-weighted index
- Ease of tracking the overall health of the economy
- Fixed spread
- Long trading hours
- Less risk than capitalization-weighted indexes
There is no financial instrument that is flawless and carries zero risks. In this context, here are some considerations regarding the Nikkei index:
- Significant effect of small firm stock changes
- No attention to the size of the industry sector
- Vulnerability to sudden drops in the bear market
What is Nikkei 225 CFD Trading
The Nikkei 225 remains the most widely quoted average in Japan because of good trading opportunities. However, the Nikkei index is not directly tradeable. Instead, there is a convenient option to trade this index using CFDs (contract for difference).
What is CFD Trading
(https://carigold.com/forum/attachments/3-jpg.430301/)
CFD trading is based on price differences rather than acquiring the asset. The main goal is to gain speculative profits from the differences in underlying assets’ prices. CFDs are an easy and convenient way to invest in the securities market in either direction. Depending on what behavior you expect from the market, you will be able to adjust your strategy accordingly.
Advantages and Disadvantages of CFD Nikkei 225
Those familiar with CFD, in more detail, recognize the many positive aspects of this tool. In many cases, it proves to be more profitable and convenient than trading the underlying asset itself. The benefits include:
- You can significantly increase your initial capital with leverage
- Work with both rising and falling market
- Ability to trade international markets from one account
- Opportunity to hedge an existing shares portfolio
- The flexibility of timeframes and contract sizes
Novice traders who want to try trading CFDs should not forget that such trading still has certain risks:
- Losses associated with excessively large leverage
- Over-trading because of low capital requirements
- No rights as a shareholder
FTSE Nikkei 225 Trading Strategies
The Nikkei 225 has gained popularity among CFD traders due to its good volume and volatility. The index has earned a reputation of being the most volatile index due to sharp fluctuations in quotes. Analysts recommend that trading on the Nikkei Index be done by experienced and active traders. At the very least, you should feel prepared for different outcomes.
The index is usually growth-oriented. Sharp drops in value only occur during massive crises, that is, every five to 10 years. Once a year, you can expect it to sink by 10-15%. When trading in a bearish market, stay cautious, and always set up a stop-loss. All the other times, when the market is going up, stick to a bullish strategy. Setting a stop-loss is less crucial but still advisable.
Conclusion
Nikkei 225 Index is a leading stock price index in Japan. If you are looking for an investment tool to diversify your risks, it will be a suitable choice. The Japanese economy is still on the rise, and this directly affects the performance of the index.
With all this information in mind, it's time to use it to your advantage. Register for a free demo account on Libertex and try out your skills in trading any financial instrument. Real practice can only occur in a live market environment. You will familiarize yourself with the technical aspect of our platforms and become equipped to be able to make a good profit.
-
Full What Is Interest Rate Guide for Forex Trader
The interest rate was introduced as a tool that allows you to get paid for submitting your funds for other parties’ usage. Interest rates were introduced in Ancient Greece and sometimes were represented as natural goods, not money. For example, those who took grain had to return more grain.
In any case, throughout the years, the interest rate was assumed to be something negative, so banks and lending organizations, as we know them now, became widespread and completely legal in the recent past. Today, taking out a loan is quite easy, and almost everyone has taken out a loan, at least once, so it is important to know more about the essence of the interest rate, as well as the different types.
What Is Interest Rate?
The interest rate can be called payment for receiving a loan. When you take out a loan, you need to return the total loan amount, plus interest rate, which is derived from the amount owed. For example, if you take a $100 loan and a 7% interest rate, you need to return the $100 principal and $7 in interest.
When Are Interest Rates Applied?
(https://libertex.com/sites/default/files/inline-images/was-ist-ein-zinssatz1.jpg)
The interest rate is applied when you lend assets - fiat, crypto, etc. No matter whether you are an individual or act as an entity, the interest rate can be applied when you borrow funds. The interest rate can rise or decrease - it all depends on the terms of the loan.
How Is The Interest Rate Calculated?
There are different types of interest rates, and thus each type is calculated differently. Regardless of what interest rate amount is applied, it can always be represented in an equation. We will disclose below how to calculate simple and compound interest rates.
How to Calculate Simple Interest Rate
A simple interest rate is a basic type of interest rate. It considers that you need to repay a principal plus interest only. For example, when you take out a $100 loan, with a simple interest rate of 5% applied, you need to repay $105 in total.
However, usually, when you take out a loan, there is a specified term for which the interest rate is applied and payment periods. Usually, the interest rate is applied per annum, and the payment period is applied on a monthly basis. Thus, if you take $100 for three years, and a simple interest rate makes 5% per annum, you have to repay:
$100*(5%*3+100%) = $115
We take $100 as principal, multiply 3 by 5% as there are three years for the loan usage with a 5% interest rate per annum.
Your monthly payment will be:
$115/36= $3.19
We take the whole sum to repay, which totals $115, and divide it by the number of months in 3 years, which equals 36. Thus, you need to pay $3.19 if you take out a loan under the terms described above.
How to Calculate Compound Interest Rate
Compound interest is much more complicated than simple interest. An applied compound interest rate means that you pay interest on the principal, plus interest on the interest for the past time periods. In plain words, that means that if you take $100 for three years, with a 5% compound interest rate per annum, you will be charged by $5 interest for the first year, $5.25 for the second year, and $5.51 for the third year. The full interest amount will total $15.76, and the whole sum you need to repay will equal $115.75 ($100 of principal plus $15.76 in interest).
The compound interest you need to repay can be calculated using this formula:
CI=P*(1+IR)^n-P; CI - compound interest P - principal IR - interest rate
When you compare a simple and compound interest rate, it’s obvious that the second option is worse for the borrower if the same rate is applied. For example, we have provided the difference only equals $0.76 ($15,75-$15). However, if you take out a loan for a long period of time, like 20 years, the difference becomes much more significant.
Which Types of Interest Rates Are There?
Along with the simple and compound interest rates, there are other types of interest rates one should know about:
- fixed
- variable
- amortized
- prime
- discount
Fixed Interest Rates
A fixed interest rate considers that it won’t change no matter how the interest rate changes on the market. For example, if at the moment you take the loan at a 7%vinterest rate, with a medium interest rate on the market of 7%, it remains unchanged no matter what.
Most lenders prefer this type of rate because it allows you to plan your payments precisely. The main advantage of this kind of rate is stability. However, there are issues with it, as well. For example, your interest rate cannot be decreased if the interest rate on the market falls. On the other hand, it cannot rise if the interest rate on the market rises.
Variable Interest Rates
A variable interest rate means that the interest rate for the loan can change, and its size depends on the prescribed conditions. For now, in the US, the variable interest rate usually changes along with changes in the Cost of Savings Index. The good thing about this type of interest rate is that it can decrease. However, the bad thing is that it can increase as well, and thus you may have issues with repaying the loan. Generally, it is an antipode of the fixed interest rate.
Amortized Interest Rate
An amortized interest rate is about charging the principal remaining with the interest rate applied. Thus, an amortized interest rate considers that you pay more interest at the beginning of the loan period and less principal. As time passes, you pay less interest and more principal.
Prime Interest Rate
This kind of interest rate is usually applied to large institutions like banks or corporations. The prime interest rate is usually lower than the general interest rate and is only enforced for trustworthy parties.
Discount Interest Rate
A discount interest rate is applied for short term loans. It is calculated on the basis of the risks, borrower’s cash flow, and other temporary factors.
Comparison Rate for Decision-Making
When you have a choice of alternatives to choose from when taking a loan, your best helper in this decision making is the comparison rate. It is used to figure out the loan cost deriving the interest and all other costs that will be charged when you take the loan. For example, if the interest is 7%, while in the meantime, the fees and charges applied for this loan make 0.3%, the comparison rate will equal 7.3%. This indicator allows you to get a clear understanding of your true costs for loan repayment.
Thus, when you have several offers to take out a loan from, consider not only the interest rate but the comparison rate as well. Let’s take an example:
- One bank offers you a loan with an interest rate of 6%. Along with that, you are charged for loan insurance by 0.2% and a service fee of 0.6%.
- Another bank offers you a loan with an interest rate of 6.5%. There are no additional fees applied.
As you can see, although the first bank offers you a loan for 6%, your comparison rate will make 6.8%. Although the second bank offers a greater interest rate for the loan, it is still going to be a more profitable solution to take out a loan there as 6.8% is more than 6.5%.
What Is The APR
APR is the annual percentage rate. The annual percentage rate is a coefficient of the rate which is charged per annum. The APR is the basic and most widespread indicator used to evaluate the cost of the loan. Considering the APR is vital for decision-making purposes.
What Is the Difference Between Interest Rate and APR
There is actually no difference between the interest rate and APR. Actually, APR is one of the characteristics of the interest rate. As we already know, APR is the annual percentage rate, which means that it is the charge for the loan per annum. The interest rate is a figure that shows the charge for using the loan. Usually, when someone points out the interest rate, the period for which it is applied, is also underlined. For example, what we call interest rate can be applied per quarter or on a monthly basis. Though usually interest rate is applied per annum, so in the majority of cases, the interest rate equals the APR.
Let’s take an example. You take out a loan with an interest rate of 4% per quarter applied. If it is a simple interest rate, then you can say that the APR for this loan equals 16% as there are four quarters in a year.
Interest Rates and the Forex Market
Interest rates play a large role in the economics and financial markets, including Forex. The increase of interest rate usually considers that the economy has slowed down, while a decrease in the interest rate usually means that the economy is moving faster.
Depending on the assets and tools Forex traders deal with, there can be different effects upon a change of interest rate, on the global markets. An inadequate interest rate, no matter whether it is too low or too high, will cause instability and crises on the market, which should be considered by the Forex trader when one figures out a strategy.
(https://libertex.com/sites/default/files/inline-images/was-ist-ein-zinssatz2.jpg)
How Do Interest Rates Affect Currencies?
The higher the interest rate, the higher the inflation will be. If you compare prices 20 years ago and today, it will be obvious that they have increased dramatically. That is all tied to inflation, so $10 today and $10 in the 1990s is a lot different.
If the central bank of a specified country has increased an interest rate, this will lead to the growth of inflation of the currency, and in the long or even short term, this factor will cause a falling trend for the specified currency.
Thus, for a trader, it will be valuable to have practice dealing with this factor. Track the changes in the currency price on the Forex after the release of news related to a change in interest rates.
Conclusion
Forex traders should be aware of interest rates, types of interest rates, policies of central banks, and other related subjects. The thing is, prediction of changes in interest rates in a given period can help a trader make better decisions.
Knowledge of interest rates on the mortgage or business loan markets and peculiarities of this subject will also be helpful. Considering the role interest rates play in the global economy and all of the industries, a trader who ignores this topic will be blind in one eye.
To figure out the best strategies for using information about interest rate changes in trading, use the Libertex trading platform. Here you can open a demo account and test various strategies to examine them for efficiency.
Consider registering an account and making demo orders upon receiving a change of interest rate news release. For example, try the EUR/JPY trading pair. Track the changes in interest rates of central banks and news related to this topic, and make orders (long or short) based on these changes. It is likely that, based on monitoring the interest rate, you will build a successful trading strategy on the Forex market.
-
Dollar in the spotlight ahead of crucial FED meeting
The world's reserve currency, the US dollar, has experienced sustained demand in recent weeks as uncertainty grows amid rising coronavirus cases and runaway inflation. Mounting price pressure has led to louder calls for the central bank to tighten its monetary policy, with the US Federal Reserve hinting at this possibility several times over the past couple of months. Though the greenback has been trading slightly subdued following a sell-off across shorter-duration Treasury bonds, the consensus is that the Fed will announce the long-awaited start of its stimulus tapering at the regulator's upcoming meeting on Wednesday. Such a firm move towards a more hawkish stance will likely buoy the dollar, prompting a rise in demand for US Treasury bonds that should help the US national currency strengthen against the other majors.
Bad news for the Fibre
The EUR/USD pair has been on a protracted downtrend for some time and seems to have moved into a consolidation phase around 1.1600 this week. However, a combination of inflation woes and Fed stimulus tightening is likely to drive the euro down to new local lows over the coming weeks. In fact, Commerzbank's Team Head FICC Technical Analysis Research, Karen Jones, expects the pair to challenge the recent low of 1.1522, to begin with, before slipping to 1.1366 thereafter.
Let's not forget that Europe and the single currency have their own unique problems right now. First, there's the ongoing energy crisis that has seen natural gas (and, by extension, electricity) prices rise several-fold in the space of a few months. Then, there's the nascent COVID wave that threatens to plunge several European countries back into lockdown. Looking at the technicals, EUR/USD has just failed a smidge ahead of the 55-day MA at 1.1694 and the 1.1696 five-month downtrend. This suggests a decline is due, especially considering the fundamentals we've already covered.
In light of this and other cyclical concerns, the Fibre looks a solid short at the moment. To protect against intensifying volatility, however, it may also be wise to consider a small gold allocation.
Sterling rues missed opportunities
Things are not quite as negative for the British pound, despite the island nation facing similar issues surrounding energy prices and inflation. Some supporting factors include the positive sentiment over the future of post-Brexit Britain and the extremely high vaccination rate of the population, making a fresh lockdown unlikely.
However, GBP/USD has already failed to capitalise on the mild bearish atmosphere around the dollar, continuing to slip lower as investors gear up for pivotal Bank of England (BoE) and the Federal Reserve policy meetings. If a rate hike is ultimately announced by the US regulator, it will put even more downward pressure on the Cable. This effect is only likely to be amplified by the continuing uncertainty over the Northern Ireland protocol, which makes sterling inherently less attractive to investors.
According to FX Strategists at UOB Group, GBP/USD could be heading for its local support of 1.3625 in the weeks ahead as capital flows out of risk assets into safe havens such as the US dollar and precious metals. Much will depend on the extent of the central bank tightening on both sides of the pond, but the downtrend can be expected to continue, so shorting the Cable or simply buying the US Dollar Index could be a smart move. Perhaps consider waiting until after Wednesday or at least have a tight Stop-Loss set.
Not much to separate USD /JPY
The domestic situation in Japan is relatively stable compared to the West. Japanese Prime Minister Kishida's Liberal Democratic Party has just easily retained its majority in parliament, and the country has no energy supply crisis to speak of. In the short term, the yen is down from its 8-day high of 114.44, but this is largely due to slumping US Treasury yields ahead of this critical Fed decision.
It's easy to forget that the greenback isn't actually doing that well at all in the grand scheme of things; it's just that its competitors in Europe and elsewhere in the world are faring much, much worse. The Japanese yen is an interesting case as — unlike the other majors — it's also considered a defensive currency. This means that any strengthening of the greenback in response to a more hawkish Fed policy will also be reflected in the yen. As such, any gains for the dollar will be effectively cancelled out or at least diminished.
Estimates for the pair would appear to corroborate this theory as no significant swing is expected over the long term. Trading Economics have USD/JPY trading at 114.48 by the end of this quarter, rising to 115.89 in 12 months. As we've seen, factors like central bank tightening and general global uncertainty mean the yen and USD are fairly correlated at present. While there isn't likely to be much upside on the yen that the US Dollar Index won't equal, it's always wise to diversify to mitigate any potential US-specific negative factors. It might be a good shout to keep half your dollar cash in yen just to be on the safe side.
Experience you can rely on
Libertex has been connecting investors and traders with financial markets since 1997, so you can rest easy knowing your money is in good hands. As a forex specialist, we offer both long and short positions in a wide range of major and minor pairs, including EUR/USD, GBP/USD, USD/JPY and many more. Libertex's extensive offering of over 150 instruments includes currency-related commodities, such as gold (XAU/USD) and silver, enabling you to hedge your positions against increased volatility. Our commission is among the lowest on the market, and our spreads are some of the tightest. Try our multi-award-winning app for yourself and benefit from in-app trading signals, technical analysis and price alerts, as well as easy-to-use, intuitive pending order and position management.
-
What Is Russell 2000 Index?
Stock indices are an important part of financial markets and provide information for a basket of stocks, not just one. Created in 1984, by the Frank Russell Company, the Russell 2000 index quickly became a household name.
While indices like S&P 500 act as a reference point for large-capitalization stocks, Russell 2000 reflects small-cap stocks in the United States.
Russell 2000 Definition
The Russell 2000 index measures the performance of approximately 2,000 smallest-cap American companies. The index is market-cap weighted, meaning the weight of its components changes relative to the total market capitalization.
The index is operated by FTSE Russell, of the London Stock Exchange (LSE) Group. The subsidiary also maintains other indices that it should not be confused with. The Russell 3,000 index lists the largest 3,000 US companies. The largest 1,000 companies, out of these, are listed on the Russell 1,000 index. The rest, which is small/mid-caps, is a subset of the smaller components within Russell 3,000 and belongs to Russell 2,000.
Understanding the Russell 2000 Companies
(https://carigold.com/forum/attachments/1-jpg.432919/)
The constituents for Russell 2,000 are not chosen by a committee or the groups operating it. Instead, they are calculated according to a formula based on a combination of their market cap and current index membership.
Rebalancing takes place every June on the last trading day. The current composition includes 2,021 stocks; the top-10 companies are as follows:
(https://carigold.com/forum/attachments/2-png.432920/)
Not all types of stocks are considered eligible to be included in the Russell 2000. These are the defining characteristics that all constituents must have – otherwise, they are excluded from the list:
- Must be traded on the U.S. exchanges
- No less than a $1.00 closing price on the rank day in May
- A total market capitalization of no less than $30 million
- More than an absolute 5% of shares available
- No royalty trusts, LLCs, limited partnerships, closed-end investment, and blank-check companies
Factors Influencing the Russell 2000 Index Price
(https://carigold.com/forum/attachments/3-jpg.432921/)
Primarily, the value of the index is affected by whatever happens in the companies listed on it. Investors should also keep an eye on sectors reflected in the index constituents – it could be events occurring in healthcare, finance, technology, energy, etc.
Just like any financial asset, Russell 2000 does not exist in a vacuum. Therefore, multiple interrelated or even seemingly unrelated factors can play a significant role in its value. Since it is a barometer for the U.S. economy, the index receives influences by similar determinants: political news, market corrections, speculative behavior, dollar strength/weakness, demand for certain commodities, etc. It is also essential for traders to be aware of the U.S. geopolitical tensions with other regions, such as China, Middle Eastern countries, and South-East Asia.
Advantages and Disadvantages of Russell 2000
Before you can make the right decision on whether this type of trading is for you, thoroughly research the topic from both sides. Russell 2000 advantages include:
- Presents opportunities on the entire market rather than narrow sectors
- Outperforms bigger indices during periods of falling interest rates
- Offers a higher potential return for investing for investors
- Has the potential to grow easily
Here are the downsides of the Russel 2000 index:
- Associated with higher fees
- More volatile than large-cap stocks
- Appears to be slightly risky
What Is the Russell 2000 Index CFD Trading?
(https://carigold.com/forum/attachments/4-jpg.432922/)
If you want to work with Russel 2000 or venture into financial markets in general, CFDs (Contracts for Difference) might be a match for you. But before that, you need to understand the technical side and consider its benefits as well as drawbacks.
What Is CFD Trading?
CFD is an instrument that lets traders speculate on the price changes across many financial markets such as indices, shares, currencies, bonds, etc. If you make correct predictions, you can profit from rising as well as falling prices.
The main difference of CFDs is that you never actually own the asset you are trading with. Instead of making the full physical purchase or sale, you mimic and receive the same profits (losses) as if you owned them.
Advantages and Disadvantages of CFD Russell 2000
Here are the main reasons to consider CFDs to make a profit on financial markets:
- Flexibility of trading in both directions
- Lower transaction costs
- Tax efficiency
- Ability to open trades with bigger value and leveraged gains
- Access to different types of indices and other assets
The negative aspects include:
- Inherent risks of trading in financial markets
- Leverage may amplify losses
- Not suitable for long-term strategies
Russell 2000 Stocks Trading Strategies
Typically, investors can rely on "financial rules of thumb” to provide guidance for investors. But an interesting fact about trading Russell 2000 is that conventional pearls of wisdom do not apply. With small-cap stock, it's advised to avoid the purest forms of market timing, unless you are a strategic and tactical investor:
- Bullish strategy – It has been noticed that small caps can outperform large ones in bull markets. However, you can expect periods of rising interest rates when the Federal Reserve stops decreasing to stimulate the economy.
- Bearish strategy – The most common advice on the time to purchase small-cap stocks is when the market seems to be going down for a long time. Active investors can benefit from buying at times when the Fed begins raising rates.
Conclusion
Adding small caps to your portfolio diversifies your investments, which is a universally accepted tactic. However, you should always be cautious about investing in any financial asset since past performance does not guarantee future results. Fortunately, platforms like Libertex make it possible to improve your skills without risking real money. By registering a free demo account, you can practice with whatever asset you want and then, you can enter the real market and maximize your gains.
-
What Are Gaps?
Generally, candlesticks on a Forex chart open at the same level where the last candle was closed after the end of the trading session. After that, a new candle is opened immediately.
That is what happens in typical situations. Despite that, when a gap performs on the chart, you see a possible divergence between the starting and the ending price of the two connecting candles.
A gap is a space of a chart where a security's rate changes with no trading activity happening in between.
What Is Gapping
(https://carigold.com/forum/attachments/1-jpg.434037/)
Gapping is when a stock, or different trading tool, opens over or under the preceding day’s end, with no trading action in between.
For example, the share price picked at the level of $338.00 on Wednesday and opened at $356.40 on Thursday, and no trading happens in between this space. This unfilled interval looks like a gap on the chart.
What Causes Gaps in The Market?
Gapping in the market happens due to many factors. Here are the most common of them:
Political Events
(https://carigold.com/forum/attachments/2-jpg.434038/)
Some of these events are essential. For example, the US dollar has decreased slightly after trading steady among other global currencies, presenting a small gap, after revealing the news about Trump’s impeachment. On 19 December 2019, the US dollar index DXY was trading at the level of 97.33.
Economical Events
Significant economic moves can change not only a single position on the Forex market. Some of them can affect the global economic landscape, such as Black Wednesday. In 1992, between September and December, the GBP/USD declined by about 25%, down to the level of 1.5057. Furthermore, there was no trading activity in that period.
Natural Disasters
The result of a natural disaster may cause a catastrophe for a country. Earthquakes, floods, and hurricanes hurt country's residents, confidence, and infrastructure. Besides, such disasters will also harm a nation's official currency.
For example, Harvey Hurricane had led to instability at the absolute worst time for the markets. A previously weak dollar dropped to a one-and-half-year low against a currency basket.
The USD index was falling at 92.501 value by 28th August 2017 and had earlier dropped to 92.372. It was the lowest position since early May 2016.
In brief, gaps are mostly built by significant changes, making it all the more valuable for traders to remain refreshed by the economic program, as well as other geopolitical matters.
Gap Types
(https://carigold.com/forum/attachments/3-jpg.434039/)
There are four types of gaps, excluding the gap that happens because of a stock reinvestment. Each type has its unique implications, so it is crucial to be able to select between them.
Common Gaps
(https://carigold.com/forum/attachments/4-jpg.434040/)
They can develop from a stock reinvestment when the trading volume is low. These gaps are common and typically get filled almost immediately. "Getting filled" means that the price action, in the last few days or weeks, usually returns at the least value to the previous day before the gap. It is also known as closing the gap.
A common gap appears typically in a range-bound or congestion zone, where it strengthens the apparent absence of interest in the stock at that time. It is frequently increased more by a low trading volume.
Being conscious of these types of gaps is useful, but it's questionable that they will provide trading opportunities.
Breakaway Gaps
(https://carigold.com/forum/attachments/5-jpg.434041/)
It’s a new trend where the asset ‘gaps away’ from the price pattern. If a breakaway gap is followed by higher trading volume, it may be deserved to get a position long for a breakaway gap up, and short for a breakaway gap down, on the candlestick next to the gap.
Runaway Gaps
(https://carigold.com/forum/attachments/6-jpg.434042/)
Runaway gaps may be termed as gaps caused by a raised interest in the stock. Runaway gaps usually describe traders who did not get in through the first move of the uptrend and, while waiting for a temporary reversal in price, decided that it wouldn’t happen.
Elevated buying interest appears suddenly, and the price gaps over the past day's ending. This kind of runaway gap describes a state of traders’ panic. Also, a good uptrend can have runaway gaps caused by significant news and events that produce new interest in the stock.
Exhaustion Gaps
(https://carigold.com/forum/attachments/7-jpg.434043/)
In contrast to runaway gaps, there are occasions when the price does a final gap in the trend course, but then shifts. It is frequently caused by a crowd mentality of traders racing to the trend and pushing the stock into the overbought area.
Accordingly, skilled traders will be waiting for the withdrawal and get the opposite position to the previous direction.
All of these kinds of gaps can be full or partial gaps. Common gaps are usually partial gaps, as the rate doesn't move substantially. Though, in some cases, the cost may not change much; nevertheless, in the end, it will do a full gap. Breakaway, runaway, and exhaustion gaps conduce to become full gaps.
Gaps are classified as breakaway, exhaustion, common, or continuation. Classification is based on when they happen in a price pattern and the meaning of the signals.
Gap Trading Basics
After you’ve got acquainted with the various types of gaps, we will go on by telling you about a few strategies for trading gaps in Forex.
First, when trading gaps, it is essential to learn that price may not start rapidly moving in the expected place. In many cases, a healing move will arrive, filling part, or the entire gap space. Otherwise, you may even feel a false signal made by the gap. Let's review some different Forex gap trading methods, which will help you in making the decision.
Gap Trading Strategies
Some traders use gaps for analytics. For example, if a gap happens almost at the start of a trend, then it is a breakaway gap or a runaway gap. It lets the trader understand the price possible so he/she can run. Other traders use gaps for trading objectives. They may open positions after a gap happens. Let's take a look at some of the most effective strategies.
Buying the Gap
(https://carigold.com/forum/attachments/8-jpg.434045/)
Traders usually notice this strategy as the "gap and go". A position could be taken at the moment the stock gaps with a stop order traditionally placed low under the gap bar. The gap should happen above a critical resistance and trade on heavy volume to enhance the possibilities of a successful trade. And conversely, traders could remain for prices to fill the gap and set a limit order to buy the stock almost before the preceding day's ending.
Selling the Gap
(https://carigold.com/forum/attachments/9-jpg.434046/)
This strategy is related to the previous one. In this case, the trader opens a short position following a gap down.
Fading the Gap
(https://carigold.com/forum/attachments/10-jpg.434049/)
Contrarians may apply a fading strategy to use gapping. Traders can get a trade in a different area of the gap, under the assumption that most gaps tend to be filled over time. A stop order is placed over the gap bar's high, developing a gap up, with a profit mark set near the preceding day's ending. For a gap down, the trader purchases put a stop loss under the gap bar's low and set a profit target near the previous day's close.
Gaps as An Investing Signal
(https://carigold.com/forum/attachments/11-jpg.434051/)
Breakaway and runaway gaps can both indicate that there is more trend left to hold.
Consequently, following one of these gaps, a long-term investor may open a position in the area of the gap (usually watching for gaps above).
They may hold onto the trade until an exhaustion gap happens or till a trailing stop is gone, giving them a reason to quit.
There are three main trading strategies: Buying the Gap, Selling the Gap, and Fading the Gap.
How to Play the Gap in The Forex Market
Let's review all steps, using the example of common or weekend gaps. Forex fans trade the weekend gap by requiring Sunday's opening price to be a replacement for Friday's closing price. Here is one of the Forex gap trading strategies:
1. Open a chart with the common gap
2. Find a chart pattern
3. It will be nice if there is a nearby gap midnight
4. Following the price gaps, place the first candle above or below the base of the gap
5. Enter quickly (aggressive entry) or enter at the recess of the candle high (conservative entry)
6. Stops are set under or over the candle high/low
7. The target is the gap close or three pips above/below it
Gap trading is complicated, but if you understand which gaps are tradable and which are not, it should be more manageable. Try to find different gaps on your chart and examine how the price works after the creation of a gap. Finally, yet importantly, always keep the risks under control!
Tips and Tricks for Gap Trading
(https://carigold.com/forum/attachments/12-jpg.434052/)
So, everyone's favorite part is tips and tricks. Here are the essential tips you need to learn when trading gaps:
- Be assured to watch the volume. High volume should be near the breakaway gaps, while low volume should happen in exhaustion gaps.
- In some cases, you will see that a gap happens within the structure of a classical chart pattern. When this occurs, it is essential to use a multiple period method and zoom into the lower timeframe. You will get a more visible picture of the chart pattern and, therefore, accurately control the trade.
- As price is running in your favor, focus on price interactions with the pivot points, particularly on the first interactions of the Pivot Point (PP), S1, and R1 Levels.
- If the price breaches a pivot point in the way of your trade, next, you should hold the trade, in expectation of a continuation of the pivot, until the next critical swing level or pivot level is examined. Still, if the price jumps sharply from a pivot point zone, you need to quit your trade and to get your open trade profits.
- When you start your trading day as a large gap trader, you will need to look for essential rates in the premarket price action to trade against. It will assist you in preparing for the trade and give you an advantage when things become real and working.
- For those traders who play large gaps, you will usually get useful information on daily charts. While browsing daily charts, look for spaces of more extended support and resistance. It will assist you in identifying large gaps where you can take the upper hand.
It's also essential when you trade with a small size. Large gappers can be hugely active. It means you can waste a lot of money immediately if you aren't armed.
Conclusion
(https://carigold.com/forum/attachments/13-jpg.434053/)
Now, when you understand what large gap trading is and how you can take the upper hand, you should start practice trading. Discovering how to trade large gaps properly before you work with real money will encourage you to become a more skilled trader without risking your money.
So, you can easily use all of the provided knowledge in trading with Libertex.
Firstly, it’s a very profitable solution. You can trade stocks, indices, currencies, metals, and energy without any hidden fees.
Secondly, it’s simple; there is no need to understand the terminology, lots, and spreads.
Thirdly, you can get a convenient solution by blending all of the trading instruments into one platform.
Finally, Libertex provides the ability to trade from anywhere in the world, anytime you want. All you need is a laptop and a sober mind.
Ready to apply the acquired experience and knowledge in real trading? Register a free demo account right now!
-
Libertex adds a hot CFD pair as the crypto dog fight hots up
They say every dog has its day. Well, there are currently not one but two puffed-up pooches in the digital spotlight, and neither one of them looks ready to step aside. Believe it or not, the entire crypto community has gone barking mad over these two tokens based on the same famously cute Japanese dog breed. Of course, we're talking about the prolific Dogecoin (DOGE) and Shiba Inu (SHIB), which have both seen spectacular growth in recent months. After much anticipation, Libertex has finally added CFD on this pair of pups to their list of tradable assets. All that's left for you to do now is decide which dog you want to back in this particular fight!
Many of you know that both Shiba Inu and Dogecoin started their lives with low expectations. One was launched as a deliberate joke and the other as a parody of that same joke. Now, their creators are still laughing…just all the way to the bank. That's because these two canine capers have – against all odds – made it into the top 10 largest cryptocurrencies by market cap to join legacy contenders like Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP). If the long-term performance of meme stocks like GameStop is anything to go by, these two coins could be a smart addition to your crypto portfolio. But before you can make your choice, you'll naturally need to see how these pups stack up next to each other.
Dogecoin: a technical overview
In many ways, Dogecoin works just like Bitcoin. Both networks are blockchain-based and verify transactions using proof of work consensus. That said, Dogecoin has some advantages of BTC for everyday payments since its transactions have faster processing times and lower costs than Bitcoin ones.
Dogecoin also has a much higher circulating supply than Bitcoin. DOGE's supply is theoretically limitless. With over 129 billion already in circulation, the supply is far more abundant than Bitcoin's 21 million capped maximum. Then, there's the issue of block rewards: 10,000 Dogecoin are mined every minute in the form of miner compensation.
As mentioned already, DOGE is a proof-of-work cryptocurrency, which means it shares many parallels with Bitcoin regarding how it uses computing power to secure its blockchain. What's more, DOGE is merge-mined with Litecoin. The upshot of this is that any miner of Litecoin or Dogecoin can choose to mine the other currency, stabilising its network power compared to solo-mined coins.
What about Shiba Inu?
The differences between these two pups start with the very system they operate, with Shiba Inu serving as a token on the Ethereum network. SHIB is what is known as a fungible token, which is assigned the ERC-20 protocol. Amid their widespread fame of late, many of you have undoubtedly heard of non-fungible tokens (NFTs), but these use the ERC-721 token standard.
The biggest advantage of being Ethereum-powered for Shiba Inu is multiplying smart contracts to generate its own decentralised financial products. DeFi has gained traction this year with tokens like yearn.finance, Uniswap and Aave, exploding in terms of price and adoption. Cryptocurrencies use smart contracts on Ethereum's blockchain to create decentralised exchanges (DEXs), lending protocols and even interest-bearing accounts. This could be a huge growth vector for SHIB going forward and certainly gives it an extra point for utility.
Shiba Inu has even made a foray into the NFT space with Shiboshis, a limited supply of 10,000 NFTs based on its Shiba Inu mascot. The decentralised programme leverages Ethereum's network to allow artists to auction off NFTs, supplanting the third party needed for transactions with smart contracts.
All about supply
Before looking at each coin's market performance and prospects, it would be remiss not to cover how SHIB and DOGE are issued and managed. After all, crypto coins and tokens are effectively currencies like the dollar or pound, and their supply (including its growth potential) is a huge factor determining yields on capital investment.
Let's start with the older of the two, Dogecoin, launched initially with a limited supply of 100 billion coins. By 2015, every last Dogecoin was mined, so the supply limit was changed so that a further 5 billion coins could be mined every year. Now, there's no established limit to how many Doge can be produced, meaning that DOGE is inherently inflationary. That said, as long as mining parameters remain unchanged, the inflation rate will decrease as a function of the extra coins in circulation.
Moving on to Shiba Inu, whose supply system is very different. Right from the outset, the total possible supply of SHIB was set at one quadrillion, after which 50% of the tokens were sent to crypto exchange Uniswap, with the other 50% given as a "gift/tribute" to Ethereum founder Vitalik Buterin. Interestingly enough, Vitalik opted to burn 90% of his SHIBA, donating the remaining tokens to the Indian Covid Relief Fund. SHIBA can't be mined to complicate matters further, and a portion of it is destroyed every time someone buys the token.
As such, SHIB differs from DOGE in being a deflationary currency, which should theoretically make it more likely to rise in value over time compared to its older rival. Remember that both of these coins have skyrocketed recently, and current valuations could thus be inflated.
What the charts say
As we've already touched upon, to say that these puppies have grown up incredibly quickly would be an understatement. SHIB, for instance, shot up by over 8,000% in the space of six months to reach $0.00008 in late October. Dogecoin, meanwhile, eclipsed even Shiba's impressive growth spurt, rising 12,000% from January to May 2021. Many astute investors would naturally expect a correction to ensue after such an incredible run. And that's what happened. Both coins are now down 50% and 65%, respectively, making them tempting buys just now. That's right, SHIB is currently hovering around $0.00004 per token, with DOGE available at a knockdown price of $0.38 at the time of writing. With both technical and fundamental factors suggesting a return to growth in the medium term, now could be a great time to add either one (or indeed both) to the portfolio.
Trading CFDs on SHIB and DOGE with Libertex
You guessed it, both these puppies are now available for trading on the award-winning Libertex trading platform, along with numerous other cryptocurrencies and digital assets. The only question that remains is which you think will prove the top dog? Truth be told, you shouldn't feel under pressure to pick a pup as both these assets could well have a place in a balanced and diversified investment portfolio. What's more, Libertex's new SHIB/DOGE CFD pair allows you to fight the competing dogs against each other. Choose your dog and Trade for More!
-
MACD Indicator - Your Multifunctional Indicator
When you ask traders to name a good technical analysis indicator, no matter if they are newbies or professionals, they will undoubtedly mention the MACD indicator. MACD is one of the widely-used indicators that has many advantages.
The crucial benefit is that it gives many signals and can be used in different circumstances. Moreover, it’s free and doesn’t require any downloading. You can simply find it in MetaTrader and apply it to your chart. Let’s take a closer look at the best indicator’s implementation.
What Is the MACD Indicator?
MACD stands for Moving Average Convergence Divergence. It’s a momentum indicator that follows the trend and shows the correlation between two moving averages of the asset’s price.
Here, we need to clarify what the momentum indicator is. A momentum indicator calculates the change or speed of the price movement of the asset.
MACD indicator was developed by Gerald Appeal in the late 1970s. If the indicator is used for so many years, we don’t need any other proof of its effectiveness.
Look at the picture below. The MACD indicator consists of 2 lines: MACD and signal line, and one histogram (bars). A histogram is used to show the difference between the fast and slow moving average. Thus, when the distance between EMAs increases, the histogram rises. It’s called divergence. As soon as moving averages get closer, the histogram reduces. It’s called convergence. This explains why the indicator is called the Moving Average Convergence Divergence.
(https://carigold.com/forum/attachments/1-jpg.437932/)
Calculation of Moving Average Convergence Divergence
The formula of the MACD is simple. MACD is a subtraction of the 26-period Exponential Moving Average (EMA) from the 12-period EMA.
MACD = 12-period EMA – 26-period EMA
If you don’t know what the Exponential Moving Average is, there is a simple explanation. EMA is the moving average that puts a greater weight on the most recent price points. That helps this type of moving average to stronger react to the recent price changes.
However, when setting the MACD indicator, you will see three numbers. For example, 12, 26, and 9, which are default settings. As we said above, MACD is the 12-period EMA minus 26-period EMA. MACD signal line is the 9-period EMA. MACD histogram is the MACD minus the MACD signal line.
How to Implement the MACD Indicator
This indicator is a standard tool in MetaTrader. That means you don’t need to buy it or download it additionally:
1. Go to MetaTrader
2. Click Insert – Indicators – Oscillators
3. Pick MACD
If you use any other platform, it’s likely that the indicator will be set by default. If not, you can always download it for free.
In the settings window, you can change the periods of the moving averages price, from close to open, high, low, and, of course, style. We would recommend you keep the close price. Also, you can change the MA periods. Remember that longer periods are better for bigger timeframes, while shorter periods are better suited to smaller ones.
How to Read the MACD Indicator
We are at the most important point of this article. Let’s look ar what signals the MACD indicator gives.
Crossover
The first and most common indicator function is the buy/sell signal. A buy signal appears when the MACD line breaks above the signal line. A sell signal happens when the MACD crosses the signal line upside down. The signal will be more influential within the sharp trend. In the case of a weak trend, the signal may turn out fake as the market will turn around.
(https://carigold.com/forum/attachments/2-jpg.437934/)
Overbought/Oversold Zone
Don’t forget that MACD is an oscillator so, one of its functions is to determine market conditions. Both lines will be the crucial point you should consider. If they form significant tops or bottoms, it’s a sign of a close correction. There is no need to mention any specific level. You will understand when the rise or fall is more significant than usual.
If the lines reach the top, it depicts that the asset is overbought. Wait for the reversal down. If they form an extreme low, wait for a reversal up. In this case, you can combine the MACD with the RSI to get additional confirmation.
(https://carigold.com/forum/attachments/3-jpg.437935/)
Zero-Line Crossover
Pay attention to the MACD histogram. If it rises above the 0 level, it’s a signal of the upward trend. If it falls below the 0 line, consider opening a short position. However, be careful. The signal works in a strong trend. In times of high volatility, the histogram can move up and down frequently, and that will lead to fake signals.
(https://carigold.com/forum/attachments/4-jpg.437936/)
Convergence/Divergence
A MACD divergence/convergence is a difference between the direction of the price and the indicator. Bullish convergence happens when the price forms lower lows, while the MACD histogram sets higher lows. It’s a buy signal. Bearish divergence is formed, when the price sets new tops, while the MACD indicator’ extremums become lower. It’s a sell signal.
(https://carigold.com/forum/attachments/5-jpg.437937/)
Benefits and Limitations of the MACD Indicator
Everything has two sides, and indicators are no exception. No matter how great the indicator works, it will have something that will affect its effectiveness.
(https://carigold.com/forum/attachments/6-png.437940/)
Why MACD Indicator Matters
MACD indicator signals traders whether a bullish or bearish movement is strengthening or weakening. It’s an important point. By having this knowledge, you will avoid unprofitable trades. The significant number of the applications makes the MACD indicator an irreplaceable trading tool.
Bonus. How to Avoid Mistakes Trading with MACD
There is no perfect indicator. Any indicator can give fake signals. However, sometimes the reason is not in the indicator – it’s in the trader. The lack of experience and understanding creates additional mistakes.
Histogram
The first mistake you can face is the wrong interpretation of the MACD histogram. What does the histogram show? It shows whether the market is bullish or bearish and the strength of either bulls or bears.
Some traders think that when the histogram rises significantly, showing the power of the buyers, it’s a good signal to buy. However, it will likely be a late signal. If the histogram shows the strength of either bulls or bears, it means that the recovery may happen soon. Thus, it’s too late to enter the current market. The best time to open a position is when the histogram is near the 0 level.
Crossover
The MACD crossover works well on a strong trend. However, you should remember that the market changes its direction quite often, especially on short timeframes. Thus, the crossover signals will not be accurate if the trend is weak.
Bonus. MACD Strategy: Follow the Trend
Here is how you can use MACD in trading:
1. The first step is to wait for the MACD to form a higher swing high. It’s essential the price forms the higher swing high, too. After that, we should look for a lower swing high. Again, the lower swing high of the indicator should be confirmed by the lower swing high of the price.
2. After we get two swing high points of both price and indicator, we need to connect them with a trendline.
3. The third step is to wait for the MACD breakout. The MACD line crossing the signal line from bottom to top is not enough. The indicator should break above the trendline we drew. It will be the entry point. Open a long position as soon as the MACD crosses the trendline bottom-up.
4. Remember about the stop-loss order. You should place the stop loss 5-10 pips below the latest low swing of the price.
5. Now, you need to wait for a good exit point. Close the position as soon as MACD crosses the signal line in the direction opposite to the entry point. It means from top to bottom. However, don’t close the trade immediately as soon as you notice the MACD crossover. Wait for a candlestick to close to be sure the crossover happened. Then you can close your position.
You can use the same rules but in reverse to open a short position.
(https://carigold.com/forum/attachments/7-jpg.437938/)
Conclusion
We can say that the MACD indicator is one of the oldest, most effective, and easiest indicators you can apply for profitable trading. The most significant advantage is that it is multifunctional. If you read our article carefully, you remember that there are four situations when the indicator gives signals. Compare this number to other technical indicators, and you will understand that it’s a lot. The indicator can easily be applied to any timeframe. Thus, you can use it for any of your trading strategies.
It’s time to practice! Use the Libertex demo account to experience the advantages of the Moving Average Convergence Divergence indicator.
-
Rising inflation and fresh virus fears threaten global recovery
It’s no secret that global inflation has been running wild of late. All over the world, this key economic indicator is well above central bank target rates; in many cases, it’s more than double these levels. The Fed’s reassurances that increased price pressure was only a “transitory” phenomenon are beginning to look like empty platitudes as the reality of protracted above-target inflation sets in. Of course, many of the causes of the present inflation trouble stem from the coronavirus pandemic. Chief among them are unbridled central bank stimulus and restrictions-induced supply chain ruptures. However, just as mass vaccination had appeared to be bringing things under control, the Omicron variant arrived and threw everything back into uncertainty.
Eyes on the US
As the world’s biggest and most significant free-market economy, it’s natural that the US should be the focus of any evaluation of the global inflationary risks we are currently facing. US price pressure has been rising steadily since the beginning of the year, and the latest figures have it at 6.8% in annualised terms through November, a 0.6% rise from a month ago. Sadly, this is unlikely to be the end of the increases, and with no end in sight, things are now beginning to look rather worrying.
That said, Federal Reserve Chairman Jerome Powell has indicated that the deteriorating price environment is likely to prompt officials to accelerate their stimulus tapering efforts, even despite Friday’s revelation that November saw the smallest jobs gain this year. While such a move could certainly help combat inflation, it is not without its own risks. The stock market, for instance, would not respond well to the consequent reduction in liquidity, and another crash could easily derail the economic recovery. In any case, the greenback is always a good bet in times of inflation and offers a nice place to park wealth until the dust settles. As opposed to physical dollars, a more convenient vehicle could be the US Dollar Index.
Commodities in the spotlight
While rampant inflation is certainly a worldwide issue just now, some regions have been hit worse than others. And commodities-based economies like Australia, New Zealand and Canada have definitely had a much easier time of it, with respective annualised inflation rates of 2.5%, 2.96% and 4.7%. Now, this is just as much about central bank policy as it is sectoral weighting. New Zealand already has one of the highest interest rates in the world right now after raising its base rate to 0.75% this month amid further action planned for the year ahead. Canada has a similarly high bank rate of 0.5%, and its central bank is preparing its own aggressive campaign of interest-rate hikes for 2022, having already ended its bond-buying programme.
Of course, the reason these countries have a bit more leeway when it comes to monetary tightening is their strong commodities reserves. Rising inflation is always good news for precious metals like gold and silver, of which Canada and Australia both have plenty. Their rise might be tempered slightly by the lack of industrial demand, but investor interest for these haven assets will likely see net gains in the event of continued price pressure. As such, gold and silver constitute good hedges against ongoing volatility and uncertainty, particularly as Omicron threatens to become the dominant coronavirus strain.
What about China?
The place where the whole crisis began is still feeling the economic fallout of the coronavirus pandemic two years on. Its manufacturing business is yet to recover, and even domestic consumers are beginning to notice the knock-on effect of rising materials costs and ruptured supply chains. While Chinese price pressure looks absolutely normal at 1.5-2%, make no mistake that this is a major increase in a country used to near-zero inflation.
Given the frequent manipulation of such figures, a much more eye-opening indicator is the Producer Price Index, which stood at a whopping 13.5% in November. With goods costing more and more to produce for Chinese exporters, it’s hardly surprising that worldwide prices are on the up. When we add to this endemic corporate debt issues, potential delistings and enhanced risk of defaults, it makes already battered Chinese stocks appear ripe for even more falls in 2022. It might therefore be a wise idea to exit any positions in individual Chinese stocks or ETFs, or perhaps even consider shorting them outright.
Europe and the UK
Things are extremely tense on the Old Continent at present. Beyond rising price pressure and new variant fears, there’s also a serious energy crisis and the omnipresent spectre of Brexit to contend with. Both the ECB and the BOE will be looking at the latest GDP figures with concern as they head into their pre-Christmas policy meetings on 16 December.
German industrial output and factory orders are expected to show declines amid global supply-chain snarl-ups. Talk of potential lockdowns in early 2022 will only add to the economic fears brewing in Frankfurt and London. UK and euro area inflation currently stands at 4.2% and 4.9%, respectively, which, although double the regulators’ target rates, is not quite as high as elsewhere in the world. The problem is that the economic risks engendered by the energy crisis and coronavirus mean that it is extremely difficult for the ECB and BOE to take the stimulus-slashing steps required to keep a lid on price pressure.
As for rate hikes, both major European regulators have stated that such a move is “unlikely” before the end of 2022. The current uncertainty is bad news for European stocks and major currencies, leaving little else for the risk-averse to turn to. Other than potentially adding natural gas and oil to one’s portfolio as protection in case of a protracted energy crisis, that is.
Trade the world with Libertex
Libertex offers trading in over 200 underlying assets across virtually all asset classes from stocks and forex through to commodities, energy resources and even cryptocurrencies on CFDs! To learn more information about trading with Libertex or to create an account, simply visit https://libertex.com/sign-up (https://libertex.com/sign-up)
-
A holiday toast to all Libertex clients: thank you for your continued support!
After experiencing a crisis the world had never seen before, the bar wasn't exactly very high for 2021. Of course, the pandemic is still not completely over and done with, though we're much closer to the ‘old normal' than we were 12 months ago. For Libertex, however, the success of this past year far outstripped all expectations, and we're delighted to see all our hard work paying off for both ourselves and our clients.
Following 2020, a year replete with achievements for the company despite external pressures, we were absolutely committed to making 2021 even more of a shining success. Nonetheless, we wouldn't have been able to do any of it without the extensive hard work of our valued staff and the unwavering support of our clients, both new and existing. That's why we'd like to take a moment to express our sincere gratitude to all of you for helping us to reach new heights during this time of ongoing uncertainty. Without you, none of our success would be possible.
After we won a raft of awards the year before, the pressure was on to match or improve on our performance in 2021. Thankfully, we weren't left disappointed. Libertex's commitment to user experience was once again rewarded with another Best Trading Platform award from Forex Report. In addition to this, we were then named Best FX Broker by European CEO. The latter was a special win because it showed that, even with all our newly added instruments, we're still one of the top players in financial markets. But the one all of us at Libertex are most proud of was Ultimate Fintech's Most Trusted Broker of Europe since it represents recognition of our multi-year campaign to build Libertex's strong reputation.
Everyone loves being awarded, but what clients really want from their brokers is a constant effort to improve the service provided and expand the available options. That's why we're so committed to keeping our product-line up-to-date with the hottest new asset classes and instruments. A testament to this fact would be our additions of SHIB and DOGE CFDs to our already extensive cryptocurrency pool, the inclusion of Robinhood CFD in our list of tradable assets, and the long-awaited arrival of options trading on Libertex.
But we didn't stop at individual instruments; we even created our very own new account type, Libertex Portfolio, which comes with no transaction commissions and allows users to become shareholders!
As 2021 draws to a close, we'd like to wish you and your loved ones all the very best for health and happiness in the new year. Let's hope that 2022 will see the end of the pandemic and we will finally put all of this behind us.
See you in 2022 and don’t forget to… #TradeForMore!
-
What are the Nasdaq exchange and Nasdaq 100 index?
The Nasdaq is a stock exchange that also publishes two widely followed stock indexes. Some of the largest companies in the world, including Apple, Microsoft and Amazon are listed on the exchange.
Both the exchange and the Nasdaq indexes are heavily weighted to technology and growth companies, making it of interest to investors and traders alike.
What is the Nasdaq exchange?
Nasdaq is an American stock exchange headquartered in New York. It was the first electronic exchange in the world and led the move to automated trading.
The exchange is owned by Nasdaq Inc, a publicly listed company. Nasdaq Inc also owns and operate eight European exchanges.
While originally licensed as a stock market, Nasdaq is now a licensed national securities exchange.
Over 3,000 companies are now listed on the Nasdaq exchange. These companies are divided into three tiers for small, mid and large cap stocks.
NASDAQ stands for National Association of Securities Dealers Automated Quotations.
(https://carigold.com/forum/attachments/1-jpg.442238/)
The Nasdaq Indexes
The two widely followed Nasdaq indexes are the Nasdaq Composite and the Nasdaq 100.
The Nasdaq Composite is an index of all common stocks, ADRs and other types of ordinary shares that are listed on the Nasdaq exchange.
The Nasdaq 100 is a subset of the Nasdaq Composite, consisting of the 100 largest non-financial companies in the Nasdaq Composite index.
ETFs, futures and options on both indexes are widely traded. Products tracking the Nasdaq 100 are amongst the most widely traded in the world.
The History of the Nasdaq
The Nasdaq exchange was started in 1971 by the NASD (National Association on Futures Dealers), now known as FINRA. Initially it was set up as an electronic system. When the electronic quotation system became operational it was relatively easy to add a trading system. Thus, the world’s first electronic exchange was born.
By 1981, 37% of stock trades in the US were conducted on the NASDAQ exchange, and by 1991 the percentage had grown to 46%. The exchange really took off in the late 1990s during the “Dot Com’ bubble. It was the first exchange to facilitate online trading and became the preferred exchange for technology companies to list on.
Nasdaq Inc became a listed company in 2002 after FINRA sold its stake in the company. The company now has a market value of $16 billion and annual revenues of $4.2 billion.
(https://carigold.com/forum/attachments/2-jpg.442239/)
How are the Nasdaq indexes calculated?
Both Nasdaq indexes are market cap weighted. That means the weight of each stock in the index reflects its value compared to the value of all the companies in the index.
Market cap weighted indexes are calculated by adding up the value of all the companies and then calculating the percentage attributable to each company. The index is based to 100 when it is launched, and then grows in line with the growth of the companies it includes.
Nasdaq indices are rebalanced annually, in December. Any companies no longer eligible are removed from the indexes and replaced by newly eligible companies. Weighting may also be adjusted according to new share issues or repurchases.
(https://carigold.com/forum/attachments/3-jpg.442240/)
What is the Nasdaq 100?
The Nasdaq Composite index, which includes all Nasdaq listed companies, was launched in 1971 when the exchange went live. In 1985, The Nasdaq 100 index was launched, to reflect the values of the most liquid, non-financial companies.
The Nasdaq 100 is one of the three major US Indexes, the other two being the Dow Jones Industrial Average and the S&P500. The Dow contains just 30 stocks, and is prices weighted. The S&P 500 is also a market cap weighted index but includes 500 stocks. These indices also include financial companies like banks and insurers.
The index began with a value of 100 in 1971 and first reached 1,000 in 1995. At the peak of the Dot Com bubble in March 2000, it reached 5046. It then fell 3,938, or 78% over the following 18 months. After bottoming at 1,108, it took another 13 years to reach its previous high again. In July 2019 it reached a new record high of 8,321.
(https://carigold.com/forum/attachments/4-jpg.442241/)
The following 5 companies account for 45% of the Nasdaq 100, and therefore have the most influence on the direction of the index:
Microsoft (MSFT) makes up around 11% of the index and has a market value of about $1 trillion. Besides the company’s well-known software, it is building a rapidly growing cloud business.
Apple (APPL) which accounts for just over 11% of the index is worth just over $1 trillion. Apple sells computers, tablets and smartphones. It also sells subscription services for video, music, apps and other services.
Amazon (AMZN), with a market value of $850 billion makes up 9.5% of the index. Amazon’s profits come from its marketplace, its cloud business (AWS) and advertising.
Alphabet/Google (GOOG) accounts for 8.5% of the index and is worth $820 billion. Google owns numerous businesses including YouTube, Gmail. Android and the Google search engine. Most of Google’s revenue comes from advertising.
Facebook (FB), with a value of $500 billion is 4.7% of the index. Besides the Facebook platform, the company owns WhatsApp and Instagram. It makes its money from advertising on the various platforms.
(https://carigold.com/forum/attachments/5-jpg.442242/)
The largest 20 companies account for just under 70% of the index. Other prominent members of the index include Intel, Cisco, Pepsi, Comcast, Adobe, Starbucks and Netflix.
The Nasdaq 100 includes the largest non-financial companies listed on the Nasdaq. The Nasdaq Financial 100 includes financial companies like Etrade, T Rowe Price and Zillow. The Nasdaq 100 is widely considered a technology focused index, which it is, though this is not by design. There are several companies from other sectors, including Pepsi, Costco, Starbucks and Walgreens.
Trading the Nasdaq 100
An index is merely a calculation based on prices, so you cannot trade an index. However, you can trade ETFs, futures contracts and CFDs that are based on an index.
The largest ETF (exchange traded fund) tracking the Nasdaq 100 is the Invesco PowerShare’s QQQ fund. This fund has $73 billion under management and is listed on the Nasdaq exchange too.
While ETFs are adequate for investors who don’t require leverage, traders and most investors look to CFDs and futures contracts to trade the Nasdaq 100, because they are more liquid and offer other advantages.
What is CFD Trading
Contracts for Difference, or CFDs, are derivative trading instruments. They are similar to futures contracts but are not traded on centralized exchanges like futures. Instead, each CFD is a contract between a broker and a client,
There are several advantages to trading CFDs. They can be traded on any tradable instrument, including stocks, index futures, currencies, commodities and cryptocurrencies.
They allow traders to trade all these instruments from markets around the world, on one trading platform, such as Libertex, and with one trading account. This is a major advantage of CFD trading as it reduces the number of accounts you need to keep track of.
CFDs are traded using margin, which means only a percentage of the value of the trade needs to be deposited to open a position. CFDs can easily be shorted too
Nasdaq CFD Trading
CFDs offer several advantages for traders and investors alike. Libertex offers CFDs on the Nasdaq 100 futures, as well as live charts and prices. The market can be tracked on the Libertex platform, as well as on the very popular MetaTrader 4 platform.
Libertex Nasdaq 100 CFDs offer leverage of 100x and a minimum trade value of just EUR 20.
Advantages and disadvantages of Nasdaq 100 CFDs
As with all trading activities and instruments, there are advantages and drawbacks to consider when trading Nasdaq 100 CFDs.
Pros:
- The Nasdaq 100 is more volatile than other indexes, creating more trading opportunities.
- Several of the fastest growing companies in the world make up a large percentage of the index. They include Apple, Amazon, Google and Microsoft. This means the index gains more value than other indexes during bull markets.
- CFDs on the Nasdaq allow traders to increase their profits by using leverage.
- CFDs also allow traders to open short positions, and profit during corrections and bear markets.
- CFD trading accommodates smaller trades than futures trading, which has a very high minimum trade size.
(https://carigold.com/forum/attachments/6-jpg.442243/)
Cons
Because of its volatility, the Nasdaq can move a lot overnight and during a single trading session. While this can help you increase your profits, it applies to losses too.
The Nasdaq can be unpredictable during periods of market volatility.
Nasdaq trading hours
The Nasdaq exchange official trading times are 9.30am until 4pm EST. However, there is also a pre-market session from 4am until 9.30am and a post-market session from 4pm until 8pm.
Conclusion
The Nasdaq exchange is home to many of the most successful companies in the world. The Nasdaq 100 offers exposure to the largest 100 of these companies. The index is a good benchmark for long term growth investors. Trading instruments like CFDs based on the index offer traders numerous opportunities to trade this index as it rises and falls.
You can trade CFDs on the index with Libertex . If you want to get started, you can open a risk-free demo account today. This will allow you to get used to the trading platform and learn more about trading the Nasdaq 100, with no risk or cost.
Libertex is a broker and trading platform which offers CFDs stocks commodities, indices, ETFs and cryptocurrencies with leverage of up to 100 times. The platform offers free trading tutorials and state of the art trading tools.
-
The forex landscape in 2021 and beyond
It’s a well-known fact that the forex market is one of the biggest financial markets in the world, boasting a value of around $2.4 quadrillion and a turnover of about $6.6 trillion every single day. However, the lifeblood of this marketplace is international trade, and the disastrous effects of the coronavirus pandemic and associated inflation on supply chains and global economic activity have had a serious impact on foreign exchange trading. Meanwhile, regulators and financial policymakers have been forced to perform a delicate monetary balancing act to keep the unfortunate combination of rising public debt, runaway inflation and uncertain business outlook in check.
While the central bank liquidity drip and government stimulus have been a veritable boon for the stock markets, traditional currencies have been driven down by swelling balance sheets and low interest rates around the world. Against this backdrop, commodities currencies like the Australian and Canadian dollars have lost significant ground against their US counterpart, which is generally seen as the world’s reserve currency and a solid hedge in times of high volatility on the currencies market. This is unsurprising given the risk-averse profile of many forex traders; a clear trend towards safe currencies is emerging among individual and institutional investors alike.
A fistful of dollars
As we already touched upon, the big winner in the traditional currencies’ space this year has been the US dollar. Forex traders have flocked to the greenback as a hedge against the ongoing pandemic uncertainty, high inflation and ultra-dovish monetary policy of other major regulators such as the ECB and the Bank of England. While the Fed has refrained from raising interest rates, it has been very vocal about the need for a transition towards fiscal tightening and has taken active steps towards tapering its economic stimulus package. Treasury bond yields have also been rising steadily, which naturally attracts foreign capital. What’s more, organic demand has also risen in countries suffering from hyperinflation, such as Argentina, Turkey and Venezuela, as locals seek to protect their wealth from depreciation. A combination of these factors has seen the USD gain more than 5% on the CAD in the second half of 2021. Meanwhile, the dollar’s gains against the EUR and GBP over this same period have been even more impressive, averaging around 7.5%.
Bargains there for the taking
While US Treasury yields may well have depressed the bulk of developing world currencies, some were probably punished a bit too harshly, providing too much of a temptation for those with a slightly higher appetite for risk. Indeed, Barclays Plc has advised its clients to consider the Brazilian real, Russian rouble, Mexican peso and South Korean won as long-term investments. Discovery Capital, on the other hand, favours minor European currencies such as the Hungarian forint, Czech koruna and Polish złoty against the euro. The logic here is clear: these countries’ central banks have already enacted interest rate hikes, while the ECB has told markets not to expect any in the euro area until 2023. Other developing market currencies with strong growth prospects include the South African rand and Indonesian rupiah. More adventurous investors could include these as a weighting in a larger basket of European minors and majors.
New money
With all this talk about traditional currencies, it’s easy to overlook the novel form of money that has made more millionaires in the past 5 years than any other asset class in history. Out of all currencies, crypto has undoubtedly been the biggest gainer across the board in 2021…but it isn’t for the faint of heart.
When it comes to digital currencies, everyone likes to focus on Bitcoin and Ethereum. These once derided instruments have now become a staple of many institutional portfolios and are close to shedding their reputation as a volatility trap. Indeed, despite some ups and downs this year, they are now up 77% and 492% YTD, respectively.
However, the more risk-tolerant would do well to look at some of the newer altcoins that have taken the market by storm. The meme cryptocurrency Dogecoin would be one prime example. Amid vocal support by Tesla founder Elon Musk, this crypto has proven to be an interesting asset for investors and traders, bringing them a 3,400% YTD gain, despite recently losing nearly 70% of its value in H2. Another pup spawned off the hype of DOGE, Shiba Inu, has posted even more impressive gains of 55,299,173.2% since launching in May of this year.
Of course, there is huge risk involved in these kinds of investments, but the wise trader or investor would conduct their own research before taking any further steps.
Trade currencies with Libertex in 2022
With Libertex, you can trade CFDs on both digital and traditional currencies — along with stocks, commodities and even options on CFDs — all from the comfort of one multi-award-winning app. Visit our Forex section to explore CFDs for all the majors like EUR/USD, USD/CAD and AUD/USD. You’ll also find CFDs for a range of exotic cross rates, including EUR/RUB, EUR/MXN and many others. Then, if you’re ready to take the crypto CFD plunge, you might want to consider CFDs for legacy coins BTC and ETH, or even the new top dogs, DOGE and SHIB. Create a Libertex account if you haven’t already, and make 2022 a year to remember!
-
This holiday season, “Trade For More”, with multiple fees slashed to zero on all crypto CFDs at Libertex
Libertex is thrilled to announce our latest feature and one of the most unique on the market: zero-commission crypto CFD trading! Plus, we’ve eliminated swap and exchange fees on all cryptocurrency CFD trades! Trade CFDs on Bitcoin, Ethereum, Litecoin, Stellar, Solana or any of the crypto CFDs on the Libertex platform without some of the usual fees getting in the way. This option is now available for both new and existing clients on one of the most user-friendly trading platforms!
Fewer Fees, More Possibilities
Effective immediately, there will be NO exchange fees, NO commissions and NO swaps on any cryptocurrency CFDs for all Libertex platform retail clients (with the exception of UK retail clients, where cryptocurrency CFDs are not available). This means that the only thing you pay on a CFD trade is the spread. For Libertex crypto CFD traders, this can obviously save a substantial amount of money compared to the competition when making multiple trades, overnight trades, high-volume trades and more.
You asked, we listened! Ditch those fees and trade crypto CFDs
The elimination of three different kinds of fees not only makes cryptocurrency CFD trading more affordable but also gives you the freedom to trade without worrying about incurring extra charges.
Cryptocurrencies have shown significant price movements in the market these last few years, and this has presented traders with interesting new options. You can explore all of them with Libertex, which offers up-to-date market conditions for its traders, all of which are available at our market prices.
Crypto CFD traders in the Libertex community raised these concerns to us, and we listened: crypto trading should be fast and more affordable. Libertex was founded on the principle of making trading possible for as many traders as we can on terms that work for them. So, we became possibly the first trading platform to eliminate all of these kinds of fees on crypto trading. And this is not an exclusive offer hidden behind some small print and strict conditions; anyone can join Libertex and start trading cryptocurrency CFDs on these exact conditions.
Libertex: the number one platform for crypto trading
With over 24 years of financial market experience and more than 40 international awards, including most recently Best Trading Platform (Forex Report, 2021) and Most Trusted Broker of Europe (Ultimate Fintech, 2021), Libertex has been one of the preferred choices for all traders looking to make the most of modern technologies, whether they’re experienced professional traders or beginners who can start with a practice demo account. Thanks to the fast, user-friendly apps for mobile and desktop as well as your Internet browser, you can manage your market activity from any device, anywhere and anytime.
As possibly the only trading platform to provide crypto CFD trading with zero commission, zero swaps and zero exchange fees, Libertex has become one of the most cost-effective places to buy, sell and exchange the most popular cryptocurrencies. By comparison, other trading platforms and crypto exchanges impose maker and taker fees ranging from 0.1% to 2%.
Sign up for free and… “Trade For More”
It only takes a few seconds to register with Libertex and start experiencing one of the most unique crypto trading options. And that’s not all. Faithful to its “Trade For More” motto, Libertex is constantly striving to provide the highest-quality services to its clients. This includes a full range of stock, forex and crypto CFDs and extensive analytical tools.
If you’re ready to level up your trading game in the new year, then ditch those commissions, swaps and exchange fees for good and start trading crypto CFDs with Libertex! (https://promo.libertex.com/lp/en-en/zero-crypto-a/ (https://promo.libertex.com/lp/en-en/zero-crypto-a/))
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% 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. Cryptocurrency instruments are not available to retail clients in the UK.
-
A holiday toast to all Libertex clients: thank you for your continued support!
After experiencing a crisis the world had never seen before, the bar wasn't exactly very high for 2021. Of course, the pandemic is still not completely over and done with, though we're much closer to the ‘old normal' than we were 12 months ago. For Libertex, however, the success of this past year far outstripped all expectations, and we're delighted to see all our hard work paying off for both ourselves and our clients.
Following 2020, a year replete with achievements for the company despite external pressures, we were absolutely committed to making 2021 even more of a shining success. Nonetheless, we wouldn't have been able to do any of it without the extensive hard work of our valued staff and the unwavering support of our clients, both new and existing. That's why we'd like to take a moment to express our sincere gratitude to all of you for helping us to reach new heights during this time of ongoing uncertainty. Without you, none of our success would be possible.
After we won a raft of awards the year before, the pressure was on to match or improve on our performance in 2021. Thankfully, we weren't left disappointed. Libertex's commitment to user experience was once again rewarded with another Best Trading Platform award from Forex Report. In addition to this, we were then named Best FX Broker by European CEO. The latter was a special win because it showed that, even with all our newly added instruments, we're still one of the top players in financial markets. But the one all of us at Libertex are most proud of was Ultimate Fintech's Most Trusted Broker of Europe since it represents recognition of our multi-year campaign to build Libertex's strong reputation.
Everyone loves being awarded, but what clients really want from their brokers is a constant effort to improve the service provided and expand the available options. That's why we're so committed to keeping our product-line up-to-date with the hottest new asset classes and instruments. A testament to this fact would be our additions of SHIB and DOGE CFDs to our already extensive cryptocurrency pool, the inclusion of Robinhood CFD in our list of tradable assets, and the long-awaited arrival of options trading on Libertex.
But we didn't stop at individual instruments; we even created our very own new account type, Libertex Portfolio, which comes with no transaction commissions and allows users to become shareholders!
As 2021 draws to a close, we'd like to wish you and your loved ones all the very best for health and happiness in the new year. Let's hope that 2022 will see the end of the pandemic and we will finally put all of this behind us.
See you in 2022 and don’t forget to… #TradeForMore!
-
Slippage: How to Get Your Desirable Price
Slippage is a term that is used frequently in finance and applies to Forex and stock markets. Slippage may either bring you loss or higher profit. Thus, it’s essential to know how it occurs and how to avoid its negative impact.
Slippage: Definition
The meaning of slippage is simple. Slippage is the difference between the price at which you desire to enter or exit the market, with the price at which the trade was executed. It can be positive and negative.
The negative slippage occurs when your trade is executed at a worse price for you. A positive one means you get a better price to open or close your position. Usually, execution speed is the primary trigger of the slippage. Any delays between the placement of the order and its execution may lead to a price change. At the same time, slippage may happen if you hold a position overnight or over the weekend when the market is closed, and unexpected events cause incredible price spikes.
Don’t confuse slippage with a spread. A spread is a difference between ask (sell) and bid (buy) prices that applies to any trade you open. The spread is the commission you pay to a Forex broker to open a position. You can calculate the spread ahead and choose the asset that has the smallest spread. As for the slippage, you can’t predict how much it will cost you and can barely forecast when it occurs. However, we will share the best tricks to predict slippage.
Why Slippage Happens
Let’s consider the reasons for slippage, which will help us to build a strong strategy on how to avoid it.
High Volatility
The first and primary reason for slippage is high volatility. There is always volatility in the market; it’s either low or high. In times of high volatility, the price changes so fast that the price you require can’t be fulfilled by the market.
A reliable broker, such as Libertex, should provide quick order execution to limit the slippage size. Economic events, unexpected news, and rumors are always a trigger of high volatility. The economic events are mentioned in the economic calendar. Nevertheless, it’s not easy to accurately predict their effect. The situation becomes more difficult when the event is not in the economic calendar.
Have a look at an example that happened on March 9, 2020. March 9 is called Black Monday due to the enormous stock market sell-off caused by the spread of the coronavirus pandemic and the Russia-Saudi Arabia oil price war. Although Black Monday affected the stock market more, currency pairs were under pressure as well.
Take a look at the EUR/USD pair, where long shadows signal high volatility.
(https://carigold.com/forum/attachments/slippage-1-jpg.447430/?watermark_date=1641885976)
The price moved very fast, so there would be a vast price gap between the time when you placed an order, and when an authority executed it.
Low Liquidity
High liquidity means many active market participants are ready to fulfill your trade. If you are a seller, they are prepared to buy at the price you establish. If you are a buyer, they are ready to sell at the price you want. Low liquidity occurs when there are not enough market participants who are prepared to offer the price you expect.
So, there is a significant time lag between the moment when you placed an order and the time when a buyer or seller was found. It mostly relates to unusual assets that are not too popular among market participants.
Large Order
Another reason that appears less frequently but is worth mentioning is large orders. Slippage happens if you place a large order, but there is no interest in filling it at the desired price level.
How Slippage Occurs
Slippage equally applies to Forex and stock markets. In terms of stocks, we are talking about the difference between ask and bid prices, the so-called spread. To avoid stock slippage, investors should avoid times of high volatility.
Let’s consider an example. Imagine you would like to buy Apple stocks (CFD). The bid-ask spread is 247.75 to 247.85. You suppose the price will rise, so you want to buy shares. However, high market volatility boosted the ask price to 248.25. The difference between 247.85 and 248.25 is slippage.
What Is Slippage in Trading
We mentioned above that the slippage in Forex happens either because of high volatility or low liquidity. Let’s imagine you want to sell the USD/SGD pair that is considered as an unconventional pair that can be affected by low liquidity.
Suppose you open a trade at the close price of the previous candlestick at 1.3872. However, due to the low liquidity, the next candlestick opens at 1.3893. This gap is a slippage that you would have to deal with due to the low liquidity.
(https://carigold.com/forum/attachments/slippage-2-jpg.447431/?watermark_date=1641885977)
We explained the negative slippage. Let’s look at the positive slippage. We will consider the same example where you wanted to buy at 1.3872. However, there was a better price of 1.3865, so your order was filled at a better price.
How Slippage Affects Trading Transactions
It's essential to consider slippage while trading, as it's one of the factors that determine the final cost of your trade, including spread, swap, and commission. If we talk about negative slippage, the higher slippage you experience, the worse trade you will get.
However, positive slippage will have an opposite effect on your trade, increasing the profit you will get. Every trader looks for the best entry and exit levels. Imagine you can buy an asset at a lower price or sell it at a higher price – your income will improve immediately. However, it’s significant that slippage doesn't occur when you exit the trade.
How to Avoid Slippage
Although it's impossible to predict the amount of slippage, it's possible to take some measures to prevent it.
Don’t Trade in Times of High Volatility
High volatility occurs in times of important economic events, news, and rumors. The first thing you should do is to avoid the market in times of notable economic releases. The list of important economic events is available via the economic calendar.
The Bank of Canada had a meeting on March 4, 2020. Analysts didn’t expect any changes to the interest rate. Nevertheless, the central bank cut the rate by 50bp. If you are familiar with the monetary policy rules, you know that the rate cut leads to a weak domestic currency, while a rate hike causes its appreciation. On the chart, we see the USD/CAD pair surged immediately after the bank’s decision.
(https://carigold.com/forum/attachments/slippage-3-jpg.447432/?watermark_date=1641885977)
Liquidity depends on the asset you trade and trading hours. The major pairs, such as EUR/USD, GBP/USD, USD/JPY, USD/CAD, AUD/USD, NZD/USD, and USD/CHF, have the highest liquidity. While rare pairs, such as USD/TRY, USD/MXN, are traded less often, thus, the liquidity is lower.
As for the best trading hours, they depend on the asset you trade. Every market has trading sessions. If we talk about Forex, we are looking at Australian, Asian, European, and American sessions. For example, the Australian dollar will have high liquidity during Australian and Asian sessions because traders in those regions are more interested in AUD that is used for financial operations than in GBP.
Slippage and Order Types
There are two types of orders: market and limit. Slippage occurs when you apply to a market order. It means you want to open a trade right now at the market price. However, there are limit and stop-limit orders. They are executed only at a specific or better price.
Let’s determine how they work:
- Sell limit. When you place a sell limit order, you expect the price to rise to a certain level and pullback moving down. Thus, it’s an instruction to sell the asset at the specified price or higher. The chosen price is always higher than the current one.
- Buy limit. Buy limit order means you expect the asset to fall to a certain level and return back up. So, you assume the trade will be opened at a specified price or lower. The specified price is always below the current market price.
- Sell stop. When placing a sell stop order, you expect the price to break below a certain level and continue falling. That means the entry price is lower than the current one.
- Buy stop. If you place a buy stop order, you expect the price to break above a certain level and continue rising. Thus, an entry price is higher than the current one.
(https://carigold.com/forum/attachments/slippage-4-jpg.447433/?watermark_date=1641885978)
Nonetheless, slippage may happen not only when you open a position, but when you close it. To avoid the slippage closing a trade, use guaranteed stop loss orders. A guaranteed stop loss differs from the standard one as it will close the trade at the level you specified. However, a guaranteed stop loss is not free. You will have to pay for a premium when it triggers.
Reliable Broker
As we said above, slippage can be either negative or positive. If the market moves in your favor and offers a better price, a trustworthy provider, such as Libertex, will execute the position at a better price.
If the slippage is negative for you and surpasses an acceptable level, a broker should reject the trade and ask you to resubmit it. Also, a broker should have low slippage rates and fast execution speed that will limit the size of the slippage.
FAQ
Here are the questions you may ask.
What Is Broker Slippage?
A broker slippage is a difference between the price you require and the price at which the broker opens your trade. Usually, the slippage size depends on the provider you choose as the speed of the market execution, and the slippage rate differs from broker to broker.
First, it’s essential to find a broker with a low slippage rate, such as Libertex. A slippage rate means there is a range within which the price can be executed, even if there is a difference with the requested price. This range won't hit your trade, so you don't lose a lot of your capital. If the price exceeds this rate, the broker will ask you to resubmit the trade.
Another critical issue is the type of execution. If the broker fills the trade at the market price, that means the slippage can occur in times of high volatility or low liquidity. If the broker offers an instant execution option, the trade will be filled accurately at the desired price or may not be filled at all, due to sharp price changes during the process of placing an order.
How Can We Stop Trading Slippage?
It’s impossible to remove the slippage entirely. Every trader has experienced slippage at least once in their trading career. Although it's possible to check significant economic events and avoid trading during them, there is no chance to predict unexpected news and rumors. Markets are driven not only by fundamental factors but by the market participants who form the market sentiment. It’s impossible to fully remove the slippage.
Recently, world central banks have been holding unscheduled meetings and cutting interest rates due to the coronavirus pandemic. Such events are unpredictable and not placed on the economic calendar. Thus, traders can’t predict them and place either a limit order or avoid trading at all.
All you can do is to find a reliable broker that will guarantee a low slippage rate in case of the negative slippage and trade execution at a better price in case of positive slippage.
How Do You Measure Slippage?
It’s easy to calculate slippage, as it’s just a difference between the desirable price and the final price, at which the trade was executed. If you placed a long position at the level of 1.3500, but the trade was opened at 1.3502, 2 pips are your slippage.
Conclusion
Slippage is an integral part of trading along with spread, swap, and commission. Although it's impossible to get rid of negative slippage, it's possible to reduce its impact. As for positive slippage, it's essential to find a trustworthy broker such as Libertex, that will execute your trades at the best market price.
-
What Is Rollover In Forex?
The value of each world currency is often tied with its interest rates. Since you’re betting on the value of one currency against another, trades involve two different interest rates. And traders should pay attention to the payment, which is applied when you hold a position overnight. Depending on the interest rate of the two currencies, you can either profit or lose money from it.
What is Rollover?
When conducting a transaction, with banks in other nations, banks deal with foreign currencies and pay the interbank rate. The interbank rate will differ depending on the kind of currency you hold in the Forex market. Such interest rates will dictate the amount of rollover a trader will have to pay for an open position.
Traders need to determine which currency offers a high yield and which offers a lower one. When the markets close for the day, the position can generate profit if a borrowed currency has a lower interest rate. On the opposite side, traders might be charged for the interest rate if the purchased currency has a lower interest rate. If you don’t want your positions to be subject to these calculations, you need to close them by the end of the day.
End of Day in Forex
Rollover transactions are carried out when a position is being held open to the next value date. Therefore, rollover is linked to the terms trade and value date. There is also a need to determine what would count as the end of the day, taking into account different international markets.
The trade date or entry date occurs when a trader enters an order for purchasing/selling an asset, and the broker accepts it. When the trade settles, it is considered the value date, meaning when either party in the transaction receives or pays home currency, in exchange for foreign currency.
But what is considered the end of the day if the working hours of the Forex market travel across different time zones? In this 24-hour market, the community had agreed upon what is considered the end of the trading day. Following the established practice, the trading day ends at 5 p.m. Eastern Standard Time (EST). Open positions are considered overnight after 5 p.m. EST.
- If you are in New York, rollover takes place at 5 p.m.
- For traders in London, it will be 10 p.m.
- If you are in Tokyo, positions are rolled over at 6 a.m. the next day.
- For Sydney, it corresponds to 7 a.m. the next day.
Rollover During Weekends and Holidays
The amount of interest will vary depending on how many days it took to rollover. Bear in mind that the rollover interest is calculated every day, which includes weekends and holidays.
Practically every bank in the world is not open on Saturdays and Sundays. Even with no rollover on the weekends, the rate is still charged/earned over these periods. This means that the Forex market will book an interest amount equal to three days of rollover on Wednesdays.
Additionally, there are special conditions for holidays because of the banks. To account for that, a holiday rollover normally takes place two days before the holidays. For example, before the US President’s Day on February 18, the rollover is calculated at 5 p.m. two days before that for all US dollar pairs.
Sometimes interest is calculated for four to five days – for example, when the rollover would be applied on the weekend.
Forex Rollover Calculation
(https://carigold.com/forum/attachments/rollover-in-forex_1-jpg.448300/)
In order to calculate the rollover rate, you need to know the following figures: position size, currency pair, and the interest rate for each currency. Then, you apply the formula:
Rollover Rate = (Base Currency – Quote Currency)/365 x Exchange Rate
If the final value comes out positive, it indicates that a trader gained a profit overnight. A negative value means that the trader sustained a loss.
Here is how the daily rollover cost would play out in a hypothetical scenario EUR/GBP 0.8
1. With a trade size of 100,000 units, a 2% annual EUR rate, 2.5% annual GBP rate, a trader holds a long position.
2. Profit of 100,000 EUR x 2% = 2,000 EUR annually or 5.48 EUR at rollover.
3. You will also need to pay 80,000 GBP x 2.5% = 2000 GBP annually or 5.48 GBP (6.14 EUR) at rollover.
4. Subtract the amount gained from the amount charged = 5.48 - 6.14 = - 0.66 EUR (rollover cost).
Different Forex Rollover Rates Scenarios
The examples below show how the concept of rollover applies in different scenarios:
- If you hold a long position (meaning, you own the currency) and the interest rate applied to the base currency is higher than the quote currency, you make a profit.
- When you are shorting a position (selling an asset you do not own), the base currency can have a higher interest rate than the quote currency. In this case, you sustain a loss.
- When you take a long position, and the base currency has a lower rate, that also means that you suffer a loss from the overnight charge.
- Lastly, for a short position, the base currency can have a lower interest rate, in which case, you make a profit.
Meaning of Rollover in Trading
Some traders use methods that rely on interest rate difference, namely in Forex carry trading. They profit from taking a long position on currencies that offer a higher rate and short low-interest-rate currencies. But if your strategy depends on holding positions overnight, you need to always account for the rollover rates and any changes related to them.
Normally, market conditions ensure the relative stability of the roll rates. However, this method still comes with certain drawbacks. For example, the interbank market becomes more sensitive to borrower risk, and the roll rates can change significantly from day to day. Besides, traders sometimes face the risk of a sharp decline in the currency price. The Central Bank Calendar shows changes in interest rates, which often cause rollover rates to fluctuate.
Let’s say the interest rate in New Zealand is 4% and the interest rate in the USA is 1.5%. When you purchase NZD, the interest rate is 2.5%. If you hold a $100,000 lot for a year, you will make $2,500 without doing anything else. It sounds great, but there is a catch.
The potential for fluctuation can go as high as 20% throughout the year. So, if you fully rely on interest to gain profits from trading, you might have a difficult time. With the fluctuations, you could lose a lot more than 2.5% if NZD begins to fall against the USD. For this reason, traders focus on getting daily gains from the Forex rollover strategy, rather than keeping the position open for long periods of time.
Conclusion
If you open and close a Forex position within the day, you will not be subject to a rollover. You can leave an open position overnight if you want to continue with the trade and you expect the rollover rate to be positive. But if you have reason to believe it will be negative (for example, with emerging market currencies) you should close it before the end of the day.
Profit from rollover can become an additional form of income. But traders are advised not to depend on interest gains entirely but rather explore other venues of trading. You can make this happen with an internationally regulated Libertex Broker. The platform offers educational materials so that you can start trading with the necessary knowledge.
There is no denying that having access to many currency pairs gives you more options. But with Libertex, you can also trade a range of other assets to diversify your portfolio. Along with Forex, the platform covers Stocks, Crypto, Metals, Indices, Agriculture, Oil and Gas, and ETFs.
You can open a demo account and test-run the platform. It will definitely convince you to conduct your trading with Libertex – it is reliable, user-friendly, and offers highly favorable terms.
-
Could 2022 be the year it all comes crashing down?
The past two years have been quite the rollercoaster ride. In day-to-day life, the political climate and, of course, the stock market. After a flash crash following the arrival of the pandemic, equities have been on a seemingly endless upward trajectory, with only highly affected sectors like aviation and leisure lagging behind. As we embark upon 2022, the increasingly market-exposed population is asking one thing: how long can this unbridled growth continue?
Gurus and would-be prophets have been predicting a huge crash since as early as 2014, but the indices have just kept on trucking regardless. However, as the old adage says, what goes up must eventually come down, and there are certainly quite a number of headwinds at the moment. High levels of inflation, central bank stimulus tapering, and new coronavirus variants all threaten to slam the breaks on the runaway growth train. So, let's take a closer look at some of these risks and see what can be done to protect capital in the year ahead.
Inflating the bubble
The biggest macroeconomic worry of 2021 has undoubtedly been the above-target inflation that has significantly increased the costs of doing business, just as companies are trying to get back to normal. After much procrastination, the US Federal Reserve (and other world central banks) have finally bitten the bullet and announced combative measures, including stimulus tapering and interest rate hikes. Their reluctance to take these steps was quite understandable given their propensity for provoking a significant correction on the stock market.
Indeed, should the Fed keep its promise of three rate hikes in 2022, a 20-30% retracement is perfectly plausible. But that doesn't mean you should sell everything and hoard cash. Remember that inflation we're talking about? While taking some profit from overheated markets like the US tech sector is perhaps a good idea, there are plenty of equities that are still underpriced. Established value names like Berkshire Hathaway, Wells Fargo or Coca-Cola could be a good conservative move. However, the world is much bigger than the US, and those with a higher appetite for risk may want to consider some of China's beaten-down tech giants: Alibaba, Baidu and Tencent are all trading at around 40% below all-time highs.
Omicron and other mutations
While we're on the topic of China, it seems the perfect juncture to discuss the risk of Omicron and new coronavirus variants as a whole. Omicron was initially hailed as a saviour and the potential end of the pandemic due to its low severity and high transmission rate. Unfortunately, the poor efficacy of existing vaccines against Omicron is leading to an increase in hospitalisations among the vulnerable, prompting governments to consider additional restrictions and lockdowns.
This would obviously be bad news for the stock market and could be a catalyst for corrections in affected countries. Given that the virus is constantly mutating, the risk of such an event could be even higher if we see a variant that is as communicable as Omicron but which causes more severe disease.
As they say, though, any crisis is also an opportunity, one which vaccine manufacturers are already capitalising on. Pfizer and Moderna have begun developing Omicron-specific vaccines, and, in the meantime, booster programmes will mean even more profits for these companies. When we consider that these two stocks are down 10% and almost 50%, respectively, from all-time highs, this could be a good play to ride out any COVID-related volatility.
Cash for gold
Some people prefer to keep the risk to a minimum and are convinced that 2022 is going to be the year that the long-awaited crash finally comes. In that event, there are always traditional haven assets like gold and silver, not to mention less traditional alternatives like Bitcoin and Ethereum. These assets would also be a wise hedge against inflation, which Fed chief Jerome Powell has now admitted is likely to be a little more than just "transitory". It goes without saying that diversification is the key to investment success, and any sound portfolio should contain a precious metals (and crypto) allocation.
However, now might be the time to consider increasing your percentages of these asset classes. The yellow metal has hardly moved in a year, and silver is actually down almost 20% on reduced industrial demand, making them both smart buys at the moment. Besides physical gold and silver, there's even greater upside potential in mining stocks like Vale and Sociedad Química y Minera de Chile. As for crypto, there are also alternatives to owning physical BTC or ETH on a cryptocurrency exchange, with products like the Grayscale Bitcoin Trust offering an excellent method of gaining exposure to this space without the hassle of navigating the crypto sphere.
Libertex Invest for long-term investors
Whether or not 2022 is the year the crash finally comes, do your best to protect yourself from any possible drawdowns. If you do your due diligence and avoid buying at all-time highs, you've already done the hard bit. For long-term investors, Libertex Invest could be just the product they've been looking for. This new account type offers zero commission and comes with a wide variety of advantages over CFD trading. Best of all, it actually allows you to own shares with all of the dividends. For more information or to create an account, visit http://www.libertex.com/invest
-
What Is a Lot in Forex
Every novice Forex trader, at the beginning of his journey in the financial markets, faces the concept of the lot. On the majority of trading platforms, the lot size should be set independently. So, what is a lot? Does its size matter? How can it affect the transaction? You will learn the answers to these and many more questions after reading this article.
What Is a Lot Size in Forex?
A lot is a unit of measurement of a product at an auction or an exchange. A lot size means a certain volume of goods, which is convenient to operate in trading.
For example, at auctions the lot is usually one item:
- a work of art
- a piece of jewelry
- an ancient artifact, etc.
At the exchange, the lot is often formed by a certain amount of goods:
- 100 barrels of oil
- 100 ounces of gold
- 100,000 currency units, etc.
As on any exchange, Forex lot is a standard unit of measurement of goods traded. Lot size differs depending on the type of asset:
- currencies
- shares
- metals
- energy resources
- cryptocurrencies, etc.
Let’s say, a lot of the EUR/USD currency pair on the Forex market is 100,000 euros, the lot of GBP/USD is 100,000 pounds, the lot of USD/JPY is 100,000 dollars, etc. In currency pairs, the lot will almost always be 100,000 units of base currency – the first one in the currency pair.
Standard Lots
A standard lot is the main unit of measurement in Forex. For currency pairs, it is 100,000 units of the base currency. Due to the use of leverage (margin trading), a trader does not need to have hundreds of thousands of dollars in his account to trade full lots on Forex.
For example, having only 1,000 dollars on the account and using the leverage of 1:200 provided by the broker, the trader can operate with 200,000 dollars. In this case, he can buy one lot of EUR/USD, GBP/USD, or any other currency pair.
Mini Lots
A mini lot is 0.1 of the standard lot. On Forex, a mini lot is equal to 10,000 units of the base currency. Mini lots have been introduced in order for traders to be able to make transactions even with capital less than $1,000. In addition, mini lots give room to maneuver: instead of opening a single deal with a full lot, a trader can open several deals with a smaller volume, and wait for a more favorable price.
Micro Lots
A micro lot is 0.01 of the standard lot. On Forex, a micro lot is equal to one thousand units of the base currency. The meaning of a micro lot is the same as the meaning of a mini lot, but a trader needs even less capital for the transaction.
Nano Lots
A nano lot is 0.001 of the standard lot. On Forex, a nano lot is equal to one hundred units of the base currency. Nano lots are practically obsolete in real trading.
Instead, brokers launch cent or nano accounts. On such accounts, the trader's capital is measured but in cents. Ten dollars on a cent account will be displayed as 1,000 cents.
Board Lot
A board lot is a block of shares, which differs depending on the company. For example, for one company, the round lot will be equal to 1,000 shares, and for another to 10 shares.
Round Lot
A round lot is often like a board lot, but it can be larger. For example, with a board lot of 100 shares, round lot shares may be equal to 300. In this situation, a round lot is equal to 3 board lot.
Odd Lot
An odd lot is usually a part of the board lot. It can be any number of shares, 5, 15, or even 37 with a board lot of 100. This lot is a rare phenomenon on the exchange because brokers charge a higher commission for its formation.
Why Forex Lot Is Important in Trading and How to Calculate It on Forex
(https://carigold.com/forum/attachments/1-jpg.450181/)
The trader chooses the lot for each trade independently. Potential profit and loss depend on the transaction volume.
For example, if you trade one full lot of EUR/USD, the price increase by one pip (percentage in point) will either bring the trader 10 dollars (if the transaction was opened for purchase) or reduce his capital by 10 dollars. If the deal was opened for one micro lot (10,000 EUR/USD), the trader's capital would change by only one dollar.
What Are CFD Lots
CFDs are contracts for price differences that allow you to trade in Forex shares, gold, oil, and other non-currency instruments.
Lots for CFDs will correspond with the asset for which the contract was launched. For example, 1 CFD lot for oil will be equal to 100 barrels. And one lot of CFD per share of a company will be equal to its board lot.
It is a bit more difficult to calculate the CFD lot for trading, but the principle remains the same - it is recommended to open deals with a lot, which is a maximum of 10 times more than the trader's capital.
Conclusion
For effective trading, each trader should be able to calculate a lot correctly. One needs the practice to learn how to calculate a lot properly, and the best way to do so is to use a demo account. A demo account is available for free on the Libertex platform. In addition, the multiplier mode allows you to calculate the volume of a deal using a simplified scheme, so even beginners can handle this task.
-
Regulatory pressure creating opportunities in Chinese tech
In the wake of the coronavirus, global tech stocks enjoyed an unprecedented boom. It truly was nothing short of spectacular, with companies making ten years' worth of gains in the space of just a few months. There was, however, one notable exception: China.
This was particularly surprising given the erstwhile rapid growth rate of Asia's biggest economy and its current position in the development cycle. Far from rivalling their US counterparts Alphabet, Amazon and Facebook, China's tech giants Alibaba, Baidu and Tencent actually saw an average of 40-50% knocked off their share prices. But as shocking as this all might seem, there is, in fact, a perfectly understandable explanation for it.
So, is this the end of the road for Chinese stocks, or are we looking at the buying opportunity of a lifetime? Without a crystal ball, it's impossible to say for sure where prices are headed. However, what we can do is look at the reasons behind the recent declines and assess the future prospects of the tech space in China.
So, what's the story?
It's no secret that the Chinese authorities have been wary of Big Tech for some time now. And it just so happened that the advent of the coronavirus coincided with the regulators finally cracking down on the once freewheeling sector. The brunt of their ire fell on Alibaba CEO Jack Ma, leading to the cancellation of the Ant Financial IPO and a huge $2.8 billion antitrust fine for the e-commerce leviathan. This led to a nearly 70% decline in Alibaba's share price and started a chain reaction across Chinese tech stocks, initiating a downtrend, the end of which is still not in sight.
In reality, though, this has been a long time coming. The CCP has been gradually taking legislative action to rein in their biggest data holders, starting with its Cybersecurity Law (enacted 2017). This was then followed by its Data Security Law (enacted 2021), with the trifecta eventually completed by the Personal Information Protection Law (also enacted in 2021). Now that the government has its protective legal framework in place, it might just spell the end of the crackdowns. Assuming they all play ball with the regulators, the bulk of the damage could already be priced into the shares of Alibaba, Baidu and Tencent.
But why?
The reason for the CCP's regulatory offensive is actually quite simple. Data has been heralded as the new gold, and nobody recognises this more acutely than the Chinese government, which recently listed data as a "factor of production" on par with the traditional factors of socialist economic policy: land, labour, capital and technology.
In light of this, it's understandable that the authorities were not particularly happy about its biggest data holders listing on US stock exchanges, where they can be required to share precious bytes with local regulators. It's no coincidence that the past couple of years has seen a raft of secondary Hong Kong listings from China's tech elite. The Chinese government has been encouraging firms to migrate to exchanges within its sphere of influence for some time as it seeks to build its own Shanghai-based answer to the Nasdaq, the Star Market.
This explains why Didi (which does not yet have a second listing) was so hard-hit post-IPO, with the authorities removing its apps from domestic stores for suspected data breaches. Since Alibaba, Tencent and Baidu are already listed on the Hang Seng, they could be on their way to regaining the Chinese regulators' trust and some of their lost value along with it.
When will it all be over?
The truth is nobody knows for sure. While it looks like there is light at the end of the tunnel as far as regulatory woes go, the current macroeconomic climate makes it tough to tell exactly when growth will return. Aside from the local real estate crisis, the high global inflation rate is also taking its toll on the country's major exporters. While this might be an ongoing problem for Alibaba, Tencent and Baidu can count themselves lucky that their business is largely unaffected by rising raw materials prices.
This relatively minor issue aside, though, there certainly are many positive factors for the entire Chinese tech sector. First, having already taken such a beating of late, there's not much more room for them to fall given their all but assured future as some of China's biggest companies. To put things into perspective, Alibaba is down 58% at the time of writing, while Baidu and Tencent aren't faring much better with 32% and 39% losses of their own. When taken together with the fact that all of them are present in some way in the rapidly developing countries of South-East Asia, this gives them every chance of reaching the market cap of US counterparts Amazon, Alphabet and Facebook in the next ten years, making current prices an absolute steal!
Is there a way to play with a Big Tiger?
Attempting to trade the market is always risky, and this is especially true when it comes to China. There are far too many variables, political and otherwise, to make short term bets on individual stocks here. As for leverage, don't even think about it! All of that aside, every serious investor ought to have at least some portion of his or her portfolio invested in the Asian powerhouse.
While the short-term risks are very real (and totally unpredictable), it's hard to imagine a scenario where China's tech giants fail to grow their businesses multiple times over in the decade ahead. As such, some form of measured, long-term, and unleveraged (can't stress this enough) investment in these instruments should at least be on the radar for even the most risk-averse of investors, especially at these valuations.
With Libertex Invest, you can purchase individual shares in Alibaba, Tencent and Baidu – or a wider basket of Chinese tech firms via the iShares China Large-Cap ETF – all at the touch of a button. Best of all, Libertex charges no commission whatsoever on investments made via Libertex Invest, which means more of your potential profits stay in your pocket. For more information or to register an account, visit http://www.libertex.com/invest (http://www.libertex.com/invest)
-
Forex und CFD Swap Raten
The term swap comes up from time to time in the world of trading and can cause confusion. Part of the reason is that the word is used to refer to two different things. Swaps are a type of derivative trading product, but the word is also used to describe the interest that is either earned or paid on overnight CFD and forex trades. In this article we describe both and clear up the difference, and then go into a little more detail on how swap rates apply to CFD and Forex trading.
Swaps as Trading Products
What is a swap and how does it work?
A simple example would involve two parties exchanging the cash flows of two interest rate products, such as bonds. One may pay a fixed rate, while the other pays a variable rate. If the holder of the fixed rate instrument believes rates may rise, they would be happy to receive the variable rate cash flows, rather than the fixed rate cash flows. If the holder of the variable rate instrument wants more certainty of the rate they will receive, they will be happy to exchange their variable cash flows for fixed cash flows.
Swaps allow institutions like pension funds, insurance companies and banks to manage liabilities and risk. They also allow hedge funds and traders to speculate on interest rates, currencies and other variables in the economy. They are generally traded on an OTC (over the counter) basis and are not listed on exchanges. This means the terms of each swap agreement are agreed by the two parties for each trade.
(https://carigold.com/forum/attachments/swap-1-jpg.452284/)
Types of swaps
- Interest Rate Swaps are used to exchange interest payments that are either paid or received. Usually one rate will be fixed, while the other is variable. They allow issuers of floating rate debt instruments to fix their liabilities and also allow funds to speculate on interest rate changes.
- Currency Swaps allow two parties to exchange the principal and interest payments of debt instruments. This allows parties to manage risk or speculate on interest rates and currency changes. They are used by central banks to stabilize currencies, and by corporations to manage their foreign exchange exposure.
- Commodity Swaps are used to exchange the spot price of a commodity for a fixed price, for a specified period. They allow producers and manufacturers that use commodities to manage their revenue and costs.
- Total Return Swaps are very similar to CFDs, but are used by institutions rather than retail traders. They allow two parties to exchange the price changes, in addition to the dividend and interest payments of an asset or pool of assets, for a fixed rate.
- Credit Default Swaps are like insurance policies that protect the holder of a bond in the event of default by the borrower. In the event of default, the seller pays the buyer the principle and interest payments they have lost.
Swap and Rollovers in the CFD and Forex Markets
CFD and forex trading involves various currencies and interest rates. Interest is always paid or received daily, so every time you hold a CFD or forex position overnight, you must either receive or pay interest.
This means any overnight position involves a type of interest rate or currency swap.
(https://carigold.com/forum/attachments/swap-2-jpg.452285/)
CFD Swap
When you buy a CFD on a stock, index, cryptocurrency or commodity, you are trading on margin and effectively borrowing capital from the seller of the CFD. There is usually no interest cost if you sell the CFD on the day you bought it. However, if you hold it overnight, you will have to pay interest on the position. This is the Swap Buy Rate and is debited from your trading account.
If you hold a short position overnight using a CFD on a stock, index, cryptocurrency or commodity, you are effectively lending capital to your broker. When your broker sells the underlying asset, they receive cash which earns interest until the position is closed. However, you must also pay a fee to borrow the underlying asset. The interest you earn is netted against the asset borrowing fee and may result in a positive or negative rate, depending on the interest rate. The net rate is the Swap Sell Rate.
In most cases, the interest rate will be calculated based on the base currency of your trading account. However, in more complex transactions, the interest may be charged based on the country where the underlying asset is traded or held. This may seem complicated, but Brokers list the Swap Buy and Swap Sell rates on their websites or on the trading platform. These vary from one instrument to the next, as the applicable interest rates and asset lending rates vary.
Example:
Apple CFDs have a swap buy rate of -0.0302%, and a swap sell rate of -0.0254%. That means that for every day you hold a long position, you will be debited 0.0302% of the value of the position at the time of purchase.
Let’s say you buy CFDs on 10 Apple shares at $201.50 each.
The nominal value of that position is $2015. So, for each day you hold the position, your account will be debited $2015 x 0.0302%, or $0.61.
If you open a short CFD position on 10 Apple shares at the same price, your account will be debited for $2015 x 0.0254% or $0.51.
(https://carigold.com/forum/attachments/swap-3-jpg.452287/)
Forex Swap
Forex swaps work in a very similar way. When you buy a forex pair, you own the first currency and you are short of the second currency. That means you earn interest on the first and receive interest on the second currency.
Because most countries have very low interest rates, in most cases, the net interest rate will still be negative. However, when you buy currencies with higher rates you may earn a net positive rate.
Example One
The EUR/USD forex pair has a swap buy rate of -0.0038 % and a
swap sell rate of -0.0018%.
If you buy the EUR/USD pair, you are holding Euros and you owe US Dollars. That means you earn interest on the EUR position and pay interest on the USD position.
If you sell the EUR/USD pair, you are short Euros and long USD. That means you pay less on the position, because USD rates are higher than Euro rates.
Example Two
The USD/MXN pair has a swap buy rate of -0.0184 % and a swap sell rate of 0.0123%.
In the case of the USD and Mexican Peso, there is a significant interest rate differential between the two currencies. That means that if you hold Pesos, you will earn the difference between the two interest rates.
To hold Pesos, you would have to sell the USD/MXN pair, and pay USD rates while earning MXN rates.
Swap Trading Strategies
Strategy №1: Carry Trade
Buy a high yielding currency and sell a low yielding currency when the higher yielding currency is in an uptrend. Hold for as long as the uptrend persists.
Example:
Sell EUR/MXN, which yields 0.0131% per day. Hold as long as the swap rate remains positive and the MXN does not lose value.
Pros:
- A very effective strategy when rates are generally high and emerging market currencies are in demand.
- The yield will increase if the interest rate of the lower yielding currency falls.
Cons:
- Profits can be wiped out quickly if the price of the higher yielding currency falls.
- Takes a long time to generate a decent return.
Strategy №2: Triple Swap Credit
Daily swap interest is debited or credited every day. However, to make up for the weekend, a triple debit or credit is applied on one day every week. Some brokers do this on Friday and some brokers do it on Wednesday. This means holding a carry trade overnight on that day can result in a triple credit.
Example:
Sell EUR/MXN, which yields 0.0131% per day on Wednesday and close the position on Thursday morning. This will result in a credit of 0.0393%.
Pros:
- An effective way to earn a small profit on an overnight trade. Works best when executed in conjunction with another trading strategy.
Cons:
- The profit can be wiped out quickly if the currency pair moves against you.
No swap accounts
A no swap account, or swap free account, is an account that does not get debited or credited when positions are rolled over each day. These accounts were originally developed for Islamic traders. However, some brokers now make them available to everyone.
The loss of revenue is usually made via other types of fees.
Pros:
- You get to focus entirely on the price action without worrying about interest rates.
- You won’t pay interest when you are short of high yielding currencies.
Cons:
- You can’t earn interest when you buy higher yielding currencies.
- You may end up paying more in hidden fees than you would with a regular account.
Conclusion
From time to time, changes in the global interest rate environment create opportunities to earn interest from Forex swaps. Short selling other assets can also generate interest credits in the right environment.
If you would like to learn more about Forex and CFD trading, Libertex is a great platform to start with. Libertex is a broker and trading platform which offers Forex, CFDs, stocks, commodities, indices, ETFs and cryptocurrencies with leverage of up to 30 times. The platform offers free trading tutorials and state of the art trading tools.
You can open a free demo account with Libertex and begin learning about the market immediately, with no risk.
-
Technical Analysis
It would not be an exaggeration to say that technical analysis is the most popular analytical method in the financial market. Many new Forex traders follow strategies based on the results of this analysis. However, not everyone truly understands what technical analysis is, what it’s based on, or why this trading strategy is sometimes successful and sometimes not. You will learn about the different types of technical expertise, advantages, and disadvantages while reading this article. It will also help you decide whether or not you are going to use this method in your trading strategy, and if so – how to use it correctly.
Definition of Technical Analysis
Technical analysis is a prediction of future price changes based on the analysis of price changes in the past. Technical analysis consists of the study of charts and the identification of patterns. Mathematics and statistics calculations are often used to convert models and patterns that are formed in the chart into the forecasts, which determine the one that can be opened for trading.
History of Technical Analysis
It is believed that technical analysis was first implemented in Japan during the 18th and 19th centuries. During those times, Japanese rice merchants started using charts to track and analyze product prices.
At the end of the 19th and beginning of the 20th century, an American journalist and researcher named Charles Dow started the classic technical analysis. His published series of articles about prices on the securities market later became a fundamental component of the Dow theory.
In the middle of the 20th century, the development of computer technologies allowed the first indicators to appear. The indicators calculations were created automatically, which made it possible to apply the results of complex formulas to the graph. From that point onwards, computer analysis developed very fast, indicators began improving, and new tools were found. “Candle” and graphic analyses have kept their initial design, but they are still quite popular among traders.
Postulates of Technical Analysis
(https://carigold.com/forum/attachments/1-jpg.453236/)
There are several main postulates of the technical analysis made by Charles Dow (or by his followers on the basis of his articles). They represent the very essence of technical expertise and explain why it should even work in the first place.
Price considers everything
This postulate rejects the significance of the fundamental analysis. Price considers everything means that there is no point in tracking down all economic and political news, pay attention to the “loud” events. Everything that could affect the price is already taken into account. That is why the priority is to study charts and indicators.
Price movement delivers the trend
Random price fluctuations form the sequences – trends. Each timeline represents the directional price movement (ascending and descending trends), or flat – fluctuations in the horizontal diapason. Even though the tendencies break and change sooner or later, it is believed that the possibility of the continuation of the current trend is higher than the probability of its change.
History repeats itself
This postulate explains how technical analysis works in general. It is based on the following idea: let’s say, that you formatted a certain pattern on the graph, which resulted in the price moving in a particular way. The next time the same pattern occurs, it is likely the price will behave similarly. At the very least, its probability will be much higher than the probability of a different scenario.
The main problem is that the probability of an absolutely identical situation occurring is extremely rare. That is why analyzing the patterns is a priority. Often, a trader has to decide whether the situation on the graph fits the pattern or not, and question whether he should open a deal.
Technical Analysis tools
Let’s take a look at comprehensive technical analysis tools which are used in contemporary Internet trading.
Candlestick patterns
Candlestick analysis is believed to be the very first sub-type of technical analysis, its predecessor. In contemporary candlestick analysis, trade is conducted on the patterns formed by one or several candles.
The main patterns of candlestick analysis are:
- External bar
- Internal bar
- Morning/evening star
- Hummer/hangman
- Doji
- Gap, etc
(https://carigold.com/forum/attachments/2-jpg.453237/)
Each pattern informs a trader that the price will likely move in a particular direction. For example, the “hangman” pattern on the graph indicates that the price is more likely to turn downwards (the pattern forms at the top of the ascending trend). The pattern thus gives the trader a signal to sell.
Trend lines
The trend line is the basic instrument of graphic analysis, which helps to reveal the current direction of the trend. It is first defined in a visual manner, then the relevant line is added.
1. If the trend is ascending, the line is held under it, being attached to the local minimums.
2. If the trend is descending, the line is held above, attached to the local maximums.
(https://carigold.com/forum/attachments/3-jpg.453238/)
The most effective way to trade using trend lines is to trade breakouts.
1. If the price penetrates the descending trend’s line, bottom-up, then one should open a deal to buy.
2. If the price is penetrating the ascending trend’s line, top to bottom, one should open a deal to sell.
Support and resistance levels
Support and resistance levels are quite similar to trend lines. The only difference is that the S&R levels are horizontal. The support is built on the local minimums and the resistance is built on the local maximums. Support breakout gives the signal to open a deal to sell, while resistance breakout signals that it is the right time to buy.
(https://carigold.com/forum/attachments/4-jpg.453239/)
Figures of Graphic Analysis
Graphic analysis is one of the largest components of technical analysis. It is based on studying the figures created by fluctuations in the price chart.
There are three types of figures:
1. Turnaround figure (head and shoulders, double top/double bottom). If you see these figures, then the trend is very likely about to change, and you should open deals in the opposite direction.
2. Figures of the trends’ continuation (flag, pennant). Formation of these figures signals that there is a high possibility that the trend will continue, and you should open deals in its’ direction.
3. Uncertainty figures (triangles and others). Such figures mean that the market could move in any direction and one should abstain from the trade for a while.
(https://carigold.com/forum/attachments/5-jpg.453240/)
In accordance with the type of figure formed on the chart, the trader will open a deal in one direction or another, or will even stop trading for the moment.
Indicators
Technical analysis indicators are automatic tools which spare the trader the necessity to analyze the graph himself and make a decision about opening the deal.
The indicator gives you a clear sign and the trader opens the deal when he sees the signal.
Each indicator is automatically plotted according to a certain formula. For example, the most popular and basic indicator, moving average, is just the average value of the price indicators during a certain period. A moving average, with a period of 10, is the arithmetic mean of the price for the last 10 time marks.
Indicators can be the following:
- Osma
- Oscillators
- Volume indicators
- Informational
(https://carigold.com/forum/attachments/6-jpg.453242/)
Usually, the signal for opening a deal is formed by the interaction between indicators and the price, or with other indicators.
Fundamental vs. Technical Analysis
It is hard to tell what type of analysis – technical or fundamental – is more effective or popular. Each of them has its own advantages and followers.
Followers of this method certainly do not agree with the postulate “price considers everything”. They believe that technical analysis is looking at the past (and history doesn’t always repeat itself), while fundamental analysis is looking to the future.
Though they may have one thing in common: even the most thorough analysis of the fundamental data does not guarantee you a prediction of the price changes that is 100% correct. For example, a positive quarterly company report, with the revenues significantly exceeding expectations, may not raise the price of the company’s shares if the market participants think that it is already high.
Novice traders may find it challenging to choose the type of analysis they should use for themselves. On the one hand, technical analysis systems are often totally automated and the trader just has to notice the signal in time and open a deal in the proper direction. On the other hand, newbies also look for strategies that do not have indicators (they think indicators are too complicated for them), and fundamental analysis does not use these tools except for several information panels.
Technical Analysis in Forex
In Forex trading, technical analysis has an even better position than fundamental analysis. This is due to certain fundamental analysis facts that are relevant for the stock market (like quarterly reporting of a company or dividend info), but are not suitable for the Forex market. Still, the techniques used in technical analysis can be applied to both the stock and Forex market.
For example, let’s have a look at the Forex trading strategy using the MACD indicator and two MA.
You can open a strategy transaction when you meet the following requirements:
1. If the fast-moving average (5-period) crosses the slow (10-period) from top to bottom and the MACD histogram crosses the MACD line in the same direction, a sales transaction is opened.
2. If the fast-moving average crosses the slow one from the bottom up and the MACD histogram crosses the line from the bottom up, a buy transaction is opened.
(https://carigold.com/forum/attachments/7-jpg.453243/)
This is an example of a simple Forex strategy. Some trading strategies are based on the readings of five or more indicators and include tools for the automatic recognition of the figures of graphical analysis. Complex systems are not always better than simple ones, although well-known strategies are rarely profitable. To be able to make a fortune using Forex trading, you have to develop your own unique strategy.
Conclusion
Every trader should know the basics of technical analysis, even if he doesn’t plan on building his own trading strategy using technical expertise. This method allows for a better understanding of the market and its participants.
To practice technical analysis, a trader needs a trading system. One of the best options is to use the Libertex system provided by the Forex Club. It is completely free, and novice traders may train there using a demo account until they are ready to start trading for real. Besides, the platform has all of the necessary instruments and indicators to complete a high-quality technical analysis of the charts.
-
Copy of Tired of trading commissions? You've come to the right place
Last December, Libertex announced that it was completely slashing commission, swap and exchange fees to zero on all crypto CFDs available on its platform as part of a special holiday promotion. But it was simply too good to let go since undoubtedly these are possibly the best trading conditions currently available on the market. The response from clients was so overwhelmingly positive that Libertex has decided to continue these trading conditions indefinitely.
The cryptocurrency sector is one of the most exciting areas of trading today, and Libertex is making it infinitely more exciting by eliminating some of the annoying fees that other brokers still charge. Essentially, this means that, with the Libertex platform, if you have €100 in your account, you can use your entire balance to trade crypto CFDs without wasting a big part of it on fees. That’s it! No catch, no fine print! With three different kinds of fees slashed to zero, Libertex lets traders save money that other brokers would normally charge as fees.
Libertex is possibly the only online broker to eliminate these three fees. Going forward, it plans to continue offering 0% swap, commission and exchange fees on all cryptocurrency CFD trades. These include Bitcoin, Ethereum, Litecoin, Stellar, Solana and any other cryptocurrencies on the Libertex platform. These special conditions are available for both new and existing Libertex retail clients (except UK retail clients, where cryptocurrency CFDs are not available).
How much money is a typical trader losing to broker fees?
In trading, while one can make or lose money on any individual trade, most brokers charge for their administrative services in several ways. The commission is charged for activity on a platform, such as deposits and trades. It is taken directly from the equity of the trading account, usually as a percentage, and deducted before any transaction happens, whether the trade is successful or not. Swap fees are interest charged on holding a trading position overnight. Exchange fees are charged for currency and asset exchanges.
- 0% commission means that all the money you deposit for a trade will actually be used for trading. This is not the case with typical brokers, who deduct a percentage before any trading can take place. For example, if you deposit 100 euros with a broker that has a 5% commission fee, then you will have only 95 euros to make your trade with. Trade crypto CFDs with Libertex, and your 100 euros deposit will be used in full for trading. Many new traders are taken by surprise by commission amounts, and end up trading less than they wanted to.
- 0% swap means that you will not be charged for holding a trading position overnight. Brokers usually charge swap on currency pairs based on the interest difference between the currencies, so it is also percentage-based. But the crypto market doesn’t sleep, nor does it depend on any issuing government’s time zone. Libertex recognises that it serves a large body of clients, and no one should be worrying about closing their crypto position by a certain time to avoid swap fees.
- 0% exchange fees mean that you won’t be charged for exchanging cryptocurrency, whether to fiat money or other crypto CFDs, on Libertex. Most exchanges will charge a percentage-based fee for this, limiting a trader’s flexibility.
So, what does it actually cost someone to trade crypto CFDs on Libertex?
The only thing a trader would pay on a crypto CFD trade with Libertex is the spread (the difference between the Ask and Bid prices). In other words, traders can expect to save a substantial amount of money with Libertex when making multiple trades, overnight trades, high-volume trades and more.
Fewer fees, more freedom in trading crypto CFDs
It is only natural for traders to do their best to minimize or avoid fees, but in the fast-moving crypto market, this can restrict their flexibility in responding to trends or cause unnecessary stress. Feedback from crypto CFD traders on Libertex indicated that they need cryptocurrency trading to be faster, more flexible and more friction-free than classic forex trading. By eliminating three different kinds of fees, Libertex continues its mission to make trading accessible for everyone and provide its clients with high-quality assets such as crypto CFDs and more.
Trade for More with Libertex
With over 24 years of financial market experience and more than 40 international awards, including most recently Best Trading Platform (Forex Report, 2021) and Most Trusted Broker of Europe (Ultimate Fintech, 2021), Libertex has been one of the leading platforms combining classic market expertise with cutting-edge technology, designing user-friendly software that makes the market accessible from any device, anywhere, anytime. Used by everyone from professional traders to complete beginners (who can start with a practice demo account), Libertex features a full range of tools and information in order for its clients to get the most out of the platform.
It only takes a few seconds to register with Libertex and enjoy the potential advantage of these unique crypto CFD trading conditions as well as a full range of stocks, commodities, and forex CFDs. Say goodbye to crypto CFD commissions for good and sign up to trade with Libertex!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.3% 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. Cryptocurrency instruments are not available to retail clients in the UK.
Available for retail clients on the Libertex Trading Platform.
-
Forex Market Hours
Other than being the largest and most talked about financial market out there, Forex has a very appealing characteristic - around-the-clock operation. Being available and opening its doors to international participants at any time of the day is arguably its best characteristic. Even though Forex never sleeps and you have endless opportunities to start trading, some time frames are a better choice. Here is what you should know about the FX exchange hours.
Forex Market Hours Definition
The foreign exchange marketconsists of banks, large organizations, asset management companies, hedge funds, retail brokers and investors all over the world. The market hours offer them a timetable that indicates when they can conduct currency operations and when they can’t.
Technically, sessions are restricted to business hours like typical stock exchange hours, but considering there are multiple markets all over the world, Forex can be entered at any time. When one session ends, there is already another one in full swing. It only stops for weekend breaks and holidays. However, with moving time zones, weekends are squeezed tighter.
There’s not just one market in Forex that you should be paying attention to. This network accommodates many markets and trading hours are dictated by when trading opens in different parts of the world.
Why Forex market hours are so important
(https://carigold.com/forum/attachments/forex-market-hours-1-jpg.455686/)
Currency pairsare open to trading whenever you wish, but no trader or investor has the capability to keep an eye on the market, or a position for hours on end. Moreover, not all market hours offer equal opportunities.
Certain currency pairs demonstrate different trends and activity as you move throughout the day. This is explained by the fact that market participants belong to varying demographic groups and engage during different parts of the day. This brings us to the conclusion that the most profitable activity is closely connected to certain busy market hours.
The most profitable activity is closely connected to certain busy market hours.
For instance, if a Forex trader is unaware of what to expect from a session, they might miss a profitable opportunity. Or the trader might not be at their computer the moment when there is a spike in volatility, allowing them to move against a set position. To minimize the risk, you can learn the most common volatility patterns and thus, choose what time fits your personal trading needs.
Major Forex trading sessions
Major sessions and the most influential financial centers go hand in hand. The session bears the title of the relevant city during its business hours. Generally, Forex is divided into sessions according to which ones are associated with peak traction.
Asian session (Tokyo)
When an optimal liquidity position is restored from the weekend break, the Asian trading session appropriately sees the results of that first. This is where the trading week effectively starts. The trend for this region is unofficially defined by the Tokyo financial markets.
Tokyo works from 7:00 pm to 4:00 am EST (EDT)
Nevertheless, this session is not restricted to Tokyo alone and attracts movement from other places. Given the fact that Australian, Chinese and Russian markets are so geographically distant, there are good reasons why the beginning and ending of Asian markets hours go further than the regular Tokyo hours. Minor fluctuations are due to the fact that Asian economies are highly dependent on the export of their goods, and therefore they do not need strong fluctuations in national currencies.
Asian economies are highly dependent on the export of their goods, and they therefore do not need strong fluctuations in national currencies.
European session (London)
As the trading day advances, not long before the Asian session closes its doors, the European session steps in on the activity. This particular area is crammed with multiple markets so this zone is notably busy, due to a number of leading European financial markets. London takes on the role of dictating the parameters for the European session, which accounts for 30% of all Forex operations.
London works from 3:00 am to 12:00 noon EST (EDT)
The European market is an interesting field since there are many influential platforms such as France and Germany, and they even start operating before the official start in the UK. At the time of its opening, the euro grew in price, and the market saw a strong price movement.
Such a situation is ideal for obtaining high profits, but this can only be achieved by experienced players who are able to monitor the fluctuations of many currencies and make a quick forecast regarding market trends. The session is extended to use the volatility generated by the London market.
There is strong price movement in the market, which is ideal for obtaining high profits.
US session (New York)
By the time the American market starts participating, the Asian session has already finished several hours prior. Nevertheless, the European participants have only gone through half of the working day. For the most part, the US session is naturally determined by what is happening in the States, for the most part, with some influence coming from Canada, Mexico, and a few other participants.
New York works from 8:00 am to 5:00 pm EST (EDT)
Unsurprisingly, the active state of the market in New York signifies intense volatility. If there is a news release that directly relates to the region, then it always causes a strong reaction and a very sharp change in exchange rates. This market is peculiar because it creates the strongest market price change in a matter of seconds.
The New York session signifies intense volatility and it creates the strongest price change in a matter of seconds.
The 8:00 am start of the US session is the unofficial start prompted by the early work of the futures exchange, commodity market and the noticeable inflow of economic and political news. As a result of the difference between the market closing time in one part of the world and a new trading day in another, a gap in liquidity takes place at 5:00 pm when the New York market closes.
Minor Forex trading sessions
Wellington/Auckland
Early Monday morning, New Zealand comes into play with the Wellington market, and it technically indicates the start of the new week.
Wellington works from 5:00 pm to 1:00 am EST (EDT)
Wellington is very calm and observes a rather small turnover. Because of this, it is not considered a very popular platform.
Sydney
Another market in the Pacific area is Sydney. The market activity only begins to gain momentum with this session because the real movement starts with the Tokyo session in two hours’ time.
Sydney works from 5:00 pm to 2:00 am EST (EDT)
Hong Kong/Singapore
The Hong Kong and Singapore exchanges open an hour after Tokyo and the movement is seen in pairs, such as the Japanese yen, CNY, the Hong Kong and Singapore dollar.
Hong Kong and Singapore work from 8:00 pm to 5:00 am EST (EDT)
After the news at 8:00 - 8:30 pm there is generally an off-peak period, which lasts a couple of hours. The trading volume increases towards the end.
Frankfurt
The amount of conversion operations in Frankfurt is significant. The operations are simultaneously carried out in London, Frankfurt and partly in New York, so it is great for conducting large-scale operations.
Frankfurt works from 2:00 am to 11:00 am EST (EDT)
Chicago
The majority of Chicago banks open an hour later than in New York.
Chicago works from 9:00 am to 6:00 pm EST (EDT)
The exchange time of the International Monetary Market (IMM) - a division of the Chicago Mercantile Exchange, CME - is 7:20 am 2:00 pm. The trading in currency futures is heavily conducted at IMM, which has a strong impact on exchange rates.
Overlaps in Forex trading sessions
(https://carigold.com/forum/attachments/forex-market-hours-2-jpg.455693/)
Overlaps correspond to bigger price movements, leading to favourable circumstances. There are three overlaps that take place every day:
- Frankfurt and Tokyo (2:00 am to 4:00 am): there is a much smaller volatility movement compared to the New York/London overlap. However, there are still moderate fluctuations for you to use. EUR/JPY is the better combination to go for, as they are affected the most.
- London and Tokyo (3:00 am to 4:00 am): the profit opportunities can be seen in currencies that are in high demand such as yen, euro and pound combinations. Since the US market has yet to open, this overlap has moderate pip changes.
- New York and London (8:00 am to noon): the central time for the day, i.e. the most intense and fruitful period. Since more than 70% of all FX operations are carried out at this overlap, it is proof that high volatility brings greater profits. This has to do with the fact that the US dollar, euro and pound gain the biggest traction.
When is the best time to trade?
The most profitable period for conducting FX operations are the busiest periods, such as the sessions in London and New York. This involves large operation volumes, so take a look at whether your currency pair is in high demand. It also means sharp price changes, but keeping up with changing trends requires some experience. The presence of these two factors causes the most impressive results. This is common for the busiest sessions and their overlaps. The spreads also get narrower and this leads to lower fees.
The broadly acceptable principle is that Tuesday, Wednesday, and Thursday attract the biggest activity. In case you want to limit your work week, these three days would be the best choice.
That said, there are serious grounds for acting cautiously. If a trader wants to have tremendous profit, they might be tempted to use leverage as high as 1000:1. While this ratio could potentially provide large gains, on the flipside, the trader risks losing equally large sums of money because of one trade.
For example, you could be working with the EUR/USD currency pair. With the influence of busy traction, the New York/London session overlap could possibly yield the highest profits for you. Similarly, depending on what pair you are aiming to work with, you should research when peak activity takes place. Generally, it revolves around the local time zone for the national currency.
Conclusion
(https://carigold.com/forum/attachments/forex-market-hours-3-jpg.455695/)
As a trader, the first task is to decide whether the periods of high volatility will be compatible with your particular technique. If they are, then you should recognise your optimal trade times – it could be a particular session, an overlap, or the short periods after economic and political releases.
Knowing the best market hours doesn’t mean you have to seize every opportunity for a favourable move. An FX trader could be forced to wake up extremely early to keep up with everything. This could cause long-term burnout and frequent mistakes, so you also have to consider your well-being.
Having enough information about what to do during certain Forex trading hours, in addition to a general knowledge of FX trading sessions, provides a significant benefit for your trading results.
-
Looking to ditch fees when trading crypto CFDs? Look no further than Libertex!
Last December, Libertex announced that it was completely slashing commission, swap and exchange fees to zero on all crypto CFDs available on its platform as part of a special holiday promotion. But it was simply too good to let go since undoubtedly these are possibly the best trading conditions currently available on the market. The response from clients was so overwhelmingly positive that Libertex has decided to continue these trading conditions indefinitely.
The cryptocurrency sector is one of the most exciting areas of trading today, and Libertex is making it infinitely more exciting by eliminating some of the annoying fees that other brokers still charge. Essentially, this means that, with the Libertex platform, if you have €100 in your account, you can use your entire balance to trade crypto CFDs without wasting a big part of it on fees. That’s it! No catch, no fine print! With three different kinds of fees slashed to zero, Libertex lets traders save money that other brokers would normally charge as fees.
Libertex is possibly the only online broker to eliminate these three fees. Going forward, it plans to continue offering 0% swap, commission and exchange fees on all cryptocurrency CFD trades. These include Bitcoin, Ethereum, Litecoin, Stellar, Solana and any other cryptocurrencies on the Libertex platform. These special conditions are available for both new and existing Libertex retail clients (except UK retail clients, where cryptocurrency CFDs are not available).
How much money does a typical trader lose in broker fees?
When it comes to trading, while one can make or lose money on any individual trade, most brokers charge for their administrative services in several ways. Commission is charged for activity on a platform, such as deposits and trades. It is taken directly from the trading account's balance, usually as a percentage, and deducted before any transaction happens, whether or not the trade is successful. Swap fees are interest charged on holding a trading position overnight. Exchange fees are charged for currency and asset exchanges.
- 0% commission means that all the money you deposit for a trade will actually be used for trading. This is not the case with typical brokers, who deduct a percentage before any trading can take place. For example, if you deposit €100 with a broker that has a 5% commission fee, you will have only €95 to use for trading. When you trade crypto CFDs with Libertex, your €100 deposit will be fully used for trading. Many new traders are taken by surprise by commission amounts and end up trading less than they wanted to.
- 0% swap means that you will not be charged for holding a trading position overnight. Brokers usually charge swaps on currency pairs based on the interest difference between the currencies, so swaps are also percentage-based. However, the crypto market doesn't sleep, nor does it depend on any issuing government's time zone. Libertex recognises that it serves a large body of clients, and no one should worry about closing their crypto position by a certain time to avoid swap fees.
- 0% exchange fees mean that you won't be charged for exchanging cryptocurrency, whether to fiat money or other crypto CFDs, on Libertex. Most exchanges will charge a percentage-based fee for this, limiting a trader's flexibility.
So, what does it actually cost someone to trade crypto CFDs on Libertex?
The only thing a trader would pay on a crypto CFD trade with Libertex is the spread (the difference between the Ask and Bid prices). In other words, traders can expect to save a substantial amount of money with Libertex when making multiple trades, overnight trades, high-volume trades and more.
Fewer fees, more freedom in trading crypto CFDs
It is only natural for traders to do their best to minimise or avoid fees, but in the fast-moving crypto market, this can restrict their flexibility in responding to trends or cause unnecessary stress. Feedback from crypto CFD traders on Libertex indicated that they need cryptocurrency trading to be faster, more flexible and more friction-free than classic forex trading. By eliminating three different kinds of fees, Libertex continues its mission to make trading accessible for everyone and provide its clients with high-quality assets such as crypto CFDs and more.
Trade for More with Libertex
With over 24 years of financial market experience and more than 40 international awards, including most recently Best Trading Platform (Forex Report, 2021) and Most Trusted Broker of Europe (Ultimate Fintech, 2021), Libertex has been one of the leading platforms combining classic market expertise with cutting-edge technology, designing user-friendly software that makes the market accessible from any device, anywhere, anytime. Used by everyone from professional traders to complete beginners (who can start with a practice demo account), Libertex features a full range of tools and information in order for its clients to get the most out of the platform.
It only takes a few seconds to register with Libertex and enjoy the potential advantage of these unique crypto CFD trading conditions as well as a full range of stocks, commodities, and forex CFDs. Say goodbye to crypto CFD commissions for good and sign up to trade with Libertex!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.3% 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. Cryptocurrency instruments are not available to retail clients in the UK.
Available for retail clients on the Libertex Trading Platform.
-
What is Forex and how to trade on it?
The term "Forex" — also known as foreign currency trading, currency exchange or by its acronym "FX" — refers to Foreign Exchange or to transactions between currencies.
Today, it is considered to be the most important exchange market in the world with over $5 trillion traded every single day. The combined volumes of all the stock markets in the world do not even come close to this figure. But, what does that mean to you? Well, if you take a closer look at the currency market, you're sure to come across some intriguing trading opportunities that you won't find with other investments.
As for the price of each currency, that varies depending on its demand in relation to other currencies. In other words: the more in demand a given currency is, the higher its price will be and vice versa.
If you're still wondering exactly what Forex is, let's just say that it's basically a decentralized marketplace where you can trade all the major world currencies. It encompasses a wide range of different market actors, from the world's largest financial institutions dealing in big money transactions all the way to ordinary people converting a few dollars here and there. But they all have the same end goal — they either want to buy a currency and then sell it for more than they paid, or else sell a currency and then buy it back for less money.
To join the ranks of those already trading on the Grand Bazaar of exchange markets that is Forex, all you need is a computer, an internet connection and a trading account to complete your transactions.
How does Forex Trading work?
(https://carigold.com/forum/attachments/forex2_0-1_0-jpg.459000/)
The aim of Forex trading is to profit from changes in the value of one currency relative to another. You can make a profit by buying a currency and then selling it at a higher price, or by first selling it and then buying it back at a lower price.
To understand how this works in practice you need to understand what exactly a currency pair is. Currencies are priced relative to other currencies. If you buy Euros (EUR) the price you pay will depend whether you are exchanging US Dollars (USD), British Pounds (GBP) or another currency for those Euros.
A currency pair consists of a base currency and a counter or reference currency. The base currency is the first currency in the quote, and the counter currency is the second. The counter currency is the reference currency in which the base currency is being quoted.
For most pairs, the most liquid currency is usually quoted first. However, when the USD is paired with the British Pound, Euro, New Zealand Dollar, or Australian Dollar, the USD is quoted second.
If the base currency is a foreign currency, the quote is known as a direct quote. If the base currency is the domestic currency, the quote is known as an indirect quote.
Currency pairs are divided into three categories:
- The most widely traded currency pairs in the world are known as the majors. They include the EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD. You will notice that these pairs all include the USD.
- Currency pairs that include two of the currencies listed above, but not the USD, are known as minor currency pairs. These pairs are also known as cross currency pairs or crosses. Examples include EUR/GBP, AUD/JPY and GBP/CAD.
- Exotic currency pairs include one major currency and one other. The second currency is usually the currency of a developing nation like Turkey, Thailand or South Africa. However exotic currencies also include those of quite developed nations like Singapore and Hong Kong.
An important aspect of Forex trading is liquidity. If two countries have a healthy trading relationship, the currency pair with their two respective currencies should be very liquid. On the other hand, a currency pair that includes the currencies of two countries that don’t have trading relationships may be illiquid.
The major and minor currency pairs are the most popular to trade due to high liquidity levels. These pairs can be traded on any time frame as the spread is narrow. Exotic pairs can be traded but require larger price movements to cover trading costs. This means you will need high levels of volatility, or a longer time frame.
Types of Forex trading strategies
(https://carigold.com/forum/attachments/forex2_0-2_0-jpg.459002/)
There are several approaches to analyzing and trading currencies:
- Fundamental analysis considers the difference between the economies of two countries and how that may affect the relative strength of each currency. This includes interest rates, money supply and trade balances.
- Technical analysis considers the price action of the pair. Price patterns, indicators and support and resistance levels are used to identify profitable trading opportunities.
- Traders also use news, market sentiment and algorithms to identify potential trading opportunities.
- Scalping strategies take advantage of short-term price movement that may last seconds or minutes to generate profits.
- Day traders use technical analysis to identify trades to hold minutes to hours. They close all positions at the end of the day.
- Swing traders hold positions for a few days to take advantage of larger price swings.
- Position traders and trend flowers hold positions for as long as few years. They follow major trends, or trade price patterns.
Lot sizes and how to calculate position size
One of the more confusing aspects of Forex trading is calculating the size of a position. The size of a position, which is the size of its exposure to the market, depends on the traded price, the lot size, and the number of lots.
So, what is a lot? A lot is the standardized trade size for Forex. One lot is 100,000 units of the base currency. So, if you buy 1 lot of EUR/USD at 1.1019, you are buying 100,000 Euros and you will be paying $ 110,190.
You probably noticed that if you are trading a lot size like that your minimum trade size would be quite large. Fortunately, you can also trade smaller lots:
- Mini lots are 10,000 units of the base currency
- Micro lots are 1,000 units of the base currency
- Nano lots are 100 units of the base currency
How to learn to trade Forex
(https://carigold.com/forum/attachments/forex2_0-3_0-jpg.459006/)
Any type of trading requires ongoing learning. It’s not like becoming a doctor where you first learn and then do. In the case of trading you need to simultaneously learn and practice what you learn.
You can start out with a demo account (which you can do for free with Libertex) but your learning curve will speed up when you have ‘skin in the game.’ Some of the most important lessons to learn concern the way you react when you make money and when you lose money. So, it’s a good idea to graduate to a live account as soon as you feel confident trading with a demo account.
To improve your knowledge, you should read books on trading, technical analysis and technical analysis. For Forex traders its worth learning about economics and monetary policy too, as this is what drives the value of a currency. There are also lots of very good videos and blogs on these topics available on the internet for free.
Finally, you should keep a journal, set goals and track your progress. The more systematic you are about the process of learning the more efficient your learning curve will be.
Why is Forex the best investment option?
Foreign currency trading, or simply Forex as it's often called, is one of the most popular activities among investors today. More and more people are showing an interest in currency trading. Their reasons are numerous and varied, though many of them see it as a good source of trading income for the future. With the right strategy, people can definitely profit from this unique method of trading.
Forex has a variety of benefits that are helping it to expand the online trading market:
- Greater liquidity
It is the most liquid market in the world with a trading volume in excess of $5 trillion. This means you can open and close positions more easily than in other less liquid markets.
- Low volatility
In the Forex market, there are fewer variables affecting the price difference between two currencies. It is also far more predictable compared to other assets such as stocks, for example.
- Greater leverage
Leverage and volatility are closely linked. Since foreign exchange is a low volatility market, leverage will always be higher when trading with Forex.
- Constant price updates
You are able to check prices in real time 24 hours a day, 5 days a week.
- It is decentralized
As a market founded on decentralization, it is much more accessible and this, in turn, enables trading volumes to expand further and further.
Disadvantages and risks of Forex trading
Like any trading activity, Forex trading does come with some risks and drawbacks.
- Market risks
All trading instruments are subject to a range of market risks. Political, economic, and geo-political factors can contribute to increased volatility, which can make trading challenging.
- Potential for large losses
The use of leverage and margin can be used to increase profits but can also magnify losses. Forex traders must use leverage with caution, and make sure they are aware of the potential loss on each trade.
- Weekend Gaps
Because currency markets trade 24 hours a day, Forex traders do not have to worry about the overnight gaps that occur in other markets. However, Forex markets are closed over weekends, which can result I price gaps. Forex traders should be cautious when holding positions over a weekend.
- Liquidity
Some currencies can go through extended periods with low liquidity. This can result in wider spreads and greater volatility. Even liquid currencies can become illiquid at certain periods of a trading session.
- Counterparty risks
Forex is not traded on centralised exchanges like equities and other instruments. This means there is less oversight of the way trading occurs, and traders may not be protected if a broker becomes insolvent.
- Regulatory risks
Forex brokers are regulated by several regulatory bodies which depend on the country where the broker is domiciled. Traders should always ensure their broker is certified by a reputable regulator.
What does "spread" mean?
(https://carigold.com/forum/attachments/forex2_0-4_0-jpg.459007/)
You have surely heard the word "spread" used endlessly in relation to the financial markets, but do you know its exact meaning?
Well, in most financial markets, you have three prices: the market price, the buy price and the sell price.
The word spread is used to refer to the difference between the supply (or sell) and demand (or buy) prices and is used for all shares and stock market derivatives.
In short, the spread is the difference between the sell price and the buy price.
(https://carigold.com/forum/attachments/forex2_0-5_0-jpg.459008/)
In the chart margin, you can see the price for which you can buy the first currency and then compare it with the second currency.
Say the EUR/USD sell price is 1.300, if you want to buy €1, you should pay $1.30. Therefore, it would be advisable to make the purchase if you believe that the EUR will rise against the US dollar. In other words: you should buy only if you think you can sell your €1 for an amount greater than the $1.30 you paid for it.
In the event that you wish to sell, the chart will show you the price at which you can sell the first currency for the second.
If the EUR/USD sell price stands at 1.300, you could sell €1 at that price. However, it is only advisable to sell if you think that the price of the EUR will fall against the US dollar. Because then you could buy the same euro for less than the $1.30 you paid when you opened the position.
What is a pip?
(https://carigold.com/forum/attachments/forex2_0-6_0-jpg.459011/)
A pip — short for point in percentage — is a very small measure of change in a currency pair traded on the foreign exchange market. It can be expressed either in terms of the quoted price or in terms of the underlying currency. A pip is a standardized unit and is the smallest amount by which a currency's quoted price can change.
The actual profit you receive will depend on the amount of currency you have purchased. For instance, if you bought micro lots (1,000 units) and trade with an account denominated in US dollars, the pip value will be $0.1. Thus, if your profit was 50 pips, this means you made $5. In the event you bought mini lots (one unit of 10,000), the pip value will increase to $1, making your profit $50. Similarly, when you purchase a standard lot (100,000 units), the pip value rises to $10, which translates to a profit of $500.
The same pip value will apply to all pairs where the US dollar appears in the second position. If it is listed as the first currency, though, the pip value will be different. To calculate this new pip value, you must divide the normal pip value by the current exchange rate. For example, if your currency pair is USD/CHF, you must divide $0.10 (micro lot value) by 0.9435 (the current exchange rate for CHF) to get $0.1060 (new pip value). If JPY is part of your pair, as in USD/JPY, you must follow the same steps and then multiply your result by 100 at the end.
What is leverage?
(https://carigold.com/forum/attachments/forex2_0-7-jpg.459012/)
Leverage essentially means using something small to control something bigger. In the specific case of currency trading, it means having a small amount of capital in your account that you use to control a larger amount elsewhere in the market.
If, for instance, Forex offers you a leverage of 1:100, it means that you can trade with 100 times more money than the amount of your initial deposit. That means that, if you want to invest in 100,000 EUR/USD, you now only need €1,000. However, these kinds of trades come with much higher risk... Let's suppose you're using a leverage of 1:100: your losses could then be multiplied by a factor of 100. So only go for it if you are completely sure.
Advantages of leverage:
- Increase profits
The first and probably the most important benefit of trading with leverage is that it allows you to earn more money with less effort. Whatever it is you're trading and however much of it, the main purpose of leverage is to increase your per-trade profits.
- Increase capital efficiency
It follows that by increasing the amount of money you can earn per trade, you will naturally increase your capital efficiency, too. To understand the whole technical process better, consider your capital as an asset with the potential to offer a return.
Look at it this way: if it takes two days to generate £100 with unleveraged positions, leverage would mean that it takes a much shorter period of time to earn the same £100. This means your capital can be reinvested more and thus bring you more frequent profits.
- Mitigate low volatility
Another key advantage of leverage, especially when it comes to currency trading, is that it has the effect of mitigating low volatility. It is usually volatile exchanges that generate the highest profits. That's because these markets are moving in wider cycles than more stable instruments.
Take care when using leverage in Forex! Leverage can help you amplify your earnings, but it can also lose you a lot of money. Use it responsibly.
What are CFDs?
CFD trading is a popular form of derivatives trading. CFD trading allows you to speculate on the rises and falls of fast-moving financial markets (or instruments), such as stocks, indices, commodities, currencies and other liquid assets.
Trading with CFDs in currency pairs allows you to open long or short positions. A long position means you are buying the base currency, and you are effectively short of the reference currency. The price will rise if the base currency strengthens or if the counter currency weakens. You will profit if you close the position at a higher price.
If you open a short position, you are selling the base currency and buying the reference currency. The price will fall if the base currency weakens, or if the counter currency strengthens. You make a profit by closing the position at a lower price.
Advantages of CFDs:
Liquidity: CFD prices are a direct reflection of what is happening in the underlying market. This means that CFDs provide access to liquidity in the wider market, in addition to the liquidity offered by the broker.
The ability to work in different financial markets from one account: many brokers dealing with these instruments offer CFDs based on shares from different markets around the world, as well as other types of financial instruments such as gold, silver, oil, stock indexes, sectors, commodities, government bonds, currencies, etc. This gives traders the opportunity to diversify their trading and investments by maintaining a wider portfolio of options.
Ability to work at any time: many brokers offer their clients extended hours, which means they can work with certain instruments or markets such as the FTSE and Dow, even after the underlying market has closed for the day.
Traders can work for as long as they like: CFDs do not have a fixed maturity date.
There is no set contract size. Traders can work with volumes of any size.
CFDs are less complicated than options and guarantees: the direct price and liquidity of any given CFD are reflected in the underlying market.
Contracts for Difference (CFDs), are part of a group of derivative financial products which permit the use of leverage. This means that you can trade more money than you actually have, which increases your profit potential, but also amplifies your possible losses. For this reason, traders should have some previous experience of using leverage before trying it with CFDs as profits or losses could considerably exceed the amount invested.
Bulls and bears: Long positions vs short positions
(https://carigold.com/forum/attachments/forex2_0-9-jpg.459013/)
The terms "bull" and "bear" are used to identify the two types of investors we encounter in the exchange market.
Bulls are unsurprisingly found most commonly in bull markets. This type of investor is optimistic and expects the price to rise and so prefers long positions as a way of making money. Therefore, in the context of FOREX, a long position is opened when the investor buys a pair of currencies and waits for the price to rise.
Bears, on the other hand usually reside in bear markets, where investors are pessimistic and expect prices to fall, thus electing to open short positions. With respect to the specific case of FOREX, a short position is opened when the investor sells a pair of currencies hoping for its price to fall.
How do I start trading Forex?
For the best results from Forex trading (Exchange Market), first make sure you follow these core principles:
- Select the currency pairs you will be trading. For Forex newcomers, we recommend currency pairs with high trading volumes. As a general rule, these will typically include the currencies of the world's biggest economies, such as the United States, European Union, United Kingdom, Japan or Switzerland.
- Know all upcoming economic events likely to affect your pairs. Currencies can be influenced by things like releases of macroeconomic data on major global economies and economic decisions made by their issuing Central Banks. Knowing about these kinds of developments can tell you a lot about the strength or weakness of your currencies.
- Set yourself a trading schedule. The best hours for trading are those during which volumes are at their highest. These typically coincide with the open and close of trade on the biggest foreign currency exchanges, e.g. New York, London and Tokyo.
- Use technical analysis tools. If you want to make money trading FOREX, you simply must make use of technical analysis. This type of analysis involves using charts to study price trends.
- Use leverage effectively. Knowing how to use leverage will help you to minimise your losses wherever possible. You need to set a "stop loss" or level of manageable loss for each trade. That way, you can avoid greater losses by closing a position that did not go as expected.
- If you have made it this far, then you must have been able to grasp all the concepts explained in this article. These concepts will help you to understand graphs and how to track the appreciation or depreciation of your selected trading currency, so you can detect potentially profitable investment opportunities.
- The next step is to create your own free Forex demo account. Once you have such an account, you can practice choosing currency pairs and buying them if you think they will increase in value.
- Then you will gradually acquire new strategies that will prepare you to start trading with real money. Eventually, these will help you become a prolific trader in one of the best positioned exchange markets in the world.
We recommend that you consult our free lessons before you start trading with real money.
-
Crypto winter has arrived: why crypto CFDs might be a good option to consider now?
Alarming articles about the “new crypto winter,” i.e., multi-month bear market for Bitcoin (BTC) and major altcoins are popping up here and there. Crypto influencers and media outlets are reiterating that all signs of “winter is coming” are present. If true, which trading strategy can help holders to come through this painful prolonged correction? And is there a reliable service that can help in implementing such a strategy?
What is a bear market?
A bear market (“winter,” correction, recession) is a market situation in which the prices of the majority of assets are falling. It is accompanied by negative investing sentiment (from “fear” to “extreme fear”) and panic-driven selling. For stocks and index markets, analysts indicate the start of the bear market at which the rates are falling by 20% from the local peak. As crypto markets are far more volatile, bear markets start here only after a 45-55% decline.
(https://carigold.com/forum/attachments/optuma-png.460166/)
Both traditional and cryptocurrency markets know long-term cycles: every market will go through a bullish and bearish stage. For instance, on Bitcoin (BTC) markets, a bearish recession followed 2013 and 2017 peaks. For the S&P 500 and Dow Jones Industrial Average (DJIA), the last prolonged bear markets took place in 2007-2009. Similar recessions were registered in March, 2020 but bulls managed to push prices higher.
Is the bear market already in for crypto?
While we cannot be sure about whether crypto markets are already in the “bear market” phase, there are some optimistic and pessimistic theories about this trend.
Bearish: Negative sentiment on social media and euphoria of illiquid NFTs
Mostly, analysts are sure that Bitcoin (BTC) and major altcoins have already dipped into bearish waters. Santiment statistics show that social media users have not been so bearish since mid-May 2021. As such, the “crowd wisdom” indicates a bearish correction. So does Chris Burniske, former ARK analyst and author of the most popular crypto asset valuation instruments. According to him, the surprising upsurge of the NFTs market is not good for Bitcoin as it siphons liquidity from digital gold and major altcoins. For Mr. Burniske, the entire situation looks like the “ICO boom” that ended with the “crypto winter” of 2018.
Bullish: Healthy on-chain metrics and RSI
At the same time, the data from many on-chain analytical instruments ‘screams’ that too many large-scale holders are aggressively increasing their bags. As per Coinmetrics, Bitcoin (BTC) holders are back to accumulating. So, the sell-off might be over which suggests the upsurge of price is on cards.
(https://carigold.com/forum/attachments/coinmetrics-jpg.460167/)
Also, Bitcoin Relative Strength Indicator dropped to ‘extremely overbought’ levels unseen since ‘Black Friday 2020 in Crypto’.
Switching to more flexible trading strategy: Psychology and instruments
Switching to more flexible trading strategy: Psychology and instruments
As the trading sphere has come through dozens of bear markets, there are a number of ready-made strategies that might prove helpful in overcoming a bearish recession with minimum losses.
Stablecoins
Increasing the share of stablecoins in the portfolio might also be a good solution for the bear market. When you are buying stablecoins, you do not need to “cash out” by withdrawing to SEPA, PayPal or other fiat accounts. With increased stablecoins bags, you will be able to either “buy the dip” in potentially promising assets or try “dollar-cost averaging” (DCA), which is generally considered as the go-to strategy for every bear market.
Diversification: Indexes, stocks, commodities
Last but not least, bear markets rarely target all types of markets simultaneously. So, the diversification of the portfolio should be increased. Bitcoiners can try adding ETFs and real world segment stocks, while “gold bugs” can experiment on ForEx markets.
CFDs on crypto: viable alternative for bear markets
Contracts for difference (CFDs) are contracts that allow traders to find potential benefits in volatility, while for others it might mean higher risks and potential losses as well. As crypto markets are the most volatile ones, trading CFDs here might bring significantly more benefits than that for stocks or commodities, but of course it might also bring losses as well considering the potential risks.
When you are certain that some of your assets have entered the bear market, switching to the strategy with dominant short positions might prove to be a smart move. By opening ‘shorts’ and ‘longs’, traders can benefit from price swings in either direction.
Libertex for crypto and Web3 enthusiasts: Trading with no exchange fees
To ensure maximum resource-efficiency for all categories of traders, Libertex introduced a completely novel architecture of fees. As of December 2021, all operations in cryptocurrencies CFD trading on Libertex platform are charged with zero commission fees. Zero exchange fees, commissions or swap fees are introduced for all positions from the crypto segment. As such, spread is the only extra expense for crypto CFD traders.This scheme is valid for all retail crypto trading clients except for U.K. traders, as CFDs on digital assets are not allowed in this jurisdiction.
As the market recession after the 2020-2021 euphoria gains steam, stocks and crypto traders should adjust their strategies to new contexts. Diversification, a resource-efficient fee model and advanced trading UX/UI is one of the best choices for trading in a bear market.
As such, CySEC-regulated Libertex is quite possibly one of the best go-to solutions for all categories of traders due to its unmatched range of assets available, user-friendly interface, large toolkit of deposits/withdrawals methods and reconsidered fee structure.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.3% 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. Cryptocurrency instruments are not available to retail clients in the UK.
Available for retail clients on the Libertex Trading Platform.
-
The Best Forex Trading Patterns: Different Shapes, Common Signals
What do traders use to predict the price direction? Technical indicators, candlesticks and, of course, chart patterns.
Overall, there are many trading patterns that occur on the price chart daily. That's why they were divided into three groups. What are these groups? How do you remember all these patterns? Read our guide to get comprehensive knowledge about chart patterns.
Forex Trading Chart Patterns: Meaning
A chart pattern is a combination of support and resistance levels formed by candlesticks in a specific shape that helps to define whether the market will move in the same direction or turn around. There are three types of technical analysis patterns: reversal, continuation and bilateral.
(https://carigold.com/forum/attachments/forex-chart-patterns-1_0-jpg.462422/)
Look at the picture below. Here's one of the most famous trade patterns: head and shoulders. As you can see, candlesticks are placed so that the pattern resembles a head and shoulders. Based on the candlesticks' location, we can define the support level. Later, we'll explain how to read this pattern's signal.
(https://carigold.com/forum/attachments/forex-chart-patterns-2_1-jpg.462427/)
Trading Chart Patterns: Types
There are two major types of chart patterns: reversal and continuation. However, there is a third one that combines both types called bilateral patterns. Let's learn how to identify all types on the price chart and what patterns each type contains.
Reversal Chart Patterns
The name of the type explains the idea of the reversal patterns. These patterns predict the trend will turn in the opposite direction after their formation. If the price declines, a reversal chart pattern says the market will go up soon. Conversely, if the market rises, a reversal pattern sends you an alert that you should close a long trade and be ready for the market to decline soon.
Let's list the most effective and famous reversal chart patterns:
- Head and Shoulders and Inverse Head and Shoulders
- Double Top and Double Bottom
- Triple Top and Triple Bottom
Although chart patterns look different, we can highlight a key rule for reading their signals. To define a take-profit level, measure the distance between the support and resistance levels at the point where the pattern starts forming. This will be the distance between the entry point and the take-profit level. The entry point is the place where the price breaks either the support or resistance level, depending on the trend.
As for the stop-loss level, the idea is to measure the distance between the support and resistance levels and divide it by two. The concept suits the best risk/reward ratio of 1:2. However, we would advise you to evaluate the market conditions and use a trailing stop-loss if the situation is uncertain.
Continuation Chart Patterns
Continuation chart patterns appear when the current trend pauses. That's why they're sometimes called consolidation patterns. Trendlines serve as support and resistance levels. They occur on the chart when buyers and sellers can't beat each other, and the price consolidates for a while. Such patterns show the market will keep moving in the same direction.
Here's a list of the most famous continuation chart patterns:
- Pennants or flags
- Rectangles
- Wedges: rising and falling
- Triangles: ascending, descending and symmetrical
For most of these patterns, the trading idea is similar. You should draw support and resistance lines and measure the distance between them at the point where the pattern starts forming. This is the size of the area between the entry point and the take-profit level.
The same rules apply as with reversal patterns: the entry point occurs when the price breaks either the support or resistance level for the prevailing trend.
The stop-loss level differs. To define the size of the risk you're prepared to take, place the stop-loss above the resistance level for bearish patterns and below the support level for bullish patterns.
Bilateral Chart Patterns
A bilateral chart pattern is a pattern that doesn't predict a certain market direction. It sounds strange because the idea of the pattern is to predict the price direction. Still, the pattern will show you where the market will move. However, it won't happen during the formation of the pattern but after either the support or resistance level is broken.
Ascending, descending and symmetrical triangles are bilateral patterns. Although ascending and descending triangles usually signal a continuation of the trend, there's an odd price that will move in the opposite direction. Thus, you should always evaluate market conditions (for instance, whether the market is volatile) before opening a trade.
The Most Efficient Chart Patterns
We mentioned chart patterns above, but we can't just throw them at you without explaining how they look and work.
Head and Shoulders
A head-and-shoulders pattern is one of the easiest and most common patterns known even to newbies.
It's a reversal bearish chart pattern that forms at the end of the uptrend. Why is it head and shoulders? Because the pattern has three tops: the second is higher than the first one, but the third peak is lower than the second one. Thus, we have the highest peak, called the head, and two lower peaks, which are called shoulders. The perfect pattern has two shoulders that are similar in height and width.
(https://carigold.com/forum/attachments/forex-chart-patterns-3_0-jpg.462432/)
As we said above, the third top is lower than the second one, which signals a weakening of the current trend.
Also, the pattern has a neckline. That's the line drawn through the lowest points of the two troughs that serves as a support level. The neckline can be drawn horizontally or moving down/up. The signal is stronger if the neckline declines.
The pattern works when the price breaks below the neckline (support level) after the formation of the second shoulder. You can open a short position at the breakout. A take-profit order can be placed at a distance equal to the distance between the top of the head and the neckline.
Remember the stop-loss point. You can always apply a 1:2 risk/reward ratio. So, a stop-loss order will be half of the take-profit distance and placed above the breakout point.
Hint: We should warn you that the price can return to the neckline after the breakout point. So, the neckline will turn into resistance.
Inverse Head and Shoulders
An inverse head and shoulders or head and shoulders bottom is a reversal bullish chart pattern.
The inverse head and shoulders pattern mirrors the standard one. It consists of three lows, with the head as the lowest bottom, while the shoulders are almost the same size.
(https://carigold.com/forum/attachments/forex-chart-patterns-4_0-jpg.462433/)
The pattern begins when the price forms two lower lows that signal a downtrend. However, the third low is higher, which means bears lose their strength, and there are odds of an uptrend occurring.
The reversal is confirmed when the price breaks above the neckline. Take-profit and stop-loss orders are defined as in the standard head and shoulders pattern.
Double Top
A double top is a bearish reversal pattern that occurs at the end of upward movement. This pattern is as famous as the head and shoulders one because it's easy and frequent.
The name of the pattern explains its idea. If you find two consecutive tops of similar or nearly similar height with a moderate trough between them, it's a double top pattern. The neckline should go through the lowest point of the trough.
(https://carigold.com/forum/attachments/forex-chart-patterns-5_0-jpg.462435/)
The pattern works when the price falls below the neckline after the second top is formed. A trader can open a sell trade after the breakout point.
To measure the take-profit level, measure the distance between the tops and the neckline and put it down from the neckline.
The stop-loss level can be measured according to the risk/reward ratio. Divide the take-profit distance by two and place this number of pips up from the neckline.
After the breakout, the neckline becomes a resistance. Like in the head and shoulders pattern, the price can turn back and test the neckline again.
Double Bottom
As you might have guessed, the double bottom is a mirror pattern of the double top. It's also a reversal pattern, but it occurs at the end of the downtrend.
The double bottom consists of two consecutive bottoms which have similar or nearly similar length. Also, there's a high between them. The neckline is drawn through the highest point of the trough.
(https://carigold.com/forum/attachments/forex-chart-patterns-6_0-jpg.462436/)
The pattern works if the price breaks above the neckline after the formation of the second bottom. The take-profit and stop-loss levels are measured the same way as in the double top pattern.
The price can retest the neckline after the breakout. However, it's anticipated to rise after the pattern's formation.
Triple Top and Bottom
These patterns are rarer, but we should tell you about them so you know they can appear on the price chart.
(https://carigold.com/forum/attachments/forex-chart-patterns-7_0-jpg.462437/)
(https://carigold.com/forum/attachments/forex-chart-patterns-8_0-jpg.462438/)
The patterns resemble double top/bottom patterns and work similarly. The only difference is that triple bottom/top come into play after a third peak/low is formed.
Symmetrical Triangle
There are three variations of triangle patterns, all of which are easily recognisable. To define a triangle pattern on the price chart, you should draw the support and resistance levels. The idea of triangle trading is to open a trade when a breakout occurs. It's risky to trade within the triangle.
A take-profit order for any type of triangle can be defined by measuring the distance of the widest part of the pattern. This distance should be measured from the entry point. To define a stop-loss order, use a 1:2 risk/reward ratio.
The symmetrical triangle is neither bullish nor bearish. The signal depends on the direction of the breakout.
(https://carigold.com/forum/attachments/forex-chart-patterns-9_0-jpg.462439/)
The support and resistance levels move towards one point. The support goes up, and the resistance slopes down, so they meet at one point and form one angle.
You can use two different approaches to trading a symmetrical triangle. You can wait until the price breaks either a support or a resistance level and open a trade after the breakout. Or, another way is to place a One-Cancels-the-Other Order. So, when one order works, the other will be cancelled automatically.
Descending Triangle
A descending triangle is considered a continuation pattern that signals that the downtrend will continue. Still, it's tricky and can be called a bilateral pattern as the price may turn in the opposite direction to the prevailing trend.
In common concept, the descending triangle shows that bears are strong enough to pull the price further down.
(https://carigold.com/forum/attachments/forex-chart-patterns-10_0-jpg.462440/)
In a descending triangle, the resistance line slopes down, while the support is almost horizontal. The price is expected to break the support level and keep falling. So, as soon as the breakout occurs, you can open a short position.
We don't recommend opening a trade before the breakout as the price could break the resistance, and the trend could change.
Ascending Triangle
An ascending triangle is also a bilateral chart pattern. Still, the main idea of the ascending triangle is a trend continuation. The pattern depicts the strength of bulls, so they are ready to push the price further up.
(https://carigold.com/forum/attachments/forex-chart-patterns-11_0-jpg.462441/)
Opposite to the descending triangle, the resistance of the ascending triangle is relatively flat, while the support level slopes up. Although the price can break both the support and resistance levels, the more common case is that the upward trend continues, so the price breaks above the resistance.
You should wait for the breakout to occur before opening a trade since any bilateral pattern includes risks.
Pennants
A pennant is a continuation chart pattern that occurs after a strong move. The pennant reflects a pause in the strong market direction no matter if it's an uptrend or downtrend. There are two types of pennants: bearish and bullish.
As the market moves in the same direction, forming an almost vertical trend, it needs to pause. This short-term pause when the price consolidates is called a pennant.
(https://carigold.com/forum/attachments/forex-chart-patterns-12_0-jpg.462442/)
Traders enter the market on the breakout in the trend's direction. The take-profit level can equal the distance of the move ahead of the pennant formation. A stop-loss order should be placed above/below the beginning of the pattern.
You may be confused because pennants and triangles look similar. The difference is in their timeframes. A pennant is a short-term pattern that happens when the market moves strongly up or down. A triangle is a medium- or long-term pattern that occurs independently of the previous trend.
Flags
Flags are considered more reliable than triangles or wedges because they're less frequent. There are two types of flag patterns: bull and bear. Although the price may break in any direction, in most cases, the flags are continuation patterns.
(https://carigold.com/forum/attachments/forex-chart-patterns-13_0-jpg.462443/)
(https://carigold.com/forum/attachments/forex-chart-patterns-14_0-jpg.462444/)
The flag pattern resembles a flag and looks like a small channel after a strong movement. The flag moves in the opposite direction to the prior trend. After an upward movement, it slopes down. After a downward movement, it has an upward slope.
Traders should enter the market after the breakout. A take-profit order should equal the size of the flagpole (the distance of the movement before the flag's formation). A stop-loss can be placed above/below the beginning of the flag.
Wedges
A wedge is a chart pattern that predicts a trend continuation. There are two types of wedge patterns: rising and falling.
(https://carigold.com/forum/attachments/forex-chart-patterns-15_0-jpg.462445/)
The pattern's support and resistance levels move in one direction, so the channel narrows until the price breaks any of the levels. During an ascending (rising) wedge, the support and resistance lines move up. However, the rising wedge is a bearish pattern that signals the price will keep moving down. In a descending (falling) wedge, the support and resistance levels decline.
When the price breaks below the support level, a trader can enter the market. To measure the take-profit level, calculate the distance of the widest area of the pattern. A stop-loss order can be placed above the resistance in the rising wedge and below the support in the falling wedge.
Rectangles
A rectangle is a continuation chart pattern that occurs due to a pause in the trend. There are bearish and bullish rectangles. The pattern consists of flat support and resistance lines that the price tests several times before breaking out.
(https://carigold.com/forum/attachments/forex-chart-patterns-16_0-jpg.462446/)
The rectangle's signal depends on the trend. If the rectangle happens during an uptrend, it signals that the price will keep rising. If the rectangle occurs during a downtrend, the odds are that the market will fall.
To enter the market, wait for the price to break either the support or the resistance. The take-profit should equal the distance between the support and resistance lines. A stop-loss order can be placed above the resistance in a downtrend and below the support in an uptrend.
Reading Forex Chart Patterns
Follow these steps to read forex chart patterns:
- Step 1. Try to define the shape of any of the top patterns we mentioned above.
- Step 2. Define whether it's a continuation, reversal or bilateral chart pattern.
- Step 3. Draw support and resistance levels.
- Step 4. Wait for the price to break the support/resistance to enter the market. Don't open trade before the breakout because it could be a fake breakout. That's why you should get confirmation from other technical tools.
- Step 5. Define your take-profit and stop-loss levels in advance to avoid losses.
Tips for Traders: Everything About Chart Patterns
We've prepared a few simple rules that will make your trading more effective:
- There's no perfect chart pattern that will provide 100% accurate signals and can be applied to any market condition. Some patterns occur during high volatility, while others are workable for calm markets. Also, you should remember that the chart's timeframe affects the strength of chart patterns. That's why any chart pattern needs confirmation of the signals, which you can get by applying technical indicators.
- Chart patterns are divided into several groups: reversal, continuation and bilateral. All you need to do is learn the signals of the top chart patterns and apply them when you encounter the pattern on the chart.
- The support and resistance concept is key to any pattern's signal. All you need to do is to draw these levels, and you'll catch the signal.
- Chart patterns provide perfect entry, stop-loss and take-profit levels.
- Although chart patterns have different shapes, each type has common rules for how to read signals.
Conclusion
"Why do traders use chart patterns? Isn't it complicated to remember all the shapes and signals they provide?" If you still think this, you should do more practice looking for chart patterns in the real market.
However, we don't recommend training in a real account since an incorrect read on chart patterns can lead to losses. Use a Libertex demo account, which allows you to practise in real-market conditions on a wide range of trading instruments, on CFDs.
-
Crypto CFD trading to hedge the hodling
When trading crypto CFDs, you are speculating on whether your chosen asset will rise or fall in value. You will not be taking any form of ownership of the digital asset. Libertex, a multi-awarded online broker, recently announced that it has completely slashed fees on all crypto CFDs to zero in terms of commission, swap, and exchange fees.
It means that when deciding to trade with the Libertex platform, if you deposit €100 in your trading account, you can use that entire balance to trade crypto CFDs with. So you will not be wasting a big portion of that on fees.
Here are some of the benefits of trading the exciting cryptocurrency market via CFDs:
The large market moves: High volatility
Even though the cryptocurrency market is well within its infancy, there is a significant amount of volatility, with so much interest and activity continuing to grow day in and day out. The sheer size of movements that can be observed in a daily session is what makes this market so thrilling.
These rapid intraday movements in asset prices can provide several opportunities for traders to go long or short; however, that does come with increased risk. Therefore, it is crucial that if you decide to dive into the cryptocurrency market, be sure to have done proper research and have a good risk management plan in place.
Crypto does not sleep: 24/7
The cryptocurrency market is typically available to trade 24 hours a day, seven days a week because there isn't any centralized governance of this market. Instead, transactions via cryptocurrency take place directly between individuals on cryptocurrency exchanges across the globe.
Faster transaction times: Improved liquidity
Generally speaking, the cryptocurrency market is much less liquid than other asset classes, given its infancy. Liquidity is measured by the speed and how easy it is for a cryptocurrency to be converted into cash without impacting the market price.
Liquidity is important because it allows for better pricing and faster transaction times. Also good for higher accuracy when conducting technical analysis. As the market continues to grow, then these conditions improve for traders.
When trading cryptocurrency CFDs with Libertex, you get access to good liquidity because it sources prices from multiple sources on the trader's behalf. It means that the trades are more likely to be executed at a lower cost and faster.
Greater exposure: Use of leverage
Crypto CFDs are a leveraged product, enabling traders to open positions on what's known as margin. It is a deposit worth just a fraction of the full value of the trade taken. So essentially, you can gain a larger exposure to the cryptocurrency market while only needing to tie up a relatively nominal amount of your capital.
In terms of the profit and loss on these crypto CFD trades, they will be reflecting the full value of the position at the point of it being closed, so you do have the opportunity to make larger profits from a relatively smaller investment potentially.
However, do, of course, note that on the flip side, it can also amplify any losses, which can exceed your initial deposit. Therefore, it is vital to have a proper risk plan, including stops and targets on these trades.
75.3% of retail investor accounts lose money. Zero Commission fees on crypto CFDs are available for retail clients on the Libertex Trading Platform. Cryptocurrency instruments are not available to retail clients in the UK.
-
How to Catch Effective Forex Signals
Whether you're a newbie or an expert trader, it's worth using professional forex signals. Signals save you time and provide a higher chance of making a successful trade.
Also, it's an opportunity to use others' wisdom to improve your skills or discover a new trading method. However, not all signals are reliable. Let's learn how to distinguish between a strong signal and a failing one.
Forex Signals: Definition
A forex signal is a recommendation to open a position based on particular conditions. Usually, signals occur in the currency market, but they can be provided in other markets as well. Signals can be made by professional traders, analysts or companies, and come free and paid-for.
A forex signal includes information on the perfect entry point, take-profit and stop-loss levels. The best recommendations contain the reasons for the signal, giving you information on a profitable signal and the strategy or method an expert used. That helps you acquire new knowledge.
Why Choose FX Signals
There are several reasons why you should rely on signals and not merely your own decisions.
- Expert opinions. If you're a professional trader, you can use forex signals to get confirmation of your opinion. Also, it's a great way to save time. If you're a beginner, expert signals will help increase the chances of obtaining a profitable position.
- Gain knowledge. Whether you've just started trading forex or you've been in the market for an extended period of time, there are different approaches and strategies you can still learn.
- Save time. Sometimes, it's not easy to find suitable circumstances to open a position, and you may waste lots of time trying to do so. Using other traders' signals saves you time for other endeavours.
What's Included in Trading Signals
Let's consider the points that are included in trading recommendations:
- Entry point. As we mentioned above, a forex signal contains information about the entry point. It tells you at what level you should enter the position. Usually, professionals give signals for upcoming positions, so it's unlikely you'll see a signal that suggests opening a trade immediately because a trader may read the signal several hours after it's issued. Unclear conditions will lead to losing positions.
- Take-Profit. It's not enough to enter a position at a reasonable level. You also need to know where to exit a successful trade. That's why the signal will contain a take-profit level. If the signal is promising, there could be several take-profit levels.
- Stop-Loss. No matter how long you've been trading, there will always be a risk of loss. Even Warren Buffett and George Soros, two of the wealthiest and most successful investors in history, make mistakes. To limit losses, forex signals include a stop-loss level. If the market moves against you, you'll have a chance to save your funds.
- Buy or Sell. Any decent signal should say whether to buy or sell the asset. Some alerts may have both an alert to sell and to buy. That means that the current situation is unclear. As such, the direction of your position will depend on the specific conditions that should be met for one of the signals to work.
- Additional information. Usually, traders and analysts explain the reasons for a signal. Among the various reasons are pattern, candlestick or indicator conditions. This information may also include a chart.
Forex Signals: Types
There are different types of signals. Because there are two main types of analysis, we can divide signals into fundamental and technical. However, the most accurate signals are usually based on both types of analysis.
Fundament Signals
Fundamental analysis is based on news and economic data. Analysts who use fundamental analysis base their signals on economic data, as well as political and economic news. Thus, fundamental signals work ahead of significant market events.
One kind of economic event that provides more precise signals is a central bank meeting. For example, if the Federal Reserve is anticipated to cut its interest rate, the US dollar will depreciate ahead of the meeting and for some time after the decision is announced. Therefore, the signal will recommend buying the EUR/USD pair.
(https://carigold.com/forum/attachments/1-png.465812/)
Technical Signals
Technical analysis is based on historical price movements. Analysts use different instruments such as indicators, charts and candlestick patterns that predict the price's direction. Unlike fundamental signals, technical ones are often made by both analysts and forex bots. A forex bot follows algorithms that include particular conditions that signal possible entry and exit points.
Let's say, for example, that you're trading the GBP/USD pair. The RSI indicator predicts a price reversal, and its line has crossed 30 upward. That's a signal of a bullish movement, so the signal will recommend buying GBP/USD.
(https://carigold.com/forum/attachments/2-png.465813/)
Manual Signals
Manual signals are made by people. Professional traders or analysts working for a company or on their own use their experience, knowledge and proven strategies to provide trading recommendations.
(https://carigold.com/forum/attachments/3-png.465815/)
Automated Signals
Automated signals are provided by software programmed with a specific algorithm that follows price movements and generates signals regarding particular circumstances.
(https://carigold.com/forum/attachments/4-png.465816/)
Paid Signals
Some companies provide paid signals. To get them, you need to pay a fee or choose a subscription plan.
(https://carigold.com/forum/attachments/5-png.465817/)
Free Signals
Most forex brokers offer free signals on their websites that are available to their clients and everyone else. Moreover, many famous traders publish trading recommendations on social media.
(https://carigold.com/forum/attachments/6-png.465819/)
Entry Signals
If we consider short-term signals, they always have an entry point. If you find a trading recommendation for the short-term position with only an exit level, it's more likely that the signal will fail because there's no clarity on the entry point.
(https://carigold.com/forum/attachments/7-png.465820/)
Exit Signals
Usually, signals provide the entire range of information: the entry and exit points and the stop-loss level. However, if a position is held for an extended period of time, there can be signals with only an exit point on the current open trade.
(https://carigold.com/forum/attachments/8-png.465821/)
Where to Find the Best Forex Signals
Forex signals are available online, and you can find forex signal providers very quickly.
Forex Brokers
Most forex brokers provide signals, either free or via a paid subscription plan. If the broker is trustworthy, they'll offer a trial period to test whether the signals work. Plus, they may have a track record of successful trades that will confirm the alerts are workable.
The main advantage of this signal provider is that if you find a reliable broker you want to trade with, you don't have to waste time seeking a signal provider. Moreover, forex brokers may offer signals for free to their clients.
Specialised Companies
Also, there can be companies that provide paid forex signals. The main drawback you may meet is signals' effectiveness. Reviews will help you to evaluate their efficiency.
Bots
There are many companies and individuals that program bots for forex signals. However, these bots' services aren't free. Be careful before buying them because bots have many limitations. They don't evaluate market sentiment and don't consider fundamental factors. Check the signals before starting.
MetaTrader
If you trade on a MetaTrader platform, there are signal providers you can subscribe to. Moreover, you can implement bot algorithms that will alert you about profitable opportunities. MetaTrader allows many providers to submit their signals, so there's a risk of running into some failing recommendations.
Copy Trading
Another option that's similar to providing signals is copy trading. While using forex signals, you can decide whether to use the signal fully or not. If you have previous experience, you can take the signal as advice and modify it.
How to Choose the Best Signal Providers
It might be challenging to find a reliable forex signal provider as there are a vast number of companies, private analysts and investors in the market.
Confirmation
The first decision you should make is whether you're ready to pay for signals or not. If you choose paid recommendations, you can require information on the success rate. Moreover, a provider of paid signals should be authorised.
Even if you use free signals, a provider may share their signals' success rate by posting the performance of previous trades. If there's no information on a success rate, you can use a demo account to check whether the signals work.
Libertex offers a demo account that's similar to a real one. You can trade on it with simulated money risk-free to see if the signals perform well.
Information
Before relying on a signal, check what data it includes. Reliable signals should consist of data onthe entry and exit points and the stop-loss level, along with an explanation of how the signal appeared on the chart. Bot signals don't provide an explanation; instead, their reliability is based on mathematical algorithms.
Reviews
If reviews are available, you can check them for the signal provider. However, only companies that specialise in paid forex signals will have reviews. If you're thinking about free alerts provided by a private analyst or trader, the chance to find reviews is smaller.
Huge Rewards
Beware: the forex signals market is full of scams. If a provider promises enormous rewards, it's more likely a scam that wants your money.
Comparison
If you're not sure which signal provider is better, check their success rate and the range of information. If you don't get a full explanation of the reasons for a particular signal, there's a risk the signal won't work.
How to Use Trading Signals
To fully understand how to read signals, let's consider an example in which you want to trade the XAU/USD pair. The signal is: SELL 1.764; TP 1.759; SL 1.766.
Step 1. As you can see, the signal is to sell gold against the US dollar. The entry point is 1.764. So, you should place a sell order at this level.
Step 2. Place the stop-loss (SL). Since this is a sell signal, the stop-loss should be placed above the entry point.
Step 3. TP stands for the take-profit level. Place the take-profit or exit point below the entry level.
If the signal doesn't contain a chart, the written information may include details on the current price. When reading the recommendation, you'll understand whether the signal is still relevant or not.
(https://carigold.com/forum/attachments/9-jpg.465824/)
How to Choose Forex Signals
Signal providers try to create recommendations that suit a wide range of traders, but there are several rules you should follow to understand whether the signal suits your account and strategy:
- Evaluate the risk. If the signal suggests holding a position for a long time, you should evaluate whether your account can handle possible market fluctuations.
- Check before using. If you use bot signals, remember that they're based on technical analysis that doesn't consider fundamental factors, which may lead to high volatility, so check market conditions. Simultaneously, even if you rely on signals made by people, you should know that unpredictable news comes up frequently. The time lag between the signal and order placement may cost the success of your trade.
- Choose preferable assets. There are lots of signals for different securities. However, not all of them will match your aims. For example, exotic currencies are not the best option for newbies as they bring high risks.
(https://carigold.com/forum/attachments/10-jpg.465825/)
Trading Strategies and Forex Signals
As we mentioned earlier, the choice of trading signals depends on your aims and account. Moreover, different strategies may affect your decision. There are companies that provide signals only regarding a specific strategy.
Scalping
Let's look at scalping, for instance. Tiny positions are the core of this trading strategy. As such, signals for scalpers should apply to small timeframes, preferably no higher than one hour. Moreover, these signals will have a slight difference between the entry and exit points, and there may be several take-profit levels that will allow you to take profit step by step.
Intraday Trading
Intraday trading assumes you hold a position within a day and close it before the next trading day arrives. That means the trading signal should be based on medium-term timeframes such as one hour, four hours and daily. The difference between entry and exit points will mostly depend on fundamental analysis. If there are significant economic events or news, there might be a big difference between the points.
Swing Trading
In general, swing trading is based on technical analysis. The signal provider should find a prominent pattern or indicator that signals market fluctuations. Swing positions can be held for longer than one day, so the spread between the entry and exit points may widen significantly.
Conclusion
To summarise, a forex signal is a useful helper for both beginner and professional traders. It saves you time and effort and provides an opportunity to place successful trades. However, a considerable number of signal providers make it difficult to choose a reliable one.
So, to check whether the provider is trustworthy, try using a demo account. Libertex's demo account gives you the opportunity to test signals risk-free and at no charge to see if they work with a high success rate.
-
Apple (AAPL) Stock Forecast
Not many publicly-traded companies manage to achieve the delicate balance between being a significant option for market participants and a favorite among the public. Apple Inc. has not only achieved this balance but very masterfully maintained it over the years as well, with the market cap of Apple nearing $3 trillion.
Discover what makes the AAPL stock immensely popular, the factors that can drive its price up or down, and the expert predictions for the status of Apple stock in 2022 and beyond. Furthermore, you'll find technical analysis for Apple stock's price prediction along with answers to whether this stock is a buy, sell or hold at the moment.
About Apple (AAPL) Stock
Apple Inc., formerly known as Apple Computer, Inc., is an American multinational technology company that manufactures personal computers, tablet computers, smartphones and computer software. Headquartered in Cupertino, California, Apple was the first successful personal computer company and popularised the graphical user interface.
Apple is the largest information technology company by revenue. In August 2018, it became the most valuable publicly-traded company in the world by crossing a market capitalisation of $1 trillion. Two years later, in August 2020, Apple achieved the milestone of being the first company to have a market capitalisation of $2 trillion.
As of 11 January 2022, the stock status of Apple listed on the NASDAQ Stock Exchange is $175.08. When it comes to Apple stock, what makes this company a favourable option for many investors is not just the value its products and services offer but also the impressive fan-following the company has built.
What Affects Apple's (AAPL) Stock Price?
Before you decide to trade or invest in AAPL CFDs, it's important to understand the factors that can affect Apple stock price prediction. Knowing them can potentially help you make more informed and less risky decisions. The following factors have had a hand in driving the price of Apple stocks in the past and will likely continue to do so in the future.
iPhone Sales
The iPhone has long been the largest revenue generator for Apple. Over the years, in many financial quarters, the revenue iPhone brought to the company was more than half the total revenue. Penetration in current and new markets, such as in China, could increase Apple's market share in the smartphone industry. At the same time, competition from an increasing market share of Android phones could hurt Apple's standing.
iPad and iMac Sales
Sales of laptops, tablets and computers to individuals and corporations are another major contributor to Apple's revenue. In 2018, sales of iPads and Mac laptops and desktop computers declined due to competition from other brands. In 2019, new versions of various devices were announced, such as the iPad Pro and MacBook Air. Thus, consider the competition from rivals in this category and the resulting consumer response.
New Products
The release of new products — such as the HomePod, launched in February 2018, and the Apple Watch, launched in April 2015 — can also increase public interest in the company and lead to a surge in the stock price. Similarly, the company's decision to venture into the electronic self-driving cars industry has also led to buzz lately.
Market Sentiment
Although this is a tangible factor, it has a significant effect on the stock price of not just Apple but usually most other publicly-traded companies. Investors expect Apple to beat the estimates for their financial performance, and if the company is able to surpass the estimate by a large margin, it increases investor confidence in the company.
Apple Stock Price in the Past
Let's have a look at how the shares of Apple have performed in the past:
(https://carigold.com/forum/attachments/apple-stock-forecast-1-jpg.467255/)
- Over the past 5 years, the stock price of Apple has increased by 400%.
- Due to the coronavirus pandemic, the stock price fell to $56.56 from $81.73 in less than 30 days.
- Apple recovered gradually, and in September 2020, it was able to gain a value of $133.88, more than double the low of $56.56 in March 2020.
- The trailing return of Apple has been 42.59% over the last 5 years, whereas the industry has delivered a trailing return of 42.4%.
That being said, while knowing the historical performance of Apple stock is necessary, it does not reflect how it will perform in the future. For this, let's consider where the experts predict AAPL will be in the near as well as the distant future.
Apple Stock Technical Analysis
The most accurate indicators for Apple stock forecast can be determined from its technical analysis.
(https://carigold.com/forum/attachments/apple-stock-forecast-2-jpg.467257/)
As shown by the charts above, which present the picture for one month, the overall current trend for Apple stock is strongly bullish. The price of the stock is going up, and technical indicators such as moving averages are hinting at a strong buy. Even oscillators are at a neutral position without there being any pressure to sell any shares.
According to TradingView, almost all moving averages, including the Exponential Moving Average, are signalling to buy AAPL. Oscillators, on the other hand, are mostly neutral, including the Relative Strength Index (RSI). When considering the overall summary, even the buy-to-sell ratio is very high.
These figures indicate that it is probably a favourable time to consider investing in Apple. Still, there are risks you need to consider and accept.
Apple Stock Forecast for 2022 by Experts
Although it's imperative that you conduct your own research before making any trading decision, it can help knowing how the experts and leaders in the industry are expecting Apple to perform in the future.
Katy Huberty
Katy Huberty, the managing director and a senior analyst at the American multinational investment bank Morgan Stanley, predicts that Apple shares could hit $200 in the coming years. This prediction is based on the fact that Apple is working to tap into two very lucrative markets: augmented/virtual reality and autonomous reality.
The company has announced its plans to venture into the electronic self-driving car market, as well as its desire to manufacture augmented reality headsets. This prediction is highly optimistic, and as it is an analyst view from Morgan Stanley, it has led many to reaffirm their belief in Apple stocks rising in the future.
Ivan Feinseth
Ivan Feinseth, the Chief Investment Officer and Director of Research at Tigress Financial Partners LLC, has also shared his price target for Apple stock, setting it at $198. He reiterated a Buy rating on AAPL and analysed that Apple's stock price may not stop there.
Predictions by other analysts and experts have also led to a price target consensus of $170, which indicates a strong Buy. There are hardly any forecasts by experts hinting at a downside for Apple in the next 12-18 months.
Short-Term Apple (AAPL) Price Prediction for 2022
Here are some of the most reliable and trustworthy figures for Apple stock price prediction for 2022.
Wallet Investor
According to the Wallet Investor, Apple is predicted to start 2022 with its stock priced at a minimum value of $179.375. By the end of the year, the best estimate given is $220.965, which is an appreciation of 29% on the current price of AAPL.
Yahoo! Finance
Yahoo! Finance is also expecting strong returns from Apple for 2022, according to its predictions. It has forecasted that Apple's expansion into the virtual reality sector is bound to drive its share prices higher. In addition to this, the returns are also looking very strong due to the fact that AAPL has been able to defy the volatility lingering in the market due to the Omicron variant of COVID-19.
LongForecast
LongForecast has some of the most optimistic predictions for the stock price of Apple, with its estimates starting at $180 in January 2022 and going as high as $290 by the end of the year.
Apple Price Forecast for 2023-2025
Apple stock forecasts for the years 2023 to 2025 are looking extremely positive, according to the predictions by Wallet Investor. Although the rate at which AAPL is expected to grow is not constant, it is still predicted to move upward, and no downtrends are predicted.
In fact, by the end of the year 2025, Wallet Investor expects that AAPL stock will likely be, at a maximum, $347.362. CoinPriceForecast, moreover, has surprised many with its astonishingly high expectations from Apple stock in the upcoming years. It has forecasted the values of $217, $254 and $311 for the years 2023, 2024 and 2025.
Long-Term Apple Stock Price Prediction 2026-2030
When it comes to Apple stock predictions for longer durations such as periods beyond even 2025, the results should be taken with a grain of salt because there are too many factors at play that could impact the stock price at any given instant. That being said, since these stocks are not very volatile, the predictions can still help with decisions regarding trading and investment.
Wallet Investor forecasts a bullish movement for Apple stock where the year 2026 is predicted to end with the stock price at $387.518. CoinPriceForecast expects Apple stock to continue appreciating, reaching values as high as $466 in 2030.
Conclusion
Apple is currently the leading tech giant in the world. Investor attitude and market sentiment are both at a decent level for this company. This is especially true considering its future plans to venture into the augmented reality and autonomous vehicles industry. Thus, the predictions are seemingly very favourable and optimistic as well. However, at the end of the day, predictions are mere estimates that cannot guarantee future performance.
To ensure that you are well-aware of stock CFDs and your trading moves, consider practising in a controlled environment and learning useful skills before you start investing your actual money. You can create a demo account at Libertex to get started today.
-
Moderna (MRNA) Stock Forecast
Moderna went from a biotech company suffering losses for a few years to bringing in billions in revenue in just a few months thanks to its COVID-19 vaccine. Its high rise to popularity on the Nasdaq stock exchange makes it a favourite among many investors who are considering it for the long term.
Learn why Moderna is currently among the most popular stocks, what affects its stock price, and what is the Moderna stock forecast according to the experts. If you're looking for longer-term information, you can also check out the price predictions for the years beyond 2026.
About Moderna (MRNA) Stock
Moderna Inc. is a US pharmaceutical and biotechnology company based in Cambridge, Massachusetts. It specialises in RNA therapeutics, with a primary focus on mRNA vaccines. These vaccines use messenger RNA, or mRNA, which is a copy of a molecule, to produce an immune response in the body.
Currently, the biotech company has only one commercial product, namely the Moderna COVID-19 vaccine. Since its inception, the company has worked towards building a leading mRNA technology platform, created infrastructure to accelerate drug discovery and developed an expanding pipeline to create a new generation of transformative medicines for patients.
Moderna is listed on the Nasdaq stock exchange as MRNA, and as of 20 December 2021, its stock price is $294.80. This is a very high price for the stock considering many leading and well-known publicly-traded companies have stock prices far below this. It would not be unfair to primarily attribute this high price to Moderna's coronavirus vaccine.
What Affects Moderna (MRNA) Stock Price
Knowing the factors that drive the price of MRNA is essential if you are considering buying, selling, or holding Moderna stock. So, what is the key performance indicator when evaluating Moderna stock forecast?
For Moderna, the primary source of revenue as of late has been its COVID-19 vaccine, which has been the main driver behind Moderna's high stock price on the Nasdaq stock exchange. Reliance on one commercial product for revenue is not very unusual for a large company, considering that Moderna was founded in 2010. In 2018, it had its IPO, where it set the record for the largest IPO in biotech history. The company was not even expected to roll out a commercial product using its revolutionary mRNA technology, but it surprised the world with the accelerated development and manufacture of the Moderna vaccine. For now, the company's stock price is closely linked to the coronavirus vaccine, supply and demand for it, and its relevance in the future.
In addition to this, most Moderna investors have confidence in the claim that mRNA-based vaccines will drastically raise the antibodies in humans. However, the first human trial results from Moderna's experimental seasonal flu shot failed to meet expectations, signalling that mRNA-based vaccines do not always turn the body into an antibody-making machine. This led to a 14% drop in the company's stock price in early December 2021.
As such, it can be concluded that apart from the circumstances surrounding the COVID-19 pandemic, the results and efficacy of any product that Moderna rolls out will directly affect its stock price.
Moderna Stock Price in the Past
(https://carigold.com/forum/attachments/moderna-mrna-stock-forecast-1-jpg.467771/)
As Moderna went public in 2018, there is only 3 years' worth of data to analyse its past performance. The company went from zero product revenue and a net loss to billions in revenue in just a few months. In 2018, the year-open price was $18.60, while the year close price was $15.27, with an average price of $16.4338.
The following year saw some improvement in the performance on the stock exchange, with the year-open price at $15.33, whereas the year close price was $19.56, which was a 28.09% increase over 2018. The average price for 2019 was $18.1192.
It was in 2020 when things took a drastically positive turn for Moderna and its financials. Moderna was among the leading manufacturers of a COVID-19 vaccine. This propelled the biotech company into mass popularity, with its stock rising to $104.47 at year's end compared to only $19.23 when it started the year. This was an annual change of 434.10%, a game-changer for Moderna.
Moderna Stock Technical Analysis
When considering buying, selling or holding Moderna stock, it's essential to consider the most technical of indicators that determine the stock's status at any given time. These indicators can be studied by conducting a technical analysis of the stock.
(https://carigold.com/forum/attachments/moderna-mrna-stock-forecast-2-jpg.467772/)
The charts above present the overall summary of Moderna stock price comprising all the technical indicators (top) and the buy/sell condition determined by the oscillators (left) and moving averages (right). According to these charts, there is currently buying sentiment. The moving averages are also pointing towards buying Moderna stock right now, and the oscillators are painting the same picture, as well.
This can be attributed to the fact that vaccination is a vital and regularly discussed necessity in the world right now. Coupled with this are the new variants of the COVID-19 virus (Omicron being the latest of them all), which are making the vaccines a more important and attractive investment than ever.
As such, there is no selling pressure at the moment, and most, if not all, technical indicators paint a positive picture for Moderna shares.
Moderna Stock Forecast for 2022 by Experts
While the last two years have proved phenomenal for Moderna, investors are now starting to worry about future orders for the vaccine. Let's explore what the expert opinions regarding Moderna stock forecasts are.
Interestingly, many analysts think that COVID-19 will transition from being pandemic to endemic, with regular (perhaps annual) booster shots necessary for everyone. This means that the company would remain highly relevant, and its stocks would interest investors to a great extent, as well.
When evaluating the future of Moderna, most analysts consider two dimensions. The first is the longevity of the virus as well as the emergence of new variants. Any new variant, such as the current Omicron variant, makes Moderna attractive for investors as the entire world looks to Moderna and a few other biotech companies for a prompt solution.
On the other hand, experts also look at competition from other companies such as Pfizer and AstraZeneca since their rise in popularity could hurt the chances of Moderna's stock rising further.
With such market uncertainty regarding the pandemic and the relevance of vaccines, many experts are unable to suggest a number for Moderna's estimated future stock price.
Short-Term Moderna (MRNA) Price Prediction for 2022
Here are predictions from some of the most renowned traders and technical publications about the price of Moderna in 2022.
Wallet Investor
According to Wallet Investor, Moderna could end 2022 at a price of $379.241. estimates suggest bullish movement throughout the year, with the price constantly rising.
Long Forecast
Although Long Forecast has a similar view regarding Moderna's stock price, it does expect Moderna to perform far better than many other assets. It predicts that the year would start at a minimum of $299 and could end the year anywhere close to $428. If these figures seem too optimistic to you, remember that the Omicron variant has just emerged, and Moderna has already put out a vaccine that it claims works efficiently against the new variant.
Moderna Price Forecast for 2023-2025
While the pandemic's longevity and the need for vaccines are still being heavily studied and debated, Moderna stock predictions for 2023 to 2025 are extremely bright.
According to Wallet Investor, the price is expected to keep growing, although the rate at which it is likely to grow will fluctuate throughout the mentioned time period. In fact, Wallet Investor has forecasted that Moderna's price may go as high as $702.107 by the end of 2025.
Such confidence in the appreciation of the company can be attributed to the fact that the COVID-19 vaccination is still a significant health issue worldwide, and precautions against the Omicron variant are already being taken seriously.
Long-Term Moderna Stock Price Prediction 2026-2030
Making predictions so far ahead in time can be tricky because stock prices rise and drop quite often within a year for estimates more than 5 years out to be accurate. However, it's still important to make these estimates to potentially reduce the risk of any long-term investments.
According to CoinPriceForecast, Moderna stocks could hit a value of $1,348 by 2030, which is an upward change of 357% from the current price. Even for the previous years, the price is expected to rise gradually. The market sentiment is so positive for this company that analysts at Nasdaq are discussing the possibility of Moderna becoming a trillion-dollar company by 2030.
Conclusion
There is absolutely no doubt that Moderna's coronavirus vaccine made its stock a big pandemic winner. However, the question remains whether Moderna will be able to continue this run once the pandemic has subsided. And despite all the forecasts and expert opinions, its relevance in the industry beyond COVID-19 will eventually determine the future of its stock's performance.
If you're inexperienced in trading or simply want to try your hands at stocks CFDs before risking any real money, you can explore multiple options with a demo account at Libertex. Not only will it let you practice in a simulated environment, but it will also suggest expert strategies to you along the way.
-
Ford (F) Stock Forecast
From its much-anticipated new line of electric trucks, the F-150 Lightning, to its partnership with an autonomous driving startup, Ford has major plans for 2022. As competitors faced continued shortages in November 2021, Ford's sales increased, and in December 2021, the company reported selling the highest number of vehicles in the US for three consecutive months.
Read on to find expert predictions for Ford's stock in 2022 and the company's potential future growth. We'll also briefly explain the factors that can impact F shares and discuss the historical performance of the automaker on the stock exchange before analysing the Ford stock forecast for the next few years.
About Ford (F) Stock
Founded by Henry Ford in June 1903, Ford Motor Company is an American multinational automobile manufacturer headquartered in Dearborn, Michigan, in the United States. The automaker sells commercial vehicles and automobiles under the Ford brand, while its luxury vehicles are sold under its luxury brand, Lincoln. To gauge how powerful and well-renowned this company is, consider the fact that Ford either owns or has previously owned, partially or fully, the following automobile brands: Troller, Aston Martin, Jiangling Motors, Jaguar, Land Rover and Volvo.
Ford is celebrated for introducing methods for large-scale manufacturing of vehicles and management of an industrial workforce. This was done using intelligently engineered manufacturing sequences that exemplify moving assembly lines. These methods have been viewed so highly across the globe that they have now come to represent the idea of Fordism.
As of 14 January 2022, Ford stock is worth $25.19. Listed on the New York Stock Exchange (NYSE), it has a market capitalisation of $100.6 billion.
What Affects Ford (F) Stock Price
While there are many reliable sources to get information regarding the past, current and expected performance of Ford on the stock exchange, just knowing these numbers is not enough. In order to develop a strong and well-calculated strategy for your trading or investment moves, it's essential to know the factors that affect the price of Ford's stock, and eventually, the Ford stock forecast.
At present, the notable production and sale of vehicles by the automotive maker can be quoted as the reason for growing investor confidence in Ford. Since the company has been thetop-selling US automaker for the past three months, the price of its shares has increased. This indicates that inventory is a key factor in determining market sentiment about Ford. That being said, the production and sale of vehicles by competitors can adversely affect F stock.
Another major factor driving the price of Ford in the future will be its electric vehicles. As the world increasingly turns towards electric cars, Ford is expected to benefit from its all-electric version of the F-150, the Ford Lightning, which is set to launch in spring 2022 and has already accumulated over 160,000 pre-orders.
Interest rates also impact the stock because consumers factor in the cost of financing, which eventually affects sales. In early December 2021, Ford's stock price was down about 3.9% due to the increased likelihood of higher interest rates.
Ford Stock Price in the Past
The past performance of Ford on the stock exchange is not, in any way, an indicator of its future performance. However, knowing how F shares have fared in the past few years can help make less risky and more knowledgeable decisions with your money when considering Ford stock predictions.
The chart below shows the prices of Ford common stock for the past 5 years.
(https://carigold.com/forum/attachments/ford-stock-forecast-1-jpg.469473/)
As evident from the graph, the years 2020 and 2021 appear to be the most interesting for the company. While there were fluctuations in the prices even before 2020, it was this year when the prices severely dipped to a low of $4.24 due to the COVID-19 pandemic and its impact on the global supply chain and automotive manufacturing.
That being said, Ford exhibited remarkable recovery after this bearish movement and went on to achieve values it had not ever seen before. The highest price of $21.45 was recorded on 12 July 2021.
Apart from these, a few useful statistics about its performance in the last year are listed below:
- Ford's 52-week high of $21.49 occurred on 10 December 2021.
- Its 52-week low of $8.43 occurred on 4 January 2021.
Ford Stock Technical Analysis
According to the technical analysis conducted by TradingView, at the time of writing this article, Ford's stock is in a neutral position. The oscillators and the moving averages both indicate neutrality. While most oscillators, including the Relative Strength Index (RSI) and Bull Bear Power, are neutral, the moving averages show an interesting situation where half the indicators are pointing towards Buy while the rest are hinting at a Sell rating. The overall effect, however, is determined to be neutral.
This means that, at present, the technical analysis shows neither buying nor selling pressure, and those interested in this stock should either hold it if they already own it or wait before buying it. Conclusively, no bullish or bearish movements are expected in the near future.
(https://carigold.com/forum/attachments/ford-stock-forecast-2-jpg.469474/)
When it comes to the end of December 2021 and the start of January 2022, the oscillators are suggesting slight selling pressure, but the moving averages are indicating a Strong Buy. Thus, the overall summary gives the green light to those interested in buying Ford stock in the next 30 days.
Ford Stock Forecast for 2022 by Experts
Before delving into Ford stock predictions for the upcoming few months or years, let's consider expert opinions and learn what industry analysts think F stock will be worth in the near future.
Brian Johnson
Citing tight inventories as one of the car price drivers, Barclays analyst Brian Johnson expects automakers — not auto suppliers — to achieve good margins from car sales in 2022. Hence, Johnson increased his target price for Ford stock in 2022 from $18 to $23, bringing in interested investors, too.
Colin Langan
The renowned Wells Fargo automotive and mobility analyst Colin Langan also raised his bank's price target for F - from $19 to $23. Among the reasons he cited for this move is the expected ease in supply chain issues that have hampered automobile production the past year.
Moreover, Ford's previously held a 12 percent stake in Rivian, an electric vehicle startup, and its share of Argo AI, a startup based on self-driving, autonomous cars, are also forecasted to attract investments worldwide.
Short-Term Ford (F) Price Prediction for 2022
As for Ford's current economic environment and performance, the following are among some of the most well-grounded Ford stock predictions for 2022.
Long Forecast
According to estimates by Long Forecast, the first quarter of 2022 isn't likely to bring any improvement in Ford shares. In fact, the price is predicted to slightly drop from its current value. However, bullish movement is expected in the remaining months of the year, with the price expected to go to a high of $25.97.
CoinPriceForecast
CoinPriceForecast has exhibited strong confidence in the earning potential of Ford in 2022. It has some of the most optimistic predictions for Ford's performance in FY22. It estimates that by the middle of the year, F shares of Ford could be worth $25.48, whereas the year could end with Ford stock price as high as $28.56.
Ford Price Forecast for 2023-2025
Analysis of the F stock forecast for 2023, 2024 and 2025 suggests that Ford stock will experience both bearish and bullish movements in the future. There is far too much fluctuation in the predictions, as estimated by Wallet Investor, for one to guess with any degree of confidence whether Ford stock will be higher, lower or nearly the same compared to its current price.
Long-Term Ford Stock Price Prediction for 2026-2030
With expectations such as Ford's annual electric vehicle sales to be close to 1.24 million units by fiscal year 2030, predictions place the expected price of Ford stock for 2026 between $57.43 and $93.66. According to AI Pickup, the period of 2026 to 2030 can see the price of Ford shares ranging from $43.29 to $45.97. Interestingly, this forecast is very conservative and does not expect Ford to bring in the kind of profits that most other traders, brokers and exchanges think it will.
While these predictions paint a very promising future for Ford in 2026 and beyond, be cognizant of the fact that a Ford stock forecast so far in advance might not be beneficial at all considering their volatile nature and dependence on a number of internal and external factors.
Conclusion
In light of the predictions and driving factors behind its price, experts estimate that Ford stock will increase in the future. Not only is global automotive manufacturing accelerating, but supply chain issues are also easing and will further improve in 2022. These, coupled with the fact that Ford plans to release new models of its vehicles and is actively participating in the electric vehicles and autonomous driving race, the prospects appear very bright for the company at the moment.
That being said, stock prices are more often than not characterised by volatility which must be taken into account when making any decision to trade or invest.
You can begin by using a simulated and controlled environment to test out different strategies and plans and observe how experts are handling their CFD portfolios. To get started, create a demo account at a trading platform Libertex, which is offering the aforementioned facilities.
-
Technical analysis: what separates the pros from the schmoes
What is technical analysis?
In essence, technical analysis hinges on the study of past price movements and trends to predict future market developments. It first emerged as a tradition in 19th century Japan, where rice merchants used candlestick charts to anticipate price changes in their staple commodity. Fast forward to the present day, and it has become a must-have tool in the arsenal of virtually every serious day trader and even some long-term investors. Since its humble beginnings, technical analysis has developed significantly as a field and now comprises a variety of oscillators, patterns, trend indicators and more.
Proponents of technical analysis say it is the only research tool one needs to succeed as a trader or investor since the market 'prices in' all relevant fundamental news and developments anyway. Whatever your position on the debate, there's no denying that technical analysis is an extremely useful string to one's bow, especially when searching for entry and exit points. Today, we're going to look at some of the most popular in-chart indicators available on the Libertex platform and how to use them to your advantage!
Relative Strength Index
Let's start with perhaps the quintessential indicator for selecting when to open or close a position: the Relative Strength Index or RSI for short. This is a momentum indicator that shows whether a market is overbought or oversold at any given moment. J. Welles Wilder Jr's seminal indicator is displayed as an oscillator (a line graph that moves between two extremes), and its potential values range from 0 to 100. It's generally understood that any value below about 30 suggests that the market is oversold and a rise to the upside is close at hand. On the contrary, a reading above 70 typically indicates an overbought market, which would mean that a sell-off could be on the cards. To overlay the RSI on a chart in the Libertex platform, all you need to do is follow these simple steps:
First, enter full-screen mode on your chosen chart, then hover over the indicators tab as shown. After that, a dropdown menu should appear. Hover over the 'Oscillators' tab and then select 'Relative Strength Index' from the dropdown menu.
(https://carigold.com/forum/attachments/1_3-png.470389/)
Once that's done, the RSI will appear at the bottom of the chart as shown below:
(https://carigold.com/forum/attachments/2-png.470390/)
If we look at the first two red circles, we see that these low points on the RSI immediately precede significant moves to the upside. The last one marks where we stand currently, which would suggest that we are at or close to a local bottom.
Moving Average Convergence Divergence (MACD)
The MACD indicator is used to determine trend direction and, to a lesser extent, momentum. Beyond this, it can also provide a variety of different trade signals. Generally speaking, a security's price can be said to be in an upward phase any time the MACD is above zero. If the MACD is below zero, however, the instrument is considered to be in a bearish trend. Here's how to open it on the Libertex platform:
(https://carigold.com/forum/attachments/3_0-png.470391/)
The indicator itself consists of two lines: the MACD line and the signal line, which moves more slowly. Should the MACD crosses below the signal line, this would indicate a falling price. If the MACD line crosses above the signal line, though, this means the price is on the rise. While the MACD can be used to pick entry points in the same way as the RSI, its consideration of actual price as opposed to just buying and selling means that it can be used in conjunction with other indicators like the RSI to assess whether a given trend is likely to continue or not.
To see an example of this in action, let's see that same TSLA chart again with the MACD overlaid below:
(https://carigold.com/forum/attachments/4-png.470392/)
Look closely at the green circles. These represent points where the MACD and signal line cross. Notice how a significant move to the downside follows each crossover? Sometimes the downtrend has already begun, but picking up on the trend reversal early and closing out any long positions/opening short positions upon crossover would have undoubtedly saved/made you a decent amount of money.
Learn with Libertex
This was the first in a series of technical analysis guides that will help you make the most of the Libertex app's in-chart technical analysis tools. Tune in for a closer look at two more key indicators that all successful traders know and use to their advantage. In the meantime, try out some of these new techniques on your Libertex demo account and see for yourself how useful they can be in anticipating price movements.
-
Alibaba (BABA) Stock Forecast
Alibaba is one of the world's largest online commerce companies. In 2013, it recorded $5.78 billion in sales during its 11.11 shopping event. The Chinese company is an international B2B platform that connects suppliers and buyers worldwide in one place. Just recently, Alibaba announced that the gross merchandise volume (GMV) from the 11-day sale reached up to 540.3 billion yuan or $84.54 billion.
Alibaba's stock has been rapidly fluctuating for some weeks now. We'll take a closer look into this and include the Alibaba stock forecast for 2022 and beyond.
About Alibaba (BABA) Stock
Alibaba Group Holding Limited or Alibaba is a giantChinese multinational technology company founded in June 1999. Since then, it's been connecting small-to-medium-sized businesses (SMBs) to professional business buyers. It's helped increase sales with their B2B optimised tools.
In 2014, its initial public offering (IPO) on the New York Stock Exchange raised up to $25 billion. This resulted in the company's market value reaching $231 billion, the largest IPO in world history by then. Recently, in 2020, it was included in the Top Five AI Companies.
Alibaba has three main sites: Taobao, Tmall and Alibaba.com. It offers millions of products under different categories like apparel, electronics, machinery, cloud, entertainment and more. Jack Ma and Joseph Tsai, the two founders of the company, are the two largest stakeholders.
Alibaba technology stock sustained solid growth for many years after its official IPO. It started with an initial $88 per share and trading at $92.70. At the time of writing (end of 2021), Alibaba's stock price is over $119.
What Affects the Alibaba (BABA) Stock Price
Here are some factors that can influence the price movement of BABA shares:
- Business restrictions
- An antitrust probe of the company from China's State Administration for Market Regulation (SAMR)
- Change in management and operations
- Investors/shareholders decisions
- Trade conflict
- Fines and restrictions
- Political pressure
- Company sales
- News and events
Alibaba Stock Price in the Past
(https://carigold.com/forum/attachments/alibaba-stock-forecast-1-jpg.471486/)
We're starting from a low stock price in 2016 because the company faced a shroud of scandal and controversy. But Alibaba quickly rose again after Taobao crested 580 million active monthly users and Tmall hit 500 million monthly users.
From an all-time low stock price, Alibaba's value started to rise in 2018. This is because the market liked Alibaba's spending spree that year. In 2018, the company spent over $41.6 billion on product development, sales and marketing, general administration and the cost of revenue. Many analysts consider this to be disciplined spending.
It continued to rise in 2019, the same year that Jack Ma stepped down as the head of the company. Its mobile user base reached 1.1 billion in the same year, and revenue grew by 42%. Its workforce reached 86,000 global workers, and the company delivered 57 million packages a year. Because of all of this, the stock price increased robustly.
(https://carigold.com/forum/attachments/alibaba-stock-forecast-2-jpg.471487/)
In 2020, the value declined slightly as the State Administration for Market Regulation (SAMR) fined the company in China. Alibaba had to pay a $2.82 billion fine and end its exclusive deals. SAMR also imposed additional fines against the company over previously unapproved acquisitions. These anti-competitive practices and challenges placed analysts' expectations of 30% sales growth in uncertainty.
Unfortunately, in 2021, the company's stock price began to drop after its big issues with financial regulators and the Chinese government. Some analysts think many will avoid the stock until these issues are resolved. But in August, there was a 22% rise in quarterly profit and a 46% jump in revenues to $31.9 billion. Then the stock dropped again on 10 November after Chinese regulators announced new draft anti-monopoly rules for platforms like Alibaba.
Alibaba Stock Technical Analysis
(https://carigold.com/forum/attachments/alibaba-stock-forecast-3-jpg.471489/)
For a one-month timeframe, the technical analysis from Trading View showed that overall, BABA shares showed a sell trend. This used the most popular technical indicators — Moving Averages, Oscillators and Pivots. The stock shows a strong sell trend based on MAs, while the oscillators indicate buying movement.
The price is below its 5, 20 & 50-day exponential moving averages, and it's being strongly bearish, moving downwards. These results show that the stock isn't doing quite well in the market. That's why there's a strong sell recommendation.
Alibaba Stock Forecast for 2022 by Experts
Analysts have made their predictions for BABA's stock price in 2022. Forecasting makes use of historical and recent data as well as technical indicators and tools. However, not all Alibaba stock forecasts are the same. Here are some from experts:
CNN Business
Analysts from CNN Business offer a 12-month forecast for investors with expected prices of $302.90 as the highest price, $199.95 as the median and $140.05 as the lowest. Based on these amounts, they've predicted that it will go up next year compared to the current price of Alibaba stock. The consensus among 56 analysts from the firm indicates a buy recommendation for the stock.
Long Forecast
The Economy Forecast Agency from Long Forecast expects to begin January 2022 with $107 and end it with $102. However, this would mean that they expect the price to drop in early 2021. This drop would also seem to continue until September 2022. The largest drop would be in February 2022, the price decreasing by over 20% from its current price.
Luckily, they also predicted Alibaba to gain control and go up again starting October 2022. Based on their BABA stock forecast, 2022 will end with a 9.02% price increase.
Wall Street Zen
From 16 analysts in Wall Street Zen, the predicted prices are shown above. Their maximum price forecast is at $407 with a great 253.91% price increase while the minimum is $200, still 73.91% greater than BABA's current price. Based on these prices, it's clear that they expect only great things for the stock in 2022.
Panda Forecast
The predicted target prices are shown with arrows to indicate their movements relative to their recent price. In this regard, analysts from Panda Forecast expect to welcome the new year with a price increase. It will continue to increase until March, the end of the first quarter, and then slightly drop in April. Overall, there are more expected price increases compared to drops.
The monthly volatility is also indicated, with February being the most volatile month and July being the least. At the end of the year, the price is expected to reach up to $187 with almost 12% volatility.
Wallet Investor
Like most analysts, those from the Wallet Investor predict Alibaba's January price to be greater than its current price. Based on the forecast, January will have over $124 with a 3.18% price increase. However, like with most analysts again, this will drop in February, too.
Throughout the year, the price is expected to fluctuate. The biggest positive change would be in October 2022 and the lowest drop in November. Fortunately, the price is expected to increase before the year ends.
Alibaba Price Forecast for 2023-2025
(https://carigold.com/forum/attachments/1111-png.471490/)
It's predicted that Alibaba's price will increase in the following years, up to 2025. It started from a 43% increase from its current price in 2023, increasing up to 87% by 2025.
Long-TermAlibaba Stock Price Prediction 2026-2030
(https://carigold.com/forum/attachments/222-png.471491/)
2026 is expected to start with a 117% increase in price to $234. The stock's price is then predicted to increase each year until ending 2030 with an over $300 market value.
Conclusion
Even if Alibaba has faced extreme challenges recently, Alibaba continues to show great potential. The positive Alibaba stock forecast of many analysts can support this. Moreover, Alibaba has a good record in the market and is a big company worldwide. Overall, the BABA stock would still be a good investment and trading asset. Please keep in mind that the stock market can be ruthless and react to world events very sharply.
If you're unsure, try using a demo account from Libertex. Not only can you invest in a controlled environment, but you can also use all the traditional trading tools and features and build your own portfolio. This way, you can practice CFD trading, investing, monitoring and analysing the market before entering real conditions.
-
General Electric (GE) Stock Forecast
General Electric Company is an industrial business best known for power, aviation, financial services, renewable energy and healthcare. Its fame has increased through the awards it's won, such as Engineering Service Provider of the Year. It operates worldwide and has recently undergone a significant restructuring to offer more services.
In 2020, the company reported consolidated earnings on revenues of over $79 billion with over $5 billion from common shareholders. Just recently, in November 2021, it announced that it would split into three major companies. Where does that put future expected stock prices? Let's find out.
Overview: General Electric (GE) Stock
General Electric Co. is one of the oldest companies around, having been incorporated in 1892. The company emerged after the Thomson-Houston Company and the Edison General Electric Company merged. It started with Appliance and Lighting services.
Now, it operates as a finance, infrastructure and technology company worldwide. Its main expertise lies in the following segments:
- Aviation
- Capital
- Healthcare
- Power
- Renewable energy
As of 14 January 2022, its current stock price is $103.16.
Factors Affecting the General Electric (GE) Stock Price
Here are some factors that can influence GE stock exchange price:
- Workforce layoff
- Change in management or operations
- Investors sentiments
- Inflation
- Industry performance
- Announcement of dividends
General Electric Stock Price in the Past
(https://carigold.com/forum/attachments/general-electric-stock-forecast-1-jpg.472848/)
The stock market price started low in the 1960s and 1970s. During these years, GE was a pioneer in laser light technology and medical imaging. Over the next few years, the price started to fluctuate more until it peaked during 2000. In August 2000, it reached a closing price of $480, making it the most valuable company in the world.
However, its price drastically dropped in 2008, when the company encountered a crisis. In 2001, Welch left the company as a $130 billion conglomerate. But in 2008, GE stock dropped 42%, with the capital financial segment being the main reason. Although Warren Buffet invested $3 billion to stabilise and counter this fall, the crisis didn't end.
The following year, the company had to cut its yearly dividend from $1.24 to $0.82 and fell lower in 2010. The price continued to fluctuate through the following years and didn't drop until 2019.
(https://carigold.com/forum/attachments/general-electric-stock-forecast-2-jpg.472849/)
The company had a good year in 2019. H. Lawrence Culp, the new chairman and CEO of the company, made significant improvements and helped the company recover slightly. By the end of 2019, the stock was up at about 50%. He reduced the $55 billion debt to half in 2020. Culp also sold unproductive stakes and subsidiaries.
However, in 2020, the COVID-19 pandemic significantly affected the company's steady price increase from 2019. On 15 May 2020, the GE stock price dropped to about $44, its lowest in two decades. GE's Aviation unit was the most affected since it had to lay off 10%-25% of its workforce in 2020.
Fortunately, the company began to recover in 2021. The stock price started to increase again. It even reached up to three digits in March until May and continued to drop and rise slightly afterwards.
General Electric Stock Technical Analysis
GE stock moved past a buy point on 9 November 2021. According to the MarketSmith Chart analysis, the relative strength line for the stock is lagging again. It also earned an IBD Composite Rating of 34 out of 99 with an RS Rating of 32, which means it outperformed 32% of all stocks for the past year.
(https://carigold.com/forum/attachments/general-electric-stock-forecast-3-jpg.472850/)
Using pivot points and different indices, here's a summarised technical analysis of NYSE:GE stock:
- A bullish alert on 17 December 2021, after a bearish swing on 16 December 2021.
- The stock is at a short-term and long-term downward trend based on Moving Averages.
- Bearish trend movement according to 200 DMA and Relative Strength Index.
- With a Neutral score from Oscillators and a Sell from MAs, the GE stock is experiencing slight selling pressure.
- Its strongest support and resistance levels are at 6, 13 and 104.
General Electric Stock Forecast for 2022 by Experts
Experts have done their own analysis on GE's performance for next year to create a GE stock price forecast. Although most of them predicted the stock price to increase in the following year, some say that it wouldn't happen so quickly. The one thing they have in common is that there'd be no massive drop in its price in 2022.
Coin Price Forecast
The forecasted stock price at the end of 2021 is $92.97. It'll then increase by 9% in early 2022, and its price is predicted to reach up to $95.86. In the second half of the year, $0.53 will be added, closing the year at $96.39.
Long Forecast
The Economy Forecast Agency predicts the GE stock price to end this year at $89. It's forecasted that the price will constantly decrease, peaking at a drop by 10.75% in February, not until September 2022, with a 3.23% increase. This would continue to go up until the end of the year with a $106 and 13.98% increase.
AI Pickup
According to Wall Street analysts, slight price growth is expected in January. After that, it'll continue to decline in the year's remaining months, dropping the highest in June 2022. Fortunately, the year will end with the price slightly increasing by 0.03% from its previous predicted price of $54.21.
LeoProphet
From LeoProphet's GE stock forecast, the price will increase rapidly but decrease as well in 2022. Its price will continue to go up until March, then drop until May, and continue to rise again. However, starting from November and until the end of the year, it's expected to drop to $97.57. It's also predicted that the highest market volatility will be experienced in February.
Wallet Investor
Wallet Investor analysts announced a prognosis for the GE stock price to have a stable upward movement in the next year. Although they only range from zero to about a 3% increase, no significant drop is expected. Not until December 2022 where the price will experience a 3.53% reduction.
Short-Term General Electric (GE) Price Prediction for 2022
Many analysts have stated their GE stock predictions in the coming year. Here's a summary of the forecasts for 2022 from five high ranking analysts based on Wall Street:
(https://carigold.com/forum/attachments/%D0%9D%D0%BE%D0%B2%D1%8B%D0%B9-%D0%BF%D1%80%D0%BE%D0%B5%D0%BA%D1%82-5-png.472853/)
Most analysts gave a buy trading recommendation for the stock since they expect the price to go higher in 2022, indicated by the positive price change percentages. Most of them also predicted a three-digit stock price next year compared to the two-digit price now.
General Electric Price Forecast for 2023-2025
(https://carigold.com/forum/attachments/1%D1%84-png.472854/)
It's predicted that in the following years, from 2023 to 2025, GE stock price will continue to increase. This means that in 2025, the forecast increase is by 68% compared to the present price.
Long-Term General Electric Stock Price Prediction 2026-2030
(https://carigold.com/forum/attachments/234-png.472856/)
Even in 2026, the price will continue to increase. This would continue until 2030 with a 155% increase from the current price. There's no hint of a drop in the forecast as theprice goes up throughout each year.
Conclusion
General Electric stock is starting to get its upward movement again after facing a crisis in 2008. Although they're in debt, it's clear that the company is taking measures to pay it off. The company is doing better now, even after the turbulent pandemic times.
Since it's an old company, this performance shows how the company is managed. Overall, it's a good choice for investment since most GE stock predictions show that its price is likely to increase. The stock is doing pretty well in the market, too, based on its share forecast. However, it's best to do your own research first and then try investing on your own.
If you're still uncertain, you can try a demo account from Libertex. Explore its various features designed to help you develop your skills for building your portfolio. With a demo account, you can practice trading stock CFDs first before you do so in real life.
-
Technical analysis: harnessing Bollinger Bands
Technical analysis is a must-have skill for any self-respecting day trader. However, it is also an incredibly useful tool for long- and medium-term investors too. Following last week's look at the RSI and MACD oscillators, let's dive straight into some more technical analysis.
This time around, we'll be building on the trend oscillators studied a week ago with a close look at perhaps the most useful and versatile volatility indicator in existence: Bollinger Bands. Some of you may have never heard of them, but don't worry: by the end of this article, you'll know everything there is to know about these important indicators!
Bollinger Bands
Bollinger Bands were developed by renowned technical trader John Bollinger and consist of a pair of trendlines that are plotted two standard deviations (positively and negatively) away from the simple moving average (SMA) of a given security's price. Their purpose is to provide investors with a higher probability of properly identifying overbought or oversold conditions. This makes them a perfect confirmation tool to complement an analysis of the RSI or MACD.
The formula for calculating them is pretty complex, but luckily for us, the Libertex platform can calculate and automatically apply the bands, as well as additional oscillators expressing the width and percentage disparity between the upper and lower bands. Here's what the one-year Apple (AAPL) chart looks like with all three overlaid:
(https://carigold.com/forum/attachments/1_4-png.474454/)
But how do they help us trade?
The established doctrine among traders is that the closer prices move to the upper band, the more overbought the market is. Conversely, prices moving towards the lower band signal oversold conditions. Beyond this, a widening of bands signals increased volatility, while a contraction is a sign of lower volatility. This is because standard deviation is itself a measure of volatility.
The major leading signal with Bollinger Bands is a phenomenon known as "The Squeeze". This is when the bands come closer together, which indicates decreasing volatility and the existence of potential opportunities for opening trades. On the other hand, a widening of the bands is seen as a sign of increasing volatility and — depending on what the RSI is indicating — is often interpreted as a signal to close out positions or reassess take-profit levels.
Let's take a look at the AAPL chart once more:
(https://carigold.com/forum/attachments/2_0-png.474455/)
See the green circles? These indicate a sudden tightening of the bands. A short time after this, we see significant swings to the upside, which would indicate that the squeeze represents an optimum entry point for a long position.
What about when to sell?
This is a little trickier and requires a combination of indicators for any degree of certainty as to when a decline is imminent. Indeed, even John Bollinger himself states that his bands are not intended to be used as a standalone leading indicator and must be combined with several other technical analysis tools to provide reliable, actionable signals. Nonetheless, we will attempt to show their utility even when combined with just the RSI we looked at last week. Luckily, the Libertex in-app technical analysis suite makes this a breeze.
Simply go into full-screen mode on the chart and follow the instructions from last week to add the RSI (click on the indicators tab, hover over 'Oscillators' and select the RSI). Then, do the same again and add the Bollinger Bands as shown below:
(https://carigold.com/forum/attachments/3_1-png.474456/)
Now, as we mentioned earlier: a widening of the bands is a good sign that market volatility is increasing and a fall could be on the cards. The problem is that these widenings are generally much more protracted and less clearly defined compared to the contractions. This means that we can potentially miss out on a lot of upside movement if we close out positions at the first sign of widening, as shown by the yellow circles below:
(https://carigold.com/forum/attachments/4_1-png.474457/)
Notice how long the periods of widening (volatility) are? This is because the rising prices associated with the uptrend itself represent significant volatility compared to the trailing 20-day SMA, so it's hard to determine at what point the width represents a truly overbought market.
However, if we incorporate the RSI (peaks circled in blue) into our analysis, we see that these are much more precise as a leading indicator. By combining the two together (peak of the RSI and pronounced widening of Bollinger bands), we can predict future price declines much more accurately. This is why Bollinger himself recommends joint analysis using non-correlated tools such as the RSI and MACD.
Expand your knowledge with Libertex
Hopefully, you enjoyed this latest instalment in our technical analysis trading series. Given the interoperability of Bollinger's eponymous indicator with the key trend oscillators we looked at last week, you should now be able to refine your technical analysis skills further and generate even more accurate trading signals at home. If you're feeling confident in your abilities after these two tutorials, you could consider trying them out on a live position. For the more risk-averse, this week could be another great opportunity to test them out in your Demo account.
-
AMC Stock Forecast
As the largest movie theatre chain in the world, AMC has been popular as a global investment option, offering its shareholders the opportunity to benefit from the $18 billion US theatre industry. Despite the hit the entire sector has taken due to COVID-19, AMC's shares are still soaring.
Learn what makes AMC stand out among its competitors, how its stock price is defined, AMC's past performance on the New York Stock Exchange and the price target consensus for 2022 by experts. After that, we'll provide an analysis of AMC's future.
About AMC Stock
Founded in 1920, AMC Entertainment Holdings, Inc. is an American multinational movie theatre chain and the largest movie theatre chain worldwide. Headquartered in Leawood, Kansas, in the United States, it has the largest share of the US movie theatre market.
The company is involved in the cinema industry, which it conducts through its subsidiaries. It does so by owning, operating and having interests in theatres. AMC operates through two segments:
- United States Markets, which focuses its operations specifically in New York, Washington D.C., Los Angeles, Chicago and Atlanta.
- International Markets, which involves activity in countries that include Germany, the United Kingdom, Ireland, Estonia, Spain, Sweden, Denmark, Finland, Lithuania and more.
AMC's stock ticker on the NYSE is AMC. As of 24 December 2021, its current share price is $20.57. It has an impressive market capitalisation of approximately $10 billion and has a volume of $49.59 million. The year range for the cost of one AMC share is $2.27 to $62.55. This extreme difference is partly due to the impact of the COVID-19 pandemic on the entertainment industry. Apart from this, the stock experienced a massive rally in mid-2021 as speculative trading began intensely owing to Reddit users.
What Affects AMC Stock Price?
The performance of AMC on the stock exchange depends on certain factors. While some of these have impacted AMC's stock price for decades, others are relatively and surprisingly new.
The regular factors include financing movies, producing films, legal and regulatory rules pertaining to theatre operations, supply chain issues and more.
At present, the ongoing COVID-19 pandemic is a major factor that can vastly move the price of AMC stock up or down. Since March 2020, when COVID-19 was declared a pandemic, the share prices have gone through many surges and dips. Thus, the revenue AMC can potentially bring in largely depends upon whether the situation with the virus will ease in the upcoming few months, allowing cinemas and theatres worldwide to operate at their full capacity. Similarly, growing trust in vaccination and approval of vaccines for children will also play a key role in this situation since movies for children can then be shown, as well.
These price indicators and other general economic factors are considered when analysts and industry experts create an AMC stock forecast.
AMC Stock Price in the Past
For most of its history, AMC's stock price has remained in the $15 to $35 bracket, as shown in the chart below.
(https://carigold.com/forum/attachments/amc-stock-forecast-1-jpg.476506/)
- The lowest recorded price is $2.27, which occurred in April 2020 due to the complete closing down of cinemas and theatres worldwide owing to the COVID-19 pandemic.
- The highest recorded price is $62.55, which occurred in June 2021. This was after the cinemas were reopened after lockdowns were lifted across many parts of the world. It's interesting to note that although the virus brought the stock's price down drastically, the way it has increased since reopening has been astonishing, considering it has significantly soared past its previous high.
- An interesting and highly notable surge in the price of AMC stock was recorded in May 2021 when enthusiastic Reddit users encouraged doubling down on the stock. In fact, this wild movement even helped AMC surpass GameStop as the most popular stock among Reddit WallStreetBets forums.
As a result, shares of AMC saw a gain of 1,100% in 2021 alone.
While it helps to know how AMC has performed in the last few years, this information can't be used on its own for accurate AMC price prediction.
AMC Stock Technical Analysis
When making any AMC stock forecast, the most useful metrics are technical indicators. The technical analysis reveals whether the stock should be bought, sold or held at any given moment or during a certain period. The charts below summarise the technical analysis for AMC stock for the upcoming month.
(https://carigold.com/forum/attachments/amc-stock-forecast-2-jpg.476508/)
The indicators point towards buying the stock. Only four of them suggest selling, while twice that amount recommend buying. The rest of the indicators are at a neutral position for this 30-day period.
The individual analysis by the oscillators and moving averages is different, however. The moving averages say that AMC stock is a Buy. For oscillators, except Momentum (10) and MACD Level (12, 26), all technical indicators are pointing towards neutral.
Therefore, according to this technical analysis, it appears that the next few weeks are good for buying AMC stock or perhaps even holding it. However, this doesn't seem like an appropriate time at all for selling any shares you own. That being said, technical analysis depends on multiple indicators whose values keep changing regularly. Thus, before finalising any decision, make sure you consider the latest technical analysis.
AMC Stock Forecast for 2022 by Experts
What a senior analyst or an industry expert thinks about future performance can largely affect investor confidence in AMC stock. Mentioned below are some experts and how they predict 2022 will turn out for the international theatre giant. For 2022, most experts don't believe that AMC will make a remarkable recovery from its pandemic-induced loss. Therefore, there are many sell ratings among Wall Street analysts.
Chad Beynon
Chad Beynon, an analyst at the investment banking company Macquarie Group, downgraded AMC in September 2021, expecting the company to exhibit bearish performance on the stock exchange in 2022. The price quoted by Beynon was also shocking for some; at $6, his prediction brings down the value of AMC stock nearly four and half times from its current price. Beynon justified this decision by the fact that the film industry hasn't been able to recover to the pre-pandemic levels at a pace that can help AMC bring in notable revenue.
Michael Pachter
Michael Pachter, an analyst at the privately held investment firm Wedbush Securities, also downgraded the stock price for AMC in 2022 and changed his rating from 'neutral' to 'underperform'. Patcher gave a target price of $7.50, a drastically lower value than the current price inching closer to $30.
Note that forecasts and expert predictions can be wrong and aren't a substitute for proper research and due diligence on your end.
Short-Term AMC Price Prediction for 2022
Despite significant volatility lingering in this industry due to the pandemic, various artificial intelligence-based models and statistical tools have led to some reliable AMC price predictions for 2022.
Coin Price Forecast
According to estimates by Coin Price Forecast, AMC is expected to recover very well from the bearish movements in 2020 and early 2021. The forecasted price for mid-year is $34.52, whereas the year-end price is quoted to be $41.22. This is an extremely positive outlook that suggests confidence in AMC and the fact that the global entertainment industry is set to move past the obstacles brought on by the virus.
Long Forecast
Another optimistic outlook for 2022 comes from Long Forecast. It has released a bullish outlook for the company, with share prices increasing in most months to eventually reach a possible maximum value of $41.50 in December. This also reinforces the growing confidence among investors and traders alike regarding the comeback of cinemas and theatres.
While experts have rather bleak expectations about AMC stocks in 2022, predictions from statistics and models are revealing a very promising picture for the future of this entertainment leader. Take this as yet another reason not to stand by any prediction or rating, and always do your own homework before using your money for AMC stock.
AMC Stock Forecast for 2023-2025
The farther a time period is from the present, the less reliable predictions for it get. That being said, knowing a price target for AMC stock in the upcoming few years can help mitigate risks associated with investing and trading and facilitate the development of a trading or investment strategy.
Wallet Investor has given shockingly high estimates for the price of AMC from 2023 to 2025. Starting from $46.464 in January 2023, it expects the stock to have a bullish movement. This constant increase in the value is forecasted to lead AMC stock to close at $99.177 in December 2025.
Analysts usually refrain from giving out estimates so far ahead in time, and statistical models usually come up with very near-sighted estimates. Therefore, the least risky manner of making any decision regarding AMC stock is to study the details yourself or consult a professional.
Long-Term AMC Stock Price Prediction for 2026-2030
Wall Street analysts don't offer any predictions for the long-term status of stocks, but they can be made using artificial intelligence-based models. Below are AMC price predictions for 2026-2030 by various reliable sources.
Coin Price Forecast
Coin Price Forecast predicts that the price of AMC will follow an uptrend from 2026 onwards. Although these estimates don't depict any significant surge in price, those who are planning to hold their existing shares for the long term might be able to benefit from the expected gradual increase.
(https://carigold.com/forum/attachments/%D1%84%D1%8B%D0%B2%D0%B0-png.476509/)
Wallet Investor
Wallet Investor has shown far more confidence in the future performance and earnings of AMC, as per its predictions. While many estimates have quoted a price over $100 only in 2029 or 2030, Wallet Investor has forecasted AMC's stock status to reach around $116.191 by just the end of 2026.
Conclusion
At present, the most important factor investors and traders are analysing to determine if they should buy, sell or hold AMC stock is the future state of the leisure and entertainment industry in the US and across the world. This, in turn, depends upon the circumstances surrounding the pandemic, vaccination efficacy and speed of administration and government regulations. If unforeseen circumstances don't appear, the share price is expected to grow slowly.
Before making any trading decision, you can test your strategies and learn useful tricks in a controlled environment, such as the one provided by Libertex. Create a demo account and practice trading CFDs on numerous underlying assets from all over the world.
-
Tesla Stock Forecast: Will It Slide Deeper Into the Red?
While the past year was brutal for the manufacturing sector, Tesla (TSLA) not only managed to survive but also made history. The most significant milestones included the explosive growth to $2,000 per share, a stock split and acceptance into the S&P 500 index.
With that said, it's impossible to deny the challenges the EV maker is facing. Last year, Tesla orders nearly halved, and there were consumer complaints about safety and poor response to criticism.
Taking into account a stellar performance and controversial news, investors are divided. If you're also wondering what might come next for the stock, continue reading for Tesla stock predictions.
Is it a Buy, Hold or Sell? Is it a worthwhile addition to an investment portfolio? Find out the answer below and the context for the ratings given.
Brief Summary of Tesla's Stock (TSLA)
Tesla, Inc. operates in the automotive and energy generation and storage segments. The company designs, develops, manufactures and sells electric vehicles, grid-scale, solar panels and solar roof tiles.
Co-founder Elon Musk, J. B. Straubel and Jason Wheeler are three key management executives. Tesla's world-famous vehicle collection includes the Model 3 (four-door sedan), Model Y (sport utility vehicle), Model S (four-door sedan) and Model X (SUV). The Powerwall and Powerpack are the most popular products in the energy storage range.
(https://carigold.com/forum/attachments/1-png.479125/)
The company was launched in 2003, but it was only in 2010 when Tesla's stock became publicly available. Tesla Motors launched its initial public offering (IPO) on NASDAQ on 29 June 2010. It was the first American car company to do so since the Ford Motor Company's IPO in 1956. With 13.3 million shares issued at the price of $17.00 per share, the company raised $226 million.
In 2020, Tesla's market capitalisation surpassed those of BMW, Daimler and Volkswagen combined. It even surpassed Toyota's $202 billion, becoming the world's most valuable automaker by market cap.
Factors Behind Tesla's Stock Price Fluctuations
Let's leave some fundamental factors aside, such as pandemic-related changes on the global scale and the political environment, which impact the entire market. We'll focus on Tesla specifically and how it plans to resolve its unique challenges.
Manufacturing Capabilities
Tesla moved forward to expand its manufacturing capabilities with plans to build 20 million EVs per year over the next decade. The newest additions would be a manufacturing factory near Berlin and one near Austin, Texas. As manufacturing scales up, the company can increase revenue and push its stock price up.
International Sales
Recently, Tesla deliveries in China excluding exports fell by two-thirds. This might reflect a weakening demand from the overseas markets. If the issue of international sales isn't resolved, it'll have a huge impact on Tesla's earnings and stock price.
Public Image
Tesla is facing fallout from its handling of various customer service complaints. For example, the company had a response on their Chinese social media page that trended for all the wrong reasons. A massive public outcry never goes unnoticed with similar stocks.
Also, Elon Musk is heavily associated with his company in the minds of investors; the company's success is in part connected to Musk's perceived success. This turned out to be both negative and positive for the stock.
Index Inclusion
The last factor on this list is the effect from S&P Dow Jones Indices on the Tesla share price forecast. Nearly $5.4 trillion in funds are indexed on the S&P 500. So, every time someone bets on the index, they also bet on Tesla, thus increasing demand for the stock. On top of that, liquidity is broadly picking up, which is a positive change for Tesla shares.
Past Performance of Tesla's Stock
For the first few years, TSLA's price stayed at around $5 and then jumped into the $30-$40 range in 2014.
The stock has had plenty of ups and downs along the way. For example, in August 2018, Elon Musk sparked deep controversy with a now-infamous tweet about taking Tesla private at $420. Interestingly, it didn't have a major effect on the stock price, which hovered around the $50-$60 range from 2017 to 2019.
(https://carigold.com/forum/attachments/tesla-stock-prediction-1-jpg.479127/)
By December 2019, the share price reached $393.15 following reports that Tesla brought in $24.6 billion in revenue. As a volatile stock, TSLA suffered through the correction triggered by the COVID-19 crisis. As vehicles stopped coming off production lines, Tesla didn't have any revenue or margin.
On 31 August 2020, Tesla had a 5-for-1 stock split., followed by an increase in value from around $300 to nearly $440.
How Did Tesla Stock Perform in 2021?
TSLA started 2021 on a high note of around $880 and went through consolidation to around $600. Despite investor concerns about lacklustre results in the first half of the year, the uptrend from June to November made a statement. The highest 52-week price point was $1,243.49.
Taking a peek at 2022, we can already see a similar pattern: a rise to $1,199.78 and a setback to below $830.
(https://carigold.com/forum/attachments/tesla-stock-prediction-2-jpg.479128/)
Tesla reported Q4 2021 results on 3 January 2022. As expected by Tesla's supporters, the company surpassed analysts' expectations and reported its best revenue growth in 10 quarters. Even those who hyped Tesla stock plenty in the past were astounded. The ascent might have come from the infusion of trillions of dollars of new money into the US economy and future earnings expectations.
Narrative aside, Tesla needs to justify such outsized enthusiasm. With the price trading under $850 at the start of February, there's still room for Tesla to prove its potential.
Short-Term Tesla Stock Prediction for 2022
Wall Street is turning bullish when it comes to Tesla in the short term. The fear of higher interest rates is still prevalent, but that doesn't stop analysts from increasing their price targets.
Wallet Investor predicts a consistent uptrend through 2022. Although the forecast starts from March, it's enough to gauge the overall movement and its intensity.
(https://carigold.com/forum/attachments/11-png.479129/)
Long-Term Tesla Stock Forecast for 2025 and Beyond
Jumping to 2025, we have another positive forecast from Wallet Investor. In a few years, Tesla's stock might jump above $2,000. Over the year, the stock price might further increase from $2,100 to $2,500.
(https://carigold.com/forum/attachments/22-png.479130/)
For a second opinion, here is the Tesla stock forecast for 2025 provided by Gov Capital.
(https://carigold.com/forum/attachments/33-png.479131/)
Supporting the bull case, some experts see Tesla delivering 8 million vehicles per year by 2030 compared to 499,550 vehicles in 2020. On top of that, in the next decade, the company will become more than just a car producer. Only taking into account the value of EV sales overlooks all other businesses embedded in Tesla.
Tesla might also make a profound business model shift in the next few years. Sectors like software and connected services should start contributing significantly to their earnings.
With all that said, Tesla must be able to withstand growing competition with the following companies in 2025-2030:
- Xpeng Motors
- Volkswagen Group
- BMW
- Mercedes Benz
- General Motors
Technical Analysis of Tesla Stock
Looking at the chart, Tesla's stock has reached its pre-pandemic levels. However, it rapidly went down throughout 2021 and is still yet to catch up to its early 2022 performance.
The technicals on the daily chart look bad, but the summary for the monthly chart is much more promising.
(https://carigold.com/forum/attachments/tesla-stock-prediction-3-jpg.479132/)
Oscillators:
- Relative Strength Index (14) - 61.18 - Neutral
- Stochastic %K (14, 3, 3) - 70.08 - Neutral
- Average Directional Index (14) - 48.24 - Neutral
- Awesome Oscillator - 544.99 - Neutral
- Momentum (10) - 178.42 - Sell
- MACD Level (12, 26) - 201.03 - Buy
Moving averages:
- Exponential Moving Average (50) - 431.98 - Buy
- Simple Moving Average (50) - 315.51 - Buy
- Exponential Moving Average (100) - 265.20 - Buy
- Simple Moving Average (100) - 181.66 - Buy
(https://carigold.com/forum/attachments/tesla-stock-prediction-4-jpg.479133/)
The chart above shows values from EMAs and the MACD indicator, which help identify key levels and price targets. This particular combination suggests two sell targets, $999 and $1,240 (although the stock can be held longer for potentially bigger returns) and two buy targets, $515 and $759.
Analysts' Ratings and Price Targets for Tesla Stock
Based on 12-month Tesla stock predictions by 31 Wall Street analysts, the stock has a Hold rating. It's an average of 7 Sell ratings, 8 Hold ratings and 16 Buy ratings. The price target range is very wide, so we'll need to look at a few specific firms and their recent release notes.
(https://carigold.com/forum/attachments/tesla-stock-prediction-5-jpg.479135/)
Mark Delaney, Goldman Sachs
Robert W. Baird reissued their Buy rating on Tesla shares. The current price target from the firm is $1,200, which, at the time of issuing, had a medium effect on the share price.
Wells Fargo & Company
Morgan Stanley analyst Adam Jonas continues stock coverage with a Buy rating. The price target is currently at $1,300 a share (up from $1,200). Jonas also predicts that Tesla will continue being a stronger player as the EV marathon wears on.
Philippe Houchois, Jefferies
Jefferies has a Buy-equivalent rating on Tesla and a price target of $1,400. Analyst Philippe Houchois lifted his target price from the previous $950.
What Is Best for Tesla Stock: Trade vs Invest
Tesla's wild stock rally attracted many investors' attention. While some analysts are still sceptical about rapidly growing valuation and occasional dips. So far, investors that took the risk a few years prior have enjoyed hefty profits. On top of that, analysts and price predictions describe a rather positive set of events.
With that in mind, past performance doesn't guarantee future results. Tesla's stock can be volatile, and it can be hard to predict where Elon Musk will steer the company in the future.
While the company grows rapidly, the fastest way to potentially gain some profit might be through trading. This way, you can capitalise on price movements without making long-term investment commitments. Please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital. You can hold a long position, speculating that the TSLA price will rise, or a short position, speculating that it'll fall. In any case, you start learning about new tools and markets in a practice environment with a free Libertex demo account.
-
Just how attractive is a long term, commission free investment with Libertex Invest?
Ever since the pandemic came and changed our lives forever, the financial markets have been seeing a huge influx of participants. Interestingly enough, though, these new entrants are coming for a potential profit but not looking to “get rich quick” through leveraged trading and meme investing. On the contrary, most of these predominantly young professionals are opting for a measured and regular long-term investment approach, depositing fixed sums each month in a bid to grow their capital in a sustainable and lower-risk fashion.
Noting the trend taking hold, multi-awarded online broker Libertex decided to create an entirely new account type in order to respond to the rising demand for lower-risk, unleveraged investment products for this future-minded wave of young investors. The brand new Libertex Invest account is available to all Libertex retail clients, and comes with a whole host of its unique features.
What makes Libertex Invest so unique?
Perhaps the most attractive feature of the Libertex Invest account is its zero commission, zero fee model. No commission, no SWAPs, no transaction charges. For those looking to make regular purchases of stocks over the long term, this could potentially become a great benefit and will help them save hundreds or even thousands in brokerage costs, which can then be reinvested for potential gains. Best of all, Libertex Invest clients have an option to choose stocks which generate dividends. They will be credited directly to clients’ Libertex Invest accounts and investors can also hold them for longer periods without worrying about overnight fees.
Libertex Invest includes all the big names like Amazon, Google, Apple and Tesla, with several industry options that range from the tech, automotive, industrial, healthcare, entertainment, medicinal cannabis and agrifood sectors. This means investors can build a highly diversified portfolio, minimizing risk while taking potential advantage of a large amount of upside.
Any fine print conditions?
It might seem like there’s some hidden catch. But really there isn’t! There are just a few small restrictions on the kinds of investments you can perform and that’s all. First, Libertex Invest users are only allowed to long positions on. They can’t sell short and they’re not allowed to trade Libertex’s other high-turnover asset classes CFDs. There are no stop loss, take profit and other pending orders with Libertex Invest either.
The idea is that these investments are to be held for months or even years and so the client will be able to close these positions at their leisure without the need for autonomous assistance. Last but by no means least, this new investment account does not offer “multipliers” or indeed leverage of any kind as the purpose of Libertex Invest is for investors to possibly grow capital with the minimum risks and not attempt to make multiples of one’s initial stake in a matter of days.
Build your own equities nest egg with Libertex Invest
Now that 2020-2021’s darling growth stocks have corrected more than 50%, the time is ripe to start building an equities nest egg. And with this incredible opportunity for commission-free investment, even the most committed day investors would be tempted to set aside a little each month for a rainy day. As savings account yields look set to remain well below inflation for the foreseeable future, a well-diversified,invest in quality stocks is a wise move – even more so when quality companies are available at knock-down prices. They say that the best time for investing for the long term is always yesterday and the next best is right now, but with today’s massive discounts on high growth stocks, there probably hasn’t been a better time since quite a few years ago.
Register your own Libertex account and see for yourself what makes it so unique!
The value of investment in stocks and shares can fall as well as rise, so you may get back less than you invested. Past performance is no guarantee of future results.
Jurisdictional limitations: Libertex Invest is only available in EEA countries.
-
Understanding Dividends
A vast majority of publicly listed companies regularly share their profits with their shareholders, a payment referred to as dividends. When a trade or investor searches for a company with high financial health to invest in, the dividend is an important part of their analysis and research.
This article offers an in-depth explanation of what dividends are, the reason why companies choose to pay their profits to shareholders, the various types of dividends and relevant dates regarding dividends. It also delves into the relationship between dividends and share prices before detailing dividend-paying companies.
If you want to get the gist of the article, scroll down to our FAQ section, which briefly covers significant details about dividends.
What Are Dividends?
Dividends are rewards, cash or otherwise, that a company pays to its investors who own its shares. When the company makes profits, it shares the profit with its shareholders in proportion to their investment in the company. This is one of the ways an investor can earn a return from the money they invest.
That being said, not all stocks pay dividends, so if you’re considering making a living off of dividends, you need to choose dividend stocks. Although dividends are usually paid four times a year, they can also be paid monthly or semi-annually. The company’s board of directors determines when a dividend is to be paid.
Although dividends, by their nature, are a regular payment to shareholders of a stock, they can be cut down during a financial crisis to preserve cash for the company.
Dividend Example
To further understand what dividends are, let’s consider an example. Suppose a public company announces a cash payment of $1 per share on its outstanding shares. The total outstanding shares of the company might be $3,000,000, for instance. This will make its dividends payable equal to $3,000,000.
Given below are the quarterly dividend payments by Apple Inc. in the year 2021. For the last three quarters of 2021, the tech giant issued cash dividends of $0.22 per share of its public stock.
(https://carigold.com/forum/attachments/%D1%8B%D0%B2%D0%B0%D0%BF%D1%80%D0%BE-png.483250/)
Why Do Companies Issue Dividends?
Listed companies have several options when they make profits. They can invest the capital to help their business grow further or buy back some of their shares on the open market. Why is it then that companies choose to pay dividends to their shareholders?
- Paying dividends is a way for companies to express their gratitude to their investors for their support of the business.
- Furthermore, it acts as an incentive to not only the current shareholders to continue holding stocks but also to potential investors to consider investing in a business that regularly pays dividends.
- It also improves the reputation of a company since regular dividends are a sign of a company’s financial strength and confidence in its future performance.
How Do Dividends Work?
The decisions regarding a dividend are made by a company’s board of directors. The value of a dividend is determined on a per-share basis and shareholders belonging to the same class (for example, common and preferred) are paid equally.
Generally, these are the steps companies take.
1. A company generates profits and retained earnings it does not need to utilise in the near future.
2. The management makes a decision regarding the excess money: whether it should be reinvested or paid as a dividend to shareholders.
3. The board of directors approves the issuance of dividends and other relevant details.
4. The company announces the dividend on its declaration date along with information about the dividend, such as the value per share, payment date, etc.
5. The dividend is paid to the shareholder on the payment date.
Types of Dividends
While the payment of dividends is essentially the disbursement of profits, a dividend may not always be in the form of money. A company can pay various types of dividends to its shareholders. Detailed below are some of the most common types of dividends.
Cash
The most common type of dividend, a cash dividend, refers to the payment of cash to shareholders as a return on their investment. This dividend is paid regularly, and the shareholders can choose to reinvest this money to increase their investment.
Stock
A stock dividend is provided by giving the shareholders additional stock. This usually happens when a company doesn’t have enough cash to pay its shareholders or has other preferences to invest its cash. If the company issues less than 25% of the previously issued stocks, it is considered as a stock dividend. If the issuance is more than 25% of the previously outstanding shares, it is treated as a stock split.
Asset
As dividends are not always monetary, companies can ever offer assets as dividends. An asset dividend is recorded against its current market price. Since this fair value is likely to be different from the book value of the asset, the company could either record it as an incurred loss or a gained profit. This means that companies can deliberately issue asset or property stocks to alter their taxable income.
Scrip
Essentially a note payable, this type of dividend is issued when a company doesn’t have sufficient funds to pay its shareholders. Instead, it offers a promissory note to pay the dividend amount at a later date.
Liquidating
If a company decides to return the original capital invested by its shareholders, it offers a liquidating dividend. This is not a regular dividend and usually occurs when a company is about to wind up its affairs.
Special
Special dividends payout on all shares of a company’s common stock. However, these are not paid like regular dividends and are often issued to distribute profits that have accumulated over the years and which do not need to be used immediately.
Impact of Dividends on Share Prices
After the declaration of a stock dividend, the share price often increases. Once dividends are distributed, share prices usually drop. Let’s examine the impact dividends have on share prices.
As mentioned earlier, regular payment of dividends signals the good financial health of a company and improves its goodwill and brand value. This is why as soon as a dividend is declared and its payable date is announced, investors are interested in buying the stocks. Hence, the prices of the shares increase since many want to buy them and are willing to pay high prices in order to get the dividends later on.
Conversely, after the ex-dividend date, the interest in a company’s stocks decreases because even if someone buys shares at that point, they would not be eligible for the dividend. Therefore, no one is willing to buy the shares at high prices since they wouldn’t be able to benefit from them. Thus, share prices usually fall after the ex-dividend date and even the payment date.
What Is Dividend Yield?
The dividend yield is a financial ratio, expressed as a percentage, which calculates how much a company pays out in dividends relative to its current stock price each year. Thus, a dividend yield is an annual rate. The dividend yield is calculated according to the following formula.
Dividend Yield = (Annual Dividends per Share / Current Share Price) * 100
If a company has declared the dividend per share of $1 and its current stock price is $25, its dividend yield will be equal to (1/25 = 0.04 or) 4%.
This formula also makes it clear that dividend yield can vary a lot over a certain period of time. Given that the dividend is kept constant, if the value of a stock rises, the dividend yield will fall. Conversely, if the value of a stock sharply decreases, the dividend yield will drastically rise.
What Are Qualified Dividends?
As the name suggests, qualified dividends have to meet certain requirements and conditions put in place by the Internal Revenue Service. Qualified dividends are taxable at the capital gains tax rate, whereas regular dividends are taxed at standard federal income tax rates. These are generally from shares in either domestic companies or qualifying foreign corporations and have to be held for a specific minimum period, which is termed the holding period.
Since the tax rates on qualified and ordinary dividends often vary a lot, it can make a significant difference to an investor when receiving one type of dividend over the other.
Which Companies Pay Dividends?
The highest dividend-paying companies are usually large, established corporations with predictable profits and expected growth in the future. Such companies aim to maximise their shareholders’ profits. Although a company from any industry or sector can regularly pay dividends, many companies from the following sectors have been noted to be regular dividend payers.
- Oil and gas
- Healthcare
- Financial institutions
- Utilities
- Basic materials
In addition to this, companies that are structured as Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs) are also top dividend-paying companies since they are required to distribute their profits among their shareholders. Conversely, startups and other companies in their nascent stages might not be able to pay regular dividends owing to their high initial costs of running and expanding their business.
Dividend Dates to Look Out For
A company can decide to pay its dividends monthly, quarterly or even yearly. When it comes to dividend payment, the following three dates are important.
Declaration Date
This is the date when a company’s board or management team announces that a dividend will be paid. This is also called the "announcement date" and is not considered as important by investors as the other dividend dates.
Ex-Dividend Date
This refers to the date by which you must own a dividend-paying stock in order to be paid the dividend. This is usually one business day before a company decides whom to pay dividends to by checking its stockholder roster. If shares are bought on or after the ex-dividend date, the shareholder will not be eligible for the dividend. On the other hand, if shares are bought on or after this date, the dividend payment is still received.
Record Date
Shareholders are supposed to properly register their ownership of stocks by the record date in order to be eligible for the dividend. In most countries, the registration is automatic for shares purchased before the ex-dividend date.
Payment Date
This is the day when shareholders who held a dividend-paying stock on a company’s ex-dividend date receive their dividend payment. The dividend checks are mailed to shareholders or credited to brokerage accounts.
What Is the Difference Between a Dividend and a Buyback?
Now that we know what dividends are, let’s compare them to another financial term that comes into context when a company makes profits: buybacks. Also known as a "share repurchase", a buyback is when a company purchases its own outstanding shares in order to reduce its shares available in the stock market.
Dividends and buybacks have significant differences, as outlined in the table below.
(https://carigold.com/forum/attachments/267%D0%B3%D0%BD%D0%B5-png.483251/)
Do Dividends Affect the Valuation of a Company?
Since dividends are not included in most of the metrics for valuing a company, they do not directly impact its valuation. However, that is not to say that it does not affect the valuation at all.
A company’s dividend activity and dividend yield move its stock price and affect investor sentiment, consequently impacting the company’s valuation. For instance, a high dividend might be taken as a positive signal that the company expects to grow and perform well, eventually increasing the valuation. Similarly, a dividend cut can be interpreted as a sign that the company is underperforming, which is likely to decrease its valuation.
Conclusion
Dividends are far more than just a reward from a company to its shareholders for their trust. Dividends can, at times, be a very steady stream of income for investors. However, to ensure this, one needs to exhaustively research the kind of stocks that offer regular dividends.
Dividends do not come without disadvantages and are not completely free money. Therefore, it is important to evaluate all of your options and be completely knowledgeable about dividends before putting your money into dividend-paying stocks.
-
Crude Oil Price Forecast: Short-Term and Long-Term Predictions
Over the years, crude oil has often been compared to gold, with some even referring to it as black gold due to its secure financial position. However, this changed a couple of years ago, with crude oil's stability being completely undermined. This oil price forecast will look at the history of crude oil, factors that have affected its price and price predictions from experts.
What Is Crude Oil?
Crude oil is a fuel source in liquid form that can be found underground and extracted by drilling. Oil has many uses, including plastic and petroleum production, transportation, heat and electricity generation.
Because of oil's origins, it's considered a "fossil fuel". Simply put, crude oil was created hundreds of millions of years ago when plankton and prehistoric algae settled at the bottom of the ocean. The organic matter was covered with mud and layers upon layers of sediment; the resulting pressure heated the remains. For millions of years, the matter formed kerogen (a waxy substance), and after even more heat and pressure, it transformed into liquid oil.
Crude oil is a nonrenewable resource. When the world's current oil supply is used up, it'll take millions of years to create more oil.
A Closer Look at Crude Oil Usage
Crude oil has many uses. It's the base for gasoline, jet and diesel fuels. Furthermore, crude oil is the base for petroleum products, including paraffin wax, tar, asphalt and lubricating oils. Oil's use can even stretch as far as perfume, fertiliser, soap, vitamin capsules and insecticides.
(https://carigold.com/forum/attachments/oil-price-1-jpg.483921/)
While pretty much every country depends on oil, only a handful produce it. The top 5 countries that have the most oil are the US (17.9%), Saudi Arabia (12.4%), Russia (12.1)%, Canada (5.9%) and Iraq (5%).
Global oil consumption has risen steadily year to year over the last three decades. The only decline was during the financial crisis of 2008 and the COVID-19 crisis of 2020.
(https://carigold.com/forum/attachments/oil-price-2-jpg.483922/)
Crude Oil Types
There are two main types of crude oil: Brent and West Texas Intermediate (WTI).
WTI
West Texas Intermediate (WTI) crude oil is lightweight and has little sulphur. As such, it's high-quality and is often called "light, sweet" oil. Its properties make WTI ideal for producing gasoline, which is why it's the US's standard for crude oil.
Brent
Brent combines crude oil from over a dozen various oil fields from the North Sea. While it isn't as "light" or "sweet" as WTI, it's still good for making gasoline. It's the standard for Europe's and Africa's crude oils.
4 Factors Influencing Oil Price
Due to unexpected changes to the factors that affect oil prices, this commodity has become highly volatile. Later, we'll take a look at how exactly crude oil's price performed in 2020, but, first, we'll introduce four key factors that have had a significant impact on this black gold.
Diminishing Global Demand
The EIA estimated that the global demand for oil and liquid fuels was 92.2 million barrels per day. This was 9 million fewer barrels per day than in 2019. However, the EIA anticipates that the barrel per day rate will rise by 3.35 million in 2022.
Rising Production in the US
US producers of alternative fuels and shale oil have increased their supply. It has been gradual, with supply increasing slowly since 2015. Shale oil producers have found ways to extract oil more efficiently, mainly through keeping wells open, reducing the cost of capping.
In August of 2018, the US became the largest oil producer in the world. The next year, US crude oil production exported more oil than it imported for the first time since 1973.
Decreasing OPEC's Clout
While US shale producers have increased their market influence, they don't operate in OPEC's cartel-like manner. OPEC hasn't cut their output enough to support prices. The leader of OPEC, Saudi Arabia, desires higher oil prices, as that is where its government gets revenue from. However, this is offset by losing its market share to Russian and US companies. Furthermore, Saudi Arabia doesn't want to lose its market share to its archrival Iran.
Increasing Dollar Value
The value of the dollar has been driven up by FX traders ever since 2014. In times of economic distress, many traders consider USD to be a safe haven. For instance, from 2013-2016, the dollar's value increased as a response to Brexit and the Greek debt crisis. And the coronavirus pandemic caused USD to increase in value 3-23 March 2020.
So, how does this affect oil? All oil transactions are made in USD, and most oil-exporting countries maintain their currency's value at a fixed exchange rate to USD. As such, a 25% rise in the dollar's value comes along with a 25% decline in oil prices.
Crude Oil Price Performance in the Past
Over the last decade, the price of crude oil has been especially volatile. Crude oil is one of the most scrutinised commodity prices; its cost influences all stages of production and, therefore, alters the price of end-products, as well.
Why has crude oil been so volatile? Oil's inherent inelasticity in regards to short-term changes in supply and demand means that its prices are naturally erratic. What's more, the economic growth in BRIC countries (like India and China) and the use of horizontal drilling and hydraulic fracturing in the US have caused further changes to supply and demand, thus contributing to the heightened price volatility since 2009. The chart below shows the historical fluctuations in oil's price:
(https://carigold.com/forum/attachments/oil-price-3-jpg.483925/)
Some historical world market oil events reflected in the chart include:
- 3 May 1970: The delivery of Saudi Arabian's Trans-Arabian Pipeline was disrupted in Syria, which drove oil tanker rates to all-time highs in June-December.
- 1981: Saudis flooded the market with cheap oil in 1981, causing OPEC members to make unprecedented price cuts. In October, all OPEC members compromised on a benchmark of $32 per barrel.
- August 1990: Iraq invaded Kuwait, thus causing oil prices to soar.
- 1998: Crude oil reached its lowest price since the 1980s as a result of the Asian economic crisis.
- 2008: The globaleconomic collapse brought the price of WTI oil to an all-time high of $125.21 per barrel.
- 2020: The globalpandemic reduced oil demand. This and other factors brought the price of oil to negative territory.
How Was Oil Doing in 2020-2021?
Crude oil had a terrible year in 2020, and we don't say that lightly. The US's assassination of Iran's most powerful military commander, Qasem Soleimani, on 3 January 2020 led to heightened global tensions. Add COVID-19 to the mix, as well as the Saudi-Russia oil price war, and it's not surprising that oil's price shot down.
What nobody was expecting, however, was for the price to reach -$37.63. This occurred on 20 April 2020, plunging crude oil's price to negative prices for the first time in history.
(https://carigold.com/forum/attachments/oil-price-4-jpg.483926/)
As the commodity plummeted amidst immense oversupply and a drop in demand, investors fled. Since then, however, crude oil has managed to recover its losses and reach price levels of late 2019. On 11 February 2022, a barrel of WTI or Brent Crude was trading at over $93.96.
(https://carigold.com/forum/attachments/oil-price-5-jpg.483927/)
Crude Oil Price Forecast for 2022-2024
WalletInvestor has published Brent crude oil predictions for 2022-2024. After 2024, however, month-to-month predictions are too speculative to provide, so we'll give more general insights for later years.
(https://carigold.com/forum/attachments/%D1%80%D0%BE%D0%BB%D0%B4%D0%BE%D1%80%D0%BF-png.483928/)
Summary: Brent crude oil is anticipated to enter the second half of 2022 between $97.22 and $98.79. It may end 2022 between $90.18 and $91.65. Source: Wallet Investor
(https://carigold.com/forum/attachments/%D0%B2%D1%84%D1%8B%D0%B2%D1%87%D1%81%D0%BC-png.483929/)
Summary: Brent crude oil is anticipated to enter 2023 between $91.65 and $92.84. It may end 2023 between $92.46 and $93.82. Source: Wallet Investor
(https://carigold.com/forum/attachments/%D1%8B%D0%B0%D0%BF%D1%80%D0%BE%D0%BB%D0%B4%D0%B1%D1%8C%D1%82%D0%B8-png.483930/)
Summary: Brent crude oil is anticipated to enter 2024 between $93.85 and $95.13. It may end 2024 between $94.76 and $96.13. Source: Wallet Investor
Looking to the Future: Oil Price Forecasts for 2025-2050
Developing an oil price forecast is so much more complicated than forecasting currency pairs or crypto because it depends so heavily upon environmental changes in addition to the global economy. Oil is a limited resource, so we'll eventually hit a plateau in production, and, afterwards, this commodity will become scarcer and scarcer. This implies that the price will skyrocket.
However, we must not ignore the push for renewable resources. If solar energy becomes the new normal, global oil markets will instead plummet. This is why it's futile to provide a price prediction for crude oil set decades in the future.
Wars, climate change and government policies will all influence oil's price, for better or worse.
Technical Analysis of Oil Price
When determining whether to buy or sell oil, it's crucial to create a technical analysis. We'll show you the top technical indicators to include in crude oil analysis, presented alongside an example.
First, you need to determine whether you want to trade Brent, WTI or both. They trade differently, so they each have their own technical analysis.
Next, choose the timeline that you want to look at. While it's possible to set up technical analysis for timelines as short as 30 minutes, it can also be useful to look at the bigger picture, such as in weekly increments.
You'll also want to decide which technical indicators to use. Some useful ones include:
- Simple Moving Average (adds recent prices and divides it by the number of days in the time period)
- Bollinger Bands (shows two price channels (or bands) above and below a centerline)
- Relative Strength Index (measures the change and speed of recent price movements)
Based on the weekly trend, the moving average and technical indicators indicate a strong buy.
(https://carigold.com/forum/attachments/6-png.483933/)
Long-Term Oil Price Predictions by Experts
We've gathered several long-term price predictions from experts in the field.
EIA
The US Energy Information Administration (EIA) is one of the most reputable sources of oil price predictions. According to their short-term energy outlook, crude oil prices will hold steady.
As for their long-term opinion, the EIA predicts that the price of crude oil may follow three paths: the reference path, the high price path and the low price path. In a best-case scenario, crude oil's price could soar to $175+ by 2050. In a worst-case scenario, it could stay under $50 for the next several decades.
(https://carigold.com/forum/attachments/oil-price-8-jpg.483934/)
Kimberly Amadeo - The Balance
Amadeo is the President of World Money Watch; she has over 20 years of experience producing economic analysis. Amadeo predicts that Brent's price will rise to $89 per barrel by 2030 and then $132 per barrel in 2040. Her reasoning? By then, all the cheap oil sources will have been used up, making oil extraction more expensive.
McKinsey
In 2019, McKinsey released their Global Oil Supply and Demand Outlook, in which it predicted three paths for oil's future prices. While their recession path was not as drastically negative as what really happened in 2020, oil prices now match up with McKinsey's Base Case. McKinsey foresaw the stagnation, oversupply and OPEC issues that have plagued oil's prices in 2020 and 2021. So, what do they see for crude oil's price in the long-term?
They have several different long-term predictions, in fact, depending on which short-term scenarios are not remedied. In the best-case scenario, in 2035, there will be strong demand growth, and barrels will be worth over $100. If stagnation and oversupply remain, prices will be around $80-90 per barrel. If OPEC remains in control of the market balance, the price per barrel should be between $65 and $75. If there is long-term oversupply, the price per barrel would instead be $50-$60.
What to Do With Crude Oil: Trade or Invest?
Just as with any other market, there is no guarantee of profit when you invest in oil. Because of its often-fluctuating prices, crude oil is a very risky asset. Therefore, before making an investment decision, be sure to check out the latest expert opinions, market trends, and technical analysis. To build any trading strategy, it's crucial to inform yourself on economic goings-on as deeply as possible.
But what if you aren't ready to make a long-term investment commitment? With CFDs, you can make trades on the crude oil market in a shorter timeframe without waiting for years. With the Libertex Trading Platform, you can get started trading WTI and Brent Crude Oil CFDs.
-
Libertex gets “Best CFD Broker, Europe” at the Global Brands Magazine Awards 2022
In recent days, UK-based Global Brands Magazine announced the winners of its world-renowned annual Award ceremony, which aims to highlight excellence in performance and reward Companies across a variety of different sectors. In this year’s honours’ list, the prestigious publication named Libertex “Best CFD Broker – Europe, 2022” to the immense pride of everybody connected with the brokerage. In this instance, Libertex was assessed on digital innovation and business development, defeating a plethora of famous competitors for the crown of this year’s Best CFD Broker in Europe.
Another year, another accolade
Libertex is no stranger to industry recognition, having just last year been named Best Trading Platform 2021 by Forex Report, Best FX Broker 2021 by European CEO and Ultimate Fintech’s Most Trusted Broker of Europe 2021.
Commenting on winning this latest award from GBM, CMO of Libertex Marios Chailis had this to say: "Largely in part due to its user-friendly app that is used by millions of satisfied clients, Libertex has amassed several 'Best of' awards over the years and this new award is further testament that we remain committed to providing our customers the best possible trading experience along with exceptional customer care."
Cutting commission for crypto CFD clients
Beyond maintaining the convenience and usability of its flagship app, Libertex is also tirelessly committed to providing its clients with the best possible trading terms and conditions, while ensuring an eclectic and exciting instrument offering in line with global market trends. It was with this key goal in mind that Libertex made all crypto CFD trades commission-free for its traders. Now, all they pay is the spread (mid-point between “Bid” and “Ask” price). No withdrawal fees, no transaction commission, and no hidden costs. With this new attractive scheme, Libertex is making strong headway in cementing its Best CFD broker title for years to come.
Save smart with Libertex Invest
But as much as Libertex is proud of its CFD brokerage pedigree, it recognises that not everyone is looking to be a trader. A rising proportion of the population is keen on long-term investment in equities as an alternative to the minimal interest offered by today’s savings accounts. It was with these new market participants in mind that Libertex launched its new Libertex Invest product – a revolutionary account type that offers users commission-free investing in a range of Stocks. Once again, there are no hidden fees and Libertex Invest clients can even receive any dividends to which their stock holdings entitle them!
For more information or to register an account of your own, please visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% 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. Please click here to read our full Risk Warning.
The value of an investment in stocks and shares can fall as well as rise, so you may get back less than you invested. Past performance is no guarantee of future results.
Indication Investments Ltd is deemed authorised and regulated by the Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority's website.
LIBERTEX is a trading platform used by Indication Investments Ltd., a Cyprus Investment Firm regulated and supervised by the Cyprus Securities and Exchange Commission (CySEC) with CIF Licence number 164/12.
Jurisdictional limitations: Libertex Invest is only available in EEA countries.
-
8 Most Popular Gaming Stocks for 2022
From The Legend of Zelda and Mario to Call of Duty and Dark Souls, video games have brought joy to players for decades. And with every year that passes, the market keeps growing at an astounding rate!
There are approximately 3.1 billion gamers across the world, meaning that around 40% of the globe's population regularly play video games on their consoles, desktops or mobile devices. The market stood at $203.12 billion in 2020, and it's predicted to reach $545.98 billion by 2028, experiencing a CAGR of 13.20%.
So, gaming is only going to get even more widespread. Now, if you're interested in investing, you're likely wondering if video game stocks will be a good addition to your portfolio. The market data above looks promising, but let's examine some top video game stocks and see what investment analysts have to say. In case you're new to the finance world, we'll also show you a few different ways to invest in game company stocks.
Investing in Video Game Stocks
Even if you've never invested in stock before, there's nothing to be afraid of. Investing isn't just for people who work on Wall Street. Nowadays, there are many platforms to choose from. Some offer demo accounts and educational materials. So, you can take your time, practice and learn about various stocks before buying a single share.
Once you've carefully analysed a video game company and feel confident in its stock, you can invest in one of the following ways:
Spread betting
Essentially, you're speculating on whether the stock's price will rise or fall. In some countries, it's a commission-free and tax-free activity. Investors often go with this method, as it allows them to speculate in bear and bull markets. The profit of a spread bet is equal to:
Your per-point stake x (Closing Market Price - Opening Buy/Sell Price)
For instance, in the scenario below, a trader set £10 per point at a sell price of £11,560. They closed the trade when the price hit £11,590. There were 30 points of movement, so the trader's profit was £10 x 30 = £300.
(https://carigold.com/forum/attachments/gaming-stocks-1-jpg.486379/)
Gaming share basket
This is a type of order that contains shares from multiple video game companies. Typically, market analysts will pick out the shares within a basket. This can give investors exposure to several assets simultaneously.
CFD trading
Like spread betting, CFDs allow you to invest without actually owning an underlying asset. However, you aren't placing a stake per point of price movement with this method. Rather, a FTSE contract is equivalent to £10. So, you buy a certain number of contracts. For each point of upward movement, you'll make £10 x the number of contracts you purchased.
(https://carigold.com/forum/attachments/gaming-stocks-2-jpg.486380/)
But CFDs don't just involve upward movement! If you're expecting a price to decrease, then you wouldn't buy the contracts; instead, you would sell an opening position.
Most Popular Video Game Stocks (as of 25.03.2022)
Capcom (OTC: CCOEY)
- Market Value: JPY814.03B ($6.68B)
- Price of Share: $12.44
- Semi-Annual Dividend Yield: 1.27%
- Semi-Annual Dividend Amount: $0.16
- Year-to-Date Price Change: +6.42%
- Analysts' Opinion: 6 Buy, 2 Outperform, 5 Hold, 0 Underperform, 0 Sell (source: MarketWatch )
- Analysts' Consensus: Buy
Capcom is a Japanese gaming firm that was founded in 1979. It's globally recognised for series like Monster Hunter, Street Fighter and Resident Evil. The company is currently doing really well in the video game market, especially because of this year's release of Monster Hunter Rise: Sunbreak. What's more, it's launching an upcoming DLC for Resident Evil Village.
Out of 13 investment analysts, 6 recommend buying CCOEY. Because of the 2 analysts giving an Outperform rating, the consensus tips over to Buy. Industry analysts predict that in 2023, CCOEY will report an earnings-per-share figure of 1.60 (high estimate), 1.30 (average estimate) or 1.04 (low estimate).
(https://carigold.com/forum/attachments/gaming-stocks-3-jpg.486381/)
Take-Two Interactive (NASDAQ: TTWO)
- Market Value: $17.37B
- Price of Share: $150.50
- Year-to-Date Price Change: -15.74%
- Dividend: None
- Analysts' Opinion: 15 Buy, 3 Outperform, 6 Hold, 0 Underperform, 0 Sell (source: CNN Business)
- Analysts' Consensus: Buy
Take-Two Interactive is an American company founded in 1993. It's known for some super popular game franchises — most notably, Grand Theft Auto. So far this year, the company has experienced a 15% price drop, making it a good time to buy low. This price drop followed the company's announcement that it would acquire Zynga; a price dip is typical during acquisitions. The deal, though, may have a positive long-term effect, as it'll give Take-Two Interactive a strong foothold in the mobile gaming industry.
Out of 24 investment analysts, 15 recommend buying TTWO, bringing the consensus to Buy. There are currently 21 analysts offering 12-month price forecasts for TTWO. The high estimate is $232 in 12 months, the median is $210 and the low estimate is $102.
(https://carigold.com/forum/attachments/gaming-stocks-4-jpg.486383/)
Microsoft (NASDAQ: MSFT)
- Market Value: $2.28T
- Price of Share: $304.10
- Annual Dividend Yield: 0.82%
- Quarterly Dividend Amount: $0.62
- Year-to-Date Price Change: -9.16%
- Analysts' Opinion: 34 Buy, 6 Outperform, 3 Hold, 0 Underperform, 0 Sell (source: CNN Business)
- Analysts' Consensus: Buy
While Microsoft's success is attributed to much more than its gaming sector, the company makes plenty of profit from the Xbox console and its games. One of Microsoft's most successful games is Minecraft, which the company actually bought back in 2011. Since then, Minecraft has gone on to be the highest-selling game of all time, at 238 million sales.
When investing in Microsoft, don't just consider its video game projects and acquisitions. You have to look at the company as a whole. The company has its hands in many pots, including operating systems, mobile devices, cloud servers and productivity solutions.
The stock price has dropped by about 9% this year, mainly due to the overall tech bear market. However, if you look at the company's historical price, you can see that it has a strong positive trend.
(https://carigold.com/forum/attachments/gaming-stocks-5-jpg.486385/)
Out of 43 investment analysts, 34 recommend buying MSFT, bringing the consensus to Buy. There are currently 37 analysts offering 12-month price forecasts for MSFT. The high estimate is $425 in 12 months, the median is $370 and the low estimate is $306.55.
(https://carigold.com/forum/attachments/gaming-stocks-6-jpg.486386/)
Electronic Arts Inc. (NASDAQ: EA)
- Market Value: $35.31B
- Price of Share: $125.57
- Annual Dividend Yield: 0.54%
- Quarterly Dividend Amount: $0.17
- Year-to-Date Price Change: -6.95%
- Analysts' Opinion: 19 Buy, 5 Outperform, 7 Hold, 0 Underperform, 0 Sell (source: CNN Business)
- Analysts' Consensus: Buy
Electronic Arts, better known as EA, has been around since 1982 and has published smash gaming hits like The Sims and FIFA. While EA has demonstrated excellent growth in stock price over the last couple of decades, it floundered in late 2021 and late 2022 — this was a combination of a disappointing game release (Battlefield 2042) and the overall market's risk-off tone. But, considering EA's excellent EPS growth, high CAGR and low capital requirements, analysts believe the company will bounce back.
Out of 31 investment analysts, 19 recommend buying EA, bringing the consensus to Buy. There are currently 28 analysts offering 12-month price forecasts for EA. The high estimate is $188 in 12 months, the median is $167.80 and the low estimate is $127.
(https://carigold.com/forum/attachments/gaming-stocks-7-jpg.486387/)
Nintendo (OTC: NTDOY)
- Market Value: JPY 8.55T ($70.17B)
- Price of Share: $66.22
- Year-to-Date Price Change: +13.25%
- Dividend: None
- Analysts' Opinion: 13 Buy, 0 Outperform, 3 Hold, 0 Underperform, 2 Sell (source: CNN Business )
- Analysts' Consensus: Buy
Interestingly enough, Nintendo was founded back in 1889 as a playing card company — but, of course, it eventually transitioned to the world-renowned video gamingcompany responsible for hits like Animal Crossing and Mario.
Nintendo's share price has grown by 13% so far this year — but it might be worth buying now instead of waiting for a low. That's because Nintendo is notorious for releasing new consoles every couple of years, and it's approaching that point of the cycle. Every time a new Nintendo console is released (or even just announced), revenue skyrockets. The new consoles then generate demand for games, and revenue drives even higher.
Out of 18 investment analysts, 13 recommend buying NTDOY, bringing the consensus to Buy. There are currently 16 analysts offering 12-month price forecasts for NTDOY. The high estimate is $102.69 in 12 months, the median is $74.68 and the low estimate is $32.40.
Bilibili (NASDAQ: BILI)
- Market Value: $11.63B
- Price of Share: $30.31
- Year-to-Date Price Change: -34.72%
- Dividend: None
- Analysts' Opinion: 27 Buy, 4 Outperform, 6 Hold, 0 Underperform, 2 Sell (source: CNN Business)
- Analysts' Consensus: Buy
Bilibili is a Shanghai-based video-sharing website; it focuses on several aspects, including gaming, anime and comics. The company is showing incredible growth, with China's Gen-Z population being the main user base. What's more, China is a fairly low-inflation environment, which could both draw global equity investors to Bilibili and allow the company to sustain consumer demand.
Out of 39 investment analysts, 27 recommend buying BILI, bringing the consensus to Buy. There are currently 37 analysts offering 12-month price forecasts for BILI. The high estimate is $121.38 in 12 months, the median is $46.50 and the low estimate is $14.88.
(https://carigold.com/forum/attachments/gaming-stocks-8-jpg.486388/)
Tencent Holdings (OTC: TCHEY)
- Market Value: HKD 3.74T ($4.78B)
- Price of Share: $46.21
- Year-to-Date Price Change: -20.65%
- Dividend: None
- Analysts' Opinion: Buy, Outperform, Hold, Underperform, Sell (source: CNN Business )
- Analysts' Consensus: Buy
Tencent Holdings is a Chinese technology and entertainment company that was founded in 1998. Like Microsoft, the company doesn't just deal in video games; it has a part in music, comics, video streaming, cinema, social media and even the medical industry. So, this is another company where you have to examine all of its projects and acquisitions. Right now, the stock is down after a recent announcement of strict Chinese gaming regulations. But analysts expect the price to rebound, especially considering Tencent's dominant market position, diversified revenue stream, and strong balance sheet.
Out of 50 investment analysts, 35 recommend buying TCEHY, bringing the consensus to Buy. There are currently 46 analysts offering 12-month price forecasts for TCEHY. The high estimate is $67.74 in 12 months, the median is $87.37 and the low estimate is $33.87.
Activision Blizzard (NASDAQ: ATVI)
- Market Value: $62.03B
- Price of Share: $79.62
- Year-to-Date Price Change: +18.10%
- Annual Dividend Yield: 0.59%
- Quarterly Dividend Amount: $0.12
- Analysts' Opinion: 10 Buy, 2 Outperform, 16 Hold, 0 Underperform, 0 Sell (source: CNN Business)
- Analysts' Consensus: Hold
Activision Blizzard is an American video game company that was founded in 2008. The company has published some incredibly successful games — including Overwatch, Call of Duty (CoD) and World of Warcraft. Now could be a good time to get ATVI shares; their annual CoD release is usually in early November. That time of year almost always leads to a surge in share price for the company.
Out of 28 investment analysts, 16 recommend holding ATVI, bringing the consensus to Hold. There are currently 24 analysts offering 12-month price forecasts for ATVI. The high estimate is $100 in 12 months, the median is $95 and the low estimate is $79.
(https://carigold.com/forum/attachments/gaming-stocks-9-jpg.486389/)
Best Value Video Game Stocks
Out of all the video game stocks mentioned above, these are the ones offering the best value. We've selected ones with lower 12-month trailing P/Es (price-to-earnings ratio). Generally, ratios of 15 and below are considered cheap, while those over 18 are considered pricey. Actually, none of the most promising gaming industry stocks can be considered cheap per se, but these ones offer the most bang for your buck.
(https://carigold.com/forum/attachments/10-png.486390/)
Fastest-Growing Video Game Stocks
Out of the top gaming sector stocks, these are the ones experiencing the best YoY revenue growth. This percentage indicates how much a company's revenue has increased over the course of one year. The higher the percentage, the more promising the company's stock will be. Generally, revenue growth of 10%-15% is considered good, so the companies in the table below are going above and beyond expectations.
(https://carigold.com/forum/attachments/11-png.486391/)
Video Game Stocks With the Most Momentum
These video game stocks are exhibiting the most momentum, which is measured by their 12-month trailing total return on equity. Return on equity (RoE) is calculated by dividing a company's net income by the average shareholder's equity.
Net income = total income, net expenses, and taxes that the business generates in a time span (for a trailing 12-month metric, it would be over the last full fiscal year).
Shareholder equity = The total amount of money that would go to shareholders if the company liquidates (after all debts are paid).
A higher RoE means that the company efficiently uses equity to generate income, and anything over 14% is considered acceptable. So, once again, these companies are doing well above average.
(https://carigold.com/forum/attachments/12-png.486392/)
Conclusion
The video game industry is only going to keep growing, especially as consoles get faster and offer higher resolution. Do you want to get in on it and add some gaming company stocks to your portfolio? Investment analysts expect the stocks in this article to perform well over the next 12 months. But before investing or trading, make sure to conduct your own research!
-
Best Short-Term Investments for 2022
The average interest rate for savings accounts is only 0.19%, which is fairly low. If you crunch some numbers with Bankrate's simple savings calculator, you'll see the problem for yourself. Let's say you put €10,000 into a savings account and make a monthly deposit of €300 for the next 10 years. With a 0.06% APY, you'll only earn €532.61 in interest over the entire decade.
If you're trying to prepare for the future, it may be worth looking into other investment methods. There are many options available, but today we'll go over short-term investments.
Please note: we don't offer financial advice. Our guides are for educational purposes. We hope this article will serve as a launching point for you to do more research before, ultimately, choosing the path that's best for your individual situation.
What Are Short-Term Investments?
Short-term investments — also known as temporary investments or marketable securities — are investments that are highly liquid. This means that they can easily be converted into cash when it's needed. Some short-term investments, like a cash management account, are often used by traders who need money in 2 years or less. Others, like CDs, are better for a 3-5 year timeframe.
It may seem that 3-5 years is a long time, but it's relatively short in the world of investing. Long-term investments are typically held by individuals for 7-10 years (although there is no cut-and-dry period of time).
Check the table below to see the short-term investments covered in this article, sorted by their respective cash-out timeframes.
(https://carigold.com/forum/attachments/1-png.487740/)
Now, we'll explain each type of investment; they're sorted based on the timeframe, so head to the section that best meets your savings goal.
Short-Term Investments: 2 Years or Less
Cash Management Accounts
Cash management accounts combine the features of checking, savings and investment accounts. They can be accessed from a single, convenient platform. These accounts are offered by non-bank financial organisations like mobile trading apps, robo-advisors and online investment companies.
With a cash management account, you can carry out normal banking tasks like paying bills and receiving direct deposits, but you can also invest through the account. Depending on the institution, you may receive a debit card, chequebook or both.
Unlike traditional banks, cash management accounts usually don't charge fees for their banking services. Instead, they make money via investment fees and through add-ons like financial coaching.
Cash management accounts at a glance:
- Potential interest rate: 0.25%-0.5%
- Risk: Low
- Liquidity level: High
Pros: Many accounts don't have fees and come with FSCS insurance on up to €1 million.
Cons: Investment returns may be lower than those of high-yield savings accounts.
High-Yield Savings Accounts
We mentioned earlier that the average savings account only offers a 0.06% APY. However, you can opt for a high-yield savings account. These usually pay 20-25 times more in interest.
So, why isn't everybody putting their money into high-yield savings accounts instead of regular ones? Well, the banks that offer these accounts usually have fewer features. Many don't provide checking accounts or ATM cards, and they may require all inflows and outflows to occur via electronic bank transfer. Furthermore, they may require a certain minimum balance as well as a monthly deposit minimum. If you want to open a high-yield savings account, make sure to compare multiple banks and find one with reasonable requirements.
High-yieldsavings accounts at a glance:
- Potential interest rate: About 0.5%
- Risk: Low
- Liquidity level: High
Pros: Up to €250,000 of your savings are protected by FSCS insurance. Your money can easily be managed on the go via mobile bank apps.
Cons: While savings accounts are highly liquid, you can only withdraw or transfer money a maximum of 6 times per month. Otherwise, your account could be closed.
Treasury Bills
There are three kinds of treasuries, but for very short-term investments, we're focusing on T-bills. These are very safe, as they're backed by the US federal government, which has an AAA credit rating.
You can purchase T-bills in increments of €100, and they are offered via TreasuryDirect or through a bank or broker. Most T-bills have maturity periods of 4, 13, 26 or 52 weeks — although there are certain types that reach maturity in just a few days.
Treasury bills at a glance:
- Potential interest rate: 0.05% - 0.4%, depending on the maturity period you select.
- Risk: Low
- Liquidity level: High
Pros: Treasury bills are very short-term and are considered to have very low risk.
Cons: The shorter the maturity date, the lower the interest rate will be.
Short-Term Investments: 2-3 Years
Short-Term Corporate Bond ETFs
Major corporations may issue corporate bonds, which are used to fund their investments. Usually, these bonds pay holders at regular intervals, such as twice per year or once per fiscal quarter.
You can buy a corporate bond from a single company, or you can opt for a bond exchange-traded fund (ETF). The latter compiles corporate bonds from multiple companies, typically including organisations of different sizes and industries. The main advantage here is that you get to diversify your portfolio. If one company tanks, you won't lose as much in a bond fund as if you had put all of your money into that company's bonds. What's more, bond funds pay more often: typically, you'll get interest once per month.
Short-term corporate bond ETFs at a glance:
- Potential interest rate: 2% or more
- Risk: Medium
- Liquidity level: High
Pros: Diversify your portfolio and get paid interest more frequently.
Cons: It's not insured by the government, so you could lose money.
Short-Term Government Bond ETFs
Government bonds work similarly to corporate bonds, but the US government and its agencies issue them. You can purchase individual government bonds or instead go with a government bond ETF: these will contain T-bills, T-notes, T-bonds and mortgage-backed securities.
Short-term US government bond ETFs at a glance:
- Potential interest rate: 0.05%-2%
- Risk: Low
- Liquidity level: High
Pros: Government bonds are backed by the US government and are considered very safe.
Cons: There aren't as many ETFs to choose from. There are 43 government bond ETFs compared to 86 corporate bond ETFs.
Money Market Mutual Funds
A money market mutual fund invests in bank debt securities, treasuries, municipal and corporate debt and other short-term securities. Investors can purchase shares of the fund either directly from the mutual fund company or via a broker.
Because this is a mutual fund, you'll have to pay an expense ratio to cover administrative and operating expenses. This fee is typically calculated as a percentage of the money you invest in the fund. For instance, if you invest €1,000 into a money market mutual fund in one year, and there was an annual expense ratio of 0.75%, you would need to pay €7.50. However, you won't get a bill in the mail for the expense ratio; rather, when you buy a fund, the money will be deducted from your returns.
Money market mutual funds at a glance:
- Potential interest rate: 1%-2%
- Risk: Medium
- Liquidity level: High
Pros: Some funds hold municipal securities that you won't have to pay state or federal taxes on.
Cons: Investors will have to pay an expense ratio, which reduces the rate of return. They are also not FSCS-backed.
Short-Term Investments: 3-5 Years
Bank Certificates of Deposit
A bank certificate of deposit (CD) is a product that credit unions and banks offer. If you agree to make a deposit and leave it untouched for a certain amount of time, you'll earn a premium interest rate on the money. Banks offer a wide range of CD rates, so shop around and find one with the best terms.
Bank certificates of deposit at a glance:
- Potential interest rate: 0.8%
- Risk: Low
- Liquidity level: Medium
Pros: Because CDs offer a guaranteed interest rate, this is an extremely low-risk short-term investment method.
Cons: If you withdraw money before the CD ends, you'll be penalised. Typically, the penalty ranges from 3-6 months of interest.
Is the Stock Market a Good Place for Short-Term Investing?
You may have noticed that we didn't include stock trading in our list of the best short-term investing methods. That's because trying to time the stock market can have devastating results. Some people dedicate decades to learning about short-term stocks and day trading — some are successful, while others lose it all.
During times of low interest rates, you may be tempted to try your hand at stocks to boost short-term returns. But unless you're a professional trader with years of education and experience, long-term investments in the stock market are more likely to be successful. Here's why.
- Withstand the highs and lows: Stocks are fairly volatile; it's not unusual for them to drop 10%+ in value over a short period of time. But more often than not, the prices recover. By investing in stock for the long-term, you'll get to ride out the highs and lows across many years and generate better returns. When you look at data from the 1920s until now, individuals have rarely lost money when investing in stocks for a 20-year time period. It can pay off to play it safe.
- Higher return rate: According to a study by Dalbar, the S&P 500 had a 6% APY for the time period of 31 December 2001-2021. But during that timeframe, the average investor experienced only a 2.5% APY. If they had held their stocks for the full 20 years, they would have experienced a 3.5% higher APY.
- Avoid emotional decisions: Emotional buying and selling are detrimental for traders. If you read up on trader psychology, you'll see how fear and greed sway people to buy high and sell low, thereby crippling their returns.
- Lower taxes: If you sell a security within one calendar year of purchasing it, the gains will be considered 'short-term capital gains', and they'll be taxed. The max tax rate for these gains is 37%. But if you hold the securities for over 1 year, the maximum you could be taxed is 20%. If you're in a lower tax bracket, you may even qualify for a 0% tax rate.
- More cost-effective: Besides your tax liability, there are other ways that short-term stock trades can cost you. The longer you hold stocks, the fewer fees you'll have to pay. But if you're constantly buying and selling stocks, you'll be charged transaction fees and commission.
- Take advantage of compounding: Some companies offer dividend stocks, in which holders are paid regular dividends on a regular basis — usually, once per quarter. You might be tempted to cash them out each quarter to boost your short-term returns, but it is usually more fiscally wise to hold off. Why? Because of compound interest! When you add your dividends to your stock portfolio, they'll start generating compound interest. This means that any interest you earn is added to your portfolio, and then your interest starts earning its own interest. It's one big snowball effect.
(https://carigold.com/forum/attachments/short-term-investments-1-jpg.487749/)
Investing Money Based on Timeframe
When deciding what investments to make, you'll need to decide upon a time horizon.
A short-term time horizon refers to investments that will last for 5 years or less. This is a common choice among people who need a certain sum of cash in the foreseeable future or who are getting close to retirement.
The medium-term time horizon refers to investments that are held for 3 to 10 years. This is popular among people who are saving up to buy their first home.
Lastly, the long-term time horizon refers to investments that are held for 10 or more years. The most common investments within this category are retirement savings.
Here are a few questions to help you determine your time horizon:
- What age-based financial events will you experience, and how far away are they? When are you planning to buy a home, fund a wedding, pay tuition for a child, etc.? If there are several years between now and your next big funding, then a medium-term or even long-term horizon could work. But if you're saving for a wedding that's in 2 years, it might be best to choose short-term investments.
(https://carigold.com/forum/attachments/short-term-investments-2-jpg.487750/)
- What does your income look like now? How about 5 years from now? Maybe 10 years down the road? What is going to change? You can think of your financial goals as a final destination, and your investments are part of the engine that drives you there. But your income is the fuel that powers that engine. If you're planning on switching career paths or climbing the corporate ladder, your income situation will change. Not only does this affect the size of your financial targets, but it can also speed up or slow down your timeframe.
- How much risk are you willing to accept? Short-term investments can earn you a lot more than long-term ones, but they can also lose you a lot more.
Perhaps you've decided that longer-term investments are a better fit for your lifestyle and goals. However, this guide is all about short-term investments, so, below, we've compiled some strategies for trading on timeframes of 5 years or less.
What to Know When Investing Money for Less Than 5 Years
When you make short-term investments, you'll need to do things pretty differently than with decades-long investments. Here are a few tips:
Focus on minimising risk
With short-term investments, there's not as much time for prices to recover after a crash. Let's say you put a huge chunk of money in stocks, and you're planning on buying a house in 2 years. However, there's a huge market crash, and you don't recover all of your money when the 2 years are up. You'd be in a really bad position. That's why it's important to focus on low-risk methods that are backed by the government or the FSCS. The shorter the time frame is, the less risk you should take on. Bank CDs are one of the best choices for safe short-term investments in 5 years or less because the interest rate is guaranteed, as long as you don't touch the money.
Recognise that not all short-term investments have the same risk and return
While bank products are backed by the FSCS, market-based products could end up declining over a short time frame. So, a high-yield savings account has much less risk than, say, short-term corporate bond ETFs.
(https://carigold.com/forum/attachments/short-term-investments-3-jpg.487751/)
Know what to look for in a short-term investment
When selecting a short-term investment, consider these factors:
- Risk: As mentioned above, when you need the money back soon, you can't take on much risk.
- Liquidity: Some short-term investments like CDs charge penalties if you withdraw money early. Your high-yield savings account might be shut down if you make more than six withdrawals in one month. So, ask yourself: how quickly will you need to access money? Is it important that you are able to withdraw it early if needed?
- Stability: If you're on the longer end of the short-term timeframe (3-5 years), you can afford a little bit more volatility in your investment choices. But if you need to get your money back in the next 6-12 months, stability needs to be a big priority.
- Costs: Some high-yield savings accounts charge monthly maintenance fees. With a money market mutual fund, you'll have to pay an expense ratio. Are these costs worth it to you? In the long run, they might be, but what about when compared to smaller short-term returns?
Synchronise assets that could potentially meet your goals
If you have narrowed down your specific time horizon to six months, for instance, look for products that offer returns in that period of time. Government bonds and AAA corporate debt bonds are both popular choices for the 6-month timeframe. If your timeframe is up to a year, you could look for products that have varying durations of 6-12 months. In this scenario, laddered CDs are a common choice.
Model short-term portfolios + risk levels
(https://carigold.com/forum/attachments/5-png.487752/)
Conclusion
If you want to invest money in the short term, there isn't a lot of room for error. To ensure that your portfolio performs well before you hit the 1-, 3- or 5-year mark (or whichever time frame you decide on), it's best to go with less risky FSCS- or government-backed assets. Liquidity, low risk and stability are the most important qualities to evaluate when it comes to short-term investments.
Depending on your potential goals and exact timeframe, you can tweak the ratio of those factors. But, overall, high-yield savings accounts, bond funds, Treasuries and cash management accounts are popular options for short-term traders.
For more educational information on financial topics, check out the other posts on our blog! At Libertex, we regularly publish guides for investors learn about their options. From cryptocurrency predictions to CFD explanations, our online trading platform has an extensive resource library. Please keep in mind that crypto CFDs are not available for retail clients in the UK.
-
Technical Analysis: Average True Range
Whether you're a short-term trader or a set-and-forget investor, technical analysis is always beneficial when it comes to picking the ideal entry and exit points for a range of different asset classes. After looking at Bollinger Bands in our previous educational article, we thought we'd show you another indicator that works great in combination with the MACD and RSI we reviewed in our first article of the series. Now, we'll take a look at J. Welles Wilder's Average True Range.
What is the ATR?
The Average True Range or ATR is a volatility indicator that works by decomposing the entire range of an asset price for a given period. The true range indicator is calculated by taking the greatest of the following: current high minus current low; the absolute value of the current high minus the previous closing price; and the absolute value of the current low minus the previous closing price. The ATR is thus a kind of moving average, one which generally uses a 14-day simple moving average of the true ranges. It was initially developed for use with commodities but is applicable to a range of instruments, including equities. While it is typically configured for a 14-day timeframe, it can easily be modified for traders with shorter-term targets by following the same calculation principle as given above.
To add it to this one-month Google chart (of course, you can use it with any instrument and timeframe you like), simply enter full-screen mode on the chart timeframe of your choice, hover over the indicators tab, select volatility and then click the Average True Range as shown below:
(https://carigold.com/forum/attachments/img1-png.488817/)
What's its purpose?
Essentially, a stock (or any other instrument) experiencing high volatility will have a higher ATR, while a low-volatility stock will be characterised by a lower ATR. This being the case, the ATR is clearly a volatility indicator, though it can be incredibly useful at confirming entry and exit points when combined with other indicators. Since it was developed as a more accurate measure of the daily volatility of an asset, it is thus inherently more common among day traders and other short-term market participants. The indicator does not give any indication of price direction and is instead used primarily to measure gap-induced volatility and limit moves up or down.
How is it applied practically?
The most common use of the ATR is as an exit method, one that is particularly versatile as it is not dependent upon how the entry decision was made. There is a popular method known as the "chandelier exit", which was developed by Chuck LeBeau. This exit involves placing a trailing stop-loss order under the highest high the instrument has reached since you entered the trade. The distance between the highest high and the stop level is defined as some multiple times the ATR. For example, we can subtract three times the value of the ATR from the highest high since we entered the trade and place a stop loss here. Naturally, this isn't a fool-proof method, but in day-trading, not much is.
If we want to use it as a breakout signal, then we need to combine it with other indicators like the RSI. As the ATR doesn't tell us which direction the breakout will occur, we need a trend confirmation (i.e., whether the given stock is overbought or oversold) in order to pick a direction for the trade. Let's look at that same Google chart now with both the ATR and RSI overlaid:
(https://carigold.com/forum/attachments/img2-png.488818/)
There are a few signals, but the single clear one is definitely high-quality. Notice the low point on the ATR below the main chart (circled in yellow)? This wouldn't be particularly useful on its own, but combine it with the RSI, and the signal becomes a strong one. Here, not only is the ATR at a low, the RSI is signalling overbought. Since the price is still at a low despite significant buyer presence, we can expect a powerful leg up in the near term. Lo and behold, just one day later, a vigorous move to the upside is initiated.
Keep on learning with Libertex
Like all the technical analysis tools examined in this segment, we're not suggesting that this strategy is complete, perfect or flawless. However, it's certainly a good string to your bow and can help select opportune moments to sell or buy. All the indicators we've covered so far can be used in combination with one another for greater accuracy, and Libertex clients may try this out for themselves using a free Libertex Demo Account (https://libertex.com/).
-
What is a Stop-Loss Order and How to Use it in Trading
Setting a stop-loss order is one of the most important and mandatory actions when trading CFDs. The conditions of placing a stop order must be spelt out in the algorithm of each professional strategy. Otherwise, this strategy cannot be considered complete.
However, some beginners who have started the trading do not fully understand what stop-loss is and why it should be exposed. In this article, we will examine all of the main points related to a stop-loss order and consider several effective strategies for placing stop orders.
Stop-Loss Definition
A stop-loss is an auxiliary order set to protect a trader from serious losses in a particular transaction.
If the price goes in the wrong direction from which a trader expected movement, and the trade becomes unprofitable, the stop-loss helps save the stock.
When the price reaches the stop-loss level, the transaction closes automatically. The trader is able to save the rest of their money and can begin developing a plan to return their losses. The trader himself assigns a stop-loss level before opening a trade. A stop-loss is always tied to a certain price (with the exception of a stop-loss on time, which will be discussed later).
(https://carigold.com/forum/attachments/stop-loss-1_0-jpg.489797/)
For example, if a trader opens a EUR/USD trade to buy at a price of 1.2500, then the stop-loss can be set at 1.2490. It means that if the price goes down and a trader starts to suffer losses, the loss will be a maximum of 10 points. After that, the transaction will be closed, and a trader can make a new decision. For example, open a transaction for sale if the trend of price reduction continues.
Why Use a Stop-Loss in Trading and How to Place It Correctly
A stop-loss must be set in order to minimise and control possible losses during trading. Even the best trading strategy periodically gives false signals, and opening trades with these signals leads to losses. A stop-loss helps to reduce these losses to a minimum, which allows a trader to quickly compensate for the lost funds and again get a plus.
A stop-loss can be set both at the time of opening the transaction and later. It is better to place a stop order immediately because sometimes the price can make a sharp jump and move 20-30 points in just a few seconds.
If such a jump occurs in the opposite direction than the trader expected, a stop-loss will reduce losses many times. If a sharp price fluctuation occurs immediately after the opening of the transaction, in which the stop-loss was not set in advance (for example, a trader decided to do it a little later), the funds will be, to some extent, defenceless.
(https://carigold.com/forum/attachments/stop-loss-2_0-jpg.489798/)
In practice, it is very easy to set stop-loss. For example, in the popular MetaTrader 4 trading platform, this can be done in at least two ways:
- When opening a new order, enter the stop-loss level in the price level at which you would like to place a stop-loss and close the trade.
- When the trade is already open, you need to hold down the left mouse button by hovering the cursor over the order line and dragging the line in the opposite direction to the open trade. For example, if you have opened a purchase transaction, you need to drag the line downwards or upwards for a sale.
How to Calculate Stop-loss
There are many ways to calculate the size of the stop-loss for each specific transaction. In most professional trading strategies, it is already written, under what conditions, and at what distance from the opening price of a transaction, a stop should be placed. There are also several universal tactics for calculating and installing a foot. We'll discuss them later in this article.
There is also one well-known rule that is recommended for all traders and for beginners in particular. The rule is this: losses in each individual transaction should not exceed 2% of the total capital. Based on this, you can calculate the stop-loss.
For example, a trader has a capital of $10,000 and opens a EUR/USD transaction with a volume of 1 lot. The calculation is as follows:
1. 1 lot EUR/USD = €100,000, one point of price movement will cost $10.
2. 2% of the capital of a trader is $200.
3. 200/10 = 20. So, a trader can afford a drawdown of a maximum of 19 points before forcibly closing trades and fixing a minus. The stop order must be placed at a distance of 20 points from the opening price of the transaction.
Types of Stop-losses
(https://carigold.com/forum/attachments/stop-loss-3_0-jpg.489799/)
There are at least three types of stop-losses, each of which works differently and allows a trader to rely on a different result.
Basic Stops
The standard stop-loss that most brokers offer on their platforms works as follows:
1. A trader places a stop order at a specific price.
2. When the real market price reaches this mark, the transaction closes.
3. Stop-loss is set once and remains unchanged (if a trader does not change it himself, manually).
The main drawback of such a stop-loss is that it is subject to "slippage”. If the price makes a sharp jump of several points and the stop-loss "jumps", the transaction will close, not on the level indicated by a trader, but only on that level where the price jumped to. It means that a trader can lose a few points more than he allowed for according to this plan.
Guaranteed Stop-loss
Guaranteed stop works on the same principle as the base, but it has one significant difference. When a guaranteed stop-loss is triggered, the transaction will always be closed precisely at a price set by a trader.
In other words, the guaranteed stop is not subject to slippage. The broker undertakes to close the transaction at a certain price and assumes all the risks associated with volatility. However, for such a guarantee, the broker may assign an additional commission.
Trailing Stop
A trailing stop is different from the base and guaranteed that it can move after the price stops.
The trailing stop is not set at any particular price point. It is tied directly to the current price - for example, it might be set at a distance of 20 points.
If the price moves in the necessary direction a trader plans for, the trailing stop “pulls” behind it, always remaining at a distance of 20 points. If the price turns in the opposite direction, the stop-loss remains in place.
Using a trailing stop, a trader can not only ensure against excessive losses but also protect part of the profits. A trailing stop can be used as a method of taking profits, instead of the standard Take Profit.
Stop-loss Strategies
If your trading system does not provide any specific conditions for placing a stop order, you can use one of the universal strategies.
Percent Stop-loss
The percentage stop is set in a certain relation to constant values, such as the amount of capital or the level of a Take Profit.
This involves placing a stop order, based on the size of the capital, we have already considered earlier. The recommended ratio of stop loss to capital is 2:100 (i.e., 2%). For example, with a capital of $10,000, For example, if your capital is $10,000, it will be correct to put a stop loss at about $200. Binding to take profit is usually 1:2 or 1:3 - that is, the planned profit must be 2 or 3 times higher than the allowable loss.
(https://carigold.com/forum/attachments/1-png.489801/)
The advantages of such tactics are obvious - the stop level is easy to calculate, and its goal is to ensure the profit in one transaction is many times greater than the loss (although, this goal is not always met). However, it is far from reasonable to set a stop-loss with such tight binding in every situation and to ignore the objective situation in the market.
If the stop-loss set in a ratio of 1: 3 to take profit is in front of a key level, the probability that the price will affect such an order is very high. In this case, the frequency of closing trades using stop-losses can negate the profit obtained due to the relatively large take profit.
Volatility Stops
Setting a stop-loss based on volatility is an effective technique since in this case a trader can take the stop beyond the main range of price fluctuations and ensure that the order that will be accidentally “touched”.
(https://carigold.com/forum/attachments/stop-loss-4_0-jpg.489802/)
To determine volatility, simple indicators like Standard Deviation (SD) or Average True Range (ATR) are most often used. The calculation of the stop-loss is as follows:
1. A simple moving average (SMA) is set on the chart to determine the average price indicator.
2. Next, an ATR or SD indicator is installed to determine volatility.
3. To determine the price for a stop order, the last ATR (SD) value multiplied by 2 must be subtracted from the last SMA value.
(https://carigold.com/forum/attachments/2-png.489804/)
Stop-loss on volatility may be the best option at the time of exposure, but its relevance decreases with each new candle on the chart. For medium and long-term trade, this method is not recommended.
Chart stop
When installing a stop-loss on the schedule, key levels (support and resistance), as well as local extremes are taken into account. They need to be determined before setting a trade open and setting a stop. This tactic to set a stop-loss is most effective when trading according to technical analysis. In this provision, the definition of levels, extremes, and other important elements occur in the general analysis of the graph.
Stop-loss should be set beyond the nearest level or local extreme. If the stop is set at the level itself or in front of it (relative to the price), the likelihood that it will be affected by random fluctuation increases.
(https://carigold.com/forum/attachments/3-png.489805/)
Stop-loss by time
Stop-loss of this type is set based not on price indications but on time parameters. For example, a trading strategy may require a trader to close a trade at the end of the day, regardless of the outcome.
This stop-loss is not very popular and is used in rare cases.
(https://carigold.com/forum/attachments/4-png.489807/)
Conclusion
A stop-loss is an important element of the trading system. It makes trading more secure and controlled. It can be difficult for a novice trader to understand all the nuances of placing a stop-loss immediately, so the best option would be to start with mastering the simplest techniques.
For trading training and working with stop-loss, the Libertex trading platform is perfect.
Unlike other trading platforms, it is very intuitive, and even a novice who has no trading experience will quickly learn how to navigate its functionality. In addition, you can open a demo account for free at Libertex (https://libertex.com/blog/what-stop-loss-and-how-use-it-trading#modal-demo) and practice on it as long as it takes for you to improve you skills the platform.
For all its convenience and intuitiveness, Libertex offer a wide range of features and a large selection of assets and tools for analysis. On this platform, a novice trader will be able to try out all the strategies for placing stop-loss and, after evaluating the results, make an optimal selection.
-
Navigating the new normal with Libertex
If the post-pandemic age has been defined by anything, it has to be the massive surge in activity across the financial markets. The numbers of ordinary people getting into trading and investing over the past two years have been absolutely unprecedented. In fact, it is now estimated that retail actors currently account for up to 25% of the total stock market, and these figures are even higher in developing markets.
After hitting new all-time highs at the tail end of 2021, cryptocurrencies are another asset class that has enjoyed record capital inflows and newfound popularity among institutional and retail investors alike. And it's easy to see why more and more men and women in the street are shunning the banks and opting for higher risk-to-reward options. Between near double-digit inflation and paltry savings account rates, the huge gains posted in the stock and crypto markets of late have been enough to tempt even the most conservative of savers. In this article, we'll look at what is driving the hype on the financial markets and how you can maximise your potential returns as a trader or investor.
The hidden tax
Sound financial planning and saving money have traditionally gone hand in hand, but the era of ultra-low interest rates had already begun to challenge that paradigm. Then, as super-inflation started to take hold, long-term cash savings became nothing more than a surefire way to economic ruin. If your savings account is paying you 2% APY on deposits, but prices are rising by 8% a year, it doesn't take a rocket scientist to work out that you're actually losing 6% of your wealth each year.
Contrast this with the amazing returns seen in the stock market over the past 12 months, and it becomes a no-brainer. Even conservative plays like Tesla (TSLA) or Alphabet Inc (GOOGL) would have netted you 65% and 38.5%, respectively. Certainly, many of the new entrants to the stock market were perhaps reluctant at first, but now they're confidently purchasing ETFs, indices and even individual stocks. Until inflation is brought under control — which could be many months (or even years) and multiple rate hikes from now — securities investments will be an absolute necessity for anyone below retirement age.
The digital revolution
Crypto has been one of the most hotly discussed asset classes of the past 24 months, making headlines in 2021 for its explosive growth, newly discovered utility and widespread adoption. The movements in this higher-risk market have been even more spectacular in their swings than stocks but come with much more uncertainty. For instance, while BTC was up over 90% at one point this year, it is currently down almost 40% from this recent all-time high.
However, with institutional investors now 'all-in' on crypto as an instrument class with staying power, it does appear as though these relatively young digital assets still have several growth cycles ahead of them. Despite their characteristic volatility, they are still touted as potential inflation hedges, and an increasing number of people are thus including portfolio allocations of Bitcoin on a par with gold, for instance. There are still many fraudsters and scam artists operating in this space, and it is wise to take the time to find a reputable broker like Libertex, with a secure and user-friendly app that allows you to store your crypto holdings alongside the rest of your stocks, currencies and commodities.
Caveat investor
With the rising popularity of trading and investing, the market has become quite saturated with companies offering financial services. Unfortunately, not all are made equal, and your choice of broker will have a significant impact on overall performance. Libertex, for example, offers commission-free crypto CFD trading, which means all you pay is the spread when buying or selling digital currencies. Most operators in this space charge transaction, exchange and commission fees on every single purchase or sale, reducing your potential returns by a significant margin.
And, if like many new crypto investors, you are predominantly a holder of equities or other more traditional assets, you might prefer having the option to store your entire portfolio in one easy-to-access location for added comfort and convenience. Luckily, Libertex has been connecting ordinary people with a range of financial markets for nearly a quarter-century and can give you access to all your holdings via its intuitive, multi-award-winning app.
Don't put all your eggs in one basket
As exciting as short-term trading may well be, some people reasonably prefer long-term investing. Well, now the company's new Libertex Invest account type enables you to make long-term stock purchases completely free of charge. That is to say, you won't be charged any transaction fees, commission or other costs. This means you can buy and hold individual stocks like Microsoft or Apple or even indices like the S&P 500 or Nasdaq under the most attractive terms. Even if you're a die-hard trader at heart, you have to admit, it's always good to have a lower-risk nest egg stashed away for a rainy day.
With this in mind, the brand-new Libertex Invest (https://libertex.com/invest) product now allows you to keep your active trading and passive investment portfolios conveniently separate, all the while providing you with fair conditions for both account types. So, if you are about to dive into one or both crypto CFD and investment worlds, trying Libertex and opening your very own dedicated account would be a rather wise choice!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% 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. Please click here to read a full Risk Warning.
The value of an investment in stocks and shares can fall as well as rise, so you may get back less than you invested. Past performance is no guarantee of future results.
Indication Investments Ltd is deemed authorised and regulated by the Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority's website.
LIBERTEX is a trading platform used by Indication Investments Ltd., a Cyprus Investment Firm regulated and supervised by the Cyprus Securities and Exchange Commission (CySEC) with CIF Licence number 164/12.
Jurisdictional limitations: Libertex Invest is only available in EEA countries.
-
How to Invest in Facebook Stock
Facebook is a popular social media platform all over the world. In addition to that, Facebook, Inc. (Nasdaq:FB) is now one of the world's biggest companies, with its shares making a smooth, steady rise after its IPO. Since then, it has become more popular in the stock market. In this guide, you'll gain knowledge on what it takes to invest in Facebook stock and whether it's a good idea.
Overview: The History of Facebook
Most people only know that Mark Zuckerberg developed Facebook, but the truth is he wasn't alone. Facebook was founded by Mark Zuckerberg, Eduardo Saverin, Chris Hughes, Andrew McCollum and Dustin Moskovitz in their dorm at Harvard University back in 2004.
The team first developed Facebook for Harvard students only. But after some time, it was expanded into more areas until the website was opened in 2006 to anyone with a valid email address who was at least 13 years old. In 2012, Facebook raised about $15 billion in an Initial Public Offering (IPO), which valued Facebook at about $100 billion. In just three years, it had reached more than a hundred million users. Today, Facebook now has almost 3 billion active users.
Facebook, Inc. develops products that allow users to connect and share using tablets, mobile devices and computers. In addition to its main social media network, Facebook, the company has also acquired Instagram and WhatsApp and developed and launched Oculus and Messenger.
Why Invest in FacebookStock?
There are many reasons why investing in Facebook stock may be a good idea, including:
- Active users
- Sales growth
- Profitability and pricing power
- Stock valuation and performance
Active Users
Facebook has over 260 million active users in the US and Canada alone. The age of users is mostly above 18. Even if US and Canadian users are the smallest per cent of the total users of the social media company, each user still generates excellent revenue. Additionally, even though US and Canadian users make up only about 10% of total users, they generate revenue that's three times more than the revenue of Europe. Overall, the monthly active users of the platform increased to 2.8 billion last year.
Sales Growth
Facebook's revenue reached $84.2 billion in 2021, and net profit increased to almost $41 billion. The majority of Facebook's revenue is from ads on its platform. In 2021, the company's advertising sales hit $25.4 billion. Of that, $732 million came from streams on the platform, which involve the company's Oculus VR hardware and other minor business lines.
Profitability and Pricing Power
Among the various big social media platforms, Facebook's gross margin and operating margin are far better off. The gross margin includes direct costs from the business, and the operating margin includes R&D and salaries. Pinterest Inc. and Snap Inc. have negative operating margins since they're focused on rapid growth. They also lack gross margins. On the other hand, Facebook is at its critical mass phase in terms of users, so its gross margin is more consistent, and that's a good thing for the investor community.
Stock Valuation and Performance
When using old-school valuation metrics, Facebook isn't overvalued. Accordingly, its price-to-earnings ratio is at 21.54, according to Nasdaq. Its predicted P/E ratio for next year's earnings is 21.71, while the forward P/E for S&P 500 Index is at 21.56, and the Nasdaq Composite Index is 24.77.
Compared to these two, Facebook's P/E is normal relative to the broader market and is below similar platforms. This is reasonable since Facebook's growth has led many investors to grant a premium valuation above less dynamic stocks in other sectors.
How Much Does Facebook Stock Cost?
Facebook stock reached a market cap of $839.285 billion in late January 2022, which puts it among the top 5 most valuable companies in the S&P 500 index, alongside Apple, Amazon, Google and Microsoft. On 28 January, the stock cost $301.71.
Fundamental Analysis of Facebook's Stock
Based on ChartMill, Facebook has an overall fundamental rating of 8 out of 10 compared to another 383 networks in industries such as data processing, computer programming and other computer-related services. The fundamental analysis of Facebook stock involves:
Profitability
Facebook scored 4.5 out of 5 in profitability for these reasons:
- It has a 23.77% Return of Assets, which is one of the best returns in the industry, where the average is -2.42%.
- Its profit margin is at 35.88%, which is also significantly better than the industry average of -4.38%.
- It has a Return on Equity of 30.22%, which is still better than the average of 13.29%.
Valuation
In terms of valuation, Facebook garnered a 1.5 out of 5. This is because:
- Facebook is valued lower than the industry average P/E ratio of 21.54.
- The forward P/E ratio of FB is at 20.65, which shows that it's expensive.
- Its price-book ratio is in line with the industry's average book ratio of 6.29.
Growth
Scoring 4 out of 5, Facebook has:
- 65.41% growth in its Earnings per Share and is growing at an average of 34.17% each year.
- 42.23% growth in its Revenue for the past year.
- The EPS growth will decrease for the next five years.
- Comparing the growth rate of the revenue, the next few years will have a lower growth compared to the past years
Health
Facebook has a great health rating (4 out of 5) because of the following reasons:
- With its current ratio at 4.23, Facebook isn't having any trouble paying its short-term obligations. It's better than the industry average of 1.98.
- It has an Altman-Z score of 16.55, implying that Facebook is not near bankruptcy.
- The Debt to Equity ratio belongs to the industry averages.
Dividend payouts
This is the only 0 out of 5 rating of Facebook since Facebook doesn't offer dividends.
What Affects The Price of Facebook?
Since the price of Facebook stock fluctuates, there are some factors or things investors or traders usually look for. These factors can affect the price and include:
Active Users
Even though there are now billions of Facebook users, Munster predicted that it would reach a saturation point. According to this prediction, there will come a time when the number of new active users will decrease and stop, and the users will spend less time on the company's platforms.
Ad Revenue
Facebook is very reliant on ad revenue. In 2017, Facebook's ad revenue reached 98%, according to Statista.com. But the cost of advertising on the platform has increased to 219%, which means that some ad users get great results, but most don't. This shows that the company lacks revenue diversification. Relying on only one source of revenue is risky.
Competition
There are many rival platforms that continue to rise in the industry, and Facebook can't buy all of them like how they bought Instagram for $1 billion. As competition increases, some active users may turn away from Facebook or use it less.
Market Risks
This factor will probably have the biggest effect on all stocks. When the stock market experiences a crash or a crisis, there isn't much any company can do. For instance, during the dot-com crisis, Nasdaq lost over 75% of its value. Furthermore, it's hard to predict when another crisis may come.
Regulatory Risks
This factor can also affect the stock's price since social media is viewed as an unregulated market. These risks include the misuse of Facebook, like what happened in 2016, when the data of about a million Facebook users fell to the hands of foreign political operators after Facebook allowed Cambridge Analytica's political data firm to acquire the data. Instances like this may result in fewer users, leading to less ad revenue.
Facebook Stock's Historical Performance
(https://carigold.com/forum/attachments/facebook-stock-1-jpg.491610/)
In 2012, Facebook experienced three significant events:
- It was the first social network to reach over a billion users.
- With its Initial Public Offering, or IPO, Facebook raised up to $16 billion.
- The price of each IPO share reached $38, putting the company's valuation at $104 billion.
In the same year, the company acquired Instagram and WhatsApp after two years. In 2019, Facebook was considered one of the most popular social networks, resulting in a relatively high stock price.
Trading during the first year wasn't good for Facebook. The stock lost at least 50% of its first valuation and needed over a year to get it back to more than $100 billion. From $250 billion in 2015, it crossed $500 billion in 2017 and continued to rise.
How Is Facebook After the Coronavirus?
Despite COVID-19, Facebook is doing relatively well. Although many industries and companies were left devastated after the coronavirus, Facebook still had a relatively good year. As mentioned, its revenue grew by 22% and reached $86 billion. Its active users per month also increased to 2.8 billion.
Because of worldwide lockdowns, people are spending more time at home — and many are filling this extra time by scrolling through social media platforms like Facebook.
Businesses recognise that more people than ever are active on Facebook and are accounting for this in their marketing strategies. Companies are placing advertisements on Facebook to reach the widest possible target audience. As such, Facebook is raking in ad revenue, so one could even say that it benefitted from the pandemic.
Facebook 2021 Results
(https://carigold.com/forum/attachments/facebook-stock-2-jpg.491611/)
Facebook stock has been consistently high-performing over the years. According to Macrotrends, on 28 January 2022, Facebook stock experienced:
- A 52-week high stock price of $384.33, which is more than 27.4% of the current share price.
- A 52-week low stock price amounting to $253.50, which is about 16% less compared to the current share price.
- An average Facebook stock price of $325.32 for the last 52 weeks.
The all-time high closing price was 382.18 on 7 September 2021.
What to Expect in the Future
Based on Wall Street analysts, the consensus target price for Facebook stock is about $460 and implies some possible upside of over 50%. If Facebook performs well, it might join Apple in the group of corporations that have crossed the $1 billion market cap mark multiple times.
TechnicalAnalysis of Facebook Stock
There are two main ways to analyse the potential of Facebook stock: through fundamental analysis and technical analysis. Fundamental analysis of Facebook stock has been discussed in this guide, and it focuses on the intrinsic value of the stock. However, with technical analysis, investors use the stock's statistics.
Technical analysis focuses on analysing trends and patterns in the current and future price fluctuations of the stock. Here are some more general indicators you might want to look at:
- Momentum and volume indicators
- Moving averages
- Oscillators
- Resistance and support levels
Pros and Cons of Facebook Stock
To determine whether Facebook stock is right for your portfolio, make sure to review the pros and cons of purchasing it.
(https://carigold.com/forum/attachments/3-png.491612/)
How to Invest and Trade FacebookStock
When you buy Facebook stock, there are two major strategies: investing in it or trading it. When you invest, you buy the stock and wait for it to reach a significant amount or a certain period of time and sell it. It's a long-term strategy. But when you trade stock, you buy it and sell it again when the market conditions are great. This is a short-term strategy.
Investing in Facebook Stock
Investing starts with buying. Remember that Facebook trades on Nasdaq and is part of the S&P 500 index. And as mentioned, investing is a long-term strategy, so it's a better approach for people who have money to spare and for people who prefer keeping stocks as assets. Here are the steps you need to follow to invest:
1. Decide how much you would like to invest.
2. Choose and join a broker.
3. Deposit your funds.
4. Place an order to buy stock.
Trading Facebook Stock
Aside from investing, you can also trade Facebook shares using a contract for difference (CFD) or spread bets. Using these two, your results will depend on the full value of your position.
Technically, the steps you need to follow are the same as when you invest in Facebook stock. You choose your broker or platform, open an account, deposit your funds, and buy your stock. The only difference is when trading, you have an additional step, which is to sell or trade what you bought after a short period of time.
Specifically, when you trade CFDs, you're watching and observing if the price will go up or go down. And based on your prediction, you can go long or go short. If you expect the price to go up, you can go long. But if you expect it to go down, you can go short. And remember that with CFDs, you're exchanging the difference between the opening and closing difference of your position.
On the other hand, when you spread bet, you're betting based on the point on its share price movement. So, if you predicted correctly, it will result in a profit, and if you're wrong, you'll experience a loss.
Conclusion
There are various ways you can make use of Facebook stock (https://libertex.com/shares/fb). If you prefer a long-term approach, you can just invest. But, trading CFDs is also a good way to participate in the market since you can potentially get profit in a shorter period of time. Please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital. The best way for anyone to decide is to practice so that they can try whichever without any risk. And to practice, opening a Libertex demo account (https://libertex.com/blog/facebook-stock#modal-demo) is always the best choice.
-
Short-Term and Long-Term Nvidia Stock Price Prediction
Nvidia Corporation is a multinational technology company founded in 1993 and based in Santa Clara, California. Its primary niche is processing units for the gaming and professional design markets, as well as chip units for the mobile computing and automotive markets. The company's revenue in 2020 was $7.10 billion, and the current number of employees is 18,100.
The NVIDIA stock history has seen a lot of ups and downs, so we'll need to take a closer look at it below. For our Nvidia stock forecast for 2022 and the more distant future, please continue reading.
All You Need to Know About Nvidia Stock
One of the roots of the name is the word invidia, which is Latin for 'envy'. Envy and vision are closely tied in mythology, with the eye or the gaze being a common symbol.
For more than 28 years, the company has been working on semiconductors, artificial intelligence, video games, consumer electronics and computer hardware. Its main products are graphics processing units, central processing units, chipsets, drivers, tablet computers, TV accessories, laptops and data processing units.
At the end of July 2021, Nvidia launched the eighth generation TensorRT™ 8. The product slashes inference time in half for language queries, allowing developers to build the world's best-performing search engines, ad recommendations and chatbots and offer them from the cloud to the edge.
During the last five years, TensorRT has been downloaded almost 2.5 million times. More than 350,000 developers across 27,500 companies in wide-ranging areas, including healthcare, automotive, finance and retail, have tried the product and were quite satisfied with it.
What Influenced Nvidia Stock Price in the Past
After losing about half of its value in 2018 due to struggles in the gaming business and slowing growth in the company's data centre platform, 2019 was a better period for Nvidia's share price. The company managed to return 76.9% of the loss, but that was not all. In the first half of 2019, the company recovered from its previous poor stock performance, and this recovery went much better than expected by experts.
After releasing new graphics processing units at the beginning of 2020, the situation changed dramatically. Data centres and gaming were two spheres with the biggest demand for new technologies, and Nvidia managed to give the market what it wanted. The segment hit a quarterly record of $2.27 billion in revenue in the third quarter of fiscal 2020.
Having published marvellous 2020 financial results at the beginning of 2021, NVDA stock earnings rocketed. Right now, Nvidia's chips are cutting-edge technology. In addition to this, Nvidia is also the leader in providing high-performance graphics processing units (GPUs), which are now in high demand.
Will the price of NVIDIA shares go up? Let's turn to our experts for their NVIDIA stock forecast and find out.
NVDA Stock Forecast for 2022 According to Experts
According to the experts from Tip Ranks and their analysis of 12-month price targets for Nvidia in the last 3 months, the average price target is $357.95 with a high forecast of $400.00 and a low forecast of $285.00.
Investor's Business Daily notes that NVDA stock analysis shows that the stock rallied on strong earnings and a stronger-than-expected outlook, but supply constraints remain.
The repeated mentioning of Nvidia's products in the media, especially in the technical and financial sphere, can't be left without attention. Nvidia has seemed to dominate headlines more frequently than many other chipmakers over the past year. Analysts still expect Nvidia's revenue to jump this year, thanks to robust demand for its gaming and data centre GPUs. But its growth rates would likely be even higher if it weren't facing a global chip shortage.
Forbes predicts significant appreciation in the future, and its analysts' report contains information that suggests that Nvidia is on its way to becoming a trillion-dollar company.
Gov Capital
Gov Capital experts expect stable revenue growth for the company, which ought to lead to a higher NVIDIA stock price target in 2022. It could well be a bumpy ride, with the NVDA price first climbing to $422.61 (maximum price) and then slowly retracting from there. By the end of December 2022, the closing price is predicted at an average of $372.56 ($316.68 min, $428.45 max).
Coin Price Forecast
The NVDA stock prediction price, according to Coin Price Forecast, will be $268 at the mid-year mark. The mark of $300 is expected to be crossed during the second half of the year, with the stock tipped to close the year at $389.
Long Forecast
As the Economy Forecast Agency claims, the NVDA price could see a slow recovery, eventually getting back to its normal position by September. By the end of the last month of 2022, the share price is forecast to be $327 (the closing price).
Technical Analysis of NVIDIA Stocks Prices
(https://carigold.com/forum/attachments/nvidia-stock-price-prediction-1-jpg.491959/)
As you can see from the charts above, the current trend is considered strongly bullish, and NVDA is experiencing slight buying pressure. According to Financhill, NVIDIA stock price has been improving, but the signals are still mixed. It is also essential to notice that the score for NVDA was 49 at the end of January, which is 2% below its historic median score of 50 and infers higher risk than normal.
According to the simple moving average, exponential moving average, oscillators, and other technical indicators, NVIDIA Corp is overvalued.
NVDA Stock Forecast for 2023 According to Experts
It is very unlikely that NVDA will cross the $1,000 mark in 2023. Some experts do not even expect it to reach $500. However, no catastrophic declines are seen in most NVIDIA stock predictions.
Gov Capital
In January 2023, the price is forecast at $350-$400. The potential not-so-slow and steady price increases could see it reach $488.99 by the end of June. The end of 2023 ought to come without any panic or dramatic falls. The closing price of 2023 is projected at $596.47.
Coin Price Forecast
The next NVDA stock forecast claims 2022 will end with a price of $496. To put things into perspective, its mid-year price target for the stock stands at $414.
Long Forecast
The Economy Forecast Agency gives an NVIDIA stock forecast stretching just until the end of 2023. In its view, the year will begin at $342. It predicts that we will end the first half of the year with a price of $381, with December's closing price projected at an impressive $490.
NVDA Stock Forecast for 2025-2030 According to Experts
It is impossible to create a precise forecast for such a long time in the future, so these forecasts are only approximate. Multiple economic, social, and political events can have a great impact on the value of a share. You need to keep that in mind when planning a long-terminvestment.
The Gov Capital
According to the Gov Capital, 2025 will begin with NVDA at $870.48. By the end of the year, it is predicted to hit $1,181.57. By the end of the first half of 2026, it forecasts a price of $1,358.52. Finally, Gov Capital expects the $1,500 line to be crossed at the beginning of November 2026.
Coin Price Forecast
As you can see from the table below, experts from Coin Price Forecast are not as optimistic as the ones from Wallet Investor. Barely reaching $1,000, Nvidia is not expected to go anywhere near $1,500. The year 2025 is tipped to begin at around $600, with the price gradually crawling up thereafter. At the end of 2029, it is finally predicted to reach $1,000, with the price predicted to hit $1,053 by the end of 2030.
(https://carigold.com/forum/attachments/2-png.491962/)
How Has The Price of an Nvidia Stock Changed Over Time?
(https://carigold.com/forum/attachments/nvidia-stock-price-prediction-2-jpg.491963/)
Here are the main historical events that formed the current price of NVDA:
- The stock's strong run in 2017 was being fuelled by the graphics-chip maker's superb financial results. Nvidia had grown from a successful GPUs maker to a major player in GPUs for artificial intelligence applications, ranging from data centres to driverless cars to drones.
- In October 2018, the stock price dropped because the financial results that had been released before disappointed the market.
- In 2019, the GPUs sales dropped, taking down the NVDA stock price with them.
- In 2020, the pandemic, with its growing demand in online gaming as well as the elaboration of new technologies, made NVIDIA share prices pleasant for the investors again.
- At the beginning of 2022, Nvidia is in a bear market, although some speculate that it's just a temporary dip.
Is Nvidia a Good Buy Now?
Every potential investor must do their own research and see if investing in NVIDIA is a good idea for achieving their personal goal. According to experts, no enormous and outstanding growth is expected. However, some may say that growth is growth and is always a good sign, whether fast or slow. In order to save your money, register a demo account on Libertex (https://libertex.com/blog/nvidia-stock-price-prediction#modal-demo). It is one of the best ways to start trading because:
- It can help you understand how to use the platform and invest.
- It is perfect for beginners: there are plenty of articles by leading experts on different topics.
- Educational materials are openly available.
- You won't lose your money while learning with the help of our special demo account.
- Price forecasts and technical analysis are up-to-date.
- Our client support is ready to answer all your questions; don't hesitate to ask at any time.
-
STEPN: Libertex explains what you need to know about the 'move-to-earn' crypto trend
STEPN (GMT) is a so-called 'move-to-earn' crypto token that was launched back in the summer of 2021. However, the price of STEPN has recently picked up the pace and sprinted ahead, leaving competing cryptos in the dust. GMT price has surged over 3500% over the last month, going from just over $0.10 to $3.89, a jump of around 70% in the last week.
How STEPN works
According to the creators, STEPN is a Web3 lifestyle app with a move-to-earn business model that combines elements of metaverse technology, gamification and personal fitness. The project's crypto token with the ticker GMT was created on the Solana (SOL) blockchain.
You may have already heard of 'play-to-earn' cryptocurrencies such as Axie (AXS), which reward users for taking action inside a video game. Move-to-earn cryptos have a similar concept, but rather than awarding cryptocurrency for in-game activity; they reward users for physical activity in the real world. STEPN awards tokens to users for walking, jogging or running, offering a monetary incentive for personal fitness.
Move-to-earn is becoming a big trend in the crypto space, with strong selling points such as encouraging personal health and fitness, environmentalism (as users are incentivised to not use cars) and game elements that tie into the NFT and metaverse markets.
Here's how it works. STEPN offers virtual sneakers in the form of NFTs on its in-app marketplace. Purchasers of these sneaker NFTs get access to play the STEPN augmented reality game, which tracks physical activity and movement and rewards them with the in-game Green Satoshi Token (GST). The more they exercise, the more they earn. Users can then trade the GST reward for Solana (SOL) or USD Coin (USDC). According to STEPN, the company will use profits to "buy back and burn GMT on-chain from the secondary market", thus increasing the scarcity of the GMT token.
The move-to-earn crypto craze
Move-to-earn is generating a lot of buzz in the crypto space, although the concept is still relatively new, and it's too soon to tell if the concept of move-to-earn will stick around in the long term. Technology has become a bigger part of health and wellness culture in recent years as joggers and athletes integrate wearable fitness trackers or mobile apps into their fitness routines. Augmented reality apps such as Pokemon Go have also shown the effectiveness of gamified incentives for movement, although the famous game has yet to find a worthy successor to continue the trend. Cryptocurrency has the potential to bring a new selling point to this phenomenon.
STEPN isn't the only move-to-earn token on the market. Competitors include Genets (GENE) and dotmoovs (MOOV). The price of many move-to-earn tokens has surged lately, thanks to media and investor attention to STEPN after the company's recently released earnings report, in which it declared a profit of $26.81 million from its NFT marketplace trading and royalty fees in Q1 2022.
For anyone interested in investing in move-to-earn cryptocurrencies, STEPN is the frontrunner in this race. CoinMarketCap data shows that the total market capitalisation of STEPN token has crossed $2.3 billion and currently ranks as the 45th largest crypto by market cap.
Trade crypto CFDs on Libertex
Libertex is an award-winning platform for trading CFDs on forex, metals, indices, cryptocurrencies and others. It offers fast, powerful and user-friendly apps for both mobile and desktop as well as your Internet browser so that you can manage your market activity from any device whenever it suits you.
If you're looking to trade STEPN CFD or any of the 70+ crypto CFDs available on the Libertex platform, then you can take advantage of one of the best crypto trading offers on the market. Libertex charges no commissions, swap, or exchange fees on crypto CFDs, making it a fantastically cost-effective place to trade the most popular cryptocurrencies. Will you be moving on the “move-to-earn” crypto?
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% 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. Cryptocurrency instruments are not available to retail clients in the UK.
Available for retail clients on the Libertex Trading Platform.
-
What is Online Trading?
Trade exchanges and investments have been a part of people's lives in all developed countries for years now. However, it doesn't mean that just anyone can become a trader. In fact, until recently, it was quite an arduous task to get inside of this business. Trades were held exclusively in exchange buildings, and one needed a licence to have access.
The internet made the entire process of trading on stock exchanges much easier for everyone. It gave birth to a whole new trend: online trading. For some, it became a hobby; for others, it's a full-time profession. And even though it has spread widely among, there still are many people who don't know what online trading is, why it's so popular and how everyday people can become traders.
Online Trading Definition: What Is Online Trading?
Online trading is trading in financial markets via the internet. Previously, all trading was held in an exchange building in person or by phone. Now, every trade is concluded with the help of an electronic platform.
All you need to start trading is a computer with internet access and a trading system installed.
How Online Trading Works
Online trading allows you to make trades on the financial market within minutes or seconds or even less. However, one thing still remains the same with pre-online times: a private trader still needs a broker in order to trade. A broker provides a trader with a trading platform, which is the software a trader uses to conduct their business.
It all goes like this:
1. A trader decides to make a trade (for example, to purchase 100 shares of Apple).
2. They find this asset (Apple stock) on the trading platform, select the quantity (100 shares or 1 lot) and place a buy order.
3. The broker gets a request from the trader and starts executing the order. The broker needs to find a counterparty, i.e., another trader who's willing to buy the same asset for the same price.
4. The broker looks for a counterparty on the stock exchange, and when the search is completed, the trade is made.
Nowadays, the trading platform does all the work to find a counterparty and clinch a trade. The trading process is fully automatic, which is why the time needed to make a trade is no more than a couple of seconds.
But it wasn't always like this. Previously, the whole process took a lot of time even though the "trader – broker – stock exchange – broker – trader" chain was the same. The trader used to call their broker and ask to open a trade. The broker would then personally try to find a counterparty on the stock exchange.
Leverage and Short Trading
(https://carigold.com/forum/attachments/online-trading-1-jpg.493703/)
One of the most significant and important innovations that online trading has brought is the possibility to trade using leverage and short trading. Before, traders could only make trades for the amount they actually possessed and that they deposited into the broker's account.
Now, private traders can conclude trades worth 100 times more than the capital they own.
One may ask, "how is this even possible?" This is when leveragecomes into play, and the broker presents additional capital. For a better understanding, take a look at the following scheme:
1. A trader wants to purchase 100,000 euros for dollars but possesses only 1000 dollars.
2. A broker provides the trader with the sum necessary for the trade. At a EUR/USD exchange rate of 1.2000, that would require 120,000 dollars.
3. The broker makes a trade on behalf of the trader. $1000 in his account becomes a pledge.
4. If the EUR/USD rate increases, the trader gets the profit. They can close the trade when the rate reaches 1.2100, for example. In that case, the trader will receive $121.000. The broker gets $120,000 plus a fee for concluding the trade and providing the leverage. The overall profit for the trader will be $1000 minus the costs. By doing so, the trader can double the sum in their account.
5. If the EUR/USD rate decreases, the trader loses money. His losses are limited by his security deposit. If the rate drops to 1.1900, the amount of working capital will decrease from $120,000 to $119,000. If this happens, the broker will have to forcibly close the trade to avoid further losses. The broker will take the remaining $119,000 dollars plus the $1000 that belongs to the trader to compensate for the loss. In this scenario, the trader can lose their entire deposit.
Thanks to leverage, it's now also possible to use the short-trading scheme. A trader can not only buy assets worth much more than his deposit but also sell assets they don't possess. For example, with only $1000 in their pocket, a trader can open a trade to sell euros (that the trader doesn't have) for dollars. In this case, the trader has to take leverage, not in USD but in EUR. The remaining part of the trade is quite the same.
Types of Assets You Can Trade Online
(https://carigold.com/forum/attachments/online-trading-2-jpg.493705/)
There are several types of assets that you can use in online trading. Some of them are categorised as 'classic', and they have been sold for hundreds of years now. Others appeared after the spread of internet trading. Let's take a closer look at each category of assets.
Stocks
Stock market shares are one of the oldest types of assets. A stock share is a specific share of a big company that is traded publicly. There are two possible roles for you when making trades in the stock market: the speculator and the investor.
1. A speculator makes short-term trades. Their main goal is to buy low and sell high (or vice versa, to sell for a high price, then buy for a lower one). Speculators don't care about any other factor. The only important thing is the difference between the purchase price and the sale price.
2. An investor doesn't just buy shares to sell them at a higher price. They invest money in a business that has issued the stock. A long-term investment is the highest priority for investors. The main source of income for an investor is a dividend. However, the increase in a stock's price also makes their portfolio more valuable, which is also very important in the long run.
Cryptocurrencies
(https://carigold.com/forum/attachments/online-trading-3-jpg.493707/)
Cryptocurrenciesare the newest assets in contemporary financial markets. To find out what they are, let's dig deeper.
Cryptocurrencies are digital assets created by a complex programme code. Bitcoin was the first and most popular cryptocurrency and served as the model on which many more were created. Today, there are more than 2000 different cryptocurrencies, and the number is still growing.
Cryptocurrencies differ according to their structure, ideology and values. Some of them are just a new way of completing financial transactions and are more reliable, more confidential and faster than bank transactions (though there are certainly some cons to this approach). But some cryptocurrencies, or crypto assets, represent platforms for making different applications with advanced features or a wide variety of other interesting projects.
Because cryptocurrencies are assets, their price is constantly changing, which means that they can also be traded. Just like with stocks, one can speculate on a cryptocurrency or invest in it (because almost every cryptocurrency has a value).
The main difference between stocks and cryptocurrencies is the latter's very high volatility:
1. The price of an average stock may rise by 20-30% in a year, which would be considered a very good result.
2. A cryptocurrency can rise by 200-300% in a month, then fall by 20-30% in a day, and this would be considered a normal trend.
Fiat currencies
(https://carigold.com/forum/attachments/online-trading-4-jpg.493708/)
Fiat currencies are the main assets in forex trading. Currencies are commonly used in currency pairs, such as EUR/USD, GBP/USD, etc. Trading is conducted in one currency relative to another. However, for everyone's convenience, the currencies in a currency pair don't switch places. For example, if a trader wants to buy USD for GBP, they should open a trade to sell GBP/USD.
Metals
Precious and non-ferrous metals are also very popular assets. Traders choose mostly gold and silver, and many brokers also allow trading platinum on their trading system. It's possible to make trades to buy or sell copper, nickel, aluminium and other precious metals. However, not all brokers provide access to such assets.
Indices
Indices are another tool used on the stock market. An index is formed by a certain number of stocks that are generally combined in one category. For example, the Nasdaq 100 index consists of stocks from the 100 biggest high-tech companies traded on Nasdaq.
There are also many other indices: DJ 30, S&P 500, Nikkei 225, etc. Stocks in an index are often united by the fact that they're traded on the same exchange, just like the Nasdaq 100 and Nikkei 225. The figures you see after the name of the index are the number of stocks that form the index.
The index's value changes according to the price movements of the individual stocks that form it. For example, if the majority of stocks on the Nasdaq 100 rise, the index's value will increase, too. The opposite is also true: if stock prices fall, the index's value will decrease, as well.
Agriculture
The agriculture category includes such assets as wheat, soybeans, beans and more. These are not the most popular assets because their prices don't change as often as the price of gold might, for example. However, the fundamental factors that affect agriculture prices are clearer and easier than when trading currencies or gold. That is why these assets have their own dedicated audience.
Oil and Gas
Oil and gas are the assets of the energy resources category. It's as popular as assets like gold and second only to general currency pairs.
ETFs
ETFs are investment funds that are similar to stock indices. ETFs are a combination of stocks and other assets whose value changes in accordance with the price changes of their counterparts.
Types of Investments
Aside from variable assets for online trading, there are several types of investments. Each type has its own approach, and the trader has to clinch the trade differently: markets, terms and the contract period will not be the same. Let's have a look at the most common types of investments.
CFDs
CFDs (Contracts For Difference)is the equivalent of a stock that can be traded on platforms. However, traders don't buy or sell the stock itself but rather a contract. The terms of the contract define their profits or losses in accordance with the price changes for this stock.
Here's how it works:
1. Trader A buys a CFD for a stock at a price of $10. Consequently, Trader B sells the CFD for a stock at a price of $10.
2. The stock's price reaches $11.
3. Trader A closes the CFD for a profit of $1 per share. But for Trader B, closing the CFD means a loss of $1 per share.
In the end, the traders received the same profits and losses as if they traded the actual stocks, but trading CFDs allowed them to use leverage and other advantages provided by forex brokers.
Binary Options
A binary option is a type of financial instrument where the trader has to define how the price will change within a specific amount of time.
In a standard binary option, there are only three parameters:
1. The direction of a price change (up/down)
2. Expiration date
3. Transaction volume (rate)
The trader needs the price to change at least one point in the specified direction and hold there until the expiration date. In that case, the trader will get 80-90% of their bid, which can be pretty high. Although the risks are also high, if the price goes in the wrong direction, even by one point, the trader will lose their bid.
For example, a trader has $1000 in capital. They can open an option for EUR/USD with the following parameters:
1. Direction – up
2. Period – 5 minutes
3. Rate – $100
If the price goes up even by one point during these five minutes, the trader will get 80-90 dollars profit (this depends on the conditions the broker set). If the price goes down, the trader will lose $100.
Futures Contract
(https://carigold.com/forum/attachments/online-trading-5-jpg.493712/)
A futures contract is a way to trade goods like oil, palladium or wheat as a document without directly exchanging goods for money. When concluding a futures contract, the seller undertakes to deliver the buyer certain goods in a certain time frame after making a trade (for example, in 3 months). However, the buyer usually doesn't need the actual commodities; they need the right to the commodities, so they can make a speculative profit from trading this product. As such, the buyer sells the futures to another trader.
Pros and Cons of CFDs and These Types of Investments
Let's take a closer look at the advantages and disadvantages of these types of investments so we can define the most profitable and promising approach to online trading.
(https://carigold.com/forum/attachments/6548120-png.493720/)
As you can see, CFDs appear to be the most attractive option for online trading when traders are willing to take large risks for a potentially large profit. Moreover, contracts for the price difference are generic instruments that suit both investors and speculators.
Pros and Cons of Online Trading
(https://carigold.com/forum/attachments/online-trading-6-jpg.493714/)
Now that we know a bit more about online trading, it's time to evaluate it objectively and state its pros and cons.
Pros of online trading:
- Potentially unlimited income
- The possibility to set your own work hours, without a strict schedule or location
- Can be combined with your main job
- This kind of work can be interesting for people who like finances, analysis, etc.
- You can start trading even without a large amount of capital
- Constant self-development and new experiences
Cons of online trading:
- The risk of losing the whole capital when trading CFDs because of the complex of the instrument (Financial risks)
- You're your own boss, and you're responsible for your own actions.
Can Anyone Become a Online Trader?
Have a lot of patience and emotional stability, be ready to be a better version of yourself and pursue your goal.
There are a lot of people who have the potential to become good traders. Unfortunately, 99% give up in the early stages.
There is no common path to success, no one-size-fits-all plan on how to make anyone a professional and thriving trader. However, there are certain steps that are compulsory for anyone interested in starting to invest or trade:
1. Create an online trading plan. You've got to decide how and when you're going to trade and how much time you're prepared to spend. What are your goals? Will it be your main occupation or just a hobby?
2. Set up functioning risk management. Both trading and investments require risk evaluation beforehand. Even though you start with a demo account, you have to assess the risks. Allocate for investment only the amount of money you can afford to lose. You also have to calculate the risk for each and every trade or trading session.
3. Choose your trading style. A trader must have a trading strategy. That is why you have to know your methods of analysis, your market, type of assets and other nuances. You can start by using someone else's strategy, but eventually, you'll need to implement your own unique strategies to potentially make profitable trades.
4. Take your first trading steps in a demo account. When you choose a strategy, try it out using a demo account. It would be wise not to switch to a real account unless your demo account is steadily gaining profits.
(https://carigold.com/forum/attachments/online-trading-7-jpg.493716/)
Conclusion
Online trading is an interesting and potentially promising occupation. It allows you the possibility of gaining financial independence and spending your time how you want to. It involves a lot of learning and work before you can set out to become a online trader.
Please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital.
You can open a free demo account with Libertex (https://libertex.com/blog/what-is-online-trading#modal-demo), an award-winning platform. Libertex is a broker which offers CFD trading on stocks, commodities, indices, ETFs and cryptocurrencies with leverage of up to 30 times for retail clients. The platform also offers free trading tutorials and state-of-the-art trading tools.
-
Elon Musk's Twitter takeover takes over the news
Tesla's eccentric South African CEO is no stranger to controversy. Everything from his crypto musings to political leanings and even love life seem to garner headline after headline. It's no secret that Musk has been less than pleased with what he views as outright censorship on Twitter for some time now, and this latest move appears to be his way of "saving" the legacy social media platform from what he sees as "wokeness" gone mad. Indeed, Elon himself has stated that his motivation for buying the company has always been about preserving free speech within the meaning assigned to it in law. As he put it: "Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated."
But naturally, the question on traders' and investors' lips remains the following: What does this mean for Tesla and Twitter share prices? Unfortunately, the answer is not as clear-cut as many would hope. In this article, we will seek to explain the reasons behind the immediate stock price movements following the deal and, with any luck, predict the future trajectories of these two companies' fortunes over the near term.
What's good for Musk isn't always what's good for TSLA
Now, anyone would probably agree that gaining control over what is one of the world's biggest and farthest-reaching social media platforms must be considered a coup for the individual who successfully completed such a takeover. However, that doesn't necessarily mean that such an individual's other concerns will receive the news quite as positively. In the immediate run-up to the deal's announcement, TSLA lost 12.2% (or almost $125 billion in share capital) as Musk was forced to sell personal stock holdings in order to fund his Twitter purchase. Many might say that this is just a routine temporary correction and things should normalise within a few weeks or months, but several analysts aren't so sure. Some suggest that this significant slump could pose problems for a $12.5 billion credit line the Tesla CEO took out against his own TSLA holdings. Their fear is that he might now be forced to sell even more shares in order to service this debt, which will, in turn, lead to further price declines. Not to mention that many view Tesla as extremely overpriced compared to the rest of the sector in general.
Twitter up, but trading suspended
As we have seen so many times in the past when underperforming companies have been taken over by corporate royalty, Twitter's stock price shot up by some margin to gain around 60% over the course of a month as rumours of Musk's takeover whirred around the internet. To the tristesse of prospective investors, trading was halted by the NYSE on the day that Twitter’s board announced it had accepted the deal and would submit it for approval by shareholders. This means that unless you were smart enough to buy in during the March doldrums, you have probably missed your chance to gain from what will likely prove to be the M&A of 2022. To make matters worse, it could well turn out that this is the highest level TWTR ever reaches as an independent equity of its own. Musk has made no secret of his intention to take Twitter private as this is the only way he can realistically make all of the changes he wishes to make to the social media platform. It could be good news for ordinary Twitter users, though, as Elon has pledged "to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans."
Libertex: giving you more than the rest
While trading in physical Twitter shares may be suspended on the NYSE, CFDs such as those offered by online CFD and stockbroker Libertex are unaffected. This means you can lock in the current price of $49.11 with Libertex, and, should any new development come to light that leads to trading in TWTR being reopened, you can then benefit from any potential future gains. Meanwhile, TSLA remains open for trading, and if Musk is successful in his stated aim to finally monetise Twitter effectively, it's hard to imagine a situation where TSLA doesn't benefit, particularly given this recent -10% net correction.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% 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. Cryptocurrency instruments are not available to retail clients in the UK.
-
What is the Bid and Ask?
The bid and ask prices are the most important ones to consider when trading in any market. This article will cover the way trading instruments are traded and how the bid and ask prices are relevant to trading strategies, trading costs, liquidity and the timeframe being traded.
What is a Bid Price, and What is an Ask Price
(https://carigold.com/forum/attachments/bid-and-ask-1-jpg.496233/)
What is the Bid Price?
The bid price is the highest price the market is willing to pay for that trading instrument in any given market. If several buyers are willing to pay a different price, the highest of those prices will show as the bid.
What is the Ask Price?
The ask price is the lowest price at which the market is willing to sell a given trading instrument. Also known as the offer price. If several sellers have limited orders in the market, the order with the lowest price will show as the market's ask price.
What's the difference between the bid and ask price?
The following is an example of a forex quote:
GBPUSD: 1.27256/1.27272
In this example, the first price shown is the bid price, which will always be the lower of the two prices in a quote. As a seller, this will be the price at which you'll sell GBP for USD.
The second price in the example is the ask price, which is also the higher of the two. If you are a buyer, this is the lowest price at which you can buy GBP for USD.
On a trading platform, you may sometime sell prices quoted as follows, which can cause some confusion:
SellBuy
GBPUSD1.272561.27272
In this case, the bid price is labelled 'Sell', and the ask price is labelled 'Buy' because these are the prices you can sell and buy at.
Quote-Driven Versus Order-Driven Markets
To properly understand where bid and ask prices come from, you need to understand the two types of markets; quote-driven markets and order-driven markets.
(https://carigold.com/forum/attachments/bid-and-ask-2-jpg.496234/)
Quote-Driven Markets
A quote-driven market is run by a market maker or broker. Their job is to maintain an orderly market by continuously quoting the bid and ask prices for each instrument they make a market for.
Order-Driven Markets
An order-driven market is made up entirely of buy and sell orders from market participants. There is no intermediary; instead, all orders are processed by a broker who charges a commission. Most stock markets are order-driven.
What is the Bid-Ask Spread?
The Bid-Ask Spread
The Bid-Ask spread is simply the difference between the ask and bid prices. In quote-driven markets, the spread is determined by a market maker or broker, whereas the spread for an order-driven market is determined by supply and demand.
Liquidity and the Bid-Ask Spread
A tighter spread signifies a more liquid market. Higher liquidity means more buyers and sellers and more market makers. As buyers compete with one another, the bid price rises, and the ask price falls as sellers compete. The result is a tighter spread between the bid and ask prices.
Orders Types and the Bid-Ask Spread
- Limit Orders
A limit order is placed in the market at the limit price and can only be executed at the limit price or better. All visible bid and ask prices in the market are limit orders.
If a limit buy order is entered, the order will be executed immediately if its price is equal to or greater than the market ask price. If it's lower than the ask price, it will be placed in a queue behind any existing limit buy orders with the same price. The opposite applies to limit sell orders.
- Market Orders
A market order is a buy or sell order which is immediately executed at the best available price in the market. A market buy order will immediately be executed at the market ask price. A market sell order will immediately be executed at the market bid price.
Which Type of Order Should You Use?
You can use a limit price to get a better price, but doing so may mean you miss a trade if the price moves away from you. A market order will ensure that you don't miss an opportunity, but your execution price won't be as good.
For this reason, it's important to look at the bid and ask prices and the last traded price, which is usually labelled 'Last' on trading platforms.
(https://carigold.com/forum/attachments/bid-and-ask-3-jpg.496235/)
The table above shows the Bid, Ask and Last prices for four currency pairs on MetaTrader 5. By looking at the Last price, you can see whether the price is being traded on the bid or ask side of the bid-ask spread.
The top two currencies each had their last trade at the bid price. That means other traders were selling at the bid price. For the bottom two pairs, the last trades were at the ask price.
The colours also indicate whether the Bid, Ask and Last prices are higher or lower than their previous level. Blue means the price is higher, and red means it is lower.
Understanding the Bid and Ask in the Forex Market
When trading in the forex market, the bid-ask spread will have an impact on the strategies you use and the timeframes you trade on.
(https://carigold.com/forum/attachments/bid-and-ask-4-jpg.496236/)
The above example from MetaTrader 5 shows the bid and ask prices for the EUR/USD pair, which is very liquid, and for the USD/TRY pair, which is far less liquid. The spread for the first pair is 0.9 pips, while the spread for the second is 90 pips.
For a trade to be profitable, the price needs to first move enough to cover the bid-ask spread. In the above example, if you buy at the ask price, the bid must move that much higher before you break even. For the EUR/USD pair, the bid needs to only move 0.9 pips, but for the USD/TRY pair, it needs to move 90 pips just for the trade to break even.
The tighter a spread, the lower the timeframe that can be traded. The EUR/USD pair can be traded on timeframes as low as 1 minute as the pair will move enough in a short space of time. A less liquid pair like the USD/TRY will need to move a lot further, probably taking a lot longer.
When considering a trading strategy, you need to consider the spread. If the average profit is less than the spread, you may not be able to trade the strategy profitably.
How to Use the Bid-Ask Spread when Trading CFDs
What is a CFD?
CFDs, or contracts for difference, are a type of trading instrument that allows traders to easily gain exposure in any market. CFDs can be traded on stocks, indices, commodities and cryptocurrencies. They can be used to open long and short positions, with or without leverage.
(https://carigold.com/forum/attachments/bid-and-ask-5-jpg.496237/)
How the Bid-Ask Spread Affects CFD Trading
In most cases, when you trade CFDs on a trading platform, the quote you see will be a market maker quote. This means CFDs can be traded exactly like forex.
In some cases, you may be able to trade stock CFDs in the underlying stock market. You will see multiple bids and offers in this case, meaning the market is order-driven. An order-driven quote will look something like this:
Apple Inc. 800 194.57 194.60 600
400 194.56194.61 200
1000 194.55194.62 300
This example shows the best 3 bids and offers for Apple Inc's stock, along with the quantity being bid and offered at each level. In this case, the bid-ask spread is $194.57-$194.60. The bid volume is 800, and the ask volume is 600. If a trader wanted to buy more than 600 shares, they would have to buy 600 shares at $194.60 and then pay more for any other shares they wanted to buy.
Conclusion
The best way to learn about the concepts covered in this article is by following various trading assets and entering different types of orders. You can do that for free and without risk by opening a demo trading account (https://libertex.com/blog/bid-and-ask#modal-demo).
You can open a free demo account with Libertex, an award-winning platform. Libertex is a broker which offers CFD trading on stocks, commodities, indices, ETFs and cryptocurrencies with leverage of up to 30 times for retail clients. The platform also offers free trading tutorials and state-of-the-art trading tools.
-
Bitcoin down over 50% as crypto market big chill sets in
Cryptocurrencies — and Bitcoin, in particular — have been in the headlines this week for all the wrong reasons. To the chagrin of investors, the original digital coin dipped to a low of $29,330 to record a decline of 55-57% from its November ATH of $69,000. This flirtation with its key support of $30,000 has prompted many analysts to suggest that we ought to be strapping in for a full-on 'crypto winter' with much more downside ahead. Indeed, in typical bubble-bursting fashion, we're already seeing altcoins dropping like stones, with Terra LUNA plummeting 97% literally overnight (10-11 May). Even more worrying, it appears as though this has even spread to Terra's algorithmic stablecoin UST, which is currently trading at around half its supposedly guaranteed value of $0.49.
These developments have now led many to question the future of the entire cryptocurrency market, or at the very least, its short-term prospects. But what are the reasons for this sudden decline, and how long can it be expected to persist? Read on to find out the answers to these questions and more.
So, should we be preparing for a long winter?
To put it bluntly, it all boils down to your definition of 'long'. Rising central bank interest rates and general instability mean that the world is currently risk-off, for the most part. And with the Fed seemingly ramping up its hawkish rhetoric, there could well be more downside to come. It's no coincidence that Bitcoin's Spring 2021 peak of $63,000 came exactly as the Treasury yield curve began flattening amid the US regulator's normalisation of the country's monetary policy. Since then, the tech-overweight Nasdaq has lost more than 25% of its overall value, with many of the index's smaller-cap stocks losing over 80%. With the Fed now preparing for a cumulative full percentage point rate hike in the next two months, it's hard to envisage a scenario where crypto and tech stocks don't incur further losses. The only question that remains is whether this is the end of the line for crypto or whether — like so many times before — it will ultimately rise again from the ashes, stronger and more resilient than ever.
Light at the end of the tunnel
While things might look bleak at the moment, it's always darkest before the dawn. Remember how bad things looked in early 2018 when BTC corrected by 85%? Bitcoin eventually hit a low of around $3,100 in December of that same year but is now worth almost ten times that today. At some point, the speculators will be driven out of the market, leaving only active crypto users and genuine long-term HODLers, laying the foundation for the green shoots of stable, sustainable growth. That is, of course, not to say that every single project will make it to the other side. If a Top 10 coin like LUNA can lose 97% in the span of just 24 hours, there will definitely be scores of other altcoins that don't survive. The most probable scenario is not unlike the Dotcom Bubble of the early 2000s, meaning we can expect significant bloodletting and a multi-year slowdown in capital investment in the space. However, when the next leg up comes — and it will — the growth will be much more viable and enduring as it will be driven by proper fundamentals and a loyal user base.
Have your say with Libertex
Whether you think the crypto market is headed for more pain or is priming for a resurgence, Libertex's selection of long and short positions helps you invest your money accordingly for either choice, although profit is not guaranteed. Libertex's extensive crypto CFD offering consists of over 50 digital coins and tokens, including Bitcoin, Ethereum and more.
The experienced EU-based broker also offers unbeatable no-commission trading on all its digital asset CFDs, which means you only pay the spread (difference between the Bid and Ask prices) on any cryptocurrency CFD transactions completed on the platform.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% 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.
Available for retail clients on the Libertex Trading Platform.
-
Everything You Want to Know About Social Trading
Social trading is a relatively new but incredibly useful concept for new traders. It incorporates everything that works about social networking and applies it to trading. By being active on social platforms, you have direct access to experts and the methods they employ. Let's talk about how to use social trading to your benefit.
What Are the Basics of Social Trading?
Social trading is a trading method where investors can observe their peers or expert trading behaviour. The technique allows beginners with little to no prior knowledge to learn trading strategies using copy trading or to follow a mirror trader.
What Is Copy Trading And Why Do Traders Use It?
The actual method varies depending on the platform used, but the basic principle remains the same:
- Trade according to the scheme of your chosen trader.
- Copy their trades in a percentage-based manner.
Most sites do not allow you to invest any more than 20% of your portfolio with a single trader, which is a great policy to prevent you from losing too much if said trader hits a bad streak.
There have been a few studies done on this tactic to measure how successful people are when using copy trading. Results show that those who invest in carefully chosen traders based on previous statistics and portfolio experience up to 10% more success than people who choose traders based on personal preference or trade manually.
Copy trading is a great method that enables beginner traders since it allows you to dip into trading using the experience other traders have.
How Are Copy and Social Trading Different From Each Other?
Social and copy trading share the same basis but differ in many ways. Copy trading is a part of social trading but not vice versa. In fact, copy trading is a very strict type of social trading where your trading account is bound to another trader's account. Their trade and decisions are reflected in your trading account. Their profits and losses are shared with you, and your trading account changes in the same way theirs does.
Your trading account automatically changes depending on the trader you follow, and you do not have the choice to make any trades or changes. The only change you're entitled to is to stop following the trader. In its simplest form, copy trading means your trading account mirrors each move the other trader makes – hence the name!
Social trading differs because not all types of social trading allow someone else to manage your trades. Instead, you can use information from other traders you follow to base your investing decisions on, meaning the ultimate decision is yours.
How Do You Use Social Trading?
Social trading is quite similar to social networking that you probably already use, but the information you come across is more deliberate and directly useful. You will still come across trading topics, but the platform is lively and easy to be part of. You are quickly connected to traders on the network and can trade in collaborations with them or use readily provided information to improve your trading strategies.
If you come across a trader whose advice you appreciate, you can follow them. Following them gives you access to their moves, comments, and updates, allowing you to learn from them in real time. If they make a trade you are unfamiliar with; you can easily ask them to explain the process and how their idea will play out.
Other than commenting on their profiles, you can also privately message traders when you want to learn more about different strategies. Once you are more skilled, you can help fellow traders on the same platform.
Why Is Social Trading So Popular?
The method's popularity stems from the unique access new traders have. Social trading platforms cut down on the time spent searching the internet for trading information by giving you access to expert traders you can interact with.
Getting access to their techniques also means you do not have to spend money on tutorials. These platforms allow you to earn while you're still learning which strategies work, and in time, you can build a community of investors that you trust.
What’s an Example of Social Trading?
The above terms may be difficult to conceive without being an active part of the process, so let's look at an example:
Let's say there was a domestic market crash in Brazil around the time you wanted to get some exposure to the Brazilian real. This is the first time you are attempting to understand local economics, banking policies, and politics with the aim of coming to an informed investment decision. You turn to a trading platform and look for traders who are talking about trading with Brazilian real and either follow, get in touch with them, or both. You use this opportunity to learn market sentiment. This is what social trading is all about.
Let's say you want to begin trading sooner rather than later. Instead of following traders to watch their strategies, you choose to copy trade with a trader whose methods work for your local market.
How Do You Copy Trade?
(https://carigold.com/forum/attachments/social-trading-1-jpg.497701/)
Copy trading connects part of your portfolio (usually up to 20%) with a trader's portfolio. As soon as you do, their opened trades get copied to your trading account, and their future actions are automatically copied onto your trading account. Most times, your trading account does not contain the same amount as the traders, so the trades are made as percentages of each other instead of actual amounts.
For example, let's say you invested $100 in your trader, which happens to be 10% of their portfolio. If they then invest $200 somewhere else, you will make the same trade but with only 10% of that amount, which comes to $20.
The method can be intimidating, but once you understand the patterns, it can be a very successful approach to trading. Since you're not actively trading, you can focus on learning while making some money. Each time they make a good decision, you benefit from it in knowledge and in funds. Just be sure to choose a reputable trader.
You Can Copy The Traders Experience
Copying a world-leading trader may be the best way to learn as a beginner. The process is the same as above, but the people on the platform are different. Since you may not have a lot of prior trading knowledge, you are investing in people who make good decisions instead of stocks.
Traders are experts in reading the market's implied volatility (VIX) and saving their commodities from a bearish market. They may not have as much time to reply to questions you have, so you'll need to pay attention to how they trade and why it was a good choice. They also make the kinds of investments that require constant attention (as they are usually high risk, high reward).
What's great about the technique is you're in the middle of the action without having to study technical analysis or fundamentals. If you're quick to learn and good at reading profiles, it's a method that might work for you.
What Are Some Social Trading Types?
- Copy trading is the most used social trading on Forex's Meta Trader 4 (MT4) platform, but it's not the only one:
- Tips/signals: the easiest way to find information or strategies is to find tips across the platform. The advice is usually free-floating instead of targeted to a specific audience, but still helpful.
- Profiles and forums: Forums allow traders of all experience levels to share information or to get to know one another. Good platforms can provide full profiles with details on other traders' styles.
- Bots: most platforms allow you to use customisable trading bots, so you do not need to monitor trades at all times. You can use autochartist to monitor trends in Forex.
What Are the Pros and Cons of Social Trading?
Now that we've covered the various terms, let's talk about some advantages and limits to social trading.
Potential benefits of social trading:
- Earn while you learn. It is possible to make money by following or copying others and increase your capital quickly.
- Awareness of market sentiment. You can see market movements both as a newbie and also through the eyes of an expert. You get to immerse yourself in the market and quickly get information not accessible elsewhere.
- Take your time back. By creating quick access to experts, you save time on combing the internet for these tips and can spend your time doing something else.
- Diversify your portfolio. Getting access to different traders (and investing in traders rather than stock).
Drawbacks of social trading:
- Little to no agency. If you rely on social trading, you are relying on other people's experience and skills to make trading decisions and then cross your fingers to hope it was a good decision. If you copy trade, you have no say in where the trades are made even if you know they might be bad trades which is a large drawback of social trading.
- Constant monitoring. As with most techniques, you need to constantly monitor the market to know what is happening. This is true even if you're copy trading, as it's a good idea to know what the traders you entrust with a part of your portfolio are actually doing.
Social Trading: Fundamental and Technical Analysis
Technical analysis refers to the process of analysing data to allow you to make good predictions about an asset's future price movements. The method is based on the asset's past movements that show hints of how it will do in the future. That also means you need to know what you're looking at for the information to be useful to you. You'll need to be able to read and interpret charts and patterns and move from there.
Fundamental analysis goes deeper than looking at previous past movements. The analyst's aim is to determine the actual intrinsic value of the commodity. Any factor that can provide a specific inducement to the asset and its price is taken into consideration: the company's revenue,CFD*, NFA, profits, etc. Their idea is that the general price of an item does not always reflect the intrinsic value.
Each of these techniques takes some time to learn and then more time to dive into each commodity before engaging in a trade. So why are we talking about this? You need to understand these methods in order to understand how the traders make decisions, especially if you are using someone else's advice instead of copying their trades. Knowing how fundamental and technical analysis differs from one another will also help you evaluate different traders. Whichever analytical method you choose to adopt, learning about the pros and cons of each is a good idea.
*Please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital.
Managing Risk While Social Trading
Risk management is an important factor to consider while trading. In most cases, your money management is closely tied to risk management and leads to successful trades. Risk management is a set of rules that you set to help you determine whether a situation is risky or not. Good risk management is the root of responsible trading.
- Understanding risk: Studying short-term and long trends can help you evaluate what is low or high risk. The mood of financial markets can definitely change at any moment, but studying previous trends can help you gauge how the price changes at least within the next few hours.
- Mitigate risk: Diversifying your portfolio means you invest in different fields and trades. Each new trade improves your chance of success but also prevents you from losing too much if one of your fields hits a bad streak.
In Conclusion
Sharing information on platforms and learning from experts is just the beginning of social trading. Now that you've read this article, you are almost ready to put this knowledge to the test. You can test your skills using a Libertex demo account to try different techniques before you begin live trading. A Libertex demo account allows you to try the statistics without risk.
-
What Is the Dow Jones Index?
Large companies inevitably affect the entire economy, especially when it comes to the top blue-chip companies. By combining and tracking stocks of these companies, traders can get a good view of how the American market is performing as a whole. This is the exact reason the Dow Jones Industrial Average (DJIA) index exists.
Let's see what makes the Dow Jones one of the most well-known stock market indices, how the index is constructed and calculated, and what you should know before trading on it. Additionally, we'll take a more in-depth look into what makes it an attractive investment tool and what drawbacks you need to be aware of.
Dow Jones Industrial Average Definition
The Dow Jones Industrial Average, often referred to as 'the Dow', is an index consisting of 30 well-established and financially sound US companies. It serves as a benchmark for stock market performance and sentiment.
Initially, the index listed just 12 companies. These days, the Dow Jones has 30 components from all major sectors of the economy, except for transportation and utilities. There aren't any strict rules of what companies are eligible to be included. But the primary condition is to be a publicly-owned company listed on the Nasdaq and the New York Stock Exchange (NYSE).
Understanding the Dow Jones Industrial Average
(https://carigold.com/forum/attachments/dow-jones-index-1_0-jpg.498553/)
The DJIA is the second-oldest US market index, following the Dow Jones Transportation Average from 1884. At the time of its inception in 1896, the Dow Jones Industrial Average reflected the performance of companies only within heavy industries, like oil, machinery manufacturing and construction. The name and composition were decided by the editors of the Wall Street Journal.
Over time, the name transformed into something remote from its original meaning. Very few Dow Jones companies are related to industrial goods. Now, it mostly acts as a measure of the activity of the biggest companies in the US market, as stated previously. The top 10 companies in the index include:
(https://carigold.com/forum/attachments/546785-png.498554/)
How Is the Dow Calculated?
The Dow 30 is price-weighted, which means the member companies are weighted based on their price per share. Higher-priced stocks have a more significant impact on lower-priced ones. For example, if the issuing company's stock is $100, it'll be weighted more than a $50 stock.
This method is contrasted to weighing by market capitalisation of the index constituents. Examples of capitalisation-weighted indices include the S&P 500, FTSE 100, Nikkei 225, etc.
Share price weighting has some downsides, and it raises the question of whether it's just a holdover from the past. Share price mostly depends on the volume of issued shares. To put it simply, it mostly measures the cake by the number of slices rather than how big it is.
This is the reason why DJIA 30 isn't the true average of its constituents. The resulting index is calculated with a special divisor, which initially was taken arbitrarily. To ensure the continuity of the Dow index, the divisor adjusts to component the stock structural changes.
How Does the Dow Divisor Work?
To illustrate how the Dow divisor works, let's use an example:
1. A company trading at $100 undergoes a 2-for-1 split; it'll reduce the stock price to $50.
2. If our divisor remains unchanged, the index will drop, despite no fundamental changes in the stock.
3. To compensate for the effects of the split, the divisor is adjusted downward.
4. The overall index remains the same as it should.
The divisor is currently at around 0.1474. It accounts for such events as a stock split or a stock dividend for the index components to accurately reflect the value. Traders don't necessarily need to know the divisor, but it's still listed on the Dow Jones Indices' website and the Chicago Board of Trade.
Advantages and Disadvantages of Dow Jones
Does investing in DJIA fit into your financial plans? Here are some reasons that make this index a compelling instrument to trade:
- Convenience. You don't need to do as much research to make an investment decision. With the Dow index, you select only one instrument rather than pick many individual stocks. And all further actions will be executed easily, which isn't the case when you have multiple different stocks.
- Simplicity. This kind of trading activity doesn't require much technical knowledge, so investors can build a diverse portfolio without doing much work. Although, it may mean your profits are unlikely to skyrocket. But if you don't want to leave room for mistakes, this index is well worth it.
- Solid returns. The historical return on US stocks yields is close to 7% a year, which is a decent amount. Considering there are fewer and less impactful risks, many traders are inclined to use that to their advantage. For conservative investors, taking a familiar, less risky path is a better deal.
- Little room for emotions. Index investing is a rather sensible approach that doesn't encourage rushed and heated decisions. Unlike other trading methods, indexing takes a more measured, peaceful approach, without such an emphasis on trying to outsmart and outperform others.
At the same time, despite being one of the most crucial stock market performance trackers, Dow Jones has limitations and drawbacks related to this index:
- Flaws of a price-weighted index. DJIA gives some listed companies an unfair advantage. For example, a $100 stock has twice as much influence on the index as a $50 stock. However, the latter may have a more significant effect on the American economy.
- Insufficient representation. There are more than 5,000 common stocks listed on the Nasdaq and NYSE. The Dow tracks only 30 of them, which is a little part of it. So, an index measuring less than 1% of companies may give you misleading information on the activity of the entire market.
- Too rigid. In most cases, picking individual stocks will give you more flexibility. You have better control of your portfolio allocation, and you can buy/sell assets here and there. However, you get a bulk deal with indexing, and you're forced to invest in all companies on the constituent list.
How to Trade Dow Jones Index CFDs
(https://carigold.com/forum/attachments/dow-jones-index-2_0-jpg.498556/)
Stock index CFDs are a speculation tool that allows for tracking larger sectors of the overall stock market rather than individual shares. Let's see why CFDs are considered to give great exposure to global financial markets and whether they have any risks.
What Is CFD Trading?
CFD is short for Contracts for Difference. This form of trading allows you to speculate on the underlying assets without actually owning them. However, actions with the purchased contract work are similar to as if you owned the asset.
By taking a CFD position, you either profit or lose money due to the price difference of the index during a specific period. If traders think the index will appreciate in value, they open a long position, i.e., buy the asset. On the contrary, if the market is expected to fall, you can go short, i.e., sell it.
You can utilise leverage, which allows you only to use a portion of the trade value and borrow the remaining amount from your broker. However, it can go either way. You can increase your profits or expose yourself to more substantial losses.
Advantages and Disadvantages of DJIA CFD Trading
(https://carigold.com/forum/attachments/dow-jones-index-3_0-jpg.498557/)
There are numerous arguments in favour, as well as against CFD trading. We'll discuss all aspects to help you in your decision-making process and start with the CFD benefits:
- Potential benefits from both rising and falling markets
- You are not limited to one market or asset
- Amplified gains due to leveraged positions
- Minimised tax liabilities
- Stamp duty exemptions
Having said that, you should also consider a few drawbacks and decide in advance how you are going to mitigate them:
- Greater losses when trading with leverage
- Growing costs over long-term
- Risk of overtrading
Conclusion
The Dow Jones Industrial Average is one of the most widely followed market indicators for a good reason. It provides insights into the 30 blue-chip companies, as well as the US economy on the whole. But even if you have a useful tool measuring stock market performance, it's essential to approach it correctly.
Any market or financial instrument requires knowledge and appropriate skills. It's time to start practising to gain valuable experience on Libertex. Get a free demo account (https://libertex.com/blog/what-is-dow-jones-index#modal-demo) and sharpen your skills without risking real money, which is the best way to start trading.
-
Crypto winter or just another cold snap? Libertex explains
The past few weeks and months have brought carnage to the crypto markets. That's undeniable. Bitcoin is down more than 50% from its all-time highs, while ETH has bombed by almost 60%. And just when crypto investors thought they could at least rely on stablecoins to protect their digital wealth, we saw a totally unpredictable catastrophe hit UST (Terra) and DEI (Deus). Even the sector leader, Tether, has lost nearly 10% in the span of a week. You could be forgiven for thinking that this marks the beginning of an intractable bear market for digital assets, but haven't we been here before?
Circle of life
It may have seemed as if cryptocurrencies' extreme volatility was a thing of the past. After all, we were in a seemingly endless bull market, institutional investors were finally getting on board en masse, and ancillary markets like DeFi and NFTs were expanding at a rapid rate. However, this wouldn't be the first time we've seen leading digital currencies lose over 50% of their value. Everyone remembers 2018, but what about 2013 (-83%), 2012 (-56%) and 2011 (-99%)? The fact that the last major crash was a whole 4 years ago should really be taken as an optimistic sign for the future. At the end of the day, all asset classes are vulnerable to major drawdowns of 50% or more. Ups and downs are an inevitable part of every market's life cycle. As long as they aren't too frequent and remain relatively short-lived, we shouldn't be overly concerned.
Bear necessities
While passive investors and HODLers can take solace in the idea that crypto may have a very bright future ahead of it, active traders may wish to benefit on the way down as well as from the eventual recovery. They can potentially do so by buying the dip and investing regularly throughout the downtrend, thus reducing the average price paid and possibly maximising their potential percentage gain over time. Another solid bear market strategy is staking, which involves locking crypto into the blockchain for a period of time, generating a passive income. Indeed, following the demise of Terra, stablecoin staking yields have risen as high as 40% (USDD). But for those looking for the biggest risk-to-reward ratio available, shorting is by far the most potentially lucrative option. You can do this via options or futures, but have you ever thought about an interesting alternative way through Contracts for Difference (CFDs)?
So, what are CFDs?
CFDs or Contracts for Difference are unique financial products that allow you to trade on changes in the price of a given underlying asset without having to physically own the said asset. Best of all, this means you can just as sell an underlying asset as buy it. As a consequence, you need not worry about finding a physical buyer or crypto transaction speeds. As soon as you close out your position, the price you receive is guaranteed. There are many CFD providers out there, but Libertex has been recognised on multiple occasions as one of the most awarded and client-focused brokers on the market.
Why Libertex?
Apart from the annual awards and industry accolades, Libertex is renowned as a broker that puts its customers first. And because Libertex offers CFDs in a range of different underlying assets from virtually every asset class imaginable, users are able to store their entire holdings in one easy-access location. In fact, Libertex clients can maintain a diversified portfolio of CFDs on stocks, indices, gold and, yes, crypto – all in a single account.
If all that wasn't enough, Libertex even offers zero commission fees on all cryptocurrency CFDs, no swaps and exchange fees you’ll have to pay. All you'll be asked to pay is the spread (the difference between the Bid and Ask prices). Nothing more.
70.8% of retail investor accounts lose money when trading with this provider. You should consider whether you understand how derivatives work and whether you can afford to take the high risk of losing your money.
Available for retail clients on Libertex Trading Platform.
-
Definition of FTSE 100: Meaning, Composition and Strategies
The FTSE 100 index is one of the most popular choices for traders around the world. It represents the UK's top 100 companies and serves as a measure for the broader UK market. Since it comprises a large number of individual stocks, it produces a reliable signal compared to the American Dow Jones or the German DAX.
What Does FTSE Stand For?
FTSE is short for Financial Times and Stock Exchange, which refers to their joint ownership over the company. The FTSE Group maintains financial indices to measure sections of the overall stock market. Information on how a particular market segment is performing gives traders and investors invaluable insight.
The most well-known index produced by the FTSE Group is the FTSE 100. It embodies the overall performance of the 100 major companies in the UK listed on the London Stock Exchange (LSE). It provides a snapshot of the most highly capitalised 'blue-chip' companies, which are trusted and recognised.
Understanding the FTSE 100
(https://carigold.com/forum/attachments/ftse-1_0-jpg.499638/)
Every constituent of the FTSE 100 Index participates in the London Main Market. Combined, they account for about 80% of the total value of all publicly traded companies within the LSE. Currently, the top 10 companies that belong to the index include:
(https://carigold.com/forum/attachments/4523154-png.499641/)
The composition of the FTSE 100 index is revisited every quarter. The review usually takes place on Wednesdays following the first Friday in March, June, September and December. Any numbers and values used in the calculation are taken from the night before. The methodology relies on price changes of underlying constituents.
Market capitalisation is a defining factor by which companies make the cut. However, there are other conditions for being featured in the index:
- Being quoted on the LSE
- Staying compliant with the company's origin and liquidity ratio
- Remaining publicly traded stocks.
If it turns out a company doesn't meet all of the requirements, it gets taken out. The composition always includes 100 companies, so a new one is added to the list. Obviously, it must meet all the rules mentioned above.
Factors Influencing the FTSE 100 Index Price
(https://carigold.com/forum/attachments/ftse-2_0-jpg.499642/)
The price of the FTSE can be affected by a variety of events around the world. The most influential factors include:
- News regarding GDP
- UK manufacturing statistics
- Events in the Middle East
- Any global news, especially somehow relating to specific industries from the list
- Economic and political shifts.
Advantages and Disadvantages of FTSE 100
Just like any financial asset and instrument, the discussion around FTSE 100 has arguments both in favour of and against it. The upsides include:
- You receive instant exposure to the top companies in the UK with established positions in their respective industries
- It allows you to diversify your portfolio
- FTSE 100 tends to be cheaper to track
- There's no stock-specific risk since you have a composition of 100.
It's also essential to mention the downsides associated with this style of trading:
- Some stocks have high levels of debt
- There's minimal technology representation in the composition
- You may be conflicted about investing in the companies that make warships, produce tobacco and alcohol.
What Is FTSE 100 CFD Trading?
If you want to trade FTSE with CFDs, there aren't drastic differences from traditional trading strategies. You can set stop loss and limits, enter short or long trades, etc. Depending on your predictions, you can speculate on the index price in either direction.
What Is CFD Trading?
The acronym CFD stands for contract for difference. It's a financial instrument that allows you to trade assets, which in our case is the FTSE 100 index. One of the main distinguishing features of CFDs is that there's no actual delivery of the instrument being traded. When a trader acquires CFDs and then sells the contract, they make a profit due to price fluctuations for this asset.
Advantages and Disadvantages of FTSE 100CFD Trading
Let's take a quick look at what makes CFD an attractive way to work with the FTSE index. Major benefits for a trader include:
- Leverage. For example, if you have a 1 to 100 leverage, you can make 100 times more money than you would without it
- Suits beginners. You only need to place a small deposit to start. Leverage helps you significantly increase your investment capital when the market is not moving in your favour
- Varying contract sizes. Until you're confident in your skills and knowledge, you can start trading with smaller amounts. It allows you to minimise the consequences of any mistakes you make
- Provides flexibility. The instrument offers you opportunities for different future values of the asset. Whether you expect an increase or decrease, you can use it to your advantage.
Keeping all the pros in mind, it's crucial to be aware of the risks involved. The biggest risk is the downside of using leverage. If the market behaves differently than you anticipated, your losses may increase. Another disadvantage is large spreads, which can also affect your losses. However, if you apply the right approach, you can manage and offset these risks.
FTSE 100 CFD Trading Strategies
(https://carigold.com/forum/attachments/ftse-3_0-jpg.499643/)
When trading FTSE 100, you always need to make a thorough analysis and accurate charting. It's recommended that you use the moving average and RSI in your analysis. Be cautious when choosing a particular strategy:
- Bullish strategy. Use the indicators mentioned above and always apply a stop loss. You can use this strategy when the price has reversed or is already going down. However, the latter is riskier and more aggressive.
- Bearish strategy. You can use it for short- and long-term trading. A stop-loss would also be useful; you can also move the stop-loss if you have enough deposit.
Conclusion
The FTSE 100 gauges the overall sentiment in the UK market based on the most capitalised companies. It has great prospects, which makes it such a widely traded instrument.
If you want to try it out on CFDs without risking money, open a free demo account on Libertex (https://libertex.com/blog/definition-ftse-100-meaning-composition-and-strategies#modal-demo). Having theoretical knowledge is essential by practising. Develop your skills in a controlled environment.
-
What Is the CAC 40 Index: Meaning, History and Trading Tips
The CAC 40 is one of the stock market indices you'll always see included in business news round-ups. It represents the overall performance and the economic health of Europe and France in particular.
When it officially launched in 1988, it coincidentally was registered at an all-time low. An all-time high was recorded in September 2000. But what about the CAC 40 index now, and is it worth investing in? Let's explore what purposes this index serves, how it's calculated, and what trading strategies can yield good profits
What Is the CAC 40 Index?
The CAC 40 is a free-float capitalisation-weighted index. It quotes 40 of the largest and most actively traded shares in France and is considered a measure of the economy and the Paris stock market. It's similar to what Dow Jones represents for the United States, FTSE 100 is for the UK, Nikkei 225 is for Japan, etc.
Originally, the acronym CAC meant Compagnie des Agents de Change. It was a group of brokers that operated the Paris Stock Exchange since at least the 16th century. The initial sentiment was transformed, but the acronym stayed.
Companies within the CAC 40 composition account for about 20% of market capitalisation in Europe, which shows how influential it is. It's also tightly connected to the Euro Stoxx 50 index, where they have almost 20 companies in common. CAC often catches the attention of international investors, with almost half of CAC 40 shares held by non-residents and a quarter owned by investors outside of the Eurozone.
What Are CAC 40 Companies?
(https://carigold.com/forum/attachments/cac-40-1_0-jpg.500424/)
The CAC 40 represents various industries within the French economy. Some sectors include personal products, pharmaceuticals, banking, industrial materials, telecommunications, publishing, media and entertainment, chemicals, etc.
The composition of the index is reviewed multiple times a year by the Conseil Scientifique. They study market capitalisation and turnover of constituent companies. They make their selection after the close of the third Friday of March, June, September and December.
(https://carigold.com/forum/attachments/%D0%9D%D0%BE%D0%B2%D1%8B%D0%B9-%D0%BF%D1%80%D0%BE%D0%B5%D0%BA%D1%82-5-png.500464/)
It's not uncommon for companies to be taken away from the list. Here are some criteria companies need to meet to be admitted to the CAC 40 listing:
- Euronext Paris as a market of reference
- Significant activities and presence in the French economy
- Members of staff and/or headquarters located in France
- Sizable trading volumes.
Factors Influencing the CAC on the Stock Exchange
The key factor you need to understand about CAC 40 is that it relies on French economic activity. In addition to that, multiple accompanying influences affect its price and general market sentiment. To make the right decisions, you should stay informed on:
- National events (GDP, the employment and unemployment rates, trade balance)
- Global events (international politics, related indices, Eurozone governance)
- Performances of quoted companies (capitalisation, turnover, etc.)
- Major changes in companies' structures and policies.
Advantages and Disadvantages of the CAC Index
(https://carigold.com/forum/attachments/cac-40-2_0-jpg.500425/)
These days, you can find hundreds of assets that you can trade with. Below are some arguments favouring the CAC 40 Index:
- Indices are more liquid than equities.
- CAC 40 traders are exposed to lower risks because it's made up of several stocks.
- France remains one of the leading economies in Europe, so it makes sense to invest in French indices.
- It's easier to keep track of one index rather than many individual companies.
There's no such thing as a perfect trading asset. So, for transparency reasons, let's take a look at the downsides of CAC 40:
- You have no control over individual index components.
- This index doesn't provide exposure to smaller-cap companies.
- The index price calculation isn't always fair.
CAC 40 CFD Trading
As a trader, you can't buy indices, including CAC 40, because they're just benchmarks. However, it doesn't mean it's unfit for trading at all, this is where you should go for CFDs. There are many perks to using this particular instrument, and you will see why.
What Is CFD Trading?
CFD stands for contract for difference and acts as a form of derivative trading. In recent years, CFDs have become a popular method for online investing. It can be applied to indices, commodities, currencies and stocks.
When you work with CFDs, you aren't actually purchasing an underlying asset directly. Instead, you engage in a contract with a CFD broker and buy/sell a number of units for a particular financial instrument. No matter which way the market goes, CFDs are suitable when you expect prices to go up or down.
Advantages and Disadvantages of CFD CAC 40
If you're interested in working with CAC 40, it makes sense to enter the market using CFDs. With CFDs, you can:
- Use CFDs as a quicker and more accessible medium for trading.
- Gain exposure with less capital by using leverage.
- Take advantage of all market movements.
- Save money from stamp duty exemption.
At the same time, you shouldn't overlook some downsides associated with this technique:
- There are additional risks when trading with leverage.
- You still have to pay fees: spread, holding costs and commission.
CAC 40 CFD Trading Strategies
(https://carigold.com/forum/attachments/cac-40-3_0-jpg.500426/)
When you trade the CAC 40 with CFDs, you can use leverage to increase gains in a relatively small amount of time; at the same time, leverage also increases potential losses, up to your entire capital. You can only do so if you pick the right strategy. You can employ regular strategies, but remember to consider specific characteristics of CFDs. Here's how you behave during:
- Bullish market. Even during rising markets, prices inevitably go through occasional consolidation or retracement periods. Try swing trading to benefit from these small reversals and get maximum returns
- Bearish market. Since CFDs allow you to trade in all directions, you can go short when prices are falling. So, even in tumultuous periods, you have the option of buying in through CFDs.
Takeaways on the CAC French Stock Index
The CAC 40 is a great asset to diversify your portfolio. It exposes to a variety of the most prominent French companies and provides decent potential profits (when done right). It suits all kinds of traders; you can trade as much or as little as you want.
Before you're ready to enter the real market, you need to learn the basics. At Libertex, we offer a wide range of resources to build your trading skills. Sign up for a free demo account (https://libertex.com/blog/what-is-cac-40#modal-demo) to ensure you'll be managing your future CFD portfolio properly.
-
Crypto’s meteoric rise: exploring the history with Libertex
It wasn’t too long ago that crypto was such a niche asset class that nobody other than computer whizzes and insiders had even heard of it. However, all that changed in 2017 when these little-known instruments began to dominate headlines following unprecedented gains in the space of just a few months. Indeed, by the end of that same year, Bitcoin had risen 2000% to reach a day high of $19,650. Nevertheless, it still took another three years before digital currencies became a regular fixture in most institutional portfolios.
In this article, we’ll track cryptocurrencies’ journey from obscurity to the limelight as we explore how they made their way through early adopters, young retail investors, and finally, into the holdings of pension funds, changing the lives of many along their way.
The early days (2009-2012)
Immediately following Satoshi’s launch of the original cryptocurrency in 2009, prices hovered around zero for nearly two years. It wasn’t until 2011 that BTC eventually reached parity with the US dollar. What followed was not unlike what we saw in the big boom and bust of 2017. Prices on Mt. Gox rose from $1.00 to $30.00 in the space of a few months before crashing back down to $5.00 by the end of 2011. Despite the percentage gains being equally as impressive as those seen in recent bull markets, this whole episode went more or less unreported in the media. Why? Well, back then, Bitcoin’s market cap could be counted in the tens of millions of dollars, and adoption was virtually non-existent. Beyond early crypto aficionados and dark web criminals, barely anybody actually owned BTC or even knew what it was. In fact, in 2010, BitcoinTalk user SmokeTooMuch tried to auction off 10,000 BTC (currently worth $350 million) for just $50…but couldn’t find a buyer.
A turning point
Ten years ago, the only big-name company accepting Bitcoin was WordPress (added in 2012). And unless you wanted to buy something from a handful of independent BitPay merchants, using BTC legitimately was quite difficult. But all of this changed in early 2013 when the Internet Archive started accepting Bitcoin donations and even offering to pay part of its employees’ salaries in the digital currency.
A short time later, OkCupid and Foodler began allowing users to pay for services in BTC. This was followed by the opening of the world’s first Bitcoin ATM in Vancouver. The University of Nicosia in Cyprus even started letting students pay their tuition fees in the cryptocurrency! All of this then paved the way for many more companies to add Bitcoin to their payment methods in the years that followed, but that was not all. It also served as a watershed moment that saw the first wave of ordinary retail investors pile into the market at an average price of around $500.
The Great Bitcoin Boom 1.0
Bitcoin started 2013 at around $13.00, but by December, it was worth over $1000. Despite short-term fluctuations and corrections, it’s safe to say that any hodlers that got in back then have made life-changing returns in the space of less than a decade. Nonetheless, it wasn’t until 2017 that BTC really made it onto the mainstream media radar. Sure enough, the gains were indeed spectacular: Bitcoin went from a price of around $900 in January to a 15 December high of $19,650, doubling its 1000% rally from four years prior. The key difference this time around was that, even after the typical post-bubble >80% correction, Bitcoin never revisited its pre-2017 lows. The extensive coverage of this year-long bull run saw large numbers of new retail investors enter the space. While many of these did make significant paper losses in 2018, those who held on would be more than happy with their gains today. Furthermore, the buzz around Bitcoin also helped nascent projects like Ethereum (2015) and Cardano (2017) attract new users and capital as a so-called ‘altcoin’ market began to take shape.
A world of possibilities
Perhaps the most interesting facet of this most recent crypto boom was that it was largely driven by the long-awaited arrival of institutions and legacy investors. Indeed, a staggering $9.3 billion of institutional capital flowed into digital asset classes in 2021, marking a near 36% jump against $6.8 billion in 2020 and virtually nothing in 2017. Meanwhile, Bitcoin has been made legal tender in economically challenged El Salvador, while the original cryptocurrency has taken on new roles as a store of value in inflation-stricken Turkey and a secure means of free, cross-border exchange in war-torn countries across the world.
But one of the most exciting ongoing industry developments since 2020 has to be the emergence of the DeFi and NFT segments, which have respective CAGRs of 47% and 35%. What’s more, this market is virtually all altcoin. Bitcoin is barely present; instead, it’s Ethereum, Cardano, Solana, Terra Luna and other smart contract-enabled coins and tokens that rule the space. It could well be that these are the kinds of projects that see the most growth going forward, and many future-minded investors are already stockpiling these like the pioneer Bitcoin hodlers of the early 2010s.
Libertex is a wise option for exploring crypto CFDs
For many traditional traders wishing to add crypto to their portfolios, the biggest barriers are security and ease of access. Luckily for them, experienced CFD broker Libertex has fully incorporated CFDs on digital assets into its standard instrument offering. Libertex now offers over 50 CFDs on coins and tokens to its user-friendly app.
Best of all, Libertex has recently made its zero-commission crypto offer a permanent fixture, which means that Libertex clients no longer pay any fees or charges on cryptocurrency CFD purchases, sales or exchanges. All they have to pay is the spread (the mid-point between the Bid and Ask prices for a given asset). For long-term hodlers, this can translate to massive savings and have a significant impact on the size of any returns potentially earned. As for convenience, it’s probably unbeatable. Libertex clients’ crypto CFD transactions are stored alongside their other trades and investments in the Libertex trading platform and are thus accessible at any time, day or night.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads in the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Cryptocurrency instruments are not available to retail clients in the UK.
Available for retail clients on the Libertex Trading Platform.
-
What Is A Stock Split? Definitions, Types, Pros and Cons
At face value, a stock split is supposed to make a stock more affordable for investors. Sounds good, right? Well, it's a little more complicated than that. You have to consider the type of split, of which there are several.
And what if you already own shares in that company? Should you sell them off prior to the split, or should you hold off?
It can be confusing, but this article will break down stock splits. Read on to learn about the stock split, different kinds of splits, their pros and cons and how a split will affect you if you already hold stock in the company.
What Is a Stock Split?
Here's the basic split stock definition: when a company splits its stocks, it increases the number of shares it has issued, which boosts liquidity. It's important to note that the split doesn't change the company's value. Therefore, even though the number of shares outstanding increases, their total dollar value stays the same.
So, if you own shares in a company that splits its stocks, is your investment suddenly cut in half? Well, yes and no. In a basic 2-for-1 stock split (which we'll explain in more detail later), the price of one share halves. BUT, as an investor, your one share becomes two shares, so you still have the same dollar amount invested.
If you're confused, don't worry! We'll walk you through an example.
How It Works: Example
Let's take a look at a real-life stock split. In August 2020, Apple carried out a 4-for-1 stock split. Prior to the split, a share was worth about $540. Because the company did a 4-for-1 split, the share amount was divided by 4. $540 divided by 4 is $135, so that's what the new share price was.
If you held five shares of Apple before the split, it would have been worth $2,160. After the split, you still would have owned $2,160, but you would have twenty shares instead of five.
When Does a Company Decide to Split Stock?
So, if your dollar amount invested stays the same before and after a stock split, what's the point?
It's more of a benefit for the company and for investors with less capital. By splitting its stock, a company is able to make its share price more attractive to a greater number of people. In the example above, Apple's shares were originally $540 each, which would be a daunting figure to many amateur traders. But after the 4-to-1 split, the new price was $135, which was much more attainable for a wider pool of investors.
That's the driving force behind a stock split, but a company can also carry out a reverse stock split. We'll cover it in great detail later in this guide, but we'd like to give you a brief overview now. With a reverse stock split, a company does the opposite: they reduce the number of shares and increase the value of each one.
A company might choose to do a reverse stock split if they are in danger of being removed from an exchange. Stock exchanges require a minimum share price. For instance, the Nasdaq requires a minimum price of $4 per share.
Will It Influence Your Taxes and Cost Basis?
A stock split is not a taxable event. After all, the company's total market value is the same, and you're not making any gains. After you sell the stock, you'll be taxed on profit made, but this would happen regardless of the split.
Something to keep in mind, though: even though a stock split doesn't change your overall basis, your 'basis per share' will be adjusted. You'll need to calculate the new per-share basis, so you can calculate losses and gains correctly when you decide to sell your stock.
It's a pretty easy process, though. Your original per-share basis is found by dividing the amount you paid by the number of shares purchased. So, if you paid $100 to buy 10 shares of a company, your per-share basis is $10.
If the stock experienced a 2-for-1 split, you would then own 20 shares instead of 10. So, just divide $100 by 20 (or divide $10 by 2 since it was a 2-for-1 stock split), and your new per-share basis is now $5.
Types of Stock Splits
Now that you know how stock splits work in general, let's take a look at each kind. When a company undergoes a stock split, you'll see a certain number template: X-for-Y. It represents a ratio of shares, with X being the new amount and Y being the original amount.
(https://carigold.com/forum/attachments/stock-split-1-jpg.502377/)
4-for-1
The company's shares are split into 4. Let's say a company has 100 million shares outstanding, and each share is worth $100. After the split, they will have 400 million shares outstanding, and the share price will be $25.
2-for-1
The company's shares are split into 2. Following the example above, the company's 100 million shares will be split into 200 million shares. And the share price would decline from $100 to $50 per share.
10-for-1
It's the same thing here! The company's shares are split into 10. Instead of 100 million shares, they now have 1 billion shares. And in this 10-to-1 stock split, the share would drop from $100 to $10.
3-for-2
So, a company announces a 3-for-2 stock split, meaning shares will increase by 1.5x. So, the 100 million shares increase to 150 million. To get the share price, you'd divide the original one by 1.5. $100 divided by 1.5 is $66.66, which would be the new share price.
What Is a Reverse Stock Split?
A reverse stock split works very similarly to a forward split. The one exception, of course, is that it moves in the opposite direction: the number of shares decreases while the price increases.
We previously mentioned that a company might do a reverse stock split if they need to increase the price per share to stay listed on an exchange. There are also a couple of other reasons: perhaps they want a higher price to gain more attention from analysts or to boost their company's image. In general, a company's reasons for reverse splits are related to improving its reputation.
What Does a Reverse Stock Split Mean for Shareholders?
As with a stock split, the company's market capitalisation will be the same afterwards unless they decide to pay fractional shares out as cash. To illustrate this, let's say you own 10 shares in a company that does a 1-to-3reverse split. After the reverse split, rather than ending up with 3.33 shares, you'll have 3 shares and receive the cash equivalent for the remaining 0.33.
This scenario does have tax implications; the cash paid out will be subject to capital gains or losses, dependent on your holding period and cost basis.
Is a Reverse Stock Split Good or Bad?
There's no clear-cut answer here, as every company's situation is different. It helps to know, however, that reverse stock splits have a negative connotation, as companies that use this scheme are often in distress.
However, if the company makes operational changes along with the reverse split, they stand a decent chance of turning things around. So, an upcoming stock reverse split isn't always a signal to sell. If you hold stock in a company that's announced a reverse split, do some research before selling your shares in a panic. Read press releases, compare earnings reports, get up to speed on new initiatives within the corporation and carefully review recommendations from investment analysts.
To prove this point, let's look at some reverse splits that have turned out really well for their companies:
- Laboratory Corporation of America (NYSE: LH) turned to a 1-for-10 split in 2000. The company experienced great success after the split and ended up doing a forward split two years later. The company has not needed to perform a split again since 2002.
- Priceline.com (now Booking Holdings Inc) performed a 1-for-6 reverse split in 2003. Unlike LH, Priceline did not do a forward split later. However, the company has excelled over the last two decades, and its share price has grown from a mere $20 to over $2,000!
Forward Stock Splits vs Reverse: Pros and Cons
Before we close out this article, let's take a look at the pros and cons of forward and reverse stock splits.
Forward Split
(https://carigold.com/forum/attachments/2-png.502379/)
Reverse Split
(https://carigold.com/forum/attachments/3-png.502380/)
Conclusion
A stock split — forward or reverse — doesn't change the market capitalisation of a company. It does, however, alter public perception, make share prices more affordable or more expensive and (in the case of fractional shares in a reverse split) may come with tax implications.
Generally, a forward split is seen as a positive sign, while reverse splits indicate poor financial health.
However, this isn't always the case: there are companies that have flourished after reversals and companies that have struggled after forwards. Before buying or selling shares from a company that's splitting stock, make sure to study the reasons behind this choice. Is the company exceeding or falling short of revenue projections? What is the market sentiment? Just make sure to do plenty of research!
-
How to Read Stock Charts When Trading
If you're new to trading, you may have some questions about where you should begin. With so much information on trading and the stock market in general, getting started can often feel daunting.
This article will take you through the basics of how to read charts for trading. If you can read stock charts and correctly interpret the information represented on them, this increases your chances of placing wise trades.
So, if you want to know more about how to read charts and how to understand the data presented on them, read on!
Types of Stock Chart
There are four main types of stock charts: bar charts, candlestick charts, line charts and point and figure charts. Each type has its benefits, and as you learn more about them, you may find that you prefer one type over another.
This section will explain a little about each chart type and why they are useful.
Bar Charts
(https://carigold.com/forum/attachments/how-read-stock-charts-1-jpg.502754/)
Bar charts allow you to determine four bits of information for the trading day:
- The opening price
- The closing price
- The highest price
- The lowest price
Bar charts can be used to display different lengths of time. They might break down price action over weeks or over minutes. It all depends on what's more useful for the trader.
You should be able to learn how to read bar charts fairly quickly because they have a clear, stripped-back layout. Each day is represented by a vertical line. This line shows the trading range of that day (or week, or hour, depending on the timeframe the chart covers). Two horizontal lines stick out from the vertical bar, one pointing left and one pointing right. The former indicates the opening price of the day, while the latter indicates the closing price.
These types of charts are particularly useful for analysing trends. You can use them to try and find possible trend reversals or to keep an eye on price movements and volatility.
Candlestick Charts
(https://carigold.com/forum/attachments/how-read-stock-charts-2-jpg.502756/)
Candlestick charts present the exact same data as bar charts, but the information is displayed in a different format. Each period of time is depicted as a candlestick made up of two parts. The first part is a rectangle, called the "real body", that shows the range between the opening and closing prices. If the closing price is higher than the opening price, the real body is green; if it is lower, then the body is red.
The second part is a thin line extending from this that shows the high-low price range, known as "the shadow". You'll notice that the shadow sticks out both the top and bottom of the real body; the part that sticks out the top is known as "the wick", while the part that sticks out the bottom is called "the tail".
Candlestick charts are used fairly often by traders. This is because they impart a lot of information. The length and colour of a candlestick can instantly let you see what direction the market is moving in and whether it is weakening or strengthening.
Line Charts
(https://carigold.com/forum/attachments/how-read-stock-charts-3-jpg.502757/)
Line charts are the most straightforward form of stock market chart out of the four we have considered. A line chart can only be used to show daily closing prices. Closing prices are plotted onto a chart and connected with a single line.
Even though a line chart doesn't convey as much information as a bar or candlestick chart, line charts are still quite useful. They allow traders to instantly get an idea of a security's overall performance over a given time period without being overwhelmed by irrelevant pieces of information.
That said, some traders need the additional information provided by charts like bar and candlestick charts to deploy their methods well. Line charts may be useful to some but not to others. When it comes right down to it, the matter is entirely subjective.
Point and Figure Charts
(https://carigold.com/forum/attachments/how-read-stock-charts-4-jpg.502758/)
The final type of chart this article will consider is the point and figure chart. This type of chart is solely concerned with the price of a security and doesn't take into account volume or time.
Point and figure charts use Xs to symbolise price increases and Os to symbolise price decreases. Using this method, it can be easier for traders to identify trends and trend reversals. That said, since this type of chart doesn't record time, it can't be used to determine how long it may take for certain goals to be met.
There are several benefits to point and figure charts, even despite this limitation. For one thing, because these charts are limited to showing price increases and decreases, they can help traders focus on important market movements and visualise support and resistance levels.
Basic Stock Chart Terms You Should Know
Now that we've gone over the different types of stock charts you might come across, this section will explain a few basic stock chart terms you should know. Having a firm grasp of these ideas is essential to explore the market:
Open, high, low and previous close
These terms are used to describe price movement during market hours. The open is the initial price a security trades at when the market opens. As you may have guessed, high and low refer to the highest and lowest price points the stock reaches during market hours. Finally, the previous close is a term used to refer to the final price of the security in question at the end of the previous trading day.
Market cap
Short for "market capitalisation", the market cap of a company is a measurement of its size based on the number of outstanding shares it has on the market multiplied by the company's share price. A company's market cap represents the total market value of a business' outstanding stock.
PE ratio
PE ratio stands for price-to-earnings ratio. Sometimes traders use the PE ratio to decide whether or not a stock has been fairly valued.
Dividend yield
An annual dividend yield is the amount of money a trader receives annually from dividends — profits distributed from a company to its shareholders. It's given as a percentage of the company's current share price.
Bid and ask
A bid is a term used for the maximum price a trader will pay for a particular stock. If you see a price listed as the bid, that means traders are willing to pay that current price for a share. While a bid is the highest price a trader will pay for a stock, the ask price is the opposite. The ask price represents the absolute lowest price a trader will sell a particular stock for. You might see the term "bid-ask spread" mentioned regarding stocks. This is the difference between the bid and the ask.
Volume, average volume and day range
Volume refers to the number of shares that have been traded during the market day. As the name implies, average volume refers to the average daily volume of shares traded during a specific duration of time. The day's range refers to the stock's highest and lowest prices on a given market day.
Beta
A stock's beta value is a measurement of its volatility when compared with the market. The beta gives traders an idea of how risky it is to purchase shares in that stock. If a stock's beta is more than one, this indicates that it has been relatively volatile in the past when compared to the market. If the beta value is less than one but more than zero, this shows that when compared to the market, it has been less volatile.
Earnings per share
Otherwise known as EPS, a company's earnings per share is the amount of profit per outstanding share made over the past year. You can figure out a company's EPS by dividing its most recent company earnings by the number of shares they have listed on the market.
Ex-dividend date
To get dividends from a company for the next business period, you have to make sure to purchase stock before the ex-dividend date. If you become a shareholder after this date, or even on the day, you'll miss out on that period's dividend.
One-year target estimate
This term is quite self-explanatory. A one-year target estimate is an approximation of what a stock's value might be in a year's time. While such forecasts can sometimes prove useful, a one-year target estimate is just that: an estimate, not a guarantee.
How to Read and Interpret Charts Using Technical Analysis
This section will explain how to read and understand trading charts by analysing statistical trends to try and identify potential entry and exit points. For example, traders might examine fluctuations in stock volume or price, using trends and patterns to determine how the stock might behave going forward.
Patterns in stock market movements can be categorised into two groups: continuation and reversal patterns.
Continuation Patterns
Continuation patterns indicate that a particular price trend will probably remain steady. They are found in the middle of a trend and signal to the trader that the trend will most likely continue once the pattern has been completed. Continuation patterns can be found on daily charts, weekly charts, and even tick charts.
Let's now consider five commonly occurring continuation patterns that traders look for and work with: pennants, flags, wedges, triangles and cup and handle.
Pennants
(https://carigold.com/forum/attachments/how-read-stock-charts-5-jpg.502759/)
Pennant charts are plotted with two trendlines — an upward and a downward trendline — that converge at a point. They are drawn when the volume or value of a security sees a particularly dramatic movement and is then followed up by a consolidation period and a further breakout period where the market moves in the same direction as before. Converging trendlines are drawn during the stock's consolidation period to try and determine when the next peak in value or volume will be.
Flags
(https://carigold.com/forum/attachments/how-read-stock-charts-6-jpg.502760/)
With flag charts, two parallel lines are plotted onto a chart. These lines may slope up, down or diagonally. A flag chart that slopes downwards usually indicates a pause in an up-trending stock market, while the opposite is true of upward-sloping flag charts. Flag charts are used to try and determine the likelihood of a previous trend continuing.
Wedges
(https://carigold.com/forum/attachments/how-read-stock-charts-7-jpg.502761/)
Like pennant charts, wedges are also drawn with two sloped, converging trendlines. Unlike with pennant charts, however, the trendlines on a wedge chart both move together in the same direction. Wedge charts that slope downwards indicate a pause in the middle of an uptrend, and the opposite is true of upward-sloping wedge charts. These types of charts are especially useful for forecasting future price reversals.
Triangles
(https://carigold.com/forum/attachments/how-read-stock-charts-8-jpg.502762/)
Triangles are an extremely popular type of chart among technical analysts. This is because, compared to other patterns, triangles appear relatively frequently. There are three kinds of triangles most typically encountered by stock chart analysts: ascending triangles, descending triangles and symmetrical triangles.
Ascending triangles include an ascending lower trendline that converges with a flat upper trendline. These types of triangles suggest that an upward breakout is quite likely. Descending triangles are instead characterised by a downward sloping upper trendline and flat lower trendline and usually suggest that a breakdown is imminent. Finally, symmetrical triangles are characterised by two sloped, converging lines. These types of triangles indicate that a breakout may occur but not in the direction one will occur.
Cup and Handle
(https://carigold.com/forum/attachments/how-read-stock-charts-9-jpg.502763/)
A cup and handle chart is a pattern that appears when an upward trend has momentarily paused but will soon continue. The name refers to the shape of the chart, with the "cup" referring to a U-shaped line on the chart and the "handle" referring to a breakout that sticks out from the cup in a similar shape to a flag chart. Traders use cup and handle charts to determine whether or not they should go long on a particular stock.
Reversal Patterns
Reversal patterns are chart patterns that indicate a change in a particular trend. This trend will come to a stop before heading in a new direction — rising or falling depending on whether the market is bullish or bearish. When stock prices reverse after this pause, the resultant pattern is known as a reversal pattern.
This article will now consider four different kinds of common reversal patterns: head and shoulders, double top, gaps, and bull and bear traps.
Head and Shoulders
(https://carigold.com/forum/attachments/how-read-stock-charts-10-jpg.502764/)
Head and shoulders appear either at the top or bottom of the market. They are characterised by a small peak or dip, followed by a larger one, and finally a smaller one again that appears similar to the first. A head and shoulders pattern may indicate a trend reversal and is widely considered one of the most reliable types of trend reversal patterns.
Double Top
(https://carigold.com/forum/attachments/how-read-stock-charts-11-jpg.502765/)
A double top pattern on a market chart indicates a point where the market has tried two times to breach a resistance or support level and has failed. Double tops look similar to the letter M, while the inverse, the double bottom, looks more like the letter W. The former indicates that the market has tried to push up through a resistance level. The latter signals that it has instead attempted to push down through the support level.
Both double tops and double bottoms serve as useful indicators of trend reversals.
Gaps
(https://carigold.com/forum/attachments/how-read-stock-charts-12-jpg.502766/)
Gaps can be observed on stock charts when a relatively large decrease or increase in value causes a break between two separate trading periods. There are three kinds of gaps to be aware of: breakaway, runaway and exhaustion gaps. Breakaway gaps occur at the beginning of a new trend, runaway gaps in the middle of one and exhaustion gaps towards the end. While it's not difficult to identify gaps in the market, it's a great deal more difficult to determine what sort of gap it is, meaning you won't be able to play the gap each time.
Bull and bear traps
(https://carigold.com/forum/attachments/how-read-stock-charts-13-jpg.502767/)
Bull and bear traps are false indications that a particular asset is bullish or bearish, often induced by companies. In the case of the former, the security appears to be climbing higher and higher in value, tempting traders to join. When the trend abruptly reverses, however, traders must pull out of the trade or else get caught in a long position.
Bear traps are the opposite of bull traps. The market appears to be declining, and so traders make short plays in hopes of making a profit off the asset's drop in price. In the end, though, the security continues increasing in price, which means these traders miss out.
Since bull and bear traps are by their very nature unpredictable, it can be difficult to spot them. However, with rigorous application of technical and fundamental analysis, you can hopefully avoid falling for potential traps.
The Bottom Line
To identify stock chart patterns, it's important to pay attention to the movement of trendlines. Through the application of technical analysis, you can use stock chart patterns to forecast future market behaviour.
There is no guarantee your prediction will be 100% accurate, but if you practice technical analysis, you may one day be able to successfully predict trend reversals and continuations.
Conclusion
This article has gone over the basics of how to read technical charts and has provided a few common examples of stock chart patterns. We'll leave you now with a few common practices for reading and analysing stock market charts:
- Identify the trendline. You can't find patterns in stock market charts without first identifying the trendline. Practice looking at different sorts of graphs and trying to interpret them to get comfortable with them.
- Look for lines of support and resistance. Another important feature to be able to identify is support and resistance lines. The support line is the point at which the market stops falling and starts to rise again. The resistance line is the point at which the market stops increasing and begins to drop again.
- Know when dividends and stock split occur. When dividends and stock split occur, the overall value of a business isn't affected, but its share price might be. Oftentimes, when a stock split comes about, the share price drops, so you'll usually see an increase in the trendline.
- Understand historical trading volumes. There isn't always a direct correlation between trading volume and stock value, but it's still useful to have an understanding of previous trading volumes.
-
Technical Analysis: Directional Movement Index
Get ready for another instalment in our technical analysis educational series. After a multi-week hiatus, we’re back and ready to share even more knowledge and practical skills on this highly useful, frequently underestimated trading tool. Both short-term traders and long-term investors can potentially benefit greatly from using technical analysis properly. Doing so can help market participants pick optimal entry and exit points, which makes technical analysis a useful string to anyone’s bow. After covering the Average True Range in our last piece, this week, we decided to shed light on a little-known indicator known as the Directional Movement Index (DMI).
What is the DMI?
The directional movement index, or DMI for short, is a trend indicator developed by legendary market analyst J. Welles Wilder in 1978. It works by identifying the direction in which the price of an asset is moving. It does this by comparing prior highs and lows and drawing two lines: a positive directional movement line (+DI) and a negative directional movement line (-DI). There is also an optional third line called the average directional index (ADX), which can also be used to gauge the intensity of the uptrend or downtrend. Basically, when +DI is above -DI, it means upward price pressure is greater than downward pressure. On the other hand, when -DI is above +DI, this means the greater pressure on the price is downward. In the Libertex app, it’s possible to calculate and overlay the DMI directly onto any chart, sparing us significant mathematical gymnastics.
Given DMI’s use when it comes to establishing the direction and strength of trends, long-suffering Bitcoin could be an interesting instrument to apply it to on the monthly chart. Of course, you can use it with any instrument and timeframe you like, but let’s try this one. All you need to do is go to your Libertex account, enter full-screen mode on the chart timeframe of your choice, place your cursor over the indicators tab, select ‘Trend’ and then click ‘Directional Movement Index’ as shown below:
(https://carigold.com/forum/attachments/1_6-png.504221/)
Why use DMI?
Whilst not the most famous indicator we’ve looked at, DMI is an excellent method for reliably assessing both the direction and strength of a given trend. When used in conjunction with some of the other TA tools we’ve reviewed (notably the ATR and RSI), it becomes an even more powerful predictive tool.
Crossovers are the main trading signal generator with the DMI. For instance, when the +DI crosses above the -DI, it indicates an uptrend. Conversely, a sell signal is generated when the +DI instead crosses below the -DI. Like any technical analysis method, it is far from flawless and should typically be combined with other complementary indicators, as mentioned above.
Practical applications
The most practical use of the indicator is as a trade confirmation tool. Essentially, if the -DI is well above +DI, the trend has serious strength on the downside. Naturally, this will provide a solid confirmation for a short position. Let’s look at that same monthly BTC chart with the DMI overlaid and see if we can spot the signal:
(https://carigold.com/forum/attachments/2_2-png.504222/)
Naturally, this isn’t a fool-proof method, but in day-trading – not much is.
As the ATR doesn’t tell us which direction the breakout will occur, we need a trend confirmation (i.e. whether the given stock is overbought or oversold) in order to pick a direction for the trade. Let’s look at that same Google chart now with both the ATR and RSI overlaid:
Look closely at the point at which the two lines intersect (circled in yellow). After this, the -DI (orange) clearly pulls away from the +DI, leading to the initiation of a powerful downtrend that has lasted until the end of the current month (May). While on this occasion, the signal was both correct and leading, there are many false signals generated by the DMI, and it’s wise to seek confirmation through the use of another trend indicator, such as the RSI.
With that in mind, let’s add the RSI to this same chart and see if we get a confirmation:
(https://carigold.com/forum/attachments/3_3-png.504223/)
Notice the spike in the RSI just at the exact same point that the DMI crosses over? This indicates a sharp increase in buying just at the moment that the downtrend begins to form. Taken together, you could feel relatively confident opening a short position on the basis of these indicators. Of course, it’s always wise to seek further confirmation as nothing is certain in trading, and the more data you have on your side, the better.
With the crypto market under pressure at the moment, Bitcoin would actually be quite an example to track to see whether a dominant downtrend is taking hold or a correction to the upside is at hand. And thanks to Libertex, you can now trade Bitcoin CFDs as well as dozens of other cryptocurrency CFDs.
Practice makes perfect with Libertex
As with all TA tools analysed in this series, we must stress that this indicator shouldn’t be considered perfect. However, it is definitely a good weapon in your arsenal and can certainly assist you in selecting suitable buying and selling points. Every indicator we’ve studied thus far can be used in combination with each other for optimal accuracy, and we highly recommend you practice doing exactly that on your free Libertex Demo Account (https://libertex.com/).
-
How to Research Stocks: Everything a Beginner Should Know
When you're thinking about investing your money in the stock market, it's important to do your research first. This means looking into the company, the sector it operates in and the market as a whole.
Research helps you evaluate an asset's strengths, weaknesses and growth potential. No matter whether you're buying stock, an ETF, trading CFDs or a relatively predictable savings bond, you need to examine the pros and cons.
With thorough research, you can minimise your chances of loss. There are several ways that you can go about researching stocksand other tradable assets. The most important thing is to make sure that you're using multiple sources of information and interpreting that information correctly. In today's article, we'll explain where to find information on stocks and which factors you should pay close attention to.
Please note: there's no such thing as a guaranteed investment. Even if you do all of your research, there's still a risk that you could lose your money. So, before investing in the stock market, make sure that you're comfortable with the level of risk — only invest money that you can afford to lose.
Where to Find Stock Research Materials
Investors can use various sources when looking for reliable and credible stock research materials. Here are a few to get you started:
Stock Research Sites
A variety of subscription-based and free websites focus on providing investors with analyst recommendations, forecasts, newsletters, calendars, charting tools, etc. For instance, credible websites include The Wall Street Journal's Markets section and Bloomberg's Investing section. If you just want objective information, such as historical price data, market cap, earnings calendars, etc., Google Finance is an excellent resource.
"State of the Market" Reports
Remember how we mentioned that it's important to assess the overall industry's health before selecting stocks? These reports can help you make an informed decision. Keep in mind, though, that many organisations charge hefty fees for access to these reports. To easily find publicly available ones, just Google "State of the [Market] Industry Reports filetype:pdf". Then you can access numerous reports in PDF format immediately.
Broker Website
Your broker of choice may provide educational materials, so you can research shares. For instance, at Libertex, investors and traders can view webinars, read informative articles, etc.
Company's Financial Reports:
You can gather financial reports from companies you're interested in investing in, such as their Form 10-K and 10-Q. The former includes independently-audited financial statements, including the balance sheet, revenue, expenses and sources of income. The latter is the company's quarterly update on financial results and operations.
The Two Main Ways To Research Stocks
There are two main ways how to research a stock — fundamental and technical.
Fundamental Analysis
This measures a stock's intrinsic value and determines whether a share is currently overpriced or underpriced. To do so, you can gather information on each of these factors:
(https://carigold.com/forum/attachments/1-png.504864/)
Technical Analysis
Technical analysis is all about identifying short-term trading opportunities by observing charts. You'll keep an eye out for price trends and patterns rather than paying attention to how the market will perform months or years from now.
Some indicators to consider during technical analysis include:
- Simple moving average
- Exponential moving average
- Stochastic oscillator
- Bollinger Bonds
- MACD
- Relative Strength Index
If you aren't sure what these indicators mean, your broker website of choice should have educational materials that guide you through each one. And, with a demo account, you can practice reading charts and pinpointing potentially advantageous entry/exit points.
What to Look for When Researching Stocks
At this point, you know where to gather research and which points are relevant to fundamental and technical analysis. So, you've likely compiled materials — perhaps you sit in front of a quarterly earnings report or a State of the Industry breakdown. But what do you do with the information therein? It's easy to get overwhelmed by the sheer amount of data that these documents contain. We'll show you how to do stock researchand which areas to focus on.
Common Analysis of the Industry
We've mentioned it before, but we'll highlight it again since it's so crucial: before you dive too deep into stocks, you need to make sure that the market sector is viable. You don't want to invest in a company in a dying industry, as it is likely that their stock will drop in value. And if you're planning to trade on short timeframes, you need to identify stocks that are priced low but are expected to enter a bull market.
First, familiarise yourself with market sectors — there are 11 outlined by the GICS.
(https://carigold.com/forum/attachments/how-to-research-stocks-1-jpg.504865/)
After you've learned about the stock market sectors, you can follow our earlier tip about finding "State of the Market" reports. These are often quite lengthy, but you can head to the sections about innovations and trends, revenue reports, CAGR, geographical breakdown and market outlooks.
Look at the Company's Business Model
When you research a company for investment, it's important to look at more than just its products and services. You also need to take a look at the business model — in other words, how the company turns a profit.
(https://carigold.com/forum/attachments/4-png.504867/)
Key Competitive Advantages
This area of astocks' research refers to whether a company can gain an edge over its competitors, usually in one of two ways: by offering cheaper goods or of higher quality. You may have heard this concept referred to as a "unique selling proposition".
There are many kinds of business models, but here's a glance at several popular ones:
(https://carigold.com/forum/attachments/how-to-research-stocks-2-jpg.504866/)
You want to find companies with strong competitive advantages. Unfortunately, there's no simple "advantage" metric you can track on a chart. You'll have to read the company's USP, innovations and plans for the future, using that information to determine whether they offer a better service than their competitors. Thankfully, to make this decision a little easier, there are numerous investment analysts that provide thought pieces on the strength of publicly traded companies. Seeking Alpha is a great place to look!
Financial Strength
To determine a company's financial strength, you should analyse these areas.
- Income Statement. It states the company's operational results for a certain quarter or year. It records the funds flowing in and out of business during that specified time frame. You can view the income statement to find information like sales, gross profit, the cost of goods sold, taxes on income, net income, depreciation expenses, dividends per common share, earnings per share, etc.
- Balance Sheet. This sheet gives you a snapshot of the company's financial position, including its assets, liabilities and owners' equity.
- Cash Flow Statement. A cash flow statement shows how the company has managed its cash inflows and outflows, which gives you a good idea of the business's liquidity. You'll be able to see their cash at the beginning and end of the year, the cost of equipment purchased, bonds issued and the increase/decrease in accounts payable and receivable.
Management Research
Who's at the helm of a company can make a big difference in the stock price and future success. For instance, when Satya Nadella became the new CEO of Microsoft, he transformed the company into a cloud-first company. This transition established Microsoft as a major cloud computing vendor, and the share price has increased seven-fold since then.
Of course, not every new CEO will bring such great results to a company; you have to look at their business history and the general market sentiment towards the management shift. Keep in mind that when new management is brought on, the stock price will be highly volatile for a while.
Growth Analysis and Target Price
Stock prices generally rise as a company's earnings increase. So, it's important to pay attention to a company's projected earnings and, perhaps more importantly, whether it could achieve its previous projections. You can also view growth forecasts accompanied by target prices by Wall Street analysts.
Valuations
Valuation is the process of assigning value to a stock, which helps you determine whether the current price is high or low compared to the business' growth projections and current performance. The most common valuation method is by determining the price-to-earnings ratio, which we'll examine in a bit. Some other valuation methods include calculating the return on investment, pay-back period, internal rate of return and net present value.
How to Research a Stock Before You Buy: Ratios and Metrics to Examine
Here, we talk about the financial parameters of the stocks you're going to buy.
Earnings per Share (EPS)
To find Earnings per Share, you'll divide the company's net profit by the number of shares outstanding. The results indicate how much the company makes per share, and it's commonly used to indicate its corporate value.
It's worth knowing that EPS can be distorted by "extraordinary items", such as one-off transactions that bring in a huge profit or a huge loss caused by a natural disaster. Some analysts factor these items into their calculations.
Price-to-Earnings (P/E) Ratio
A price to earnings ratio is a stock valuation method for a company's current share price compared to its prior earnings per share— usually over a time frame of 12 months. In such a case, it would be called a 12-month trailing P/E ratio. You can also calculate the forward P/E by dividing the stock price by Wall street analysts' projected prices.
A high P/E (25+) indicates the company is quickly growing, but risks are higher. Slow-growing companies have a lower P/E, but it's often safer, even though earnings may be lower.
Price-to-Earnings-Growth (PEG) Ratio
To find this ratio, you'll divide the stock's price-to-earnings ratio by its earnings growth rate over a certain time period. A PEG of 1-2% a year is considered "normal".
Price-to-Book (P/B) Ratio
This calculation compares a company's market capitalisation to its book value. You can find it by dividing the share price by the book value per share (also referred to as the shareholder's equity per share). If the value is below 1.0, this indicates the stock is undervalued and may be a good buy.
Debt-to-EBITDA Ratio
First, understand that EBITDA stands for earnings before interest, taxes, depreciation and amortisation. So, to find the debt-to-EBITDA ratio, you'll divide the former by the latter. The results indicate the company's ability to pay off its debts: if the ratio is high, the debt load is too high. A ratio of 4.0 or above is typically considered a red flag.
Market Capitalisation
This refers to the company's total market value of all outstanding shares. This figure helps classify companies based on their cap level: large-cap companies have a market cap of $10B or more, mid-cap companies fall between $2B-$10B, and small-cap companies are $2B or less. Market capitalisation doesn't affect the share price — it's the other way around. However, it's useful for portfolio diversification; many investors prefer to split their shares across small-, mid- and large-cap companies.
Return on Equity (ROE)
To find ROE, you'll divide the company's net income by shareholder's equity. It's a profitability ratio and shows you how much a shareholder will receive back on their invested capital. An ROE of 15-20% is considered "good."
Net Profit Margin
The net profit margin is found by dividing a company's net profit by its revenue. This figure tells you which percentage of a company's income is actually profit. An appropriate net profit will vary from sector to sector, so make sure to research those! But, on average, a 20% net profit margin is considered "good".
Free Cash Flow
Free cash flow indicates how much cash a business generates after operating expenses and capital expenditures. This is a pretty complicated figure to calculate, as you'll need to gather data from multiple financial statements. You can follow the steps in this image, or, to save some time, you can find the metric on sites like Yahoo Finance.
Return on Assets
This is a financial ratio that measures how profitable a business is compared to its total assets. In other words, you can use the figure to determine how efficiently the company is using its assets to turn a profit. To find this ratio, you'll divide the net profit by total assets and multiply the results by 100. A ROA of over 5% is considered "good", while one over 20% is considered "excellent".
Conclusion
After reading this article, you'll be well on your way to making data-driven investment and trading decisions. Just make sure to gather information from multiple sources and, if possible, verify calculations yourself by manually reviewing income statements and cash flow sheets. It's time-consuming, but minimising losses is worth it.
-
What Are Bollinger Bands, and How Are They Used in Trading?
Bollinger Bands are commonly used as a tool in technical analysis in a range of financial markets, including forex. It helps understand the market conditions and identify the right moment for entry/exit, which is an essential skill for any trader.
Bollinger Bands demonstrate the prices and volatility over time of a given asset and are used in various trading strategies. The formula was first introduced in the 1980s by the American financial analyst John Bollinger. Since then, these statistical charts have been utilised to analyse market data, inform trading decisions and manage algorithmic trading.
What Are Bollinger Bands?
Bollinger Bands demonstrate on-chart market volatility. They are two intervals drawn to predict an asset's potential volatility range in relation to its moving average (MA). Normally, these price channels move across the chart symmetrically, but the distance between the bands varies significantly in certain market conditions.
Despite trends, market moves can be quite erratic. Technical analysis applies this method for anticipating a price action. Bollinger Bands appear as three bands, the middle being a simple moving average usually plotted in a 20-minute period.
The other two bands (upper and lower) are reactive to volatility shifts and indicate the two extremes. They are calculated around the simple moving average shown below. They are drawn first and then projected into a channel that will contain the expected price changes. For trading decisions, the important pieces of information derived from the bands include the entry and exit points for trades. And unless the price moves way beyond the price channel, traders can be fairly certain about what to expect.
(https://carigold.com/forum/attachments/bollinger-band-1-jpg.505772/)
Some prefer to connect the top or bottom of the price to determine the upper or lower extremes. And then, they extend parallel lines to illustrate the interval of price changes.
Bollinger Bands Calculation
Bollinger Bands can be used in five-minute charts, daily, hourly or monthly timeframes. Traders can adjust the following two parameters: period and standard deviations (StdDev).
The most used period is 20, but it can be modified to suit a specific need. As for the standard deviation, it's often positioned at 2.0. Consequently, Bollinger Bands denoted (20,2) indicate that the period and the standard deviation are set at 20 and 2, respectively. A high StdDev means that the price is less likely to reach either band. With a low StdDev, the price will possibly break out of the channel.
To calculate Bollinger Bands, you need to determine the Middle, Lower and Upper Bands separately. The formulas are as follows:
Middle Band = 20-day SMA (simple moving average)
Lower Band = 20-day SMA – (20-day standard deviation of price x 2)
Upper Band = 20-day SMA + (20-day standard deviation of price x 2)
How to Use Bollinger Bands
The simplest way to interpret and use Bollinger bands in trading strategies is to view the channel as a measure of the highness or lowness of the price relative to previous trades.
Let's quickly go over the kind of information traders can gauge from this indicator:
- The upper band demonstrates statistically higher prices.
- The lower band demonstrates the opposite.
- The bandwidth, i.e. difference between the upper and the lower Bollinger Bands, corresponds to market volatility.
As a volatility indicator, Bollinger Bands tighten or broaden around the price plot on the chart. As seen in the formula above, the price range widens as the standard deviation goes up and vice versa. For example, when the volatility of a given currency pair is low, the channel narrows down.
Bollinger Bands can also be used to confirm a trend and describe its direction and strength:
- During an upward trend, the price will continuously reach the upper band, meaning buying activity is strong.
- The trend is likely to head up when it is higher than the 20-period MA and when it goes beyond the upper band.
- In case the price is pulling back during an upward trend, it can mean two things. If it doesn't drop lower than the SMA and goes back up, it confirms the trend's strength. Alternatively, if it breaks the lower band, the uptrend is reversing.
By confirming the price action, Bollinger Bands provide traders with information on whether they should make buying or selling orders. For instance, a sell trade should be carried out at the upper band limit; entering a buy trade is advisable at the lower band limit. If a currency normally follows a range pattern, this method will be useful. However, mistakes can cause huge losses, such as when a breakout occurs.
As a technical analysis tool, Bollinger Bands offer reassurance when traders make certain decisions. When trading near the outer boundaries, they can be confident there's resistance (upper band) or support (bottom band). But Bollinger Bands alone are an insufficient signal as they simply offer a perspective on the price relative to historical volatility.
5 Bollinger Bands Trading Strategies You Show Know
Having determined what Bollinger Bands are, how to calculate them and what kind of information they provide, it's time to look at the strategies. We have five trading strategies to showcase this trading indicator in action.
Bollinger Band Squeeze
When the distance between Bollinger Bands reaches a six-month minimum, it's identified as a Squeeze. When the volatility is that low, traders should prepare for the eventual breakout. The biggest challenge is to figure out the direction of the breakout:
Assume other indicators, such as relative strength index (RSI) and a volume-based indicator, are heading up. At the same time, the price is going down or sideways. These are indications of a bullish market.
Alternatively, look for a bearish breakout when the price goes up and the indicators are flat or making a lower top.
(https://carigold.com/forum/attachments/bollinger-band-2-jpg.505773/)
When the price takes off in either direction after this period of consolidation, the price move is often large. If it breaks through the upper band, traders need to make buy orders and vice versa. A stop loss is preferably set on the opposite side of the breakout.
Double Bollinger Bands
First, you apply Bollinger Bands using the default parameters:
- Period: 20
- Deviations: 2
Next, the second set of Bollinger Bands should be set at slightly different settings:
- Period: 20
- Deviations: 1
(https://carigold.com/forum/attachments/bollinger-band-3-jpg.505774/)
These two BB indicators outline the following areas of the chart:
- A1-B1: Buy Zone
- B1-X: Neutral Zone
- X-B2: Neutral Zone
- B2-A2: Sell Zone
If the upward trend is strong, it's very likely the price will move up. Provided the candles will be closed at the topmost zone, traders should hold long trades or even enter new ones. If the downward trend is strong and the candles close in the lowest zone, traders are advised to keep short trades or open new ones.
Bollinger Bands Scalping
This strategy takes advantage of short-term volatility in the currency. It's well-suited for range-bound conditions accompanied by close to flat horizontal Bollinger Bands.
Here are the settings:
- Bollinger Bands are set at default parameters – 20,2
- The best timeframes for Bollinger Bands Scalping are 1-minute, 5-minute and 15-minute charts.
- The recommended trading sessions are London, New York and Tokyo.
- Lastly, traders could potentially yield maximum profits by trading currency pairs with low spreads, such as GBP/USD, EUR/USD, etc.
(https://carigold.com/forum/attachments/bollinger-band-4-jpg.505777/)
It may be advisable to enter a long trade if:
- The price stays above the middle band and is drawn to the upper band
- The bandwidth widens
- The price seems to be pushed higher.
The sell entry rules are the following:
- The price stays below the middle band and is drawn to the upper band
- The bandwidth widens
- The market sentiment points to the bearish movement, and the price is pressured further down.
Bollinger Bands & MACD Indicator
The strategy is set up to use the MACD indicator to define the trend and the Bollinger Bands to trigger the trade.
The settings for the MACD indicator are:
- Slow-moving average at 26
- Fast-moving average at 12
- 9-day EMA as the 'signal' line
The Bollinger Bands settings are:
- MA at 12
- StdDev at 2
The conditions for entering a long position are: MACD should be higher than the signal, zero lines and a buy stop order should be placed at the upper Bollinger Band.
The short trade is entered when MACD is lower than the signal, zero lines and the sell stop order is set at the lower Bollinger Band.
(https://carigold.com/forum/attachments/bollinger-band-5-jpg.505779/)
With this strategy, you receive accurate signals, avoid substantial streaks of losses, and have the opportunity to profit from consolidating and trending conditions. However, it requires you to constantly observe the charts.
Gimmee Bar
This trading strategy aims to trade on reversals downward from the top of a trading range or upward from its bottom.
When to enter a long trade:
- Prices are going down inside the trading range
- Prices are tagging the lower Bollinger Band
- The bar should close higher than open, which is the Gimmee bar
- A buy order should be placed one tick above the bar
When to enter a short trade:
- Prices are rising inside the trading range
- Prices are tagging the upper band
- The bar should close lower than it opened
- A sell order should be placed one tick below the bar
(https://carigold.com/forum/attachments/bollinger-band-6-jpg.505780/)
The strategy creator warns traders about certain scenarios with Gimmee bars. For example, you shouldn't trade when the bar overlaps or moves closer to the MA.
Trading with Bollinger Bands
All traders need to determine how the markets are moving. Bollinger Bands are applied to analyse trend strength, monitor when a reversal may be occurring and inform them if they should enter or exit the market to generate profit.
Even with certain limitations of Bollinger Bands strategies, the indicator has become one of the most useful and commonly used tools. Since the bandwidth contracts and widens with volatility, it helps traders take advantage of oversold and overbought conditions.
With this information in mind, you can find a strategy that suits your skills and preferences with Libertex. Please keep in mind that CFD trading is risky, even when you're using the best tools available. The platform is built by professionals, which ensures features and insights for every skill level. Start a free Demo account (https://libertex.com/blog/bollinger-bands#modal-demo) to learn more about selecting and placing trades and step up to more complex strategies.
-
Libertex named “Best Crypto CFDs Broker” for 2022 by Ultimate Fintech
After much anticipation, the 2022 Ultimate Fintech awards winners have finally been announced. The prestigious publication that provides traders and businesses an industry benchmark of the best companies to trade and do business with, honoured the industry’s shining stars for their contribution to the sector over the last twelve months. And in yet another consecutive year, the online broker Libertex has once again taken gold, beating off the best in the business to be crowned as the “Best Crypto CFDs Broker” for 2022.
Commenting on the company’s latest success, Libertex CMO Marios Chailis had this to say: “Naturally we are absolutely thrilled to receive a second honour in as many years from this well-respected authority. In 2021, Ultimate Fintech named us the “Most Trusted Broker” and having spent so much time and effort positioning ourselves as one of the most reputable platforms on the market, that certainly meant a lot. Now, to be able to extend that reputation of trust to crypto CFDs, an asset class that has previously been plagued by numerous fees and commissions, is a culmination of our efforts for which we feel extremely proud! As the “Best Crypto CFDs Broker” of 2022, we pledge to continue making crypto CFD trading even more exciting for all Libertex clients!”.
Libertex has not only increased its crypto CFDs range to include all the major currency pairs, it now boasts a sizable altcoin offering, too. If that wasn’t enough, the long-serving CFD broker has even made all crypto CFD purchases and sales completely commission free for its clients. The only thing that applies are the broker’s spreads. This means that Libertex users only pay the spread (difference between Bid and Ask prices) on all their digital asset CFDs transactions on the platform. Apart from massively increasing any potential gains they might make, these lucrative terms mean Libertex clients have more live funds available to trade. Undoubtedly such a fresh approach to the trading conditions of crypto CFDs distinguishes the broker by far from others in the field.
Best of all though, trading crypto via CFDs saves traders the hassle of actually owning physical coins, while simultaneously allowing leveraged trading and even making it easier to close out positions irrespective of market liquidity conditions. When trading crypto CFDs, Libertex clients are able to store their entire CFDs portfolio – from futures, Forex and commodities, right through to indices ETFs and corporate stocks – all in one easily accessible and simple to use app.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads in 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. Cryptocurrency instruments are not available to retail clients in the UK.
-
What Is a Carry Trade?
The term carry trade originates from the financial concept based on profiting from holding (i.e., carrying) an asset. More technically, it's considered a type of interest arbitrage.
The strategy first caught traders' attention in the 1990s. At the time, it was especially popular with hedge funds. Investors noticed big potential interest rate differences between countries like the US, Japan and Australia, where they could reach an impressive 5%. Even now, carry trades remain a widely used strategy, so it makes sense to learn how to utilise it to your advantage.
What Is a Carry Trade?
A carry trade is a straightforward strategy. It's a method of gaining profits through a high-interest currency against a low-interest one. For example, US dollars are considered high interest because the US pays a high interest rate on its bonds, whereas the Bank of Japan keeps the interest rates low.
When an investor holds a trade for an extended period, the interest accumulates for every day the asset is held. Of course, this is profitable when done in the interest-positive direction. Using the examples of high- and low-interest currencies above, a trader can benefit from borrowing JPY to buy USD.
The difference between the rates can often be substantial, especially if you invest a large amount or apply a multiplier. Thus, the potential for big profits makes it one of the most popular trading strategies.
Understanding How Positive Carry Trades Work
A positive carry trade on a high-yielding currency can result in a win if the exchange rate doesn't move or changes to your advantage. However, the opposite scenario can cause large losses. For example, carrying trade in large volumes can produce a dramatic depreciation. The interest gained every single day can offset the losses from the change. But it's debatable whether it'll cover the loss entirely. Therefore, carry trading can be treated as an additional form of income.
The Australian dollar has a 4.5% interest rate, and the New Zealand dollar's is 2.75%. If you buy or go long on the AUD/NZD, you're entering a carry trade. The 1.75% difference will be paid daily, as long as you have that trade open on the market. This seemingly small amount adds up over time.
Apply proper risk management in forex. The best and most popular currencies are often associated with high volatility. So, instead of being tempted to gain as much interest as possible, you should assess supportive fundamentals and market sentiment.
Advantages and Disadvantages of Carry Trade in Forex
(https://carigold.com/forum/attachments/carry-trade-1-jpg.509904/)
A currency carry trade, like most trading strategies, comes with appealing aspects as well as certain drawbacks. Here are the main pros and cons to consider before adopting this trading tactic.
(https://carigold.com/forum/attachments/2-png.509905/)
These reasons make carry trading suitable for those who can accept the high-risk, high-reward strategies. Bear in mind that the appetite for big profits should never be the driving force for your actions. Treat carry trading as an additional method of taking advantage of the market.
Yen Carry Trade Examples
Let's say a trader wants to benefit from the interest rate of 0.5% in Japan, whereas it is 4% in the US. They expect to gain profits from the difference between them, which is 3.5%. At the time of the trade, the exchange rate is 107 yen per dollar, and the trade volume is 0.5 million yen:
0.5 million yen / 107 = $4,673
The 4% rate on the dollar will result in an annual balance of:
$4,673* 1.04% = $4,856
At the same time, the amount of yen owed will be:
0.5 million yen * 1.005 = 0.503 million yen, which is $4,701
The profit will amount to the difference between the amounts earned and owed:
$4,856 - $4,701= $155
If the exchange rate changes against the yen, the profits may grow bigger. If it moves in the opposite direction, the profits may decrease or even turn into losses.
The calculated profits seem insignificant. However, the prospects seem much better if you use leverage. Now, let's assume a trader wants to invest the same amount for the same currency pair. Libertex offers leverage of up to 1:30, which considerably increases potential profits as well as potential risks.
- If the trader leaves that purchase for a year, here is what can happen:
- A trader misjudges an opportunity, and the position loses value. If the drop brings the account down, the trader closes the position with only the 0.5 million/$4,673 remaining on the account, i.e., the funds allocated for the margin.
- The exchange rate of the currencies doesn't change. There is no loss or gain on the value position, but the trader profits from the 3.5% interest (4% for the US dollar – 0.5% of the Japanese yen). This equals $4,907, which is more than the amount in the beginning! - This could not be possible without the leverage from the platform.
- The position gains value. On top of getting the $4,907 in interest, the trader may earn additional gains, which often exceed the interest earnings.
How to Use the Carry Trade Strategy for Trading CFDs
The nature and risks of trading CFDs are quite different. Some say that CFDs are suitable for people who are used to trading in volatile market conditions. However, when you use carry trade strategies on CFDs, it puts a different spin on this otherwise tough instrument.
What are CFDs?
(https://carigold.com/forum/attachments/carry-trade-2-jpg.509906/)
A CFD (Contract for Difference) is a leveraged derivative financial product. The value of CFDs is derived from the value of another asset, which is considered an underlying asset (for example, currencies, stocks or commodities).
When you buy CFDs, you don't own the asset. Nevertheless, the potential success of your trade depends on how the underlying asset is valued. As a trader, you put trust into the contractor and its sound financial position over time.
How to Trade CFDs Using the Carry Trade Strategy
Regardless of how you trade CFDs, you expect to receive profits from the positive difference between the closing value and the opening value. When you carry trade CFDs, your income partially depends on the increased value of the underlying asset, but you don't rely on the price changes to receive profit. CFDs are complex instruments, and, unfortunately, many investors lose money when trading CFDs. Therefore, you should always consider the risk when deciding if it's worth it.
CFDs can be traded on a variety of underlying assets, limited to what your CFD broker can access. Moreover, the possibilities continue to expand to a wider range of markets. If you buy CFDs on assets that pay out dividends, then you can combine the profits. Even if the interest rate doesn't yield profits, your chances for a long-term gain rise to a large extent.
Conclusion
Carry trading is a strategy that exhibits the potential for profits over time if you manage it accurately. The solid stream of income acts as a safety net. If everything works out as you expected, carry trading can be an additional income.
Libertex contains a hub of articles and guides that will help you navigate different trading strategies available for the money markets, including carry trades. You can find various ways of mitigating and managing certain risks, for example, exchange rate risk.
If you register a free Demo account on Libertex (https://libertex.com/blog/what-is-carry-trade#modal-demo), you can practice carry trading before fully committing to it. This is the best way to introduce yourself to a new strategy or trading in general. Whether you're just starting your trading journey or you want to further improve your skills, you can learn the essentials and apply them in practice on Libertex.
-
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.
-
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.
(https://carigold.com/forum/attachments/510848254-jpg.517102/)
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.
(https://carigold.com/forum/attachments/1164968740-jpg.517103/)
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.
-
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.
(https://carigold.com/forum/attachments/1172166805-jpg.518812/)
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
-
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.
-
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%.
-
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.
-
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.
-
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.
(https://carigold.com/forum/attachments/1-png.525704/)
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
(https://carigold.com/forum/attachments/shutterstock_511018642-min-jpg.525705/)
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.
-
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.
-
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:
(https://carigold.com/forum/attachments/tech-analys-1-jpg.527891/)
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:
(https://carigold.com/forum/attachments/tech-analys-2-jpg.527892/)
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.
-
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
(https://carigold.com/forum/attachments/shutterstock_720579289-min-jpg.529524/)
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
(https://carigold.com/forum/attachments/shutterstock_476126533-min-jpg.529525/)
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.
-
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.
-
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.
-
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
(https://carigold.com/forum/attachments/equity-ratio-1-jpg.537364/)
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
(https://carigold.com/forum/attachments/equity-ratio-2-jpg.537365/)
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.
-
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.
-
Pedal to the metals
The post-pandemic era has been characterised by both supply-side and demand-side deficits in a range of commodities. The prices of everything from fuel and energy resources to household goods and even industrial raw materials have been gradually driven up by inflation. One asset class has defied all logic these past two years, though: precious metals. Conventional wisdom and the historical record would dictate that gold and silver should have enjoyed huge gains during this protracted period of economic uncertainty and price pressure, but the reality is very different.
The two major precious metals are actually down over 10% from their January 2020 levels. While the whys and wherefores are certainly interesting, traders and investors are more interested in where they’re now headed. So, without further ado, let’s see what the technical analysis says about their likely future trajectory!
FED up with inflation
As we are all aware, price pressure has been worryingly high for some time now, which should translate to higher gold and silver prices. Unfortunately for gold bugs, though, central bank policy has seen things unfold very differently. The Federal Reserve has been battling inflation with a strong hawkish stance and multiple meaty rate hikes over the past year. After a succession of 0.75% increases, we are now hearing talk of a full 1% key rate hike to come before year end.
Following late September’s CPI report and Powell’s affirmations, gold dipped below its $1,700 an ounce support and has now fallen as low as $1,620. Analysts had spoken of the risk of a break below the key support between $1,680 and $1,675, with many predicting serious declines to as far as $1,500 if this level is breached. Now that this has come to pass, it could well signal the end of gold’s three-year bull market.
Dollar signs
If you’ve been following the forex market at all in recent weeks, you’ll know that the dollar has reached a historic parity with the euro. Apart from ravaging the competitiveness of US exports, this has resulted in soaring T-note yields. Bar the 10-year, every single US government bond now pays above 3%, and with a Fed firmly committed to hawkish policy, the only way is up from here.
For ease of access and liquidity, investors would much prefer to hold US dollars as opposed to gold or silver. That being the case, demand for precious metals is sure to suffer in an environment where the dollar is able to outperform most haven assets. As we await the latest euro area inflation data to see whether the ECB’s rate cuts have put a dent in inflation, we can expect a lot of volatility in the EURUSD pair. It would appear that the recently formed falling wedge pattern has fallen flat, and so a reversal in the near term is now unlikely. If the dollar does continue to strengthen against its major competitor, then gold and silver should expect the low demand for metals to persist.
The big picture
Short-term signals and technical patterns are, of course, invaluable tools for any trader or investor, but we ought to remain mindful of the “super-cyclical” nature of commodities, gold and silver in particular. They simply don’t play by the same rules as most other financial assets. Take the GFC of 2008 and the ensuing commodities bull market: stocks had hit their bottom and were almost back at pre-crisis levels a full year before gold hit its 2011-12 peak of $1,800, a level that is still within touching distance a decade later.
This goes to show that the precious metals cycle is frequently out of step with risk assets, and thus, declining stock prices can be viewed as a leading indicator of gold growth to come. Indeed, the IGCS shows that retail traders are currently distinctly long on gold, with 86% of traders currently holding long positions. The general consensus is that gold and silver prices will hold relatively steady at current levels until central bank policy or runaway inflation cause a severe break in the economy. Then, experience would suggest that we will see a precious metals bull market lasting at least 12-24 months.
Go for CFDs on gold with Libertex
Libertex offers trading in a vast array of CFD underlying assets, including precious metals like gold and silver. Libertex supports both long and short positions, and it has ultra-low spreads. For more information or to register your own trading account today, 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. 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.
-
Don’t take your foot off the gas
It doesn’t seem all that long ago that we were talking about an energy crisis the likes of which we’ve never seen before. As European gas prices peaked above €300 per MWh in August, the world was terrified of what carnage the heating season would wreak on already suffering consumers. But now, as the Old Continent prepares to dust off its radiators, futures in the precious fuel of natural gas are hovering around €100 per MWh, a level nobody would have predicted just a couple of months ago. And it doesn’t stop there. After at-the-pump petrol prices more than doubled, Brent oil is now down almost 30% from its annual high of $127.98. So, what factors are behind this seemingly illogical (albeit welcome) drop in fuel costs, and how can traders take advantage of this trend?
Climate change to the rescue
As serious as global warming may be, it might have just saved many Europeans’ bacon this year. The unseasonably mild autumn we’ve experienced thus far has meant that many households have not yet turned on their heating. At present, temperatures across Northwest Europe, which includes the continent’s biggest consumers Germany and France, are above the long-term average. Meanwhile, the latest forecasts call for further above-normal readings into early November. As a consequence of this, gas prices are expected to remain subdued for at least the next month. Naturally, this doesn’t mean the worst is behind us. Not by a long shot. Many experts have predicted an unusually cold winter to come. As such, when the inclement weather does arrive, there’s nothing to prevent gas prices from skyrocketing in the absence of a long-term resolution to the ongoing supply-side issues.
Full tank
Beyond the atypically warm weather, there are, of course, other factors at play. As prices were rising uncontrollably, Europe went on a buying spree to ensure it wouldn’t be left out in the cold come winter. As a result, the EU’s gas storage facilities are now at 93% capacity, which means that European governments simply have nowhere to put any additional natural gas they might wish to buy. And with the reduced consumer heating use, they aren’t even able to use up some of their existing reserves and replace them with this relatively cheap gas currently available.
All of this has meant that demand for natural gas is well below the average for this time of year, which is, in turn, pushing down open market prices. As such, we can expect the current downtrend to continue until the cold weather finally arrives. All in all, it appears as though the crisis everyone expected following the sabotage of Russia’s Nord Stream gas pipeline has been averted…at least for now. Given many European countries’ preparedness, a standard to mild winter could actually see prices avoid another spike and perhaps even fall slightly further.
What about the US?
With all this talk about Europe, it’s easy to forget that there are other key natural gas markets in the world. The US, for instance, is a major producer of the resource, and, with Russian gas likely to be a much smaller share of the energy mix this winter, prices across the pond have taken on special significance this year. US percentage price action has actually been quite similar to Europe’s, with gas now 40-50% cheaper than two months ago. The Henry Hub is currently trading at $5.17 per 1 million BTU (0.3 MWh), which is significantly cheaper than anything available in Europe right now.
Even after the recent dip, European gas is still almost 20 times the price of its US counterpart. If transporting it wasn’t so cost-prohibitive, we might have been able to resolve the energy crisis rather easily. For ordinary Americans, retail prices have increased over the past year or so, but it hasn’t been anywhere as dramatic as it has been for Europeans. US prices have been significantly higher than their current levels for almost ten out of the last twenty years, whereas the Dutch TTF is displaying prices that are around four times the average historical price per MWh. In an uncertain economic climate such as this, this reality is clearly unsustainable for the EU and will surely foster the political will for a resolution to the geopolitical conflict on its border.
Trade natural gas CFDs with Libertex
With ongoing political and economic instability around the world and a cold winter just around the corner, nobody can be certain as to where the energy markets are headed in the short-to-medium term. However, with Libertex, at least you can be sure you’ll have the possibility to trade gas-related CFDs long or short for maximum diversification. Libertex’s extensive range of CFDs includes the Henry Hub natural gas index for those who prefer to trade the underlying commodity directly. We also offer a wide variety of energy-related stock CFDs, such as Gazprom, Petrobras and Exxon Mobil. It’s completely up to you! Take advantage of tight spreads and low commission and trade at your convenience in our multi-award-winning app. For more information or to create your own account today, 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.
-
Libertex joins its parent group in celebrating a quarter-century in the business
Today we join our parent group (Libertex Group) in celebrating a quarter-century of connecting ordinary people with the financial markets.
What began as a small business back in 1997, has grown into a diverse group of companies, serving millions of clients all over the world. Celebrating 25 successful years in the financial markets would not have been possible without the continued support and involvement of our loyal clients, partners and employees so THANK YOU all!
We remain focused on our commitment to always innovate and to offer nothing less than excellence! Here’s to many more years of success, more impact, more excitement, and more history!
#TradeForMore (https://libertex.com/)
-
Digital asset bears preparing to hibernate
It's hard to characterise 2022 as anything but a total disaster for the crypto market at large. This time last year, Bitcoin was at all-time highs above $65,000 as fanboys and analysts alike were calling for prices above $100k in the months ahead. As we all now know, that couldn't have been any further from the truth. Since November 2021, Bitcoin has lost over 70% of its value and, as of 1 November 2022, sits at $20,418, paltry by comparison. For much of the year to date, the majority of other major coins and tokens had followed the same disappointing pattern, but then something totally unexpected occurred.
Crypto pack has a new top DOGE
While the original cryptocurrency was stuck trading sideways in a narrow range around its key support of $20,000, the Scrappy Doo of digital assets, Dogecoin, made an independent move against the Alpha Dog. Starting just a week ago, in late October, DOGE has managed to nearly triple in value, rising from a lowly $0.059 to a six-month high of $0.15. This huge upside momentum was also accompanied by a sizable increase in the coin's daily trading volume. According to Santiment, the exciting price action also coincided with a spike in the number of DOGE transactions exceeding $100,000. Taken together, these two indicators would suggest growing demand for Dogecoin tokens among whales. Even the Dogecoin spin-off Shiba Inu rose by 60% in a week amid the release of a gaming guide for Shiba Inu's Collectible Card Game. But what is behind this seemingly illogical moonshot by what have been derogatorily dubbed 'meme coins'?
The unmistakable musk of Elon
The established orthodoxy of the cryptocurrency market (if such a thing even exists) would tend to dictate that the Top 10 coins by market cap move more or less in lockstep with Bitcoin. At the very least, they are not expected to make 150+ percentage gains against BTC itself. It's no secret, however, that Dogecoin is a pet project of Tesla CEO Elon Musk, a man who is definitely capable of moving any market with a simple tweet. And that appears to have been precisely what sparked this latest DOGE/SHIBA rally. Following the long-awaited completion of his landmark Twitter takeover, the South African visionary pledged to introduce DOGE as a payment option for his controversial paid blue tick service. Thus, when Musk tweeted a titillating image of a Shiba Inu dog wearing a Twitter shirt beside a pumpkin with a Twitter logo carved into it, the message to the Dogecoin community was clear: Elon may soon make good on his promise.
In the Ether
This divergence in the crypto market's general trajectory isn't just limited to the unexpected rise of the two big canine coins. Ethereum is another major project that has been going against the grain to make solid gains against Bitcoin. Indeed, the market's second-largest project, Ethereum (ETH), has shocked investors' by climbing as high as $1,600 in last week's 20% rally. This outshines BTC's paltry 7% rise by nearly 300%. At its current level of $1587.27, Ether is now up around 40% from its July lows.
Meanwhile, Bitcoin has barely appreciated by 5% over this same period. Many analysts have attributed this bump in ETH to the project's migration over to a PoS model in the summer. Since making the switch, Ethereum's official net issuance has fallen from 3.6% to nearly 0%. However, data from IntoTheBlock suggest this indicator has actually dropped below zero, which would make Ethereum a deflationary coin. The cumulative reduction in the ETH supply could, therefore, drive the ETH price even higher in the future.
Release the bulls!
The question most crypto traders and investors are asking is: do these recent rallies mean that the end of the dreaded crypto winter is in sight? And while one swallow does not make a summer, the gains we've seen in several major coins of late would seem to tentatively suggest that a reversal could indeed be in the making. The missing piece of the puzzle right now does appear to be the original cryptocurrency. Whatever the community might say about utility and deflationary mechanisms, Bitcoin is still the number one digital asset and represents almost 40% of the $1.06 trillion market.
This being the case, we cannot talk about an official end to the bear market until we see some more convincing upward movement on the BTC chart. Nevertheless, it is encouraging to see other correlated projects moving independently on their own fundamentals, a defining feature of more mature asset classes. In any case, the fact remains that many digital currencies are available at relatively bargain prices, and any long-term HODLERs would do well to pick some quality coins up while they can.
Trade crypto CFDs with Libertex
Aside from CFDs on stocks, forex and commodities, Libertex also offers a wide range of cryptocurrency CFDs for traders around the world. With Libertex, you can hold long or short positions in over 100 digital currency pairs, including Bitcoin, Dogecoin and Ethereum. For more information or to create your very own trading account, 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. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Gearing Ratio: Complete Guide with Examples
A gearing ratio is a financial measure that takes into account the proportion of a company's liabilities (creditors' funds) versus the total equity (shareholders' funds), thus representing the entity's financial risk level. It is a powerful tool that investors can use together with fundamental analysis to gauge the overall performance and financial stability of a company they want to invest in.
In this guide, we'll dive deeper into the gearing ratio, explain how to calculate and interpret it, examine its benefits and drawbacks, and provide you with examples to make it easier to apply this instrument to your analysis.
What Is a Gearing Ratio, and What Does it Tell Investors?
A gearing ratio is a calculation used to show the degree of a company's financial leverage. It is found by dividing total credit funds by shareholder's equity. This number tells how much debt the company uses compared to the money investors have put into the business. As such, a low gearing ratio implies that the company can pay its debt several times over, while high gearing represents a highly leveraged business that is likely to face more risk during times of market volatility.
High Gearing Ratio vs Low Gearing Ratio: How to Interpret Ratio
It's difficult to say whether a company has a good gearing ratio or a bad one. Everything's relative. When conducting such an analysis, it's crucial to take into account the total market situation and make a comparison between a particular business you want to invest your capital in and other companies from the same industry. However, there are some commonly used gearing ratio measures: low, middle and high. Let's have a closer look at them.
1. A low gearing ratio is below 25%. This means that a company uses less debt financing and more equity financing. Both investors and lenders would consider this ratio to be low-risk because, if the asset goes down in value, the equity will cushion the loss.
2. Mid-level or optimal gearing ratio is between 25% and 50%. Companies with this level of gearing are usually characterised as stable, well-established and with a reasonable level of risk.
3. High gearing ratio is more than 50%. A company with high gearing is said to be more leveraged. This means that investors have to deal with an increased risk of losing money. This is because the company's debt holders have the first claim on its assets and profits. If it comes to liquidation, the shareholders will only receive any proceeds after the creditors have been paid in full.
Gearing Ratio Formulas
There are several ways to calculate gearing ratio. However, the most common gearing ratio formula is:
NET Gearing Ratio= (Long-term debt + Short-term debt + Bank overdraft) / Shareholder's equity
Debt-to-Equity Ratio
Another common gearing calculation is based on the debt-to-equity ratio. All you need to do is divide the total company debt by the total amount of company equity. The formula will be as follows:
Company's gearing ratio = Total debt / Total equity
The gearing ratio can also be presented in percentages. It's necessary to multiply the result from the formula above by 100:
Company's gearing ratio = (Total debt / Total equity)*100
Debt Ratio
The debt ratio is very similar to the debt-to-equity ratio. It shows the percentage of a company's assets that are financed by debt and is calculated by dividing total liabilities by total assets.
Debt ratio = Total debt / Total assets
Equity Ratio
The equity ratio is a financial ratio that measures the extent to which the equity capital of a company is owned by its stockholders. It is calculated by dividing a company's total equity by its total assets.
Equity ratio = Total equity / Total assets
How to Calculate the Gearing Ratio of the Company You Are Researching
(https://carigold.com/forum/attachments/gearing-ratio-1-jpg.549760/)
Once you decide to calculate the gearing ratio of a particular company, here are the steps to follow:
1. Choose the company. As a result, the gearing ratio will help you analyse if it is a potentially good investment option.
2. Choose the most suitable gearing ratio formula. There are various ways to calculate gearing ratio; one of the most commonly used is the debt-to-equity ratio.
3. Calculate the gearing ratio. If you've chosen the debt-to-equity calculation method, it's necessary to divide the total debt of the company by its total equity. If you want to receive the result in percentage, multiply the fraction by 100.
4. Analyse the results. Companies with high gearing ratios are considered risky, as they have considerable debt that must be paid back. Low gearing ratios indicate that the company is more conservative, stable and associated with lower risks.
Example of a Gearing Ratio and Its Interpretation
(https://carigold.com/forum/attachments/gearing-ratio-2-jpg.549762/)
Here is an example of how to calculate and interpret the gearing ratio. Let's say that an imaginary company — we'll call it AAA — has a total debt of $1 million, while its total equity accounts for $4 million. To calculate its gearing ratio using the debt-to-equity formula, we need to divide total debt by total equity and, if we want to have the result in percentage, multiply the result by 100.
AAA's gearing ratio = ($1 million / $4 million)*100 = 25%
25% is a good gearing ratio, meaning that the company has a higher percentage of financing that comes from equity. This business is likely to be more financially stable and less risky, especially if the investment does not perform as well as expected.
Let's have a look at an opposite example. Company AAA has come with the following financials:
- Total debt - $4 million
- Total equity - $2 million
Then, the calculation of the gearing ratio will look like this:
AAA's gearing ratio = ($4 million / $2 million)*100 = 200%
This is an extremely high result, which means that for each $1 of equity, the company has $2 in debt. In this situation, the company AAA will be significantly riskier to invest in.
Gearing Ratio and Risk: Everything You Need to Know
(https://carigold.com/forum/attachments/gearing-ratio-3-jpg.549763/)
Gearing ratios are often used to evaluate a company's financial health, as well as its level of risk for potential investors and lenders. Businesses with high gearing ratios are considered riskier than those with low ratios, as they have more debt that must be paid back. In addition, companies with high gearing may find it difficult to obtain new financing, as lenders will view them as being less financially stable. As a result, this can put them at risk of defaulting on their loans or going bankrupt.
However, it's important to note that not all companies with high gearing ratios are financially unstable. Some of them may have such a percentage because they are operating in industries with high levels of debt, such as the oil and gas industry. In these cases, the higher gearing ratio may actually be due to factors beyond the company's control.
The gearing ratio is a robust tool that is helpful when trading any financial assets. However, it's particularly useful for potentially riskier instruments like CFDs.
CFDs are very popular in the modern world of online trading. This is because they offer many advantages, such as low transaction costs, high leverage and the ability to trade on a wide range of assets. For CFD traders, it is important to understand the gearing ratios of the companies they are trading, as this will help them to mitigate the potential risks.
How Can Companies Reduce Their Gearing?
Gearing can be reduced if the company starts to pay off its liabilities. Several techniques can help businesses to control and improve their gearing ratio. Here are some of them:
1. Reduce reliance on debt financing. A company may need to take on new investors, sell assets, or restructure its business. This strategy can be difficult to implement, but it can ultimately help a company protect its financial stability.
2. Raise new equity capital by selling shares. This will help to generate cash that can be used to reduce debt.
3. Increase profits. By increasing profits, the company will be able to collect money to pay off its existing debts and increase the price of its stock.
4. Reduce operational costs. This can be accomplished through a variety of methods, such as reducing the number of employees, lowering salaries or cutting other expenses. While such measures may seem drastic, they can be necessary to keep the company afloat during difficult economic times.
Pros and Cons of Gearing Ratios
A gearing ratio is a handy tool for investors and lenders that helps them make more consistent decisions. However, just as with any tool, this indicator comes with its benefits and drawbacks.
Pros
The major advantage of gearing ratios is that they provide a quick and easy way to assess a company's leverage. For example, a high ratio may indicate that a company is highly leveraged and thus riskier. On the other hand, a low gearing may denote that a company has a strong financial position and is less likely to default on its debts.
Cons
When it comes to the disadvantages of using this ratio, one challenge is that different companies use different accounting methods, which can make comparisons difficult. Additionally, gearing ratios do not take into account important factors such as the interest rate on a company's debt or the maturity date of its debt obligations. Moreover, as mentioned before, it's necessary to understand that high gearing doesn't always indicate financial instability, especially for companies operating in high-risk industries.
Summing up, a gearing ratio is a powerful tool. However, it should be used in combination with other tools in an overall assessment of a company's financial health rather than as the sole indicator.
-
Dollar dominance drags on as Europe edges towards recession
Headlines were made when the value of one euro fell below that of one US dollar back in September of this year. That key technical and psychological level – parity, as it is commonly called – had not previously been breached in two decades. It was, and remains, a big deal. Two months on and it appears as if EURUSD could now be stuck in a sideways channel between 0.97-1.00, from which it might well struggle to break out anytime soon. This, in theory, makes European goods more attractive to US consumers, but the general economic climate and high fuel costs are actually producing bigger deficits than ever before. Does this mean Europe will fall into recession and what will be the implications for the EURUSD and risk assets if it does? What is behind this illogical crisis and how can investors protect their capital?
The gas connection
Goldman Sachs has predicted that the single currency will remain at or below parity for as long as gas prices remain at multi-year highs. At their current levels of about 300% above what is considered normal, many businesses have been forced to increase prices of finished goods significantly, negating any exchange benefits from the single currency’s relative weakness. As European countries are now paying exorbitant prices for energy, traditional business centers have deteriorated significantly. After decades of surplus, Germany, for instance, is now running a trade deficit. This means that there is now an excess of euros in international financial markets, thus weakening the currency against its major competitors. It is like an uninterrupted negative feedback loop of sorts. Higher prices make EU-manufactured goods more unpopular, which then makes euros more unpopular. A radical change beyond the power of price discovery will be required to break the cycle. Unfortunately, it doesn’t look like gas prices will fall significantly anytime soon – not until the ongoing political instability to the East is resolved, at least.
Blame the (central) bankers
To ignore the impact of central bank policy in explaining the origins of the euro’s current woes would be remiss at best. It is self-evident that sharp interest rate hikes by the US Federal Reserve have helped buoy the US dollar by boosting the attractiveness of US assets. After all, the Fed has notably raised borrowing costs by 375 basis points since March, which is significantly faster than its European counterpart. Faced with major inflation amid the aforementioned energy crisis, the ECB has been restricted to an increase of just 200 basis points over the same period. The US regulator is now predicted to raise its funds rate by a further 50 basis points (to 4.25-5%) before year end in line with its “dot plot” median projection. The European Central Bank is also tipped to increase its own rate by 50 basis points, but this will only place it at 2.0%, which is still significantly below the Federal Reserve’s. If recession does then arrive as expected, one would expect the euro to continue to crash as investors look to move more capital into high yielding government bonds.
The ”R” word
A deadly combination of higher energy costs, low consumer confidence, and reduced economic activity in general has been understandably devastating for sales across the European Union. This has been aggravated even further by global inflation-fueling factors, such as supply chain ruptures and geopolitical instability. In light of all of the above, a recession seems inevitable for many analysts. Despite this, Eurozone retail sales did manage to rebound in September. According to Eurostat, the indicator rose 0.4% from August instead of declining 0.3% as predicted. Nevertheless, most economists agree that this modest boost in September is unlikely to be the turning point. The latest statements from senior ECB officials predict a euro area recession starting in Q4 2022 and lasting through until Q1 2023. Historical data indicate that the single currency tends to perform poorly during eurozone recessions. Over the last three EU-wide recessions, the euro suffered most between Q3 2011 and Q1 2013, losing 8.9%. Its best performance came between Q4 2019 and Q2 2020, during which time it gained 2.5%. If the US is able to avoid a recession of its own, then the downward pressure on EURUSD would be amplified further. In such an eventuality, risk assets would become even less attractive and savvy investors would naturally gravitate towards a >4% yielding US treasury bond over a sub-2% European alternative.
Trade the Fibre CFDs with Libertex
Whichever way you think the currency market is headed, you can always have your say with both long and short positions from Libertex. Since Libertex offers not only EURUSD CFDs but also a wide variety of other major Forex CFDs, such as GBPUSD, AUDUSD and USDJPY, you’re sure to find something to tickle your fancy. What’s more, Libertex also offers leveraged trading of up to 30:1 for all major currency pairs, enabling you to maximise your potential gains. For more information, or to create an account of your own, visit www.libertex.com or download our handy trading app from the Apple or Google Play stores.
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.
-
What did 2022 bring? Summing up as we're coming close to the year's end
As the end of 2022 approaches, many of us will be happy to see the back of what has been one of the toughest years in recent memory. Not only have a majority of instrument classes seen devastating losses but the world has also been plagued by runaway inflation, energy insecurity and supply chain ruptures. Virtually all risk assets have been in freefall, with tech stocks and crypto particularly hard hit.
Gas and oil prices have risen to unsustainable levels, along with the prices of most everyday staples. The impact has been even more dramatic for Europeans, with the euro and British pound losing serious ground against the dollar. Even gold has been relatively flat considering the extent of the economic carnage experienced. So, what were the mechanics behind this maudlin market situation, and will 2023 finally bring some much-needed respite to tormented traders and investors everywhere?
Taking stock of the damage
It's no secret that equities have been on the decline since November 2021. But while many expected a short-lived correction, stocks have defied the odds to edge ever lower over the past twelve months. The premier US index, the S&P 500, has dropped 15% on average since the start of the year, while the tech-heavy Nasdaq is down almost 25% over the same period. For individual companies, the losses have been exponentially higher. Take 2021's darlings Tesla (TSLA), Netflix (NFLX) and PayPal (PYPL), for example, all of which are down over 50% YTD.
While it's easy to panic in the face of such declines, it's actually totally normal in times of economic strife such as these. We have, indeed, seen a general flight from risk during these uncertain times, and it's unsurprising that the most overvalued equities have suffered the worst. Recent upticks in both indices and individual stocks over this last quarter, coupled with ECB Vice-President Luis de Guindos' recent confirmation that inflation is slowing, could indicate a bottom has already been reached. Thus, investors who have been dollar-cost averaging over the 2022 bear market may well reap the rewards in the new year.
Crypto's big freeze
In light of the flight from risk discussed above, it's hardly shocking that cryptocurrencies have recorded the most disastrous declines of all asset classes this year. Both Bitcoin and Ethereum are now down an average of 75% from their all-time highs, and some lesser-known coins and tokens have lost over 90% of their value over this same timeframe. Not to mention some outwardly promising projects that have disappeared completely along with billions of investors' money, such as Terra and FTX. As we mentioned, it's quite normal for the most volatile and inherently risky instruments to lose the most in precarious markets. This shouldn't deter investors from holding cryptocurrency for the long term.
Perhaps the most worrying aspect of this crypto winter, however, has been the mass bankruptcies of all too many overleveraged public miners. Compute North is one high-profile name that has already gone, with Core Scientific on the brink. After selling all their coin reserves to keep the lights on, they're now being forced to sell off state-of-the-art ASICs at a fraction of their cost, to the delight of their better-capitalised colleagues. However, once the chaff has been cleared and rewards begin to rise, 2023 could certainly generate new highs in digital assets. According to Huobi Global, at least, BTC should hit a $15,000 bottom by March 2023, paving the way for a new leg up in the final three quarters of the year.
Frisky Forex
The high volatility of crypto is well documented, but traditional currencies are expected to be about as stable and predictable an asset class as they come. Well, 2022 saw that trend well and truly bucked as fiat had one of its most rollercoaster years on record. EUR/USD fell below parity for the first time in 20 years, while the dollar's value soared against a majority of the world's majors. Inflation was naturally a major factor in this unusual scenario, but its impact was then further exacerbated by increased dollar demand in the face of twin liquidity and energy crises. The greenback is still the world's reserve currency, and market participants tend to flock to it during tough times. Not to mention that the global oil trade is conducted in USD.
There has been much talk of Fed money printing devaluing the dollar, but the truth is this money never makes it into the real economy and thus has little effect on the actual USD supply. The demand for dollar-based collateral in the form of short-dated T-bills from the multi-trillion-dollar derivatives market, on the other hand, has worked to drive up the value of the US national currency significantly. With the Fed taking care of demand-pull pressures via sharp interest rate hikes and the expected shift from futures and options to physical securities in 2022, the year ahead should be characterised by a normalisation of the EUR/USD and GBP/USD cross rates going forward. Indeed, Citibank's six- to twelve-month EUR/USD forecast stands at $1.05, rising to a much more familiar $1.10 over the long term.
Has gold lost its shine?
Since as early as 2020, just after the pandemic struck, analysts everywhere have been tipping gold to outperform. It stands to reason, right? Testing times and economic pain have almost always been a boon for the yellow metal. The only thing that has proven even more profitable has been periods of hyperinflation. So, when price pressure hit 10% this year, you could forgive gold bugs for expecting massive gains in precious metals. However, despite a relatively positive first quarter, gold entered the final month of 2022 at basically the exact same level ($1800 per Troy ounce) as it was 12 months ago.
What's the reason for this paltry performance? It's all down to the dollar, of course. Because gold prices are quoted in USD, the metal appears to have traded flat all year. However, if we scratch the surface, we see that inflation means the dollar has actually appreciated by around 10% YTD. As a result, we can say that gold has also gained around the same. Confusing, we know. But if we look at the price per gram in euros, the picture becomes much clearer. Spot prices in Europe are up almost 8% from €50.49 to €54.53. As such, gold has, in fact, performed its role perfectly by preserving its holders' spending power throughout this turbulent year. In fact, analysts from Saxo have claimed gold could slice "through the double top near $2,075 as if it wasn't there and hurtle to at least $3,000" in 2023.
-
The factors that shaped the year and what to expect in 2023
As we prepare to close the door on 2022, most traders and investors will be happy to see the back of this disappointing year for a majority of asset classes. It has seemed as though virtually everything is down, with almost no safe place for storing or growing wealth to be found. Tech stocks have been in freefall, and even major indices like the S&P 500 and Nasdaq have suffered over 20% and 30% declines, respectively. As for crypto, the carnage has been unfathomable, with Bitcoin now down 70% YTD.
This time last year, the optimism was palpable: we were finally putting the pandemic behind us, and, despite many instruments probing all-time highs, things were only going to get better…or so we thought. Sky-high inflation, a devastating energy crisis and a looming global recession have seen pretty much everything but gold and the USD's record double-digit losses over the past 12 months. But what market participants are desperate to know is whether 2023 will finally see an end to these calamities and send the bears back into hibernation.
Inflation, inflation, inflation
The headline economic news throughout the past year has been spiralling inflation, with the indicator pushing double digits throughout much of 2022 and reaching a high in the EU of 18% in September. Obviously, this has wreaked havoc on the buying power of ordinary consumers and, by proxy, the exchange rates of all European currencies. This has, in turn, meant a reversal of capital flows into risk assets like stocks and crypto. Of course, holders of USD, gold and other commodities might well have preserved their wealth or even gained slightly, but compared to the bumper profits of 2021's bull market, these were paltry at best.
The Fed has now raised rates by a total of 425 basis points since the start of this year, which has helped the US avoid the worst of it. Europe's central banks have now mobilised to bring this runaway inflation into check, with the Bank of England and ECB hiking their respective key interest rates by 340 pts and 250 pts, respectively. Now, inflation in the Old Continent is below 10%, and the ECB's latest macroeconomic predictions see it moving as low as 3.6% by the end of 2023. According to different economic analysts, in such a scenario, equities and other risk-on instruments are expected to recover in line with consumer spending power.
Keeping the lights on
If hyperinflation wasn't bad enough, Europe's residents have also had to contend with a serious fuel crisis. Natural gas prices rose almost 400% from January to August 2021. Though they have since dropped significantly to €92.50 per MWh, even now, prices are still almost 500% higher than in 2020. Meanwhile, wholesale electricity costs have more than doubled in 2022, with fuel now ten times more expensive than it was two years ago. Of course, the impact on households has not been quite severe, but still significant enough to reduce disposable income by some margin. The resultant drop in consumer spending has had knock-on effects for manufacturers, leading to a stagnation of stock prices in the sector.
As with any complex crisis, the reasons are varied and include geopolitical instability and the associated tariffs on producing countries, the unexpected decommissioning of the Nord Stream gas pipeline, and an over-emphasis on expensive and insufficient green energy at the expense of nuclear power. As an energy-heavy industry, crypto mining has understandably been hit hard by this reality. The rapidly rising cost of mining, coupled with low coin prices and increased difficulty, has created a negative feedback loop of declining prices. If prices stabilise below the cost of mining next year, however, market analysis predicts that we'll see a new bull cycle emerge.
Don't say the "Recession" word
As much as governments might try to postpone the inevitable, it looks like we will soon have to accept the reality that many of the world's economies are now in a technical recession. The combination of rampant inflation, soaring fuel and commodities costs, and supply chain ruptures linked to China's zero COVID policy has been devastating for the business community and global trade in general. A Reuters poll put the probability of a eurozone recession within one year at 78% as Brussels admitted that we could expect to enter one by the New Year. Meanwhile, the UK's GDP has already fallen (-0.2%) for a second consecutive quarter, which means Britain is already in a technical recession.
As scary as that might first sound, the outlook is not quite as bleak as we might think for Europe. Indeed, in a recent report, Goldman Sachs predicted "a shallower recession" for the EU, claiming that "the euro area economy will contract by only 0.7% from Q4 2022 to Q2 2023 (vs 1.1% before)". A recession of any kind is obviously not the best news for commodities and manufacturers, but a mild one could be good for consumer staples, the US dollar and gold as the poor tighten their belts and the rich look for safe havens for their wealth. In any case, we will have to keep an eye on PMI and GDP data throughout H1 2023 in order to try and spot the point of reversal.
Carry on with Libertex
As we bid farewell to 2022, Libertex (https://libertex.com/) remains hopeful for a prosperous 2023. Check out our website or app for the full list of available CFDs, spanning a variety of asset classes, such as stocks, indices, commodities, futures, forex and, of course, crypto. We wish you all a wonderful holiday season and can't wait to welcome you back for a (hopefully) profitable 2023!
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.
-
Chinese stocks catch investors' eyes as US and EU continue to lag
Every investor knows too well how much of a disaster 2022 was for stocks. Individual equities plummeted by up to 90%, and even major indices like the S&P 500 and Nasdaq are down around 19% and 31%, respectively. Chinese stocks suffered just as severely in 2022. Between supply chain ruptures, the Chinese Communist Party's (CCP) "zero COVID" policy and government crackdowns on big tech, China's equities market seemed to be on a never-ending downward spiral. Until it wasn't anymore.
But with all the negative news coming out of Western markets of late, you could be forgiven for missing the slow-but-steady recovery that has taken place in China over the past couple of months. It all began in early November, and since then, some of the Asian giant's biggest tech firms have gained over 30%, showing a clear bullish trend emerging. But does this mean traders and investors should move their capital into Hong Kong and Shanghai, or could this positive movement be foreshadowing a wider global recovery?
Party killers
China's tech giants were making headlines for all the wrong reasons throughout 2021 and 2022 as US American Depositary Receipts (ADR) trading bans and homegrown crackdowns by the country's ruling Communist Party drove a mass exodus of investors from household names like Tencent, Baidu, Netease and, of course, Ali Baba. This latter was perhaps the worst hit as a result of its outspoken founder Jack Ma's repeated political faux pas following Chinese regulators' decision to halt Ant Group's much-hyped IPO on Hong Kong's Hang Seng exchange.
But this was just one high-profile example of a clear paradigm shift within the country. On a more general level, China's CCP had ultimately decided that it was time to reign in their own Big Tech firms, lest they become a law unto themselves. The end result of all of this was a long-drawn-out slump to ever-lower stock prices for the majority of China's tech companies. When all was said and done, Tencent, Baidu and Alibaba had lost around 70%, 60% and a whopping 80%, respectively. Meanwhile, the party's misguided "zero COVID" policy piled on the misery for Chinese business as a whole, with lockdown after lockdown stifling trade and commerce.
Watch the dark horse
With the world's focus on recession-threatened Europe and the US, analysts and market participants alike completely missed the bottom in Chinese Big Tech. But since November 2022, the stock prices of Tencent, Netease, Baidu and Ali Baba have been edging up almost unnoticed by western actors. Now, these stocks are up an average of 70% in the past three months alone, and the uptrend looks set to continue. In a global equities market that is decidedly in bear territory, these are certainly not to be sniffed at.
In fact, despite the regulatory barriers and risk involved, numerous US and Europe-based investors are being tempted back to China in search of gains that are so elusive elsewhere just now. Indeed, many of the biggest hedge funds had called the bottom back in October and November, with such funds being consistent net buyers of China equities for over eight of the past 10 weeks now. And now that less major players are starting to bolster capital inflows into Shanghai and Hong Kong, we can safely say the tide has truly turned. With the Lunar New Year also just round the corner, there are further drivers of growth on the near-term horizon.
Chinese stocks CFDs with Libertex
It's too early to tell whether this recovery in Chinese equities foreshadows a general recovery in risk assets globally or even whether this rally will continue into the Chinese New Year and beyond. But one thing's for sure: no other stock markets are showing anything like the positive movement currently being seen in China's tech sector. With Libertex, you can trade CFDs on some of Asia's largest cap firms, including Tencent, Baidu and Ali Baba. More conservative investors can also benefit from China-focused ETFs, such as the iShares China Large-Cap. For more information or to create an account today, 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.
-
Bitcoin market cap back above $1 trillion as crypto rot stops
The cryptocurrency market was one of the worst performers of 2022, with prices of many of the major coins falling by over 70%. In fact, the market capitalisation of the original digital currency, Bitcoin, fell from well over $1 trillion to just a shade over $300 billion by December 2022. Hoards of miners and crypto-heavy funds were forced to file for bankruptcy. Then the infamous FTX collapse threatened to sound the death knell for the entire sector. But, as is often the case in financial markets, this moment of peak pessimism actually turned out to be precisely where the bottom formed.
That's right. Against the predictions of even the most relentlessly rabid of crypto bulls, the New Year started with a resounding bang for digital assets. In just a little over the first two weeks of January on the clock, Bitcoin managed to rise around 25%. And though there has been a slight correction since then, it is clear now that this is more than just another crypto bull trap. But what is behind this sudden change of fortunes, and is it safe to call the reversal so soon? In this article, we'll discuss the current situation in this highly volatile sector and look at the analysts' best guesses for the rest of 2023.
It's not just Bitcoin
As has often been the case with the crypto sector, Bitcoin tends to set the trend, and we then see similar movement across the wider market. Well, this time appears to be no different, with the next two biggest projects by market cap (Ethereum and BNB) similarly gaining 20-25% over this same period. However, certain coins managed to gain significantly more than the founding father of digital assets. Avalanche (AVAX), for instance, has managed to gain over 50% since 1 January, while Solana (SOL) has more than doubled in value over this same period.
While there has certainly been some fundamental news that could explain this asymmetric growth — such as AVA Labs' freshly signed collaboration deal with Amazon and its Amazon Web Services (AWS) cloud-computing arm and the launch of Solana's memecoin BONK — there is also a deeper force at play. The explosion of demand in the DeFi and dApps spaces is naturally driving up tokens and blockchains like AVAX and SOL, which are uniquely suited to these kinds of applications. In fact, many analysts, including the Motley Fool, predict that these two projects will be the biggest gainers of 2023 due precisely to these factors.
Becoming institutionalised
It was once the case, not that long ago, that the cryptocurrency market was virtually devoid of what many term "smart money". It was a disorderly, unpredictable free-for-all dominated by devil-may-care retail traders with zero accountability and no quarterly or even annual targets. Together, these features all contributed to the sector's infamous volatility and made it extremely difficult to forecast movement. But all that changed during the pandemic. After many years on the sidelines, the funds started piling into digital currencies, and by December 2020, they already had over $15 billion under management.
Then, just twelve months later, this figure had risen to over $65 billion. One undeniable advantage of this new injection of capital has been the increased predictability that institutional money brings. Thus, when their crypto investments shrunk by 95% over 2022, it was clear to analysts that a bottom must be close at hand. Finally, when the tide turned and inflows began to overtake outflows in the second week of January, the foundations were laid for sustained growth as the year progresses. It's still too early to tell whether the reversal is complete, but savvy investors will continue to watch the weekly inflows report to see if a firm uptrend emerges.
Risk on, risk off
Now that we've established that the cryptocurrency market is gradually maturing to become a bona fide asset class like equities, commodities or futures, we have to accept that it will also be increasingly susceptible to economy-wide factors influencing investor behaviour. Well, you'd have to have been living under a rock not to have noticed the rampant inflation and seemingly ever-present threat of recession that ruled 2022. Unsurprisingly, economic turmoil and uncertainty tend to wreak havoc on risk assets, and this past year was no different. It's no coincidence, then, that stocks, ETFs and crypto were some of the worst-hit instruments over the last 12 months and that the looming spectre of eurozone and US recessions have kept many of these risky asset classes flat into the New Year.
What is unusual, however, is that the historically volatile and inherently riskier crypto market was the first to rebound significantly, more than doubling gains made by even the best-performing US stocks. Could this be a sign that digital assets are now leading risk-on assets as a whole, or is it just more proof of crypto's native unpredictability? As the wider global economy continues to outperform expectations, it could well be that a V- or U-shaped recovery is on the cards, with digital assets priming themselves to lead the risk-on pack into a new bull cycle.
Trade CFDs on crypto with Libertex
Libertex offers both long and short positions, and you can trade whichever trend you like. Over 150 CFDs on different digital asset pairs are available, including Bitcoin, Ethereum, Avalanche and Solana, so you most likely will be able to find an underlying asset to pique your interest. What's more, the unique advantage of CFDs means that there's no need to physically own the coin or token you wish to trade, you can buy or sell at any time and simply collect the difference. For more information about our extensive crypto CFD offering and highly favourable commission structure, visit www.libertex.com/cryptocurrencies
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Fed leads the way on rates as inflation continues to slide
It wasn't long ago that it seemed as if inflation was an out-of-control freight train that was threatening to destroy the world's buying power for years to come. However, thanks to some aggressive action by central banks around the world, the price pressure monster appears to be under control once again. In the space of just over 12 months, the US Federal Reserve has raised its effective funds rate by over 400 basis points (bps) to levels not seen since 2007. Meanwhile, the euro area's ECB has hiked its own lending rate by 250 bps, with the Bank of England opting for an increase of 300 bps over the same period.
Raising rates to combat inflation is a classic central bank play almost as old as time. The underlying logic is that as the cost of borrowing money increases, the value of existing cash stabilises. This is great in theory, but in a world as overleveraged as today's, it also poses a significant risk to the wider economy as businesses and ordinary citizens' debt burdens are exacerbated by additional interest payments. For now, the strategy seems to be working satisfactorily, but what will be the effects of this ongoing hike cycle on the already tense global currency markets?
Fed up with inflation
There are no two ways about it: the US Federal Reserve has come down the hardest on price pressure and has undoubtedly been the most hawkish of the Big Three central banks globally. This was largely due to the fact that it had more leeway in terms of already having the highest rates in the Western world before the hyperinflation of 2021-2022 set in. What's more, it has also enjoyed the privilege of energy security during a particularly tough time for Europe. Since energy is used to produce, well, everything, the 5-to-10-fold rises in energy prices had a much more pronounced effect on the EU consumer price index than its US counterpart.
In any case, the US regulator delivered on analyst expectations yesterday (1 February 2023) when it raised rates by another 50 bps to take the overnight lending rate to between 4.75-5%. And while Fed Chairman Jerome Powell noted that the tightening monetary policy had been effective in bringing down price pressure, he also stated that inflation "remains too high", pledging to "stay the course until the job is done". The effect of this was a strengthening of US Treasury bond yields, with the 10-year T-bill sliding 13 bps to a four-month low of 3.4%. Meanwhile, the dollar remained fairly flat as this rate increase had been more or less fully priced in already.
Lagarde back on track
The European regulator has received some criticism for being too dovish with its monetary policy as the EU has faced severe inflation in recent months and still trails its counterparts in the US and Britain by 100-200 bps. This is due to a combination of a lower starting point following years of zero rates and a keen consideration for ordinary debtors. Nevertheless, the ECB delivered on its promise to raise rates a further 50 bp, bringing its aggregate rate to 2.5%. ECB President Christine Lagarde has even gone as far as to commit to "at least one more" rate hike before the year's end, which will certainly give some solace to the EU hawks.
This also gives us some insight into the euro area regulator's "terminal rate" target, which Lagarde initially stated to be 3.5-3.75%. The ECB Governing Council also affirmed that the APP portfolio will decline by an average of €15 billion per month from the beginning of March until the end of June 2023, in line with December's claims. The euro did dip slightly on the announcement, highlighting that some market participants are somewhat doubtful that this will be achievable in the medium term.
BoE presses on with policy
Since Brexit, Britain has certainly erred more towards its trans-Atlantic cousin's monetary policy than that of its European neighbour. However, it would be remiss to ignore that the BoE was the first major central bank to begin the post-pandemic shift to tightening. From that point on, though, the UK has been playing catch up with the Fed to match the US regulator's 50-75 bps rate hikes. As the analysts predicted, February was no different as the UK regulator announced it had increased its lending rate by 50 bps increase in line with Powell's across the pond. Many analysts and economists, however, will be on the lookout for signals that this tenth consecutive rate rise will prove one of the BoE's last.
One confounding factor for the UK is its relatively higher inflation rate compared to the US and, indeed, the EU. Inflation remains above 10% in the island nation, which behoves a more aggressively hawkish position than in countries that have already brought price pressure down to single digits. For now, the pound remains steady, with this decision already largely baked into its exchange rates.
The future for forex
This past year or so has been an uncharacteristically volatile time for currency markets. The epitome of this had to be the historic passing of EUR/USD parity when the US dollar was briefly worth more than the euro. Thankfully, sound central bank policies on both sides of the water have helped bring the Fibre back into more familiar (and stable) territory. As the geopolitical and general economic climate continues to calm, we should expect asymmetric USD demand to disappear, allowing the other majors to recover.
After hitting a 20-year low in September 2022, the European single currency has made a fourth consecutive monthly gain as energy prices return to more sustainable levels and the ECB maintains its hawkish stance. EUR/USD currently stands at 1.10, and its lack of movement in and around these key rate decisions is a testament to its long-term outlook. The Cable, on the other hand, did move slightly just following Powell's post-meeting comments on Wednesday, 1 February 2023, but quickly fell back to its pre-meeting level of 1.23 the next day. With all the world's major central banks seemingly on the same page, we can expect a period of more typical stability in the forex market.
Trade with Libertex
Libertex has huge experience connecting traders with the market. With over 51 CFD currency pairs, including both key majors — EUR/USD and GBP/USD — you're guaranteed to find a pair to take your fancy. And because Libertex offers both long and short positions, you can have your say in whichever way you think the market is headed. Try our multi-award-winning platform for yourself by visiting www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
US stocks are down in the dumps, but for how long?
For many US stockholders, 2022 was a year to forget. During the heady pandemic heights of unbridled growth, it felt at times as though the only way was up for equities. But, as is always the case, sooner or later, the bubble has to burst…and burst it did. Unsurprisingly, it was those companies that had gained the most in 2020-2021 that suffered the worst. Many of these, such as Tesla, Meta (formerly Facebook) and Salesforce, have appeared to be in freefall throughout the past twelve months as ever-lower lows became the norm.
This was, however, a worldwide phenomenon. In China, Alibaba, Baidu, Tencent and other tech darlings also suffered a similar fate. Europe’s stocks have had their fair share of pain amid ongoing geopolitical uncertainty, spiralling energy costs and soaring inflation. But in Q3/4 2022, that all changed. Since then, China’s tech giants have managed to regain almost 30%, while the DAX is up over 20% in the same period. The S&P 500 and Nasdaq, on the other hand, have been relatively flat in comparison, barely managing +10%. What is behind this lag, and does it mean that a bottom is now in place for US stocks?
What goes up must come down
It’s no secret that US tech was the stand-out sector of the 2020-2021 market boom. From its March 2020 low of 6,879.50, the Nasdaq index more than doubled over a period of 18 months to reach an all-time high of 16,057. But some individual stocks like Tesla had gained many multiples higher than this, with the futuristic automaker growing more than 1000% over this time. Viewed through this lens — and with the benefit of hindsight — it’s clear to see that these valuations were completely unsustainable.
All it took was a slight jolt to bring the entire house of cards tumbling down. And that ultimately came in the form of rising inflation and the collective realisation that the end of the pandemic wasn’t going to be the panacea for the economic problems that had been festering over two years of rolling lockdowns many hoped it would be. A totally predictable flight from risk ensued, resulting in devastating losses for unduly inflated asset classes like crypto and tech stocks. Tesla proceeded to a long, slow decline that eventually saw it lose around 70% of its ATH value. This pattern was repeated across a whole host of other tech names; Meta, PayPal and Salesforce all lost between 60% and 70% over the same period.
Insult to injury
If the massive anti-climax of phasing out coronavirus restrictions wasn’t bad enough, things only seemed to get worse after Q4 2021. First came the rampant double-digit inflation that saw prices of everything from consumer staples to industrial aggregates race to ever higher highs, forcing ordinary people to cut back their spending in any way they could. Then, we had the energy crisis and a severe escalation of the geopolitical situation in Europe to contend with. Not to mention the ever-present spectre of a global recession.
All of this naturally put the boot on the neck of an already weakened stock market. Surprisingly, though, precious metals remained relatively flat. That left really nowhere for anyone to park their cash except in, well, cash. This supported the USD and actually made it the best-performing instrument of 2022. Another side effect of this was that investors, both retail and institutional, had capital literally burning a hole in their pockets. Thus, we were always going to reach a point when natural price discovery made risk assets good value again. And that’s exactly what happened. Perhaps the most volatile asset class of all, cryptocurrencies, positively exploded this month. After losing almost 80% of its value, BTC has now gained 35% in 2023 so far.
Let’s get technical
As we touched upon before, the S&P 500 and Nasdaq have barely managed to gain 10% from local lows. Meanwhile, crypto, Chinese stocks and even European equities are up over 30% on average. Given the relative security and insulation of the US economy from many of the problems plaguing the globe — and Europe, in particular — this disparity in performance simply doesn’t add up.
Indeed, most technical analysis suggests that the bottom has been and gone for US tech. Take the Nasdaq 100, for instance: virtually all of the TA available rate it as a “Strong Buy”, with the RSI, all the MAs (5,10, 20, 50, 100, 200), and the ADX predicting growth ahead. A break upward through the 11,500 mark will be received as a positive signal by market participants, and with the RSI curve showing a rising trend, there is reason for us to hope that a trend reversal is in its early stages. It’s a similar story for individual stocks like Meta and TSLA, too, with analysts at Investing.com giving them a 12-month price target of 156.75 (+10%) and 199.60 (+38.20), respectively. This makes current entry points highly attractive for both wide indices and individual blue chip tech stocks.
Trade the trend with Libertex
Libertex is a CFD broker offering both long and short positions in a range of CFDs on Stocks (including Tesla and Salesforce), ETFs, Indices and more — all with the advantage of leveraged trading — you can have your say on where the markets are headed without having to own physical assets at all. With Libertex, you can trade a variety of CFD instruments all in one user-friendly app. Try our multi-award-winning app or online trading platform and #TradeForMore with Libertex (https://libertex.com/)!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Pressure builds in precious metals as dollar correction reveals gold's gains
Investors could be forgiven for thinking precious metals have been trading flat this past year or so, with prices more or less at the same level as they were before the COVID pandemic. However, what many forget to factor in is that the last 12 months have also been characterised by historic strength for the US dollar. Even leaving aside the mid-summer highs, when the greenback was well above parity for some time, the USD is still worth almost 15% more in euro terms than it was pre-pandemic. This effectively means that gold has not only held its value over this turbulent time, but it has also actually recorded double-digit "real world" gains.
Now, starting from Q3 2022, gold and silver have practically exploded, rising between 10-15% in the space of a few months. It might not sound like much, but — by precious metals standards — that is quite a pronounced trend. Is this a sign of an incipient bull cycle, and what are the driving forces behind this strong movement from an otherwise reserved asset class? In this article, we will hopefully be able to answer these questions and more, shedding some light on the long-term outlook for gold and silver into 2024 and beyond.
Position 1: Dollar weakness works up metals
As we touched upon above, the USD had one of its strongest years in over two decades in 2022. But as any investor will tell you, what goes up fast must come down equally as fast — and this is precisely what we're seeing play out now with the greenback. From a high of 1.04 in late September of last year, the EUR/USD cross rate is now down more than 10% to 0.93. The upshot of this is that gold's "real world" gains, which were previously only visible when compared against the euro, have now become apparent in dollar terms, too.
Add to this some natural increase in precious metals demand on account of ongoing geopolitical instability and above-target inflation, and gold and silver's seemingly rapid appreciation makes logical sense. Amid softer 10-year US Treasury yields of 3.61%, the risk-off sentiment is fading, and we can confidently expect the yellow metal to keep going above $1,880.00. Furthermore, the Federal Reserve is tipped to complete its tightening cycle by year-end, and with these subsequent hikes largely priced in already, the path is clear for gold to rise further without the headwinds of a strong dollar.
Position 2: All about inflation
After a truly torrid couple of years for the global economy, it might feel as though the worst is behind us. This might well be true, but we're definitely not out of the woods just yet. Geopolitical uncertainty in Europe and the Pacific and ongoing inflationary uncertainty mean that risk-off assets like gold and silver remain attractive hedges to diversification-seeking investors of all stripes. In fact, while the Federal Reserve and other major world central banks are expected to reach their terminal rates with total additional hikes of under 100 basis points, this is by no means set in stone.
If inflation doesn't drop below 4%, global regulators will be required to keep tightening, which will only increase demand for precious metals. The Canadian bank CIBC sees gold and silver prices averaging around $1,800 and $23.50 an ounce over 2023, which is roughly 5% below current prices. Meanwhile, April gold futures were trading around $1,887.30 per ounce at last week's end (10/02), while March silver futures stood at $22.35. However, once again, these prices are predicated on only 1-2 additional rate hikes in 2023. If we see more, all bets are off.
Position 3: What about stocks?
Aside from metals ETFs, investors can also gain exposure to gold, silver, and other precious metals by purchasing stocks in mining companies. Obviously, this is not a strategy for everyone, but the increased volatility of mining and royalties equities can mean better gains while also providing a greater degree of diversification across all the commodities that the company in question trades in. Another undeniable advantage of such stocks is that they typically benefit from some pretty solid dividends. Vale, Barrick and Rio Tinto are all stable and well-established players in the precious metals mining sector and remain at very attractive valuations despite average gains well above that of gold and silver over the past six months. Barrick is up over 20%, while Vale has managed around 30% over the same period. But the sector leader is Rio Tinto, with gains of nearly 50% since September.
Meanwhile, these mining giants offer very generous dividends of 2.93%, 8.86% and 7.84%, respectively. Despite these market-beating price gains and relatively high dividend yield, Vale is still rated a Buy by a majority of Wall Street analysts, and its 18.64 average price target represents a potential upside of 10%. If, however, inflation remains high and investors' risk appetite is reduced once more, we could well see even bigger returns.
Go for gold (or silver) CFDs on metals with Libertex
With Libertex, you can trade CFDs in a wide range of assets, from stocks and ETFs to cryptocurrencies and, of course, commodities. Aside from gold (XAUUSD) and silver (XAGUSD), Libertex also offers CFDs in other precious metals like copper, platinum and palladium. Best of all, Libertex gives you the option to hold both long and short positions in any of the available assets, which means you can have your say, no matter what you believe the dominant trend to be. For more information or to create a live trading account of your own, visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Getting into the heads of today’s traders
The past few years have been a rollercoaster ride for both traders and investors. Since the global pandemic of 2020, we've seen crashes, bubbles and just about everything in between. As of the start of this new year, the stock markets seem to be shaping up for a new bull cycle. But after what happened in Q4 2021, people are understandably reluctant to stick their necks out again. With inflation still way above target and the geopolitical situation teetering on a knife edge, it's impossible to say for sure whether the bottom has been and gone.
Such rampant volatility, as we've observed of late, was always bound to take its psychological toll on even the most stoic of market participants, and you'd need nerves of steel to try and predict the market at a time like this. But after all, it's ordinary traders and investors that move the market and understanding what "groupthink" is could be your key to making money in turbulent conditions such as these. With this in mind, today we will be looking at some of the best-known indicators of trader sentiment and how these combine with existing fundamental factors to direct the future trajectory of world equities markets.
Fearful and needy or selfish and greedy?
Perhaps the most popular indicator of market sentiment — and one named after a famous Warren quote, no less — is the Fear and Greed Index. Initially developed by CNN Money, its purpose is to determine whether investors are overly bullish or overly bearish on the major US stock indices. The scale ranges from O (extreme fear) to 100 (extreme greed) and is calculated using seven key factors: Stock price strength, stock price breadth, market momentum, put and call options, safe haven demand, junk bond demand, and market volatility. The index's current level of 69 is only 10% lower than its 12-month high of 76, suggesting relatively high levels of greed.
For much of the past 18 months, however, the indicator has been swinging wildly from extreme fear to within a few points of its present reading as a result of ongoing Fed tightening, inflation, and geopolitical instability. Its wide scope makes the Fear and Greed Index a good general barometer of the overarching market psyche, but it must be combined with other analysis tools, as well as non-technical fundamentals, to give actionable guidance. And this time is no different. It will ultimately be the world central banks that decide whether a new bull cycle emerges. If they stay hawkish and keep hiking above the suggested terminal rate of 5.0-5.75%, the chances of a sustained uptrend will be significantly diminished.
Value the VIX
The VIX, or volatility index, was created by the Chicago Board of Options Exchange and is designed to track the implied volatility of S&P 500 options. Basically, when the VIX is low, volatility is low, and when the VIX is high, volatility is, too. The simplest way to think about the VIX is almost like an inverse S&P 500. That's why traders say: "When the VIX is high, it's time to buy (ordinary stocks). When the VIX is low, look out below!" The best feature of the VIX is that it allows us an insight into the psychology of the big market movers. Because these players are unable to sell off their entire stock positions when they feel markets are turning, they instead purchase options in order to offset their losses.
Since the VIX essentially tells us what kind of options the major institutions are purchasing, it allows us to pre-empt large moves to the downside. The indicator has been below its key level of 20 for the past week now, and the technical analysis would suggest that we will need to wait until at least March for a retesting of the January high of 2022.
There are, however, certain market participants that are banking on more significant swings in the medium term. The famous "50 Cent" options trader was back in the market this past week, purchasing 100,000 call contracts at 50 cents each for a total of $5 million and then another 50,000 identical contracts worth $2.6 million a day later. Whoever this mysterious investor is, they are predicting a rise in the VIX above 50 in May. With the ongoing conflict in Europe and global economic uncertainty in general, there certainly are plenty of potential factors for such an eventuality, but traders will have to use both technical and fundamental analysis for actionable information.
All about the fundamentals
As much as TA buffs will try to persuade you otherwise, fundamentals are absolutely central to trader psychology. Especially as the stock market becomes more and more saturated with retail traders and investors — many of whom take their lead exclusively from news events and emotional cues — the effects of general economic developments on equities markets are becoming increasingly pronounced. And despite the average 10% YTD increase in the major US indices, there are a number of fundamental factors that will have more of a say in whether this rally turns into another bull cycle or not.
First, there's the Fed and its hawkish stance. Rates have now been increased 450 basis points this past year alone, and yet inflation remains above target. If we don't see inflation down below 4% when Powell's terminal rate of 5.25-5.75% is reached, it's hard to see how there will be any appetite for risk. US and European PMIs are also below that magic 50 number, making corporate profits vulnerable. If Q1 reports underperform, stocks will struggle to make significant gains, especially in a tightening cycle. One factor that is positive for US equities, however, is the strong labour market data we've seen in recent months. After adding 517,000 new jobs in January, US employment continues to expand despite surging energy costs — a factor that could help engineer a soft landing in case of a correction in stocks. Essentially, everything is still up in the air, and traders ought to take their lead from a combination of volatility indicators and fundamental developments for the best results this year.
Trade the trend with Libertex
With Libertex's extensive equities CFD offering, which includes long and short positions on the S&P 500, Nasdaq, Dow Jones and others, you're able to make a trade in any market situation. With the Libertex trading app, you can hold all your CFDs on one platform. 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. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Oil adrift as dual market emerges
Oil is the lifeblood of the global economy. Without it, goods cannot be moved or even produced; people cannot get to and from work or shops; and food cannot be farmed, packaged or transported. It's no coincidence, then, that the price of oil is directly correlated with economic health and prosperity. A prime example of this was in March 2020, in the wake of the COVID crash, when Brent prices turned virtually negative. Countries were locked down, factories shut, and domestic travel severely restricted. Of course, it was basic supply and demand. Nobody needed fuel, so its price collapsed. But as the caveat of one famous expression states, "what goes down must also come up".
After two years of yoyoing in lockstep with pandemic policy and supply-side pressures, oil appears to be levelling out, with the market leader Brent now standing at around $82.30 per barrel (27/02/2023). However, this is still well above the ten-year average and — with above-target inflation and a general climate of uncertainty — it represents serious headwinds for the manufacturing and transport sectors, as well as the wider economy. As central banks continue to raise rates and oil-producing nations look to balance demand and supply, 2023 is shaping up to be a key year for this energy resource. Now, without further ado, let's look at what is causing the current price instability and try to predict the most likely movement for this crucial commodity going forward.
Demand choppy amid dismal data
The world still hasn't fully recovered from the coronavirus crisis of 2020. Things might seem as though they're back to normal, but the economic fallout of this unprecedented global black swan is still thick in the air. Rampant inflation caused by excessive quantitative easing during the acute phase of the pandemic is driving up all commodities, oil included. However, a side effect of this is diminished buying power and highly volatile consumer sentiment, which has meant manufacturers have had to adjust production regularly.
In fact, the typically linear durable goods orders chart was an uncharacteristic picture of ups and downs in 2022. Since February 2022, four out of eleven of the months studied showed a decline, with the four-month period from March to June marking the most consecutive rises of the year. Coincidentally (or perhaps not), it was during this same period that oil prices hit their June local maximum of over $120 per barrel. Meanwhile, the US ISM PMI has been in a steady decline from 58.6 to 47.4 over the same time frame, having spent the past three months below the key minimal level of 50. Unsurprisingly, oil's movement has virtually mirrored these two indicators, with Brent gradually having lost almost 35% since June. Whether the business climate will improve is yet to be seen, but if it does, we could then expect oil to rise.
Everything's cheaper in China
After lagging severely behind for much of 2022 following the CCP's much-criticised zero-COVID policy of sweeping lockdowns, which led to severe drops in oil consumption from both ordinary consumers and big industry, the situation appears to be normalising now in China. Analysts now predict the Asian giant's oil imports to hit a record high in 2023 amid increased transportation demand and the arrival online of new Chinese refineries. Indeed, OANDA senior markets analyst Craig Erlam has claimed that the optimism around post-corona China — the world's largest importer of oil — may have something to do with the gains we're seeing in crude.
China and India have become major importers of Russian oil amid Western sanctions, embargoes and price caps on the OPEC+ member. In India, too, government crude imports data hit a six-month high in January. Essentially, the geopolitical instability in Europe and the associated measures imposed on Russian oil has seen two markets emerge. As a result, Urals crude currently sits at around $49.70 a barrel, representing a hefty 40% average discount on Brent. For non-aligned countries like China and India, this is a huge boom that means that they are not only able to meet potentially high demand in 2023 but will also be able to save billions of dollars in transport and production costs. However, with Russia this week reducing its output, we could soon see both Urals and Brent rising in the short-to-medium term.
What do the technicals say?
Very much in line with the fundamentals we've already covered, the technical analysis is similarly mixed. Both Brent and WTI have conflicting signals, and it appears we will need to see a convincing move in one direction before any truly actionable signals will be forthcoming. The weekly and monthly charts for the US's big two crude varieties seem to range anywhere from sell to strong sell, though the MACD for both of these timeframes rather confusingly suggest that current prices represent a good deal for prospective long-term holders.
If, however, we move over to the daily, 5-hour and 1-hour charts, a completely different picture emerges. The number of indicators flashing Buy increases exponentially as we reduce the charts' timeframes. On the 1-hour, for instance, the RSI, MACD, ADX, CCI and Bull/Bear Power all recommend buying. As such, it would appear that day traders could certainly consider picking up both Brent and WTI at current levels. For longer-term investors, it might be wise to take a wait-and-see approach until we have some much-needed clarity on some of the fundamentals detailed above.
Trading CFDs on oil with Libertex
Libertex is an experienced CFD broker renowned for its low commission, tight spreads, and multi-award-winning trading app. Apart from CFDs on Forex, stocks and ETFs, Libertex also offers CFD positions in a wide range of energy commodities, including WTI Crude, Brent and Light Sweet Crude. Since Libertex allows you to open long or short positions in any of its tradable instruments, it doesn't matter which way you believe the market is headed. For more information or to open your own live account, visit www.libertex.com and join the ranks of Libertex clients worldwide.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
What the US labour market's strength might mean for markets
From having to survive off of government handouts in 2020 to holding all the bargaining power today, unskilled workers have been on a rollercoaster ride of ups and downs over the past couple of years. But it isn't just restaurant workers and retail employees who have gained the upper hand in labour negotiations. The latest topline economic indicators reveal a remarkably strong US labour market across all sectors. That's right, over the last 3 months, the US economy added an average of 356,000 jobs, while national unemployment stands at a 50-year low of 3.4%. Almost all major industries have now exceeded their pre-pandemic engagement levels. Meanwhile, the "quit rate" remains at near record highs, which is a clear sign of American workers' confidence in the labour market and an abundance of better employment opportunities.
Following last week's (08/03/23) release of the US Labor Department's Job Openings and Labor Turnover Survey, the numbers remain very positive, albeit slightly less impressive than the last report. New job openings were down slightly to 10.8 million, layoffs were marginally higher, and the quit rate dipped mildly. However, this is perfectly normal in January as the seasonal employment effect disappears and businesses look to trim costs for the next financial cycle. And while this is all very well and good for employees, traders and investors would understandably like to know what the implications of such a strong labour market are for their investments in the financial markets. Therefore, this article will look at the effect of the strong labour market on three of the most-traded asset classes around: stocks, forex and commodities.
Equities in the frame
A strong labour market is generally good for the stock market as it means more people are secure and confident about the medium- to long-term future and, thus, more likely to have surplus income they wish to invest. Combine this fact with the pandemic-era influx of retail investors into the equities markets and the relatively low prices of US stocks right now, and you would think it's a recipe for stock market gains to come. However, the reality is that many of these same new retail investors bought at the top and are nursing heavy losses. And despite logic dictating that buying more now is the wisest way to try and recoup what they've lost, statistics demonstrate that most do the exact opposite: sell at a loss and swear off stocks for good.
Another compounding factor here is the US Federal Reserve. The US regulator is likely to view these steadfastly positive labour numbers as a green light to press on with their rate hike cycle. As anyone with even a passing interest in trading knows, higher interest rates are typically bad news for stock prices. We would also be wise to consider the effect of strong labour bargaining power on company profits. Employees with plenty of options tend to be able to negotiate higher wages, which is bound to impact corporate bottom lines in 2023. At its current level of 3,946, the S&P 500 has been flat since May 2022, and it's hard to see cause for a major swing to the upside anytime soon.
Dollar bills
One asset class that undoubtedly benefits from a buoyant labour market is the country's national currency. In this case, it's the US dollar. As Americans' earnings go up relative to their counterparts' in other countries, the greenback's foreign exchange value increases. But in the current climate, this effect has been doubled, and, once again, the Fed is at the centre of it all. As we touched upon earlier, Powell is watching the labour market like a hawk and using it as a gauge for how fast and hard the regulator can continue to tighten. While the data remain largely positive, the central bank will carry on pressing towards its projected terminal rate of 5.3%. And we all know that higher interest rates always translate to a stronger USD.
Add to this the ongoing economic uncertainty globally and the dollar's safe harbour status, and there's reason to believe that green truly will be the colour of money in 2023. Apart from the US national currency, we can also expect positive returns for other haven currencies such as the Swiss franc and Japanese yen. The US Dollar Index has already risen 5% to 105 this month and could well continue to push on towards its September 2022 high of 114.10.
Don't forget commodities...
With more fashionable assets like crypto and stocks, we can often overlook simple commodities like gold, silver, and even energy resources. However, these are powerful vehicles for profit in bull cycles, especially for day traders. Interestingly enough, there is a direct link between higher commodity prices and labour market strength, as was noted as early as 2017 by Martin Bodenstein of the Washington DC Federal Reserve. In his report Commodity Prices and Labour Market Dynamics in Small Open Economies, he notes that "for every one per cent increase in commodity prices, our estimates suggest a one basis point decline in the unemployment rate and at its peak a 0.3% increase in unfilled vacancies". Well, we all know all too acutely how much energy commodities have risen over the past year, and this could indeed have played a role in strengthening the labour market.
However, in stark contrast to other commodities, precious metals have been fairly flat. In fact, at its current price of 1,834 per Troy ounce, gold is actually down almost a full 10% from this time last year. Meanwhile, silver has fared even worse. It's currently sitting 20% below its March 2022 level at 20.11 an ounce. One has to feel that if the rest of our predictions play out in terms of a stronger dollar and further Fed tightening, these core commodities will have to make good at least some of this lost ground before year's end.
Trade with Libertex
As a veteran CFD broker providing access to multiple different markets, one of Libertex's main advantages is its versatility. Our traders and investors can gain exposure to a wide range of instruments, from stocks, bonds and forex all the way through to energy, precious metals and more. Libertex's extensive CFD offering includes major indices like the S&P 500 and Nasdaq, forex options like the US Dollar Index — as well as major pairs such as the EURUSD and GBPUSD — and even gold and silver. And because Libertex offers long and short positions, not only can our clients diversify across asset classes, they can trade on any market outcome. For more information or to create an account of your own, visit https://libertex.com/signup
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
UBS saves Credit Suisse, but for how long?
In a matter of days since the collapse of Silicon Valley Bank and Signature Bank, yet another behemoth of corporate finance has had to be pulled from the jaws of bankruptcy in what has been dubbed a “shotgun wedding” takeover. Long-maligned Credit Suisse has finally bitten the bullet, with UBS forced to absorb the ailing business bank and its $5 trillion of invested assets. Optimistic analysts are claiming that this finally draws a line under the questions about Credit Suisse’s viability, while their more pessimistic colleagues are pointing to potential signs of contagion much like during the 2008 GFC that could spell catastrophe for the world’s already precarious financial markets. So, who’s right and what does this mean for traders and investors in the short term?
Devil’s in the detail
The collapse of SVB and Signature was by no means a drop in the ocean – they now rank in second and third spot respectively in the US’s biggest bank failures of all time. However, their highly speculative activity predicated on the unsustainably high stock prices of 2020-2021 made them especially vulnerable during this extended bear market. Credit Suisse is a completely different animal altogether. This is a Swiss national institution with a history dating back to 1856 and a much broader spectrum of activity than its US counterparts. With major investors including the Saudi National Bank and Qatari Investment Authority, Credit Suisse is a major global player with influence on a wide variety of asset classes and businesses. For this reason, its failure would have far-reaching effects on world markets, which is most likely why it wasn’t allowed to go the same way as SVP and Signature.
A long time coming
It might have come as a shock to hear that a bank with a 167-year history has gone under, but this failure has been building for some time now. Over the past two years, Credit Suisse’s stock price had fallen 84%, while its new owner UBS had managed to cement 15% gains over this same period. Last year, Credit Suisse posted a loss of over $7 billion, and just a week before the eventual $3 billion takeover, it was valued at just $8 billion. Indeed, amid mass depositor panic that saw tens of billions of dollars being withdrawn each day, the Swiss government provided the bank with a bridge loan of $54 billion – all of which has now been spent. In fact, so dire is the situation that the Swiss National Bank has even agreed to provide a further $108 billion in funding to UBS in order to boost Credit Suisse’s liquidity over the long term. As a result of this entire debacle, even UBS’s share price has taken a hit of more than 10% over the last week alone.
Why worry?
There are many who would say that these are just three overleveraged banks whose chickens have come home to roost and there’s no sign of wider contagion like in 2008. And while that would certainly be true enough for SVB and Signature, Credit Suisse is a totally different matter. Its own shareholders have already lost over 50% of their investment following the post-takeover share swap, while the bank’s AT1 bondholders have been left with nothing. It has been made clear that the bank is still far from out of the woods and, with over $5 trillion in invested assets, a future collapse would be absolutely disastrous for markets everywhere. This loss of principle by the AT1 bondholders has already provoked a rout on the European convertible bonds markets, which could lead to further trouble for the banking sector at large. Analysts are also predicting a general dip in demand for risk assets until confidence returns. Nothing is certain just now…and that’s part of the problem. But if another major bank falls into trouble, then it could well be time to panic and consider increasing one’s gold allocation.
Trade any trend with Libertex
As one of Europe’s leading CFD brokerages, Libertex provides competitive terms on a wide range of instruments and asset classes. Beyond CFDs in individual stocks like Deutsche Bank, Goldman Sachs, and Citigroup, and a range of indices and ETFs, such as the S&P 500, DAX, and EURO STOXX 50. We also provide CFDs in gold and silver. For more information or to create your own 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. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
India on the up again as current account gap narrows
When talk turns to major developing economies, India can sometimes find itself overlooked. However, with a population of more than one billion and industrial might to rival some of the world's biggest economies, we would all do well not to underestimate the great sub-continent. It's not without reason that some refer to the South Asian nation as the New China. In fact, India's GDP growth rate averaged between 5-10% from 2010-2020 and, last year, it finally overtook China for the title of Asia's largest economy and the world's fastest-growing major economy.
But, like the rest of the world, India had some of the wind taken out of its sails by the pandemic. Supply chains were broken, and industrial output dwindled amid weaker demand for durable goods and energy products worldwide. Things got so bad that the emerging market's current account deficit reached an all-time high of $36.4 billion (or 4.4% of its GDP) in Q3 2022. Now, however, the tide finally appears to be turning, with the latest predictions tipping a reduction of the Indian trade deficit to 2.7% of GDP in Q4 2022. This will, of course, come as good news for the rupee, which has been underperforming of late. But what does it mean for world markets and investors in India and beyond?
Always believe in…gold!
It's a little-known fact, but India is the world's second-largest consumer of gold. In fact, before it was overtaken by China in 2009, it was actually the largest. As such, the performance of the Indian economy has a huge effect on the global precious metals market. While the overarching trend in the West is for gold to rise commensurate with economic strife and uncertainty, India's relationship with the yellow metal is very different. For many on the sub-continent, gold is the preferred method of saving, with many prizing it for its phenomenal store of wealth capabilities. Thus, when the Indian economy is doing well and the country's citizens have surplus income to save, gold tends to experience upticks in demand.
Indeed, Indian gold consumption in the bear market of 2022 stood at 774 tonnes, which was down from 797 tonnes in the post-pandemic buzz of 2021. Now, the World Gold Council is predicting increased demand on news that El Nino will likely not affect the 2023 monsoon season, which is absolutely crucial to Indian agriculture. With rural India accounting for up to 60% of the country's gold market, the effect of the surplus wealth generated by a good harvest will likely translate not only to higher gold prices in Q3 and Q4 of this year but also to declines in the price of India's major agricultural export, sugar cane.
Crude but effective
Energy is the lifeblood of any economy, and for an energy-producing country, good fortunes are typically measured in exports. However, for the past year or so, the energy markets have been anything but typical. Despite reduced supply and increased demand for oil and gas products on account of geopolitical insecurity on Europe's borders, Indian energy exports have been yo-yo-ing between extremes since at least late 2021.
While the country doesn't export much crude oil at all (since it only has 3 years' worth of extractable reserves available), it is a major exporter of value-added petroleum products. With the abundance of cheap Russian oil, the Asian nation has seen its refined product exports rise exponentially. From April 2022 to January 2023, this indicator increased to $78.6 billion, up 54.78% from $50.8 billion year over year.
While one would think this would be good for the country's trade balance, we also have to consider how much crude it has imported from Russia. From April through December 2022, Indian imports of Urals crude stood at $27.7 billion, a 700% increase from $3.4 billion in 2021. Naturally, there is a lag between when crude is imported and the refined derivatives are exported. Thus, any changes in the Indian current account balance should be taken with a grain of salt for the moment.
Return to favour for risky rupee
As much as Indians love gold, like in any country, the national currency is the most liquid form of money, with its value tied inextricably to the economy's health. As an inherently "risk-on" currency, the rupee suffered severely since as early as 2020 and has now lost 20% of its value against the world's safe-haven currency, the US dollar. India's relatively poor trade balance, coupled with an aggressively hawkish monetary policy from the Fed, threatened to push the rupee even lower, but the tide now appears to have turned. With Barclays and Citigroup slashing their Indian current account gap forecasts to 1.9% and 1.4% of GDP, respectively, it looks as if the RBI will now be able to cut its sales of foreign currency reserves while still holding back imported inflation.
The recent turmoil in the US banking sector that culminated in the collapse of SVB and Signature earlier this month has also forced the US regulator to tone down its hawkish rhetoric, with the FOMC announcing a relatively dovish hike of just 25 bps as it similarly reduced its target rate from 5% to 4.75% in a bid to settle markets. The end result of this fortuitous combination of circumstances for the rupee could see the Indian national currency become naturally stronger on its own fundamentals while the greenback continues to weaken amid ongoing worries of systemic risk to the US banking sector. The gains are unlikely to be huge, but the USD/INR pair could still prove a lucrative long position for active forex swing traders.
Trade CFDs on the world's markets with Libertex
Regardless of the economic situation at home, you can trade CFDs on world markets with Libertex. Because Libertex offers a wide range of underlying assets — from forex and precious metals through to stocks, commodities and indices — you're always sure to find an asset class to interest you. You can trade CFDs in both pure gold and major mining stocks like Vale and Rio Tinto; energy resources like Brent crude oil or Henry Hub natural gas, as well as connected companies like Gazprom and Rosneft; and, of course, hundreds of currency pairs, including the US Dollar Index. You can even buy and sell CFDs in agricultural commodities like sugarcane and soybeans. Enjoy leveraged trading, highly competitive commission and tight spreads on the world's most popular instruments. For more information or to create an account of your own, visit https://libertex.com/signup
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Bitcoin bears back off as crypto closes Q1 on a high note
Bitcoin's 2022 descent was almost as spectacular as its rise a year earlier. After tripling in value to reach a high of $64,440 in November 2021, it gradually slipped to a local low of $16,450 twelve months later. Amid the second round of lost fortunes, ensuing bankruptcies, and assorted scandals — FTX probably being the most notable — many pundits were quick to write off cryptocurrencies as still nothing but a speculative fool's errand. And don't even get them started on altcoins!
Fast forward just six months later, and it seems that many have since considerably changed their tunes. Since the lows of November 2022, Bitcoin has gained almost 80% and has now reached a goal of $30,000 at the time of writing (11/04/2023). But it's not just BTC that has had a solid Q1. Solana is also up over 100%, while Dogecoin and Ethereum have managed to gain around 50% over this same period. So, what's bringing the bulls out of hiding? And what might the future hold for digital assets and their investors?
Getting institutionalised
Perhaps the biggest shift in the digital currencies market of late has been the active adoption by institutional investors. Cryptocurrencies were previously viewed as an inherently volatile and uncorrelated asset class that had no place in serious portfolios, but all of that changed in the last 24-36 months. Back in 2020, annual institutional inflows into crypto stood at a respectable $6.8 billion, but just one year later, they had gained 36% to reach an unprecedented $9.3 billion. Even after the severe flight to safety in 2022, total crypto assets under management by institutions are still around $30 billion. A recent study by Fidelity Capital showed that nearly 80% of investment funds were "interested" in crypto, but of these, only 12% have held digital assets for two years or more.
Regulation is a major restricting factor for more conservative institutions, and with the PwC Crypto Regulation report stating that a majority of global regulators have either enacted regulatory schemes for dealing in digital assets or are on the brink of doing so, it's expected that this barrier will fall in 2023. Indeed, the data show that Bitcoin institutional inflows are once again positive after over a year of net outflows. Last week's $2.5 million BTC inflow might look modest, but this could be the turning point that signals the development of a bull market.
Risk appetite remains
In the wake of the Fed's aggressively hawkish policy to combat inflation, risk assets fell significantly as investors moved wealth to gold and the US dollar. However, the recent collapses of SVB and Signature, as well as the shotgun takeover of ailing Credit Suisse, have all forced the US regulator to put the brakes on its monetary tightening programme. Now, crypto might well be a difficult market to call, but if one clear pattern has been identified since the market's inception a decade ago, it's that digital assets do not perform well in a risk-off scenario. But the interest in major coins like Bitcoin, Solana and Ethereum is more than mere speculation. Since the arrival of serious institutional capital, Bitcoin and Ethereum are now genuinely viewed as stores of value and with prices at multi-year lows, it made sense for people to start buying in early 2023. Behind Solana's superior performance, meanwhile, is another factor altogether. Its rapid transaction speeds, immense scalability, and interoperability have made it an attractive investment ahead of the coming metaverse revolution. Of course, it is this more risk-friendly atmosphere that has facilitated investor activity. Whether we see a true bull market emerge will largely depend on if this sentiment is maintained for a reasonable length of time.
Fundamental volatility
Like any asset class, cryptocurrencies are also highly influenced by fundamentals. And the crypto news climate has been mixed, to say the least. This probably explains the rally-correction cycles we've seen since late 2022. One of the biggest sources of volatility this year has been the decision by the Commodity Futures Trading Commission (CFTC) to bring charges against Binance for breaching the law. Although BTC's price responded by dipping below $28,000, it soon recovered to regroup above $29,000 within just a few hours. While some see a case like this as a negative factor, others would consider it a step in the right direction when it comes to regulation and, hence, the lack of a clear, uniform response to the news.
Beyond Bitcoin, another huge development in the cryptosphere came from none other than Twitter's new owner, Elon Musk. The larger-than-life Tesla and SpaceX CEO moved markets as he changed Twitter's emblematic bird logo for the iconic Doge Shiba Inu dog. As one might expect, Dogecoin responded positively, gaining 25% in the space of just a day. Musk has long been a proponent of Dogecoin, and an almost cult of personality has developed around him among fans of the canine coin. Could this move be a cryptic hint that Dogecoin could become the official digital currency of Twitter? If so, this would obviously be very good for the memecoin's long-term prospects.
Diversify your trading with Libertex
With multi-decade experience in the market, Libertex is a famous name in the online trading space. Our wide variety of CFDs now spans numerous asset classes, from stocks and ETFs all the way to commodities, cryptocurrencies and even options. Libertex offers CFDs on over 100 digital underlying assets, including Bitcoin, Dogecoin, Solana and Ethereum, as well as crypto-related CFDs on stocks, such as the Grayscale Bitcoin Trust. Best of all, you are now able to enjoy 0% commission and ultra-tight spreads on all crypto trades made with Libertex. For more information or to create an account today, visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
China returns to growth as zero-COVID restrictions relax
After nearly two years of relative normalcy in the world at large, many of us have almost forgotten the pandemic ever happened. As harsh and unprecedented as the lockdowns, travel bans and social distancing measures were at the time, they now seem like a brief and distant memory. For the citizens of mainland China, however, these draconian restrictions were much more intense and long-lasting. We will all remember horror stories from just a few months ago of residents walled up in their multi-story apartment blocks, dead-of-night abductions of non-conformers by quarantine police and even summary executions of family pets. Needless to say, the impact of the Chinese Communist Party's zero-COVID policy on Chinese GDP was catastrophic, with growth of just 3% recorded in 2022 (compared to 6% in 2019). Meanwhile, the US economy has already surpassed its pre-pandemic GDP growth rate by over 0.5%.
But now, after three long years of on-off restrictions, authorities have finally announced an end to their much-maligned zero-COVID policy — to rapturous applause from Chinese citizens and global investors alike. The response from both national statistics data and domestic markets has been extremely positive, as the Q1 2023 GDP figures show above-forecast growth of 4.5%. Among the strongest sectors, as one would expect, are retail sales (+10%) and services (+5.4%), though industrial production also beat analysts' projections to record growth of 3.9% to March. As Goldman Sachs confirms its bullish full-year projection of 6% GDP growth, many investors will be wondering what a resurgent China will mean for both Chinese and world markets.
When the (blue) chips are down
As a result of the pandemic and other regulatory factors, some of China's most prospective and well-established companies have been on a downward spiral for several years. Perhaps the most famous and reputable among these are Baidu, Tencent, and, of course, Alibaba. Since their highs of 2021, these Chinese tech giants saw between 50% and 75% of their share price wiped off. And while not all of this pain can be attributed to lockdowns and restrictions, they certainly haven't helped in generating a recovery.
But now, as retail sales rebound, we are beginning to see the green shoots of new growth emerge. Indeed, Baidu has already seen YTD stock price growth of over 10%, while Baidu and Alibaba have managed to see price increases of 8.5% and 4%, respectively. One can't help but think that if the growth in key sectors like retail and services continues as projected, this will surely benefit the share prices of these major players in Chinese e-commerce and remote services markets. While many Western investors are wisely cautious about investing in mainland companies, China's big tech troika represent a relatively safe and easy way to gain exposure to the Chinese stock market.
Whether the ongoing regulatory uncertainty will keep these stocks subdued remains to be seen. However, the latest comments by the State Administration for Market Regulation (SAMR) suggest the crackdown may be over, with SAMR stating its main focus in 2023 as maintaining the "bottom line of development security" and strengthening its "linkage effect" with international markets.
Beyond the bamboo curtain
While above-target GDP growth in China is clearly a bullish factor for domestic markets, what are the implications for US and European stocks? Well, they say that a rising tide raises all ships and — with China responsible for almost a fifth of global GDP — what's good for Beijing will undoubtedly benefit other economies around the world. However, with much of this post-lockdown growth expected to be limited to private consumption and retail markets, the positive contagion effect is likely to be restrained for the US and Europe.
In a recent report, Fitch Ratings suggested that the largest boom will likely be reaped by those economies that are "more closely integrated with Chinese consumer markets via merchandise trade and tourism". That said, the concurrent strengthening of both the dollar and euro we've seen of late, coupled with a more moderate ramp-up in China's industrial and manufacturing sector, could well see an increase in exports at more competitive prices. The result of this would be lower costs for US and European importers, which would allow them to increase their margins and, thus, profits. It's still early days, but provided that Western central bank policies don't take a more hawkish turn, the knock-on effect for US and European manufacturing stocks could be significant.
Finding the energy
Ask any economist, and they'll tell you: you can't have an economic recovery without large amounts of power. And even amid the renewables boom of recent years, that still means large quantities of oil and gas. Now, it is no secret that Russia and China have solidified relations in the face of rising geopolitical tensions between the Eurasian continent and the West. With Russian oil and gas under severe sanctions and price caps, Putin will be just as happy to provide Urals crude at knockdown prices as Xi will be to receive it.
However, China is a huge industrial powerhouse and its annual consumption for 2023 has been projected at over 11.8 million bpd, a full 1 million bpd higher than Russia's total daily output. Given that Russia also has significant commitments to India and other major industrialised nations, China will have to make up some of the shortfall elsewhere. Consequently, we can expect the prices of Brent and WTI to rise amid rising global demand and supply-side constraints. Furthermore, as Fitch Ratings also notes in the above-mentioned report, a strong rise in LNG demand from Chinese users "could thus interrupt the energy-led disinflation that we forecast this year in Europe, where gas inventories have been rebuilt partly through increasing LNG imports". The end result of this would be higher energy prices for many Europeans that could well continue into the next heating season.
Trade China and the world with Libertex
Regardless of where you think global markets are headed, you'll always be able to have your say with Libertex. With long and short CFD positions available in a wide range of asset classes, from Chinese and US stocks, all the way through to oil, gas and forex, you're sure to find an underlying asset to trade. As China's economy enters recovery mode, Libertex users can trade CFDs in Alibaba, Tencent and Baidu, as well as ETFs like the iShares China Large Cap index. We also offer CFD trading for energy resources, such as Brent and WTI crude oil and even Henry Hub natural gas. For more information or to create an account of your own, visit https://libertex.com/signup
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Banking crisis averted or merely postponed?
A little over a month after UBS's landmark acquisition of Credit Suisse was announced, we are finally seeing the first results of one of the highest-profile mergers and acquisitions in banking history. As part of the deal brokered by Swiss regulators, UBS paid 3 billion Swiss francs ($3.25 billion) for Credit Suisse, around 60% less than the bank was worth when markets closed on Friday, 17 March. Although many of Credit Suisse's shareholders and additional tier-one bondholders were totally wiped out by the takeover agreement, the hope was that it would help protect the historic Swiss institution's whopping $1.7 trillion of assets under management while averting a potentially devastating GFC-esque banking crisis.
It might seem melodramatic at first glance, but we would do well to remember that Credit Suisse ate through nearly 20 times the amount of the agreed purchase fee in the days leading up to the announcement amid daily net withdrawals of around $10 billion. Indeed, even a $54 billion loan from the Swiss National Bank failed to stop the bleeding. But now, as UBS releases its first quarterly results since this 'shotgun' acquisition, many traders and investors are wondering whether the deal is set to achieve its desired aims and, if so, how are the world's markets likely to respond.
So far, so good
It's obviously far too early to tell, but the initial responses from both markets and private wealth have been rather encouraging. Perhaps the most visible positive is the near 10% share price increase we've observed over the past month, demonstrating that investors are confident in UBS's ability to steady the ship and deliver new growth in future years. In its Q1 report, UBS also noted that it has managed to attract $28 billion in new money to its global wealth management unit. While only totalling about half the amount that was lost during the final throes of Credit Suisse's asset management business, it is certainly a step in the right direction.
Of course, it's far from all good news. UBS did underperform significantly compared to analysts' initial predictions, with net profit down 52% to just $1.03 billion amid projections of $1.75 billion. However, it's important to note that these forecasts were made well before the unexpected and somewhat forced takeover of Credit Suisse, which was always going to have a significant negative impact on the bank's bottom line. If this trend continues through to Q4, we could certainly take it as a good sign that a full-scale European banking crisis is now unlikely and inflation is somewhat under control.
Don't bank on it
This most recent banking crisis began with the simultaneous collapse of crypto-friendly lenders Silvergate, Silicon Valley Bank and Signature Bank. Other banks, such as First Republic, were lucky to survive what has since been termed "the first Twitter-fueled bank run". While the Swiss regulator might have expertly managed to avert what would have been a catastrophic failure for European capital, it could've easily gone the other way. Therefore, with many European banks still dangerously undercapitalised, there is every chance that we aren't quite as lucky next time round.
Despite ECB President Christine Lagarde's affirmations that "the euro area banking sector is resilient, with strong capital and liquidity positions" and that "the ECB's policy toolkit is fully equipped to provide liquidity support to the euro area financial system," concern is nevertheless strong among ordinary market participants and economists alike. The biggest worry is that any large-scale programme for rescuing Global Systemically Important Banks (G-SIBS) like Credit Suisse could lead to the creation of behemoths, which, in the words of German economist Hans-Werner Sinn, could turn out to be "too big to bail". Let's not forget that UBS needed its own bailout just 15 years ago, and if such a situation were to arise again in its new enlarged form, even the IMF would struggle to finance it.
Trade stocks and more with Libertex
Libertex is an experienced CFD broker with a long history of providing access to the financial markets for traders and investors in EEA and Switzerland. We offer CFDs with a diverse range of underlying assets, including forex, crypto, commodities, and, of course, stocks. Because Libertex offers both long and short positions in a wide range of instruments, you can potentially benefit from any movements in the markets.
With us, you can trade CFDs of a range of major business and private banks, including BNP Paribas, Citibank, JPMorgan Chase, and Goldman Sachs. For a more conservative and wide-reaching strategy, you could try CFDs in major US- and Europe-based ETFs and Index funds, such as the Vanguard FTSE Europe, the SPDR S&P 500 and theiShares Core US Aggregate Bond ETFs. For more information about trading or investing with Libertex or to create your own account today, visit https://libertex.com/signup
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Bitcoin slides following First Republic takeover
After the dizzying heights of the post-pandemic crypto boom, 2022 was a particularly poor year for digital currencies. From a November 2021 high of $64,400, Bitcoin had dropped all the way to below $17,000 by the end of the following year as some investors racked up losses of over 70%. But then something unexpected happened. By mid-April 2023, the original cryptocurrency had gained almost 100%, breaking through the key psychological resistance of $30,000.
Many have attributed this phoenix-like resurgence to the financial turmoil and uncertainty that has ruled the market of late. First, we had the FTX scandal, then the collapse of Signature and SVB, and it looked like the embattled First Republic Bank would be the next domino to fall. However, after regulators took possession of the bank, JPMorgan Chase stepped in to assume the majority of its deposits and assets, putting an end to the months-long saga and promising stability for the future. This was much to Bitcoin's chagrin, which immediately responded with a 4.2% decline on Monday (01/05/2023). But what is behind Bitcoin's new-found correlation with volatility, and what does the wider economic context predict for BTC during the rest of 2023?
Digital gold…or something like that
Ever since Bitcoin emerged, its fans have tried to cast it as a new alternative to the historic yellow metal. Well, it is limited in supply and impossible to forge, but until recently, that's where the similarities ended. Bitcoin's immense volatility and correlation with higher-risk assets had always ruled it out as a store of value or inflation hedge. However, since the post-pandemic influx of institutional capital, things appear to be changing. Yes, BTC lost around 70% of its value over the course of 2022, but so too did many major tech stocks like Shopify and Square.
Since January 2023, however, it has outperformed virtually every other instrument — a fact that can only be attributed to its appeal as a long-term store of value, which investors believe has an intrinsic value above the local lows of late 2022. As central banks struggle to combat inflation and preserve national economies, the fate of the entire fiat system hangs in the balance. Some have suggested that a return to a gold or even Bitcoin standard will ultimately be required. Whatever happens, the data are clear that younger generations prefer digital currencies to precious metals, and so it is entirely feasible that Bitcoin could replace gold as the go-to hedge. For this to happen, Bitcoin would need to increase in value above $100,000, which some have predicted could happen by year-end.
Mine the gap
Any discussion of Bitcoin's intrinsic value and, thus, potential future price action wouldn't be complete without an overview of the situation in the mining market. The previous year of pain for BTC was accompanied by an unusual phenomenon: mining difficulty and cost increased exponentially at a time when prices were in freefall. As a result, Hashrate Index and Luxor now estimate that it costs miners at least $17,000 to produce one BTC in the United States, which is significantly more than the $5,000-10,000 it cost one year ago when prices were almost double their current level.
The reason for this increase in difficulty and cost is complex, but one obvious contributing factor has been the massive energy inflation we've seen. There is a general consensus that electricity prices will fall in the second half of the year, with the US Energy Information Administration predicting declines in both price per kWh and overall demand. This will, in turn, allow mining companies to increase their margins, but we would nevertheless expect BTC to remain well above its intrinsic cost. However, mining difficulty will also depend on technological upgrades and capacity increases by major miners, and any significant increase here will also have the potential to drive Bitcoin's price up.
FED up with inflation
The final and by no means least important factor will be central bank policy in the wider economic context, with the US Federal Reserve taking the leading role as usual. As the US regulator remains between a metaphorical rock and a hard place amid pressure to contain inflation and the need to support a precarious financial system, something will eventually have to give, and this will necessarily lead either to a flight to safety or a return to risk.
The question, however, is which category does Bitcoin now fit into in an ever-changing economic landscape, and is crypto even correlated with anything anymore? Conventional wisdom would suggest that if the Fed continues with its stated aim of additional rate hikes, this should lead to a decreased appetite for high-risk options like Bitcoin. However, it could well have the opposite effect since recent experience has shown that BTC is now viewed as a desirable hard asset to hold in times of economic uncertainty. If, however, the regulator is forced to return to stimulus mode, the historical data would indicate that Bitcoin could rise in lockstep with stocks as has previously been the case.
It would seem that we're at a crypto crossroads of sorts, and 2023 may well prove a seminal moment for Bitcoin and digital currencies at large as this fledgling-no-more asset class sheds its earlier correlations and begins to shape its own unique hybrid profile as both a store of wealth and speculative instrument.
Trade crypto with Libertex
Whatever the situation is in the cryptocurrency market, there's always a way you can participate with Libertex. We offer both long and short CFD positions on over 100 digital currency pairs, includingBitcoin (BTC), Ethereum (ETH), Solana (SOL), Avalanche (AVAX) and more. With leveraged trading, ultra-tight spreads and some of the most competitive rates of commission around, Libertex gives you unbridled access to the cryptocurrency market with all the convenience and accessibility of traditional trading. For more information or to start trading crypto with us today https://libertex.com/
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Dollar lagging behind competitors despite strong data
Last year was a famously strong twelve months for the US dollar, with the greenback stampeding its way to the top of the majors’ table amid high inflation and aggressive monetary policy from the Fed. Between achieving historic parity with the euro, some of the highest government bond yields in recent memory, and record levels of demand from both institutions and private investors, 2022 was one of USD’s best years on record. But that all appears to have changed now.
The dollar has been sinking like a stone against the other majors, and, far from trading 1:1 with the euro, the fibre is now back at pre-pandemic levels of 0.91 at the time of writing (10/05/2023). So, what’s behind this sudden downturn? Employment figures are better than good, and Treasury note yields are still high. The reasons for the ongoing USD decline aren’t immediately clear. In this article, we’ll explore some of the key factors at play as we attempt to predict what the future might hold for the dollar.
All hawked out
The relationship between central bank policy and a given currency’s performance is well established, and the US dollar is no exception in this respect. The Federal Reserve has been aggressively tightening longer and harder than any of the other major regulators and has now been forced to bring its hiking cycle to a premature end following the failures of several major banks, including the high-profile collapses of Signature and SVB.
And while the Fed did raise its funds rate once again this week, it was only by 25 basis points, and, as is often the case, it wasn’t what the regulator said that moved the markets but rather what it chose to omit. The US regulator’s outlook was markedly more cautious than many of its peers’, and it opted to drop all guidance about future rate hikes entirely. The US Dollar Index closed 0.42% lower on the day of the decision (03/05) and has held on to those losses for the past week. Markets are clearly pricing in the now-clear scenario that the Fed will be forced to stop hiking at 5.25%, despite setting its target rate closer to 6% earlier in the cycle.
Risky business
Anybody with money invested in the markets will be well aware of how devastating 2022 was for risk assets. There was a mass flight from risk, and, unsurprisingly, most of the capital flowed (at least temporarily) into US dollars. Along with gold and the Swiss franc, the greenback is the go-to risk-off asset, and last year’s fear and anxiety surrounding rampant inflation and general uncertainty quite predictably translated to dollar strength.
The big story of 2023 so far is the resurgence of risky instruments like crypto and stocks, so it’s unsurprising that we should now be seeing the dollar correct back to more reasonable levels, historically speaking. Bitcoin is currently up almost 70% YTD, while the S&P 500 is up almost 10% over the same period. Even high beta fiat currencies like the Aussie dollar have recorded modest gains following the latest FOMC meeting. For most traders and investors, the tentative reversal of the protracted bear market is an overwhelming positive, even if it does mean a short-term decline in the US dollar. Provided that a major devaluation can be avoided, a reasonable correction from late 2022 levels would probably be best for both the dollar and the US economy.
Just try and stay positive
Given the wholesale doom and gloom being spread around of late, it’s important to note that the US economy is, in fact, looking extremely healthy right now. Unemployment is at a more than 50-year low of 3.4%, a level unseen since the Summer of Love in the late 1960s. Meanwhile, the latest non-farm payrolls indicated 253,000 new jobs were created in April. This absolutely obliterated all forecasts, the most optimistic of which hovered around just 165,000.
Looking at Treasury yields now, we are also seeing a very positive dynamic. The two-year government bond has risen back above 3.92% after visiting 3.56% last month, representing a strong sign of confidence in the US national currency. While both a strong labour market and high T-note yields are traditionally good for the dollar’s paper value, too, investors shouldn’t be perturbed by the USD’s failure to turn strong fundamentals into real-world gains. We would all do well to remember just how high the dollar rose in 2022 due to a combination of geopolitical uncertainty, hyperinflation and central bank policy divergence. A correction is not only perfectly understandable, it’s absolutely necessary to ensure the competitiveness of US exports and the stability of the monetary system at large.
Trade CFDs on currencies with Libertex
Whether you think that the US dollar will continue its downtrend or that the foundations have now been laid for stable growth, you’ll always be able to throw your hat in the ring with Libertex. Because we offer both long and short CFD positions on a range of key majors like EUR/USD, GBP/USD and JPY/USD, as well as more exotic pairs like CHF/USD and AUD/USD, you’re sure to find an underlying asset and direction to suit you. With ultra-low spreads from 0.2 pips and leveraged trading up to 30:1, Libertex offers some of the most competitive terms around. Beyond currency pairs, Libertex also offers CFD trading in the US Dollar Index, core stock indices, and more! To find out more about what Libertex can offer you or to create your very 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. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Gold flirts with all-time high as strong fundamentals persist
Gold has been making headlines of late after breaking through a key psychological level as it once again approaches its August 2020 all-time high of $2075 per Troy ounce. Indeed, the yellow metal has been steadily rising since the start of the year, and the reasons behind its good fortunes are numerous.
Beyond runaway inflation, banking sector fears, and geopolitical insecurity, there are also more subtle factors driving up the gold price, all of which we will look at in more detail in this article. But what most investors and traders would like to know is: Will this run continue, or have gold’s gains already been made? While we can’t answer this question for sure without a crystal ball, we can provide an overview of what is behind the precious metal’s growth this year and assess how likely these are to remain relevant going forward.
Crises everywhere
If you believed everything you’ve seen in the news recently, you’d be forgiven for thinking the end of the world was nigh. From the ongoing geopolitical uncertainty now on virtually every continent of the Earth to the economic uncertainty embodied by the latest US banking crisis, the future looks very bleak, indeed. First, we had the collapse of SVB and Signature Bank in the US, then there was the last-minute rescue of Credit Suisse in Europe, and now there are fears that even more high-risk lenders could be next in line.
While this kind of news is bad for most assets, for safe harbours like gold, it’s music to investors’ ears. At its highest level this year of $2065, gold had gained over 15% YTD, and though it has since corrected down slightly, the long-term perspective seems as if the way is paved for future rises in 2023. Some were surprised that we hadn’t seen this kind of movement last year when inflation was well into the double digits while gold remained fairly stagnant, but as is often the case in financial markets, not everything is exactly as it seems…
Counting those dollars
We will all surely remember the hyperinflation of last year all too well. It seemed as if prices would never stop rising, and, as any gold bug will tell you, high levels of inflation virtually always translate to increases in precious metal prices. But gold’s dollar price was virtually flat for the entirety of 2022. Why? Well, this was also a time of historic strength for another haven asset, the US dollar.
The greenback famously rose above parity with the euro, for one, a feat unmatched since the early 2000s. And since gold’s price is almost always quoted in USD, much of the real-world gains made by gold were masked. Now that the dollar is back at pre-pandemic levels against the other majors, all of this previously unseen growth is now being revealed. What’s more, the ongoing uncertainty and high interest rate environment mean that there is still an overarching trend towards safety, which is further buoying gold prices this year. So, will the USD remain at more stable levels going forward, or could we see further strengthening in the medium-to-long term?
Fed up with inflation
To answer that, we need to look closely at the single most influential player when it comes to the dollar’s dynamics: the US Federal Reserve. As we’ve already touched upon, gold is largely up due to inflation, the exact same market force that the Fed has been trying to combat with aggressively hawkish monetary policy. Unfortunately, the recent mini-banking crisis has forced the US regulator to cut its tightening cycle short of its target rate of 6%. Though it did announce a 25 bp increase to 5.25% in its latest policy decision, Powell’s rhetoric was much more restrained in April and May, as all guidance about future hikes disappeared from post-meeting comments.
A side-effect of the Fed’s tightening has been higher US Treasury bond yields, the inverse relationship of which with the price of gold is well-established. Now that the Fed has been forced to accept a more dovish wait-and-see approach, yields are falling sharply. For example, the two-year T-note yield now stands at a hair above 4% compared to 5.05% in March. If this trend continues, those looking to hedge against inflation will pour into gold, thus increasing its value over the medium term.
Trade precious metals with Libertex
Libertex is an experienced CFD broker with a long history of connecting traders and investors with the financial market. Beyond forex and equities, Libertex also offers CFDs in a range of precious metals, including silver, platinum, palladium, and, of course, gold. Since Libertex allows its clients to trade both long and short positions, you can put your money to work, no matter what you think the future holds for gold. Best of all, CFD trading means you don’t have to purchase physical metals to profit from any positive price changes, and our multi-award-winning, one-stop trading platform allows you to hold your entire portfolio in one manageable location. Enjoy ultra-tight spreads and some of the lowest commissions around when you become a Libertex client. For more information or to create your own account today, visit www.libertex.com/signup
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Libertex launches “Push For More” Brand Campaign with FC Bayern
Libertex are launching Push For More, a brand new campaign in partnership with FC Bayern, the recently crowned 2022/2023 Bundesliga Champions. The campaign aims to engage and inspire people around the world to act with more confidence, trust and self-belief in order to achieve success.
The new brand campaign is the first we’ve created utilising FC Bayern players since we announced a multi-year partnership together in August 2022, which saw us becoming the first Online Trading Partner of FC Bayern for CFD and foreign exchange trading.
What’s in the campaign?
The joint campaign launch video features current FC Bayern stars Matthijs De Ligt, Eric Maxim Choupo-Moting and Leroy Sané, all wearing the new 23/24 season home kit.
The players explain how three basic principles (discipline, strategy and skill) have led them to where they are today, and how those qualities have pushed them to achieve success as a team and as individuals on and off the pitch. De Ligt talks about how mastering the art of discipline creates a sense of unity, Choupo-Moting explains why strategy is key to unlocking your full potential and Sané describes why skill gives you the ability to find the “edge” to achieve success.
Take a look at the full video, which is also available to watch on both Libertex and FC Bayern’s official websites and social media channels.
Words from our CMO, Marios Chailis:
“Libertex is more than just a trading platform, and FC Bayern is more than just a football club. Yet both organisations share a lot more in common than most would initially think. This campaign, the first collaboration of this kind, shines a light on this.
Combining the fast paced and exciting worlds of football and financial services, we share core values, such as trust, teamwork and a winning mentality. It was important for us to create something that highlights the synergies between both brands. Using inspirational and engaging content with first-team players, our Push For More campaign will help us successfully elevate and raise awareness of the Libertex brand utilising FC Bayern’s channels, in Germany and beyond.
FC Bayern are the benchmark for perfection and success on the pitch, which is something we want to apply to our millions of customers around the globe. We’re incredibly proud to continue our partnership with FC Bayern for the foreseeable future.”
FC Bayern x Libertex
Our multi-year sponsorship with FC Bayern currently runs until 2025 with the collaboration encompassing numerous activities such as visibility across FC Bayern’s social media channels, as well as a presence on the LED advertising boards at home matches in the Allianz Arena.
-
India to scrap its biggest banknote ahead of harvest season
After positive reports of a national GDP recovery, India is back in the headlines as the Reserve Bank of India (RBI) prepares to withdraw the country's largest denomination note. The 2000-rupee note was only introduced in 2016 but is now being removed from circulation as part of the country's 'clean note policy' to reduce low-velocity banknotes. The note will be phased out gradually over the next four months by September 2023. Many might be wondering why this is significant for world markets. Well, India is not just one of the BRICS group's biggest economies; it's also growing at one of the fastest rates in the world, both in terms of GDP and population.
And it is precisely this massive population that has the power to move markets, particularly when we take into account some specifically Indian factors like a proclivity towards precious metals and large cash-based transactions. With many analysts tipping potential upticks in gold and consumer durables in response to this news, we will be looking at the factors behind these projections and assessing the expected real impact on global markets.
Metal mania
It's a well-known fact that Indians are crazy about physical gold. Indeed, it is far and away the most popular investment vehicle for investors on the sub-continent, with 53% of Indians stating that they are currently invested in gold. When we're talking about a country with a population of over 1 billion people, it's easy to see how a major move one way or the other could have a palpable impact on the global bullion market.
Analysts have suggested that the large amounts of high-value 2000-rupee bills floating around the economy could lead Indians to use up the notes by investing in their favourite long-term instrument, gold. Of course, they will be permitted to exchange them in banks for lower-denomination notes. However, there will be a transaction limit of 20,000 rupees per person. The thinking is that many farmers and other seasonal workers, who often receive large payments in cash at harvest time, will prefer to purchase gold as opposed to digitising their wealth. In any case, the effect on worldwide yellow metal prices will clearly be modest, but it could be enough of a bump to push an already buoyant gold above its key resistance of $2,000 and on to a new all-time high should a genuine bull cycle ensue.
Big spenders
As we have already touched upon above, India is still very much a cash-based economy. Digital transactions have been increasing exponentially in recent years, but huge numbers of participants in this largely agrarian economy still deal almost exclusively in cash, which typically means large-denomination banknotes. Apart from gold and silver, another option many Indians are expected to take when it comes to getting rid of their 2000-rupee notes is purchases of big-ticket items. This could mean anything from high-tech items like smartphones, TVs, and laptops to white goods or even major consumer durables like new vehicles. It's not as if the analysts are suggesting all Indians will walk out of the house one day and buy a brand-new truck, but any purchases of such items that were planned for the next one to two years might well be brought forward as a method of using up some of the soon-to-be-withdrawn banknotes.
With India being a major producer of goods for domestic consumption, this is likely to be very positive for the country's GDP, which could move above 9% for the year as a result. Rising retail sales would also likely be a boon for the stock prices of India's largest conglomerates, like Mahindra, Tata and Reliance.
Not India's first rodeo
We often have a tendency to over-dramatise the effect of such a move by a central bank, but the reality is that India experienced a much further-reaching and disruptive event less than a decade ago. In 2016, the RBI scrapped a full 86% of India's national currency in circulation during its so-called "demonetisation" drive that saw all Ghandi-series 500- and 1000-rupee notes withdrawn over a very short period. This time round, only one note will be removed and one that is much less frequently exchanged than the two mentioned above. The Reserve Bank of India is also providing very clear guidelines and FAQs, a move that is expected to greatly reduce panic compared to six years ago.
Aside from the existence of a sufficient supply of 100- and 500-rupee banknotes for those who are heavily reliant on cash transactions, the rapid adoption of digital payments across all demographics will also minimise the impact of the 2000-rupee note's withdrawal. In terms of the rupee itself, the withdrawal is expected to have little to no effect on the exchange rate in the long term. There will, of course, be a temporary increase in demand as notes are exchanged, as well as a slight drop in supply (around 10% of the total money supply), but this impact is projected to be minor and short-lived.
Trade the news with Libertex
Whatever the latest developments in world markets are, you can always find an angle to trade with Libertex. Because Libertex offers a wide variety of underlying assets for CFDs from numerous asset classes, including commodities like gold and silver, all the way to stocks and traditional currency pairs, you can trade any news with us. So, whatever the effect of the RBI's note withdrawal, you can cover your bases with long or short CFD positions in gold, silver, and much more. Beyond these, our intuitive and multi-award-winning app supports trading for lots of other underlying assets, from stocks and ETFs to options, futures and even crypto. For more information, visit www.libertex.com today!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Default diverted as debt ceiling bill draws closer
One of the biggest stories of recent weeks has undoubtedly been the fast-approaching debt-ceiling deadline in the United States. It seems almost impossible to imagine, but the US has nearly reached its $31.381 trillion debt limit, after which there is a real risk of the country being unable to meet its obligations to creditors. The implications of this would, of course, be unthinkable for the world's biggest economy, and markets have been understandably anxious for a resolution to be found. And it looks like disaster might thankfully have been averted as discussions between President Biden and House of Representatives Speaker Kevin McCarthy finally bore fruit this past Saturday.
While the bill remains to be passed by the Senate, the agreement that would see the debt ceiling raised for two years and a cap put on spending passed by the House of Representatives on the evening of 31 May. Before the collapses of SVB and Signature banks, a default was hardly ever discussed, but since then, a kind of "will-they-won't-they" saga has emerged that has had markets in limbo.
And yet, the debt ceiling has actually been increased countless times since its introduction in 1917, including 16 times between 2000-2016, for an average of about one increase per year. That's not to say that this bill's passing is a done deal. One example of a divided government being unable to come to an agreement resulted in the infamous government shutdowns of 1995, 2013 and 2018. However, that scenario is certainly much more likely than a US default. In this article, we'll look at the debt ceiling debacle's effect on stocks, energy and metals and examine what the future might hold for these key asset classes as a debt limit deal is still yet to be officially done.
Taking stock(s) of the damage
After an undeniably awful 2022, US stock markets appeared to start 2023 with renewed vigour as the key S&P 500 and Nasdaq 100 indices gained an average of 20% from November 2022 to March 2023. Then followed a significant dip following the mini-banking crisis of March and early April. However, despite the uncertainty surrounding the debt ceiling crisis, both major indices regained their temporary losses, with the S&P 500 standing at 4,205 at the time of writing, just a hair above its previous peak in late February. The Nasdaq appears to have fared even better, actually cementing a 7% gain on this local maximum to reach 13,007 over the same period.
This would suggest that the stock market has never doubted that a deal would be reached to raise the debt ceiling, as has happened in virtually every other case of an imminent US default. That said, Treasury Secretary Janet Yellen has warned that the potential "substantial financial distress" on the stock market could well be delayed, citing recent volatility as "just the beginning". Since the imminence of the deal became known, however, Dow futures and Nasdaq futures are up around 0.35%, with S&P 500 futures up 0.3%, which hopefully means that stocks will avoid a major move to the downside in the near future.
Oil aboard!
It's been an odd time lately for the oil markets, with many of the dominant market forces becoming less relevant to prices amid price caps and wider macroeconomic pressure, particularly from inflation. Given the already precarious market situation, it's unsurprising that oil should be more reactive to the risk of no debt ceiling agreement being forthcoming. Despite the positive implications of Saturday's milestone, crude still slumped a further 4.4% on Tuesday (30/05) to dip below $70 for the first time in a month, while the world standard Brent lost 4% to hit $74 per barrel. Many oil analysts have blamed this major sell-off on concerns that conservatives in the House of Representatives would try to sink the bipartisan deal agreed over the weekend.
To make matters worse, renewed Russia-Saudi tensions over Moscow's failure to curb production, as agreed, is increasing general scepticism in the energy markets while also ensuring production remains high. Over the longer term, there are serious fears that failure to pass a debt ceiling bill of some kind will lead to a long, deep recession that will see a sustained period of reduced demand for oil. Provided that the supply-side issues can be resolved by OPEC+ negotiations, a positive outcome to the debt ceiling saga in the coming weeks should generate significant gains for the energy resource.
Test your metals
Another instrument that has been making headlines over the past year or so is gold: first for its relative stagnation during the hyper-inflation of 2021-2022 and more recently for its illogical flirtation with the all-time high of $2075 per Troy ounce at a time when stocks were back in bull territory. However, gold has now reacted exactly as one would expect to the news of a breakthrough in the discussions around the debt ceiling bill. Spot gold slipped 0.1% to $1,944.09 per ounce and now hovers in and around the two-month lows hit on Friday. Futures for the yellow metal were also listless at $1,943.30. The initial boon from the Fed's more dovish approach in its recent FOMC meeting has also been nullified as rumours of a further rate hike in June circulate.
This is excellent news, however, for Treasury bond yields, which had already been rising nicely in early 2023 amid a strongly hawkish Fed monetary policy. Then, from 5.05% in March, yields on the two-year note fell to around 4% in May. Given the well-established inverse correlation between gold prices and T-note yields, fixed-income investors will most likely be looking forward to higher rates of return if a deal is finally done and the Fed's promise of continued tightening materialises.
Trade it all with Libertex
Libertex is a well known name on the international CFD market, with millions of clients across EEA and Switzerland. With Libertex, it doesn’t matter what you think is going to happen on the markets because you can go long or short on any of our underlying assets. Libertex offers CFD trading in a wide range of asset classes, including stocks and indices, such as the S&P 500 andNasdaq 100; crude oil like Brent, Light Sweet and WTI; and of course, gold and currencies galore. Try our multi-award-winning app today with ultra-tight spreads and some of the lowest rates of commission available. For more information or to create your very own live trading account today, visit www.libertex.com/signup
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Debt ceiling deal done as both sides of the aisle come together to stave off default
Last week, we discussed the fast-approaching US debt ceiling as a deal between both parties in the US House of Representatives remained elusive. But then the House approved the Fiscal Responsibility Act of 2023 with an overwhelming majority vote of 314-117 on 31 May. The drama still wasn't over, however, as the Senate still had to approve it in time to avoid catastrophe. Well, with mere days to spare before the deadline that would see the world's biggest economy face financial default, the Senate, at last, approved the legislation to lift the debt ceiling in a relatively convincing bipartisan 63-36 vote, and Joe Biden signed the bill into law on Saturday, 3 June.
The much-anticipated agreement will see the debt ceiling suspended until 1 January 2025, and according to the Congressional Budget Office, the new act will generate over $1.5 trillion in savings over the course of the decade ahead. Despite some last-gasp attempts by ultra-conservatives to have 11 potentially devastating amendments adopted, all were rejected in the Senate, and the bill ultimately passed as is. So, what does this mean for world markets, and how should traders and investors react to this news?
Time to restock?
Although the effect on the stock market has been relatively modest since the bill was signed into law – with major US indices like the Dow Jones IA, S&P 500 and Nasdaq 100 registering only modest gains of between 1-2% since the news broke – the impact of the increased debt ceiling cannot be underestimated when it comes to Wall Street. Essentially, market movers never doubted for a second that the legislation would pass. After all, we've already seen the ceiling raised an average of once per year since 2001. As a result, much of the benefit of the debt limit increase was already priced in during the rallies in US equities early in the year. But rest assured, if a deal had not been forthcoming, stocks would have surely tanked hard.
Europe reacted in much the same way, with the Stoxx 600 index gaining 1.5%, while individual sectors like mining and oil & gas seemed to do the best, recording average gains of between 3-4%. Given the long-term suspension of the debt ceiling that the Fiscal Responsibility Act of 2023 entails, the supportive environment for stocks looks set to continue (provided that the Fed backs off on its hawkish policy before year-end). As such, now could be a good time for medium- to long-term investors to increase purchases of discount stocks.
That's oil, folks
As we mentioned earlier, energy and commodities have reacted even more positively to the news. The reasons for the larger jumps in mining and oil & gas are rather complicated, however, and it's not necessarily guaranteed that Brent, WTI and Henry Hub will respond in kind. However, one thing is clear: beyond the general boost that the US economy being saved from default brings for all sectors, the promise of even more supply-side inflation is a growth factor in its own right for these asset classes. After all, energy commodities are exactly that: commodities. If the US debt is free to increase, which it surely will following the temporary removal of this ceiling, the value of hard assets like oil, gas, coal and minerals can only increase. So, what we're seeing is a double whammy of sorts whereby the guaranteed further depreciation of fiat is buoying the prices of these commodities, and the generally positive economic sentiment surrounding the avoidance of default is multiplying this effect.
Most varieties of crude are now firmly above the key $70 a barrel level, with Brent futures rising $1.85 (or 2.5%) to hit $76.13 a barrel and US WTI crude up $1.64 (or 2.3%) to top out at $71.74. All that remains now is for OPEC+ to reach a new deal on production cuts amid Saudi discontent with Russia's failure to reduce supply as agreed at the cartel's previous meeting. If harmony can be achieved, then we would be wise to expect further price gains ahead for oil, especially now the debt limit issue has been put to bed.
Going for gold
At the height of the debt ceiling panic, when it really looked as if a deal might not be forthcoming, there was only one instrument that felt like a safe bet. As usual, gold offers security and an unbeatable (as of yet) store of value potential. So, now that the bill has been passed, does that mean the gold bugs are about to lose out? Well, not exactly. An increase in the US national debt will only mean a weaker dollar in the long run. And what does that mean for the dollar-denominated gold price? You guessed it: more growth ahead.
While the yellow metal is currently more or less unchanged following the deal's announcement (gold, in fact, lost 0.1% in the days following the announcement), this is more of a knee-jerk reaction to the immediate strengthening of the US dollar on the aversion of a potentially devastating default. Over the longer term, it's hard to see how the greenback can avoid losing value as more are inevitably printed and the value of the existing money supply is further devalued. In any event, any serious investor should have some kind of gold allocation to hedge against short-term volatility. However, taking into account both the factors alluded to above and the nascent commodities super-cycle, many analysts are suggesting that gold is a solid buy at present prices.
Trade it all with Libertex
Libertex is a well-respected CFD broker with a long history of providing traders and investors across Europe with access to world markets. With Libertex, you can trade long or short CFD positions on a wide range of popular underlying assets, including major indices like the Dow Jones Industrial Average, S&P 500 and Nasdaq 100; oil and gas vehicles like Brent, WTI and the Henry Hub; and even precious metals like gold and silver. Best of all, Libertex offers some of the lowest levels of commission and tightest spreads in the industry. And because Libertex offers an easy-to-use app, you can keep your entire portfolio in one easily accessible location. For more information about Libertex's available asset classes and investment options, visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Awarded: Libertex receives German Brand Award 2023
Libertex (https://libertex.com/), one of the leading online trading platforms, has been awarded the German Brand Award 2023 in the "Excellent Brands: Banking & Financial Services" category. The company, which participated in the long-established annual competition for the first time, received the award at the official ceremony at Verti Music Hall in Berlin on 15 June, 2023. The German Brand Award is presented by the German Design Council to companies operating in Germany that have attracted attention through their pioneering and effective brand work, independent projects and extraordinary campaigns. The online broker has already won over 40 international awards throughout its history, with this one being the first from Germany.
The German Brand Award is an independent annual award that recognises successful brand management. The "Excellent Brands" category honours the best products and brands of individual industry sectors. This year, the organisation received applications from around 1,200 companies, agencies, service providers and marketeers, as well as non-commercial and governmental organisations from all sectors, which the German Design Council’s expert panel evaluated to first select admissions and then assign winners in each category. Each year, around 700 guests attend the awards ceremony, including brand decision-makers from large German corporations, agencies, the creative industry, the trade press and category winners.
Representative office in Munich: Libertex strengthens position on the German market
“We are incredibly happy and proud to receive the German Brand Award 2023, as it shows that our work in Germany is bearing fruit", says Michael Geiger, the German-born CEO of the Libertex Group. “With our new representative office in Munich and our partnership with FC Bayern, we wish to further expand our position in the market in the future, so that we continue to be one of Germany’s ‘Excellent Brands’".
"The German Brand Award shows that our hard work is paying off", says Libertex Group CMO Marios Chailis. "All of our branding and marketing is done in-house by our creative team that works tirelessly day after day. Their phenomenal work is also reflected in our recent “Push for More” brand campaign with FC Bayern, which was created as part of our partnership with the club”.
(https://carigold.com/forum/attachments/nino-ilievski-libertex-gba23-jpg.638587/?watermark_date=1688730198)
Libertex Head of Brand & Creative, Nino Ilievski at the German Brand Award ceremony on June 15 at Verti Music Hall in Berlin
Nino Ilievski, Head of Brand & Creative at Libertex, adds: "It is always fascinating for me to brainstorm with my colleagues in our internal creative studio and to see how the many imaginative ideas develop into concrete projects. It is such a great honour that our efforts are now recognised with the prestigious German Brand Award."
-
Dual counter system hits Hong Kong. What will it mean for Asian markets?
Much like in the rest of the world, the Asian stock market has had quite a bumpy ride in recent months. After reaching dizzying heights during the pandemic, both the Hang Seng and SSE Composite Index were in freefall until practically the end of 2022. As in the US and Europe, Chinese equities' fortunes began to improve at the beginning of this year, and both of the aforementioned indices are now up 25% and 15%, respectively, from local lows.
But this is by no means the most interesting news to come out of the East of late. That's right. This Monday saw the launch of the much-anticipated HKD-RMB Dual Counter Model, which will see an initial 24 companies start offering yuan counters that will allow investors in Hong Kong to trade the company's stock in both RMB and HKD.
The initial list of early adopters of the new dual counter model includes tech giants like Tencent, Alibaba, and Baidu. This is particularly interesting in light of the years-long tech crackdown on China's tech sector. It seemed like the Chinese Communist Party had set its sights on curtailing the power of these companies, but now all that appears to have changed. Traders and investors will certainly be wondering what this means for Chinese stocks, as well as the yuan and Hong Kong dollar. And while there are no sure things when it comes to the markets, we'll do our best to lay out the landscape.
Why now?
Perhaps the biggest question on people's minds is what is behind the Hong Kong Exchanges and Clearing's decision to offer stock trading in both RMB and HKD. After all, it's not the first time this has been attempted. Many will remember 2012's fated "dual tranche, dual counter" initiative, which failed when only one company adopted it. On top of that, Mainland investors are already able to purchase Hong Kong-listed stocks via the Southbound Stock Connect market access programme.
However, this is a rather inconvenient method of investing for many citizens of Mainland China, and HKEX CEO Nicolas Aguzin is convinced that the interest in the new dual counter model will be overwhelming as more and more companies sign up for the new system over the coming months and years. As he puts it: "The fact that they [Mainland investors] will be able to transact on an instant basis in renminbi […] is a huge difference." It might well take some time until stocks can be purchased seamlessly in RMB, but the HKEX is working closely with regulators and other stakeholders to ensure everything is in place before making a proper announcement.
What might it mean for Hong Kong-listed stocks?
Anybody with even a passing interest in Asian markets will surely remember the 2020-2021 crackdown from both US and Chinese authorities. Washington famously put an end to shady ADRs with the Holding Foreign Companies Accountable Act, which allowed the US Securities and Exchange Commission to delist Chinese companies from American exchanges if domestic regulators were not able to review company audits for three consecutive years.
Meanwhile, Beijing sought to rein in the country's overly powerful tech companies in a campaign that was most remembered for Jack Ma's temporary disappearance and the blocking of the $315 billion Ant Pay IPO. Now that the Chinese tech sector is cowed and unrest in Hong Kong has largely been put to bed, the Chinese Communist Party feels confident in realising its plan to centralise trading of China's stocks within its own sphere of influence. All of this points to a potential resurgence for big names like Tencent, Alibaba and Baidu, but also lesser players like Netease, Nio, and SMIC.
Indeed, the 24 names that have already applied for the dual counter system account for 40% of the average daily turnover of the cash equities market. And with another 1.6 billion potential investors on the Mainland now in reach, the sky truly is the limit.
Don't forget about Forex
As we've already touched upon above, trading volumes are expected to increase exponentially, with the influx of capital from the Chinese Mainland into the Hong Kong exchange anticipated once direct access is available. It can be easy to forget, but wherever securities are traded, so is cash. One of the biggest drawbacks of the RMB in the past has been its command economy context and limited trading potential. The yuan is already up 5% on the US dollar and is expected to continue to move upward for the foreseeable future. This is particularly impressive given the strong dollar we've seen of late amid hawkish Fed policy and strong US Treasury yields.
As of 22 June 2023, the RMB stands at 7.18 against the US dollar. The increased trading volumes associated with this opening up of markets, coupled with Beijing's shift towards trading traditional dollar assets in its own currency, is likely to lead to further strengthening for the renminbi. Add to this the US Federal Reserve's compulsion to pause its monetary tightening and perhaps even transition towards a more dovish policy amid increased economic uncertainty, and we could well see the yuan up towards the key psychological level of 8.00 by year's end.
Trade without borders with Libertex
As a well-respected broker within the CFD trading markets with many years of history. With a vast offering spanning multiple underlying asset classes, Libertex can give you the opportunity to trade CFDs in Forex and stocks, all the way to indices, commodities, and crypto. Whether you think the Chinese market is headed up or down, we have you covered with a choice of long or short positions. You can trade individual stock CFDs like Tencent, Alibaba, and Baidu or more balanced ETFs CFDs like the iShares China Large-Cap. Beyond that, Libertex also offers Forex CFD trading in pairs that include USDCNH and EURCNH. For more information or to create an account of your own, visit www.libertex.com/signup today!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money
-
Six down, six to go: the state of the markets 6 months into 2023
Just when it seemed like the worst was behind us, after weathering the pandemic and finally returning to something approaching “the old normal”, we were completely blindsided by an economic and energy crisis the likes of which hadn’t been seen since the 70s. Inflation ran riot, stocks plummeted, and fear was at an all-time high. But since the start of 2023, things have slowly but surely, almost unobservedly, begun to improve across all markets.
The three biggest US indices (DJIA, S&P 500, and Nasdaq 100) are up around 10%, 20%, and 30% respectively since Q4 2022. Europe, too, has seen its flagship Eurostoxx 600 increase approximately 15% over the same period. Even China – which has had its own combination of a housing crisis and geopolitical uncertainty to deal with – has now begun to see a resurgence after over a year of stagnation. Forex, on the other hand, has been uncharacteristically volatile, with the dollar and euro making history. Gold and silver, meanwhile, have been surprisingly flat considering the fear and risk aversion characterising the market. Finally, crypto appears to have weathered the worst of the storm and is back to a certain level of stability.
Six months into the year, we’re able to have a closer look into what factors were behind these market trends.
Taking stock(s)
The global equities market has been on a rollercoaster ride ever since 2020. It started with the huge yet predictable crash once it became clear the world economy would be locking down, then we had a period of monster growth in just about everything but air travel, leisure, and hospitality – though tech and green energy were by far the best-performing sectors. This was followed by a series of small crashes and a long, protracted bear market in 2022 once it became clear that the end of the pandemic wasn’t going to be the panacea many had been hoping for and many of the largest gainers of 2021 were now hugely overvalued. After a very lengthy sideways channel, US and European stocks appear to have entered a new bullish cycle as of Q4 2022. As we touched upon earlier, Western indices are now up an average of 20% over the last six-to-nine months. This is somewhat unusual given the high level of inflation and correspondingly hawkish policy of the Federal Reserve. However, equities markets are usually ahead of the curve, and it could well be that the smart money had pre-empted a change of stance by the Fed amid the economic pain that was present.
East isn’t East
The recovery isn’t just limited to the West, though. After a period of uncertainty stemming both from internal factors like China’s tech crackdown and international geopolitical issues surrounding Taiwan and Hong Kong, Chinese stocks are also apparently entering a new growth phase. We’ll surely remember the infamous disappearance of Jack Ma and the last-hour scrapping of the Ant Group IPO – these examples and others promptly sent Chinese tech stocks into a prolonged tailspin. However, as of November 2022, China’s Big Three of Tencent, Alibaba, and Baidu have in fact gained around 60%, 25%, and 65% respectively. Much will still depend on Fed policy and a resolution to the ongoing geopolitical and economic crises. However, the Fed’s recent softening and the HKSE’s dual counter system are both positive factors for global stocks, including Chinese
Forex in the spotlight…for once
The traditional currencies market is often overlooked. We get it, it’s not as exciting or as fast-moving as stocks or crypto. But Forex is actually by far the largest market of all with trading volumes of over $40 billion every single day – and so when it goes nuts, people take note. And at the tail end of 2022, something highly irregular happened. That’s right, the euro and US dollar were briefly trading at parity – a quote that hadn’t been seen for over two decades beforehand. By the end of January 2023, however, we were already seeing a perfectly average 1.10 on the Fibre. The reasons behind this sudden recovery are less clear than the factors behind the initial disbalance in EURUSD. Effectively, the Fed started to ease off slightly on the hawkish rhetoric at a time when the ECB became serious about getting interest rates up above 4% in a bid to halt mounting price pressure. However, the dollar also has problems of its own. Recent geopolitical tension has demonstrated that the BRICs and other developing world nations are no longer afraid to trade dollar-denominated assets in their local currencies and this could lead to a long-term waning of the greenback’s strength. Investors would be wise to keep an eye on the 2- and 5-year Treasury bond yield for clues about short- and medium-term movement.
Don’t forget the metals
One asset class that some have called lacklustre over the past six months and earlier is precious metals. Ever since the pandemic struck, gold bugs and analysts alike have been calling a “commodities super-cycle” in which gold is tipped to top $3000. The reality, however, has been very different. Despite record inflation, geopolitical instability, and general economic uncertainty, gold was relatively flat throughout 2022 and the first half of 2023. In fact, until about January of this year, the yellow metal was toying with pre-pandemic price levels. Since then, however, gold is up almost 20% and has already breached its key resistance of $2000 per Troy ounce. The truth, as usual, is a bit more complicated than it looks at first glance. One of the main reasons for gold’s perceived weakness in 2022 was the uncharacteristically strong US dollar. In reality, gold had strengthened over 10% when quoted in euros, but the galloping greenback had virtually wiped out the dollar-denominated asset’s gains. That isn’t to say that gold isn’t looking strong on its own now that the currency market has normalized.
Cryptic clues
Any modern discussion of the market landscape wouldn’t be complete without at least a passing glance at digital assets. We’ll all surely remember the whirlwind boom cycle of 2020-2021, followed by the equally memorable “crypto winter” that saw Bitcoin lose almost 70% from its November 2021 ATH of $64,400. After sliding all the way to $16,529 on the last day of 2022, the first six months of 2023 have been overwhelmingly positive for the original cryptocurrency. Its current price of $31,187 marks an 85% increase in value YTD. Ethereum, too, is up a solid 55% since January, as well as numerous other major altcoins. This would suggest that the worst of the previous bear cycle is well and truly behind the digital assets market. As well as this, a new mining capacity comes online amid a more reasonable mining price of $17,000 per BTC. Institutions also appear to be predicting a bull market in 2023, with weekly capital inflows from investment funds backed by digital assets reaching $199 million last week. Another positive factor for both institutional and retail investment was the filing on 15 June by BlackRock, the world’s largest asset management firm, to list a spot Bitcoin exchange-traded fund (ETF). Much remains to be seen in this still volatile space, but crypto is definitely a much more welcoming sector than it was this time last year.
About Libertex
Part of the Libertex Group, Libertex is an online broker offering tradable CFDs with underlying assets being commodities, Forex, ETFs, cryptocurrencies, and others. Libertex also offers investments in real stocks.
Over the years, Libertex has received more than 40 prestigious international awards and recognitions, including “Best CFD Broker Europe” (Global Brands Magazine, 2022) and “Most Trusted Broker in Europe” (Ultimate Fintech Awards, 2021). Libertex is the Official Online Trading Partner of FC Bayern, bringing the exciting worlds of football and trading together.
Since being founded in 1997, the Libertex Group has grown into a diverse group of companies, serving millions of clients from several countries all over the world.
In Europe the Libertex trading platform is operated by Indication Investments Ltd., a Cyprus Investment Firm regulated and supervised by the Cyprus Securities and Exchange Commission (CySEC) with CIF License number 164/12.
For more information about Libertex visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Libertex Named ‘Best CFD Broker’ at World Finance Forex Awards 2023
After much anticipation, the 2023 World Finance Forex Awards winners have finally been announced. As a prestigious publication aimed finance professionals, as well as corporate and private investors, World Finance magazine is famed for its award-winning reportage. It covers a broad range of topics from banking and insurance to wealth management and infrastructure investment, with contributions from some of the world’s most well-respected economists and theorists as well as consultants in government think tanks and the WEF.
In its annual Forex Awards ceremony, World Finance magazine seeks to formally recognise the companies that have stood out in the Forex market over the previous year. It was a great honour, therefore, that Libertex was named ‘Best CFD Broker’ in this 2023 year’s edition. For Libertex as a company, every single award has unique significance.
However, not all accolades worthy of pride come with a trophy. One such extraordinary achievement came last year in the form of Libertex’s official recognition as a Great Place to Work®, with our receipt of this certification of the highest distinction of working culture in the business world. Another massive coup for Libertex was the securing of a multi-year deal as an Official Online Trading Partner of FC Bayern whose core values align strongly with our own.
-
Currency markets mixed amid latest Fed rate hike
The past couple of years have been tough on much of the world, but between severe geopolitical insecurity and astronomical fuel costs, Europe has undoubtedly been the hardest-hit region. And now, after a more-than-deleterious start to 2023, the European economy is starting to show worrying signs of a manufacturing slowdown compared to its US counterpart. As a result, the euro and British pound find themselves in a precarious position against the US dollar, whose domestic economy seems to be faring far better amid a strong jobs market and healthy manufacturing and services PMIs. Though the summer has provided some respite for the fuel-poor Old Continent, winter will be here soon enough, and then fuel insecurity will surely rear its ugly head once more, plunging the European economy back into trouble.
Living in America
In stark contrast to Europe, the US has been gradually improving over the past 12-18 months as a combination of the Fed's policies and an increase in the global trade of energy resources has helped the world's biggest economy drag itself out of the dire straits of 2022 and steadily slash inflation to manageable levels, while also adding increasing numbers of new non-agricultural jobs. Now, the hope is that this slow-but-steady recovery can continue and inflation be pushed down to target levels.
As analysts at HSBC have stated, the US data largely support this "Goldilocks" scenario, which means the grind lower in the USD could extend, especially if we see fewer data disappointments from outside the US. As illogical as it seems, a weaker dollar is actually exactly what the US economy needs right now. Back in the days of EUR/USD parity in Q3 2022, US imports were prohibitively expensive for the EU. However, at more reasonable levels of 1.10 or above, US gas and other exports are much more attractive. However, after the Fed's latest 0.25% rate hike, the likelihood of a rise up towards 1.15 became even more distant. Following the US regulator's decision, the greenback strengthened against most of the major world currencies.
But what about the euro?
Europe's problems are multiple and well-known. Aside from geopolitical instability and a persistent energy crisis, manufacturing and job growth are also in long-term negative downtrends. And as much as the dollar aims to strengthen, the euro appears to be shifting towards a downward trajectory. It wasn't so long ago — back in November 2022, in fact — that EUR/USD was at parity. Now, the possibility that we could be headed back in the same direction is growing by the day, something that neither the EU nor the US wants at a time when the Old Continent is likely to need to import American natural gas.
After reaching a local high of 1.12 in mid-July, EUR/USD is now down to 1.10. Unfortunately, the ECB is still in a "damned if it does, damned if it doesn't" scenario in which it really needs to cut rates to stimulate economic activity. But it can't do this without tanking the single currency. For this reason, many analysts see an extended spell of weakening to come for the euro. Indeed, in a recent note, Danske Bank predicts that the relative strength of the US economy will weigh on the Fibre in the coming months, forecasting the cross at 1.06/1.03 in 6-12 months. What's more, this is not only a general trend but a specifically euro-centric problem. During the same time that the euro has lost 1.8% against the dollar, sterling has actually managed to gain 2.5%.
Japan bucks the trend
As we touched upon previously, the US dollar was able to gain against many of the world majors after the Federal Reserve announced its much-anticipated rate hike, but one notable exception to this trend was the Japanese yen. It all came down to the Bank of Japan's (BoJ) post-meeting comments in which it stated that it would allow for "greater flexibility" in its 10-year government bond yields.
This immediately prompted the 10-year to rise 0.575% for the first time since 2014 and a moderate dip in USDJPY to 139.54. It might not seem like a lot to most Westerners, but in the context of negative interest rates, that's quite a big deal. As the BoJ continues to target 2% inflation, we can most likely expect the yen to remain stable. There are concerns that Japan's ultra-low rates make the yen vulnerable to selling, but this is nothing new, and — as we saw this week — it hasn't stopped the yen from gaining ground on its major competitors. Let's not forget that the yen is also a favoured safe-haven asset, and, at this time of ongoing global uncertainty, this will surely drive interest in the Asian currency.
Trade CFDs on Forex with Libertex
Libertex is a multi-award-winning CFD broker offering trading and investment in a wide range of asset classes, from stocks, commodities and crypto to indices, options and Forex. Libertex offers both long and short positions in a variety of CFDs. With Libertex, you can trade CFDs in EUR/USD, EUR/GBP, GBP/USD, and USD/JPY, so you're always sure to find a currency pair to suit you. For more information or to create an account of your own, visit www.libertex.com today!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Chinese stocks surge on bullish Beijing rhetoric
We all remember just how devastating the pandemic was for the entire world's economy. However, as much pain as some countries experienced, no nation was hit worse than China. This was due to a combination of factors, but chief among them are the heavy reliance of Chinese industry on Western custom and, of course, the CCP's ultra-draconian and now infamous "Zero COVID" policy.
But now, after a more than underwhelming three years that has seen the bulk of China's biggest companies on a seemingly unstoppable downward trajectory, there finally appears to be light at the end of the tunnel this week following a much-anticipated meeting of the Chinese Politburo on Monday (31 August 2023). As we head into Q3 of this highly uncertain year for the world, investors and traders everywhere are looking for bargain markets with strong independence and low correlation with US and European markets, and China certainly fits that bill.
What's the news?
The July Politburo meeting is known to set the tone for China's economic policies in the second half of the year. This is why market participants and pundits watched it closely in eager anticipation of firmer policy guidance for faltering growth in the world's second-biggest economy. And the elite of the communist government certainly didn't disappoint this time around. Following significant GDP underperformance in Q2, with figures putting growth at 6.3% instead of the 7.3% forecast, China's top leaders pledged to increase policy support for domestic consumption amid a much slower-than-expected post-pandemic rebound. In the meeting minutes, Xinhua News Agency reported the Politburo as stating that a full post-COVID recovery will take a "wave-like" shape and the process will be "torturous".
Stocks on the up
Despite the long road ahead, the clear sign that the government recognises the scale of the problem and is willing to offer policy support helped to buoy stocks across Asia. The biggest initial gains came on Hong Kong's Hang Seng, where some of China's biggest tech stocks are registered. Alibaba, for instance, shot up 5% the day after the Politburo meeting this week and, as of 3 August, is sitting at HKD 93.15, a monthly gain of 10%. Baidu, on the other hand, made its gains in the days leading up to the meeting and then dipped slightly in the days that followed. BIDU is still up almost 8% to HKD 144.85 since 25 July, so things are still definitely looking positive for the tech giant. Tencent's trajectory was very similar, rising slightly ahead of the meeting before correcting downward again after the meeting itself. It currently stands at 342.80, which marks a 7.5% gain from its 25 July local low.
A look to the future
Traders and investors would be forgiven for thinking that this is the end of the Chinese stock market's stagnation, but we shouldn't forget November of last year. Just like now, we saw a strong uptick across Chinese equities once the CCP announced the end of its harsh anti-COVID restrictions, but the market soon moved back into a sideways channel. We would be wise to heed the Politburo's message that this recovery is likely to be "wave-like".
As we mentioned earlier, China's industry is largely dependent on a healthy economic situation in the US and Europe. With the ongoing geopolitical uncertainty and energy crisis, we can't be too optimistic about a rapid rebound for China's manufacturing-heavy economy. That said, domestic consumption and sentiment are definitely trending up, and the multi-year lows of many of the biggest Chinese companies certainly make them attractive buys for long-term investors. There's still a long way to go, and we have to be cautious in our optimism, but the medium-term picture for Chinese stocks will become much clearer by the end of this year.
Trade China-related underlying assets with Libertex
Libertex offers CFDs in a wide variety of asset classes, from stocks, commodities and indices all the way through to forex, options and even crypto. There's something for everyone. And since we offer both long and short positions, you can throw your hat in the ring in whatever direction you think the market is headed. From China, Libertex offers CFDs in all the major tech stocks, including Alibaba, Baidu and Tencent, as well as the China A50 index and iShares China Large-Cap ETF for more diversified traders For more information or to create an account of your own, visit www.libertex.com today!
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
US rating downgrade has far-reaching consequences
The news last week of ratings agency Fitch's decision to strip the US of its AAA credit rating was nothing short of groundbreaking. For over a century, the United States has been a debtor of choice for many major financial institutions on account of its strong, stable, and very large economy. However, Fitch stated in a recent report that: "The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance".
US Treasury Secretary Janet Yellen, meanwhile, called the move "arbitrary", asserting that the decision was based on "outdated data". However we analyse the situation, it's undeniable that the US has shown uncharacteristic weakness in recent months. First, we had the collapse of several major banks. Then, there was the June bipartisan agreement to lift the debt limit to $31.4 trillion until January 2025, which almost saw the US default on its existing commitments.
Now, another rating agency, Moody's, has decided to downgrade 10 mid-sized US banks and has placed six banking giants, including Bank of New York Mellon (BK.N), U.S. Bancorp (USB.N), State Street (STT.N) and Truist Financial (TFC.N), on review for potential downgrades. The response from the markets was immediate, with all three major US indices experiencing sell-offs. The Dow Jones Industrial Average (DJIA) fell 0.45% to 35,314.49, the S&P 500 (SPX) lost 0.42% to reach 4,499.38, and the Nasdaq Composite (IXIC) dropped 0.79% to 13,884.32. While it might not seem like much on the surface, this could well be just the tip of the iceberg. A growing sense of uncertainty and worry is growing in the US market and, by extension, the world. Traders and investors are understandably concerned and keen to grasp what the future might hold for their capital.
Equity release
Apart from the initial dip that is to be expected after such an unprecedented development, the longer-term outlook for US stocks is cloudy at best. Both the S&P 500 and Nasdaq 100 indices have been up and down all year and have only managed an average of a 6% gain since August 2022. This sideways movement speaks to a larger issue that has prevented equities from gaining any sort of real traction since the post-pandemic crash of late 2021. One of the biggest factors behind this uncertainty has been the above-target inflation that has plagued both the US and the wider world. As traders braced for the latest US inflation numbers on Thursday (10/08), further declines were expected. According to Reuters analysts, they tipped consumer prices to reveal a 3.3% year-on-year increase in July, up from 3% in June. This would be the first acceleration in inflation since June 2022 and could spell trouble ahead for already-wavering equities.
Buried Treasury
Ironically enough, despite the downgrading of the US Treasury's creditworthiness, bond yields have actually been outperforming the expectations of many analysts. Indeed, it seems the worse the prospects of stocks, the better T-note yields look. In fact, data from BofA Global Research showed the one-month correlation between the S&P 500 and the 10-year T-note yield at their most negative since 2000, which means the two assets are once again moving sharply in opposite directions. At the current level of 4.003, the 10-year is actually up almost 10% MoM, which, at first glance, seems illogical given the US's credit rating woes.
However, if we return to rising inflation, the picture becomes much clearer. Coupled with the Federal Reserve's firm stance on future rate cuts — having all but ruled out any reductions this year — the case for government bonds becomes stronger. And with the stock market looking stagnant, T-notes offer a relative safe haven for investor capital over the medium term. What's more, the 2- and 5-year Treasury bills offer even more attractive yields (4.80% and 4.13%, respectively), making them particularly solid buys for risk-off investors looking to ride out the turbulence.
Nowhere to turn
The prospect of holding the bulk of their capital in cash or bonds is an ignominious last resort for many die-hard bulls. In situations such as these, the risk-friendly would typically look to low-correlation regions like China to put their money to work. Unfortunately, though, even these markets have felt the impact of the recent turmoil. Beyond the contagion effect of the US credit downgrade, China's stock market has its own deeply entrenched problems. News that China's consumer prices had slipped into negative territory for the first time in 28 months in July sparked further sell-offs on the already reeling Chinese and Hong Kong equities markets. Mainland Chinese markets closed lower on Wednesday (09/08), with the Shanghai Composite down 0.49% to 3,244.49 at the close of play.
The Shenzhen Component, meanwhile, dropped 0.53% to end the day at 11,039.45, while Hong Kong's Hang Seng index was just about hovering above the flatline in its final hour of trade. This comes after a torrid year for the flagship Hang Seng, which is already down more than 10% YTD. On the bright side, these multi-year lows do suggest good buys for long-term investors, but it looks like they'll have to be extra patient for significant returns.
Trading different CFDs according to the world situation with Libertex
With Libertex, you can trade a mind-boggling large range of CFDs from a variety of asset classes, including stocks, ETFs and commodities, through to forex, options and even crypto. And because Libertex offers both long and short positions, it doesn't matter where you feel the market is heading. You can always find an underlying asset and direction to suit you. Aside from CFDs on major US indices like the S&P 500, Nasdaq and Dow Jones Industrial Average, Libertex offers CFD exposure to the US bond market through the iShares Core U.S. Aggregate Bond ETF and Chinese stocks via the iShares China Large Cap ETF, China A50 or Hang Seng. The best part of all is that our CFD model means you don't need to actually own any of these underlying assets in order to work with changes in their price. For more information or to create an account today, visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Oil and gas are steady, but for how long?
After a relatively mild winter characterised by largely balanced supply and demand, many of us appear to have forgotten the crippling oil prices of last summer. At a time of runaway inflation and with many still reeling from the pandemic, crude prices reached an eye-watering high of $116 a barrel. This sent prices shooting up at the pump and had knock-on effects for a range of related service sectors, such as freight forwarding, passenger transportation, and local delivery, to name but a few. Then, to make matters worse, the ongoing geopolitical tensions in Eastern Europe led to record increases in natural gas prices that saw the Natural Gas EU Dutch TTF increase from an already high average price per MWh of €93.16 in August 2021 to an all-time high of €339.42 exactly one year later.
Since the start of this year, however, prices of both these key energy resources have been in relative freefall, with WTI and Brent crude now (as of 29/08) sitting at $80.65 and $85.12 per barrel, respectively. Natural gas has come down even harder, with EU average prices currently at €36.40 per MWh and $2.55 per million BTU for US Henry Hub (down from $8.81 twelve months ago). With OPEC+ remaining steadfast in their production cuts as demand from post-zero-COVID China rises and with what's expected to be a much harsher winter fast approaching, many investors and traders are wondering whether these multi-year lows in the energy markets can be sustained much longer. In this piece, we'll take a broad look at the global oil and gas markets and their prospects into 2024.
Oil slippery
As we've already stated, crude oil of virtually all varieties has been quite steady since the start of the year, with prices hovering around $80 for much of 2023. Now, however, we've started to see some more intentional movement as both Brent and WTI have managed to make gains of almost 12% over the past thirty days. It's no secret that both the Saudis and the Russians have been aiming to support prices in and around current levels, with Riyadh now making voluntary output cuts of 1 million barrels per day for a third consecutive month and Moscow committing to a 300,000 bpd reduction in September.
Furthermore, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) already agreed a broad deal in June to curtail total supplies until the end of 2024. This means that the oil market is likely to be highly sensitive to demand jumps over this entire period, and this is precisely what we've seen with the recent gains following increased demand from China following the end of its zero-COVID policy. Experts from Morgan Stanley "suspect that the likely inventory trajectory anchors the market around $80/bbl, probably in a $75-85/bbl range", and yet the investment bank has still increased its demand forecast from 1.8 million bpd to 2.1 million bpd and does expect the bulls to come to the fore in Q4 2023 and Q1 2024.
Cooking with gas
While oil is certainly a staple commodity, gas is a matter of life or death, especially when winter comes rolling around. And while we might have gotten away with a mild one last year, all the latest data suggest that this year will be bitter. As temperatures plummet and demand for natural gas soars, we simply cannot predict how high prices might go. After all, the geopolitical situation at present means Europe still lacks a stable supply of cheap and plentiful gas. Despite the potential to import from the US, the practicalities of such an undertaking might not only mean higher prices but also supply interruptions.
Though demand has been weaker of late, that's expected to change very soon. First, it was revealed that the new German LNG terminal will face substantial delays in becoming operational just as Norway announced that it is shutting down its Troll gas field for maintenance. And with the major EU reserves at below 90% capacity, this could soon become a problem if the heating season begins earlier than expected. What's more, the supply-side risks don't end in Europe but are, in fact, global. In Australia, Chevron is still in the grip of industrial action that has seen LNG workers down under strike for higher pay. Until an updated proposal is accepted by the unions, this will inevitably magnify any increases in global prices. Given the current cocktail of supply drought and impending demand hikes, Henry Hub Natural Gas prices could rise to above $3.00 in the coming weeks, especially if the current sentiment and the news environment are sustained.
Energise your trading with Libertex
As a CFD broker with a strong reputation built over many years, Libertex has a long history of connecting traders with the financial markets. Because Libertex offers both long and short positions in a varied range of CFDs, you can find an underlying asset class and direction to suit your trading strategy. Beyond favoured instruments like stocks, ETFs and currencies, Libertex also offers CFDs in the full gamut of energy resources, including oil and gas derivatives such as WTI Crude, Light Sweet, Brent, and, of course, Henry Hub Natural Gas. Best of all, Libertex's CFD model means you don't need to physically own any of the underlying instruments you wish to trade and can keep your portfolio in Libertex's multi-award-winning trading app. For more information or to create an account today, visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
European inflation dips as traders and investors look for opportunities
It’s been a tough couple of years for Europe. Beyond the geopolitical uncertainty and energy insecurity that has been tearing the continent apart, the rate of inflation has been solidly above target and has even threatened to enter hyperinflation territory at times. Anyone in the eurozone will surely remember the torrid Q4 2022 when price pressure averaged over 10% and hit an all-time high of 11.5% in October. But after all that, it finally looks as if the worst is behind the Old Continent, despite there being no end in sight to its other problems.
As of July 2023, inflation in the European Union is down to 6.1%, while in the euro area, this figure stands at 5.5%. Naturally, this is still significantly above the usual target of around 2%, but it sure is a massive improvement on double digits. It’s also a sign that the ECB’s more hawkish policy is working as intended and that a September rate increase may be able to be avoided. For context, post-Brexit Britain is struggling with inflation of 6.8% and likely staring at another BoE rate hike of at least 25 basis points in the autumn. Of course, what traders and investors are most interested in is how this is likely to affect their investments. In this article, we’ll be covering the likely impact of this new trend on a range of asset classes, including stocks, commodities and forex.
Equitable deal
After hitting astronomical heights in 2020-2021, stocks experienced a very hard return to reality in 2022. This was followed by a seemingly unending period of stagnation for many tickers. Some of the worst affected were the biggest gainers of the pandemic era. Meme-investor darling GameStop, for example, has gained less than 1% since finding a bottom in January of this year. DocuSign, Salesforce and PayPal tell a similar story. In fact, it’s only extremely competitive and well-funded companies like Tesla and Palantir that have managed to make any sort of return to growth in 2023.
It may sound incredibly impressive that these two tech giants are up an average of 115% at 233.19 and 14.67, respectively, but these prices are actually still a whole 50% below their all-time highs, which leaves much more growth potential to be realised. China is a similar story, with huge names like Tencent, Alibaba, and Baidu languishing at multi-year lows, just begging to be snapped up by prospective investors. Meanwhile, the EuroStoxx 600 index is currently just 13% higher than it was over two decades ago in 2000. These current prices in equities the world over represent excellent value for money, and as inflation continues to drop, interest in risk assets like stocks will only increase, potentially leading to a new bull cycle in 2024.
Gold, silver and more
Any old-school investor will tell you that physical assets are what you want during times of high inflation. Some like gold and silver, others like industrial metals like copper and platinum, while others still like the day-to-day staple of oil. However, in today’s changing world, traditional strategies don’t always hold true. The yellow metal, for instance, has been fairly stagnant since the end of the pandemic and now only stands 25% above its pre-COVID levels. After flirting with its all-time high of$2014 per Troy ounce in April of this year, gold is now down around 5% to $1914 at the time of writing (23/08), and it looks as if the famed commodities supercycle is firmly off the cards for now.
It’s much the same for silver, too, which is currently hovering around $23 an ounce, down from $26 at the end of Q2 2023. Copper futures prices are also down around 10% over the same period, a trend that seems to be consistent across both stores of value and industrial metals. Despite the general global uncertainty, it appears that commodities haven’t been able to provide the safe haven many would typically predict. And with inflation, these 10% losses are actually even more pronounced. The real reason behind this phenomenon is the strong dollar, but we’ll get to that in a bit.
Don’t forget Forex
In a context of higher-than-average inflation, traditional wisdom would tell us to steer well clear of fiat currency. However, in this particular instance, that might be a bit of an oversimplification. We’ll all surely remember the historic parity achieved between the US dollar and the euro back in November 2022. Well, since then, things have certainly calmed down, but the greenback still remains much stronger than it was throughout the pandemic period. And since virtually all assets are quoted in US dollars, any gains that are made have to be offset against the value of the US national currency.
However, it’s not in pairs with the USD where the current opportunities lie in the forex market but rather in the cross rates. As we touched upon earlier, the ECB appears to be dealing with inflation much more competently than the BoE just now, and this is clearly reflected in GBP/EUR. Since the start of the month, the pair has risen from 1.15 to 1.17, and it looks as if this trend will continue unless the UK regulator takes truly decisive interest rate action in the autumn. But this is easier said than done amid a cost-of-living crisis in a country with extremely high levels of home ownership, which makes the island nation especially sensitive to any more rate increases. Shrewd investors looking to bide their time before entering riskier asset classes like stocks and crypto could well benefit from holding their cash in GBP/EUR in the meantime.
Trade it all with Libertex
Libertex is a well-respected broker with experience connecting ordinary traders and investors with the world markets.Libertex offers CFDs in a wide range of asset classes from stocks, indices and ETFs such as Tesla, Salesforce, Tencent and the EuroStoxx 50 index, all the way through to commodities and Forex pairs like XAUUSD and EURGBP. With our CFD model you can have short or long positions in all these underlying assets without having to own the instrument. With Libertex’s multi-award-winning app, you can keep your entire trading portfolio in one location for. For more information or to create an account of your own, visit https://libertex.com/signup
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Oil and gas are steady, but for how long?
After a relatively mild winter characterised by largely balanced supply and demand, many of us appear to have forgotten the crippling oil prices of last summer. At a time of runaway inflation and with many still reeling from the pandemic, crude prices reached an eye-watering high of $116 a barrel. This sent prices shooting up at the pump and had knock-on effects for a range of related service sectors, such as freight forwarding, passenger transportation, and local delivery, to name but a few. Then, to make matters worse, the ongoing geopolitical tensions in Eastern Europe led to record increases in natural gas prices that saw the Natural Gas EU Dutch TTF increase from an already high average price per MWh of €93.16 in August 2021 to an all-time high of €339.42 exactly one year later.
Since the start of this year, however, prices of both these key energy resources have been in relative freefall, with WTI and Brent crude now (as of 29/08) sitting at $80.65 and $85.12 per barrel, respectively. Natural gas has come down even harder, with EU average prices currently at €36.40 per MWh and $2.55 per million BTU for US Henry Hub (down from $8.81 twelve months ago). With OPEC+ remaining steadfast in their production cuts as demand from post-zero-COVID China rises and with what's expected to be a much harsher winter fast approaching, many investors and traders are wondering whether these multi-year lows in the energy markets can be sustained much longer. In this piece, we'll take a broad look at the global oil and gas markets and their prospects into 2024.
Oil slippery
As we've already stated, crude oil of virtually all varieties has been quite steady since the start of the year, with prices hovering around $80 for much of 2023. Now, however, we've started to see some more intentional movement as both Brent and WTI have managed to make gains of almost 12% over the past thirty days. It's no secret that both the Saudis and the Russians have been aiming to support prices in and around current levels, with Riyadh now making voluntary output cuts of 1 million barrels per day for a third consecutive month and Moscow committing to a 300,000 bpd reduction in September.
Furthermore, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) already agreed a broad deal in June to curtail total supplies until the end of 2024. This means that the oil market is likely to be highly sensitive to demand jumps over this entire period, and this is precisely what we've seen with the recent gains following increased demand from China following the end of its zero-COVID policy. Experts from Morgan Stanley "suspect that the likely inventory trajectory anchors the market around $80/bbl, probably in a $75-85/bbl range", and yet the investment bank has still increased its demand forecast from 1.8 million bpd to 2.1 million bpd and does expect the bulls to come to the fore in Q4 2023 and Q1 2024.
Cooking with gas
While oil is certainly a staple commodity, gas is a matter of life or death, especially when winter comes rolling around. And while we might have gotten away with a mild one last year, all the latest data suggest that this year will be bitter. As temperatures plummet and demand for natural gas soars, we simply cannot predict how high prices might go. After all, the geopolitical situation at present means Europe still lacks a stable supply of cheap and plentiful gas. Despite the potential to import from the US, the practicalities of such an undertaking might not only mean higher prices but also supply interruptions.
Though demand has been weaker of late, that's expected to change very soon. First, it was revealed that the new German LNG terminal will face substantial delays in becoming operational just as Norway announced that it is shutting down its Troll gas field for maintenance. And with the major EU reserves at below 90% capacity, this could soon become a problem if the heating season begins earlier than expected. What's more, the supply-side risks don't end in Europe but are, in fact, global. In Australia, Chevron is still in the grip of industrial action that has seen LNG workers down under strike for higher pay. Until an updated proposal is accepted by the unions, this will inevitably magnify any increases in global prices. Given the current cocktail of supply drought and impending demand hikes, Henry Hub Natural Gas prices could rise to above $3.00 in the coming weeks, especially if the current sentiment and the news environment are sustained.
Energise your trading with Libertex
As a CFD broker with a strong reputation built over many years, Libertex has a long history of connecting traders with the financial markets. Because Libertex offers both long and short positions in a varied range of CFDs, you can find an underlying asset class and direction to suit your trading strategy. Beyond favoured instruments like stocks, ETFs and currencies, Libertex also offers CFDs in the full gamut of energy resources, including oil and gas derivatives such as WTI Crude, Light Sweet, Brent, and, of course, Henry Hub Natural Gas. Best of all, Libertex's CFD model means you don't need to physically own any of the underlying instruments you wish to trade and can keep your portfolio in Libertex's multi-award-winning trading app. For more information or to create an account today, visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
SEC puts spot crypto ETFs on ice again
After a truly awful 2021-2022, Bitcoin has made an impressive comeback in 2023 to gain over 50% since January alone. Naturally, this has brought crypto well and truly back onto the radar of institutional fund managers as they look to add digital assets back into their portfolios after a long hiatus. Indeed, both BTC and Solana have seen particularly powerful inflows in H1 2023 and beyond, and the market looks set to continue its bullish trend to the end of the year. However, one vehicle that would supercharge institutional investment into crypto has been lingering on the horizon for some time and looks to have been pushed back at least another month.
That's right, spot Bitcoin ETFs, which would open the floodgates for a variety of similar products for the full gamut of cryptocurrencies, won't be approved until late October at the earliest following the SEC's move to postpone its decision on exchange-traded fund applications filed earlier this year by firms including BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck and Valkyrie Digital Assets.
Apart from institutional investment, it is also believed that such ETF instruments will drive adoption from retail investors who don't feel comfortable technically with buying and selling physical crypto. So, why the delay, what is the timeline for the approval of these groundbreaking instruments, and more importantly, what will likely be their effect on the wider digital assets market?
Are we there yet?
For those who haven't been following the space especially closely, these attempts to have Bitcoin ETFs listed have become a never-ending saga of sorts. From when it first receives an application, the SEC has a total of 240 days to make a final decision to approve or reject. In the past, the regulator's staff have often taken advantage of every possible comment and review period to delay making their final decision until those 240 days have elapsed. One of the first firms to make an application was the eminent Cathy Wood's Ark Invest Group, which had originally believed that its initiative would be rewarded by the US regulator.
However, several commenters have pointed out that the SEC's decision to make full use of its 240-day review period is to ensure that no single provider has a significant advantage over its competitors, opening that the regulator will likely approve all applications at the same time to avoid a monopoly or oligarchy arising in the space. If it does happen that all of these funds are launched in Q4 2023, we can expect the crypto market to respond in a big way as capital flows rapidly into Bitcoin.
Never underestimate crypto
If the past 5-10 years of boom-and-bust cycles have taught us anything, it's that digital currencies — and Bitcoin in particular — can do things many of us thought impossible. Now, as a spot Bitcoin ETF looms, it appears as if many are not giving this huge development the respect it deserves. In fact, analysts from crypto research firm K33 (formerly Arcane Research) have said that the ability of such an approval to drive up BTC prices significantly is currently being massively underestimated by the market. K33 senior analyst Veste Lunde has stated that, while Bitcoin had all but given up its gains amid Grayscale's legal victory over the SEC, the approval of any spot Bitcoin ETF would "attract enormous inflows" and significantly increase buying pressure across the cryptocurrency market.
On the contrary, if the applications are rejected, they predict the impact on prices to be "negligible". And as the next BTC halving approaches in early 2024, it's hard to see how BTC can fail to grow over the longer term. Meanwhile, the K33 team believes that the biggest gainer in the medium term will be Ethereum, with "strong momentum" predicted following its futures-based ETF listing. ETH is already up 35% YTD, and the analysts suggest these gains could accelerate in Q4.
Trade crypto CFDs with Libertex
Until spot cryptocurrency ETFs become a reality, you can potentially achieve the same results with crypto CFD trading with Libertex. There's no need to own the physical coins; simply pick your underlying digital asset and close your position when at your chosen price level. Because Libertex offers both long and short CFD positions in a range of asset classes, including cryptocurrencies like Bitcoin and Ethereum, you can find something you'd like to trade in the direction that suits you.
But Libertex's offering doesn't stop there. We can provide CFDs on forex, commodities and stocks, all the way through to indices, ETFs and even stock options. And thanks to Libertex's multi-award-winning app, you can store your entire portfolio in one accessible and secure location. For more information about Libertex, visit www.libertex.com, where you can create your own account today.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Investors look to the CPI report for guidance
The year so far has been a relatively good one for US equities, with the US big three indices of the Nasdaq 100 (+40.76%), S&P 500 (16.68%) and Dow Jones Industrial Average (+4.56%) all up significantly YTD. This comes after a fiendishly devastating 2022 that saw US tech stocks especially hard hit.
The good performance is almost illogical given the bleak situation around the world, with geopolitical instability, rising price pressure, and energy shortages abounding. Once again, the market reminds us just how unpredictable it can be. As always, however, macroeconomics will remain a leading factor in any analysis of the medium-to-long-term performance of key asset classes, including stocks and indices.
And as the world braced for the key release of the latest US inflation data — a metric that will undoubtedly help to guide Fed policy on interest rates — on 13 September 2023, investors and traders were looking for any hint as to where the market is headed in Q4 2023. Ahead of the release, stocks corrected slightly downwards while oil managed to cement its recent gains in response to the impending publication, but what does this mean is expected, and how will it affect equities and other key instruments?
Inflation not out of air yet
The latest Consumer Price Index report revealed that, far from melting away, inflation in August was reported at 4.3% year-over-year, with elevated energy prices threatening to keep headline inflation at 3.7% or above for the foreseeable future. This was slightly worse than the predicted level of 3.6%, but it's the increases in core expenses like petrol (+10.6%) and rent (+0.5%) that make the situation worse.
What's more, energy costs — and natural gas, in particular — are only going to increase further as the winter sets in. And this winter is tipped to be a cold one. If these numbers show anything, it's that we're unlikely to reach the Fed's target inflation rate by Christmas, at least not organically. That means that the US regulator could still be forced to intervene with additional rate hikes, which will push consumer finance rates higher and thus reduce ordinary people's spare income for investment.
This impact will be further exacerbated by the higher central heating and petrol prices, leaving very little left over at the end of the month. As we touched upon earlier, US stocks had already dipped overnight in the futures market, with the S&P 500 (.SPX) falling 0.6% and the Nasdaq losing 1%. This would suggest that the smart money was always banking on these CPI figures coming out worse than expected. However, this did not play out to significant declines during regular trading on Wednesday, which could be a positive sign for the longer term.
Essential oils
Oil is holding on to its recent gains and shaping up for further rises in Q4 2023 and Q1 2024. We've already seen pump prices increase nearly 10% this month, and with crude still rising, who knows where it will end. Industrial production is up in China and India, and to sustain this activity, fuel is required. In fact, China's state-owned energy giant Sinopec recently issued a tender for as many as 25 LNG cargoes between October 2023 and December 2024. Despite the green revolution, internal combustion engine vehicles are still by far the most numerous across Europe and the US, and many people drive more in winter to avoid the cold.
In light of this expected demand hike, the effects of the OPEC+ production cuts are going to be even more pronounced. We must remember that Saudi Arabia and Russia recently agreed to extend their respective 1 million and 300,000 bpd cuts to the end of 2023. With Brent already above $90 a barrel for the first time in almost a year, we could be headed for another energy crunch unless supply-side pressure eases.
Natural gas, on the other hand, is at a multi-year low and a veritable million miles away from the prices we saw in late 2022. Given the geopolitical instability in Europe and the colder-than-usual winter predicted ahead, demand is set to skyrocket in the winter. Without any stable gas supply through traditional routes, LNG is likely still to be a huge part of the Old Continent's energy mix, so the Henry Hub could be one to watch in the coming months.
Diversify yourself with Libertex
Since none of us truly know what's going to happen in the markets, it's always best to cover as many bases as possible. However, holding multiple brokerage accounts and purchasing commodities like gold, oil and gas can be a serious headache for the ordinary investor.
That's what makes Libertex's CFD model so attractive. With them, you can hold a varied CFD portfolio of everything from stocks, forex, crypto and, of course, commodities in one comfortable location. You also don't need to actually own the underlying assets. What's more, Libertex can offer leveraged trading on both long and short positions on a variety of CFDs, including major indices like the S&P 500, Nasdaq 100 and Dow Jones Industrial Average through to energy commodities like Brent, WTI, Light Sweet and the Henry Hub.
With experience spanning two decades, Libertex has a long history of connecting ordinary traders and investors with the financial markets, all with market-leading terms and conditions. For more information about Libertex and the range of products it can offer you, visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.77% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Libertex wins "Best Trading Experience" at Ultimate Fintech Awards
Libertex is delighted to have received the "Best Trading Experience" award at this year's Ultimate Fintech Awards during the closing ceremony of the iFX Expo, which took place in Limassol, Cyprus. The accolade was presented after Libertex was nominated in multiple, varied categories.
About the world-renowned event
iFX EXPO is one of the world's largest financial B2B expos. For more than a decade, it's been bringing together professionals in online trading, fintech and financial services from across Europe, Asia, and the Middle East and honouring the industry's standout businesses. The Cyprus iFX EXPO event is Europe's most talked-about industry meetup of the year, offering unlimited opportunities for attendees to connect with C-level executives from the most prominent international companies, as well as providing engaging content from inspiring industry experts. The esteemed Ultimate Fintech Awards, which take place as part of iFX EXPO, recognise industry-leading brands in the online trading and fintech space with the aim of providing traders and businesses with industry benchmarks of the best companies in it.
Words from Libertex Group CMO, Marios Chailis
Commenting on this prestigious recognition, Libertex Group Chief Marketing Officer Marios Chailis had this to say: "It's always a great feeling when our hard work is recognised in the form of an award, but the fact that this latest one was voted on by our industry colleagues makes the honour all the more special. To receive such a prestigious and important honour, such as the "Best Trading Experience", is proof of the success of our efforts to ensure our clients find trading with us as enjoyable as possible. Achieving a goal like this takes dedication, and it's a journey that never really ends, but we are committed to keep doing all we can to ensure that Libertex traders and investors have the best trading experience imaginable."
Libertex has always cared about your trading experience
For Libertex, the meaning of trading experience goes far beyond simple terms and conditions, though we work to stay ahead of the competition in this area, too. As far as Libertex is concerned, customer experience involves more intangible qualities like a sense of belonging and loyalty. This all ties in with our "Trade For More" philosophy, which we leverage through initiatives such as our sponsorship deals with top football clubs like FC Bayern. As we head towards the end of 2023, we remain committed to continuing to put our clients and their overall experience with us first and foremost.
-
Crypto looking up as positive inflows return
Following a year of ups and downs for digital assets – amid regulatory uncertainty, increasing energy prices and investor hesitancy – things are finally looking up for cryptocurrencies. While Bitcoin and Ethereum have both gained a whopping 38% and 65% YTD, those metrics don’t really tell the full story. Most of these gains came in a short burst of growth during the first few weeks of 2023, which famously followed a monster crash of almost 80% spanning from late 2021 throughout the entirety of 2022. Since March 2023, prices have been literally stagnant across a majority of digital currencies. But now, after six consecutive weeks of outflows, crypto is finally back in the game with $21 million of inflows recorded this week.
That said, however, it’s not all smiles for every digital currency, and there are still some definite winners and losers. Market leader Bitcoin recorded an impressive $20 million in inflows, while short BTC saw outflows of $1.5 million ($85 million since April). Major altcoin and potential Ethereum killer Solana had quite a good week, too, recording $5 million in net inflows and hitting a total value locked (TVL) of $338.8 million, its highest level this year.
Ethereum, on the other hand, continued its losing streak to post outflows of $1.5 million despite the buzz around a potential spot ETF product. As we enter Q4, investors want to know what the key factors will be for crypto and where we can expect prices to move.
Spot the difference
One of the biggest stories in the digital assets space this summer has been the SEC and its decision to approve multiple applications for spot Bitcoin and Ethereum ETFs from big names like Ark Invest, Blackrock and Invesco. The regulator has already taken full advantage of each possible comment and review period to delay making their final decision until their statutory 240-day response period is up. Commenters have suggested that this is to ensure no provider has an undue advantage over any other provider and that they will all likely be approved at once.
However, Bloomberg analyst Eric Balchunas has suggested an encouraging signal that the SEC could move to approve these earlier than the 10 January 2024 deadline. This is the fact that the regulator has sent comments to address the investment firms’ S-1 filings (related to plumbing, legal, and other technicalities). After all, VanEck’s Ethereum ETF is set to launch on the CBOE, though this has failed to ignite interest in the coin as expected. Bitcoin is a different animal altogether, though. Factors such as huge institutional demand, a proven track record, and trailblazer status coupled, of course, with its anti-inflationary model, make it much more likely to take off as an investment vehicle among more traditional investors.
Alt is the new black
Beyond the uptick in interest in BTC expected from institutions and more traditional investors, early adopters and true crypto aficionados are very much focusing their sights on the altcoin space for interesting and highly capable projects with good growth potential. With these savvy and prospective investors, functionality is everything. It’s also in this part of the market where we can expect to see the biggest swings in the coming months.
Solana, for instance, is already taking huge market share away from Ethereum and is slowly but surely laying the foundations to become the smart contract coin of choice. As we already mentioned, SOL reached a record TLV this past week and has enjoyed vigorous price growth over recent weeks. It’s currently trading in a horizontal range between $18 and $32 and sits comfortably at $23.14 at the time of writing on 5 October 2023. Since the beginning of the year, however, it has more than doubled in value to cast a shadow over the gains made by ETH and even BTC.
Another functional coin that is turning heads right now is Chainlink. In fact, in the past month alone, this smart contract darling is up 29.15% and looks set to make further gains before the year is up. The evidence would seem to suggest that two markets are now emerging – or rather, the bigger, more established projects like Bitcoin and Ethereum are being absorbed into the broader financial market system. As this trend deepens, the altcoin space will be fertile ground to grow for digital assets with real-world applications.
Trade crypto and more CFDs with Libertex
Libertex (https://libertex.com/) is a trading platform with many years of experience connecting ordinary traders and investors with the financial markets. Libertex has an extensive offering of CFD products from numerous asset classes, including stocks, ETFs and energy, through to metals, options and, of course, crypto. The best thing about Libertex’s CFD model is that it allows you to trade long or short instantaneously without the need to physically hold any of the underlying instruments.
In addition to some of the biggest cryptocurrencies by market cap, such as Bitcoin (BTC) and Ethereum (ETH), Libertex also offers CFDs in altcoins like Solana (SOL) and Chainlink (LINK). In fact, Libertex has over 120 different digital assets available to trade as CFDs, with market-leading conditions and spreads.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
Oil and gas volatile as geopolitical instability spreads
Despite the green revolution, oil and gas are still staple commodities the world over. When their prices move, it affects ordinary people and investors alike. After a manic 2022 in the wake of rising tensions in Eastern Europe that saw Brent oil shoot up to near ten-year highs above $125 a barrel, prices eventually normalised back down below $80 per barrel. At the same time, spot natural gas prices on the open market exploded over 1000% as European Dutch gas prices increased from an average of less than €20 per MWh to a high of €338.54 in August 2022 before gradually dipping back down to around €30 per MWh this past summer.
Now, however, the price appears to have entered a new uptrend amid Russian and Saudi production cuts coupled with an uptick in political instability in the Middle East. And though crude prices have corrected downwards slightly since then, there is a clear dynamic towards the upside. Meanwhile, the Natural Gas EU Dutch TTF is up over 50% since then to €45 per MWh at the time of writing on 10 October 2023, having gained over 15% in the last month alone. As the heating season approaches, consumers and market participants alike are bracing for further price hikes both in oil and natural gas on typical demand-driven factors. If, however, we see an escalation in the ongoing conflict, then prices could be even further impacted.
OPEC+ in the spotlight again
In the wake of last year’s price hikes, all eyes have been on OPEC and its associated nations, with the cartel having huge control over oil price dynamics. It has been widely noted that two of the biggest producing nations — Russia and the Kingdom of Saudi Arabia — have committed to voluntary production cuts of 300,000 and 1 million barrels per day, respectively. These pledges have now been extended to 2024, and with demand expected to increase due to various factors, from increased industrial output in China to seasonal pressures, this artificial reduction of supply is only going to exacerbate any organic upward price movement.
In its latest forecast report, OPEC has raised its long-term demand outlook to 116 million bpd by 2045, which would require $14 trillion worth of investments to satisfy. Clearly, this means that the cartel sees a significant future for the energy resource and will do everything it can to maintain high prices in order to see a return on this sizable capital outlay. In the short term, it’s hard to predict where prices are headed. That said, OPEC seems intent on doing all it can to keep crude prices in the $80-100 range, which would make premium varieties, such as Brent, WTI and Light Sweet, all good value for longer-perspective investors at their present prices of $86.20, $84.28 and $84.25, respectively.
What about Washington?
The American Petroleum Institute noted that US crude oil stockpiles swelled by about 12.9 million barrels this week, which was much higher than the 500,000 barrel increase predicted by a poll of Reuters analysts. This has helped to ease some of the spiking effects brought about by the troubles in Israel and production cuts elsewhere. But, in addition to being a significant oil and gas producer in its own right, as the world’s leading superpower, the US has major influence on the energy market beyond simple supply and demand flows.
When looking to the long term, its environmental policy is liable to have an immeSPAM BANble global impact on demand for fossil fuels. As we head into the 2024 US Presidential Election, we find ourselves at a policy crossroads. Incumbent Joe Biden is very much committed to the net-zero agenda, while his major rival, Donald Trump, is much more laissez-faire in terms of environmental concerns.
Trump infamously took the US out of the UN Paris climate agreement and is now pledging to remove clean water and air pollution protections while fast-tracking environmental reviews of dozens of major energy and infrastructure projects, such as drilling and fuel pipelines. Biden, on the other hand, made his first acts in office back in 2021 to rejoin the Paris climate agreement and revoke permits for the Keystone Pipeline. Since then, he has invested billions in green infrastructure and renewable energy and set a goal for the US to be net zero by 2050. Clearly, then, oil’s fortunes from 2024-2028 will depend largely on who wins the presidential election, and investors would do well to watch the polls closely ahead of any major position changes.
Trade oil and more CFDs with Libertex
As a CFD broker with many years of experience connecting ordinary retail traders and investors with the financial markets, Libertex is a name you can rely on for competitive terms and conditions. Libertex’s CFD model allows you to trade long or short with no need to own the physical underlying instrument.
Libertex offers CFDs from a wide range of asset classes such as stocks, commodities, forex, crypto and, of course, oil and gas. Our platform allows you to open long or short positions in crude oil CFDs like Brent, WTI, and Light Sweet, as well as the US flagship natural gas fund, the Henry Hub. And best of all, you can keep your entire diverse portfolio in one place: the multi-award-winning Libertex trading app (https://libertex.com/).
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
-
+
-
Crypto surges once more as ETF finish line comes into sight
As any cryptocurrency investor or trader will tell you, it's been somewhat of a rollercoaster ride for Bitcoin and other digital currencies over the past couple of years. After a prolific rise, the bubble burst in late 2021. From a high of $64,400, Bitcoin crashed hard to a lowly $15,760 by November 2022. After the latest in a series of huge boom-bust cycles, it was understandable that many were wary to call a new bull market in digital assets, but since Bitcoin reached gains of over 100% in less than 12 months this Monday (23/10), sceptics everywhere finally began to believe that the crypto thaw was underway. Then, in the space of just a day, the original cryptocurrency shot up a full 10%, enough to melt the heart of even the biggest naysayer.
And although prices have corrected slightly since then, this week has truly been a watershed moment. Typically amongst some of the most conservative crypto investors, institutions recorded a fourth consecutive week of net inflows, with the latest figures putting their total weekly cash invested at $66 million. As usual, the factors behind the decisive market movement are varied and numerous, but chief amongst them right now has to be the imminent approval of spot Bitcoin ETFs by the US Securities and Exchange Commission and coming shifts in the regulatory framework at large. As we head into Q4, crypto traders and investors are understandably keen to see where the market is headed. In this piece, we'll look at these two factors and try to draw conclusions for the rest of the year and beyond.
X marks the spot
After much discussion and delay, it appears that the long-awaited arrival of spot Bitcoin ETFs will soon be upon us. Indeed, it transpired this week that Blackrock had listed its prospective product on the Depository Trust and Clearing Corporation database under the ticker $IBTC. But Blackrock is by far from the only horse in the race, with similar applications under review from Ark Invest, Invesco, and crypto fund trailblazer Grayscale, whose trust model has its downsides that full security status would mitigate.
After kicking the can down the road as long as is legally possible, the end of the SEC's 240-day review period is fast approaching. The most likely scenario, according to Volatility Shares Chief Investment Officer Stuart Barton, is that multiple products will be approved all at the same time so as to avoid giving one provider any undue advantage over its competitors. And while nothing is yet set in stone, the landmark overturning of the SEC's original ruling to deny Grayscale its spot ETF by a three-judge panel for the DC Court of Appeals in August has been taken by many market participants as a sign of a key sea change.
This dynamic, coupled with the institutional investment surge already noted, looks as if Bitcoin could be headed for a new bull market in the weeks and months ahead. As Woo Network's Jack Tan wrote in a recent note, "Bitcoin is in an 'anti-gravity' phase and could hit $75,000 in the coming months," going on to add that "the sudden spike is just a preview of what will happen if ETFs actually get approved."
Regulators gonna regulate
For many years, the cryptocurrency market was able to avoid regulation as a kind of outcrop of the financial markets populated exclusively by tech aficionados and early adopters. However, starting with the initial big boom of 2017 and intensifying with each subsequent bull cycle, digital currencies (Bitcoin especially) have garnered more and more attention from regulators the world over. The problem remains the lack of harmonisation globally, with huge variations in the way cryptocurrencies are treated.
For instance, in places like Switzerland and Singapore, crypto innovation is actively encouraged, and there is a clear legal framework for investors and businesses to operate within. Meanwhile, we also have countries like China that have cracked down on cryptocurrency activity, outlawing ICOs and cryptocurrency exchanges altogether. Even within the US, the lack of an unequivocal federal line means that there is huge legal variation between individual states. The SEC, however, cannot seem to reach a consensus on whether tokens and coins can be considered securities and has changed its positions several times since the 2017 DAO report was released.
Beyond security status, investors and traders are most interested in taxation and it appears that nationwide clarity is finally coming to the US on this particular matter. The IRS has finally released guidelines on how to calculate and report bitcoin gains and losses, and people must now declare their cryptocurrency holdings and transactions on their annual returns. Exchanges are also being required to implement strict KYC and AML checks on their depositors, and it is hoped that once both the tax and legal compliance issues are ironed out, even more institutions and funds will get on board with BTC, which will most likely result in further gains.
Trade Bitcoin and more with Libertex
Libertex (https://libertex.com/) has vast experience bringing the financial markets to ordinary traders and investors. As a regulated CFD broker, Libertex offers a wide variety of CFD underlying assets spanning a range of asset classes, including stocks, ETFs and commodities, through to forex, options and, of course, cryptocurrencies. Libertex provides its clients with the opportunity to trade both on long or short CFD positions with optional leverage, all without the need to physically own any of the underlying assets. Its cryptocurrency offering naturally includes CFDs tracking the major physical coins, such as Bitcoin (BTC) and Ethereum (ETH). However, it also offers CFDs in crypto-related underlying assets such as the Grayscale Bitcoin Trust and Bitcoin/USD futures. Libertex has over 120 different digital assets available to trade as CFDs with industry-leading terms and spreads.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.1% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.