How to Manage Risk in Your Forex Trading Account

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Forex Money Management Defined

It is universally accepted that Forex money management is a set of processes that a Forex trader will use to manage the risk in their Forex trading account.

Successful Forex traders tend to accept the adage, “If I’m right on the entry, the upside will take care of itself. If I’m wrong, the downside or losses can be unforgiving.”

The underlying principle of Forex money management, or for that matter, any speculative investment, is to preserve trading capital. This doesn’t mean you won’t have any losing trades because that is impossible. The objective of Forex money management is to minimize trading losses so that they are “manageable”. That means keep your losses small and try to manage a winning trade to get the most profit out of the move.

Essentially a successful Forex trader doesn’t necessarily have more winning trades than losing trades, but rather the dollar amount of his winning traders are consistently bigger than the dollar amount of his losing trades.

The concept of money management is often used interchangeably with the term risk management. However, they are not the same. Risk management is about preparing for and managing all identifiable risks – that can include things as arbitrary as having a backup quote service or charting program. Money management, on the other hand, relates entirely on how to use your capital to grow your trading account balance without putting it in a position to risk it all.

How to Best Avoid Losing Money when Trading Forex Markets

The implementation of a Forex money management plan may be the best way to try to avoid losing money in the Forex market. No trading system is perfect nor are humans, or even robot traders. They all have similar traits (good or bad), but collectively, they do share common mistakes. These common mistakes are the ones that successful traders strive to avoid.

Successful Forex traders tend to think of trading as a business. In that business, there will be profitable trades and overall profitable days, but there will also be losses. Once again, if you want to stay in business then your profits are going to have to be greater than your losses. And once again, we are not saying that you can’t have any losses.

It is important to say at this time that yes, you can lose all your money in any investment where your funds are put at risk. So it is your job as trader/business owner to minimize the chance of that happening.

There are ways to fine tune a trading strategy i.e. optimal entry and/or optimal exit, tighter, well placed stop losses or identifying better profit objectives, with the goal to win more and lose less.

But that is not usually the main reason traders lose money in the Forex markets. The main reason tends to be having no specific money management rules to follow. Here is a list of the rules that top Forex money managers tend to follow.

Top Forex Money Management Rules to Follow

Define Your Risk Per Trade Using a Position-Sizing Model

The idea behind this rule is that a trader should risk only a small percentage of their trading capital on any one trade. Several books or papers on Forex trading preach the ‘2% rule” where a trader should risk 2% of their account on every trade.

This ‘Fixed Percentage Risk’ can actually be any amount you are comfortable with and can afford.

If your trading account has a $50,000 balance then 2% of that amount will be $1000 of risk per trade.

A $1000 risk per trade may be a huge amount to a trader with a balance of $5000 in his account. In this case, 2% risk will be $100 of risk per trade.

The reason you’ll want to risk a fixed percentage is because if the first trade is a loss then the next trade will carry a smaller amount of dollars at risk.

Taking a smaller amount of risk following a loss will allow you to ride out a losing streak longer than an individual who risks the same amount on every trade. This will buy you time and allow you to have a big enough balance to perhaps start a willing streak.

Know Your Maximum Drawdown Level

A drawdown is the difference in account value from the highest the account balance has been over a certain period and the account value after some losing trades. For example, if a trader begins with $5000 in his account and she loses $1000 then she has a 20% drawdown.

The larger the drawdown, the harder it is to become profitable.

Following a 20% drawdown, a trader would have to make 25% in the market just to get back to even. If your trading system has never shown that kind of return over a reasonable time period then your maximum drawdown rule will tell you to stop trading.

At that point, you can reevaluate your trading strategy. You can lower your fixed percentage of risk, but most of all you can relax and breathe again, allowing you to regroup and reload after you have learned from your mistakes.

Assign a Risk/Reward Ratio to Every Trade

The generally accepted rule in the trading industry is that traders should aim to have winning trades that are on average twice as big as losing trades. With this risk:reward ratio, the trader need win only a third of their trades to breakeven.

The mathematics behind this rule says if a trader choses a risk/reward ratio of 1:1, then the trader must win a higher number of trades (at least 6 out of 10) trades to be profitable. If the trader chooses a risk/reward ratio of 3:1, then they need to win fewer trades (1 in every 4 trades) to break even.

It should be noted that this rule works great on paper, but in reality a trader really has little control of the actual risk/reward he will achieve on a trade.

Furthermore, a trader may be able to control is losses through stops (provided there is no slippage), but at the same time, a trader could cut his profits by not allowing a winning trade to end naturally, for example, by hitting a trailing stop.

The best trading strategy tends to cut losses and let profits run. Over the long-run you’ll get the actual risk/reward ratio.

Essentially, a successful trader has larger average wins than average losses. The bigger the average win, the less a trader has to worry about having a high percentage of wins. For example, you can have 90% accuracy, but if you average loss is $50 per trade and your average win is $10 per trade then one average loss will wipe out 5 of your winning trades.

Use a Stop Loss and Set a Profit Objective

Using a stop loss locks in the maximum amount a trader can expect to lose in any one trade, while a profit objective order locks in the maximum amount the trader can profit.

Don’t just use dollar stops. Place a stop in a place where you are wrong on the trade.

Additionally, if your strategy has been tested for fixed profit levels then follow the rules. If your strategy calls for trailing stops to lock in profits then follow that strategy. Try to avoid mixing your exit strategies because it can skew the risk/reward ratio your trading system needs to be profitable over the long-run.

Remember, in order to be successful, you’ll need to have a few big winners to offset a series of small losses.

Only Trade with Risk Capital

Successful trading is only possible when a trader can make unemotional decisions about what to do when a trading opportunity presents itself.

If you are undercapitalized, you will trade scared. If you trade scared then you will cut corners which could be trading without a stop, taking profits too soon, doubling down on a losing trade or putting yourself in a position too big to handle. If you do any of those things then you limit your chances of success.

Only trade with money you can afford to lose.

Investing vs Speculating – What’s the Difference

Sometimes, it’s easy to tell the difference between investing and speculating. Consider two people who prefer different approaches: one prefers a “buy and hold” approach (when financial instruments are bought and held for a long time without selling), while the other prefers scalping (when positions are opened and closed in seconds).

In other cases, the difference is more subtle. Is a person who holds a position for eight months and then sells it investing or speculating? Let’s look at key factors that separate investment from speculation.

Time Horizon

Time horizon is probably the most visible factor that distinguishes investing from speculation.

Investing is always associated with longer timeframes and involves putting money to work for years and even decades. An investment is a bet on the fundamental appreciation of the asset’s value, something that cannot happen overnight. In addition, investments provide investors with a stream of income, such as stock dividends or bond coupon payments.

In turn, speculators bet on the appreciation (or depreciation) of the asset’s price which can happen within a short timeframe. Speculators prefer quick profits as they are always ready to put their money to work on other ideas. Typically, speculators do not pay attention to the potential income which could be generated by the instrument.

Leverage

In most cases, investors do not use leverage. Since investors are willing to endure the ups and downs of the market over several years, using leverage does not make sense as it makes the position vulnerable to downside moves, and incurs a cost.

Meanwhile, speculators use leverage as it provides them with an opportunity to boost their potential profits. Speculators incur a cost when they use leverage, but the costs are usually insignificant since positions are often closed within days or weeks or, in the case of day trading, within just one trading session.

Potential Returns

Investors and speculators would both argue that their preferred method of making money is the most effective.

In general, speculation offers traders the opportunity to gain significant profits in the near term. In the past, traders’ performance often suffered because of significant commissions which accompanied active trading. Currently, commissions are minimal (sometimes, trading is commission-free), so market conditions have significantly improved for active traders.

Investing does not promise quick profits, but the results of an investor may look great in the long run if the investor’s performance is consistent and income is reinvested.

Put simply, speculation is a tool to “make money now”, while investing is used to “make money in the future”. It should be noted that both methods require sufficient knowledge and discipline.

Risk Levels

Speculation usually carries a higher risk level. There are several reasons for this. First, speculative trades typically involve leverage which increases risk. Second, speculation is focused on shorter timeframes where market behavior is more dependent on random factors.

For example, a sudden market-wide sell-off caused by news that is unrelated to the instrument may cause a temporary panic and push a trader out of a speculative position. Meanwhile, an investor will keep this position and enjoy future upside when the instrument gets back to fundamentally justified levels.

Fortunately, risks can be managed, and the level of risk ultimately depends on the skill of the trader or investor rather than on outside forces.

How Decisions Are Made

Investors typically make their decisions based on fundamental analysis. Some investors use technical analysis to find better entry points, but technical analysis does not serve as the basis for an investor’s decision. In the long run, fundamental factors are crucial, while technical factors are more important in the short run. As investors enter long-term positions, they must make their decisions based on fundamentals.

Not surprisingly, technical analysis is the main tool for speculators who deal with shorter timeframes. Although some traders consider fundamental factors, many speculative traders base their decisions solely on price action and general market conditions.

The Key Mistake To Avoid

After we have discussed the five most important factors that distinguish investing from speculation, we should discuss the biggest mistake made by both investors and speculators so that we can avoid it.

Here’s a simple rule: use only one method for both entry and exit. Sounds simple? It does, but many people break this rule, and their performance suffers.

Let’s look at a common example. The trader enters a long position based on technical factors, but the trade does not go as expected. Rather than closing the position, taking a small loss and moving on, the trader tells himself that he is now “an investor” and holds this position for days or even weeks. The luck may be on his side, but he may also become a “bag holder” – a poor investor watching his position decline in a long-term downside trend.

This mistake also affects investors. Some investors are tempted to take quick profits when an instrument’s price rises, essentially becoming speculators. The price of an instrument continues to rise over time if the original fundamental thesis was correct, and the unfortunate investor misses most of the price appreciation and income generated by the instrument.

Fortunately, this mistake is very easy to avoid. If you have entered a position based on the fundamental analysis, you should exit it when fundamentals change. In this case, technical analysis could be used as an auxiliary tool, but it should not guide your decisions. Do not let market action distract you and focus on fundamentals.

Likewise, if you have entered a position based on technical factors, you should also exit the position based on these factors. Regardless of whether the instrument is “overvalued” or “undervalued,” it may become even more “overvalued” or “undervalued” in the near future as markets may easily ignore fundamentals in the near term. Focus on your trading strategy and ignore the noise.

This article is brought to you by Forex4you.

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.

Introduction to the Major Fundamental Influences on Forex Prices

When most individuals think of trading, they think of stocks and futures. This is probably because of the long-term history of these investment vehicles. Some may even think of cryptocurrencies because of their huge popularity with a younger generation of investors.

What they may not realize, however, that in terms of market value, there is one asset class that dwarfs them all and, in fact, some may not have even realized that they’ve already speculated in it when they’ve traveled internationally or bought something from a foreign country.

This huge investment class is the foreign exchange market, also known as FOREX. In the FOREX market, an estimated $6 trillion is traded on a daily basis. To put this in perspective, the U.S. stock market trades around $257 billion a day; quite a large sum, but only a fraction of what FOREX trades.

For a novice trader, there is a lot to learn about trading in the foreign exchange market because it lacks the familiarity of stocks like Apple, IBM and Google, as well as the glamor of gold and silver futures.

Before even attempting to trade or invest in the FOREX market, individuals have to become aware of the macro-economic and geo-political factors that help drive the price action in this trading vehicle.

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What is FOREX?

Simply stated, the word FOREX is derived by combining parts of foreign currency and exchange. It is also referred to as FX trading.

Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, finance or tourism. FOREX markets tend to be the largest and most liquid asset markets in the world.

Briefly, Forex markets exist as spot (cash) markets as well as derivatives markets, offering forwards, futures, options, and currency swaps.

Market participants use Forex to hedge against international currency and interest rate risk, to speculate on geopolitical events, and to diversify portfolios, among other reasons.

What is a FOREX Pair?

In foreign exchange, currencies trade against each other as exchange rate pairs. For example, EUR/USD is a currency pair for trading the Euro against the U.S. Dollar.

A FOREX pair or currency pair is simply the quotation of the value of a given currency against another. The first is termed the base currency and is the currency being sold, while the second is known as the quote currency and is the currency being bought.

For example, the quotation EUR/USD = 1.0700 would mean 1 Euro is exchanged for $US1.07.

What are the Factors Affecting Forex Pairs?

If you desire to become a successful FOREX trader then you have to develop an understanding of the fundamentals that drive the price action. This is the information that will help you to establish an informed hypothesis about whether a particular FOREX pair is being fairly valued at present and what potential upsides or downsides might be from current price levels.

These include: central bank policy, interest rates, inflation, economic growth, trade data, and political/government factors.

How Does Central Bank Policy Influence FOREX Prices?

The major central banks influence Forex prices by controlling open market operations and interest rate policies. They are responsible for fixing the price of its domestic currency on Forex.

Any action taken by a central bank in the FOREX market is done to stabilize or increase the competitiveness of that country’s economy. A central bank may weaken its own currency by creating additional supply during periods of long deflationary trends, which is then used to purchase foreign currency. This effectively weakens the domestic currency, making exports more competitive in the global market.

Central banks use these strategies to calm inflation. Their doing so also serves as a long-term indicator for FOREX traders.

How Do Interest Rates Influence FOREX Prices?

Interest rates have a significant influence on currency movements. So much so that a currency pair will often spike up or down following a central bank announcement.

The main reason for the volatility is the so-called carry trade, where investors borrow at lower interest rates in one currency and invest at higher interest rates in another.

Basically, investors tend to chase yields so when a central bank raises rates, it tends to make that country’s currency a more attractive investment.

How Does Inflation Influence FOREX Prices?

Central banks raise and lower interest rates to control inflation. Therefore, movement in the inflation rate can impact currency prices. For example, if a country’s central bank believes inflation is rising too quickly, it may raise interest rates to lift the cost of borrowing and to take money out of the system. This action is designed to slow the economy.

For this reason, the national consumer price index (CPI) is one of the most closely watched pieces of information for FOREX traders.

How Does Economic Growth Influence FOREX Prices?

Economic growth is tied directly to the inflation rate, which relates to interest rates. When a country’s economy is growing quickly as measured by the Gross Domestic Product (GDP), for example, the rate of inflation will typically start to rise. This usually means the central bank will need to lift interest rates to slow the rate of growth.

This is why the currency of a country showing strong economic growth will often appreciate against those of other countries showing slow or negative growth.

How Does Trade Data Influence FOREX Prices?

Balance of Trade data, which is based on the relationship between a country’s imports and exports, also has an impact on the direction of a currency’s prices. Trade figures can also be seen by some as a sign of the strength of the economy, which in turn has implications for inflation and interest rates, and therefore the domestic currency.

If a country is exporting more goods than it imports, for example, it increases demand for its currency as the money used to pay for those exports ultimately needs to be converted into the domestic currency.

How Does Political/Government Factors Influence FOREX Prices?

Government policy can have profound implications on FOREX prices especially if it influences the inflation rate.

A government could decide to trim spending and pay down debt, which may end up causing the economy to slow.

Following the pandemic of 2020, many governments flooded their economies with fiscal stimulus. As this money trickled through the economy, it caused inflation which is fueling a response from central banks in the form of interest rate hikes.

In response, Forex markets have experienced heightened volatility as the major central banks race to stem runaway inflation by raising rates. Investors will become more attracted to the currency of the country that raises interest rates more aggressively.

Other Factors to Consider When Trading FOREX

Although fundamental data and daily news events play a major role in the price action of a currency, it is important to note that an estimated 90% of the daily FOREX volume is fueled by speculators (traders). So in addition to knowing the major fundamental influences on the long-term direction of currencies, traders will also need to learn about the technical factors that play a major role in the movement of currency prices.

Gold Technical Analysis – How Do Professionals Trade Gold?

Professional money managers use several technical, fundamental, and sentiment indicators to determine the future direction of gold prices. The Metal is both precious and industrial and is viewed as both a commodity and a currency. The yellow metal, as it is often referred to as, is generally quoted in US dollars and trades both as an exchange-traded instrument as well as over the counter.

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How Do Professionals Trade Gold?

Gold is considered a safe-haven asset that appreciates in value when investors are looking for an alternative to other currencies that are depreciating. When interest rates are declining around the world, the demand for a currency that will sustain its value provides a backdrop for rising gold prices. Gold is traded in the cash, futures, and forward markets.

Gold has a forward interest rate, like dollar rates or Euribor rates. This interest rate called the GOFO rate increases relative to the US dollar when gold demand rises. Officially, the Gold Forward Offer Rate, or GOFO, is the interest rate at which contributors are prepared to lend gold on a swap against US dollars, they can use gold as collateral and potentially pay a much smaller rate of interest to borrow the cash than otherwise.

Cash, futures, and forward traders will evaluate three dimensions that provide them with a view of the gold market. These include the technicals, the fundamental backdrop, and sentiment.

Technical Analysis of the Gold Market

Professional gold investors attempt to analyze the long-term trend in gold prices by evaluating a weekly chart. Gold prices trend and trade sideways like other capital market instruments. By using different tools you can determine if the price is likely to trend or remain in a range.

Weekly continuous gold futures prices in August 2021are trading sideways to lower based on its position relative to the 50 and 10 Weekly Moving Averages.

Momentum is confirming this assessment as the MACD (moving average convergence divergence) index is generating a crossover sell signal, while the relatively tight distance between the moving averages suggest nearly flat momentum. The indicator is also suggesting momentum may be getting ready to accelerate.

The MACD is a very useful momentum index that uses moving average to generate a crossover signal that describes when positive as well as negative momentum is accelerating.

Weekly Continuous Gold MACD
Weekly Continuous Gold MACD

Momentum is Important

An often used momentum indicator is the Relative Strength Index (RSI). This momentum oscillator describes whether prices are accelerating relative to the last 14-periods.

After peaking during the week-ending August 7, 2020, the RSI has been trending lower. With a reading of 70 the high threshold and a reading of 30 the low threshold, the current reading of 47.56 indicates nearly flat momentum with a slight bias to the downside. Bullish gold traders are now waiting for the market to cross over to the strong side of the 50 level. This will give them an early jump on a shift in momentum to higher.

The key to using the RSI is to look at prior highs to determine how far momentum has accelerated in the past. The weekly RSI has hit levels of 82, 77 and 75 in the past, which means that positive momentum can still accelerate over the upper threshold at 70 as gold prices break out.

Weekly Continuous Gold RSI

Gold Market Sentiment

There are several ways to determine market sentiment within the gold market. One of the best indicators is using the Commitment of Trader’s report released by the Commodity Futures Trading Commission (CFTC). This report helps traders understand market dynamics.

The COT reports show position data that is reported by category. This information is reported to the CFTC by brokers and clearing members. While the actual reason that a trader has a position is not reported, experts make certain assumptions that provide information about those positions.

Gold Committment of Traders

Positions are reported by category. For gold futures and options, the categories include swap dealers, managed money, and other reportables. Swap dealers include banks and investment banks as well as industry-specific merchandisers. Managed money includes hedge funds, pensions funds, and mutual funds. Other reportables is retail trade.

The CFTC staff does not know specific reasons for specific positions and hence this information does not factor in determining trader classifications. For example, the CFTC does not know if a swap dealer is taking a speculative position or hedging risk. What experts need to evaluate is why positions are increasing or decreasing.

Gold Committment of Traders Small and Large Speculators

Professional traders generally assume that all the swap dealer positions reflect hedges from deals transacted with gold producers and refiners. Those positions are offset with speculative positions taken by managed money.

Managed money takes positions that provide you with information about sentiment. There are two concepts that you need to evaluate. The first is a trend in place. If the COT information shows that managed money or large specs are increasing their long positions, sentiment toward gold is increasing. If they are increasing their short positions, then the negative sentiment is increasing.

The second concept is whether the open long or short positions in managed money is overextended. If managed money is overextended, sentiment is too high and prices could snap back quickly.

Gold Fundamentals

The two most important gold fundamental indicators are the direction of US Treasury yields and whether the US dollar is likely to rise or fall.

Higher Treasury yields or interest rates raise the opportunity cost of holding non-interest-bearing gold. In another way to look at it, since gold doesn’t pay interest or a dividend to hold it, rising or high interest rates make gold a less attractive investment. When interest rates fell to near zero as they did in 2020 – 2021, gold became a more desired asset.

Since gold is priced in US dollars, when the dollar rises, it makes gold more expensive to holders of foreign currencies. This means gold prices need to fall to accommodate the higher cost of purchasing it in dollars. The reverse is true when the dollar declines.

A third fundamental factor to watch is consumer inflation. Gold is viewed as a hedge against inflation, which can be caused by massive stimulus measures. When inflation is on the rise, gold prices will offset increases in a basket of goods or services.

Summary

Gold prices fluctuate weekly, and over the long term either trade within a trend or consolidate. There are several technical indicators, such as the MACD, RSI, and Moving averages that can help you determine the future direction of gold prices.

In addition, professional traders use a combination of technical analysis, sentiment analysis, and fundamental analysis to determine the future price of gold.

Sentiment analysis can include the Commitment of Traders report released weekly by the CFTC.

Additionally, professional investors will track the direction of Treasury yields and the value of the US dollar, which are the driving forces behind the value of gold.

5 Investment Tips for Forex Market Investors

Forex trading is a complex but fascinating field. Forex traders have tremendous opportunities to make money, but they also need to constantly improve their skills. In this article, we’ll discuss how you can enhance your trading results.

Consistency is the Key to Successful Trading

If you want to be successful as a trader, you must have a trading strategy and a proper trading plan for each trade you make. Once you choose your trading strategy, you should stick with it for a while to see whether it produces positive results in the current market environment.

Many traders, especially beginners, fail to appreciate the importance of consistency in trading. They quickly switch between trading strategies if some trades go in the wrong direction.

This is a major mistake as trading is a probability game. To be profitable, you do not have to be right about the market direction every time. Instead, you need a trading strategy with a decent risk/reward and win/loss ratios.

Any strategy that you choose should be tested with a sufficient number of trades to see if it works well in the current market environment. This is very important since trading strategies need time to show their true performance.

For example, if your strategy has a 60% win/loss ratio, you may easily start with three losing trades in a row. You need to make more trades to see its potential. The more trades you make, the more confidence you’ll have in the expected results of your strategy. If you switch to another trading strategy right after a disappointing start, you’ll never know the true potential of your trading strategy.

Choose Your Risk Levels Wisely

You need to make a certain number of trades to test any trading strategy. Therefore, you must limit risk in each trade you make in order to provide yourself with an opportunity to test various trading strategies.

The math is simple. If you risk just 1% of your account in every trade, you’ll have to make 100 losing trades in a row to run out of money. This is an extremely unlikely scenario.

Do not be greedy during the testing phase. Choose modest risk levels for every trade, test various strategies without stress and concentrate on execution of every trade. Once you have established what works best for you in the current market environment, you’ll be able to increase your risk level if you wish so.

Analyze Your Trades

Profitable trading requires analyzing trades on a regular basis. Proper analysis provides you with an opportunity to learn what works in the current market environment – and, even more importantly, what does not work.

To get the best out of your analysis, you’ll have to follow a certain strategy (as noted above, consistency is the key to success in trading). If you make trades based on your “gut feeling” rather than a well-defined strategy, there’ll be nothing to analyze – your results would be random.

Meanwhile, following a strategy will equip you with information that will improve your trading performance.

Start by looking at whether all your trades met the conditions of your strategy. Even experienced traders sometimes fail to make trades according to their strategy. Reasons for such failures may be emotional (markets are always exciting) or technical (for example, some patterns look similar). Eliminating unnecessary trades should boost your performance so do not take this issue lightly.

Once you have established which trades were made according to your preferred strategy, you can analyze its performance. This analysis will show whether your strategy works in the current market environment, as well as expected win/loss and risk/reward ratios. If you are satisfied with the results, keep using your current strategy and focus on execution. If results fail to meet your expectations, you can tweak your existing strategy or try a new one.

If you choose to tweak your existing strategy, make sure to proceed with just one change at a time so that you can evaluate the impact of this change on the performance of your strategy. If you make several changes and something goes wrong, you will not be able to learn what hurts your performance.

Focus on a Limited Number of Instruments, then Expand your Watchlist

Forex markets offer multiple trading opportunities every day, but it is not easy to track them all if you have just started trading.

Thus, you should start by tracking a limited number of instruments so that you do not miss entry and exit points according to your strategy.

Once you have tested your strategy on several instruments, you can add more pairs to your watchlist and evaluate whether your strategy works with them.

Eventually, you will have a set of various strategies to choose from, and you’ll learn what works best for every pair you trade.

Having several strategies is very important for a trader’s success in the long term as markets always change. Let’s discuss how to deal with this challenge.

Be Prepared for the Inevitable Change

Change is the only constant thing in markets and – this is why you often hear that past performance does not guarantee future results.

What works well today may not work tomorrow, and a strategy that brings disastrous results in the current market environment may turn into a real gold mine in the future.

Fortunately, you can prepare for the inevitable change. Analyze your trades and closely track the results of your current trading strategy. Pay attention to the efficiency of your strategy – if you see that its performance is declining over time, then it’s time to act.

Do not wait until your current trading strategy stops being profitable. Instead, start testing another strategy on a limited basis once you see that the performance of your current strategy is declining.

By the time your previous strategy stops bringing profits, you’ll be ready to use a new strategy that works better in the current market environment. Be prepared, and you’ll successfully navigate through all market changes and profit from them!

This article is brought to you by Forex4you.

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.

Cryptocurrency vs Forex Market – Similarities and Differences

Over the past few years, cryptocurrencies have become mainstream, and many traders wonder whether they should focus on crypto markets instead of forex or try to have the best of both worlds. This article explains the similarities and differences between these two asset classes so that you can make an informed decision.

Similarities Between Crypto Markets and Forex Markets

To start trading, you’ll need a trading account and a modern electronic device with a stable internet connection. You can easily learn the basics of crypto trading if you have experience with trading forex and vice versa. Charts are widely available and execution is fast, so that you can concentrate on your trading.

Like forex markets, crypto markets are driven by the supply-demand balance. The price moves higher when there are more buyers than sellers and drops when sellers overwhelm buyers. Thus, you’ll be able to use familiar indicators and chart patterns when trading crypto.

Differences Between Crypto Markets and Forex Markets

While crypto trading looks very similar to forex trading on the screen, there are many differences that will be discussed below.

Number Of Available Instruments

Inforex, traders typically concentrate on main currency pairs (EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, NZD/USD). Some traders prefer to work with exotic currency pairs, which include a major currency and a currency of a developing economy like South Africa or Mexico.

Currently, there are more than 11,000 different cryptocurrencies, and the number keeps growing. Some of them are actively traded, like Bitcoin or Ethereum, but many cryptos are only known to hard-core crypto enthusiasts.

There are many instruments to choose from in crypto markets, whereas forex markets can occasionally experience periods of calm trading for days or even weeks.

It is impossible to track all cryptocurrencies, so traders will have to choose a finite number of coins to track. Thus, traders will still be working with a limited watchlist.

Liquidity

Forex is an extremely liquid market, and forex trading volume exceeded $6.6 trillion in 2019. Regardless of your position size, you will be able to easily buy or sell your chosen instrument without material slippage. This is a big advantage as you will always be able to get out of the trade at a price that is equal or very close to the price that you see on the screen.

This is not true for most cryptocurrencies. The total crypto market cap is less than $2 trillion, and more than 45% of this market cap is taken by Bitcoin. For most cryptocurrencies, trading is not nearly as active as in Bitcoin, so traders may have some trouble getting out of the trade at a desired price.

Huge Difference Between Coins

Due to the enormous number of available cryptocurrencies, there is a huge difference between various coins. Anyone who is willing to trade lesser-known cryptocurrencies will have to dive deep into their fundamentals.

As noted above, there is no way to track all opportunities in crypto markets, so traders will have to focus on coins that they understand well. This makes the size of their trading watchlist similar to the size of a typical watchlist for forex traders.

Volatility

Cryptocurrencies are very volatile while forex markets are more stable. The world’s leading cryptocurrency, Bitcoin, started this year at $29,000 and moved up towards the $65,000 level before pulling back to $30,000 and rebounding towards $45,000. Smaller cryptocurrencies can make huge moves within short time frames.

Such moves are rare in forex markets and mostly occur in exotic pairs. In this light, it is easier to control risk on forex, but the profit potential is bigger in crypto markets.

Profit Potential

Crypto markets gained popularity as they offer opportunities to make outsized profits. In trading, risk increases together with profit potential, so traders should be prepared to take bigger risks when trading cryptocurrencies. In fact, the value of many coins may ultimately drift to zero if the projects do not work well or capital flows into more established coins, which is the norm for more advanced stages of developing markets.

It should be noted that traders can always increase their potential in forex trading by using leverage. Leverage is a double-edged sword, so risks also increase, but traders can manage risks by choosing the appropriate amount of leverage for their trades.

Market Hours

Crypto market is open 24/7 while the forex market is open 24/5. This is a huge difference from a lifestyle point of view. Forex traders can switch off their screens and enjoy their weekends. Crypto traders should always be in touch with markets as cryptocurrencies often make big moves on weekends.

While both markets are open 24 hours, forex market activity follows a regular pattern as forex trading is driven by big institutions. The situation is different in crypto markets as bigger institutions have only recently started to increase their activity, and many coins are driven by individual traders or small crypto investing firms.

Security

Crypto markets are still in their early development stages, and appropriate regulations are currently developed in various countries. Crypto traders have to deal with counterparty risks (scams occur, which is natural for booming markets) and hacking risks. Just recently, hackers have stolen $600 million in Poly Network (oddly, they have returned about half of the stolen assets at the time of writing this article).

In contrast, the forex market is heavily regulated, so forex traders face fewer risks. Forex traders should still check the history of their broker and the appropriate regulations in the country where the broker is registered. As the forex trading industry is well-developed, scams have been mostly eliminated.

Choosing between Crypto Trading and Forex Trading

Traders should check their financial goals, available capital, trading style, and lifestyle demands when choosing between crypto and forex markets.

The best way to make an informed choice is to try both crypto trading and forex trading with small accounts. After a few months, you’ll see which market suits your needs.

Don’t forget, you aren’t required to choose between crypto trading and forex trading, which means you can take advantage of the opportunities available on both markets.

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.

This article is brought to you by Forex4you

Analysis Methods – Fundamental, Technical and Sentiment Analysis

Technical analysis is the study of trading activity through the use of patterns, trends, price movement, and volume. Fundamental analysis is the study of price movement to determine the value of an asset. Sentimental analysis is feeling the tone of the market through the study of crowd psychology.

Each of these methods of looking at an asset’s value has its merits and no one of them is complete on its own. Still, with some types of trading, you will want to rely more heavily on one type of analysis than another in order to better control the risk.

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Analysis Tools Defined

Technical analysis differs from fundamental and sentimental analysis in that it only takes into account the price and volume of an asset.

The core assumption is that all known fundamentals are factored into price; thus, they become irrelevant and there is no need to pay close attention to them.

The technical trader is not attempting to measure the asset’s intrinsic value, but rather trying to use technical analysis tools like chart patterns, oscillators and trends to determine what an asset will do in the future.

Fundamental analysis relies on macro-and micro-economic factors to determine the long-term and short-term value of an asset. Fundamental analysis looks at the factors that cannot be measured in a price chart. Some of these factors include supply/demand, economic strength, and economic growth.

Sentimental analysis has often been described as “reading the news”. However, it is probably closer to “reading the price action”. This is because something reading the headlines can fool a trader. Therefore, sentimental analysis works better over the short run with technical analysis, but over the long run, fundamental analysis will likely override any short-term sentimental biases.

Trading with sentimental analysis alone can be effective, but you need to be patient when you utilize this method. News does not happen every day for every asset. If you specialize in currencies, for example, you might only be making a couple of trades per week.

How and When to Use the Three Analysis Tools

Every trader will have a slightly different way of analyzing their assets of choice, and this is okay.

Some traders refer to themselves as pure technical traders and choose to ignore the fundamentals completely. They rely on statistical confidence in trading signals and assume the fundamentals have been priced into their analysis.

Fundamental traders tend to develop a bias in a market based on the macro-economic or long-term fundamentals then make adjustments to the microeconomic or short-term fundamental news.

Sentimental traders tend to react to the headlines and trade the momentum based on the news. This implies that a sentimental trader leans toward the technical side since momentum refers to price action.

A sentimental trader is linked to the fundamental side of the equation because the best momentum-generating headline is often caused by a surprise in the news. In order to be surprised by the news, one has to know the fundamental expectations ahead of a report, for example.

Summary

There is no one way to trade that is better than another. However, when measuring trading risk, technical analysis is probably the best tool to use. Furthermore, when building a trading system, technical analysis is probably best because of the plethora of statistical tools available to back-test trading theories.

It’s difficult to measure the success of fundamental analysis over the short run because it takes a long-time for a major fundamental event to develop. Think about how difficult it is to trade central bank activity over the short run. Then think about how much easier it is once a central bank decides to loosen or tighten policy.

Sentimental analysis is primarily used by the trader who likes action. The sentimental trader often has an indication of what the fundamental report is expected to show then reacts to whether the report is above or below expectations. Furthermore, the trader likely takes a peek at the chart to determine the momentum of the price action. In this case, it’s safe to say the sentimental analysis trader is more likely to use a blend of technical and fundamental analysis.

Many people thrive on short-term trades, but just as many need to trade longer-term in order to be successful. A well-rounded approach will utilize both time frames and will also use all three types of analysis.

You’ve probably heard the popular phrase about how you shouldn’t keep all of your eggs in one basket. This is a fancy way of saying you shouldn’t rely solely on one method for success. This suggests that trading a blend of technical, fundamental, and sentiment analysis may be the best approach with more control over risk.

Trading is a high-risk activity any way you look at it and you will want to reduce that risk for long-term success. A little bit of short-term trading plus a little bit of long-term trading will be your best choice for sustained results. Just like blending a little technical analysis with a little fundamental analysis.

Meanwhile, if you like trading the action then sentimental trading is probably the best, provided you use technical chart points to control the risk.

Interest Rates and Their Importance

In simple terms, an interest rate is the percentage of principal charged by the lender for the use of its money. The principal is the amount of money loaned.

Interest rates affect the cost of loans. As a result, they can speed up or slow down the economy. The Federal Reserve manages interest rates to achieve ideal economic growth.

Banks and other institutions charge interest rates so they can run a profitable business. They borrow money at a lower rate than the rate that they charge. This generates a profit.

Credit card companies charge interest on the goods and services that you purchase. Mortgage companies charge interest on the money borrowed to buy a house.

Banks and the U.S. Treasury also pay interest to investors who put money into savings accounts, CDs, Treasury bills, notes and bonds. In these cases, the investors lends the money to the bank or Treasury.

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What is an Interest Rate?

An interest rate is either the cost of borrowing money or the reward for saving it. It is calculated as a percentage of the amount borrowed or saved. The interest rate on a loan is typically noted on an annual basis known as the annual percentage rate (APR).

Understanding APR

The annual percentage rate (APR) is the total cost of the loan. It includes interest rates plus other costs. The biggest cost is usually one-time fees, called “points.” The bank calculates them as a percentage point of the total loan. The APR also includes other charges such as broker fees and closing costs.

Both the interest rate and the APR describe loan costs. The interest rate will tell you what you pay each month. The APR tells you the total cost over the life of the loan.

Understanding Interest Rates

Interest is essentially a charge to the borrower for the use of an asset. Assets borrowed can include cash, consumer goods, vehicles, and property, according to Investopedia.

Home buyers borrow money from banks when they take out a mortgage. Other loans can be used for buying a car, an appliance, or paying for college.

Banks also become borrowers when an investor deposits money into a savings account. They pay the investor interest on the money deposited. They then use the deposited money to fund loans that they charge a higher rate to borrow. The difference between what a bank pays and what a bank receives is their profit.

How Interest Rates Work

When an individual borrows money from a bank, it applies the interest rate to the total unpaid portion of his loan or credit card balance, and he must pay at least the interest in each compounding period. If not, the outstanding debt will increase even though the individual is making payments.

Bank interest rates are very competitive, and their lending and savings rates aren’t the same. A bank will charge higher interest rates if it thinks the borrower is a credit risk. For that reason, it assigns a higher rate to revolving loans such as credit cards. The interest rate a bank pays a savings account holder is usually determined by market conditions usually set by the Federal Reserve.

Fixed Versus Variable Interest Rates

Lending institutions charge fixed rates or variable rates on their loans. Fixed rates remain the same throughout the life of the loan. At first, your payments consist mostly of interest rate payments. As time passes, the borrower pays a higher and higher percentage of the debt principal. An example of a fixed-rate loan is a conventional mortgage.

Variable rates change with the prime rate. This is the interest rate an institution charges to its best borrowers. The prime rate is based on the Fed funds rate. This is the interest rate the Fed charges to its best banking customers.

How Are Interest Rates Determined?

Interest rates are determined by the Federal Reserve, or the Fed funds rate, or by Treasury note yields, which are determined by the financial market conditions.

The Federal Reserve sets the Federal Funds rate as the benchmark for short-term interest rates. The Fed funds rate is what banks charge each other for overnight loans. The banks consider other banks their best customers.

Treasury note yields are determined by the financial market’s demand for U.S. Treasurys, which are sold at auction. Under certain economic conditions, demand for Treasurys will be high. When investors are willing to pay more for Treasurys, interest rates move lower. There are certain conditions like an economic recovery when interest rates increase, this drives down U.S. Treasurys.

Impact of High versus Low-Interest Rates

High interest rates have a negative effect on the economy because they make loans more expensive. When interest rates are high, few consumers and businesses can afford to borrow. This slows down economic growth. At the same time, it encourages people to save because they get paid more for their savings deposits. This takes money out of the economy and slows down growth.

Low-interest rates have the opposite effect on the economy. Low mortgage rates, for example, increases home buyer demand. This tends to drive up home prices. Savings rates fall and investors move money into assets that pay higher yields like the stock market. Basically, low rates increase liquidity that helps the economy expand.

Fed Tries to Hold Rates Steady

Consumers and investors often ask, “If low-interest rates provide so many benefits, why wouldn’t the Federal Reserve keep rates low all the time?”

It is generally accepted that the U.S. government, the Federal Reserve, some businesses and consumers prefer low-interest rates.

The U.S. government likes low interest rates because it borrows tremendous amounts of money to run the country. Capital intensive companies like technology firms prefer lower rates as well as consumers who want to buy houses, cars, appliances and clothes on credit. Banks, however, prefer higher rates because they tend to increase profits due to the high rates of interest they can charge on loans.

But low-interest rates can cause interest rate. If there is too much liquidity, then the demand outstrips supply and prices rise. Some inflation is good for the economy because it shows growth, but runaway inflation tends to be detrimental to the economy.

Investment Strategies for Extremely Volatile Markets

Volatile markets can be very challenging to navigate. At the same time, they offer great opportunities for outsized profits. In this article, we’ll discuss key things that will help you stay the right course during times of extreme volatility.

Always Stick to Your Plan

Trading always requires planning. A proper plan becomes even more important when markets are volatile since traders have to react quickly. It is important to stick to your original plan during big price swings, as they cause big emotions. Make sure that you are well-prepared before you make a trade. Once you have established a position, you may have little time to analyze the market’s movements, so you should just stick to your original plan. Changing plans “on the fly” often leads to poor results.

Adjust Your Position Size

Extreme volatility provides traders with a chance to win big. But, losses may also be significant if your trade goes the wrong way. In this light, it is important to limit your position size to successfully survive volatility and profit from the opportunities it provides. Some traders feel the urge to increase their position size when they feel that markets are ready for a big move. You should resist this temptation. If you see several opportunities, you’d be better off taking several positions of limited size rather than betting big on one trade.

Use Limit Orders

As the market situation changes fast, it is extremely important to get the correct price for every entry. Thus, you should only use limit orders. You can place such orders a bit above (or below, depending on the direction of your trade) the market to increase your chances to get into a trade at times of huge volatility, but you should not be too generous. A good price is a very important component of a successful trade. It is better to avoid getting into a trade altogether than to get into a trade at a price you weren’t expecting.

Use Wider Stop Loss Orders

When markets move fast, prices can easily breach key levels even if these levels are strong. Stop loss orders should be wider if you want to avoid being stopped out of a good trade – your trade need some room to “breathe” when the market is volatile. If you have adjusted the size of your position and stayed within the limits of your usual risks, wider stops will not cause problems.

Watch Your Leverage

Leverage is a two-edged sword. It helps you make more money in a winning trade, but it also bites hard when the trade goes in the wrong direction. Be conservative with leverage when markets are volatile. Volatility itself will provide you with a great opportunity to make money. Attempts to artificially increase potential profits by using excessive leverage may hurt your trading account if the market suddenly turns against you.

Focus on Short-Term Trades

Markets can move very fast in both directions at times of extreme volatility. Thus, traders should focus on short-term trades so that they can take their profits off the table before the direction of the instrument changes. Even traders who are comfortable with calm, positional trading will be better off taking at least some profits when their trade goes in the right direction in volatile markets.

Exit Your Positions in Parts

There is no magic indicator that will show you when the market is changing its direction if prices are changing very fast. You should exit your positions in parts to increase your chances of taking advantage of the instrument’s move. This tactic will also help you limit losses (or avoid them) if the trade went according to your original plan but then suddenly reversed course.Besides, it will be easier to sit through major swings if you have already taken some money off the table.

Breakthroughs Typically Work Well In Volatile Markets

Extreme volatility is a time when market moves are very strong. Thus, instruments easily breach levels and attract more speculative traders which is good for the continuation of the move. Going with the market’s momentum will work better in the majority of cases in this environment. False breakthroughs will also occur, but the percentage of false breakthroughs will be lower than at times of calm, range-bound markets.

Don’t Catch Falling Knives

As we have discussed above, momentum is a major factor in volatile markets. As they say, the trend is your friend, and this is especially true at times of volatility. While “bottom picking” may look attractive as it promises outsized profits, risks are often too big when markets are volatile. Furthermore, it is much more difficult to determine the potential bottom when prices are moving very fast in comparison with ordinary times.

Do Not Trust RSI And Similar Indicators When Markets Move Fast

By definition, volatility causes outsized moves. Thus, instruments will become overbought or oversold, but it means nothing in such an environment. Time and time again, you will see that an “overbought” instrument is rallying if momentum is strong, while the “oversold” instrument keeps dropping like a rock. Watch momentum and key levels and do not worry about indicators screaming “overbought”/”oversold”. Such indicators work much better in calmer markets.

Once A Major Level Was Breached, Minor Levels May Have Little Impact on Trading Dynamics

When markets are extremely volatile, you should focus on key technical levels. Minor levels, which may have served as material obstacles during calm times, will be ignored in most cases. That’s the nature of volatile markets. Price swings are big, and only major levels count.

Bottom Line

Stay calm and focused despite extreme volatility. Have a plan and stick to this plan. Do not be greedy – take smaller positions and use wider stops. Do not forget to take some profits off the table if your trade is going in the right direction. Follow momentum and don’t try to find the ultimate top or bottom. Extreme volatility is a time of opportunity – use this time wisely.

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.

This article is brought to you by Forex4you

What are Real Yields?

The concept of real interest rates or real yields hit the headlines last month, raising growth concerns for global investors. To everyday consumers, the phrase meant little, but to professional investors, it meant returns investors expect to earn after inflation.

Everyday consumers are conscious of interest rates. They know they are earning very little by putting their money in the bank. They are also aware of rising inflation, which has dominated the headlines for several months.

What they haven’t done is put together the concept of how little they really earn on their money in the bank when one strips out the inflation rate. That number is the real rate they are earning.

Investors didn’t pay much attention to the real yield when inflation was low in the sub-2% area. This is because the benchmark 10-year U.S. Treasury yield was trading in the essentially the same area. But since the start of the global economic recovery, yields have stayed near historical levels, while inflation has soared to multi-year highs. This has pushed real rates into negative territory.

Many consumers know the interest rate on their savings account, or the money they earn on their balance. However, they probably don’t know what their real interest rate is. This article will explain real interest rates.

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What is the Real Interest Rate?

Simply stated, a real interest rate is an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower and the real yield to the lender or to an investor.

In equation form, the real interest rate is simply equal to the nominal interest rate minus the actual or expected inflation rate.

To understand real interest rates, you have to first understand inflation. Inflation is a general, sustained upward movement in the prices of goods and services in an economy.

Inflation matters when making decisions related to interest rates on savings accounts and other financial assets. For example, when you have a savings account, interest is at work increasing the amount deposited, while inflation is at work reducing its value.

What is Your Real Rate of Return?

Knowing your real interest rate gives you an idea of what your investment is paying you after factoring in inflation. It also gives you a better idea of the rate at which their purchasing power increases or decreases.

Treasury bonds are fixed-rate U.S. government debt securities with a maturity range between 10 and 30 years.

Treasury Inflation-Protected Security (TIPS) is a Treasury bond that is indexed to an inflationary gauge to protect investors from the decline in the purchasing power of their money.

To estimate their real rate of return, an investor compares the difference between the current Treasury bond yield and the current Treasury Inflation-Protected Securities (TIPS) yield of the same maturity, which estimates inflation expectations in the economy.

What are Real Yields Telling Us about the State of the Economy and Investments?

Currently, the U.S. economy is in a low-yield, high-inflation environment and is likely to remain there until inflation starts to decline and the Federal Reserve begins to raise interest rates. Because of this, the yield on 10-year Treasury Inflation-Protected Securities (TIPS) is hovering near record lows.

In July 2021, yields on U.S. Treasuries eased after the auction of $16 billion in 10-year TIPS was bid at a record low of -1.016%.

Some analysts believe this means investors are pricing in higher inflation going forward. Other analysts believe this reflects concerns about slowing growth after a strong first half of the year. Still others are saying it’s just a function of mathematics and may not mean anything.

In other words, negative real yields are a function of the expected path of short-term interest rates set by the Fed compared with current and forecasted inflation. So there is no way that term real yields could be anything but negative in July 2021.

With yields this low, investors are throwing money at the stock market. This is driving up prices to unwarranted levels. Although stocks, for example, are overpriced using traditional indicators, investors don’t have a lot of choices if they want to beat inflation.

Negative real yields pose a big problem for pension funds and other long-term asset allocators that are also grappling with equity markets trading at high valuations.

One effect of deeply negative real yields is to buoy a range of other asset classes, as they make the returns they offer more attractive in comparison to bonds.

Real Yields Reflect the Future Investment Environment

Monitoring the direction of real yields offers investors a chance to gauge the state of the economy.

If real yields remain near record lows then this likely means investors believe elevated inflation levels are going to linger and the Fed is going to stand pat on policy. It could also indicate investor expectations of a weakening economy.

If real yields start to move higher then this will tell investors that the Fed may be getting ready to tighten policy by raising rates in the near future. It could also be an indicator of economic growth and lower inflation on the horizon.

Ethereum 2.0: What Is It and Why Is It So Important?

Ethereum began as a spark in the eye of co-founder Vitalik Buterin’s back in 2013. That’s when he released the whitepaper for the project, though the Ethereum network wouldn’t see the light of day until 2015.

In between, there was the Ether sale in 2014, which is when early buyers could scoop up some of the now second-biggest cryptocurrency using bitcoin. Back then, Ether fueled the Ethereum network as a payment method for transactions on the network, and years later it stills serves that purpose.

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PoW to PoS

Ethereum was launched using the proof-of-work (PoW) consensus protocol, similar to Bitcoin. The PoW data essentially does two things:

  • Allows computer nodes, which secure and guard the platform, to agree on the validity of the information published on the Ethereum network
  • Thwarts any economic attack on the network

The PoW algorithm, however, is not perfect, and the flaws — including slow transaction times and hefty gas fees — became too big to ignore. The emergence of the Ethereum-based CryptoKitties game is a good example. The game, which introduced an early version of non-fungible tokens (NFTs), became so popular that it clogged the Ethereum network, delaying transactions and causing fees to skyrocket.

The rise of decentralized finance, or DeFi, is yet another use case that has underscored the importance of an efficient network. While the DeFi market has seen its total-value-locked (TVL) balloon since catching on like wildfire in 2020, its growth has been stifled in some ways. Some developers have opted for other blockchains, while institutions have largely remained on the sidelines until the kinks are worked out. With greater scalability and more stable fees, Ethereum would likely disrupt traditional finance even more.

This is where Ethereum 2.0 comes in. In order for developers to avoid shooting themselves in the foot with their own innovation, they are building Ethereum 2.0. This is a massive upgrade of the existing network to one that is more scalable and could hasten the adoption of the blockchain among the mainstream.

Chief among the changes is a switch in the consensus protocol from PoW to proof-of-stake (PoS). Staking will lead to greater participation in securing the Ethereum network, which in turn will create a more decentralized blockchain.

3d illustration of bitcoin and Ethereum coins

What Are the Problems With the Original Ethereum Protocol?

The version of Ethereum that was introduced in 2015 was groundbreaking, but unprecedented demand for the network exposed some issues. These problems can be boiled down into three key areas:

  • A clogged network: The blockchain became too crowded, which is not ideal when trying to attain global adoption. To maintain security, each and every computer node must verify transactions on the blockchain, which slows transaction times down.
  • Insufficient disk space: As the Ethereum network grew more popular, it became increasingly difficult to run software known as nodes. The trick is to come up with a way to increase Ethereum’s size and power without compromising decentralization.
  • High energy consumption: Ethereum’s power use to maintain the PoW consensus algorithm for network security is not sustainable for the long term.

The Ethereum team sought out to solve these issues while keeping the most important feature of the network intact: decentralization. Eth2 is the solution to achieving greater scalability and security without becoming a centralized network, though it is far from an easy task.

What Is Ethereum 2.0?

Now that we’ve established how far Ethereum has come, let’s take a look at where it is headed. Ethereum 2.0, which is synonymous with Eth2 and Serenity, is a major upgrade of the blockchain network. While it was not the first upgrade, it is the one that is designed to catapult Ethereum to total-value-locked (TVL) balloon

It is a massive undertaking among the developers that will not happen overnight. Instead, Ethereum 2.0 is unfolding in a series of steps, the first of which occurred in the year 2020 with Phase 0, otherwise known as the Beacon Chain.

The Beacon Chain is an implementation of PoS that runs alongside the PoW network and is being battle-tested first. In August 2021, Ethereum completed a hard fork dubbed London, which introduced greater stability to gas fees on the Ethereum network and presented a deflationary model to the protocol’s monetary policy. With every phase comes new functionality and enhanced performance that will ultimately lead to the destination of Ethereum 2.0, a PoS network.

What Are the Benefits of Ethereum 2.0?

Ethereum 2.0 will deliver a host of key benefits that are likely to attract even more developers to the network. The three key improvements include:

  • Greater scalability: Ethereum must be able to support thousands of transactions per second (TPS) for applications built on the network with greater speed and cheaper fees. The one-two punch of sharding and a PoS algorithm is expected to create greater scale thanks to the addition of more nodes, resulting in higher TPS without using more electricity.
  • Greater security: Ethereum must be as secure as possible to thwart attacks so that users including institutions will feel comfortable using it. The aforementioned Beacon Chain is designed to help with network security.
  • Greater sustainability: A lesser carbon footprint has become a major theme in the cryptocurrency industry. The PoW consensus algorithm consumes a great deal of energy. Ethereum 2.0 will be better for the environment as there will be no more mining involved. According to Ethereum Co-Founder Vitalik Buterin, whose vision for Ethereum is outlined in the below graphic, Ethereum’s energy consumption will be diminished “by a factor of more than 1,000” with PoS.

What’s Taking So Long?

Ethereum 2.0 comprises three separate upgrades, each of which is a monumental task in its own right.

  • Beacon Chain: Launched in 2020, this technology introduced staking to the network and paved the way for future upgrades. While the Beacon Chain is in testing mode, it is live and will eventually be the cornerstone of Eth2.
  • Merge: The Ethereum merge is expected for either late 2021 or sometime in 2022. This is where the Beacon Chain will be combined with Ethereum’s mainnet and it will make staking on the Ethereum blockchain a reality while marking an end to mining.
  • Shard Chains: This represents the splitting of the Ethereum network, which will occur in phases will result in a greater capacity for processing transactions and storing data. Sharding chains are planned for 2022.

Ethereum is one of the biggest cryptocurrencies, second only to bitcoin. The transition to Eth2 is a major series of events that solve the issues plaguing the network and could potentially lead to wide-scale adoption of the blockchain while potentially strengthening the Ether price in the interim.

Bitcoin Fork Explained

Since the Beginning

In response to the global financial crisis of 2008, Satoshi Nakamoto ventured into the unknown and delivered the global financial markets with Bitcoin and blockchain tech.

Bitcoin’s creator set on a path to bring to end the control that central banks held over the global financial markets.

The concept and ideology of blockchain and ultimately Bitcoin was to allow the community to advance the technology on a united front in a bid to bring down central banks and the world’s largest financial institutions.

Things have not turned out, perhaps, how Satoshi had intended.

Miners vs Developers

In order to police and keep Bitcoin and the blockchain world moving forward, Bitcoin and the crypto community, not only needed developers, but also miners to verify transactions on the Bitcoin network and other crypto networks.

In contrast to Satoshi’s ambition to decentralize, miners and developers, have on occasion, fallen into disagreement over blockchain enhancements and/or developments.

For Bitcoin, minors had cornered the market with mining farms, leaving want-to-be minors out in the cold. This also meant that the income stream was just too large to give up control. Decentralized became centralized in a matter of years.

As a result, the Bitcoin community and the crypto community became divided between those in search of crypto income and the ideologists looking to continue to prize control from governments, central banks, and the world’s largest financial institutions.

This divergence in view and intent ultimately led to the splitting of crypto communities. The crypto technical term for this being a “Fork.”

The Fork

In the crypto sphere, there are two types of forks that investors need to be concerned with. The first and generally of little impact to value and the broader market are soft forks.

In the event of a soft fork, only one blockchain remains valid, with users adopting the changes made to the blockchain.

By contrast, hard forks can have a material impact on price in the lead up and immediate aftermath of a fork.

In a hard fork event, both blockchains coexist. The coexistence occurs from nodes continuing to support the original blockchain.

In some instances, therefore, both blockchains can coexist and remain prominent in the crypto market place. This is when there is sufficient support for both the old and the new versions.

In some cases, however, nodes may eventually shift to the new version, leaving the old blockchain obsolete.

From an investor perspective, an important feature of a hard fork is that holders of the original crypto are awarded the new coins upon completion of the hard fork.

In the case of a successful hard fork, where both chains coexist, the value of the coins can increase substantially.

For this reason, anticipation and an eventual hard fork can have a material impact on price and crypto market volatility.

Since Bitcoin’s creation, the total number of cryptos in the market place have surged to a whopping 11,064 based on numbers from CoinMarketCap.

Notably, in spite of numerous soft and hard forks, Bitcoin (“BTC”) continues to be the dominant crypto.

The 2017 Convergence

Back in late 2017, we did see Bitcoin’s dominance converge with the likes of Ethereum. This coincided with Bitcoin’s first major hard fork, which resulted in the creation of Bitcoin Cash (“BCH”).

While Bitcoin Cash (“BCH”) enjoyed a lengthy period in the top 10 by market cap, a Bitcoin Cash hard fork in late 2018 led to the creation of Bitcoin Cash ABC and Bitcoin Cash SV.

The Bitcoin community have not been alone in dealing with hard forks.

Ethereum hard forked, leading to the creation of Ethereum Classic. In this case, Ethereum Classic maintained the old blockchain history. We also saw Litecoin hard fork, leading to the creation of Litecoin Cash.

In spite of disagreements between respective developers and the communities, however, Bitcoin, Ethereum, and Litecoin have all remained the dominant chain.

Lessons Learned

Major disagreements between developers and communities can lead to significant disruption. More importantly, market stability also comes into question.

Since the headline grabbing hard forks of Bitcoin, Ethereum, and Litecoin, the number of notable hard forks have fallen.

Developers and nodes working together to achieve Satoshi’s ambition of toppling central banks is now a more plausible outcome. Infighting had led to significant disruption and ultimately a marked decline in value.

Stability across the major crypto blockchains have supported the increased adoption. The increased adoption contributed to Bitcoin’s surge to an all-time high $64,829.0, struck in April 2021.

While volatility across the market place will unlikely abate anytime soon. The absence of hard forks and infighting, however, would serve the crypto community and investors well in the short to medium term.

The Role of Blockchain in Finance

Blockchain offers tremendous benefits for businesses. The question is whether they will use them to their advantage.

The rapidly progressing adoption of blockchain technology and cryptocurrencies are disrupting the financial industry.

According to CoinMarketCap, the crypto market – which now includes over 9,800 digital assets – has a combined capitalization of $1.25 trillion, outpacing Apple on the road to challenge gold’s leading position ($11.65 trillion).

At the same time, a recent report estimates the blockchain market to expand from 2019’s $2.01 billion to $69.04 billion by 2027 at a compound average growth rate (CAGR) of 56.1%.

By now, it has become clear that distributed ledger technology (DLT) is in high demand.

But how can blockchain and crypto help financial organizations in improving business efficiency?

Blockchain Is More Than Crypto

When most people hear the phrase “blockchain”, the first thing that comes to their minds is cryptocurrency.

Indeed so, blockchain is the underlying technology of crypto, which powers nearly all digital assets on the market while promoting transparency, high security, peer-to-peer (P2P) transactions, and decentralization.

That said, blockchain is not solely about cryptocurrency transactions. Instead, DLT can be used in almost any field related to data delivery and information processing.

For that reason, many companies are either considering or already adopted blockchain technology to enhance their business processes.

Despite that DLT is still in its very early form, there are many examples of large corporations utilizing the blockchain for real-world use-cases.

One is Walmart that has partnered with IBM and Unilever to leverage the Hyperledger Fabric blockchain for tracking product supply chains.

IBM also has its own blockchain, with the multinational tech firm becoming a leading B2B distributed ledger technology provider in recent years.

Real-world blockchain applications continue to proliferate, with an increasing number of companies integrating DLT-based solutions into their business processes to achieve higher efficiency.

Through transparency in a decentralized environment, businesses can promote trust as well as attract new customers and increase their existing clients’ loyalty, who can now track their products to assess their quality via the blockchain.

In China, the clothing-retail giant H&M partnered with the VeChain blockchain platform to implement a similar solution.

By leveraging DLT, the company’s customers can access detailed information about the production of branded clothing by simply scanning a QR code via their smartphones. Furthermore, shoppers can even watch videos of how the products in the stores were made in the factories.

The Power of Blockchain

As you can see, blockchain is a powerful tool for businesses.

And for an excellent reason, DLT offers both service providers and end-users tremendous benefits compared to traditional systems.

Due to its transparent nature, blockchain technology allows data to be tracked from start to finish, eliminating the need for blind trust from customers. At the same time, it offers an opportunity for businesses to attract more users.

Furthermore, blockchain transactions are peer-to-peer, which means there’s no need for intermediaries or other third parties. As a result, companies can significantly reduce their operational costs while improving business efficiency by accelerating and automatizing processes via smart contracts.

Despite the traceability and visibility of blockchain transactions, users do not know the real persons behind the transfers, which makes them more private than traditional solutions.

How Businesses Adopt Crypto

Blockchain and cryptocurrency often walk hand in hand.

For that reason, many businesses are increasingly exploring crypto as an asset class for investments.

Since 2020, we have seen that this has become a growing trend among not just private and digital asset businesses but also publicly traded companies.

For example, MicroStrategy, Tesla, and Square have invested $2.24 billion, $1.5 billion, and $220 million in BTC to date, respectively.

But what would happen if businesses decided to adopt cryptocurrencies for payments as well?

The thing is, many of them already did.

In addition to the travel industry where digital assets have demonstrated increased adoption for payments (e.g., Expedia, airBaltic, LOT Polish Airlines), large enterprises like Microsoft, Starbucks, AXA Insurance, etc. have integrated crypto as a payment method for their solutions.

Furthermore, while PayPal has already added support for crypto transactions, Visa and MasterCard are racing against each other to integrate digital asset settlement into their massive payment networks.

Cryptocurrency Promotes Financial Sovereignty

Compared to fiat currency, crypto has three major advantages: autonomy, convertibility, and decentralization.

Blockchain networks are highly resilient against network issues and do not require third-party intervention to operate.

For that reason, cryptocurrencies are virtually independent of government action, with the latter potentially causing severe failures in the monetary system that can often lead to economic collapses.

Furthermore, with the industry maturing, it has become much easier to exchange fiat currency to crypto with only a small commission.

Thereby, crypto can be effectively used for cross-border transactions, which usually feature much faster settlements and cost-efficient fees compared to traditional international transfer (especially for payment-optimized assets like XRP or XLM).

Businesses Must Adopt Blockchain to Become More Efficient

Blockchain is a technology that is still being studied.

Yet, despite its early development stage, DLT already has a lot to offer for the companies willing to adopt it.

Besides, as more of blockchain’s potential gets harnessed, we will undoubtedly see drastic changes in the financial industry and many other sectors as key players seek to achieve greater operational efficiency.

Petr Kozyakov, co-founder and CEO at the global payment network Mercuryo

How To Choose The Right Forex Strategy

How To Choose The Right Forex Strategy

There are many trading strategies available, but going through them one by one is not practical. Instead, traders should focus on the following key things when choosing a trading strategy.

Available Time

Your search should start with the question “How much time do I have”. If you can sit behind your desk for hours watching charts, you’ll be able to choose from the whole set of forex trading strategies, including those that were developed for day trading and scalping.

If this is not your case, you should focus on longer timeframes. Such strategies will allow you to set alerts at key entry points in advance, and you’ll be able to trade according to your plan while taking a look at markets from time to time rather than staying glued to your screen all day long.

It’s important to note that you should be frank with yourself. Markets will not wait for you to come back home from your daily job. If you try to use a strategy that does not fit your schedule of life, your results may be disappointing.

Traits Of Character

Your forex trading strategy should fit your personality. This is a very important point as success in trading is very dependent on the psychological strength of the trader.

If your trading strategy is uncomfortable for you for whatever reason, you will become anxious, get tired and make mistakes that will cost you money.

If you are able to make fast decisions but patience is not your strength, you’d be better off searching among strategies for shorter timeframes, like the ones created for day trading or scalping. In the opposite case, you’d look into strategies developed for swing trading or positional trading.

A forex trading strategy that fits your personality will make your trading much easier so you should not neglect this important part when choosing which strategy to use.

Risk Tolerance

Some forex trading strategies are rather risky (but offer higher potential returns), while other are more conservative. Your forex trading strategy should fit your risk tolerance level, or you’ll set yourself up for trouble.

Your risk tolerance depends on your psychological traits (some traders are more conservative, while others are risky and are ready to experience material losses in pursuit of big profits) and financial situation.

If you plan to supplement you current income with trading, you’d be better off choosing more conservative strategies. In case your goal is to grow your account aggressively and you have other sources of income that support your lifestyle, you could try strategies that involve bigger drawdowns.

In any case, if the risk of your forex trading strategy exceeds the level of your risk tolerance, you will not be able to execute the strategy correctly and your results would be poor. In this light, aligning your trading strategy with your financial goals is very important for your future success in trading.

Market Direction

There are two basic types of market behavior – a trending market and a ranging market. You must evaluate the type of market before choosing your forex trading strategy.

Using strategies that tend to perform in a trending market when the market is in the range may lead to a disaster. For example, various strategies based on breakouts will fail time after time in a true-ranging market since you’ll get caught in many false breakouts.

The same is true for using strategies for the ranging market at a time when the market is moving in a strong trend. Your attempts to buy at support levels or sell at resistance levels will fail in a trending market since these levels will likely get breached.

In this light, you should learn to distinguish between a trending market and a ranging market and have a forex trading strategy for each type of market behavior.

Recent Performance Of The Forex Trading Strategy

Past performance is no guarantee of future results – you have probably heard this statement many times. This is true as trading strategies that worked in the past may not work in the current market environment.

However, this does not mean that you should not back-test the forex trading strategy that you are going to use. If you have correctly identified the current type of the market (trending or ranging) and selected the appropriate forex trading strategy, you should take a look at how it would have performed in recent weeks or months.

If you see that the strategy would have delivered positive results, you should try it in real trading. However, if your analysis shows that the strategy was not working in recent weeks, you should search for another forex trading strategy that had better performance.

Putting It All Together

Now that we’ve discussed the main things to consider when choosing a forex trading strategy, let’s take a higher-level view on this process.

The most important thing is to stay realistic when choosing a forex trading strategy. There is no need to rush. You should take your time and carefully evaluate your personal financial goals, time available for trading, current preferences in trading and the current state of the market.

You should also prepare for various market conditions. At a minimum, you should have a plan at hand for a trending market and a ranging market. Ideally, you should have several strategies for each type of market so that you can quickly switch between them if you see that one of your strategies does not perform according to your initial expectations.

You must also keep in mind that any strategy needs time to show its true performance in current market conditions so you should be patient and give it some time before you draw final conclusions.

If you do everything correctly, you’ll have a set of trading strategies that could be tweaked over time to suit your needs.

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.

This article is brought to you by Forex4you

What You Need to Know about SPACs – Wall Street’s Hottest Trend

Recently, U.S cryptocurrency exchange “Bullish” announced it is aiming for a $9 billion listing on the New York Stock Exchange via a merger with Far Peak Acquisition Corporation, a special purpose acquisition company (SPAC).

While many were focusing on what this transaction will mean to the crypto industry, others were asking, what is a SPAC and why should I learn about it? Still, others want to know if it’s an investment strategy that’s here to stay or another Wall Street fad.

What is a Special Purpose Acquisition Company (SPAC)?

According to most legal sources, a special purpose acquisition company (SPAC) is a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.

SPACs aren’t new. They have been around for decades, but have recently become more popular because low yields have driven investors to seek alternative ways to increase their capital. Not only have they become popular with sophisticated, high-wealth individuals, but they have also drawn the attention of underwriters who envision a big payday in the form of commissions and fees.

SPAC IPOs have seen a resurgent interest since 2014, with increasing amounts of capital flowing to them.

  • 2014:  $1.8 billion across 12 SPAC IPOs
  • 2015:  $3.9 billion across 20 SPAC IPOs
  • 2016:  $3.5 billion across 13 SPAC IPOs
  • 2017:  $10.1 billion across 34 SPAC IPOs
  • 2018:  $10.7 billion across 46 SPAC IPOs
  • 2019:  $13.6 billion across 59 SPAC IPOs
  • 2020:  $83.3 billion across 248 SPAC IPO

How is a SPAC Formed?

A SPAC is created, or sponsored, by a team of institutional investors, Wall Street professionals from the world of private equity or hedge funds. They create this entity that has no commercial operations. It makes no products and does not sell anything. In fact, the SPAC’s only assets are typically the money raised in its own IPO, according to the Security and Exchange Commission (SEC).

What’s interesting about a SPAC is that when it raises money, the investors buying into its IPO do not know what the eventual acquisition target company will be. That’s part of its mystique, however, since institutional investors with track records of success can more easily convince other investors to invest in the unknown. Due to this, a SPAC is also often called a “blank check company.”

How Does a SPAC Operate?

After the SPAC is legally created, it now needs cash to create the capital needed to do the acquiring of another company, for example, in the future. Remember, the SPAC is not going to raise money to buy equipment, computers, software, or even pay rent. It needs the money to buy what is often referred to as the “eventual acquisition target company”.

A SPAC will raise the money it needs through its own IPO. CNBC says that SPAC IPOs are usually priced at $10 a share. Once the initial capital is raised, the money goes into an interest-bearing trust account until the SPAC’s founders or management team finds a private company looking to go public through an acquisition.

Legal experts say that once an acquisition is completed (with SPAC shareholders voting to approve the deal), the SPAC’s investors can either swap their shares for shares of the merged company or redeem their SPAC shares to get back their original investment, plus the interest accrued while that money was in trust. The SPAC sponsors typically get about 20% stake in the final, merged company.

Time is of the Essence

Once SPAC sponsors raise the capital they need to go to work acquiring companies, they can’t sit on the funds forever, even if they are protected by trust and earning interest. SPAC sponsors also have a deadline by which they have to find a suitable deal, typically within about two years of the IPO. Otherwise, the SPAC is liquidated and investors get their money back with interest.

What are the Advantages of a SPAC and Who Benefits?

Owners of smaller companies find selling to a SPAC more profitable because the sale often adds about 20% to the price of the deal compared to a typical private equity deal. Additionally, being acquired by a SPAC can also offer business owners what is essentially a faster IPO process under the guidance of an experienced partner, with less worry about the swings in broader market sentiment.

Business owners are often worried about extreme market volatility or the fear that weak investor sentiment could force the postponement of an IPO. By dealing directly with the SPAC, these worries are essentially eliminated.

Furthermore, a deal with a SPAC can be wrapped up in just a few months versus the traditional process of registering an IPO with the SEC, which can take up to six months.

Basically, the key advantage is a business owner can get his money faster and without a lot of government tape.

Are There Any Pitfalls?

Nothing is guaranteed and SPACs are no exception to that rule. Although they are extremely popular in 2021 for large institutional investors and other billionaire backers, this trend can go away quickly if “something better” comes along.

Other factors that could determine its long-term popularity include the fact that target companies run the risk of having their acquisition rejected by SPAC shareholders. Even the rich get cold feet about a deal. Furthermore, investors are literally going blindly into the investment.

SPACs will probably retain their popularity until the major players decide to let the smaller investors into the game. That’s usually when the rules change and the government regulations get tougher in order to protect undercapitalized investors from losing all their money.

What are Some High-Profile Examples of SPACs?

We don’t know yet how the SPAC for Bullish will play out because it was just announced. But since it involves cryptocurrencies, it will probably become a profitable venture since investors looking to get aboard the craze have been throwing money at the asset class.

High-profile SPACs like DraftKings and Virgin Galactic have performed well for investors, but that hasn’t always been the case with average returns from SPAC mergers completed between 2015 and 2020 falling short of the average post-market return for investors from an IPO.

A noted prominent short-seller of SPACs said, “a business model that incentivizes promoters to do something – anything – with other people’s money is bound to lead to significant value destruction on occasion.”

Like any investment, it pays to do your homework before putting money into a SPAC.

What Distinguishes Japanese Technicians from Western Technicians

However, within years I realized that there were major shortcomings to the Western technical approach as they were based upon technical studies which used lagging indicators.

One of my mentors, Larry Williams expressed that sentiment in the best possible way. He said that as a Western technical analysts we are like individuals sitting at the back of a boat looking at the wake caused by the propellers. We are attempting to derive where the boat is headed by determining where it has been. Truly a lagging indicator. But he added one caveat, “only the captain knows when he will turn the wheel”.

However, it was a client of mine that first exposed me to the art of Japanese technical analysis. Within my first few years of trading, I noticed that the vast majority of first-time futures traders lost money. Within that pool of new traders, I noticed one gentleman who had the uncanny knack of selling market tops right before a key reversal, as well as buying market bottoms before a pivot occurred.

After witnessing him correctly predict and profit from 10 consecutive trades, I realize he was using a technique that was completely foreign and unfamiliar to me. I asked him what techniques he used to have such a stellar performance and he answered that it would be too complicated to explain, but he could send me a book that would detail this technique.

The book I’m referring to is the Japanese chart of charts written by Seiki Shimizu. It was the first book written by a famous Japanese trader and translated into English in 1986. It is one of the more difficult books I have ever tackled in that the Japanese language is composed of “Kanji”, or word pictures.

According to Seiki Shimizu, “A chart is like a cat’s whiskers” In his book, he writes “Standing on the corner we notice many things… in the case of a skipping rope, a child will always focus on the moving rope while jumping. However, this habit and instinct are not limited to human beings. A cat preying for a mouse will wait near a likely hiding hole. If a mouse does appear, the cat must decide which way it thinks the mouse will go and springs in that direction once the mouse begins to move. I don’t think the cat understands the mouse’s feelings and thought patterns. It’s the cat’s whiskers that are said to have the telepathic power of being able to interpret a mouse’s movement by smell, light, and wind. Therefore, I believe it is this power that moves a cat’s whiskers, whereupon the cat decides whether to wait or chase after the mouse.

It is said that “A market price is a living thing.”

Japanese Candlestick Charts and their patterns were conceived over three hundred years ago by a rice trader named Sokyu Honma (1716 -1803). Sokyu lived in Sakata, Japan, and was also known as Sokyu Honma and Munehisa Homma.

It was rumored that he made 100 consecutive profitable trades. His success was so great that he achieved the rank of honorary Samurai, as well as attaining the government rank of a financial advisor.

At first, his methods of trading were kept a secret as they were passed down when he compiled a book in 1755 called the ‘Fountain of Gold – the Three Monkey Record of Money’. This book detailed his findings and observations of market sentiment.

Simply put the Japanese technical approach can mathematically quantify market sentiment. Something that has alluded to Western traders.

This article has been written as an ancillary discussion to the interview that David Linda myself did this morning in which we spoke about my methodology. As it is too complex to be able to discuss the totality within a single opening letter I am providing links to articles that I have written for Kitco education at the end of this article.

I hope that the knowledge presented within these brief presentations will allow you as a trader to gain insight, and most importantly be a more effective trader.

For those who want more information, please use this link.

Wishing you, as always, good trading and good health,

Gary S. Wagner

References on the Japanese candlestick technique found in the Kitco education section;

THE HISTORY OF JAPANESE TECHNICAL ANALYSIS

EAST VERSUS WEST (LESSON ONE)

EAST VERSUS WEST – CLASSIC NAMES AND EXPLANATIONS OF JAPANESE CANDLESTICKS (LESSON TWO)

THE SAKATA FIVE

AN INTRODUCTION TO HEIKIN-ASHI CHARTS