Can Crypto Really Beat Inflation?

Crypto has been vaunted variously as an inflation-proof asset and a digital answer to gold. But just how accurate are these descriptions? With inflation on the rise, the answer could well be around the corner.

The Problem of Inflation

Everyone with fiat savings fears the dreaded “i” word. But after years of low or almost no inflation in many parts of the world, it suddenly seems we cannot escape talk of a coming inflationary storm.

Much of the economic talk in 2021 centered on inflationary hotspots in Turkey, Argentina, Venezuela and the like.

Source: https://dolartoday.com/indicadores/; http://www.bcv.org.ve/estadisticas/tipo-de-cambio
Graphic: Nicolas Perrault III

But while these were once seen as outliers, nations that have been living without inflation for decades are now posting worrying figures. In countries like the UK and the United States, central banks are now finding themselves under increasing pressure to raise interest rates to fight back.

However, the problem cannot be so easily swept under the carpet. Wages in the West are on the rise, food prices are shooting up worldwide and energy price hikes are becoming commonplace.

If inflation is now a given, it is only logical to expect fiat currency holders to respond. Pressures like these naturally push investors toward “safe assets” – traditionally blue-chip stocks and gold. But more recently, the “safe asset” category has a new member: crypto.

Does Crypto Work as a Store of Value?

Many major economists say they think so, with some calling Bitcoin and the like “digital gold.”

One notable example is the Visa CEO Alfred Kelly, who last year said: “We see all [cryptoassets] as digital gold. They are predominantly held as assets that are not used as a form of payment in a significant way at this point.”

Just as gold or “safe-bet” stocks often experience price volatility, they are simply too valuable to bottom out. They are also a safe distance from currency markets, meaning that they might get dragged into periods of fiat-related volatility, but can never (or so the theory goes) experience the same kind of hyperinflationary pressures that can cause a currency to collapse, à la Germany in the 1920s.

While the Turkish Lira and the Argentine Peso are not quite at the same level, they too are edging ever closer to inescapable currency chaos.

In both nations, crypto adoption is flying up. Turks make a million crypto transactions a day, Reuters reported last month. In Argentina, even the President has called crypto a “hard currency, somewhat,” with the power to “nullify inflation.”

Bitcoin prices over the past five years

Is There Really Any Truth to All This?

This month, Rio de Janeiro’s Mayor said that he intends for the Brazilian city to keep 1% of its treasury reserves in crypto. Other cities have taken a similar tack, while there is now no shortage of mainstream financial advisors speaking to media outlets like CNBC and Time about the benefits of buying crypto. Most now advise investors to keep at least a small portion of crypto (10% or less, mostly) in their portfolios.

It looks like global politicians are starting to take this advice to heart.

Could Crypto Actually Replace Fiat?

Most critics think that crypto’s weak point is its use as a form of payment. Visa’s Kelly is just one of those who have pointed out that people seem happy to buy, trade and hold crypto, but seem unwilling to spend their coins on goods or services.

High gas fees, slow and transaction prices are often cited as prohibitive factors, while crypto pay incentives have thus far failed to blossom. But micro-payment-friendly solutions have been mooted, including the Bitcoin Lightning Network, which has been championed by the Bitcoin-keen government of El Salvador’s President Nayib Bukele.

Bukele’s government last year adopted BTC as legal tender, and has since snapped up hundreds of tokens using public funds. That means that crypto is now being put to the test in the Central American nation as not only as a treasury reserve asset (a store of value), but also as a means of payment.

As these are perhaps the two key properties an asset needs to possess if aspires to be called a currency, perhaps we will find out very soon if crypto really has what it takes to go toe-to-toe with fiat!

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3 Big Environmental Concerns About Crypto – What Can We Do About Them?

Some environmental activists and lawmakers have labeled Bitcoin (BTC) and the like “dirty” industries, reliant on vast quantities of power – much of it fossil fuel-based.

What – if anything – crypto developers and miners can do to clean up their act and win over the hearts and minds of an increasingly environmentally conscious public?

Problem #1: “Crypto Mining is Carbon-intensive”

Up until very recently, this statement was certainly very true. At one point, China was responsible for some 51% of the global BTC hashrate. And most major mining players in the country were masquerading as “Big Data” centers, usually using power from older coal-powered stations in poorer parts of the country.

In September last year, that all changed, however. Early in 2020, China committed itself to go carbon-neutral by 2060. A few months later, Beijing started to hit out at its most polluting provinces, which responded by marginalizing crypto miners. September’s crackdown followed. Many miners relocated to Eastern Europe and Central Asia.

But now these areas, many of which also rely on coal, oil, and gas, are also starting to shun miners after energy shortages, fuel price rises, and power outages. This is driving more and more pools to the Americas. “Green” crypto mining is on the rise in the USA, which is now the world’s de facto BTC mining center of gravity.

And further “green” initiatives could be on the cards in Latin America: Paraguay’s Senate has approved a bill that seeks to allow foreign miners to set up shop at locations such as the Itaipú Dam – the biggest hydroelectric facility in the world. Miners are also setting up shop in Costa Rica, a nation where fossil fuel consumption has been all but eliminated.

Problem #2: Crypto mining is just too energy-intensive

The proof-of-work and proof-of-stake debate has been raging for years in crypto communities. You can get a clearer idea of the differences between the two models of mining by checking out this article.

But, put very basically, proof-of-stake (POS) requires far less energy. The word on the grapevine is that Ethereum, the world’s second-biggest coin and one of the most important blockchain networks (most NFTs, for instance, are minted on the network), will migrate to POS in the months ahead.

The snag is, developers have been saying this about ETH for some time yet, and for environmentalists, the move isn’t coming quickly enough. Also, only a handful of blockchain protocols actually use POS.

The good news, perhaps, is that this small collective includes the likes of Cardano (ADA), one of last year’s breakaway coins and a self-proclaimed ETH competitor. If ETH can successfully make the shift this year, perhaps other developers on different networks will be inspired to follow suit.

Problem #3: Crypto Mining isn’t Worth it

Many eco-activists say that crypto should be shut down, so deep is its environmental cost. But crypto advocates counter that many industries use large amounts of power, but are simply thought to be “worth the environmental cost,” due to the fact that they provide society with so many benefits.

If crypto can provide us with a currency for the Web 3.0 era, might it not, argue some, be worth investing energy in?

This kind of reasoning is actually as old as Bitcoin itself – and can be traced back to none other than BTC’s founder, Satoshi Nakamoto. In 2010, Nakamoto wrote, in response to the accusation that “Bitcoin minting is thermodynamically perverse:

“The marginal cost of gold mining tends to stay near the price of gold. Gold mining is a waste, but that waste is far less than the utility of having gold available as a medium of exchange. I think the case will be the same for bitcoin. The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, not having Bitcoin would be the net waste.”

What Are Staking Tokens? How It Differ From Other Tokens?

Investors may think staking as less profitable option to mining. Although its the other way around.  A cryptocurrency wallet is used to keep money safe and secure for a blockchain network. Staking is just locking up cryptocurrency in order to reap the benefits.

Proof of Stake (PoS) is an important concept to learn before diving into the world of staking. It is possible to run a blockchain more efficiently while retaining a reasonable degree of decentralisation by using PoS, a consensus method. Let’s take a look at what Proof of Stake (PoS) is and how it works.

What is Staking?

Staking cryptocurrency implies committing crypto assets to a blockchain network to facilitate and validate transactions. Proof-of-stake (POS) allows cryptocurrency owners to verify block transactions based on staked currencies. As an alternative to Proof-of-work (POW), which is used to verify blockchains and add new blocks, POS was made. POS is considered less dangerous since it arranges payments in a manner that makes an attack less effective.

At the end of the day, staking is a way to earn rewards for holding cryptocurrencies.

How Staking Tokens Differ From Other Tokens?

Trust Wallet is an example of a crypto wallet that allows one to stake their coins straight from their account. On the other side, staking is available on several exchanges.  All one has to do is keep their coins in the exchange’s custody.

Play-to-win gaming platforms like Decentraland, Sandbox, and Axie Infinity are where most of the NFT staking opportunities are found, among others. All one needs to stake is a cryptocurrency wallet that has NFTs in it, and that’s all. Although, it should be noted that not all NFTs can be staked.

Staking in NFTs is a new approach to generate cryptocurrency passively. In order to get incentives, NFT holders may store their assets on DeFi platforms. They can all keep their NFT collections without having to sell them. Investors may profit from less overall supply by using NFT staking. For the most part, however, NFT stakes open the door to new applications for NFTs outside of digital art collection, but not all NFT’s can be staked unlike tokens.

The 4 Best Crypto Staking Tokens of 2022 are as follows:

Terra (LUNA)

Terra (LUNA) hit a new record of $20.05 billion in total value locked (TVL) across its 13 product lines, according to industry figures. Terra’s TVL was $11.9 billion on Dec. 1, up 68% in less than a month.

Luna is presently trading around $90, a gain of almost 12,000% from its price of $0.7 in January 2021. The coin is now valued at $34.8 billion on the market. LUNA has an annual staking payout of roughly 12.10 percent, making it one of the finest cryptos to stake.

PancakeSwap (CAKE)

PancakeSwap (CAKE) is a popular and enjoyable staking platform that allows users to stake any CAKE tokens they earn. When users stake CAKE coins, they have the option of earning extra CAKE or other currencies. Transaction costs on Binance Smart Chain are much cheaper than compared to Ethereum.

The owner may either collect their rewards or reinvest them into PancakeSwap after earning them. The CAKE coin’s yearly returns vary from 31 to 42 percent, making it one of the greatest crypto staking currencies available.

Shiba Inu (SHIB)

Shiba Inu (SHIB), also known as Shiba Token, has been more popular in recent years. With a 9.4 billion dollar market cap, it is now the 9th biggest cryptocurrency. Many investors regard SHIB as an asset to acquire and retain in their cryptocurrency portfolio. With the ShibaSwap exchange launch, SHIB holders may now stake and farm their tokens.

While Shiba Inu operates on Ethereum (now PoW), the initial quantity of SHIB was minted upon launch; therefore, it cannot be mined. SHIB holders may stake their Shiba coins on the ShibaSwap exchange for BONE tokens and 0.03 percent of the ETH swap transaction costs.

Solana (SOL)

SOL is a great staking currency due to its cheap transaction fees and fast transfers. On the Solana network, users may stake their coins with over 640 validators, but one cannot operate their own node.

It’s possible for the owner to share in the rewards that validators get on Solana if the owner gives them the stake. When the owner stakes the SOL coins, they may expect to obtain yearly returns ranging from 7–11 percent. SOL coins have soared in value in recent months, hitting an all-time high of $210.

Conclusion

Proof of Stake and staking opened the crypto market to more people who weren’t able to mine or trade cryptocurrency. Crypto staking is open to anyone wishing to contribute to blockchain consensus and governance. As the entry barriers to the blockchain ecosystem drop, staking becomes more comfortable, simpler, and more economical. With cryptocurrencies paying high interest rates, staking could be a brilliant method to earn passive income.

What Is Santa Floki Coin and Where To Buy It

A brand-new cryptocurrency made the headlines across the sphere due to its astonishing skyrocketing move after a tweet made by the eccentric billionaire and Tesla’s CEO, Elon Musk.

Of course, we’re talking about Santa Floki Coin (HOHOHO), whose price soared by over 18,840% in a couple of days ahead of the end of 2022.

The token surged from $0.000000012935 to a new all-time high of $0.00000245, according to data from CoinMarketCap.

Since then, the optimism around the coin as often happens with the sudden spikes that follow such patterns, faded away, and HOHOHO retraced back to exchange hands at around $0.0000002049 as of press time.

Who Are The Creators

According to Santa Floki’s official website, the coin was developed by Parabolic’s Development Team, which was established with the objective to produce “strong projects, offering the investor peace of mind.”

On November 16, 2021, it began a presale across social media platforms and the website, accompanied by official audits and an NFT launch.

The team behind the token also developed a personal wallet and announced a 3D metaverse gaming project, including major partnerships. However, the development team hasn’t given enough information on whether there are more plans for 2022, aside from growing the community of holders.

HOHOHO coin was developed under Binance Smart Chain (BEP20) blockchain, and it has a fully diluted market of over $2.5 million as of press time, according to CoinMarketCap. As per the rewards, the website says:

“(…) as a matter of fact, the contract is designed to allow 4% of all BUY/SELL transactions to be rewarded back to the holders of SantaFloki in the form of BUSD.”

Where Can I Buy Santa Floki Coin

Santa Floki can be bought via cryptocurrency exchanges like PancakeSwap and LATOKEN. The website also notes that HOHOHO can be acquired via Trust Wallet and Metamask.

Elon Musk and Santa Floki: Is He Endorsing the Coin?

As highlighted above, the Santa Floki coin price pumped strongly before the end of 2021 due to a tweet from Elon Musk, where he published the picture of a dog dressed in a Santa Claus outfit, accompanied with the text “Floki Santa.”

It’s not clear if Tesla’s CEO bought the cryptocurrency or not, as somebody could infer that after the cryptic tweet crossed the wires.

In fact, the creators of Santa Floki thanked Musk for the “recognition” granted through the tweet, although the billionaire never replied nor continued with the saga in other tweets to confirm if he’s legitimately endorsing the project.

Santa Floki creators’ tweet included a meme’s image comparing the surge of Dogecoin (DOGE) in 2020 and HOHOHO coin recently.

Risks of Trading Santa Floki

As usual with the brand-new tokens, there are high risks involved when somebody wants to invest in them. But, first, a cryptocurrency that just arrived in the space carries a lot of volatility because it’s gathering investors from around the world.

In fact, if it’s legitimate, the project is actively working to gain trust across people and make them acquire the tokens.

Second, the cryptocurrency will be highly susceptible to pump and dumps followed by tweets from celebrities or key crypto players’ statements, such as the one that came from Musk.

Moreover, as time passes, the market cap will increase and thus the volatility, which will produce even more savage swings that could make even riskier trading coins like Santa Floki.

Recent Brand-New Tokens Pumps

Early in December, FXEmpire reported that just a single joke during a Congressional hearing was needed to encourage cryptocurrency enthusiasts to create a brand-new coin.

A US Congressman, Representative Brad Sherman, made some statements in the midst of regulatory discussions with crypto CEOs, talking about meme coins and the relationship with the name of an animal.

In fact, Mongoose Coin (MONG) became a reality and hit a market cap of $14 million at that time, on December 10. After such a mention in the hearing named “Digital Assets and the Future of Finance: Understanding Innovation in the United States,” MONG gained an ROI of over 80,000%.

It became interesting how just an ironic mention sparked discussions about the risky nature of investing in meme coins like Mongoose Coin, which are exposed to such volatility.

What Can You Buy With Cryptocurrencies?

The cryptocurrency market has become one of the leading financial markets in the world, thanks to its recent growth. The industry is worth more than $2 trillion, and with this level of growth comes the adoption. However, despite the growing popularity of cryptocurrencies, some people still don’t know what they can purchase with their crypto.

To address those concerns, this article informs you of the various places where you can pay with cryptocurrencies.

Cryptocurrencies are accepted in many sectors

A decade ago, Bitcoin was a relatively unknown financial asset. However, nowadays, it is known in every part of the world and is slowly going mainstream. With the mainstream adoption of cryptocurrencies increasing, it became easier to pay for goods and services using Bitcoin and other cryptos.

El Salvador became the first country to make Bitcoin a legal tender, and you can pay for anything with BTC. The United States, Canada, Spain, the United Kingdom, South Korea, and Singapore are amongst the countries that are also recording an increase in cryptocurrency transactions. Here are some of the ways to use your cryptocurrencies to pay for goods and services.

Technology and Ecommerce

One of the areas where you can easily spend your cryptocurrencies is technology and eCommerce. eCommerce companies are making it easier for their customers to pay for their products using BTC and other cryptocurrencies.

Overstock is one of the leading retailers that allows users to pay for their products with crypto, thanks to its partnership with Coinbase. NewEgg is an online retailer of technology products like computer hardware and consumer electronics, where you can use your bitcoins to pay for these products. Alza, the leading online retailer in the Czech Republic, and Japan’s Rakuten are other top retailers that accept cryptocurrencies.

If you wish to pay for your domain name in bitcoin, then Namecheap is the hosting company you should patronize. The Internet Archive also allows users to access web archives and accepts bitcoin donations.

AT&T is one of the first major mobile carriers globally to enable its users to pay for services using cryptocurrencies. The company partnered with BitPay to provide the crypto payment option to its subscribers.

Tech giant Microsoft allows its users to top up their Microsoft account using cryptocurrencies. The company suspended the service for a while but reactivated it as the adoption of BTC and other cryptos grew.

Dish, one of the leading TV service providers in the United States, allows users to pay for their cable subscription using Bitcoin, thanks to its partnership with Coinbase.

Entertainment sector

One of the areas where cryptocurrencies have gained adoption is the entertainment sector. It is becoming easier to pay for services using bitcoin and other cryptos in this industry. AMC, one of the leading cinema chains globally, now allows people to pay for movie tickets and other services with a few cryptos such as BTC, ETH, SHIB, and DOGE.

Amazon-owned leading game streaming platform Twitch is another place where you can pay for services using Bitcoin. The company briefly removed the service in March 2019 but has re-enabled it in June 2020.

Food Industry

Another area where cryptocurrency adoption is growing is the food sector. Several fast-food joints are now accepting Bitcoin and other cryptocurrencies as payment options for their products.

Burger King Venezuela partnered with Cryptobuyer to accept cryptocurrencies as a mode of payment. Their customers can pay in Bitcoin, Dash, Litecoin, Ethereum, and Tether. Pizza Hut is another giant pizza franchise that allows customers to pay for their food with Bitcoin.

KFC Canada is another major fast-food company that accepts Bitcoin as payment for its products. The company partnered with BitPay to process the payments. Denver-based Quiznos partnered with Bakkt to launch a pilot that allows customers to purchase food with bitcoin via the Bakkt app.

Sports

Cryptocurrency companies have penetrated the sports industry. Over the past few months, crypto companies such as FTX and Crypto.com have partnered with numerous sporting institutions to increase the awareness of cryptocurrencies.

The adoption goes beyond sports entities partnering with cryptocurrency companies. Some sporting institutions now accept cryptocurrency payments. The Dallas Mavericks accepts Bitcoin as a payment method for both game tickets and merchandise, and BitPay processes cryptocurrency payments via the team’s website.

The Miami Dolphins is another team that allows you to pay for game tickets using Bitcoin and Litecoin.

Portuguese-based football team Benfica is one of the first soccer institutions in Europe to accept Bitcoin for game tickets and merchandise.

Travel and Hospitality

The hospitality industry is one of the biggest promoters of cryptocurrencies. Richard Branson’s Virgin Mobile and Virgin Airlines allow you to pay for space travel with BTC. Norwegian Air Shuttle (Norwegian), Scandinavia’s largest airline and Europe’s third-largest budget airline, is another travel company that allows customers to pay for tickets with cryptocurrency.

CheapAir, one of the leading online travel agencies in the United States, partnered with Coinbase to allow its customers to pay for travel and hospitality services with Bitcoin. Travala and Bitcoin.Travel are two other leading online travel agency that permits their customers to pay for services using BTC and a few other cryptocurrencies.

Real Estate and Art

An increasing number of real estate firms accept cryptocurrencies as payment for their properties. Cryptocurrencies have also penetrated the art world. British auction house Christie’s now accepting Bitcoin and Ether for some of its paintings, both physical and digital.

Gift Cards and VPNs

The other sectors where cryptocurrencies have gained adoption are VPN and gift cards. Gyft allows users to buy and sell gift cards online for top retailers like Amazon, iTunes and Starbucks, and the company accepts Bitcoin as payment for its services.

ExpressVPN, CyberGhost, NordVPN, and PrivateVPN are some of the leading VPN service providers that allow users to pay for their services and upgrade their accounts using Bitcoin and a few other selected cryptocurrencies.

Final Thoughts

The use of cryptocurrencies to pay for goods and services is becoming increasingly popular. Businesses are beginning to accept cryptocurrency payments directly or through third-party processors like BitPay, a trend that seems set to continue through 2022.

 

TickMill Webinar December 15: Trading Micro E-mini S&P500 Futures

This exclusive webinar will be addressing the following topics:

• The Micro E-mini S&P500 futures contract and the benefits of this trading venue.
• How to trade on the popular CQG platform and how to make the most of its advanced features, specifically market internals.
• Core Market Internals including Breadth Ratio, Advance/Decline Line, Volume and Tick.

By attending this webinar you’ll also access Patrick’s Trade Plan, identifying pivotal Support/Resistance zones based on market auction theory & multi timeframe analysis, where smart money is looking to enter and exit trades.

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TickMill Webinar December 17: Forex Trading 101 – From Zero to Hero

From Zero to Hero – A webinar series designed to equip beginners with the knowledge they need to get started in the world of Forex trading.

Country Manager and Educator, Rosalie Sta. Ana will be providing a comprehensive overview of the Forex Market and how you can start trading, with a series of 3 webinars.

The series includes the following sessions:

  • Session 1 | 3 December | 19:00 GMT+8 | What is Forex and how do you trade Forex?
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Support and Resistance – Pivot Analysis

What is Support and Resistance?

The purpose of support and resistance levels is to identify favorable entry and exit points.

There are multiple trading strategies that incorporate support and resistance levels. Additionally, there are multiple support and resistance strategies, the most common being the use of pivot levels and their associated major support and resistance levels that are based on a time period’s pivot level.

When trading, it is beneficial to use more common strategies as these will tend to be followed by a greater number of traders.

Support

Support levels refer to price levels below which an asset does not drop for an extended length of time.

At support levels, buyers enter into long positions thus delivering support and preventing further downside.

It is important to note, however, that there will be multiple support strategies. These include the use of the most recent lows as an example and Fibonacci’s. Pivots and major support levels are the most commonly used levels.

Once a support level has been breached, the support level becomes a resistance level.

Resistance

Similarly, resistance levels are price levels at which sellers will look to exit an asset or enter into a short position.

Here, resistance levels are calculated for time intervals by using the highs and lows of the previous time interval. In the case of using major resistance levels, traders base their resistance levels on the pivot level for a specified time interval, t.

Other resistance levels commonly used include daily, weekly, monthly, yearly, and all-time highs and Fibonacci’s.

Once a resistance level has been broken, the resistance level becomes a support level.

How to draw support and resistance

Analysts and traders calculate the pivot and the major support and resistance levels for multiple time periods. These can be as short as hourly and as long as monthly.

Once you have calculated the pivot and major support and resistance levels, traders and analysts will then plot these on charts to assist in their trading decisions as shown in the chart below.

Calculating Pivot Levels

A pivot level is derived by calculating the average of the high, the low, and the closing price of a time interval, t.

Looking at a 1-hour time interval for the chart below, we would take the average of the day high $55,329, the day low $53,711, and the closing price $54,791 to obtain the next day’s pivot level. Here the pivot level would be $54,610.

Chart 1 FX Empire Chart

Calculating Support Levels

Once you have calculated the pivot level, the major support levels, these being S1, S2, and S3 can be calculated. In the example below, using an hourly chart, a day’s pivot and major support levels can be calculated.

First Major Support Level: 2 x Pivot / the previous time interval high. In the example above, this would be (2 x $54,610) / 55,329 = $53,892.

Traders would be looking at the first major support level as an entry price.

Second Major Support level: S2 = Pivot – (Day high – Day low).

In the example above, this would be $54,610 – ($55,329 – $53,711) = $52,992.

Traders would be looking at the second major support level as an entry price in the event of an extended reversal.

Third Major Support level: S3 = S2 – (Day high – Day low).

In the example above, this would be $52,992 – ($55,329 – $53,711) = $51,374.

Traders would be looking at the third major support level as an entry price in the event of a market sell-off.

Support FX Empr

Calculating Resistance Levels

Once you have calculated the pivot level, the major resistance levels, these being R1, R2, and R3, can also be calculated.

First Major Resistance Level: R1: = 2 x Pivot / the previous time interval low. In the example above, this would be (2 x $54,610) / 53,711 = $55,510.

Traders would be looking at the first major resistance level as an exit price.

Second Major Resistance level: R2 = Pivot + (Day high – Day low).

In the example above, this would be $54,610 + ($55,329 – $53,711) = $56,228.

Traders would be looking at the second major resistance level as an entry price in the event of an extended rally.

Third Major Resistance level: R3 = R2 + (Day high – Day low).

In the example above, this would be $56,228 – ($55,329 – $53,711) = $57,846.

Traders would be looking at the third major resistance level as an exit price in the event of an event-driven breakout.

Resistance FX Emp

Support and Resistance trading strategies

As previously outlined, traders can use major support and resistance levels for a range of time periods. It is therefore important to decide the trading strategies to then select the appropriate time periods for calculating the pivot and major support and resistance levels.

For instance, day traders would use 1-minute charts and the previous day’s high, low, and closing price to calculate the support and resistance levels for the day ahead.

By contrast, swing traders would use 4-hourly and daily charts to calculate the respective pivot, major support and resistance levels.

Pivot and Support Levels

When considering major support levels, the pivot levels play a hand in whether support levels are likely to come into play. There are two ways in which to consider pivot levels:

  • A fall through a pivot level would be needed to bring support levels into play. This tends to be the scenario in a post-bullish or during a bullish session.
  • Failure to move through or back through the pivot level would also bring support levels into play. This tends to be the scenario in a post-bearish or during a bearish session.

Pivot and Resistance Levels

When considering major resistance levels, the pivot levels play a hand in whether resistance levels are likely to come into play. There are two ways in which to consider pivot levels:

  • A move through a pivot level would be needed to bring resistance levels into play. This tends to be the scenario in a post-bearish or during a bearish session.
  • Avoiding a fall through or back through the pivot level would also bring resistance levels into play. This tends to be the scenario in a post-bullish or during a bullish session.

Using Support Levels

In a correcting market, an asset may fall through its first support level, labelled as S1. Once breached, the second major support level will be the next key entry point for investors. In such an event, S1 would then become a resistance level.

The 3rd major support level is generally only breached and a major economic or financial event. These include earnings, central bank and government policy, and other global events.

The below chart shows flight to safety in response to the new Omicron COVID-19 strain. Demand for the Japanese Yen broke down support levels as the Greenback slid to sub-¥114 levels.

Support Example FX Empire Chart

Historically, global events would include:

  • The global financial crisis.
  • COVID-19 pandemic.
  • Dot.com

Here, 1st and 2nd major support levels would have provided little interest to investors looking to enter the market.

3rd major support levels, however, may have drawn investors in. Key in using major support levels is for an asset price not to fall below for an extended period of time

Using Resistance Levels

In a bull market, an asset may move through its first major resistance level, labelled as R1. Once broken, the second major resistance level will be the next key entry point for investors. In such an event, R1 would then become a support level.

The 3rd major resistance level is generally only broken through as a result a major economic or financial event. These include earnings, central bank and government policy, and other global events.

As with the above example, news of the new COVID-19 strain and government plans to contain the spread led to a reversal of EUR carry trades. The EUR broke down the 3 major resistance levels on its way to $1.13 levels against the Greenback.

Resistance Example FX Empire Chart

Historically, global events would include:

  • COVID-19 Pandemic recovery.
  • Post-Global Financial Crisis recovery.
  • Central bank action.
  • U.S Presidential Election
  • In the case of equities, corporate action and earnings.

Here, 1st and 2nd major resistance levels would have provided little interest to investors looking to exit the market.

3rd major resistance levels, however, may have resulted in investors locking in profits. Key in using major resistance levels is for an asset price not to move above a specified price for an extended period of time

Once a resistance level has been broken, however, the resistance level become a support level that forms part of the major support levels for the time period in question.

Other Major Support and Resistance Levels

There are multiple indicators/strategies that traders. Traders and analysts need to consider these when using pivot levels and the major support and resistance levels described above.

Of particular importance are all-time highs and lows, and daily, weekly, monthly, and yearly highs and lows.

For example, an asset class may face resistance at its current week high that may sit below the first major resistance levels.

Other strategies include the use of Fibonacci’s, moving averages, Bollinger’s, and MACDs.

Trading without the use of support and resistance levels would likely lead to losses. More significant losses are likely, however, without a trading strategy. Importantly, the two will need to be aligned.

What are Lending Protocols? The Rise of DeFi Lending

The cryptocurrency space has grown to become a $3 trillion industry. Over the past decade, there have been numerous innovations within the cryptocurrency space. One of the most recent innovations is the decentralized finance (DeFi) space.

DeFi is one of the fastest-growing sectors within the cryptocurrency space. It offers numerous services to cryptocurrency investors and other market players. Due to its importance, this post will touch on an aspect of DeFi, which is lending.

What is DeFi?

DeFi can be defined in simple terms as decentralized finance. This is an ecosystem of financial applications built on top of blockchain technology. Unlike the regular financial ecosystem, the DeFi space operates without any third part of central authority.

Instead, DeFi relies on a peer-to-peer network to establish decentralized applications that would allow people to connect and manage their assets regardless of their location or status. DeFi aims to ensure people gain access to open-source, transparent and permissionless financial services from every part of the world.

The decentralized finance ecosystem is built on smart contracts. Smart contracts are self-executing and don’t require a third-party intermediary. DeFi started on the Ethereum network. Hence, it is not a surprise that most of the DeFi protocols are built on the Ethereum blockchain.

Understanding DeFi Lending

DeFi lending occurs thanks to the lending platforms or protocols. These platforms offer cryptocurrency loans in a trustless manner, allowing the holders to stake the coins they have in the DeFi lending platforms for lending purposes.

On the DeFi platform, a borrower can take a loan, allowing the lender to earn interests once the loan is returned. The lending process is executed from the start till the finish without intermediaries.

A coin holder sends the tokens they intend to lend into a pool using a smart contract. Once the coins are sent to a smart contract, they become available to other users to borrow. Afterward, the smart contract issues tokens (usually, the platform’s native token) that are doled out automatically to the lender. The tokens can be redeemed at a later stage in addition to the underlying assets that were sent to the smart contract.

Virtually all the loans issued via the native tokens are collateralized. This means that users who wish to borrow funds will need to provide a guarantee. However, unlike the centralized financial system, the guarantee in the DeFi space is in the form of cryptocurrencies that are worth more than the actual loan itself.

On paper, this idea might seem absurd as the borrower could potentially sell their assets in the first place to generate the money. However, there are numerous reasons why DeFi borrowing makes sense.

For starters, the users might require funds to take care of unforeseen expenses they may have incurred and don’t intend to sell their holdings as they believe the assets are due to an increase in value in the future. Furthermore, by borrowing money via DeFi protocols, users can avoid or delay paying capital gains taxes on their cryptocurrencies. Also, individuals can use the funds they borrow from the DeFi protocols to increase their leverage on some trading positions.

What are the Popular DeFi Lending and Borrowing Protocols?

Maker

Maker is one of the leading and unique DeFi crypto lending platforms. It allows users to borrow money via its DAI tokens. DAI is a stablecoin whose value is pegged to the US Dollar. Using the Maker protocol is available to anyone. Users can open a vault, lock collateral like ETH or other cryptocurrencies and generate DAI as a debt against the locked collateral.

The Maker protocol encourages users to take part in operational earnings via governance fees, acting as interest rates for the platform. MKR is the native token of the Maker protocol, and its holders serve as the last line of defense in the event of a black swan. As soon as the collateral value starts to decrease, MKR is minted and sold in an open market to raise more collateral. Hence, diluting MKR holders.

Aave

Another leading DeFi lending protocol is Aave. This is an open-source platform and one of the most popular DeFi lending protocols in the crypto space. Aave is a non-custodial liquidity platform for earning interests on deposit and borrowing assets. It allows the lenders to deposit their cryptocurrencies in a pool and receive an equivalent amount of aTokens, its native token. The protocol algorithmically adjusts interest rates based on demand and supply, indicating that the more a user holds aTokens, the higher the interest amount.

AAVE/USD chart. Source: FXEMPIRE

Compound

Another popular DeFi lending protocol is Compound. This is an algorithmic and autonomous money market protocol designed to unlock numerous open financial applications. Compound allows users to deposit cryptos, earn interests and borrow other cryptocurrency assets against them. By using smart contracts, Compound automates the management and storage of capital on the protocol.

As a permissionless protocol, anyone with a cryptocurrency wallet and an internet connection can interact with Compound and earn interest. Metamask is one of the wallets that support the Compound DeFi protocol. The Compound protocol supports the lending and borrowing of numerous assets, including DAI, ETH, WBTC, REP, BAT, USDC, USDT and ZRX.

How NFTs Can Be More Than Just Tools for Artists

There is little to no doubt that the world has definitely evolved and is ready to move even deeper into the NFT trend. However, like every new concept that grabs attention, many people run the risk of misunderstanding some fundamental things about NFTs.

NFTs Have Benefited the Art and Content Industries

One of the biggest misconceptions about NFTs is that they are only beneficial for artists and content creators who want to protect themselves. This misconception is completely understandable since NFTs have become especially popular because of these artists. Names like Snoop Dogg, Grimes, and more have been prominent in the push for artists to jump on the NFT train and become more self-sufficient.

Even in Africa, artists are using NFTs massively. Jude “MI” Abaga, one of the biggest hip-hop artists on the continent, has partnered with Binance and is looking at the possibility of launching his next album as an NFT. everywhere you go, artists are driving the adoption of NFTs.

Then, there’s the actual art scene. People are minting NFTs everywhere, using them to sell digital art and make money. They’re now side-stepping the conventional art industry, which involves exhibition houses and curators – all of whom take their own cut of the funds. Now, with NFTs, anyone can make money.

The same can be said for content creators. These people can build their following significantly and leverage that to sell NFTs to people. They set their own prices, and they get to enjoy all the profits that come from the sales of their tokens. If they like, they could program their NFTs so they take cuts out of any token sales that occur even after they’re done with their own purchases.

Utility NFTs: Their Rise, and Why They Look Appealing

But, NFTs are much more than this. Today, there is an interesting rise of “utility NFTs” – NFTs whose values are based on specific metrics which, to the largest extent, can be measured. Many NFT enthusiasts actually believe that these utility NFTs are the future of the industry.

Today, the NFT market is in an interesting position. Many tokens don’t specifically have a market value, and this has experts scared that the rise in popularity of NFTs will eventually create a bubble that will massively pop eventually. We saw a bit of a glimpse into this eventuality when the crypto market itself went on a downturn for months. Coins dropped significantly in value, and NFT volumes actually slowed down.

With NFT volumes rising significantly in February, things took a bit of a turn for the worse at the start of April. Coincidentally, this was also the period when the larger crypto market started what would be a months-long crash.

While things might be going great again, the crypto market has shown several signs of dangerous volatility that could wreck investors. What if we’re seeing the same thing with NFTs?

Despite the general belief that we could be in an NFT bubble, however, many experts believe that NFTs can still survive any wipeout that happens. One of the key factors that will play into that will be utility NFTs.

The concept of utility NFTs is pretty much the same as a utility token. These NFTs provide actual value, as well as the benefit of being scarce. A utility NFT could offer access to specific benefits and perks to its holder. Then, combined with the nature of being scarce, this token can drive massive value.

Several projects are already exploring the growth of utility NFTs. One interesting project is Sloties – an NFT project looking to revolutionize the gaming industry. Sloties are a collection of 10,000 NFTs built on the Ethereum blockchain. Each Slotie purchased offers ownership of an actual gaming platform’s profits. Sloties can also be used for staking, while the tokens offer additional perks like rakeback guarantees on bets and much more.

It’s easy to see the benefits that a project like Sloties will bring. The gaming industry is a real one, with billions of dollars in value and revenues. Instead of just buying an NFT for the fun of it, Sloties actually allow you to benefit from gaming.

There are many other projects using utility NFTs to their benefit – and those of the token buyers.

Should You Keep Faith in Utility NFTs?

For now, it is worth noting that utility NFTs are still in their infancy. If anything will be done with these tokens, prospective investors will need to verify the details of the utility that they claim to offer.

The cryptocurrency space is filled with several scam projects that claim to do something but aren’t true. Considering that there is still a lack of regulation in the NFT space, investors are tasked with verifying the details of the tokens they purchase.

Of course, this isn’t to say you shouldn’t invest in utility NFTs. Based on the intrinsic value that they offer, utility NFTs are actually a much better investment than just any other token out there. At the very least, they offer something. The problem is simply that you need to be more confident about the projects you’re backing by purchasing these tokens.

What is Shiba Inu? The Meme Coin Designed to Kill Dogecoin

One of the most important trends in the cryptocurrency space over the past year is meme coins. The rise of Dogecoin has led to the creation of a wide range of other meme coins as investors flocked to them in hopes of making money.

Dogecoin rallied by more than 7,000% at some point earlier this year, attracting more people to the cryptocurrency world. As a result, investors started to focus on other meme coins and invest in them looking to make as much profit as Dogecoin did.

Dogecoin chart

One of the biggest meme coins in the market is Shiba Inu (SHIB), the coin designed to “kill Dogecoin” and overtake it in the market. However, for those who are hearing about it for the first time, here is everything you should know about Shiba Inu.

What is Shiba Inu?

Shiba Inu (SHIB) is an Ethereum-based cryptocurrency that features the Shiba Inu dog. SHIB is considered by many to be an alternative to Dogecoin. However, the Shiba Inu coin was created to be the “Dogecoin killer.”

shibainu coin fxempire

SHIB is a meme coin based on the Japanese Shiba Inu dog. The meme coins are usually launched as an inside joke rather than as digital products with real-world utility although Dogecoin has been around since 2013, Shiba Inu was launched in August 2020 by an anonymous individual or group called Ryoshi. 

According to the 28-page whitepaper or woof paper, the goal of Shiba Inu’s creator was to move away from the rigid social structures and traditional mindset. Shiba Inu is designed to be an experiment in decentralized spontaneous community building” and to give power back to the “average person.”

How Does Shiba Inu Work?

Shiba Inu is an Ethereum-based token, which means that it is compatible with the vast Ethereum ecosystem. According to the developer, the Ethereum blockchain was the perfect host for Shiba Inu because it was already secure and well-established, and it allowed the project to stay decentralized.

The Shiba Inu ecosystem is comprised of three tokens and other services that users can enjoy. The three tokens are;

  • Shiba Inu (SHIB): SHIB is the project’s main currency. It is the token that powers the entire Shiba Inu ecosystem and has a total supply of 1 quadrillion. However, the developer locked 50% of the supply in Uniswap for liquidity purposes while Ethereum co-founder Vitalik Buterin was tasked with holding the remaining 50%. Buterin sold some of the tokens in his possession and donated the money to a Covid-19 relief fund in India, an act that further pushed SHIB’s price higher. Buterin burned 40% of SHIB’s total supply, reducing the possible amount available to users. 
  • Leash (LEASH): This is the second token in the Shiba Inu ecosystem and it represents the other side of Shiba. Its total supply is 107,646 tokens, far below the trillions of Shiba Inu tokens.
  • Bone (BONE): This is the governance token of the Shiba Inu ecosystem. It allows the ShibArmy to vote on upcoming proposals and has a total supply of 250 million tokens. 

There are other sides to the Shiba Inu ecosystem and they include;

  • ShibaSwap: This is the decentralized exchange of the Shiba Inu ecosystem. This is an exchange designed to allow people to trade cryptocurrencies in a decentralized manner. 
  • Shiba Inu Incubator: The incubator is designed to discover ways to honor the creativity of artists outside of the traditional artforms. It aims to breed genuine creators of art and other content. 
  • Shiboshi: These are Shiba Inu-generated Non Fungible Tokens (NFTs) available on the Ethereum blockchain each Shiboshi has a different trait, making them unique. 

Is Shiba Inu Real Money? Why has it Rallied so Much?

It is tough to think of Shiba Inu as real money. The cryptocurrency space has evolved over the past few years to involve stablecoins. Stablecoins are digital currencies whose values are tied to fiat currencies. They are the most likely to be considered real money.

SHIB/USD chart. Source: FXEMPIRE

We also have some coins such as Bitcoin, DASH, Litecoin and some others that are designed to serve as currency and have received adoption in various parts of the world. However, Shiba Inu is a meme coin, and is hard to consider it as real money. 

SHIB has been one of the best performing cryptocurrencies so far in 2021. Over the past three months alone, SHIB has added more than 500% to its value. It briefly overtook Dogecoin in terms of market cap.

The rally was caused by a wide range of things including getting listed on the Coinbase cryptocurrency exchange a few weeks ago. The rally brought so much media attention to SHIB and more investors flooded into the cryptocurrency. 

Tesla founder Elon Musk added fuel to the fire when he tweeted a picture of his new Shiba Inu puppy Floki last month. thus, generating massive retail investor interest in the meme token. 

The launch of the Shiba Inu NFTs also added to the excitement as NFTs are gaining popularity in the cryptocurrency space and beyond. There are currency unconfirmed rumors that popular stock and crypto trading app Robinhood is set to list SHIB on its platform. All these contributed to Shiba Inu recording massive gains in recent weeks. 

Shiba Inu Wallet

As one of the top 20 cryptocurrencies in the world, SHIB is very valuable in the crypto space. It is an ERC-20 token, which means that it can be stored in numerous wallets that support Ethereum-based tokens. Some of the wallets you can use to store your SHIB tokens include; 

  • Ledger Nano X (cold storage wallet)
  • Trezor (cold storage wallet)
  • Trust Wallet 
  • Ellipal Titan (hardware wallet)
  • MetaMask 
  • Coinomi
  • Lumi wallet
  • CoolWallet
  • Guarda Wallet 

What is Solana – One Of Ethereum’s Major Rivals

The cryptocurrency market has been in a bearish trend for the past few weeks. Bitcoin has lost its position above the $50k mark, while Ether has been unable to surpass the $4k mark over the past few months.

Despite the bearish trend in the market, one of the cryptocurrencies that stood out is Solana. Solana (SOL) reached a new all-time high above $200 at a time when the other major cryptocurrencies were suffering massive losses. This unusual movement in price grabbed the attention of many traders, investors, market participants, and people outside the cryptocurrency space.

As one of the leading cryptos in the world, it is not a surprise that many people want to learn about Solana and why it pumped when other cryptocurrencies were losing their value. This post looks into the Solana basics and explains its rally a few weeks ago.

What Is Solana?

The first obvious question is what Solana is. Solana is a blockchain platform specifically designed to host decentralized applications. It is similar to other leading dApp blockchains like Ethereum and Cardano.

However, Solana is an open-source project currently run by the Geneva-based Solana Foundation. The blockchain was built by developers at San Francisco-based Solana Labs. Solana has gained traction by offering something that the Ethereum blockchain has so far being unable to deliver; faster operation and lower transaction fees.

Unlike Ethereum, Solana is a PoS (proof of stake) blockchain, making it more environmentally friendly than the popular PoW (proof of work) blockchains like Ethereum and Bitcoin. It has a naïve coin called Solana and has the ticker SOL.

The proof of stake protocol used by Solana is currently preferred in the cryptocurrency space. Unlike the proof of work where massive energy is needed to run a blockchain, proof of stake makes the validator nodes on the network to stake something. In the case of Solana, the validators stake the SOL tokens. Although the validators also consume power to operate, their power consumption is far lower than that of the PoW miners.

Solana Is A Programmable Blockchain

Solana can best be described as a programmable blockchain. It is currently one of the fastest programmable blockchains in the cryptocurrency space. It is a major competitor to other programmable blockchains such as Ethereum and Cardano.

Programmable blockchains are very popular within the cryptocurrency space and beyond due to their massive functions and potential. They have the ability to store tiny pieces of code known as smart contracts. Smart contracts can be programmed to execute certain actions when the conditions of the contract are met.

For instance, if you rent a car, the dealership might initiate a smart contract that automatically pays back your deposit when you return the car in good condition. Ethereum was the first and remained the leading programmable blockchain in the world. Over the past few years, the Ethereum blockchain has attracted a wide range of developers who use it to build decentralized applications (dApps).

However, the Ethereum network continues to fall short in certain aspects, especially in terms of scalability. The network congestion sometimes leads to huge fees. The developers are currently working on ETH 2.0, migrating the blockchain from a proof of work to a proof of stake protocol. The ETH 2.0 upgrade is expected to solve the scalability issue and make Ethereum have a lower carbon footprint.

Due to Ethereum’s shortcomings, new programmable blockchains have come up and are taking some of Ethereum’s market share. The likes of Solana, Tezos and Cardano are designed to be cheaper, faster, and more sustainable than Ethereum. Solana is now the fastest of them all.

How Does Solana Differ From Ethereum?

Ethereum is currently the leader in the smart contract space, with over 70,000 nodes compared to just 1,000 for Solana. However, Solana is considered to be an Ethereum killer because of its innovation and how it is tackling some of Ethereum’s weaknesses.

Solana, through its proof-of-history (PoH) protocol, is revolutionizing how blockchains work. By allowing validators to be in charge of their own clock, the transaction verification process is reduced since the nodes don’t have to put in processing power before they can verify various timestamps. Thus, improving the speed at which transactions are processed on the Solana network. The Solana network processes up to 60,000 transactions per second, surpassing that of Bitcoin, Visa, XRP and Ethereum combined.

In addition to the transaction speed, the costs are significantly lower on the Solana blockchain. As mentioned above, one of Ethereum’s major challenges is its high gas fees. Users pay up to $50 to process a transaction on the Ethereum network. Earlier this week, Bitfinex paid $23.7 million just to move $100,000 USDT on the Ethereum network. With Solana, the fees are significantly lower, usually around $0.00025 per transaction.

How Fast Is Solana?

Solana is currently one of the fastest programmable blockchains in the world. It can process more than 50,000 transactions per second (TPS). The developers say the transaction speed can reach 700,000 TPS as the network grows. This is far better than Ethereum, which currently processes between 15 to 45 TPS.

Solana’s speed and low transaction fee have attracted numerous developers to the blockchain. A wide range of dApps and smart contract projects are now deployed on the Solana project. Thus, making it one of the most widely-used blockchains and cryptocurrencies in the world.

Coins Supported By Solana Blockchain

The Solana blockchain is becoming home to a wide range of cryptocurrencies. Some of them include;

  • Chainlink
  • The Graph
  • Waves
  • Serum
  • Audius
  • REN
  • Raydium
  • Coin98
  • Oxygen
  • Akash Network
  • Mango Markets
  • Velas
  • Civic
  • Bonfida
  • Star Atlas
  • Hxro
  • Orca
  • Kin
  • Solanium
  • Ramp
  • Step Finance
  • MAPS
  • PARSIQ
  • Frontier
  • Saber
  • Cope
  • Only 1 and hundreds of others

Why Did Solana Pump When Others Were Dumping?

There is no denying the fact that Solana (SOL) is one of the best-performing cryptocurrencies this year. SOL has forced its way into the top ten cryptocurrencies by market cap, surpassing the likes of Dogecoin and Polkadot and also competing with XRP in terms of market cap.

Although its price is now slightly above $170, Solana reached a new all-time high at $213 on September 9. This was during a time when the broader cryptocurrency market was losing most of its value.

Although other competitors such as Ethereum, including Cardano, Polkadot, Dfinity, Terra, Polygon, and Avalanche, have all increased huge gains in price over the past year, Solana’s performance was extraordinary.

A key reason for its growth is that the Solana ecosystem has the backing of FTX, one of the leading digital asset exchanges in the world. FTX has launched numerous Solana-based projects over the past few months.

The Solana project is also backed by some of the biggest investors in the cryptocurrency space, including Alameda Research, Andreessen Horowitz and Polychain. Solana also has lower transaction fees than most of its competitors.

Some market experts believe that Solana is at the beginning of its growth cycle and has the potential to match Ethereum in terms of price and market value over the next few years. As such, several investors remain bullish on the medium and long-term prospects of the Solana project.

Solana – A Look To The Future

Solana is one of the leading cryptocurrencies in the world. The cryptocurrency and its blockchain are expected to continue growing and eventually pose further challenges to the Ethereum network.

Sam Bankman-Fried is very bullish about the Solana blockchain and for good reasons. The developers continue to innovate and push for more developments. while Ethereum remains the market leader, Solana, alongside Cardano, will continue to eat into Ethereum’s market share.

In terms of price performance, many analysts are bullish that Solana’s price could top the $1,000 mark over the coming months. If the adoption and growth continue, SOL could reach ETH’s price of roughly $3,500 in the next few years.

How to Manage Risk in Your Forex Trading Account

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.

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