Top 5 Tips on How to Spot Cryptocurrency Scams in 2022

If you have been following the cryptocurrency industry closely throughout the past few years, it is clear that not everything is what it seems.

Social media platforms and phishing websites have been utilized to exploit users out of their cryptocurrencies.

This also includes non-fungible tokens (NFTs) or anything else of the value connected to their cryptocurrency wallets.

From hacks to rug pulls or any other types of cybercrime initiated by bad actors, there are seemingly new headlines daily that make their way throughout the crypto space.

Those extra careful might not fall for any of these scams, even the most complex ones. However, not everyone is tech-trained and can spot the differences between authentic and phishing websites.

Furthermore, the hacks of actual Twitter and Discord pages of legitimate projects can provide an additional barrier for those who just want to make the most out of their crypto holdings.

All of this makes trading and investing in cryptocurrencies a lot more difficult.

Suppose you are new to the crypto sphere or have been lucky enough to avoid getting scammed thus far. In that case, it is now more important than ever to educate yourself and become able to identify all of the possible scams, so you can have the highest probability of avoiding them and not becoming a victim to them.

Understanding Cryptocurrency Scams Through Real examples

The Federal Bureau of Investigation (FBI) has recently warned cryptocurrency users about numerous investment scammers on the LinkedIn platform, which significantly threaten user safety.

Sean Ragan had an interview with CNBC, saying that he believes LinkedIn has a problem regarding investment scams.

Regan had the following statement: “They are always thinking about different ways to victimize people, victimize companies, and they spend their time doing their homework, defining their goals and their strategies, and their tools and tactics that they use.”

However, LinkedIn isn’t the only social media platform with a reputation for cryptocurrency scams.

The Federal Trade Commission reported that U.S. cryptocurrency traders lost $575 million due to investment frauds from January 2021 to March 2022.

The popular NFT collection Bored Ape Yacht Club (BAYC)’s Instagram page got compromised on April 25.

At this point, we saw the theft of over $2.5 million worth of NFTs. Then, the creators of the NFT set, Yuga Labs, had their Discord server compromised, where through phishing links, the hackers stole 200 ETH ($360,000 at the time) worth of non-fungible tokens (NFTs).

These are just some notable examples. However, there are many more, so protecting yourself from these scams is a must.

The Top 5 Tips on How to Spot and Protect Yourself From Cryptocurrency Scams in 2022

With all of that in mind, these are the top 5 tips you need to be aware of and utilize within your daily crypto activities.

Avoid Phishing websites

For this example, we will be using MetaMask. Let’s, for example, say that you want to visit the official MetaMask website so you can download the wallet extension and log into it.

Well, the default URL address for MetaMask is “metamask.io.”. But if you are not careful, you could find alternative website URLs that show up as an Advertisement (Ad) on the top Google search result, such as meetamask.io, maskmehaa.io, maskingmeta.io, and so on.

Some can be extremely close to the real deal, so ensure that you always check that you are on the authentic wallet website before downloading and installing any extension or logging in with your credentials.

Never Give Out Your Private Keys

If you use a wallet where you control the private keys, remember that no legitimate wallet supplier will ever ask you for your 12-word seed phrase.

This should always be kept for your eyes only and nobody else.

With your public key, nobody can compromise your wallet, but the second someone gains access to the password you have or the 12-word seed phrase, your cryptocurrencies are gone forever.

Double-Check The Authenticity of Messages

There have been numerous scams online where the “support team” for a specific project or the “promotional team” for a specific NFT collection will message you.

Here, they would tell you that your wallet “has been compromised” and that you must send them information to recover it.

Avoid these types of scams at all costs. Specifically, even if it’s an influencer you trust, always double-check who messaged you, when the account was created, when the URL was registered, and if there is a genuine company behind the messages.

These will also typically be investment scams, promising huge returns on your initial investment in a project that might eventually be a rug pull.

Again, never, under any circumstances, share your private keys, but avoid communication with fake or scammer profiles altogether. Through social engineering, they will find a way to scam you if they are resilient, so be wary.

Never Access Your Web-Based Wallet on Unsecure Websites

You might enter a website that will require you to connect your cryptocurrency wallet to access it. This can be a play-to-earn (P2E) game most commonly or a non-fungible token (NFT) collection.

No matter what the project is, if the URL seems shady, if there is no SSL certification, and if the website as a whole looks even slightly off to you, do not connect your wallet, as even something as simple as logging in while that website’s tab is open could lead to the compromise of your wallet.

Do Not Easily Accept Free Non-Fungible Tokens (NFTs)

The rug pull scam is by far one of the most common types of scams within the NFT space, where developers pump effort into promoting a project, and as soon as they sell the NFTs, they abandon it, leading to the project losing all value.

A form of marketing that these companies use is where they give NFT drops in the form of a giveaway to users that share the project online, invite new people to the project and genuinely convince them to invest in the collection.

Always research and ensure that the project is legitimate before accepting any free NFT. The chances are high that it might be a scam, as in some blockchain networks, minting NFTs can be costly, especially when creators are minting thousands of NFTs.

Choosing the Best Forex and CFD Broker

Instead, they have to trade through a financial services organization, known as a forex or CFD broker. These businesses act as ‘intermediaries’ or ‘middlemen”, perfectly explaining their function and importance in the trading process.

New traders have literally hundreds of brokers to choose from when opening a forex or CFD account. This diversity makes it harder to find a perfect fit for an individual’s skill level, educational needs, and initial trading stake. To assist in your investigation, we’ve organized a checklist to print out and keep at your desk, identifying key factors to review when choosing a forex or CFD broker.

KEY POINTS

  • A robust trading platform is needed to trade our modern electronic markets.
  • Good brokers offer resources and value-added services that support the client’s objectives.
  • Choose a broker who is regulated and disciplined by a local regulatory body.
  • Match the broker choice with your skill, experience, and capitalization level.
  • Look for hidden costs before opening a brokerage account.

Investor Protection & Regulations

Look at regulation and domicile when selecting a forex or CFD broker, examining the firm’s home page for compliance with competent regulatory agencies (see ‘How Do Brokers Make Money’). A regulated broker has met operating standards imposed by the regulatory body in the country or zone of domicile (headquarters).

Standard regulatory requirements include adequate capitalization, segregation of accounts in order to protect client funds, and annual filings that can be easily accessed by applicants. Additionally, regulation provides reimbursement up to a statutory amount if the firm becomes insolvent and ensures the broker upholds rigorous standards as a financial service provider.

Major countries/zones with financial regulatory agencies, backed up with strict enforcement:

Tradable Products

Examine the list of tradable currency pairs before choosing a forex or CFD broker.  At a minimum, the brokerage should offer all major currency pairs (EUR/USD, USD/JPY, GBP/USD, USD/CHF) and cross-currency pairs, as well as so-called commodity currency pairs (USD/CAD, AUD/USD, NZD/USD). Traders who take exposure solely in these instruments won’t need a long list of minor pairs from faraway places that aren’t of interest.

However, a robust list reflects a broker’s willingness to go the extra mile in providing customers with the opportunity to trade lesser-known pairs when a shock event or other market mover hits that part of the world. For example, the USD/MXN pair attracted huge buying and selling interest when the United States renegotiated NAFTA with Mexico and Canada. Just keep in mind that minor and exotic pairs usually incur much wider spreads and higher commissions.

Look at the margin and leverage offered for each currency group. European regulations have capped margin on forex and forex CFDs since 2018, with a 30:1 limit on major currency pairs and 20: 1 limit on non-major currency pairs. Make sure to read the fine print because EU-regulated brokers are also required to prominently disclose the percentage of clients who lose money and provide negative balance protection to ensure the account never drops below 0.

Account Opening

Opening a ‘live’ account at most brokerages will require personal information about your current income, savings, marital status, trading experience, and risk tolerance. You’ll also have to provide minimum opening account capital, which varies from broker to broker.

On the other hand, a free demo account just requires a name and email address, giving potential customers an opportunity to ‘kick the tires’ before committing real money.  In many venues, you can go through an instant ID verification process and access the live platform in just a few minutes. In the United States, applicants also have to provide a social security number for tax purposes.

Forex and CFD brokers may also offer tiered account options that cater to different risk, capitalization, and experience levels:

  • Micro Account: One lot is equivalent to 1,000 units of the traded instrument.
  • Mini Account: One lot is equivalent to 10,000 units of the traded instrument.
  • Standard Account:  One lot is equivalent to 100,000 units of the traded instrument.

A low minimum initial investment is required to open a Micro or Mini account. The Standard account requires a higher initial investment, although the minimum varies from broker to broker. Given these tiers, it’s best to select a trading account that is commensurate with your investment capital.

Deposits & Withdrawal Options

The new account can be funded through personal check, debit card, ACH, wire transfer, or an online service like Paypal or Skrill. Some brokers will allow credit card funding but that’s no longer typical. Many brokers also let clients choose their base currency, which will be the country of origin in most cases. Funding completed through personal or bank checks may delay account access until those funds clear.

Withdrawal options vary from broker to broker and can be hard to find at web sites. This is often intentional, with the broker seeking to hide fees and standard delays in access to withdrawn funds. Processing times can vary from 24 hours to several weeks, so read the fine print closely to avoid frustration. Withdrawals are also subject to minimum amounts that vary from broker to broker and, in most cases, must go through the originating funding source, due to money laundering considerations.

Web/Desktop Platforms

The trading platform is the client’s gateway to the forex market so the applicant must ensure the interface performs all of the functions needed to trade profitably, and is reliable, with few complaints of outages on public forums. Many brokers provide a choice of platforms but the majority of newcomers should stick with the default, at least at the beginning. Also look for desktop and web versions that offer equal functionality.

Most platforms are provided through third party solution providers like MetaQuotes Software, the forex industry’s standard-bearer. Some brokers also build ‘in-house’ proprietary platforms, in an attempt to differentiate themselves from industry rivals. A proprietary platform often provides a host of features not found on a standard platform, added in reaction to input from the broker’s client base.

Look for these standard features on all trading platforms:

  • Comprehensive charting package
  • Customizable watch lists
  • Wide range of technical indicators
  • One-click trading
  • Sophisticated order entry
  • Risk management tools
  • Portfolio management

These features play a crucial role in ensuring the new trader enjoys a seamless and productive trading experience. Even so, it’s a matter of personal choice because most platforms offer the same bells and whistles. The broker’s free demo account provides a perfect way for applicants to find the best fit for their experience and capitalization level. Walk away and don’t look back if the broker doesn’t provide a demo account.

When looking for a forex or CFD broker, you’ll quickly discover the huge popularity of MetaQuotes Software’s MetaTrader, which is now offered at more than 80% of all brokers in the United States, Europe, and Australia. This mature platform is a perfect choice for new forex traders due to easy customization, robust charting, and an API that supports hundreds of add-ons. The platform is also available by desktop, on the web, and through mobile devices, allowing easy synchronization while on the go.

Mobile Trading Platforms

All forex and CFD brokers should provide slimmed-down mobile trading platforms so you don’t have to stare at a computer screen all day. These should automatically synchronize with desktop and web versions but don’t expect all the features of bigger platforms.  Major platforms, including Metatrader, now offer mobile and tablet versions for Android and iOS. Note that some brokers will ‘self-brand’ popular mobile platforms so you might need to read the fine print to find the app’s origin.

Trading Features

Brokers try to distinguish themselves from industry rivals by offering additional, value-added services that include free market analysis, real-time news feeds, live streams, and trading signals. Most of these services are provided free of charge but brokers may require minimum account size for access.

Applicants should make a checklist of advanced features when shopping for a broker. In addition to standard add-ons, look for tools that include market scanners, VPNs, and notification alerts. Also check for discounts or free trading for high volume customers. Many traders look for advanced charting or alternate platforms that go beyond the capabilities of standard offerings. Some brokers even offer third-party integration so real-time data can be used in an ‘off-the-shelf’ platform, like Elliott Wave software.

Day traders and scalpers also benefit from specialized value-added services. Given time frames for these strategies, look for a diverse selection of instruments to scout for short-term trading opportunities. These can include a signal service, tools like an economic calendar, market news filtering, and real-time earnings releases.

Commissions & Spreads

Unlike the majority of financial markets, forex and CFD brokers usually profit through spreads rather than commissions, explaining why many of these folks advertise their services as ‘commission-free’. Brokers make money by taking the spread for each buy and sell transaction passing through their hands. The spread marks the difference between the buying price and the selling price. For example, if the bid/ask for the EUR/USD currency pair is priced at 1.0875/1.0878, the spread is 1.0878 – 1.0875 = 3 pips.

As a forex trader, you will come across three types of cost structures. The type you receive will depend on the broker’s business model:

  • Fixed spread:  the spread doesn’t change as price fluctuates so you know the cost before you trade.
  • Floating spread: the spread is variable, stretching and contracting in reaction to market volatility.
  • Commission: calculated as a percentage of the spread. You should know this cost before you trade.

Traders looking for predictability with transaction costs prefer fixed spreads. Conversely, traders looking to save money through the entry and exit timing prefer floating spreads. Ultimately, specific trading needs and transaction history will determine the right choice.

Bonus & Promotions

Brokers may offer account bonuses that include a month or more of no-commission or no-cost trades, loyalty rebates, and even iPhones. Bonuses and promotions for frequent traders have become quite common as well, with customers receiving volume discounts or a basket of free trades after passing a monthly transaction threshold. Some brokers have also introduced generous rewards programs that pay customers who achieve financial commitment ‘levels’.

Customer Support

Newcomers forget to ‘factor-in’ customer support when choosing a broker because they don’t understand this group’s role in the ultimate trading experience. It’s not a question of ‘if’ you’ll need their assistance but ‘when’ because a time comes, sooner or later, when prompt customer service is needed to avoid financial losses. When it happens, you need timely access to knowledgeable individuals who don’t hate their jobs. As a result, you should confirm the broker provides reliable customer support, verified by reviews and in public forums.

Look for multiple ways to contact customer support because some brokers still rely on antiquated ticketing systems and don’t offer real-time chat or a toll-free number. All reputable brokers provide clients with several means of contact, including e-mail, live chat, support ticket, and toll-free telephone. Bottom line: don’t put yourself in the uncomfortable position of worrying what your broker is going to do with your problem … or your money.

Research

The best forex and CFD brokers offer plenty of research resources at no extra charge, letting new traders do ‘deep dives’ on the currencies they want to buy or sell, with an eye on macro conditions or developing issues that may affect price action. These resources should include daily reports from forex experts, long-term technical analysis, dates to watch, and live webinars featuring presentations on major forex pairs and emerging opportunities.

Trader Education

The depth of educational resources at a forex or CFD broker reveals the level of their commitment or lack of commitment to new traders. Look for an on-site trading ‘academy’ or ‘university’, with dozens of useful up-to-date articles and video programming to accelerate your learning and build lifetime skills. On the flip side, walk away if your search through a broker’s website comes up empty, or the few available resources are out of date or neglected.

The Trading Experience: from Novice to Professional

New forex traders need these broker resources to start out in the trading game:

  • Comprehensive education:  a suite of educational materials to assist new traders in skill mastery. These can include webinars, live streams, videos, courses, guides, and articles.
  • Demo accounts:  Reputable brokers offer free demo accounts. They are especially useful when starting out or test-driving a broker’s platform before opening a live account.
  • User-friendly platform: As a new trader, you don’t need complicated software with lots of bells and whistles. For now, find a popular, easy-to-navigate platform with lots of customization features.

As you progress, your trading needs will differ significantly from those of a new trader.

Experienced forex traders need a broker who provides these value-added services:

  • Comprehensive trading tools:  a variety of tools including commission calculator, economic calendar, and advanced charting with tons of indicators and one-click trading.
  • High leverage: experienced traders seek leverage to multiply their capital. Just keep in mind that leverage increases risk and reward equally.
  • Low spreads: spreads can undermine long-term profitability. Look for higher-tier account types that lock in lower spreads and offer volume discounts.

Questions to Ask the Broker

  • Is (broker) regulated?
  • Where is (broker)based?
  • How does (broker) make money?
  • How do I deposit into the (broker) account?
  • What is the minimum deposit for (broker)?
  • How do I withdraw money from (broker)?
  • What is the maximum leverage at (broker)?
  • How do I open an account with (broker)?
  • Does (broker) use MetaTrader or a proprietary platform?

Summary

Finding the best forex or CFD broker is hard work but the effort pays off, greatly improving your long-term prospects as a trader. This beginner’s guide provides a good first step in that selection process. However, everyone is different and your best choice may require a delicate balance between transaction costs, perks, platforms, and all the other resources needed to trade the forex market.

To simplify your search, FX Empire conducts regular in-depth reviews of all major forex and CFD brokers, vetting each broker on our recommended list to ensure they meet high industry standards. We strongly believe these financial institutions will provide the services needed to survive and prosper in our modern electronic markets.

Benefits of Contracts for Differences

CFDs allow forex traders to take long or short exposure using leverage and settle the transaction with cash, rather than delivery of physical assets.  These instruments differ from buying or selling the underlying asset because the contract holder doesn’t need to post 100% of capital and does not own the asset. CFDs are not allowed in the United States.

The CFD trading stake only needs to cover the net change from the entry price to the exit price. Compare this to a forex broker who requires a higher percentage of capital in the account to buy or sell currency pairs. CFDs can be used to trade directionally, or you can buy one CFD and simultaneously sell another CFD, capturing the relative change in value in a ‘pairs trade’.

KEY POINTS

  • Contracts-for-difference are derivative instruments that track many assets.
  • CFDs provide leverage based on the buy and sell price, rather than the underlying assets.
  • CFDs support greater total exposure than forex cash markets.
  • EU rules limit the margin on forex CFDs to 30:1 on major pairs and 20:1 on minor pairs.
  • Limit CFD exposure on a single trade to a small percentage of total capital.

Do CFDs Provide Leverage?

The contract for difference has an embedded leverage feature that differs from broker to broker, and asset to asset. Leverage increases both trading profits and trading losses, allowing the market participant to take an exposure with borrowed capital. Current European Union regulations limit leverage on major currency pairs to 30: 1 and minor currency pairs to 20: 1. In addition, those rules provide negative balance protection so the trading account never goes below zero.

Forex contracts for difference are bought or sold in standard, mini, or micro ‘lots’, or unit sizes, that correspond with $100,000, $10,000, or $1,000 of the underlying forex pair, respectively.  So, for example, a broker following EU rules will allow the trader to purchase three EUR/USD CFD mini lots ($30,000) while posting collateral (free account capital) of just $1,000.

It’s important to understand how leverage will impact your trading returns, positively and negatively.  For example, if you purchase $30,000 of EUR/USD using 30: 1 leverage in a $1,000 account, it will take just a 3.33% ($30,000 * .0333) move to either double your money or wipe out your capital. So, while leverage is an attractive tool, it’s also a double-edged sword.

To use leverage, the trader needs to open a ‘margin’ account as opposed to a ‘cash’ account. Each broker has different criteria for opening a margin account but most require a higher minimum stake than a cash account. In addition, the applicant may need to answer questions about trading experience and investment knowledge.

After opening a margin account, the trader needs to maintain a specific amount of capital. Each position requires the account holder to post a specific amount of funds from this capital pool, referred to as ‘initial margin’.  This is the money needed to cover the loss if the trade doesn’t work out as expected.

The broker will ensure the account holder has funds to cover potential losses or positions will be closed automatically to cover the deficit. As the market moves, the amount of margin needed to maintain the trade will change. If the value of the position decreases, the broker will take a ‘maintenance margin’ to cover losses in addition to the initial margin. If the value of the position increases, the initial margin will remain unchanged, but the maintenance margin will decline.

The margin calculation is in real-time, telling the broker the minimum amount of capital required for the account holder to maintain the trade.  If the position moves against the trader and account capital isn’t increased, the broker has the right to liquidate the position.  It’s vital that new forex traders understand the written margin agreement and the broker’s rights to liquidate positions before starting to trade CFDs.

Managing Your Risk

Trading CFDs can be risky, especially if you use leverage, so a written trading plan (trading rules) must be in place before entering a position (see ‘Psychology and Trading’). Limit the amount of individual trade exposure to a small percentage of the total account size, providing a measure of safety as your trading skills grow.  Place stops on all trades, cut your losses and, if the market moves in your favor, adjust the stop and lock in some profits.

Summary

Contracts for difference (CFDs) are financial derivatives that allow market participants to trade the forex market without purchasing or selling currency pairs. CFD pricing tracks underlying assets and provides leverage to enhance returns. Trading CFDs requires opening a margin account at a CFD broker. Leverage can significantly enhance forex trading returns but will also generate damaging losses, especially when applied incorrectly. A well-constructed risk management plan is needed to trade CFDs for consistent profits.

Psychology and Trading

Unfortunately, new participants get punished with this naive mentality, shocked to discover that ‘winning’ trades aren’t enough to become successful in the forex market.

Trading is a head game and it’s not the market you need to beat … it’s yourself. Psychological habits built up over years or decades affect our trading decisions and stand in the way of long-term profitability. Psychology is the study of the mind, behavior, and behavior patterns. It’s what makes us do the things we do and how we overcome obstacles that are holding us back.


KEY POINTS

  • Discipline is the key to long-term market survival.
  • New traders need to write down trading rules and follow them.
  • Greed and fear control the buy and sell decisions of losing traders.
  • Most folks have trouble taking losses, which is a required skill for profitable trading.
  • Control emotions by limiting individual trade risk to a small percentage of total capital.

Trading Discipline: The Foundation to Profits

Trading discipline is the foundation to profits because it provides a set of rules to follow that lower the frequency of self-inflicted losses. We’re all human, prone to mistakes and miscalculations that no discipline can eradicate, but rules optimize this behavior so it doesn’t drive us insane. Even so, it won’t extinguish all greed and fear, the two strongest trading emotions and hardest ones to overcome.

Write down a set of trading rules to follow religiously to lower the impact of greed and fear. It’s harder to follow those rules than to put them on paper due to the destructive habits we’re trying to overcome. Rules can be as simple as trading just once per day or as complex and multi-leveled as entering a trade only when an instrument, for example, (1) bounces from support (2) after a bullish breakout, (3) confirmed by a bullish crossover in MACD and (4) rising RSI.

The forex market can evoke intense anger and frustration when it doesn’t do what you expect. Grudge trading, revenge trading, and trying to ‘get back at the market’ with wild bets are all deadly and real ways to lose your trading capital. Rules are intended to keep you from making trades based on blindness, triggered by these dark emotions, and the most important step you can take on the road to profitability.

List of Simple Rules

Here is a list of simple rules for speculative forex traders.

  • “I will risk no more than 2% of capital on a trade”. (Using a percentage instead of a fixed amount allows the trade size to grow or shrink, depending on account balance, in order to maximize profits and minimize losses).
  • “I will always trade with the trend. I will determine trends by price action, trendlines, moving averages, and momentum indicators”.
  • “I will only enter on confirmed long and short entry signals. My signals are bullish or bearish crossovers in relative strength and momentum indicators, confirmed by a breakout or breakdown of the 50-period moving average”.
  • “I will not enter if price action is within 3% of resistance for a buy trade or 3% of support for a sell (short) trade”.
  • “I will use support and resistance as exit targets. If the price reaches a target, I will exit to take profits”. (Some profits are better than no profits and infinitely more satisfying than losses).
  • “I won’t have more than one trade open on one asset at a time”.
  • “I won’t have more than five trades open at the same time, or risk more than 5% of account capital at one time”.
  • “I will always follow my rules”.

The last rule is the most important rule of all. It doesn’t make sense to have rules if you don’t follow them.

Negative Psychological Factors

The following list identifies the biggest reasons that traders lose money. These often-unconscious emotions generate bad decisions and must be addressed with specific rules to reduce negative fallout. When you take emotions out of the equation, better decisions, more consistent wins, and capital preservation will naturally follow.

  • Fear: one of the market’s most vicious emotions. Fear can keep you from making a good trade, or keep you from taking a timely profit. Fear of losing money will keep you awake at night but don’t let that stop you from trading. The solution: keep trade size small so one loss can’t hurt too badly and you still have the capital to trade.

Scared Trader

  • Greed: is as damaging as fear but the positive feelings make it harder to recognize. Greed is the other face of fear. Greed is the fear of losing profits you don’t have, or the desire to make big trades and take even bigger profits. Greed rears its ugly head when we’re doing well, taking most of us by surprise. In its most common form, profits build confidence beyond the current experience level, invoking greed that encourages over-aggressive trades and excessive leverage.

Greedy man

  • Ambition: a required trait for long-term success but a noose around the trader’s neck when it isn’t controlled.  Admittedly, it takes a ton of raw desire (and adrenaline) to succeed in the financial markets but ambition becomes dangerous to survival when it triggers bad decisions. Comparing results to another trader’s performance and letting that influence your decisions offers a perfect example of runaway ambition.
  • Loss: an inevitable part of trading that can be managed through rules and discipline. The goal is to take ‘appropriate’ losses while avoiding catastrophic career-ending losses. Position sizing is the key to loss management (2% rule), and not getting blinded by greed or fear and throwing away money. Walk away if you get frustrated from a string of losses.
  • Hope: turns against you when the ‘ticker tape’ turns against you. It makes sense to hope that your hard work pays off but the train goes off the tracks when ‘hoping’ a trade pays off the mortgage, buys a vacation, or saves a marriage. That’s ‘gambling’ not trading, a perfect way to lose your trading stake and wash out of the forex market.

Summary

Negative psychological traits and their impact on trade decisions need to be studied and mastered to succeed in the forex market. Putting it bluntly, emotions need to be removed from forex decision-making to be profitable in the long term. That requires specific rules, the discipline to follow them, and the ability to walk away when things go haywire.

Seven Common Trading Mistakes

In many cases, these folks just made dumb mistakes that could easily have been avoided, given the proper guidance and discipline.


KEY POINTS

  • Common mistakes force the majority of forex traders to ‘wash out’ and leave the markets.
  • Poor trend recognition is a major reason why traders fail.
  • Leverage is deadly to new traders, encouraging unskilled participants to risk too much capital.
  • The chosen market interface (platform) has to meet the trader’s specific needs.
  • Stop losses keep traders ‘in the game’ long enough to develop important skills.

Here are the most common mistakes made by new forex traders.

1. Choosing the Wrong Platform

A robust platform is essential if you want to trade the forex market. The ‘right‘ platform will provide solid educational resources, access to news, a dependable real-time feed, an easy-to-read trading interface, and a variety of trading signals. The software should also include access to major currency and cross-currency pairs, as well as minor and exotic pairs you find of interest.

2. Risking Too Much

Newcomers let the fear of missing out (FOMO) take control, encouraging excessive risk. This is a classic mind-cramp that starts when new traders see missed opportunities and wonder how much they would have gained while forgetting much they could have lost. Say you lose 50% of your capital on a single trade. You now need to double your money on the next trade, just to break even. That isn’t sustainable, especially if you’re just getting started in the forex market.

Only trade what you can afford to lose. A good rule of thumb: risk no more than 2% of capital on a single position, or a combination of correlated positions (pairs that move together). The percentage might seem small but it’s an effective methodology to stay in the game long enough to develop profitable skills.

Another advantage: you’ll stay calm and not lose your cool the next time you’re stuck in a losing trade. It will also discourage closing out good trades too early out of panic because you’re now willing to lose up to the percentage limit.

3. Ignoring Longer Time Frames

The longer the trend higher or lower, the stronger and more durable it will be. Many traders walk into the forex market with a day trading mentality, getting sucked repeatedly into 1-minute to 15-minute chart signals. However, trends on hourly, daily, and weekly time frames exert much greater control, causing the majority of contrary short-term signals to fail. For example, a dip on a 15-minute chart means nothing without a review of higher time frames.

4. Trading with Poor Risk-to-Reward Ratio

The act of trading releases adrenaline and focuses attention, generating addictive sensations that aren’t impacted by profits or losses. This bad chemistry induces the new trader to take positions with poor profit potential and excessive risk, just for the thrill of ‘being in the market’. Rigid discipline and unbiased reward-to-risk analysis is needed before taking a trade to overcome this common flaw. In most cases, stick to opportunities that generate profits of at least three times expected losses if trades turn against you.

5. Not Using a Stop Loss

Placing a stop loss at the right price marks the difference between prosperity, survival, and losing everything. The forex market becomes enormously volatile at times, carving near-violent price swings with little or no warning. Add in excessive leverage and the new trader faces a potentially catastrophic loss in just a few minutes. Even walking downstairs and making a sandwich can trigger career-ending losses so it’s vital to place a stop after entering a new position.

6. Trading Difficult and Unclear Patterns

Take only the most promising profit opportunities and walk away from everything else. Do your homework no matter how long it takes, looking for nearly-perfect technical patterns or fundamental set-ups. Beware of form-fitting when doing your research. An untrained eye can easily block out aspects of a chart that don’t fit the pre-established bullish or bearish bias. When in doubt, rely on cross-verification that looks for confirmation through three, four or even five different types of indicators or analytical methods before taking the trade.

unclear pattern

7. Losing Control of Your Emotions

A profitable trading career requires the same level of mental discipline as building a successful marriage or raising children. If you lose control of your emotions in other aspects of your life, expect the same thing to happen when a trade goes against you. Tobacco, alcohol, THC, and gluttony all contribute to a trader’s emotional state so it’s a good idea to start the journey by developing good health habits, getting a good night’s sleep, and doing a little meditation.

Frustration

Summary

New traders come into the forex game hoping to ‘score big’ and take home a quick fortune. Then reality bites, generating unexpected losses that lower confidence and generate waves of bad decision-making. Survivors eventually learn that profitable trading is a lifetime pursuit, in which the practitioner controls his or her emotions and lets numbers and signals decide buy and sell decisions, rather than greed or fear.

Basics of Forex Trading – Part 2

As a trader, you’ll have access to all or some of these venues, depending on the services provided by your broker. In addition, let’s introduce the three types of trading styles you can choose, depending on your account size, willingness to watch the forex market in ‘real-time’, and long-term goals.


KEY POINTS

  • Currencies can be traded through spot, forwards, and futures markets.
  • Forex traders can take positions lasting from a few seconds to a few months or years.
  • The majority of forex trading strategies follow the trend, higher or lower.
  • Trends and counter-trends can be subdivided into much longer and shorter time frames.
  • Charles Dow’s work on trends more than 100 years ago is still used every day by forex traders.

Spot Market and the Forwards & Futures Markets

Market participants can take risks in three types of forex markets: spot market, forwards market, and futures market:

  • Spot Market: the most popular of the three, with traders worldwide exchanging ‘real assets’ through an electronic communications network, broker dealing desk, contracts for difference, or direct interbank system. Prices on the spot market are based on supply and demand.

Spot market

  • Forwards Market:  a more sophisticated venue, accessed by international companies and large investors seeking to hedge currency risk. For example, McDonald’s might enter into forwards contracts to lower the risk of exchange rate fluctuations and price shocks in other parts of the world. The parties to a forwards contract choose agreed-upon pricing, which can differ greatly from interbank or futures quotes.

Forward Market

  • Futures Market: the most popular forex venue prior to the advent of retail forex brokers. Futures contracts are based upon a standard size and settlement dates on the Chicago Mercantile Exchange (CME) in the United States and regulated by the National Futures Association. Smaller exchanges in other countries also offer currency futures contracts. Minimum price increments, delivery, and settlement dates are determined by the contract and the exchange is the counter-party in all cases.

Different Trading Styles

The majority of retail forex traders follow one or more of three main strategies and methodologies:

  • Day trading
  • Scalping
  • Swing (position) trading

Day trading and scalping are two of the most aggressive and active trading styles. In both cases, positions will be closed before the end of the active session. However, these styles differ in trade frequency and holding period.

Scalping techniques take advantage of very small movements, often buying and selling within a few seconds or minutes. Scalpers analyze very short-term charts, looking at 1-minute to 5-minute price action for clues to directional impulses. High transaction costs eat up returns with this high volume trading strategy, requiring a high win-to-loss ratio to book consistent profits.

Day trading techniques focus exposure on 5-minute to hourly charts, looking for directional impulses lasting from one to six hours, as a general rule. Occasionally, day traders will ‘take-home’ a position, holding it overnight while seeking greater profits or an important move at the start of the next session.

Swing trading techniques are longer-term, with positions held for days or weeks. A sizable minority of swing traders also review long-term signals and hold positions for several months.  The chosen method determines which price charts to follow, looking for buying or selling signals on hourly, daily, and even weekly charts.

Forex traders use different types of entry and exit orders, depending on their trading styles. For example, scalpers use market orders more often than swing traders because it lets them enter or exit positions instantly. Limit orders are more useful for day traders and swing traders because positions can be taken at pre-determined prices. In addition, it’s important to use stops on all, day and swing trades to limit losses, in case the market decides you’re wrong.

The Importance of the Trend in Forex Trading

Forex traders follow interest rates and the world economy but most rely on technical analysis to evaluate major trends and make trading decisions. This classic approach depends upon three basic assumptions:

  • Prices discount everything.
  • History tends to repeat itself.
  • Prices move in trends.

The majority of newcomers think prices only go up or down but Dow Theory asserts there are actually three trends in the market: up, down, and ‘sideways’ or rangebound. According to Charles Dow’s work, 100 years ago, investors and traders need to look at the sequence of highs and lows to determine a trend’s long and short-term direction.

Downtrend

uptreng

Sideways

Specifically, his theory states an uptrend is generated by higher highs and higher lows while a downtrend is generated by lower highs and lower lows. In addition, when neither buyers nor sellers have control of the market, prices evolve within a lateral consolidation, also called a ‘trading range’.

ups and downs

The theory categorizes relationships between trends in different time frames, which may converge with each other or diverge from each other. According to Dow, each trend is formed by three other trends: ‘primary’, ‘secondary’, and ‘minor’.

A primary trend lasts more than a year and signals a bull or bear market. Within a primary trend, a secondary trend goes in the other direction, carving a pullback lasting between three weeks and three months. Finally, minor price action is common within the secondary trend, lasting less than 3 weeks.

Traders and technicians have refined Dow’s brilliant trend observations over the last century. We now understand, in our fast-moving modern electronic markets, that primary, secondary, and minor trends can evolve over days or weeks, rather than months or years. Even scalpers apply Dow’s work when flipping positions in the 21st century, using 1-minute to 5-minute charts to determine the primary trend.

Summary

Market participants can take forex exposure through a variety of cash and derivatives markets but most trade in a cash market through a forex or contracts-for-difference broker. Most forex traders speculate on currency prices through time-based trend-following strategies that include scalping, day trading, swing trading, and long-term investment. The majority of forex trading falls in-between these extremes, with positions open for a few hours to a few days.

Basics of Forex Trading – Part 1

What is the forex market? Why is it a great market to trade? What is a currency pair and how it is read? What are the major terms and concepts that forex traders need to learn? These are some of the questions you will find answers to at the end of this series.

Forex trading can be an exciting and lucrative activity, but it can also be tough, especially for beginners. New market participants underestimate the importance of financial education, lack risk management skills, tend to have unrealistic expectations, and fail to control their emotions, pushing them to act irrationally and impair their performance. In addition, traders in all markets have to accept drawdowns and losses because the best strategies only work part of the time.


KEY POINTS

  • The forex market is the largest and most liquid financial market in the world.
  • Traders speculate on the foreign exchange through currency pairs.
  • A variety of factors affect the price of a currency in relation to a second currency.
  • The trader opens and closes positions through buy, sell, stop, and limit orders.
  • Traders use margin and leverage to increase reward and risk.

What is the Forex Market?

The foreign exchange market, also called ‘forex’ or the ‘FX market’, is a global decentralized venue where the world’s money is exchanged through the buying and selling (short) of different currencies. This trading takes place through transactions at brokerages, over-the-counter (OTC) markets, or via the interbank system, rather than centralized exchanges.

Many types of market participants trade the forex market, including private individuals (retail traders) working from home on personal computers or on the road through mobile devices. Thousands of professionals also trade forex through funds, institutions, central banks, and commercial banks, among others.

Forex has grown into the world’s most liquid market for the following reasons:

  • Its Enormous size, with trillions of dollars in daily transactions
  • 24-hour access between Monday and Friday
  • Wide variety of currencies and currency pairs
  • All levels of volatility, from quiet price action to historic uptrends and downtrends
  • Low account minimums
  • Low transaction costs (commissions, spreads, fees, and interest)

Forex trading is conducted through cash-based spot markets, as well as derivatives markets that provide sophisticated access to forwards, futures, options, and currency swaps. Private individuals generally trade forex to speculate on higher or lower prices, making a profit or loss on each closed position. On the other hand, most institutional forex activity is geared towards hedging against currency and interest rate risk or to diversify large portfolios.

New traders open accounts at forex or contracts for difference (CFD) brokers, taking exposure when they speculate on currency pairs, like the Euro vs. U.S. Dollar (EUR/USD) or U.S. Dollar vs. Japanese Yen (USD/JPY). At a typical forex broker, the participant opens a buy or sell (short) position in a decentralized market and books a profit or incurs a loss on the difference between the opening and closing prices.

Exposure at a CFD broker is taken between the trader and broker, establishing a legal obligation to exchange the difference between the entry and exit price of the asset, which can be a currency pair or other financial instrument that includes stocks, bonds, and futures. Forex lot sizes are uniform regardless of currency pair while CFDs have greater size flexibility. This advantage translates into greater risk control and customization of a trader’s experience level and market strategy.

What Moves the Forex Market?

Many factors move the forex market on a daily basis. Forex traders keep 24-hour economic calendars close at hand because regularly-scheduled data releases generate the majority of currency pair rallies and declines, especially when numbers fall outside expectations projected by experts. Global shock events and political developments move currency markets as well, with an election, skirmish, or natural disaster translating into highly-volatile price action.

Economic Calendar

Reading a Forex Quote

Foreign exchange is always quoted in pairs. For example, in the EUR/USD currency pair, the Euro (EUR) is the ‘base’ currency while the U.S. Dollar (USD) is the ‘quoted’ currency. The quoted currency is always the equivalent of one base currency, so if the EUR/USD exchange rate is worth 1.1222, you will get $1.12 for €1.00.

Note how the EUR/USD currency pair has four decimals. This is typical of most currency pairs, except those including the Japanese Yen (JPY), which displays only two decimals. When a currency pair moves up or down, the change is measured in ‘Pips’, which is a one-digit movement in the last decimal of a currency pair. So, for example, when the EUR/USD rallies from $1.1222 to $1.1223, the EUR/USD has increased by one Pip.

Forex Quote

The broker’s trading platform will display two prices in a currency pair quotation: a SELL price on the left (BID price) and a BUY price on the right (ASK price). The difference between these prices is called the ‘spread’. The spread is pocketed by the broker and is one of the main ways in which the company makes money.

A buy order that’s filled above the quoted ask or sell order that’s filled below the quoted bid incurs ‘slippage’, one of the biggest obstacles to profitable forex trading. Slippage occurs most often in volatile or active currency pairs when placing a market order.

Forex Spread

The average daily trading volume of the forex market now exceeds 5 trillion U.S. Dollars, making it the most liquid market in the world. Liquidity refers to how easy it is for market participants to open and close positions without affecting the price of the underlying asset.

The concept of liquidity also works hand-in-hand with volatility, which measures the speed and velocity of changing buy and sell prices. The majority of forex traders love volatile markets because they provide greater opportunities to profit, especially with short-term strategies like scalping and day trading.

Forex Trading Risks

Most forex traders lose money over time. Lack of preparation, bad leveraging, weak skill sets, and emotional fatigue all take their toll, triggering losses that eventually force the trader to ‘wash out’, leaving the forex game to the next participant.  The profitable minority learns how to overcome these headwinds, often spending hours building skillsets, doing research, and testing new systems and strategies.

In addition, banks around the world seek to manage sovereign and credit risk through bid and ask prices on the interbank quoting system, triggering frequent supply and demand disruptions unrelated to market-moving events or economic releases. These pose a major risk for the typical newcomer who grows complacent between scheduled market movers, failing to place stop losses, or taking too much short-term exposure for their experience level.

Ironically, the new trader’s biggest risk comes from the broker they choose. The vast interbank system is a hodgepodge of ‘regulated brokers’, offering unbiased market access, and ‘unregulated brokers’ who take advantage of customers’ lack of sophistication. These companies are easy to spot because most are domiciled (headquartered) in off-shore tax havens, rather than in the U.S., U.K., E.U., or Australia, which heavily regulate currency trading.

Unregulated brokers do the most damage when they operate a ‘dealing desk’ that takes the other side of a customer’s position and manipulate price through ‘requoting’ to trigger stops and force unexpected losses, especially in the off-hours when most active traders are asleep. It can also be difficult to get your money back when you choose to close an account at an unregulated broker.

Key Forex Trading Terms

Currency Pair: Currency pairs consist of two currencies, the base currency on the left (top) and the quoted currency on the right (bottom). EUR/USD is an example of a currency pair. When buying this pair, the trader buys the Euro and sells the U.S. Dollar. Alternatively, when selling this pair, the trader sells the Euro and buys the U.S. Dollar.

Major Pairs: Currency pairs can be sub-divided into major, cross, minor, and exotic pairs. Major pairs include the U.S. Dollar as the base or counter-currency, coupled with one of seven major currencies: EUR, CAD, GBP, CHF, JPY, AUD, and NZD.  New traders focus on major pairs because they’re highly liquid and carry lower transaction costs through tighter spreads, limiting slippage.

Cross Pairs: Cross pairs consist of any two major currencies, except the U.S. Dollar. Unlike major pairs, cross pairs have higher transaction costs, higher volatility, and lower liquidity, increasing potential slippage. Examples of cross pairs include EUR/GBP, EUR/CHF, and AUD/NZD.

Exchange Rate:  Exchange rate shows the price of a base currency, expressed in terms of a counter-currency (quoted currency). For example, if the EUR/USD exchange rate is 1.2500, €1.00 will cost $1.25. A rising exchange rate indicates the base currency is appreciating against the counter-currency while a falling exchange rate indicates the base currency is depreciating against the counter-currency.

Bid/Ask: Currency pairs have two exchange rates: the bid price and the ask price. The bid price identifies the current price that market participants can sell (short), while the ask price identifies the current price that market participants can buy. The bid price is always lower than the ask price and the difference between the two is called the spread.

Spread: The difference between the bid price and ask price. The spread marks one type of transaction cost for a trade and a profit source for the broker. This cost can greatly reduce profits or increase losses when engaged in high-frequency trading strategies, like scalping.

Pip:  Pip refers to ‘percentage in point’, or the smallest increment that a currency pair can rise or fall in price. One pip is equal to the fourth decimal of most currency pairs. For example, if the EUR/USD ask price is quoted at 1.2542 and rallies to 1.2548, the change is equal to six pips.

Hedge: A hedge marks a forex transaction intended to offset or protect another position from positive or negative exchange rate risk. Traders, investors, and institutions apply hedging techniques to enhance profits, limit losses, or protect investments.

Margin: Brokers lend money up to a multiple of account capital, called margin, so traders can take leveraged positions. Borrowed funds incur transaction costs through overnight lending rates. For example, a 30: 1 margin allows exposure up to 30 times higher than account capital.  Leveraged positions need to build profits in excess of borrowing costs or they lose money.

Leverage: Leverage allows traders to take positions in excess of account capital through broker margin lending. Taking substantial leverage is risky for new forex traders but an appropriate and required strategy for experienced forex traders.

Major Order Types

The forex trader opens a position through a buy or sell order, specifying whether to take the position ‘at the market’, or at a specified price. A market order will execute immediately at the current ask price for a buy or the current bid price for a sell. Both orders can incur slippage when prices are moving quickly, triggering trade executions at much higher or lower price levels.

A limit order can be used in place of a market order, specifying the price at which a) the limit order turns into a market order or b) the exact price of the entry. The order will be filled when the price is hit with the first technique, potentially incurring slippage, but the price can ‘skip over’ order with the second technique and never get filled. Similar limit order types, including stop and stop-loss orders, are used to open, manage, and close outstanding positions.

In summary:

  • Buy Stop: open a long position at the price higher than the current price or close a short position at the price lower than the current price.
  • Sell Stop: open a short position at the price lower than the current price or close a long position at the price higher than the current price.
  • Buy Limit: open a long position at the price lower than the current price or close a short position at the price higher than the current price.
  • Sell Limit: open a short position at the price higher than the current price or close a long position at the price lower than the current price.

Summary

The forex market has grown hugely popular with new traders and has never been easier to access. Learning the basics of forex trading isn’t overly complicated but choosing the right way to trade requires self-examination, with a realistic view of personality traits, available time, long-term goals, and current income. It’s a rewarding endeavor that benefits from dedication, patience, emotional control, and a willingness to build multiple skillsets and strategies over time.

Crypto in Football – What’s it Being Used for and What’s it Good for?

Scores of players – some legends of the past like David Beckham and Andreas Iniesta, others contemporary superstars like Lionel Messi – are launching tokens, promoting crypto firms, or advertising crypto as a way to spin money.

Some dismiss this as a gimmick, but others are more positive about creating a brand-new model for fund-raising and fan involvement. With Crypto.com set to become one of the main sponsors of football’s biggest showcase – the World Cup – later this year, the crypto-football link is about to come under more scrutiny than ever.

How is crypto actually being used in football?

And will the increasingly tight relationship between digital tokens and the world’s favorite sport prove a hit – or will it turn out to be an own goal for the industry…and the beautiful game?

Application cases:

Sponsorship

This is possibly the most obvious connection between football and crypto. As a sport that attracts billion of USD per year in the betting markets, it makes sense that big crypto exchanges – who rely on risk-loving customers for much of their client base – would also look for a way into the picture.

As such, you can now pretty much name it – competitions, individual players, huge global teams – when it comes to football, crypto firms are keen to have their names plastered all over the lot.

Even arguably the biggest club of the lot – FC Barcelona – has had its share of crypto sponsor suitors. Not every club in the world wants a crypto exchange on the front of its matchday shirts, but it is now becoming increasingly hard to find a major club without some kind of crypto sponsorship deal in place, either major or minor.

Player payment and transfers

Transferring players is a process that looks like it belongs in the 1980s. It’s a sector of football still mired in fax machines, scanned documents, deal sheets and super-clunky bank transactions. In the fast-moving world of global football, using crypto to buy and sell players would seem to make a lot more sense. The immutable nature of blockchain protocols would help with transparency and auditing, while crypto transactions are faster and require no banking intermediaries.

Smart contracts could also be used to activate clauses in players’ contracts – performance bonuses or additional appearance fees, for instance. Some, like Messi, have even received payments in crypto.

Earlier this year month, one of Mexico’s leading women’s football clubs, Tigres Femenil, sold a midfielder named Stefany Ferrer to an American club named Angel City in a crypto-only deal. The American club’s owners include celebrities like Natalie Portman, Eva Longoria, Mia Hamm, Becky G and Serena Williams.

Other firms have even sought to pay for their own sponsorship deals in crypto, which also makes sense: It’s easy and it makes headlines.

Some may argue that crypto transfers are still a gimmick or an oddity, but their speed and efficiency could ensure that one day they become an everyday occurrence.

Fan outreach & voting rights

Fan tokens are also becoming commonplace in modern football. Clubs tout them as a way to connect to their players and former legends, but the larger coins are traded on big crypto exchanges – some of them even enjoy relatively large market caps.

Although these currently only offer fans the right to vote on relatively menial matters such as the color of a club’s next uniform or where a pre-season friendly match should be played, even this small slice of fan power is better than nothing at all.

We are still in the early days of fan tokens. Perhaps the next generation of football fan coins – perhaps if they were issued by a club itself rather than an affiliate partner – will grant fans fractional ownership rights over stadiums and training grounds.

In that kind of world, fans could one day wield the collective power to, for instance, vote on the appointment of a new coach, chairperson or manager.

NFTs and collectibles

Collectibles have been a thing almost since the modern game of football was founded. From matchday programs and ticket stubs to scarves and replica uniforms, football fans have prized ownership.

This started to really take off in the late 1970s and early 1980s, when sticker albums became a thing. In the lead-up to World Cups, playgrounds around the world were full of children swapping rare stickers for the two or three cards they needed to complete their albums.

In the digital age, then, it seems that NFTs and football make a natural match. While people in many walks of life balk at the idea of paying hundreds of dollars worth of Ethereum (ETH) for a .jpeg or .gif, football fans get it. Rarity equals value – both sentimental if you are a fan, and monetary if you have an eye for a trade.

Clubs and players will continue milking the NFT for as long as there’s demand – we might as well get used to it.

Grassroots sports club funding in Japan

Beyond the worlds of big business and speculation, crypto is also finding a role in much smaller footballing endeavors – such as crowdfunding. You might think that only mega-clubs like Paris Saint-Germain and its PSG coin, as well as Barcelona and AC Milan could realistically put their names to fan tokens. But in Japan, that isn’t the case.

Using platforms like Japan’s Financie, which now even organizes its own cup competitions, newer clubs with tens, not thousands, of Japanese fans and local investors have been funding the very basics of building a local football team with fan tokens. New stadiums are being built, many of which feature token holder-only sections.

The lower leagues of Japanese football could be the starting point for a crypto-football revolution.

Elements of Controversy

There is no guarantee that football and crypto will prove successful long-term teammates. In Spain, one of the most notable football hubs in the world, regulators have voiced their concerns about advertising unregulated financial products.

The advertising commission has warned a number of teams about their relationships with crypto firms. And in 2020, AS reported that the regulatory National Securities Market Commission (CNMV) threatened that it might “put restrictions on La Liga club advertising” – warning that a “toxic” relationship between football clubs and crypto was developing. Similar rumbling have been expressed in the most lucrative league of all: England’s EPL.

Regulators are yet to really get started with policing the sector – but conventional gambling firms that once flocked to football sponsorship have already had their fingers burned.

Crypto and Football: An Own Goal or a Winning Team?

The truth is crypto and the footballing world are still getting to know each another.

It’s far too early to predict if this team-play will be a success in the long term. But one thing is certain. As the World Cup will doubtlessly prove later this year, crypto has already radically changed the footballing financial picture – both on the field and off the pitch.

What Would Be the Benefits and Drawbacks of a Digital Dollar?

Key Insights

  • Biden government has stepped up the pace of digital USD progress.
  • Some are reluctant to let China win a tech race.
  • Others are unsure if a digital dollar is desirable – or necessary.

Central bank digital currencies (CBDCs) have become the talk of the town this year: First came the Winter Olympics in Beijing – when China took the opportunity to showcase its digital yuan to the world for the first time. Next came the Ukraine crisis, with sanctions forcing Russia to ramp up its own efforts to create a digital version of the RUB.

And in the meantime, crypto adoption and bitcoin (BTC) advocacy just keeps gaining pace – forcing central and commercial banks to create solutions that can compete with crypto in the remittance, digitization, and cross-border transactions arenas.

But while the digital yuan is likely to make a nationwide rollout in the coming months and the likes of the European Central Bank, the Bank of England and the Bank of Japan have begun exploring their own CBDC options, the dollar has become the (analog) elephant in the room.

The greenback is the world’s reserve currency, and a digital version would change the way that the world’s biggest economy does business. A digital USD could also become a heavy-hitting international trade tool for the digital age.

But until recently, progress on a digital USD was positively glacial.

All that has changed in the past few weeks, however. In February, the Boston Fed and the Massachusetts Institute of Technology (MIT) revealed results from what they are calling “Project Hamilton” – a design for a high-performance, resilient transaction processor for a CBDC that, in two tests, handled 1.7 million transactions per second.

President Joe Biden’s recent Executive Order on “Ensuring Responsible Development of Digital Assets” also instructed agencies to produce reports on a digital USD – a sign that Washington is finally getting serious about possible CBDC issuance. But what positives – and negatives – could a digital greenback bring?

Why Issuing A Digital Dollar Would Be a Good Idea

The US needs to keep pace with China

China’s digital RMB is almost ready to come out of the oven. Some 8 million users of digital e-commerce platforms are already buying everything from takeout noodles to dumbbells using the CBDC in 11 major cities, with a glut of extra cities about to be added to the pilot.

Some American Senators are none too pleased that the US is nowhere near this kind of progress. Sherrod Brown last year urged the Fed to “lead the way” on CBDCs and noted that “some of our international counterparts are moving quickly to determine whether to implement a central bank digital currency.” Brown wrote:

“The United States must do the same. We cannot be left behind.”

The USD needs to compete with crypto

The fiercest opponents of crypto are often the most vocal advocates for CBDC adoption. They realize that conventional finance has a long way to go if it wants to compete with fintech and crypto.

Even in Russia, the Central Bank has repeatedly called for a blanket crypto ban and the urgent rollout of a digital RUB.

The Fed has long ago realized that it cannot really work with crypto and that decentralization essentially wrests power away from any kind of central financial hub. As such, all it can really do – some would say – is to regulate crypto to the point where it can do no harm to the USD, and then copy all of its “good” parts for use in a digital dollar.

The Fed should create a digital reserve currency for the Web 3.0 era

The greenback is still the currency the world goes to when it is spooked about local inflation or when international companies want to make trade deals. But CBDCs and – maybe one day – stablecoins could threaten that.

Meta/Facebook and its Libra/Diem plans may be dead in the water, but the idea of a tech giant releasing a fiatbacked global token petrifies regulators. As would a digital yuan if it proved a hit on the global stage.

Some, like the Twitter founder Jack Dorsey, speak about BTC’s potential to become the internet’s native currency. But if a digital USD that did away with the need for bank transfers, Swift and the rest were to appear tomorrow, trade firms would likely be all over it.

And Why it Might Not Be So Great After All…

A Digital USD Is Not Needed (Yet)

Some lawmakers are concerned that an American CBDC runs contrary to the tried and true US values of encouraging competition in the private sector. Senator Tom Emmer, one of the biggest critics of CBDC issuance has claimed that a CBDC could “put the Fed on an insidious path akin to China’s digital authoritarianism.”

Some Fed officials have stated that they don’t see an obvious need for a CBDC, while others have urged a wait-and-see approach. A Washington Post opinion columnist recently suggested:

The United States does not need to be first to issue a digital currency; it needs to be the best.”

The non-digital USD is still dominant, so why risk a digital dollar launch now?

Even if CBDCs launch elsewhere, there is scant evidence to show that this could lead to widespread de-dollarization. Sure, some economies such as Russia have been purging their currency reserves of the greenback and the likes of El Salvador and Honduras have been trying to chip away at their dollar dependence.

But when most people talk of hard currencies, they are talking about the USD and perhaps a select few others. Per a Fed report last year, the dollar “comprised 60% of globally disclosed official foreign reserves in 2021.”

The Fed added that “this share has declined from 71% of reserves in 2000. The chasing pack is miles behind: 21% of holdings are in the euro, with just 2% in RMB. Will a digital yuan – or ruble – really change this picture?

Can the US afford to sit and wait as the CBDC race gathers pace?

The UK banking giant Barclays recently claimed that its analysts had concluded that the Fed “should have few problems in achieving widespread use of a CBDC, at least domestically if it determined that there was a need for one.”

The bank claimed that this was due to the fact that “when it comes to legality, stability, and trust – the three main advantages of public-sector systems – the Fed and the dollar score highly.”

CBDCs are still unproven on the global stage, and while it may be galling for some to let China win a tech race, others will insist that it would be more prudent for Washington to keep its digital currency powder dry for the moment – and let others test the waters first.

Centralized Crypto Exchanges VS. Decentralized Exchanges

For the uninitiated, crypto can be complicated enough without worrying about whether an exchange is centralized or not. For people used to dealing in hard currencies and stocks, for instance, trying to understand how a token like Bitcoin operates on a blockchain protocol is enough of a mind-bender without having to think about whether the platform they use to buy it has a CEO and a head office or not.

But the further down the crypto rabbit hole you travel, the more you will come to notice that it does actually matter whether you choose a centralized exchange (CEX) or a decentralized exchange (DEX).

Crypto was born in 2009 with the release of the Bitcoin White Paper, but it was not until 2014 that companies and individuals began exploring the idea of creating DEXes. Arguably it took several years for DEXes to become what they are now. But suffice it to say that crypto communities willed DEXes into being because they wanted to match their decentralized coins with the key functions of an exchange – without having to bring brick-and-mortar businesses into the equation.

What Is a Centralized Exchange?

Most people would agree that crypto exchanges have four core functions:

  • Capital deposits
  • Order broadcasting
  • Order matching
  • Token exchange

As custodial bodies with business registrations, often complying with legal regulations – including those pertaining to the financial sector – CEXes attempt to provide a gateway into the crypto world for those who want to, well, basically buy some BTC or altcoins when prices are low and sell them when the markets rise.

Ideally, such a body is accountable to government regulators, conducts know-your-customer (KYC) customer monitoring and flags suspicious-looking transactions for possible money-laundering violations, and holds considerable token and fiat reserves of its own. Bigger platforms may also be insured against the risk of hacking events.

They usually have a customer helpline, chatbot assistants, business registration numbers and actual offices – some of which offer face-to-face customer services for people who’d rather speak to an actual in-the-flesh person about their crypto investments.

They also centralize all of the above-mentioned core functions through their platforms.

If you keep your crypto in the wallets they provide, your coins are either stored in their hot (trading, online) wallets or their cold (storage, offline) wallets.

They make their money, for the most part, by charging you transaction fees every time you make a trade or a transfer.

If you think these fees are too steep or think that the whole point of crypto is to avoid the kind of centralized, Big Brother monitoring you might experience with a tradfi bank, chances are you may have been thinking of making the DEX switch.

What Are the Benefits of Using a CEX?

CEXes are expensive to use and may well run counter to the spirit of blockchain technology, but they do have a number of key benefits, namely the following:

Liquidity

A big CEX makes its money from having enough fiat and assets in reserve to let you make instantaneous deposits and withdrawals. If you want to swap your BTC for USD, for instance, you would expect to be able to do that in seconds with a CEX…or you’d take your custom elsewhere.

Liquidity is a CEX’s trump card, some would argue – and that is why they put so much effort into providing customers with all the high-speed liquidity they could possibly need.

Security

Although high-profile hacks were once common in the world of crypto, it appears that many of the bigger exchanges are finally learning their lesson. While it’s certainly true that exchanges used to have almost laughably poor security systems, this is no longer true in most cases.

As such, the number of hacks executed on bigger crypto exchanges has fallen in recent years. Many also take out costly insurance policies that allow customers to recoup some or all of their lost funds in the event of a security breach.

Regulation

In many countries, crypto exchanges have to apply for operating permits and prove their stability and competence to financial regulators. These same regulators are keen to bring crypto under the same kind of regulatory umbrella as exists for tradfi institutions such as banks.

As such, they are monitored for irregular transactions and must implement investor protection measures. They also have to provide customers with risk notifications about the non-reversible nature of transactions and comply with government orders. If ensuring that your financial operations are conducted above-board and meet compliance standards, a CEX may be for you.

Easy-to-use

For most people, this is the real biggie. Creating user-friendly interfaces that even your grandmother could make her way around is a CEX’s priority. And because orders and custody are all centralized on their platforms, they let you make your trades in seconds. Sure, you pay more for that privilege, but if you just want to buy some BTC fast and don’t care about much else, a CEX usually has you covered.

What Is a Decentralized Exchange?

Put (perhaps overly) simply, a DEX can be like turning on advanced settings in an app. The app (the CEX in this metaphor) is set up to meet the needs of the most typical user who can’t be bothered over-thinking and interacting with their phone too much. But once you start tinkering with the settings and taking manual control, things get complicated – if sometimes better.

A DEX puts you in charge of your own tokens or fiat by letting you execute functions on a blockchain network directly. They do away with the central hub of the wheel so that there is no sole point of failure.

There’s no KYC here. And when it comes to prices, the DEX usually makes use of automated market maker technology that removes the need for a middleman body that regulates the price of coins. Algorithms – rather than employees – dictate how everything works.

You also need to take charge of your own private keys. A CEX usually handles this just like a bank manages your PIN. If you forget it, you can simply ask the CEX to send you a new one or reset it. If you are using a DEX and lose your private keys, your funds could become irretrievable – forever.

What Are the Benefits of Using a DEX?

DEXes can arguably bestow the following benefits on their users:

A better fit for decentralized tokens

Crypto runs on decentralized blockchain protocols, so it has long been an irony that trading them has been confined to centralized organizations that gate off direct blockchain access. If decentralized coins and decentralized finance (DeFi) are your thing, why would you want to involve something that resembles a tradfi bank or bureau de change in the picture?

No KYC

What governments like least about crypto is elements of anonymity: anonymous wallets, anonymous transactions – and exchanges that allow users to operate under the radar. Proponents of crypto claim that the internet needs a native currency, and one that does away with governments’ rights to monitor, block or freeze transactions. It might sound a bit anarchic or utopian to some, but others like the fact that DEXes don’t require users to prove who they are and submit selfies and copies of documents like passports to faceless tech giant firms.

Self-custody options

“Not your keys, not your coins” is the familiar battle cry of the crypto podcaster Antonio Pompliano. If you don’t control your own private keys, you can’t take charge of your custody. Your tokens may be sitting in a wallet attached to your login details and password on a CEX, but – like a bank – the funds you own aren’t actually in your possession. Do you trust yourself to look after your own assets or a tech company? The answer will likely determine whether or not you will use a DEX.

Lower fees

As there’s theoretically no middleman to pay with a DEX, you don’t need to worry about a platform’s bottom line. Ultimately, if a CEX becomes unprofitable for too long, it will go out of business. With a DEX, fees can often be much lower. Sometimes the liquidity problem means that DEXes have to team up with liquidity providers – a factor that can actually drive fees up. But for the most part, the lack of an intermediary does help reduce costs to traders in many instances.

A wider selection of tokens

CEXes are forever listing and delisting coins – again often due to regulations. In Japan, for instance, regulators get to approve or reject coins, a factor that leads to an often very narrow selection of tokens on centralized trading platforms. CEXes have a lot to lose if a token turns out to be a dud – and often have listing councils that spend days or weeks going through listing applications with a fine-tooth comb. That can ensure greater safety for users, but it can also hinder your ability to make your own choices in this regard. DEXes put the responsibility in your hands, again decentralizing the process.

So Which One Is Best for Me?

It would be great to end with a quick and easy answer, but as is the case with most things crypto-related, the answer is: it’s complicated.

Essentially, whether you choose a CEX or a DEX just depends on your needs: Do you want an easy, fuss-free system, or do you prefer advanced options and greater independence?

Crypto is divisive in many ways, and the choice of whether to use a CEX or DEX will inevitably put you on one side of the fence or the other – even if you have little interest in the CEX vs DEX controversy.

If you think you have better things to do with your time than fuss about with algorithms, blockchain networks and private key management, use a big, reputable CEX. But if you want deeper levels of control over the way you trade and want to explore a way to reduce your trading costs, maybe a DEX is worth looking into.

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.

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.

Earnings Week Ahead: Advance Auto Parts, Home Depot, Nvidia and Ross Stores in Focus

Earnings Calendar For The Week Of November 15

Monday (November 15)

IN THE SPOTLIGHT: ADVANCE AUTO PARTS

The leading automotive aftermarket parts retailer Advance Auto Parts is expected to report its third-quarter earnings of $2.87 per share, which represents year-over-year growth of over 2% from $2.81 per share seen in the same period a year ago.

The Raleigh, North Carolina-based company would post revenue growth of nearly 2% to $2.6 billion up from $2.54 billion registered a year earlier. The company has beaten earnings per share (EPS) estimates three times in the last four quarters.

Advance Auto Parts (AAP) operates in a defensive (recession-resistant) category and has one of the largest long-term EBIT margin expansion opportunities in our coverage (we estimate 300-400 bps over time). COVID-19 slowed parts of AAP’s transformation but gross and EBIT margin upside from internal initiatives is still expected beginning in 2021,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Significant and improving FCF generation plus share repurchases likely to enhance EPS growth. We think the combination of a defensive category, AAP’s progress generating stable top-line growth, and significant margin upside all make for an upside case. Slowing topline momentum and associated risk to margin trajectory balance the risk/reward skew.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 15

Ticker Company EPS Forecast
AAP Advance Auto Parts $2.87
JJSF J&J Snack Foods $1.28
CMP Compass Minerals International $0.62

Tuesday (November 16)

IN THE SPOTLIGHT: HOME DEPOT

The largest home improvement retailer in the United States, Home Depot, is expected to report its third-quarter earnings of $3.39 per share, which represents year-over-year growth of about 7% from $3.18 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 4% to $34.942 billion from $33.54 billion a year earlier. In the last two years, the company has beaten earnings per share (EPS) estimates in most of the quarters with a surprise of over 5%.

Home Depot shares have gained nearly 40% so far this year. The stock closed 1.36% higher at $372.63 on Friday. Home Depot’s better-than-expected results, which will be announced on Nov 16, could help the stock hit new all-time highs.

“Shares of Home Depot have risen and outpaced the industry year to date. The company boasts a robust surprise trend with the fifth straight quarter of earnings and sales beat in second-quarter fiscal 2021. Results gained from continued demand for home improvement projects, the robust housing market and ongoing investments. The company is effectively adapting to the demand for renovations and construction activities, driven by prudent investments,” noted analysts at ZACKS Research.

“It is gaining from growth in Pro and DIY customer categories as well as digital momentum. However, in the second quarter, the company witnessed year-over-year moderation in its comparable-store sales growth. This was due to the lapping of the high demand environment for home-improvement projects seen last year. Soft gross margin, stemming from increased penetration of lumber, has also been a drag.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 16

Ticker Company EPS Forecast
ICP Intermediate Capital £32.70
HSV Homeserve £6.60
ARMK Aramark $0.19
HD Home Depot $3.35
DLB Dolby Laboratories $0.35
LAND Land Securities £18.78
IMB Imperial Brands PLC £138.10

Wednesday (November 17)

IN THE SPOTLIGHT: NVIDIA

The Santa Clara, California- based multinational technology company, Nvidia, is expected to report its third-quarter earnings of $1.11 per share, which represents a year-over-year decline of over 60% from $2.91 per share seen in the same period a year ago.

The company, which designs graphics processing units for the gaming and professional markets, as well as system on a chip unit for the mobile computing and automotive market would post year-over-year revenue growth of over 40% to $6.8 billion.

According to Oppenheimer analyst Rick Schafer, Nvidia will report above-consensus October quarter results, lifting its price target to $350 from $235 and rating the company “outperform”.

“Supply constraints continue to weigh on the group, though we see Nvidia (NVDA), a top semi-supplier, as better positioned to secure capacity. The company’s leading soup-to-nuts software/hardware platform solidifies its AI accelerator dominance,” Oppenheimer analyst Rick Schafer wrote in his report, reported by Reuters.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 17

Ticker Company EPS Forecast
BLND British Land Company £8.75
SGE The Sage Group £11.11
LOW Lowe’s Companies $2.33
CPRT Copart $0.99
NVDA Nvidia $1.11
CPA Copa -$0.19
KLIC Kulicke And Soffa Industries $2.07
TTEK Tetra Tech $1.00
HI Hillenbrand $0.91
SSE SSE £11.80

Thursday (November 18)

IN THE SPOTLIGHT: ROSS STORES

The second-largest off-price retailer in the U.S., Ross Stores, is expected to report its third-quarter earnings of $0.79 per share, which represents a year-over-year decline of over 24% from $1.02 per share seen in the same period a year ago.

The U.S. home fashion chain would post year-over-year revenue growth of nearly 16% to $4.4 billion. The company has beaten earnings per share (EPS) estimates three times in the last four quarters.

“Market share capture from competitor bankruptcies & store closures, favourable customer fundamentals, and high exposure to Hispanics, the fastest-growing US population segment, support 6-8% long-term revenue growth and 10%+ annual EPS. Upward EPS revisions appear an ongoing positive share price catalyst. Profit flow-through is magnified when comps exceed the 1-2% plan in a typical year,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“The ‘everyday value’ proposition fosters comp outperformance, while recessions accelerate customer acquisition. Low average selling prices ($8-10/unit) and narrow gross margin render selling online unprofitable at this price point.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 18

Ticker Company EPS Forecast
NG National Grid £15.70
HLMA Halma £21.19
RMG Royal Mail -£6.30
NJR New Jersey Resources $0.08
KSS Kohl’s $0.69
HP Helmerich & Payne -$0.50
MMS Maximus $0.87
BJ BJs Wholesale Club Holdings Inc $0.79
M Macy’s $0.29
BERY Berry Plastics $1.53
NUAN Nuance Communications $0.20
BRC Brady $0.76
ROST Ross Stores $0.79
INTU Intuit $0.97
FTCH Farfetch -$0.24
ESE ESCO Technologies $0.78

Friday (November 19)

Ticker Company EPS Forecast
BKE Buckle $0.80
FL Foot Locker $1.34

 

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 

Key Events This Week: Gold Could Climb Higher on Us Inflation Fears

Sunday, November 7

Daylight savings time ends in the US

Monday, November 8

  • EUR: ECB Chief Economist Philip Lane speeches
  • USD: Fed speak – Fed Vice Chair Richard Clarida
  • Tencent Music Entertainment Q3 earnings

Tuesday, November 9

  • USD: Fed speak – Fed Chair Jerome Powell, San Francisco Fed President Mary
  • Daly, St. Louis Fed President James Bullard
  • GBP: BOE Governor Andrew Bailey speaks
  • CNH: PBOC Governor Yi Gang speaks
  • EUR: Germany September trade, November ZEW survey expectations
  • USD: US October PPI
  • DoorDash Q3 earnings
  • Coinbase Q3 earnings

Wednesday, November 10

  • CNH: China October CPI, PPI, FDI
  • USD: US October CPI
  • USD: US weekly initial jobless claims
  • US crude: EIA weekly US crude oil inventory report
  • Disney Q3 earnings
  • Tencent Q3 earnings

Thursday, November 11

  • China’s Singles Day sales bonanza – watch Alibaba, JD.com
  • JPY: Japan October PPI
  • EUR: European Commission publishes updated economic forecasts
  • GBP: UK 3Q GDP and external trade, September industrial production
  • US bond markets closed for Veterans Day

Friday, November 12

  • NZD: New Zealand October manufacturing PMI
  • EUR: Eurozone September industrial production
  • USD: US November consumer sentiment

Before we take a look at the week ahead, let’s recap how gold prices reacted to last Friday’s US jobs report

Interestingly, Treasury yields tumbled in the wake of that 531k NFP print which exceeded market estimates for 450k. The drop in yields encouraged zero-yielding bullion to soar past the psychologically-important $1800 mark and post its highest closing price since early-September on Friday. At the time of writing, spot gold is trying to hold on to most of its post-NFP gains.

The movements in bond markets suggest that, because of the solid jobs report, that could bring forward the first Fed rate hike since the pandemic. However, markets also think that the rates liftoff in the US might actually trigger the next recession. Hence the flight to safety towards Treasuries, which saw their yields fall, allowing gold bulls to capitalize.

With all that in mind, markets are set to focus on the incoming US inflation data.

The reason that markets expect the Fed rate hike to happen sooner is because, now that the labour market is showing enough resilience, the US central bank could feel bolder about raising interest rates to rein in stubbornly persistent inflationary pressures. Note that markets are forecasting a 5.9% year-on-year growth for the October US consumer price index – that would be its highest reading since 1990!

Typically, when US interest rates rise, Treasury prices fall and their yields rise, all of which combine to exert downward pressure on gold prices. This time however, as explained earlier, markets think that the Fed would be making a mistake in raising interest rates and potentially trigger a recession instead.

In short, if the US CPI figure continues to climb higher, that could in turn fuel more demand for the safe-haven gold for fear of a Fed-induced recession. Still, from a technical perspective, gold bulls have to conquer a major resistance level around $1830, which had thrice repelled prices back in Q3.

Still on the theme of inflation, China is also set to make a mid-week announcement of its own consumer price index. Add to that the producer prices out of the world’s three largest economies – the US, China, and Japan, all due this week – and investors worldwide could get more clues about how the global inflation outlook is shaping up. Of course, very importantly, how various major central banks react to the threat of stubbornly higher inflation is very crucial to how markets react.

Hence, pay attention to the central bankers’ commentary and the data on consumer and producer prices, all of which could influence greatly the performances of major currencies, bond markets, and ultimately gold as well.

By Han Tan Chief Market Analyst at Exinity Group

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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.

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.

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.