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.

Key Events This Week: Economic Data to Push Brent Past 2018 Peak?

Such is the upward momentum in commodity prices that oil was able to shrug off China’s lower-than-expected Q3 GDP and September industrial production data this morning. Despite signs of slowing growth momentum in the world’s second largest economy, that could point to slowing demand for the commodity, oil benchmarks climbed another one percent at the start of the Asian session on Monday.

From a fundamental perspective, global investors will be parsing the economic data releases this week for more signs about the tightening conditions in oil markets:

Monday, October 18

  • USD: Fed speak – Kansas City Fed President Esther George and Minneapolis Fed
  • President Neel Kashkari
  • Apple to unveil redesigned MacBook Pro laptop

Tuesday, October 19

  • AUD: RBA October minutes
  • GBP: BOE Governor Andrew Bailey speech
  • Google to launch Pixel 6 phones
  • Netflix Q3 earnings

Wednesday, October 20

  • CNH: China loan prime rate, September new home prices
  • JPY: Japan September trade
  • EUR: Eurozone September CPI (final print)
  • GBP: UK September CPI
  • US crude: EIA crude oil inventory report
  • Tesla Q3 earnings

Thursday, October 21

  • EUR: Eurozone October consumer confidence
  • USD: US weekly initial jobless claims
  • Intel Q3 earnings

Friday, October 22

  • EUR: Eurozone October PMIs
  • GBP: UK September retail sales, October Markit PMIs
  • CAD: Canada August retail sales
  • USD: US October PMIs

This surge in commodity prices has been due to rising demand as economies reopen from the pandemic, while supplies have been scarce. Global inventories of oil are below their 5-year averages, while last week, we learnt of the large drawdown in US stockpiles in the key hub of Cushing, Oklahoma.

This leaves major economies scrambling for oil to meet the rising demand, especially ahead of the winter months where consumers need heating fuel, with the likes of Europe and the UK now facing an energy crisis.

Fundamentally, oil benchmarks should have more reasons to climb higher, although one would suspect that most of its steepest gains are now in the past. Global market conditions are expected to tighten through the end of 2021, before tipping back into oversupply next year.

Hence, it would be of particular interest to see how Brent prices behave around the $86 region, assuming they get there.

Three years ago, that $86.29 summit was then followed by a drop of over 40% through the end of 2018 before rebounding through the first quarter of 2019.

To be clear, I do not expect a similar scenario of a sharp drop going into 2022. I do expect more gains before year-end, with prices then likely to moderate as oil markets become oversupplied once more in 2022. After all, OPEC+ has pledged to gradually restore its output over the coming months, which should help tilt the balance.

However, if stagflation fears rise, that could hasten the declines for oil prices.

Stagflation is an environment whereby surging consumer prices comes at a time when global growth is stagnant. Such conditions typically erode demand for the commodity. As basic economics dictate, when demand falls, so too do prices. Hence, a stagflation scenario is a crucial concern for markets and it warrants close attention.

With all that in mind, global investors will be keenly eyeing this week’s data out of major economies. The PMI readings out of the Eurozone, the UK, and the US would also speak to the health of these major economies.

If the global economic recovery is showing more signs of stagnating, that could imply that demand for oil in the near future may moderate relative to supply. Such an outlook could also weaken support for oil prices.

In short, watch how oil prices react to these major economic data, and of course, the weekly EIA inventories report for the US as well.

A strong breach of $86 should pave the way for $90 Brent, but Brent has to first overcome that psychologically-important resistance level at that 2018 summit.

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.

Greenback’s Gains Pared Mostly, but Extended Against the Yen

The yen was the weakest of the major currencies, falling almost 1.75%, its worst week since March 2020. The JP Morgan Emerging Market Currency Index initially declined to a new low for the year before recovering to snap a five-week slide and gain nearly 0.45%.

Despite the six basis point gain ahead of the weekend, perhaps helped by a stronger-than-expected September retail sales report, the 10-year note yield of 1.57% was off about four basis points on the week. The short end of the coupon curve was firmer as the curve flattened. The 2-year yield rose six basis points to 40 bp, the highest since last March. The yield has fallen only in one session so far this month.

As we have noted (here), the market is particularly aggressive in pricing in Fed tightening next year. With the average effective rate holding at eight basis points, the August 2022 Fed funds futures contract implies a yield of 23 bp, which is equivalent to a 60% chance of a hike at the late July FOMC meeting. The Federal Reserve says it will finish the tapering around the middle of next year.

Dollar Index

Since last month’s FOMC meeting, the Dollar Index rallied from slightly below 93.00 to a little above 94.55. It has since pulled back to test the midpoint of that rally (~93.77). It consolidated ahead of the weekend with an inside day. The MACD is has rolled over, and the Slow Stochastic did not confirm the high and has turned down. The next retracement objective (61.8%) is closer to 93.60, which is also about where the (38.2%) retracement of last month’s rally is found. Despite the pullback and the fraying of the 20-day moving average (~93.85), the Dollar Index has not closed below the moving average since mid-September. Given its firm close before the weeks, it seems more like consolidation right now than a trend reversal.

Euro

Last Wednesday and Thursday, the euro posted its first back-to-back gain since early September. It rose to almost $1.1625 on Thursday, stopping just shy of its 20-day moving average and the month’s high of $1.1640. The $1.1640 area also marks the (50%) retracement of the euro’s losses since the FOMC meeting concluded on September 22. Although the MACD and Slow Stochastic have turned up, the price action is not inspiring, though it managed to finish the week above $1.16, even if barely, for only the second time this month.

The euro recorded a new low for the year on October 12, near $1.1525. The $1.1490 is roughly the (38.2%) retracement of the euro’s rally since the March 20202 low around $1.0635. The US 2-year premium over Germany moved above 100 bp last week for the first time since the pandemic struck. It has risen by about 10 bp since the FOMC meeting.

Japanese Yen

The greenback gained against the yen in six of the last seven sessions. It rose from about JPY111.45 to JPY114.45 during this run and reached a new three-year high. Indeed, its four-week rally matches the longest advance since April-May 2018. Rising US yields (last week more about the short-end than long-end) is the key catalyst. More participants are talking about new opportunities for the carry trade, but momentum players appear to have also jumped aboard.

We identified the JPY114.50-JPY115.00 area as the possible top of a new range. The MACD continued to trend higher and is approaching the high for the year set in March and April. The Slow Stochastic appears to be poised to turn lower earlier next week after re-entering over-bought territory. Initial support now is seen in the JPY113.00-JPY113.25 area.

British Pound

Sterling had a good week, gaining 1% against the dollar to reach its best level in a month (~$1.3775). It is up 2% this month, helped by an aggressive backing up of short-term UK rates. Specifically, the implied yield of the December 2021 short-sterling futures contract rose 8.5 bp last week, its sixth weekly advance, during which time the rate has surged 24 bp as the market prices in a hike before the end of the year.

There are two meetings left (November 4 and December 16). The momentum indicators are trending higher, and the five-day moving average crossed above the 20-day for the first time since mid-September. The pre-weekend gains toward almost $1.3775 kissed the upper Bollinger Band. Look for sterling to run into resistance in the $1.3800-$1.3850 area, which holds the (50%) retracement of its decline from the June1 high when it last traded above $1.42, the 200-day moving average, and the trendline connecting the May and September highs. Initial support now is likely in the $1.3650-$1.3670 area.

Canadian Dollar

The US dollar fell for the fourth consecutive week against the Canadian dollar. Since last month’s FOMC meeting, the Canadian dollar has been the strongest major currency, appreciating by around 3.25% to its best level in three months. At the end of last week, the US dollar approached the measuring objective of the head and shoulders pattern we have been tracking that projects to about CAD1.2300. The greenback exceeded the (61.8%) retracement objective of its rally since the multi-year low was set on June 1 near CAD1.2000, which came a little above CAD1.2365.

After dipping below CAD1.2340 before being squeezed back to CAD1.2400. The MACD is at its lowest level in a few months but does not appear poised to turn higher. On the other hand, the Slow Stochastic has flatlined in oversold territory. Initial resistance is seen in the CAD1.2430 area. Since the Bank of Canada meeting on September 10, the June 2022 BA futures contract has sold off, and the implied yield has risen by about 28 bp. It consolidated in the second half of last week. The swaps market is pricing in about 75 bp of tightening over the next year.

Australian Dollar

The Australian dollar rallied almost 1.5% last week and finished above $0.7400 for the first time in over a month, corresponding to the (38.2%) retracement of the decline from the May high of almost $0.7900. It traded above its upper Bollinger Band every day last week and closed above it (~$0.7415) for the second consecutive session ahead of the weekend. Booming commodity prices are widely seen as a supportive factor, but they did not appear to do the Aussie much good in the June-August period.

The economic re-opening helps explain why the market can look past poor data, like the September employment report. The Aussie has fallen in only three sessions so far this month and is looking stretched. The MACD is overbought and is at its highest level in five months. The Slow Stochastic is also overbought and could turn lower next week. Initial support below $0.7400 is around $0.7375-$0.7380. On the upside, last month’s high was closer to $0.7480.

Mexican Peso

The greenback’s four-week rally against the peso ended with a bang. It fell almost 1.7% last week, the largest weekly loss since June. The dollar made a marginal new seven-month high a little above MXN20.90 on October 12, reversed lower, and fell to MXN20.32 ahead of the weekend, a new low for the month. Two factors helped the peso recover. First, the tone from most Banxico officials and the minutes seemed to play up the chances that the central bank may lift rates by more than the previous quarter-point moves. Second, risk appetites were strong, helping lift equities.

The MSCI Emerging Market Equity Index rose the second consecutive week after falling in the previous four weeks. The momentum indicators are heading lower for the dollar. With the pre-weekend decline, the greenback has given up a little more than half of the gains since the mid-September low (~MXN19.85). That retracement was found a little below MXN20.38. The next retracement (61.8%) is around MXN20.25.

Chinese Yuan

On October 14, the PBOC set the yuan’s exchange rate against the dollar lower than the models (Bloomberg survey) suggested. The gap was big enough to suggest that perhaps officials were signaling that they did not want to see continued yuan appreciation. The market seemed to shrug it off and took the yuan to a marginally new four-month high before the weekend. Some observers draw a connection between foreign flows returning to the Chinese equity market and the yuan’s strength. PBOC’s claim that the risks posed by Evergrande are “controllable” and unlikely to spread is precisely what other central banks said as the housing market bubble popped in 2007-2008.

Investors seem mistrustful and have taken other high-yielding Chinese bonds (mainly in the property development sector to around 20%). Given the slowing of the economy and the low consumer inflation, we suspect officials do not want the yuan to strengthen much from here, but to impose their will, it may have to escalate its efforts. Initial support for the dollar may be in the CNY6.4200-CNY6.4250 range, with CNY6.45 the likely nearby cap.

This article was written by Marc Chandler, MarctoMarket.

5 Bad Habits Traders Should Give Up

The first advice from ASX Markets is that traders should examine to see whether any poor habits still exist and decisively give up them before making new trades. Below are five bad habits you should modify right now if you want to improve your trading outcomes.

Fear of loss

It is the psychology of many traders, including the seasoned ones. Loss is a regular aspect of trading, and traders should be prepared to take it. Furthermore, after experiencing with a loss, traders will be able to learn from their mistakes and be more mature in future trades.

Then why would you be terrified of what allows you to mature when it is an intrinsic aspect. Traders should be training their patience and skills of psychological control during trades for profits to win over the failed deals to which you have to face during your trading.

Crowded trade

This is one of the most common blunders made by many traders. Financial markets are dominated by greed and fear at all times. Crowded trading refers to a group of individual investors who rely on the actions of other investors to execute trades.

Usually crowd psychology appears in two cases: First, investors are overly enthusiastic. Second, investors are scared. Either way, it increases risks to investors’ trades. Over enthusiasm will be causative of a virtual price phenomenon and over scare results in selling everything to cut loss. Crowd psychology is a significant impact factor on the rise or fall of stock prices. When a crowd buys, the stock price rises, and vice versa.

Following the crowd is a bad habit to be eliminated at once if investors wish to invest for the long term. This is regarded as an inherent disadvantage in the market, and it is easy to cause panic if investors fail to keep their minds.

Trading 24/24

Smart traders choose several best time frames and trade sessions to enhance investment outcomes. Staying 24/24 in front of the screen is unnecessary for a trader. Moreover, if monitoring the market for too long, traders would be more likely to have FOMO and overtrading as a result.

No concrete trade plan

Trading according to a concrete plan is an important part of a trader’s profit-seeking. If you have never planned before trading, now is the time for you to change that harmful behavior. Trading under a plan allows traders to keep track of trading progress and make adjustments in due time if the market moves against their expectations.

Break up your own trading principles

Every trader has his/her own trading principles. However, many traders are so influenced by market conditions or psychological factors that they violate the principles they set for themselves. Once a trading principle is broken, that mistake is likely to repeat again and again. So, if you have this bad habit, do get rid of it right away and train yourself with principled trades.

Conclusion

Above are bad habits that traders should abandon right away if they want to get better trading results. If you need help on trading methods or how to manage your emotions effectively, don’t hesitate to contact ASX Markets via the hotline 1900299990 or our Facebook fan page for immediate assistance.

Market Mood Improves on Recovery Hopes; Gold Eyes $1800

The improving sentiment across Asian markets was also helped by optimism over the global economic recovery and prospects of higher interest rates to tame inflation. The greenback had it rough while gold enjoyed its best session in seven months, gaining almost 2% helped by falling Treasury yields. European markets have opened higher this morning with US futures also in the green.

Dollar humbled by inflation data

The dollar weakened across the board yesterday in a ‘buy the rumour, sell the fact’ reaction following the hot U.S inflation report. Consumer prices in the United States increased 5.4% year-over-year in September after advancing 5.3% in August and 0.4% versus expectations of 0.3% on the month. The decline in Treasury yields dragged the greenback lower with the Dollar Index (DXY) tumbling towards the 94.00 level.

While the firm inflation data reinforced taper expectations, it has also fuelled speculation around the Federal Reserve raising interest rates sooner than expected. This has been reflected in Fed Funds futures which have pulled forward the first interest rate hike from late 2022 to almost a full 25 basis point hike by September. The prospects of higher interest rates down the line could limit the dollar’s losses.

Fed officials see tapering in Q4

According to the minutes from September’s policy meeting, Federal Reserve officials agreed they should start tapering in mid-November or mid-December. In regard to inflation, most officials at the meeting expressed concerns over the associated risks due to supply disruptions and labour shortages. Overall, the minutes were hawkish and confirmed that tapering could start as early as next month.

Oil bulls remain in the building

Oil is continuing its upward trend, driven by the global energy crunch and supply restraints from the world’s top producers. The commodity found itself under pressure on Wednesday thanks to OPEC’s monthly report and the American Petroleum Institute reporting a larger-than-expected increase in stockpiles. OPEC cut its global demand outlook for 2021 from 5.96 million barrels per day (bpd) to 5.82 million bpd due to the Delta variant outbreaks in the summer. However, it left its forecast for 2022 unchanged at 4.15 million bpd.

All eyes will be on the Energy Information Agency (EIA) U.S crude oil inventory report and the International Energy Agency (IEA) monthly oil market report today. If they illustrate a similar outlook to OPEC, where the demand is projected to decline in 2021, this could impact upside gains.

Both WTI and Brent crude have appreciated over 60% since the start of 2021. With Brent trading around $83.88 as of writing, some analysts are targeting the psychological $100 level in 2021 which has not been seen since 2014.

Commodity spotlight – Gold

Gold prices exploded higher on Wednesday afternoon, gaining almost 2% as the dollar and Treasury yields tumbled following the hot US inflation report. With gold highly sensitive to taper expectations, real yields and the dollar’s direction, the next few weeks could be wild for the precious metal.

In regard to the technical picture, the widely watched 200-day moving average is just below $1800. But a strong move above that level could open the doors towards the summer highs at $1834. Should $1800 prove to be reliable resistance, a decline back towards $1777 could be on the cards.

By Lukman Otunuga Senior Research Analyst

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.

Gold Technical Analysis – How Do Professionals Trade Gold?

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

How Do Professionals Trade Gold?

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

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

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

Technical Analysis of the Gold Market

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

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

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

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

Weekly Continuous Gold MACD
Weekly Continuous Gold MACD

Momentum is Important

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

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

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

Weekly Continuous Gold RSI

Gold Market Sentiment

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

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

Gold Committment of Traders

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

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

Gold Committment of Traders Small and Large Speculators

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

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

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

Gold Fundamentals

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

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

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

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

Summary

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

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

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

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

5 Investment Tips for Forex Market Investors

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

Consistency is the Key to Successful Trading

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

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

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

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

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

Choose Your Risk Levels Wisely

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

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

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

Analyze Your Trades

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

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

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

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

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

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

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

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

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

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

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

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

Be Prepared for the Inevitable Change

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

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

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

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

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

This article is brought to you by Forex4you.

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

Cryptocurrency vs Forex Market – Similarities and Differences

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

Similarities Between Crypto Markets and Forex Markets

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

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

Differences Between Crypto Markets and Forex Markets

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

Number Of Available Instruments

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

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

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

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

Liquidity

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

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

Huge Difference Between Coins

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

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

Volatility

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

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

Profit Potential

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

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

Market Hours

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

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

Security

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

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

Choosing between Crypto Trading and Forex Trading

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

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

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

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

This article is brought to you by Forex4you

The Crypto Daily – Movers and Shakers – August 23rd, 2021

Bitcoin, BTC to USD, rose by 0.88% on Sunday. Reversing a 1.01% decline on Saturday, Bitcoin ended the week up by 4.77% to $49,266.0.

After a range-bound start to the day, Bitcoin rose to a late morning high $49,469.0 before hitting reverse.

Falling short of the first major resistance level at $49,677, Bitcoin fell to a mid-afternoon intraday low $48,086.0.

Bitcoin fell through the first major support level at $46,108 before a late rally to an intraday high $49,488.0.

Continuing to fall short of the first major resistance level, Bitcoin eased back to end the day at sub-$49,300 levels.

The near-term bullish trend remained intact, supported by the latest return to $49,000 levels. For the bears, Bitcoin would need a sustained fall through the 62% FIB of $27,237 to form a near-term bearish trend.

The Rest of the Pack

Across the rest of the majors, it was a mixed day on Sunday.

Binance Coin (-0.04%), Bitcoin Cash SV (-0.52%),  Crypto.com Coin (-0.01%), and Polkadot (-1.45%) saw red on the day.

It was a bullish day for the rest of the majors.

Cardano’s ADA rallied by 11.10% to lead the way.

Chainlink (+0.51%), Ethereum (+0.47%), Litecoin (+3.48%), and Ripple’s XRP (+0.91%) also found support.

For the week ending 22nd August, it was also a mixed week for the majors.

Cardano’s ADA jumped by 24.87% to lead the way, with Polkadot rallying by 14.06%.

Binance Coin (+8.32%), Chainlink (+0.47%), and Crypto.com Coin (+3.19%) also joined Bitcoin in the green.

It was a bearish week for the rest of the majors, however.

Bitcoin Cash (-2.06%), Ethereum (-2.10%), Litecoin (-0.65%), and Ripple’s XRP (-4.55%) ended the week in the red.

In the week, the crypto total market fell to a Wednesday low $1,832bn before rising to a Saturday high $2,124bn. At the time of writing, the total market cap stood at $2,082bn.

Bitcoin’s dominance fell to a Tuesday low 43.67% before rising to a Wednesday high 45.35%. At the time of writing, Bitcoin’s dominance stood at 44.56%.

This Morning

At the time of writing, Bitcoin was up by 0.09% to $49,310.0. A mixed start to the day saw Bitcoin fall to an early morning low $49,246.2 before rising to a high $49,439.9.

Bitcoin left the major support and resistance levels untested early on.

Elsewhere, it was a bullish start to the day.

At the time of writing, Crypto.com Coin was up by 1.33% to lead the way.

BTCUSD 230821 Hourly Chart

For the Bitcoin Day Ahead

Bitcoin would need to avoid the $48,947 pivot to bring the first major resistance level at $49,807 into play.

Support from the broader market would be needed for Bitcoin to break back through to $49,500 levels.

Barring a broad-based crypto rally, the first major resistance level and resistance at $50,000 would likely cap any upside.

In the event of an extended crypto rally, Bitcoin could test resistance at the 23.6% FIB of $50,473 before any pullback. The second major resistance level sits at $50,349.

A fall through the $48,947 pivot would bring the first major support level at $48,405 into play.

Barring an extended sell-off on the day, Bitcoin should steer clear of sub-$47,000 levels. The second major support level $47,545 should limit the downside.

Analysis Methods – Fundamental, Technical and Sentiment Analysis

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

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

Analysis Tools Defined

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

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

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

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

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

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

How and When to Use the Three Analysis Tools

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

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

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

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

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

Summary

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

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

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

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

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

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

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

Interest Rates and Their Importance

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

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

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

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

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

What is an Interest Rate?

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

Understanding APR

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

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

Understanding Interest Rates

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

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

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

How Interest Rates Work

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

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

Fixed Versus Variable Interest Rates

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

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

How Are Interest Rates Determined?

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

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

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

Impact of High versus Low-Interest Rates

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

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

Fed Tries to Hold Rates Steady

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

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

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

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