What are Contango And Backwardation?

Term structure, the forward curve, or time spreads are all synonymous and reflect the price differences for a commodity over time.

In some commodities, seasonality causes prices to reach lows at certain times of the year and peaks at others. Natural gas and heating oil often reach seasonal highs during the winter months, while gasoline, grains, lumber, and animal proteins can move towards highs as the spring and summer seasons approach.

Meanwhile, the price differential for various delivery dates can provide valuable information when it comes to the supply and demand fundamentals for all commodities. Contango and backwardation are two essential terms in a commodity trader’s vocabulary.

Contango is a sign of a balanced or glut market

Contango exists in a market when deferred prices are higher than prices for nearby delivery. A “positive carry” or “normal” market is synonymous with contango.

Source: NYMEX/RMB

The forward curve in the NYMEX WTI crude oil futures market highlights the contango in the energy commodity. In this example, the price of crude oil for delivery in June 2020 was at $28.82 per barrel and was at $36.10 per barrel for delivery one year later in June 2021. The contango in the oil market stood at $7.28 per barrel.

The contango is a sign of oversupply. However, it also reflects the market’s opinion that the current price level will lead to declining production and inventories and higher prices in the future.

Backwardation signals tightness

Backwardation is a market condition in which prices are lower for deferred delivery compared to nearby prices. Other terms of backwardation are “negative carry” or “premium” market.

Source: ICE/RMB

The term structure in the cocoa futures market that trades on the Intercontinental Exchange shows that cocoa beans for delivery in May 2020 were trading at $2305 per ton compared to a price of $2265 for delivery in May 2021. The backwardation of $40 per ton is a sign of nearby tightness where demand exceeds available supplies. At the same time, the lower deferred price assumes that cocoa producers will increase output to close the gap between demand and supplies in the future.

Watch the forward curve

A fundamental approach to analyzing commodity prices involves compiling data on supplies, demand, and inventories. The term structure in raw material markets can serve as a real-time indicator for supply and demand characteristics. When nearby supplies rise above demand, the forward curve tends to move into contango. When the demand outstrips supplies, backwardations occur.

Watching the movements in term structure can provide value clues when it comes to fundamental shifts in markets. Exchanges publish settlement prices for all contracts each business day. Keeping track of the changes over time can uncover changes that will impact prices.

In tight markets where backwardations develop or are widening, nearby prices tend to move to the upside. In contango markets, equilibrium can be a sign of price stability, while a widening contango often is a clue that prices will trend towards the downside.

The shape of the forward curve can move throughout the trading day. Any dramatic shifts tend to signal a sudden change in market fundamentals. For example, a weather event in an agricultural market that impacts production would likely cause tightening and a move towards backwardation. As concerns over nearby supplies rise, the curve often tightens.

Conversely, a demand shock that leads to growing inventories often leads to a loosening of the term structure where contango rises. Observing changes in a market’s forward curve and explaining the reasons can provide traders and investors with an edge when it comes to the path of least resistance of prices.

What Is A Forward Contract?

A forward contract is an over-the-counter or exchange-traded financial transaction for the future delivery of a commodity or an asset. The buyer receives guaranteed access to the asset at an agreed-upon price. The seller receives a fixed price as well as a sales outlet from the buyer.

Forward contracts can call for payment upon delivery of the asset but may also include provisions for margin or other terms expressly agreed upon by the parties to the contract. A forward can be a useful hedging tool for both producers and consumers of commodities. However, they can also be fraught with pitfalls at times.

Forwards in the over-the-counter market

In the OTC market, a forward transaction occurs on a principal-to-principal basis between a buyer and a seller. The parties to the contract obligate themselves by contractual terms with the seller assuming the credit risk of the buyer and the buyer doing the same with the seller.

In the world of commodities, there are many derivations of the forward contract. A pre-export financial transaction is a forward where the buyer pays the seller a percentage of the value before delivery. Pre-export financial transactions require the buyer to take more risk than the seller. The price for the asset tends to reflect the higher risk undertaken by the buyer. Another form of a forward transaction is a swap, where a buyer and exchange a fixed for a floating price.

In the aftermath of the 2008 global financial crisis, changes in the regulatory environment caused many forward and swap transactions to move into clearinghouses where margin requirements lowered the potential for defaults.

Forwards are very popular in the highly liquid over-the-counter foreign exchange market. Forward transactions allow for the parties to negotiate all of the terms for the purchase and sale and they are non-standardized contracts.

Forwards on an exchange

Some exchanges offer products that are forwards rather than futures contracts. The London Metals Exchange, which is the oldest commodities exchange in the world, trades forwards on nonferrous metals, including copper, aluminum, nickel, lead, zinc, and tin. While each contract represents a standard amount of the metal in metric tons, the most actively traded product is the three-month forward. Producers and consumers favor the LME contracts as they allow for delivery of the metals each business day of the year. The LME also offers forward contracts for shorter and longer terms in all of the metals.

The difference between a forward and a futures contract

The most significant difference between a forward and a futures contract is that the forward is non-standardized. Futures have the following characteristics:

  • One stated asset or commodity
  • A physical or cash settlement
  • A fixed amount of the asset per contract
  • The currency in which the asset is quoted
  • The grade or quality of the asset that is deliverable
  • The delivery month and subsequent delivery months
  • The last day of trading
  • The minimum price fluctuation per contract, which is the tick value

Futures are subject to original and variation margin. In a non-standardized forward contract, the terms of margin when it comes to a good-faith deposit and payment of market differences are subject to negotiation.

A forward contract offers less liquidity than a futures contract as the future can be offset with any other party. Many forwards can only be offset by agreement of the original parties. In futures, the clearinghouse becomes the counterpart for all purchase and sale transactions. While both futures and forwards are derivative instruments, there are tradeoffs. Futures allow for far more liquidity, while forwards often meet the needs of those buyers and sellers looking for tailor-made solutions to financial risks.

Meta Trader 4: The Complete Guide

Most of these trading platforms are customized by MetaQuotes for a broker which is referred to as a White Label. The newest addition is MT5, but many traders like the tried and true Meta Trader 4, as it provides all the functionality you need in a forex trading platform.

Getting Started with Meta Trader 4

Meta Trader 4 is intuitive and relatively easy to use.  You can start by opening a demonstration account that allows you to test drive the system without making a deposit.  You simply need to provide a broker that uses Meta Trader Platforms, your personal information including your email and they will send you a login and password to open a demonstration account.

A demonstration account uses demonstration money and allows you to see how the platform works without risking real capital.  Don’t be afraid to place multiple trades so you understand how to execute and order and view your positions.

The first page you see when you open Meta Trader 4, can be customized as your default page. You might want to see forex quotes along with a chart as an example. On the left side is a quote sheet. It shows you a list of products that you can trade through the MT4 platform.

You can double-click on any of the items on the quote sheet and it will bring up an order page.  Here you can see a graph of a tick chart along with the asset you are planning to trade. You can fill in your volume and place a stop loss and take profit orders.  This allows you to set your risk management before you even place your trade.

Additionally, you can have a 1-click trading box in the upper left side that allows you to instantly place a trade. You can place your trade using market execution or pending order.  You also can determine the volume of your trade.  Below is the bid-offer spread. As a market taker, you buy on the offer (the blue) and sell on the bid (the red).

Navigating through Meta Trader 4 is intuitive and designed to give you easy access to all of the destinations available on the platform.  You can customize your home page to see any page, including seeing your positions.

The demo account has a tab system on the bottom left, that opens to the common tab, where you can see charts of the major currency pairs.  You can change that to see daily, weekly or any intra-day period.  You can create several tabs that provide a view that you want to see.

Above the tabs is a navigator that allows you to see technical indicators as well as expert advisors and scripts.  Technical indicators allow you to perform technical analysis of different assets. An expert advisor is a system that can be back-tested to understand the performance of an automated trading signal over time.  Scripts allow you to drive alerts and run automated trading scenarios.

If you double-click in indicators in the menu of the navigator, you will a plenty of technical indicators that can be customized. In the graph above, the MACD (moving average convergence divergence) indicator is shown, along with a pop up of a custom input that you can use to change the standard MACD.

You can change the number of units (days, weeks, months, etc…) as inputs along with the colors used to generate a MACD indicator. The MACD shows both the MACD lines as well as the MACD histogram. There are dozens of technical indicators. You can save your favorite indicators into a tab and name favorites.

Expert Advisor

Metal Trader 4, offer access to their expert advisor. An expert advisor is a system that places trades after they have been back-tested.  It will automatically execute your trades when specific criteria are met. The demo account gives you a choice of a couple of different sample expert advisors.  You can choose from a moving average crossover expert advisor or a MACD expert advisor.

You can choose the inputs you use for each of these advisors such as the number of days or hours that you want in the calculation of the signal as well as the risk management that you want to employ when trading.  Risk management is a key component of your trading. The use of a demonstration account in conjunction with an expert advisor is highly recommended.

Scripts

Within the scripts section, you will find a wide variety of trading mechanisms. This includes automated trading, along with trading signals. There is copy trading as well as specific risk-reward indicators.  You can use multiple scripts with reviews of these scripts on your demonstration account to determine if the trading performance is in tandem with your goals.

Summary

Meta Trader 4 is one of the most efficient and complete trading platforms available.  You can open a demonstration account to test drive Meta Trader 4, and determine if its right for you.  You can set up multiple pages, to see charts, quotes, along with your portfolio.  You can execute traders from the quote sheet or enter an order directly.

There is a navigator you can use to add indicators, as well as create an expert advisor.  The platform provides you with access to dozens of indicators. You also can program your indicator. MT4 also allows you to evaluate a plethora of scripts that allow you to copy other investor’s trades or set up a signal that has been reviewed by others who use meta trader to transact. This is one of the most widely used trading platforms and is the benchmark platform for retail forex traders globally.

The Benefits of Using Contracts for Differences

Contracts for differences (CFDs) are financial instruments that track many assets including forex, individual equity shares, commodities, indices, and cryptocurrencies. CFDs allow you to trade the capital markets using leverage.

What is a Contract for Differences (CFD)?

A contract for differences (CFD) is a financial instrument that tracks the movements of an underlying asset such as a stock, currency pair, commodity, cryptocurrency or index. It differs from the underlying instrument in that you do not have to post the entire amount of capital to buy the underlying instrument. Instead, you only need enough to cover the change in the price from where you plan to enter the trade, and where you will exit the trade.

This compares to a stockbroker who might require that you need to have nearly all the capital in your account to buy equity shares. In some cases, when you purchase a CFD, you might be entitled to the dividend that is granted by the company on the underlying shares. CFDs can be used to trade directionally, or you can buy one CFD and simultaneously sell a different CFD and capture the relative value change.

Do CFDs Provide Leverage?

A CFD has an imbedded leverage feature which will differ from broker to broker and asset to asset. Leverage is a feature that enhances your trading returns, as it allows you to increase the capital you control with borrowed capital.

For example, some brokers will allow you to purchase $4,000 of EUR/USD while only posting collateral of $10. To use leverage, you need to open a margin account. Each broker will have different criteria for opening a margin account. They will generally ask you questions about your trading experience as well as your investing knowledge.

It’s important to understand how leverage can impact your trading returns. If you can purchase $4,000 of EUR/USD using 400-1 leverage, it will only take a 0.25% ($4,000 * 0.0025 = $10) move to either double your money or wipe out your capital. So, while leverage is an attractive tool, it can be a double-edged sword.

When you open a margin account, your broker will require that you always have a specific amount of capital in your account.  Each time your place a new trade your broker will require that you post a specific amount of fund which is referred to as initial margin.  The margin required is the amount of capital needed if the price of the CFD moved against you by a larger than the normal amount.

Your broker wants to make sure that you have enough capital allocated to a trade that if there was a larger than normal change in the price, that you have the funds to cover the losses. As the market moves, the amount of margin that you need to hold against each trade will change. If the price of the asset that you are trading moves against you, your broker will take maintenance margin to cover additional losses in addition to your initial margin. If the price of the security you are trading moves in your favor, the initial margin will remain unchanged, but any maintenance margin that was collected will decline.

The margin calculation is in real-time, and it tells your broker the minimum amount of capital you must have in your account to continue to hold your position.  If your trade moves against you and you are unable to increase the capital you have in your account, your broker will have the right to begin to liquidate your position.  Make sure you completely understand the margin agreement you sign and your broker’s rights to liquidate your position before you start to trade CFDs.

Trading CFDs relative to Stocks

CFDs can be very efficient for investors who are looking to trade stocks. This is because the leverage that is used in CFD trading, is much higher than the leverage you can receive with a stockbroker. For example, Amazon shares are trading near $1800 per share.

This means that you would need $1,800 just to purchase one share of Amazon stock. Many CFD brokers offer leverage of 20-1 which would allow you to purchase 1 CFD of Amazon for as little as $90 per CFD. A 5% rise in Amazon shares will allow you to double your money. Additionally, for the same $1,800 that would allow you to purchase 1-share of Amazon stock, you could buy 20 Amazon CFDs. Lastly, CFDs allow you to short the stock without having to borrow the shares.

Managing Your Risk

CFD trading can be risky, especially if you use leverage, so you must have a plan in place before you make each trade. To avoid the risk of ruin, you should limit the amount of capital you place on each trade to 5-10% of your portfolio. For example, if you plan to trade a portfolio of $5,000 the maximum you should post for each trade should be $500. This will provide you with a strategy that will provide some forgiveness if you start slowly.

Another concept you should follow is to cut your losses and let your profits run.  If the market moves against you and hits your stop loss, you should exit and live to see another day. If the market moves in your favor, move your stop-loss up and let your gains compound as the market moves in your favor.

Summary

Contracts for differences (CFDs) are financial instruments that allow you to trade the capital markets without purchasing the underlying instrument. CFDs track underlying instruments and provide leverage to help you enhance your returns. This would include equity shares, commodities, indices, forex, and cryptocurrencies. To trade CFDs with your broker you will need to open a margin account. While leverage can significantly enhance your trading returns, it is a double edge sword and can also lead to robust loses. You must have a well thought out risk management plan that you can employ on each trade, before risking any of your hard-earned capital.

Decisive Action in the New Decade: How to Invest Wisely in the 2020’s

Sadly, we’re still having to cope with jittery markets and widespread instability due to a range of political, environmental and technological factors, but that’s not to say there won’t be some great investment opportunities which we can capitalize on in the coming years.

The previous decade gave us a taste of the almighty potential that disruptive technology possesses, and cryptocurrencies, in particular, taught us that the sky’s the limit if investors are shrewd, wise and, in many cases, lucky enough.

Of course, cryptocurrencies are way too volatile to consider as anything other than a gamble, but there are plenty of opportunities out there that hold potential for the coming decade. Though it’s important to note that there are lots of unforeseeable circumstances that could undermine the value of just about any investment in the future – so it’s advisable to keep on guard if you decide to buy specific assets.

Looking to the clouds

(Cloud robotics industry forecasts show that industry growth is expected in the 2020s. Image: EVA)

Hamish Douglass is the billionaire chairman of Magellan and is an expert when it comes to investing in tech companies in particular. Speaking to the Financial Review, Douglass is confident that cloud computing will be the star player of the 2020s. “Mobility, internet of things, edge computing, enables the whole cloud to come together and do things we can’t even imagine today and businesses we haven’t even thought of will be $100 billion businesses in ten years,” he explained.

The beauty of cloud computing is that it’s demonstrably effective already. As opposed to the industries of AI and Virtual Reality, which still rely on some degree of speculation, the cloud is already largely used for the storage of images, home entertainment, collaboration tools, and within a range of smart devices. Many speculate that it’s soon to infiltrate the world of gaming, too.

As technology becomes smarter, the necessity of communicating with other smart devices increases. Add to this the fact that wires are fast becoming redundant in a world that’s dependent on convenience and it leaves the Internet of Things and cloud computing as an essential development in everyday life. The massive processing power of the cloud will also be key for industries depending on the interpretation of big data and powerful calculations.

In a jittery financial landscape, it’s fair to say that shares in the cloud technology companies could be one of the safest investments of the coming decade. This isn’t to say it’s completely immune from extraneous circumstances, but it’s one of the best shots to build a healthy portfolio.

Safety in real estate

Writing for Market Watch, Mark Hulbert believes that real estate is set to offer value investments over the next 10 years.

Hulbert highlights a Bankrate survey that asked investors which type of investment they would pick if they were using money that wouldn’t be needed for 10 years. The choices were stocks, bonds, real estate, cash, gold or metals, or cryptocurrencies.

The winner by some margin was real estate, which goes some way in showing that the best investments can come from more traditional places. Nearly one-third of respondents chose the housing market, and given that the stock markets as a whole face an uncertain short-term future, it could be one of the wisest decisions.

Hulbert believes that the performance of real estate during bear markets – with the notable exception of the 2008 market crash – shows that homes are safer than equities should an economic downturn occur. “In every other stock market bear market since the 1950s, the Case-Shiller Home Price Index rose in all but one. And in that lone bear market prior to 2007 in which the index did fall, it did so by just 0.4%.”

There’s also the added perk of the housing market being much less prone to the level of volatility shown by the world stock markets, meaning that over a 10-year period, your investments are likely to fluctuate less.

Geographic diversity

(Image: Visual Capitalist)

Interconnectivity has been making the world a smaller place for some time, and when looking for future investments it’s vital to look beyond the western world.

Tobias van Gils, of Countach Research believes that the fastest GDP growth of the 2020s will come from Asia. Furthermore, Van Gils highlights neglected economies surrounding both China and India as possessing great potential for growth.

The driving force behind Asian growth in the 2020s will be China’s multi-trillion dollar Silk Road Economic Belt, as well as the 21st Century Maritime Silk Road – two infrastructure investments that are designed to bring unprecedented levels of trade across the eastern hemisphere and beyond.

(Old and new: The new Silk Road infrastructure. Image: Benzinga)

Of course, such an ambitious project comes with more caveats. Firstly, much of the GDP forecast for Asia will be influenced by the successful arrival of the Silk Road. Secondly, with so many nations working together, it’s reasonable to expect some hitches in the development of such a large project.

Relationships with the US and China have been frosty to say the least, and the decade has arrived with fresh tensions in the Middle East. While China’s emerging economy still seems like a wise investment, its level of progress will depend on a more optimistic political climate.

Capitalising on disruption

Another safe set of investment options stem from the growing range of disruptive technologies set to become available in the coming decade.

There are five key areas where disruptive technologies are ripe for the future, and they include:

Green-tech and energy

Helping to propose solutions to the growing climate emergency comes renewable energy sources like wind power and fuel cells, as well as green buildings and carbon capture and storage solutions.

Advanced materials

Including nanomaterials, graphene and solid-state batteries.

Digital technology

Relating to both 5G and 6G, AI, quantum computing, blockchain and both augmented and virtual reality.

Smart machines

Involving exoskeletons, service robots, medical robots, 3D printing, driverless vehicles and industrial robots.

Biotechnology

Potentially disrupting healthcare could come technology like personalised medicine, gene therapy, nanobiosensors, cell therapy and 3D bioprinting.

Given the important role each piece of technology can play, it’s fair to assume that the future will see widespread implementation of many disruptive solutions. However, in the next 10 years, it could come down to which governments are more willing to spend money on developing the tech.

Once again, China could play a significant role in developing disruptive technology, and may focus on sectors that carry the most economic importance.

While investments in these sectors would appear generally safe, the issue is that most disruptive technology requires significant levels of funding, and in an economically unstable environment, it can be tricky to find a government or organisation willing to invest heavily in the implementation of such tech.

However, in a world that’s beginning to wake up to climate change, it’s worth taking a look at disruptive technologies in the field of sustainability and renewable energy as an area that could develop comfortably as the new decade rumbles on.

Beating The Crunch: Can We Invest Wisely in an Economic Downturn?

The very mention of a downturn can strike fear into the hearts of investors. Economics tends to be cyclical in nature and while steady periods of growth are revered with widespread speculation, they’re usually followed by a profound decline.

We currently live in challenging times for world economies. Uncertainty surrounding the United Kingdom’s Brexit alongside ongoing trade wars between the United States and China have sent some clear warning signs that investors may be facing some challenging times in the near future.

(The future of finance in the UK is conditioned primarily by Brexit, and could prompt an economic slowdown. Image: Institute for Fiscal Studies)

The UK isn’t alone in its uncertainty. With four possible outcomes of Brexit in the coming months leading to wildly different GDP forecasts, the United Kingdom is just one of many nations operating in a fragile economic climate.

But is it possible to successful invest within the volatile markets of a recession? Here are a few points on how to wisely develop your portfolio while navigating the potentially choppy waters of an economic downturn.

Coming to terms with a recession

It could be useful to clarify what is meant by the use of the term ‘recession’, as well as ‘economic downturn’.

(Chart illustrating the impact of the financial crash and the slowdowns within the global economy that followed. Image: The Economist)

Essentially, a recession is the name given to a sustained period of economic decline. Economists typically agree that two consecutive quarters of negative Gross Domestic Product (GDP) growth can be defined as a recession, but this isn’t always the case. It’s also worth noting that GDP acts as a measure of all the goods and services produced by a country over a pre-designated period.

There are plenty of factors that can contribute to a recession, which is why many economists avoid predicting their arrival with much certainty. In 2008 the collapse of the US housing market sparked a worldwide downturn, while other factors like governmental change, natural disasters, and new legislation can all be big contributors.

Recessions take shape as a result of a widespread loss of confidence from consumers and businesses when it comes to spending money. This, in turn, leads to stagnant incomes, loss of sales and ultimately production. Unemployment generally rises due to cutbacks in industries and national leaders face the challenge of kickstarting a weak economy to remedy the effects.

Right now you may be wondering how it’s even possible for anyone to build a successful portfolio from these circumstances, let alone those looking to make intelligent investments.

As they’re intrinsically linked to the financial markets, recessions tend to point towards more instances of risk aversion from investors as they plot methods of keeping their money safe from damaging losses of value. However, the cyclical nature of finance means that recessions must give way to recovery sooner or later. Let’s take a deeper look into some of the opportunities presented to investors during a time of severe financial difficulty:

Can opportunities be identified?

Recessions are terrible things that can severely impact the lives of millions, possibly billions of individuals worldwide.

But many negative events can come with some opportunities attached. And while recessions represent a considerable burden on the world financial markets, they can also offer some extremely high-value prospects for new investors.

When a recession takes hold, asset prices typically fall hard. This means that investors who were previously priced out of making meaningful revenue from stocks, bonds, mutual funds, real estate, private businesses to name but a few, can suddenly find themselves presented with considerably lower costs than a year or two prior. As other investors are forced to part with their assets, you could swoop in and grab yourself a bargain.

(The Financial Times highlights the inverted yield curves within US Treasury bonds as a sign of a coming recession – as evidenced by historical trends within this chart. Source: FT)

The Financial Times recognises that the US Treasury yield curve has inverted due, largely, to ongoing trade wars. Further to the chart above, the newspaper also reported that UK yield curves on two and ten-year gilts inverted over the past summer – indicating that there are challenging times ahead for investors.

Naturally, when market predictions appear ominous, bearish investor sentiments become more prominent. The Financial Times reports that in the current climate, the price of gold is “soaring.” With “the price of the yellow metal rising above $1,500 per troy ounce for the first time in six years” back in August.

Prolific investors will always be on the lookout for opportunities to buy low and sell high, and even though the markets will no doubt show volatility, there’s a good chance that as a recession subsides, the assets you’ve bought into will begin to regain their true value.

With this in mind, it’s worth exploring the prices associated with specific stocks and bonds. If their respective values appear to be outstandingly low compared to their value outside of the economic downturn, you could be looking at a good opportunity to gain money as the market recovers.

Searching for value in capital markets

When it comes to equity markets, the perceptions that investors hold of heightened risk typically leads to the urge for seeing higher potential rates of return for holding equities. For their expected returns to rise higher, current prices would need to drop. This happens when investors sell off riskier holdings and transition into safer securities like government debt.

This is what makes equity markets fall prior to recessions. As investors grow fearful of seeing the collective values of their assets decline, they take a series of steps in order to retain as much value as they can.

Safety in investing by asset class

History tells us that equity markets have a pretty useful habit of acting as reliable predictors of upcoming economic downturns, so it’s important to pay close attention to the optimism or pessimism of traders within this particular field.

However, even if the equity markets are in the midst of a deep decline, there’s still cause for optimism among investors. Assets still have the ability to undergo a period of outperformance, so it can often pay to keep your ear to the ground and hunt for small pockets of clear blue skies amidst the cloud-covered horizon.

Can efficiency be found within stock investing?

Stock markets can be volatile places even at the best of times. But history shows that there’s still plenty of security that can be found by investing during a recession.

One of the safest places to invest across a range of markets can be found within the stocks of high-quality companies that have been in existence for a long period of time. While this may not guarantee security, these types of businesses have shown that they can survive prolonged periods of financial difficulty in the past.

Indeed, the NASDAQ-100 index has experienced notably less profound volatility as it recovered from 2008’s crash than stock indexes comprised of less affluent companies.

Naturally, companies with credible balance sheets and little debt regularly outperform businesses with significant operating leverage and weaker cashflows. So it’s worth looking to established organisations for a little solidity when times get tight.

Will diversification remain a safe bet?

Even in the gloomiest of financial forecasts, always diversify your bonds. Even if you come across a company that appears to be thriving amidst an economic downturn, it’s vital that you diversify your assets.

Markets are extremely jittery when the world’s news is littered with closures and the falling GDP of nations and currencies. The landscape can change with little warning, and while diversification may not be a flawless way of thriving amidst the inevitable rainy days, it stands a much better chance than taking up the option of piling your faith into one company that looks stable today with no guarantee for tomorrow or the day after.

The world of finance hasn’t been brimming with confidence for some time now, and while investments should be made at the holder’s risk, there are certainly plenty of opportunities out there to build a respectable level of profits even in the midst of an economic downturn. Above all, stay patient, look out for emerging trends and make sure you diversify your investments.

The Crypto and Blockchain World – Trading and Investing in Today’s World

The Landscape

Throughout 2018, we saw regulators across key crypto markets including, but not limited to, China, India, Japan, and South Korea, clamp down on what was commonly referred to as the Wild West of the Global Financial Markets.

Over the course of the current year, however, the public attitude has shifted.

There are numerous reasons behind this, including significant steps by regulators and governments to shut down the more cavalier exchanges permitting the trading of cryptocurrencies, without the need for the standard disclosures seen across exchanges offering to trade of more traditional asset classes.

While jurisdictional restrictions continue to be a thorn in the crypto sphere’s side, crypto exchanges have also made significant strides in delivering more technically advanced trading platforms.

Not only have exchanges delivered the platforms for the effective trading of cryptocurrencies, but a number have also been built on blockchain tech, adding an additional layer of security.

Cryptocurrency Trading

Since the early days, when investors were only able to invest in the actual cryptocurrencies across exchanges that were no able to protect investor funds, times have changed.

The crypto trading market has evolved from exchanges offering crypto to crypto trading, into trading between cryptocurrencies and fiat money, but also the trading of certificates of deposits, derivatives and more.

As crypto exchanges have developed, risk management and other platform capabilities have been introduced. Encouraged by the volatility and potential earnings the crypto market offers more seasoned investors crossed over.

Across the crypto exchange spectrum, the types of exchanges on offer vary. While some are under the more standard web-based models, others are built on a blockchain platform.

As the blockchain world expands, the number of exchanges and trading platforms based on blockchain is also on the rise.

One such trading platform is Torex.

Torex

Torex is a multifunctional blockchain platform supporting cryptocurrency trading.

The advantage of using Torex is that it consolidates different exchanges, coins, and analytical tools onto the Torex platform.

In the first quarter of 2020, traders will be able to trade, gain experience and share trading strategies.

The Torex trading platform delivers the following capabilities to support both more novice and advanced crypto trading:

Centralized Parallel Monitoring

Enables the tracking of cryptocurrency rates on different exchanges on the Torex platform.

Advanced Analytics

The platform is planned to provide diverse analytics, ranging from embedded news aggregators to detailed technical analysis.

Multi-Exchange & Multi-Coin

Fast operations with any coin or token (like Bitcoin and Ethereum for example) from different exchanges.

Diverse Trading Tools

The platform, in 2020, will allow traders to choose between API-trading, copy trading, arbitrage trading, crypto betting, and more.

Advanced Cryptocurrency Arbitrage

Torex’s Arbitrage Tool analyzes the liquidity and depth of order books across multiple crypto exchanges, providing traders with easy access to liquidity-driven price arbitrage.

Cryptocurrencies are considered to be the most volatile of asset classes, with values capable of rising or falling by a few percentage points in a matter of minutes.

The volatility delivers traders with the rare opportunity of inter-exchange arbitrage.

Torex provides traders with the platform to take advantage of arbitrage windows. An arbitrage window develops when the strike price of a cryptocurrency at one exchange is higher or lower than found on another.

Using the Torex Arbitrage Tool, traders are also able to adjust the parameters. Traders are able to select the exchanges, cryptocurrency pairings, minimum trading volumes, and the minimum percentage of profit expected.

This capability is delivered through the manual mode of the Torex Arbitrage Tool. In automatic mode, an arbitrage assistant will carry out the functions, with the trader being required to make only minor inputs.

Cross-Platform

Torex is fully functional on PC and mobile devices. (A fully functional mobile version for Android and iOS is due out in Q4, 2020)

The Future of Crypto Trading

The nascent nature of the crypto trading world means there are plenty of opportunities for traders, both the novice and more advanced alike.

Crypto exchanges will need to continue to develop and introduce greater capabilities to hold onto existing liquidity and fee income.

Additionally, being flexible as such to meet the ever-fluctuating demands on the regulatory front, is also an important factor for traders domiciled across multiple jurisdictions.

The minimum requirements for the vast majority of crypto traders now include:

Stop loss, take profit, and trailing stop orders. Traders now can simultaneously place stop loss and take profit orders.

Trailing stops have become more popular in the volatile world of crypto trading.

Trailing stops allow traders to adjust the order limit along with the price, which is essential within the more volatile crypto sphere.

Other Modern Trading Platform Capabilities

API Trading

API Trading allows traders to make transactions and monitor currency rates across different exchanges. The added advantage is that it supports the managing of several accounts on one exchange.

Torex uses the official APIs, developed and released by the leading stock exchanges. These APIs allow users to manage all of their exchanges on the Torex platform.

Crypto betting is similar to the futures markets, where investors and traders forecast future prices.

Crypto Betting

Another development in the crypto world is the offering of crypto betting. In crypto betting, the user needs to predict how the rate of a coin or token will change in a given period of time. (Due for release in Q3, 2020).

Idea Sharing

On the Torex platform, there is also the opportunity to share trading tips through an encrypted TOREX end-to-end messenger.

Trader ideas is a recommendation to open a transaction that a trader creates and makes visible to all users on the platform.

Within the Torex world, traders will be able to purchase a subscription for a given number of published ideas for a given number of days. In 2020 traders will have a possibility to make payments in Torex tokens, called TOR. Basic Torex functionality is and will be available free of charge.

For an investor, the investor pays a commission for the ability to view and accept trading ideas.

The platform uses a Telegram Messenger bot to ensure both quick and easy to view trading ideas and signals in support of the network.

Trading ideas provides traders and investors alike with the opportunity to seize on a series of trading ideas.

Torex will release the idea-sharing capability in Q1, 2020. The copy trading capability is due to roll out in the 2nd quarter.

Blockchain

As the cryptocurrency world has evolved, the number of exchanges developed on blockchain technology has also increased.

A key attribute to the use of blockchain technology is the level of trust and transparency it delivers.

There are a number of increasing advantages of using blockchain tech. These go beyond the recording of transactions on the exchange.

The use of smart contracts is certainly one, which delivers even greater transparency.

Conclusion

As the crypto trading world evolves, more traders and investors continue to cross over from more mature asset classes. Trading platforms, including Torex, will need to continue to deliver equivalent, if not, more advanced trading experience than seen across traditional exchanges.

Catering to the need of both traders and investors will further fuel interest in crypto trading.

Alongside the necessary tools to trade and the appropriate transaction logging, security and speed are also significant priorities.

Since the early days, when hacking and theft was rife, cryptocurrency market players have begun to provide a far safer environment.

Exchanges are increasingly using cold wallets, which holds funds offline and out of reach from hackers. 2-factor authentication (“2FA”) is widely offered to further protect investor and trader accounts. With that in mind, 2FA authentication is implemented in Torex universal trading platform as well.

Coding has also become more sophisticated. Ensuring that hackers are unable to break into the system and take what very little is online is key.

We can expect the use of blockchain and an ever-increasing number of capabilities across the exchanges and trading platforms to further support the cryptomarket.

By historical standards, more recent crypto exchange offerings are certainly more sophisticated.

This is not surprising when considering the risks associated with trading in cryptocurrencies.

For investors looking forward to Torex, the IEO is coming soon. The soft cap has already been reached. Torex’s intention is to create a sophisticated, transparent and truly universal platform to meet the needs of every crypto trader.

How To Trade Bonds Using Macro Indicators

Bonds; What They Are And Why You Want To Own Them

Bonds, the bond market, bond yields, and the yield-curve are important aspects of the financial markets every trader should understand. It doesn’t matter if you are a bond trader or not, understanding the nature of the bond market can provide a deeper insight into just about every other market on the planet.

First let me answer the question, what is a bond? A bond is a pledge or a promise for one individual or entity to repay a debt that can be bought and sold by the public. It is, in essence, a way to guarantee a debt, the seller is borrowing money and the buyer is lending.  Bonds can be issued by just about any type of organization but are most commonly used by governments and businesses to raise large amounts of capital.

The bond issuer agrees to pay the bondholder an amount of interest that is predetermined at the time of the exchange in return for a loan.

Governments and businesses often need to borrow more money than what they can access through traditional banking means. In order to raise this money, they use public bond markets so they can tap into a larger liquidity pool. Investors buy the bonds in return for interest payments they receive over time or upon maturity. The amount of interest the issuer pays and the owner receives depends on a number of factors including Credit Rating, Interest Rates, and Demand.

Credit ratings for bonds are similar to the credit score you get as an individual, it is a measure of the bond issuer’s ability to repay the debt. Ratings are issued by agencies like Moody’s and Standard & Poors in a range from Investment Grade through Junk. Investment Grade bonds have the least likely of default, the least amount of risk, while Junk bonds have the highest amount of risk. A higher risk of default equates to a higher interest rate for the borrower, the issuer of the bond. That is good for the owners of bonds because it means a higher rate of return.

Safety-seeking investors may accept smaller returns for guaranteed investments and focus only on investment-grade bonds.

Demand can affect a bond’s cost/return ratio the same as any trading asset. Because bonds are typically issued in batches the amount of debt available for investors to buy is limited. If there is enough demand it can drive the cost of ownership higher and lower the effective yield. This is bad news for the bond investor but good news for the issuer because it lowers their cost of borrowing.

Central Bank Policy Underpins Bond Market Conditions

Interest rates are important for bonds because they determine the cost for issuers and return for investors. What makes bond trading hard is that interest rates change over time which means there times you may want to be a seller of bonds and other times when you want to be a buyer of bonds.

The primary force behind this is the prime rate or base rate maintained by the central bank of the country in which the bond is issued. When the prime rate is high bond rates tend to be higher and when the prime rate is lower bond rates tend to be lower. The challenge for bond traders is when the central bank is the process of altering its policy and changing the prime rate.

Central banks move their target for the prime rate up and down in an attempt to maintain economic stability within their respective nations. If economic activity is too high they raise the cost of borrowing money to make it harder for businesses to borrow. If activity is too low they lower the rate in an effort to stimulate business investment and flow within the capital markets. Savvy investors can sell bonds short when rates are low and then buy them back when they are high profiting on the cost of the bonds and receive interest payments in the meantime.

Inflation – This Is Why Central Banks Change Their Policy

The number one tool that central banks use to measure the economy and determine the trajectory of their policy, whether rates are rising or falling, is inflation. Inflation is a measure of price increases over time and can be applied to many aspects of the economy. The two most commonly tracked are business and consumer inflation. To that end, two of the most tracked inflation reports are the Producer Price Index and the Consumer Price Index.

Of the two, the Consumer Price Index or CPI is by far the most important. Consumers are the backbone of modern economies. While producer prices may bleed through to the consumer level, if consumer prices get too high there is nothing for an economy to do but collapse. In the U.S., the Personal Consumption Expenditures Price Index or PCE is the favored tool for measuring consumer-level inflation. It is released once per month and as a part of the quarterly GDP announcement.

Regarding inflation, most central bankers favor a 2.0% target for consumer-level inflation. This means that when CPI or PCE prices are below 2.0% the central banks tend to be “accommodative” toward their economies and ease back on policy by lowering interest rates. When CPI or PCE is above 2.0%, central banks tighten policy by raising interest rates.

Labor Data And Its Role In The Inflation Picture

Labor data plays an important role in the inflation picture. First and foremost, no economy can function if its people are not working. The FOMC at least is mandated with two functions and one of them is to ensure maximum employment. Figures like the non-farm payrolls, unemployment, and average hourly earnings become important in that light. The difficulty the FOMC faces is that stimulating labor markets can lead to increased wage inflation.

Economic Activity, Central Banks And Bond Trading

Economic activity is the alpha and omega of bond trading. When economic conditions are good capital markets are flush, when economic conditions turn the capital markets dry up and bonds are harder to issue. The takeaway is that economic conditions are what the central banks are trying to manipulate and they do that through interest rates. When conditions are bad, interest rates will fall, when conditions improve interest rates will rise until they reach a point the economy recedes. That is the nature of the bond market and bond trading, understanding that ebb and flow is key to bond trading success.

According to Learn Bonds, when the economy is performing badly and the stock markets are highly volatile, investors tend to switch investments to fixed income securities and this boosts the activity in the bond market. But this is not always the case. High volatility can sometimes drive investors towards short-term trading via online trading platforms. This way, they can benefit from both sides of the market without having to hold stocks for long periods.

Yield Curve And Market Outlook

There is a limitless supply of bonds but not all are the same. When it comes to bonds the safest, most trusted, and closely watched are U.S. Government Treasuries. The U.S. Treasuries are issued in a variety of maturities that range from a few weeks to thirty years. The yields on each maturity are different due to demand for time-frame, either long or short-term investment and can be analyzed for insight into market sentiment.

Known as the yield curve, in good time the spread of yield increases the further out you go. This is because investors believe that interest rates will be higher in the future so they don’t want to lock-in a low yield for too long. This phenomenon results in a higher demand for shorter-maturity bonds and a “normal” yield curve. In bad times that all changes. Bond investors believe interest rates will be lower in the future so they are seeking to lock in the higher rate for a longer duration. That creates a higher demand for longer maturity bonds and a signal known as a yield-curve inversion

This graph shows a partially inverted U.S. yield curve.

Psychology and Trading

Psychology Is The Most Important Factor For Your Trading Profits

When folks begin trading, the first instinct is to focus on the charts. After all, the charts are where all the action is. That’s where you find the Double-Bottoms, Reversals, Break Outs, and Trends that make big profits. What many traders come to realize, the successful ones at least is that there is more to trading than the charts, more than just making trades.

What you may have also realized is that finding winning trades isn’t enough. There’s something standing in the way to profits and that something is psychology.

Psychology is the study of the mind, behavior, and behavior patterns; what makes us do the things we do, how do we overcome the obstacles that are holding us back. Believe it or not, trading is mostly a head game. It’s not the market you need to beat, it’s yourself.

Trading Discipline Is The Foundation For Your Success

Trading discipline is the foundation for your success because it provides a set of rules for you to follow that will help prevent unnecessary losses. I say unnecessary losses because you can’t cut out all of your losses, as a trader, you must be prepared for it or else it will drive you mad. The root causes are Fear and Greed. Fear and Greed are the two strongest emotions felt by traders and not easily overcome.

What does discipline mean? It means coming up with a set of trading rules, rules you always follow so you don’t make decisions based on fear or greed. Rules can be as simple as only trading once per day, they can be as complex as only making trades when the asset price is bouncing from support after a bullish breakout and confirmed by a bullish crossover in MACD and rising RSI.

You may not believe me but the market will make you mad. It will infuriate you by not doing what you think it should. Your rules are intended to keep you from making trades based on the madness. Grudge-trading, revenge-trading, trying to get back at the market by making wild bets with valuable trading capital is a real thing.

Here is a list of sample rules for speculative traders. These rules can be used for Forex, CFDs, Options, Commodities, or Cryptocurrencies.

  • Every trade will always be 1% (or 2% or 3%, 5% is getting risky and 10% very risky) and no more or less (as close as can be had on your platform). Using a % instead of a fixed amount will allow the trade size to grow or shrink along with the account balance to maximize profits and minimize losses.
  • I will always trade with the trend. I will determine trend by price action, trend lines, moving averages, and MACD.
  • I will only enter on confirmed entry signals. My signals are bullish/bearish crossovers in stochastic and MACD, confirmed by a break of the 30-period moving average.
  • I will not enter if price action is within 3% of resistance (for bull trades) or support (for bear-trades).
  • I will use support and resistance targets as exits targets for my trades. If price action reaches a target I will exit to take profits. Some profits are better than no profits and infinitely more satisfactory than losses.
  • I won’t have more than one trade open on one asset at a time.
  • I won’t have conflicting trades open on the same asset at the same time.
  • I won’t have more than five trades open at the same time, that’s 5% of the account at risk at one time.
  • I will always follow my rules.

That last rule, I will always follow my rules, is the most important rule of all. It doesn’t make much sense to have rules if you don’t use them. I can say without a shred of embarrassment that I learned that last lesson myself more than once. Like I said before, the market will infuriate you and drive you to do things that are self-destructive to your account and trading capital.

Factors That Affect Your Trading Psychology

There are millions of factors that can affect your trading psychology. This list is intended to be a guide to what may drive you to make bad trades. The key to understanding your psychology and improving your list of rules is to be aware you can be driven to make decisions and recognize when that is happening. If you can do that you can take yourself out of the equation, step back from the situation, and regroup without losing money. The name of the game is consistent wins and capital preservation.

  • Fear – Fear is one of the most vicious emotions a trader can face. Fear can keep you from making a trade, it can also keep you from taking profits. Fear of losing money in your account will keep you making trades but you can’t let it, you have to make trades in order to make profits. If you keep your trades small no one loss will hurt you and you will still be able to trade again. Fear of losing profits you might make can keep you from taking profits you already have. What I’ve learned is that if you don’t take profits in favor of waiting for more, more often than not the profits you have will evaporate. You have to close your trades when the profits are showing.
  • Greed – Greed is the second most vicious emotions a trader can face. Greed is the other face of fear. Greed is the fear of losing profits you don’t have, or the desire to make huge trades and even huger profits. What takes traders by surprise is that greed rears its head when you are doing well. A string of wins can get your confidence up and that can lead to making aggressive trades and big losses.
  • Ambition – Ambition is a trait that all traders shares. It takes a certain  amount of desire to succeed to embark on the journey that is a trader’s life.The problem with ambition is when it leads you to make bad decisions, like when you compare your results to another trader’s and let that influence your trading.
  • Losses – Losses, a trader’s worst nightmare. Losses occur when trades don’t go your way. They are an inevitable part of trading but can be managed. The trick is not letting them become too large, always use proper position size (the 1% or 2% in my rules), and not to throw good money after bad. If a trade goes against you don’t double up on it and don’t reverse it. If you feel yourself getting frustrated from a string of losses the best thing you can do for yourself is to walk away from the market.
  • Hope – Hope can lead traders to do bad things just as bad as fear or gree. Hope is good but it can turn against you. It’s one thing to go into the market hoping all your hard work will pay off. It’s something else entirely to go into the market hoping this one trade with your rent money will pay off huge. That’s gambling and the worst kind, it’s desperation and that’s not a good place for a trader to be.

Understanding Psychology Is The Path To Your Trading Success

Understanding your trading psychology is the path to your trading success. To put it bluntly, you have to remove all emotion from your trading if you want to be truly successful. Successful over the long-term.

Successful in a way that means you can live off of trading. In order to do that you have to have some rules, the discipline to follow them, and the ability to take yourself out of the market when emotions overtake your decision-making process.

A Word On Algorithmic Trading Versus Human Trading

Algorithmic trading is the use of computers to perform trading tasks. The big-money algo-traders have billions in money-making hundreds, thousands, and even millions of trades a day as they try to scalp whatever profits they can while waiting for the big score.

Smaller traders use Expert Advisers (MT4) and other trading software to determine trading entry and exit points. What I have to say is that the algorithms are usually good but not something you want to rely on blindly.

Algorithms are based on rules and only work while the market conditions match those rules. When market conditions change the algos stop working and losses can mount quickly. At no time should a small trader ever let an algorithm trade their account unsupervised. 

That being said, social trading accounts allow you to tie your returns to professional self-disciplined traders. Using this service you are not blindly relying on algorithms but instead, you essentially let proven successful traders execute trades on your behalf.


This article is brought to you by the courtesy of Multibank Group.

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What is the RBOB/ Brent Crack Spread and How is it Used in Energy Trading?

The role of the refiner should not be underestimated as it allows crude products to be altered into a consumable good such as gasoline, diesel fuel or jet fuel. The refiner, just like the producer and consumer is incentivised by profits. Fortunately, traders can evaluate refiners profits by analyzing the margins they produce. The profit margins a petroleum refiner sees is referred to as the crack spread. One of the most well-known refinings crack spreads is the RBOB/Brent crack spread.

What is RBOB?

RBOB is an acronym for “Reformulated Gasoline Blendstock for Oxygen Blending”. This type of gasoline is used as the benchmark for gasoline trading on the Chicago Mercantile Exchange. The term “reformulated” describes gasoline that does not have any MTBE “Methyl tert-butyl ether”.

RBOB became the benchmark in the United States largely because of legislation banning gasoline with the chemical MTBE which was found in unleaded gas prior to legislation. MTBE was tied to the pollution of groundwater which threatened the health and safety of humans and wildlife. Since the legislation was introduced in the United States, RBOB futures has even become the new benchmark gasoline futures contract.

Each RBOB futures contract contains 42,000 of gasoline. RBOB futures contracts trade in US dollars per gallon. The smallest tick size for each contract is 0.0001 per gallon = $4.20. The Chicago Mercantile Exchange provide the most liquid RBOB contract.

What is Brent Crude Oil?

Brent crude oil is one of several types of light sweet crude oil that serves as the global benchmark for crude oil. Brent is described as light because of its relatively low density, and sweet because of its low sulfur content. Brent Crude is extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes. Brent crude oil is used to price nearly 65% of all global crude oils.

What is the RBOB / Brent Crack Spread?

The term crack spread describes the difference between the value of gasoline and crude oil. The refining process turns crude oil into crude oil products. This activity is known as the downstream process of oil and gas companies. In the refining process, crude oil is heated and introduced into the distillation tower. In the tower, oil is broken down into various petroleum products. Liquids and gases are separated into components by weight and boiling point. The lightest components, such as gasoline rise to the top while the heaviest components, such as residual oil, fall to the bottom. Light components include gasoline, which is condensed from a gas back into a liquid.

There are two components to the profit margin that a refiner can achieve. The first is the difference between the price of crude oil and the price of gasoline. The second is the difference between the cost to generate gasoline and the price where gasoline can be sold is the profit margin. The cost to generate gasoline is the value of crude oil plus the distillation process.

The RBOB / Brent crack spread describes the difference between the price of RBOB gasoline and the price of Brent crude oil. RBOB Gasoline is quoted in US cents per gallon and Brent crude oil is quoted in US dollars per barrel. To generate an “apples to apples” comparison, the crack is quoted in US dollars per barrel. To create this quote, RBOB gasoline is converted into US dollars per barrel. This can be accomplished by multiplying RBOB gasoline by 42, which converts the cents per gallon quote into a US dollars per barrel quote. You can then subtract the price of Brent crude oil from the price of RBOB gasoline to derive the crack spread.

The weekly chart of the RBOB Brent crack spread shows that at times the crack was as high as $28 dollars per barrel and as low as -$5.5 per barrel. When the crack spread is negative there is no incentive for refiners to purchase and refine Brent oil. This generally occurs during a recession or Brent oil is artificially buoyed by supply disruptions. When the crack spread is elevated and the price is well above the cost for refiners to convert Brent into RBOB, there is a large incentive to purchase and refine as much crude oil as possible.

Brent versus WTI

Another very actively traded crude oil is WTI (West Texas Intermediate). This is another light sweet crude oil that is used in the refining process to create gasoline. WTI is the US benchmark and since the US is the largest consumer of gasoline world-wide, WTI is an actively traded crude oil benchmark.

Since both producers of WTI and Brent compete for the same refiners as customers, the spread between the two oils is an important metrics for refiners. WTI is quoted on the Chicago Mercantile Exchange for pickup in Cushing Oklahoma. This area is landlocked and therefore requires shipment via pipeline or rail. WTI is also quoted in US dollars per barrel.

The spread between Brent and WTI has been as high at $28 per barrel and as low as -$3.6 per barrel. When the spread is elevated there is an incentive for US refiners to purchase WTI over Brent. When the spread is negative, the reverse is the case.

Summary

  • RBOB gasoline is the benchmark US gasoline traded in the United States
  • Brent crude oil is the global crude oil benchmark
  • The RBOB/Brent crack spread is the difference between the price of RBOB gasoline converted into dollars per barrel and Brent crude oil.
  • WTI (West Texas Intermediate) is the US crude oil benchmark
  • The Brent versus WTI spread describes the difference between the global benchmark of crude oil and the US crude oil benchmark.

This article is brought to you by the courtesy of Skilling.

What You Need to Know About Share Trading

The equity markets provide investors will the ability to take a view on individual company shares as well as sectors and indices. Stocks are considered riskier assets, and generally outperform other assets such as bonds, currency and commodities when global economic output rise.

What is a Share?

Each public company listed on an exchange provides an opportunity to own a piece of that company. An individual share is a partial ownership of a company. Some shares even provide the owner with the right to vote on specific issues related to the company. When you sum the total outstanding shares at a company and multiply the number of shares by the price of the stock, you can calculate the total market cap of the company.

Shares can be listed on an exchange. There are major exchanges such as the NYSE and the Nasdaq as well as several minor exchanges. Each exchange as a specific criterion which allows the shares to trade on the exchange. In some cases, if the share price falls below a specific level, the stock can be delisted from the exchange.

A share also represents a portion of a company’s distribution in any profits. The two main types of shares are common shares and preferred shares. In the past shares came in the form of paper certificates which have now been replaced with an electronic recording of a certificate.

What is a dividend?

A dividend is the distribution of a company’s profits. It is distributed by the company as a reward for owning shares of the company. Dividends are decided and managed by the company’s board of directors and need to be approved by the shareholders. Dividends are generally issued as cash payments, but they also can be distributed as shares of stock. In addition, exchange traded funds as well as mutual funds distribute dividends.

The board of directors of a company can determine the distribution mechanism as well as the timing when a dividend is released. The payout rates can also change throughout a year. Dividends are generally distributed quarterly, but some shares or ETFs payout their dividend monthly or annually.

Who Pays a Dividend?

Well establish companies, that have steady earnings and predictable cash flows are good dividend payers. Start-up company’s that are attempting to get their feet on the ground and need cash due to ad-hoc cost scenarios, are not good dividend payers. When businesses are in the early stages of expansion, they may not have enough funds to issue dividends. Good dividend paying companies are attempting to generate shareholder wealth via another mechanism outside of capital gains.

Here are some key dividend dates. Dividends are announced by company management on the dividend announcement date but still must be approved by the shareholders before the dividend can be paid. The date you need to own the shares by to be eligible for a dividend is the ex-dividend date. The payment date is the date that the company issues the dividend to its shareholders.

Types of Shares

There are several ways to take a view that the share of a company will rise in value. The most popular is common stock. This provides an owner with the right to receive a portion of the profits, as well as, earnings. In addition, a common stockholder has the right to vote on company issues.

An alternative is preferred stocks. Preferred shareholders have priority over common stockholders when it comes to dividends payments. These dividends generally have a higher yield relative to common stock and can be paid monthly or quarterly. Unlike common shareholders preferred shareholders have limited rights which usually does not include voting. Preferred shareholders also have a higher claim on recouping their capital if a company elects to go into bankruptcy. Preferred shares are more like bonds that stocks and usually have a fixed rate of return.

Quality Companies that Reinvest Profits

There is no rule that says investing in dividend stocks will be the only way to generate gains. Other opportunities do exist. There are several quality companies that do not offer dividends where the companies reinvent the capital which has the potential to be made up for in stock appreciation.

Many companies generate strong cash flow, have minimal debt and report robust earnings. Tech and biotech companies can provide substantial cashflow to generate operating profits. Here are six companies that can provide robust capital appreciation.

  • Alphabet (GOOGL)
  • Amazon (AMZN)
  • Biogen (BIIB)
  • Bookings (BKNG)
  • Edwards Life Sciences (EW)
  • Facebook (FB)

Generating Capital Gains with Contracts for Differences

Common stocks are more attractive then preferred stocks if you are interested in generating capital gains. An alternative option for trading to common stocks is contract for differences (CFDs). These are financial products that track the underlying change in the value of a common stock. There are several benefits to using CFDs instead of purchasing common stocks.

A contract for differences provides investors with leverage that is beyond what is available when trading common shares. Since a contract for difference only tracks the change in the value, your broker does not need you to post the entire value of the shares. Instead they only need you to post enough margin to capture any potential loss you might experience when trading.

Leverage on CFDs on shares can reach 100-1, depending on the shares, allowing you to post only a small portion of the value of the shares. For example, if you want to trade Apple shares with a price of $200, you might only need to post $2, as opposed to $200 for each common share. One of the downsides of trading CFDs is that brokers generally do not offer dividend payments to holders of CFDs.

A CFD is a more efficient way to trade shares if your goal is specifically to capture the changes in the price of a share. There are also many brokers who offer CFDs on Exchange Traded Funds (ETFs). The instruments allow you to take a view on an entire sector such as the technology sector or the financial space. Like shares, brokers generally do not pay a dividend to owners of CFDs on ETFs.

Summary

Common stocks are the most popular way investors take ownership of a company. These shares provide an investor with voting rights as well as dividend payments. Preferred shares provide investors with a higher yield and a better claim to a company’s dividends. If your goal is to take a directional view of share prices, then contracts for difference are a more efficient way to invest in shares.

This article is brought to you by the courtesy of Skilling.

Gold Technical Analysis – How do the Experts Trade Gold

The experts use several technical, fundamental and sentiment indicators to determine the future direction of the yellow metal. Gold is viewed as both a commodity and a currency. Gold is generally quoted in US dollars, and trades both as an exchange traded instrument as well as over the counter.

How the Experts Trade Gold

Gold is considered a safe-haven asset that gains in value when markets are looking for an alternative to other currencies that are losing value. When interest rates are declining around the globe, the demand for a currency that will sustain its value provides a backdrop for rising gold prices. 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. Expert traders will evaluate three dimensions that provide them with a view of the gold market. These include the technicals, the fundamental backdrop and sentiment.

The Technicals of the Gold Market

Experts 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.

Gold prices in June of 2019 are bucking up against the upper end of a 6-year range, and are poised to test the upper boundary. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. 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. A weekly MACD crossover on gold prices tells expert traders that gold price momentum is accelerating upward.

Momentum is Important

Another momentum indicator is the relative strength index (RSI). This momentum oscillator describes whether prices are accelerating relative to the last 14-periods. The RSI surged in June of 2019 and has broken out, which shows accelerating positive momentum. The only caveat is the current reading on the RSI is 77, which is above the overbought trigger level of 70 and could foreshadow a correction. 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 near 84 in the past, which means that positive momentum can still accelerate as gold prices break out.

The uptrend is also moving higher. The 10-week moving average crossed above the 50-week moving average in early 2019, and the 10-day moving average continues to rise which shows that a medium-term up trend is currently in place.

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 reports to 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.

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.

Expert 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 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 most important gold fundamental is whether the US dollar is likely to rise or fall. Since gold is priced in US dollars, when the dollar rises, it makes gold more expensive in other 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. Traders generally follow how the dollar is performing against the Euro and the yen as these make up the bulk of the transactions that occur around the globe on a daily basis. Gold is also viewed as hedge against higher inflation. When inflation is on the rise, gold prices will offset increases in a basket of goods or services.

Summary

Gold prices fluctuate daily, 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, expert 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. Additional, expert traders will track the value of the US dollar, which is a driving force behind the value of gold. It doesn’t hurt when a broker has a convenient, efficient and reliable trading platform, such as forex4you.


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Globalism and The Economy

Is the US still the world’s leading superpower?

While the strong global economic growth of the late 19th and early 20th centuries was driven in part by the two first phases of industrialization and the transport revolution in Western Europe, successive wars on the old continent have weakened growth and European countries. Since then, globalization has given a boost to global growth, while propelling the United States to global superpower status.

earth

What is globalization?

Globalization is all about commercial interaction between different parts of the world. These flows can be exchanges of goods, capital, services, people or information. This was all made possible by the improvement of the means of communication (NICT), the containerization revolution, the very low cost of maritime transport, the increasing liberalization of trade (GATT and then WTO in 1995) and the deregulation of financial flows between countries.

Since the 1990s, globalization has accelerated, with the fall of the USSR, the rise of the Internet, the creation of the World Trade Organization (WTO, 1995) and regional free trade agreements such as NAFTA all contributing to this acceleration.

With the First World War, the United States quickly became the world’s leading economic centre

In 1945, the US held ⅔ of the world’s gold stock and accounted for 50% of global production. The new world economic order was organized by the US (IMF and IBRD in Bretton Woods in 1944, GATT in 1947), and their currency – the American dollar, or USD – became the currency of international trade. Wall Street in New York became the economic and financial heart of the world.

What made the United States a unique superpower?

The American democratic, capitalist and liberal model, as well as the American way of life, spread to the non-communist world, with the Marshall Plan (1947) and the development of multinational companies.

By the end of the 20th century, the emergence of mass media and the Internet revolution gave Americans the opportunity to influence the entire world even more.

With the development of mass consumption that began in the 1950s, many American products arrived on other markets. Some products are now an integral part of the lives of many Europeans, Asians and South Americans, such as the Visa card, sportswear such as Nike, soft drinks such as Coca-Cola, fast food such as McDonald’s, as well as American music, cinema, universities, etc.

This undeniable cultural influence, called “soft power”, is a huge source of influence for the US across the world. This “soft power” indirectly influences and positively shapes the view of the USA in the eyes of other countries. This power makes adoption of the American point of view much more palatable to other countries, all without the need for force or threat.

In addition to “soft power”, there is also “hard power”, characterized by economic hegemony, technological progress (information technology, nuclear, space conquest) and first-rate military and diplomatic power, which make it possible to impose the will and power of the United States on the rest of the world by force or intimidation.Earth from space

The US – the powerful (and criticized) nation at the heart of globalization

The American system arouses as much wonder as questions/criticism in regards to their management of the social crisis and poverty, political extremism, weak environmental protection measures, etc. It could be argued that American influence has declined in recent years, although the country remains a first-rate power that dominates many sectors of activity.

First of all, we can see heightened criticism of the American hegemony, even if anti-Americanism is not exactly a new phenomenon. Several countries (Russia and China foremost among them) and political currents reject the American model, while US involvement in foreign wars are subject to the harshest criticism.

The United States is also experiencing an increasing number of economic competitors, such as from the European Union and the BRICS countries (Brazil, Russia, India, China and South Africa). The subprime crisis in 2007 also eroded the power of the US, both immediately following the crisis, and in the years since.

China became the world’s leading economic power ahead of the United States in 2014, after 142 years of “American rule” according to IMF figures. The increased debt burden and evidence of the United States’ dependence on foreign capital (particularly Chinese capital) is also a factor that challenges US supremacy.

How has the election of Trump altered the future of globalization?

The surprise election of Donald Trump as the 45th American president invites a re-evaluation of the future of the global economic order. Movement of goods, money, and people across international borders have all certainly changed since Trump’s election, as “resistance to globalization” was one of his prominent policy themes during his election campaign, with particular emphasis on the US-China relationship.

China and the United States have an extensive – but tense – economic partnership, often triggering periods of conflict, such as the current situation. Trade tensions have significantly increased since 2018, when Trump first sought to limit Chinese economic influence with tariffs.

Trump’s plan to reduce his country’s dependence on China focuses on increasing taxes on their imported products, so American products are favored locally and purchased instead. Of course, China reacted by increasing taxes on American imported products. These trade tensions and tariffs could cut global output by 0.5% in 2020, according to the IMF. Consequently, the organization cut its global growth forecast.

”There are growing concerns over the impact of the current trade tensions. The risk is that the most recent US-China tariffs could further reduce investment, productivity, and growth,” said IMF chair Christine Lagarde.

Trump’s wish to implement US protectionist policies will have one important consequence for the country: as the USA turns inward on worldwide economic integration, this will certainly have an impact on global stocks and flows. Knock-on effects to this policy, such as retaliation from countries like China, canceled contracts with American companies and suppliers, and countries that seek to imitate Trump’s anti-globalization agenda (like Greece and Hungary), may also all lead to significant consequences for the global economy.

What consequences on the global economy can be expected if the trade war escalates?

As noted by the European Central Bank in its analysis on Implications of rising trade tensions for the global economy, the impact of an escalation of trade tensions could be felt in different ways.

”In the case of a generalized global increase in tariffs, higher import prices could increase firms’ production costs and reduce households’ purchasing power, particularly if domestic and imported goods cannot be substituted for each other easily. This could affect consumption, investment and employment. Moreover, an escalation of trade tensions would fuel economic uncertainty, leading consumers to delay expenditure and businesses to postpone investment,” declared the ECB.

How to take advantage of the changes in our interconnected global economy? 

”In response to higher uncertainty, financial investors could also reduce their exposure to equities, reduce credit supply and require higher compensation for risk,” added the European organization.

It’s worth mentioning that ”through close financial linkages, heightened uncertainty could spill over more broadly, adding to volatility in global financial markets”, which can create great trading opportunities for investors.

Thankfully, there are plenty of available instruments that can turn a profit in any market condition. You can short an Index, diversify into a new, more promising, geography or just bet on volatility. The main things to watch for when seeking such exposure is that your broker is regulated and the scope of instruments it can provide. It doesn’t hurt when a broker has a robust, efficient and reliable trading platform, such as Multibank Group.

Times of great uncertainty breed great opportunities, investors and traders can make the most of the potential changes in the world order by focusing on the most promising region, or business sector.

Bottom-Line

The United States remains one of the world’s largest economies. It is a major power that excels in many areas, with an influence that is exercised both with hard power (economic, military and diplomatic power) and soft power (cultural influence).

However, the country faces many challenges, challenges that threaten to erode its role as a superpower, such as the emergence of significant economic competition from other countries, and their recent policy shift to economic isolationism.

Highly integrated into globalization, the recent decisions of the United States regarding greater protectionism, and the hard retreat from globalization wanted by Trump, affect the world economic order and global trade flows.

The current global climate is well encapsulated by Harvard Business Review – ”the myth of a borderless world has come crashing down. Traditional pillars of open markets – the United States and the UK – are wobbling, and China is positioning itself as globalization’s staunchest defender”…


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Adjustable-Rate Mortgages – The Pros and Cons

An adjustable-rate mortgage (“ARM”) is a mortgage loan with an adjustable interest rate. The adjustments are made to the mortgage rate on a periodic basis and can be as frequent as monthly or on a less frequent basis, such as annually.

Traditionally adjustable-rate mortgages have an initial rate fixed period before shifting to an adjustable-rate over the remainder of the loan term.

The interest rate is derived from a benchmark and ARM margin. Generally, the benchmark is based on either, 1-year U.S Treasuries, LIBOR (London Interbank Offered Rate) or 11th District Cost of Funds Index.

It is the benchmark component of the adjustable-rate mortgage that is the variable. The ARM Margin is a fixed rate throughout the term of the mortgage loan.

ARMs include rate caps that limit the impact of rising interest rates on an ARM.

Advantages

  • ARMs tend to have lower interest rates in the early part of the mortgage term, which tends to be the fixed period. The rates are traditionally lower than those offered in fixed mortgages. This benefits homes buyers looking to own a home for a shorter period of time.
  • Flexibility in selecting the fixed interest rate period is an advantage. This allows prospective homeowners to benefit from lower rates for longer.
  • ARMs increase the purchasing power of homeowners. ARM rates are based on shorter-term interest rates. Short-term interest rates are traditionally lower than long-term interest rates. The lower interest rate allows applicants to buy more expensive homes due to the lower rates.

Disadvantages

  • While ARMs do have their interest rates capped, monthly payments are a variable and can materially affect disposable incomes in rising interest rate environments.
  • Very rarely will the ARM interest rate fall after the fixed period. The initial period is an enticer, luring prospective applicants with a lower rate than those offered for fixed-rate mortgages.
  • Prospective applicants need to clearly understand the benchmark.
  • One benchmark could have greater volatility than another. Understanding and selecting the most appropriate ARM benchmark is an important step in the process.

In Summary

Prospective home buyers need to consider the advantages and disadvantages of an adjustable-rate mortgage carefully. There is certainly greater flexibility for those planning on holding the mortgage for a shorter period of time.

Advantages to an ARM can fall away as the hold period of a mortgage lengthens.

Uncertainty over the interest rate environment in 5 or even 10 year leaves ARM mortgage holders exposed to the prospect of materially higher monthly repayments.

Since last November, as fixed mortgage rates have been on the slide, the level of interest in ARMs has been on the rise. The allure of even lower mortgage rates has ultimately reignited appetite for ARMs.

Financial advisors likely consider the current economic cycle to be near its peak. Such an outlook would suggest that further upside in interest rates is limited. Some caution is required, however.

The spread between an ARM and fixed-rate mortgages could converge should economic conditions worsen. Such an event would reduce the attractiveness of an ARM, particularly if the fixed term of the ARM is beyond 1-year.

One last thing to also consider is the property market itself. Inventories have been tight in recent years. This has led to homeowners owning their properties for longer. When considering the fact that holding an ARM beyond the fixed interest period is a disadvantage, inventories can also become a factor.

Trading USD using Consumer Price Index (CPI)

To be a successful forex trader, it is essential to know the factors behind demand and supply of currency. The Central Banks control the entire world’s money supply. Traders will be better prepared when they are properly able to comprehend the effect of policy decisions made by Central Banks on the currency markets.

The Central Bank of any nation has 2 major functions – One controlling inflation and other controlling fluctuation in the currency value.

Central Banks use CPI as an indicator for measuring inflation. The Consumer Price Index (CPI) is one of the most significant economic indicators that have a major influence on forex trading. The currency of a nation is directly impacted by the policy of its own central bank’s interest rate decisions and indirectly by the decisions of central banks from other nations.

Forex traders are advised to keep track of the CPI of most major trading nations like the US, EU, Japan, and Australia.  Below section provides comprehensive information on the same.



What is CPI?

The Consumer Price Index is one of the most important economic indicators when determining currency value. It calculates the average change in prices of goods and services for a given period. These prices are on which the consumer buy any item from the given basket of products and services.

The CPI is usually computed monthly, quarterly or yearly but can be more often. CPI is also called as the Cost of Living Index. The CPI gives information about consumer level inflation, one of the central banks biggest concerns, and further help to provide data about the overall consumption expenditure.

When the prices of goods and services rise the economic situation turns into inflation. The CPI will then tend to increase with a rise in the price rates and further, the economy weakens. On the other hand, the lowering of CPI leads to a reduction in the overall inflation and hence strengthens the economy.

The basket of goods used to compute the CPI for most nations has more than 200 categories of items. These are divided into eight major groups, as follows:

  • Housing
  • Apparels
  • Transportation
  • Education and Communication
  • Recreation
  • Medical Care
  • Food and Beverages
  • Other Goods and Services

The major uses of the Consumer Price Index are:

  • CPI is an essential Economic Indicator: It is used for determination of Inflation and prominently useful in the government’s economic and fiscal policies.
  • The Deflator of other economic statistics: CPI data supports in the computation of other commercial series for deriving an inflation-free Dollar value. Examples of other economic series are Income and Wages, Retail Sales, National Income and Product Account.
  • Customizing of Dollar Values: The CPI assist in the calculation of Income payments, Social security payments, Retirement benefits, and Income-tax structure. The CPI prevents these economic components from any impact due to inflation. So the Labor Bureau refer this CPI and make further valid adjustment in these economic factors. Hence any inflation-induced Dollar value is avoided from hampering the benefits of financial services given to US citizens.

Calculation of the Consumer Price Index

The US Bureau of Labor Statistics, under its Department of Labor, provides the CPI for the United States. The Bureau computes the CPI for 30 days and releases this index during the middle of the month. The U.S. BLS collects data from Consumer Expenditure (CE) survey which primarily records the expenditure weights.

Consumer Price Index (CPI) for a single item is measured as follows:

CPI = (Cost of the market basket in the given year / Cost of the market basket in a Base year) x 100

Types of CPI

  1. Urban Consumer Group:  This group constitutes over 93 percent of the total urban population in the US. The Consumer Price Index for all the Urban Consumers (CPI-U), computes consumption expenditure of all urban dwellers. The people under the category of Professionals, Self-employed, Retired, Unemployed and living below the poverty line will come in the CPI-U.
  2. Urban Wage Earners Group: The group constitutes 29 percent of the total US population. The CPI for the Urban Wage Earners and Clerical Workers (CPI-W) will compute the income of the clerical and wage earners only. The group considers only those households which earn one-third monthly income from wages or clerical jobs. The group must have at least one of the household member is employed for a minimum of 37 weeks consecutively. The CPI-W consider the cost of social security benefits of these wage group.

The CPI does not include that portion of the population who are rural families, agricultural households, defense personnel, convicted people and mentally disabled.

Importance of the Consumer Price Index

The CPI is a crucial economic indicator for all market watchers. The index helps to provide information about consumer prices. Further, based on this index, the market can get awareness about what may happen in the Financial Market.

  • First, The CPI measures the cost of out-of-pocket expenditure made by the consumer. CPI records the change in prices and data about expenditure-based weights. The expenditure based weight is attached to each good or service. Therefore these weight assesses the price change impacts on the whole index.
  • Second, the GDP CPI index is broader. It includes prices spend by the consumer as well as the government, businesses peers and foreigners.
  • Third, the Personal Consumption Expenditure (PCE) is narrow in focus. The PCE index is focused only on the individual’s consumption expenditure, unlike CPI, which measures the average household’s purchasing power.
  • Fourth, the CPI follows the Laspeyres formula while PCE obeys the Fisher-Ideal equation. The GDP CPI index also depends on the PCE index, unlike the CPI which is an independently calculated index.

Why is CPI considered as the main driver for interest rate policy?

Let’s take a look with the following scenarios:

When inflation is rising it means that the prices for goods and services are rising, making it more expensive for consumers to buy things. In the US, the Fed will take steps to decrease inflation by raising interest rates. Higher interest rates makes it more difficult for businesses to do business, and that slows the economy and reduces inflation.

In the case of low inflation, the prices of goods and services are cooling down. Hence the Reserve Bank will lower the core Interest Rates in order to stimulate economic activity. When the Bank gives an easy loan at lesser Interest Rates its easier to buy things and do business. When economic activity expands inflation rises.

  • There is an inverse relationship exists between the CPI and the Interest Rates.

The Central Banks tend to increase Interest Rates when there is high inflation and decrease them when there is low inflation. Therefore, when Interest Rates fall, the CPI rises, and when Interest Rates Increases, the CPI decreases.

Effect of CPI on US Dollar Index

Some proficient Forex Brokers like Tickmill provide the opportunity to trade 62 currency pairs, including majors, minors, and exotics. However, among the currencies, the major one remains the US Dollar Index.

The US Dollar Index is computed against six major rival currencies. Among them, the Euro constitutes almost half of the overall weight. When the US Dollar Index gets impacted it extends the effect onto the other related currency pairs. Theoretically, the CPI and USD Index relationship is straightforward. If the CPI goes up, then the US Dollar also soars. 

If the Consumer Price Index is rising then it means costlier goods. The Federal Reserve addresses the inflation problem by boosting interest rates. Higher interest rates provide the opportunity for banks to charge more for loans, and other financial institutions to go long on US denominated assets. The overall effect translates into higher demand for USD, hence its appreciation against other currency pairs.

Let’s get straight to the point. The US Dollar Index is a geometrically-averaged computation against its six major rival currencies. The index was created to maintain an external bilateral trade-weighted average value against the greenback. The rivals are the Euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. It may seem like only “six” countries are taken for the calculation but the actual numbers remain different.

The weight for the currencies remain in this manner:

weight of currencies
Source: theice

The Euro itself contains 19 members of the European consortium of countries who follow the Euro currency. As a result, there are overall “24” countries considered for greenback formula, adding the other five rivals. Along with these 24 nations, most of the world countries closely follow the US Dollar. Hence, the greenback becomes a great indicator of its global position and the current world economic situation.

The ICE Futures US compiles and regulates the formula for the US Dollar Index.

The formula is as follows: USDX = 50.14348112 × EURUSD-0.576 × USDJPY0.136 × GBPUSD-0.119 × USDCAD0.091 × USDSEK0.042 × USDCHF0.036

The inverse correlation between the CPI and US Dollar Index

There is, of course, a direct relationship between CPI and USD from the theoretical front. However, things appear more evident in real life. The graph plotted below is of US Dollar Index and the Inverted CPI for some stipulated period.

CPI & USD Index Correlation
Source: Finance Magnates

Global Business Impact

The Global economies are integrated like never before. The US Federal Reserve is one of the strongest Central Banks in the world, it’s policy decisions spill over into the world economies. Strengthening or weakening in the USD has a direct and substantial impact over the world businesses.

Any increase in the interest rates provides appreciation in the dollar and that offsets all other currency.  It means other currencies are now depreciated versus the USD, if their economies are weaker. This means that Import, Export and other cross border transactions of those local economies directly get affected because of fluctuation and the change in USD levels and that is what forex traders try to capitalize on – the changes in value of the currency. Hence a trader must always know the USD Index and its effect on the Global Businesses.

Conclusion

Forex Traders look forward to the CPI numbers. The most precise one is Core CPI as it excludes high volatile consumer goods but it is not the only number to watch. Under the current Federal Reserve Chair Jerome Powell, the central bank has set a target of 2.0 percent for inflation.

In conjunction with the Core CPI, traders also keep a watch on the unemployment figures over the period. Both numbers are significant from the overall economic growth perspective, therefore, considering them together is the key.

Using Win/Loss Ratio in Trading

Avoiding this disaster is, luckily, easier than you think. Besides the win rate, we always focus on a simple formula called the “reward to risk ratio”. Simply said, it means that you compare two figures with each other: what do you win when you win and how much do you lose when you lose.

This article not only explains the reward to risk ratio itself but also shows how the reward to risk ratio offers more transparency and why this is one of our core principles at Elite CurrenSea. But first, we start with the importance of good Forex education.

Forex Education – Be Aware

The continuous supply of online trading education seems endless. The volume of material could easily overwhelm anyone who is looking to start with trading or anyone who is searching for more in-depth information about trading.

Often trading educators promote oversimplified information in an attempt to impress their public… But they purposefully ignore or fail to share their full trade statistics.

Luckily, there are a couple of key tips and tricks that traders can use in order to find good and reliable mentors. Following these few critical steps could save you a lot of headaches:

  • Research the mentoring website on Forex Peace Army. Evaluate the rating, check the comments and also make sure that there are a sufficient number of reviews.
  • Evaluate their transparency and openness. Evaluate whether they are sharing their trading statistics and also check what information is being shared.
  • Check out their YouTube channel. Are there serious videos with good analysis and education or are they only promoting others and offering quick-rich schemes?
  • Check their website for day-to-day help. Anyone can create a system and leave it there forever. Live analysis and setups indicate an active team.
  • Visit their seminars. Speaking to traders face-to-face makes a huge difference and you can judge their word and credibility easier.

When you keep an eye on these 5 things, then you know that you are talking to serious traders with meaningful and professional advice.

Especially seminars offer a useful way of learning. First of all, the information is conveyed face-to-face which makes it easier to retain knowledge. Secondly, seminars add a networking opportunity to the mix as well.

FX& CFD Education

Talking to other traders from the trading community can be almost as valuable as learning from mentors themselves. Traders like to help each other out by sharing tips, explaining tricks, and showing new short-cuts. Generally speaking, traders can learn a lot from their mentors, peers, and even students (teaching traders with less experience). Good mentors strive to offer a hub where trader learn, network, connect, become curious, and get creative.

The first concept that we explain to traders when they join our seminars or website is this simple fact: the reward to risk ratio is just as important as the win percentage. Most traders are surprised or even shocked, to hear this statement but the mathematical truth is simple. Let’s explain.

A danger of Only Using Win Rate

Do you sometimes dream of achieving a 99% win rate? It seems perfect but only a few traders understand the underlying risk. Essentially one bad loss or unlikely event could make your track record meaningless. Sometimes traders call this unlikely event a Black Swan (a low chance event with a massive impact – any regular loss in Forex and CFD trading is not considered a Black Swan).

Let’s say that you managed to trade with unprecedented accuracy and you made:

  • 25 wins in a row
  • With an average of 2 pips per trade
  • For a total of 50 pips.

Of course, nobody can book wins forever and a loss is only a question of time. Ironically, it only takes one loss of 50 pips to wipe out all of the previous gains. A loss of 100 pips in one single trade setup, in fact, puts the entire account at a major loss (+50 – 100 = -50 pips).

Most traders like to aim for and boast about a high win rate but unfortunately, it just gives traders a false sense of achievement and security. A trader could actually win 95%+ of their trade setups but still lose money in the long run.

Reward to risk ratio

Reward to Risk Ratio Explained

Traders can improve their approach and trading performance by simply adding the reward to risk (R:R) ratio, besides using the win rate.

The R:R ratio indicates what traders can expect to win and loss on average. As mentioned above, what do traders win when they win and how much do they lose when they lose.

Here is a definition:

  • Reward: average profit made per setup
  • Risk: average loss made per setup
  • Reward to risk ratio: average profit versus average loss.

Let’s give a simple example:

  • Your winners closed for an average of 15 pips and your losses for an average of 10 pips – what is the R:R ratio?
  • The answer is 1.5. The 15 pip average win is one and half time as a large as the 10 pip average loss.

Assuming an average win of 60% versus a loss percentage of 40, what is your expected profit?

  • Expected profit = (average profit * win percent) – (average loss * loss percent)
  • Let’s continue with our example:
    (15 pips * 60%) – (10 pips * 40%) = (9 pips) – (4 pips) = +5 pips per setup.

All in all, you are netting an average of +5 pips per trade setup, even though your win rate is only 60%. Now compare the +5 pips expected profit with the ultra high win rate (25 wins out of 26 setups):

  • (2 pips * 96%) – (50 pips * 4%) = (1.92 pips) – (2 pips) = -0.08 pips per setup.

The strategy with a 60%, counter-intuitive to many traders, is in fact far more profitable than a strategy that offers a 96% win rate. The R:R ratio helps you discover which strategy is better and more profitable and provides you with a 360-degree view of your average expected profits per setup.

There are two ways how you could improve your profit expectancy:

  1. Improve your win percentage by creating better trade ideas and/or improving your timing for trade entries.
  2. Improve your R:R ratio by cutting your losses short and/or letting your winners run.

The R:R ratio is a key aspect of risk management, which remains a core point for all type of traders.

Transparency and High Valued Education

We used the R:R ratio in this article as a prime example that trading is not as simple as some people promise. Many traders tend to boost their performance by only mentioning the pips gained (how risk is taken?) or their win rate (what is the R:R ratio?). Now you know that both of these statistics mean little without the proper context.

In fact, we at Elite CurrenSea decided to make its education more dynamic by offering regular forex and CFD seminars from the fall of 2018 and onwards. The first concept that we explain to traders when they join our seminars or website is this simple fact: the reward to risk ratio is just as important as the win percentage. If you find the topic interesting, join our facebook page and tune in to the live broadcast of the full Utrecht event 15:00 on February 16th. You can also find the recording later on our YouTube page.

REGISTER FOR FREE

Wishing you good trading,

Nenad Kerkez
Chris Svorcik

Elite CurrenSea

Elite CurrenSea is a website focused on Forex & CFD trading, analysis, systems, and software. It offers two proprietary trading systems called ecs.CAMMACD and ecs.SWAT and also a live service with trade setups, ideas, analysis, and webinars called “ecs.LIVE”. Our trading is based on a mixture of indicators, patterns, and price action for tackling the markets.

Interview with Brian Cheong, the President and the Founder of TTC Protocol

He is also the CEO & founder of tataUFO, a social discovery platform with over 13 million users. He founded tataUFO while studying at Peking University in China. tataUFO is supported by great investors like Lightspeed China Partners, Ameba Capital, SoftBank Ventures Korea, Korea Investment Partners and Union Investment Partners. Previously he worked in Softbank Ventures Korea, where he assisted the early stage investments into consumer and mobile companies such as Lotiple (acquired by Kakao) and DevSisters (KOSDAQ IPO). He also worked for the government of Central Java Province in Indonesia as an IT Consult for 2 years where he made its official intranet and official websites. He founded and sold a web company at age of 17.

How was the idea of TTC Protocol born?

“The birth of TTC Protocol stems from domain experience, hype, and opportunity.

It all started back when I was in college. It was during this time that I learned about blockchain technology, and I sensed a huge potential in its possible applications, but this was before the technology itself was well-known to the public.

What made me consider giving blockchain technology a closer look was the massive influx of funds and talent into the blockchain industry in 2017. The number of cryptocurrency investors in South Korea rose from 50,000 to 3 million in only three months, while some of the most talented people I knew were entering the industry. As my startup owned a social networking app called tataUFO for college students in China, now with over 13m users, naturally, I looked into the application of blockchain in the social network industry.

After a deep search, my team and I concluded that, when applied to social networks,  blockchain technology can empower us to build a fully dependable point-to-point and peer-to-peer social platform. I personally believed that the application of the technology would change our view on social networking platforms forever. I shared the concept with Simon Kim, the CEO of Hashed, and Richard Liu, a partner at FBG Capital. They were all very interested in the project. By March of this year, TTC Protocol was officially established.”

How would you explain your project to the general public?

“TTC Protocol is a next-generation social network protocol based on decentralization and token incentives. In simple English, we help social network services to grow their user base and revenue by empowering everyone to claim the value of their likes, or their online contribution, in a wider sense.

It benefits everyone that is part of the ecosystem. For developers, it could solve many issues faced by traditional social networks, such as fake news, cyberbullying, private data leakage, and over-commercialization. For users, it will provide benefits, such as privacy protection, higher quality content, and most importantly, fair rewards for their contribution to the growth of the platform.”

As the company successfully completed its pre-sale fundraising, what has already been done and what are you going to do with the funds collected by the ICO?

“With successful fundraising through our ICO, our team has not only been able to accomplish major milestones in the development of the TTC Protocol but have also had the opportunity to build a diversified global platform. The highlights of TTC Protocol’s progression are as follows:

  • March 2018, Whitepaper Release
  • March 2018, Institutional Investments (FBG Capital, GBIC, Hashed, Dunamu & Partners, NEOPLY, etc.)
  • March 2018, Pre ICO
  • May 2018, Main ICO
  • June 25th, 2018, Token Distribution
  • June 2018, DEx.top & UEX.com Listing
  • July 2018, Acquired ALIVE, a mobile video sharing app with over 10m downloads
  • August 2018, Bibox.com Listing
  • September 2018, Whitepaper V1.0 Update
  • September 2018, Hacken Partnership and Launch of Bug Bounty Program
  • September 2018, “Merapi” Testnet, TTC Reward Engine (TReE,) and TTC Connect (Mobile Wallet App) Release
  • October 2018, Release of TTC SDK
  • October 23rd, 2018, Announced four new Alliance Partners in Korea (Pikicast, Cobak, Womanstalk, SocDoc; total of 7.5m registered users), growing the total user base to 30m
  • November 2018, Vietnamese, Russian, and Indonesian Whitepapers Released

In the coming months, we will continue to focus on both developments of blockchain technology and expansion of the ecosystem. In addition, with the cooperation of Hacken, a leading cybersecurity white hat hacker organization, TTC Protocol keeps up to date with the most current security practices.”

Why build partnerships with apps in the South Korean market first?

There are numerous reasons why we would enter the South Korean market first, but here are the key factors to understand:

First, rapid tech adoption. More than half the population of South Korea resides within a 100 km radius of Seoul, its capital, and the majority of the population are highly educated (more than 70% of the population have the university diploma). It is one of the most technologically developed countries in the world with some of the fastest internet. South Korea has a unique environment, where information and trends can spread more quickly than other parts of the world.

Second, the network effect. A user base of over 7.5 million is considerably high by itself, yet what is more impressive is that there are about 15 million millennials (aged 14 to 36) in Korea, and they mainly reside in or nearby Seoul which enables the network effect to expand rapidly – not only is the young Korean population extremely well connected, but there is the added benefit of clearer communication, as we reside within the same time zone and region. With clear communication channels and a tech-hungry population, we can increase our impact and form a more scalable platform.

Lastly, digital currency friendly. South Korea was one of the first countries to purchase digital assets with fiat currency. As early as in 2000, a Korean citizen is reported to have paid over 25,000 USD for a single digital sword in a popular MMORPG. This trend continues today. One recent study claims that 40% of white-collar Korean workers own or have owned at least one cryptocurrency.”

How does TTC Protocol differ from similar services?

“One key difference between TTC Protocol and other blockchain protocol projects focusing on social networks is that our strategy is heavily focused to welcome and include the existing online and mobile social networks. TTC Protocol is not a single service social network, but a growth tool for helping pre-existing social network platforms to return the value of their platform to their users.

First, we lower the technological hurdles for our partners. We provide the SDK, which enables our alliance partners to smoothly integrate into our ecosystem with little effort, as little as half a day’s worth of coding in some cases. It has helped us to build an alliance with players from different regions: tataUFO is our first partner whose users are based in China, while ALIVE, a video-sharing app with 10m+ downloads globally, has users in North America, India, and many other countries. In addition, we will adopt  7.5m users in South Korean through partnerships with four mainstream social platforms. Overall, we have built an alliance with 6 services and 30m+ registered users across the globe, all using the same coin (TTC) without any shared equity among partners. This is quite a unique achievement in the blockchain industry.

Second, our technology and partnerships do not alter the partner services’ core values and functions. We believe that every social network and online community is unique, that is why our SDK provides a very flexible adjustment system for reward logic that accommodates to the needs of each partner. One service could choose to incentivize users more for likes, while another could promote content creation more. As a result, no partner service has to risk their original colors, culture, and fans to enjoy an accelerated growth and healthier community derived from blockchain technology.

Third, we provide ordinary users with easy-to-use utility functions for TTC tokens, lowering the entry barrier of blockchain technology. For example, many users might have difficulties or would be uninterested with understanding a protocol’s voting mechanism, or even how to vote, but with us, the users just simply need to download our wallet app which provides a voting mining service with a one-click binding service for all apps in our ecosystem. We try to provide the best user experience we possibly can. This is what sets us apart from other blockchain projects – we have been in the social field long enough to know that the users’ experience is key to the success of the platform.”

How can your innovative service change the way we see social networks?

“We believe that each user contributes massively to the growth of social networks. Users contribute by creating content, giving their attention (e.g. likes and comments), and most importantly, sacrificing their time. Without users, there is no Facebook, there are no billions of dollars of revenue and profit. Each user brings something – a value – to the table, and the market cap of Facebook is simply a snapshot of the sum of values from each user.

Once people realize that they can claim the rightful value of their time and contribution, you cannot put that genie back in the bottle. It will change how we perceive the value of our online labor – yes, labor – and it will change our social status from a user to a contributor and a stakeholder.”

What are your plans for the future?

“At present, TTC Protocol launched its Testnet, Merapi, allowing developers to test the integration of social exchange onto their platform – once tested, they will be able to apply the mainnet, launching in Q1 of next year, which will enable real value exchange on the platform.

With a completed mainnet in mind, the focus will be on finding partners and creating a diversified and growing ecosystem. With more partners integrated into the TTC ecosystem, TTC Protocol can increase the utility value of its token – helping to form a truly open and global community.”

About TTC Protocol

TTC Protocol is one of the largest social networking ecosystems on the blockchain, with over 30m users. TTC Protocol provides a simple-to-integrate and fully-customizable blockchain-based SDK for existing communities, which acknowledges users’ contribution to the community and rewards them.

Telegram (English): t.me/ttc_en
Telegram (Korean): t.me/ttc_kr
Email: official@ttc.eco
Homepage : http://www.ttc.eco/
Facebook : http://www.facebook.com/ttceco
Twitter : http://www.twitter.com/ttceco

5 Things You Need to Know About the Cannabis Industry

Though global demand for cannabis has existed for decades (and arguably even millennia), it was not until recently that the international cannabis market began to become completely legitimized. Ongoing legislative efforts and ballot initiatives in the United States and elsewhere around the world have transformed the industry from a black market operation to one that offers investors incredible opportunities to openly increase their wealth.

Normally, when a “new” market is created, industry producers need to wait a significant amount of time before there exists a sufficient level of demand for their product. The cannabis industry, however, has demonstrated itself to be much different. Because high levels of demand already existed all around the world, industry producers quickly recognized that if anything was lagging behind, it was the availability of the global supply.

Clearly, the cannabis industry is uniquely positioned upon a frontier of tremendous opportunity. In this article, we will discuss the most important things for you to know about the industry as a whole and—whether you plan to ever consume cannabis or not—we will also discuss the many unique opportunities for you to earn a significant return on your investment from cannabis trading.

1. The Difference Between Hemp and Marijuana

Before you consider investing in the cannabis industry, it is important to recognize that the term “cannabis” can actually be used to describe a broad range of different products. Though many of the terms in the industry are often wrongfully used interchangeably, both hemp and marijuana are distinctively different manifestations of the more-inclusive cannabis plant.

The primary difference between hemp and marijuana is that, contrary to hemp, marijuana typically contains relatively high levels of tetrahydrocannabinol (THC). THC is the primary component of the cannabis plant that causes users to feel “high” and, consequently, the way in which these products are regulated and managed are significantly different. In the United States, in order for a cannabis product to be labeled as hemp, it must have a THC content of less than 0.3%. Hemp still typically has some active ingredients—usually referred to as cannabinoids—such as CBD, CBN, and others, but these ingredients do not affect users nearly the same way as THC does.

Generally speaking, governments around the world are much less hesitant to allow the growing of hemp than they are to allow the cultivation of marijuana. Hemp can also be used for an incredibly wide variety of industrial purposes including paper, fibers, fuel, animal feed, and many others. This is especially beneficial because, contrary to marijuana, industrial hemp is actually quite easy to grow. Still, because both products are derived from the same cannabis family of plants, there are still some unresolved complications involved in the legalization process.

2. Dramatic Legal Changes around the World

As cannabis use began to enter the mainstream American public in the early 1900s, various groups—including tobacco, paper, and alcohol lobbyists—began to advocate its prohibition. By 1937, the Marihuana Tax Act began to place federal controls on the plant and, by 1970, the Controlled Substances Act outlawed cannabis altogether.

However, despite the fact that the Federal Government of the United States still considers cannabis to be a “schedule I” substance that is more heavily restricted than opiates and certain amphetamines, multiple states across the nation have effectively begun to allow its use. The first “pro” cannabis piece of legislation was California’s Proposition 215, which was successfully passed in 1996.

In 2012, Colorado and Washington were the first states to legalize cannabis for personal use. Furthermore, as of 2018, a majority of states allow the use of cannabis for medical purposes and several more states (AK, OR, CA, NV, MA, ME, VT, DC) have also decided to permit recreational use as well. Currently, only four states (KS, NE, SD, ID) do not allow at least the use of non-psychoactive cannabis.

Though—despite opposition from the federal government—the United States has effectively positioned itself as one of the leading forces with regards to recreational cannabis legalization, there have been significant efforts made elsewhere around the world as well. Uruguay, South Africa, and Georgia are the first three countries to allow full recreational consumption within their borders. Spain, Italy, and the Netherlands are believed to be on the verge of achieving total legalization as well.

Other countries around the world have begun to decriminalize recreational use, allow for medicinal use, or effectively stop enforcing their laws altogether. Furthermore, one of the most notable efforts that have been made is that, as of October 17th, 2018, Canada will allow the recreational use of cannabis across the entire country. Considering the close relationship that exists between the United States and Canada, Canada’s legalization may inadvertently accelerate the pro-cannabis movement in the United States as a result.

3. The Economic Impact of the Cannabis Industry

Though these figures are often difficult to generate, recent research conducted by Grand View Research suggests that the marijuana market is estimated to be worth more than $146.4 billion by the year 2025. When compared to IMF figures from 2017, this means that the marijuana industry alone would be the 59th largest economy in the world.

Clearly, the marijuana industry has the potential to have a major impact on the global economy and to influence a wide variety of different industries.

  • “Cannabis Tourism” is expected to rapidly grow.
  • Medical marijuana—which some claim can help treat chronic pain, cancer, various mental health disorders, and other conditions—will likely begin competing with traditional healthcare and effectively drive down costs.
  • Marijuana cafes, marijuana clubs, and other recreational venues will likely begin to emerge in Canada, the United States, and elsewhere.
  • Once cannabis is fully legal in the United States and Canada, this will likely lead to an increase in international trade (especially in light of the new trade deal).
  • The marijuana industry is also believed to have already created more than 200,000 jobs—many of these employees enjoy more than a 15% pay raise each year
  • Furthermore, in the United States, hemp—the distinctively non-psychoactive derivative of the cannabis plant—has also begun to enjoy bipartisan support from pro-business and pro-agriculture Republicans and generally pro-cannabis Democrats. The Hemp Farming Act of 2018 intends to remove hemp (cannabis with less than 0.3% THC content) from the list of federally controlled substances, support hemp farmers and researchers with various grants, and also allow hemp farmers to have clearer access to the national banking system.

Even though this act has not yet passed, the hemp industry has already begun to flourish in states such as Colorado and elsewhere and has already surpassed $1 billion in domestic value. Once hemp is fully legalized across the United States, it can be expected to perpetually compete with paper mills, animal feed producers, center wellness treatments centers, and various other industries.

4. The Cannabis Industry is “Going Public”

There is no doubt that the general movement toward the legalization of cannabis has already begun to disrupt a wide variety of different industries. What remains unclear is whether these industries—particularly those involved in the medical community—will continue to resist this seemingly inevitable growth or if they will embrace it and find a way to position themselves as industry innovators.

Until such a decision has effectively been made, it remains clear that cannabis producers will continue to occupy a significant portion of the agricultural start-up market. As is the case with many new businesses, the typical large-scale cannabis operations begin with funding from a few angel investors and then seeks additional private funds once they have been able to demonstrate a potential for growth. However, even though there still remains some legal uncertainty regarding the cannabis market, several cannabis producers have already begun the process of issuing IPOs and going public.

Here are some of the top performing cannabis stocks over the course of the past year (2018):

  • Tilray (NASDAQ: TLRY): grew from $25.60 on August 9th to $214.06 on September 19th
  • POTN (OTCMKTS: POTN): grew from $0.19 on January 12th to $0.85 on January 26th
  • Aurora (OTCMKTS: ACBFF): grew from $4.09 on August 14th to $11.36 on October 15th
  • Canopy (NYSE: CGC): grew from $24.62 on August 14th to $54.89 on October 15th
  • Cronos (NASDAQ: CRON): grew from $5.65 on August 14th to $13.75 on September 20th

Clearly, the fact that some of these stocks have demonstrated a potential to more than double their value in a matter of weeks (or even days) will continue to attract initially skeptical investors to cannabis trading. The period between mid-August and early October 2018—occurring near the time many outdoor growers were harvesting their crop—was particularly lucrative for the industry as a whole.

However, despite this potential for growth, it is important to recognize that the cannabis industry is exceptionally volatile. For example, the company India Globalization Capital (IGC) experienced more than 1,000% growth between September 14th and October 2nd, but then lost 70% of that rapid growth over the next three days. Though those who held the stock before this period of volatility are indeed still wealthier because of these movements, anyone who entered the market when IGC stock happened to be at its zenith, may be questioning their initial decision.

Source: Statista
Source: Statista

5. Reasons for Continued Growth

Despite the high levels of volatility that the cannabis industry has clearly begun to demonstrate, one thing continues to remain undeniably clear: even when using conservative projections, the cannabis industry as a whole is still significantly increased in value over time. As capital is gradually shifted from black-market operations to legal, publicly traded firms, the question is no longer whether the industry has what it takes to succeed, but who will ultimately be the most successful.

There are plenty of reasons for outside observers to believe that the cannabis industry will continue its steady rate of growth.

  • As the cost of cancer treatments and other medical treatments continue to rise, patients who find relief in the consumption of cannabis will have a significant impact on global demand.
  • Changing attitudes, legislation, and the opening of markets will help make it possible for major cannabis firms to access a wider audience.
  • Operating on an economy of scale—which is typically made much easier when done through legal avenues—will allow the cost of cannabis to decrease, which will increase accessibility without any damages to profit margins.
  • Increased competition will help spur innovation, drive down production costs, and increase the general quality of cannabis producers around the world.

For better or for worse, the days of full cannabis legalization are undeniably on the horizon. This industry presents the capacity to both complement and disrupts a variety of other industries, meaning that its economic impact is something that no investor can justifiably ignore. Between the bipartisan movement towards legalizing hemp, Canada’s dramatic push to become a world leader in cannabis production, countless initiatives occurring across the states, and various other legalization efforts occurring elsewhere in the world, the industry is clearly prepared to establish itself as a permanent economic fixture.

Conclusion

The cannabis industry—which consists of both hemp and marijuana—is volatile because, as we have seen with other industries (think about the “.com” era), all new industries are positioned upon a frontier of initial uncertainty. However, despite the fact that this level of volatility is likely to continue on into the perpetual future, it remains clear that the value the cannabis industry can offer the world is indeed authentic. The future of cannabis is exciting and will likely witness increased competition, innovation, and consolidation of the world’s top firms. Though investing in the industry is something that can certainly not be done without risk, the almost universally recognizable potential for growth that exists there has uniquely attracted the attention of investors all around the globe.

3 Innovative Solutions For the Seamless Inheritance of Cryptocurrency Assets

Earlier this year, Futurism carried a story about Michael Moody, a 26-year old who died in a tragic plane crash in Chico, California in 2013. Before his death, Michael was a Bitcoin miner, in the words of Michael’s father, “my son was actually one of the earliest people to mine it. He used his computer at home to mine bitcoins when you actually could do it that way, and he had a few, we think.” Two years after the crash, the father started exploring ways to retrieve Michael’s cryptocurrency assets. He has succeeded in piecing together information about his son’s stash of Bitcoin, but he been unable to access his crypto wallets because of the decentralized nature of cryptocurrencies.

Nolan Bauerle, director of research at cryptocurrency analysis at CoinDesk in an interview with Bloomberg observed that “if someone who owns Bitcoin, or another cryptocurrency passes away without sharing their account information, those coins are simply abandoned.”

Interestingly, being able to retrieve personal information and access a cryptocurrency wallet doesn’t automatically mean that the funds of the deceased are available to their beneficiaries. A number of legal considerations such as the Computer Fraud and Abuse Act (“CFAA”) and The Stored Communications Act prohibit the unauthorized access to people online accounts (including crypto wallets) even when they are dead.

Now, accessing deceased cryptocurrency wallets and transferring funds without legal authorization apart from being a financial crime also has tax implications. Hence, dying without clear-cut instructions on the management of your digital assets means such assets could be forfeited to the state or lost forever. This piece examines three projects introducing innovative solutions for managing digital inheritances.

TrustVerse

TrustVerse is fundamentally a blockchain-powered AI platform that provides an optimized asset management service while also minimizing cryptocurrency volatility for low-risk medium-return performance ensured by its deep neural network and secure and reliable blockchain based system. Beyond intelligent asset management, TrustVerse also offers smart contract programming and design solution on its dApp to help cryptocurrency investors manage taxes, legacy planning, inheritance and transfer of digital assets.

With TrustVerse investors can manage their crypto assets, and make sure their family and loved ones will get access to your assets after they die thanks to Smart Contracts and oracle mechanism. TrustVerse helps investors protect their assets through private smart contracts stored on a public chain. The smart contracts are also programmed with life scheduling service that reaches out to your beneficiaries to when you’ve not checked in for a while.

Proof of Death

TrustVerse also leverages a Proof of Death (PoD) consensus solution to prevent post-mortem identity theft and fraud. TrustVerse also has solutions to determine if your digital assets are required to be reported and submitted to probate. Once all statutory legal requirements are met, you can trust that the smart contract will execute and the transfer and distribution of digital assets to predefined designators will be done. The best part is that this platform manages other digital properties such as online storage accounts, websites, emails, photo , nd video sharing accounts, domain names, and intellectual property among others.

Safe Haven

Safe Haven is a platform that uses blockchain technology to help people safely and transparently share the keys to their assets with beneficiaries after their demise. Many people are worried about sharing their account information or keeping it in storage because of fears that the accounts could be compromised and that their funds could be stolen. Safe Haven is using a TFC Share Distribution Key, Trust Alliance, and Escrow protocol to encrypt the information about digital assets while sharing the keys as a puzzle.

Safe Haven allows users to protect their digital assets and ensure seamless inheritance without locking you out. The protocol distributes seeds/private keys/passphrases that provide access to an asset to between the initiator and their beneficiaries. However, the shares of the keys are distributed to give the initiator/parent control over their assets – the shares are also managed as a legally-binding document by a notary. In the event of the death of the initiation, the beneficiaries holding the other shares can present the necessary legal documents to the Trust Alliance System.

DigiPulse

DigiPulse is another platform that wants to make it easier to manage digital inheritances with a solution for storing and encrypting information on a blockchain. The encrypted information can only be accessed by prespecified recipients. DigiPulse is being developed around the notion that there’s technically no need to attorney service for the transfer of cryptocurrency assets in event of the demise of the investor.

DigiPulse adds an interesting feature into the mix in that it allows users to choose between keeping their identity anonymous and allowing their identities to be visible. DigiPulse, however, doesn’t seem to require beneficiaries to take any action before the inheritable assets can be transferred to them. DigiPulse uses its API integrations to measure activity signals. Once a pre-defined period of inactivity elapses, the smart contract will assume that you’ve passed on and the smart contract will execute to transfer the assets to your beneficiaries.

10 Things You Need to Know About Abu Dhabi

The capital of United Arab Emirates (UAE) and also one of the largest cities in the country, Abu Dhabi is a wonder. Living in the city brings to you cherished experience from all over the world and some which are truly unique to Abu Dhabi. Merely two decades ago, this city was a small town with a few immigrant families and a majority of oil corporations setting sights on the black gold. Since then Abu Dhabi has come a really long way.

For those of you seeing the town for the first time will realize that the city barely resembles the desert it is so widely associated with. Skyrocketing towers and a thriving business district give this city its worldly charm. The city is now home to thousands of immigrant families who settled in the city not only because of its world-class facilities in sports, education, business, and living but because the city offers a charm like no other in the country. Sure, the first thing you are going to wonder – ‘isn’t Dubai better?’, well to the untrained eye yes, it may seem that way. Surely Dubai has a plethora of wonderful amenities and world-class hospitality but that’s great when you are planning to stay only a few days or weeks. Those things mean very little when you want to settle your family in a city and want the best the world has to offer. That’s where Abu Dhabi provides you with all the Dubai has to offer and so much more.

For those of you who are visiting the city for the first time or relocating for work and/or business, we have collated a list of things you should keep in mind. This list is to help you better adjust to the cultural differences and nuances of the city that we love.

Conservative Cosmopolitan

Abu Dhabi is a world-recognized pioneer city in technology and business which puts it in the top brass of cities all over the world. That said, Abu Dhabi is strongly rooted in its customs and traditions. This hugely applies to women and clothing customs. Covering your shoulders, legs and knees are mandatory in public places. In the vicinity of your hotels or private venues, you have the freedom to wear what you like although, in places such as mall, mosques and other open areas, it is mandatory for women to abide by the local customs of the land. As an outsider to the customs, we recommend carrying a pashmina shawl with you at all times. This will help you cover yourself in places where the customs require you to. Also in areas where the air conditioning is high having a shawl is an added advantage.

The local language is not a mandate

While the city has a conventional culture and as a outsider, you may consider language to be a problem as well but that is not the case. Most hotels and service providers will have English speaking staff available to support you in the common language. Although, knowing a few local phrases especially ones for greeting will be beneficial to you.

Tips and additional service payments

Tipping is a common practice in the city of Abu Dhabi. There are many places like taxis, hotel valets, restaurants etc. where locals will expect a tip for their services. So it’s good to keep with the practice but there is no mandate on this. You can always refuse to do so. If you do choose to tip for the services rendered, keep to a maximum of ten percent as that is the norm. In restaurants make sure to check if the bill already contains an inclusion for the tip, if so there is no need to pay an additional tip.

Finding your way around the city

If it’s for your first time in the city and you don’t have a local guide to take you around, fear not. There are plenty of transport services available to you. You can dial for a taxi or venture out on any of the bus routes. Buses are fully air-conditioned and you will be able to converse with the attendants in English. Make sure to grab a map of the city and know the name of the location you are staying in.

Driving in UAE

The UAE traffic rules and regulations have provisions for tourists and non-residents to drive in the city. There are options for those of who prefer to drive which include temporary driving licenses and similar such provisions. Although keep in mind that driving in the cities of UAE can be perilous. We recommend checking for car insurance Dubai online for the best rates and options to ensure you are thoroughly covered on the road. Safety is our primary concern.

The best time to travel to UAE

While this point isn’t specific to Abu Dhabi in particular, it’s always a good idea to check in advance what the best time is to visit a new city or country. Since UAE is mostly desert and arid land, there is heavy sunshine all year round. This holds true for Abu Dhabi as well. The Summer months become exceptionally uncomfortable for those who aren’t used to the harsh heat that local may be accustomed to. With UAE in particular, it’s good to visit in the months between May and October. The winter periods are also fairly good times to be in the country. Although, if you are traveling in May or June, consider checking for the Ramadan dates as its a nationally celebrated time and due to fasting periods most shops and services shut early. The cities are also not too vibrant or active during these periods.

The Sheikh Zayed Grand Mosque

This is a must visit landmark in the city of Abu Dhabi. The sight of the towering mosque and its vibrant artwork will leave you speechless. It is truly a wonder and will leave you mesmerized in awe of the wondrous architecture.

Get your shades on

The harsh sun and hot climate will be a challenge for you when you begin your journey in the city. It’s a great opportunity for you to pick out your favorite shades and sport them on whenever you step out for your sightseeing tours and travels around the city.

Alcohol

Some of you may have had this questions on your mind. To ease your pain and rest easy, there are restaurants and bars in Abu Dhabi that serve alcohol. While the nation is culturally bound by the consumption of alcohol, it is available for non-residents and tourists who choose to indulge in alcohol.

Public Display of Affection

Being a conservative nation, public display of affection is not acceptable in the city of Abu Dhabi. You can hold hands in public places but anything more is not tolerated by the morally policed nation. Beware of the affectionate gestures with your beau.

We hope these pointers help you get slightly more familiar with the local customs and traditions as well as plan out your journey with more ease.