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.

High Leverage Crypto Trading: Ultimate Guide

Crypto exchanges and brokers

Many would ask why you need brokers in order to trade cryptos when you have cryptocurrency exchanges where you can buy or sell them. This is a good question, but not that easy as it seems at first sight. Indeed, signing up for an account at a crypto exchange is hassle-free, and once you have it you can directly buy, exchange, and store cryptos on your wallet before the price goes up enough to sell them and earn your profits. Experienced traders, however, know, that crypto exchanges are unable to offer a comfortable trading environment and good conditions as most brokers do.

Simply put, crypto exchanges are new to the market, while most brokers have over 20-years experience in online trading and providing the clients with top tier services. An advanced user interface, 24/7 support, high security and safety, multiple charting options, mobile apps, and many more things are only available with online brokers.

Why cryptos are popular with traders

One of the major reasons is high volatility. While long term investors buy and hold assets for years, intraday traders prefer volatile markets to reap quick profits. Volatility offers a lot of trading opportunities, and although the risk is higher, the profit potential is much bigger. This is why those who prefer short term strategies are fond of digital currencies.

Another reason is that the crypto market is growing sharply. You will hardly find a person who has never heard of cryptocurrencies. It is being advertised heavily in financial media and elsewhere, which is also pushing the crypto market higher; as a result, people are constantly requesting crypto trading options from the brokers. Currently, there are many investors who trade on the digital currency market only.

Trading cryptos with leverage

Marginal or leveraged trading is very much popular with FX traders, as it enables trading large amounts that by far exceed the account balance. You should note however that trading leveraged products magnifies both potential profits and losses, so it is not fit for beginners.

Seasoned traders, however, tend to choose those brokers that offer good leverage, as they already have much experience in risk management. For your convenience, we have analyzed more than 50 most popular world-wide brokerages and have selected a list of brokers that offer cryptocurrency trading with a leverage of 10:1 and higher.

Leveredge

Each of the above has its own features and trading conditions that may have more or less weight for a certain trader. Please note that trading cryptocurrencies carries high risks by itself while using leverage in this market is even riskier and requires a lot of experience. If you are just starting out, we recommend you first testing your strategies on a demo account in order to understand whether you are fit for trading in this market. Only once you get positive results you can try it out on a live account.

Copy-trading: Pros and Cons of Automated Trading

What is Automated trading?

Novice traders that wish to enter the markets without having a deep understanding of trading, or without putting in a lot of time and effort to develop a profitable trading strategy, often use copy-trading strategies, particularly if they can find a reliable platform like DupliTrade.

After all, it’s not easy to find the right trading strategy, one that is going to provide consistent results in any given market cycle. Testing and refining such a strategy can be a long process and should involve back and forward testing over multiple time-frames to verify that your strategy is robust enough to make profits in a number of different market conditions. If you can find someone that has worked on this process and that is now offering a profitable strategy over time to copy, why wouldn’t you follow this person and copy his trades?

According to DupliTrade – a leading marketplace for trading strategy providers – this innovative way of trading allows you “to automate your trading by duplicating expert traders’ activity according to your selected duplication setup”.

The main advantage to copy-trading is the ability to follow and duplicate successful and profitable traders that have proven track records and battle-tested trading strategies.

With copy-trading, you do not need to deal with trading stress, or to be sitting at your trading desk following the markets for hours – your trading account is copying the trading positions of a profitable master account that you would have previously selected.

Copy-trading is especially useful for newbies in the markets, but it is also used by many experienced traders that understand copy-trading and want to take advantage of following and copying leading traders, or fund managers.

One of the most important steps in copy-trading is to select the strategy your trading account is going to follow. DupliTrade’s strategy providers give a lot of information about the general activity of the account, with full statistical data and additional information you might require to select the proper audited strategies displayed, and most of the strategy providers follow a semi-automated or automated trading method.

How Can You Trade with Automated Trading?

Automated trading is all about using a trading system that limits (or even eliminates) human intervention in the process of buying and selling financial assets.

The first thing you need to do is determine the range of factors your strategy will follow:

  • Market direction
  • Position size
  • Risk management rules
  • Money management rules
  • Technical indicators

Copy-trading

One of the biggest risks when putting together a systematic trading strategy is choosing parameters that aren’t viable in the long run. Here are a few things to think about:

Pros of Automated Trading

1# It removes the emotions from the trading decision process

By using a systematic trading method, you’re able to reduce human intervention, and you can consequently avoid being influenced by your own emotions, which can negatively impact trading performance.

2# It allows you to trade around the clock

As you’re using computer models and programs to implement your automated trading strategy based on a pre-determined criterion, your system never sleeps. You can, therefore, make money on markets that are not in your time-zone, or when you’re doing things other than trading.

3# It allows you not to spend hours in front of the markets every day

Even though creating a profitable trading method takes time and energy, an automated trading strategy reduces the amount of daily work you need to dedicate to trading, which means that you can make money while having a 9-5 job, or doing other things you enjoy doing.

4# It allows you to accelerate order execution

Computer programs used for trading are a great way to accelerate order entry speed, especially in fast-changing trading environments, which are often hard to follow.

Once your automated strategy opens an order, all the other associated orders are also in the system, such as stop-loss and take-profit orders, which can make a difference when markets move very quickly.

Cons of Automated Trading

1# There is no possibility to make discretionary choices or to adapt the set-ups without your input

Obviously, automated trading is the opposite of discretionary trading, meaning that there is no ability to make discretionary choices. What this means is that you will not be able to decide when to enter (or exit) the market based on your analysis of the current market conditions and the news available.

So, if market conditions evolve outside of your initial analyses, your trading strategy may not be equipped to deal with it. For example, some trading methods are very successful in rangy markets, but they poorly perform in trendy markets.

2# You’re 100% dependant on technology and the system you’ve created

Even though one of the biggest advantages of systematic trading is that it removes human emotion in the trading decision process, thus making your decisions more rational, it also means that you are entirely relying on technology, which has its own host of problems (Internet connection cut, network crash, computer/server problems, etc.).

Bottom-line

Automated trading can help you free up time to dedicate to the things you like while making money on the markets, especially if you’re following expert investors through copy-trading platforms.

Copy trading will allow you to copy the actions of successful professional traders in real-time on your trading account. You won’t need to do anything; everything is automatically done for you.

In the end, the question you need to ask yourself is “how much time can you (or do you want to) spend on your trading on a daily basis?”.

How to Calculate the Size of a Stop Loss When Trading

There are many strategies used by traders to manage market risks while trading. These strategies are applied either during the trade or before the trade. It is important to have measures that protect your investments because the markets are always in constant change. There are many different factors that traders consider when making calculations in the market. The prevailing market conditions, the prospects of the trader and the size of investment are all important factors to consider when making calculations. We will look at one of the most common methods of avoiding losses and how to go about implementing it.

Using Stop Loss to Protect the Investment

Before we go into the calculations, let us focus on what the stop loss is and how it is used by traders to prevent losses. The stop loss is a tool that is used in the trading markets to mark points in the market where a trader no longer wishes to continue trading. This strategy is used extensively in the forex markets. The stop loss is a tool used by traders of all levels. In fact, it is recommended to use this tool on all trades, including currencies such as the EUR/USD, GBP/USD and USD/JPY or commodities such as gold and crude oil and indices. This is because the tool is a direct means of telling traders what they stand to lose on every single trade. To use this tool effectively, however, the right calculations must be done.

How to Place the Stop Loss Correctly

As stated earlier, the placement of the stop loss depends on the calculations that a trader has done. Timing is thus important and this timing is determined by mathematical projects. The ideal application of the tool is where a trader allows the market to move for a while before implementing the strategy. Every trader has projections about the market even before venturing into it. If you feel like the market will go up, for instance, then the placement of the stop-loss will be determined by the first few signs that you notice in the market.

The general rule is to always place the stop loss right under the entry price bar. This is a good way to ensure that the trade is actually going in the forecast direction. In case the market acts contrary to expectation, then the trader knows that the market is not ripe for the preferred strategy. An exit would thus prevent any losses. The market does not always go according to traders’ expectations. This is why the placement of the stop loss should not just be backed by instinct but also mathematical data.

stop loss calculation

How to Calculate the Placement

In general, the trade is measured by cents/pips/ticks or account-dollars. Each of these gives the trader a clue of what amount of investment is at risk of loss with each particular trade. The account-dollar measure is the most direct as it shows exactly how much could be lost in actual dollar value. For both of these measures, the difference between the entry and stop loss position is equal to the risk. If the entry point is at $5.00 and the stop loss is at $5.10, then the risked amount is $0.10.

While this serves to show the figure that is at risk, it does not exactly indicate the account at risk. In order to calculate the account risk, the position size must also be put into consideration. The position size is basically the number of investments made on each trade. A position size of 1,000 shares in the stock market would, for instance, result in an account risk of $.010 x 1,000, going by the initial example.

How to Control Account Risks

Having understood the placement risk and account risk, it is important to understand how you can protect your account from a risky market. As a general rule, the amount risked in a particular trade should represent less than 2 percent of what you have in your account. It is important to calculate the account risk before you do each trade because this is the only way to get any profit out of the market.

Conclusion

As stated earlier, the stop loss is a valuable tool that traders should always use when trading. This tool not only guarantees traders of proper market insights, but it also protects their investments. The market does not always go according to a trader’s expectations, having a form of risk management strategy is thus a smart move.

How Can You Profit From A Short Squeeze?

Markets are fickle. You never know when sentiment will take control and move in an unexpected direction. There are times during a trend or even a range bound situation that despite the fundamental backdrop prices of specific security will not move lower. When everyone is bearish and negative sentiment is exaggerated a short-squeeze can commence sending prices surging. There are several ways to measure if specific players are short. By using a combination of regulated reporting tools and technical analysis you can quickly determine if the market is offsides.

What is a Short-Squeeze?

The definition of a short squeeze is a scenario where a stock, index, commodity or currency surges higher forcing short sellers to exit their positions. The acceleration in the upward pressure drives irrational sentiment pushing prices higher. The term denotes a situation where short sellers are being squeezed out of their short positions. When you are short an asset, you are generally speculating that the price of the asset will decline. When you are short regulated security such as a US commodity or equity your short position is reported to the regulators of that market. Short positions in OTC currencies or CFDs are generally not reported. When you short a stock, you need to borrow the stock from someone else who owns it. The goal is to buy the stock back at a lower price and repay the loan that you used to borrow the stock.

What Starts a Short Squeeze?

The impetus for the squeeze can come from fundamental factors, where a rebound is justified, or negative sentiment becomes unsustainable creating irrational price momentum. A fundamental impetus could be economic or macro information. Most of the time, those who have short positions are closing their position at a loss during a short-squeeze.

How Can You Determine if the Market is Short?

Before a short-squeeze commences, and prices begin to rise, you can observe how the market is positioned using specific tools. For example, one of the best tools is the Commitment of Trader’s report released by the US Commodity Futures Trading Commission. This report is released every Friday unless there is a holiday during the week. The report reflects specific holdings per investor. Investors are categorized by size and occupation. For example, swap dealers managed money and retail investors are reported separately.  Swap dealers are liquidity providers to investment managers and commercial entities. Managed money funds and retail investors are self-explanatory.

For stocks, short interest reporting is readily available. All short interest positions by FINRA member firms are reportable twice a month. The SEC also requires short interest reporting. Member firms are considered members of an exchange such as the NASDAQ and the New York Stock Exchange. The exchanges report short interest generally twice a month. The first time during the middle of the month and the second time at the end of the month. The exchange has a mechanism to handle stock splits that occur inter-month.

How Can You Trade a Short-Squeeze?

Your goal is to purchase an asset when you believe that market participants are offsides and negative sentiment is overdone. As mentioned, you can use tools such as the Commitment of Trader’s report of exchange short interest to determine if there is a large short interest in a stock or commodity.

CFTC Net Short Positions
CFTC Net Short Positions

The table above is a picture of the disaggregated Commitment of Trader’s report for a combination of futures and options for the date ending November 20, 2018. Each futures contract is reported separately. The soybeans contract that is traded on the Chicago Board of Trade shows that managed money is short 132K contracts compared to long 72K contracts. The number of shorts is nearly double the number of hedge funds that are long. This is a sign that speculators are somewhat convinced that prices will continue to trend lower.

There is also a fundamental reason for prices to move lower and that’s a tariff on US soybeans installed by the Chinese government in retaliation for tariffs initiated by the US. The trade war that these economic powerhouses are experiencing is driving down the price of soybeans.  Soybeans are piling up in storage facilities in the US as farmers were caught off-guard by the tariffs and the cancelation of orders from Chinese buyers. What can change is an agreement between the US and China and an announcement by the Chinese government that they are lifting the soybean tariff.

Soybean Futures Daily Chart
Soybean Futures Daily Chart

You can also use a technical indicator as a form confirming that sentiment has become too bearish. Two good indicators are the relative strength index and the fast stochastic. Both indicators are momentum oscillators. The relative strength index measures momentum and oversold/overbought conditions based on an index that swings between 1-100. Levels below 30 are considered oversold and reading above 70 is considered overbought. The fast stochastic oscillates between 1-100 with a reading below 20-considered oversold and readings above 80 considered overbought.

If you combine a technical indicator in conjunction with a short interest rate such as the Commitment of Trader’s report, you can find specific scenarios where managed money is short and the market is oversold. These are situations that could lead to a short-squeeze especially if the fundamental news changes.

The Risks Versus the Rewards

Generally, during periods ahead of a short-squeeze, prices are trending lower. There is a very important trading concept which states that markets can remain irrational longer than most traders can remain solvent. Just because the markets are set up for a short-squeeze does not mean that the process will play out.  When you are buying a diving knife you need to have sound risk management to make sure you don’t ride a downtrend the wrong way. You can also build a position by dipping your toe in and making sure you can hold the position if it continues to trade sideways.

Natural Gas Daily Chart
Natural Gas Daily Chart

The rewards can be substantial, and the upward momentum can be extraordinary. In November of 2018, natural gas experienced a massive short-squeeze, at some points rising as much as 18% per day.

Trading Cryptocurrencies on MT5

The MetaTrader5 trading platform was released in 2010, a number of years after the release of the MetaTrader4 platform in July 2005. While the MT4 Platform had been originally established with the Forex markets in mind, both MT4 and MT5 can cater to the Forex markets but also alternative asset classes, including equities, commodities and now cryptocurrencies. Both platforms were created by MetaQuotes Software Corporation.

MT5’s adoption was slow but has certainly become more popular with the increase in trading of non-Forex asset classes.

The Benefits of MT5

The benefits of the MT5 platform include:

  • Possibility to reflect all the positions, while the MT4 platform is only able to reflect trades individually.
  • Desktop, mobile and web versions available, enabling the trading of global financial market products anywhere, anytime.
  • In addition to Forex, the MT5 platform offers to trade across most asset classes, not to mention the futures markets.
  • The use of MQL5 programming language facilitates the use of algorithms and the use of robots for trading, as well as copy trading.
  • MT5’s backtesting offering allows traders to test trading strategies, including the backtesting of Multi-pairings, at far greater speeds, saving traders significant amounts of time in the backtesting process.
  • MT5 has 4-order execution modes to support various trading options, including Instant, Request, Market, and Exchange execution.
  • MT5 supports the full suite of trade order types including market, pending and stop orders, as well as trailing stop.
  • The platform allows up to 100 charts of asset class quotes to be open at any one time, with 21 timeframes available to facilitate detailed analysis of minor price movements, the availability of over 80 technical indicators and analytical tools supporting a dynamic analytical environment.
  • In addition to the platform’s available built-in tools, the MQL5 programming language allows traders to create their own indicators with individual characteristics.
  • Traders are also able to select from a vast number of free of charge indicators from the Codebase, purchase or rent applications from the Market of more than 2,500 ready-made algorithm applications.
  • MT5 provides a fundamental analysis tool that can be used to forecast the price dynamics of financial instruments.

With the use of Virtual Hosting, MT5 can operate even when the computer is switched off.

Thanks to the work of the whole team of broker company NordFX IT engineers, the key advantage is the possibility to carry out professional cryptocurrencies trading on MT5. The clients trade exclusively peer-to-peer, that is with each other. Due to the Depth of Market, this trading is 100% transparent as each limit order is visible to each trading participant. This makes it possible for the NordFX clients to evaluate the current market situation and take correct decisions.

How to Trade Cryptocurrencies on MT5

The MT5 trading platform on a reputable broker NordFX was made available to support the trading of cryptocurrencies and can be downloaded by going to the NordFX MT5 Platform page.

Please make sure that you select the correct version, with versions available for Windows, Mac, iPhone/iPad, and Androids.

Besides, you will need to open a trading account which is called Crypto.

 

When opening the trading account, enter your details as prompted and select the source of funds, this can be USD, Bitcoin and Ethereum.

(Remember: If you have prompted for passwords to be automatically generated, you will need to keep them in a safe place)

After downloading the MT5 platform, run the executable from your desktop, if the Windows version was chosen and once completed, select ‘connect with an existing trade account’ and enter your NordFX account details.

Now that your trading platform is up and ready, the last step is to fund the account with your chosen source of funds.

On the NordFX account page the Trader’s Cabinet, select Funds Deposit and enter the prompted information, making sure that you have selected the correct destination, in this case, your MetaTrader5 account, and top up your account with the amount you think appropriate.

You can now start trading. But before you do this, we recommend you familiarize with the detailed description of the MT5 platform and the manual describing the specifics of exchange cryptocurrencies trading at NordFX. This useful information is available at the NordFX website.

Once funded, you’re good to go and, with NordFX, traders have 16 cryptocurrency pairings and 4 crypto indices to choose from.
The MT5 platform makes it possible to profit in any conditions, both when the cryptocurrency price grows and when it falls.

Unlike many crypto exchanges, in NordFX traders can earn not only on trading but also on maintaining the exchange liquidity. The commission for maker-traders is negative, that is, they receive a remuneration amounting to 0,02%  of each trade’s volume. As for the commission paid by taker-traders, it is the lowest in the market and is just 0,09%.

Another major advantage for the NordFX clients is the margin trading. Thus, for example, you only need $100 to carry out a trade of one bitcoin, which is about 60 times less than if you bought a bitcoin at a usual exchange. This brings down your risks drastically and allows you to receive a considerable profit operating with smaller amounts.

Exotic vs Major & Minor Currencies

While the currency pairs we hear about most often are the major and minor pairs, there are actually far more exotic currency pairs to trade. In this introduction, we will define the types of currency pairs and cover some of the basics you’ll need to know before you begin trading the ‘exotics’.

Major and Minor Currency Pairs

Firstly, we should define major and minor currency pairs. The following are regarded as major currencies:

  • US Dollar (USD)
  • Euro (EUR)
  • Japanese Yen (JPY)
  • British Pound (GBP)
  • Swiss Franc (CHF)
  • Canadian Dollar (CAD)
  • Australian Dollar (AUD)
  • New Zealand Dollar (NZD)

Major currency pairs refer to any pair containing one of these currencies and the US Dollar, so while there are eight major currencies, there are only seven major currency

An important issue in the currency market is liquidity – i.e. the amount of any currency being bought or sold at any time. The most liquid currency pairs tend to have natural supply and demand from exporters and importers in addition to the supply and demand generated by speculators and investors. Since all the countries listed above have substantial trading relationships with the US, constant liquidity is provided by exporters and importers.

Minor currency pairs include any two of the major currencies apart from the USD. Some of these pairs, including GBP/EUR and AUD/JPY represent pairs of countries with active

trade relationships, providing significant liquidity. Others, like CHF/JPY and EUR/JPY, have less active natural supply and demand.

Currency Liquidity

Before we move on to exotic currencies it’s important to understand that there are two major forces driving the exchange rate between two currencies; natural supply and demand, and the relationship between those two currencies and other currencies – most notably the USD. If you exchange GBP for EUR, importers, and exporters in both the UK and Europe will be buying and selling both currencies, providing an active market. On the other hand, if you exchange GBP for NZD, there will be fewer importers, and exporters active in the market – the quotes will more likely be a combination of the GBPUSD rate and the USDNZD rate. With currencies that are even less liquid, exchanging one currency for another will inevitably involve exchanging the first currency for USD and then exchanging USD for the second currency.

Most forex brokers offer clients forex trading either in the direct currency market or via CFDs (contracts for difference). Either way, the spreads they offer depend on the liquidity of the underlying currency market. Even though you may see a pair quoted as just two currencies, for the trades to take place in the underlying market, at some point an extra leg may have to be executed by a market maker.

What are exotic currencies?

Exotic currencies are any currencies not mentioned already. Some like the Hong Kong Dollar (HKD) and Norwegian Krone (NOK) are actually very liquid, some like the Mexican Peso (MXN) and Thai Baht (THB) are fairly liquid, and others like the Malawian Kwacha (MWK) and Laos Kip (LAK) have very little liquidity.

Exotic pairs are those that include one major currency and one exotic currency. While there are over 150 countries that could be classified as developing nations, trading in exotic currencies is focussed on 18 currencies. Admiral Markets UK Ltd, a prominent forex and CFD broker, for instance, lists 19 exotic FX currency pairs including 10 exotic currencies. There are plenty of other exotic currencies, but in most cases, brokers will only offer those that their clients demand.

The following are the most widely traded exotic currencies:

  • Norwegian Krone
  • Polish Zloty
  • Czech Koruna
  • Hungarian Forint
  • Russian Ruble
  • Turkish Lira
  • Chinese Yuan Renminbi
  • Singaporean Dollar
  • Hong Kong Dollar
  • South Korean Won
  • Thai Baht
  • Malay Ringgit
  • Indonesian Rupiah
  • Indian Rupee
  • Mexican Peso
  • Brazilian Real
  • South African Rand

With any broker, the spreads being offered for a currency pair will reflect the underlying liquidity for that pair. Admiral Markets, for instance, offers spreads as low as 0.1 pip for the EURUSD pair (the most liquid pair in the world) to 5 pips for CADCHF and 10 pips for the USDCNH. For even less liquid currencies, the spreads can be much wider, in some cases reaching 800 pips.

Which Currencies Should You Trade Exotic Currencies Against?

An exotic currency will usually have better liquidity if it is traded against the currency of a major trading partner. The Turkish Lira is therefore usually traded against the Euro, the HKD against the USD or Chinese Renminbi and Mexican Peso against the US Dollar. You would struggle to find a broker offering a Malawian Kwacha/Swiss Franc pair, but even if you did, the spreads would be very wide. In most cases, exotic currencies from countries in or close to Europe are traded against the Euro, and others are traded against the USD.

Pros and Cons of trading Exotic Currencies

The currencies of developing nations are often volatile and prone to trend strongly. Some countries with large current account deficits have structurally weak currencies that have weekend consistently for decades, while others have steadily strengthened over time.

This means there are certainly opportunities for forex traders to profit. The downside is that trading costs can be high and are some currencies are prone to large, unexpected moves when government policies are changed without warning.

For the most part, traders need to have a longer-term view when trading exotic currencies than they would with major currencies. The less liquid a currency is, the longer the time horizon should be. Some, like the Norwegian Krone and Singapore Dollar, are very liquid and can be treated like major currencies. However, others, like the South African Rand and Turkish Lira are not suitable for intraday trading and are only suitable for medium-term trading under unique circumstances. In most cases, exotic currencies require time horizons of weeks to months, unless a very unique opportunity presents itself.

Secondly, traders must familiarise themselves with the typical patterns for a particular currency before trading it. Each currency has its own unique personality and there are usually good and bad times of the day and week to trade them.

Conclusion

While trading exotic currencies are less straightforward than trading major and minor pairs, they do offer very profitable opportunities. Every few years there is usually an emerging market currency crisis which results in some currencies moving as much as 20 to 30%.

These situations offer forex traders opportunities they will seldom see in major pairs. It is therefore worth learning more about these currencies and adding another tool to your trading arsenal.

Risk disclosure: Forex and CFD trading carries a high level of risk that is not suitable for all investors. Presented information is not an offer, recommendation or solicitation to buy or sell. Before making any investment decisions, you should seek advice from an independent financial advisor to ensure you understand the risks involved. Read more at admiralmarkets.com.

Words Every Trader Should Know

Bear or bearish

A “bear” is a trader who believes that a price of a currency pair will move downwards. The strategy of such trader is to sell this pair or any other instrument. Why bear? Imagine an angry bear that leans on the price chart with its paws and pulls it down. The adjective “bearish” can refer to a declining trend.

Bull or bullish

A “bull” is an opposite of a bear. It’s a nickname of traders who believe that a price of an asset will rise. The term is based on the idea of a bull that raises an asset with its horns. There’s also a word “bullish”: an uptrend is called a bullish trend.

Bretton Woods system

This is an international monetary system started in 1944 in a place called Bretton Woods. It replaced the previous financial system based on the gold standard. The main idea of the Bretton Woods system is that the US dollar played the main role in the world finance. It was converted to gold at a fixed rate of $35 per ounce. Other national currencies were fixed to the USD. The International Monetary Fund was launched to control this system. You can still come across the name “Bretton Woods” when you read articles about currencies. Simply remember that it is the synonym of the US dollar’s hegemony.

Central bank

A central bank is an independent national authority that is in charge of a country’s currency, money supply, and interest rates. This institution conducts monetary policy, regulates commercial banks and provides financial services. The main goals of a central bank are to stabilize the domestic currency and support economic growth.

Central bank intervention

Sometimes a central bank needs to influence exchange rates by buying or selling currency in the Forex market. Usually, that happens when its national currency either rises too high and too fast or, on the contrary, when it collapses.

There are two kinds of interventions:

A central bank tries to weaken a domestic currency by purchasing a foreign currency. This way is used if the central bank wants to support exports.

A central bank wants to strengthen a domestic currency by selling a foreign currency in the market. As a result, domestic customers will pay less for imported good.

When a central bank intervenes, the Forex market usually reacts with big swings. That’s why traders have to be aware of risks related to central banks’ currency interventions.

Cheap money

This is the name of a monetary policy when a central bank sets low-interest rates. As a result, credits become cheaper and borrowing becomes easy for business. It stimulates investment and expansion of operations. In the medium term, cheap money can encourage economic growth. At the same time, if the central bank maintains such monetary policy for long, there is a risk of a spike in inflation.

Cross rate

An exchange rate that doesn’t include the US dollar. The calculation of cross rates is carried out via the ratio of each of the two currencies against a third currency – as a rule, the USD. For example, pairs EUR/USD and USD/JPY are used to calculate a cross rate of EUR/JPY. So, while the US dollar is not involved in a cross-currency pair, it has some indirect impact on it. Examples: EUR/JPY, EUR/GBP, EUR/CHF, GBP/JPY, GBP/CHF, and AUD/NZD.

Currency basket

A set of currencies used to establish a value of a national currency in relation to other currencies included in the basket. For example, the US dollar index is a currency basket that tracks the dynamics of the US dollar versus the currencies of America’s 6 trading partners.

Dovish

This word comes from a bird “dove”. “Dovish” refers to an attitude of a central bank towards interest rates. When you hear the word “dovish”, it means that a central bank aims at a low-interest rate to encourage economic growth. When you hear that a central bank was dovish in its report, it means that it won’t increase the interest rate in the near future. As a result, a domestic currency will decline.

Hawkish

The word “hawkish” comes from the bird “hawk”. It’s an opposite of “dovish”. When a central bank sounds hawkish, it means that it has an anti-inflation stance and aims at a high-interest rate. When you hear that a central bank was hawkish in its report, it means that it plans to increase the interest rate soon. As a result, a domestic currency will rise.

Gold standard

The gold standard is a monetary system, in which the value of banknotes and coins is linked to a certain guaranteed amount of gold. Nowadays, the gold standard is not used. It was replaced by the so-called fiat money that is used and accepted as means of payment only because a government ordered to do so. For example, lira is fiat money in Turkey.

Pump and Dump

It’s a fraud when a price of an asset rises because of false, misleading or greatly exaggerated statements. The aim of those who make such statements is to heat up the market so that they could sell the asset at a higher price. This practice is illegal.

Quantitative easing

Quantitative easing (QE) is an extraordinary type of monetary policy when a central bank aims to lower the interest rate and increase the money supply. To do that, it buys assets from the market. By doing so, it creates additional money. Increased money supply makes the national currency lose its value.

Tight monetary policy

It’s a type of monetary policy. Its main feature is that a central bank plans to reduce the demand for money and limit the pace of economic expansion. For this aim, it increases the interest rate. The national currency appreciates.

Brent and WTI: Where Differences Lie

We have gathered the most important information about Brent and WTI you need to know to make a profit on them.

Let’s start with the basics. There are plenty of oil grades and varieties in the world. However, just three oil marks became oil benchmarks. They are Brent, WTI, and Dubai Crude. We will talk about Brent and WTI. They are the most frequently used as they are ideal for refining into gasoline.

Why were these benchmarks created?

It happened at the end of the 1980s when the OPEC (the organization of the world’s largest oil exporters) refused to regulate prices making them dependent on traders’ sentiment. To set an appropriate price, exporters needed an orienting point. Brent and WTI were created for that purpose. So, nowadays, each oil producer sets a price for oil as its production depends on how much it corresponds to the benchmark.

If you think that Brent or WTI means just one of the oil grades, you are wrong! They are a common name for different grades that have common characteristics.

Let’s take a closer look at these characteristics

  • The first one is a location.

Brent is a standard for European and Asian markets. This benchmark consists of more than 15 oil grades produced on the Norwegian and Scottish shelf blocks of Brent, Ekofisk, Oseberg, and Forties.

WTI is a mark for the Western Hemisphere. It is sourced from US oil fields, primarily in Texas, Louisiana, and North Dakota.

  • The second characteristic is a chemical formula.

Firstly, it’s worth saying that there are no absolutely similar oil grades. Even grades that are included in Brent or WTI have a different structure.

Brent is the low-sulfur oil of a light type. WTI is a denser oil grade. The quality of WTI is higher than Brent’s one.

Why do Brent and WTI have different prices?

Since the middle of 80s WTI and Brent had traded at almost the same price. There were times when WTI was more expensive than Brent. However, currently, WTI has a lower price than Brent.

Mostly, prices depend on a cost of production and delivery.

Brent is produced near the sea, so transportation costs are significantly lower. Conversely, WTI is produced in landlocked areas. As a result, there are infrastructure problems that make it harder to bring surging North American production to the market and as a result, transportation costs become bigger.

Another important factor to take into consideration is geopolitical trouble. Middle East tensions weigh oil the most, especially Brent. Tensions lead to a decline in supply. You should remember that when the supply of any asset declines, prices go up. West Texas Intermediate is less affected because it is based in landlocked areas in the United States.

A price of WTI is formed by crude oil inventories. As soon as the number increases, WTI goes down. If the number of inventories declines, WTI rises. Here you should remember about a supply issue again.

So as you can see, the major benchmarks are affected by different factors. However, their trends are mostly similar. If Brent goes up, the WTI will go up as well with a high probability.

Making a conclusion, we can say that Brent and WTI will remain reliable oil benchmarks. If you want to trade in the oil market, choose one of them. However, choosing one of the benchmarks remember factors that affect their prices. By that, you will be able to forecast the future price more accurate and your trading will be profitable.

This article was written by Daria Bobrova, a senior analyst at FBS

Key Factors for Trading EUR/USD

To understand what factors affect the EUR/USD, let’s start with a description of the currency pair.

EUR/USD also has two other nicknames such as the Euro and Fiber. The name Euro is quite simple when there are two opinions why the name Fiber appeared. Some claim the currency got the name Fiber because of the GBP/USD pair that is called Cable. It is like traders made an upgrade of the old telecommunications cable that was used to connect the UK and the US to a newer fiber cable. Others decided that the Fiber name appeared because the Eurozone has the best optical fiber network in the world.

The Fiber belongs to the group of “Majors”, that also includes another six pairs such as GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD.

The power of the pair is incredible. The US dollar is the most traded and widely held currency and the euro is the second most popular currency in the world. The EUR/USD covers two main economies: European and American, so it has more than half of the total trading volume in the world on the Forex market.

So let’s move to the key factors.

Sessions

The first factor is sessions. Traders should know when the pair can have the highest volatility and when it is nearly not traded. Usually, the pair is slightly traded during an Asian session because the most important economic data and events for EUR/USD are released in European or US sessions. The activity slows down at noon when traders have lunch and rise again later when the US session starts. Liquidity leaves the market again at 5:00 GMT when traders in Europe close out their positions.

Institutions and personalities

The most important institutions that affect the pair are the central banks of Europe and the US. The European Central Bank (ECB) under the guidance of Mario Draghi and the Federal Reserve Bank with Jerome Powell as its chair regulate the monetary policy, money supply, interest rates, and the strength or weakness of the currency as a result.

The market follows every meeting of central banks and speeches that the president and the chairman give. It creates volatility in the Forex market.

Political instability

Any political issue can affect the EUR/USD pair. For example, Brexit, crises in European countries, elections in countries with the biggest economies in the European Union.

We can mention the claims of politicians as well. For example, the US Treasury Secretary Steven Mnuchin said that “a weaker dollar is good for the US”. This statement caused the immediate fall of the USD.

Economic Reports

Every week the economic calendar offers a huge amount of data. We will mention the most important, that every trader should take into account.

We have already mentioned central banks of the EU and the US and their monetary policy.

The next significant factor is CPI – Consumer Price Index – that measures inflation, the most important indicator of the economic health.

Another crucial data is GDP. It shows how much the economy is strong and healthy.

PMI is another way to estimate the economic health that affects the strength of a currency. The survey shows whether purchasing managers are optimistic or pessimistic about the economy in the medium-term. This survey is highly important because central banks use data when formulating monetary policy.

The balance of payment is not the last in the list of important economic reports. It shows how much money a country receives from abroad and how much it pays to other economies.

There are a lot of other economic reports, however, these ones are the most important and should be taken into the consideration firstly.

Interest rates

According to economic theories, there is a correlation between interest rates and exchange rates. It is called the International Fisher effect. And indeed, in most cases, it is so. Usually, currencies rise and fall according to interest rates of economies. For example, when US interest rates are higher than the European Union ones, the US dollar strengthens versus the euro. Conversely, the higher Eurozone interest rates, make the dollar weaken.

To sum up, it is important to say that the EUR/USD pair is the main pair at the currency market because it gathers two major economies. If traders want to trade it successfully, they should take into account a lot of factors such as sessions during that the pair is traded more, institutions and personalities whose comments and decisions create volatility, political instability, and of course, economic reports that display growth and health of the economy.

This article was written by Daria Bobrova, a senior analyst at FBS

How to Trade with Trailing Stop Orders

Prudent risk management is the hallmark of every robust trading strategy. Developing a trading strategy that includes dynamic stop loss levels, allows you to generate strong returns without experiencing undue risks. By incorporating a trailing stop into your trading strategy, you can capture gains that develop with a trend, without giving back what you have already earned.

What is a Trailing Stop Order?

A trailing stop order is a risk management technique where your stop loss level trails the current market level by a specific percent or value. Instead of using a fixed stop price, a trailing stop is a conditional order, that trails an assets price. You can incorporate a sell trailing stop order or a buy trailing stop order which is determined by whether you are long or short a position.

Your broker might allow you to place a trailing stop order that is based on a percent decline in the price from the current price. For example, you can place a sell trailing stop on XYZ stock if the price falls 3% from current levels. Once your trailing stop is triggered it will become a market order that is executed immediately. Since your trailing stop is likely to be a market order, there is no guarantee that you will receive a specific price or price range.

How to Trade with a Trailing Stop Order?

There are several ways to trade a trailing stop order. These types of orders are most effective when you are using a trend following system. Your goal in a trend following system is to capture as much of a trend as possible, without giving back gains when the trend turns.

There are several steps that you should take prior to entering your trade. Prior to initiating a trade with a trailing stop, you should determine your stop loss level. Your stop loss and your trailing stop loss can be at the same level. For example, if you are attempting to generate 6% in returns on a trade, you might initially have a stop loss that is 3% lower than where you purchase your asset.

A trailing stop-loss order works in the following way. If the price of the asset you are trading moves in your favor, you should increase your trailing stop to be 3% lower than the price or exchange rate. For example, if you purchase the USD/JPY at 110, your initial stop loss level could be at 106.7 which is 3% below the entry price. If the price increases to 111, your trailing stop loss would increase to 107.7.

It is important to make sure that your broker not only activates your trailing stop-loss order during liquid trading hours.

There are issues that could occur if you trade when the markets are illiquid. For example, if you have a trailing stop loss in equities during premarket hours, other traders might try to take advantage of the illiquidity and run your stop loss. This would mean your security would trade lower, triggering the loss and then run it the security up again. You can avoid this by only activating your trailing stop during certain trading hours.

In addition to using a percent level to determine your trailing stop loss level, you can also use a currency value or price. A currency value could be the number of dollars or euros you are willing to lose on a trade initially. In the example above, you might be willing to risk $200 to make $600. If this is the case, you would need to back out the price that would act as your initial stop loss and then increase or decrease the price level to generate a trailing stop. You can also use an automatic trailing stop that follows every price level or only use a closing price to calculate the trailing stop trigger.

How do You Calculate the Trailing Stop?

The goal of the trailing stop is to make sure that you catch a trend but do not give back gains that you have already accumulated. The stop can be calculated off the high of a session (if you are long) or the low of the session (if you are short) or the close of the prior session. For example, if the price of USD/JPY increased to a high of a trading session to 115, then your trailing stop should increase to 111.55 (115 * 0.97). If the price on the next day moves down to 114, you would not lower your trailing stop, if you are long USD/JPY. A trailing stop should only move in one direction.

trailing stop loss

A chart of the USD/JPY shows an example of how to use a trailing stop with a trend following strategy. The strategy generates a sell signal when the 20-day moving average crosses below the 50-day moving average. The entry price is 112.50, and the initial stop loss level is 3% higher than the entry exchange rate which is 115.87. As the price of the USD/JPY declines, the trailing stop loss of 3% is moved lower. There are times such as in early February when the exchange rate of the USD/JPY rebounded, pushing the trailing stop price up. The low price in March was at 104.62, and the trailing stop is triggered at 107.76.

Summary

A trailing stop order is a risk management tool that you can use to follow the trend of an asset. By using a trailing stop instead of a targeted take profit level, you can stay with a trend until it begins to reverse. A trailing stop loss replaces a fixed stop price. You can incorporate a sell trailing stop order or a buy trailing stop order which is determined by whether you are long or short a position. You can calculate your trailing stop order using either a percent pullback in prices or a value pullback in prices. You have to find a broker such as FSMSmart that provides to trade with trailing stop-loss orders and instruct your broker as to when your trailing stop is active. Having a trailing stop during illiquid trading hours is not recommended.

Trading Gold is a Hot Topic Today. What`s the Point?

“The desire of gold is not for gold. It is for the means of freedom and benefit” – Ralph Waldo Emerson

For ages, people adore and treasure gold for its natural glow and plasticity. Mankind started using Gold in commerce in the Middle East over 2500 years ago. Nowadays, it is recognized to be the oldest form of money. Gold seems to be a really safe asset. This metal holds good for more than two thousand years despite all wars, cataclysms and global changes.

 

Gold

Though gold sustainable keeps its value, the buy-in of traders has grown and fallen in the past decades. 20 years till the beginning of 2000s gold was overshadowed by strong and skyrocketing economic growth of the stock market. Thus, between 1982 and 2002 its price varied from $300/oz to $500/oz.

During the 2000’s, the attention to Gold slowly but surely increased until a real boom of interest during the global financial crisis of 2008. In the late 2011 prices for gold had surged dramatically, breaking the record of $1900. In this article, we will highlight the main factors that influence gold prices together with the most widely used trading methods and winning strategies.

Forces that drive gold price

Gold is among the most complex financial assets to value. It is like popular currencies such as the US dollar and euro due to its stability, strength, convenience, and recognition around the world. Yet, opposite to these widely traded currencies, gold is not supported by an underlying economy of workers, companies, and infrastructure.

This means that gold has standardized physical characteristics and is much closer to commodities coming from the ground like oil or corn. But the price of gold frequently varies apart from its industrial supply and demand, in contrast to other commodities.

Major trends in the yellow metal are driven by traders emotions and actions caused by this dynamic. Gold traders are split into two categories: one unites those who believe that gold should cost more than $10000 an ounce, as central banks are debasing their currencies. Another one comprises bearish traders, who are sure that gold price should be closer to $100 as it is an element of the past that won’t be of any use in the present and the future. The first chart shows that gold is losing some of its glow, while its popularity in the mid- and late-2000s looked a bit like a mania.

Gold doesn’t bring you income in form of interest (%). When interest rates in the United States – the world’s key economy – rise, demand for gold declines as traders prefer to invest in bonds and other financial instruments. When US interest rates fall, the appeal of gold rises and so does its price. That’s why gold traders need to watch US rates.

How does gold correlate with the US dollar?

The correlation between gold and the US dollar is the main bone of contention for gold traders. It would be reasonable to consider these assets to be inversely correlated, as gold is priced in US dollars. The price of gold and US dollar moves opposite the one to another. Simply, when the price of the dollar increases, it takes fewer dollars to buy an ounce of gold. And thus, when the price of dollars is lower, it takes more dollars to buy an ounce of gold.

At the same time, the situation is not so simple. It’s true that most of the time the relationship between the US dollar and gold described above stands true. However, during the periods of financial crisis, like the one in 2009, and other times of high uncertainty, both gold and the US dollar rise at the same time. It happens because traders consider both of them to be safe investments.

Compare the price of gold with the price of the US dollar: they move mostly in the opposite directions but can rise together during the periods of financial stress (the blue line tracks the price of gold, while the green line stands for the US dollar index).

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Gold trading strategies

As with any trading tool, one single “best” way to trade gold doesn’t exist. Yet, technical trading strategies applied to other trading tools can easily be adapted to the gold market. This especially works with gold’s tendency to form long-lasting trends. This way, many traders succeeded implementing strategies based on trend lines, Fibonacci analysis and overbought/oversold oscillators like RSI and Stochastics.

A short-term strategy: pick a cherry of a trend with a moving average crossover

A typical way to profit from the frequent trends in gold is to use a moving average crossover strategy. According to this strategy, gold is worth buying if a shorter-term moving average crossed above a longer-term moving average. And thus, when the shorter-term moving average crosses below the longer-term average it is better to sell gold.

Traders split in their understanding of the “best” intervals for the two moving averages. One of the good solutions is a crossover of 10-period and 60-period moving averages on the 1-hour chart. Such settings usually allow traders to trade successfully the middle portion of a trend. Though, future performance can’t be guaranteed. The way to apply this strategy in the gold market is demonstrated on the chart.

The green line is a 10-hour MA and the blue line is a 60-hour MA. The green line went below the green line at $1,299.45. Together with a break below the previous lows, this was a sell signal. Indeed, the price chart went down allowing a trader to profit on a sell trade. Then the green line came close to the blue line. If the green line breaks above the blue one, it will be a signal to buy gold.

This trading strategy should help traders to catch the middle portion of trends. Yet, using it when gold has no trend and just stays in a horizontal range may cause a set of continuous losing trades. As a result, traders may wish to build up this strategy with other indicators to improve its long-term profitability.

A long-term strategy: follow the level of real interest rates

Investors and long-term position traders may concentrate on the fundamental factors affecting a price of gold, in particular, on the level of real interest rates. Lower interest rates lead to the higher price of gold.

Usually, longer-term traders may consider buying opportunities if real yields are below 1%. They use the yield on TIPS as a proxy for real interest rates in the United States. And oppositely, if the yield on TIPS rises above 2%, investors concentrate on sell trades. For sure, this link between real yields and gold prices matters over a longer-term period. Shorter-term gold traders can basically forget the level of interest rates.

A chance to use real interest rates filter is among the unique options that traders can apply to gain an edge when trading gold. All in all, trading the world’s oldest “currency” gives a variety of strategies and endless opportunities.

Trading gold with FBS

You will find gold under the symbol of XAU/USD in Metatrader. Look up contract specifications for trading gold at FBS website.

Bitcoin Trading Strategies

If there were no cryptocurrencies, someone would need to invent them. Indeed, daily changes of Bitcoin price are usually bigger than those of currency pairs like EUR/USD, USD/JPY, and other majors. As Bitcoin’s price makes bigger moves, it means that you can profit more and faster.

The mechanics of trading cryptocurrencies with FBS is simple. You can trade Bitcoin, LiteCoin, Ethereum and Dash vs. the USD just like any currency pair using MetaTrader.

To increase your chances for success, you have to be systematic. In this article, we present 2 strategies that will help you gain an edge in trading Bitcoin. The strategies take into account its high volatility. Choose the one that suits you the most and start earning!

Trading the news

Bitcoin doesn’t usually react to the news from the economic calendar. You will need to follow specific news about Bitcoin. Such news seems to have a more long-lasting impact than some economic news like US nonfarm payrolls. For instance, if you learn that a large fund invested hundreds of millions in Bitcoins, consider buying the cryptocurrency during the next few days. If a big cryptocurrency exchange was hacked, consider selling Bitcoin.

Let’s illustrate this idea with the recent examples. Bitcoin price made a turn up at the beginning of April. The cryptocurrency’s advance was caused by several reasons. Firstly, Bitcoin was announced compliant with Sharia law. Secondly, there were reports that famous investor George Soros was interested in trading cryptocurrencies. In addition, traders were looking forward to World Blockchain Forum which was to take place in Dubai on April 16-17. The green arrow marks the start of Bitcoin’s swing up. The cryptocurrency rose by 30% during a month on the positive news.

Then, however, new factors came into play. Microsoft-owned search engine Bing joined the ranks of other internet giants in banning crypto-related ads from its network by July 2018. Moreover, cryptocurrencies came under criticism by European financial authorities. The red arrow marks the start of Bitcoin’s selloff. The negative trend has been continuing up to date.

Bitcoin Daily Chart
Bitcoin Daily Chart

Notice that this strategy requires following special websites and blogs which track Bitcoin-related events. You will also have to filter the really important news from the noise that doesn’t lead to any trends.

Trading with technical analysis

Technical analysis can also be a great source of Bitcoin trade ideas. We don’t recommend scalping or, in other words, trading during the most short-term time periods. Better focus on timeframes exceeding H1 as they will allow you to get the biggest best of this market.

Bitcoin tends to move in trends. The most promising strategy is to choose a trend-trading system for Bitcoin. It can be as simple as trading on the basis of a moving average or a combo of MAs.

Here’s an example of Bitcoin trading strategy.

Timeframe: H4

Indicators: 200, 26 and 12 EMA (Exponential Moving Averages)

The strategy generates a SELL signal, when:

  1. The market is in a downtrend. The price should be below 200 EMA (the orange line on the chart).
  2. 12 EMA (red line) goes below 26 EMA (blue line).

Take profit when price moves back and touches the 12-period EMA. Place a Stop Loss above the swing high. Don’t forget about money management. Do the opposite for a BUY trade.

Bitcoin 4H Chart
Bitcoin 4H Chart

A tip: trade different cryptocurrencies

To minimize your risk and maximize your profit while trading cryptocurrencies, diversify your capital among several of them. Different cryptocurrencies have different purposes. For example, Bitcoin and Litecoin act directly as currencies. Ethereum represents a decentralized application platform, while DASH is focused on the privacy of its users. These all are cryptocurrencies with high liquidity and market capitalization, and you can trade them with FBS. It’s wise to pick cryptocurrencies representing different industries: if one of them shoots to the moon, you’ll be prepared!
The conclusion is simple: diversify, follow the news, and use technical analysis to profit on cryptocurrencies!

 

Trading the Economic Calendar

Most traders believe that the current exchange rate or the price of a security reflects all the currently available information. Prices move when new information becomes available. Of course, there is always noise that will whipsaw prices around a range, but for an exchange rate to move to a new range, new information must become available.

New information can come at any time, but some of the most important information is scheduled. This includes economic data, as well as monetary policy decisions. Since the information is scheduled you can use an Economic Calendar to trade around as the new information becomes available.

The Most Important Economic Events

An economic calendar is a schedule of economic events that will take place over the next day, week, month or quarter. An economic calendar will tell you what time a release will take place. In addition, many Forex media sites and brokers offer an economic calendar that includes an estimate that is generally the average of several analysts who are covering that economic release.

There are several very important economic indicators that are market moving events. For example, the employment report in the world’s largest economy (Non-Farm Payrolls), the United States, will consistently generate volatility. The Consumer Price Index (CPI) that measures inflation in the U.S., Europe, Japan and the rest of the developed country, provides insight into price changes and this can be a driver of interest rates and currency exchange rates. Growth is reflected in an economic release called the GDP (Growth Domestic Product). Monetary policy changes by central banks, including the Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan, are key events that drive market volatility.

Trading the economic calendar or economic events applies also to commodities and other instruments. For example, if you trade crude or brent oil, you must be attentive to the EIA weekly petroleum report published on Wednesday. Also, The USDA grains report is published once a month and generate high volatility if you trade any of the grains/softs commodities (corn, wheat, soybeans, coffee, cotton, etc).

If the market is surprised by an economic release, you can bet there will be volatility. This happens but is more the outlier than the norm. Analysts from around the globe report their forecasts, which are reflected in an average, with highs and lows by analysts noted. If the actual release is unexpected, the markets will change to reflect the new information. Additionally, market changes after new information can be sharp and nasty. If you monitor these whipsaws in the securities or currency pairs you are trading, you will see that many times these events generate a breakout in the direction of the trend.

Trading the Economic Calendar

Since volatility will follow in the wake of an economic release, you will have an opportunity to take advantage of this situation. Economic releases are generally released like clockwork at a regularly scheduled time during a month. Most releases that are of significance come out once a month and generally reflect the economic situation during the prior month. For example, the May unemployment report in the United States will be released at the beginning of June. There are several economic releases that come out weekly including unemployment jobless claims and the Department of Energy’s inventory report. As a trader, once you find your broker and platform to trade with, you must follow the economic calendar on a daily basis.

How to Trade Economic Events

You can employ several strategies to take advantage of economic releases. You can use a purely technical strategy, or you can combine a technical strategy with your view of what has happened. Additionally, you need to provide yourself with robust risk management. Trading around the numbers can be very risky if you take a position before an important event. If you decide to initiate a position before a market moving event, understand that you need to incorporate illiquid market conditions into your risk management process. Stop losses when markets are illiquid can generate huge slippage. One way to measure this risk is to evaluate the changes in the price of the exchange rate you plan on trading following specific economic releases. If you find for example that the average range of the EUR/USD in the hour following the Non-farm payroll report is 50 pips, you should understand that your stop loss could be at least 50-pips.

A more conservative approach to trading the numbers is to wait for the results and then formulate a view within 30-minutes of the release. As traders begin to jockey for position, you can avoid the initial whipsaw price action as an exchange rate finds a range. Many times, an exchange rate will break in one direction and then consolidate before it continues to trend. Other times the initial move is a fake out. You can combine some technical analysis into your trading to determine a market has positive or negative momentum.

There are hundreds of products you can trade to take advantage of the new information. By trading currencies as well as Contracts for Differences (CFD), you can take a view of most financial instruments. A CFD allows you to trade indices, commodities, cryptocurrencies, and shares. Companies like HQBroker, provide a state of the art CFD trading platform that will allow traders to take a view on a financial instrument while watching economic releases in real-time.

Summary

The capital markets are efficient markets, and most investors believe that all the currently available information is incorporated into the price of a security or exchange rate. Prices generally begin to move when new information is available such as economic data, or a change in monetary policy. Market noise will generate minor fluctuations in prices and add to volatility. You can track changes in economic releases by using a financial calendar where the time and date of most economic releases will be posted.

Additionally, you will be able to find the average analyst forecast which is measured against the actual release. Once this becomes available an exchange rate will begin to move if the forecast is different from the actual release. Obviously, there are degrees of surprise, but if the market is caught offsides it will experience volatility.

Speculative vs. Regular Cryptocurrency Trading

The cryptocurrency market might be stuck in a seemingly endless bear market, but that doesn’t mean that the interest in trading cryptocurrencies has disappeared. In fact, there are still thousands of traders trying to make the best of the current market conditions.

What many of these investors have realized is that regular investments might not be the best option in a market that seems unable to find support. So let us take a look at some of your options.

Regular Cryptocurrency Trading

When we talk about regular cryptocurrency trading, we are referring to the buying and selling of digital currencies from an exchange or a wallet. This is the “traditional” way of trading cryptocurrencies, and it’s a great way to benefit from a rallying market or a falling one. It’s also the best method for long-term investments.

When you buy a cryptocurrency from an exchange such as Binance, those assets belong to you. That means you can spend them as actual currencies or hold on to them until you feel like selling them for a profit. The same goes for cryptocurrency wallets and other services that sell cryptocurrencies in their actual form.

The only downside to this type of trading is that it requires the assets to increase in price for you to make a profit and for the past few months that hasn’t been the case.

There are a few exchanges that allow you to short trade assets and even use margins, but generally speaking, you won’t make a profit unless the asset you bought increases in value.

Speculative Cryptocurrency Trading

Speculative cryptocurrency trading is trading with derivatives based on underlying assets. That means you don’t buy the actual token or coin but instead you speculate on its price.

There are several ways one can buy cryptocurrency derivatives. For example, in 2017, the first ever Bitcoin futures was launched, and now you can buy similar products on a handful of cryptocurrencies including Ethereum, XRP, and Litecoin.

Another popular derivative is ETFs which aren’t available for cryptocurrencies yet – the SEC is currently evaluating several ETF applications, and they might become a reality soon.

With that being said, both futures and ETFs are designed mostly in the same way as regular trading and investors expect to make money from increasing prices.

Enter CFD trading, a speculative investment opportunity that can easily be used for increasing as well as decreasing prices. A CFD is a derivative that mirrors the price of an underlying cryptocurrency. They are usually only open for a few minutes to hours and are always traded with leverage which increases your potential profits.

The best part about CFDs is that you can make a lot of profit from falling prices very easily.

If you want to start trading CFDs, you need to first find a regulated and safe broker to use. When it comes to cryptocurrencies, their fluctuating nature creates perfect conditions for day trading, especially for CFDs. In 2017, eToro launched cryptocurrencies as CFDs which then led to them launching an exchange function a few months later according to review of eToro. In the same year IQ Option and few currently major players on the market decided to join in on the hype as well. Regarding IQ Option, it offers cryptocurrency CFDs as well as actual assets, meaning you can invest in two different ways with the broker.

What Type of Cryptocurrency Trading is the Best?

That’s a very good question, and ultimately the decision is up to you. However, in order to benefit from as many opportunities as possible, you should combine different types of trading.

For example, when the market turns bullish again, you can buy a set of assets from an exchange and maybe even invest in some futures. Then you’ll hold on to these investments until you think it’s time to sell and pocket your profits.

At the same time, you can use CFDs to day trade on price swings and make regular profits on a daily or weekly basis. And when the market turns, you can short the prices and keep making a profit.

It’s a win-win situation when combining different trading styles and instruments.

Final Words

Most professionals would agree that cryptocurrency investments on exchanges and with wallets are the safest option, although not necessarily the most lucrative. And let’s not forget that cryptocurrency exchanges aren’t regulated meaning your funds might be lost and the exchange can turn against you since you have no support.

Derivatives trading, on the other hand, is a little more risky in terms of potential losses. However, that risk is compensated for by the potential profits as well as the fact that the services offering futures and CFDs are all regulated and operated under strict requirements.

As mentioned, it’s up to you to decide how you prefer to trade your cryptocurrencies, but it’s advisable to look into all of your options before you get started.

What is VIX and How Can You Trade It?

The CBOE Volatility Index (VIX) is a market index used to measure the general volatility of the stock market as implied by the S&P 500 Index Options over time. It is calculated and published by the Chicago Board Options Exchange. Analysts and traders use it to predict how volatile the market is likely to be in the foreseeable future. As such, it has gained many trading names over time including ‘the fear index’, or simply ‘the VIX’ among others.

The VIX uses the S&P 500 Index (SPX) options to capture the expected volatility for the next 30 days. The index uses the two options expirations that have more than 23 days and less than 30 days to narrow down on the 30-day timeframe.

Volatility Index Chart
Volatility Index Chart

As demonstrated on the charts above, the VIX and the SPX appear to have a direct relationship with significant spikes and curves occurring just about the same time, or within a 30-day period. This white paper the Chicago Board Options Exchange explains the whole relationship properly and also illustrates how the VIX is calculated using the SPX options.

Trading the VIX

So clearly, it looks like trading the VIX would be pretty a simple task. However, as it turns out, you cannot directly trade the VIX. However, as expert traders at Engine forex point out, the two key extremes of the VIX are known ahead of time that makes it a lot more complicated than it visually appears to be. As such, traders try to trade the VIX by trading products that track the volatility index.

Therefore, the market has created various products that traders can use to capitalize on the opportunities created by tracking the VIX. Most of these are ETNs that allow traders to hedge using funds. Some of the notable ETNs in the market today include VelocityShares Daily Inverse VIX Short-Term ETN (XIV) and the iPath S&P 500 VIX Short-Term Futures ETN (VXX).

When using the VXX to hedge against market volatility, analysts and online trading experts seem to have a bias towards going long when they anticipate a market correction in the foreseeable future. This decision is usually taken when the VIX appears to bottom indicating that it cannot go any lower.

However, as many traders have found out, this theory does not hold when individual funds and ETNs are involved. Sometimes these have moved lower, even when the VIX appeared to have bottomed, which again illustrates the potential impact of trading an asset that tracks a predictive measure of market volatility.

Therefore, in order to understand better how to trade products that track market volatility, it is important to use a shorter timeframe, in this case, the Volatility Index pegged to short-term S&P 500 Index options, represented by the Mini SPX Index Options (XSP).

It is pretty much like using a narrower window to determine how volatile the market is likely to be for the next few weeks, which is likely to return more accurate results.

In general terms, the VIX has also been used to determine the overall market sentiment and views towards the economy. When the market has a bullish view on the economy, the VIX tends to rise as investors flock to the stock market to invest in capital assets.

This is very well demonstrated in the chart above. Starting in late January 2018 to early February 2018, the market experienced one of the sharpest bull-runs in a long time as speculation hit multi-year highs, and this can be seen on both the S&P 500 Index and the CBOE Volatility Index.

However, what followed shortly after was a period of low market volatility as normalcy returned with most of the investors having exhausted their investment capital. Since then the VIX has traded within what appears to be a tighter range and this indicates high levels of market stability. This is also backed by the steady rally in the market as demonstrated by the SPX.

In summary, the VIX predicts market volatility and due to its wider timeframe, it is hard to target the two extremes making it difficult to trade directly. However, traders have adopted the practice of trading products that track the VIX and as demonstrated on the charts, it tends to pay off some of the time.

How to Trade Forex During the Asian Trading Hours? The Best Pairs and Strategy

While the Forex market is considered to be a 24-hour market during the working week, the trading sessions continue to be broken down into the Asian, European and North American sessions.

More specifically, the respective financial centers tend to be tagged, making the Asian session the Sydney and Tokyo sessions, with the European and North American sessions, also referred to as the London and New York sessions.

The main part of the Asian session traditionally begins at 2200 GMT, with the Sydney session, followed by Tokyo that starts at 0000 GMT, the markets opening on Sunday night and closing on Friday evening with the New York session ending at 2200 GMT.

For the Asian markets, the Sydney session ends at 0700 GMT, with the Tokyo session ending at 0900 GMT.

It’s worth noting that there is an overlap between the respective sessions, with the last hour of the Tokyo session overlapping with the first hour of the London session.

So, the Asian session starts on Sunday night at 2200 GMT and ends at 0900 GMT on Friday, with the Forex markets closed from Friday to Sunday evening.

Other than the weekends, there are just a number of public on which all of the forex markets are closed, these being 25th December and 1st January.

On a session basis, national public holidays will also result in national markets being closed, which impacts on trading volumes for the national currency and price action, with no economic data released on public holidays.

Trading Forex during the Asian Trading Hours

When looking at trading through the Asian session, the currency pairings are categorized into the majors, cross-currency pairings (also referred to as the crosses) and the exotics.

The major FX pairings for the Asian session are the U.S Dollar ($) – Japanese Yen (¥) or USD/JPY, Aussie Dollar (A$) – U.S Dollar ($) or AUD/USD and the Kiwi Dollar (N$) – U.S Dollar ($) or NZD/USD.

The Global FOREX markets major currency pairings, which also include the EURO – U.S Dollar, UK Pound – U.S Dollar, U.S Dollar-Swiss France, and the U.S Dollar – Canadian Dollar, account for over 70% of market turnover and are considered to be the most liquid as well as the most popular pairings to trade.

While the EUR – U.S Dollar may be the most traded currency globally, the U.S Dollar – Japanese Yen is the most traded currency through the Asian session and accounts for close to 20% of FX trades on a daily basis.

In recent years, there has also been an increased influence from China, with the markets paying closer attention to China’s central bank, the PBoC, and the daily fixing rate for the Chinese Yuan. How the PBoC fixes the Chinese Yuan is a guide on how the central bank views the Chinese economic outlook. Any devaluations and there would be concerns that the economy is about to weaken, such a view a negative for the Asian emerging currencies.

The Cross-currency pairings include the major currencies, but with the pairings exclusive of the U.S Dollar. For the Asian crosses, these would be AUD/CAD, AUD/CHF, AUD/JPY, AUD/NZD, GBP/JPY and NZD/JPY, with the Japanese Yen crosses being the more favored during the Asian session.

When it comes to the exotics, the currencies belong to economies that have a limited to no impact on the global economy and will have significantly lower trading volumes and therefore much tighter liquidity. Exotics would, as a result, be far more volatile and would be considered to be of much greater risk, which is reflected in their wider bid-offer spreads.

Asian exotics include, but are not limited to the Thai Baht, Singapore Dollar, Philippine Peso, Malaysian Ringgit, Indian Rupee and Hong Kong Dollar.

To have access to the full suite of Asian currencies, it is important to select the right platform to trade on, with there being little point in using a London or U.S based platform, when considering the need for liquidity, support and the availability of fundamental and technical analysis on the Asian pairings during the session.

Alpari is considered to be one of the top brokers to trade during the Asian FX market. The broker delivers a fast execution environment, supported by strong liquidity, low transaction fees, together with all the necessary analytical tools for a trader to make trading decisions and execute on a daily basis.

Best Strategies to Trade Forex during Asian Hours

The key for anyone looking to trade Forex is a strategy. Based on upon a trader is looking to trade for longer-term positions or based on fundamentals or whether a trader is looking for volatility, such as day traders, the periods during the day to trade become more relevant. Some day traders, who complete multiple trades on a daily basis, would make a little gain in a low volatility environment. However, there are many day traders that are more profitable and know how to take advantage of a low volatility market.

It is generally advised for long-term or fundamental traders to avoid the more volatile periods of a session, which are the trading session overlaps, which in the case of the Asian session would be the New York close, Asian open and the Asian close, European open.

While there may be opportunities to trade fundamentals or for the longer-term during the overlaps, should price action be favorable, the volatility could lead to a trade execution at a less desirable strike price.

In addition to the session overlaps between the U.S, Asia, and Europe, the economic calendar will also have a material influence on price action, which again plays into the hands of short-term traders looking for volatility, whilst creating uncertainty for the longer-term or fundamental trader.

Understanding the economic calendar and the level of influence of the data that is released on a monthly, quarterly or on a semi-annual basis is certainly an important consideration for short-term and long-term traders. For short-term traders, being able to predict whether the data release will be positive, neutral or negative for a particular currency presents plenty of trading opportunities, with much of the price action taking place in the hour prior to the release, upon release and in the ten to fifteen minutes following the release. It goes without saying that the greater the deviation of the data released from forecasts, the greater the volatility upon release and the minutes after release.

When it comes to the longer-term trader, having a good knowledge of the key economies, how they are performing and the respective central banks’ outlooks on monetary policy and which economic data release can alter the outlook is important.

For the Asian markets, economic data out of Australia, China, Japan and New Zealand tend to have the greatest impact, with China’s economic data releases not only influencing the Asian markets, but also beyond Asia, though the Aussie Dollar and Kiwi Dollar will be most susceptible to China’s data, particularly when it comes to trade and manufacturing sector data.

With a plethora of stats scheduled for release each day, it is important for traders to focus on the more influential stats and these would be:

  • Consumer price index.
  • Trade Balance, Imports, and Exports.
  • Consumer Confidence.
  • Business Confidence
  • Private Sector PMIs
  • Unemployment Rates
  • Wage Growth.
  • Consumer Spending / Retail Sales.
  • GDP figures.
  • Central Bank Monetary Policy Decisions.
  • The release of Central Bank Policy Meeting Minutes.
  • Central Bank Member Speeches.

So, to sum it up, traders looking for increased volatility during the Asian trading hours should be looking to trade economic data releases, during central bank member speeches and in the overlaps between sessions. It is recommended to find a local broker that operates during the Asian trading hours as decreasing trading errors and having helpful support team from your broker can significantly increase your trading confidence. Alpari operates since 1999 and considered to be a reliable broker with a wide selection of instruments.

For a trader looking to take on more risk, the crosses and even the exotics are there, though, with the exotics, it’s not just the data and sentiment towards the economies that influence, but also a geopolitical risk.

For the longer-term or fundamental trader, avoiding periods of volatility stemming from session overlaps and economic data releases would be advised and, when considering the risks and volatility associated with the exotics, avoiding them would also be a wise decision.

Here’s How Investors Can Look to Asian Markets to Predict Future Movements in the Crypto Markets

Countries like South Korea and Japan have long been early adopters in tech-forward industries like cryptocurrencies and the ongoing blockchain revolution. Because of their advanced interest in emerging tech markets, Asian markets are crucial for investors to study when determining what the next big move is going to be in the tech space and markets. Asian markets can act as an indicator and barometer for not only the current state of the industry but where the next big shifts are likely to occur. When it comes to cryptocurrencies, consider that 1 in 3 South Koreans either owns cryptocurrency or gets paid in it. That alone is substantially beyond the adoption rate of the United States and other Western Countries. In South Korea, roughly 31% of workers are cryptocurrency investors, compare that to the 7.8% ownership rate of Americans. So it comes as no surprise that places like South Korea and Japan are good markets to watch and keep one’s ear to the ground.

Past and Future Indicators

In the past, Asian markets have proven to be helpful indicators for future price movements and emerging trends in the industry. Shifts in regulatory positions and government oversight in Asian markets have led to crippling bitcoin (BTC) prices and bearish trends in the cryptocurrency markets more broadly. After regulators announced a trading ban in South Korea, bitcoin suffered a nearly $2,000 discount because of the news.

We’ve seen similar events occur because of Japanese regulatory concerns as well. In June, the price of bitcoin slumped again after Japanese regulators spoke publicly about cracking down on exchanges and rules regarding anti-money laundering practices.

Conversely, investors can also use these same markets as indicators for what the next shift is going to be in the industry to get in early. Rather than just being indicators for price downturns, Asian markets offer investors information about where the industry is heading and what’s next.

Regulatory Framework

Regulatory concerns have been at the top of nearly all cryptocurrency investors’ minds lately. While many western countries are still figuring out where they’re going to stand in the future, Asian countries have been focusing their efforts to bring crypto into the mainstream and out of the darkness.

Asian markets have proven to be helpful indicators for future price movements and emerging trends in the industry

In the United States, regulators are still debating on classifications of different crypto assets like Bitcoin and Ethereum and whether they’re securities, commodities, currencies, or an entirely new asset class altogether. However, Thailand has been taking steps in a different direction. Earlier in the year, Thai officials created the Digital Asset Business Decree that defined cryptocurrencies as a medium of exchange as well as identifying tokens as “rights to participate in a digital environment.”

Reversing their original position on initial coin offerings (ICOs), regulators in Thailand now allow for investors to participate in what are deemed to be the 7 legal cryptocurrencies: Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin, Stellar, and Ethereum Classic. Legal ICOs being conducted are then denominated and carried out in those chosen 7 cryptocurrencies.

Thailand isn’t the only Asian country shifting its position on ICOs either. At the beginning of the summer, a National Assembly committee in South Korea, whose sole purpose is to study the “Fourth Industrial Revolution” said that they’re exploring options for enhancing the legal status of cryptocurrencies in the country, including a possible reversal on the 2017 ICO ban. The shifting views of regulators and governing officials in countries like South Korea toward cryptocurrencies are likely to help pave the way for western markets and regulators when they finally make their mind up on the new technology. Though other trends are worth noting for the future of the industry, this is the one likely to have the biggest effect on the entire industry, not just investors.

Gaming and Crypto Converging

Perhaps the largest market movement taking place in the Asian cryptocurrency scene now is the convergence of the gaming and cryptocurrency industries. Both industries tend to attract more forward-thinking, tech-savvy adopters because of the technology required to participate. Beyond that, gamers are already accustomed to working with virtual currencies and online economies in a way that other consumers simply aren’t.

Dating back for years, gamers have used digital coins and tokens as a medium of exchange for in-game economies ranging from purchasing new skins, in-game items, and a variety of other accessories. It’s worth noting that Asian crypto enthusiasts and entrepreneurs have not overlooked this growing trend, especially in a region where countries make up some of the largest gaming markets in the world. Japan is the third largest gaming market globally, behind only the United States and China.TechinAsia even says that gaming may even be “the key to taking blockchain mainstream.”

the largest market movement taking place in the Asian cryptocurrency scene now is the convergence of the gaming and cryptocurrency industries
the largest market movement taking place in the Asian cryptocurrency scene now is the convergence of the gaming and cryptocurrency industries

New blockchain-based startups are taking advantage of this trend and building products to service this growing industry. Companies like BUFF are building entirely new micro-economies that span across different video game titles and allow gamers to use a single digital currency (a specific cryptocurrency) to purchase goods and online services in the industry.

Another gaming-crypto company, Singapore-based startup Bountie is developing a similar blockchain-based platform where gaming users are rewarded for their time and effort spent playing video games with cryptocurrencies.

These blockchain-based services making their way into the gaming markets aren’t accidental, either. Crypto enthusiasts, innovators, and entrepreneurs in Asia are witnessing first-hand the developments in the area. They’re seeing the growth in both interest and demand in the growing areas of the economy, and they’re developing products to meet the needs of those in the area.

These trends are important for investors abroad to take notice of. As with Asia’s ability to influence and predict what the next move is in the crypto world, consumers in the region provide investors with real-world data about emerging areas of the economy. With growing interest at the intersection of gaming and cryptocurrencies, investors can get a clear view of what one of the next biggest trends is likely to be in the blockchain industry.

How Can You Build a Cryptocurrency Portfolio with Little Money?

This is the question that most people who are just starting out with crypto investing have in their minds. And it is a very pertinent question to ask.

Cryptos are volatile assets, and as much as they can make quick gains, they can roast your rooster to charcoal as fast if your finger is not on the proper dial. This is more so if you have a little cash to start off.

So is it possible to watch your dimes grow from almost zero? Let us try and find three ways of doing exactly that.

Investing in CFD Trading

Welcome to the world of Contracts for Difference (CFDs) and the way they are used for leveraging stocks of underlying assets. Let us explore a few things to get you started;

What is CFD trading?

In Contracts for Difference trading (CFD’s), you are allowed to speculate on the rise or fall of an asset’s value without really buying the asset.

Let me explain; You sell if you predict a fall in the value of the underlying asset, and you buy if you predict a rise.

By using the leverage provided by the exchange, you could be speculating on an asset ten times larger than your investment for an equivalent gain to someone who owns the asset. For example, if you have 100 dollars, you could bet on Bitcoin and gain as much money, with good prediction, as someone who holds $1000 worth of Bitcoin if your leverage is 10%!

But note. You could lose by the same margin if your predictions are wrong! CFD trading is a zero-sum game, and so if the price goes down, the buyer has to pay the seller the difference. It’s prudent to also keep an eye on broker spreads. The larger the spreads, the riskier the CFD if you are good at predicting a particular effort. A spread is simply a price allowance

the broker puts in the rise or fall of an asset price before they can apportion gains or collect losses from traded positions.

How to start trading Cryptocurrencies?

When you decide to try out CFD but do not have a huge budget, you will need a broker to help you out. A reliable broker that provides CFD trading is crucial because they lend you the money to leverage.

From you, a broker will require a margin which is a sort of deposit to protect himself from losses.

Protecting yourself from losses

CFD trading allows you to leverage your position on asset price increase or decrease. The underlying assets (cryptocurrencies) fluctuate a lot. Your goal is to predict the right kind of movement.

To avoid massive losses, you should avoid overextending yourself financially. Hence, You should never take a position that is worth more than what you hold in your CFD account. For instance, if you have $1,000, do not take a position that is worth $1,500 as this will wipe you out if there is a massive drawdown.

In the same breath, do not take credit from your broker that is more than your portfolio. Your broker should only lend you 5% to 10% of your portfolio amount. Lastly, do not invest in CFDs with credit money. There is money to be made, but you can also make losses.

A good piece of advice with CFDs is to make good use of the stop-loss and profit target functions to manage the movement of your portfolio as you speculate. Some brokerage platforms allow you to shadow successful traders, and most have practice accounts.

Trading on Admiral Markets

Admiral Markets UK Ltd is a European based online brokerage firm. They have been in the business for a while and have earned themselves a reputation for being efficient.

In the business of money, reputation is critical. This is why Admiral markets is a known name in the CFD circles. They opened their platform to CFD trading in 2013. Their website and trading platform are user-friendly, and it allows you to keep an eye on your investments 24 hours a day.

Trading in CFDs does not have to be a million-dollar affair. In fact, starting small is most recommended. However, you should take caution to avoid suffering losses and developing cold feet from the get-go.

If you have ever wanted to trade cryptocurrencies but are risk-shy, this is a great way to warm up.

Well-researched investment

The crypto universe has seen a proliferation of many different tokens. There is a massive opportunity to buy cheap tokens and get good returns within a short time as a token starts getting enough interest.

You can make handsome returns with some good research about many tokens that are not yet mainstream. Obviously, you have to be familiar with the crypto world, the impact of fundamental news on some cryptos and, as it recently becomes the main catalyst for cryptocurrencies volatility, the effect of regulation over cryptos’ prices.

If you decide to dig into cryptocurrencies trading, read as much as you can, follow some cryptocurrencies’ investors and analysts on social media, connect to Reddit and find a broker that provides you with the best terms. From that point, your profit depends on your discipline and trading skills.

Early Bird Crypto Looting

Token sales are a great way of making early investments in ICOs that you think will generate a lot of public interest. An ICO is a tokenized business which seeks to fund its future operations using crowdfunding.

When you learn about a blockchain company and its investment idea, the first thing you do is read about how the business will unfold.

What are the problems it seeks to address? Are there better alternatives? Who is developing the idea?

Once you are confident that the idea you are funding will generate interest, you now can invest in the token either for long-term holding or until you can reap a targeted return.

How to prevent losing your portfolio with ICOs

As much as you can make money with ICOs, the risks are high with many of them. Many tokens crash soon before issue, or you could have difficulties liquidating some of them if they are not being bought at the exchanges.

There are several things you can do to manage the risks;

Read the white paper – The whitepaper is the blueprint of any ICO. It spells out what the ICO intends to bring to the market. However, most importantly, it states the amount it needs to raise and how it plans to do that.

You should invest only in tokens that convert at the ICO, that way, even if the price decline sharply, the program will not be derailed.

Look for that needle in the haystack kind of token – Most tokens nowadays are doing the same thing. They mostly just want to add themselves to the decentralized system bandwagon. When investing always go for that coin or token that goes an extra mile.

For instance, most coins that are as a result of a hard fork such as Bitcoin cash or Litecoin cash will be worth your money if their improvement is revolutionary and in demand. Endeavor to also have in your portfolio those tokens that have been well marketed as they tend to have a lot of initial gains in the market.

Final thoughts

While having a good capital base when investing in cryptos can be a good thing, it is possible to start small, learn, and grow your portfolio with time. Whatever you do, be it CFD trading via brokers such as Admiral Markets, Early Bird ICO investment or simple token purchases, use most of your time to research and get facts.

CFD trading can allow you to get leveraged earnings without buying the crypto you are speculating about. When you start with little money, you can learn early through less costly mistakes.

Learn and learn well. No one will give you foolproof advice on investing in cryptos. They are volatile assets, and this means that they make massive profits and return huge losses to different people, in different measure.

Risk disclosure: Forex and CFD trading carries a high level of risk that is not suitable for all investors. Presented information is not an offer, recommendation or solicitation to buy or sell. Before making any investment decisions, you should seek advice from an independent financial advisor to ensure you understand the risks involved. Read more at admiralmarkets.com.

3 Common Forex Mistakes Beginners Should Avoid at all Costs

Choosing the Wrong Platform

Choosing the right forex trading platform is essential if you want to get to a good start. A good platform should provide good educational resources, access to news and a variety of trading signals. They should also allow you to trade exotic pairs since some brokers can be very limited as to which pairs you can actually trade. You should also know how they’re charging you for trades, what their withdrawal and deposit conditions are, and how good the customer service and actual platform is.

Risking Too Much

One of the most fundamental mistakes newcomers make is risking too much and getting struck by FOMO, or the fear of missing out. They see a trade they could’ve got in and think about how much they would have gained instead of thinking of how much they could’ve lost.

You should make sure that you only trade what you can afford to lose, and this can be different for everyone, but a good rule of thumb is to not spend more than 2% of your total available capital on any trade. While it may seem small at first, it’s the only sure-fire way to limit how much you could eventually lose.

Just look at it this way, if you end up losing 50% of your capital on a losing trade, you’ll need to double your money on your next trade just to break even. That’s just not sustainable, especially if you’re just getting started. Another advantage of only investing small sums is that you’ll be able to stay calm and not lose your cool if you’re in an initially losing trade. That will prevent you from closing positions too early out of panic since you won’t be afraid to lose whatever you put in.

Ignoring Longer Time Frames

Too many new forex traders come in with a day trading mentality and get sucked into short term 1 minute or 5 minute charts. But sometimes, clear uptrends can only be seen on daily, four hourly, or hourly charts. The longer the trend is, the stronger it will usually be. A dip on a 5-minute chart will never be long enough to give you the clear picture on a trend. While some traders do good on short term trades, they require a lot more discipline than long term ones. There’s also much more chance that there will be interference or noise since companies and big institution players use the market as well.

The foreign exchange market can be very lucrative if you know what you’re doing but it is not as easy as many would make you think. Make sure that you do your homework and know everything there is to know about the market before you consider going in.