Three Factors Keeping Oil Prices in CheckAT A GLANCE:
Despite ongoing geopolitical conflict, oil prices and volatility are relatively low
A rise in U.S. crude production and weak demand in China are helping oil inventories maintain average levels
Considering many factors like the Russia-Ukraine war, OPEC+ cutting production by 3.6 million barrels per day and conflict in the Middle East, many traders might be surprised to find out that oil prices are only around $82 per barrel and that implied volatility on crude options are trading at relatively low levels below 40%.
Inventories Remain at Average Levels
So why are crude oil prices not higher and more volatile? Part of the answer lies in inventories. Crude and product inventories are right around their seasonally adjusted averages for the past five years. This suggests that at least some cushion exists in the event of a supply disruption.
Given that oil production is about 3.5% lower globally than it would have been without OPEC+ production cuts, how is it possible that oil inventories are still at average levels? There are two reasons. First, a boom in U.S. production has replaced about one third of what OPEC cut.
The second reason is weak demand. China buys about 10 million barrels per day in the international markets, and its economy has been growing much more slowly than it was a few years ago. Slow growth in China often hits oil prices with a lag of about 12 months and may be among the factors preventing a further rise in global crude prices.
Higher Prices Expected?
That said, traders are displaying some signs of nervousness. The skew on CME Group’s WTI CVOL index is quite positive at the moment, suggesting that some traders are buying out of the money call options to protect themselves from the possibility of much higher prices.
If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
By Erik Norland, Executive Director and Senior Economist, CME Group
*CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc.
**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
Fundamental Analysis
STOP Overtrading with these easy stepsDo you ever get caught in the whirlwind of overtrading?
You’re taking a ton of trades because you’re bored, to make up for losses, for the sake of trading and to maybe feel productive.
It’s like Netflix really. You’re watching your favorite TV series; before you know it, you’ve devoured the whole season in one sitting.
Time lost and you get deep withdrawal symptoms.
Well, you need to seriously stop overtrading.
It’s one of the BAD habits that you can find yourself repeating.
And over time, it will lead to a ton of losses, a blown account and you looking for the “next” best thing.
Let’s get into it.
Recognize when you’re overtrading and then simply – STOP!
TO put it blunt.
Overtrading refers to the excessive buying and selling of financial markets that are often driven by emotional decision-making rather than a strategic approach. This leads to low returns and increased risk.
First off, it’s crucial to recognize when you’re overtrading.
There are a couple of times when you could find yourself overtrading:
Chasing losses
This is where you try to recover from a losing streak by getting into more lower probability trades.
The gamblers overconfidence
The opposite can happen.
You might feel invincible and the king of the trading world, after a series of successful trades.
And this could get you to take on more trades, without proper analysis.
And it could lead to you losing all your wins for the day.
Market FOMO (Fear of Missing Out)
You might see a NEWS event come out.
Your buddy might have taken an enticing trade.
Or you just feel there is more profits you believe you can take off the table.
And so, you jumping into more trades due to the fear of missing a profit opportunity.
Boredom Fever
Your trader and time is passing and, you are getting bored.
In fact, you’re probably feeling unproductive just seeing on your hands.
And so you get into other positions to pass time or for the excitement.
And you disregard, your sound market analysis.
Attempting to meet unrealistic profit goals
Most traders have a maximum loss per day, before they stop trading.
The dangerous players try to have a minimum goal of a % win they want to achieve per day.
This is dangerous. And this can lead to overtrading and more loss taking.
Peer pressure
Like I said, you might hear from a buddy who’s taking trades.
You might hear from some economist or analyst who’s diving in.
And you’ll feel peer pressure if they get you to the point to follow them.
You have your own strategy, system and risk management analysis. You don’t need anything else!
Got it?
Top of Form So what do you do when you feel the sense of overtrading?
Here are some ideas.
How to stop overtrading with easy steps
Take a break
It’s like stepping away from a heated argument to cool off. It helps clear your head.
Pick your best times and days to trade
Not all hours are created equal.
Know the market rhythms and dance to the beat that suits you best.
Keep to your plan only
Your trading plan is your roadmap.
If your plan is to follow a mentor – so be it.
If your plan is to follow your own strategy – Go for it.
If your plan is to intraday trade, day trade, position trade or core trade – Just follow it.
Don’t venture off into uncharted territory.
Quality over quantity
Focus on making a few high-quality trades rather than a bunch of haphazard ones.
Think of it as choosing a super healthy meal over a fast-food binge.
Engage in other activities
Go enjoy other aspects of life. Trading isn’t EVERYTHING.
Go for a walk.
Play with your dog or cat.
Do other business.
Distract yourself with hobbies or exercise when you feel the urge to overtrade.
You’ll thank yourself for not taking any unnecessary trades.
Because you won’t set that dangerous precedent, which can continue at a later stage.
Final words:
Overtrading is doing exactly that. Taking too many trades without following your sound principles, strategy and analyses.
This can lead to taking low probability trades, increasing your losses and destroying your mechanical mindset and trading strategy.
Let’s sum up WHAT causes you to over trade.
Chasing losses:
The gamblers overconfidence:
Market FOMO (Fear of Missing Out)
Boredom fever
Attempting to meet unrealistic profit goals
Peer pressure
And we covered ways to STOP overtrading by things like:
Take a break
Pick your best times and days to trade
Keep to your plan only
Quality over quantity
Engage in other activities
Now you know what to do to STOP OVERTRADING.
Go and don’t do it!
WHAT ARE REAL WORLD ASSETS (RWA)?Just 3-5 years ago, the concept of "real assets" was clear-cut - physical items that could be owned such as stocks, gold, and currency. On the other hand, "derivatives" referred to intangible assets like swaps, options, and CFDs that allowed for profit-making. However, the emergence of cryptocurrencies and blockchain technology has completely transformed this landscape. Not long ago, cryptocurrencies were seen as a separate entity, often labeled as a risky and unsecured financial scheme. But today, they are being recognized as valuable commodities and even as securities. What's even more fascinating is the rise of a new category - Real World Assets.
💡 Real World Assets are a unique category of financial instruments that are based on blockchain technology.
💹 Real World Assets is a market where real world assets are tokenized on the blockchain. These tokenized assets, which we refer to as real assets, are essentially moving traditional assets into decentralized financial applications. The goal is to leverage technology to potentially lower fees and management costs associated with these assets.
📍 REAL WORLD ASSETS EXAMPLES:
➡️ Stablecoins are a type of cryptocurrency that are centralized and backed by real assets. For instance, Tether's USDT is backed by stocks, government bonds, and fiat currencies, and undergoes some level of auditing. This process is known as tokenization, where the value of the collateral is denominated in stablecoins equivalent to fiat money. The pegging ratio is 1:1, meaning that the value of the stablecoin is directly tied to the value of the underlying assets. Any fluctuations in the value of the assets are balanced out by adding more collateral to maintain the stability of the stablecoin.
🔴 One major drawback of this model lies in the vulnerability to fluctuations in exchange rates of the real asset. In the event that stocks experience significant drawdowns of 20-30%, it is essential for the collateral to be able to mitigate this risk. Furthermore, as the stock value increases, Tether continues to issue additional USDT. Traders are already familiar with the challenges of decoupling stablecoins from their corresponding assets, particularly in the case of centralized stablecoins as opposed to algorithmic ones.
➡️ Private lending, specifically in the form of decentralized lending, has seen a significant player emerge in the form of DAO MakerDAO, the issuer of the DAI stablecoin. In a major move, this startup secured a hefty $100 million credit line with a US bank in mid-2022, backed by real assets as collateral. The startup was able to profit from this arrangement with an impressive 3% annual return. It is noteworthy that regulators did not pay attention to this deal.
➡️ Government bonds are a popular choice for investors seeking stability. Some companies have taken this a step further by issuing stablecoins that are backed by government securities. For example, Ondo Finance offers the USDY stablecoin, while Mountain Protocol offers USDM, which is based on Ethereum. These startups manage stablecoins backed by U.S. Treasury bonds, considered one of the most reliable instruments in the market. Investors can also earn passive income of 5% on top of the stability these investments offer.
➡️ Tokenized securities are on the rise, although the market has not yet reached its full potential. Bitfinex exchange is at the forefront of this trend, with their subsidiary launching the first tokenized bonds in October 2023. These bonds offer investors a tempting yield of 10% and a three-year maturity period. In essence, these tokenized securities work much like traditional bonds, where investors trade tokens for a share of the security and receive passive income in return.
🔴 Investors should be intrigued by the inquiry into how the issuer plans to allocate the funds raised and where the profit is being generated from. This question remains unanswered, as the tokenization process is still evolving. By 2024, HSBC, the British bank, is gearing up to introduce a service for managing tokenized bonds. In October 2023, JPMorgan and Barclays, along with investment firm BlackRock, unveiled a platform for transforming shares into digital assets called the Tokenized Collateral Network.
➡️ Green tokens are an emerging trend in the world of digital assets, with artificial intelligence specifically identifying them as a key player in the future. An interesting fact is that KlimaDAO, a startup backed by billionaire Mark Cuban, ultimately did not succeed in its mission to raise funds to incentivize companies to reduce their emissions. Despite this setback, the concept of green investments and tokens is likely to become a prominent tool in the future. This new form of investment may revolutionize the way companies approach sustainability and incentivize environmentally conscious behaviors. Stay tuned for more developments in the world of green tokens.
➡️ Paxos, a startup in the cryptocurrency industry, has made a connection to precious metals through the creation of gold tokens. Pax Gold has successfully replicated the value of physical gold, allowing investors to easily participate in the gold market without the need to purchase actual bullion or deal with brokers and confusing financial instruments like CFDs and swap fees. By purchasing PAXG cryptocurrency, investors can securely store it in a cold wallet, minimizing the risks associated with exchange bankruptcies or broker insolvencies.
➡️ In January 2023, the real estate startup MarketDAO facilitated a $7 million loan in cryptocurrency DAI to a French conglomerate. The loan was backed by mortgage bonds worth $40 million in US dollars. While this practice is still inconsistent, it marks the beginning of a promising trend in the real estate industry.
➡️ Paintings, sculptures, and other works of art, as well as collectibles, have long been valued for their beauty and uniqueness. The original concept behind NFTs was to revolutionize ownership by tying it to the blockchain, thereby ensuring copyright protection. In 2021-2022, we witnessed the initial steps towards digitizing and transferring paintings onto the blockchain. The future of this trend remains uncertain, but the concept has proven to be functional and shows promise for the art world.
🔴 The prospects for Real World Assets are significant and promising. However, accurately assessing these prospects is currently difficult as the tool is still in development and has not yet found its niche. Several factors are necessary for its success.
1️⃣ Firstly, there needs to be greater user engagement in cryptocurrency and digital technologies. Despite the widespread availability of the internet, not everyone has sufficient knowledge about these topics, let alone blockchain technology.
2️⃣ Secondly, there needs to be real interest and potential benefits from the tool. This can manifest in various ways, such as generating profit or simplifying certain actions. For example, the tool could speed up data transfers, protect copyrights, and make it more accessible for everyday users. Users must see the usefulness of the tool for it to be successful.
📍 CONCLUSION
Currently, the reality is that the global market is valued at hundreds of trillions of dollars, a figure that the cryptocurrency market cannot compete with. For instance, as of 2020 estimates, the worldwide real estate market is valued at approximately $326 trillion in US dollars. According to RWA.xyz, the funds locked in blockchain technology total $4.5 billion, with just over $500 million in loans issued. However, the revolution of Real World Assets technology is on the horizon. In the next 1-2 years, this tool will begin gaining traction among the masses, similar to the rise of artificial intelligence in 2023. It is predicted that in 5 years, RWA technology will reach its peak of popularity.
Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
How to Start Forex Trading. Step-by-Step Learning Plan
Hey traders,
If you are wondering how to start Forex trading, or you just started to trade, I suggest a 12 weeks intensive learning plan.
Each week will be dedicated to a specific topic. Starting from the basics you will gradually mature and by the end of the intensive you will have a complete trading strategy.
✔️Week 1 - Practice market trend identification
Learn to identify the direction of the trend. Master the recognition of a bullish trend, bearish trend and sideways market.
✔️Week 2 - Practice support and resistance.
Learn to identify key levels. Master support & resistance recognition.
✔️Week 3 - Learn candlestick patterns.
Study classic candlestick formations and practice their recognition.
✔️Week 4 - Learn price action patterns.
Study classic price action patterns: trend-following patterns, reversal patterns and consolidation pattern and learn to recognize them.
By the end of the first month, you will mature the basics of candlestick chart analysis.
✔️Week 5 - Practice supply and demand zones.
Learn to identify supply and demand zones. Learn to combine candlestick analysis with support and resistance to identify the potential reversal zones.
✔️Week 6 - Practice multiple time frame analysis.
Master top-down analysis. Learn to apply all the techniques studied previously on multiple time frames.
✔️Week 7 - Learn different entry strategies.
With all the knowledge being obtained, you can practice different entry techniques. You can try trading candlesticks patterns or price action patterns, or simply key levels. Search what works for you.
✔️Week 8 - Learn risk management.
Of course, entry strategies are not enough for profitable trading. Learn how to set stop loss and how to manage your risks properly.
By the end of the second month, you will have a foundation for a strategy building.
✔️Week 9 - Practice trade management.
Knowing how to enter the trade and how to manage the risks, the next step is to learn how to manage the active position (stop loss trailing, position protection, manual closing, etc.)
✔️Week 10 - Create a trading plan.
Combine all the knowledge that you gained in a structured trading plan.
✔️Week 11 - Follow the strategy.
Be disciplined and follow your rules. Test them and learn to be consistent.
✔️Week 12 - Review your plan.
Following your strategy, you will inevitably find its flaws. Learn to constantly improve it.
By the end of the third month, you will have a complete rule-based trading strategy. Of course, that won't be a perfect strategy, but you will have broad knowledge in technical analysis.
The next 3 months alone should be sacrificed on polishing and improvement of your trading plan.
Try this intensive, traders. I strongly believe that you will see a dramatic improvement in your trading upon its completion.
IS IT A GOOD TIME TO BUY STOCKS? In order to assess whether it is a good time to increase exposure to riskier assets such as equities, institutional traders often use correlation tools and inter-market analysis.
Depending on the macro environment (uncertainties, market drivers, monetary narratives), traders periodically assess their exposure between offensive and defensive values (Risk-on vs Risk-off).
One of the easiest way to assess investors' trading stance and appetite for risk is to look at what is happening on other asset classes such as Bonds and currencies.
For instance, on this example you can find the US 10 year yield (bond) on the right, the US Dollar index in the middle (currency) and the S&P500 (stocks) on the right.
It is easy to notice the mechanism in place here : When the currency becomes weaker while the cash goes back into bonds (bear in mind that when bond yields drop means bond markets goes up), it usually sparks a bullish trend in the stock markets.
This is exactly what we are seeing here. Bond yields have started to drop on the 1st of May, alongside the Dollar index, which sparked a sharp rebound on the S&P500 at the same time.
Of course, sometime these three asset classes aren't correlated that much, which means there is no clear trading signal and that uncertainty lingers in the markets.
But when a drop occurs in both bond yields and the currency of a specific economic zone, this is seen as the best setup to buy stocks for traders.
This is explained by the fact that when the currency drops, large exporting groups are able to sell more internationally, boosting their exports.
Meanwhile, a drop in bond yields means investors are willing to put more cash into the market.
If you're willing to know whether it is a good time to increase your exposure to equity markets, maybe you should pay attention to what's happening in those key other assets.
Pierre Veyret, Technical Analyst at ActivTrades.
The information provided does not constitute investment research. The material has no been prepared in accordance with the legal requirements designed to promote the independence of investment research and such is to be considered to be a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
4 Golden Trading Lessons: Your Roadmap to SuccessAre your ready to elevate your trading game?
You’ll need these 4 golden tickets to have a chance.
You might have two or three of them, but it’s important to make sure so that you’re set for the rest of your trading career.
Have a read and let’s refine your trading skills.
Lesson 1: Follow a Proven Strategy and Never Deviate
Ever heard me say, “A rolling stone gathers no moss”?
That’s your trading strategy in a nutshell!
The key to success isn’t just having a strategy; it’s about taking every high probability trader, weathering through all environments and sticking to it.
Why?
Consistency is king.
Markets move up (You profit)
Markets move sideways (You lose)
Markets move down (You profit).
So you might as well enjoy the full journey and trading process you’re your one and only strategy.
So, stay the course!
Lesson 2: Only Risk What You Can Afford to Lose
Here’s a tough love moment:
Can you afford to lose what you’re risking?
Can you take the money – cut it up – throw it to the ground and you’ll be fine?
GOOD! Then you know that emotions and emergency life savings is NOT going to make the cut (no pun intended).
If you are feeling highly attached to the money, step back.
By only risking what you can afford, you keep emotions in check – win or lose.
It’s not about fear; it’s about smart, sustainable trading.
Remember, it’s a game of patience and discipline.
Lesson 3: Adhere to Strict Money Management Rules
This is your financial seatbelt.
What are your rules?
Here are some:
Risk MAX 2% per trade
Know where to place your stop loss and never move it when you’re losing
Halt trading when the drawdown is over 20% down
Never expose more than 20% of your overall portfolio
Always have a plan to deposit more money to grow more money
Lesson 4: Have a ‘Worst-Case-Scenario’ Plan
What’s your plan when the market throws a curveball?
Having a worst-case scenario plan isn’t pessimism; it’s smart trading.
You know you’re going to be in drawdown around 4 months a year.
You know there are consecutive losses to come with any trading strategy.
You know the market environments are not always to your favour.
So you need that umbrella to know when to halt trading.
Whether it’s diversifying, hedging, risking less or having a cash reserve, be ready for when the market isn’t your friend.
This isn’t about fear; it’s about being prepared.
FINAL WORDS:
These 4 Golden Trading Lessons are more than tips; they’re the pillars of successful trading.
It’s about building a trading practice that’s not just profitable, but sustainable and resilient.
Here are your 4 golden trading lessons.
Lesson 1: Follow a Proven Strategy and Never Deviate
Lesson 2: Only Risk What You Can Afford to Lose
Lesson 3: Adhere to Strict Money Management Rules
Lesson 4: Have a ‘Worst-Case-Scenario’ Plan
“DRAGON” PATTERN IN TRADINGAs we dive into studying price action, we can't help but be intrigued by the interesting names given to various patterns. Names like "Two Rivers" and "Shooting Star" not only sound captivating but also accurately describe the patterns they represent. In this post, we'll introduce you to another powerful pattern known as the Dragon. This pattern, belonging to the reversal patterns, is not only commonly found in the Forex market but is also highly effective.
💡 HOW THE DRAGON PATTERN IS FORMED?
The pattern has known points, without which the formation is not possible:
HEAD
LEFT FOOT
RIGHT FOOT
HUMP
TAIL
Each of the points, should be placed in the specified place, without distortions and various force majeure.
The Dragon pattern is a reversal pattern in the forex market.
In order to successfully trade the Dragon formation, it is crucial to have a clear understanding of the important data associated with it.
📍 Firstly, in a downtrend, you must identify the last local lower high, which will serve as the head of the Dragon pattern. Subsequently, the market will continue to decline and reach a specific level that it cannot surpass, marking the left foot of the formation.
📍 The Dragon's Hump is then formed through a corrective movement from point 1 to point 2. It is essential that this correction does not exceed 38.2% to 50%. Following this correction, the market should attempt to retest the previous lows, ideally failing to do so. This failure indicates a potential shift in momentum, allowing for a buying opportunity.
📍 Drawing a trendline from the head to the hump serves as a signal line. Once this trendline is broken, the Dragon pattern is confirmed, signaling a long position entry.
📍 Setting a Stop Loss below the dragon's feet helps to manage risk, while the first target is set at the level of the hump and the second target at the head. Take Profit levels can be set at these targets to maximize profitability.
Another possible scenario is when the bears successfully bring the market below the initial support level. Personally, I find this detail somewhat undermining to the pattern. In such a situation, it can be interpreted as follows: if the bears succeed in pushing the market to new lows, it indicates that they may not be as weak as they seemed at first, which encourages caution in buying. However, if the price returns above the last local low and creates a false breakout with a bullish divergence, it can be considered a strong signal.
The bullish reversal pattern Dragon has its counterpart in the bearish reversal pattern known as the Inverted Dragon. Just like its bullish counterpart, the Inverted Dragon follows similar patterns and characteristics, so there is no need to describe it separately. As mentioned earlier, these patterns are named for their resemblance to real-life examples, and I have included a chart overlay in the screenshot below for reference.
It is essential to have a strategy and a set of rules when considering any reversal combination in forex market. As many books suggest, patterns often form at the bottom of the market. Although the market bottom may shift quickly, it is important to stay disciplined and adhere to the rules.
The concept of identifying the market bottom involves recognizing key levels where the market has previously rebounded. If a price has bounced off a certain level in the past, there is a higher probability of it happening again in the future. Therefore, it is crucial to look for potential patterns, such as the Dragon pattern, when the price nears a support level (for bullish patterns) or a resistance level (for bearish patterns).
📒 TO AVOID MISIDENTIFYING PATTERNS, IT CAN BE HELPFUL TO FOLLOW THESE GUIDELINES:
1️⃣ Start by identifying the current trend movement. In a downtrend, look for a dragon pattern, while in an uptrend, look for an inverted dragon pattern.
2️⃣ Remember that price reversals are more likely to occur at important levels. Without a significant level, there may not be a reversal.
3️⃣ Pay attention to the hump of the dragon pattern, ensuring it does not exceed 38.2% to 50% of the distance from the head to the left foot.
4️⃣ Consider the length of the right foot, which should be 5-10% of the distance from the left foot. Ideally, the right foot should be higher, but it can also be lower.
5️⃣ If there is a trendline breakout, take your time before opening a trade. Assess the potential gain and compare it to the expected loss. If everything checks out, go ahead and take the trade.
📊 USING THE DRAGON PATTERN IN TRADING
As you can see, identifying the pattern is not difficult at all. Remember the key rules:
The hump should be between 38.2% and 50% of the head, indicating left foot movement.
The right leg should be aligned as closely as possible with the left foot.
Most importantly, pay attention to the pattern at significant levels.
The appearance of a pattern does not guarantee that the trend will reverse, but it is considered a strong signal. It is important to make sure that the pattern is formed on a sufficient amount of data. Take into account other factors such as fundamental analysis and the market context.
✅ BOTTOM LINE
The Dragon pattern is widely recognized as a strong indicator of a trend reversal, making it a valuable tool for traders looking to capitalize on market movements. While it can be a helpful guide for entering trades in line with the anticipated trend, it is important to remember that no technical indicator is foolproof and a pragmatic approach is always advised. In addition to the suggested rules, it is essential to incorporate your own money management strategies to ensure profitable implementation of the Dragon pattern. Your feedback and any further perspectives are welcomed. Thank you for your time and input.
Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Let’s Compare INVESTING, TRADING and GAMBLING
Hey traders,
In this post, we will compare investing, trading and gambling .
📈 Investing
Investing is the act of putting money in a financial market with the expectations of a long-term positive return.
The investing decisions are usually made using fundamental analysis.
The main goal of an investor is to predict the long-term market trends and benefit on them.
Professional investing also involves assets allocation and diversification aimed to hedge potential risks.
💱 Trading
Trading is the process of selling and buying financial instruments expecting a short-term (occasionally, mid-term) profit.
The trading decisions are usually based on technical and fundamentals analysis.
The goal of a trader is to predict local price fluctuations and catch them.
Professional trading implies strict, rule-based actions following a trading plan.
🎰 Gambling
Gambling is the act of betting on a specific event with the expectations of winning some value.
Being completely luck-based, gambling usually involves get rich quick schemes and pursuit of easy money.
What differs professional trading and investing from gambling is the fact that professional trading / investing involves objective analysis and strict planning, while gambling remains purely intuition based.
Unfortunately, most of the market participants pretend that they trade and invest professionally while acting as gamblers in fact.
Remember that long-term, consistent profits can be achieved only with the plan. Your intuition may bring some short-term profits, but in a long-run it will most likely lead you to a bankruptcy.
Stock Market Secrets You Need to KnowUnderstanding the Interplay Between S&P 500, Core CPI, and the Non-Manufacturing Index
The world of finance is a complex web of interconnected factors, where seemingly disparate indices can influence one another in unexpected ways. Among these, the S&P 500 , Core CPI ( Personal Consumption Expenditures Price Index ), and the Non-Manufacturing Index stand out as key indicators of economic health. Understanding their relationship is crucial for investors, economists, and policymakers alike.
The S&P 500 , often referred to simply as "the S&P," is a stock market index that measures the performance of 500 large companies listed on stock exchanges in the United States. It is widely regarded as one of the best indicators of the overall health of the U.S . stock market and, by extension, the broader economy. When the S&P 500 rises, it generally indicates investor confidence and economic growth.
On the other hand, Core CPI tracks changes in the prices of goods and services consumed by households, excluding food and energy prices, which tend to be more volatile. As a measure of inflation, Core PCI provides insights into consumers' purchasing power and the overall cost of living. Central banks, such as the Federal Reserve, closely monitor inflation trends to inform their monetary policy decisions.
The Non-Manufacturing Index, also known as the ISM Non-Manufacturing Index , gauges the economic activity in the services sector, which encompasses industries such as retail, healthcare, finance, and transportation. A reading above 50 indicates expansion, while a reading below 50 suggests contraction. As services dominate modern economies, the Non-Manufacturing Index is a crucial barometer of economic health and consumer sentiment.
So, how do these indices relate to each other?
Firstly, the S&P 500 and the Non-Manufacturing Index often move in tandem. As the services sector accounts for a significant portion of the U.S. economy, positive data from the Non-Manufacturing Index tends to boost investor confidence, leading to higher stock prices reflected in the S&P 500. Conversely, a decline in the Non-Manufacturing Index may signal economic weakness, potentially causing the S&P 500 to fall.
Secondly, Core CPI plays a vital role in shaping monetary policy decisions. Central banks use inflation data to adjust interest rates and implement other monetary tools to stabilize the economy. A higher Core CPI could prompt the Federal Reserve to tighten monetary policy by raising interest rates to curb inflation, which could potentially dampen stock market returns represented by the S&P 500.
In summary, the relationship between the S&P 500, Core CPI, and the Non-Manufacturing Index underscores the interdependence of financial markets , consumer behavior , and economic activity . Investors and policymakers must carefully analyze these indices in concert to gain a comprehensive understanding of the prevailing economic conditions and make informed decisions.
The "Up Only" MentalityThe Allure of Upward Trends:
Humans are naturally drawn to positive trends and progress. We find satisfaction in seeing things improve, whether it's personal growth, technological advancements, or the value of our investments.
This inherent bias towards upward trends has been amplified in recent times by:
The widespread availability of information showcasing constant innovation and economic growth.
The rise of social media, where success stories and positive experiences are often overrepresented.
The Discomfort of Downturns:
When faced with downturns, corrections, or periods of stagnation, we can experience:
Psychological discomfort: The dissonance between the expected upward trajectory and the reality of a decline can be unsettling.
Fear of loss: Potential financial losses or a missed opportunity to capitalize on further gains can trigger anxiety.
Loss of control: The feeling of not being able to predict or influence the market's direction can be frustrating.
The "Up Only" Mentality:
The combination of these factors can contribute to an "up only" mentality, where anything less than constant growth is perceived as negative. This mindset can manifest in various ways:
Unrealistic expectations: Expecting consistent, uninterrupted upward trends in investments, careers, or even personal lives.
Impatience: A growing sense of frustration when progress feels slow or when setbacks occur.
Disillusionment: A tendency to view downturns as failures or signs of an impending collapse.
Important Considerations:
Market Cycles are Inevitable: All markets, including financial markets, experience natural cycles of growth and decline. Downturns are a normal part of the economic and investment landscape.
Long-Term Perspective: Focusing solely on short-term price fluctuations can lead to emotional investment decisions and missed opportunities.
Psychological Biases: Understanding our inherent bias towards positive trends can help us make more rational decisions during periods of market volatility.
Conclusion:
Our tendency to favor upward trends and feel discomfort during downturns is a natural human response. However, recognizing this bias and adopting a long-term perspective are crucial for navigating the inevitable cycles of growth and decline within markets and various aspects of life.
Cryptocurrency: Don't Get RektCrypto: Conquering the Coin Quest (Without Getting Wrecked)
So, you've been hearing all this buzz about crypto and that sweet, sweet potential for BIG gains. Totally get it – it's like a treasure hunt in the digital age! But hold on to your astronaut helmet, because this wild world also comes with some serious risks.
The key to surviving (and thriving!) in the crypto jungle is mastering risk management. Think of it like your personal treasure map – a guide to navigating those choppy waters and keeping your loot safe. Here's the lowdown on some essential strategies:
1. Diversify Your Crypto Crew:
Don't put all your eggs in one basket (or should we say, digital wallet?). Spread your investments across different cryptocurrencies, like picking a mix of rare gems and reliable gold coins. This way, if one coin takes a nosedive, the others can help keep your portfolio afloat. Research different projects, understand what they're all about, and pick a mix that matches your risk tolerance and goals. Don't chase the latest shiny thing – think long-term and build a balanced crypto crew.
2. Stop-Loss Orders: Your Crypto Lifeline
Imagine a safety net that catches you if you fall – that's what a stop-loss order is! It's a pre-set price level where your exchange automatically sells your coins if things go south, limiting your potential losses. Setting stop-loss orders is crucial, but don't place them too tight (missing out on gains) or too loose (waving goodbye to a big chunk of cash). Think about your risk tolerance, analyze the market trends, and set your stop-loss wisely.
3. Position Sizing: Betting Smart, Not Going All In
Crypto trading ain't a casino. Every trade should be a calculated move, not a desperate hail Mary. Position sizing is all about figuring out how much of your hard-earned cash to put into a single trade. A good rule of thumb is the 1-3% rule: only risk a small percentage of your total crypto stash on any one trade. This way, even a string of bad bets won't leave you flat broke. As you gain experience, you can adjust your position size based on your confidence in the trade and your comfort level with risk.
4. Risk-Reward Ratio: Aiming for Asymmetry (in Your Favor!)
Successful crypto traders don't just dream of profits – they also consider the potential downside. The risk-reward ratio compares the possible profit you could make with the potential loss you might face. Look for trades with a favorable risk-reward ratio, ideally 2:1 or higher. This means you're willing to risk $1 to potentially make $2 (or more!). By focusing on trades with a higher potential reward, you tilt the odds in your favor over time.
5. Technical Analysis: Decoding the Crypto Code
Ever wished you could decipher ancient scrolls and predict the future? Well, technical analysis is kind of like that for crypto. It's all about studying past price charts and patterns to get a feel for where things might be headed. By analyzing trends, support and resistance levels, and cool tools like RSI or MACD, you can gain insights into potential price movements. Remember, technical analysis isn't a magic crystal ball, but it equips you with data to make informed decisions, not just blind guesses.
6. Keep Learning: Staying Ahead of the Crypto Curve
The crypto market is like a living, breathing beast – it's constantly evolving. To stay on top of your game, you gotta keep learning! Research the coins you invest in, follow the latest blockchain tech developments, and stay updated on broader market trends. Read crypto news, follow smart analysts on social media, and join online communities to stay ahead of the curve. A well-informed trader makes better decisions and navigates the ever-changing crypto landscape with confidence.
7. Beyond the Basics: Fancy Tools for Risk Management
Many trading platforms offer cool features that can take your risk management to the next level. Explore things like trailing stop-loss orders, which automatically adjust your stop-loss as the price goes up, or take-profit orders, which sell your coins when you hit a certain profit target. These tools can streamline your risk management process and potentially help you maximize your gains.
8. Taming the Emotional Rollercoaster: Discipline is Your BFF
Fear of missing out (FOMO) can make you buy on impulse, while panic selling during a dip can lock in your losses. Emotions can be your worst enemy in crypto. Here's where discipline becomes your BFF. Develop a clear trading strategy, stick to your risk management plan, and don't let emotions cloud your judgment. Keeping a cool head is key to long-term success in the exciting,
Draining Trading Habits: The Pitfalls to Avoid for Market SuccesYou know that trading is a mental game.
And if you play it wrong, it can be very draining on the mind and the soul.
Your aim is to make trading effortless and not overstressing.
And to do this, you need to avoid making these draining trading habits.
That’s what we’ll cover in this piece.
Personalise Losses: The Emotional Pitfall
Ever felt like the market is out to get you?
Go look at any chart and you’ll see there were times where you would have won and would have lost.
It’s a common trap.
Losses are not personal attacks.
And winners are not personal appraisals.
They’re part and parcel of the trading game.
Remember, the market is as impersonal as it gets.
When you personalize losses, you cloud your judgment, making it harder to learn from mistakes.
Instead you need to:
Shift Your Perspective:
View losses as the trading costs of doing business.
And if you’re still learning, then you can see losses as tuition fees for your trading education.
Keep a Trading Journal: Document your trades and reflect on your overall track record.
This way you’ll see both losses and gains as part of the process.
Cling to Long-term Trades: The Hope Trap
Ah, the classic ‘hold and hope’ strategy.
It’s easy to fall in love with a trade.
It’s also easy to marry a trade or even an investment.
But as a trader, you must NOT get married to a trade.
See them as short term conquests where you take one – lose one win one. But know that the next one is on the way.
So, how do you break free?
Set Clear Exit Strategies:
Before your enter a trade, know your exit points for both profit and loss.
Practice Detachment:
Treat each trade as just another business transaction. Or like I said – Conquest.
Always checking your trades: The Anxiety Generator
Checking your trades every five minutes? ‘
This can turn into an obsession.
I must say. This is not a good for your stress levels and your trading performance.
This habit can turn trading into a nerve-wracking obsession.
So instead:
Set Alerts:
Use technology to your advantage. Set alerts for price movements.
Schedule Check-ins:
Limit how often you check your trades.
Discipline is key!
Overstress about trades: The Health Hazard
Stress is the silent killer in trading.
It not only harms your health but also impairs your decision-making abilities.
So, how do we keep our cool in the heat of the market?
Practice Mindfulness:
Meditation and mindfulness can work wonders for stress management. Maybe even self-hypnosis at night to manage your worries, stress and to compartmentalize them.
Physical Activity:
Regular exercise helps in reducing stress and improving focus. You’ll be surprised what a simple walk, exercise or even punching the old bag can do to calm your mind.
The complaint department: Trading’s Emotional Baggage
Complaining about trades is like carrying around a bag of emotional bricks.
It’s exhausting! It’s heavy on you! And it’s just plain unnecessary.
This habit breeds negativity and affects your mindset.
Focus on Solutions:
Instead of complaining, channel your energy into finding solutions through your track record and money management strategies.
Seek Constructive Feedback:
Engage with a trading community for support and advice.
FINAL WORDS:
Your job is to manage stress, worry and to make trading as effortless and as easy as possible.
This requires some physical and mental activities.
And not just once off. On an ongoing basis…
Let’s sum up the draining trading habits so you know what NOT to do.
Personalise Losses: The Emotional Pitfall
Cling to Long-term Trades: The Hope Trap
Always checking your trades: The Anxiety Generator
Overstress about trades: The Health Hazard
The complaint department: Trading’s Emotional Baggage
Dynamics of Bear Market CyclesBear markets, characterized by declining asset prices and investor pessimism, are a formidable force in the financial landscape. Understanding the distinct phases of a bear market cycle is essential for investors to navigate turbulent times and identify potential opportunities amidst the chaos.
Shot across the Bow:
The onset of a bear market sends a shockwave through the financial markets, shattering the "animal spirits" that drive bullish sentiment. Investor confidence wanes as uncertainty looms large, marking the beginning of a challenging journey ahead.
Bull-Trap:
Amidst the downward spiral, occasional rallies can deceive investors into believing that the worst is over. The "buy the dip" mentality prevails as hopeful traders attempt to capitalize on perceived bargains, only to be ensnared by the bear's trap once again.
The Lower-High:
As the bear market persists, a crucial shift in market behavior and psychology becomes apparent. The formation of lower highs signals a fundamental change in sentiment, as optimism gives way to caution and apprehension.
Breakdown:
The breakdown phase marks the definitive confirmation of a change in trend, as selling pressure intensifies and asset prices plummet. This descent into the deflationary abyss underscores the severity of the market downturn and underscores the need for defensive strategies.
Fear and Capitulation:
With fear gripping the markets, sentiment reaches a nadir as pessimism pervades and panic selling ensues. Investors capitulate in droves, relinquishing their holdings in a desperate bid to salvage what remains of their portfolios.
Bottom Fishing:
Amidst the chaos, value buyers emerge, scouring the market for opportunities amidst the wreckage. However, their efforts are met with fierce resistance from residual sellers, as the battle for market equilibrium rages on.
Despair, End of Bear:
In the depths of despair, all hope seems lost as the bear market reaches its nadir. Yet, amidst the gloom, a glimmer of optimism emerges as residual selling dries up, signaling the potential for a new beginning.
Bear market cycles are a testament to the ebb and flow of market sentiment, characterized by periods of turmoil and uncertainty. By understanding the key phases of a bear market cycle, investors can better prepare themselves to weather the storm and emerge stronger on the other side.
WHAT ARE THE DIFFERENT TYPES OF STABLECOINS?👋 Hello everyone, today we will be discussing stablecoins, which currently have a market capitalization of around $160 billion. Those who are not very familiar with cryptocurrencies often use stablecoins for various purposes such as making payments, storing money in a stable currency as an alternative to the US dollar, and for international transactions as well. However, stablecoins actually have a wide range of potential uses beyond these basic functions. In this post, you will learn about the different types of stablecoins available in the market.
💎 DIFFERENT TYPES OF STABLECOINS, THEIR APPLICATIONS, AND POTENTIAL RISKS
The type of stablecoin and its purpose are typically defined by the developer, who also establishes the asset to which it is pegged, and creates the system for issuing and burning coins. Stablecoins that are listed on the top 20 exchanges globally in terms of capitalization are the ones that garner the most interest.
💎 SECURED BY FIAT WITH A PEG TO A SPECIFIC CURRENCY
Binding can be done in various currencies such as USD, EUR, and others. One of the most well-known coins for binding is Tether. According to its developers, the coin is fully backed by real currency, stocks, bonds, and low-risk assets.
⚠️ However, there are risks involved with backing. For instance, Tether has faced challenges with verifying its backing. The company was not forthcoming in providing all necessary information to auditors. As a result, there are doubts about whether the security can serve as a protection fund in times of unexpected events.
In another example, the second largest USDC stablecoin pegged to the USD fell below 87 cents in early March 2023. This drop was widely attributed to the bankruptcy of Silicon Valley Bank, where the startup had held approximately $3.3 billion in collateral. While the situation has since been stabilized, the potential for another bank failure to affect the value of a stablecoin remains a concern.
💎 SECURED BY A SPECIFIC ASSET
One example of this is the PAXG coin, which is backed by physical gold. This means that the value of the coin is directly linked to the price of gold, eliminating the need for complicated stock market investments or futures trading. By simply purchasing the coin, you can potentially earn money.
⚠️ However, there are risks involved, particularly regarding security. The price of PAXG is not determined by traditional supply and demand forces, as it is tied to the value of gold regardless of the number of tokens in circulation. The algorithm controls the number of tokens, but there is uncertainty about whether the startup behind the coin will fulfill its obligations in case of unforeseen circumstances.
💎 ALGORITHMIC STABLECOINS
One of the most complex models of operation to comprehend is the concept of stablecoins. These digital currencies are built on computer code, which is essentially an algorithm that governs the creation and destruction of coins.
There are primarily two types of algorithmic stablecoins
1️⃣ The first type operates without any external backing. When the price of the stablecoin rises, the algorithm mints more coins. Conversely, when the price drops, it burns existing coins. This mechanism seems logical from an economic perspective, but it becomes problematic during times of crisis when everyone rushes to convert their virtual coins into real money.
⚠️ There are inherent risks associated with algorithmic stablecoins as they lack any physical backing. When you purchase stablecoins by providing USD, the developers may use the funds as they see fit. You can only expect to retrieve your investments if someone else injects more USD into the system. The story of Do Kwon and his Luna stablecoin serves as a cautionary tale of such a pyramid scheme.
2️⃣ The second type of algorithmic stablecoins introduces a more sophisticated concept, exemplified by the workings of DAI created by the startup MakerDAO. The innovative approach involves a redundant reservation system, where the responsibility of securing the collateral lies with the user rather than the developers.
Each user can mint a DAI coin, pegged to the value of 1 USD, by locking up another cryptocurrency as collateral in excess of 100%. This surplus serves as a safety net in case the value of the pledged cryptocurrency experiences a significant drop, potentially by 50% or more. If the value of the collateral falls below the 100% threshold, the investor's position is automatically liquidated. Notably, developers have no control over the issuance of DAI, with the stability of its price reliant on the collateral provided by users.
⚠️ Despite the innovative approach, there are inherent risks involved. A sudden decrease in the value of the collateral cryptocurrency can result in standard "slippages", where users not only lose their collateral asset but are left with a stablecoin experiencing a drastic devaluation from 1 USD to just a few cents.
💎 WRAPPERD STABLECOINS
One popular example is Wrapped Bitcoin (WBTC). Bitcoin and Ethereum are the two largest platforms, but they are not compatible with each other. Developers who deploy startups on Ethereum find that their users also work with BTC as a reliable investment tool. WBTC was created as an intermediary to bridge this gap. The coin is deployed on the Ethereum network and is tied to WBTC in a 1:1 ratio.
⚠️ However, there are risks involved in using WBTC. As it belongs to people, there is a lack of decentralization. Only the portion of WBTC that is in demand is secured, leading to a smaller capitalization compared to bitcoin. The extent to which this network can be trusted is a complex question that requires careful consideration.
✅ CONCLUSION
Stablecoins are an effective asset when utilized as a medium of exchange rather than as an investment, unlike gold-backed coins which function more as an investment tool. These coins provide protection against price fluctuations as they are linked to a stable asset. However, they still carry similar risks to altcoins such as detachment from the collateral, a decrease in the collateral's book value, and potential fraud by developers.
Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Here is WHY You Must Learn TRADE MANAGEMENT
Hey traders,
In this post, I will share with you my tips for trade management in Forex trading .
But first, let me elaborate on what is exactly a trade management .
Trade management is the set of rules and techniques applied for managing of an already active position.
Trade management is a very important element of any trading strategy that should never be neglected.
1. Never remove a stop loss
Being in a huge loss, many traders refuse to admit that they are wrong. Instead, watching how the price moves closer and closer to a stop loss, they remove stop loss hoping on a coming reversal.
The alternative situation may happen when the price is going sharply in the desired direction. Watching the increasing profits, traders remove a stop loss (and occasionally take profit), being afraid to miss bigger profits.
Both situations may lead to substantial, higher than initially planned losses. Driven by many factors, the market can easily burn all gains and move against the desired direction much longer than traders stay solvent.
Take a look at this long trade on Gold. When the price comes closer and closer to a stop loss, many traders can not take a psychological pressure and remove stop loss, being afraid to take the loss.
However, most of the time, stop loss will help you to limit your losses. You can see that after Gold reached stop loss, the price dropped much lower. Removing the stop loss, you would inquire bigger losses.
Never remove a stop loss. It must be always set.
2. Never modify your stop loss if a position is in loss
Watching how the price moves closer and closer to a stop loss is painful. Instead of removing stop loss, some traders move it and give the market more space for reversal.
Even though such a technique is safer than the complete stop loss removal, it is still a very bad habit.
Each stop loss adjustment increases the potential loss, not giving any guarantees that the market will reverse.
It is highly recommendable to keep your stop loss fixed and let the price hit it and admit the loss.
Above is one more example, why the earlier you close the trade in a loss, the better. Modifications and adjustment of your stop loss will most of the time lead to even bigger losses.
3. Know in advance your profit protection strategy
Where do you take your profit?
Do you have a fixed tp level or do you apply trailing stop?
You should always know the answers.
Coiling around take profit level but not being able to reach it, the price makes many traders manually close the trade or move take profit closer to current price levels.
Another common situation happens when the market so quickly reaches the desired TP level so the traders remove TP hoping to make bigger than initially planned profit.
Such emotional interventions negatively affect a long-term trading performance. TP removal may even burn all profits.
Do not let your greed intervene, and always follow your rules.
Above is the example of trade management rules in Forex trading. After GBPUSD reached a key support, a long position was opened from that. Once the price moves up by a certain distance, stop loss will be moved to entry. Take profit will be the closest key resistance.
4. Never add to a losing position
Watching how the price refuses to go in the intended direction and cutting a partial loss, many traders add to a losing trade in hopes that the market will reverse and all the losses will be recovered.
Again, such a fallacy usually leads to substantial losses.
Remember, you can add to a position only AFTER the market moved in the desired direction, not BEFORE.
Just imagine what could happen with your trading account, if you kept adding to a losing short position in a recent crazy bullish market on Gold.
5. Close the trades manually only following rules
Quite often, newbie traders manually close their trades because of some random factors:
they saw someone's opposite view, or they simply changed their mind.
Remember, that if you opened a trade following your trading plan, you should always have strict rules for a position manual close. Do not let random factors affect your trading.
Above is the example how you could easily miss a lot of pips on Gold, simply because the market temporarily stuck on some resistance.
Following these 5 simple tips, your trading will improve dramatically. Remember, that it is not enough to spot and accurate entry. Once you are in a trade, you should wisely manage that, following your plan.
Deciphering the Enigma: Understanding the Forces Behind ForexWithin the seemingly tranquil surface of the forex market lies a realm of intricate complexities and dynamic interactions that dictate its ever-evolving landscape. Unlike the tumultuous fluctuations often witnessed in stock markets, the forex arena operates with a measured cadence, its movements orchestrated by an array of global forces. In this comprehensive exploration, we delve deep into the enigmatic depths of the forex market, unraveling the myriad factors that drive its dynamics and providing strategic insights for navigating its multifaceted terrain.
The Forex Market Unveiled: A Global Phenomenon of Unprecedented Scale
The forex market stands as a towering colossus in the financial world, commanding unparalleled liquidity and facilitating trillions of dollars in transactions on a daily basis. Its decentralized nature allows it to operate seamlessly across borders and time zones, serving as the primary arena for the exchange of currencies on a global scale. From the widely traded major pairs such as EUR/USD and USD/JPY to the more exotic combinations like GBP/NZD and AUD/CHF, the forex market boasts a diverse array of currency pairs, each with its own unique characteristics and trading dynamics.
Deciphering the Forces Behind Market Movements: A Symphony of Economic Indicators
At the heart of forex market dynamics lie a plethora of economic indicators and events that shape investor sentiment and drive currency valuations. Central bank meetings, with their decisions on interest rates and monetary policy, wield significant influence over market sentiment and can trigger pronounced fluctuations in currency prices. Similarly, employment data, GDP reports, inflation figures, and retail sales statistics all offer valuable insights into the health of an economy and can impact currency movements in profound ways.
Navigating the Forex Landscape: The Art of Research and Strategic Planning
Success in the forex market hinges on a combination of knowledge, skill, and strategic planning. Conducting thorough research becomes imperative for traders seeking to gain a deeper understanding of market dynamics and identify potential trading opportunities. By staying abreast of upcoming news events, economic releases, and geopolitical developments, traders can position themselves strategically and adapt their trading strategies accordingly. Moreover, understanding the seasonal trends and historical patterns that influence currency pairs can provide traders with a valuable edge in their decision-making process.
Trading Around News Events: Exercising Caution and Implementing Risk Management Strategies
While trading around news events can offer lucrative opportunities for profit, it also carries inherent risks that must be managed effectively. Novice traders may be tempted to enter the market impulsively in the hopes of capitalizing on short-term price movements, but seasoned professionals understand the importance of exercising caution and implementing robust risk management strategies. By setting clear stop-loss levels, diversifying their portfolios, and adhering to disciplined trading practices, traders can mitigate the potential impact of market volatility and safeguard their capital against adverse movements.
Conclusion: Embracing the Challenges and Opportunities of the Forex Market
In conclusion, the forex market presents traders with a myriad of challenges and opportunities that require a nuanced understanding of its underlying dynamics and a disciplined approach to trading. By cultivating proficiency through continuous learning, research, and strategic planning, traders can navigate the complexities of the forex landscape with confidence and skill. While the path to success may be fraught with obstacles, those who embrace the challenges of the forex market with determination and resilience stand to reap the rewards of their efforts and achieve their financial goals in the long run.
5 Hidden Dangers of Trading with FOMOIn the previous TradingView article we spoke about FOMO (Fear of Missing Out).
And why it is really not necessary to deal with.
There is always the next trade coming.
There is always another opportunity coming your way.
There is always time to take the next one.
No we are going to unpack the five hidden dangers of trading with FOMO and how to sidestep them like a pro.
The Emotional Rollercoaster: Stress & Anxiety
Remember when I said.
“Trading is not just a financial challenge, but an emotional marathon”?
That’s never more true than when FOMO kicks in.
When you miss a trade, I know that you could feel stress and anxiety creeping in.
You feel like you’ve missed the most important trade of the year.
Well guess what, you might have missed one trade – but that’s it.
Success is based on 1,000s of trades not just one.
So the key is to remember this, so you eradicate the feelings of stress and anxiety next time you miss a trade.
The Short-Term Mirage: Losing Sight of Long-Term Goals
FOMO pushes you to focus on short-term gains.
Yes it’s important to try and spot high probability trades on a daily basis.
But, if you miss the trade – just go on and look for another.
There is bound to be more ready for you to execute or at least prepare for.
And while you’re at it, remember these are lessons to help you to be more punctual and vivid with your trades.
Following the Herd: The Danger of Sheep Behaviour
Ever heard the saying, “If your friend jumps off a bridge, would you do it too?”
That’s FOMO in a nutshell.
YOUR job is NOT to take a trade based on what your friend, foe, analyst or stranger tells you to buy or sell.
Your job is to either follow your own trading plan and strategy or your mentor’s.
Resist the urge to follow the flock and rather, trust your own research, strategy and instincts.
You’ll form Bad Habits
Each time you give in to FOMO and you take a trade for the sake of it, you’re not just making a bad trade.
You’re also cultivating bad habits for the future.
And once the bad habit forms, it then cultivates and becomes harder to escape from it.
Break the cycle by sticking to your disciplined trading routine. You’re better than that!
Ignored analysis
When you have that FOMO you want to then take impulse trades.
And all your hard work and analyses and discipline is thrown out of the window.
It’s like trying to navigate yourself without a map or GPS.
And you’re depending on your instincts or your “memory”.
It’s a very risky gamble and it could take a LOT longer to find your way.
Don’t go against the strategy. Don’t take trades for the sake of it. Don’t have FOMO because you missed one or two trades.
Just keep to your strategy and move on. It’s your trading compass for a reason.
FINAL WORDS 🚀🌟:
Trading with FOMO is like sailing in stormy seas – it’s risky, stressful, and often leads to nowhere good.
Let’s go other the 5 danger of trading FOMO
Stress & Anxiety: Keep emotions in check and stick to your trading plan.
Short-Term Focus: Remember your long-term goals and don’t get distracted by short-lived trends.
Sheep Behaviour: Be an independent thinker, not a follower.
Bad Habits: Avoid developing harmful trading habits by maintaining discipline.
Ignored Analysis: Trust in your research and analysis; they are your best tools for successful trading.
Portfolio Beta Hedging Ahead of Super Seven EarningsYou cannot predict the future. But you can prepare for it. Mega cap tech stocks have collectively lost USD 930 billion in value since Nasdaq 100 peaked on 21st March 2024. Will Super Sevens earnings turn the tide?
Starting this week, the Super Sevens will start announcing first quarter results. NASDAQ:TSLA is up first on 23/Apr (Tue) followed by NASDAQ:META on 24/Apr (Wed) with NASDAQ:GOOGL and NASDAQ:MSFT on 25/Apr (Thu).
NASDAQ:AAPL reports on 2/May followed by NASDAQ:NVDA on 22/May.
Broad US equity markets are facing multiple headwinds. Rate cut hopes are fading. Geopolitics are turning for the worse with tensions escalating in the middle east. Investor sentiments are gloomy. Consequently, both S&P 500 and Nasdaq 100 have endured their worst week in a long time.
Investors are pinning hopes on AI-infused tech earnings to stem the downdraft and to turn the tide. Bloomberg reports that Super Seven earnings are forecast to rise 38% during Q1 2024 compared to a year ago. If true, those earnings would dwarf the overall S&P 500’s meagre +2.4% forecasted YoY earnings growth.
This paper is set in two parts. Part 1 summarises idiosyncratic factors affecting each of the Super Sevens. Second part of the paper illustrates beta hedging using index options to help portfolio managers defend against downside risk while retaining upside potential.
ARTIFICIAL INTELLIGENCE. EXCITEMENT TO EXHAUSTION?
AI hype remains palpable. But monetising AI is hard. That is becoming increasingly clear. Even among the Super Sevens, not everyone has cracked the AI monetisation formula.
Investors are starting to moderate AI linked expectations. They need a clear path to profits from AI initiatives. Investor scepticism is showing up even among Super Sevens.
NASDAQ:NVDA has been selling shovels to AI gold miners. Expectedly, their earnings and consequently their stock prices are up sharply. Its share prices are up 54% YTD leaving the rest in dust. NASDAQ:META is up 36%, compared +10% for NASDAQ:GOOGL and +6% for $NASDAQ:MSFT.
NASDAQ:AAPL and NASDAQ:TSLA are increasingly losing shine. NASDAQ:TSLA (down a colossal 41%) risks being booted out of the Super Seven grouping.
“Investors are expecting not just strong results — but strong guidance,” said Quincy Krosby, chief global strategist at LPL Financial. “Any disappointment from the mega-tech names reporting could push this week’s oversold market deeper into oversold territory” as reported by Bloomberg.
NASDAQ:AMZN is expected to deliver modest EPS growth.
Analysts remain strongly bullish with 60 of 63 analysts giving a Strong Buy or Buy rating.
Source: TradingView
NASDAQ:GOOGL is facing justified scepticism by investors about its AI capabilities after multiple missteps. AI powered search engines potentially threatens Google’s dominance.
Despite the headwinds, analysts remain bullish on NASDAQ:GOOGL with average 12-month price target offering an 8% upside.
Source: TradingView
Falling smartphone market share, slowdown in innovations, nothing to show for in AI, lacklustre demand for Vision Pro, closure of Apple Car project, Anti-trust fines and more. Adverse news is hammering NASDAQ:AAPL share prices non-stop.
While overall analyst rating remains bullish, the number of hold and sell calls are rising fast for NASDAQ:AAPL .
Source: TradingView
Bloomberg reports that NASDAQ:META is expected to show revenue growth of 26% this quarter and almost double the net earnings from a year ago.
Analysts remain very bullish on NASDAQ:META with an average 12-month price target of USD 540.90 a share.
Source: TradingView
NASDAQ:MSFT is expected to benefit from AI. It has cleverly implemented Copilot AI into its product suite. Last quarter, demand for AI fuelled growth in its Azure cloud-services business.
Analysts remain constructively bullish on NASDAQ:MSFT with 54 out of 57 analysts holding a Strong Buy or Buy rating on the stock.
Source: TradingView
NASDAQ:NVDA will be the most watched quarterly earnings yet again. Its stock is priced to perfection. Feeble earnings or guidance could send its share prices into a free fall.
Fifty-three of Sixty analysts have either a Strong Buy or a Buy rating on NASDAQ:NVDA with average 30% upside over next 12-months.
Source: TradingView
EV market contraction. Price wars from Chinese EV makers. Deep discounts. All these are heavily weighing down on NASDAQ:TSLA shares.
Not unexpectedly, analysts remain neutral on NASDAQ:TSLA .
Source: TradingView
ILLUSTRATING BETA HEDGING USING INDEX OPTIONS
Super Seven earnings are critical to US equities given their outsized impact due to substantial index weightings. Valuations remain lofty. Despite the recent selloff, these mega caps trade at an aggregate thirty-one times forward earnings.
Earnings can and does have enormous impact on share prices. When valuations are priced to perfection, even a hint of negative news will plummet stock prices down.
Astute portfolio managers defend their portfolio using beta hedging. Beta hedge requires that notional of the hedging trade is equivalent to the beta-adjusted notional value of single stocks.
Illustration of the beta hedge below assumes that a portfolio manager holds thirty shares in each of the Super Sevens.
TradingView publishes trailing twelve month beta values for each firm which is the stock’s sensitivity to the S&P 500 index.
In the lead up to results, implied volatility on shares expands rapidly. While hedging using equity put options is an alternative, but it is an expensive one.
A portfolio manager can cleverly deploy short-dated equity index options to minimise hedging costs. CME offers Micro E-Mini S&P 500 Options (“Micro S&P500 Options”) with each contract providing a notional coverage of USD 5 times the S&P 500 index which translates to USD 25,000 per lot based on current S&P 500 levels of 4,967.23.
Using Micro S&P500 put options expiring on 25th April 2024 at a strike of 4950, a portfolio manager incurs a premium of USD 105 per lot based on close of market prices on 19th April 2024. It requires approximately 4 lots (USD 25,000 per lot times 4 lots = USD 100,000) notional of put options to hedge the above beta adjusted portfolio of USD 107,153.
Source: CME
Table below illustrates hedging pay-off under different price action scenarios during quarterly earnings:
Long Options delivers financial convexity. Options allow portfolio managers to harvest asymmetric gains. It provides protection when markets plunge and allows portfolio managers to capture gains from rising markets.
MARKET DATA
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SIMPLE STEPS IN CREATING A TRADING SYSTEMTrading system and strategy are often equated, but this is not quite right. Both a strategy and a trading system is a single algorithm of actions, including the process of searching for signals and opening trades. But strategy is often understood as following certain rules, while a trading system is a combination of technical, fundamental and psychological components. In other words, the creation of a trading system implies a combination of several strategies that work depending on the situation and their combination with external factors (emotions or news).
📊 CREATING A TRADING SYSTEM
Creating a trading system is the basis of trading. No one prevents you from finding interesting strategies on the Internet, but a trading system is the very core that defines a trader's personality. After all, all people are different. A system is a set of rules, which takes into account the risk appetite, psychological qualities, and way of thinking. The market is influenced by hundreds of different variables, and in order not to drown in the flow of information, it is necessary to identify the basic path and the most influential factors. Building a trading system starts with choosing a narrow niche, which can/should then be gradually expanded.
📝 THE TRADING SYSTEM SHOULD ANSWER THE FOLLOWING QUESTIONS:
• What is currently happening in the market?
• What can happen in a fixed period of time?
• How can a trader use the obtained information and forecast at the moment?
There are several basic variants of price action, which most often form the basis of trading systems:
1️⃣ TREND FOLLOWING
When it comes to trend following, the key is to pinpoint the start of a trend and monitor any corrections without mistaking them for a trend reversal. This strategy typically utilizes tools such as wave analysis, patterns, and support&resistance levels. Trend following strategies are commonly implemented on an intraday basis.
2️⃣ BREAKOUT OF RESISTANCE AND SUPPORT LEVELS
The direction of the trend is not the key focus. What truly matters is the price breaking through significant levels. The primary challenge lies in distinguishing between a genuine breakout and a false one.
3️⃣ TRADING INSIDE THE CHANNEL
This is an alternative to the second option. If the price does not break through the level, it returns to its average value. The main tools are the same levels, oscillators, channel indicators.
Additionally, it is important to consider time allocation when creating a trading system. It is crucial to determine the timeframe that best suits your trading style and objectives. Different timeframes, such as intraday, mid-term, and long-term, offer various opportunities and challenges in the market. Understanding how to effectively allocate your time based on your chosen timeframe will help you make well-informed trading decisions:
Intraday. Trades are opened and closed within the day with savings on swaps. They can also include scalping. But if scalping is a high-frequency exhausting trade, then intraday means strategies with the frequency of opening trades up to 3-5 per day.
Mid-term. Can be held for several days, less often - several weeks. They have a strong dependence on the fundamental factor.
Long-term. One of the investment options, providing for the creation of a diversified portfolio of different types of assets.
✔️ The trading system should also answer the following questions:
Which asset optimally corresponds to individual preferences (level of average daily volatility, liquidity, winrate, principle of using leverage/margin percentage).
What are the main parameters of the risk management system: risk level per one trade and for all open positions, lot calculation formula, etc.
What timeframes and technical/fundamental analysis tools to use.
What signals correspond to a successful point of opening a trade.
At what moment to close trades.
✔️ All these points are obvious, but it is the lack of a clear plan that causes mistakes and panic. A trading system plan is a kind of "road map", which provides for:
Different combinations of risk management system parameters. It is not necessary to stick to one risk control strategy. Sometimes an increase in risk is justified. Flexibility is important.
Scenario in case of deviation of actual results of the trading system from statistical results (obtained during testing).
Behavior in different emotional states.
Sources of reliable information.
Order of actions in case of force majeure.
📍 In conclusion , developing a trading system is essential for any trader looking to achieve success in the financial markets. A well-thought-out trading plan with a systematic approach helps traders make informed decisions, manage risks effectively, and stay disciplined in their approach. To trade without a plan is to hope for luck, and luck is not comparable with the theory of probability. Therefore, do not neglect the trading plan.
Bitcoin vs. Ethereum: Deciphering the DistinctionsCryptocurrencies have revolutionized the financial landscape, with Bitcoin and Ethereum emerging as two prominent players shaping the digital economy. Despite sharing the common ground of blockchain technology, each offers distinct features and functionalities, underscoring the need to understand their differences.
Introduction to Bitcoin
Bitcoin, introduced in 2009 by the mysterious Satoshi Nakamoto, heralded the dawn of decentralized digital currencies. Its primary objective was to provide an alternative to traditional fiat currencies through a peer-to-peer electronic cash system. Transactions on the Bitcoin network are verified and recorded on an immutable public ledger, known as the blockchain.
Introduction to Ethereum
In 2015, Vitalik Buterin introduced Ethereum, presenting a paradigm shift beyond mere digital currency. Ethereum serves as an open-source platform for executing smart contracts and decentralized applications (DApps) without intermediaries. At its core is Ether (ETH), the native cryptocurrency powering transactions and fueling the ecosystem.
Core Differences
Purpose: Bitcoin functions primarily as a digital currency, aiming to revolutionize financial transactions. Ethereum, on the other hand, is a versatile platform enabling the execution of smart contracts and DApps, with broader implications for decentralization beyond monetary exchange.
Technology: Bitcoin operates on a Proof-of-Work (PoW) consensus mechanism, requiring significant computational power for transaction validation. Ethereum initially adopted PoW but is transitioning to Proof-of-Stake (PoS) with Ethereum 2.0, offering improved scalability and energy efficiency.
Scalability: Bitcoin processes approximately 7 transactions per second, while Ethereum can handle up to 30. Both face scalability challenges, with Ethereum exploring solutions like sharding to enhance throughput and efficiency.
Supply: Bitcoin has a fixed maximum supply of 21 million coins, creating scarcity akin to digital gold. In contrast, Ethereum does not have a predefined supply limit, potentially allowing for continuous production, albeit with economic implications.
Use Cases: Bitcoin is synonymous with a store of value, often likened to digital gold due to its limited supply and scarcity. Ethereum's versatility enables the creation of innovative applications such as decentralized finance (DeFi), non-fungible tokens (NFTs), decentralized autonomous organizations (DAOs), and more, expanding its utility beyond monetary transactions.
Price Dynamics
Bitcoin's market movements often dictate the broader cryptocurrency landscape, impacting the prices of assets like Ethereum. Influencing factors include market sentiment, regulatory developments, and macroeconomic conditions. Ethereum's price dynamics are further influenced by platform upgrades, developer activity, and the burgeoning demand for decentralized applications.
Monthly Bitcoin Chart
Monthly Ethereum Chart
Conclusion
While Bitcoin and Ethereum share the foundation of blockchain technology, their purposes, technologies, and applications diverge significantly. Bitcoin seeks to redefine monetary exchange, while Ethereum aims to revolutionize contractual agreements and decentralized applications. Understanding these distinctions is paramount in navigating the evolving landscape of digital assets and harnessing their transformative potential in the global economy.
what currencies to buy in times of geopolitical tensions. In times of geopolitical turmoil or war, investors often seek refuge in currencies perceived as safe havens. several currencies are considered safe harbors due to their stability, liquidity, and low risk of depreciation. Some of the notable safe-haven currencies include:
1-US Dollar (USD): The US dollar is often regarded as the ultimate safe-haven currency due to the size and stability of the US economy, as well as the liquidity of USD-denominated assets. During times of uncertainty, investors tend to flock to the USD, driving up its value.
2-Swiss Franc (CHF): Switzerland's reputation for political neutrality and its strong banking system make the Swiss Franc a popular safe-haven currency. Investors view the CHF as a stable and reliable asset during periods of geopolitical tension.
3-Japanese Yen (JPY): The Japanese Yen is considered a safe-haven currency due to Japan's status as a net creditor nation and its large current account surplus. During times of crisis, investors often repatriate funds into the JPY, driving up its value.
4-Euro (EUR): Despite occasional uncertainties surrounding the Eurozone, the Euro is still considered a safe-haven currency by many investors. The Euro's status as the second most traded currency in the world and the stability of major Eurozone economies contribute to its safe-haven appeal.
5-Gold-Backed Currencies: Some countries, particularly those with significant gold reserves, may issue currencies backed by gold or pegged to the price of gold. These currencies offer stability and are perceived as safe havens during times of crisis.
AI vs. AGI: The Race for Performance, Battling the Cost?Artificial intelligence (AI) has become ubiquitous, transforming industries and powering everything from facial recognition to self-driving cars. However, the dream of Artificial General Intelligence (AGI) – machines with human-level intelligence and understanding – remains elusive. Let's delve into the key differences between AI and AGI, particularly regarding their performance and the immense computational cost that hinders AGI development.
AI: The Specialized Powerhouse
Current AI excels in specific tasks. Deep learning algorithms trained on massive datasets can identify objects in images with superhuman accuracy, translate languages with remarkable fluency, or play games at a level surpassing even the most skilled humans. This specialization, however, comes at a cost. AI systems often struggle with tasks outside their narrowly defined domain. For example, an image recognition AI trained on cat pictures may misidentify a dog as a cat due to a lack of broader understanding.
Computationally, AI can be quite efficient. While training complex models requires significant resources, once trained, they can run on relatively inexpensive hardware. This efficiency is crucial for real-world applications where cost is a major factor.
AGI: The Elusive Generalist
AGI represents the holy grail of AI research – a machine that can learn, reason, and adapt to new situations just like a human. Such an intelligence would have applications beyond our wildest dreams, revolutionizing every aspect of society. However, achieving AGI presents a significant challenge.
The human brain, with its intricate network of neurons and complex processes, is a marvel of biological engineering. Replicating this level of intelligence artificially requires immense computational power. Training AGI models on the vast amount of data needed for general knowledge would require massive computing clusters, consuming enormous amounts of energy. This not only raises practical concerns about cost but also environmental ones.
The Road Ahead
The quest for AGI continues, with researchers exploring various avenues. Neuromorphic computing, which attempts to mimic the structure and function of the brain, holds promise for more efficient learning algorithms. Additionally, advancements in hardware, such as specialized AI chips, could help reduce the computational burden.
While the development of true AGI might still be far off, the ongoing research paves the way for more powerful and versatile AI. By optimizing existing algorithms and developing new computational architectures, we can bridge the gap between specialized AI and the dream of a general artificial intelligence. This journey will require innovation not just in AI research but also in sustainable energy solutions to power these future advancements.
1Current AI vs. Non-existent AGI: By definition, there is no true AGI (Artificial General Intelligence) yet. So, in that sense, current AI excels in its specific field because AGI wouldn't have a "field" in the same way.
Specialized AI vs. Hypothetical General AGI: If an AGI ever emerges, it's unlikely to directly compete with specialized AI in their narrow domains. Here's why:
Specialization is Key: Current AI thrives because it's laser-focused on specific tasks. An AGI, with its broader intelligence, might not be as efficient for these tasks.
Different Tools for Different Jobs: Imagine needing to hammer a nail. You wouldn't use a Swiss Army knife (the AGI) when a simple hammer (the specialized AI) is perfect for the job.
Outperform in Unfamiliar Situations: While a specialized AI might struggle with anything outside its training data, an AGI could potentially adapt and learn new tasks more readily.
Revolutionize the Field: An AGI might not directly "beat" a specialized AI, but it could completely redefine how a task is approached, leading to even more powerful AI solutions.
DeepMind, a leading AI research lab owned by Google, is tackling a wide range of ambitious projects. Here are some highlights:
Healthcare: DeepMind Health is applying AI to medical challenges. They've collaborated with hospitals to develop algorithms for analyzing eye scans for early signs of blindness and differentiating healthy from cancerous tissues.
Scientific Discovery: DeepMind's AlphaFold project has made significant strides in protein folding prediction, a critical step in understanding diseases and developing new drugs.
Efficiency and Sustainability: A collaboration with Google AI led to WaveRNN, a method for improving audio call quality, even with dropped packets. Their AlphaFold project itself has the potential to accelerate discoveries in clean energy and materials science.
Gaming and Robotics: DeepMind's AI agents have achieved superhuman performance in complex games like StarCraft II. Their AlphaFold project demonstrates the potential for AI-powered robotics in scientific experimentation and materials creation (Project A-Lab).
AI for the Future: DeepMind's efforts extend beyond specific applications. Their Visualising AI program commissions artists to create thought-provoking pieces that challenge how we perceive AI. Additionally, their recent release of Gemma, a state-of-the-art open model, promotes responsible AI development by making research tools more accessible.
These are just a few examples.
DeepMind is constantly pushing the boundaries of AI research, aiming to use this technology for positive impact across various fields. You can find more details on their latest projects on their website
The DXY's Reach: Beyond Traditional MarketsThe DXY, though primarily impacting foreign exchange (forex) markets, casts a long shadow across various asset classes, including cryptocurrencies. Here's how a strong dollar (rising DXY) and a weak dollar (falling DXY) can influence these markets:
Foreign Investment in Crypto: A strong dollar can make cryptocurrency investments less attractive to foreign investors for similar reasons as traditional stocks and bonds. They would need to exchange more of their local currency for dollars to buy cryptocurrencies, increasing their investment costs. Additionally, if the dollar appreciates significantly, potential returns from crypto investments, when converted back to their home currency, might become less appealing.
Risk Appetite and the "Safe Haven" Status: The dollar is often seen as a safe haven during periods of economic uncertainty. When the global economic outlook weakens, investors might flock to the dollar, pulling investments out of riskier assets like cryptocurrencies. This can lead to a decline in cryptocurrency prices as demand wanes. Conversely, a weak dollar might indicate a stronger global economic climate, potentially boosting risk appetite and leading investors to allocate more funds towards cryptocurrencies, driving their prices up.
Correlation with Traditional Markets:
The cryptocurrency market, though evolving its own dynamics, still exhibits some correlation with traditional markets. If a strong dollar weakens the stock market, it might indirectly impact cryptocurrencies as well, as investor sentiment can influence both asset classes. However, the correlation between crypto and traditional markets is not always perfect and can fluctuate.
Bitcoin: A Special Case?
Bitcoin, the most established cryptocurrency, often presents a unique case. While a strong dollar can dampen investor interest and potentially lead to a price decline, some view Bitcoin itself as a hedge against fiat currencies like the US dollar. The limited supply of Bitcoin, unlike the potentially infinite supply of the dollar, is seen as an advantage by some investors seeking protection against inflation. However, Bitcoin's price is still susceptible to broader market forces and investor sentiment, making it vulnerable to fluctuations alongside the DXY.
Beyond the DXY: A Holistic View
It's important to remember that the DXY is just one piece of the puzzle. Several other factors can influence cryptocurrency prices:
Regulations: Government regulations and policies surrounding cryptocurrencies can significantly impact their market performance.
News and Events:
Major news events related to hacks, security breaches, or mainstream adoption of cryptocurrencies can trigger price movements.
Technological Advancements: Developments within the blockchain technology and the broader cryptocurrency ecosystem can influence investor sentiment and market movements.
The Takeaway:
The DXY undeniably plays a role in shaping the cryptocurrency market landscape. However, its influence is intertwined with various other factors. By understanding how the DXY interacts with traditional markets, investor risk appetite, and the unique characteristics of cryptocurrencies, you can gain a more comprehensive perspective on potential price movements. Remember, the cryptocurrency market remains highly volatile, and technical analysis of the DXY should be used in conjunction with other factors to make informed investment decisions.
