The Most Famous Traders Around the GlobeThe Most Famous Traders Around the Globe
You may have come across news articles and personal stories on social media about traders who have made huge profits and achieved early retirement. Such stories can motivate you to learn and practise to achieve your personal highs. In this FXOpen article, you will find out more about the most famous traders and their success stories.
What Makes a Trader Successful?
It’s important to realise that success is subjective, and there is no one formula for achieving it. For some people, success is earning as much as possible in a short period, while for others, it’s about gradually saving up and building capital for retirement.
Still, people who come to succeed generally share certain character and behavioural traits. Let’s consider what can positively influence trading.
Experienced and successful traders:
- are well-educated in their fields
- have a solid trading plan
- are disciplined and patient
- can control their emotions
- are flexible and adaptable
These qualities are essential for navigating the changing markets and finding profitable opportunities, and developing these characteristics could help you on your way.
Edward Arthur Seykota: an Algorithm for Success
Edward Arthur Seykota is known as a “Father of Trading Systems”. This man is a legend in the world of trading, and for good reason. Ever since beginning his career as a trader in the 1970s, he has been captivated by the concept of a mechanised system for conducting trades and performing technical analysis.
Ed Seykota developed algorithms for trading and used computer programs to execute trades. The profit made by his robot used between 1972 and 1988 was over 250,000% — the assets of his client grew from $5,000 to $15 million. He has been consistently profitable in the markets for more than four decades, and his success has inspired countless traders around the world.
Andy Krieger: How to Hack Forex Trading
One of the best day traders is Andy Krieger, a currency trader who gained notoriety in the late 1980s for his aggressive trading strategies. He worked for Bankers Trust, and he’s best known for trades against the New Zealand dollar. His primary strategy was to bet against the NZD because he believed it would be susceptible to short-selling.
Krieger enlarged his risk by combining foreign currency options with his significant trading limit, took a position, and benefited from the 1987 New York Stock Exchange crash. Andy made a profit of over $300 million for his employer in just one day.
Ingeborga Mootz: A Great Female Trader
Ingeborga Mootz is a woman from Germany who proved that there are no age or gender restrictions on trading. Having no relevant education or experience, she became a successful investor at the age of 75. Now she is almost 100 years old and a millionaire, and she keeps advising others on how to make money in the stock market.
Ingeborga Mootz used to have a humble existence, and when she married, her husband forbade her from working. Her stock market activity began after her husband’s death when she found a thousand shares of VEBA while going through his papers. She sold the shares and made a 100% profit, and trading became her point of interest. The main area that Frau Mootz looks at is banking.
Richard Dennis: How to Trade a Trend
Richard Dennis inspires traders with his ingenious and innovative approach to commodities trading. Dennis was a trend trader who preferred identifying trends and making trades in their direction with increasingly high leverage, maximising profits in good scenarios.
Richard was born into a poor Irish family in Chicago, and he made a name for himself trading on the Chicago Mercantile Exchange at the age of 17. Within ten years, he turned a borrowed $1,600 into an astounding $200 million through commodities trading.
One of his most famous experiments involved training a group of people known as “Turtles” for just two weeks. The Turtles reportedly made an impressive cumulative profit of $175 million over five years.
Bill Lipschutz: How to Learn From Mistakes and Manage Risk
Bill Lipschutz began his trading career after graduating from Cornell University in the late 1970s. During this period, he managed to turn a modest investment of $12,000 into a staggering $250,000. However, there was a setback, and one bad trading decision caused him to lose his entire stake. This experience taught him a valuable lesson in risk management that he has carried through his career.
In 1981, Lipschutz took a job as a currency trader at Salomon Brothers. At the time, forex trading was only growing in popularity. He quickly established himself as a very successful trader and, by 1985, was making the company more than $300 million a year in profits. He eventually became Salomon’s chief currency trader and held this position until his departure in 1990.
Final Thoughts
All these experienced traders who have achieved success differ from each other in biography, trading style, and strategy. The amounts they have earned are also different. It is important to remember that these are the exceptions rather than the rules, and most traders face losses while trading.
However, what you can learn from them is that they possess some specific qualities such as risk management skills, emotional control, loss acceptance, discipline, and flexibility. You can develop these skills as well, and to do this, open an FXOpen account and start your journey. To boost your performance, consider using the advanced trading tools offered on our TickTrader platform. We are sure that they will be helpful for trading, learning and skill development.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Fundamental Analysis
Stock feedback loopStock market is a adaptive system or a stock, with feedback loops (for inflow, outflow function). Where nobody knows the outcome or future, but feedbacks (corrections or resistance) gives tells (makes inflows or outflows). Without a common leader.
Economists think in models (price is the result of supply-demand, or inflow-outflow) that helps to explain system behavior (short term moves), but models are just ideas to explain complex world (models work until they dont). System thinkers study the stock not aggregate behavior .
Looking at markets trough perspective of "eco system" helps better understand the drivers or moving forces?
How to Perform Fundamental Analysis of StocksHow to Perform Fundamental Analysis of Stocks
In the dynamic world of financial markets, traders seek every available edge to make informed decisions. Among the numerous tools at their disposal, two approaches stand out: technical analysis and fundamental analysis of stocks. In this article, we will explore what fundamental analysis is, how it applies to stocks, and why it is a crucial tool for traders. Traders have the option to open an FXOpen account to perform fundamental analysis on numerous stocks available at FXOpen.
Understanding Fundamental Analysis
Before diving into the intricacies of fundamental analysis, it's essential to grasp the basics of technical and fundamental analysis.
Technical analysis primarily focuses on historical price and volume data to predict future price movements. Traders using this approach rely on charts, trendlines, and indicators like moving averages and Relative Strength Index (RSI) to make trading decisions.
Fundamental analysis, on the other hand, takes a more holistic view. It delves into the financial statements of a firm, examines economic indicators, and assesses industry trends. The goal is to determine the intrinsic value of an asset and whether it is overvalued or undervalued in the market.
Key Fundamental Analysis Components
Fundamental analysis involves several key components that traders must understand to make informed decisions:
Financial Statements
Fundamental analysis begins with a deep dive into a company's financial statements. These documents provide a wealth of information that is critical for assessing a company's financial performance. The three primary financial statements to consider are:
Balance Sheet: This statement offers an overview of a company's assets, liabilities, and shareholders' equity at a specific point in time. It acts as a quick overview of the company's financial standing.
Income Statement: Also known as the profit and loss statement, the income statement details a company's revenue, expenses, and profitability over a specific period. These ratios evaluate a company's capability to fulfil its immediate commitments.
Cash Flow Statement: The cash flow statement tracks the inflow and outflow of cash from the company's operating, investing, and financing activities. It offers valuable information about the company's liquidity and cash management.
Ratios and Metrics
To gain deeper insights into a company's financial health, fundamental analysts use various financial ratios and metrics. Some of the key ratios and metrics include:
Liquidity Ratios: These ratios evaluate a company's capability to fulfil its immediate commitments. Notable examples include the Current Ratio and Quick Ratio.
Profitability Ratios: These ratios measure a company's ability to generate profit relative to its revenue and assets. Examples include the Gross Margin, Net Profit Margin, Return on Equity (ROE), and Return on Assets (ROA).
Solvency Ratios: Solvency ratios evaluate a company's ability to meet its long-term financial obligations. The Debt-to-Equity Ratio and Interest Coverage Ratio are significant in this category.
Efficiency Ratios: These ratios assess how efficiently a company manages its resources to generate income. Examples include Inventory Turnover, Receivables Turnover, and Payables Turnover.
Growth Metrics
Understanding a firm's growth trajectory is essential for projecting its future potential and assessing its investment attractiveness.
Earnings Per Share (EPS) Growth: This metric indicates the rate at which a firm's earnings per share are increasing or decreasing over time.
Revenue Growth: It measures the growth in a firm's revenue compared to a specific period.
Book Value per Share Growth Rate: This metric assesses the increase in the firm's Book Value Per Share over the last five years.
Steps to Perform Fundamental Analysis
Here are the most essential steps to perform fundamental analysis.
Company Selection
The first step of fundamental analysis in the stock market is selecting the companies you want to analyse. Criteria for selection may include factors like the company's industry, market capitalisation, and growth potential. It's crucial to consider the broader industry landscape and market trends to identify promising candidates.
Collecting Financial Data
Gathering accurate and relevant financial data is paramount. Sources of financial data include the company's website, authority filings, and financial news outlets. Ensuring the data's accuracy and timeliness is essential for making informed decisions.
Analysing Financial Statements
In-depth analysis of a company's financial statements is the heart of fundamental analysis. Such metrics as a balance sheet and income and cash flow statements that were mentioned above are widely used by traders and investors to determine companies’ strengths and weaknesses.
Calculating and Interpreting Ratios
Utilising financial ratios is a critical aspect of fundamental analysis. These ratios provide a quantitative basis for evaluating a company's performance. Comparing the ratios with industry benchmarks helps identify areas of strength or weakness.
Evaluating Business Strategy
Assessing the quality of a company's management and its strategic decisions is another crucial element of fundamental analysis. This involves evaluating factors such as corporate governance, competitive positioning, and market share.
Economic and Industry Analysis
Understanding the broader economic landscape and industry dynamics is essential for contextualising a company's performance. Identifying macroeconomic trends and the stage of the industry lifecycle is critical.
Valuation Techniques
Fundamental analysts employ various valuation techniques to determine whether a stock is overvalued or undervalued. These techniques help traders make informed decisions about whether to buy, sell, or hold a particular asset. Common methods include:
Discounted Cash Flow (DCF) Analysis: This method calculates the present value of a company's future cash flows to estimate its intrinsic value.
Price-to-Earnings (P/E) Ratio Analysis: Comparing a company's stock price to its earnings per share, relative to industry peers, to assess its valuation.
Price-to-Book (P/B) Ratio Analysis: Comparing a company's market capitalisation to its book value per share to determine undervalued and overvalued companies.
Risk Factors and Limitations
Fundamental analysis, while a powerful tool, comes with its own set of challenges and limitations:
1. Incomplete Data: Many firms, especially in less regulated markets, may not disclose full financial information, thus hindering comprehensive analysis.
2. Future Uncertainty: Even though it's grounded in thorough research, fundamental analysis relies heavily on historical economic data. This approach also makes assumptions about future geopolitical and macroeconomic events, which can be unpredictable, thereby carrying a degree of inherent uncertainty.
3. Subjectivity: Different analysts may interpret the same data in various ways, leading to different conclusions about a currency's value.
4. Overemphasis on Long-term: Fundamental analysis typically focuses on long-term economic cycles and trends, potentially missing out on short-term trading opportunities.
5. Political Instabilities: Unexpected political events, like elections, conflicts, or diplomatic tensions, can have sudden and significant impacts on a stock value.
6. Global Events: Natural disasters, pandemics, or major technological breakthroughs can all have unforeseen effects on the stock market, making predictions based on fundamental analysis challenging.
7. Market Perception: Even if all fundamentals point towards a particular trend, market perception and investor sentiment can drive the market in the opposite direction.
8. Lagging Nature: By the time certain economic indicators are published, the market might have already reacted, making it a lagging tool.
By understanding these limitations, traders can complement their fundamental analysis with other techniques to make more informed decisions in the forex market.
Conclusion
Fundamental analysis is pivotal for traders who aim to make judicious decisions in the financial landscape. It extends beyond just scrutinising financial statements, encompassing the assessment of crucial ratios, metrics, and the overarching economic and industry environment to gauge an asset's inherent worth. FXOpen enhances this analytical journey with its suite of resources.
You can combine fundamental and technical tools on the TickTrader platform to conduct a comprehensive analysis, allowing you to navigate the intricate realm of financial markets with bolstered confidence and insight.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Understanding The Gambling Mindset In TradingGambling addiction is a pathological and uncontrollable urge to gamble, characterized by an inability to manage emotions and a failure to stop in time, often leading to intense emotional outbursts in response to negative outcomes. Initially, this term was used within the context of gambling to describe a situation where an individual experiences rage and loses control over themselves and their surroundings, often resulting in rapid financial loss. However, with the rise of various tools and strategies in Forex and prop trading, this term has also become relevant for traders.
📍 How to Learn to Conquer Your Impulses
Signs of Gambling Addiction:
1. Irresistible Urge to Bet: A compulsive need to place bets or open positions at any cost, often without grasping the potential consequences. This feeling is driven by a deep-seated excitement and the inner voice saying, “I just want to!”
2. Intense Emotional Responses: Dramatic fluctuations in mood, often resembling hysteria, can occur alongside the betting behavior.
3. Despair and Euphoria: A cycle of self-destructive feelings, manifesting as despair or euphoric highs, regardless of financial outcomes.
It's important to recognize that gambling addiction yields no positive results, whether a trader wins or loses money.
📍 Causes of Gambling Addiction:
1. Illusion of Easy Profits: Many brokers use aggressive marketing techniques, such as promotions and bonuses, to attract newcomers. Initial successes in trading can create a false sense of euphoria, leading traders to become overconfident. This complacency can result in careless mistakes and a quick depletion of their accounts. Experienced traders understand that a few profits should not lead to complacency.
2. All-In Betting Mentality: Traders who have something to lose and lack self-control may find it difficult to admit defeat. This can lead to placing high-stakes bets in the hope that luck will ultimately favor them. It’s not uncommon for desperate traders to resort to loans, further exacerbating their financial situations.
3. Innate Psychotype: Certain personality traits may predispose individuals to gambling addiction. Those who thrive on risk may be more susceptible to compulsive trading behaviors.
In trading, a clear sign of gambling addiction is a reliance on risky strategies, such as the Martingale system, paired with a lack of a coherent trading strategy or effective risk management practices. These tendencies can lead to significant financial harm and emotional distress.
📍 Consequences of Gambling:
• Loss of Deposit: This is often the immediate financial consequence, leading to significant monetary losses for traders.
• Self-Disappointment: Many traders experience profound disappointment not just with their trading outcomes, but also with themselves. This can lead to feelings of discouragement, stress, and apathy.
• Emotional Turmoil: The emotional rollercoaster of trading can be intense, characterized by highs of euphoria and lows of despair.
📍 How to Reduce Emotional Dependence in Forex Trading:
1. Invest Only What You Can Afford to Lose: Limit your investments to funds that won't impact your financial stability if lost. This helps alleviate pressure and allows for a more rational approach to trading.
2. Set and Adhere to Limits: Establish clear profitability targets and consistently stick to them. If your target is met, close the position without awaiting a potential trend reversal.
3. Recognize and Learn from Mistakes: Develop the ability to assess unprofitable positions realistically. Close losing trades rather than clinging to the hope of a reversal.
4. Maintain Emotional Control: If you experience anger or a strong urge to recover losses, take a break from trading. Stepping back can help clear your mind and reduce impulsive decisions.
5. Develop a Risk Management Strategy: Create a clear plan that details your lot sizes, risk per trade, and stop-loss lengths. Ensure you test this strategy using a demo account to refine your approach without financial risk.
Accountability. Remember that in 90% of trading failures, the responsibility lies with the trader, not the broker or the trading platform. Recognizing your role in trading outcomes can empower you to make informed and responsible decisions moving forward.
📍 Summary
Individuals struggling with gambling addiction, heightened emotionality, and an inability to calculate risks should refrain from participating in trading. Forex operates as a zero-sum game, where the financial resources of some traders are transferred to others. Success in this environment is reserved for those who approach trading with a cold-blooded, pragmatic mindset and the ability to analyze situations several steps in advance. Continuous improvement in knowledge and emotional discipline is essential for achieving success in the Forex market. Emphasizing strategic decision-making and risk management is crucial for long-term prosperity in trading.
Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
Geometry: Using Chords to Predict Trend EndpointsIdentify Key Points :
Start by pinpointing significant highs and lows within the trend. These will be the endpoints of your chords.
Draw Chords:
Connect these significant highs and lows with straight lines (chords). These chords represent potential paths the market might follow.
Analyze Chord Patterns:
Uptrend : Draw chords connecting higher lows to higher highs. This helps visualize the upward momentum and potential reversal points.
Downtrend : Draw chords connecting lower highs to lower lows. This helps identify the downward momentum and potential support levels.
Sideways Trend : In a sideways trend, chords can connect alternating highs and lows, helping to identify consolidation zones.
Looking at the EUR currency index, we can see the chord being used to monitor the trend critical points, lower highs and lower lows, validating a weaker EUR.
Conclusion
Expect a rise in pairs paired with EUR, such as USD, GDP. Keep in mind that it’s also important to validate the strength of the other economies before deciding on a trade.
The Problem of Fundamental Analysis in the Crypto MarketFundamental analysis in the traditional financial markets involves evaluating a company's intrinsic value through a variety of metrics, such as earnings, revenue, and growth prospects. However, applying this same approach to cryptocurrency networks presents unique challenges. Cryptocurrencies operate on decentralized networks, and their value often stems from factors that don't align with conventional financial metrics.
Key Challenges:
Traditional Metrics Fall Short:
Cryptocurrency networks are not companies with revenues, profits, or physical assets. Therefore, traditional metrics like price-to-earnings (P/E) ratios or revenue growth don’t apply.
Misleading Social Media Data:
Social media presence and subscriber count might seem like indicators of a project’s popularity or potential, but these figures are easily manipulated. Fake followers, bots, and exaggerated engagement can create a false impression of legitimacy and success.
Isolated On-Chain Metrics:
While on-chain metrics provide valuable insights, they can be misleading if analyzed in isolation. For instance, a high number of active addresses might suggest widespread usage, but without context, it doesn't reveal whether these addresses represent genuine users or automated bots.
Relevant On-Chain Metrics:
Number of Transactions: Indicates the level of network activity, but doesn’t differentiate between meaningful transactions and spam.
Transaction Cost: Reflects the cost of using the network, which can indicate demand, but also congestion or inefficiency.
Active Addresses: Shows how many unique addresses are participating, but could be skewed by the creation of multiple addresses by a single entity.
Commissions (Fees): High fees might indicate network demand, but can also point to issues like scalability problems.
Hashrate or Coins in Staking: High hashrate or staking levels suggest network security and confidence, but can also centralize control if dominated by a few large players.
Design Indicators:
Whitepaper: This document outlines the project's goals, technology, and roadmap, but its value depends on the technical understanding of the reader and the honesty of the team.
Project Team: The experience and reputation of the team are crucial, but the anonymous or pseudonymous nature of many crypto projects complicates assessment.
Competitors: Understanding a project's competitors helps gauge its potential, but the fast-paced nature of the crypto space means that new competitors can emerge quickly.
Tokenomics: The economic model of the token, including supply, distribution, and incentives, is vital, but poorly designed tokenomics can lead to inflation or lack of demand.
Financial Indicators:
Capitalization: Market cap is often used as a quick measure of a project’s size and importance, but can be misleading in low-liquidity markets.
Liquidity: High liquidity indicates that an asset can be traded quickly without affecting its price, but low liquidity can lead to price manipulation.
Emission Method: The way tokens are issued (e.g., through mining, staking, or ICOs) affects supply dynamics, which can influence price stability and long-term viability.
In summary, while fundamental analysis in the crypto market is challenging, a multi-faceted approach combining on-chain metrics, design indicators, and financial indicators can offer valuable insights. However, these should always be interpreted with caution and in context, given the unique dynamics and rapid evolution of the cryptocurrency landscape.
Hope you enjoyed the content I created, You can support with your likes and comments this idea so more people can watch!
✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes.
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• Look at my ideas about interesting altcoins in the related section down below ↓
• For more ideas please hit "Like" and "Follow"!
I’ve spent 8 years in crypto, and here’s what I’ve discovered ↓↓I’ve spent 8 years in crypto , and here’s what I’ve discovered ⏬
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▪️ Throughout my journey, I’ve met hundreds of ambitious traders, but today only a few remain —those who were willing to wait and those who didn’t dream of quick profits.
▪️ According to most official studies, only 1-3% of traders make money.
▪️ Only 1% can overperform the market and earn more than a simple buy-and-hold strategy.
▪️ Intuition and prayers don’t work here; without a clear strategy , you will lose everything, I guarantee it.
▪️ The best of the best earn 100-150% annually (check the World Cup Trading Championships to verify this). Yes, there are sometimes bull markets where you can make 500% or more, but this happens only once every four years, and you need to be earning consistently.
▪️ The crypto market is changing, and this cycle is very challenging , even for professional market participants. The only way to succeed is to constantly adapt.
▪️ 99% of bloggers and influencers you follow are complete scams. Most of them won’t be able to show you a yearly trading account performance report upon request in real-time. They make money not from trading, but from you, by selling yet another course. (Always check their profitability statistics; it's the only way to verify if this person is a professional or a fraud).
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Everyone is looking for the holy grail , and I searched for it too, but I found it in algorithmic trading . This trading style allows me to rely solely on numbers, clear profitability indicators, and statistics. Most importantly, it removes the human factor (staying emotionally stable, not succumbing to fear and greed).
Smart Money and the why behind it
I have used @TradingView for near enough 10 years now. What I like about the platform is the simplicity and the tools.
I often get asked about things like strategy or other people's techniques - "What do you think of SMC or this guy or that guy"
Look, when it comes to trading - Liquidity is something very little people understand. Gurus talk about it and draw pretty lines but still fail to break it down as to why it's there in the first place.
"Ah it's where the big boys buy or sell"
so to help visualise this lets use some of these tools here on Tradingview.
Look at my first chart here;
What I have done is jumped up a timeframe and placed a volume profile tool on my chart, then simply used the drawing tool to draw a squiggle around the relevant nodes.
I then dropped back to the smaller timeframe and switched on a couple of indicators to help visualise where the liquidity is.
if you look at the lines 15minutes and 30minutes both in green and cast your eyes to the right, can you see they sit just below (as price is coming from above) to those higher volume nodes from that higher timeframe?
Let's use another tool here on TradingView;
This one is called a fixed range volume profile.
the two blue lines extended out are known as the value area high and low. Often this is set to around 70-75% but I like to reduce that a little. The red line is called a PoC or point of control. This basically means the highest transactional point of the range you fixed.
However, if you look over to the left this time you will see two higher volume nodes (mountains) and therefore look at the 15m and 30m lines again with fresh eyes.
In this next image I have increased the range and dragged it over to include more data. I could write full strategies on this tool alone.
The first thing you should notice is the PoC has now jumped up higher. Think logically about this for a second.
We are seeking lower timeframe liquidity down low and the area of interest and value is showing price was accepted up high.
So, after grabbing liquidity, would we anticipate the price to continue down lower or come back to play in the accepted zone?
This is where a lot of newer traders fail, especially when trading smart money concepts "SMC" for short. They fail to understand the bigger picture.
Another little tool in the same box-set is the Timeprice indicator.
Much like session volume this gives a pretty clean view and of course settings can be adjusted. I like the look on this one, it's very modern. But the real value isn't until you zoom in and zoom in and you see why it's called Time - Price. I'll leave that for another post.
But continuing the theme of this post; look at the clusters of the time price indicator and note where the PoC sits on the 15m liquidity level. Then below the 30m liquidity is the lower side of the value area. Are you starting to see a theme?
In this last image; I have simply highlighted liquidity to keep my chart clean.
You will see candles showing the last buys before the selloff. Then a consolidation under the liquidity - this is basically a Wyckoff structure prior to a mark down move.
We then drop into the liquidity pocket and here is where most SMC traders would be jumping long. We see a very nice little rally, then a large fast drop through the liquidity, this hitting many stops and triggering new short positions.
which is why as these shorts get triggered, you anticipate the pullback - to what level? Well look left and the charts will tell you.
I hope this has opened a few eyes - go away and have a play with these indicators on @TradingView and feel free to aks if you have any questions.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years' experience in stocks, ETF's, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Risk-off & The Yen Carry Trade Explained Hi guys,
I'm trying something new here.
In this video I explain what risk-off is and what causes it. I break down the recent yen carry trade and what went on there.
It's good to study these events so that next time you have the knowledge in the bank. That way you can plan and make better decisions.
Let me know if you like this sort of thing and I can do more.
Cheers,
Sam
How to Overcome Trading Psychology ChallengesHow to Overcome Trading Psychology Challenges
Dealing with common trading psychology challenges involves identifying and addressing the emotional and psychological factors that impact performance. This means you need to know how to manage fear, greed, hope, and regret carefully. In this post, we’ll talk about forex trading psychology and proper emotional control.
What Is the Psychology of Trading?
Trading psychology focuses on the mental state of a trader and the emotions that could predetermine trading decisions. It represents the various aspects of an individual’s character and behaviours that influence their trading actions. The psychology of trading is just as crucial as knowledge about assets (currencies, stocks, and commodities), your previous experience, and your skill in determining price movements.
Understanding Trading Emotions and Psychology
Trading is all about psychology and actions that are based on what you feel. That’s why it’s paramount to learn as much as you can about this topic. This list may help you better understand common traders' problems and your personal feelings. You should know that you are not alone, and many people face similar cases.
Identify your emotions. Recognise the emotions that you experience while trading, such as greed, hope, and regret. Let’s break down these concepts:
- Greed is the desire to make more money than is reasonable or realistic.
- Fear is the feeling of anxiety or panic when faced with market volatility/uncertainty.
- Hope is the belief that a trade will turn around and become profitable.
- Regret is the feeling of disappointment or remorse after making a losing trade.
By clearly differentiating between these emotions, you will understand exactly what you are experiencing right now and how it could potentially affect your trading decisions.
Create a plan. It’s a great idea to develop a trading plan that matches your trading style and includes a strategy you want to follow, with entry and exit points and risk management techniques. A good plan could help you stay focused on your goals.
Practise risk management. Consider managing risk by using stop-loss orders and position sizing. This way, you may avoid large losses. Losses often trigger emotional reactions and lead to more irrational decisions, so keep this in mind and don't fall for the tricks your brain is playing on you.
You can practise various strategies on our free TickTrader platform. For example, we have a strategy back tester, a detailed charting system, and advanced technical analysis tools. And to make it even more convenient for you, we have created a highly customisable, user-friendly interface where you can personalise each element of the settings panel. Test these instruments in various markets with FXOpen.
Keep a trading journal. Experts believe that when you record your trades and the emotions you experienced during each of them, you will identify patterns in your behaviour and make adjustments to your initial plan.
How to Have Emotional Control
There are a lot of techniques on how to remain calm during trading, and we’ve chosen the most popular ones. Here’s what you could consider doing:
1. Practise mindfulness — mindfulness techniques, such as meditation and deep breathing, can help you stay calm and focused.
2. Take breaks — regular breaks during trading are wonderful tools to clear your mind and reduce stress. They help you avoid making impulsive decisions.
3. Stay disciplined — stick to your plan and avoid any decisions based on emotions.
4. Seek support — talk to other traders or a mental health professional if you are struggling with emotional control.
Another important thing to talk about is confidence and awareness. If you make trades “blindly”, anxiety increases. And conversely, the more you know, the calmer you feel. Explore our blog to learn more about trading. Once you feel confident, you can open an FXOpen account to put your knowledge into practice.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
How To Pick Top Pharma Stocks like a ProAnalyzing the pharmaceutical industry, whose products play a key role in improving the quality of life of people around the world, is quite challenging sometimes also it requires deep knowledge and a careful approach, as I believe that investors should consider many factors, starting with evaluating the efficacy of the analyzed company's medications, including in relation to its competitors and the "gold standards," and ending with an analysis of its financial indicators
In this article you will learn how to pick Top Pharma stocks like a pro trader and which factors you should consider, so buckle up
1/ Recognizing the risks
At the very beginning, an investor you must recognize that the pharmaceutical industry is highly competitive, where a company's investment attractiveness depends not only on the rate of expansion of its portfolio of product candidates, revenue growth, margins, the amount of total debt and cash on the balance sheet but is also heavily influenced by the expiration of patents on medications and vaccines.
Moreover, in recent months, the healthcare sector has increasingly felt the impact of the upcoming 2024 US presidential elections, as some politicians are aiming to further tighten regulation of drug prices despite the existing Inflation Reduction Act.
2/ Leveraging data to your advantage
The second step use data wisely, you should check all kinda data including stock screener, transcripts of earnings calls, financial results for the last quarters, analyst expectations, options data... The goal is to filter companies in poor financial condition, as well as those that trade at a significant premium to the sector and/or competitors
I would also like to point out that in the current market environment, with Fed interest rates remaining at multi year highs, I do not recommend investing in companies with market caps below $500 million, as they typically have limited cash reserves and weaker institutional backing
Also, I'd recommend investors read 10-Ks and 10-Qs, especially the section related to debt and sources of financing of the company's operations, to reduce the likelihood of an "unexpected" drop in the share price. A striking example is Invitae Corporation aka NVTAQ which declared bankruptcy in mid February 2024!
Was there a prerequisite for this? The answer is yes since the company continued to generate negative cash flow and also had convertible senior notes maturing in 2028.
Convertible notes can involve significant financial risks if the company cannot effectively use the cash to grow the business and break even. In this case, management will not be able to pay off the bonds with cash reserves and will have to resort to significant dilution of investors. In my opinion, Pacific Biosciences of California, Inc. NASDAQ:PACB may face this problem because it has convertible senior notes maturing in 2028 and 2030.
Factors that concern me include the company's declining revenue and total cash and short-term investments in recent quarters, while its operating expenses remain extremely high at around $80 million per quarter.
Let's return to the second step in my approach to selecting the most promising assets in the healthcare sector.
When selecting companies with market caps between $4 billion and $40 billion, I use more parameters since most of them already have FDA approved drugs and/or vaccines.
As a result, it is also necessary to consider the rate of growth of operating income, net debt/EBITDA ratio, and how management copes with increased marketing and production costs.
Finally, let's move on to the last basket, which contains pharmaceutical companies with market capitalizations exceeding $40 billion. I think, this group is best suited for more conservative investors looking for assets offering attractive dividend yields and growing net income, supported by a rich portfolio of FDA approved and experimental drugs.
So, from Big Pharma, I like Pfizer Inc NYSE:PFE , AbbVie Inc NYSE:ABBV , Merck & Co NYSE:MRK and AstraZeneca PLC NASDAQ:AZN . I also want to include Novartis AG NYSE:NVS and Roche Holding AG OTC:RHHBY in this group
sometimes investors need to make exceptions, namely if one larger company buys out a smaller player and/or when a major partnership agreement is concluded, as was the case between Merck and Daiichi Sankyo Company, Limited OTC:DSKYF in 2023.
Also, in the event of a major acquisition or merger, the company's debt may temporarily increase sharply. If its management has previously implemented effective R&D and financial policies, the "net debt/EBITDA ratio"
A remarkable example of a company falling into the "value trap" is Takeda Pharmaceutical Company Limited NYSE:TAK , which overpaid for Shire. This deal did not significantly strengthen or rejuvenate the Japanese company's portfolio of drugs.
As a result, it had to sell off billions of dollars in assets to pay off its debt partially. However, despite all the efforts of Takeda's management, its net debt/EBITDA ratio, although it fell below 5x, remains high, namely about 4.7x at the end of March 2024.
3/ Identifying promising therapeutic areas
In general, the more prevalent a disease is, the larger the total addressable market for a drug and, as a result, the higher the chances that it will become a commercially successful product.
Global spending on cancer medications will reach $377 billion by 2027, followed by immunology, and diabetes will come in third with an estimated spending of about $169 billion
What challenges arise when choosing pharmaceutical companies?
you should also keep in mind that the larger the market, the higher the competition between medicines, as companies strive to grab as big a piece of the pie as possible.
As a result, for drug sales to take off, they need to have significant competitive advantages over the "gold standard." These competitive advantages may include greater efficacy in treating a particular disease, less frequent administration, a more favorable safety profile, and a more convenient route of administration.
So, in recent years, competition in the global spinal muscular atrophy treatment market has intensified. Spinal muscular atrophy is a genetic condition. Currently, three drugs have been approved to combat the disorder, including Biogen Inc.'s (BIIB) Spinraza, Roche/PTC Therapeutics, Inc.'s (PTCT) Evrysdi, and Novartis AG's (NVS) gene therapy Zolgensma.
All three products have similar efficacy, but Evrysdi has a more favorable safety profile and is the more convenient route of administration, namely the oral route, which is reflected in its sales growth rate from year to year.
The second pitfall is the company's pipeline of experimental drugs.
I believe that financial market participants opening an investor presentation that presents a company's pipeline, especially if its market cap is below $5 billion, should also pay close attention to what stage of clinical trial activity its experimental drugs are in.
if a pharmaceutical company has most of its product candidates in the early stages of development, this represents a significant risk because, in this case, institutional and retail investors are often overly optimistic about the prospects for the drugs' mechanisms of action and/or clinical data obtained in a small group of patients. Simultaneously, as is often the case, the higher the optimism, the less favorable the risk/reward profile.
In most cases, the larger and more diverse the patient population, the weaker the efficacy of a drug relative to what was seen in Phase 1/2 clinical trials. This ultimately leads to a downward valuation of its likelihood of approval and casts doubt on its ability to take significant market share from approved medications.
This may subsequently reduce the company's investment attractiveness, making it more difficult to attract financing for its operating activities.
As a result, I recommend excluding any company that, instead of focusing its financial resources on the most promising product candidates, conducts multiple early-stage clinical trials to evaluate the efficacy of its experimental drugs.
In my experience, the most successful pharmaceutical companies focus their efforts on bringing up to three product candidates to market and then reinvesting the revenue from their commercialization into developing the rest of the pipeline.
The table below highlights the following parameters that I use to screen out the least promising companies.
A third factor that investors, especially those new to the investment world, should consider is that large pharmaceutical companies are leaders in certain therapeutic areas, with a rich portfolio of patents covering various mechanisms of action and delivery methods of drugs, making it more difficult and more prolonged for smaller players to find product candidates that could potentially have the competitive advantages.
So, Novo Nordisk A/S NYSE:NVO and Eli Lilly and Company NYSE:LLY have long been leaders in the global diabetes and weight loss drugs markets, and only very recently, they may be joined by Amgen Inc. NASDAQ:AMGN , Roche Holding, and several other companies
4/ Assessing a company's drug portfolio in comparison to competitors
Evaluating the effectiveness, safety profile, and mechanism of action of a medication, as well as comparing clinical data with its competitors, takes a lot of time and effort. I provided examples of drugs and the most promising mechanisms of action in the obesity treatment market. Their manufacturers are Eli Lilly, Novo Nordisk, Roche Holding, Viking Therapeutics, Inc, Amgen, Pfizer, Altimmune, Inc, OPKO Health, Inc, Boehringer Ingelheim, and Zealand Pharma A/S
5/ When market exclusivity for a company's key medications ends
Every financial market participant who is considering investing in pharmaceutical companies should consider the expiration time of key patents of medicines.
Marketing exclusivity represents protection against the entry of a generic version and/or biosimilar of a branded drug into the market, thereby allowing the company to recoup the resources spent on its development and, in the event of its commercial success, also reinvest the money received to accelerate the development of the remaining product candidates.
Where can you find information about patent expiration dates?
All the necessary information is either in 20-Fs/10-Ks or on the FDA website, namely in the "Orange Book" section. let's take Eli Lilly as an example. Open the latest 10-K. Then, the CTRL + F combination opens the ability to find specific words in the document. I usually enter "Expiry Date" or "compound patent" to find the patent section.nvestors can also find information about patents on the FDA website.
As an example, I enter "Mounjaro" in the top line, and a list of patents opens that protect Eli Lilly's blockbuster from the introduction of its generic versions onto the market.hen, clicking on "Appl. No." will open information about the submission date of the patent and when it will expire.
6/ Evaluating the impact of insider share transactions
The next step in selecting the most interesting assets in the healthcare sector is to analyze Form-4s. The CEO, CFO, and other key members of the company's management buy or sell shares from time to time.I am only interested in analyzing purchases since, most often, sales by management are option exercises carried out to pay taxes.
When management starts making large outright purchases of a company's shares, it can signal that it believes in its long-term growth potential.if more than two top managers buy a large block of shares within two weeks of each other, it significantly increases the likelihood of the company's stock price rising in the next two months from the moment of their transactions
But as with everything, there are exceptions, such as in the case of OPKO Health, which is developing a long-acting oxyntomodulin analog for the treatment of obesity together with LeaderMed Group.Over the past 12 months, OPKO's management, especially CEO Phillip Frost, has purchased over 12 million shares.
However, despite this, its stock price has fallen by 27% over the same period. I believe that the key reasons for the divergence between these two facts are investors' lack of confidence in Phillip Frost's ability to make the company profitable again, as well as its low cash reserves. Therefore, companies like OPKO Health have already been eliminated at the second step of selection using Seeking Alpha's screener.
7/ CEO Performance in Business Development
The CEO plays a crucial role in the success of a pharmaceutical company since the pharmaceutical industry is highly dynamic, and the competition between Big Pharma is especially high, I advise readers to pay attention to the track record of the CEO, especially how he copes with force majeure situations, as well as how effective the R&D policy is carried out under his leadership.
8/ Identifying Entry and Exit Points for Long-Term Investments
The eighth step is in addition to the information that was obtained in the previous steps, as well as the analysis of financial risks and various financial metrics of the company, including its net debt, maturity dates of bonds, historical revenue growth rates, EBIT, gross margin, I build a DCF model with the ultimate goal of determining the price target.
it is necessary to conduct a technical analysis of them, as well as the main ETFs that include them. In my opinion, the key ETFs are the SPDR® S&P Biotech ETF AMEX:XBI , Fidelity Blue Chip Growth ETF AMEX:FBCG , iShares Biotechnology ETF NASDAQ:IBB , and VanEck Pharmaceutical ETF $PPH. The purpose of technical analysis is to determine the stop-loss level and entry points at which the risk/reward profile is most favorable. taking profit is not that easy cuz you must master your emotions and greed which damn hard
9/ Creating a Watchlist Based on Risk/Reward Ratio
The purpose of which is to create a watchlist of the companies I have selected based on the previous steps. I make several lists of companies based on their market caps and also rank them according to risk/reward profile, that is, in the first place is the stock that I think has minimal risks and at the same time can bring the greatest potential profit.
I also advise creating small notes on each company, which can include information about risks, support/resistance zones, dates of publication of clinical data, and any thoughts you have that will make your decision more conscious when opening a position
“What’s your secret sauce for choosing pharma stocks?”
Enhancing Trading Proficiency: Top Educational ResourcesEnhancing Trading Proficiency: Top Educational Resources
Staying abreast of the ever-evolving market trends and honing trading techniques are critical aspects of becoming a successful trader. Luckily, a plethora of educational resources are readily available to aid traders in enhancing their skills and decision-making abilities. In this FXOpen article, we will discuss the best websites, books, online trading classes, and other information sources that can help traders succeed.
The Best Educational Resources for Traders
We recognise the importance of having a readily accessible knowledge base to find prompt answers to your trading queries. Below, we have curated a list of the most sought-after educational resources for traders, covering a diverse range of topics, from technical analysis to risk management.
1. Investopedia: A highly popular website that offers comprehensive learning materials suitable for traders at any experience level. Alongside trading, Investopedia delves into investing and personal finance, presenting a vast array of articles, tutorials, and videos.
2. TradingView: This social platform is a haven for traders, providing access to various trading tools, including charts of a wide range of financial instruments from different trading platforms, as well as technical analysis tools. Additionally, it hosts a vibrant community where traders can engage in discussions and share educational ideas.
3. ChartSchool: Specialising in technical analysis and charting, ChartSchool presents articles covering essential topics such as chart patterns, indicators, and other technical tools. If you harbour an interest in technical analysis, this resource furnishes all the necessary information to deepen your understanding of various instruments.
At FXOpen, we regularly update our blog with market analysis and educational articles for traders with any level of experience.
Top Trading Courses to Be Aware Of
Corporate Finance Institute: an online education platform that offers courses on finance, accounting, and investment banking. It provides in-depth knowledge and practical skills for traders. CFI’s courses cover topics like financial modelling, valuation, risk management, and portfolio management.
Babypips: a platform that provides one of the best stock trading courses for traders. Any online trading course from this platform for forex trading education will be of great help. Babypips offers a structured curriculum and interactive quizzes.
Coursera: an education platform that offers great trading courses. The courses taught by industry experts focus on financial markets, trading strategies, and risk management. Coursera trading courses are flexible, and there’s the possibility of self-study.
Udemy: an e-learning platform that allows instructors to create and publish online courses. With Udemy’s course development tools, instructors can upload various materials — videos, audio files, source code, and PDF files — to enhance their students’ learning experience.
Websites That Publish Economic News
In this section, we’ll explore the top websites that publish economic news and highlight their key features. Here is a list of them:
- Financial Times: a renowned news outlet. With a team of journalists, the Financial Times provides analysis and commentary on the latest economic events and trends. In addition to informative articles, the site offers market data.
- Fortune Magazine: a platform that publishes articles on business news and technology. The website features interviews with top executives and entrepreneurs and lists of top companies such as the Fortune 500. It’s a must-read for anyone looking to stay ahead in the world of business.
- Forbes Economy Market News: a well-known business and finance publication. The website has a special economic news section with articles about global financial markets. The site also provides tools like market data, stock quotes, and investment information.
- SEC Website: a website of the U.S. Securities and Exchange Commission. The SEC is dedicated to protecting investors, ensuring fair and efficient markets, and promoting capital formation. The SEC seeks to create a marketplace environment that is credible to the public.
- Yahoo Finance: a resource that helps traders effectively manage their investments and stay abreast of the latest market trends and news. The site provides current news, portfolio management tools, international market data, and social interaction — all designed to help readers manage their financial lives with ease.
Books by Famous Traders
In addition to articles and courses, we decided to gather a list of books that will be interesting to traders:
- The Market Wizards – Conversations with America’s Top Traders by Jack D. Schwager
- The Intelligent Investor by Benjamin Graham
- Technical Analysis of the Financial Markets by John J. Murphy
- The Psychology of Trading by Brett N. Steenbarger
- How to Trade In Stocks by Jesse Livermore
If you are ready to try your hand at the real market, you can open an FXOpen account and check out our TickTrader trading platform. Our blog will also help you make rational decisions when trading.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Identifying Market Correction EndpointsCorrection or trend? How deep is the correction if it exists? When can we expect a reversal? These are common questions among traders who utilize trend strategies. The foundation of trend trading systems rests on the understanding that a trend can become 'exhausted.' Prices cannot rise indefinitely nor plummet to zero. Unlike stocks, currency pairs operate within ranges established by central banks, leading to frequent reversals and corrections.
Corrections differ from trends in both depth and duration. If the price retraces more than one-third of the previous trend's length after a reversal, it is often considered the beginning of a new trend rather than a mere correction, which is the basis for counter-trend strategies. However, local corrections can occur, enabling the trend to continue. Entering the market at the end of a correction allows traders to secure positions at optimal prices, which is the essence of swing trading.
📍 METHODS FOR DETERMINING THE END OF A CORRECTION
1. BY PATTERNS. This straightforward and logical approach relies on market psychology. As a trend ascends, more buyers enter the market. When news prompts some to sell, a correction occurs, causing temporary price declines. However, buyers often see this as a chance to purchase at lower prices. A key indicator of the end of this correction is a candle with a small body and a long downward wick, suggesting that selling pressure has subsided and buyers are stepping back in.
2. BY CANDLE BODY SIZE. The size of candle bodies reflects price movement. When candle bodies decrease in size during a correction, it indicates waning interest in the asset. In an upward trend that turns bearish, if the correction shows small candle bodies, it likely signals a recovery of the trend. Conversely, during a downtrend, large downward candlesticks signify strong selling, while small bodies during corrections suggest minimal price movement.
3. CHANGE IN TRADING VOLUMES. Similar to the analysis of candle bodies, observing changes in trading volumes can signal the end of a correction. A decline in volume may indicate that the correction is over. However, a limitation of this method in Forex trading is the absence of aggregated volume data, necessitating reliance on indicators that may show tick volumes or specific broker volumes.
4. FIBONACCI LEVELS. Based on mathematical concepts, Fibonacci levels help identify potential retracement points. The end of a correction is most likely to occur at the first or second Fibonacci level after a reversal. If the price retraces to the 50% level, it often indicates the potential continuation of the initial trend.
5. TECHNICAL INDICATORS. Technical indicators, particularly oscillators like the Stochastic and Relative Strength Index (RSI), can be valuable tools for identifying the end of a correction. When these oscillators reach overbought or oversold territories and subsequently reverse their direction, it often signals that the correction has concluded, indicating a potential resumption of the original trend.
6. FUNDAMENTAL FACTORS. Local reversals frequently occur in response to news events. For instance, a cryptocurrency might be on the rise, but negative news—such as a significant fund dumping its holdings or regulatory actions by the SEC—can lead to a temporary price pullback. However, if positive news later arises, it can trigger renewed buying interest, signaling the end of the correction and a potential return to upward momentum.
📍 CONCLUSION
In trading, there are no infallible tools for pinpointing trends, corrections, or their respective beginnings and endings. A correction can seamlessly shift into a new trend, while a reversal following a correction may lead to a false breakout. Given these uncertainties, it is prudent to combine multiple analytical tools into a cohesive signal system. By doing so, we can enhance our decision-making process and improve ability to interpret market movements. Additionally, it is essential to test this system against historical price data to ensure its effectiveness and reliability in various market conditions. This comprehensive approach allows us to better navigate the complexities of the market and make more informed trading decisions.
Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
Why we always widen our stop loss when DAY TRADINGVery important and basic rule with Day Trading.
Always increase the stop loss when going short (sell) above the original stop loss.
Always decrease the stop loss when going long (buying) below the original set stop loss.
Reason: When the index touches the ASK or BID price (regardless of it actually trading there), it will get you out of your trade and hit your stop loss.
So, don’t be afraid to increase the distance between the entry and stop loss.
As long as the Risk to Reward stays above 1:1.5 – It’s fine.
How much do I increase the distance between the entry and the stop loss?
Notice what the spread is on the contract when you place your stop loss.
So wherever you wanted to put your stop loss originally, add the spread on top of that and that is where you would place your NEW stop loss.
Maybe 20 – 30 points is safe.
But other times it could be up to 50 points
8 Key qualities of a good traderA good trader often possesses a combination of skills, discipline, and mindset that sets them apart. Here are eight key qualities:
1. **Discipline**: A good trader sticks to a well-defined trading plan and doesn't let emotions drive their decisions. They consistently follow their strategies, whether in profit or loss, avoiding impulsive actions.
2. **Patience**: Successful traders understand that good trades don't happen every day. They patiently wait for the right opportunities that align with their trading strategy, avoiding the temptation to chase the market.
3. **Courage**: Trading often involves making difficult decisions under uncertainty. A good trader has the courage to take calculated risks, enter trades that align with their analysis, and stay in positions even when the market is volatile, as long as their strategy supports it.
4. **Confidence**: Confidence in their trading strategy and decisions is crucial for a trader. A good trader believes in their analysis and is not easily swayed by market noise or the opinions of others. This confidence helps them stick to their plan even in challenging situations.
5. **Consistency**: Consistency in execution is key to long-term trading success. A good trader applies their strategy consistently across different market conditions, refining it over time but maintaining a steady approach to achieve reliable results.
6. **Analytical Skills**: A strong ability to analyse market data, charts, and trends is essential. Good traders can interpret technical indicators, fundamental data, and market sentiment to make informed decisions.
7. **Risk Management**: Managing risk is crucial in trading. Good traders set stop-loss orders, position sizes, and risk-reward ratios to protect their capital. They understand that no trade is guaranteed, so they always prepare for potential losses.
8. **Adaptability**: Markets are constantly changing, and good traders can adapt to new conditions. They update their strategies as needed, learn from mistakes, and stay informed about market developments to remain competitive.
These qualities, combined with experience and continuous learning, help traders succeed in the long run.
Many happy trading years ahead.........NicheFX.
Maximise Your Trading Success 3 Essential Tips for Setting AlertSetting alerts in trading is crucial for effective risk management and maximising opportunities. Here are three key reasons why you should set alerts:
1. Timely Response to Market Movements:
Proactive Trading: Alerts enable traders to respond promptly to significant market movements, ensuring they don't miss critical entry or exit points. This is particularly important in the highly volatile markets, where prices can change rapidly.
Automation: Automated alerts reduce the need for constant monitoring, allowing traders to focus on analysis and strategy while being notified of important market events.
2. Risk Management:
Stop-Loss and Take-Profit Alerts: Alerts can help enforce disciplined trading by reminding traders to execute their stop-loss or take-profit orders, thus limiting potential losses and securing profits.
Risk Mitigation: By setting alerts for specific price levels or economic events, traders can better manage risk and avoid significant losses due to unforeseen market changes.
3. Enhanced Trading Efficiency:
Focus on Strategy: Alerts allow traders to concentrate on their trading strategy without being glued to their screens all day. This can lead to more thoughtful decision-making and reduced emotional trading.
Opportunities Identification: Alerts can be set for various technical indicators or chart patterns, helping traders to identify and act on potential trading opportunities more efficiently.
Setting alerts in forex trading enhances your ability to respond to market changes quickly, manage risk effectively, and improve overall trading efficiency.
Best Currency Pairs to Trade at NightBest Currency Pairs to Trade at Night
In forex trading, time is of great importance. The forex market operates 24/5, and it is divided into different trading sessions, including Asian, European, and North American. Each session has its own unique characteristics, and their overlap can impact activity and volatility.
Night trading presents both opportunities and challenges. To make the most of night hours, it is important to identify the best forex currency pairs to trade during this period. This FXOpen article will delve into the world of night trading, exploring the key elements affecting it and offering valuable insights.
Factors Impacting Nighttime Forex Trading
Time is a critical factor in forex trading because it influences market conditions, liquidity, and volatility. Traders consider the timing of their trades and adapt their strategies accordingly to maximise opportunities while managing risk.
Market Hours Around the World
Nighttime forex trading coincides with different market sessions. The primary session during the night for European traders is the Asian session (Sydney and Tokyo sessions). In addition, although the New York session is not technically a night session, the latter part of it often moves into the night.
The North American trading session, which includes markets in New York, Chicago, and Toronto, aligns with the evening and night hours for Australian traders. The European session overlaps with the late evening and early morning hours for Australian traders. This overlap is where traders can find significant trading opportunities.
Liquidity During Different Sessions
Nighttime trading sees lower liquidity compared to the major sessions, but this doesn’t mean it’s devoid of opportunities. Major forex pairs, for example, tend to remain relatively liquid, ensuring traders can enter and exit positions with ease.
Also, liquidity differs depending on the currency pair. For Europe, pairs with Asia-Pacific currencies (e.g. Japanese yen, Australian dollar, and New Zealand dollar) will have more liquidity at night. Meanwhile, for Asian and Australian traders, pairs with the USD and European currencies will be more liquid in the overnight hours.
Volatility Patterns
Night trading often sees more stable price movements than day sessions. Traders seeking smoother trends and reduced risk often find night trading attractive. Night traders analyse and react to the information accumulated during the day sessions. This allows for more methodical and less impulsive trading decisions, which also contributes to price stability.
Economic Events and News Releases
Despite the quiet hours, economic events and news releases can still impact nighttime trading. Keep an eye on economic calendars to avoid unexpected surprises and capitalise on market reactions.
Best Currency Pairs to Trade at Night
The choice of the best forex pairs to trade at night depends on your trading strategy, risk tolerance, and preferences. However, some currency pairs are generally considered more suitable for this. Here are some popular forex pairs to consider.
Major Currency Pairs
Major forex pairs, such as EUR/USD (Euro/US dollar), USD/JPY (US dollar/Japanese yen), and GBP/USD (British pound/US dollar), remain attractive options for night trading due to their liquidity and stable price movements. As these are the most traded pairs in forex, many market participants favour them.
Cross Currency Pairs
Cross currency pairs, like EUR/GBP (Euro/British pound), EUR/JPY (Euro/Japanese yen), and AUD/JPY (Australian dollar/Japanese yen), can provide diversification and trading opportunities during the night. They might exhibit different volatility patterns from major currency pairs.
Exotic Currency Pairs
While exotic currency pairs can be riskier, some traders find them intriguing during the night. You can consider, for example, USD/SGD (US dollar/Singapore dollar), USD/TRY (US dollar/Turkish lira), or EUR/TRY (Euro/Turkish lira). These are among the most volatile pairs in forex, and they often experience substantial price swings, offering the potential for higher profits.
Trading Strategies for Nighttime Trading
Trading strategies for night trading require careful consideration of market conditions and trader preferences. Below are a few trading strategies suitable for night trading.
Scalping
Scalping is a short-term strategy that allows traders to capitalise on small price movements. This strategy can be effective, as news that comes out at night can create more volatility in the market, which is the main benefit for scalpers.
Swing Trading
This approach involves capturing medium-term price movements. This strategy provides opportunities to identify and enter positions that can be held overnight or for several days. By using swing trading, traders reduce risks of price fluctuations that can affect day traders and scalpers. Swing traders typically need to conduct technical analysis to know when it’s best to enter and exit a trade.
Carry Trading
Carry trading utilises the difference in interest rates between currency pairs. Traders earn interest on the currency they buy (the currency of the country with a higher interest rate) and pay interest on the currency they sell (the currency of the country with a lower interest rate). For night trading, traders may look for pairs with favourable interest rate differentials and hold positions to accumulate interest income.
Range Trading
Range trading involves identifying price ranges or support and resistance levels and trading within those boundaries. During the night, many currency pairs consolidate within narrower ranges, making range trading an appealing strategy.
Risk Management Techniques
Regardless of the trading strategy, setting stop-loss and take-profit orders is crucial. They help limit potential losses and lock in profits. You can also consider managing your risk through proper position sizing. The theory states that you shouldn’t risk more than you can afford to lose in a single trade.
Another smart idea is to diversify your portfolio and trade different currency pairs to spread risk. Before entering a trade, a good way to go is to evaluate the risk-reward ratio. A favourable ratio ensures that potential gains outweigh potential losses.
Final Thoughts
To identify the best currency pairs to trade today, it’s crucial to conduct technical and fundamental analysis. The TickTrader platform can help you with the former, as there you will find the most advanced analysis tools, graphs, and more. To assess external factors, use news resources and analyses by experts, which you can find on our blog. You can open an FXOpen account and start trading tonight.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
The Dark Side of Prop Trading: Factors Leading to Financial LossA few years ago, few people were familiar with prop trading, but it has gained popularity in recent years as an alternative to traditional PAMM accounts. With PAMM accounts, traders manage investors' funds but must first attract and convince these investors. In contrast, prop trading offers a more straightforward approach to fund management that initially appears more convenient. A trader pays a fee (up to $1,000) to enter a challenge, and if successful, can be granted up to $1 million in management funds. However, the reality is more complex. A study conducted in the United States revealed that many prop traders are dissatisfied with their experiences working with prop trading firms.
📍 The Performance Of Prop Traders: Results Of A 2023 Study
A study conducted in 2023 examined the performance of prop traders by surveying 10 randomly selected prop trading firms in the United States. Additionally, the study included responses from 3,000 traders who had experienced varying degrees of success in their trading endeavors. The data was sourced from the website of the CFTC regulator, statistics from an investigation into a complaint against the prop firm MyForexFunds, and publicly available information about another prop firm FTMO.
📍 General Analysis Results
The study revealed some striking insights regarding the performance of prop traders:
◾ Approximately 94% of traders fail to complete the challenges during the first or second phase, with only 6% successfully meeting the profitability and drawdown requirements.
◾ A significant 73% of traders who fail believe their outcomes are unjust, attributing their failures primarily to the prop firms rather than their own mistakes. Many contend that the firms manipulate results, undermining their chances of success.
◾ Of the small percentage 6% who do succeed in completing the challenge, an overwhelming 98% choose to sever their ties with the prop firms within the following six months.
The failure rates at both the first and second phases of the challenges are approximately equal. This suggests that the stricter conditions imposed during the second phase do not significantly influence the overall outcome. Instead, it indicates that the mistakes and challenges encountered are consistent across both phases.
Importantly, the survey revealed that inexperience is not a primary factor in the failure of the challenges. Over 80% of traders reported having prior trading experience, with many having actively traded on demo accounts for several months. These traders stated they understood the risks involved, were aware of their trading strategies, and had previously achieved positive results during their demo trading sessions.
📍 1. Reasons Cited By Prop Traders For Failing The Challenges
◾ Lack of Time (79%). Many traders feel pressured by high revenue targets set by prop firms, which often need to be achieved within a limited time period of just 1-2 months. Although, since 2023, almost all prop firms do not set such strict time limits.
◾ Technical Problems (61%). A significant number of traders reported encountering technical issues during the challenge process. Problems such as unreliable quotes, slow platform performance, and unexpected widening of spreads were commonly mentioned as major obstacles to their success.
◾ Violation of Risk Management (27%). A smaller but still notable proportion of traders admitted to breaching risk management rules. Common mistakes included engaging in high-risk gambling behavior, mismanaging leverage, and neglecting to set stop-loss orders.
Some traders reported that their lack of understanding of the prop company's terms and conditions led to unintentional rule violations. Specifically, many were unclear about the guidelines surrounding practices such as copying trades, trading during news releases, and the use of trading advisors. This confusion contributed to their unsuccessful attempts in the challenges, emphasizing the importance of clear communication and thorough understanding of the rules set by the prop firms.
📍 2. Most Frequent Complaints From Traders About Prop Firms
◾ Non-Market Prices (92%). A staggering majority of traders reported issues with prices that do not reflect real market conditions.
◾ Order Execution Failures and Canceled Profitable Orders (73%). Many traders experienced problems with their orders not being executed as expected, particularly when they were set to generate profits.
◾ Slippage (67%). A significant number of traders reported encountering slippage, where their orders were filled at prices different from those expected.
◾ Technical Problems with the Trading Platform (52%). Technical glitches and issues with the trading platform were cited as major frustrations by more than half of the traders surveyed.
◾ Ambiguous Contract Conditions (45%). Many traders found the terms outlined in their contracts to be unclear, leading to confusion and misunderstandings.
◾ Insufficient Support Service (19%). A smaller proportion of traders expressed dissatisfaction with the lack of adequate assistance from customer support.
◾ Kicking Out from the Market Due to Non-Market Gaps (11%). Some traders noted instances where they felt they were unfairly removed from trading positions due to non-market gaps.
◾ Other Complaints (7%). A few traders reported additional issues not covered by the aforementioned categories.
Traders often encounter hidden rules when working with prop firms, such as minimum holding periods for positions, strict limitations on the minimum length of stop-loss orders, and restrictions on the use of certain trading strategies.
Additionally, many traders express concerns about the lack of transparency in the operations of prop firms. On average, over 50,000 traders attempt to pass these firms' challenges each year, but only about 6%, or around 3,000 traders, succeed. Once qualified, these traders are offered between $100,000 and $1 million of the firm's capital, which is sometimes claimed to be sourced from investors. However, there is little clarity regarding how these prop firms can amass such significant investor capital to support 3,000 traders annually.
📍 3. Main Difficulties Encountered By Prop Traders During The Challenge Phases
◾ Sharp Spread Widening and Violation of Maximum/Daily Drawdown Level Requirements (44%)
◾ Automatic Position Closures and Stopping of Challenges by the Company Due to Drawdown Violations (34%)
◾ Other Reasons (51%)
It's important to note that traders could cite multiple reasons for their difficulties. The survey results indicate that many successful traders perceive prop firms as having a vested interest in creating obstacles to intentionally disadvantage traders.
◾ Difficulty of Challenge Conditions. 89% of traders described the challenge conditions as difficult, stating they were able to pass only due to their prior experience.
◾ Funding Amounts. 96% reported receiving an amount equivalent to their initial challenge deposit, typically ranging from $20,000 to $200,000. The anticipated funding of $1 to $2 million, as promised by the prop firm, is not accessible until at least one year of successful trading.
◾ Retention Rate. 98% of traders exited the program within six months.
In theory, prop firms claim to offer the same trading conditions on a live account as they do during the challenge phases. Additionally, these firms are transparent about their model; traders often operate on demo accounts, while analysts copy their trades. A significant number of traders cited emotional burnout as a primary reason for leaving the prop firms. The tough conditions, restrictions on instrument use, and the risk of having their agreements terminated due to breaches create considerable emotional pressure.
Once traders recover the costs associated with the challenge fees and their time, many choose to transition to independent trading, where they can set their own restrictions.
📍 CONCLUSION
Prop trading presents several problems that diminish its appeal for novice traders. Many beginners struggle to pass the challenges, while seasoned professionals prefer the freedom of individual trading, free from the constraints typically found in prop trading.
Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
Beware of Trading on Public Holidays!
In this educational article, we will discuss why is it recommendable not to trade during the public holidays. I will explain to you how banking holidays affect the financial markets and how it may impact your trading.
WHY???
🏦 The main source of problems comes from the fact that the big market players like:
banks,
hedge funds
investing firms
are absent.
Similarly to ordinary people, bankers and investors prefer to spend the holidays with their relatives and friends instead of staring at charts on Holidays.
HOW???
But how does it affect the market?
Big players are the main source of the market liquidity.
The liquidity itself is the measure to which an asset can be quickly bought or sold in the market at a price of its quotes.
Therefore, when the big players are missing, the market liquidity drops.
WHAT???
1️⃣ That fact instantly reflects in the market spreads.
They become substantially bigger, directly increasing the costs of each trade and making it problematic to open a position at a desired price.
2️⃣ Secondly, low liquidity leads to a decrease in volatility.
The market becomes weak and indecisive.
As traders, we make the money on market moves. Our goal is to catch a bullish or a bearish wave. Their absence deprives us of profits or, at least, dramatically decreases them.
Look at a chart above, it is EURJPY on a 4H time frame. Look how weak and boring the pair was in US Independence Day - official US banking holiday.
And here is how weak and slow was Gold during US Independence Day on an hourly time frame .
3️⃣ Thirdly, when the liquidity is low, even small market participants can move the market.
It dramatically increases the probabilities of false signals. Relatively low trading volumes may manipulate the market, substantially decreasing the efficiency of technical and fundamental analysis.
Look at a density of false breakout on Dollar Index DXY on 15 minutes time frame the 19th of June - Juneteenth National Independence Day in US.
All these breakouts were the manipulations and false signals.
The increased costs of trading, low volatility and manipulations should have convinced you to stay from charts during the holidays season.
However, the main reason to not trade on holidays is much simpler.
Holidays give you an opportunity to stay with your family, to take a break, to recharge and relax. Even a part-time trading is very exhausting and requires a constant attention. Let yourself be distracted and return after holidays.
❤️Please, support my work with like, thank you!❤️
What Is a Blue Chip Stock?What Is a Blue Chip Stock?
Investing and trading the stock market is like navigating a vast sea of options, each with its own set of risks and rewards. For those seeking stability, reliability, and the potential for long-term growth, blue chip stocks have long been a beacon of hope. But what exactly are they, and why do some traders avoid them? This FXOpen article examines what a blue chip stock is and why it is valuable to investors and traders.
What Is Considered a Blue Chip Stock?
A blue chip stock is a stock of a reputable, profitable, and recognised company. It is characterised by a high market capitalisation, a listing on a major stock exchange, and a history of reliable growth. Such stocks are known for their stability, which means they have lower volatility than other stock classes.
The term comes from the world of poker, where blue chips have the highest value. Similarly, in the stock market, these are the most valuable and sought-after investment options. What is an example of a blue chip stock? Shares in IBM, Coca-Cola and McDonald's are considered blue-chip. Below, you will find more examples from different industries.
Key Features
Companies offering blue chip stocks have four core features that make them attractive to traders. These are:
- Financial stability. They typically have strong balance sheets, healthy cash flows, and minimal debt, making them less susceptible to financial crises.
- Leadership. Large issuing companies are leaders in their industries, typically holding a dominant market share.
- Consistent dividends. These companies pay regular dividends, providing investors with a reliable income stream.
- Longevity. They have a track record of long-term success and a history of adapting to changing conditions.
What Is the Difference Between a Regular Stock and a Blue Chip Stock?
Blue chip and regular shares differ in several ways. In the comparison table, you’ll see the main differences between them.
Blue Chip Stocks
- Issued by large companies with excellent reputations
- These companies have dependable earnings and usually pay dividends
- These companies have market capitalisations in the billions of dollars
- These companies are generally the market leaders or among the top in their sectors
- Are included in the most reputable indices
- Less volatile than other stock classes
Regular Stocks
- Issued by any company, regardless of size and reputation
- May not pay dividends
- These companies have market capitalisations that vary widely
- These companies may not be market leaders in their sectors
- May not be included in indices
- May experience a high level of volatility
Blue chip stocks are often seen as a safe haven during periods of economic instability. These shares tend to weather market downturns better than other stock types. They are also the cornerstone of many long-term investment strategies.
What Is the Difference Between a Blue Chip Stock and a Speculative Stock?
In addition to top-tier and regular stocks, there are also speculative ones. Let’s look at their main characteristics to see how they differ from blue chips:
- They are issued by companies that don’t have a strong business model or don’t show solid strength.
- They are more volatile than other stock classes.
- They have the potential for appreciation.
- They have much lower prices than other shares.
The issuing companies may be operating under new management or have the potential to become a monopoly or develop a very lucrative product that could cause the stock price to go upward. For the above reasons, blue chip stocks are generally less volatile and preferred by conservative investors, while speculative ones fluctuate more and are preferred by more risk-tolerant investors.
What Are Some Famous Examples of Blue Chip Shares?
Now that you know a lot about the key characteristics of various shares, you may want to ask the question, “What is an example of a blue chip stock?”.
Technology
- Apple (AAPL)
- Microsoft Corporation (MSFT)
- Meta Platforms (META)
Healthcare
- Johnson & Johnson (JNJ)
- Pfizer (PFE)
- AbbVie (ABBV)
Consumer Goods
- Procter & Gamble Company (PG)
- Coca-Cola Company (KO)
- Walmart (WMT)
Financial Services
- JPMorgan Chase & Co. (JPM)
- Visa (V)
- Goldman Sachs Group (GS)
What Is a Catalyst for a Blue Chip Stock?
A catalyst can be an event or news that causes a significant change in the performance of the stock. General market trends can also be catalysts. For blue chip stocks, these are typically:
- Strong earnings reports
- News about a corporation’s products or services
- Mergers and acquisitions
- Changes in management or leadership
- Economic or political events affecting the corporation
- Changes in interest rates
- Changes in consumer preferences
Catalysts have a significant impact on the performance of blue chip stocks, so it’s important for traders to stay abreast of industry developments. You can explore our blog to keep up to date with the latest news.
Risks and Considerations
While top-tier stocks offer numerous benefits, they are not without risks. They also suffer during severe economic recessions or crises. While less volatile, blue chip shares are not immune to fluctuations. They may not offer the rapid growth potential seen in smaller, high-risk investments. Finally, they can sometimes become overvalued, leading to subpar returns.
Final Thoughts
Blue chip stocks have stood the test of time as reliable, financially stable investments. They play a crucial role in diversified portfolios, providing stability and long-term growth potential. However, investors and traders must be mindful of the associated risks and stay informed about market conditions to make informed decisions when putting money in these elite shares. If you want to try trading blue chip shares or more volatile stocks, you can open an FXOpen account. You can also consider using the TickTrader platform to conduct technical analysis and take advantage of the advanced charts and indicators.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
It's OK to change your mind- it even makes you a better traderIn the fast-paced and ever-evolving world of trading, the pressure to make quick decisions and stick to them can be intense. There's a pervasive belief that once a decision is made, a good trader should stand by it, no matter what.
However, this mindset can be misleading and, in some cases, even harmful.
In truth, the ability to change your mind in trading is not a sign of weakness or inconsistency. On the contrary, it’s a hallmark of a skilled and adaptable trader who understands the complexities of the market.
The Nature of the Market: Constant Change
The financial markets are anything but static. They are influenced by an array of factors that can change within moments—economic indicators, global political events, shifts in market sentiment, and even unexpected news releases. These variables make the market highly unpredictable. A trading decision that was well-founded one moment can become obsolete the next due to new developments.
Successful traders recognize this inherent uncertainty and embrace the need to adapt. Being rigid in your approach can lead to unnecessary risks and missed opportunities. Flexibility allows you to respond to the market’s constant fluctuations, ensuring that your trading strategy remains relevant and effective.
Embracing Flexibility: The Power of Adaptation
Flexibility in trading is not just about changing your mind when things go wrong; it’s about continuously assessing your position in light of new information. This doesn’t mean constantly second-guessing yourself but rather being open to the possibility that your initial analysis may need adjustment as new data becomes available.
For instance, you might enter a trade based on a specific market pattern or trend. However, as the trade progresses, you might notice signs that the market is shifting in an unexpected direction. At this point, the ability to re-evaluate your position and, if necessary, change your strategy can mean the difference between a small loss and a significant one—or even turning a potential loss into a profitable trade. This willingness to adapt shows not indecision but a deep understanding of the market’s unpredictable nature.
Ego vs. Objectivity: Trading Without Emotional Attachment
One of the biggest hurdles traders face is overcoming their own ego. Ego can cloud judgment, pushing you to stick with a decision out of pride rather than sound reasoning. This is particularly dangerous in trading, where the market has no regard for your personal biases or feelings. Ego-driven decisions can lead to stubbornness, causing you to hold onto losing trades far longer than you should.
Objectivity, on the other hand, is the foundation of successful trading. It requires detaching your emotions from your trades and focusing solely on the data and what the market is telling you. Changing your mind in response to new market information is not a sign of weakness; it’s a demonstration of objectivity. By prioritizing market signals over personal pride, you’re aligning yourself with the realities of the market rather than a fixed idea of what should happen.
The Importance of Capital Preservation
In trading, your capital is your most valuable asset. Preserving it is crucial for long-term success. The notion that "it’s better to be right than to be profitable" can be a dangerous trap. Sticking to a losing trade out of stubbornness can lead to significant losses, quickly eroding your trading account and undermining your ability to recover.
When you change your mind in response to market conditions, you are, in effect, practicing good risk management. Recognizing when a trade isn’t going as planned and adjusting your strategy accordingly helps you limit losses and protect your capital. This approach not only safeguards your resources but also keeps you in the game, allowing you to capitalize on future opportunities.
Continuous Learning: Evolving as a Trader
Trading is not a static skill—it’s a dynamic process that involves continuous learning and adaptation. Every trade, whether successful or not, provides valuable insights. When you allow yourself to change your mind, you’re acknowledging that there is always something new to learn. This openness to learning and evolving is essential for long-term success in trading.
The market itself is a constantly evolving entity, influenced by countless factors that change over time. Traders who are rigid in their thinking are often left behind, while those who embrace change and are willing to learn from their experiences continue to grow and succeed. Changing your mind in trading isn’t about flip-flopping or being indecisive; it’s about recognizing that the market is bigger than any one individual and that adaptability is key to thriving in this environment.
Navigating the Fine Line: Reason vs. Reaction (AND THIS IS VERY IMPORTANT)
While the ability to change your mind is crucial, it’s important to recognize that there’s a fine line between making well-reasoned decisions and reacting impulsively to every market fluctuation. The market is filled with noise—short-term movements that can be misleading if taken out of context. Constantly changing your mind in response to every minor shift can lead to overtrading, unnecessary stress, and ultimately, poor performance.
The key is to differentiate between significant market changes that warrant a reassessment of your strategy and normal market noise that should be ignored. Strong, data-driven reasons should guide your decision to change course, not fleeting emotions or fear of missing out. Successful traders strike a balance—they remain flexible and open to change, but they do so based on sound analysis, not on every whim of the market.
Building Confidence Through Adaptability
Another critical aspect of changing your mind in trading is that it can actually build your confidence rather than diminish it. Confidence in trading doesn’t come from being right all the time; it comes from knowing that you can navigate the market effectively, even when things don’t go as planned. By being flexible and willing to change your mind, you develop a stronger sense of control over your trading strategy.
This adaptability also helps you develop resilience. In trading, losses are inevitable. What separates successful traders from the rest is their ability to recover from those losses and learn from them. When you change your mind in response to the market, you’re not just minimizing losses—you’re also building the mental toughness needed to succeed in the long term.
Conclusion: The Strength in Changing Your Mind
In the world of trading, changing your mind doesn’t make you a bad trader—it makes you a better one. It demonstrates that you are flexible, objective, and committed to continuous learning—qualities that are essential for long-term success in the markets. The ability to adapt to new information and evolving market conditions is not just a good practice; it’s a necessary one.
So the next time you find yourself reconsidering a trade, remember: it’s not about being right all the time. It’s about making the best possible decision with the information at hand. In the ever-changing landscape of trading, those who can adapt and change their minds when necessary are the ones who ultimately thrive.
Global Economic News & MarketsGlobal Economic News & Markets
In our interconnected world, it’s more important than ever to stay up to date with global economic news. The link between economic events and financial markets emphasises that traders need to be well-informed. This FXOpen article looks at the significance of global economic news and its impact on financial markets. Through expert judgement and attention to long-term trends, the article aims to equip you with the knowledge you need to make wise financial decisions.
Top Global Economic News
Why is it so critical to keep abreast of current global economic news? The answer lies in how much influence they have on the financial markets. News can cause market volatility and influence long-term trends. Top global economic news can be divided into five categories:
- Central bank announcements
- Economic indicators such as GDP growth, employment, and inflation
- Trade agreements and geopolitical tensions
- Fiscal policy, government initiatives, and infrastructure investment
- Earnings reports of major corporations
Market Reactions
Stock market indicators, currency market fluctuations, changes in commodity prices and the level of volatility reflect market sentiment. Traders try to learn as much as possible about them to make informed decisions.
Stock Market Performance
When economic data or corporate news is released, it can trigger immediate reactions in the stock market. For example, when publicly traded companies release their earnings reports, analysts assess whether the company has met, exceeded, or fallen short of expectations. Positive earnings often lead to stock price increases, while disappointing results can lead to price declines.
Individual stocks affect the direction of the indices they are included in. Indices serve as benchmarks or references for evaluating the overall performance of a specific stock market or a particular sector within it. They provide a quick and easy way to assess whether the market, as a whole or in part, is doing well or poorly. Also, indices serve as a benchmark of the market sentiment.
Volatility Level (VIX Index)
The Volatility Index, often referred to as the VIX or fear indicator, measures market volatility and trader sentiment. A high VIX indicates that traders expect significant market fluctuations, indicating uncertainty or fear in the market. Typically, the VIX rises when the level of fear and uncertainty is high.
Currency Market Fluctuations and Exchange Rate Shifts
Central banks set interest rates, and changes in these rates can significantly impact a country's currency value. Higher interest rates typically attract foreign capital, leading to an appreciation of the currency. Conversely, lower rates may lead to depreciation.
Various economic indicators, such as GDP growth, employment figures, inflation rates, and trade balances, provide insights into a country's economic health. Positive economic data can boost a currency, while negative data can weaken it.
Changes in Commodity Prices and Their Drivers
The fundamental driver of commodity prices is the balance between supply and demand. Factors such as population growth, economic development, and shifts in consumer preferences can influence demand, while supply can be affected by weather conditions, geopolitical events, and production decisions by producers.
Regional Focus
Not all regions face the same economic challenges. There are emerging markets with promising growth prospects and developed economies with unique challenges. Let’s explore some specific regions and countries that are particularly noteworthy in the current economic landscape.
Emerging Markets
Emerging markets refer to economies that are in the process of rapid industrialisation and experiencing substantial economic growth. They tend to be characterised by a growing middle class and urbanisation. They are seen as long-term growth engines for the global economy.
- Many investors are attracted to emerging markets because of the opportunity for high returns in sectors such as technology, consumer goods, and infrastructure.
- To diversify risk, traders can allocate a portion of their portfolio to emerging markets. These markets may not necessarily correlate with developed markets, providing a buffer during global economic downturns.
- Investing in emerging markets comes with risks. Political instability and currency volatility can create uncertainty.
Developed Economies
Developed economies, generally characterised by stability and strong financial systems, also face specific challenges. For example, many advanced economies have ageing populations, which can put strain on social protection and health care systems.
- Some developed economies have experienced long periods of low economic growth. This is due to demographic trends and low labour productivity.
- Managing public debt and deficits is challenging for developed economies. The balance between social spending and fiscal responsibility is a key issue.
- Developed countries are highly dependent on international trade, which makes them vulnerable to trade disputes and supply chain disruptions.
Long-Term Trends
Traders and investors explore technological advancements, sustainable investing, and demographic shifts to guide their investment strategies for years to come.
Technological advancements are a driving force behind economic and market transformation. Key points to consider include the rise of e-commerce, FinTech, AI and automation, blockchain and cryptocurrency, renewable energy and green technologies.
Environmental, Social, and Governance (ESG) factors are increasingly influencing investment decisions and corporate behaviour. ESG-focused investments consider a company’s impact on the environment and society. Companies that demonstrate a commitment to social responsibility and fair labour practices tend to attract investors.
Demographic changes are altering consumption patterns, labour markets, and economic dynamics. Factors to keep in mind are ageing populations in developed countries, rapid urbanisation, consumption habits and preferences of Millennials and Gen Z, and increased global mobility.
Insights from financial analysts and market experts provide valuable context. They interpret recent economic data, offer forecasts, and recommend investment strategies. You may, for example, check out global markets news at Reuters or read JPM global markets news. Of course, you should double-check for yourself, but you can find some main areas to consider in their analyses.
Final Thoughts
The significance of economic events cannot be overstated, and their impact on financial markets emphasises the importance of adaptation. It’s best to monitor economic news globally, seek expert advice and consider long-term trends when making financial decisions. Informed and adaptable investors and traders are most successful in an ever-changing global economic and market environment.
You can open an FXOpen account and read our blog to learn more about potential opportunities and ways to mitigate risks. Also, you can use the TickTrader platform to conduct technical analysis and benefit from advanced charts.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Comparing Different Financial MarketsComparing Different Financial Markets
In trading, understanding the types of international financial markets is crucial. This article offers a comprehensive market comparison of the stock, forex, commodity, crypto* and bond arenas. You’ll learn the importance of these financial markets and what it takes to navigate each one effectively.
Stock Market
The stock market is a financial marketplace where traders and investors can buy and sell shares of publicly traded companies. By purchasing a stock, an investor essentially owns a slice of the company, and their investment's value moves in tandem with the company's performance.
- Risk: Stocks can be volatile, subject to market sentiment, economic indicators, and company performance. Risk varies widely among different types of stocks.
- Income Potential: Day traders aim for short-term gains, while long-term investors often seek stocks that offer dividends or high growth potential.
- Knowledge: A solid understanding of market trends, company fundamentals, and technical indicators is beneficial for effective trading.
- Liquidity: Most stocks, especially those listed on major exchanges, have high liquidity, allowing for quick entry and exit.
- Costs and Fees: Costs can include brokerage commissions, although many online platforms now offer zero-commission trading.
- Trading Hours: Generally restricted to weekdays, opening and closing at set times, with after-hours trading being possible but less liquid.
Forex Market
The forex market is the global marketplace for buying and selling currencies. Traders pair two currencies, like EUR/USD, and profit from the fluctuations in exchange rates.
- Risk: Forex trading can be highly volatile and is considered riskier than stock trading, influenced by geopolitical events, interest rates, and economic data.
- Income Potential: High leverage can amplify gains but also increase risk. Many traders seek to profit from short-term fluctuations.
- Knowledge: Understanding of macroeconomic indicators, geopolitical events, and technical analysis can be crucial for success.
- Liquidity: Extremely high, given the 24/5 operation of the Forex market.
- Costs and Fees: Typically lower than other markets, often involving spreads rather than direct commissions.
- Trading Hours: Operates 24 hours a day, five days a week, allowing for flexibility in trading times.
Commodity Market
The commodity market is one of the types of international financial markets where physical or virtual assets like gold, oil, or agricultural products are traded. These markets often act as a gauge for supply and demand conditions globally.
- Risk: Commodities can be quite volatile, influenced by global events, natural disasters, and political instability. Traders often hedge against other market risks by investing in commodities.
- Income Potential: Gains can be substantial but are also subject to dramatic shifts based on the factors mentioned above.
- Knowledge: Understanding of global economic indicators, supply and demand factors, and geopolitical events is critical.
- Liquidity: Varies widely depending on the commodity; for example, gold and oil are highly liquid.
- Costs and Fees: This can include brokerage commissions, futures contract fees, and costs associated with physical storage for some commodities.
- Trading Hours: Vary by commodity and exchange, but many have extended hours due to global demand.
Cryptocurrency Market*
The cryptocurrency market is a decentralised digital asset market that includes cryptocurrencies like Bitcoin, Ethereum, and various tokens. It's the newest and one of the most rapidly evolving financial markets.
- Risk: Extremely volatile, with prices subject to rapid fluctuations, sometimes within minutes. Regulatory concerns add another layer of risk.
- Income Potential: High potential for both short-term and long-term gains, but also significant risk of loss.
- Knowledge: Understanding of blockchain technology, market sentiment, and technical analysis is often crucial. Familiarity with regulation is also beneficial.
- Liquidity: Generally high for well-known cryptocurrencies but can be low for lesser-known tokens and coins.
- Costs and Fees: Vary by platform and may include transaction fees, deposit/withdrawal fees, and "gas" fees for certain types of transactions.
- Trading Hours: Operates 24/7, allowing for ongoing trading and the chance to react to market news or events.
You can head over to FXOpen's free TickTrader platform to explore the above-mentioned markets for CFD trading in real-time.
Bond Market
The bond market is a segment of the financial market where debt securities are issued and traded. Unlike the stock market, which is a part of the capital market, the bond market focuses on long-term debt instruments. This highlights the difference between capital markets and financial markets.
- Risk: Generally considered lower risk compared to stocks and commodities, although risk can vary depending on the issuer's creditworthiness.
- Income Potential: Lower yield compared to more volatile markets, but often offers more stable returns through interest payments.
- Knowledge: Understanding of interest rates, yield curves, and credit ratings is essential for bond trading.
- Liquidity: Varies depending on the type of bond; government bonds are usually highly liquid, while corporate bonds can be less so.
- Costs and Fees: Transaction costs are generally built into the bond's price, but some brokers may charge commissions.
- Trading Hours: Primarily traded over-the-counter (OTC), with some bonds available on exchanges. Trading hours can vary but are generally regular business hours.
The Bottom Line
In summary, the diverse features of financial markets offer traders a range of opportunities, from stocks and commodities to cryptocurrencies* and bonds. Armed with this knowledge, you're now equipped to navigate the markets with confidence. Want to put these insights into action? Consider opening an FXOpen account to kickstart your trading adventure.
*At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.