Economic Lessons From 2023We entered 2023 with a pessimistic consensus outlook for U.S. economic performance and for how rapidly inflation might recede. As it happened, there was no recession, and personal consumption posted sustained strength. Inflation, except shelter, declined dramatically from its 2022 peak.
The big economic driver in 2023 was job growth. Jobs had recovered all their pandemic losses by mid-2022 and continued to post strong growth in 2023, partly due to many people returning to the labor force.
When the economy is adding jobs, people are willing to spend money. The key for real GDP in 2023 was the strong job growth that led to robust personal consumption spending. For 2024, labor force growth and job growth are anticipated by many to slow down from the unexpectedly strong pace of 2023, leading to slower real GDP growth in 2024.
And there is still plenty of debate about whether a slowdown in 2024 could turn into a recession. Followers of the inverted yield curve will point out that it was only in Q4 2023 that the yield curve decisively inverted (meaning short-term rates are higher than long-term yields). It is often cited that it takes 12 to 18 months after a yield curve inversion for a recession to commence. Using that math, Q2 2024 would be the time for economic weakness to appear based on this theory. Only time will tell.
The rapid pace of inflation receding in the first half of 2023 was a very pleasant surprise. Indeed, inflation is coming under control by virtually every measure except one: shelter. The calculation of shelter inflation is highly controversial for its use of owners’ equivalent rent, which assumes the homeowner rents his house to himself and receives the income. This is an economic fiction that many argue dramatically distorts headline CPI, given that owners’ equivalent rent is 25% of the price index.
Once one removes owners’ equivalent rent from the inflation calculation, inflation is only 2%, and one can better appreciate why the Federal Reserve has chosen to pause its rate hikes, even as it keeps its options open to raise rates if inflation were to unexpectedly rise again.
The bottom line is that monetary policy reached a restrictive stance in late 2022 and was tightened a little more in 2023. For a data dependent Fed, inflation and jobs data for 2024 will guide us as to what might happen next. Good numbers on inflation or a recession might mean rate cuts. Otherwise, the Fed might just keep rates higher for longer.
If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
By Bluford Putnam, Managing Director & Chief Economist, CME Group
*Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below.
**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
Fundamental Analysis
Why you Are a Mass Procrastinator – 7 ReasonsAre you stuck in a trading rut?
Have you thought to yourself.
You have all the knowledge, tools, skills, strategies etc…
And yet you don’t believe you’re getting the trading results you expected?
I think it’s because of the ‘Procrastination Gremlin”.
It’s a common issue. For three years during my trading career I was a mass procrastinator.
I never took trades when they lined up.
I never deposited more money to grow my account.
I never tracked and reviewed my trades on a weekly basis.
It became a disease as well as a comfort zone.
But what you might realise is when you LEAVE that comfort zone of procrastination, you might find it was never comfortable to begin with.
It slowed down your growth and progress as a trader.
So if you can relate to some of the things I’ve mentioned already, this article is for you.
Let’s explore if you’re a mass procrastinator.
You Doubt Trades
One of the most common forms of procrastination is when you doubt taking trades.
You hesitate and find every excuse to not trade for the day.
The problem is this.
Doubt slows down your decision-making process, and causes missed opportunities.
If you have a winning and proven system and you have money you can afford to trade with great money management principles.
Just Take The Trade!
Skip Trades
Ahhh, I’ll skip this trade and take the next.
Skipping trades is another form of procrastination.
What are you waiting for?
The “perfect” trading setup, the right “timing”, the right gut (gat) feel?
Stop skipping.
Remember, in trading, there’s no perfect moment. You are bound to take trades with losses. So if you’ve incorporated them into your trading, why are you skipping the trades?
Worst case scenario, you take a small loss.
Best case scenario, you ban a whopper of a winner.
Listen… Consistency and resilience are what brings success.
Stop skipping trades when they line up. J.T.T.T
Skip Days
I get this.
Monday is a storm of a day after the weekend.
Friday is a calm day to prepare for the weekend.
That’s what I’ve gathered over the years.
But it doesn’t mean I skip trades. If they line up (Monday or Friday or any other day, just take it).
Successful trading requires regular market analysis and being persistent with your trading.
Stick to a routine, check the markets and try not to skip days.
Forget Tracking
If you also forget to track your trades, this is another sign of procrastination.
Tracking helps you analyse your performance, learn from your mistakes, and make informed decisions.
Every time you take a trade, plot it in your journal.
At the end of the week, go through the journal to see how your trades are looking.
Go through the open trades, to see how they’re performing.
Also maybe see if you need to make any adjustments.
Don’t neglect this crucial task.
Forget Setups
You might have written your trading setups for the week.
And then you don’t take them.
You’re procrastinating your success.
Be more accountable and responsible with the trades that are lining up.
Write it on sticky notes.
Put them on your fridge.
Set alerts on your trading and charting platform.
Set reminders on your phone!
Do whatever you need to to NOT forget the setups that are nearly ripe for the picking.
Neglect Self-Education and adaptation
As I’ve said often.
Trading is an adapting and ever-evolving game.
You need to:
~ Keep learning and revising
~ Be up to date with new markets
~ Adapt your strategies
~ Add or remove from your watchlists
~ Update yourself as a trader
Procrastinating on Diversification
If you’re only trading one type of asset, you might be in trouble.
You’re delaying portfolio diversification.
There are so many new stocks to apply.
There are new algorithms with indices, commodities, Forex and Crypto.
If they work with your system, diversify and hedge.
Don’t be a dinosaur and stick to what was instead of what there is!
Start researching other asset classes today.
Final words:
You’re your own worst enemy with trading.
Not any trader, analyst, company… You.
You need to stop procrastinating and start doing.
Only then you’ll see improvement, development and even mindset growth.
Let’s sum up potential reasons why you might be a mass procrastinator.
You Doubt Trades
Skip Trades
Skip Days
Forget Tracking
Forget Setups
Neglect Self-Education and adaptation
Procrastinating on Diversification
BULLISH AND BEARISH FLAG PATTERNSBullish and bearish flag patterns are common patterns in forex that are used by traders to determine potential price movement in a trending market. These patterns can provide clues about market sentiment and help us make informed decisions about when to enter or exit a trade. It should be remembered that this pattern is a continuation pattern, not a reversal pattern, as these patterns appear after a strong movement. How to apply in trading patterns bullish and bearish flag?
The bull flag pattern is a continuation pattern that forms after a strong upward price movement. This pattern is characterized by a sharp price rally, followed by a period of consolidation in the form of a descending channel or flag, and then a continuation of the movement. The flag is usually accompanied by a decrease in market volatility and momentum, which indicates a temporary pause in the uptrend. The price is resting after a strong bullish movement before continuing.
How to apply in trading?
1. Identify a strong upward movement (flagpole): The first step is to identify the flagpole of the initial strong upward price movement that precedes the formation of this pattern.
2. Flag formation: After identifying the flagpole, traders must draw a trend line connecting the highs and lows of the consolidation to see the flag pattern. You need to watch the price closely because this pattern can turn into an ascending triangle.
3. Breakout of the contraction: Then wait for a breakout above the upper trend line of the flag pattern, accompanied by an increase in momentum. A breakout of the co-principal level confirms the continuation of the uptrend and is a potential entry point for long positions. Usually the price makes a move equal to the flagpole, which gives an approximate take profit point.
Conversely, the bearish flag pattern is a continuation pattern that is formed after a strong downward price movement. This pattern is characterized by a sharp decline in price followed by a period of consolidation in the form of an ascending channel or flag. Similar to the bull flag pattern, the bear flag pattern is accompanied by a decrease in momentum, which indicates that the price is temporarily resting in a downtrend.
How to apply in trading?
1- Identify a strong bearish move (flagpole): The first step is to identify the flagpole of the initial strong downward price movement that precedes the formation of the flag pattern.
2. Flag formation: After identifying the flagpole, we must draw a trend line connecting the highs and lows of the consolidation boundary to recognize the flag pattern.
3. Waiting for support breakdown: We should wait for a breakdown of the lower trendline of the flag pattern, accompanied by an increase in price momentum. Such a breakdown confirms the continuation of the downtrend and is a potential entry point.
In conclusion, the use of bullish and bearish flag patterns in trading requires identifying a flagpole, building a flag pattern and waiting for a breakout to confirm the continuation of the trend. By understanding and effectively utilizing these patterns, we can enhance our analytical skills. This pattern can complement your existing trading method.
An optimal distribution of cryptocurrency holdings - Educational
Welcome to our video where we talk about the best way to spread out your crypto investments. We'll break down the key ideas and important things to think about when deciding where to put your money in the ever-changing world of cryptocurrencies.
If you have any questions Feel Free to reach out!
Five Habits for Safer TradingGreetings @TradingView community!
There are five everyday habits that can significantly limit your risk exposure and contribute to a more secure trading experience.
💜 If you appreciate our charts, give us a quick 💜
1. The Imperative Trading Plan
Despite repeated emphasis, many traders still operate without a well-defined trading plan, succumbing to impulsive decisions. Every trader should have a plan specifying entry and exit points, curbing emotional reactions to adverse price movements. A trading plan acts as a compass, navigating the unpredictable seas of the financial markets.
2. Trading Detox: Take a Step Back
Feeling trapped in a trading rut? Fundamentals and technical analyses losing their edge? Taking a step back from trading provides a valuable reset. By disengaging emotionally from positions, traders gain a fresh perspective on market themes and chart patterns. A break allows for reflection on past trades, often revealing insights that lead to an improved trading plan upon return.
3. Profit Lock-in Strategy
Often overlooked, locking in profits on winning trades is a prudent risk management practice. While riding a trend is tempting, securing a portion of profits limits exposure to potential volatility. Following strategies like STA or scaling techniques, where positions are adjusted based on market conditions, allows traders to secure gains even if trends abruptly reverse.
4. Precision in Execution
The ease of electronic trading comes with a caveat—erroneous commands. The infamous "fat finger" event of May 2010, resulting in a trillion-dollar market drop, serves as a cautionary tale. Double, triple, and quadruple-checking your orders is crucial. Make reviewing commands a routine, taking only seconds of your time but preventing costly blunders.
5. Regular Withdrawals for Stability
While seeing an account grow is gratifying, regularly withdrawing profits is a prudent move. It prevents overexposure and guards against impulsive decisions associated with additional capital. Being consistently profitable requires a focus on the trading process rather than profits. Treat yourself to the fruits of your labor by withdrawing money, enjoying a well-deserved break, and maintaining a healthy trading perspective.
Incorporating these habits into your daily trading routine can enhance your risk management strategy, contributing to a safer and more successful trading experience.
Trading Strategies Based on Geopolitical RisksUnderstanding the influence of geopolitical events on trading is crucial for success, especially in the volatile forex market. This article delves into the types of geopolitical events that affect financial markets and provides key insights into risk management and strategic trading during such times.
Understanding Geopolitical Events
Geopolitical events refer to significant occurrences that impact the relations between nations on a global scale. These events can shape economic policies, trade relations, and international alliances, thereby exerting a considerable influence on financial markets.
Types of Geopolitical Events
These are the most common types of geopolitical events:
Political Elections and Transitions
Elections, whether presidential, parliamentary, or local, are pivotal events that can induce market volatility. For instance, the US Presidential election can affect not just American markets but also international equity, forex, and commodity markets.
Trade Negotiations and Agreements
Trade talks can either ease or escalate tensions between countries. A case in point is the US-China trade war, which impacted a variety of asset classes, from equities to commodities like soybeans and steel.
Military Conflicts and Terrorism
Military confrontations or acts of terrorism have immediate and often lasting impacts on markets. The uncertainty that follows such events tends to drive investors towards safe-haven assets like gold or US Treasury bonds.
Economic Sanctions and Policy Changes
Sanctions or regulatory changes have a far-reaching impact. For example, the imposition of sanctions on Iran led to increased oil prices due to reduced global supply.
The Role of Sentiment and Market Psychology
Beyond the tangible impacts of geopolitical events, sentiment and market psychology play crucial roles in shaping market trends. Traders' perceptions and emotional responses to these events can significantly influence asset prices, often amplifying or mitigating the effects of the actual geopolitical occurrences.
Preparing for Geopolitical Event Trading
Here are some techniques that can help traders prepare for geopolitical events.
Risk Assessment and Strategy Selection
Accurately assessing the risks of geopolitical events is pivotal for traders. This involves a thorough evaluation of the event’s potential market impact and selecting a trading strategy aligned with the identified risks. Some may opt for low-risk day trading strategies to mitigate short-term volatility while still participating in market movements.
Building a Geopolitical Event Trading Toolkit
Keeping an eye on reliable research sources and news feeds is crucial. These sources offer insights into the geopolitical landscape, aiding traders in making calculated moves. Economic calendars serve as another invaluable tool, marking crucial dates that could influence asset prices.
[Risk Management and Capital Allocation
Effective risk management strategies in the stock market often involve setting precise stop-loss and take-profit levels. In forex, risk management techniques may differ slightly but generally rely on these same measures. Defining these levels helps to mitigate losses while capitalising on gains. Equally important is the concept of position sizing and leveraging, which directly influences the level of risk a trader is exposed to.
Event-Driven Trading
In a trading environment rife with geopolitical risk, trading strategies typically focus on three crucial timeframes: before, during, and after a significant geopolitical event.
Trading Leading Up to the Event
In the run-up to a known geopolitical occurrence, traders often adopt a cautious stance. Here, the emphasis is on accumulating information and adjusting trading strategy to mitigate undue risks. Asset diversification and hedging are common practices during this period.
Trading the Event Itself
As the event unfolds, market volatility usually spikes. Traders need to be agile, adapting their strategies to real-time information. High-risk, high-reward assets may provide substantial returns, but they should be approached cautiously, especially in forex markets where volatility is already high. Here, strong risk management when trading forex becomes crucial, as the market can move rapidly and unexpectedly.
Post-Event Trading Strategies
After the event concludes, markets often go through a period of correction or consolidation. It's essential for traders to reevaluate their positions and strategies in light of the new geopolitical landscape. This post-event period is an opportune time to reassess asset allocation and risk parameters.
Trading Strategies for Geopolitical Events
In the tumultuous landscape created by geopolitical events, traders often resort to specific strategies to mitigate risks and capitalise on market movements. The particular assets that appreciate or depreciate can be context-dependent, but there are general trends to watch for.
To observe how these markets move during geopolitical events, head over to FXOpen’s free TickTrader platform. There, you’ll find 1,200+ trading tools ready to help you navigate the markets with confidence.
Safe-Haven Assets
Traditionally, assets like gold and US Treasury bonds have served as safe havens during times of geopolitical unrest. For example, significant military conflicts that have a global impact often drive up gold prices as investors seek stability.
Safe-Haven Currencies
In the forex risk management, the US dollar, Swiss franc, and Japanese yen are commonly considered safe-haven currencies. These currencies typically appreciate when uncertainty rises as investors look for less risky assets.
Diversification
Maintaining a diversified portfolio can help traders lessen their exposure to any single asset that might be adversely affected by geopolitical factors. For instance, sanctions on oil-producing countries could potentially lead to higher oil prices. Traders might consider investing in oil futures or related equities in anticipation of such an event.
The Bottom Line
Navigating the markets during geopolitical events requires keen awareness, thorough preparation, and strategic execution. This article aims to equip traders with the insights and tools needed for such endeavours. For those looking to apply these principles in a real-world trading environment, consider opening an FXOpen account to trade the safe-haven assets and currencies discussed here.
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.
Bitcoin: The Future Of MoneyBitcoin, the world's first and most prominent cryptocurrency, has sparked a revolution in the financial landscape, challenging conventional notions of money and paving the way for a decentralized digital economy. Its potential to transform the future of money is undeniable, but its journey towards widespread adoption is still in its early stages.
Decentralized Digital Currency
Bitcoin's core innovation lies in its decentralized nature. Unlike traditional currencies controlled by central banks, Bitcoin operates on a distributed ledger technology called blockchain, where transactions are recorded across a vast network of computers. This eliminates the need for intermediaries like banks, empowering individuals to take control of their finances and fostering greater financial inclusion.
Key Features of Bitcoin
Several characteristics make Bitcoin a compelling alternative to traditional currencies:
Decentralization: Bitcoin is not controlled by any government or institution, reducing the risk of manipulation and promoting financial independence.
Transparency: All Bitcoin transactions are publicly visible on the blockchain, ensuring transparency and accountability.
Security: Bitcoin's cryptographic underpinnings make it highly secure, preventing counterfeiting and double-spending.
Scarcity: Bitcoin's supply is limited to 21 million coins, preventing inflation and maintaining its value over time.
Potential Impact on the Future of Money
Bitcoin's potential to transform the future of money is multifaceted:
Cross-border payments: Bitcoin can facilitate fast, low-cost international transactions, eliminating the barriers and costs associated with traditional remittance systems.
Financial inclusion: Bitcoin can provide financial access to the unbanked and underbanked populations, particularly in developing countries.
Innovation in financial services: Bitcoin can foster the development of new financial services and products, such as decentralized finance (DeFi) and micropayments.
Challenges and Uncertainties
Despite its potential, Bitcoin faces several challenges that could hinder its widespread adoption:
Volatility: Bitcoin's value has historically been highly volatile, making it a risky investment and deterring its use as a daily currency.
Regulation: Governments worldwide are still grappling with how to regulate cryptocurrencies, creating uncertainty for businesses and investors.
Scalability: Bitcoin's transaction processing speed is limited, which could pose a challenge as its usage increases.
Adoption by merchants: The acceptance of Bitcoin as a means of payment is still limited, hindering its practicality for everyday transactions.
Conclusion: A Promising Future
Bitcoin's potential to revolutionize the future of money is evident. Its decentralized nature, security, and transparency offer a compelling alternative to traditional currencies, particularly in areas like cross-border payments and financial inclusion. While challenges such as volatility and regulation remain, Bitcoin's underlying technology and its potential to disrupt the financial landscape make it a force to be reckoned with in the future of money.
Quantitative Tightening Effects on the Markets This video tutorial discussion:
• What is QE and QT?
• Each impact to the stock market
• The latest QT, how will the stock market into 2024?
Dow Jones Futures & Its Minimum Fluctuation
E-mini Dow Jones Futures
1.0 index point = $5.00
Code: YM
Micro E-mini Dow Jones Futures
1.0 index point = $0.50
Code: MYM
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Understanding GDP Growth: A Key Indicator of Economic HealthIntroduction
Gross Domestic Product (GDP) growth is a crucial economic indicator that provides insight into the overall health and performance of a country's economy. As a comprehensive measure of a nation's economic activity, GDP growth reflects the value of all goods and services produced within a country over a specific period. In this article, we will explore the significance of GDP growth, its components, and the impact it has on various aspects of a nation's well-being.
Definition and Components of GDP
GDP is the total value of all goods and services produced within a country's borders in a given time frame. It is commonly calculated quarterly and annually. There are three main ways to measure GDP: the production approach, the income approach, and the expenditure approach. Each approach provides a unique perspective on economic activity.
Production Approach: This method calculates GDP by adding up all the value-added at each stage of production. It includes the value of intermediate goods and services to avoid double counting.
Income Approach: GDP can also be measured by summing up all the incomes earned by individuals and businesses within a country, including wages, profits, and taxes minus subsidies.
Expenditure Approach: This approach calculates GDP by summing up all the expenditures made in the economy. It includes consumption, investment, government spending, and net exports (exports minus imports).
Importance
Here are some of the primary reasons why GDP growth is considered important:
Economic Health - GDP growth is a fundamental measure of a country's economic health. A positive growth rate indicates that the economy is expanding, producing more goods and services over time. This growth is essential for creating jobs, increasing incomes, and improving overall living standards.
Job Creation - A growing economy often leads to increased employment opportunities. As businesses expand to meet rising demand for goods and services, they hire more workers, reducing unemployment rates and contributing to a more robust labor market.
Income Generation - GDP growth is linked to the overall income generated within a country. As the economy expands, incomes generally rise, providing individuals and households with more financial resources. This, in turn, contributes to an improvement in the standard of living.
Investment Climate - Investors and businesses often use GDP growth as a critical factor in assessing the attractiveness of a country for investment. A growing economy suggests potential opportunities for businesses to thrive, encouraging both domestic and foreign investments.
Government Policy - Policymakers use GDP growth data to formulate economic policies. High GDP growth rates may lead to expansionary policies aimed at sustaining economic momentum, while low or negative growth rates may prompt policymakers to adopt measures to stimulate economic activity.
Consumer and Business Confidence - Positive GDP growth contributes to increased confidence among consumers and businesses. When people perceive a growing economy, they are more likely to spend money, and businesses are more inclined to invest and expand.
International Competitiveness - A country with a strong and growing economy is often viewed as more competitive on the global stage. A robust GDP growth rate enhances a nation's economic influence and can attract international trade and investment.
Government Revenues - Higher GDP growth rates can lead to increased tax revenues for the government. This additional income can be used to fund public services, infrastructure projects, and social programs, contributing to the overall development of the nation.
Debt Management - Economic growth can help manage a country's debt burden. A growing economy typically generates more revenue, making it easier for the government to service its debt without relying excessively on borrowing.
Poverty Reduction - Sustainable GDP growth is often associated with poverty reduction. As the economy expands, opportunities for employment and income generation increase, helping to lift people out of poverty.
Conclusion
In conclusion, Gross Domestic Product (GDP) growth stands as a cornerstone in understanding and evaluating a nation's economic well-being. Through its comprehensive measurement of all goods and services produced within a country, GDP growth provides valuable insights into economic health, job creation, income generation, and various other facets that collectively contribute to the overall prosperity of a nation.
The three approaches to measuring GDP—production, income, and expenditure—offer distinct perspectives, ensuring a holistic understanding of economic activity. The importance of GDP growth cannot be overstated, as it serves as a fundamental gauge of a country's economic trajectory and influences crucial decision-making processes at both the individual and policy levels.
The positive correlation between GDP growth and job creation underscores the role of a thriving economy in fostering employment opportunities and contributing to a robust labor market. Additionally, the impact on income generation translates into an improved standard of living for individuals and households, reflecting the tangible benefits of economic expansion.
Investors and businesses keenly observe GDP growth as a key indicator when evaluating the potential for investment. Government policymakers, armed with GDP data, craft strategies to either sustain economic momentum or stimulate activity, underscoring the pivotal role GDP growth plays in shaping economic policies.
The ripple effects of GDP growth extend to consumer and business confidence, international competitiveness, government revenues, and effective debt management. A growing economy not only instills confidence but also attracts global trade and investment, positioning the nation favorably on the international stage.
Perhaps most importantly, sustainable GDP growth is intricately linked to poverty reduction. As the economy expands, opportunities for employment and income generation increase, contributing to the uplifting of individuals and communities from poverty.
In essence, the study of GDP growth goes beyond mere economic statistics; it serves as a compass guiding nations towards prosperity, inclusive development, and an improved quality of life for their citizens. Recognizing the multi-dimensional impact of GDP growth enables policymakers, businesses, and individuals to make informed decisions that foster long-term economic well-being and societal advancement.
How To Build A Trading Journal That Helps You Make MoneyHey everyone!
In this video, we discuss why trading journals are important, talk about how to avoid common pitfalls in using them, and go over the keys to implementing one successfully in your own trading.
Over time, a well-crafted trading journal can actually help you make money, while building out the most important skill you can acquire as a trader: pattern recognition.
We also cover three main principles that you can use if you already have a journal set up that isn't working as you'd like. Be sure to:
1.) Keep it simple.
2.) Track the right things.
3.) Follow up regularly.
Do these, and it's impossible you won't get significantly better over the next 6 months - year.
Cheers!
Looking for more high-quality trade ideas? Follow us below. ⬇️⬇️
How AI will revolutionise the trading world – 14 WaysThe era of AI has unleashed in almost every aspect of our lives.
And I believe that there will soon be a seismic shift in financial trading with AI.
I feel it’s my duty to share some of the ways, we will incorporate, adapt and integrate AI into trading.
To explain in simple terms…
AI is a concept to teach machines, robots and computers how to perform human actions. And trading is just another element that AI will apply to.
Let’s start…
#1: AI Trading Bots
We’ve had EA (Expert Advisors), chat bots and machine learning when it comes to trading.
As AI adapts more into the financial world, they will be able to signal, alert and even optimise our trading strategies, risk management and financial profile.
#2: AI will alert more markets into our watch lists
Not all markets work with our trading strategies.
Right now we have to manually search for different markets to back, forward and real test.
Once AI adapts to our trading strategy, it will be able to pinpoint the most efficient and effective markets to include into our trading arsenal.
#3: Real-time risk management
AI’s rapid data processing will be able to identify our risk profile.
In the near future, it will be able to identify not only trading setups, but also the volume we’ll need to buy or sell to enter or exit a trade.
It will alert us when trades are ready to go and will ask us whether we want to go ahead and action the high probability trades (according to our risk management.
#4: Algorithmic automatic trading
Once we lay out the parameters of what we want our AI trading bots to do, they will be your employee.
They’ll be able to take action while you’re away such as:
Layout the chart setups
Plug in the trading levels (entry, stop loss and take profits)
Execute trades on our behalf
They will work for us, which will limit our time staring at screens.
#5: Sentiment Analysis: Read the market’s mood
This tool will help us identify who’s dominant in the markets.
Are the bulls or bears stronger.
It will then give us a gauge meter to tell us whether demand or supply is higher.
And this will help us make calculated decisions, based on our own trading analyses.
#6. Freeing humans from the grind
When AI takes over our trading, it will do all of the mundane tasks for us.
It’ll focus on:
What markets work best with the system
Which markets to remove from the watch list and
whether we are in favourable or unfavourable terrorist according to our system
This will free traders from spending hours behind a screen on the daily.
#7: Automation: Back and forward testing
When AI learns a system with the right parameters and criteria, it will be able to backtest for us.
It’ll be able to go through hundreds of trades in the past and will provide a full review of the stats and measures.
It’ll tell us the:
trades
of winners and losers
Win and loss rate
Average winner and loser per trades
Costs, risks and losses
Accumulation of profit and losses and more…
#8. Pre-emptive fraud detectors
AI doesn’t just detect fraud—it sniffs out all the unregulated and fraudulent type companies, brokers, market makers.
It also analyses the markets micro and macro analyses to see which companies are doing well, cooking the books and / or are red flags to buy or sell.
Its predictive capabilities will be able to save millions of traders from falling into financial trading traps and scams.
#9: Customizable AI trading assistants
Also, I bet we will see companies create their own trading assistants.
Similar to Siri, Alexa and Google.
You will have your own finance-savvy cousin ready to act on your trading needs.
Whether you want to trade, find setups, talk about tested systems, create new strategies, learn real time info about markets and instruments.
You’ll have your own AI trading assistant just call away.
#10: The rise of quantitative trading
Quant trading will soar to new heights.
AI will be able to crunch numbers and optimise strategies with high speed and precision.
This will make sense of complex financial models at lightning speed.
#11: Real-Time chart pattern identification
Eventually, AI will adapt machine and deep learning into charts.
We will finally see the day where market patterns, trends are identified on any time frame.
As they learn the bends, turns, vectors and consistency with the charts through predictive analysis from historical market data…
AI will adapt and learn to plot more accurate, recurring chart patterns and use them to predict future price movements on any market.
And AI will be able to scan hundreds of charts simultaneously and highlight significant patterns as they emerge. This will present high, medium and low probability setups for our trading.
#12: Past chart patterns predictive analyses
Not only will it identify real-time chart patterns.
It will also spot historical price patterns and insights that took place in the past.
This will help us to back test the systems and how they worked on particular markets.
AI will be able to identify the chart patterns that have proven to be most successful for that particular trader.
#13: Personalized and customised trading strategies
What if you have a new chart pattern you’d like to adapt into your analysis?
Well I’m sure AI will have the ability to learn, recognise and incorporate your chart patterns into the system.
This way you can personalise what chart patterns, candlestick patterns or strategies you would like customised to your style.
This means that each trader can have a unique set of chart patterns to look for, tailored to their trading style and risk tolerance.
This personalized approach can potentially enhance your trading performance and your profitability.
#14: Integration with other data sources
This will most likely be open-ended.
It’ll work via the network where AI will improve chart pattern recognition in financial trading by integrating with other data sources.
Imagine AI learns from millions of traders, millions of strategies, systems and new inputs.
I can only imagine that traditional manual chart pattern systems will be a thing of the past.
With the new set of systems, formation, price and volume data – we will see integration of brand new forms of analyses and strategies.
And this will bring a new era of financial trading.
Final Words and summary!
It’s all exciting and frightening at the same time.
Because with AI integration, we will see yet another shift in the algorithms and it’ll bring a new future for trading.
Only those who learn to adapt and evolve – will make it…
Let’s sum up all the AI elements that will we mentioned here.
#1: AI Trading Bots
#2: AI will alert more markets into our watch lists
#3: Real-time risk management
#4: Algorithmic automatic trading
#5: Sentiment Analysis: Read the market’s mood
#6. Freeing humans from the grind
#7: Automation: Back and forward testing
#8. Pre-emptive fraud detectors
#9: Customizable AI trading assistants
#10: The rise of quantitative trading
#11: Real-Time chart pattern identification
#12: Past chart patterns predictive analyses
#13: Personalized and customised trading strategies
#14: Integration with other data sources
and How to Fix ThemTechnical analysis (TA) stands out as one of the most widely utilized methods for scrutinizing financial markets, finding applications across diverse sectors like stocks, forex, gold, and cryptocurrencies.
While the fundamental tenets of technical analysis may seem straightforward, mastering this craft poses its own set of challenges. Navigating through a plethora of errors is a natural part of the learning curve, much like acquiring any skill. This becomes particularly crucial in the realm of trading and investing, where the absence of vigilance and failure to glean insights from mistakes can potentially result in substantial capital losses. While acknowledging the value of learning from errors, it is imperative to prioritize the avoidance of these pitfalls wherever possible.
So, what missteps tend to be common among beginners when delving into technical analysis and trading?
Neglecting Risk Management:
‣Failing to establish appropriate risk-reward ratios and neglecting risk management strategies can lead to significant losses.
‣Traders must define their risk tolerance , set stop-loss orders, and diversify their portfolios to protect against adverse market movements.
‣Understanding position sizing and employing risk management tools, such as trailing stops, is crucial for preserving capital.
Chasing the Trend:
‣While trend-following is a popular strategy, blindly chasing trends without thorough analysis can result in poorly timed entries.
‣Traders should wait for confirmations, utilize technical indicators to identify trend strength, and avoid entering trades impulsively.
‣Recognizing trend reversals and adjusting strategies accordingly is essential for sustainable trading success.
Lack of Continual Learning:
‣The dynamic nature of financial markets requires traders to stay informed about market trends, economic developments, and emerging trading strategies.
‣Continuous learning through reading market analyses, attending webinars, and participating in trading communities enhances traders' decision-making capabilities.
‣Stagnation in learning may lead to outdated strategies and missed opportunities for profitable trades.
Impatience with Strategies:
‣Successful trading strategies require time to prove their effectiveness, and impatience can lead to premature abandonment.
‣Traders should maintain discipline, rigorously follow their strategies, and resist the urge to switch strategies too quickly.
‣Consistency and a long-term perspective are critical for evaluating the true efficacy of a trading strategy.
Focusing Solely on Technicals:
‣While technical analysis is valuable, ignoring fundamental factors can result in a narrow perspective.
‣Traders benefit from integrating both technical and fundamental analyses for a comprehensive understanding of market conditions.
‣Economic indicators, news events, and geopolitical factors can significantly impact asset prices, complementing technical analysis.
Emotional Trading:
‣Emotional decision-making, driven by FOMO , greed, or excitement, can lead to irrational actions and losses.
‣Traders must cultivate emotional discipline, adhere to their trading plans, and avoid making impulsive decisions based on transient emotions.
‣Utilizing mindfulness techniques and taking breaks during periods of high stress can help manage emotional responses.
Lack of Record-Keeping:
‣Maintaining a detailed trading journal is essential for tracking trades, analyzing strategies, and identifying areas for improvement.
‣Traders often overlook the importance of record-keeping, missing valuable insights that could enhance their trading performance.
‣Regularly reviewing past trades enables traders to learn from both successes and mistakes, refining their approach over time.
Ignoring Market Sentiment:
‣Market sentiment influences price movements, and overlooking it can lead to missed opportunities or unexpected losses.
‣Traders should pay attention to sentiment indicators, news sentiment analysis, and social media trends to gauge market sentiment.
‣Understanding how sentiment aligns with technical analysis provides a more holistic view of market conditions.
Overconfidence:
‣Overestimating one's abilities and becoming excessively confident can lead to risky decisions and substantial losses.
‣Traders should remain humble, acknowledge market uncertainties, and avoid overconfidence biases.
‣Regular self-assessment and seeking constructive feedback from peers can help prevent overconfidence.
Neglecting Diversification:
‣Concentrating all investments in a single asset class or market exposes traders to higher risks during market downturns.
‣Diversification involves spreading investments across different assets to mitigate risk and enhance portfolio stability.
‣Neglecting diversification may result in significant losses if a specific market experiences adverse movements.
Failure to Adapt to Market Conditions:
‣Unwillingness to adapt strategies to changing market conditions can lead to ineffective approaches.
‣Traders must stay flexible, recognize shifts in market dynamics, and adjust their strategies accordingly.
‣Failure to adapt may result in missed opportunities or losses during evolving market landscapes.
We've covered several fundamental mistakes that you'd do well to steer clear of when employing technical analysis. Keep in mind that trading is a challenging endeavor, and adopting a longer-term perspective often proves more practical.
Remember, achieving consistent proficiency in trading is a gradual journey that demands time and effort. It involves extensive practice to fine-tune your trading strategies and acquire the skills to craft your unique trade concepts. This approach enables you to pinpoint your strengths, recognize your weaknesses, and maintain command over your investment and trading choices.
Investors' Holy Grail - The Business/Economic CycleThe business cycle describes how the economy expands and contracts over time. It is an upward and downward movement of the gross domestic product along with its long-term growth rate.
The business cycle consists o f 6 phases/stages :
1. Expansion
2. Peak
3. Recession
4. Depression
5. Trough
6. Recovery
1) Expansion :
Sectors Affected: Technology, Consumer discretion
Expansion is the first stage of the business cycle. The economy moves slowly upward, and the cycle begins.
The government strengthens the economy:
Lowering taxes
Boost in spending.
- When the growth slows, the central bank reduces rates to encourage businesses to borrow.
- As the economy expands, economic indicators are likely to show positive signals, such as employment, income, wages, profits, demand, and supply.
- A rise in employment increases consumer confidence increasing activity in the housing markets, and growth turns positive. A high level of demand and insufficient supply lead to an increase in the price of production. Investors take a loan with high rates to fill the demand pressure. This process continues until the economy becomes favorable for expansion.
2) Peak :
Sector Affected : Financial, energy, materials
- The second stage of the business cycle is the peak which shows the maximum growth of the economy. Identifying the end point of an expansion is the most complex task because it can last for serval years.
- This phase shows a reduction in unemployment rates. The market continues its positive outlook. During expansion, the central bank looks for signs of building price pressures, and increased rates can contribute to this peak. The central bank also tries to protect the economy against inflation in this stage.
- Since employment rates, income, wages, profits, demand & supply are already high, there is no further increase.
- The investor will produce more and more to fill the demand pressure. Thus, the investment and product will become expensive. At this time point, the investor will not get a return due to inflation. Prices are way higher for buyers to buy. From this situation, a recession takes place. The economy reverses from this stage.
3) Recession :
Sector Affected : Utilities, healthcare, consumer staples
- Two consecutive quarters of back-to-back declines in gross domestic product constitute a recession.
- The recession is followed by a peak phase. In this phase economic indicators start melting down. The demand for the goods decreased due to expensive prices. Supply will keep increasing, and on the other hand, demand will begin to decline. That causes an "excess of supply" and will lead to falling in prices.
4) Depression :
- In more prolonged downturns, the economy enters into a depression phase. The period of malaise is called depression. Depression doesn't happen often, but when they do, there seems to be no amount of policy stimulus that can lift consumers and businesses out of their slumps. When The economy is declining and falling below steady growth, this stage is called depression.
- Consumers don't borrow or spend because they are pessimistic about the economic outlook. As the central bank cuts interest rates, loans become cheap, but businesses fail to take advantage of loans because they can't see a clear picture of when demand will start picking up. There will be less demand for loans. The business ends up sitting on inventories & pare back production, which they already produced.
- Companies lay off more and more employees, and the unemployment rate soars and confidence flatters.
5) Trough :
- When economic growth becomes negative, the outlook looks hopeless. Further decline in demand and supply of goods and services will lead to more fall in prices.
- It shows the maximum negative situation as the economy reached its lowest point. All economic indicators will be worse. Ex. The highest rate of unemployment, and No demand for goods and services(lowest), etc. After the completion, good time starts with the recovery phase.
6) Recovery :
Affected sectors: Industrials, materials, real estate
- As a result of low prices, the economy begins to rebound from a negative growth rate, and demand and production are both starting to increase.
- Companies stop shedding employees and start finding to meet the current level of demand. As a result, they are compelled to hire. As the months pass, the economy is once in expansion.
- The business cycle is important because investors attempt to concentrate their investments on those that are expected to do well at a certain time of the cycle.
- Government and the central bank also take action to establish a healthy economy. The government will increase expenditure and also take steps to increase production.
After the recovery phases, the economy again enters the expansion phase.
Safe heaven/Defensive Stocks - It maintains or anticipates its values over the crisis, then does well. We can even expect good returns in these asset classes. Ex. utilities, health care, consumer staples, etc. ("WE WILL DISCUSS MORE IN OUR UPCOMING ARTICLE DUE TO ARTICLE LENGTH.")
It's a depression condition for me that I couldn't complete my discussion after spending many days in writing this article. However, I will upload the second part of this article that will help investors and traders in real life. This article took me a long time to write. I'm not expecting likes or followers, but I hope you will read it.
@Money_Dictators
Algorithmic vs. Manual Trading - Which Strategy Reigns SupremeIntro:
In the dynamic world of financial markets, trading strategies have evolved significantly over the years. With advancements in technology and the rise of artificial intelligence (AI), algorithmic trading, also known as algo trading, has gained immense popularity. Algo trading utilizes complex algorithms and automated systems to execute trades swiftly and efficiently, offering numerous advantages over traditional manual trading approaches.
In this article, we will explore the advantages and disadvantages of algo trading compared to manual trading, providing a comprehensive overview of both approaches. We will delve into the speed, efficiency, emotion-free decision making, consistency, scalability, accuracy, backtesting capabilities, risk management, and diversification offered by algo trading. Additionally, we will discuss the flexibility, adaptability, intuition, experience, emotional intelligence, and creative thinking that manual trading brings to the table.
Advantages of Algo trading:
Speed and Efficiency:
One of the primary advantages of algo trading is its remarkable speed and efficiency. With algorithms executing trades in milliseconds, algo trading eliminates the delays associated with manual trading. This speed advantage enables traders to capitalize on fleeting market opportunities and capture price discrepancies that would otherwise be missed. By swiftly responding to market changes, algo trading ensures that traders can enter and exit positions at optimal prices.
Emotion-Free Decision Making: Humans are prone to emotional biases, which can cloud judgment and lead to irrational investment decisions. Algo trading removes these emotional biases by relying on pre-programmed rules and algorithms. The algorithms make decisions based on logical parameters, objective analysis, and historical data, eliminating the influence of fear, greed, or other human emotions. As a result, algo trading enables more disciplined and objective decision-making, ultimately leading to better trading outcomes.
Consistency: Consistency is a crucial factor in trading success. Algo trading provides the advantage of maintaining a consistent trading approach over time. The algorithms follow a set of predefined rules consistently, ensuring that trades are executed in a standardized manner. This consistency helps traders avoid impulsive decisions or deviations from the original trading strategy, leading to a more disciplined approach to investing.
Enhanced Scalability: Traditional manual trading has limitations when it comes to scalability. As trade volumes increase, it becomes challenging for traders to execute orders efficiently. Algo trading overcomes this hurdle by automating the entire process. Algorithms can handle a high volume of trades across multiple markets simultaneously, ensuring scalability without compromising on execution speed or accuracy. This scalability empowers traders to take advantage of diverse market opportunities without any operational constraints.
Increased Accuracy: Algo trading leverages the power of technology to enhance trading accuracy. The algorithms can analyze vast amounts of market data, identify patterns, and execute trades based on precise parameters. By eliminating human error and subjectivity, algo trading increases the accuracy of trade execution. This improved accuracy can lead to better trade outcomes, maximizing profits and minimizing losses.
Backtesting Capabilities and Optimization: Another significant advantage of algo trading is its ability to backtest trading strategies. Algorithms can analyze historical market data to simulate trading scenarios and evaluate the performance of different strategies. This backtesting process helps traders optimize their strategies by identifying patterns or variables that generate the best results. By fine-tuning strategies before implementing them in live markets, algo traders can increase their chances of success.
Automated Risk Management: Automated Risk Management: Managing risk is a critical aspect of trading. Algo trading offers automated risk management capabilities that can be built into the algorithms. Traders can program specific risk parameters, such as stop-loss orders or position sizing rules, to ensure that losses are limited and positions are appropriately managed. By automating risk management, algo trading reduces the reliance on manual monitoring and helps protect against potential market downturns.
Diversification: Diversification: Algo trading enables traders to diversify their portfolios effectively. With algorithms capable of simultaneously executing trades across multiple markets, asset classes, or strategies, traders can spread their investments and reduce overall risk. Diversification helps mitigate the impact of individual market fluctuations and can potentially enhance long-term returns.
Removal of Emotional Biases: Finally, algo trading eliminates the influence of emotional biases that often hinder trading decisions. Fear, greed, and other emotions can cloud judgment and lead to poor investment choices. Byrelying on algorithms, algo trading removes these emotional biases from the decision-making process. This objective approach helps traders make more rational and data-driven decisions, leading to better overall trading performance.
Disadvantage of Algo Trading
System Vulnerabilities and Risks: One of the primary concerns with algo trading is system vulnerabilities and risks. Since algo trading relies heavily on technology and computer systems, any technical malfunction or system failure can have severe consequences. Power outages, network disruptions, or software glitches can disrupt trading operations and potentially lead to financial losses. It is crucial for traders to have robust risk management measures in place to mitigate these risks effectively.
Technical Challenges and Complexity: Technical Challenges and Complexity: Algo trading involves complex technological infrastructure and sophisticated algorithms. Implementing and maintaining such systems require a high level of technical expertise and resources. Traders must have a thorough understanding of programming languages and algorithms to develop and modify trading strategies. Additionally, monitoring and maintaining the infrastructure can be challenging and time-consuming, requiring continuous updates and adjustments to keep up with evolving market conditions.
Over-Optimization: Another disadvantage of algo trading is the risk of over-optimization. Traders may be tempted to fine-tune their algorithms excessively based on historical data to achieve exceptional past performance. However, over-optimization can lead to a phenomenon called "curve fitting," where the algorithms become too specific to historical data and fail to perform well in real-time market conditions. It is essential to strike a balance between optimizing strategies and ensuring adaptability to changing market dynamic
Over Reliance on Historical Data: Algo trading heavily relies on historical data to generate trading signals and make decisions. While historical data can provide valuable insights, it may not always accurately reflect future market conditions. Market dynamics, trends, and relationships can change over time, rendering historical data less relevant. Traders must be cautious about not relying solely on past performance and continuously monitor and adapt their strategies to current market conditions.
Lack of Adaptability: Another drawback of algo trading is its potential lack of adaptability to unexpected market events or sudden changes in market conditions. Algo trading strategies are typically based on predefined rules and algorithms, which may not account for unforeseen events or extreme market volatility. Traders must be vigilant and ready to intervene or modify their strategies manually when market conditions deviate significantly from the programmed rules.
Advantages of Manual Trading
Flexibility and Adaptability: Manual trading offers the advantage of flexibility and adaptability. Traders can quickly adjust their strategies and react to changing market conditions in real-time. Unlike algorithms, human traders can adapt their decision-making process based on new information, unexpected events, or emerging market trends. This flexibility allows for agile decision-making and the ability to capitalize on evolving market opportunities.
Intuition and Experience: Human traders possess intuition and experience, which can be valuable assets in the trading process. Through years of experience, traders develop a deep understanding of the market dynamics, patterns, and interrelationships between assets. Intuition allows them to make informed judgments based on their accumulated knowledge and instincts. This human element adds a qualitative aspect to trading decisions that algorithms may lack.
Complex Decision-making: Manual trading involves complex decision-making that goes beyond predefined rules. Traders analyze various factors, such as fundamental and technical indicators, economic news, and geopolitical events, to make well-informed decisions. This ability to consider multiple variables and weigh their impact on the market enables traders to make nuanced decisions that algorithms may overlook.
Emotional Intelligence and Market Sentiment: Humans possess emotional intelligence, which can be advantageous in trading. Emotions can provide valuable insights into market sentiment and investor psychology. Human traders can gauge market sentiment by interpreting price movements, news sentiment, and market chatter. Understanding and incorporating market sentiment into decision-making can help traders identify potential market shifts and take advantage of sentiment-driven opportunities.
Contextual Understanding: Manual trading allows traders to have a deep contextual understanding of the markets they operate in. They can analyze broader economic factors, political developments, and industry-specific dynamics to assess the market environment accurately. This contextual understanding provides traders with a comprehensive view of the factors that can influence market movements, allowing for more informed decision-making.
Creative and Opportunistic Thinking: Human traders bring creative and opportunistic thinking to the trading process. They can spot unique opportunities that algorithms may not consider. By employing analytical skills, critical thinking, and out-of-the-box approaches, traders can identify unconventional trading strategies or undervalued assets that algorithms may overlook. This creative thinking allows traders to capitalize on market inefficiencies and generate returns.
Complex Market Conditions: Manual trading thrives in complex market conditions that algorithms may struggle to navigate. In situations where market dynamics are rapidly changing, volatile, or influenced by unpredictable events, human traders can adapt quickly and make decisions based on their judgment and expertise. The ability to think on their feet and adjust strategies accordingly enables traders to navigate challenging market conditions effectively.
Disadvantage of Manual Trading
Emotional Bias: Algo trading lacks human emotions, which can sometimes be a disadvantage. Human traders can analyze market conditions based on intuition and experience, while algorithms solely rely on historical data and predefined rules. Emotional biases, such as fear or greed, may play a role in decision-making, but algorithms cannot factor in these nuanced human aspects.
Time and Effort: Implementing and maintaining algo trading systems require time and effort. Developing effective algorithms and strategies demands significant technical expertise and resources. Traders need to continuously monitor and update their algorithms to ensure they remain relevant in changing market conditions. This ongoing commitment can be time-consuming and may require additional personnel or technical support.
Execution Speed: While algo trading is known for its speed, there can be challenges with execution. In fast-moving markets, delays in order execution can lead to missed opportunities or less favorable trade outcomes. Algo trading systems need to be equipped with high-performance infrastructure and reliable connectivity to execute trades swiftly and efficiently.
Information Overload: In today's digital age, vast amounts of data are available to traders. Algo trading systems can quickly process large volumes of information, but there is a risk of information overload. Filtering through excessive data and identifying relevant signals can be challenging. Traders must carefully design algorithms to focus on essential information and avoid being overwhelmed by irrelevant or noisy data.
The Power of AI in Enhancing Algorithmic Trading:
Data Analysis and Pattern Recognition: AI algorithms excel at processing vast amounts of data and recognizing patterns that may be difficult for human traders to identify. By analyzing historical market data, news, social media sentiment, and other relevant information, AI-powered algorithms can uncover hidden correlations and trends. This enables traders to develop more robust trading strategies based on data-driven insights.
Predictive Analytics and Forecasting: AI algorithms can leverage machine learning techniques to generate predictive models and forecasts. By training on historical market data, these algorithms can identify patterns and relationships that can help predict future price movements. This predictive capability empowers traders to anticipate market trends, identify potential opportunities, and adjust their strategies accordingly.
Real-time Market Monitoring: AI-based systems can continuously monitor real-time market data, news feeds, and social media platforms. This enables traders to stay updated on market developments, breaking news, and sentiment shifts. By incorporating real-time data into their algorithms, traders can make faster and more accurate trading decisions, especially in volatile and rapidly changing market conditions.
Adaptive and Self-Learning Systems: AI algorithms have the ability to adapt and self-learn from market data and trading outcomes. Through reinforcement learning techniques, these algorithms can continuously optimize trading strategies based on real-time performance feedback. This adaptability allows the algorithms to evolve and improve over time, enhancing their ability to generate consistent returns and adapt to changing market dynamics.
Enhanced Decision Support:
AI algorithms can provide decision support tools for traders, presenting them with data-driven insights, risk analysis, and recommended actions. By combining the power of AI with human expertise, traders can make more informed and well-rounded decisions. These decision support tools can assist in portfolio allocation, trade execution, and risk management, enhancing overall trading performance.
How Algorithmic Trading Handles News and Events?
In the fast-paced world of financial markets, news and events play a pivotal role in driving price movements and creating trading opportunities. Algorithmic trading has emerged as a powerful tool to capitalize on these dynamics.
Automated News Monitoring:
Algorithmic trading systems are equipped with the capability to automatically monitor news sources, including financial news websites, press releases, and social media platforms. By utilizing natural language processing (NLP) and sentiment analysis techniques, algorithms can filter through vast amounts of news data, identifying relevant information that may impact the market.
Real-time Data Processing:
Algorithms excel in processing real-time data and swiftly analyzing its potential impact on the market. By integrating news feeds and other event-based data into their models, algorithms can quickly evaluate the relevance and potential market significance of specific news or events. This enables traders to react promptly to emerging opportunities or risks.
Event-driven Trading Strategies:
Algorithmic trading systems can be programmed to execute event-driven trading strategies. These strategies are designed to capitalize on the market movements triggered by specific events, such as economic releases, corporate earnings announcements, or geopolitical developments. Algorithms can automatically scan for relevant events and execute trades based on predefined criteria, such as price thresholds or sentiment analysis outcomes.
Sentiment Analysis:
Sentiment analysis is a crucial component of news and event-based trading. Algorithms can analyze news articles, social media sentiment, and other textual data to assess market sentiment surrounding a specific event or news item. By gauging positive or negative sentiment, algorithms can make informed trading decisions and adjust strategies accordingly.
Backtesting and Optimization:
Algorithmic trading allows for backtesting and optimization of news and event-driven trading strategies. Historical data can be used to test the performance of trading models under various news scenarios. By analyzing the past market reactions to similar events, algorithms can be fine-tuned to improve their accuracy and profitability.
Algorithmic News Trading:
Algorithmic news trading involves the automatic execution of trades based on predefined news triggers. For example, algorithms can be programmed to automatically buy or sell certain assets when specific news is released or when certain conditions are met. This automated approach eliminates the need for manual monitoring and ensures swift execution in response to news events.
Risk Management:
Algorithmic trading systems incorporate risk management measures to mitigate the potential downside of news and event-driven trading. Stop-loss orders, position sizing algorithms, and risk management rules can be integrated to protect against adverse market movements or unexpected news outcomes. This helps to minimize losses and ensure controlled risk exposure.
Flash Crash 2010: A Historic Market Event
On May 6, 2010, the financial markets experienced an unprecedented event known as the "Flash Crash." Within a matter of minutes, stock prices plummeted dramatically, only to recover shortly thereafter. This sudden and extreme market turbulence sent shockwaves through the financial world and highlighted the vulnerabilities of an increasingly interconnected and technology-driven trading landscape.
The Flash Crash Unfolds:
On that fateful day, between 2:32 p.m. and 2:45 p.m. EDT, the U.S. stock market experienced an abrupt and severe decline in prices. Within minutes, the Dow Jones Industrial Average (DJIA) plunged nearly 1,000 points, erasing approximately $1 trillion in market value. Blue-chip stocks, such as Procter & Gamble and Accenture, saw their prices briefly crash to a mere fraction of their pre-crash values. This sudden and dramatic collapse was followed by a swift rebound, with prices largely recovering by the end of the trading session.
The Contributing Factors:
Several factors converged to create the perfect storm for the Flash Crash. One key element was the increasing prevalence of high-frequency trading (HFT), where computer algorithms execute trades at lightning-fast speeds. This automated trading, combined with the interconnectedness of markets, exacerbated the speed and intensity of the crash. Additionally, the widespread use of stop-loss orders, which are triggered when a stock reaches a specified price, amplified the selling pressure as prices rapidly declined. A lack of adequate market safeguards and regulatory mechanisms further exacerbated the situation.
Role of Algorithmic Trading:
Algorithmic trading played a significant role in the Flash Crash. As the markets rapidly declined, certain algorithmic trading strategies failed to function as intended, exacerbating the sell-off. These algorithms, designed to capture small price discrepancies, ended up engaging in a "feedback loop" of selling, pushing prices even lower. The speed and automation of algorithmic trading made it difficult for human intervention to effectively mitigate the situation in real-time.
Market Reforms and Lessons Learned:
The Flash Crash of 2010 prompted significant regulatory and technological reforms aimed at preventing similar events in the future. Measures included the implementation of circuit breakers, which temporarily halt trading during extreme price movements, and revisions to market-wide circuit breaker rules. Market surveillance and coordination between exchanges and regulators were also enhanced to better monitor and respond to unusual trading activity. Additionally, the incident highlighted the need for greater transparency and scrutiny of algorithmic trading practices.
Implications for Market Stability:
The Flash Crash served as a wake-up call to market participants and regulators, underscoring the potential risks associated with high-frequency and algorithmic trading. It highlighted the importance of ensuring that market infrastructure and regulations keep pace with technological advancements. The incident also emphasized the need for market participants to understand the intricacies of the trading systems they employ, and for regulators to continually evaluate and adapt regulatory frameworks to address emerging risks.
The Flash Crash of 2010 stands as a pivotal moment in financial market history, exposing vulnerabilities in the increasingly complex and interconnected world of electronic trading. The event triggered significant reforms and led to a greater focus on market stability, transparency, and risk management. While strides have been made to enhance market safeguards and regulatory oversight, ongoing vigilance and continuous adaptation to technological advancements are necessary to maintain the integrity and stability of modern financial markets.
How Algorithmic Trading Thrives in Changing Markets?
Algorithmic trading (ALGO) can tackle changing market conditions through various techniques and strategies that allow algorithms to adapt and respond effectively. Here are some ways ALGO can address changing market conditions:
Real-Time Data Analysis: Algo systems continuously monitor market data, including price movements, volume, news feeds, and economic indicators, in real-time. By analyzing this data promptly, algorithms can identify changing market conditions and adjust trading strategies accordingly. This enables Algo to capture opportunities and react to market shifts more rapidly than human traders.
Dynamic Order Routing: Algo systems can dynamically route orders to different exchanges or liquidity pools based on prevailing market conditions. By assessing factors such as liquidity, order book depth, and execution costs, algorithms can adapt their order routing strategies to optimize trade execution. This flexibility ensures that algo takes advantage of the most favorable market conditions available at any given moment.
Adaptive Trading Strategies: Algo can utilize adaptive trading strategies that are designed to adjust their parameters or rules based on changing market conditions. These strategies often incorporate machine learning algorithms to continuously learn from historical data and adapt to evolving market dynamics. By dynamically modifying their rules and parameters, algo systems can optimize trading decisions and capture opportunities across different market environments.
Volatility Management: Changing market conditions often come with increased volatility. Algo systems can incorporate volatility management techniques to adjust risk exposure accordingly. For example, algorithms may dynamically adjust position sizes, set tighter stop-loss levels, or modify risk management parameters based on current market volatility. These measures help to control risk and protect capital during periods of heightened uncertainty.
Pattern Recognition and Statistical Analysis: Algo systems can employ advanced pattern recognition and statistical analysis techniques to identify recurring market patterns or anomalies. By recognizing these patterns, algorithms can make informed trading decisions and adjust strategies accordingly. This ability to identify and adapt to patterns helps algocapitalize on recurring market conditions while also remaining adaptable to changes in market behavior.
Backtesting and Simulation: Algo systems can be extensively backtested and simulated using historical market data. By subjecting algorithms to various market scenarios and historical data sets, traders can evaluate their performance and robustness under different market conditions. This process allows for fine-tuning and optimization of algo strategies to better handle changing market dynamics.
In summary, algo tackles changing market conditions through real-time data analysis, dynamic order routing, adaptive trading strategies, volatility management, pattern recognition, statistical analysis, and rigorous backtesting. By leveraging these capabilities, algo can effectively adapt to evolving market conditions and capitalize on opportunities while managing risks more efficiently than traditional trading approaches
The Rise of Algo Traders: Is Technical Analysis Losing Ground?
Although algorithmic trading (algo trading) can automate and optimize certain elements
of technical analysis, it is improbable that it will fully substitute it. Technical analysis is a financial discipline that encompasses the examination of historical price and volume data, chart patterns, indicators, and other market variables to inform trading strategies. There are several reasons why algo traders cannot entirely supplant technical analysis:
Interpretation of Market Psychology: Technical analysis incorporates the understanding of market psychology, which is based on the belief that historical price patterns repeat themselves due to human behavior. It involves analyzing investor sentiment, trends, support and resistance levels, and other factors that can influence market movements. Algo traders may use technical indicators to identify these patterns, but they may not fully capture the nuances of market sentiment and psychological factors.
Subjectivity in Analysis: Technical analysis often involves subjective interpretation by traders, as different individuals may analyze the same chart or indicator differently. Algo traders rely on predefined rules and algorithms that may not encompass all the subjective elements of technical analysis. Human traders can incorporate their experience, intuition, and judgment to make nuanced decisions that may not be easily captured by algorithms.
Market Adaptability: Technical analysis requires the ability to adapt to changing market conditions and adjust strategies accordingly. While algorithms can be programmed to adjust certain parameters based on market data, they may not possess the same adaptability as human traders who can dynamically interpret and respond to evolving market conditions in real-time.
Unpredictable Events: Technical analysis is often challenged by unexpected events, such as geopolitical developments, economic announcements, or corporate news, which can cause significant market disruptions. Human traders may have the ability to interpret and react to these events based on their knowledge and understanding, while algo traders may struggle to respond effectively to unforeseen circumstances.
Fundamental Analysis: Technical analysis primarily focuses on price and volume data, while fundamental analysis considers broader factors such as company financials, macroeconomic indicators, industry trends, and news events. Algo traders may not have the capacity to analyze fundamental factors and incorporate them into their decision-making process, which can limit their ability to fully replace technical analysis.
In conclusion, while algo trading can automate certain elements of technical analysis, it is unlikely to replace it entirely. Technical analysis incorporates subjective interpretation, market psychology, adaptability, and fundamental factors that may be challenging for algorithms to fully replicate. Human traders with expertise in technical analysis and the ability to interpret market dynamics will continue to play a significant role in making informed trading decisions.
The Ultimate Winner - Algo Trading or Manual Trading?
Determining whether algo trading or manual trading is best depends on various factors, including individual preferences, trading goals, and skill sets. Both approaches have their advantages and limitations, and what works best for one person may not be the same for another. Let's compare the two:
Speed and Efficiency: Algo trading excels in speed and efficiency, as computer algorithms can analyze data and execute trades within milliseconds. Manual trading involves human decision-making, which may be subject to cognitive biases and emotional factors, potentially leading to slower execution or missed opportunities.
Emotion and Discipline: Algo trading eliminates emotional biases from trading decisions, as algorithms follow predefined rules without being influenced by fear or greed. Manual trading requires discipline and emotional control to make objective decisions, which can be challenging for some traders.
Adaptability: Algo trading can quickly adapt to changing market conditions and execute trades based on pre-programmed rules. Manual traders can adapt their strategies as well, but it may require more time and effort to monitor and adjust to rapidly evolving market dynamics.
Complexity and Technical Knowledge: Algo trading requires programming skills or the use of algorithmic platforms, which can be challenging for traders without a technical background. Manual trading, on the other hand, relies on an understanding of fundamental and technical analysis, which requires continuous learning and analysis of market trends.
Strategy Development: Algo trading allows for systematic and precise strategy development based on historical data analysis and backtesting. Manual traders can develop their strategies as well, but it may involve more subjective interpretations of charts, patterns, and indicators.
Risk Management: Both algo trading and manual trading require effective risk management. Algo trading can incorporate predetermined risk management parameters into algorithms, whereas manual traders need to actively monitor and manage risk based on their judgment.
Ultimately, the best approach depends on individual circumstances. Some traders may prefer algo trading for its speed, efficiency, and objective decision-making, while others may enjoy the flexibility and adaptability of manual trading. It is worth noting that many traders use a combination of both approaches, utilizing algo trading for certain strategies and manual trading for others.
In conclusion, algorithmic trading offers benefits such as speed, efficiency, and risk management, while manual trading provides adaptability and human intuition. AI enhances algorithmic trading by processing data, recognizing patterns, and providing decision support. Algos excel in automated news monitoring and event-driven strategies. However, the Flash Crash of 2010 exposed vulnerabilities in the interconnected trading landscape, with algorithmic trading exacerbating the market decline. It serves as a reminder to implement appropriate safeguards and risk management measures. Overall, a balanced approach that combines the strengths of both algorithmic and manual trading can lead to more effective and resilient trading strategies.
The Timeless Abyss of Trading: The Greatest Trap Of All-timeI am here with a unique topic. It is about a psychological trading trap called the cycle of doom. What got me interested in this psychological topic? Well, there are very few articles about it. You can count them on one hand, and more than 90% of traders are losing money.
Most traders find their method of trading. What stops them from becoming profitable traders? Tradingview platform is one of the biggest charting platforms that provide an educational section and editorial peak for traders to sharpen their knowledge related to technical analysis, trading methodology, trading psychology, etc.
As a trader, we are making market memories by improving screen time, practicing technical analysis, analyzing option data(if applicable), and a lot more. Why do we still fall short in applying in real time? What stops us from becoming a profitable trader? Something looks missing out!
I would like to draw your attention to the psychological trap cycle of doom, a topic discussed by only a few traders. Let me be clear, I do believe that this topic is universally applicable!
The cycle of doom is made up of three phases:
The search
The Action
The Blame
"Sun Tzu said Know the enemy and know yourself in a hundred battles you will never be in peril."
In order to exit from the loop of the cycle, we have to understand the parts of the cycle.
1) The Search:
Probably, it's the first phase of the cycle. Just recall your initial stages of trading. You were finding a trading strategy to make money out of the money. You may have asked to friend, watched a YouTube video, read an article on Tradingview, bought a book or course or indicators, or purchased the strategy. At that time, you were entered into the cycle.
Additionally, we should never trade for enjoyment but treat it as a business. The statement does not apply to the initial stages. Trader explores new methods, theories, and systems.
Postulate, Trader A uses X theory to do their day trading for a living, and you were impressed and took it to put your money on it, or you found the method by yourself. The trader will switch his next position after finding a system that is convenient for his trading and trusts that he can take minimal risks to achieve expected returns.
2) The Action:
The Action phase is the second phase of the cycle. Now, you have a trading system that will make your money grow to expected returns. This phase can be super exciting for traders as they believe he has an edge and is most likely a key to opening a present of unrealistic returns.
Issues arise when a trader employs their strategy without supporting evidence, like backtesting results. Your heart may be pounding, and your fingers may be trembling like a child, but it doesn't mean you should directly trade the strategy without checking the results, failure, and performance of the system.
Just five percent of traders actually test a trading system before putting it into action. You might discover that the trading system performs well for a prolonged period. Suddenly, a drawdown appeared! At a certain point, everything may seem bleak. While profits might flow in initially, eventually, the losing trades start to accumulate.
It's a red signal for traders that their trading system is now on oxygen. I don't think traders can trust the system after a big streak of losing traders. You have entered into the blame phase.
3) The Blame:
The Blame is the final stage of the cycle. As we discussed, the trader has lost their trust in his trading system, which was a holy grail for him at the initial stage. The Red portfolio hurts more than a break-up. The trader is not happy with the system as it has wiped out the gain + trading capital, and the trading system is the only cause that affected the profit and wants to remove the system and search for a new strategy.
4) Loop of the cycle:
As can be seen, the trader again finds a new strategy and makes an effort and action on it, then blames the system. The cycle repeats and traps the trader in this way.
How to get out of the cycle?
1. Modification is the only way to survival & Trust the system:
Traders should modify their strategy according to market conditions, instruments, and trading style. Maybe not everything works for everyone. Therefore, traders should do this according to him. For example, I use Elliott wave theory as the first base and price action as a confirmation tool along with different indicators according to the situation. I do modify Elliott and price action as per my observation of price moves and wavelength.
2. Backtesting is the holy grail:
Choosing trading theory also depends on traders' mindset, risk-aptitude, and expected return. Scalpers will never check the PE, P/S, or EV/EBITDA ratio of the firm just because of their duration and risk-reward calculation.
After choosing an appropriate trading strategy, traders should backtest their trading strategy before doing real-market transaction. We have the advantage of backtesting tools, algo, and virtual account, which was not available for pit traders.
3. Risk management:
Already many ideas are available on this topic. The trading system should be giving proper returns as per the taken risk unless it is nothing more than Drilling a well in the desert.
I need more time to write a full idea on the escape of the cycle of doom.
Thank you!
@Money_Dictators
Psychographic Analysis - Life Cycle of InvestorImagine an investment as a journey with twists and turns. Knowing its different stages is like having a map for investors. It helps them decide if they want a thrilling ride with big potential rewards or a smoother path with steady stability, based on their comfort with risk. For investors, understanding the life cycle is crucial because it directly impacts the investor's risk appetite.
✨Personality characteristics of investors
✨Risk/Return Trade-Offs for Investors:
🔸 Risk/reward trade-offs are related to the relationship that exists between the degree of risk an investor takes and the potential reward for the investment. larger-risk investments have the potential for greater returns, but they also have the potential for greater losses as well. Lower-risk investments, on the other hand, have the potential for lower profits, but also for fewer losses.
🔸 The risk tolerance and investment objectives of investors will change over time. Younger investors who are just starting out are more likely to be on the risk/reward spectrum, willing to take on more risk in exchange for the chance of larger profits. This is because they have a longer time horizon with which to invest and recoup from losses. Investors may grow more risk-averse and migrate to the left side of the spectrum as they near retirement. They may need to start withdrawing from their assets to fund their retirement, so they want to protect their money and avoid large losses.
✨Phases of the Investment Life Cycle:
↪️ Here is a breakdown of the investment life cycle and how risk/reward trade-offs may change at each stage:
1️⃣ Accumulation Phase
In the initial stage, known as the accumulation phase, individuals find themselves with a modest net worth relative to their liabilities. Their investment portfolio tends to be limited and less diversified. Goals often include funding education, purchasing a home, and laying the groundwork for future financial independence. With a long time horizon and potential income growth, investors in this phase can afford to explore high-return, high-risk capital gain-oriented investments.
2️⃣ Consolidation Phase
As individuals progress through their mid-to-late careers, they enter the consolidation phase. Characterized by income surpassing expenses, this period, although still distant from retirement, prompts a shift towards capital preservation. Investors start balancing high capital gain investments with lower-risk assets, creating a more stable and resilient portfolio.
3️⃣ Spending Phase
The spending phase marks a transition when living expenses are no longer sustained by earned income but by accumulated assets, such as investments and retirement funds. With a decreased likelihood of returning to work, stability becomes paramount in the investment portfolio. Preferences shift towards investments generating steady income through dividends, interest, and rentals. Despite the reduced time horizon, some growth-focused investments are retained to hedge against inflation.
4️⃣ Gifting Phase
In the final phase, the gifting phase, investors realize an abundance of assets beyond personal needs. At this juncture, the purpose of investments may evolve, focusing on leaving a lasting legacy or supporting charitable causes.
📊 Importance:
It's like having a guide for your financial journey when you understand the investor life cycle. It assists you in choosing, depending on your comfort level with danger, between an exhilarating, high-risk ride and a more steady, smooth road. Understanding the various investment phases is essential as it influences your willingness to accept risk. It's similar to changing your game plan as you move through different stages of life, such as the exuberant early years and the more measured approach as you near retirement. Put simply, understanding the investor life cycle assists you at every stage in reaching your financial objectives and making wise decisions.
By @Money_Dictators on @TradingView Platform
Real Interest Rate: How It Affects the Economy and Forex MarketReal interest rate is the interest rate adjusted for inflation. Nominal interest rate is the reported rate, while real interest rate is the actual rate that the borrower receives after accounting for inflation.
The formula for calculating real interest rate is as follows:
Real interest rate = Nominal interest rate - Inflation rate
For example, if the nominal interest rate is 5% and the inflation rate is 3%, then the real interest rate is 2%.
Real interest rate plays an important role in the economy. High real interest rates can encourage investment and economic growth. Conversely, low real interest rates can dampen investment and economic growth.
Real interest rate has a significant impact on the forex market. An increase in the real interest rate will make the domestic currency more attractive to foreign investors. This is because foreign investors can earn higher returns from their investments in countries with high real interest rates. An increase in the real interest rate will cause the domestic currency to appreciate against foreign currencies. This is because foreign investors will increase demand for the domestic currency to invest. A decrease in the real interest rate will cause the domestic currency to depreciate against foreign currencies. This is because foreign investors will reduce demand for the domestic currency to invest.
Here are some examples of the impact of real interest rates on the forex market:
In 2022, the US Federal Reserve (The Fed) raised the real interest rate. This caused the US dollar to appreciate against other currencies.
DXY
USDJPY
USDDKK
USDCNH
In 2022, the European Central Bank (ECB) lowered the real interest rate. This caused the euro to depreciate against other currencies.
EURCAD
EURCHF
EURSEK
Governments and central banks can use the real interest rate as one of the instruments of monetary policy to influence the exchange rate of the currency. For example, if the government wants to increase the exchange rate of the domestic currency, the government can raise the real interest rate. Real interest rate can be used to predict the movements of currency pairs. Currency pairs with higher real interest rates tend to appreciate against currency pairs with lower real interest rates.
Here are the steps for using real interest rate to predict the movements of currency pairs:
Collect data on real interest rates from the two countries whose currencies form the currency pair.
Compare the real interest rates of the two countries.
If the real interest rate of country A is higher than the real interest rate of country B, then the currency pair A/B will tend to appreciate.
For example, the real interest rate of the United States is 1.8%, while the real interest rate of Japan is -3.1%. Therefore, the currency pair US dollar/Japanese yen (USD/JPY) will tend to appreciate by 4.9%.
Real interest rate is only one factor that affects the movements of currency pairs. Other factors that should also be considered include economic and political factors that can affect the demand and supply of the two currencies.
The World of ETFsIn the vast landscape of investments, Exchange-Traded Funds (ETFs) stand as a unique bridge, merging the best of both stocks and mutual funds. While traditional managed funds pool investors' money into assets managed by professionals, ETFs introduce a compelling twist, allowing for the flexibility of stock trading.
Unlike managed funds, ETFs are akin to stocks, enabling investors to buy and sell them at any time during market hours . This accessibility aligns ETFs more closely with the dynamic nature of stocks, catering to the on-demand needs of modern investors.
However, just like any investment, ETFs come with their nuances and risks. Diversification, often touted as an investment safety net, does mitigate some risks but can't fully shield against market volatility.
Different ETFs carry varying levels of risk, making understanding these distinctions vital before investing. Additionally, the past performance of ETFs isn't always a reliable indicator of future results, underlining the importance of comprehensive research and sound decision-making.
Bitcoin ETFs: The Gateway to Crypto Investments
In recent years, the advent of Bitcoin ETFs has added an intriguing chapter to the investment narrative. These financial instruments enable investors to engage with Bitcoin's price movements without directly owning the cryptocurrency. Bitcoin ETFs, traded on conventional stock exchanges, provide an accessible avenue for traditional investors to venture into the crypto sphere.
Within the realm of Bitcoin ETFs, there are two primary types: spot and futures-based ETFs:
Spot Bitcoin ETFs offer direct exposure to Bitcoin's real-time market price, involving the actual cryptocurrency.
On the other hand, futures-based ETFs utilize Bitcoin futures contracts, enabling speculation on the asset's future price without owning the underlying asset.
The interest in Bitcoin ETFs can be attributed to several factors. First and foremost, they offer unparalleled ease of access. Trading on mainstream stock exchanges simplifies the process, allowing investors to leverage existing brokerage accounts without delving into the complexities of crypto exchanges.
Moreover, the regulatory oversight accompanying ETFs adds a layer of security, easing concerns related to fraud and market manipulation prevalent in unregulated crypto markets.
Additionally, the introduction of Bitcoin ETFs signifies a significant shift, indicating the integration of cryptocurrencies into traditional financial systems.
While the United States has yet to approve a spot Bitcoin ETF, several Bitcoin futures-linked ETFs have gained regulatory approval , broadening investment horizons.
Beyond Bitcoin: Exploring the Crypto ETF Spectrum
While Bitcoin has seized the spotlight, the crypto ETF landscape is not confined to it alone. Outside the United States, various Cryptocurrency Exchange-Traded Products (ETPs) encompass a spectrum of digital assets beyond Bitcoin. These offerings enable diversification within the digital asset space, catering to investors keen on exploring a range of cryptocurrencies.
In the United States, ETFs linked to cryptocurrencies like Ether also exist, albeit in the futures-related domain. Although spot-based crypto ETFs are yet to make their debut, the evolving regulatory landscape and market demand may pave the way for these in the future.
As the financial world continues its digital transformation, understanding ETFs and their crypto counterparts becomes paramount. By bridging the gap between traditional stocks and the dynamic crypto sphere, ETFs empower investors with newfound opportunities and avenues for portfolio growth.
Stay tuned for the evolving of crypto ETFs, where the world of investments meets the future of finance.
12 Most Common Trading Myths - BUSTEDAs long as people lose money with trading (and that is like 98%) of the lot.
They will preach the bad word.
And this will lead to rumour which will create false beliefs - I.E Myths...
Well I've been trading for two decades and I'm going to put these myths to bed.
Let's go!
Myth 1: It’s a Get-Rich-Quick Scheme
Trading has long been shrouded in the myth of transforming anyone into an overnight millionaire.
But it’s an illusion. It’s what drives newbies and amateurs into the trading world.
And then a few months later, when they realise what it actually takes to grow an account.
They move to the next “best” thing.
Trading is a forever life-style that requires ongoing discipline and patience through strategic planning, knowledge and presteen execution.
And not to mention, it also involves periods of losses.
There are no shortcuts to wealth in trading, it’s a journey, not a sprint!
Myth 2: It’s Just High-Stakes Gambling
Trading is a form of gambling.
But strategic gambling.
It’s not like pulling the slots machine and having a chance of being right or wrong.
Or flipping a coin.
No, trading has an element of risk and reward control.
And it is based on nothing more than probabilities and comprehensive understanding of market trends, money management and analytical skills.
Unlike gambling, which is based largely on luck.
You have an element of control with the outcome. That’s through trading journals, back and forward testing and making stringent decisions.
Myth 3: More Risk, More Reward
Yes! If you risk more you’ll gain more.
But when you risk more, you can also LOSE way more.
With trading derivatives and leverage, you’re exposed to more than what you put in.
Sometimes 10 times, sometimes 50 and other times 500.
So, this alone should tell you how dangerous trading is.
When your portfolio goes to 0 – due to high risk – That’s it.
And many traders full port their accounts. And majority become the 98% losing stat of trading.
Stick to low risk, low return.
Keep consistent and the return will start adding up and you’ll reap the rewards in time.
Myth 4: Only the Rich Can Trade
The myth that trading is a club exclusive to the wealthy is just that, a myth.
Decades a go, you would have needed thousands to start trading and investing.
But no longer is that the case.
Some brokerages don’t even have a minimum with trading. You can start off with a demo or practice account.
As long as the competition and innovation picks up, trading will be cheaper, faster and more accessible.
Myth 5: Trading is Only About Buy low – sell high
Although this seems like a logical strategy.
It’s not the only way to profit.
Trading techniques like short selling allow traders to profit from falling markets.
Not only can you buy low and sell high.
You can also sell high and buy low.
Myth 6: More Trades Equal More Profit
Trading isn’t a game of ping pong.
You don’t just play as many times as you can in a day, to profit.
First, Overtrading can lead to rushed decisions, increased transaction costs, and significant stress. Patience often plays a crucial role in a trader’s success.
And second, it all depends on the market environments.
If the market is not trending, you can go long or short and still lose every bet.
Rember you still have to let the market move up or down a bit to make up for the trading costs!
And so you’re already at a disadvantage when you take a trade.
Sometimes the best move is to sit on your hands.
Neutral is also a position and a powerful position during certain periods.
Myth 7: Successful Trading Means Winning Every Trade
Even the most successful traders get knocked down by losses.
It’s the nature of the trading game.
What matters is the net outcome over a period of time.
Your job is to make sure the losses are small and the gains are bigger.
That way, even with a 50% win rate you’ll win and the profits will outweigh the losses in the long run.
Myth 8: Complicated Strategies Yield Better Results
You’ve heard of analysis paralysis right?
When you literally plant so many indicators on your chart it looks like a Jackson Pollocks Christmas Tree painting.
Complication does not equate to success.
You’ll learn that:
Too many indicators will conflict with each other.
You’ll struggle to back test a system.
You’ll struggle to find high probability trades.
You’re making it more complex than it needs to be.
And most important… You need to learn to KISS (Keep It Simple Stupid).
Often, the best trading strategies are the simplest.
What’s essential is understanding your strategy thoroughly and executing it consistently.
Myth 9: You Need to Monitor the Market 24/7
Thanks to stop-loss orders and other automated tools, you do not need to be glued to your screens all day.
The most important attention you’ll need to apply is trading layout, setup and execution.
Once you’re done and the trading levels are in place.
Go live, do something else.
Don’t be a nerd.
Enjoy life.
Trading requires attention, indeed, but a healthy balance is crucial to maintain clear-headed decisions.
Myth 10: Markets Are Always Rational
Markets, unfortunately, aren’t always rational.
Just like you learn in school. There is ideal and real ways of the world.
Sometimes, the market is one clusterfreak of confusion.
Correlations don’t work according to the book.
Trends don’t match up the micro and macro analyses of companies.
Good news doesn’t mean strong uptrends.
Markets are run by many, many, many other factors.
They can be swayed by demand, supply, algorithms, Smart Money, greed, panic, emotion, rumor, and corruption and manipulation.
This will lead to price distortions.
There is a famous quote attributed to Great Depression-era economist John Maynard Keynes –
“Markets can remain irrational longer than you can remain solvent”.
Myth 11: Brokers Want You to Lose Money
Yes there are a ton of brokers who make money when you lose.
But reputable, credible and top regulated brokers – do NOT want you to lose.
They make their money from brokerages, spread and from trading volumes.
They want you to succeed and grow. Because if you blow your account, they lose a client.
Hence, when brokers approach me I always tell them the importance of education, guidance and helping them SUCCEED.
Myth 12: Once a Successful Trader, Always a Successful Trader
Market conditions, strategies, and personal circumstances change.
If you want to be a successful trader and remain one it requires constant learning, adaptation, and diligent risk management.
This includes me!
Despite how long I’ve been in the markets, I treat each day independently. I follow my system, risk management rules. I look for future opportunities and prospects to improve my trading, platform, journals and even testing.
This is forever an alive game that requires action. We are always learning, growing, improving and adapting.
Like they say, past success doesn’t guarantee future profits.
Let’s sum up the 12 common Trading Myths:
Myth 1: It’s a Get-Rich-Quick Scheme
Myth 2: It’s Just High-Stakes Gambling
Myth 3: More Risk, More Reward
Myth 4: Only the Rich Can Trade
Myth 5: Trading is Only About Buy low – sell high
Myth 6: More Trades Equal More Profit
Myth 7: Successful Trading Means Winning Every Trade
Myth 8: Complicated Strategies Yield Better Results
Myth 9: You Need to Monitor the Market 24/7
Myth 10: Markets Are Always Rational
Myth 11: Brokers Want You to Lose Money
Myth 12: Once a Successful Trader, Always a Successful Trader
Can you think of anymore?
Ethereum Dencun Upgrade (1st Q 2024)Hello friends.
Today im going to explain some features of the next big Ethereum Upgrade called "Dencun"
Lets Deep into it.
The crypto world eagerly awaits Ethereum’s groundbreaking Dencun Upgrade, a massive undertaking by Ethereum developers that promises to reshape the course of the Ethereum network. Set to be introduced as a hard fork in the coming years, this upgrade brings a host of transformative changes that pave the way for a more scalable and efficient blockchain ecosystem.
One of the highly anticipated features of the Dencun Upgrade is Proto-Dank Sharding, also known as Ethereum Improvement Proposal (EIP-4844). This innovative enhancement sets its sights on addressing one of the key challenges faced by Ethereum: scalability. Proto-Dank Sharding introduces a new transaction type that incorporates data “blobs” unlocking additional storage capacity and reducing gas fees, particularly for layer 2 rollups. In simple terms, it can be likened to organizing luggage efficiently for a holiday trip. By optimizing data storage, Proto-Dank Sharding maximizes available space and minimizes unnecessary costs.
It’s important to note that the Dencun Upgrade is not a solitary effort. The term “Dencun” represents a combination of two simultaneous upgrades: “Cancun” at the execution layer and “Deneb” at the consensus layer. While Cancun focuses on executing protocol rules, Deneb ensures block validation. This comprehensive approach aims to maximize system efficiency, offering a guiding light for the future of the blockchain while considering the interests of stakeholders.
The Cancun segment includes five pivotal Ethereum Improvement Proposals (EIPs) :
EIP-4844 (Proto-Danksharding) : Sets the stage for the full implementation of Danksharding, enhancing scalability.
EIP-1153 : Lowers the cost of on-chain data storage, optimizing block space.
EIP-4788 : Improves the structure of cross-chain bridges and stake pools.
EIP-5656 : Introduces minor code changes to the Ethereum Virtual Machine (EVM).
EIP-6780 : Removes SELFDESTRUCT, which is code that could potentially terminate smart contracts.
Key Benefits of Ethereum Cancun
Boosted Scalability : The introduction of Proto-Danksharding will facilitate a higher volume of transactions, processed at a quicker pace, enhancing Layer 2 solutions which operate atop the main blockchain.
Reduced Gas Fees : Through the utilization of data "blobs" and the implementation of EIP-4844, the upgrade aims to significantly cut down the gas fees, a move that will be particularly beneficial for Layer 2 solutions, making transactions more affordable.
Strengthened Security : The network's security infrastructure will be fortified, safeguarding user data and investments, thanks to initiatives like EIP-6780.
Efficient Data Storage : EIP-1153 is set to optimize data storage on the blockchain, fostering more efficient and cost-effective operations, which is a boon for Layer 2 solutions that rely on optimal data management.
Enhanced Cross-Chain Connectivity : The upgrade, through EIP-4788, promises smoother and more secure interactions between different blockchain networks, facilitating better integration with Layer 2 solutions.
Technical Innovations : With minor code modifications introduced through EIP-5656, the upgrade sets the stage for future technical advancements, potentially spurring innovation in Layer 2 solutions.
I hope you enjoy this article and pay attention to ETH in the next coming Bullrun :)
THANK YOU ALL
Refrences :
www.ethereum.org
www.medium.com
Trading: The Art of Doing NothingIn the fast-paced world of Forex trading, it's easy to get caught up in the excitement of making rapid decisions and executing trades. While active trading can be rewarding, there are moments when the best course of action is not to trade at all. In this post, we'll explore the idea of embracing patience in Forex trading and how it can lead to more successful and strategic outcomes.
Analysis is Key
Before entering any trade, thorough analysis is paramount. Forex traders have access to an abundance of tools and resources for market analysis, including technical and fundamental analysis. Rushing into trades without proper analysis can lead to impulsive decisions and, more often than not, losses.
By taking the time to analyze the market, traders can identify potential trends, support and resistance levels, and key economic events that might impact currency values. Patience in this stage allows for a well-informed and calculated approach to trading.
Timing is Crucial
In Forex trading, timing can make all the difference. It's essential to wait for the right moment to execute a trade. Rushing into trades out of fear of missing out or overtrading due to impatience can lead to poor outcomes. The market's nature is volatile, and sometimes the best approach is to remain on the sidelines until the conditions align with your trading strategy.
The Art of Doing Nothing
Sometimes, doing nothing is the best course of action. Staying patient and avoiding trades during uncertain or unpredictable market conditions can preserve capital. It's crucial to remember that not every market movement warrants a trade, and inaction can be a strategic choice.
Focus on the Exit
While many traders place a strong emphasis on the entry point of a trade, the exit is equally, if not more, important. A well-thought-out exit strategy, which includes setting stop-loss and take-profit orders, ensures that you're managing your risk and capital effectively.
Traders who focus on the exit strategy are less likely to fall into the trap of holding onto losing positions in the hope of a turnaround. Patience in waiting for the trade to reach its predetermined exit point can result in more consistent and successful trading outcomes.
Conclusion
In the world of Forex trading, patience can often be the difference between success and failure. While it's tempting to jump into the markets with every price fluctuation, there are times when it's better to sit back, analyze, and wait for the right opportunities. Embracing patience allows traders to make more informed decisions, manage risk effectively, and prioritize the exit strategy. By doing so, traders can increase their chances of achieving long-term success in the Forex market.
Do nothing.
CAPITALCOM:EURUSD
Economy: A Social Science Shaped by Human Behavior and HistoryThe world of Forex trading, with its ever-fluctuating currency exchange rates and intricate financial instruments, may seem like a realm dominated by numbers, charts, and algorithms. However, beneath the surface, the Forex market is a vivid testament to the intricate relationship between economics and social behavior. In this idea, we will explore how the economy is a social science at its core, and how historical events have consistently reshaped and influenced economic dynamics.
Economics as a Social Science
At its essence, economics is not just about money; it studies how societies allocate their limited resources to satisfy their various wants and needs. The behaviors, decisions, and interactions of individuals, groups, and nations inherently influence this process. Economics is, therefore, a social science, as it explores the dynamics of human behavior and the collective choices we make.
Historical events, such as wars, pandemics, and technological advancements, have consistently demonstrated the profound impact of social behavior on the economy. Let's delve into some examples to understand this connection better.
World Wars and Economic Transformation
The two World Wars of the 20th century provide an excellent illustration of how historical events can shape the economy. These catastrophic conflicts forced nations to mobilize their resources and allocate them to the war effort. The result was significant shifts in economic priorities, with governments heavily investing in military production and infrastructure. These investments not only led to economic growth but also spurred technological innovation, such as radar and nuclear energy.
Furthermore, the post-war period witnessed the creation of international economic institutions like the Bretton Woods system, which set the stage for a more interconnected global economy. The forex market played a pivotal role in this period by facilitating international trade and currency exchange, reflecting the evolving economic landscape.
The 2008 Financial Crisis and Behavioral Economics
The 2008 financial crisis, driven by the bursting of the housing bubble and reckless lending practices, revealed the profound impact of human psychology and behavior on financial markets. Behavioral economics, a subfield of economics, studies how psychological biases and cognitive errors influence decision-making.
During the crisis, fear, panic, and herd behavior contributed to market volatility, massive losses, and a global recession. Understanding these behavioral aspects is essential for forex traders, as they need to navigate the market's emotional swings and avoid succumbing to the irrational exuberance or fear that can drive price movements.
Technological Advances and Financial Innovation
The emergence of the internet and electronic trading platforms has revolutionized the forex market, making it more accessible to individual traders worldwide. This technological shift highlights the ongoing impact of social behavior on financial markets. As more people participate in online trading, the collective decisions and sentiments of traders, often amplified through social media, can sway exchange rates in real-time.
In summary, the Forex market is not just a financial platform but a reflection of the intricate relationship between economics as a social science and human behavior. Historical events have repeatedly demonstrated how social behavior shapes economic outcomes, whether through the impact of wars, financial crises, or technological advances. To succeed in the Forex market, traders must understand and adapt to the ever-changing landscape influenced by the behaviors and choices of societies, governments, and individuals.
Do nothing.
Modeling a shift in SRAS and AD over the past year, I think. I used the U.S PCE YoY as the base, I then overlaid the M1 YoY and Real GDP YoY. I used the beginning of this years as a reference point as that is roughly when the fed began increasing interest rates.
As the price level declines demonstrated by a decline in the money supply and PCE YoY declining
Real GDP YoY is seen increasing
To my understanding this visualizes how SRAS and AD have shifted to the left over the past year
