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Fundamental Analysis

CHOCH vs BOS ‼️WHAT IS BOS ? BOS - break of strucuture. I will use market structure bullish or bearish to understand if the institutions are buying or selling a financial asset. To spot a bullish / bearish market structure we should see a higher highs and higher lows and viceversa, to spot the continuation of the bullish market structure we should see bullish price action above the last old high in the structure this is the BOS. BOS for me is a confirmation that price will go higher after the retracement and we are still in a bullish move WHAT IS CHOCH? CHOCH - change of character. Also known as reversal, when the price fails to make a new higher high or lower low, then the price broke the structure and continue in other direction.
OANDA:XAUUSDEducation
by Snick3rSD
What is Confluence❓✅ Confluence refers to any circumstance where you see multiple trade signals lining up on your charts and telling you to take a trade. Usually these are technical indicators, though sometimes they may be price patterns. It all depends on what you use to plan your trades. A lot of traders fill their charts with dozens of indicators for this reason. They want to find confluence — but oftentimes the result is conflicting signals. This can cause a lapse of confidence and a great deal of confusion. Some traders add more and more signals the less confident they get, and continue to make the problem worse for themselves. ✅ Confluence is very important to increase the chances of winning trades, a trader needs to have at least two factors of confluence to open a trade. When the confluence exists, the trader becomes more confident on his negotiations. ✅ The Factors Of Confluence Are: Higher Time Frame Analysis; Trade during London Open; Trade during New York Open; Refine Higher Time Frame key levels in Lower Time Frame entries; Combine setups; Trade during High Impact News Events. ✅ Refine HTF key levels in LTF entries or setups for confirmation that the HTF analysis will hold the price. HTF Key Levels Are: HTF Order Blocks; HTF Liquidity Pools; HTF Market Structure.
OANDA:XAUUSDEducation
by Snick3rSD
Market Structure Identification ✅Hello traders! I want to share with you some educational content. ✅ MARKET STRUCTURE . Today we will talk about market structure in the financial markets, market structure is basically the understading where the institutional traders/investors are positioned are they short or long on certain financial asset, it is very important to be positioned your trading opportunities with the trend as the saying says trend is your friend follow the trend when you are taking trades that are alligned with the strucutre you have a better probability of them closing in profit. ✅ Types of Market Structure Bearish Market Structure - institutions are positioned LONG, look only to enter long/buy trades, we are spotingt the bullish market strucutre if price is making higher highs (hh) and higher lows (hl) Bullish Market Structure - institutions are positioned SHORT, look only to enter short/sell trades, we are spoting the bearish market strucutre when price is making lower highs (lh) and lower lows (ll) Range Market Structure - the volumes on short/long trades are equall instiutions dont have a clear direction we are spoting this strucutre if we see price making equal highs and equal lows and is accumulating . I hope I was clear enough so you can understand this very important trading concept, remember its not in the number its in the quality of the trades and to have a better quality try to allign every trading idea with the actual structure
OANDA:XAUUSDEducation
by Snick3rSD
Countries with the Highest Debt-to-GDP Ratio 🌍💰📈 The world's financial landscape is a tapestry of economic prowess and fiscal challenges. A critical indicator of a nation's economic health is its debt-to-GDP ratio, a measure that reveals the extent to which a country's debt burdens its economy. In this insightful exploration, we'll delve into the figures that highlight countries grappling with the highest debt-to-GDP ratios. With real-world examples, we'll shed light on the complexities of global debt dynamics and their potential impact on the world economy. Understanding Debt-to-GDP Ratio The debt-to-GDP ratio is a crucial metric that reflects a country's ability to manage its debt relative to the size of its economy. A higher ratio indicates a greater level of indebtedness. Let's examine why this metric is so significant and its implications: 1. Greece: A Tale of Economic Turmoil Greece serves as a prominent example of a country with a high debt-to-GDP ratio. In the early 2010s, Greece faced a sovereign debt crisis that shook the European Union. Its debt-to-GDP ratio exceeded 180%, signaling unsustainable levels of debt. The crisis forced Greece to implement severe austerity measures and seek international bailouts. 2. Japan: A Unique Fiscal Challenge Japan represents a distinctive case where a high debt-to-GDP ratio coexists with economic stability. Japan's debt-to-GDP ratio is among the highest globally, surpassing 200%. However, it has maintained economic stability due to unique factors such as a high domestic savings rate and central bank policies. 3. United States: Juggling Debt and Economic Growth The United States, with a debt-to-GDP ratio exceeding 100%, showcases the balance between debt and economic growth. While a high ratio can raise concerns, the U.S. has managed its debt effectively, leveraging its economic strength to service its obligations. The debt-to-GDP ratio is a critical barometer of a nation's fiscal health and economic stability. Understanding the complexities and nuances of this metric is essential for evaluating a country's financial resilience and potential risks. As we explore countries with the highest debt-to-GDP ratios, it becomes evident that each nation's economic circumstances are unique. While a high ratio can signal challenges, factors such as economic policies, domestic savings, and global financial dynamics play pivotal roles in shaping a country's fiscal destiny. Ultimately, the global economy is an intricate web of financial interdependencies, and monitoring these debt ratios is a vital component of navigating this complex landscape. 🌍💰📈 Do you like this post? Do you want more articles like that?
Education
by ProSignalsFx
8
How to Time Manage your Trading – 6 WaysWhen it comes to the world of trading, time isn’t just money – it’s everything. A minute delay, can miss a profit opportunity. A minute delay, can make you question the trade. A minute delay, can affect your emotions. This is something I am constantly working on (even 20 years later). I truly want to wake up earlier, spot trades quicker (as they come) and have a better time management system. I might not be an expert in time management yet, but I will share some crucial tips I have learnt over the years. This will help you to not miss the trade. #1: Why you need to be punctual Being punctual isn’t just a good trait – it’s a survival skill. The markets move so quickly. They move with or without you. And they present opportunities on the daily. You need to be on time and when you see an opportunity that is about to present itself. Write it down. Stick note it. Set a reminder or something. But for Flying Spaghetti monster sake, don’t miss it! #2: Easy to miss a profit – when you don’t time analyses Every trader has stories about the “one that got away”. So what can we do to avoid this? You need to have your watchlists spread out according to what you trade. With TradingView, I have all my watchlists in different categories. Stocks, Forex, Commodities, Indices, International stocks. Etc… Then you’ll need to go over each watchlist every day. Write down the potential trades lining up. Then revisit the markets the next day. You need to be more punctual and disciplined to monitor, analyse and prepare for execution. Those golden opportunities missed due to hesitation or distractions. By maintaining punctuality in monitoring and execution, you can minimize these missed chances and keep your trading performance on the upbeat. #3: Set Reminders: The Power of Alerts Luckily, we have the technology to harness. You can set reminders for price levels to hit, on your own trading and charting platforms. Use these alerts to remind you when to act, or at least prepare for execution. #4: Sticky Note It Old school? Maybe. Effective? Absolutely! It doesn’t hurt to pick up a pen and a sticky note once in a while. Keep these visual reminders, to prioritise what you may be trading today. You’ll be surprised how useful this little pieces of paper are. #5: Develop a Routine Trading is a lifestyle. So you need to establish your routine with it. If you’re an early Hadeda you need to do a full pre-market review and write down the trades lining up for the day. If you prefer to look at the markets in the afternoon, choose a time where you will not be distracted by work, social media, kids or the Rugby! If you are an after the markets kind of trader, then do your research, analyses and even set your trading levels for the next day. I like to plot and draw all the levels and setups in the charts, and then write down which ones are almost ripe for the picking. #6: Prioritize Your Trades Not all trades are ready to action. Some might take a few days or months. What you can do is, flag them or colour them. GREEN – Act soon. ORANGE – Check over the next few days YELLOW – Trade could line up in the next few weeks RED – Potential setup but not likely in a few weeks. This approach will help you allocate your time better. So let’s sum up the time-management methods you can apply. #1: Why you need to be punctual #2: Easy to miss a profit – when you don’t time analyses #3: Set Reminders: The Power of Alerts #4: Sticky Note It #5: Develop a Routine #6: Prioritize Your Trades
JSE:J200Education
by Timonrosso
Understanding Euro Zone Economic NewsEuro Zone Economic News Explained: Purchasing Managers Index Manufacturing: The Purchasing Managers Manufacturing report is a survey of manufacturing providers in the Eurozone (EZ) and focuses in on issues such as costs and demand. Essentially, a strong PMI, in which costs are low and demand is improving is bullish for the Euro, whereas a survey that results in increasing costs and decreasing demand implicates speculation against the Euro. Manufacturing is a significant component of the EZ economy, and thus a survey that indicates optimism or pessimism about the sector can really get the markets moving, the Euro in particular. A reading of 50 is a critical measure in the PMI index with a number below 50 indicating contraction and a number above 50 indicating expansionary conditions. Taking a strong position based solely on the PMI Manufacturing Survey though could prove to be regretful. Purchasing Managers Index Services: The Purchasing Managers Services report is a survey of service providers in the EZ and focuses in on issues such as costs and demand. Essentially, a strong PMI, in which costs are low and demand is improving is bullish for the Euro, whereas a survey that results in increasing costs and decreasing demand implicates speculation against the Euro. A reading of 50 is critical measure in the PMI index with a number below 50 indicating contraction and a number above 50 indicating expansionary conditions. The services sector is very important to the EZ and any significant gains or shortcomings could set the Euro climbing or falling. Retail Trade: Retail Trade is the measure of retail sales, and thus the willingness of the consumer to spend. An upswing in this figure could result in Euro buying whereas a shortfall could cause Euro selling. This number is very important to the trader because it correlates to consumer conditions and outlook within the EZ region. If the Retail Trade figure comes in strong it means that consumers are spending money and thus are probably well off, hinting that EZ consumer confidence and the CPI may also be strong. However, if Retail Trade figures are low, it could suggest that interest rates are too high, consumer confidence is sinking, or businesses are suffering. Clearly, a worse than expected Retail Trade figure offers more information (though ambiguity hand-in-hand) than does a strong figure because a strong figure seeks reinforcement from other indicators (such as the CPI and Consumer Confidence survey) and thus lags, whereas a less-than-expected figure immediately suggests that the EZ economy is most likely turning sour in one respect. Traders will often react immediately to this release, but much caution is exercised due to the wide array of implications this number carries with it. It is inadvisable to trade solely on this figure. German Retail Sales: German Retail Sales are very similar to the Retail Trade figure but differ in that they report an aggregate number of sales at retail outlets to provide for a better estimate of German private consumption. Like in Retail Trade, traders will often look to long the Euro should the figure be impressive, and short the European currency should it fall below expectations. Much like Retail Trade, traders will use the Retail Sales figure to better understand the direction of the economy in terms of other key economic releases. One of the few advantages the German Retail Sales has over Retail Trade is the time of release. Because the German figure is reported before the EZ number, traders can “jump the gun” should they wish, though acting in such a manner is not usually advisable in the Forex market. Eurozone Gross Domestic Product: The general rule of thumb when using GDP as a fundamental signal to trade is that an improved number means Euro positive whereas a lesser or unchanged figure translates into Euro stagnancy or bearishness. The Eurozone Gross Domestic Product is a measure of the progress of the Eurozone economy as a whole. The figure is very important to traders because it gauges the level of performance with which the Europeans are proceeding as well as harbingers and undermines the set of economic data that is expected to be reported from the region during a certain time period. Generally, the disclosure of a number that’s either expected or ahead of forecasts sets off bullish signals for the Euro; a number that falls below predictions invokes the Euro bears. GDP data for Germany, France, Italy, and the collective Eurozone region tend to be most closely followed. Current Account: The Current Account Deficit is probably the most comprehensive measure of international transactions for Europe as it is the measure of net exports, (total exports minus total imports). If the figure falls below expectations, slight movements against the Euro should be expected. But it is also important to keep in mind that a number that outperforms or either falls short of expectations is not necessarily going to get the traders to act hastily. The release of this number is monthly and tends to be in accord with the Trade Balance numbers that are generally reported a day or two in advance of the Current Account figure. The Current Account Deficit is usually interpreted in one way; a large negative number is damaging to the European currency. This is because the Current Account is a reflection of the net exports, and if it is negative, it shows that the Eurozone is importing more than it is exporting; a bad sign for industries at home and means that more Euros are going out of than coming into the region. However, the negativity of the number is not what traders pay attention to, but rather the change in it; the marginal change in the Current Account. The logic is very similar to that behind the GDP in that if a number comes in below expectations, it could hurt the Euro, whereas if it out performs forecasts, it could prove bullish for the European currency (despite its negativity). However, this number cannot be solely “judged by its cover” because the number says a lot more than meets the eye. For instance, a more negative figure does indeed signal a decrease in net exports, but at the same time could also serve to patron other economic releases, such as consumer spending. If the Europeans are spending a lot of money, and that money is leading them to buy things from abroad as their fiscal conditions are allowing them to do so, then a decrease in net exports doesn’t seem so “damaging” to the Eurozone economy; it could simply mean people are buying things exotic to them because they are better off. Generally though, the trend in industrialized western nations (Eurozone included) has been that a more negative Current Account is damaging to industries at home. So if the figure falls below expectations, at least slight movements against the Euro should be expected. Unemployment Data: Unemployment is a very significant indicator for Eurozone performance. It is reported in the beginning of every month and measures the percentage of the workforce that is currently out of a job but is actively seeking to be employed. Generally, traders understand slight improvements in the unemployment figure (as monthly figures generally vacillate by tenths of percentages) to be positive for the Eurozone economy and will buy Euros, whereas a no-change or increase in the unemployment numbers could lead to Euro stagnancy or dumping across the board. The figure is important because it signals how hard the Eurozone is actually working and helps to foreshadow consumer spending. High unemployment generally leads to lower consumer spending which can be bearish for the Eurozone economy as well as the Euro. The flip scenario is also true, weak Eurozone employment is bearish for the economy as well as the Euro. Generally speaking, unemployment raises concerns about the performance of firms, questioning whether businesses are either not hiring because they do not need more help, or are not hiring because they cannot afford to do so. If the latter is the case, then it could prove even more bearish for the Euro as it could be forecasting sour economic data regarding the productivity of businesses. German Unemployment: The German Unemployment figure is expressed in thousands and measures the change in unemployment in Germany; a positive figure says that more people are unemployed, thus leading to Euro selling, whereas a negative figure is indicative of decreasing unemployment and thus leads to Euro buying. Germany is important because it is the Eurozone’s largest economy. Any big or unexpected movements in this country have significant consequences for the Euro. This figure usually coincides with the Unemployment rate, but offers “greater detail” as it reports actual numbers, so that traders may have substance to trade off of if the rate itself remains unchanged. Consumer Price Index: The Consumer Price Index measures the change in price for a fixed basket of goods and services purchased by consumers. The higher the CPI, the more positive it is for the Euro, whereas the opposite is also true. The ECB has a 2% inflation target, so whenever consumer prices grow by more than 2%, the ECB becomes concerned and contemplates the need for rate hikes. If consumer prices grow by much less than 2%, the central bank has more flexibility to adjust monetary policy and interest rates. If the CPI has substantial gains, then the ECB would have the incentive to raise interest rates to keep inflation in check, thereby benefiting the Euro. However, if the CPI remains idle, or prices decrease, then even a rate cut is possible. CPI itself though consists of a few major components: one that includes energy prices, and one that includes food prices. These two constituents are very volatile and thus tend to sometimes “exaggerate” the CPI. Though they are undoubtedly considered when considering inflationary concerns, many times traders will also focus in on the “core CPI” to see how the change in prices in other sectors measured up to the changes in these two key areas. Either way, a sharp increase would generally prompt Euro buying, and a decrease would call for Euro dumping. German ZEW Survey: The German ZEW economic survey reflects the difference between the number of economic analysts that are optimistic and the number of economic analysts who are pessimistic about the German economy for the subsequent six months. Obviously, a positive figure bodes well for the Euro, while a negative number foreshadows Euro selling. The ZEW survey is important because firstly, it gauges the economic productivity of Germany, the Euro-Zone’s largest economy. Secondly, it forecasts the string of economic releases concerned with the different sectors of the economy. For instance, something like Factory Orders, Industrial Production, or even Retail Sales could be implicated (or at least their negative or positive changes) in the ZEW survey. Therefore, the survey is one of the key economic indicators that move the Euro during its time of release; the sentiment that results usually fuels the Euro strongly in one direction (at least in the short-term intra-day period). German IFO Survey: The Germany IFO economic survey is much like the ZEW economic survey in that it measures the sentiment, the confidence, in the German economy, but differs in that it includes the market-moving words of business executives. Usually, an improvement in the figure leads to Euro bullishness whereas a decrease or an unchanged number leads to either Euro stalemating or dumping. The IFO survey usually follows the ZEW and reflects sentiment along the same lines. However, should there exist a discrepancy between the ZEW and the IFO, traders tend to give the ZEW a bit more favoritism because it lacks the bias of business executives. Trading on either the ZEW or IFO survey isn’t usually very lucrative, unless both of these numbers are in line with each other and reinforce other key fundamental indicators as well. Industrial Production: The Industrial Production figure is a measure of the total industrial output of them Euro-Zone either on a monthly or yearly basis. The number is very significant as an improvement in the figure could lead the Euro to make significant gains whereas a decline or stagnant number could lead to weakness in the European currency. The reason Industrial Production is important is because it is a confirmation of its type of preceding economic releases (PPI, CPI, Retail Sales, etc.); the only key data following the IP figure being the Eurozone CPI estimate. This is why many times, by the time the Industrial Production data is due for release, traders will argue that the market has already “priced in” industrial productivity in the previous economic releases. Therefore, though large gains or losses in this figure could spark some immediate movement in the market, the market has more or less, factored in the expected Industrial Production data. German Industrial Production: German Industrial Production is a composite index of German Industrial Output that accounts for about 40% of GDP. This figure is very important because it measures the level of German Industrial Production; an improvement usually signals a “buy” in the Euro, whereas a decline in the figure constitutes a “sell” to many traders. The reason this particular IP report is more important is because not only does it measure the industrial output of Germany, the EZ’s largest economy, but also because of the fact that though it comes out late in the month, it is one of the first IP reports, and thus serves as a harbinger to the EZ IP report; if Germany saw decline, then the EZ IP report probably won’t be too bright, at least from the perspective of the trader. In a sense, the EZ IP continues to get priced in before its release. The German release has four significant components: manufacturing, which constitutes 82% of the figure, construction, which accounts for 9.5%, energy that has a 5.9% share, and mining which has the smallest share at 2.7%. Though all four components are important for Germany, movement in its largest constituent, manufacturing, usually carries the weight of the figure and has the attention of traders. German Factory Orders: German Factory Orders is an index of the volume of orders for manufactured products in Germany. This is a key figure for many traders, as an improvement in the number signals buying of the Euro, while a shortcoming signals a sell-off. The reason this reading is important is because Factory Orders not only reflect the strength of businesses but also help forecast other key economic releases such as retail sales. If orders are high, then businesses need more inventory, meaning that consumers are probably purchasing more. Traders key in on this figure, especially its components, before reacting towards the Euro. The four major constituents of German Factory Orders include intermediate goods (45.6%), capital goods (35.1%), consumer durables (11.8%), and consumer non-durables (7.4%). All four are very significant, but for different reasons. Traders will take the first two figures, the intermediate goods and capital goods, as an understanding of the strength of businesses within Germany. If there is an increase in these categories, then subsequent economic releases such as the PMI could also look very bright. The second two say much about consumer confidence and retail sales; if these two sectors are outperforming expectations, then the Euro could see significant gains. However, traders are usually wary when interpreting the German factory orders, because given some economic scenarios, gains in some sectors may very well offset losses in others whereas during certain time periods a different emphasis may be given to the different components. Therefore prudent traders will usually first consider the weight of each component before the release comes out and then act accordingly. Eurozone Labor Costs: The Eurozone Labor Costs (inclusive of both direct and indirect) figure reports the expenditures endured by employers in the EZ region in order to employ workers. Traders will generally understand higher costs to be negative for the EZ and consequently short the Euro, whereas decreasing costs may result in buying the Euro. However, it is advisable to understand the complexities involved in labor costs. On one hand, labor costs could be interpreted as a negative for businesses, but on the other hand they could be viewed as a positive stimulus for the economy. This is because firms may simply be hiring more qualified and thus more “expensive” individuals to increase specialization. If this is the case, then individuals within the economy may be better off, signaling that optimism is rising in the EZ; the Euro may see more gains. Also, there exists the possibility that while costs are rising, revenue is also rising, thus keeping total profit for businesses constant, and at the same time increasing payouts to workers, a signal that the EZ is expanding. In this case, the Euro may also be bought. However, understanding this complexity is again subject to the current economic scenario surrounding the EZ; if it is in a situation where expansionism is fertile or businesses have excess capital, then only can the increasing costs in labor justify a long position in the Euro. If that is not the case then increasing labor costs will result in Euro shorting.
Education
by Mihai_Iacob
9
Fundamental Analysis in Forex In forex trading, fundamental analysis looks at the outlook of a whole economy to determine the actual value of a currency. The value is then compared with the value of other currencies to assess whether it will strengthen or weaken relative to those currencies. This post will further discuss how fundamental analysis is used in forex, what to look out for, and how you can incorporate it into your trading. What is Fundamental Analysis? Fundamental analysis is a way of looking at the forex market by analysing economic, social, and political forces that may affect currency prices. The idea behind this type of analysis is that if a country’s current or future economic outlook is good, its currency should strengthen due to an increase in demand for that specific currency. The better shape a country’s economy is in, the more attractive it is, which will lead to foreign businesses and investors investing in that country. This results in the need to purchase that country’s currency to obtain those assets. There are a multitude of factors that determine the intrinsic value of a country’s currency. Factors covering a whole range of economic data, social trends, and political developments come together to generate a broad view of the outlook for the country. This will subsequently drive the outlook for the currency. Due to this, forex fundamental analysis allows traders and speculators to take a longer-term view of whether the current value of a currency will likely increase or decrease towards its actual worth. Fundamental Analysis Information So, what information is used in the fundamental analysis of forex markets? There are several fundamental factors and components that analysts use to value a currency. From an economic perspective, the most important data are interest rates, inflation, economic growth, homes, and employment. Central banks and governments will use all of this information to formulate their monetary policy and fiscal policy, respectively. Changes to interest rates will impact the outlook that fundamental analysts have on a currency. As such, central bank policy decisions and governments' fiscal policy decisions are critical factors in the valuation of a currency. (More on this later.) Key Fundamental Data Let’s go into further detail on some of the most important fundamental data and how they impact the valuation of a currency: Interest rates Interest rates are a tool that central banks use to control an economy. Depending on how a country's economy is performing, central banks will adjust the general interest rate level to bring the economy back towards its respective targeted levels. When the level of one country’s interest rates is compared to another, this is a driver of the relative attractions of the currencies. A higher interest rate level will generate a better return for the holder of assets in that currency since higher interest rates draw capital from around the world as money seeks a higher rate of return, thereby increasing the demand for the currency as foreigners convert their domestic currency into the investment. Thus, the currency will strengthen relative to the other currency. Additionally, government bond yields are an indicator of the market’s outlook for central bank interest rates. Bonds pay a fixed income, so fluctuations in a bond’s price will determine its yield. If a central bank raises the interest rate, traders can get a better return on their money at the bank; therefore, the fixed-income government bond will likely be sold. So, if yields reflect the expectation of interest rate moves, fundamental analysts can compare the government bond yields of various countries to assess the relative valuation of the currencies. That is why fundamental analysts will look at interest rate differentials in their valuation to determine whether a currency is mispriced. Inflation Inflation is caused by an excess supply of money in a country's economy. This then leads to more spending, which then leads to an increase in prices. If the inflation rate is higher in one country than in another, then the relative value of its currency will decline. It is possible for inflation to get completely out of control, and in fact, there are some countries that print so much money that their currency becomes almost worthless as money. Because money has such an important function in all societies, people will often find substitutes when the domestic currency becomes worthless—even using the currency of another country, in what is also known as 'dollarization.' Inflation is a crucial driver of central bank interest rates. High levels of inflation eat away at the underlying value of an individual's assets or even savings. Furthermore, if inflation is too low or negative (deflation), it will lead people not to currently spend, and this can cause a downward economic spiral. Why would people buy something today if they think it will be cheaper tomorrow? Every month, inflation measures such as the Consumer Price Index (CPI) and Purchasing Price Index (PPI) are assessed by traders and speculators to judge a country's inflation outlook. Central banks use inflation targeting as they set interest rates. Higher inflation levels require higher interest rates to prevent continued price rises. Therefore, if one country has a higher level of inflation, it is likely that the interest rate will also need to be higher, which will also impact the currency’s value. Gross Domestic Product Economic growth is measured almost universally by changes in Gross Domestic Product (GDP). Gross domestic product is a measure of the size and health of a country’s economy over a period of time (usually measured quarterly or yearly). It is also used to compare the size of different economies at different points in time. GDP is the most commonly used measure for the size of an economy. The GDP is the total of all value added created in an economy. Value added means the value of goods and services that have been produced minus the value of the goods and services needed to produce them. The biggest drivers for GDP calculation are: Consumer spending: Also known as personal consumption expenditures, this is the measure of spending on goods and services by consumers. Government spending: It’s everything that is spent from a government’s budget within a public sector on items such as education, healthcare, defence, and more, depending on the country. Business investment: Any spending by private businesses and nonprofit companies on assets to produce goods and services is considered business investment. Balance of trade: The difference in value between a country’s imports and exports is what constitutes the balance of trade. If exports exceed imports, the country is in a trade surplus. On the contrary, if imports exceed exports, it’s a trade deficit. Homes The data on homes is very important due to the sole reason that one of the main aims for most people in life is to own a home. Additionally, a home is most likely the most expensive item a person will ever buy. So most people will work hard for a large part of their lives to own one. Because of this, housing forms an important part of the worldwide GDP calculation, so if a country's housing data is strong, this tends to also show in the country's economic performance. The biggest drivers in housing data are: Pending home sales: This number shows the number of home sales where a contract between the seller and the buyer has been signed. Existing home sales: This number measures the number and value of transactions of existing homes that were sold in a given month. New home sales: This number measures the new homes that were sold in a given month. In a strong economy, the number of new home sales tends to keep rising. Employment A country's employment rate is very important in gauging a country's economic strength. The reason is that employment is very important to a country's economic output. If people have jobs, they will spend money and contribute to economic growth. If employment is low, companies will have a shortage of workers. This will lead to lower productivity and then lower company revenues, which will then lead to companies not being able to pay back loans and even fewer jobs being available because companies can no longer sustain themselves. Also, consumer spending will decrease, and the never-ending cycle continues. The US Nonfarm Payroll employment figure is one of the most important figures that comes out on the first Friday of every month. The figure is an estimate of the number of payroll jobs at all nonfarm businesses and government agencies, the average number of hours worked per week, and the average hourly and weekly earnings. Because labour is an important economic factor of production, the unemployment rate is a good indicator of how closely economic output is to potential output, which measures economic efficiency. A falling unemployment rate is a good indicator of economic growth, while an increasing unemployment rate indicates economic decline. Fiscal and Monetary Policy Monetary policy is very important in fundamental analysis. Central banks vary in philosophy and economic stance; some central banks are 'hawkish, meaning that they prefer higher interest rates to encourage saving and investing, whereas others are 'dovish, meaning that they prefer lower interest rates to encourage consumer spending and borrowing. Economic data can help a central bank formulate its monetary policy, but there is another aspect to consider. Fiscal policy (government spending and taxation) is also relevant to the fundamental economic outlook of a country. While governments and central banks tend to be independent, they are not mutually exclusive. The fiscal actions of a government can have implications for the central bank (for example, the response of the Bank of England to the unfunded spending cuts of the UK Government in September 2022). Therefore, politics are also important. The type of government ruling a country can affect its economic outlook and, more importantly, its perception of future prospects for the country’s economy. A government that favours high spending might be seen as fiscally irresponsible. However, if the view is that this will generate more growth and a larger economy, it might be viewed positively. How fundamental analysis is used in forex trading Fundamental analysis is widely used to generate potential bull and bear markets in forex trading. Technical analysts will discuss trends; however, the medium- and longer-term fundamental outlook mostly, if not all of the time, generates the source of those trends. Fundamental traders will generally position themselves according to where they see a big trend. There might be some near-term fluctuations within the trend that can be taken advantage of using technical analysis. However, broadly speaking, a currency will move in a particular direction due to an economy’s longer-term prospects and interest rates. How traders perceive fundamental economic data is very important. On a longer-term basis, it is all about what the data means for the future outlook of the country's economy. Is a central bank on a path of raising or tightening interest rates? Does a country's government have to raise or cut taxes? Is consumer borrowing and spending too high? For short-term trading, it is all about expectations. Day traders usually look at the economic data for their signals. How did the data perform relative to market expectations? Did it beat the consensus forecast? Fundamental traders will examine how data announcements compare to the market’s estimates. Better-than-expected data should drive a stronger currency; if the data is less than expected, it tends to lower its value. Dangers when trading using fundamental analysis Though fundamental analysis can be useful in predicting the direction of currency prices, there are dangers that you need to be aware of. First, important figures like the nonfarm payroll and interest rate announcements are extremely volatile and can wipe your account instantly if you end up on the wrong side of the market. Additionally, there are times when markets are 'priced in', meaning that the move has already happened in anticipation before the fundamental data or announcement; therefore, the market is already priced in, and the market tends to go the opposite way. For example, if traders have been strongly anticipating that a country's central bank will cut interest rates, they will short the markets all the way prior to the central bank actually confirming the interest rate cut, so now the market is priced in and the market will tend to go the other way due to those traders exiting their early short positions. Forex fundamental analysis can sometimes be very complex and time-consuming. However, a general understanding of its principles will not only help you in your journey to finding consistency in the markets but will also improve your economic knowledge and awareness. BluetonaFX   
Education
by BluetonaFX
2
WHAT IS A PRICE DECELERATION?✴️ What Is A Price Deceleration? A price deceleration is when the market slows down after a trend movement. It occurs when the price of an asset begins to slow down its ascending or descending impulse. It usually occurs at key levels, such as support and resistance. The price finds it difficult to make highs at resistance and lows at support. It all looks like an upward or downward wedge at levels or just channels. Price deceleration can occur at the end of a trend movement or at the end of a pullback. When the price approaches key levels, the bulls are reluctant to buy and the bears are reluctant to sell, which is characterized by price deceleration and poor highs and lows trading. As a result, this leads to a pullback or a complete reversal of the trend. Therefore, this one works well for price reversals. ✴️ Price Deceleration Identification One of the key features of a deceleration and then a price reversal is divergence. The pattern is formed when the price touches the channel border for the fourth time. Thus, we determine the first clues of the future price reversal or price continuation. Another important sign of deceleration is a decrease in the slope angle or steepness of the trend line, as well as a decrease in the size of price swings. It means that the price is squeezed before the impulse movement. Price usually shoots up and accelerates after the squeeze. ✴️ Confirmation Of Price Deceleration Oscillators are used to confirm the deceleration. For example, the relative strength index (RSI) shows divergence very well. Price, after a strong movement like a big ship, still makes some motion moving forward. So, it does not stop immediately. At this time, RSI shows that there is no strength in this movement and goes in another direction, confirming divergence and a soon reversal. Once we have four touches forming the channel, we can look for entry opportunities. Usually the 3rd or 4th touches of the border lead to reversal IF it is confirmed by RSI divergence. ✴️ Plan Your Entry and Exit Points Once we have identified the price deceleration, we need to plan entry and exit points. If the price touches the upper channel and the oscillator shows a bearish divergence, it can be called a confirmation. Usually, if there is a divergence, the price immediately goes in the opposite direction. The engulfing candlestick or pinbar can be used as a trigger to enter the market, as it perfectly shows the current market sentiment and the dominance of one of the sides, be it bulls or bears. The optimal risk/profit ratio in trades is 1:2, because if the trade is counter-trend, there is a probability that the price will go further along the trend. More Examples BTC/USD USD/CAD XAU/USD
Editors' picks
Education
by DeGRAM
25
Warren Buffett's Margin of SafetyIn the world of investing, few names carry as much weight as Warren Buffett. Often hailed as the Oracle of Omaha, Buffett's wisdom has guided countless investors to financial success. At the core of his investment philosophy lies a concept he considers paramount: the Margin of Safety. Buffett once famously said that the three most important words in investing are "Margin of Safety." To delve deeper into this principle, he pointed to Chapter 20 of "The Intelligent Investor," a seminal work by Benjamin Graham, which he deemed the best chapter ever written on the subject. Chapter 20: The Concept of a Margin of Safety At its essence, the Margin of Safety revolves around the idea that every stock has a fair (intrinsic) value based on the underlying company. However, this fair value often deviates significantly from the stock's current market price. No Margin of Safety: When the stock price exceeds its fair value, there is no margin of safety. Margin of Safety: When the stock price falls below its fair value, a margin of safety exists. Benefits of the Margin of Safety Investing in any asset for less than its intrinsic value is a sound financial decision. However, in the world of investing, where determining precise fair values can be elusive, this principle holds even greater significance. One can never pinpoint an exact fair value; they can only estimate a range. The Margin of Safety serves as a shield against potential errors in estimating fair value. The Mathematical Advantage A Margin of Safety provides two critical mathematical advantages: Downside Protection: Avoiding losses is paramount in investing. It takes a 100% gain to recover from a 50% loss. Therefore, preventing losses should be a top priority. Exponential Returns: Imagine a stock with a fair value of $10 but currently trading at $8, offering a 25% upside. Now, if that same stock were available for $5, the upside potential would skyrocket to 100%. A Margin of Safety can turn a good investment into an exceptional one. Why Do Margins of Safety Exist? The concept of Mr. Market, introduced by Benjamin Graham, plays a pivotal role in understanding the existence of Margins of Safety. Mr. Market is depicted as an impulsive individual, prone to bouts of depression (selling stocks at a discount) and exuberance (selling at a premium). Stock markets exhibit such fluctuations due to the psychological biases and errors of market participants. Understanding this human element is crucial in grasping the significance of Margins of Safety. In the words of Warren Buffett himself, "If you understand chapters 8 and 20 of 'The Intelligent Investor' and chapter 12 of 'The General Theory,' you don't need to read anything else." These chapters provide a foundation for investors to navigate the complexities of the market with the wisdom of a Margin of Safety. In conclusion, the Margin of Safety isn't just a concept; it's a guiding principle that can safeguard your investments and unlock their full potential. Buffett's reverence for this idea underscores its importance in achieving success in the world of finance.
Education
by Vestinda
Peter Lynch's Timeless Investing Principles Introduction Peter Lynch, one of the most celebrated investors of all time, is renowned for his remarkable track record managing the Fidelity Magellan Fund from 1977 to 1990. Under his stewardship, the fund generated average annual returns of approximately 29%, outperforming the S&P 500 by a substantial margin. Lynch's success was not just a stroke of luck; it was the result of a well-thought-out investment philosophy and principles that remain relevant to this day. In this five-page article, we will delve into the core principles that underpin Peter Lynch's approach to investing and explore how these principles can be applied by individual investors seeking to achieve their financial goals. I. Invest in What You Know One of the foundational principles of Peter Lynch's investment philosophy is to "invest in what you know." This principle emphasizes the importance of understanding the companies and industries you invest in. Lynch believed that individual investors have a natural advantage over professional fund managers because they can leverage their everyday experiences and knowledge to identify promising investment opportunities. Lynch often cited examples from his personal life to illustrate this principle. For instance, he famously discovered the potential of the Hanes Corporation when he noticed his wife buying their products. He reasoned that if his family liked the company's products, there was a good chance that others did too. This simple observation led to a highly profitable investment. II. Long-Term Perspective Lynch advocates taking a long-term perspective when it comes to investing. He discouraged frequent trading and market-timing, believing that such strategies often led to poor performance and excessive transaction costs. Lynch's approach focused on identifying fundamentally strong companies and holding them for the long haul. He often remarked, "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." This means that in the short term, stock prices can be influenced by emotions and market sentiment, but over the long term, the fundamentals of a company will ultimately determine its stock price. III. The P/E Ratio The Price-to-Earnings (P/E) ratio is a fundamental metric Lynch frequently employed in his investment analysis. He believed that the P/E ratio could provide valuable insights into a company's valuation. A low P/E ratio might indicate an undervalued stock, while a high P/E ratio could suggest an overvalued one. However, Lynch cautioned against relying solely on the P/E ratio. He emphasized the importance of considering a company's growth prospects, industry dynamics, and competitive position when evaluating its stock. A low P/E ratio might be justified if a company has strong growth potential. IV. Diversification and Concentration Peter Lynch had a nuanced approach to diversification. While he recognized the benefits of spreading risk across different investments, he also believed in concentration when you have high conviction in a particular investment opportunity. This approach is sometimes referred to as "diworsification" – spreading investments too thin, which can dilute returns. Lynch advocated holding a concentrated portfolio of your best ideas while still maintaining a level of diversification to mitigate risk. He noted that over-diversification could limit potential gains and lead to mediocre performance. V. Be Patient and Contrarian Lynch's investment philosophy often aligned with being patient and contrarian. He suggested that investors should not be swayed by short-term market fluctuations or popular trends. Instead, they should have the patience to wait for the market to recognize the value of their investments. Moreover, Lynch saw value in going against the crowd when necessary. He believed that some of the best investment opportunities could be found in out-of-favor industries or companies that others were avoiding. Contrarian thinking often led him to uncover hidden gems. VI. Stay Informed and Do Your Homework Despite his emphasis on simplicity and "investing in what you know," Lynch was a firm advocate of doing thorough research and staying informed. He advised investors to study financial statements, read annual reports, and understand the ins and outs of the companies they invested in. Furthermore, Lynch recommended paying attention to economic indicators and industry trends. Being well-informed allowed him to make informed investment decisions and identify potential risks and opportunities. Conclusion Peter Lynch's principles of investing continue to resonate with both novice and experienced investors. His common-sense approach, emphasis on knowledge and patience, and focus on long-term value have stood the test of time. By adhering to these principles, individual investors can navigate the complex world of finance with confidence and increase their chances of achieving their financial goals. Whether you are a seasoned investor or just starting on your investment journey, Peter Lynch's timeless wisdom provides a solid foundation for success in the world of investing.
Editors' picks
CAPITALCOM:US100Education
by financialflagship
10
Qredo OverviewQredo Overview Despite a challenging 2022, signs of institutional digital asset adoption – here, here, and here – are still aplenty. However, a major barrier that continues to prevent these large capital pools from coming onchain is still the risk and complexity associated with most forms of digital asset custody. Whether it’s the single point of failure risk of self-custodying private keys or the reintroduced counterparty risk and illiquidity that comes with entrusting third parties, most existing solutions have glaring flaws. Qredo is a digital asset custody protocol that sidesteps these issues by leveraging a cryptographic technique called distributed multi-party computation (dMPC). This approach distributes private key shards across a blockchain network and allows only the private key owner(s) to authorize their reassembly for the signing of transactions, thereby greatly mitigating the chance of private key loss or theft and all but eliminating counterparty risk. On top of this core security offering, Qredo has developed a suite of complementary products and services including “vaults” to store, manage and trade digital assets directly from self-custody, as well as integrations with premiere Web3 wallets like MetaMask Institutional and WalletConnect. Qredo’s complex, multifaceted middleware is worth understanding because it plays an increasingly important role behind the scenes. It has been embedded into core workflows and operations by over 350 of the industry’s leading funds, custodians, and market makers. And now, thanks to a sweeping product upgrade, Qredo is well-positioned to become essential to the entire crypto community – from institutional investors to developers and builders, to crypto-native market participants. Background Qredo Ltd. was co-founded in late-2018 by Anthony Foy, a seasoned business executive and entrepreneur with more than 20 years of experience in cybersecurity and scaling up digital businesses. Qredo shipped out the Qredo v1.0 Testnet at the end of 2019 and the Qredo v1.0 Mainnet about a year later, in September 2020. Since Mainnet, Qredo has continued shipping throughout market cycles, building an impressive suite of products and features to facilitate the securing and deployment of, as well as building with, digital assets in the realm of DeFi. For the full 20+ page report, click here .
QEducation
by ReflexivityResearch
VeChain OverviewIntroduction to VechainThor Initially launched as a private consortium chain in 2015 to enable enterprise blockchain ecosystems, the team quickly realized the value-add of trustless, immutable, and decentralized information. With this realization, Vechain began the process of going public, launching a foundation, and conducting an Initial Coin Offering (ICO) in 2017. VechainThor is the public blockchain launched in 2017 and built by the Vechain Foundation. It was conceived with a focus on enterprise use cases and designed to foster the proliferation of business-oriented decentralized applications (dApps). The network was specifically designed to overcome technical hurdles posed by other public blockchains such as scalability, unpredictable gas fees, and an unwillingness by businesses to handle crypto assets directly. Initially conceived to solve problems in supply chain management - a vision born from CEO Sunny Lu’s experiences as Chief Information Officer at Louis Vuitton China - Vechain launched its mainnet in 2018, embracing Ethereum’s technology framework but with additions aimed at tackling issues like high transaction costs and scalability. Vechain’s blockchain delivers instant visibility, traceability, and transparency within business operations, enabling blockchain adoption with adherence to local regulatory regimes. In turn, Vechain has allowed companies to save on costs and time while increasing operational efficiency. In March 2023, Vechain announced its partnership with Boston Consulting Group, considered a Top Two Global Management Consultant with specialisms in the fields of ESG and sustainability. Between them, the pair outlined their approach to helping enterprises and individuals act more sustainably through ecosystems that reward and incentivize specific user engagement. An early prototype of this approach to sustainability can be found here, developed alongside BYD and DNV, rewarding drivers of electric vehicles with credits that could be spent with participating retailers... For our full 20-page+ report, click here
Editors' picks
Education
by ReflexivityResearch
6
Investing vs Trading: A Comparative AnalysisHello, money enthusiasts! Whether you're a Wall Street wolf or a Main Street newbie, today we're diving into the exhilarating world of finance to dissect two popular money-growing strategies - investing and trading. So, sit back, relax, and prepare to soak up some knowledge! The Basics Let's kick things off with some simple definitions. Think of investing as adopting a kittens. It requires time, patience, and care, but over the years, the bond strengthens and becomes incredibly rewarding. On the flip side, trading is like pet-sitting. You look after someone else's pet for a short while, enjoy the perks, and then move on to the next one. It's all about quick interactions and constant change. Risk & Reward: The Financial Tango In the world of finance, risk and reward are partners, always moving together. Investing often involves lower risk and lower returns over a long haul. It's a slow waltz where you glide along with the rhythm of the market. Trading, however, is a fast-paced salsa. It's high risk, high reward, and you need to keep up with the tempo. The possibility of quick gains is exciting, but remember - one misstep can lead to a financial tumble. Time Commitment: Marathon vs Sprint Investing is like running a marathon. Once you've done your research, picked your stocks (your training plan), and invested, you can pace yourself and wait for the finish line. Trading, in contrast, is a series of sprints. It demands constant attention, quick decisions, and the stamina to keep going. You need to be on your toes, ready to sprint when the starting gun fires. Skills & Knowledge: Driving vs Racing Investing generally requires a basic understanding of a company’s fundamentals, kind of like driving a car. You know the basics, you follow the rules, and you get to your destination safely. Trading, however, is like racing. It requires an in-depth understanding of market trends, technical analysis, and financial charts. You need to know your vehicle inside out, anticipate the moves of other drivers, and make split-second decisions. Emotion & Stress: Meditation vs Thrill Ride Investing is akin to a meditation session. It's slow, steady, and although it might seem boring at times, it's beneficial in the long run. Trading, on the other hand, is like a thrill ride. It's exhilarating, nerve-wracking, and requires a strong stomach. But for some, the thrill is part of the appeal! In conclusion, whether you choose to invest or trade depends on your risk appetite, time commitment, knowledge level, and how much excitement you want from your money. Neither approach is inherently better—they're just different strategies to reach financial growth. So, are you the patient pet owner, nurturing your investment over time? Or are you the dynamic pet-sitter, always looking for the next opportunity? Whichever path you choose, remember to stay informed, stay calm, and may your financial journey be prosperous. Happy money managing!
NASDAQ:IXICEducation
by AfnanTAjuddin
Joe Ross Trading StrategyHello everyone This post will be devoted to the trading methods of the famous trader Joe Ross. There is very little information about Ross on the internet, mostly copied from his books, so let's try to study this situation more deeply. The information is not for beginners. Support and resistance, trend lines, the concept of flat market, all this should be already worked out. You should already know and be able to apply them. You should also take into account that this Ross strategy used only in a trending market. It is not applicable in a sideways movement or choppy. 1-2-3 Setup 1-2-3 setup according to Ross is a reversal formation, that is, its development is information for thinking about the change of the current trend. This setup works absolutely on any timeframe and asset, which once again confirms its quality and flexibility. Bullish Setup This setup is formed at the end of the downtrend and consists of 3 key points. EURUSD chart, 1 hourly timeframe will be used as an example. What is the point of the setup; after the bearish movement, when the price consistently made new lower highs and lows, a breakout of the last local high was formed. This means that there may have been a change of movement and market sentiment. The setup is considered complete after the breakout of point 2. It is not the closing of the candle above point 2 that is considered a breakout, but the creation of a new high above this mark. After that it is taken as a condition that there is a new bullish trend. So, what we have in the case of a set-up occurring: • A clear 1-2-3 pattern • The pattern is finally formed and considered formalized after breaking the high/low at point 2 We identify the peaks, then we look for some sort of 1-2-3 formation to begin to emerge. If the last high is broken in a bullish setup, we look to see if this formation is clearly visible. If yes, we can enter the trade. Bearish Setup How this formation is built and what to pay attention to when marking charts. As we can see on the 1st chart, point 1 has formed a new low with its shadow. And here, when moving to the potential point 2 and then to point 3, the most important thing to pay attention to when marking this setup (for the example, we take a bullish setup) is hidden, namely: • The highs of the candles from point 1 to point 2 must be higher than the previous ones. In other words, each new candle makes a new high. As soon as the next candle is formed without making a high - we have point 2 • When moving from point 2 to point 3, each candle should make deeper lows, while the upper highs of the candles should not be higher than point 2. If shorter, we have a decline going down like a ladder • As soon as the next candle closed without forming a new low - ready, we have point 3 Ross Hooks (RH) The next step, and it is the main one in trading this method, is Ross's Hooks. This is the fundamental part of his strategy, which, by the way, uses it more than half a century. So, we have a 1-2-3 setup. There is a breakout of point 2 and the price goes up further. Each new candle makes a new low, while the highs does not go above the point 3. As soon as the next candle fails to make a new low, we have a Ross Hook (RH). Let's look at an example for clarity: We broke through point 2, created a new low and rolled back. The first RH and confirmation of the trend change to a downtrend appeared. Further price movement will be based on attempts to break through RH and pullback after the breakthrough and further attempts to establish new lows. It would be interesting to note that at the current stage we do not care what candles formed this trend, there is no need to pay attention to Price Action setups. Even this simplified view shows the development of the trend, its growth and direction. Later we will see how to apply hooks and trade with them in combination with Price Action setups. Ross Reversal Hooks Ross Reversal Hook (RRH) is formed by a pullback from RH and the formation of a new low in the current trend. Let's take a look at the same example above: Ross Trend Detection Methods So, let's summarize the main methods of determining the Ross trend and its pros and cons. Cons: • Firmly identifying a trend change happens quite late. In other words, a part of the trend movement is lost. • It is extremely rare that a 1-2-3 formation is formed, then RH, and the trend changes sharply to the opposite. Pros: • Despite the late entry, we have fairly reliable entries with low risks to our capital. • We have a strict orderly system and we can clearly see if there is a trend on the current timeframe or not. • The 1-2-3 and Rh formation works perfectly on any timeframe. • The period of trend change can be detected at an early stage if we apply filtering and Price Action methods. Now let's discuss trend detection methods in conjunction with basic Price Action methods. Forex trading is highly dependent on a few major factors. These are leverage size, spread size, lot size to trade, asset to trade. Now, as for the definition of trends. Ross' principles are applicable to any timeframe, so, having defined your trading timeframe (let's say 1 hour), you should proceed to 4 hourly, 1 daily, 1 weekly timeframes. On each of them, in accordance with the rules of technical analysis, mark the trend lines, starting from the higher timeframe. As a result, we get a picture on the trading timeframe, within which we can see the price movement at the current moment of time. And, having a complete picture, we mark 1-2-3 setups, hooks (if any) and the potential for further price movement. Finding the Best Trend Depending on the Timeframe How to determine if a trend is good? How to quickly and easily determine the timeframe, which is most interesting when trading using the Ross technique. Simply put, there should be a good growth, then a pullback of no more than 3 bars, possibly with the formation of RHR and a break of RH. If we see choppy market, a bunch of dojis, inside bars, incomprehensible moves; this timeframe is not quite well chosen. In particular, on GBPAUD a good timeframe can be seen on the 4 hourly timeframe, but on the hourly one the same trend does not look so good. Let's see: 4H 1H And it happens that on the hourly timeframe there is a perfect trend, but when you switch to the 4-hour or daily timeframe, there are confusions. The same is true for 15 minutes, and so on. The main thing is to learn to determine whether a trend is ""nice"" or not by just looking at it. It is also very useful to look at the previous trends on the selected timeframe. History repeats itself and trends can behave similarly precisely because there will be support and resistance lines in approximately the same places. RHs Filtering Methods Here we come to one of the most difficult parts of the Ross trade. RH filtering is something you need to pay the most attention to. Even if you don't trade Ross, but know his filtering methods - it helps a lot in terms of identifying such moments, what we call "false breakout", "collecting stops" and so on. Support and resistance line Trend line A price break or gap Accumulation The first and easiest way of filtering is, of course, in support and resistance lines. If we see that the hook hit the monthly resistance when trading on a 4 hourly timeframe, it is a good reason to think about whether a trend change will follow. But on the other hand, a breakout of the maximum of such a hook combined with strong resistance can be a good buy signal. Also, if the trend is long enough and the hook is formed at the resistance level, there is a good chance that the trend will turn sideways. The next way of filtering is the trend line or channel lines. They are good for determining the end of a pullback in a trend and the formation of reversal setups. This post is a simplified representation of Joe Ross's strategy, there are so many nuances, subtleties, and filters. Ross in his books shows combinations of his hooks with such indicators as Stochastic, ATR, Bollinger Bands, moving averages and much more. In practice, as soon as there is some "confusion" of the price, which is out of the framework of the normally current trend, you should put this tactic aside and use other ones. Hooks work exclusively in a trending markets. Traders, If you liked this educational post, give it a boost and drop a comment.
Education
by Lingrid
11
How to be a Trading WARRIOR!To trade well you need to think like a warrior. You need to harness your inner strength and go through the battles of trading. There are spectators, there are participants, and then there are warriors. These warriors stand apart. And you need to blend your skills and traits to equip you with everything you need to WIN. In this article, we’ll delve into the core qualities that can transform you into a genuine trading warrior. Mastering the Sword of Time Trading, like a warrior’s battle, is not won in haste. You need the three Ps as I often write – patience, persistence, and passion. Markets are fluid entities that are always shifting and changing. So, you need to take the time to learn how to adapt or die trying. The Shield of Dedication Your shield is dedication. You need to commit to the journey, embrace the learning curve, take the losses and drawdowns in your stride. You need to continuously seek to improve with every trade, every trend analysis, and every market lineup that comes your way. Embrace it with dedication. Discipline: The Unyielding Armour Discipline is what will make you win. You need to follow your trading plan and stick to your risk management strategy. You need to make decisions based on logic, not emotions. Discipline keeps you grounded, even in the face of market chaos. The Quest for Self-Understanding This is a self-journey too. It’s a lonely but essential quest you need to undergo. I always say you need to understand your trading personality and risk profile. Know and identify your strengths, weaknesses, and biases. This will help you to develop a stronger understanding of who you are as a trading warrior. Resilience: The Warrior’s Tenacity Resilience is about bouncing back from losses and setbacks. They are going to come. Some are going to be short. Some are going to be extending. Rome was not built in a day. Strategic Thinking: The Battle Plan Trading warriors are not impulsive. They develop a strategic plan and evaluate all possible outcomes. We make sure we calculate risks before we think of getting into a trade. So have your strategic game-plan with you all times. Adaptability: The Shape-Shifter’s Gift The financial market is volatile and unpredictable. It’s forever changing. New markets, new volume, new algorithms, new economic cycles, and new breakthroughs. A trading warrior is adaptable and can adjust their strategies to align with the changing markets. Continuous Learning: Sharpen the Sword A warrior never stops to hone their skills. You need to continue to learn, stay ahead of the market trends. And always refine your strategy when need be. Keep that sword sharp and ready for anything. Emotional Intelligence: Harness the Stallion Successful trading requires emotional control. Learn to adapt to your emotions and feelings. Become the market and think like them, so you don’t get clouded by your irrational and illogical judgement. Confidence: The Warrior’s Roar Confidence is NOT about being right. That’s ego. Confidence is embracing your losses to come. Confidence is when you trust your abilities, strategies and decisions. Confidence is being comfortable with your trading, no matter what. Independence: The Lone Wolf’s Path Trading warriors are self-reliant. They make their own decisions. They might follow a leader, but they take responsibility with their own trading and risk profile. You need to learn to take responsibility for them, and don’t blame others for their losses. Focus: The Eagle’s Gaze Trading warriors have tunnel vision. They are looking straight at their goals and responsibilities. The only thing you can do is to concentrate on your tasks, block out distractions, and don’t allow fear, greed or ego to shift your focus. Perseverance: The Mountain’s Steadfastness A trading warrior keeps going. No matter what obstacles or setbacks approach. They understand that perseverance is the key to long-term success in trading. Balance: The Zen Master’s Touch You don’t want to be glued to your trading screen. This alone will defeat you. You need to learn to balance trading, business, work and life. Don’t put so much energy in things you cannot control. Balance your life and your lifestyle. Integrity: The Knight’s Virtue In every trade, a warrior upholds honesty and fairness. They stay true to their principles, even when nobody’s watching. Integrity is what gives you the confidence, respect and laser focus you need to achieve. Courage: The Lion’s Heart This is not a faint-hearted game. You need a lot of courage and calculated risks to trade. Face losses and stand up against market pressure. Developing these qualities will not guarantee instant success. But with time, patience, and perseverance, you’ll find yourself becoming a true trading warrior! Let’s sum up the trading warrior traits… Mastering the Sword of Time The Shield of Dedication Discipline: The Unyielding Armour The Quest for Self-Understanding Resilience: The Warrior’s Tenacity Strategic Thinking: The Battle Plan Adaptability: The Shape-Shifter’s Gift Continuous Learning: Sharpen the Sword Emotional Intelligence: Harness the Stallion Confidence: The Warrior’s Roar Independence: The Lone Wolf’s Path Focus: The Eagle’s Gaze Perseverance: The Mountain’s Steadfastness Balance: The Zen Master’s Touch Integrity: The Knight’s Virtue Courage: The Lion’s Heart
TVC:SA40Education
by Timonrosso
ACCUMULATION/DISTRIBUTION INDICATOR ✴️ Accumulation/Distribution (A/D) is a standard pack of technical analysis tools of many trading platforms. Today we will get to know this tool in detail and see how it works on Forex. This indicator can be especially interesting for supporters of the VSA method, as it takes into consideration trading volumes in its analysis. The author of the tool, world-known theorist and practitioner of technical analysis of stock markets Mark Chaikin, managed to describe the market phases with the help of volumes and price behavior: Accumulation - purchases of shares by investors and speculators; Distribution - sales of stocks at fixation of income. The forex market looks somewhat different: the accumulation or growth phase is interpreted by the A/D curve as an increase in the strength of the bulls, while the distribution or decline is perceived as an increase in the pressure of the bears' positions. ✴️ How indicator works Accumulation/Distribution is considered a technical tool for confirming or rejecting a trend. The growth or fall of prices on the chart must necessarily coincide with the direction of the indicator curve. All divergences are interpreted in the direction of A/D, i.e. any divergence is considered as a signal of the soon reversal of the currency pair. Indicator divergences from price are the most popular signals in technical analysis, but only A/D indicators have a high leading predictive accuracy. The indicator formula uses real volume indicators compared to price range changes, thanks to which Chaikin has achieved the best algorithmic display of VSA theory principles on the chart. ✴️ How to use the indicator in trading The most common strategy for applying Accumulation/Distribution is considered to be the oscillator method proposed by the author himself. It consists in finding the difference between two exponential moving averages with a period of 3 days and 10 days, taken from A/D values. Due to the settings of A/D to generate leading signals of trend change, the Chaikin oscillator (CHO) indicator has an important feature of signals synchronized with the current change in prices, despite the use of exponential averages, which traditionally lag due to averaging the result of calculations. The strategy of trading on the oscillator signals is to open positions: Long - the CHO curve crosses the zero line from bottom to top; Short - the CHO curve falls below the zero line. M. Chaikin suggested using divergence signals, divergence of tops and bottoms of the chart and oscillator trends as a trade filter, interpreting them in favor of CHO. The chart above shows how an uptrend is not confirmed by the next top of the curve, which means that we open a Short position at the zero line crossing from top to bottom. The situation is similar with a falling trend: if it is not confirmed by new CHO lows, we open a Long position after the indicator crosses the zero line. Positions are closed by reversal on the reverse signal, it is possible to insure the open order with a stop-loss moved to the breakeven zone. At the first opening of the trade, it is located at the nearest maximum or minimum, usually coinciding with the top CHO. Some traders who trade exclusively counter-trend divergence signals choose Accumulation/Distribution. As soon as a divergence is identified on the chart - a pending order is placed: Sell limit at the maximum not confirmed by the A/D indicator; Buy limit at the minimum at which the A/D divergence occurred. In other cases, the Accumulation/Distribution indicator is used as part of trading systems as an overbought/oversold oscillator filter. The picture below shows a simple MA + RSI strategy, where one of the conditions for a sell signal is the A/D divergence in the overbought zone. Having confirmed the trend reversal in this way, the trader waits for the prices to cross the MA and opens a Sell order on the market. ✴️ In conclusion Accumulation/Distribution is a sample of perfect synchronization of trading volume indicators with the dynamics of market quotes. The indicator is easy to interpret and use, it will not cause problems with its application even for a beginner, as it has no settings that would have to be selected. Like any other tool of the chanalysis, A/D indicators are better used as a part of trading systems or together with other developments of Mark Chaikin. They are published on the Chaikin Analytics website, repeatedly recognized as the best portal for quantitative analysis of financial markets.
Education
by DeGRAM
2
Kelly Criterion and other common position-sizing methodsWhat is position sizing & why is it important? Position size refers to the amount of risk - money, contracts, equity, etc. - that a trader uses when entering a position on the financial market. We assume, for ease, that traders expect a 100% profit or loss as a result of the profit lost. Common ways to size positions are: Using a set amount of capital per trade . A trader enters with $100 for example, every time. This means that no matter what the position is, the maximum risk of it will be that set capital. It is the most straight-forward way to size positions, and it aims at producing linear growth in their portfolio. Using a set amount of contracts per trade . A trader enters with 1 contract of the given asset per trade. When trading Bitcoin, for example, this would mean 1 contract is equal to 1 Bitcoin. This approach can be tricky to backtest and analyse, since the contract’s dollar value changes over time. A trade that has been placed at a given time when the dollar price is high may show as a bigger win or loss, and a trade at a time when the dollar price of the contract is less, can be shown as a smaller win or loss. Percentage of total equity - this method is used by traders who decide to enter with a given percentage of their total equity on each position. It is commonly used in an attempt to achieve ‘exponential growth’ of the portfolio size. However, the following fictional scenario will show how luck plays a major role in the outcome of such a sizing method. Let’s assume that the trader has chosen to enter with 50% of their total capital per position. This would mean that with an equity of $1000, a trader would enter with $500 the first time. This could lead to two situations for the first trade: - The position is profitable, and the total equity now is $1500 - The position is losing, and the total equity now is $500. When we look at these two cases, we can then go deeper into the trading process, looking at the second and third positions they enter. If the first trade is losing, and we assume that the second two are winning: a) 500 * 0.5 = 250 entry, total capital when profitable is 750 b) 750 * 0.5 = 375 entry, total capital when profitable is $1125 On the other hand, If the first trade is winning, and we assume that the second two are winning too: a) 1500 * 0.5 = 750 entry, total capital when profitable is $2250 b) 2250 * 0.5 = 1125 entry, total capital when profitable is $3375 Let’s recap: The trader enters with 50% of the capital and, based on the outcome of the first trade, even if the following two trades are profitable, the difference between the final equity is: a) First trade lost: $1125 b) First trade won: $3375 This extreme difference of $2250 comes from the single first trade, and whether it’s profitable or not. This goes to show that luck is extremely important when trading with percentage of equity, since that first trade can go any way. Traders often do not take into account the luck factor that they need to have to reach exponential growth . This leads to very unrealistic expectations of performance of their trading strategy. What is the Kelly Criterion? The percentage of equity strategy, as we saw, is dependent on luck and is very tricky. The Kelly Criterion builds on top of that method, however it takes into account factors of the trader’s strategy and historical performance to create a new way of sizing positions. This mathematical formula is employed by investors seeking to enhance their capital growth objectives. It presupposes that investors are willing to reinvest their profits and expose them to potential risks in subsequent trades. The primary aim of this formula is to ascertain the optimal allocation of capital for each individual trade. The Kelly criterion encompasses two pivotal components: Winning Probability Factor (W) : This factor represents the likelihood of a trade yielding a positive return. In the context of TradingView strategies, this refers to the Percent Profitable. Win/Loss Ratio (R) : This ratio is calculated by the maximum winning potential divided by the maximum loss potential. It could be taken as the Take Profit / Stop-Loss ratio. It can also be taken as the Largest Winning Trade / Largest Losing Trade ratio from the backtesting tab. The outcome of this formula furnishes investors with guidance on the proportion of their total capital to allocate to each investment endeavour. Commonly referred to as the Kelly strategy, Kelly formula, or Kelly bet, the formula can be expressed as follows: Kelly % = W - (1 - W) / R Where: Kelly % = Percent of equity that the trader should put in a single trade W = Winning Probability Factor R = Win/Loss Ratio This Kelly % is the suggested percentage of equity a trader should put into their position, based on this sizing formula. With the change of Winning Probability and Win/Loss ratio, traders are able to re-apply the formula to adjust their position size. Let’s see an example of this formula. Let’s assume our Win/Loss Ration (R) is the Ratio Avg Win / Avg Loss from the TradingView backtesting statistics. Let’s say the Win/Loss ratio is 0.965. Also, let’s assume that the Winning Probability Factor is the Percent Profitable statistics from TradingView’s backtesting window. Let’s assume that it is 70%. With this data, our Kelly % would be: Kelly % = 0.7 - (1 - 0.7) / 0.965 = 0.38912 = 38.9% Therefore, based on this fictional example, the trader should allocate around 38.9% of their equity and not more, in order to have an optimal position size according to the Kelly Criterion. The Kelly formula, in essence, aims to answer the question of “What percent of my equity should I use in a trade, so that it will be optimal”. While any method it is not perfect, it is widely used in the industry as a way to more accurately size positions that use percent of equity for entries. Caution disclaimer Although adherents of the Kelly Criterion may choose to apply the formula in its conventional manner, it is essential to acknowledge the potential downsides associated with allocating an excessively substantial portion of one's portfolio into a solitary asset. In the pursuit of diversification, investors would be prudent to exercise caution when considering investments that surpass 20% of their overall equity, even if the Kelly Criterion advocates a more substantial allocation. Source about information on Kelly Criterion www.investopedia.com
Editors' picks
Education
by sofex
2
Understanding Interest-rates & InflationHey Traders So, I have been asked by many of my clients to explain the relationship between interest-rates and inflation and how to translate that information into their analysis. For this reason I put this little mini lesson together to explain: - The core role of the central bank - Reason and objectives for interest-rates and inflation - How you can use this information to enhance your analysis - How to take advantage of this info when taking, managing or closing your trades. PS. if you would like me to do more of these types of videos be sure to leave a comment in the comment section.
TVC:DXYEducation
by DeanMuller
How does OUTsurance have Data from 2013?“How is it possible for Outsurance to have data on my charting platform, as far back as 2013 while it was just listed on the JSE.” A. The data that you see from 2013, came from the parent company Rand Merchant Investment Holdings (RMI). They then changed the name to OUTsurance Group Holdings Limited (OUT). And they have been in the process of transitioning and rebranding from RMI to OUT following the unbundling of its investments in Discovery1. And now, the Centurion-based insurer has officially swapped places with its parent company, Rand Merchant Investment Holdings (RMI), which is no longer listed on the exchange.
OEducation
by Timonrosso
1
🥶 FACT: Most traders quit year one. Hmm, but why? 🤔You all heard the statistic, "gambling is more profitable than trading - 13 out of 100 gamblers leave the casino with gains compared to 1 out of 100 traders". Yeah yeah. Nice story. Now tell us the real story. The market is not a casino. Don't compare. What about the thousands of traders making consistent gains? It's a FACT that most traders quit their trading "hobby" or "career" within their first year of trading. But what's ALSO a FACT is most traders: Don't take profits when they see them (keep holding for more). Go too heavy on a single trade. Go all in on a single trade. HODL for glory, even when they're super green on a trade. Are too bullish/ bearish and turn a blind eye to the other bias. Are over-speculating all the time (i.e. " NASDAQ:AMD 120 tomorrow. All in calls" Trade without a chart. Have no risk management. Don't follow their own rules. Have no trading strategy. One cannot state the first "fact" without stating the other; the real reason. Otherwise, that's a shallow statistic. That's like looking at a 15 min chart and not realizing that each candle is constructed of 1,000+ mini candles. Here's a 15 min NASDAQ:AMZN chart: Here's the same chart in 15 second candles: Zooming in to the chart gives you a clearer picture. Digging deep into the "quitting" traders' psychology, you'll get the answer. Also, I wouldn't say they quit. It's possible that the energy they were putting in wasn't paying off, and they didn't want to waste their time any further. Treat your trading like a job. Be strict. You see quick +20% profit? Take it. But you believe it's going higher? Still take it. Find another trade. Baby gains add up! Most traders who got burned on NYSE:AMC NYSE:GME , kept HODLing. This is coming from someone who bought NYSE:AMC at $2.13 pre-split in 2021 and sold around $25 and $70: ACHIEVING SUPER GAINS WILL RUIN YOUR MENTALITY! You will start treating the market like a casino. You will stop appreciating the smaller 20 to 40% gainers that you can do once per day or week. You will see yourself starting to go heavy because you "believe" that "this is the next banger". To avoid all this headache, build a strategy slowly over time, use the right tools to plan your trade, find a community to trade with, use proven strategies (i.e. support/ res, supply/ demand, patterns), go light in your first 1,000 trades, and so on. Happy to help if you have any questions below. Follow for more insight and for live trade swing & day-trade ideas! Good luck trading! Trade safe and don't go all in. Baby gains add up.
CME_MINI:ES1!Education
by kingdips
1
Blockchain Architecture Blockchain Architecture Around how to realize decentralized trust, a blockchain can be divided into five layers from a technical point of view, which are the data layer, network layer, consensus layer, contract layer, and application layer, as shown in Figure 1. The data layer defines the blockchain’s underlying data structure, storage structure, and ledger pattern as the theoretical basis and outlines a theoretical model of decentralized trust. The theoretical model of blockchain decentralized trust in the network layer is realized by utilizing the distributed P2P network. In the consensus layer, the consensus algorithm organizes and coordinates the behaviors of nodes in the decentralized system to drive the continuous operation of the blockchain. In the contract layer, smart contracts are introduced as the extension of the blockchain so that the blockchain can handle more complex transactions. At the application layer, providing blockchain APIs makes it easy for developers to build Dapps and offer decentralized solutions to problems from various industries. Mathematics 11 00101 g001 550Figure 1. Blockchain architecture. 3.1. Data Layer Due to the lack of authoritative central node coordination and management, the decentralized system has problems such as easy data tampering, untraceable node behavior, and difficulty in rapidly authenticating transactions, leading to the data not being trusted. As the theoretical basis of blockchain, the data layer needs to solve the appealing problem to ensure that the data are credible to achieve decentralized trust. From the perspective of the logical structure of data, the blockchain is a chain composed of a connected block, and each block stores the transaction information. The blocks are connected by hash pointers and are chained in chronological order of their generation. According to the characteristics of the hash function, any slight modification to the block data will create a huge change in the hash value of the block, leading to the block not being chained. Based on that, security ensures that the data on the block is not tampered with, and thus the credibility of the data on the chain. The data layer constructs the decentralized trust model of blockchain from three aspects: data structure, storage structure, and ledger pattern. 3.2. Network Layer The network layer is the key to implementing a decentralized system at the physical level. Decentralization means that the blockchain nodes are peer-to-peer at the physical level and that each node can communicate with each other without passing through the central node. Therefore, the network structure of the blockchain adopts the decentralized P2P structure. As shown in Figure 2, compared to a centralized network structure, a P2P network can ensure peer-to-peer communication between nodes, and nodes can join or exit the system quickly. Mathematics 11 00101 g002 550Figure 2. P2P network vs. centralized network. The P2P network is a distributed application architecture. The P2P networks were initially designed to facilitate the distribution of large files over unreliable networks. In a P2P network, multiple computers are connected in a peer-to-peer position, and the entire network does not require centralized coordination by a central processing node. In P2P networks, each peer can act as both requestor and responder of network services. Research on p2p network technology has recently focused on improving system performance and security. In system performance: Abudaqa et al. summarized, evaluated, compared, and classified the techniques used to improve the performance of P2P file-sharing systems based on network coding; Milojicic et al. provided a general analysis of the design and implementation issues of P2P systems in the context of practical cases. In security: Alharbi et al. explored the security weaknesses and threats in P2P networks and proposed that the fundamental problem of P2P networks is the trusting of peers and the problem of secure traffic routing. Risson et al. discussed the metrics affecting the robustness of P2P systems. 3.3. Consensus Layer The consensus layer implements the consensus algorithm, which organizes and coordinates the decentralized system, allowing the blockchain to operate securely and stably. A blockchain is a distributed system where nodes communicate and coordinate with each other only through messaging because no central node is involved. In a distributed system, nodes agreeing on an event is also called a consensus, and a consensus algorithm is used to ensure data consistency among nodes in the system. Due to unavoidable problems such as network latency, node failure downtime, and bandwidth limitation, distributed systems are subject to the FLP impossibility principle and CAP theory. The FLP impossibility principle means that in a system containing multiple deterministic processes, as long as one process may fail, no protocol can guarantee a finite time for all processes to agree. CAP theory points out that it is impossible for any distributed system to satisfy consistency, availability, and partitioning of fault tolerance at the same time , as shown in Figure 3. Therefore, according to CAP theory and the FLP impossibility principle, certain aspects must be traded off when designing consensus algorithms for blockchains. Mathematics 11 00101 g003 550Figure 3. CAP theory. Blockchain can be regarded as a distributed public ledger. The essence of consensus is to decide the bookkeeping right, i.e., to solve the problem of who can produce the blocks and package the transactions into the blocks. According to the different mechanisms to reach consensus, blockchain consensus algorithms can be divided into proof-based and voting-based. 3.4. Contract Layer The contract layer implements smart contracts, a set of digitally set commitments that are unmodifiable once deployed and executed immediately once triggered. Smart contracts, as an extension of the blockchain, enable the blockchain to have the ability to handle logically complex transactions. 3.5. Application Layer The application layer provides API interfaces for users to easily build Dapps using blockchain services and applies blockchains to various practical scenarios. With the development of blockchain technology, various Dapps have emerged to bring decentralized trust solutions to the problems of traditional industries. 4. Blockchain Basic Principle 4.1. Data Structure A blockchain has a chain structure in terms of blocks to achieve data immutability. The data structure of different blockchain platforms differs in specific details but is the same overall. Take Bitcoin as an example. The block in Bitcoin is divided into the block header and the block body. The block header contains the version number, random number, hash of the previous block, Merkle tree root hash, timestamp, current workload proof difficulty, etc. The block body contains all the transactions packed into the block, and the Merkle tree comprises these transactions. To support smart contracts, Ethernet adds a system state to the block header for storing account balances, contract storage, contract code, and account random numbers. A block contains a block header, timestamp, proof-of-workload random number, hash of the previous block, packed transactions, Merkle tree, etc. . The block’s verification signature and proof-of-work use cryptographic algorithms such as elliptic curve encryption and SHA-256. The data-layer structure differs slightly from blockchain platform to blockchain platform because of the different functions they focus on. Take the Bitcoin system as an example, and the data-layer structure is shown in Figure 4: Mathematics 11 00101 g004 550Figure 4. Blockchain data-layer structure. To reduce the bandwidth consumption caused by block synchronization, each block in the Bitcoin system can be divided into two parts: the block header and the block body, which stores all the transaction records in the current block. Bitcoin nodes are divided into full nodes and light nodes. Bitcoin light nodes only need to synchronize the block header for block synchronization. The transaction records in the Bitcoin system are similar to the transaction records in the physical system. Each transaction record includes information such as the input and output addresses of the transaction information and the number of transfers. Based on this transaction information, a corresponding form of Merkle-tree structure can be generated from the bottom up. The hash value of the root node of the Merkle tree is stored in the header of the block, and at the time of each block generation, the bookkeeper of the block adds a timestamp to the block, which is used to mark the generation time of the block. As the timestamp is enhanced, the block is extended to form a chain of blocks with a time dimension, allowing data information to be traced back in time. In addition, the block header contains the hash value of the previous block header, the version number, the random number of the proof of work, and the target hash value, among other information. Finally, the all information in the header of this block is hashed, and the resulting hash value exists in the header of the next block, which, in terms of logical structure, makes each block linked together in the form of a chain. 4.1.1. Hash Function Hashing converts data of any length into a number within a fixed range. The conversion method is called a hash function, which calculates the value obtained after the original value is called a hash value. Take MD5, a widely used hash function, as an example. The MD5 algorithm is also called the MD5 message digest algorithm, which can generate a 128-bit hash value to ensure the integrity and consistency of information transmission. The MD5 algorithm is universal, stable, and fast; and it is widely used in the encryption and protection of ordinary data. Hash functions are the basis of crucial blockchain technologies such as hash lists, digital signatures, and Merkle trees. The calculation of the hash function is unidirectional. It is easy to calculate the hash value of the given data, but it is difficult to deduce the original data given the hash value. The generated hash value may be the same for different data, and this phenomenon is called a hash collision. Due to the one-way nature of the hash function, people who want to generate hash collisions can only continuously try random numbers through brute force. Therefore, the process of finding suitable random numbers to create hash collisions is often used as “proof of work” by the blockchain. 4.1.2. Hash List In order to ensure that the block data cannot be tampered with, the hash value of the previous block is retained in other blocks except the Genesis block, and the blocks are connected with the hash value to form a hash list. A hash list is a one-way chain table in which hash pointers connect nodes. Any small change in the block data will cause a huge change in the hash value, so it is impossible to tamper with the data in the hash list. In addition to a chained structure, some scholars have proposed a blockchain with a non-chain structure for dealing with different scenarios. Qi et al. proposed a cascade structure of blockchain to solve the performance problem of blockchains, which can accelerate the generation of blocks, expand the capacity of blocks, reduce the risk of bifurcation, and increase the security. Ribero et al. proposed a cryptocurrency called DagCoin based on DAG structure, the first blockchain-based on DAG. DagCoin has no fixed blocks; each transaction has its own proof of work. The system can achieve a speed comparable to Bitcoin. Despite the emergence of blockchains with non-traditional chain structures, such as DAG and cascade structures, mainstream blockchains are still dominated by chain structures. 4.1.3. Timestamps To make transactions traceable, Bitcoin adds timestamps to blocks and calculates the block’s hash value by using the timestamp as the information in the block together. The timestamp is the total number of seconds from 00:00:00 GMT on 1 January 1970 to the present, and the timestamp proves that the transaction in the block must have existed at that time. The current development of timestamps mainly revolves around improving timestamp accuracy and reducing errors. Zhang et al. proposed an accurate blockchain-based timestamping scheme which solves the problem of the inaccuracy of file timestamps caused by blocks due to the existence of time errors in timestamps. Ma et al. proposed an optimized blockchain timestamping mechanism that reduces the range of timestamps in blocks to an average of 10 min by serving external trust timestamps to the blockchain consensus. 4.1.4. Merkle Tree Blockchain stores all the transaction records of history, and the data volume of historical transaction data will become larger and larger as time goes by. It is unrealistic to verify the existence of a certain transaction by traversing all the historical transactions. To enable fast transaction verification, all transactions in the block are stored as a Merkle tree. A Merkle tree is a tree that connects parent and child nodes with a hash pointer. Bitcoin uses the simplest binomial Merkle tree to quickly verify whether a transaction exists in a block. The structure of a binary Merkle tree is shown in Figure 5. Each leaf node in the tree corresponds to a SHA256 hash of one transaction data within the block. The value of the parent node is obtained by concatenating the values of the two child nodes and then performing a hash operation. Hashing between nodes is performed repeatedly until the root hash value is reached, when the transaction Merkle root is generated. The Merkle root is used to detect any tampering with the transaction data in the block, so as to ensure the integrity of the transaction data in the block. Mathematics 11 00101 g005 550Figure 5. Merkle tree. 4.1.5. Digital Signature Bitcoin is a chain of digital signatures designed to prevent transactions from being forged or denied. A digital signature is an unforgeable string of numbers that can be generated only by the sender of the message. It proves the validity of the sender of the message. Digital signatures are often used to verify the integrity of documents or messages and are an effective way to make transactions non-repudiation and unforgeable. In the process of Bitcoin transactions, the owner of a Bitcoin transfers the coin to the next owner by digitally signing it with the hash of the previous transaction and the next owner’s public key and adding it to the end of the coin. The recipient can verify these signatures to validate the ownership of the coin. Digital signatures are based on asymmetric encryption, first proposed by Rivest et al. . Asymmetric encryption has two keys, which are used in the encryption and decryption processes. The commonly used asymmetric encryption algorithms in blockchain are RSA, SHA256, ECC, etc. As a decentralized distributed system, blockchain needs to adopt a compatible encryption algorithm because the system configuration of each node is different. RSA algorithm is an international standard algorithm that is widely used and compatible and can be applied to different systems. RSA is the first algorithm that can be used for encryption and digital signature, and it is also considered one of the best public key schemes. Although RSA has the characteristics of strong compatibility and high security, RSA has the problems of long key and time-consuming cryptographic computation. Compared to RSA, ECC has the advantages of small key length, high-security performance, and small time consumption for the whole digital signature. Compared with RSA, ECC can use a shorter key to achieve comparable or higher security than RSA. 4.2. Storage Structure During blockchain transaction execution, transaction data need to be packaged into blocks, and data writing is in high demand. In the process of blockchain transaction validation, it is necessary to quickly locate the block where the transaction is in and perform transaction validation. Based on the above functional requirements, blockchain often uses a combination of file systems and databases to store block data. The file system can facilitate the system to append data in the form of logs, and the database stores the index information of the file where the block is located, which can quickly find the location of the relevant transaction block and assist the system in query. Block data and block “undo” data are stored in the file system, and block “undo” data are the data for rolling back the blockchain when the system generates a chain fork. The database stores the state and index data of the blockchain, which are usually stored in key–value pairs for quick querying. 4.3. Ledger Pattern A blockchain is a decentralized transaction ledger, and the ledger records the history of all transactions. There are two main types of mainstream ledger patterns: transaction-based and account-based. 4.3.1. Transaction-Based Ledger The transaction-based ledger is used for digital currency transactions and is the ledger model used by Bitcoin. In Bitcoin, an “Unspent Transaction Output” (UTXO) is used instead of a centralized institution to clear transactions. In this transaction-based model, the user’s assets are not explicitly recorded directly in the system but instead extrapolated from the information in UTXO. In order to know how many bitcoins a user has in total assets, we need to calculate how many coins that user has in total in all accounts in UTXO. The transaction-based ledger can record each transaction, trace the origin of each fund, and protect user privacy. 4.3.2. Account-Based Ledger The account-based ledger is suitable for blockchain platforms that support smart contracts, such as Ethereum and Hyperledger Fabric. The account-based ledger model is similar to a bank account, where the account balance information is recorded explicitly by the system, and the transaction balance and business status data can be easily checked. Take Ethereum as an example. Ethereum accounts are divided into external accounts and contract accounts. External accounts are controlled by public–private key pairs; the user locally generates a public-private key pair. The private key controls the account also called a normal account. The user creates a contract that returns an address, and the contract can be invoked as long as the address of the contract is known. The account-based ledger gives participants a more stable identity and better support of smart contracts. 5. Consensus Mechanisms In the decentralized scenario, without the participation of the central node, a fair operation mechanism, i.e., a consensus mechanism, must be established among the nodes of the blockchain to enable each node’s unified and coordinated operation. Blockchain establishes a “trustworthy” network among nodes through the consensus mechanism so that each node can reach an agreement and achieve data consistency in the ledger of each node in the blockchain, which drives the continuous operation of the blockchain. The consensus mechanism of blockchain mainly solves the problem of who will construct the block and who will package the transactions into the block . The consensus mechanism is the core of blockchain technology, which determines the security, scalability, and distributed nature of blockchain system. The problem of consensus originates from the “biliteracy problem”, and later the “Byzantine general problem” was proposed. The biliteracy problem refers to how to achieve reliable communication over unreliable channels. The Byzantine problem refers to the problem of how to make a distributed system agree in the presence of malicious behavior (e.g., message tampering or forgery), and the nodes that can both fail and behave badly are called “Byzantine nodes”. Consensus algorithms can be divided into classical distributed system consensus algorithms and blockchain consensus algorithms, depending on the time. Classical distributed consensus algorithms include Paxos, Raft, and Kafka. According to the different mechanisms used to reach consensus, blockchain consensus algorithms can be divided into proof-based and voting-based. The proof-based consensus algorithms require “some competition” among nodes to decide the bookkeeping rights, such as proof-of-work (PoW) and proof-of-stake (PoS). Proof-based consensus algorithms do not require the strict identity of participants, and nodes are free to join and exit, so proof-based consensus algorithms are commonly used in public chains. The voting-based consensus algorithm is initiated by a node to reach consensus by having the whole network nodes vote on whether to agree to the proposal, such as practical Byzantine fault tolerance (PBFT) . The voting-based consensus algorithms require a high identity of participating voting nodes and control the joining and exiting of nodes by the access mechanism, so voting-type consensus algorithms are commonly used in consortium chains. The consensus algorithm is the core of blockchain technology and a research hotspot of blockchains. The current research on consensus algorithms mainly focuses on two aspects: performance optimization and application. In performance optimization: Wu et al. proposed a hybrid consensus algorithm for blockchains that combines the advantages of PoS and PBFT algorithms. It reduces the number of consensus nodes to a fixed value through verifiable pseudo-random ordering and witnesses transactions between nodes. The improved hybrid consensus algorithm has excellent scalability, high throughput, and low latency, which is superior to the previous single algorithm. In applications: Biswas et al. proposed a proof-of-block-transaction (PoBT) consensus algorithm. The algorithm allows the verification of transactions and the reduction of computation time for blocks, improving the performance of the system in terms of security, computation, memory, and bandwidth. Fu et al. proposed a framework for evaluating consensus algorithms to provide guidance for the selection of consensus algorithms in sundry blockchain application scenarios. 5.1. Pow 5.1.1. Overview The proof of work (PoW) algorithm is one of the most widely used consensus algorithms in blockchain systems, and the Bitcoin system uses the PoW consensus algorithm. The PoW algorithm was first used for spam detection , and the core idea is to include in the email proof that a certain job has been completed (hence the name “proof of work”). Usually, the calculation of such proofs takes a few seconds, so this does not cause any difficulties for casual users. However, for spammers, this can take weeks to send millions of spam emails. Email recipients can easily verify if an email is a spam by proof of workload. In the blockchain using the PoW consensus algorithm, nodes need to constantly search for a specific random number, which is usually required to be calculated by a hash function (e.g., SHA-256) to obtain a hash value starting with several zero bits. It can be verified that the average work required to compute the random number is an exponent of the number of required zero bits. Due to the one-way computation and irreversible nature of the hash function, the random number found by the node is easily verified. In the Bitcoin system, the first node to find a specific random number is given bookkeeping rights and 50 coins as a reward. Hence, the process of finding random numbers is also called: “mining”. 5.1.2. Advantages and Disadvantages The Bitcoin system has been running smoothly since its launch in 2009 without any major failures, which is a testament to the effectiveness and security of PoW. In the PoW consensus, a node needs to control 51% of the computing power of the whole network to launch an attack. In the absence of a centralized node, the probability of a successful node attack is very low. Therefore, PoW consensus can effectively guarantee the security of the blockchain system. However, in PoW consensus, nodes constantly performing hashing operations will consume a large number of power resources, and blockchain chain systems using PoW consensus generally have serious energy consumption problems. In addition, the throughput of transactions in PoW consensus is very low. E.g., Bitcoin processes about seven transactions per second due to the limitation of block-out time and block size. This low transaction throughput makes it difficult to meet other application scenarios. 5.1.3. Improved Algorithms PoEWAL (proof of elapsed work and luck) : The PoEWAL consensus reduced the energy cost of the consensus by adding a time limit to the PoW. The mechanism emphasizes consensus by solving problems partially rather than completely within a fixed time frame. By adjusting the size of a given time period, the resource consumption of block mining can be effectively reduced, and devices with low computing power can also participate in mining. However, the essence of the consensus is still to obtain more consecutive zero hash values through continuous hashing operations. There is a problem similar to PoW where nodes with high arithmetic power have a higher probability of successful mining. The trust-based PoW mechanism : It can effectively solve the problem of high energy consumption in PoW consensus while ensuring the security of the blockchain network. By introducing the attribute of the node credit value, the higher the credit value, the lower the difficulty of node mining. Using a malicious behavior detection mechanism, the behavior of nodes is divided into positive and negative aspects, and positive behavior helps to increase the credit value of nodes. In contrast, negative behavior decreases the credit value of nodes. The positive aspect is expressed as the number of valid transactions calculated and verified by the node in the consensus process. In contrast, the negative aspect is determined by the node’s malicious behavior time and penalty coefficient, where the malicious behavior is divided into two types. One is the node’s lazy inaction in the consensus process. The other is the node’s double spending attack in the transaction. The system dynamically adjusts the penalty factor according to the actual malicious behavior of the node, but it will bring on an additional computational overhead for malicious behavior monitoring. 5.2. Pos/Dpos 5.2.1. Overview The Proof-of-Stake (PoS) algorithm is designed to solve the problem of wasting a lot of resources by using PoW mining. Unlike PoW, which determines the bookkeeping right through the arithmetic power of nodes, PoS differentiates the bookkeeping right through the “equity” of nodes owning coins. The core idea of PoS is that in a decentralized network, the node with the largest equity will have a greater incentive to maintain the network. In terms of implementation, PoS introduces the coin age to dynamically adjust the mining level of nodes with different equity. The older the node, the lower the difficulty of mining it. Based on the appealing advantages of PoS, the PoS algorithm was first adopted in the blockchain platform peercoin, and Ethereum’s consensus mechanism was transitioned from PoW to PoS on 15 September 2022. Although PoS solves the energy consumption problem of PoW, the performance is still not improved. In response to the performance problems of PoS, Dan proposed the delegated proof-of-stake (DPoS) algorithm . The topology of DPoS is shown in Figure 6. DPoS reduces the pressure on the network by reducing the number of participating consensus nodes and adding an election mechanism to PoS. As a variant of PoS, DPoS is similar to PoS in that the number of representative members is limited and elected by all, and the elected representatives participate in the consensus. Mathematics 11 00101 g006 550Figure 6. DPoS topology. 5.2.2. Advantages and Disadvantages PoS consensus can significantly provide the transaction throughput of the system and reduce the energy loss in the consensus process. However, PoS consensus has disadvantages such as poor fairness and ease of generating the Matthew effect. The use of coin age will make it easier for the node with more tokens to gain bookkeeping rights, shifting the power gradually to that node, decentralizing the degree of decentralization, and making fairness worse. 5.2.3. Improved Algorithms e-PoS : In response to the possibility that PoS can lead to centralization and unfairness in blockchain systems, Saadd et al. improved PoS and proposed modular e-PoS. Compared with PoS, e-PoS can resist the power concentration of the network. Ouroboros : Kiayias et al. proposed the first proof-of-stake-based consensus protocol with strict security guarantees. Ouroboros also employed a new incentive mechanism to incentivize “proof-of-stake” protocols, where honest behavior is an approximate Nash equilibrium. 5.3. Pbft 5.3.1. Overview Practical Byzantine fault tolerance (PBFT) can tolerate Byzantine faults. The PBFT algorithm was proposed by Miguel Castro and Barbara Liskov in 1999. It improves the efficiency of the Byzantine algorithm and reduces the complexity from exponential to polynomial, making Byzantine fault tolerance practical. The PBFT algorithm can achieve 2f + 1 fault tolerance; f is the number of Byzantine nodes that can be tolerated; and 2f + 1 can ensure that the correct nodes in it send more information than malicious nodes. Therefore, the minimum number of nodes required by PBFT is 3f + 1 (the maximum number of fault-tolerant nodes is (n − 1)/3). The PBFT algorithm is divided into five stages: request, preparation, preparation, confirmation, and reply. The process is shown in Figure 7. In the request stage, the client initiates a transaction request to the master node. In the pre-preparation phase, the master node verifies the message signature after receiving the request from the client. After the message signature verification is passed, it broadcasts the pre-preparing message to all the network’s nodes. In the preparation phase, the replica node verifies the message after receiving the pre-preparing information broadcast by the master node. If the verification is passed, the node broadcasts the prepare message to other nodes. In the confirmation phase, after receiving the correct prepare message from 2f other nodes, the node will enter the prepared state and send a commit message to other nodes. In the reply phase, after the node receives the commit message, it verifies the message, passes the verification, and waits for the commit message sent by 2f + 1 different nodes. After receiving the message, it will send a reply message to the client. Mathematics 11 00101 g007 550Figure 7. PBFT consensus process. 5.3.2. Advantages and Disadvantages The PBFT algorithm can realize Byzantine fault tolerance with polynomial complexity and reach a consensus in the presence of malicious nodes in the network so that the Byzantine fault tolerance algorithm can be applied in practical systems. However, the PBFT algorithm has problems such as high communication complexity, a fixed number of nodes, poor scalability and dynamics, and only being suitable for private chains or consortium chains. In terms of network resource consumption, the frequent broadcasting of messages by the system will also lead to high bandwidth consumption. When the number of participating nodes increases, network congestion will likely occur, resulting in system performance degradation. Regarding the number of participating nodes, the number of nodes in the PBFT algorithm remains unchanged, the nodes cannot enter and exit at will, and the number of nodes is fixed. 5.3.3. Improved Algorithms Hot-Stuff : This algorithm was proposed by Abra et al. It improves the efficiency of the distributed consistency algorithm by making improvements to PBFT. The Hot-Stuff algorithm uses a parallel pipeline processing proposal, which is equivalent to combining the preparation and commitment phases in PBFT into one phase. In addition, Hot-Stuff uses linear view change (LVC), which reduces the communication complexity in view change. RPBFT : In response to the problems of arbitrary master node selection, a high communication overhead, poor dynamics, and low efficiency in the PBFT algorithm, Li proposed the practical Byzantine fault-tolerant consensus algorithm (RPBFT) based on role management. The RPBFT algorithm divides nodes into three roles, manager, candidate, and normal nodes; and realizes the transition between roles through a reward mechanism and election mechanism. Each role has specific responsibilities, so the nodes do not need to restart the system during joining and exiting. Meanwhile, using a synchronous verification mechanism instead of the traditional view replacement protocol increases the node efficiency. 5.4. Discussion The consensus mechanism is the core part of a blockchain. The traditional distributed consensus mechanism (PBFT) is not well adapted to the unique open environment of the blockchain, and the network connection is replicated between nodes. Therefore, traditional distributed consensus blockchain systems often employ various networking assumptions. However, reality often differs from our assumptions. Consensus mechanisms explicitly designed for blockchains (such as PoW, although its original purpose is not this, are still regarded as representatives of blockchain consensus mechanisms) often do not need to make various assumptions about the network and nodes. Thus, openness and decentralization tend to be stronger. In different application scenarios, the two have their advantages and disadvantages, and blockchain designers must choose. 6. Smart Contracts Smart contracts are the core of blockchain 2.0 , represented by Ethereum smart contracts. They allow a blockchain to handle complex transactions not just limited to cryptocurrency ones. The concept of smart contracts was proposed before the emergence of blockchain, almost simultaneously with the emergence of the modern Internet. However, limited by the technological development at that time, smart contracts were not widely used until the emergence of blockchains. Smart contracts are digitally established contractual terms that are self-verifying, self-executing, and do not require a third party. Compared to traditional contracts, smart contracts are more efficient, less costly, more secure, and free from “repudiation”. Smart contracts are designed to perform safely and efficiently without a trusted third party, which aligns with the “decentralized trust” of blockchain. The smart contract in a blockchain is essentially a piece of code that runs continuously, cannot be modified once deployed, and is executed automatically when a predefined condition is triggered. A blockchain enables reliable information exchange, value transfer, and asset management through smart contracts. 6.1. Development Smart contracts were first proposed by American computer scientist Nick Szabo in 1995 . In 2009, the Bitcoin platform went online, supporting the use of Bitcoin scripts to manage transactions with the prototype of smart contracts. Bitcoin also represented the first generation of blockchain technology. In 2014, Ethereum introduced smart contracts and supported the creation of smart contracts in the Turing-complete programming language. In 2016, Kosba et al. proposed Hawk, a smart contract development framework that protects user privacy. In 2018, Kalra et al. proposed ZEUS, a smart contract security analysis framework. The framework provides an order of magnitude improvement in security analysis time compared to previous techniques. In 2020, Zheng et al. classified smart contract applications by comparing and analyzing typical smart contract platforms. In summary, smart contracts are evolving towards easier development, higher security, and widespread application. Additionally, with the rise in blockchain technology, smart contracts will also receive more attention from scholars while developing rapidly. 6.2. Contract Languages Smart contracts are deployed to blockchains, which requires the contracts to be strongly typed, as blockchains have valuable storage space. In addition, smart contracts should be easy to read and not misleading. Therefore, traditional programming languages such as C/C++ and Java do not write smart contracts very well. Programming languages for smart contracts have been born to meet the development needs of smart contracts. 6.2.1. Solidity Solidity is a new language developed specifically for Ethereum smart contracts. It has a syntax similar to JavaScript and runs on EVM. Solidity is a statically typed programming language that supports inheritance, libraries, and user-defined types. It can be used to create voting, crowdfunding, blind auctions, and multi-signatures. It can be used to create a variety of contracts, such as voting, crowdfunding, blind auction, and multi-signature wallet. On Ethernet, solidity contracts are compiled into bytecode, written to blocks through special transactions, and eventually executed by other transactions driven by the Ethernet VM. Solidity is one of the most widely used contract languages today, but at the same time, solidity has seen many security vulnerabilities and corresponding attacks. 6.2.2. Vyper To solve solidity’s security vulnerabilities, Vyper provides a smart contract language focusing on simplicity, suitability, and security , a contract-oriented Python programming language targeting EVM . Vyper has a very clean and easy-to-understand syntax, so it is almost impossible for developers to write misleading programs. 6.2.3. Daml The DAML language is a domain-specific language specifically designed to encode shared business logic for simple, secure, and efficient applications. DAML is used for developing and deploying distributed applications in blockchain environments and is one of the best programming languages for smart contracts. Developers can use DAML to write applications quickly and concisely as an open-source programming language. 6.3. Platform Comparison 6.3.1. Bitcoin In the Bitcoin network, users can write Bitcoin scripts to manage transactions. Bitcoin scripts are used to implement bitcoin transaction validation by checking a transaction’s lock script and unlock script. Bitcoin scripts are stack-based, non-stateful, non-Turing-complete scripting languages with no complex statements such as select and loop statements, and therefore, they have limited functionality. Bitcoin scripting reduces the complexity of the system while meeting the requirements of transaction needs. However, it also brings disadvantages, such as low flexibility and limited usage. To allow Bitcoin to adapt to different systems, Bitcoin scripts are designed to be stateless so that a script can be executed similarly on any system. Suppose a script is validated on one system. In that case, it ensures that every other system in the Bitcoin network can also validate the script, meaning that a valid transaction is valid for everyone. A Bitcoin script is a sequence of actions for a transaction that describes what happens to the next person who wants to spend the bitcoins being transferred and will gain access to them, divided into locking scripts and transaction scripts. Bitcoin scripts have the makings of a smart contract. 6.3.2. Ethereum For the first time in a blockchain system, Ethereum introduced smart contracts that support Turing completeness . Ethereum uses Solidity to write smart contracts. Solidity is a contract-oriented, high-level programming language created to implement smart contracts. In Ethereum, smart contracts deploy bytecode to the Ethereum network through transactions. Ethereum successful deployment generates a new smart contract account, executed by an Ethereum Virtual Machine (EVM). When deploying a smart contract, the contract code is first compiled into EVM bytecode by the SOLC smart contract compiler, and then a single transaction is used to create the smart contract. Ethereum smart contracts are Turing-complete, so in theory, users can write programs that do anything with them. It is easy to create contracts for voting, crowdfunding, closed auctions, multi-signature wallets, etc., using solidity, and they can meet most smart contract development needs. 6.3.3. Hyperledger Fabric Hyperledger Fabric is a platform for distributed ledger solutions based on a modular architecture that is highly confidential, resilient, flexible, and scalable. Its main purpose is to support the pluggability of different components to the complexity and complexity of the economic ecosystem. Hyperledger Fabric typically deploys smart contracts in the form of chain code. In Hyperledger Fabric, the chain code is the business bearer and is primarily responsible for the specific business logic, i.e., encapsulating transaction definitions and processing logic into interfaces. Each chain code runs in a protected container (Docker), isolated from the running of background nodes. Hyperledger Fabric supports writing smart contracts in multiple languages, such as golang, java, and node.js, which greatly reduces the development threshold for smart contracts. 6.3.4. Eos The Enterprise Operation System (EOS), a commercially distributed application blockchain operating system, is a new blockchain system developed by Block.one which aims to decentralize everything. As a new blockchain architecture , EOS provides a platform for smart contract development. It distributes storage designed to address scalability issues common in blockchain systems such as Ethereum and Bitcoin. EOS provides a decentralized application development environment with high transaction throughput through dPoS consensus and BFT consensus. Unlike Ether, which uses a virtual machine to execute smart contracts, EOS uses WebAssembly3, a portable, small, fast-loading, and web-compatible format, so users can write smart contracts in various languages as long as they can be compiled into WebAssembly3 (e.g., C++). 6.3.5. Avalanche Avalanche is a new generation of public chain projects, and the main network was launched in September 2020. Avalanche is not a blockchain but a collection of blockchains composed of multiple subnets. The subnet has a special subnet consisting of three blockchains, the Primary Network. The three chains are the exchange chain (X-chain), platform chain (P-chain), and contract chain (C-chain). Each of the three chains has its functions, and they can be converted across chains, making it more convenient for users to take advantage of assets. The X-chain is responsible for the establishment and transferal of assets, and most users use this chain when transferring assets or trading assets. The P-chain is responsible for storing the data, information, and verification work on the chain. The C-chain is responsible for the functions of smart contracts. This chain is compatible with EVM, so it can be applied to most smart contracts. Thanks to its unique structure compared with traditional blockchain platforms, Avalanche has higher performance—it can achieve more than 4500tps—and is more scalable and secure. 6.4. Example The following is an example of a money transfer contract to show the complete workflow of smart contract development, deployment, and execution. Suppose A wants to transfer money to B through a smart contract. The contract workflow is shown in Figure 8. First is development, where the business process of transferring money from A to B is written as smart-contract source code, and the source code is compiled into bytecode by a compiler. Next is deployment, where the compiled bytecode is deployed to the blockchain network via a single transaction. After consensus in the P2P network, the contract address is returned for contract invocation. Finally, when the deployed smart contract triggers an execution condition or is invoked to execute the contract transaction (e.g., deducting a specified amount from A’s account and adding a specified amount to B’s wallet), the result of the execution will be written to the block. Mathematics 11 00101 g008 550Figure 8. Smart contract workflow. In the process of transferring funds from A to B, the whole process is open and transparent without the intervention of a third party, and the results of the transaction execution are written to the blockchain and cannot be tampered with. 6.5. Discussion The execution of smart contracts does not require the participation of a third party and can respond to user requests at any time, ensuring the fairness and efficiency of transactions. Before the contract is deployed, all the terms and execution processes have been formulated and executed under the computer’s absolute control, so there is no possibility of errors in the entire process. Once the contract is deployed, all content cannot be modified. If one party breaks the contract, it will be punished accordingly. Using smart contracts can save transaction fees charged by banks and service fees of intermediaries. In addition to the advantages mentioned above, smart contracts still have the following problems: security issues, as it is difficult for anyone to guarantee the complete correctness of the code, and errors cannot be modified; interface problems, as each blockchain has different forms of storage for digital assets; the issue of how to call smart contracts across blockchains to realize asset transfers remains to be researched. 7. Applications From blockchain 1.0 to blockchain 3.0, blockchain technology has been flourishing. Blockchain technology has also been applied from the earliest cryptocurrency to a wider range of fields, such as cryptocurrency, healthcare, IoT, Security AI, and NFT. . The decentralized, open, and transparent characteristics of blockchain can also bring decentralized solution ideas to existing problems in some fields. 7.1. Cryptocurrency Cryptocurrencies have been around since the 1990s but were not used and developed for various reasons until the emergence of Bitcoin made them widely known. Electronic cash (Ecash) emerged in 1990, changing the way traditional money works and allowing it to be traded digitally and anonymously over the Internet. In 1997, Back proposed the hashcash algorithm mechanism , which calculates a token through the CPU cost function and can be used as a proof of workload. In 1998, Dai proposed the electronic cryptocurrency system B-money, a distributed system that uses cryptography to control the currency for transactions, and first adopted the idea of decentralization to design cryptocurrency. In 2008, influenced by the global financial crisis, the international community began exploring innovative finance. Satoshi Nakamoto proposed Bitcoin in this context, which also marked the birth of Blockchain 1.0 technology. Satoshi Nakamoto combined a distributed system using cryptography from Ecash and B-money and a proof-of-work mechanism from Back and Finney to solve the trust and Byzantine problems. Bitcoin is a P2P form of digital currency. Unlike traditional currencies, Bitcoin does not have a central currency issuer, and the P2P network nodes work together to keep the system running. Bitcoin is also the most successfully used cryptocurrency to date. Cryptocurrency is by far the most successful and well-known application of blockchain. Cryptocurrencies, represented by Bitcoin, were once synonymous with blockchain. It is foreseeable that even in the future when blockchains are widely used, cryptocurrencies will remain among of the most important blockchain applications. 7.2. Energy Current energy trading methods are still dominated by traditional centralized trading, which suffers from inefficient trading, opaque trading information, and long settlement times; and distrustful and opaque energy markets have potential security and privacy issues. In addition, intermittent energy sources and microgrids are an important part of the energy supply, and the increasing amount of renewables in the energy system requires new market approaches to pricing and decentralized generation . Compared to centralized generation and single -arket pricing strategies, using a decentralized blockchain to control generation and energy trading can better incentivize generation organizations, improve generation efficiency, and facilitate energy trading. Kang et al. proposed a localized P2P power trading system (PETCON) for local power trading among plug-in hybrid electric vehicles (PHEVs) based on consortium chain technology. In PETCON, electricity trading among PHEVs is resolved through an iterative double-auction mechanism that maximizes social welfare while protecting PHEVs’ privacy. Su et al. proposed a smart-contract-based energy blockchain system that enables secure charging services for electric vehicles by executing smart contracts. The experimental results show that the scheme has higher efficiency compared to other conventional schemes. Blockchain technology will be applied more to decentralized energy management and energy trading in the future, and decentralized energy management systems can supplement the current centralized energy management system. 7.3. Healthcare The current information systems of most medical institutions are centralized and stored independently, which makes it difficult to efficiently interconnect data among medical institutions and inconvenient for patients to seek medical treatment across institutions. Centralized information systems are also vulnerable to hacking and data leakage, compromising patients’ privacy. Blockchain’s tamper-proof and verification features can ensure that patients’ private information is not leaked . Azaria et al. have built a decentralized record management system (MedRec) to handle electronic medical data using blockchain technology. The system provides a comprehensive, immutable patient log and is easily accessible. Using PoW incentives enables patients to participate as “miners” in maintaining the system’s security while allowing patients and providers to choose the release of metadata to facilitate medical research. healthbank, a Swiss global digital health startup, offers users a secure blockchain-based data management platform , where users can store and manage their health information data, and the sovereignty of the data is in the hands of the user. In addition, healthbank can act as a data trading platform where users can save data for medical research, and where users can receive specific financial compensation for the data they provide. hirtan et al. implemented a medical data-sharing system using Hyperledger Fabric, which can share important information about medical analytics among hospitals, medical clinics, and research institutions based on patient-defined access policies. The system uses a combination of public and private chains to protect user privacy. The private chain stores the user’s accurate ID information, and the public chain stores patient health information labeled with temporary IDs. In summary, the use of blockchain to build a decentralized medical data management platform enables the sharing of medical data to facilitate medical research while ensuring the privacy and security of the data. 7.4. Internet of Things IoT devices are found in various scenarios, such as cities, buildings, and homes. IoT combines various information sensing devices with networks to form a huge network to achieve interconnection of people, machines, and things at any time and place, allowing traditional devices to become intelligent and autonomous . However, the IoT still has issues such as security and privacy that hinder its widespread use. A blockchain can establish decentralized trust in a distributed environment , which helps to overcome the security issues and privacy problems of IoT. Alphand et al. combined an object-based IoT security architecture and an ACE authorization framework. Their solution uses a blockchain to replace a single ACE authorization server. It enables smart contracts, handles authorization requests, and uses a self-healing key distribution scheme to achieve efficient management of the IoT. Li et al. proposed a multilayer, secure IoT network model based on blockchain technology, providing a wide-area network solution for the IoT. The model reduces the difficulty of blockchain deployment by dividing the IoT into a multi-layered decentralized network while ensuring the high security and trustworthiness of the blockchain. Pinno et al. proposed a blockchain-based IoT access authorization architecture that ensures the privacy and confidentiality of information collected by IoT devices. The architecture is compatible with many access control models used in the IoT today. In summary, more and more blockchain technologies are being applied to the Internet of Things (IoT) to solve the privacy and security problems in the IoT. However, a blockchain consumes many resources, and IoT devices generally have little computing power and storage space, so the traditional blockchain is not directly applicable to the IoT. 7.5. Security AI Thanks to the development of computing power brought about by cloud computing and the generation of many samples in the era of big data, artificial intelligence technology, represented by machine learning, has been developed and used increasingly. However, studies have shown that machine learning models are vulnerable to attacks that lead to privacy leaks, posing privacy and security risks. Blockchain’s data are highly redundant and decentralized, which is ideal for storing and protecting important privacy data from data loss or privacy leakage caused by attacks or mismanagement of centralized institutions. In recent years, various scholars have researched how blockchain can be applied to AI privacy protection. Zyskind et al. implemented a decentralized personal data management system based on blockchain technology to ensure that users own and control their data. Additionally, they implemented a protocol that turns the blockchain into an automated access control manager that does not require a third party. Chen et al. proposed LearningChain, a decentralized machine learning system for privacy protection and security, and designed a distributed stochastic gradient descent (SGD) algorithm to learn general prediction models. Decentralized SGD uses a differential privacy-based scheme to protect the data privacy of each party. Qi et al. proposed a federated learning framework based on the consortium chains which can achieve secure and reliable federated learning without the need for a central model server. The federated learning framework can effectively protect model data privacy and prevent data poisoning attacks due to the noise-added differential privacy mechanism. The blockchain can be regarded as a decentralized trusted database, replacing the centralized server to realize the data storage function required for machine learning and avoid privacy and security attacks on the central server. 7.6. Nft A Non-Fungible Token (NFT) is a token issued according to the Ethereum ERC721 and ERC1155 standards. It has indivisible, irreplaceable, and unique characteristics. Through NFTs, all tokenized properties can be freely traded with customized values based on age, rarity, liquidity, etc. NFT is mainly used for games, artworks, domain names, collectibles, virtual assets, real assets tokenization, and other fields, especially artwork and games that have received great attention in the market. NFT has greatly stimulated the prosperity of the decentralized application market. According to data from the cryptoslam website, as of August 2022, the cumulative transaction volume of NFT has reached $39,245,668,068. Wang et al. conducted systematic research on NFTs for the first time, pointing out that the development of the NFT ecosystem is at an early stage, and related technologies need to be further developed. 7.7. Web 3.0 Web 3.0 is generally considered the next generation of the Internet, a decentralized Internet running on blockchain technology. In this environment, users do not have to create multiple identities on different centralized platforms but can create a decentralized universal digital identity system that can pass through various platforms. The most prominent feature of Web 3.0 is that it can not only realize the exchange of data but also realize the circulation of value . Web 1.0 data are read-only, such as Yahoo and MSN data. Web 2.0 data are read–write interactive, such as Facebook and Twitter data. Web 3.0 data are read–write interactive and owned and controlled by the creator; representative applications include Bitcoin, Ethereum, IPFS, etc. Web 3.0 is a new network infrastructure that integrates the traditional Internet, blockchain, programmable economy, etc. It is currently experiencing a blockchain, and its final architecture is uncertain, but the booming trend is unavoidable.
CRYPTOCAP:TOTALEducation
by BitonGroup
4
CONTRACTING AND EXPANDING TRIANGLESTriangle patterns are powerful technical indicators that provide traders with valuable insights into potential market trends and price movements. Among the various types of triangle patterns, horizontal triangles, contracting triangles, and expanding triangles are widely recognized for their reliability and effectiveness. Horizontal triangles, also known as symmetrical triangles, occur when the price consolidates between two converging trendlines. These trendlines are drawn by connecting a series of lower highs and higher lows. Horizontal triangles signify a period of indecision in the market, as buyers and sellers battle for control. There are two types of horizontal triangles: Contracting Triangles and Expanding Triangles. Contracting Triangle: Contracting triangles, also known as descending or ascending triangles, are characterized by converging trendlines with one trendline slanting upward or downward. These patterns indicate a gradual decrease in price volatility and suggest an imminent breakout. Characteristics: 1. Converging Trendlines: One trendline is drawn horizontally, acting as support or resistance, while the other trendline slants in the opposite direction. 2. Decreasing Range: The price range between the trendlines gradually narrows as the pattern progresses. 3. Breakout Anticipation: Traders expect a breakout in the direction opposite to the slant of the converging trendlines. Entry and Exit points 1. Entry Point: Wait for a confirmed breakout above the upper trendline (in descending triangles) or below the lower trendline (in ascending triangles) to enter a trade. 2. Stop-Loss Placement: Set a stop-loss order slightly outside the triangle pattern to mitigate potential losses if the breakout fails. 3. Target Price: Measure the height of the triangle pattern and project it in the direction of the breakout to determine a potential target price. Expanding Triangle: Expanding triangles, also known as broadening triangles, are characterized by diverging trendlines, indicating increased volatility and uncertainty in the market. These patterns often precede significant price reversals. Characteristics: 1. Diverging Trendlines: The upper and lower trendlines move in opposite directions, creating a widening pattern. 2. Increasing Range: The price range between the trendlines expands as the pattern develops, reflecting growing market volatility. 3. Breakout Anticipation: Traders anticipate a breakout in the direction opposite to the widening of the triangle pattern. Entry and Exit points 1. Entry Point: Wait for a confirmed breakout above the upper trendline or below the lower trendline to initiate a trade. 2. Stop-Loss Placement: Set a stop-loss order slightly outside the triangle pattern to limit potential losses if the breakout fails. 3. Target Price: Measure the height of the triangle pattern and project it in the direction of the breakout to determine a potential target price. Horizontal triangle patterns offer traders valuable insights into potential market trends and price movements. By understanding the characteristics and formation of these patterns, traders can effectively identify entry and exit points, set appropriate stop-loss orders, and determine target prices. However, it is essential to combine triangle patterns with other technical analysis tools and indicators for a comprehensive trading strategy. With practice and experience, traders can harness the power of triangle patterns to enhance their trading decisions.
Education
by UnknownUnicorn15614419
4
Mastering the Pin Bar Candlestick Pattern in Forex 🕵️‍♂️📈✨ In the world of forex and gold trading, chart patterns often hold the key to unlocking profit potential. Among these patterns, the pin bar stands out for its reliability and versatility. In this comprehensive guide, we'll delve into how to effectively apply the pin bar candlestick pattern to enhance your trading strategies. Through real-world examples, you'll gain the skills and knowledge to spot and leverage this powerful pattern in your trading endeavors. Understanding the Pin Bar Candlestick Pattern A pin bar, or "Pinocchio bar," is a single candlestick pattern that indicates potential price reversals or continuations. It consists of a small body with a long wick or "nose" that extends beyond the body. The direction of the nose (up or down) is a crucial signal: - Bullish Pin Bar: The nose points downward and appears at the bottom of a downtrend, suggesting a potential bullish reversal. Example 1: Bullish Pin Bar in Gold Trading - Bearish Pin Bar: The nose points upward and forms at the top of an uptrend, indicating a possible bearish reversal. Example 2: Bearish Pin Bar in Forex Applying the Pin Bar in Your Trading Strategy 1. Confirmation: Don't rely solely on the pin bar; use it in conjunction with other technical analysis tools like support and resistance levels, trendlines, and indicators to confirm your trade. 2. Risk Management: Set stop-loss orders below the low (for bearish pin bars) or above the high (for bullish pin bars) of the pin bar to limit potential losses. 3. Entry and Exit: Determine your entry and exit points based on the pin bar's implications. For instance, you might enter a trade on the open of the next candle after a pin bar and exit when a predetermined profit target is reached. The pin bar candlestick pattern is a valuable tool in forex and gold trading, offering insights into potential reversals or continuations. By understanding its structure and applying it in conjunction with other technical analysis tools, you can make more informed trading decisions. Remember, practice and careful analysis are key to successfully integrating the pin bar into your trading strategy. Now, armed with this knowledge, you're ready to uncover profit potential in the markets! 🕵️‍♂️📈✨ Dear followers, let me know, what topic interests you for new educational posts?
COINBASE:BTCUSDEducation
by SignalProvider
11