FAQ

What is algorithmic trading?

Algorithmic trading (also called automated trading, black-box trading, or algo-trading) uses a computer program that follows a defined set of instructions (an algorithm) to place a trade. The trade, in theory, can generate profits at a speed and frequency that is impossible for a human trader.

The defined sets of instructions are based on timing, price, quantity, or any mathematical model. Apart from profit opportunities for the trader, algo-trading renders markets more liquid and trading more systematic by ruling out the impact of human emotions on trading activities.

To learn more about algorithmic trading, read the algorithmic trading guide.

What Is the Stock Market?

The stock market is any exchange that allows people to buy and sell stocks and companies to issue stocks. A stock represents the company’s equity, and shares are pieces of the company.

When people talk about buying and selling stock, they mean that they’ve bought or sold one or more shares of a particular stock. The purpose for the trader is to make money. For instance, if I buy 2,000 shares of Apple stock at $190 and sell it six months later for $210 per share, I’ll make money. If Apple tanks (which isn’t likely), I could lose money, in which case I’d want to sell quickly to limit my losses.

How does algorithmic trading work?

Algorithmic trading bot identifies market inefficiencies and exploits them, potentially resulting in substantial profits. All algo trading strategies follow a set of defined rules, suppose a trader follows the below trade criteria:

  • Purchase 50 shares of a stock as its 50-day moving average rises beyond the 200-day moving average
  • Sell stock shares as its 50-day moving average dips under the 200-day moving average

These two simple instructions can be written to automatically monitor stock price (and the moving average indicators) and place the buy and sell orders when the defined conditions are met. This simple algorithm is much more efficient than a trader who would monitor the live prices and graphs, or place orders himself.

What is swing trading?

So what the hell is swing trading? Simply put, swing trading is a style of trading that attempts to profit from securities’ short-term price movements spanning a few days to a few weeks. Swing traders focus on taking smaller but more frequent gains and cutting losses as quickly as possible. This trading style is purely based on assumptions that market prices rarely move in a straight line and that traders can profit from entering and exiting trades at these swings.

Swing traders wait for low-risk opportunities and attempt to take a share of a significant market’s move up or down. When an overall market is riding high, they go long (buy) more often than they go short (sell). When the overall market is weak, they go short (sell) more often than they go long (buy). If there are no significant market movements, swing traders usually don’t trade and wait for new opportunities to arise.

*This answer has been borrowed from Quant Savvy blog article about swing trading

How to swing trade?

Swing trader utilizes technical and fundamental analysis, price trends, and patterns to find trading opportunities. Typically, swing trading involves holding a position, either long or short, for more than one trading session but usually no longer than several weeks. Swing trades can also occur during a trading session, though this is rare outcome that is brought about by extremely volatile conditions.

Swing trading strategies often look for arising opportunities on the daily charts, which we will be discussing later in this article, and may watch 1-hour or 15-minute charts to find a precise entry, stop loss, and take advantage of market swings.

Ultimately, each swing trader devises a plan and strategy that gives them an edge over other traders. However, even for the best swing strategy, it is impossible to work every time, so favourable risk/reward must produce an overall profit over a longer period of time.

Many swing traders assess trades on a risk/reward basis. For instance, profit factor of $3 is considered a favourable risk/reward, while risking $1 to only make $0.75 might be considered as not favourable risk/reward. To anticipate potential profits, traders analyze various charts and then predict when is the best time to enter and where to place a stop loss.

 *This answer is borrowed from Quant Savvy blog article about swing trading

What is the difference between day trading and swing trading?
  • Day trading, as the name suggests, involves making dozens of trades in a single day, based on technical analysis and sophisticated charting systems.
  • Swing trading is based on identifying swings in stocks, commodities, and currencies that take place over a period of days.
  • Neither strategy is better than the other, and traders should choose the approach that works best for their skills, preferences, and lifestyle

Day trading and swing trading each have advantages and drawbacks. Neither strategy is better than the other, and traders should choose the approach that works best for their skills, preferences, and lifestyle. Day trading is better suited for individuals who are passionate about trading full time and possess the three “D’s”: decisiveness, discipline, and diligence (prerequisites for successful day trading).

Day trading success also requires an advanced understanding of technical trading and charting. Since day trading is intense and stressful, traders should be able to stay calm and control their emotions under fire. Finally, day trading involves risk—traders should be prepared to sometimes walk away with 100 percent losses.

Swing trading, on the other hand, does not require such a formidable set of traits. Since swing trading can be undertaken by anyone with some investment capital and does not require full-time attention, it is a viable option for traders who want to keep their full-time jobs, but also dabble in the markets. Swing traders should also be able to apply a combination of fundamental and technical analysis, rather than technical analysis alone.

*The above answer is borrowed from Investopedia

What is day trading?
  • The day trader works alone, independent from the whims of corporate bigwigs. He can have a flexible working schedule, take time off whenever needed, and work at his own pace, unlike someone on the corporate treadmill.
  • Day traders have to compete with high-frequency traders, hedge funds, and other market professionals who spend millions to gain trading advantages. In this environment, a day trader has little choice but to spend heavily on a trading platform, charting software, state-of-the-art computers, and the like. Ongoing expenses include costs for obtaining live price quotes and commission expenses that can add up because of the volume of trades.
  • Long-time day traders love the thrill of pitting their wits against the market and other professionals day in and day out. The adrenaline rush from rapid-fire trading is something not many traders will admit to, but it is a big factor in their decision to make a living from day trading. It’s doubtful these kinds of people would be content spending their days selling widgets or poring over numbers in an office cubicle.
  • To really make a go at it, a day trader must quit his day job and give up his steady monthly paycheck. From then on, the day trader must depend entirely on his own skill and efforts to generate enough profit to pay the bills and enjoy a decent lifestyle.
  • Day trading is stressful because of the need to watch multiple screens to spot trading opportunities, and then act quickly to exploit them. This has to be done day after day, and the requirement for such a high degree of focus and concentration can often lead to burnout.
  • For many jobs in finance, having the right degree from the right university is a prerequisite just for an interview. Day trading, in contrast, does not require an expensive education from an Ivy League school. While there are no formal educational requirements for becoming a day trader, courses in technical analysis and computerized trading may be very helpful.

*The above answer is borrowed from Investopedia

    What is swing trading?

    Swing trading is based on identifying swings in stocks, commodities, and currencies that take place over a period of days. A swing trade may take a few days to a few weeks to work out. Unlike a day trader, a swing trader is not likely to make trading a full-time career, though a trader might choose to be a day trader AND a swing trader.

    Anyone with knowledge and investment capital can try swing trading. Because of the longer time-frame (from days to weeks as opposed to minutes to hours), a swing trader does not need to be glued to his computer screen all day. He can even maintain a separate full-time job (as long as he is not checking trading screens all the time at work).

    • Trades generally need time to work out. Keeping a trade for an asset open for a few days or weeks may result in higher profits than trading in and out of the same security multiple times a day.
    • Since swing trading usually involves positions held at least overnight, margin requirements are higher. Maximum leverage is usually two times one’s capital. Compare this with day trading where margins are four times one’s capital.
    • The swing trader can set stop losses. While there is a risk of a stop being executed at an unfavorable price, it beats the constant monitoring of all open positions that are a feature of day trading.
    • As with any style of trading, swing trading can also result in substantial losses. Because swing traders hold their positions for longer than day traders, they also run the risk of larger losses.
    • Since swing trading is seldom a full-time job, there is much less chance of burnout due to stress. Swing traders usually have a regular job or another source of income from which they can offset or mitigate trading losses.
    • Swing trading can be done with just one computer and conventional trading tools. It does not require the state-of-the-art technology of day trading.

    *The above answer is borrowed from Investopedia

    Different types of trading
    • Scalping: The scalper is an individual who makes dozens or hundreds of trades per day in an attempt to “scalp” a small profit from each trade by exploiting the bid-ask spread.
    • Momentum Trading: Momentum traders seek stocks that are moving significantly in one direction in high volume. These traders attempt to ride the momentum to the desired profit.
    • Technical Trading:  Technical traders focus on charts and graphs. They watch lines on stock or index graphs for signs of convergence or divergence that might indicate buy or sell signals.
    • Fundamental Trading: Fundamentalists trade companies based on fundamental analysis, which examines corporate events such as actual or anticipated earnings reports, stock splits, reorganizations, or acquisitions.
    • Swing Trading: Swing traders are fundamental traders who hold their positions longer than a single day. Most fundamentalists are actually swing traders since changes in corporate fundamentals typically require several days or even weeks to produce a price movement sufficient enough for the trader to claim a reasonable profit.
    What is market order?

    A market order is a request by an investor – usually made through a broker or brokerage service – to buy or sell a security at the best available price in the current market. It is widely considered the fastest and most reliable way to enter or exit a trade and provides the most likely method of getting in or out of a trade quickly. For many large-cap liquid stocks, market orders fill nearly instantaneously.

    When to use market order?

    Market orders are well-suited for securities that are traded in very high volumes such as large-cap stocks, futures or ETFs. For example, market orders for the E-mini S&P or a stock such as Microsoft tend to fill very rapidly without issue.

    It’s a different story for stocks with low floats and/or very little average daily volume. Because these stocks are thinly traded, the bid-ask spreads tend to be wide. As a result, market orders sometimes get filled slowly for these securities, and often at unexpected prices that lead to meaningful trading costs.

    Market order vs limit order

    Market orders are the most basic buy and sell trades. Limit orders, on the other hand, allow investors to have more control over the bid or sell price. This is done by setting an acceptable maximum acceptable purchase price amount or an acceptable minimum acceptable sales price.

    Limit orders are good for trading securities that are trading thinly, are highly volatile or have wider bid-ask spreads.

    If Everyone Is Selling, Does Your Broker Have to Buy Your Shares From You?

    A broker is not required to buy from you if you want to sell shares and there is no one willing to buy. A broker won’t lose money when a stock goes down in a bear market because the broker is usually nothing more than an agent acting on the seller’s behalf when they find somebody else who wants to buy the shares.

    Is it True That Everyone Is Selling?

    Other traders and investors are on the opposite side of a transaction, not usually the broker. To say “everyone is selling” is usually an erroneous statement, because in order for transactions to occur there needs to be buyers and sellers transacting to create trades—even though those trades may occur at lower and lower prices. If everyone were to sell, there is no market in that stock (or other assets) anymore until sellers and buyers find a price they are willing to transact at.

    When a stock is falling it does not mean there are no buyers. The stock market works on the economic concepts of supply and demand. If there is more demand, buyers will bid more than the current price and, as a result, the price of the stock will rise. If there is more supply, sellers are forced to ask less than the current price, causing the price of the stock to fall.

    For every transaction, there must be a buyer and a seller. If the last price keeps dropping, transactions are going through, which means someone sold and someone else bought at that price. The person buying was not likely the broker, though. It could be anyone, like another trader or investor who thinks the price offers an opportunity to make a profit, whether in the short-term or long-term.

    *The above answer is borrowed from Investopedia

    Can a Stock Have No Buyers?

    Yes, it is possible for a stock to have no buyers. Typically, this happens in thinly-traded stocks on the pink sheets or over-the-counter bulletin board (OTCBB), not stocks on a major exchange like the New York Stock Exchange (NYSE).

    When there are no buyers, you can’t sell your shares—you’ll be stuck with them until there is some buying interest from other investors. A buyer could pop in a few seconds, or it could take minutes, days, or even weeks in the case of very thinly traded stocks. Usually, someone is willing to buy somewhere: it just may not be at the price the seller wants. This happens regardless of the broker.

    The broker only places your order in the marketplace so it can transact with other orders. The broker itself does not typically try to solicit a trade in a stock, which means your decisions to buy and sell are up to you, and the broker just facilitates those decisions.

    If an institution acts as the principal to a certain amount of stock, a rapidly declining stock price will affect them. This is because, unlike an agent, the dealer is an owner of the stock. Examples of this include market makers.

    *The above answer is borrowed from Investopedia

    How and where to open Roth IRA account

    While there are many Roth IRA account providers, all accounts are not created equally. The majority of accounts will fall into one of two types: self-directed accounts and robo-advisors.

    Choosing a brokerage may be the hardest part of opening a Roth IRA.

    Most U.S. citizens and legal residents with a Social Security number can open a Roth IRA account. The process of opening a new account is similar with most major brokerage firms.

    • Pick your brokerage: The first step in opening a Roth IRA is deciding where you want it. Consider criteria like fees, available investments, research, advising, customer service, and other important factors to you.
    • Complete the application: Most brokers allow you to complete the entire application online. You’ll need to supply your contact information and tax information to open a new account.
    • Make your first contribution: Once your account is approved, set up a recurring contribution or make a one-time contribution to fund your account.
    Are you eligible for Roth IRA account?

    While Roth IRA accounts are a great way to invest, particularly for investors with a decade or more until retirement, there are limits that restrict how much you can invest in a Roth. Income limits may further restrict your contribution limits and eligibility.

    Here are the contribution limits for most Roth IRA savers and investors:

    • 2018: $5,500
    • 2019: $6,000
    • 2020: $6,000

    If you are 50 or older, you can add an extra $1,000 per year for a total of $7,000 for 2019 and 2020. You can’t contribute more than you earn in a year, although married couples filing jointly can share earnings to bring both spouses to the annual limit.

    For 2020, if you earn more than $124,000 per year for single filers or $196,000 when married filing jointly, an income limit kicks in. Your contributions are restricted over those income limits and phase out completely at $139,000 when single or $206,000 when filing jointly.

    You are able to make contributions for the prior year until you file your taxes or the tax due date in April, whichever comes first. That means you can make contributions for 2019 until April 15, 2020. This deadline also applies to traditional IRA contributions, which are made with pre-tax dollars.

    *To learn more about Roth IRA accounts, read Investor Junkie

    How to invest in commodities?

    You can invest in commodities through a brokerage account at many popular brokerages. Some firms focus on active trading but most full-service brokerage firms make it possible to invest in commodities through funds even if other options are not available.

    Here are the methods most people use to buy and sell them in the markets:

    • Mutual funds: Like ETFs, with mutual funds, you can own commodities as any underlying asset without going into the futures or options markets yourself. These are best for long-term commodity investments.
    • Futures: With futures trading, you own an asset without taking control. Most contracts work similarly to options, where you have a right to exercise a contract on a specific date in the future. If the value is higher than what you paid, you make money. If it has fallen since you bought it, you lose money when selling your position.
    • Options: Commodity options work like a hybrid of stock options and commodity futures. These instruments allow you to buy (through a call) or sell (through a put) a specific quantity of a commodity at a future date at a specific price. Unlike futures, options typically put a limit on risk. Options trading also usually cost more than other types of investing options.
    • ETFs: Over 100 different exchange-traded funds (ETFs) allow you to invest in instruments that follow the price of underlying commodities. You can buy and sell them like a stock.
    What are advantages of investing in commodities?
    • Diversification: Commodity investing gives your portfolio exposure to an asset class other than stocks. This can help you manage overall stock market volatility, although it does not guarantee a profit.
    • Potential for high returns: Commodities fluctuate often, which also means they have the potential for higher returns. Rising demand for products could have a positive impact on your portfolio. However, with great returns comes great risk. While there might be demand for oil and metals today, tomorrow might be different.
    • Hedging against inflation: Inflation can really eat into your investments. Historically, commodities tend to be higher during times of strong inflation. If you buy commodities before inflation hits, it could help you hedge against inflation losses from other investments.
    How to invest in S&P 500 Index?

    If you want to invest in the S&P 500, you don’t have to buy every single stock individually. Instead, you can invest in all the stocks in the index with one purchase via a mutual fund or exchange traded funds (ETFs).

    If you want to invest in the S&P 500, you’ll first need a brokerage account. This could be a retirement account like a traditional IRA or Roth IRA, an employer-sponsored 401(k) or similar, or your own traditional, taxable brokerage account.

    There are many brokerages to choose from. Look at fees for buying and selling mutual funds and ETFs if you are opening a new account intending to invest in the S&P 500. Many brokerages offer their own family of funds or a group of partner funds with no mutual fund trading fees. For ETFs, you should pay any trading fees.

    When you already have a broker, log into your brokerage account and enter the trade. Or employ algorithmic trading solutions for faster and potentially more profitable trading. To learn more, we recommend to visit Quant Savvy.

    How to diversify your investment portfolio?

    Diversification can be done in many ways, which we’ll get to in a moment. But the most important part of having diversified investments is that it provides some protection for your portfolio.

    If you put all your eggs in one basket and that basket gets knocked off the table, all your eggs will break. If you had put only half your eggs in that basket and put the other half in a carton in the refrigerator and the basket fell off the table, you’d still have half your eggs safe in the fridge.

    It’s the same thing for your investments. If you invest solely in stocks and the market tanks, you could lose everything. Diversification means that any catastrophic loss in one area won’t wipe out all your investment holdings.

    These are a few types of asset diversification:

    • Spread your investment accross different asset types (stocks, bonds, commodities). You can also diversify even within one asset type, for instance, buy different companies’ stocks
    • Asset Allocation: You can use an asset allocation fund that uses a predetermined percentage of stocks and bonds. For example, a 60/40 fund invests 60% in stocks and 40% in bonds.
    • Invest in a mix of ETFs and mutual funds:  ETFs and mutual funds are generally more diverse than buying one or two stocks.
    • Invest in foreign companies and assets: While the United States is the biggest country in terms of market capitalization, global companies play an essential role in the markets. And it’s good to have some exposure to other markets.
    • Vary your investment by company size:In addition to investing in different assets, you should also invest in different company sizes and types. You could do this by buying a mix of stocks from bigger companies, as well as a few lesser-known companies. You can also hold stock in different industries, such as health care, energy, or retailers.
    What is the downside of diversification?
    • When diversifying, it is important not to spread yourself too thinly. Diversification is not a bulletproof case for your investments, and it doesn’t mean your investments won’t go down in value.
    • Spreading your money across too many investments may cause you to lose out on growth. Say you have only $100 invested in 5,000 different stocks. If one does well, you won’t earn that much, because your initial investment isn’t that much money. But if you had $10,000 invested in 50 stocks, you would earn significantly more should one (or more) do well. Too much diversification can mess with your bottom line.
    • Diversification does offer some protection, but it doesn’t fully protect you from a general market decline. In the event of a total market meltdown, where the market declines and people sell off their “safer” investments like bonds, diversification wouldn’t help protect you at all, as all asset classes would decline at the same time.

    *To learn more about diversification, read Investor Junkie

    How to invest in penny stocks?

    If you want to invest in penny stocks, you will need to open up an account with a broker. This is one of the most important decisions you’ll make if you want to invest in penny stocks. Because of the risks associated with penny stocks, not all brokerage firms accommodate trading in them.

    It’s usually straightforward to set up an account. Pick a company, fill out its application form, provide your identifying information like your Social Security number, and fund your account.

     

    Why penny stocks are so cheap?
    1. The issuing company is new or relatively new and doesn’t have the kind of track record that generates widespread investor interest.
    2. The issuing company’s stock no longer holds value due to poor business performance, legal or regulatory challenges, scandals, or any of a dozen other causes.

    An investor who buys into the first company hopes to ride the price higher as the company grows. An investor buys stock in distressed companies in the hope of a turnaround or buyout.

    In either case, the potential returns can be dramatic, making penny stocks so appealing to many investors. In both cases, you’re more of a speculator than an investor. After all, you’re not betting on past performance — which is either unknown or known to be poor — but on events that have yet to play out.

    To learn more about penny stocks, we highly recommend to read Timothy Sykes’ penny stocks guide

    Why you should invest in penny stocks?
    • Potentially high returns
    • Potentially fast profit: While you may need to wait years for an established company to double in price, a penny stock can double in under a year and even in a matter of days.Of course, that requires the announcement of an earth-shattering event. Such events include the launch of a new product line, a takeover bid from another company, or the elimination of the negative force that brought the stock price down in the first place.

      Penny stocks also appeal to small investors who can buy a large number of shares with just a few hundred dollars.

    What are the risks of investing in penny stocks?
    • Limited liquidity — One of the reasons the price is so low for penny stocks is because of a lack of interest by buyers. That creates liquidity problems. When you want to sell, there may be no one to buy. That sometimes makes getting out in a hurry nearly impossible.
    • Limited information — If a penny stock trades on the OTC, company information will be extremely limited, if it’s available at all. Unlike other stocks, there’s no steady flow of reports to base your investment decisions on.
    • No exchange-imposed standards — Unless a penny stock is listed on the NYSE or Nasdaq; there’s no oversight. The company doesn’t have to meet any minimum exchange-imposed standards. This dramatically increases the possibility of fraudulent activity.
    • Wide bid/ask spreads — Because of the low liquidity of penny stocks, the bid/ask spread can be uncomfortably large. You may pay $2.50 for a stock that usually sells for $2.00. This gives you an immediate 20% loss on your investment. This gets back to the lack of available buyers. The smaller the pool of buyers, the wider the spread will be.
    • The potential for bad news — Due to the low interest in penny stocks, it would take only a few sellers — or one dumping a few thousand shares — to send the price of the stock plummeting. Just because the stock is trading at 90¢ doesn’t mean it can’t go down to 30¢. And just as the price can go up in a hurry, it can also come down just as fast. That leaves you no time to react and little opportunity to recover after the fact.
    • The company could go out of business — Penny stocks represent companies that are dangling on the edge of solvency. If the company you’re invested in decides to close its doors, your investment — small that it may be — will disappear forever. Some distressed companies never recover, and most small companies never become big companies.
    • Possible schemes — Keep a lookout for fraudulent deals. Watch out for pump-and-dump schemes, which is when someone claims they have insider information to inflate the price. Sometimes a promoter short sells a penny stock for a high price then gives negative news to lower the price. Also, be wary of any promoter who advises you to buy stock every time the price falls and assures you of massive profits once the price goes up.
    Should you invest in penny stocks?

    It’s possible most investors have speculated in penny stocks at some point or at least contemplated the possibility. If you’re considering taking the plunge, make sure you’re doing it within the context of a comprehensive investment strategy that isn’t based primarily on the success of penny stock investing.

    You should fully understand the probability that you’re going to lose money, all in the hope of getting that big-league home run. And there’s a genuine possibility you’ll lose your entire investment. It can happen if you choose too many of the wrong companies.

    But it can’t be emphasized enough: Never invest in penny stocks with money you can’t afford to lose. It’s best done with “play money,” while most of your portfolio is invested in more traditional and predictable assets.

    Finally, if you’re seriously considering penny stocks, start by paper trading them. You can paper trade for free using the Webull app. Invest real money only if you show a consistent pattern of picking enough winners to make it profitable. If that pattern never emerges, you can give up the effort without having ever lost a penny.

    To learn more about penny stocks, we recommend reading Investor Junkie.

    What is value investing?

    Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Value investors actively ferret out stocks they think the stock market is underestimating. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond to a company’s long-term fundamentals. The overreaction offers an opportunity to profit by buying stocks at discounted prices—on sale.

    Warren Buffett is probably the best-known value investor today, but there are many others, including Benjamin Graham (Buffet’s professor and mentor), David Dodd, Charlie Munger, Christopher Browne (another Graham student), and billionaire hedge-fund manager, Seth Klarman.

    How value investing works?

    The basic concept behind every-day value investing is straightforward: If you know the true value of something, you can save a lot of money when you buy it on sale. Most folks would agree that whether you buy a new TV on sale, or at full price, you’re getting the same TV with the same screen size and picture quality.

    Stocks work in a similar manner, meaning the company’s stock price can change even when the company’s value or valuation has remained the same. Stocks, like TVs, go through periods of higher and lower demand leading to price fluctuations—but that doesn’t change what you’re getting for your money.

    Just like savvy shoppers would argue that it makes no sense to pay full price for a TV since TVs go on sale several times a year, savvy value investors believe stocks work the same way. Of course, unlike TVs, stocks won’t go on sale at predictable times of the year such as Black Friday, and their sale prices won’t be advertised.

    Value investing is the process of doing detective work to find these secret sales on stocks and buying them at a discount compared to how the market values them. In return for buying and holding these value stocks for the long-term, investors can be rewarded handsomely.

    What is momentum trading strategy?

    A momentum strategy is designed to capitalize on existing market trends. It involves going long stocks, futures, or market ETFs showing upward-trending prices and short the respective assets with downward-trending prices. Most momentum strategies are utilized on longer-term charts but we want to test if they can work intraday.

    How big is Forex marker?

    The foreign exchange market does $6.6 Trillion of trading volume each day! This is GINORMOUS compared to the $22.4 billion trading volume of NYSE each day.

    How many letters do currency symbols have?

    Currency symbols always have three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country’s currenc

    What is another nickname for the USD?

    The U.S. Dollar is also called greenbacks, bones, benjis, benjamins, cheddar,paper, loot, scrilla, cheese, bread, moolah, dead presidents, and cash mone

    What type of market is the forex market?

    The forex market is considered an over-the-counter (OTC) market due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.

    When Is It Okay to Trade Against The Trend?

    Some days most forex pairs are just going in one particular direction and it makes no sense to go against the herd.

    However, if you’re a fan of picking tops or bottoms and if you think that these strong trends are already exhausted, you shouldn’t be afraid to take a contrarian approach to your forex trades.

    When all charts point to a single direction and the current market sentiment is supported by the newswires, it’s easy to understand why many traders hesitate to go against the herd.

    But as investment pundit Warren Buffett famously said, “We should also be fearful when others are greedy and greedy when others are fearful.

    You see, just because a majority of the traders out there have a certain trading bias, it doesn’t necessarily mean that they’re right.

    Sometimes, strong momentum merely reflects the entrance of trading amateurs that just go with the flow without knowing what’s driving price action.

    This is why following the flock blindly can lead to herding bias – one of the 5 common trading mistakes traders make.

    Ask anyone who has successfully tried trading against the herd and they will tell you that it can feel intimidating when your analysis leads you to an unpopular bias. But sometimes, it pays to go against the herd and be the odd one out – to be the contrarian.

    Contrarian trading is a forex strategy that favors going against the current market bias in anticipation of a shift in market sentiment. It involves buying a currency when it is weak and selling it when it’s strong.

    Contrarian traders try to take advantage of moments when the markets get carried away by strong momentum.

    When everyone and his grandma is ready and willing to push prices higher, it can sometimes lead to overpriced assets. Likewise, when everyone is hell-bent on selling an asset, opportunities to buy at a bargain arise.

    One of the main benefits of contrarian trading is that it allows you to get good prices and catch reversals right as they begin. In turn, this often leads to very attractive reward-to-risk ratios, giving you more bang for your buck.

    However, contrarians trade against the trend, and that doesn’t always work out in their favor. As the saying goes, “the trend is your friend,” but it can be a mean son of a gun when you fight it.

    When a trend is particularly strong, it can bust right throw potential reversal points and wash away those who go against the flow.

    By no means am I saying that you should go against the trend just for the heck of it.

    What I’m merely saying is that if, after thoroughly conducting your own fundamental and technical analysis, you have enough reason to believe that the market is about to turn, don’t be afraid to go against the herd and take a contrarian position.

    Remember, you don’t always have to go with the flow; plenty of lucrative trading opportunities arise from straying from the crowd.

    But always keep in mind that although contrarian trading can be rewarding, it’s not without its dangers.

     

    *Thank you BabyPips for this article – click here to see original article about trading against the trend

    How does Bitcoin work?

    Balances – blockchain

    The blockchain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the blockchain. It allows Bitcoin wallets to calculate their spendable balance so that new transactions can be verified thereby ensuring they’re actually owned by the spender. The integrity and the chronological order of the blockchain are enforced with cryptography.

     

    Transactions – private keys

    A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast to the network and usually begin to be confirmed within 10-20 minutes, through a process called mining.

     

    Processing – mining

    Mining is a distributed consensus system that is used to confirm pending transactions by including them in the blockchain. It enforces a chronological order in the blockchain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all the subsequent blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively to the blockchain. In this way, no group or individuals can control what is included in the blockchain or replace parts of the blockchain to roll back their own spends.

    *Thank you Bitcoin team for this article. Click here to read the original text about how does Bitcoin work.
    How to day trade?

    Day trading is skyrocketing in popularity as more and more people are looking for financial freedom and the ability to live life on their own terms.

    What is Day Trading?

    Day trading is a speculative trading style that involves the opening and closing of a position within the same day.

    Day traders, or active traders, typically use technical analysis and a trading strategy to try and make profits in a short period of time and will often use margin to increase buying power.

    How Does Day Trading Work?

    Day trading works by capitalizing on short-term price movements in a stock through the active buying and selling of shares. Day traders seek volatility in the market.  Without short term price movement (volatility) there is no opportunity. The more a stock moves, the more profit a trader can make or lose in a single trade.

    Best securities for day trading

    ou can day trade bonds, options, futures, commodities and currencies, but stocks are among the most popular securities for day traders —  the market is big and active, and commissions are relatively low or nonexistent.

    Typically, the best day trading stocks have the following characteristics:

    • Good volume. Day traders like stocks because they’re liquid, meaning they trade often and in high volume. Liquidity allows a trader to buy and sell without affecting the price much. Currency markets are also highly liquid.

    • Some volatility — but not too much. Volatility means the security’s price changes frequently. This kind of movement is necessary for a day trader to make any profit. Someone has to be willing to pay a different price after you take a position.

    • Familiarity. You’ll want to understand how the security trades and what triggers moves. Will an earnings report hurt the company or help it? Is a stock stuck in a trading range, bouncing consistently between two prices? Knowing a stock can help you trade it.

       

    Time to day trade

    Day traders need liquidity and volatility, and the stock market offers those most frequently in the hours after it opens, from 9:30 a.m. to about noon ET, and then in the last hour of trading before the close at 4 p.m. ET.

     

    Day trading risk management

    Risk management is all about limiting your potential downside, or the amount of money you could lose on any one trade or position. When considering your risk, think about the following issues:

    • Position sizing.

    • Percentage of your portfolio.

    • Losses.

    • Selling.

       

    Day Trading Tools

    What you’ll need to start day trading:

    • Online Broker
    • Scanners
    • Charting Platform

     

    Your broker is one of the bigger decisions you will make. Click here to learn about the best day trading platform and brokerage fees.

     

    How to Start Day Trading

    Here are the steps you will need to take:

    • Open a brokerage account and transfer money in
    • Have a written trading plan you can review every morning
    • Make your watchlist in the morning
    • Trade your plan and stick to it
    • Review your trades at the end of the day

    Alternatevely, you can employ algorithmic trading systems that will work 100% hands-free.