Latency-driven trading describes a trading strategy that attempts to profit from latency differentials across traders or trading platforms.
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- An uptrend is displayed as series of thick vertical lines
- A downtrend is displayed as series of thin vertical lines
“Keep the powder dry” is a phrase that means to limit your trades due to harsh trading conditions.
In either choppy or extremely narrow markets, it may be better to stay on the sidelines until a clear opportunity arises.
In public key cryptography, a key pair is a pair of private key(s0 and public key(s) that are mathematically linked to each other. Public keys are used to encrypt data, and the private key of the key pair is used to decrypt that data. This is known as asymmetric encryption. Key pairs are used to control access to your cryptocurrency.
Know Your Customer (KYC) is the process of a business, involved with financial transactions, to to identify and verify the identity of customers. It is an essential part of banking regulation.
Latency is the delay between the transmission of information from a source and the reception of the information at its destination.
One specific example is the time that elapses between the placement of an order in an electronic trading system and the execution of that order.
The delay can be affected by factors such as geographical distance or bandwidth congestion.
In simplified terms, latency is a measure of delay.
More specifically, latency describes the time that passes between a price quotation being made and a transaction being confirmed.
Latency can be a consequence of a wide range of technological shortcomings.
- Inadequate network performance can lead to communication latency, or the time needed to communicate between two network nodes.
- Inadequate server processing power, meanwhile, can lead to so-called application latency, or a delay arising because the reply requires a large amount of processing before it can be sent.
- Inadequate computer processing power can prompt memory latency, or the time needed to write or access data in memory within a computer program in order, for example, to run a margin check on a client.
- To assess near-time consumer attitudes on the business climate, personal finance, and spending
- To promote an understanding of, and to forecast changes in, the national economy
- To provide a means of incorporating empirical measures of consumer expectations into models of spending and saving behavior
- To gauge the economic expectations and probable future spending behavior of the consumer
- To judge the consumer’s level of optimism/pessimism
Why is it important?it gauges consumer attitudes on their financial and income situations. Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more optimistic that consumers feel about the economy and their own personal finances, the more likely they are to spend. With this in mind, it’s easy to see how this index of consumer attitudes gives insight into the direction of the economy. Economists and analysts look to this survey over the Conference Board’s Consumer Confidence Index for an early clue on the NFP. This is because the data includes interviews conducted up to a day or two right before the official release. This makes it a good real-time measure of consumer mood. According to the University of Michigan, the surveys “have proven to be an accurate indicator of the future course of the national economy.”
How to read it?Also referred to as the Index of Consumer Sentiment (ICS), the report created by the University of Michigan’s Consumer Survey Center that measures consumer optimism regarding the US economy. Each month, 500 households are telephoned and surveyed on their financial conditions and attitudes about the economy. Fifty core questions are asked. They are asked about their view on three things:
- Their own financial situation
- The short-term general economy
- The long-term general economy
Where to find it?On Niclaxfx.com economic calendar, you can find its event listing. The index figures are published twice a month consisting of a preliminary release mid-month and a final report at month’s end.
What time is it released?The preliminary release is at 10:00 am ET on the second Friday of each month The final release is at 10:00 am ET on the fourth Friday of each month.
Leading indicators are used by traders to predict imminent changes in a market. Since leading indicators change before an actual market changes, traders consider them important as guidelines for investing wisely to take advantage of price events before they occur.
In some cases, leading indicators are useful mainly as a guideline for potential change in a market, rather than assured change. For example, information about employment records, building permit applications and prominent changes in the executive lineup of a corporation can reflect coming changes in the production level of the corresponding asset, or in the buying or selling pressure on that asset. However, this kind of leading indicator should be used as a guideline to investment rather than as a sure-fire prediction of future events.
In other cases, leading indicators can actually change the behavior of a market. A number of leading indicators–among them unemployment insurance claims, the amount of money in the economy, and increases in the production workweek–are watched by the Federal Reserve in order to determine whether or not to change the interest rate. Thus some traders watch these leading indicators carefully, and if enough leading indicators seem to point to the fact that the Fed is preparing a change in interest rates, traders can take the appropriate actions.
LIBOR, or the London Interbank Offered Rate, is a benchmark that dictates daily interest rates on loans and financial instruments around the world.
It is the reference interest rate that’s calculated daily at which global banks lend to one another.
LIBOR is also used as a standard gauge of market expectation for interest rates finalized by central banks.
It accounts for the liquidity premiums for various instruments traded in the money markets, as well as an indicator of the health of the overall banking system.
To calculate LIBOR each day, the Intercontinental Exchange (ICE) asks banks around the world to provide the rates at which they would offer a short-term loan to each other.
ICE takes out the highest and lowest figures, then calculates the average from the remaining numbers.
The result is the daily LIBOR figure.
LIBOR is calculated in five different currencies:
- U.S. dollar
- British pound
- Japanese yen
- Swiss franc
Each with seven different lengths of loan:
- Overnight/spot next
- One week
- One month
- Two months
- Three months
- Six months
- Twelve months
The combination of five currencies and seven maturities leads to a total of 35 different LIBOR rates calculated and reported each business day.
The most commonly quoted rate is the three-month U.S. dollar rate, usually referred to as the current LIBOR rate.
Financial companies around the world use the LIBOR as the basis to calculate their own interest rates on loans, mortgages, credit cards, and financial derivative prices.
This means that LIBOR impacts consumers also, and not just financial institutions.
While LIBOR is accepted globally, other domestic and regional financial centers construct their own interbank offered rates for domestic loans and financial instruments.
For example, Europe has the European Interbank Offered Rate (EURIBOR), Japan has the Tokyo Interbank Offered Rate (TIBOR), China has Shanghai Interbank Offered Rate (SHIBOR), and India has the Mumbai Interbank Offered Rate (MIBOR).
A light note (also referred to as a thin client) does not store the complete copy of the blockchain like a full node. By only storing the block headers (and not block transactions), light nodes can be run on devices with limited memory resources, such as smartphones. Light nodes are dependent on full nodes to run.
The Lightning Network is a low latency, off chain P2P system for making micropayments of cryptocurrencies. It offers features such as instant payments, scalability, low cost and cross-chain functionality. Participants do not have to make individual transactions public on the blockchain and security is enforced by smart contracts.
A limit order is an order placed to either buy below the market or sell above the market at a certain price.
It is an instruction to your broker to execute a trade at a particular level that is more favorable than the current market price.
The blue dot is the current price.
Notice how the green line is below the current price. If you place a BUY limit order here, in order for it to be triggered, price would have to fall down here first.
Notice how the red line is below the current price. If you place a SELL limit order here, in order for it to be triggered, price would have to rise up here first.
Limit orders differ from market orders, which instruct your broker to execute a trade at the best current available price.
Limit orders allow you to specify the minimum price at which you will sell or the maximum at which you will buy.
If you want to open an order to buy or sell an asset at a price that is less favorable than the current market price, you use a stop order.
There are two varieties of limit orders
- Entry orders (that open a new position)
- Closing orders (that terminate an open position)
By using both, traders are able to execute a trade automatically at a certain level instead of constantly tracking the price of an underlying asset.
Entry Limit Order Example
For example, EUR/USD is currently trading at 1.1050. You want to go short if the price reaches 1.2070.
You can either sit in front of your monitor and wait for it to hit 1.1070 (at which point you would click a sell market order).
Or you can set a sell limit order at 1.1070 (then you could walk away from your computer to attend your ballroom dancing class).
If the price goes up to 1.1070, your forex trading platform will automatically execute a sell order at the best available price.
You use this type of entry order when you believe the price will reverse upon hitting the price you specified!
A limit order to BUY at a price below the current market price will be executed at a price equal to or less than the specified price.
A limit order to SELL at a price above the current market price will be executed at a price equal to or more than the specific price.
When should you use a limit order?
You should use limit orders when you are not in a rush to buy or sell.
Unlike market orders, the limit orders are not executed instantly, so you need to wait until your ask/bid price is reached.
Limit orders allow you to get better selling and buying prices and they are usually placed on major support and resistance levels.
The Lightning Network is a low latency, off chain P2P system for making micropayments of cryptocurrencies. It offers features such as instant payments, scalability, low cost and cross-chain functionality. Participants do not have to make individual transactions public on the blockchain and security is enforced by smart contracts.
A technical analysis indicator. It is a moving average that assigns more weight to more recent prices. As a result, it is more sensitive to price changes compared to the Simple Moving Average.
Liquidity aggregator refers to technology that allows participants to simultaneously obtain streamed prices from several liquidity providers/pools.
Computer algorithms allow customization of the price streams for both the liquidity provider and the receiving counterparty.
Litecoin (LTC) is a type of cryptocurrency that enables instant payments to anyone in the world.
It was created by Charle Lee, a former Google employee, in 2011.
Litecoin functions similarly to bitcoin, but with a higher maximum number of coins that can be mined. 84 million litecoins will be produced, which is 4 times as many currency units as bitcoin.
One of the main reasons that people buy Litecoin is that transactions take significantly less time to transfer than bitcoin, with a fraction of the transaction fees.
Litecoin blocks can also be created faster, once every 2.5 minutes compared to Bitcoin’s algorithm which is one block every 10 minutes.
It also offers features such as Segregated Witness and the Lightning Network which allows for faster processing at lower cost.
Price charts that use log scales show equal distances for similar percentage change. For example, the distance on the chart for a price move from 1.5000 to 3.0000 will be the same as a move from 5.0000 to 10.0000 as they both represent the same (100% change) percentage change.
When used in trading, long refers to a position that makes a profit if an asset’s market price increases.
Usually used in context as “going long” or “taking a long position“.
When you trade in the forex market, since you buy or sell in currency pairs, “going long” means that you are buying the base currency and selling the quote currency.
For example, if you go long EUR/USD, you are buying euros and selling U.S. dollars.
Going long is the opposite of going short or shorting, which means taking a position that makes a profit if an asset’s market price falls.
Taking a long position doesn’t necessarily mean buying an asset.
Derivatives allow traders to take a long position on a market without actually buying the underlying asset.
A long candle represents a single Japanese candlestick where the length (or height) of the candlestick’s body is very long
The large body indicates a huge price move from open to close.
Long white/green candlesticks indicate there is strong buying pressure.
This typically indicates the price is bullish. That said, a long candle should be looked at in the context of the overall price action as opposed to just as a standalone candle.
For example, a long white candle is likely to have more significance if it forms at a major support level.
Long black/red candlesticks indicate there is significant selling pressure. This suggests the price is bearish.
Long term trading, otherwise known as position trading, refers to a trading style in which the trader will hold on to a position for an extended period of time. A position trade can last anywhere from a few weeks to a couple of years.
Most long term trading traders rely heavily on fundamental analysis, as they are mostly concerned with the future outlook of the market they are trading. They are not as concerned with the intraday ups and downs and instead focus on the fundamental factors driving the longer term trend. Because of their longer term outlook, long-term traders will normally look at daily, weekly and even monthly charts for their analysis.
- Savings deposits (which include money market deposit accounts, or MMDAs).
- Small-denomination time deposits (time deposits in amounts of less than $100,000).
- Balances in retail money market mutual funds (MMMFs).
- Confirmation of the trend is in place when MACD crosses the zero line.
- Early Buy signals (or reversal warning) are triggered when MACD crosses above the Signal Line when below the zero line.
- Early Sell signals (or reversal warning) are triggered when MACD crosses below the Signal Line when above the zero line.
- Overbought/Oversold signals are triggered when the 12 period EMA pulls away from the 26 period EMA.
- MACD is unbounded and as such, there no overbought and oversold lines.
- Divergence follows the rules for positive and negative divergence.
Maintenance margin is the amount that must be available in funds in order to keep a margin trade open.
It is also known as the variation margin or “free margin”.
Its purpose is to ensure you have enough money in your account to fund the present value of the position at all times and cover any running losses.
You need enough maintenance margin to “maintain” your open positions.
The maintenance margin is one of the two types of margin required to make a leveraged trade.
The other is the initial margin (or deposit margin), which is the amount needed to open a new position.
To keep a leveraged position open, a certain amount of funds must be paid and kept in your account.
If your position starts to make a loss, then your deposit may no longer be enough to keep the trade open.
In this case, your broker will ask you to increase the funding in your account. This is called a margin call.
Margin requirement is a financial concept related to the minimum amount in collateral that the issuer of a financial security requests from the buyer, to hedge against the risk of adverse price movements or the buyer defaulting.
In the foreign exchange markets, businesses, or individuals who wish to enter a spot FX contract are normally requested to deposit a minimum margin requirement.
It acts as a surety against transactional default and provides other parties to a transaction with confidence that the counterparty will fulfill its contractual obligations.
The margin requirement in currency exchange is normally in cash, deposited in a margin account. It is usually a percentage of the total amount to be transacted.
Should the margin requirement change, which is regularly the case in currency transactions as exchange rates change continuously, there is a margin call, whereby the counterparty must deposit the shortfall in order to meet the new margin requirement.
Mark-to-market accounting, also referred to as “marked-to-market” accounting, is the procedure used to obtain the market value of assets and liabilities through daily revaluation rather than referring to the “book value”.
This accounting method is used to assess the true value of assets and liabilities, as it shows their current market price and gives a more realistic picture of a company’s financial position.
Originally introduced to assess the value of futures contracts, mark-to-market accounting has become prominently used in over-the-counter derivatives (OTC) markets, including spot trade and forward contract markets.
It is considered an accurate method based on market conditions at any given time, but it has also received criticism because, in volatile times, it can provide results that do not accurately portray the true value of an asset or liability.
If, for example, investor confidence in a certain market dissipates, an asset’s value could fall sharply based on the current market conditions.
Additionally, it has been associated with financial fraud and scandals.
An investor purchases 100 shares in a company for $10 per share. The book value of their investment is $1,000.
On the trading day following the purchase, the company’s stock price falls by 10%.
The mark-to-market value is therefore $900. The book value remains $1,000.
Market can have several meanings in the financial world.
Generally, it is defined as a medium through which assets are traded, with their value determined by supply and demand.
“Market” can refer to:
- A broad grouping of assets (like the technology market) or an index
- A place – physical or nominal – that facilitates buying and selling of assets
- The price movements of financial assets as a whole (“the markets” or “financial markets”).
- The price at which an asset is being traded (the market price).
Market capitalization (market cap) is the market value of a company, market or sector at a point in time commonly used to rank relative size.
In equities, it refers to the total market value of a company’s outstanding shares.
In cryptocurrency investing, it refers to either price multiplied by the circulating supply (free float market cap) or price multiplied by the total supply (fully diluted market cap).
The Bureau of Labor Statistics measures labor market activity, working conditions, price changes, and productivity in the U.S. economy to support public and private decision making.The NFP component usually gets the most attention because it measures the actual number of paid employees (full and part-time) in the business and government establishments. NFP gets its name from the jobs that aren’t included: farmworkers, and those employed in private households or non-profit organizations. The data is usually delivered on the first Friday of any given month and can create high volatility in the financial markets. Lots of analysts release their forecasts for NFP figures in advance of the actual release. This causes a great deal of speculation prior to each report.
A technical indicator developed by Dr. Bill Williams to evaluate the efficiency of the price movement. An efficient market is defined as a market when all traders (long-term and short-term) are actively trading. The indicator combines price and volume:
MFI = (High – Low) * Volume
There are 4 combinations:
- MFI Up and Volume Up (Green): Follow the direction of the market. The market is accelerating as more traders enter the market in the established direction.
- MFI Down and Volume Down (Brown): Both MFI and Volume fade, resulting in no interest to advance further.
- MFI Up and Volume Down (Blue): Price movement without volume confirmation. It is a fake move.
- MFI Down and Volume Up (Pink): The most important signal. The increased volume signifies the increased number of participants entering the market. The squat as Bill Williams named it, implies a reversal or continuation of the prevailing trend.
A market order is an order to quickly buy or sell at the best available current price.
It is an instruction from a trader to a broker to execute a trade immediately at the best available price.
Unlike a limit order, where orders are placed on the order book, market orders are executed instantly at the current market price.
A market order is the simplest type of order, with no specific price needed.
Provided there is enough liquidity in the market, they are usually executed very quickly.
With market orders, you do NOT have any control over the price at which your order is filled.
Your market order will be filled at the then market price which may be significantly WORSE than the prices visible when placing the order.
If you are happy to trade at or near the current market price, then a market order may be the best option.
When a market order has been executed, it is referred to as a “filled order“.
When should you use a market order?
Market orders are handy in situations where getting your order filled is more important than getting a specific price.
This means that you should only use market orders if you are willing to potentially pay a higher price due to slippage.
In other words, market orders should only be used if you are in a rush.
You might be in a rare situation where your stop loss order didn’t get filled, and you need to buy/sell as soon as possible.
So if you need to get into a trade right away or get yourself out of trouble, that’s when a market order can come in handy.
A technical analysis tool developed by J. Peter Steilmayer to allow traders to get information about the activity in the futures pit. It displays price distribution and reveals who is in control of the market:
- Short-term traders
- Long-term traders
The Markets in Financial Instruments Directive, commonly known as MiFID, is a law that was created by the European Union for the purpose of regulating all investment services in member states of the European Economic Area (EEA).
The European Economic Area (EEA) combines the countries of the European Union (EU) and member countries of the European Free Trade Association (EFTA) to facilitate participation in the European Market trade and movement without having to apply to be one of the EU member countries.
The Markets in Financial Instruments Directive (MiFID) is a European regulation that increases the transparency across the European Union’s financial markets and standardizes the regulatory disclosures required for firms operating in the European Union.
The goal of the Markets in Financial Instruments Directive (MiFID) is to increase transparency across EU financial markets and to standardize regulatory disclosures for firms.
MiFID implemented new measures, such as pre- and post-trade transparency requirements, and set out the standards of conduct to be followed by financial firms. MiFID has a defined scope that primarily focuses on stocks.
The EU hoped that the directive would help to increase competition among investment services while also boosting consumer protection and providing harmonious regulations for all participating states.
The directive was drafted in 2004 and has been in force across the European Union (EU) since 2007.
In 2018, a new law, known as MiFID II, has since replaced MiFID.
A Marubozu is a long or tall Japanese candlestick with no upper or lower shadow (or wick).
The candlestick pattern comes in both a bearish (red or black) and a bullish (green or white) form and is easy to spot due to its long body.
It basically looks like a vertical rectangle.
To identify a Marubozu candlestick pattern, look for the following criteria:
- The single candle involved in the signal should have a long body.
- There must not be an upper or a lower shadow (or wick).
- The candle can be white/green or black/red, and it can appear anywhere on the chart.
- A white/green Marubozu moves upward and is very bullish.
- A black/red Marubozu moves downward and is very bearish.
- The longer the candle is, the stronger the price move.
A bullish Marubozu is called a White Marubozu and a bearish Marubozu is called a Black Marubozu.
The word marubozu means “bald head” or “shaved head” in Japanese, and this is reflected in the candlestick’s lack of shadows.
When you see a Marubozu candlestick, the fact that there are no shadows tells you that the session opened at the highest price and closed at the lowest price of the day.
In a bullish Marubozu, the buyers maintained control of the price throughout the session, from the opening to the close.
In a bearish Marubozu, the sellers controlled the price from the opening to the close.
To better analyze a specific Marubozu, observe the following:
- If a White Marubozu occurs at the end of an uptrend, a continuation is likely.
- If a White Marubozu occurs at the end of a downtrend, a reversal is likely.
- If a Black Marubozu occurs at the end of a downtrend, a continuation is likely.
- If a Black Marubozu occurs at the end of an uptrend, a reversal is likely.
A technical indicator developed by Donald Dorsey. It measures the difference between High and Low prices in order to identify reversals. Trading signals are triggered when a “reversal bulge” is identified. That is, a reading above 27.0 and then a decline of the indicator below 26.5.
A buy signal occurs during a downtrend and a “reversal bulge” in place.
A sell signal occurs during an uptrend and a “reversal bulge” in place.
A market breadth indicator. It was developed by Sherman and Marian McClellan. It is the difference of a 19-period EMA and a 39-period EMA of advancing minus declining issues in the New York Stock Exchange.
A reading above 100 implies extreme overbought conditions whereas a reading below -100 signals extreme oversold conditions. A buy signal is triggered when the oscillator falls in the area between -70 and -100 and then turns up. Similarly, a sell signal is generated when the oscillator rallies in the area between 70 and 100 and then turns down.
A Japanese candlestick pattern signaling a bullish reversal. During the course of the uptrend, the presence of a long white candlestick confirms the strength of the prevailing direction of the market. While the sentiment is clearly positive, the next session gaps even higher, creating an open window. Eventually the session closes lower but at the same level as the previous session’s close.
A mechanical trading system is often touted as the end-all to Forex trading. Traders choose a system to follow and enter it into a program that will then pick starting and stopping points for trades as well as maintain a position, without requiring a trader be present to control those actions.
Implementing a mechanical trading system can be the best decision a Forex trader can make. However, it can also be hard for those traders who work off of emotion. The idea of putting future profits into the hands of a computer program can be a scary situation, however, with free platforms available now, it is a limited-loss system: a computer program won’t ride a trend just to see it plummet in the end, and a program can’t get cold feet and sell too early.
As an automated system, a mechanical trading system is a good all-around program to keep in the background. Whether a trader wants to implement a break-out system, reversal, indicator or trend-following system, there are plenty of options available.
A Japanese candlestick pattern signaling a bullish reversal. During the course of the downtrend, the presence of a long black candlestick confirms the strength of the prevailing direction of the market. While the sentiment is clearly negative, the next session gaps even lower, creating an open window. Eventually the session closes much higher but at the same level as the previous session’s close.
MetaTrader 4 (MT4) is a trading platform developed by MetaQuotes in 2005.
Although it is most commonly associated with forex trading, MetaTrader 4 can be used to trade a range of markets, not just forex.
Like most online trading platforms, MT4 allows traders to view charts, stream live prices, and place orders with their broker.
MT4 is extremely popular due to the fact that it is highly customizable to your individual trading preferences.
It can also be used to automate your trading, using algorithms which open and close trades on your behalf according to a list of set parameters.
The software is licensed to forex brokers who provide the software to their customers.
The software consists of both a client and a server component.
The server component is run by the broker and the client software is provided to the broker’s customers, who use it to see live streaming prices and charts, to place orders, and to manage their accounts.
The client is a Microsoft Windows-based application that became popular mainly due to the ability for users to write their own trading scripts and robots that could automate trading.
While there is no official MT4 version available for Mac OS, some brokers provide their own custom developed MT4 variants for Mac OS.
In 2010, MetaQuotes released a successor, MetaTrader 5 (MT5).
MetaTrader 5 (MT5) is a multi-asset trading platform by MetaQuotes. that allows trading forex, stocks, and futures.
Like most online trading platforms, MT5 allows traders to view charts, stream live prices, and place orders with their broker.
Trading on MT5 gives traders access to financial markets including foreign exchange, commodities, CFDs, stocks, futures, and indices.
Its diverse functionality includes fundamental and technical analysis tools, copy trading, and automated trading.
MT5’s most popular feature is the ability to use trading robots, known as Expert Advisors or EAs. The robots operate without the participation of the trader, monitoring price, and performing trading operations by following an underlying algorithm.
Other benefits of MT5 include a multi-threaded strategy tester, fund transfer between accounts and a system of alerts to keep up to date with all the latest market events.
Traders can also communicate through the embedded MQL5 community chat to network with other traders and share tips and strategies.
MiFID II is a legislative framework instituted by the European Union (EU) to regulate financial markets in the European Economic Area (EEA) and improve protections for investors.
Its aim is to standardize practices across the EU and restore confidence in the industry.
One of the most influential laws enacted by the European Union to regulate the investment sector is the Markets in Financial Instruments Directive.
This directive, which is usually referred to as MiFID, has been in place since 2007 and has dramatically changed how the investment sector is run.
The original Markets In Financial Instruments Directive (MiFID) went into effect in November 2007.
The onset of the subsequent global financial crisis exposed some weaknesses in its provisions.
It focused too narrowly on stocks (ignoring fixed-income vehicles, derivatives, currencies, and other assets) and did not address dealings with firms or products outside the EU, leaving the rules about those to be decided by individual members.
Recently, the legislation was significantly updated, and it is now known as “MiFID II”.
MiFID II is intended to be a stronger version of the previous law, and it is focused mainly on increasing customer protection, making trading platforms more open, and ensuring that portfolios are properly managed.
MiFID II harmonizes the application of oversight among member nations and broadens the scope of the regulations.
With the updated version of MiFID, trading transactions and information will be more transparent than ever before.
MiFID II requires that all prices are clearly posted before and after trades are completed, no matter the type of trading platform on which transactions occur.
This gives investors access to a whole new scope of data and information and enables them to make more educated decisions regarding their clients’ portfolios.
Additionally, the new-and-improved MiFID II will also cover more types of financial instruments (rather than just shares).
Equities, commodities, debt instruments, futures and options, exchange-traded funds, and currencies all fall under its purview.
If a product is available in an EU nation, it is covered by MiFID II
Even if the trader wishing to buy it is located outside the EU.
Sellers will be required to clearly state their prices before and after all transactions, as well as other pertinent information.
The main purpose of this new requirement is to allow retail firms and their customers to find the best deals available by comparing prices and other factors from the newly available data.
MiFID II now covers structured deposits as well. Previously, structured deposits were not regulated by the European Union, despite the fact that they are quite a common investment and have several protection challenges.
With the introduction of the new regulations, companies that sell and purchase structured deposits will have to comply with certain rules regarding interactions with clients and oversight by supervisory bodies, as well as a variety of other stipulations.
Another major change in MiFID II is that some firms will be banned from accepting payments or benefits (“inducements”) from third parties.
Thus, if an individual (such as a consultant) or a firm provides financial advice on another individual’s behalf, they no longer will be able to keep any payment that they receive.
Instead, they will be forced to transfer this payment along to the actual investor. This provision marks a major change for the European financial sector.
MiFID II not only covers virtually all aspects of financial investment and trading but also covers virtually all financial professionals within the EU.
Bankers, traders, fund managers, exchange officials, and brokers—and their firms—all have to abide by its regulations. So do institutional and retail investors.
Regarding retail investors, the law will substantially increase the protection of retail investors and will severely limit the types of financial instruments with which retail investors can complete transactions without being legally obligated to consult a trader or similar professional.
Mining is the process where transactions are verified and added to a blockchain.
It is also the process where new bitcoins or certain altcoins are created.
In theory, anyone with a computer and access to the internet can be a miner and earn income, but nowadays, the cost of industrial hardware and electricity has limited mining for bitcoins and certain altcoins to large-scale operations.
Most cryptocurrencies will eventually stop being created when they reach a predetermined amount known as a mintage cap.
This is the maximum supply of the coins and the level at which no more coins will be created.
Bitcoin’s current theoretical limit is at 21 million coins by 2140. This limit is built into the technology powering the cryptocurrency, but it’s just software, and even decentralized software can be changed if the majority votes for the change.
While most cryptocurrencies have mintage caps, there are some, like Peercoin, which do not.
The Momentum indicator identifies when the price is moving upward or downward and how strongly.
Momentum measures the rate of change in prices as opposed to the actual price changes themselves.
Momentum is measured by continually taking price differences for a fixed time period.
For example, to create a 10-day period momentum line, you would subtract the closing price from 10 days ago from the most recent closing price.
It compares where the current price is in relation to where the price was in the past.
The result is then plotted around a zero line.
if the current price is higher than the price in the past, then the Momentum indicator is positive.
If the current price is lower than the price in the past, then the Momentum indicator is negative.
A momentum value above zero indicates that the price is moving up
A momentum value below zero indicates that the price is moving down.
How to Use the Momentum indicator
Since the Momentum indicator does not have an upper and lower boundary, you must visually inspect the history of the momentum line and draw horizontal lines along its upper and lower boundaries.
When the momentum line reaches these levels it may indicate that the currency pair may be overbought or oversold.
Momentum is an unbound oscillator, meaning there is no upper or lower boundary. This makes interpreting whether a currency pair is overbought or oversold subjective.
When the Momentum indicator is overbought, the price can continue to move higher.
When the Momentum indicator is oversold, the price can continue lower as well.
Use the Momentum indicator in conjunction with additional technical indicators or price action analysis when attempting to read overbought or oversold conditions.
A crossing above the zero line during an uptrend signals a buy.
A crossing below the zero line during a downtrend signals a sell.
When using these signals, you should trade in the direction of the overall trend.
Momentum as Volume
Momentum can be used as a measure of the volume of a market.
If prices are changing rapidly (meaning that momentum is high), it’s likely that a large number of traders are buying or selling the asset to push the price change in either direction.
Extremely high or extremely low values for momentum are taken as signs that an asset is either overbought or oversold.
If momentum reaches an extreme high, the asset is considered overbought.
If momentum reaches an extreme low, the asset is considered oversold.
When momentum reaches an extreme low and then rapidly advances back upward across the zero line. this signals a buy.
When momentum reaches an extreme high and then rapidly falls below the zero line, this signals a sell.
How to Calculate Momentum
The momentum of a price is very easy to calculate.
The momentum (M) is a comparison between the current closing price (CP) and a closing price “n” periods ago (CPn).
You determine the value of “n.”
M = CP – CPn
The Momentum indicator isn’t going to provide much information beyond what can be seen just by looking at the price chart itself.
If the price is moving aggressively higher, this will be visible on the price chart as well as on the Momentum indicator.
The Momentum indicator can be used to provide trade signals, but it is better used to help forex traders confirm the validity of trades based on price action such as breakouts or pullbacks.
A momentum trade is a trading strategy where a trader buys currencies with high past excess returns (”winners”) and sells in currencies with low past excess returns (”losers”).
The idea is to go long in a portfolio of “winner” currencies and go short in a portfolio of “loser” currencies.
The portfolio of winner currencies might contain both high interest rate currencies, such as the New Zealand dollar, and low interest rate ones, such as the Japanese yen or the Swiss franc.
It all depends on their short-term behavior in the immediate past.
One distinguishing feature of the momentum strategy is that the long-short combination requires more frequent rebalancing than the Carry Trade strategy which results in a less stable currency composition over time.
As a result, transaction costs are potentially large.
By design, momentum strategies may potentially perpetuate past directional moves in exchange rates.
This could result in amplification, as well as delayed, but more abrupt exchange rate moves.
Momentum strategies are also known as “trend-following” strategies.
They have been quite profitable across several asset classes, including equities, commodities, and corporate bonds.
It measures the difference between the current price and the price n periods ago of a financial instrument. If the difference is above the 100-line and rising then it is presumed that the uptrend is accelerating. If the difference is below the 100-line and falling then the downtrend is accelerating. If the difference is above the 100-line and falling then the uptrend is decelerating. Similarly, if the difference is below the 100-line and rising then the downtrend is decelerating. Momentum follows the general oscillator analysis:
- A crossing of the oscillator above the 100-line triggers a buy signal.
- A crossing of the oscillator below the 100-line triggers a sell signal.
- Divergence between the oscillator and price gives early signals of a reversal.
- Overbought/Oversold levels are not easily spotted on the Momentum Oscillator since it is unbounded. Hence, visual inspection is used instead, to identify extreme readings above and below the 100-line.
Historical data modelling for backtesting Expert Advisors. There are three available methods:
- Open Prices only (fastest method to analyze the bar just completed)
- Control Points (the nearest less timeframe is used)
- Every tick (based on all available least timeframes)
Monetary easing is the policy in which a central bank lowers interest rates and deposit ratios to make credit more easily available.
This makes borrowing easier for businesses, which stimulates investment and expansion of operations.
Monetary easing part of an expansionary monetary policy.
The immediate result of monetary easing is generally a boost in stock prices.
In the medium term, it promotes economic growth. However, if this policy remains for too long, it can lead to a situation in which there is too much money chasing too few goods and services, leading to inflation.
For this reason, most central banks alternate between policies of monetary easing and monetary tightening to encourage growth while keeping inflation under control.
What are the central banks’ goals when conducting monetary policy?Central bankers typically have many goals in conducting monetary policy:
- They wish to maintain economic growth at the highest sustainable level
- They hope to keep unemployment to an absolute minimum.
- They seek to keep inflation low.
- They hope to maintain interest rates at reasonable levels (so as not to discourage investment)
- They aim to keep exchange rates stable.
Financial StabilityIn recent years, central banks are reconsidering their role in fostering financial stability Should financial stability be an explicit central bank goal on a par with other objectives such as price stability and sustainable economic growth? Financial stability is defined as “a condition whereby the financial system is able to withstand shocks without giving way to cumulative processes, which impair the allocation of savings to investment opportunities and the processing of payments in the economy”. Financial instability as a situation characterized by these three basic criteria:
- some important set of financial asset prices seem to have diverged sharply from fundamentals; and/or
- market functioning and credit availability, domestically and perhaps internationally, have been significantly distorted; with the result that
- aggregate spending deviates (or is likely to deviate) significantly, either above or below, from the economy’s ability to produce.
The Monetary Policy Committee (MPC) is the voting committee of the Bank of England that decides the official benchmark interest rate of the U.K. They convene for two and a half days every month.
The committee has 9 voting members, including the Bank of England Governor (as of 2011). The main responsibility of the MPC is to keep inflation as close as possible to their target (2% as of 2011).
It is a momentum oscillator developed by Gene Quong and Avrum Soudack.
It combines both price and volume. It measures the strength of money flowing in and flowing out of a financial instrument over a period.
There are two general interpretations:
- Overbought/Oversold: A reading above 80 is considered Overbought and a market top may be in place. A reading below 20 is considered oversold and a market bottom may be imminent.
- Divergence between the oscillator and price hints at reversals.
Money supply is the total amount of money in circulation in the economy at a particular time. It is considered an important instrument in controlling inflation.
There are three measures for money supply, namely M1, M2, and M3. M1 is a narrow measure of money
Monetary tightening is the policy in which a central bank raises interest rates and deposit ratios to make credit less easily available.
This usually happens when the central bank is seeking to slow down overheated economic growth.
Monetary tightening is considered a contractionary monetary policy.
Central banks engage in tight monetary policy when an economy is accelerating too quickly or inflation is rising too fast.
The central bank tightens monetary policy or makes money tight by raising short-term interest rates.
Raising interest rates increases the cost of borrowing and effectively reduces its attractiveness.
Tight monetary policy can also be implemented via selling assets on the central bank’s balance sheet to the market through open market operations.
Monetary tightening can negatively impact security prices and make it hard to receive a loan for a house or business.
The Morning Star is a bullish three-candlestick pattern signifying a potential bottom.
It warns of weakness in a downtrend that could potentially lead to a trend reversal.
The morning star consists of three candlesticks with the middle candlestick forming a star.
The bullish reversal pattern consists of the following three candlesticks:
- A long-bodied black candle extending the current downtrend
- A short middle candle that gapped down on the open
- A long-bodied white candle that gapped up on the open and closed above the midpoint of the body of the first candle.
The star can be a bullish (empty) or a bearish (filled in) candle.
To identify a Morning Star, look for the following criteria:
- The price must be in a downtrend before the signal occurs.
- The first candle must confirm the downtrend with a long black (or red) body. This shows that the bears have firm control of the stock
- The second candle must convey a state of indecision through either a Star candlestick (of either color) or a Doji.
- This shows that supply and demand are equal, and the bears and the bulls are fighting for control.
- The third candle must be represented by a white (or green) candle that closes at least halfway up the first day’s black (or red) candle.
- This last candle confirms that a reversal will occur.
The Morning Star candlestick pattern is the opposite of the Evening Star, which is a top reversal signal that indicates bad things are on the horizon.
The first candle shows that a downtrend was occurring and the bears were in control. However, after a tug-of-war and a period of uncertainty, the bulls successfully took over. You can expect increased stock prices to follow.
To get more information about this story of triumph, pay attention to the characteristics of the Morning Star’s candlesticks. Look for the following signs:
- The longer the candles, the greater the reversal force.
- If there is a gap between the first and second candles (conveying a stronger sense of indecision), the odds of a reversal increase.
- If there is a gap on both sides of the Star candle, the probability of a reversal is even higher.
- The higher the third candle’s white (or green) candle comes up in relation to the first day’s black (or red) candle, the greater the strength of the reversal.
Reliability is enhanced by the extent to which the real body of the third candlestick pierces the real body of the first candlestick, especially if the third candlestick has little or no upper shadow.
If volume data is available, reliability is also enhanced if the volume on the first candlestick is below average and the volume on the third candlestick is above average.
- Open Prices only (fastest method to analyze the bar just completed)
- Control Points (the nearest less timeframe is used)
- Every tick (based on all available least timeframes)
A mortgage-backed security is a claim on interest and principal payments from a pool of mortgage loans.
After a borrower makes a mortgage loan, banks, mortgage companies, and other originators would usually combine the loan with other mortgage loans and sell it to governmental, quasi-governmental, or private entities like the Government National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).
Then, in a process called securitization, these entities would
In Elliott Wave theory, a complete cycle has two phases, Motive and Corrective.
The Motive phase consists of the waves 1, 2, 3, 4 and 5. The Motive wave moves in the direction of the wave of one larger degree.
A trend following indicator. It is a series of averages of sequential data subsets. It may be used as a curving trend line that follows the price action. Buy signals are seen when prices cross above the moving average whereas sell signals are in place when prices cross below the moving average. There are many moving average calculation methods:
- Time Series
- Linearly Weighted
- Volume Adjusted
The major difference between the calculation methods is the weight attached to the most recent prices.
Multiple time frame analysis is the process of viewing the same currency asset across different time frames on a chart.
Multiple time frame analysis follows a top-down approach when trading and allows traders to gauge the longer-term trend while finding ideal entries on a chart with a shorter time frame.
Using multiple time frame analysis can improve the odds of success for a trade.
Traders who use multiple time frame analysis subscribed to the Dow Theory.
Charles H. Dow argued that price movement unfolds in three ways:
- Primary trend
- Secondary reactions
- Minor trends
He likened these market price movements to major ocean tides, waves, and ripples.
According to the Dow Theory:
- Primary trends can last several years or more.
- Secondary trends, or reactions, can last from several weeks to several months.
- Ripples, or short-term minor trends, can last from several days to several weeks.
How can traders apply this multiple time frame trading methodology to their trading?
When looking at charts, consider using multiple time frames to decide when you confirm a trend and choose positions when the trends align.
- Start with a top-down approach by looking at a weekly chart to determine the market tide or primary trend.
- A daily chart can be used to determine potential secondary market reactions, which are counter-trend corrections.
- Minor trends can be seen on hourly charts
How to Trade Multiple Time Frames
To look for primary trends, you could start by looking at a weekly chart.
If you identify a major upward trend on that weekly chart, it’ll be easier to spot a shorter-term trend on a daily or even shorter time frame chart.
Starting with the longer-term chart first and then confirming that all trends align is more logical when it comes to considering trading decisions.
How can you incorporate looking at different time frames into your trading routine?
One way is to apply technical analysis using multiple time frames.
For example, if you use moving averages, do all moving average indicate an uptrend across multiple time frames?
If you’re just looking at a 15-minute chart and see an uptrend, it’s difficult to figure out if this uptrend is happening within a larger uptrend or downtrend.
Short-term trends are part of a larger trend, and it’s a good idea to trade in the direction of the primary trend.
It’s better to start with weekly time frame charts to confirm the big-picture trend before moving to a shorter-term chart.
Trading with multiple time frames shouldn’t necessarily change your strategy.
You’re simply using more information so your trading decisions aren’t made in the dark.
Ask yourself, “What trends am I riding?”
The more aware you are of trend direction, the better you will be at making your entry and exit decisions.
Multisignature (multisig) refers to requiring more than one key to authorize a transaction. It is generally used to divide up responsibility for possession of a cryptocurrency.
For example, standard transactions on the Bitcoin network could be called “single signature transactions” because transfers require only one signature….from the owner of the private key associated with the Bitcoin address.
However, the Bitcoin network supports much more complicated transactions that require the signatures of multiple people before the funds can be transferred.
A mutual fund is an investment product that acts as a delegated investment manager.
When an investor buys a mutual fund, the investor gives his cash to a financial management company that will use the cash to build a portfolio of assets according to the fund’s investment objective.
The objective includes the fund’s assets and investment strategy, and its management fees.
The fund’s assets can belong to a large number of asset classes such as equities, bonds, FX, real estate, and more.
The fund’s investment strategy refers to the style of investment, primarily whether the fund is actively managed or passively tracks an index.
An investor who puts money in a fund participates in both the appreciation and depreciation of the asset as allocated by the fund manager.
In order to covert one’s investment back to cash, the investor’s options depend on the type of fund.
There are two main types of mutual funds: open-end and closed-end funds.
Closed-end funds are mutual funds that are not redeemable. The fund issues a fixed number of shares usually only once, at inception, and investors can’t sell the shares back to the fund.
The fund initially sells the shares initially through an IPO and these shares are listed on an exchange where investors buy and sell these shares to each other.
Open-end funds are mutual funds with a varying number of shares. Shares can be created to meet the demand of new investors or destroyed (bought back by the fund) as investors seek to redeem them.
Some investment firms feel that the regulation imposed on mutual fund managers to ensure they fulfill their fiduciary duties to investors is too constraining.
The solution is the creation of hedge funds.
Hedge funds pursue more aggressive trading strategies and have fewer regulatory and transparency requirements. Because of softer regulatory oversight, access to these investment vehicles is largely limited to accredited investors, who are expected to better informed and able to deal with the fund’s managers.
A non-deliverable forward (NDF) is a forward or futures contract in which the two parties settle the difference between the contracted NDF price and the prevailing spot market price at the end of the agreement.
A non-deliverable forward (NDF) is a two-party currency derivatives contract to exchange cash flows between the NDF and prevailing spot rates. One party will pay the other the difference resulting from this exchange.
Cash flow = (NDF rate – Spot rate) * Notional amount
The largest NDF markets are in the Chinese yuan, Indian rupee, South Korean won, Taiwan dollar, and Brazilian real.
Other popular markets are Chilean peso, Columbian peso, Indonesian rupiah, Malaysian ringgit, Philippine peso, and New Taiwan dollar.
What is an NDF?
NDFs, which are traded over the counter (OTC), function like forward contracts for non-convertible currencies, allowing traders to hedge exposure to markets in which they are unable to trade directly in the underlying physical currency.
Rather than delivering in the underlying pair of currencies, the contract is settled by making a net payment in a convertible currency, proportional to the difference between the agreed forward exchange rate and the subsequently realized spot fixing.
This fixing is a standard market rate set on the fixing date, which in the case of most currencies is two days before the forward value date.
The basis of the fixing varies from currency to currency, but can be either an official exchange rate set by the country’s central bank or other authority, or an average of interbank prices at a specified time.
NDFs are distinct from deliverable forwards in that they trade outside the direct jurisdiction of the authorities of the corresponding currencies and their pricing need not be constrained by domestic interest rates.
The bulk of NDF trading is settled in dollars, although it is also possible to trade NDF currencies against other convertible currencies such as euros, sterling, and yen.
How does an NDF work?
All NDF contracts set out the currency pair, notional amount, fixing date, settlement date, and NDF rate, and stipulate that the prevailing spot rate on the fixing date be used to conclude the transaction.
The fixing date is the date at which the difference between the prevailing spot market rate and the agreed-upon rate is calculated. The settlement date is the date by which the payment of the difference is due to the party receiving payment.
If one party agrees to buy Chinese yuan (sell dollars), and the other agrees to buy U.S. dollars (sell yuan), then there is potential for a non-deliverable forward between the two parties.
They agree to a rate of 7.00 on $1 million U.S. dollars. The fixing date will be in one month, with settlement due shortly after.
If in one month the rate is 6.9, the yuan has increased in value relative to the U.S. dollar. The party who bought the yuan is owed money.
If the rate increased to 7.1, the yuan has decreased in value (U.S. dollar increase), so the party who bought U.S. dollars is owed money.
NIRP stands for “negative interest rate policy”.
NIRP is a macroeconomic concept that describes conditions characterized by negative nominal interest rates.
It’s when central banks resort to unconventional monetary policies and set target interest rates below 0%.
So under NIRP, the price of money isn’t zero. It’s less than zero.
This usually happens once a central bank has hit the zero lower bound (ZLB) in its benchmark interest rate.
A negative interest rate means that the central bank will charge negative interest.
The idea is to charge the banks that park their money with their central bank.
This means that borrowers are credited with interest rather than paying interest to lenders.
Instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank.
In recent years, central banks in Sweden, Denmark, Japan, and the European Union have all adopted NIRP.
The economic theory behind NIRP is that negative interest rates will encourage banks to push money out the door rather than pay a fee to hold it.
Corporations will start investing again, and consumers will spend sooner rather than pay a negative interest rate for holding cash in their banks.
As a result, the overall aggregate demand will rise.
How does NIRP work?
Interest rates are one of the main levers that a central bank uses to adjust monetary policy and maintain balance in the economy.
The central raises interest rates to help cushion the economy against inflation, because higher rates make borrowing by consumers and businesses more expensive.
It lowers interest rates when the country is facing a recession because it encourages borrowing and spending, which stimulates the economy.
Historically, when you take out a loan, you pay more than the amount originally borrowed because of the interest accrued.
Yet if interest rates are negative, the process reverses itself.
If you take out a loan at a negative interest rate, you don’t pay interest on the amount you borrow. Instead, the lender would pay you.
With negative interest rates, you’d end up paying back less than you borrowed, so you’d earn money in the long run.
If you have a savings account with your bank, you will pay the bank for holding your money.
Those central banks currently pursuing NIRP have only imposed it on commercial banks.
Here’s how NIRP would affect consumers:
- If you put $10,000 into a one-year certificate of deposit at 1% interest, at the end of that year, your initial deposit will be worth only $10,100, earning $100 of additional purchasing power.
- If you put $10,000 into a one-year certificate of deposit at a negative 1% interest rate, at the end of that year, your initial deposit will be worth only $9,900.
Negative rates aren’t a response to a specific economic event.
Instead, central banks use negative rates to encourage those holding cash in short-term government notes to move the funds into other, (hopefully) more productive, parts of the economy.
Because you would lose value to negative deposit rates, NIRP discourages hoarding cash.
It is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe.
Charging people to keep cash in the bank is meant to encourage people to spend their money, which puts money back into the economy.
In theory, negative interest rates encourage people to buy homes, use credit cards, and take out other types of loans. By spending more, people would be helping the economy.
What’s the purpose of NIRP?
NIRP is meant to fight deflation.
In economic downturns, people typically hold onto their money and wait to see some sort of improvement before they start spending again.
As a result, deflation can become entrenched in the economy.
Deflation is a decrease in the general price level of goods and services.
When people stop or decrease spending, demand declines for goods and services, and people wait for even lower prices before spending.
For example, if you want to buy a TV but think the TV will be cheaper tomorrow, you’ll hold off on the purchase today. Then tomorrow comes, and you think it’ll even be cheaper the next day, so you hold off again. And the next day comes…
This can turn into a vicious cycle that can be very hard to break.
Negative interest rates fight deflation by making it more costly to hold or hoard your money, basically, forcing you to spend (“use it or lose it”).
At the same time, negative interest rates would make it attractive to borrow money, since the bank is paying you to do so
Risks of NIRP
Here are the risks arising from NIRP:
- Negative interest rates (NIRP) force investors and money managers to chase yield (seek a positive return on their capital). This requires taking on higher risk, as higher yields are a direct consequence of the higher risk. Investors could be taking on risks an order of magnitude higher than the yield. This phenomenon is called “yield chasing“.
- To generate fees in a NIRP world, lenders must loan vast sums to marginal borrowers (borrowers who would not qualify for loans in more prudent times). This forces lenders to either forego income from lending or take on enormous risks in lending to marginal borrowers.
- The income once earned by conventional savers has been completely destroyed by NIRP, depriving the economy of a key income stream.
NIRP in the U.S.?
Fed Chairman Jay Powell has gone out of his way to dispel any notion that negative interest rates are under consideration, but the one thing he does not do is affirmatively close the door to using them.
He raises doubts about their efficacy and says they would not be appropriate in the U.S. economy.
NIRP could also wreak havoc with the banking sector and money market funds. Nevertheless, if all other tools fail up to this point, negative interest rates have to be left on the table.
Negative market rates can happen in the U.S., and most likely will happen at some point.
The only question is whether the Fed endorses a negative interest rate policy.
The central bankers would be loath to do it, but they cannot rule it out if the market forces their hand and other policy tools prove inadequate.
Set up in 20l5 as an alternative to the World Bank, the Shanghai-headquartered New Development Bank (NDB) is seen as the first major BRICS achievement after the group came together in 2009 to press for a bigger say in the post-World War II financial order created by Western powers.
The bank aims to address a massive infrastructure funding gap in the member countries, which account for almost half the world’s population and about a fifth of global economic output.
A non-convertible currency, also known as a “blocked currency”, is the legal tender of a country that is not traded at all on the international foreign exchange market, usually because of government restrictions.
It is normally a method of protection as a non-convertible currency’s economy is usually particularly vulnerable to market movements.
If the non-convertible currency decreases or increases sharply in value, its potential adverse effects could be devastating for a country.
A flight of capital is one of the principal fears of governments that leads to the blocking of currency convertibility.
The only way to trade a non-convertible currency is on the black market.
The Brazilian real and Chilean peso are two examples of non-convertibles which represent considerable challenges for businesses operating in Brazil and Chile.
Non-convertible currencies are very often exotic currencies but do have some different characteristics.
In order to conduct business within such countries, companies use a financial product known as a “non-deliverable forward contract” (NDF).
NDFs are the principal way to hedge local currency risks in emerging markets that operate with a non-convertible currency.
It is crucial, however, to highlight that the non-deliverable currency can never be removed from the country of its denomination.
NFP is part of a monthly report representing how many people are employed in the US, in manufacturing, construction, and goods companies.
It is an important economic indicator related to employment in the U.S.
NFP stands for Non-Farm Payrolls, which is actually part of the Employment Situation report, released by the Bureau of Labor Statistics, an agency for the U.S. Department of Labor (DOL).
The Employment Situation Report also includes the Labor Force Participation Rate, the Unemployment Rate, Average Hourly Earnings, and Average Workweek Hours, among many other statistics.
The Bureau of Labor Statistics measures labor market activity, working conditions, price changes, and productivity in the U.S. economy to support public and private decision making.
The NFP component usually gets the most attention because it measures the actual number of paid employees (full and part-time) in the business and government establishments.
NFP gets its name from the jobs that aren’t included: farmworkers, and those employed in private households or non-profit organizations.
The data is usually delivered on the first Friday of any given month and can create high volatility in the financial markets.
Lots of analysts release their forecasts for NFP figures in advance of the actual release.
This causes a great deal of speculation prior to each report.
Norges Bank is the central bank of Norway. and promotes economic stability in Norway.
Norges Bank also manages the Government Pension Fund Global and the bank’s own foreign exchange reserves.
Norges Bank’s mission is to promote economic stability and manage substantial assets on behalf of the Norwegian people.
Norges Bank has executive and advisory responsibilities in the area of monetary policy and is responsible for promoting robust and efficient payment systems and financial markets.
Norges Bank is responsible for the management of Norway’s foreign exchange reserves and the management of the Government Pension Fund Global (GPFG) on behalf of the government.
The investment strategy of the GPFG is designed to obtain the highest possible return within the framework of the investment mandate.
Norges Bank is a separate legal entity owned by the state.
In foreign exchange, the notional amount, also known as the notional principal, or the notional value, is the amount of currency to be sold and bought.
It is important to remember that in FX there are always two notionals, as a currency exchange will always involve two currencies.
A party to a currency transaction is always subject to two underlying notional amounts, those of the currency bought and the currency sold.
For example, a company may elect to purchase EUR 1,000, which will cost USD 1,100. Therefore, the notional amount inU.S. dollar is 1,310 , while in euros, it is 1,000.
Notional amount is also frequently used in the options and futures markets being the total value of a leveraged position’s assets.
Offer is the term used when one trader expresses an intention to buy an asset or financial instrument from another trader or institution.
The “offer” price is also known as the “ask” price.
The offer price is one of the prices often quoted in the buying and selling of financial assets.
It represents the price at which you can buy an asset, and as such will usually be higher than the market price.
It is the opposite of the bid.
In forex, this is the price that you, the trader, may buy the base currency.
The bid (the price at which you can sell an asset) is quoted as lower than the offer (or ask), and the difference between the two is known as the spread.
Oil is a substance that is used for power and energy in order to run all the machines that we humans use.
It is normally referred to as petroleum. It is important for consumers because they depend on oil for everyday activities.
Naturally, companies also need oil to run their machinery and keep up production.
However, like other commodities on the market, not all regions can produce the same amount of oil. Thus, the oil market is created in order to match the supply and demand for oil.
Oil is traded through the purchasing and selling of oil futures.
Futures are contracts that carry an obligation between two parties to make a transaction in the future at a predetermined price and date.
Such contracts are standardized in terms of quality, quantity, and transaction date and are traded on regulated futures exchanges.
The main exchange markets for crude oil are the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE).
These exchanges are regulated by the Financial Services Authority (FSA) in the UK and the Commodity Futures Trading Commission (CFTC) in the US.
The different types of oil that are produced also affect the way it is traded and where it is traded.
As it is, when people talk about oil, they normally refer to crude oil, which is the type most traded the most on international markets.
It is a Volume Indicator developed by Joseph Granville. Each day’s volume is assigned a plus or a minus sign, depending on whether the current day’s closing price is higher or lower than the previous day’s closing price. The result is added to a running cumulative total.
If Closing Price current > Closing Price previous then add Volume
If Closing Price current < Closing Price previous then subtract Volume
If Closing Price current = Closing Price previous then no change
The On Balance Volume should be in the same direction as the prevailing trend. Divergence is a signal that the prevailing trend is weakening and an impending reversal may be imminent.
The On Neck pattern is a two-candlestick pattern that is created by a tall down candle, followed by a much shorter up candle that gaps down on the open but then closes at or near the prior candle’s close.
The pattern is called “On Neck” because when the two closing prices are the same (or almost the same) across the two candles, it forms a horizontal line that can be viewed as a “neckline” or “neck”.
The price for both candles closed “on the neck”.
The On Neck pattern is considered a continuation pattern
To identify the On Neck pattern, look for the following criteria:
- A downtrend must be in progress.
- A tall black (bearish) candle must appear.
- A smaller white (bullish) candle must follow the black candle.
- The close of the white candle should nearly match the prior candle’s low. It should not rise higher than the black candle’s low price.
- To confirm the On Neck pattern, look for a black candle on the third day, continuing the downward trend. A long body shows strength, as does a gap between the second and third days.
The bears are in control of the market, and they continue their dominance with the On Neck pattern.
The first candle is bearish, continuing the downward trend, and although the next candle is bullish, it opens and closes beneath the first candle.
This movement suggests a continuation of the downtrend, so it is recommended that you continue to ride the trend.
A “One Cancels Other” Order (OCO) is the execution of one order automatically cancels a previous order.
A special type of order stating that if one part of the order is executed the other is canceled.
For example, you enter an OCO order, if you have two instructions to trade a market at different levels and one of the instructions is executed, the other instruction will be canceled automatically.
Organization of Petroleum Exporting Countries. OPEC’s mission is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry. The twelve-member states are: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.
The total number of outstanding (long or short) contracts at the end of the trading day. Open Interest applies to futures and options markets.
Buyer Sell Comment Open Interest
New Long New Short New Position ↑
New Long Old Short Not new Position − −
Old Long New Short Not new Position − −
Old Long Old Short Old Position ↓
A financial derivative where the buyer has the right to buy/sell an asset by the expiration date. More specifically, Call Options are contracts that give the owner the right (not the obligation) to buy an asset in the future (before or at the expiration date) at an agreed price. Investors buy Call Options when they believe that the value of the underlying asset will increase above the strike price. Similarly, Put Options are contracts that give the owner the right (not the obligation) to sell an asset in the future (before or at the expiration date) at an agreed price. Investors buy Put Options when they believe that the value of the underlying asset will decrease below the strike price.
Here are some examples of different types of Options:
- American Style
- European Style
- Exchange Treaded Options
- Over the Counter Options
- Option Type by Expiration
- Option Type by Underlying Security
- Employee Stock Option
- Cash Settled Options
- Exotic Options
Operation Twist pertains to the Federal Reserve’s action to sell short-term US Treasury bonds and invest the proceeds into long-term US Treasury bonds.
In September 2011, the Federal Reserve implemented Operation Twist in order to lower long-term interest rates. Lower interest rates would hopefully increase household and business borrowing and spending, therefore boosting the economy.
Over-the-counter derivatives (OTC derivatives) are securities that are normally traded through a dealer network rather than a centralized exchange, such as the New York Stock Exchange.
These securities are referred to as “over-the-counter” as they are traded directly between two parties rather than being listed on a central exchange.
Each trade is an individual contract between the two counterparties making the trade.
This lack of a central exchange means that the parties to an OTC transaction are exposed to higher counterparty risk.
If you default, the counterparty will not get paid.
The value of an OTC derivative is determined by the value of its underlying asset, which can include bonds, stocks, commodities, or currencies (foreign exchange).
Prior to the 2007-09 global financial crisis, the OTC derivatives market was unregulated.
The risks of default in the derivatives market led global policymakers to increase regulation, leading to the Dodd-Frank Wall Street Reform and Consumer Protection Act in the United States and the European Market Infrastructure Regulation (EMIR) in the European Union.
This legislation is designed to limit the threat of default in the OTC derivatives market and therefore reduce the risk of another financial crisis.
Over-the-counter trading, or OTC trading, refers to a trade that is not made on a formal exchange.
Instead, most OTC trades will be between two parties, and are often handled via a dealer network.
OTC trading is less regulated than exchange-based trades, which creates a range of opportunities, but also some risks which you need to be aware of.
When you trade OTC with a trading provider, you’ll usually see two prices listed: a single buy price, and a single sell price.
This differs from on-exchange trading, where you will see multiple buy and sell prices from lots of different parties.
The most popular OTC market is forex.
Forex trading also takes place in over-the-counter markets as transactions are executed outside of a centralized exchange.
This is what allows forex traders to trade 24 hours a day as trading isn’t limited by the market hours of a formal exchange such as the New York Stock Exchange.
Instead, traders are able to buy and sell currencies through a network directly connecting various banks, dealers, and brokers.
Stocks of small companies, bonds, and other securities that aren’t traded over a formal exchange can be traded over the counter.
In over-the-counter markets, dealers, also known as market makers, buy and sell securities from their own inventories.
As such, if an investor wanted to buy or sell certain security, he would contact a dealer of the particular security and ask for an appropriate bid or ask price.
In the U.S., the OTC Bulletin Board (OTCBB) is a popular electronic inter-dealer quotation system through which over-the-counter securities are traded.
The OTCBB, and other inter-dealer quotation networks such as Pink Quote, are regulated by the Financial Industry Regulatory Authority (FINRA).
Trading stocks OTC can be considered risky as the companies do not need to supply as much information as exchange-listed companies do.
The Pandemic Emergency Purchase Programme (PEPP) is a new temporary asset purchase program of private and public sector securities.
As a response to the COVID-19 (coronavirus) crisis, the European Central Bank (ECB) has launched a €750 billion Pandemic Emergency Purchase Programme (PEPP).
On June 4, 2020, the ECB announced that it would increase its PEPP by 600 billion euros, taking the total to 1.35 trillion euros.
The duration of the program was also extended from the end of 2020 until June 2021, or until the bank believes the crisis is over.
It’s basically a massive stimulus package from the ECB to help mitigate the economic shock caused by the coronavirus crisis.
It is an expansion of the ECB’s Asset Purchase Programme (APP), a package of asset-purchase measures that the ECB initiated in 2014 to support monetary policy.
The PEPP, like the earlier APP, includes programs to buy sovereign debt, covered bonds, asset-backed securities, corporate bonds, and commercial paper.
As with the APP, the ECB will make available for lending any securities that it purchases under the PEPP.
Why is PEPP important?
On March 18, 2020, the ECB unveiled PEPP as a temporary program to purchase up to €750 billion in public and private-sector securities until the “crisis phase” of the COVID-19 crisis is over, but at least until the end of 2020.
The ECB’s Pandemic Emergency Purchase Programme aims to support the liquidity and the financial condition of all sectors of the eurozone economy.
This new temporary asset purchase program is focused on both private and public sector securities, which in addition to the €120 billion increase in the ECB’s €20 billion per month program of asset purchases announced on March 18, 2020. amounts to 7.3 percent of euro area GDP.
Purchases under the program, which started on March 26, 2020, will continue until at least June 2021, but may very well extend beyond this time frame should the ECB determine that the coronavirus pandemic remains in a phase of the crisis.
Christine Lagarde, the President of the European Central Bank, also noted that the ECB was fully prepared to increase the size and adjust the composition of this asset purchase program as and when needed.
The ECB has stated that asset categories eligible under the existing asset purchase program of the ECB (APP) would be similarly eligible under the PEPP, those being:
- Corporate Sector Purchase Programme (CSPP)
- Public Sector Purchase Programme (PSPP)
- Asset-Backed Securities Purchase Programme (ABSPP)
- Third Covered Bond Purchase Programme (CBPP3)
Parabolic describes a market that moves a great distance in a very short period of time, frequently moving in an accelerating fashion that resembles one half of a parabola.
Parabolic moves can be either up or down but usually are up.
When prices arc upward at an ever-increasing speed, they form a parabolic curve, which should cause us to feel ever-increasing caution.
With parabolic moves, we never know when the final top will arrive because of the frenzy of buying driving the move, but we know that vertical moves cannot be sustained, and ultimately we can expect that the parabolic will collapse, with prices falling as quickly as they advanced.
Parabolic up moves are exciting to ride, but there is the almost certain danger that the rocket will run out of fuel, resulting in a rapid collapse of prices.
Trying to pick the final top for this kind of move could be hazardous to one’s health, but being aware of the potential danger can be useful in managing positions.
A passive order is a trading order in which the order price is different from the market price.
An order is passive when traders set a price that the currency pair must reach before they go ahead with buying or selling.
Passive order occurs when a trader sets a price which is different from the bid or ask price.
A passive order sets a new price, creating a new level in the order book, waiting for other participants to hit it.
There is a time limit for the passive order.
If the transaction is not executed at the specified price within the given period, then the order expires and the trader will have to place a new one.
The further the price is from the market price, the more passive the order is.
In contrast, aggressive orders are when a trader executes the order to buy or sell straightaway.
A passive order waits for the price to come to it.
This is the opposite of an aggressive order, which chases the price.
Personal Consumption Expenditure, or PCE, is an inflation index similar to the Consumer Price Index. In the United States, it is released by the Bureau of Economic Analysis of the Department of Commerce and it is the preferred gauge of inflation by the Federal Reserve.
The measurement of signed real estate contracts for existing co-ops, condos, and single-family homes.
This data can be used as a leading indicator of future home-sales as signed contracts are not counted until the final closing transactions have been made. On average, this happens 1 or 2 months later.
This data is release the first week of every month by the National Association of Realtors.
A Continuation price pattern composed of a small symmetrical triangle, preceded by an almost straight-line move called a flagpole. The breakout of the pennant should be accompanied by heavy volume where available. The measuring implication is equal to the length of the pole. The pennant pattern causes a brief pause in the market that lasts less than 3 weeks.
The People’s Bank of China (PBOC or PBC) is the central bank of China.
It is responsible for carrying out monetary policy and regulation of financial institutions in China, officially called the People’s Republic of China.
The People’s Bank of China (PBC) was established on December 1, 1948, based on the consolidation of the Huabei Bank, the Beihai Bank, and the Xibei Farmer Bank.
In September 1983, the State Council decided to have the PBC function as a central bank.
The Law of the People’s Republic of China on the People’s Bank of China adopted on March 18, 1995, by the 3rd Plenum of the 8th National People’s Congress has since legally confirmed the PBC’s central bank status.
A petrocurrency is a currency of an oil-producing country whose oil exports as a share of total exports are sufficiently large enough that the currency’s value rises and falls along with the price of oil.
In other words, a petrocurrency appreciates when the oil price rises and depreciates when the oil price falls.
Given such a large share of exports, the currency will rise and fall in correlation with the price of oil.
If the share of oil and gas exports increases further, the link between oil prices and the exchange rate may become even stronger.
Oil-producing nations that rely heavily on oil export revenue include Saudi Arabia, Russia, Norway, Canada, and Mexico.
While the U.S. has recently cracked the top 5 in crude oil exports, it’s not considered a petrocurrency (yet).
Here are examples of petrocurrencies that have significant exposure to fluctuating oil prices.
- Canadian dollar
- Russian ruble
- Columbian peso
- Norwegian krone
- Brazilian real
When oil falls, the following currency pairs usually rise:
Additional exporting countries whose currencies have a strong link to oil prices include Saudi Arabia, Iran, Iraq, Nigeria, and Venezuela.
You can keep track of individual petrocurrencies on MarketMilk™ through the Petrocurrencies watchlist.
Another way to monitor how petrocurrencies are doing is to watch the MarketWatch PetroCurrency Index (MWPC).
It measures the U.S. dollar against a basket of currencies weighted according to their share of global oil output as compiled by the U.S. Energy Information Administration.
Some familiar Middle Eastern names, including Saudi Arabia, and others have been excluded because monetary authorities in those countries keep their currencies closely pegged to the dollar.
Petrodollars are oil revenues denominated in U.S. dollars.
They are the primary source of revenue for many oil-exporting members of OPEC, as well as other oil exporters in the Middle East, Norway, and Russia.
All oil purchases from OPEC must be paid in U.S. dollars.
If Mexico wants to buy oil, it has to sell its local currency and buy U.S. dollars, then use those dollars to buy oil from OPEC.
Any country that buys oil from OPEC must do so using petrodollars.
Petrodollars are U.S. dollars paid to an oil-exporting country for the sale of the commodity.
Put simply, the petrodollar system is an exchange of oil for U.S. dollars between countries that buy oil and those that produce it.
The Philadelphia Federal Index (also known as the Philadelphia Fed Index or the Business Outlook Survey) is a report published monthly by the Federal Reserve Bank of Philadelphia.
Companies surveyed indicate the direction of change in their overall business activity and in the various measures of activity at their plants.
The index signals expansion when it is above zero and contraction when below zero.
This index is considered to be a good indicator of changes in everything from employment, general prices, and conditions within the manufacturing industry.
The survey is released three weeks into the month and includes data from the previous month.
For example, June’s report would include data about May
The Piercing Line pattern consists of two candlesticks, that suggests a potential bullish reversal.
The candlestick pattern is likely named piercing because of the way the white candle’s close “pierces” through the midpoint of the previous black candle.
The Piercing Line pattern involves two candlesticks with the second candlestick opening lower (or gapping down) than the previous candle.
This is followed by buyers driving prices up to close above 50% of the body of the first candle.
This pattern is a warning sign for sellers since a reversal to the upside might be imminent.
To identify a Piercing Line pattern, look for the following criteria:
- There must be a clear and definable downtrend in progress
- The first candlestick (which appears at the end of the downtrend) must be a bearish candlestick.
- The second candlestick must be a bullish candle.
- The second candlestick must open below (gap down) the black candlestick and close above the black candlestick’s midpoint.
- If you mark a line through the vertical center of the black candlestick, the white candle must close above it.
Shown by the first candle, since the price is clearly in a downtrend. the bears are in control.
On the second candle, although the bears continue pushing the price down at the start of the session, the bulls jump in and fight back.
The price turns around dramatically, finishing near the high of the session. It has almost (but not quite) recovered from the previous candle’s price decline.
To analyze a specific Piercing Line pattern, observe the following:
- The longer the two candles are, the more forceful the reversal.
- The greater the gap down from the black candle to the white candle, the more powerful the potential reversal.
- The higher the white candle closes on the black candle, the more probable the reversal.
The Piercing Line is the opposite of the Dark Cloud pattern, which a bearish reversal pattern that appears after an uptrend warning of “rainy days” ahead.
PIIGS is an acronym made popular during the European debt crisis.
The European debt crisis (often also referred to as the eurozone crisis or the European sovereign debt crisis) is a multi-year debt crisis that has been taking place in the European Union since 2009.
PIIGS stood for the five countries that had high debt and deficit and poor prospects of repaying their loans.
These financially weak countries were Portugal, Ireland, Italy, Greece, and Spain.
The first recorded use of this derogatory moniker was in 1978, when it was used to identify the underperforming European countries of Portugal, Italy, Greece, and Spain (PIGS).
The term was used in reference to the growing debt and economic vulnerability of the Southern European EU countries
Ireland was added during the economic crisis as that country’s debt and deficit rose sharply.
A point in price, or pip for short, is the measure of change in a currency pair in the forex market. The acronym can also stand for a “percentage in point” and “price interest point”. It is a standardized unit and is the smallest unit of measurement by which a currency quote can change. Most currency pairs are measured to five decimal places. For pairs like EURUSD, a pip corresponds to the fourth decimal digit [EURUSD 1.06712]. Yen-based currency pairs like USDJPY are the exception, and are measured to three decimal places and the pip corresponds to the second decimal digit (USDJPY 114.612).
- De Mark’s
Just like the Standard method, the Fibonacci method uses the previous candlestick’s high, low and close price to determine the current period’s direction. Future support and resistance levels are estimated by employing Fibonacci ratios 0.382, 0.618 and 1.00.
Unlike all other pivot point methods, DeMark’s method uses the relationship between the previous period’s close and open prices, to determine which of the 3 formulas to use, when calculating support and resistance. The main Pivot Point is not part of the DeMark method.
Camarilla Pivot Points provide a “road map” for both range and break-out traders, looking for potential turning points in the market. The emphasis is focused on the third support and resistance levels as potential reversals. Also, the fourth support and resistance levels play a key role in accelerating markets in both upward and downward directions.
Woodie’s method is another variation of pivot points. The main pivot point represents the deciding factor of the market’s sentiment and its future direction.
The corresponding support and resistance levels provide take profit opportunities and possible turning points.
Unlike other pivot point methods, Woodie’s use the current period’s open price when calculating the main pivot point. Just like the other methods, the daily timeframe is the preferred timeframe for calculations.
Price charts that display supply and demand. Demand is represented as a column of X’s and supply as a column of O’s. They ignore time and volume. Each box (i.e. X or O) represents a predefined price movement called the box size. Price movement less than the box size is ignored, thus noise is not recorded. A reversal, i.e. a column of X’s, is created after a column of O’s, when there is a price movement to the upside equal to the number of boxes - known as the reversal size. Conversely A reversal, i.e. a column of O’s, is created after a column of X’s, when there is a price movement to the downside- equal to the number of boxes - known as the reversal size. Point and figure charts are named after their box and reversal size, for example 1 x 3.
Premining is when the founders of a cryptocurrency “self-mine” and keep a portion of newly created cryptocurrency for themselves before launching publicly.
The founders, usually developers, claim that premining offers them the financial independence they need to focus on the real work of building and scaling their decentralized system. However, if a few people hold vast reserves at the outset, new users are effectively beholden to founders’ economic power. These large holders can sell their holdings at a moment’s notice, causing significant price volatility.
A ICO presale, or pre-sale, also known as Pre-ICO is a token sale event that takes place before an ICO is made available to the general public to participate.
The fundraising targets for Pre-ICOs are often lower as compared to that of the main ICO and tokens are usually sold cheaper.
A downside of an ICO presales is that early investors or adopters tend to dump tokens as soon as they become tradeable on exchanges. They often sell the tokens at the ICO price because they got the tokens for less than the price of the main ICO, making them big profits while negatively affecting the price for ICO participants.
Price discrimination is the practice of selling identical goods or services at different prices from the same provider.
In pure price discrimination, the seller will charge the buyer the absolute maximum price that he is willing to pay.
The goal of price discrimination is for the seller to make the most profit possible.
Although the cost of producing the products is the same, the seller has the ability to increase the price based on location, consumer financial status, product demand, etc.
An example of price discrimination would be the cost of movie tickets.
Prices at one theater are different for children, adults, and seniors.
The prices of each ticket can also vary based on the day and chosen show time.
Ticket prices also vary depending on the portion of the country as well.
Industries use price discrimination as a way to increase revenue.
It is possible for some industries to offer retailers different prices based solely on the volume of products purchased.
Price discrimination can also be based on age, location, desire for the product, and customer wage.
A prime broker is an institution (usually a large commercial bank) that facilitates trading for its clients (often institutional funds, hedge funds, and other proprietary trading firms).
Prime brokers enable their clients to conduct trades, subject to credit limits, with a group of predetermined third-party banks in the prime broker’s name.
A principal model is a mode of trading whereby a dealer commits its balance sheet, which means it uses its own inventory to meet client orders and to make gains or losses from trades.
The purpose behind principal trading is for firms (also referred to as dealers) to create profits for their own trading book through price appreciation.
In the “principal” model, the FX operators are counterparties to client transactions
They are essentially taking the other side of the trade. They can decide to not hedge the resulting risk, or hedge on an as-needed basis once certain overall risk limits have been reached.
A dealer will charge a bid-offer spread as compensation for the inventory risk it incurs.
A principal trading firm (PTF) is a firm that invests, hedges, or speculates for its own account.
This category may include specialized high-frequency trading firms (HTFs) as well as electronic nonbank market-making firms. Sometimes referred to as a proprietary trading firm.
Proof of Stake (PoS) is an algorithm by which a cryptocurrency’s blockchain aims to achieve distributed consensus.
Unlike Proof of Work or PoW, a person can validate transactions and create new blocks based on their individual wealth (stake) such as the total number of coins owned. One of the key advantages that PoS has over PoW is lower energy consumption.
Proof of Work (PoW) is an algorithm that rewards the first person that solves a computational problem (mining) to achieve distributed consensus.
Miners compete to solve difficult cryptographic puzzles in order to add the next block on the blockchain. It prevents spam and cyberattacks such as DDoS as it requires work (i.e. processing time).
Psychology in Forex is almost as important as the money that traders invest in the market. Without the proper mind-set, trading can be intimidating and confusing. Those who lose the most money in the market are those who don’t grasp this fundamental truth. Thought is reality here. Emotions have to be faced down and controlled in order to become a successful Forex trader.
It is often easier for traders to say that they can control their impulses, but when profit is staring them in the face, it can be hard to deny the chance for a better life. But it is just as important to stay in the trading game as it is to realize a profit. To guarantee a future in the Forex market, traders need to know how to control their impulses, remain motivated and persistent even as loss stares them in the face, and develop a self-awareness that will intuitively point them in the direction to success.
Scientists are only now beginning to realize the effect of emotions on a person’s thought process. It has been found that emotions are
A pullback describes price action when there is a tendency of a trending market to retrace a portion of the gains before continuing in the same direction.
It is is a temporary pause or dip in an asset’s overall trend.
The term is sometimes used interchangeably with “retracement”
A pullback is a short-term move in the opposite direction of the longer-term trend, which can offer an opportunity to join an uptrend at a relatively favorable price.
A pullback tells you that the overall market trend has temporarily paused.
This could be down to several factors, including a momentary loss of trader confidence after certain news or economic data releases.
A pullback should not be confused with a reversal, which is a more permanent move against the prevailing trend.
You’ll need to determine whether the price drop is a pullback rather than an outright trend reversal.
Several indicators, including moving averages and pivot points, can help you to determine whether a pullback is actually a reversal.
The Purchasing Manager Index (PMI) assesses the business conditions of the manufacturing and service sectors of a country.
The PMI is used to measure the change in the spending of business firms.
About 500 purchasing managers are asked to grade the relative level of business conditions regarding employment, level of inventory and new orders, state of production, and supplier deliveries.
A reading above 50 indicates growth in the sector. Conversely, a reading below 50 points to a contraction.
What is PMI?
The PMI is a composite index that is based on five major indicators:
- New orders
- Inventory levels
- Supplier deliveries
- Employment environment.
Each indicator has a different weight and the data is adjusted for seasonal factors.
The Association of Purchasing Managers surveys over 300 purchasing managers nationwide who represent 20 different industries.
A PMI index over 50 indicates that manufacturing is expanding, while anything below 50 means that the industry is contracting.
Why is PMI important?
The PMI report is an extremely important indicator of the financial markets as it is the best indicator of factory production.
The index is popular for detecting inflationary pressure as well as manufacturing economic activity.
The PMI is not as strong as the CPI in detecting inflation, but because the data is released one day after the month, it is very timely.
Should the PMI report an unexpected change, it is usually followed by a quick reaction in the market.
One closely watched part of the report is growth in new orders, which predicts manufacturing activity in future months.
The Purchasing Power Parity (PPP) is a theory that states that the foreign exchange rate between two countries should be equal to the ratio between their respective prices of a fixed basket of goods. When this holds true, the exchange rate is said to be in equilibrium.
For instance, if a Big Mac, fries, and a rootbeer float costs $1.80 in the US and A$2.00 in Australia, then the AUDUSD exchange rate should be 1.80/2.00 or 0.9000.
This theory is based on the Law of One Price, which says that an item should have the same price (expressed in the same currency) in different countries. Of course, this doesn’t take transportation and transaction costs into account.
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