finance-trading-blog

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What happens during a Recession?

Many fear recession but what does it mean? How does it affect the market?

It is a significant decline or a halt in the growth of the economy that lasts for six to 18 months. Traders and investor associate this term with what happened during the last decade. The last worldwide recession caused the market to crash significantly, numerous companies went bankrupt and many people became jobless. Many were traumatized by it. And now, they are alarmed and cautious about the recent economy. But is recession really a bad happening?

A recession is nothing but a drop in demand. It may be unpleasant, but it is a normal part of the business cycle. This business cycle happens when there is a surplus of production and scarcity of demand. During this cycle, people don’t have enough money to spend and companies won’t have the resources for production. Storing their stockpiles in a warehouse and making it stagnant. So they start laying off employees which may then cause unemployment and a drop in the Gross Domestic Product because of decreased production.

Investors are very watchful during this business cycle. They won’t trust a certain company even if it is doing well despite the recession. During this period, investors do not trust the market because the whole market has a common trend — it’s going down. Although there are circumstances for some exceptional stocks that tend to counter the general trend. If the whole market declines, individual stocks will decline too. As a result, investors will move to a cash position and convert their investments into cash. Which will further cause the market to decline?

Arguably, one of the best times to begin investing is during a recession. Despite the negative happenings, there are still good opportunities to look up to in a recession. For example, market prices greatly fall down. Which means you can buy mutual funds, real-estate, stocks, bonds, and more for far less than you could afford before the recession happened. While other investors are busy dumping their assets, you can step in and pick them for a portion of their value. Investors act cautiously during this period. But they remain observant in watching the market, waiting for opportunities to grab a high-quality asset at a discounted price. Recessionary environments are difficult but it can still provide enterprising investors with their desired outcomes.

After the recession comes to the recovery. This is a period in the business cycle which signals the end of a recession because of increased business activity. During a recovery, the economic conditions normalize; the market has low-interest rates and is rising in growth.

Opportunities are around all the time, search for them and welcome them when they present themselves. As long as a trader remains creative and diligent, it is not important whether he/she invest in a recession or not. Trade with us here in Millennium-FX.

Read More: https://blog.mlnfx.com/what-happen-during-recession/

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Important Gold Trading Tips for Beginners

This precious metal has a lot of advantage and many investors diversify their portfolio with it. This commodity protects a diversified portfolio from big losses whenever the economy is volatile. During market turmoils, investors with a diversified portfolio of assets may struggle with declining stocks but continue to be rewarded with an increase in gold price.

Compared to other trading instruments, this yellow metal presents an attractive price action — the movement of a security’s price. If you are a newbie in trading this commodity, the best thing to do is start doing your research, speculate the market, and stay updated with economic news.

Make informed decisions. Constantly review the headlines of websites that are related to gold. Through this, you can measure the market’s current investor sentiment — the overall attitude of investors toward a certain market. Aside from reviewing various websites, also check the recent news and surveys.

There are no markets in the present global economy that moves independently of each other. Gold is not an exemption. Be sure to stay informed of the progress of various markets. This will enable you to check and examine your trading strategy. For example, a news about the yen can influence gold price. This yellow metal has a very high correlation to the Japanese yen because both are safe-haven instruments. Thus, by using this method you may be able to use other assets to reinforce your decisions.

This yellow metal dominates the price action. The price action of gold is one the best indicator of consecutive price movements. For example, if gold price moves toward or against a particular trend, after a certain period of time, the resulting price movement will be very consistent.

Another advantage of this commodity is that it is a well-known economic indicator. The changes in the prices of gold describe the economy of U.S. and other economies of the world. An increase in the gold price signals a struggling U.S. economy. This may mean that dollar is getting weak, inflation is increasing or the low-interest rate is taking its toll. Investors and traders who are interested in this precious metal should know the relationship of gold to other markets.

Keep in mind that gold trading is not for beginners. Be disciplined. If you do not have a structured and consistent trading plan, this precious metal will devastate your account. You need to have a reliable plan. If you have doubts about your strategy then this commodity can make you lose quickly. Do not let your emotions overcome you. Taking gut moves and revenge trading is a big mistake in gold trading.

There are no best strategies to trade this historic commodity, as with any trading instruments. Be extra cautious when trading this commodity. Pay attention to its volatility because it can swing recklessly in either direction. Stay updated with what’s happening in the market, it can instantly affect the price of gold. This yellow metal has a firm relationship with various economies. It is tied to a fluctuating currency, electronic companies, jewelry, and even financial institutions. It’s hard to predict what will set off this commodity, so stay prepared and be ready to act quickly.

Trade gold and other commodities with us, here in Millennium-FX.

Read More: https://blog.mlnfx.com/important-gold-trading-tips-beginners/

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Important Guide About the U.S. Federal Reserve

Many people know that each country’s economy has a government body that acts as its guardian. This body is responsible for implementing policies that are designed to keep its country’s economy to operate smoothly. In the United States, the government body responsible for implementing such policies is the Federal Reserve. This financial institution is popularly known as the Fed. It is considered one of the most powerful organizations around the globe since it oversees the world’s largest economy.

The U.S. Federal Reserve has a wide scope of influence to other economies. Its policies can directly affect different markets in the world. Because of this, it has established itself as one of the primary topics of discussion and speculation among investors.

As an investor, it is essential to gain basic knowledge about the Federal Reserve. But unfortunately, a number of them do not understand how and why this institution involves itself in America’s economy.

How does the Fed affect the global market?

The Federal Reserve sets America’s monetary policy. It supervises and regulates banking institutions in order to maintain stability in the financial system. It also provides financial services to banks, the U.S. government and foreign institutions.

Contrary to what most people believe, the Fed does not regulate the economy by affecting the supply of money. Instead, it preserves a targeted interest rate and controls the needed flow of money to keep the desired level of rate. This institution is responsible for guiding the U.S. economy. It raises and lowers the interest rates that borrowers pay to lenders.

The primary role of the Fed is to stabilize its economy, particularly the growth of its country’s currency. Therefore everything that this central bank does will affect the U.S. dollar (USD). The Fed can cause movement in the USD by either increasing or decreasing the interest rates.

If the Fed decides to increase the interest rates of the USD, investors will have more reason to invest in it. On the other hand, if it decides to decrease the interest rates, then investors will have less reason to invest in the USD. Thus, whatever the Fed decides to do will affect the demand and value of the USD.

Keep in mind that America is the largest economy in the world. Due to the development of economics, every economy in the world is now dependent on one or more other economies. Because America has the world’s largest economy, any changes the Fed makes which affects the U.S. economy will also affect the global economy.

For example, when the Fed increases the interest rates of USD, the value of the USD will also increase. This will then lead to pressure on the global economy since most assets in the forex market and commodities market are priced with USD. Currencies, gold, oil, silver, wheat, and corn is priced with USD. If the value of the USD rises, currencies and commodities outside America will increase in price.

The influence of the U.S. Federal Reserve is so immense. Its decisions and policies do not only affect the U.S. economy but also the Global economy. Any decision made by this central bank leads to a chain reaction, it causes movement in the world market. Therefore, whenever this institution speaks, it is wise for every traders and investor to listen.

Trade with us and gain more access to these guides here in Millennium-FX

Read More: https://blog.mlnfx.com/important-guide-federal-reserve/

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Important Guide About Oil Trading

One of the best commodities to trade in the market is the crude oil. It belongs to a very active market and it is popular among traders and investors. News about this commodity is abundant and it causes the oil price movements every day. Thus, it showcases many trading opportunities for day-traders and long-term traders alike.

It is a valuable commodity and it has marked its importance to mankind. This commodity is the main asset of many global industries. It is a major source of energy. It generates electricity, provides power for transportation, and allows factories to function. Therefore, oil price movements can affect many other assets such as bonds, currencies (forex), stocks, and in special cases even other commodities.

Developed industrial countries are the biggest consumers of this commodity. China, Japan, Germany, U.S., and the UK are one of the largest consumers. Its price is determined by supply and demand factors. When demand increases, its price will also increase. While a decrease in demand will also decrease its price. Thus, it is important to pay attention to these big oil-consuming nations, regardless of the commodity’s demand status.

Traders should be aware of various reports when they trade this commodity. The first one is the weekly oil inventory of America’s Department of Energy (DOE).  This report presents the supply that is available for the market. Whenever the supply is high it implies that there is less demand in the previous week, making the price to fall. When the supply is low, it implies that demand is high which results in a higher price.

The second one is the annual report of the Organization of the Petroleum Exporting Countries (OPEC). This report presents the production of each representing countries. It checks how much supply is going to be produced for the world market. OPEC’s production will depend on the status of the world’s supply and demand. For example, if supply is low then OPEC will increase in production, resulting in low price. Traders must know of the influence the OPEC has in deciding the oil price.

Another component traders should pay attention to is the U.S. dollar. This currency is used for pricing oil. This commodity and the U.S. dollar has an inverse relationship. A lower price of the dollar means a high oil price and a lower price in oil means a high price of a dollar.  

Crude oil is a special asset it requires exceptional skills to make a profit out of it. Newbies who are looking to trade this commodity must learn what moves it, its crowd, its history, and different physical variations. Trade oil with us, here in Millennium-FX.

Read More: https://blog.mlnfx.com/important-guide-oil-trading/

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Factors That Affect Forex

The forex market is a worldwide community. Every day, millions upon millions of buyers and sellers participate in trading various currencies.

It is noticeable that forex (foreign exchange) is a global activity. It is a transaction or an agreement to exchange a specific country’s currency for another at an agreed value. Foreign exchange does not only happen in large markets, it happens to individuals as well. For example, when a tourist from Europe decides to buy a souvenir in America which is priced with the dollar, s/he will have to trade euro for dollars in order to buy that certain souvenir. Hence, forex is a global activity and worldwide economic events play a very significant role in affecting the price of forex.

There are many factors that affect foreign exchange prices. Everything that influences the circulation of money in a country has a possibility to affect the values of a certain currency. Newbies who are not yet familiar with forex should pay attention to these various events. Here are some of the major factors that drive the value of a currency:

Inflation

It is a major increase in prices and a falling purchasing value of money. A chain reaction happens during an inflation. When the prices of goods and services in a country increases it reduces the demand for goods and services. As a result, the country’s exports decreases as well. If the country’s exports are less than its supply, then it has lesser foreign currency to pay for its imports. Making its government request for more foreign currencies from other countries. Thus, the demand for foreign currency increases. When demand for foreign currencies increases, the country will have to pay more national currency to acquire foreign currencies. In other words, the country’s currency devalues against a foreign currency.

Interest Rates

This is the rate for borrowing money. A country’s central bank often sets its interest rates. It is a principal tool of the central bank to regulate inflation and exchange rates. If the interest rates are low then people will start to borrow more money. When people have more money, they start to spend more on goods and services. Thus, the demand in the economy increases which results in an increase in demand. An increase in demand will also increase in price and when prices increase it is called inflation.

Political Conditions

The political structure of a country plays an important role in its nation’s economic impression and currency value. Forex traders consistently monitor political news and events to predict the upcoming movement of the administration in its economy. These can be an increase in spending or restriction in a certain industry. One of the factors that determine the economy of a country is its government. Often times, a political crisis brings a lot of doubts about development and hinders economic growth and its nation’s currency value. A change in leadership or an upcoming war may result in a discreet investment approach, decreasing the nation’s cash flow.

The foreign exchange market is majorly influenced by economic indicators that signal its nation’s economy. The economy of a country is the most valuable cause of its currency’s value. Therefore, observing and having knowledge about a nation’s economy will help a trader progress and abreast in competing in the world of forex.

Read More: https://blog.mlnfx.com/factors-affect-forex/

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Forex Trading Myths and Misconceptions

The world of forex is swirling with myths and misconceptions. It doesn’t matter if you are an amateur or an experienced trader. These forex trading myths often affect how traders decide their transactions. It is very important to know these various myths and misconceptions. Having knowledge about these can help a trader minimize unnecessary risks, stress, and frustrations.

Forex trading is attractive to many traders. Numerous people trade in forex but many of them fail because of wrong judgments that lead to bad decisions. Hence, it is important to figure out why traders fail and make a backup plan that will help you succeed in trading forex.

Here are some common forex trading myths and misconceptions:

Instant Fortune

With the help of the internet, the popularity of the forex trading has rapidly increased.  Numerous forex retail markets emerged from extensive online advertisements. This, in turn, brought many people to think that forex trading can be a good tool in effortlessly acquiring cash. But in reality, this rarely happens. Forex trading is not a tool for the instant money. It requires patience and consistency. Keep in mind that Forex trading platforms are not gambling tools. It requires tremendous discipline, practice, experience, and knowledge.

More trades, More Cash

People often believe in the saying “the more, the merrier”. This is another forex trading myth. For some situations, this may be true but it is not effective when it comes to trading. The main point here is that over-trading is bad for your account. Unless you are already an experienced trader. It is important to trade with fewer currency pairs. Stay focused and have fewer pairs to trade. This will result in more focus and attention that will give more profit in your trades. The key factor here is being patient. Do not be too excited about earning fast, it may cause a lot of trouble. Wait for the best opportunities and stay focused no matter how little a profit is. Allot a significant amount of time in preparing your strategies, contemplate your decisions.

Forex Market is Rigged

Oftentimes, large and well-known institutions have theories about conspiracies and manipulations. The Forex market is not an exemption. When traders lose in the forex market, they blame the market. They complain that the forex market is manipulated. Their allegations are wrong. The Foreign Exchange market is, by far, the largest market in the world. Every day, thousands and thousands of transactions happen in the forex market. If a newcomer is just gambling and not treating his/her account like a business, it is more likely that those with much more experience will easily notice and take advantage of them. Resulting in unexpected losses.

Learn more about forex trading, read our featured articles, free eBooks, and videos.

Read More: https://blog.mlnfx.com/forex-trading-myths/

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U.S. Dollar’s effect on Commodities

Beginners in trading, often ask why the U.S. dollar affects the price of many commodities in the market. To answer this question, it is important to understand first what a reserve currency is.

Reserve currencies are currencies that are stored by Central banks and major financial institutions in very large quantities. These currencies are used for major investments, massive transactions, and all aspects that are related to the global economy.

One of the most notable reserve currency in the world is the U.S. dollar. It is widely known for its liquidity and it is the currency of America, one of the world’s most powerful and stable economy. Commodities are usually priced in reserve currencies. Gold, oil, steel, platinum and many others are priced with the U.S. dollar. Oftentimes, commodity buyers use the U.S. dollar to purchase various commodities. Thus, a sudden change in the price of the dollar can widely affect a number of commodities in the market.

Commodities and the U.S. dollar have an inverse correlation. If the price of the dollar rises then commodity price falls and if the price of the dollar decreases then commodity prices increase. An increase in the U.S. dollar value indicates that the buyer will have to spend more of their own currency to purchase a certain amount of a commodity. When commodities become more expensive its demand will fall resulting in a price decrease.

Every commodity has its own peculiar attributes. These attributes often affect the price of various commodities. But the value of the dollar has a superior influence on commodity prices compared to the different attributes of commodities. Even history has its testimonies with the inverse relationship between the U.S. dollar and commodities. In the year 2014, a significant number of commodity prices fell when the dollar appreciated by approximately 23%.

As a trader, it is important to always monitor the price of the dollar and even the aspects that will affect its price. It is common knowledge that commodities and the U.S. dollar move in opposite directions. This insight doesn’t assure a specific investment decision but it can guide in making reliable decisions.

Read More: https://blog.mlnfx.com/u-s-dollars-effect-commodities/

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Trading indicators: Fundamental or Technical Analysis?

One of the key indicators for a successful Forex trade is by correctly predicting the upcoming price movement of a market.

There are various strategies that are used when trading. Some traders follow patterns and some follow the various news to guide them in their decision-making. But these strategies are still categorized if it uses technical analysis or fundamental analysis. Some traders use fundamental analysis, some use technical analysis, some even use a combination of both.

As a trader, it is important to know this two analysis. It can help bolster strategies which can further provide consistent profit for your account.

Technical Analysis

Technical analysis is a methodology that forecasts the direction of market prices through the study of historical market data. It is one of the most common methods in trading. This analysis is very easy to learn and it is well-known to numerous traders especially those who prefer day-trading. Many people think this strategy is some sort of a trading hack because of its high probability to give profit.

This analysis uses various equations which are applied to personal charts. These equations are known as indicators — data that measures market conditions to calculate economic trends. These indicators provide historical information for a particular market. It presents the history of price actions and price volumes of that market.

To effectively use this analysis, a trader must understand how to use various indicators such as Relative Strength Index (RSI), Moving Average Convergence-Divergence (MACD), Money Flow Index (MFI), Stochastics, and many more. Profitable forex traders often use many indicators when trading. These indicators illustrate historical data in a particular aspect. Despite its useful method, this analysis does not guarantee a 100% prediction of the price movement of an asset.

Fundamental Analysis

Like technical analysis, fundamental analysis attempts to forecast the price movements of a particular market. One of the most popular traders who use fundamental analysis is Warren Buffet. Traders who excel in using this analysis claims that this methodology showcases a wider view of the upcoming price movement of a certain market.

When trading in Forex it is essential to learn about fundamental analysis. This analysis presents key economic indicators of the market. It is also one of the vital factors in analyzing the eight major currencies that are traded in the foreign exchange market (USD, EUR, GBP, AUD, CHF, JPY, ZAR, & NZD).

Here are some fundamental analysis traders should always check: Central banks’ Interest rate decision, Employment Reports, Customer Price Index (CPI), and Gross Domestic Product (GDP). These reports will always affect a currency’s price.

Another factor when using fundamental analysis is the economic calendar. This calendar indicates upcoming economic events. As a trader, it is important to always be aware of the worldwide economic happenings. Being caught in the wrong position after an economic announcement is a trader’s worst nightmare.

Are you ready to trade now? You can create a demo account or start trading with us here in Millennium-FX.

Read More: https://blog.mlnfx.com/trading-indicators-fundamental-or-technical-analysis/

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What is Forex ?

One of the most intriguing markets in the world right now is the Foreign Exchange Market. What people popularly call fx trading, currency trading or forex exchange happens in this market.

In the most simple explanation, the foreign exchange market is where currencies are traded. It is currently the largest and most liquid market in the world. It averages a daily trading volume of almost five trillion dollars. Even if all the stock markets in the world combined, all those markets would still be overshadowed by the immenseness of the forex market.

Fx, foreign exchange or currency exchange is commonly tagged as forex.  Large financial institutions, organizations, companies, banks, and rich investors are experts in forex trading. They have found greater trading potentials that other investments cannot cater.

Currencies are very significant. These are medium for exchange and without it, people cannot conduct trades and businesses. If a person who lives in America wants to buy a product in Europe, that person has to pay in euros to conduct a trade. That person has to pay in Euros to purchase that particular product. A tourist traveling in China cannot pay in the dollar to see the Great Wall since the dollar is not the accepted currency in China. Hence, the tourist should first exchange the dollar with the Chinese Yuan before seeing that fantastic landscape.

Currency exchange is essential for businesses and various trades to happen. This is the major reason why the currency exchange market or forex market is the largest market in the globe.

The foreign exchange market has numerous features that attract investors and traders alike. One notable feature of this immense market is that it is a decentralized marketplace — trading transactions don’t happen on one centralized exchange. In the forex market, fx trading is conducted electronically or over-the-counter which means transactions happen electronically.

Another notable feature of the forex market caters is that currencies are traded all around the globe and across almost every time zone. Currencies are traded in cities such as London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney — the cities with the major financial institutions of the world. When the market in the U.S. closes, the market in Tokyo and Hong Kong is just about to open. Which means the forex market is open 24/5, 24-hrs a day, five days a week.

There are many ways to trade in forex such as the spot market, forwards market, and the futures market. The most widely-known way to trade in forex is through the spot market. This is the largest market in the foreign exchange world since the forwards and futures markets bases their underlying assets in the spot market.

Before, the futures market was the most popular market in fx trading. But because of the recent technological advancements, it gave birth to electronic trading and numerous forex brokers. Since then, the spot market experienced great growth in activities and has now surpassed the forwards and futures market as the preferred trading grounds for investors and traders.

Due to its popularity and attractiveness to investors, many people brought many names to forex such as fx, fx trading, currency exchange, and foreign currency exchange but those labels are simply referring to one market, the Forex Market.

Learn more about forex here at Millennium-FX.

Read More: https://blog.mlnfx.com/foreign-exchange-market/

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CFD Trading Benefits

Contracts for Difference (CFD) are attractive trading instruments to many traders. This financial derivative has numerous benefits that draw the attention of amateur and expert traders. CFD trading is very flexible and an efficient alternative to traditional investing.

Here is a list of reasons why CFD Trading is popular among traders:

No stamp duty

A stamp duty is a  tax imposed on numerous acquisitions, including selling real estate, cars, and assets belonging to a business. Remember, CFDs give traders the opportunity to speculate on markets without physically owning the underlying asset. Since you do not own the underlying asset, you won’t have to pay stamp duty.

Trade in both rising and falling markets

Another solid advantage of CFD trading is that traders are not restricted to open in only one position. CFDs are very flexible financial instruments because it can make you trade in both falling and rising markets, allowing you to produce more effective strategies for more profit.

Margin Trading

One of the most notable aspects of CFD is that you can trade using margin. This means you don’t need to purchase the full value of an asset to open a position, you only need to deposit a fraction of the actual trade size of each transaction. For example, you have a CFD share for $100, if your broker has a margin requirement of 5% then you only have to pay $5 to open the position.

Trading using a margin means you can multiply your profit although it is important to recognize that losses can also be multiplied in margin trading. Thus you can lose more than your initial deposits.

Hedge Positions

CFDs are one of the best hedging tools for traders. If you are anticipating a loss in your current position then you can limit your potential risk by using a CFD to hedge your position. For example, if you have a short position in an asset that is accumulating losses, you can open a long position to balance your losses. The long position will start to gain profits once the prices move in the upward direction.

Read More: https://blog.mlnfx.com/cfd-trading-benefits/

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An In-depth Comparison of Technical and Fundamental Analysis Based on their Practices.

Technical and Fundamental analysis are the two most commonly used tools for determining whether an investment is potentially attractive or not. One of the greatest misconceptions about Technical and Fundamental Analysis is the notion of the idea that one is better than the other. This is relatively untrue because neither of the two is meant to replace the other on a general sense.

In truth, a trader should not employ their strategy solely based on either the one or the other. A combination of both is the best practice. Depending on your goal, Fundamental Analysis takes into account the basic aspect of a company’s financial strength and compares them with its competitor.

This type of trading is not ideal for traders with short-term goals. As an example, Forex traders often look at the general state of a countries economic standing and would compare this with another country. This takes time. Assessment of the key data must first be established to determine which stock to buy and when to buy it. In terms of commodities, CFD traders are often up to date with the seasonal variations in demand and supply. At the very least, awareness of pending news releases is also a must especially announcements regarding dividends that may have an impact on the company’s economic health.

A Technical Analysts uses a variety of tools and indicators to determine price action to predict where prices may go in the future. Some of these indicators are focused on identifying a current market trend, including support and resistance areas, while others are focused on determining the strength of a trend and the likelihood of its continuation. They believe that history tends to repeat itself. They believe that the reoccurring nature of price movements is often attributed to market psychology which makes future price movement predictable and more likely to be in the same direction as the trend than to be against it. This belief is considered the cornerstone of technical analysis.

On a Technical analysis, there is no need to analyze a company’s financial statements because the stock price already includes all relevant information. Instead, the analyst focuses his attention on the stock market chart for hints into where the price may be headed.

Short to medium term trades are identified for similar patterns that have formed in the past, and from this trade, ideas will be formed believing that price will act the same way that it did before.

Now, although Technical analysis and fundamental analysis are often seen as opposites, many investors have actually experienced big success in making money in the market by using both techniques.

As an example, an investor may use technical analysis to find a specific entry and exit point for the position and identify an undervalued stock through fundamental analysis. Some of these technical traders may use fundamental analysis to support their trade.

The idea of mixing both techniques may not always be properly received by most of the devotees of each group in each school, but there are certainly benefits in at least understanding the advantages of both practice.

Read More: https://blog.mlnfx.com/comparison-of-technical-and-fundamental-analysis-based-on-their-practices/