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currency-strength-indicator-mt4-definition

What is a Currency Strength Indicator MT4?

A technical indicator that assesses the relative strength of currencies is the currency strength indicator 

The currency strength indicator MT4 aims to display the absolute strength of major currencies to find sudden price movements.

EUR/USD (Euro Dollar)

GBP/USD (Pound Dollar)

USD/CHF (Dollar Swissy)

USD/JPY (Dollar Yen)

AUD/USD (Aussie Dollar)

NZD/USD (Kiwi Dollar)

USD/CAD (Dollar Loonie)

>> Related article: How to Create MT4 Expert Advisor: MT4 Basic and How to Use EA

What Is the Function of the Currency Strength Indicator MT4?

The meter takes readings from every forex pair in the last 24 hours and applies the calculations to each pair. It then combines each linked pair into an individual currency. This helps traders to guess whether their position is in a potential or risky phase.

The currency strength indicator MT4 works in the following 5 steps:

Identify the base currency

Match the base currency with all available Forex pairs

Calculate the relative strength of each paired currency.

Calculate the average score.

Use the result

Pairings with positive correlations (EUR/USD, GBP/USD, USD/JPY, EUR/GBP, AUD/USD) tend to move in the same direction, whereas pairs with negative or inverse correlations move in the other way. Correlations are also classified into four groups in the matrix above based on their strength:

Green: Little or no correlation

Blue: Weak correlation

Orange: Medium correlation

Red: Strong correlation

>> Explore the Forex Course about CAD, AUD, NZD TRADING COURSE  – BK FOREX

The CAD is the strongest currency, as evidenced by the +91 connection between the USDCAD and the EURCAD in the graphic above. The EURGBP and GBPCHF pair has the smallest correlation, at -96, which indicates that simultaneous positions in this pair within the same direction are likely to cancel one another out. This shows that the GBP is the strongest currency and that the Swiss Franc is the weakest.

How to Use the Currency Strength Meter in Forex Trading

You can use the 

You can start trading with the following timeframes:

Scalping: 50 bars at M5

Trading within one day: H1 – 200 bars

Swing trading during the week: H1 with 500 bars or H4 with 200 bars

Currency Strength Indicator For MT4 Trading Setup

Strength Meter Indicator MT4 can be used by forex traders to determine the strength of one currency relative to another and the strength of a specific currency. Therefore, forex traders can pair the strongest currency against the weakest currency and buy or sell in line with that pairing. The lower value of a currency reveals the underlying bearish pricing movement, whilst the higher value shows the underlying bullish market trend.

Forex traders can use this indicator to determine the strength of one currency

A decreasing strength value, on the other hand, shows that the currency is weakening. Forex traders might close the position or partially book profits. However, if the strength of the currency holds, traders can keep their positions and ride the trend until the currency begins to weaken.

Explanation of Currency Strength Meters with Examples

In the image below you can see that the USD is very strong. The Euro is the weakest of the three, while GBP is comparatively strong. The CHF, NZD, and CAD are all extremely weak.

The image demonstrates each currency

View the USD/CHF pair’s most recent chart. You can see the USD’s significant rising trend (strong meter reading) vs CHF over the past five hours (weak meter reading). Trading in the direction of the USD would have been wise.

The USD/CHF pair's most recent chart

Look at EUR/USD, once more, we observe a similar decline in the EUR (weak meter reading) relative to the USD (strong meter reading). The movement was not as violent, and unlike the other example (CHF) above, EUR did not completely turn red with one bar.

There is a similar decline in the EUR relative to the USD

>> Maybe you want to know: Which is the best Indicator for Swing Trading?

Best Currency Strength Indicator

The best currency strength indicator 

Unique Special Features

You won’t need to spend hours scrutinizing every chart. One window forex market analysis (1 minute).

Select the moment when you want the currency strength calculation to begin.

Anywhere you go, receive signals immediately to your phone.

Enable Alerts to receive a notification whenever a new signal is received.

Dashboard for the Currency Strength Meter

(showing all the values, dates, time, and connection speed in milliseconds).

Currency Strength Dashboard for Multiple Timeframes (Calculated across all timeframes).

28 FOREX pairs plus 5 more pairs of your choice and gold and silver (Stocks, CFDs, Crypto Currencies, Indexes, or any chart).

Eight. Unique period separators (showing months, days, and times)

Indicators on a chart (Arrows showing all signal entry points in a chart).

Numerous options for calculating currency strength (Anytime, date, or a number of candlesticks).

The Bottom Line

Using the colors, generates trading signals. However, the trading signals produce the best results when the price rebounds from a support or resistance level or channel. Additionally, forex technical traders have the option of using other trend indicators in conjunction with the trading signals. Additionally, forex traders may easily install the indicator after downloading it for free.

Article Source: https://libraryoftrader.net/currency-strength-indicator-mt4-definition

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How to Use Gann Indicators

How to Use Gann Indicators

What Are Gann Indicators?

Gann indicators are techniques built and developed by WD Gann. Their purpose is to predict support and resistance levels and future price movements. Gann trading techniques are still widely applied today and give traders remarkable results.

How to Use Gann Indicators

Application of Gann Theory

Traders can use Gann time as well as price theory to study patterns as explained.

Price Study: With the help of Gann angles, you can follow the price movement of a stock. You can identify the future price movement of a stock using the pivot levels and predict the stock price using the resistance levels and support levels.

Time Study: With Gann’s time study model, traders can grasp the idea of which the stock’s price can reverse. By reading the historical data and analyzing the stock’s price at a different point in time, traders can estimate at what point the price of the stock can reverse.

Pattern Study: Traders can use patterns to find the movement of stock. Pattern study uses the trend and patterns to show the reversal in the stock’s movement.

How to Use Gann Theory in Stock Market

To trade stocks using the Gann theory, you need to follow the following procedure and assumptions.

A time cycle governs stock market movements.

Markets are geometric in their movement and design.

A market is only affected by time, price, and range.

Traders should consider that the market moves in different angles that will remain the same and can only be rotated. According to the “Rule of All Angles”, an asset can move from one angle to another once it has achieved an angle. Therefore, Gann angles are commonly used to locate support and resistance lines.

When support is broken, it is called a break and the price will drop. When it breaks out, resistance has been broken and the price will move down.

How to Use Gann Theory for Intraday Trading

The Gann theory is considered one of the best methods for intraday trading. To make the most of it, you need to follow the following procedure and assumptions.

The 180 degree is assumed as number 1.

The resistances will be derived from the low and supports from the high in every 15-degree interval.

We buy the stock in the price cross over of 30-degree in the resistance side and vice-versa.

Keep in mind that we will use this method for making swing trades, which means we will close our buy position at the sell entry point and initiate fresh short at that point. Sometimes we will come across the situation where the buy entry and sell entry will be placed very close to each other or even equal to each other. This is called the congestion band. If the congestion band is present, you should make an entry on the 1st target point.

How to Use Gann Fan Indicator

The market is always in motion and goes from one angle to another. The rule of all angles states that an asset moves from one angle to another when it has reached an angle. The purpose of the Gann angle is to identify support and resistance lines.

The Bottom Line

Gann indicators are important technical analysis tools that traders use. They are used to set stop loss and target for trades based on LTP (last traded price). If used properly, Gann trading strategies using Gann indicators can lead to many successful trades. Gann’s theory is only successful when applied correctly. This requires time and experience.

Article Source: https://libraryoftrader.net/how-to-use-gann-indicators

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5 Essential Butterfly Spreads For Your Options Trading Plan in 2022

1. Getting Started

These are the top 5 butterfly spread option strategy, always chosen by the professionals for maximizing their profits in a neutral market. Unlike trading equity in more traditional financial markets, options trading utilizes a form of derivative contracts that grants both buyer and seller new approaches to making profits. However, trading with this kind of financial instrument is not something that is too common and intuitive for any trader to understand.

2. Butterfly Spread Definition

What is a Spread?

Generally speaking, a spread refers to the difference between two specific financial values. They can either be two prices, rates, yields, and so on. The bid-ask spread is one of the most common types of spreads, referring to the distance between the bid and the ask prices of a certain financial instrument.

What is a Butterfly Spread?

In finance, a Butterfly Spread options strategy is a non-directional strategy that is designed to benefit from little movements of the market and utilized to significantly increase the probability of winning trades while limiting all the lurking risks. During such a strategy, users usually expect the future volatility of the underlying assets to be either lower (when long) or greater (when short) than the current state of the implied volatility.

A butterfly spread option strategy can be regarded as the combination of both a bear spread and a bull spread and applied in a neutral market expected with little movement. A basic butterfly spread usually contains four options contracts with the same expiration date and three different strike prices – a high one, an at-the-money one, and a lower one.

Combining the basic butterfly spread with puts and calls will create more varieties of butter spreads and new approaches to benefit yourself from trading options contracts while being adaptable to any extent of volatility.

3. Type of Butterfly Spread Option Strategy

Long Butterfly Spread With Puts

The long butterfly spread with puts setup:

Sell two at-the-money put options (strike price B)

Buy an in-the-money put option with a lower value (strike price A)

Buy an out-of-the-money put option with a higher value (strike price C)

All contracts have the same expiration date

As the strategy benefits from the stability of the market movements, the long butterfly spread with puts reaches its potential when the stock price is at the same value as that of written puts at the expiration date. The option buyer will then have a chance to receive a maximum profit that is equal to the strike price C minus strike price B and any premium or commission paid.

Long Butterfly Spread With Puts

Long Butterfly Spread With Calls

The long butterfly spread with calls setup:

Sell two at-the-money call options (strike price B)

Buy an in-the-money call option with a lower value (strike price A)

Buy an out-of-the-money call option with a higher value (strike price C)

All contracts have the same expiration date

Just like the long butterfly spread with puts, this strategy is expected to reach the highest profitability as long as the stock price stays close to the strike price B. In short, the closer they are, the lower volatility should be, and vice versa. 

Long Butterfly Spread With Calls

Short Butterfly Spread With Puts

Short butterfly spread with puts setup:

Buy two at-the-money put options (strike price B)

Sell an in-the-money put option with a lower value (strike price A)

Sell an out-of-the-money put option with a higher value (strike price C)

All contracts have the same expiration date

This kind of butterfly spread is obviously the reverse version of the two aforementioned strategies. To realize the maximum profit with this approach, you – the option writers – will want the price of the underlying asset to stay outside the two outer strike prices (A and C). The gains are the premiums paid by the option buyers. The loss is only limited to the amount calculated by having strike price C minus strike price B as well as the premiums received.

Short Butterfly Spread With Puts

Short Butterfly Spread With Calls

Short butterfly spread with calls setup:

Buy two at-the-money call options (strike price B)

Sell an in-the-money call option with a lower value (strike price A)

Sell an out-of-the-money call option with a higher value (strike price C)

All contracts have the same expiration date

In this version of the short butterfly spread, we utilize calls instead of puts to be more adaptable to the movements of the market. A net credit is usually created as the trader initiates the contract. Just like its counterpart of short butterfly spreads, this strategy achieves its full profitability if the stock price manages to go anywhere else except for the gap between strike price A and strike price C.

Short Butterfly Spread With Calls

Iron Butterfly Spread 

Iron butterfly spread setup:

Sell an at-the-money put option (strike price B)

Sell an at-the-money call option (strike price B)

Buy an out-of-the-money put option with a lower value (strike price A)

Buy an out-of-the-money call option with a higher value (strike price C)

All contracts have the same expiration date

You want all four option contracts to expire worthless for maximizing your profit thanks to the premiums paid by the buyers.

The iron butterfly utilizes both calls and puts to create one more version of butterfly spreads for traders to consider in their trading system. This strategy is best suited for a neutral market with an insignificant state of volatility. If the price of the underlying manages to stay as close to the strike price B as possible, the trader who initiated this strategy will receive premiums as his gains. 

4. In conclusion

At first glance, the butterfly spread option strategy share significant similarities that can easily get newcomers greatly confused. But if you actually take your time to digest the information, you will soon come to find out that each strategy is tailored to making the most out of certain situations. What is left for you to do is identify those opportunities and make your decisions to seize your deserved earnings.

Article Source: https://libraryoftrader.net/butterfly-spread-option-strategy

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How to Use the TTM Squeeze Indicator - Library of Trader

What Is the TTM Squeeze Indicator?

The volatility and momentum indicator TTM Squeeze was developed by John Carter of Simpler Trading. It takes advantage of the fact that prices tend to break out forcefully after consolidating in a narrow trading range. The TTM Squeeze indicator’s volatility section tracks contracting prices through Bollinger Bands and Keltner Channels. A period of minimal volatility is indicated if the Bollinger Bands are contained entirely inside the Keltner Channels. The squeeze refers to this tight condition. When the Bollinger Bands re-expand beyond the Keltner Channel, it is stated that the squeeze has “fired,” signaling an increase in volatility and a possible departure from the confined trading range. Squeeze on/off status is shown by little dots on the zero line of the indicator; red dots signal squeeze is on, while green dots show squeeze is off. The TTM Squeeze indicator is available for TradeStation® and thinkorswim®, two widely-used charting software platforms currently.

How to Read the TTM Squeeze Indicator and How Does the TTM Squeeze Work?

TTM Squeeze Indicator Explained

The TTM Squeeze is predicated on the premise that decreased prices would eventually lead to higher prices. If we can pinpoint when the market is particularly tense, we can position ourselves to benefit from a potentially powerful move in one direction

What Do the Colors Mean on the TTM Squeeze?

Indicators of a squeeze are represented by red and green dots on the zero line. If there is a red dot, it indicates a squeezing situation. If there is no red dot, we are not in a confined space at the moment. When a green dot appears following a string of red dots, the squeeze has been successful.

Using the TTM Squeeze in Trading

There is a wide range of periods compatible with the TTM Squeeze indicator. When trying to confirm a security’s value, many chartists look at data from several different time periods. Squeezes that fire on many time frames at once are more reliable signals than those that fire on just one.With the TTM Squeeze, traders may rededicate themselves to the market and get the self-assurance they need to consistently turn a profit and increase their wealth. Having faith in yourself and your abilities will help you:

Avoid bad trades

Make profitable trades

Optimize returns

Put away your doubts

Enhance market sense

How to Build a Profitable Trading Plan Using the TTM Squeeze?

John Carter’s route to regular profits in trading was revolutionized by the TTM Squeeze indicator. The TTM Squeeze is an important technique for traders who wish to rapidly expand their trading capital. To put it bluntly, the TTM Squeeze indicator is not a miracle worker. Any kind of trading carries with it some degree of inherent risk. Additionally, you are not expected to “make it big” in the trading world in the manner of some well-known trader who claims to make you a millionaire if you only “be a billionaire” on the internet.

How to Set up TTM Squeeze Indicator

Here is what you simply need to do to set up the TTM_Squeeze to your thinkorswim charts:

Login to your thinkorswim account

Select the studies button

Add study

Then find John F. Carter studies

Select the TTM_Squeeze

Trading the TTM Squeeze Indicator with Divergences

Although the TTM Squeeze indicator is recognized to provide a strong signal as to where price is heading, the best trades are those in which numerous indicators are flashing the same signal.

Using divergence is a strategy that may be applied while trading with the TTM Squeeze indicator. When price and the histogram momentum bars are moving in different directions, this is called a divergence. When price is forming higher highs while the slope of the histogram is forming lower highs above the “zero line,” a bearish divergence exists.

What is the Squeeze Pro Indicator? ​

The Squeeze Pro Indicator is the upgraded version of TTM Squeeze. Conversely, the TTM Squeeze is a fantastic indicator that can do wonders for traders of any skill level. The premium Squeeze Pro Indicator makes it easy to choose one of three squeeze intensity levels, provides clear entry and exit signals, and anticipates and capitalizes on market rallies. You should upgrade to TTM Squeeze Pro if you’ve outgrown the free version.

The Bottom Line

The TTM Squeeze indicator takes into account both volatility and momentum in order to help traders profit from swings in the security’s volatility. Squeeze dots, which are part of the indicator’s volatility component, point to possible breakouts after tame trading conditions. The momentum histogram shows the most likely path of the breakout and can aid in locating potential exits. Article Source: https://libraryoftrader.net/how-to-use-the-ttm-squeeze-indicator

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What Are CE and PE in Stock Market? Explanation and Examples

Options trading can be very confusing for those without a background in finance. There are several terminologies that are challenging to comprehend. The two biggest ones are CE and PE. When you first begin to learn options trading. What is CE and PE in stock market is a common question that everyone has?

What is C.E. in the Stock Market?

C.E. stands for Call European and is a short form of the Call Option. These kinds of investment agreements give the option investor the choice, but not the duty, to buy a stock, product, or any other asset at a predetermined price within a predetermined window of time.

What is P.E. in the Stock Market?

The abbreviation P.E. for “Put European” refers to the Put Option. PE grants the right to sell the securities at a predetermined price (the strike price) within a predetermined time frame to the owner of a put option.

What is CE and PE in the stock market?

Example of CE and PE in the Stock Market

If a company’s call option (C.E.) costs 20 rupees and you believe that the market price will rise, you should buy the call option (C.E.). You have the chance to make money as the price of a call option (C.E.) rises along with the market price. If you believe that the market price will decline and a company’s Put Option (P.E.) is priced at 20 Rupees, you should buy the Put Option (P.E.). You have a possibility to make money from this if the market price declines.

Why Would You Buy CE and PE?

Advantages of CE

The multiplier effect on stock price gains is the main advantage of buying a call option. For a very little up-front cost until the option expires, you can benefit from a stock’s gains above the strike price. You anticipate the stock to increase before the call expires when you purchase it.

Advantages of PE

In order to profit more from a stock’s drop, traders purchase a put option until the conclusion of the contract period and for an advance payment. Stock prices below the strike price can be profitable for a trader.

CE and PE buy level in the share market

Best Mediums for CE and PE Calls

There are several places where you may get calls on F&O, but you should use extreme caution when contemplating them, trade at your risk, and conduct your own analysis before setting up any F&O trading. The two options that are most frequently traded in F&O are Nifty and Bank Nifty.

How Do You Trade Options in Upstox?

There are numerous stock trading platforms available for CE and PE trading. We will be demonstrating how to use Upstox for options trading.

Step 1: Launch the Upstox app and select the “Search” icon in the upper-left area.

Step 2: Access the F&O menu.

Step 3: Select the F&O menu, type the appropriate indices or equities to trade, and then choose the desired CE and PE.

Step 4: Next, choose either “Buy” or “Sell.”

Step 5: At this point, you must choose 1 lot or more; the minimum quantity to be traded will be specified in that field. Since you are a newbie, we advise selecting 1 lot and beginning trading before clicking the “Review” button.

Step 6: You must confirm the order by swiping the “Swipe to schedule order” button after clicking the “Review” button on the following screen.

CE and PE buy level in the share market

FAQs About CE and PE in the Share Market

What does CE in the stock market’s complete name mean?

Call Option is the name of CE’s full form.

What does PE’s full name mean in the stock market?

PE stands for Put Option in its entirety.

Is it Safe Trading Options

Compared to standard trading, options trading is highly dangerous and needs extensive market analysis. Since options trading is only appropriate for experienced traders, we advise novice traders to avoid it.

The Bottom Line

The two forms of options contracts that are offered on the market are CE and PE, or call option and put option. Hope our article has helped you to understand the difference between CE and PE in the stock market.

Article Source: https://libraryoftrader.net/what-is-ce-and-pe-in-stock-market

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Fibonacci Retracement Levels: Definition & How to use

1. What is the Fibonacci retracement in trading and how does fibonacci retracement work?

Fibonacci retracement levels (Fib retracement levels) is a technical analysis method used in finance to determine support and resistance levels. This powerful tool is named after a sequence of numbers produced by a famous mathematician Leonardo Pisano (1170-1250), aka Fibonacci. The Fibonacci sequence of numbers is described as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610…, in which each number is simply the sum of two preceding ones and hence the series is infinite.

2. What are the Fibonacci ratios? The best Fibonacci levels in trading

Fibonacci levels are horizontal lines on the trading chart that show where support and resistance are expected to occur. They link any two positions that the trader considers important, usually a high and a low point. The percentage levels given represent locations where the price might halt or reverse.

From the Fibonacci sequence as listed above, the following ratios are produced: 23.6%, 38.2%, 50%, 61.8%, 78.6%, 100%, 161.8%, 261.8%, and 423.6%. Despite the fact that 50% is not a Fibonacci ratio, it is nonetheless employed as a support and resistance signal.

The best Fibonacci retracement levels in trading

3. Is Fibonacci the golden ratio?

The ratios of Fibonacci numbers sequence identify price levels to which markets tend to retrace a portion of a move before continuing in the original direction. The important idea is that as the numbers increase in size, the quotient between each subsequent pair of Fibonacci numbers approaches 1.618, or its inverse, 0.618. This proportion is known by several terms, including the golden ratio, the golden mean, ϕ, the divine proportion to name a few. 

Is Fibonacci the golden ratio

Fibonacci golden ratio in trading and investing

Traders and technical analysts regularly employ the golden ratio to anticipate market-driven price fluctuations. This is due to the psychological significance of the Fibonacci number series and the golden ratio in herd behavior. Traders are more inclined to grab gains or cover losses at specific price points denoted by the golden ratio.

Fibonacci golden ratio in technical analysis

In technical analysis fib retracement, the golden ratio is usually expressed as three percentages: 38.2%, 50%, and 61.8%. More multiples, such as 23.6%, 161.8%, 423%, and so on, can be employed as necessary. Meanwhile, the Fibonacci sequence may be applied to charts in four ways: retracements, arcs, fans, and time zones. However, depending on the charting application used, not all may be available. And in the scope of this post, we only look at

4. What do Fibonacci levels tell you?

As mentioned above, Fib retracements can be used to create stop-loss levels, place entry orders, and set price goals. Following an upward movement, it retraces to the 61.8% level. Then it begins to rise again. The trader decides to purchase since the rebound happened at a Fibonacci level during an upswing. A stop loss might be put at the 61.8% level, since a return below that level could suggest that the rally has failed.

The Fibonacci retracement method is often used by technical traders to find critical locations for transactions, stop losses, or target prices in order to get in at a decent price. Many indicators, including Tirone levels, Gartley patterns, fib retracement

5. How to use Fib retracement in trading?

Fibonacci retracement lines are formed when the vertical distance between the high and low points is divided by the key Fibonacci ratios. On the trading chart, horizontal lines are drawn at the 23.6%, 38.2%, and 61.8% retracement levels. Some traders prefer to use a 50.0% ratio, which is not a Fibonacci ratio, but it is useful. A security will frequently retrace by 50% before resuming its original trend.

6. How to apply Fib retracement levels in a trading chart?

You can utilize a level Fibonacci retracement  to suggest where to initiate a trade, which is one of the most prevalent technical trading tactics. For example, suppose you observe that a stock has dropped 38.2% after experiencing tremendous momentum. You choose to enter the trade as the stock begins to rise in price. Because the stock has hit a Fibonacci level, you believe it is a good moment to purchase, with the trader anticipating that the company would subsequently retrace, or recoup, its recent losses.

7. What are the best Fibonacci trading strategy?

Fibonacci retracements are applied to a wide range of financial markets and on different periods like stocks, commodities, and forex. 

Fib retracement lines are frequently utilized in trend 

Using Fibonacci extension

How effective is fibonacci extension?

Using Fibonacci levels can predict future regions of support or resistance for traders to enter the market in the goal of capitalizing on the continuance of an original trend. Using Fibonacci extensions

Differences between Fibonacci retracement vs extension

Fibonacci retracements apply percentages to a retreat, whereas Fib extensions apply percentages to a continuing rise. For example, a stock may rise from $5 to $10 before falling down to $7.50. The drop from $10 to $7.50 represents a retracement. If the price begins to rise again and reaches $16, this is an extension.

8. The drawbacks of using Fibonacci levels

While the retracement levels show where the price finds support or resistance, there is no guarantee that the price will stop there. This is why other confirmation indications, such as the price beginning to bounce off the level, are frequently employed.

The drawbacks of using Fibonacci retracement levels

In conclusion

Fib retracements are powerful tools for traders to find support and resistance levels. They can use the information acquired to make trades, define stop-loss, and create price goals. Fibonacci levels, while useful, should not be used in isolation. To create more accurate evaluations of trends and make better trading decisions, other.

Article Source: https://libraryoftrader.net/fibonacci-retracement-levels

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How Long Do Recessions Last?: Lessons From History

‘How long do recessions last?’ has been one of the main concerns for those who are in the middle of chaos. It arouses curiosity about the reasons, effects, and possible solutions. This article walks you through the history of recessions to see what we can learn to better the present and potentially unpleasant economic downturns.

What Is a Recession?

A recession refers to a prolonged downturn lasting at least six months. It has profound and widespread effects on the economy, such as drops in economic output, consumption, and employment. Two consecutive quarters of decline in national GDP typically lead to a recession. Economists find it common when a recession begins at the peak of the expansion and ends at the low point of the following downturn. Some indicators generating insights into this economic phenomenon are nonfarm payrolls, industrial production, and retail sales. Ups and downs in the market happen all the time. So, do all the downturns mark a recession?

What Causes a Recession?

Numerous factors, not only economic ones, contribute to a recession but also finance and psychology. Some experts concentrate on economic changes, such as the shifts in structure in industries. For instance, a sharp and ongoing surge in oil prices can lead to a rise in costs across the economy. Or, the Covid-19 epidemic and the public health restrictions created a shock to not only our health but also the economy. This pandemic accelerates a recession as the whole world freezes under its influence. Here are the top 12 common causes of a recession.

Lack of Faith in Investment and the Economy

Rising Interest Rates

The Crash of Stock Market

Falling Prices of Housing and Sales

The Removal of Essential Safeguards

Bad Business

The Controls of Wage and Price

The Effects After War

Asset Bubbles

Deflation

How Long Do Recessions Usually Last?

The National Bureau of Economic Research (NBER) has the authority to determine the periods of recessions in the U.S. According to its data, the average U.S. recession lasts around 17 months from 1854. Yet, it shrinks to about 10 months from 1945 to 2020. The longest recession was the Great Depression (1929 – 1933) with a length of 43 months. The shortest recessions include the stagflation recession (1981 – 1982), dot-com recession (2001), gulf war recession (1990 – 1991), etc. Each of them lasted eight months.

How Long Does the Average Recession Last?

How long do recessions last on average? A recession has averaged around 11 months since World War II. The longer a recession lasts, the more negative the effects are on the gross domestic product (GDP). There are multiple factors impacting or triggering recessions, such as high-interest rates, the slowdown of production, an asset bubble burst, credit crunches, etc.

What Do Past Recessions Teach Us?

We will walk you through past recessions to see how long they lasted, why they happened, and how we made it back to the balance. As a result, we can draw valuable insights that help us not repeat the same mistakes and accelerate the rally.

The Covid-19 Recession: 2 Months (Feb to Apr 2020)

Covid-19 pandemic was the time when the whole world seemed to have a break but with anxiety and fear. As an infectious disease without a comprehensive treatment then got involved.

The Great Recession: 18 Months (Dec 2007 to Jun 2009)

One of the most notorious recessions in history is the Great Recession with more than 18 months. The unemployment rate was at 10% and GDP dropped to 2.6%.

The Dot-Com Recession: 8 Months (Mar to Nov 2001)

The ‘dot-com’ name indicates the rise of Internet technology from the late 1990s. It led to massive amounts of money flowing into ever less viable dot-com investments with low-interest rates.

The Gulf War Recession: 8 Months (Jul 1990 to Mar 1991)

The crisis of savings and loans (S&L) and the First Gulf War were two events triggering the recession of the early 1990s.

The Stagflation Recession: 16 Months (Jul 1981 to Nov 1982)

The turbulence of the 1970s led to the U.S. inflation peak of 22% in 1980. The Fed chair’s plan caused an economic slowdown and a brief recession through a huge rise in interest rates. The rate of unemployment reached 7.8% while GDP declined to 0.2%. The recession lasted until 1982 and became the worst economic downturn in the U.S., according to the Fed. Unemployment climbed to around 11% and GDP dropped by 1.8%  throughout this time.

The Oil Shock Recession: 16 Months (Nov 1973 to Mar 1975)

The fallout of The Yom Kippur War of 1973 was the main cause behind the major problems for the U.S. The Organization of the Petroleum Exporting Countries (OPEC) placed an oil embargo on the U.S. due to their support for Israel in the war. The oil shock by quadrupling prices led to inflation and an international stock market crash. The unemployment rate got 9% and GDP got the bottom of 0.5%.

Review of Past U.S. Recessions

‘How long do recessions last?’ might not be the only question that people ask amidst the crisis. It comes along with why it happens and how it recovers. We can learn from our history as many recessions happened, including the most terrible ones.

Article Source: https://libraryoftrader.net/how-long-do-recessions-last

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Best Indicators for Swing Trading in 2022 - Library of Trader

Swing trading indicators can come along and change the whole game as they ease the process but also provide many false signals. Such a double-edged benefit of technical tools makes many swing traders hesitate about whether they should use these indicators. This article offers an exclusive overview of the common technical indicators for swing trading. So, you can learn how to leverage their superior functions to help you earn higher profits from swing trading.

What’s Swing Trading and How Does It Work?

Swing trading indicators a type of fundamental trading where you can hold positions longer than a single day. Technical analysis plays an important role in the development and modification of swing trading strategies.

The Importance of Understanding Swing Trading Indicators

There are three aspects of a trade that you should take into consideration, trends, momentum, and volume. Thus, the help of tools in such areas can help you profitably swing trade no matter how volatile the market is.

Trend Indicators.

Momentum Indicators.

Volume Indicators.

Top Swing Trading Indicators

Moving Averages (MAs)

Moving averages (MAs) are a stock indicator that you typically find in technical analysis. This tool can mitigate short-term fluctuations in stock prices over a specified time frame. So, the price data becomes much more understandable and generates more valuable insights.

Volume

​Volume is also a technical analysis tool that many swing traders use to better analyze the strength of a new trend – whether it can last or not amidst multiple influential factors. The underlying principle is simple: if a trend comes along with a high volume, it shows much more strength than the trend with a weak volume.

Ease of Movement (EOM or EMV)

Ease of Movement indicator clarifies the relationship between price and volume so that the strength of an underlying trend can be under the spotlight. Simply put, the tool helps swing traders determine whether prices can rise, or fall, with little resistance in certain movement directions.

Relative Strength Index (RSI)

Relative strength index is helpful to determine whether a stock’s price is strong or not. So, it is among the crucial momentum indicators in technical analysis. Specifically, it gauges the speed and magnitude of an asset’s recent price changes to assess overvalued or undervalued conditions.

Stochastic Oscillator

Stochastic oscillator is an indicator that has the same operating system as the RSI. It indicates the market movements through the comparison of the closing price of a market to the range of its prices in a specific period. The difference between a stochastic oscillator with RSI is the inclusion of two lines – one indicates the current value of the oscillator, and another line shows a three-day moving average (MA).

MACD

MACD stands for Moving Average Convergence Divergence. This trend-following momentum indicator points out the relationship between two moving averages of an underlying asset’s price. You can get the result of MACD by subtracting the 26-period EMA from the 12-period EMA.

Bollinger Band

A Bollinger band, a technical analysis tool, entails a group of trendlines with two standard deviations. These deviations are apart from a simple moving average (SMA) of an asset’s price. A well-known technical trader, John Bollinger, was the man behind this tool. He developed this tool to uncover the opportunities that enable swing traders and investors to accurately identify the timing of an overbought/oversold asset.

Bullish Candlestick Reversal Patterns

There are five powerful patterns that showcase bullish candlestick reversals, such as hammer, piercing, bullish engulfing, morning star, and three white soldiers.

The creation of a hammer pattern takes place when the open and close prices meet each other. It comprises a lower shadow that is twice as long as the real body.

Piercing pattern is a candlestick pattern that offers us potential bullish reversal signs near the support levels when a downtrend ends.

Bullish engulfing informs a potential reversal from a downtrend as more buyers join the market and move the prices up after a long period of downward movement.

Morningstar is a triple pattern of candlesticks telling us a bullish reversal in advance. In other words, it warns us of the upcoming uptrends.

Three white soldiers, also a bullish candlestick pattern, takes place at the end of a downtrend and showcases a bullish reversal. It includes three long bullish candlesticks that are green in color but not long shadows.

Other Indicators used for Swing Trading

Support and Resistance

Support and resistance refer to areas on a market’s chart with challenges of crossing. They create the basis of main technical strategies for many trading types, and swing trading is no exception.

Patterns

There are many swing trading patterns that you can use as hints for potential uptrends and reversals.

Wedges help you identify reversals. If a wedge falls on a falling market or rises on a rising market, it can be a signal of an upcoming price reversal.

Pennants can be a factor leading to new breakouts as the market consolidates after a considerable price action.

Triangles are a precursor to a breakout in the case of the pattern’s invalidation.

Standard head and shoulders are the pre-ups for bear markets. Meanwhile, inverse ones can be the beginning of uptrends.

How to Start Using Swing Trading Indicators

These tools will be a great help for swing traders to identify the timing and methods of opening trade or position. You can find optimal entry points with the aid of the signals that the superior features of these tools can offer.

Why Should use Swing Trading Indicators

The��swing trading indicators that we introduce in this article are the basic tools that many swing traders have used to better their trades. You can see those indicators showcase three primary dimensions of a trade, including trend strength, momentum, and volumes. Article Source: https://libraryoftrader.net/swing-trading-indicators

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Multiple Time Frames Analysis in FX With Efficiency in 2022

Trading with multiple time frames allows the trader to increase the probability of winning trades and reduce the risk. This concept involves observing different timeframes for the same asset, determining the overall market direction on the higher time frames, and then looking for entries on the lower timeframes.

What Is Multiple Time Frames Analysis?

Multiple Time Frames is the analysis that is tracking a currency pair in different time frames. Larger time frames (three different time periods) for long-term trend-setting, allow for a wide enough reading in the market. While shorter time frames are used to spot ideal entries into the market. Sometimes it also causes significant data loss. 

Multiple Time Frames Analysis Using Counter-Trend Trading

The green line shown is 1 (resistance level), which is the same green line as shown in the 1-hour chart above – it’s the same resistance level. The candles are much smaller on the 15-minute chart because the price doesn’t move as far in fifteen minutes as it does in an hour. 

This means you can enter a short position, shown as 2 (entering on a lower time frame means lower risk), with much less risk, as you can place your stop loss above the resistance line, shown as 3 (stop loss above resistance level). This leads to a much smaller risk of 8.9 pips, shown in the chart as 4 (lower risk of 8.9) compared to a risk of 19.5 pips on the 1-hour chart above.

the resistance line with less risk

How to Select Time Frames

The trading timeframe you choose will greatly affect how you interpret the information displayed. The lowest trading timeframes will show a lot of unhappiness, most of which can be attributed to simple noise. However, they will also show you important turning points and resistance levels that higher timeframes may not be so obvious.

Short-Term Time Frame

The advantage of a short-term timeframe is the granularity of the information provided. Some charts will offer timeframes as low as a tick, which allows you to track every nuance of the price over a period of several hours. This means you can more accurately identify inflection points and resistance levels, allowing you to quickly identify sharp price movements around these key areas.

The image below shows the difference between a 1-minute chart (left) and a 5-minute chart (right). The 1-minute chart has 5 candles for each on the 5-minute chart and is faster in showing entry and exit points. However, the 5-minute chart is cleaner and less noisy.

The difference between a 1-minute chart and a 5-minute chart

The disadvantage to shorter timeframes is that you can easily lose sight of the forest to the trees. Much of the movement in the shorter timeframes will simply be noise, which means you’re making trading decisions based on essentially random movements on the chart. The shorter timeframes are ideal for traders of size and momentum who are looking to make a quick trade or two to take advantage of strong but short-term price movements.

Long-Term Time Frame

The advantage of a long-term timeframe is that you have a much better picture of what is driving the price in the long term. A stock can typically change 5% over the course of a trading day, but then stabilize back to its opening price at the close of the trading session.

You can see that the two charts (as shown) are much slower than the chart of the short-term timeframe. It is easy to understand when it is used in long-term trading such as intraday swing trading, etc.

The two charts are much slower than the chart of the short-term timeframe

How to Identify the Best Forex Time Frame?

Time frame in forex trading can refer to any specified unit of time in which a trade takes place. Typically, forex timeframes will be measured in minutes, hours, days, or weeks. You will choose the timeframe that best suits your trading strategy.

In general, traders should choose a timeframe that suits:

Amount of time available to trade per day

Most commonly used timeframes used to determine trade setups

Choose the timeframe that best suits your trading strategy

Best Forex Timeframes for Scalpers

Scalping is a style of trading that involves identifying small price changes in the forex market and then buying and selling large volumes of currencies in a very short time. By repeating this strategy over time, scalpers aim to make a series of small profits plus a decent day’s profit.

Best Forex Timeframes for Day Traders

Day traders tend to take a short-term approach, with most time frames choosing between 15 minutes and four hours. The benefit of being a day trader is that you can choose from a wide variety of timeframes, depending on the liquidity of your chosen market, the amount of time you have available to execute your trades, and your preferred trading strategy.

Multiple Time Frames Analysis Techniques for Day Traders

Day traders trade in short timeframes. These time periods are anywhere from a minute to 15 minutes, to a one-hour timeframe. Day traders usually set up their trades on the 1-hour timeframe first, then can change to smaller timeframes like 15 minutes to find the ideal entry points of the market.

How to Use Multiple Time Frames in Trading

You first determine the timeframe that you should focus on. A multiple time frames trading is simply the process of looking at the same pair and the same price but on different timeframes.

A pair exists on several timeframes – daily, hourly, 15 minutes, or even 1 minute. As you use the chart, you will notice that there are different timeframes being offered.

The “1 day” or daily timeframe

The current chart above is the “1 day” or daily timeframe. When you click on “1 hour”, it will show a 1-hour chart, similar to a 1 week, 1-month, etc chart. Charting apps offer multiple timeframes because there are different market participants in the market. This means that different forex traders can have different opinions on how a pair trades and both can be completely correct.

4-hour chart is in an uptrend

For extra certainty and to avoid getting caught in the wrong direction, you can zoom back to your favorite timeframe (1-hour chart as shown below) and enable the Stochastic indicator.  You can define the entry point.

1-hour chart with the Stochastic indicator

This 1-hour chart shows that a Doji has formed and the Stochastic has just broken out of the oversold conditions. If you are still not sure whether to buy now or not, further analyze the 15-minute chart.

The 15-minute chart shows that the trendline is holding quite strongly and is a good signal to start buying orders.

1-hour chart with the Stochastic indicator

What Are the Benefits of Looking at Multiple Time Frames?

Some benefits of using multiple time frames:

Provides different perspectives on a currency pair

Detect trend changes earlier

Spot upcoming support or resistance areas

The Bottom Line

Using multiple time frames analysis can greatly improve the odds of successful trade execution. This is a simple way to ensure that a position benefits from the direction of the underlying trend but many traders overlook the usefulness of this strategy.

Article Source: https://libraryoftrader.net/multiple-time-frames-analysis

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BEST NFTS WITH PASSIVE INCOME

 NFT (Non-Fungible Token) is the only cryptographic token that exists on a blockchain and cannot be copied. NFTs are usually located on the ETH blockchain but some of them can also be created on other blockchains like Solana.

Today, the number of participants in the NFT market is increasing. Learn to get involved in the creation and sale of your NFTs with passive income from attractive prices. The global market volume of tokens increased 200% year-on-year (2021), to over $50 billion.

NFT coins are a form of cryptocurrency used to support NFT-based ecosystems

1. The Sandbox – SAND

Sandbox is a community-driven platform, users can monetize their gaming experience and voxel assets on the blockchain. There are several ways to earn passive income on the platform, like renting out their land. It includes business, entertainment, and advertising spaces.

2. Decentraland – MANA

Decentraland is the first virtual world entirely owned and created by users. This supermarket’s Decentraland virtual reality batches have seen massive popularity thanks to a $3.5 million lot. The platform uses $MANA as its native currency. Decentraland is an investor’s dream in the metaverse .

Decentraland is the first NFT with passive income projects virtual world entirely owned and created by users

3. Gala Games – GALA

GALA is an NFT with passive income projects where users can create different games as NFTs and give them complete control over their assets. GALA describes itself as “the largest decentralized gamer network in the world” and gathers more than 1.3 million users every month . 

4. Axie Infinity – AXS

Axie Infinity – AXS is considered the ruler of money games and is the best NFT with passive income projects.

AXS helps generate passive income by earning rewards for locking its tokens 

5. Enjin – ENJ

Enjin describes itself as the largest online gaming community platform with more than 250,000 game communities and 18.7 million registered players.

Enjin (ENJ) is valued at $1.46 and has a market capitalization of $1.2 billion as of April 18, 2022.

6. Theta Network – THETA

The Theta Network team includes experienced media technologists and executives, with roles previously held at Netflix, Amazon, Samsung, Vimeo, and Salesforce. 

7. Polygon – MATIC

Polygon has made potential forays into the metaverse and other projects. Polygon is a “layer two” or “sidechain” scaling solution that runs alongside the Ethereum blockchain. 

8. CyberKongz

CyberKongz is the first NFT to use a passive income model using coins or tokens. These are avatars with randomly generated ape characters. NFT, originally 1000 tokens launched in March 2021, was sold out instantly. 

3. How To Buy NFT Coins

Step 1: Open an Exchange Account

You can start setting up a virtual wallet from MetaMask or choose to open a wallet directly with a crypto exchange like Binance or Coinbase. A virtual wallet will help you keep your coins safe and highly secure.

Step 2: Buy Your NFT Coins

The process to buy NFT coins may vary depending on the platform you choose. As for Coinbase, it allows you to buy most NFT coins with funds from your bank account. 

4. How to Get Passive Income From NFTs

Staking NFTs

Staking NFTs comes from the convergence of NFT technology and decentralized finance (DeFi) protocols. Users provide a token commitment for network security and transaction validation in PoS protocols. 

Renting out NFTs

Earning passive income from NFTs by renting out your digital assets is also a good idea. This is a new trend because the utility got from NFT games offers attractive income.

Earning Royalties From NFTs

Innovators are looking for ways to bring their products to market to passively profit from NFTs through royalties. You can set the terms that apply royalties whenever your NFT trading is on the secondary market. This way you can earn passive income from NFT sale price in perpetuity.

Providing Liquidity With NFTs

The continuous integration of NFTs in the DeFi ecosystem lets you provide liquidity in DeFi pools and earn NFTs.

Source: https://libraryoftrader.net/best-nfts-with-passive-income

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Options Trading for Beginners: Simple But Powerful Strategies

Options trading for beginners might be the aspect that many novice investors and traders overlook. They all love to learn advanced techniques. Yet, how can you have flying leaps without a stepping stone? Building a solid foundation of basic options trading knowledge is the top priority for beginners. Scroll down this article to unfold effective strategies for entry-level options traders.

What is the Basic Options Trading for Beginners?

Effective Strategies for Options Trading

There are two main types of contracts in options, including call and put. Investors and traders are likely to use the results of technical analysis and fundamental analysis to draw insights into market trends. Then, they decide to buy or sell their call or put options. This section deep dives into some basic options trading strategies for beginners.

Buying Calls (Long Calls)

Buying a call option is a recommended action to the expectation that the price of an asset will rise. In case the market moves in the opposite direction, you only have the limited loss of the premium for the options.

For example:

If you want to buy $165-priced Apple shares with an investment of $5,000. It means you can buy around 30 shares. A scenario is that the stock price can increase by 10%, around $181, over the next month. Not to mention any brokerage commission or transaction fees, your portfolio will be around $5,445 – a net dollar return of $495, equivalent to 10% of the investment.

Such huge potential profits can come along with great potential losses, can’t they?

The good news is that if things go awry, you only have to suffer from the loss – the paid premium. It is a real bargain when you gain unlimited profits with limited losses.

Buying Puts (Long Puts)

A put option allows the holder the right to sell the underlying asset at the strike price by the expiration date. Those who are cautious of a specific stock, ETF, index, etc., or want to earn profits through the falling price actions.

For example:

When expecting the price of a security to decrease from $60 to $50, you can sell the stock short. Yet, it can be risky as your forecast can be wrong. So, the recommendation is to buy the $50 put option with a premium of $2. As a result, you will only lose $2 if the price does not drop as expected. Yet, you can make around $3 if the price of the stock declines to $45.

So, what is the point?

Same with the call options, a put option can leverage the trader’s return to maximum levels while the risks are limited.

Covered Calls

A covered call , as the name suggests, has an existing long position overlaid in the underlying asset. The model works like an upside call to cover the existing position size with the same amount. The writers of covered calls will gain income through the option premium, yet have limited potential for profitability.

For example:

Assuming that a trader buys 1,000 shares at $44 per share and writes 10 call options per which has 100 shares at the strike price of $46. These options will expire in one month. The total cost for 10 contracts is $250.

What is the risk/reward in this case?

If the share price is higher than the strike price by the expiration date, the short call option can make a trader suffer from bigger losses. They have to deliver the shares at the strike price when it can be lower than the market price. Yet, a covered call can help them with limited risk in the form of premium when selling the call!

Protective Puts

A protective put relates to buying a downside put to overlay an existing in the underlying security. The purpose of this strategy is to set the limit of your losses.

The option premium is a must, yet a protective put is a real shield for those who expect downside protection for their assets. It shares some common characteristics with a long put. Yet, it can help you gain profits from a downside move instead of an upside move.

For example:

When buying 1,000 shares of Coca-Cola at $44, you can protect the investment from adverse price actions in the next two months through three options as below.

If you want to hedge against the risk of a price drop, you can purchase 10 at-the-money put options at $44. Or you can switch to a less costly out-of-the-money (OTM) option to lower the cost to under $200.

Long Straddles

A straddle enables you to capitalize on the future volatility without taking a bet on the real market moves. It means you can gain profits whether it moves up or down. A trader will buy both a call and a put option sharing the same strike price and expiry date on the same stock. So, it can be more expensive than other options trading strategies as it refers to the purchase of two at-the-money options.

Example:

The case is where a trader forecast large price fluctuations after an earnings announcement. The current price is $100. So, they create a straddle by purchasing both a $5 put option and a $5 call option at the strike price of $100.

What Are the Levels of Options Trading?

Options Trading Levels

There are two factors in determining the levels of options trading , including the riskiness and complexity. The strategies that we share above are mostly in the basic learning options trading for beginners. So, they are mostly in level 1 and level 2. Another requirement is to maintain a margin account to gain the approval of the brokerages.

Level 1 includes covered calls and protective puts. It happens when an investor is the owner of the underlying asset.

Level 2 refers to long calls, puts, straddles and strangles.

Level 3 comprises options spreads. It involves the purchase of one or more options while selling one or more different options of the same securities.

Level 4 relates to the writing of naked options.

What is The Best Way to Learn Options Trading?

There are many ways to kick off your options trading. Yet it can be an odd lack if not mentioned online education. Many successful traders now share that they collect useful knowledge and tools through online classes.

FAQs

Can a Beginner Trade in Options?

Yes, they can as long as they master the crucial basics. Getting themselves familiar with common terms and entry-level options trading strategies is the least they should do before trading options.

How Can I Start Trading Options?

You can start your options trading through simple applications to online brokerage. Another requirement is to have a margin account. After getting the approval, you can enter orders to trade options in the same way you trade stocks. An option chain is to determine which underlying, expiry date, strike price, etc.

How Much Can a Beginner Make Trading Options?

The rate ranges from 10% to 50% per trade. For example, if you start with $10,000 in an options contract, you can earn from $250 to $1,000. Yet, realistic trading involves risks so it is crucial to stay focused on the enhancement of trading knowledge and risk management.

When Do Options Trade During the Day?

You can trade options during normal stock market hours, from 9:00 AM to 04:00 PM EST.

Before You Go

Our guide on options trading for beginners shares basic strategies to help novice traders maintain their profitability amidst the volatility. Besides, you can find answers to relevant aspects, such as expected income from options trading, popular platforms, etc. Hopefully, this blog can help you gain more confidence to start your options trading career. Stay tuned for our next articles with deep dives into not only options trading but also other instruments!

Article Source: https://libraryoftrader.net/options-trading-for-beginners

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Happy Asian Panda Fire Flowchart Reddit ?

Happy Asian Panda Fire Flowchart is a flowchart of the concept FIRE created by a Reddit user named Happy Asian Panda, whose work has been published on Forbes. 

This flowchart shows you how to create a budget and increase the complication of the strategies for portfolio building in a very simple and easy language. It also shows you how to include a health savings account (HSA),Roth IRAs, and other types of investment plans to scale your revenue. 

With the Happy Asian Panda Fire Flowchart, users can see at what point in their trip to pay off particular types of debt, which may be a huge roadblock for those trying to decide whether or not to increase their investment or pay off debt.

What is the Happy Asian Panda Fire Flowchart ?

Why did the Happy Asian Panda Fire Flowchart Reddit photo become viral on Reddit?

After Happy Asian Panda published his FIRE flowchart photo on Reddit, it became trending and caught the attention of many Internet users at that time. A number of people across social media platforms join and express their curiosity about this topic. The Happy Asian Panda Fire Flowchart Reddit photo now has various versions and is still the looking forward of those who are interested in making steady profits and expanding their finance funds. 

It’s never too soon to prepare for your early retirement

Why are the first steps of early retirement essential?

Your retirement expenditures and the length of your retirement must be estimated when preparing for retirement at any age. It’s entirely up to you to choose how early you can retire. If you’re in good health, your life expectancy may be as high as 90 years old, therefore deduct this age from that figure.

In addition, if you build a good money management plan from an early age, you will get the option to pick whenever you want to retire. It’s possible that you’ve already decided that you’ll never retire. However, if you’ve worked for 30 or 40 years, you may be ready to take a break and recharge your batteries. You’ll be able to take early retirement if you’d prepared beforehand. If you’re content to work for as long as you wish, you may simply pass on your money to the next generation when you die.

How to create the right plan for your early retirement?

Keep up with your retirement calculators’ suggested monthly savings amount. If you can’t, consider making some budgetary changes, such as cutting down on luxuries and dining out less often. Other options include beginning a side business or seeking promotion.

The application of Happy Asian Panda Fire Flowchart Reddit to your real-world plan

In this FIRE flowchart, Happy Asian Panda emphasized the importance of saving, investing, and paying off one’s debt. Frugal folks may not have a hard time adopting a FIRE lifestyle. To be successful, it requires the use of sound strategy, and the methods of Happy Asian Panda Fire Flowchart Reddit will assist you in achieving this goal. 

Article source : https://libraryoftrader.net/what-is-happy-asian-panda-and-fire-flowchart

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Common Straddle and Strangle Option Strategy

Introduction

When taking on options trading, new commoners usually begin with basic strategies for calls and puts including purchasing puts to provide temporary downside protection and selling covered calls to generate potential income. Although it is not compulsory that you have to move on to using more complex ones like straddle and strangle option strategy, having the overall understanding as well as knowing the differences between straddles and strangles will surely help investors make better decisions in their trading plans.

Straddles and Strangles Explained

Unlike other strategies, straddles and strangles are magnitude-driven instead of being based on the direction of the price movement. These two strategies share the process of buying an equal number of calls and puts with the same expiration date. Here’s the end of their similarities. While a straddle options strategy has a common strike price, a strangle includes out-of-the-money calls and puts and has two different strike prices.

Unlike some traditional financial markets, some options strategies require high volatility to make profit.

Common Straddle and Strangle Option Strategy

Long Straddle

When you are expecting a change in the stock price but just have no clue of the direction it will head, you can implement the long straddle. The strategy involves buying both a call and a put at the same strike price A and expiration date.

Considered the best of both worlds since the two contracts give the buyer the right to buy as well as to sell the stock at strike price A, with a considerable cost of course. Most of the time, a straddle is set up with the call and the puts are at-the-money or near the strike price as possible.

Short Straddle

The short straddle shares a mutual aspect with the long straddle as they only need one strike price. The strategy is often implemented if you are expecting minimal movement in the stock price. When you set up the strategy, sell both a call and a put at the same strike price A and expiration date.

By selling both options, your possible profits will increase more than those you would otherwise achieve from selling a single contract. As the strategy comes to action, you will want the volatility to decrease and the market price to make no sudden changes. If the stock price soars, your loss can simply go limitless. If it plummets, the cost will still be significant but limited to the strike price excluding the net credit received from selling the contract.

Long Strangle

Unlike the two strategies mentioned above, the long strangle needs two values as strike prices when you are expecting a considerable fluctuation of the market price. During the setup, you buy a put at strike price A and a call at strike price B and hope for the highest state of volatility to hit the market.

The strategy profits when the stock price makes strong moves in either direction just like the long straddle. The difference between these two strategies is that you have two strike prices for the two legs of the trade. Both should be out-of-the-money, hence the reason why we need the high volatility and significant price changes before you can actually make profits.

Some contracts are simultaneously set up as protection against possible risk.

Short Strangle

Like the short straddle, advanced traders should consider running this strategy when expecting the market price of the underlying stock is making almost no remarkable changes or experiencing a decrease in the implied volatility.

During the short strangle, you sell a put at strike price A and a call at strike price B. Generally, the stock price is expected to stay between these two points and ideally plateau out becoming worthless. 

Conclusion

These strategies above are considered for experienced and seasoned traders already with years spent doing options trading. If you are just a fresher embarking on this new promised land, make sure you have a thorough understanding and careful preparation so that you can still know what should the situation turn against your favor. Remember to check out other guides on options trading. Stay tuned!

Article Source: https://libraryoftrader.net/straddle-and-strangle-option-strategy

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Is Options Trading Worth It?

‘Is options trading worth it?’ You should ask this question to uncover aspects, both good and bad, before getting your blood money on this instrument. It is crucial to learn the advantages you can enjoy and the risks you should be careful of. This article walks you through such facets so that you can answer whether options trading is worth it or not.

Why Should You Consider Options Trading?

Among many trading instruments, the option stands out as the top pick. It must have some fascinating advantages that need our discoveries.

You Can Reduce Cost

Compared to stocks, options require less upfront investment. The cost of buying an option includes the price of the option, trading commission, and premium amount. It is a more economic way than owning the actual shares.

You Can Use Options To Hedge Against Risk

When trading options, you undertake less risk than trading equities due to the requirement of less financial commitment and the substantial imperviousness to the effects of gap openings.

You Can Earn High Potential Returns

From the point above – cost reduction and the same-same earnings, the profits from options trading will increase. With the equivalent amount of shares, options can help you pay less than direct ways.

You Can Apply Various Strategies

With options trading, you always ‘one way or another to earn high profits or cut down on potential losses. ​

It Does Not Occupy All Your Time

One of the overlooked facets is time management or work-life balance for traders. The image of being a trader relates to being glued to monitoring screens. So, you might question what you trade to earn money while you have no time to enjoy life!

Are There Any Drawbacks of Options Trading?

After reading the benefits that options trading offers, ‘what a perfect instrument to trade!’ might be what you think of. Yet, everything has its dark sides which are crucial to see for the sight of the whole landscape! So, we share with you a brief walkthrough of some disadvantages of options trading.

Suffering High Commissions

While the cost of buying direct shares is higher than using options, commissions of weekly options can cover the difference. It is possible to have commissions exceeding 30% of your investments. So, it raises concerns about the game of mind rather than the dependence on sheer fluke or instincts.

​No Exception With Time Decay

Time decay, also known as theta – an option Greek, relates to the reduction of an option’s value as it reaches the expiration date.

Complex Frameworks Are the Real Challenges

Don’t take options trading as an impossible mission as we can sort it out. Yet, it is not an easy-peasy task for novice traders or the faint of hearts.

Who Should Trade Options?

Though options trading is not easy, if you are into learning and practicing, you can become a master.

When Should You Trade Options?

Let’s trade options when the market is open, specifically from 9:30 am to 10:30 am. The first hour has the most volatile price movements which provide great chances to earn high profits (if having effective strategies).

Are Options More Profitable Than Stocks?

It depends. If the stock prices witness a significant rise, the purchase of a call option generates much higher profits than owning stocks.

Is Options Trading Better Than Stocks?

Well, it is fair to say that there is no better trading instrument than any other. The question should be ‘stock trading vs. options trading: which is more suitable?”. ​

In a Nutshell

So, is options trading worth it? The part of answering this question should be under your charge. There are advantages and disadvantages to all instruments, and options are not an exception.

Article Source: https://libraryoftrader.net/is-options-trading-worth-it

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How to Develop a Trading Strategy: A Complete Guide

How to develop a trading strategy is hatever kind of financial instruments you are trading, there are two common requirements for trading consistently profitably: a set of sound trading strategies and an excellent money management system. Therefore, ‘How to create a trading strategy?’ is among the first questions one asks when they start trading. Although there is no trading strategy with a 100% win rate, we all need one to remain focused amid the huge inflow of news and economic data that can seriously impede our analysis process. With this blog, you will learn the definition, the importance, as well as how to develop your own trading strategy for higher profitability and lesser risk. 

Every trader needs trading strategies to navigate volatile markets.

What Is a Trading Strategy?

A trading strategy is a fixed plan designed to achieve a profitable return by going long or short in financial markets. A properly researched trading strategy should be consistent, objective, quantifiable, and verifiable.

Understanding Trading Strategies

A trading strategy includes a well-considered investing and trading plan that specifies investing objectives, risk tolerance, tax implications, and time horizon. To develop a trading strategy, a trader needs to research, adopt, then adhere to ideas and best practices. Making strategies for trading includes developing methods that include buying or selling stocks, ETFs, bonds, or other investments and may extend to more complex trades such as options or futures.

A solid strategy helps you stay focused on your trading goals

Why Is a Trading Strategy Important?

No matter the reason one starts trading, the ultimate aim is to achieve consistent profitability in the markets. A trading strategy is developed for the purpose of ensuring they will stay on track on their journey to their desired destination. And here are the main reasons why you should learn how to make strategy for trading. 

Sticking to a trading strategy allows you to stay focused, especially for novice traders who do not have profound knowledge of the pricing characteristics of a certain asset or asset class. With a predetermined trading strategy based solely on price action, you will be able to profit, disregarding the constantly incoming news.

With a solid strategy, you will be able to assess, and thus improve your performance. By adjusting certain parameters and comparing the new results to the historical data, you will be able to determine whether the upgrade was successful or not.

How to make strategy for trading

How To Develop a Trading Strategy?

Here are the detailed guidelines on how to develop a trading strategy for novice traders. With these 10 steps, you will be able to make your very first trading strategy that might not be profitable but indispensable for your trading journey. 

Step 1: Form Your Market Ideology

Before making your own trading strategy, you should do extensive research about the chosen markets, both technical and fundamental analysis, to form your market ideology. 

Step 2: Choose A Financial Market

The rule for a profitable trading strategy is that you must understand the market you choose to trade.

Step 3: Pick A Trading Time Frame

Ask yourself if you are more suited to quick scalping or longer timeframes.

Step 4: Pick A Tool To Determine The Trend

Choose a tool to help you judge the market context to see if it is rising or going sideways. 

Step 5: Decide Your Entry Trigger

You need an objective entry trigger to enter the market without hesitation. Consider bar, candlestick patterns, or oscillators like the RSI and stochastics.

Step 6: Define Your Exit Trigger

The market can always go wrong and you need to plan to exit without heavy losses. Even when the market goes your way, you also need an exit plan to take profits.

Step 7: Limit Your Risk

Watch your position size carefully to control how much money you are putting on the line.

Step 8: List Down Your Trading Rules

To ensure discipline and consistency, you should write down your trading rules.

Step 9: Backtest Your Strategy

Backtesting your trading strategy is a great way to develop your market instinct and improve your trading strategy for higher profitability.

Step 10: Always Look to Improve Your Trading Strategy

As stated above, there is no perfect strategy. But you can always improve yours with growing experience and knowledge.

Learning how to develop a trading strategy is not a piece of cake. If your first strategy does not work, don’t sweat it, it is not static, it is a living object that can always be improved.

Article Source: https://libraryoftrader.net/how-to-develop-a-trading-strategy

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What Is Forex Options Trading? How to Trade FX Options

Forex options trading is a financial derivative that gives the right, but not the obligation, to buy or sell a currency pair at a set price, known as the exchange rate exercise on a specific date that is called the expiration date.

What Is Forex Options Trading?

Forex options trading (FX options trading) is derivatives that give the buyer an option but no obligation to buy or sell (call and put option) foreign currency at a certain exchange rate before or on a specified date before. It is also related to the strategies available in the forex market.

In-depth Understanding Forex Options Trading

Forex options trading is a strategy that gives currency traders the ability to realize some of the payouts and excitement of trading without having to go through the process of buying a currency pair.

The difference between forex options trading and other options trading is that traders do not need to deliver physical assets. Forex options trading allows traders to choose a price and expiration date to suit their profit or risk strategy needs. 

While the futures trader must fulfill the terms of the contract, options traders do not need to do so at expiration. There are many reasons to prefer forex options trading. When making this trade, the trader can limit the risk. The trader only takes the premium to buy the options.

Forex options trading is complicated because once you buy an option, you cannot re-trade it or sell it. The premium is also very high with the risk, market volatility, current price of the currency pair, and expiry time. FX options trading has many moving parts so it is very difficult to determine their value.

The difference between forex options trading and other options trading

Primary Types of Forex options trading 

SPOT – Single Payment Options Trading

Another type of option available to retail forex traders to trade currency options is single-paying options trading (SPOT). SPOT options cost more than traditional options, but they are easier to set up and execute.

The Traditional (Vanilla) Call/Put

The call gives the buyer the right to buy a currency pair at a certain exchange rate at some point in the future. A put option gives the buyer the right to sell a currency pair at a certain exchange rate at some point in the future. Both put and put options give the investor the right to buy or sell, but no obligation. If the current exchange rate puts the options out of the amount, the options will expire worthlessly.

How to Trade FX Options

Make Sure FX Options Are How You Want to Trade Currency

Besides forex options trading, you can also trade spot or forward FX forex.

Fully Knowledge About Options Trading

Some special knowledge to note for effective options trading is options trading terminology, determining the option’s price, learning about the Greeks, options trading strategies and choosing the time frame, etc.

Choose the Currency Pair You Want to Trade

There are over 80 currency pairs that you can choose from, including

Major currency pairs, eg GBP/USD, EUR/USD,  and USD/JPY

Minor pairs, such as SGB/JPY, USD/ZAR, CAD/CHF

Emerging currency pairs, eg EUR/RUB, USD/CNH,  and AUD/CNH

Exotic pairs, eg TRY/JPY, EUR/CZK,  USD/MXN

Open a Trading Account

With FX options trading, you trade with a CFD account. A CFD is a derivative product, which means you only need a small amount of margin – called a margin to open a position.

Choose Your Time Frame & FX Option

Determine whether you will place a buy or sell order. If you predict that the market will rise, place a buy order and vice versa. In daily options trading, you determine whether the market will be higher or lower than a certain price when the market closes on the same trading day.

Pick Your Strike Price

The strike price in forex options trading is the price at which a combination of options can be exercised. The underlying market price must go through the strike price to execute the trade and it is called money. If the money runs out, which is not possible, the option will expire worthlessly.

Call and Put daily price

Open And Monitor Your Position

Once you have selected the currencies to buy or sell, you need to track them on certain forex trading platforms. Traders can use tools and indicators to measure and evaluate the health of the currency they are trading. You should also keep an eye on news and events that are constantly updated as it can affect the price of the forex pair you own.

Forex Options Trading With Example 

If you are bullish on the Euro and predict that the US dollar will also rise. Then you buy a currency call option on the euro with a strike price of $115. When you buy a contract, the spot rate of the euro is equivalent to $110.

The Bottom Line

The combination of forex trading vs options trading requires thorough knowledge and understanding. These are just the basic steps so that you can somewhat understand forex options trading. Information about them is a lot on the internet but to be on the right track, you can refer to trading courses from top experts, which will definitely help you. Check out more of our useful blogs because it’s free to learn trading.

Article Source: https://libraryoftrader.net/forex-options-trading

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Value Investing Vs. Growth Investing: Different Good Points

Value investing vs growth investing has no difference in profit potential because they both have their own advantages and disadvantages. Choosing which form to invest in requires you to have the right view of them and understand which one is suitable for your tolerance.

What Are Differences Between Value Investing vs Growth Investing?

Value investing vs growth investing has distinct differences. Choosing the type of value investing or growth investing also depends on many factors. ​

What Is Value Investing?

Value Investing is the strategy of picking value stocks that appear to be trading for less than intrinsic value or some form of fundamental analysis. Investors/traders tend to hunt for stocks with future potential but the stock market is underestimating them.

What Is Growth Investing?

Growth investing is a strategy focused on increasing value capital. They buy growth stocks in small, young companies with an impressive capacity for profit. However, these companies also contain high risks because they have not been tested.

Which Is Better: Value Investing or Growth Investing?

Growth Investing

Growth investing has great potential for returns relative to the overall market (according to analysts’ results). This type of investment is most commonly found in small and mid-cap companies.

Value Investing

Value investing is often found in larger, older companies. Investors look for stocks with low value but the true value can be a lot higher.

How Do Growth And Value Investing Overlap?

Depending on the criteria used for selection, you will see stocks included in both value and growth mutual funds. It’s very much about a distinction not established in stone. A stock can evolve over its lifetime from value to growth or vice versa.

When Will Value Outperform Growth Again?

There is no best answer to this question. However, many experts still believe that value investing will be the preferred choice in the market. Weniger asserts that inflation helps value stocks more than growth stocks.

The Bottom Line

Investors can own both growth and value stocks. Each group has its own attractive qualities. Diverse exposure to both in your portfolio can give you the best of both worlds. It is also good if you identify more investment styles than others. Once you’ve completed the goals for your investments, you’ll have a better understanding of whether you’re a growth investor, a value investor, or part of both.

Article Source: https://libraryoftrader.net/value-investing-vs-growth-investing