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Investor Risk Profile: What It Is and How to Determine It

Author: Maks Artemov

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Dear Clients and Partners,

Work in financial markets and investing have always been associated with risks. Every investor should keep in mind that they might not only gain but also lose due to price declines and irreparable losses.

Before beginning to invest, decide for yourself what risks you are ready for on the way to your goal. This article is devoted to the risk profile of an investor and controlling risks and losses.

What risk and risk profile are

Risk is the possibility of partially or completely losing your investments. The main task of each investor is to decrease risks and limit possible losses by any acceptable level.

Risk profile, or investment profile is the individual attitude of the investor to possible risks in his work.

Types of risk profile

An investment profile depends on the personality of the investor, the aims and length of investing. In trading and investing, there are three types of risk profile: conservative, moderate, and aggressive.

Conservative risk profile

This approach suggests that the investor is not ready for big risks and agrees on a minimal profit from ivesting. Their goal is to make a profit that will compensate for inflation and this save their capital.

As a rule, a conservative investor has a calm, balanced character and analytical mind. They take any losses very seriously and avoid unnecessary risks. Their approach to choosing instruments is scrupulous and takes time.

Moderate risk profile

By this approach, the investor assumes certain risks to increase profitability. Current minor losses are considered normal and can be withstood for the sake of better perspectives.

Low profitability does not satisfy the investor, so they look for the ways to improve it, disregarding higher than conservative risks.

Aggressive risk profile

Aggressive approach is good for risky people. They are ready to suffer serious controlled losses to get super profits fast.

In other life spheres, such people are also prone to risks and making fast decisions. Such investors have well-trained and developed intuition. Losing a part of their capital is a normal part of work for them and does not influence their future investment projects. The main goal of risky investors is highly risky assets that yield impressive revenue.

How to determine investor risk profile

The main goal of determining a risk profile is checking whether a future investor is prone to risks. If they are ready for all sorts of risks having no experience, this might be a real problem. Fast loss of the capital might undermine their future investment process.

There exist special tests for determining investor risk profiles. One should answer the questions based on their emotions and experience. It is vital to be honest because this is the only way to select your best investment strategy.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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How to Trade by One-Two Strategy

Author: Victor Gryazin

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Dear Clients and Partners,

This article describes a plain short-term trading strategy based on the signals of the popular Bollinger Bands trend indicator. The article deals with the peculiarities of the strategy, its use in trading, and examples of buying and selling.

What one needs to know about One-Two

One-Two is a type of reversal trading systems based on Bollinger Bands signals. The strategy is easy to master and uses just one tech indicator with altered parameters. Note that it is a default indicator in almost all trading terminals, including MT4 and MT5.

The trading approach is based on using bounces of the quotes off the outer borders of the Bollinger Bands channel that act as dynamic support and resistance levels. After a bounce, the price is expected to return to the middle line of the channel.

Which instruments, time frames, and indicators can be used

For trading by the strategy, you can use currency pairs, oil, gold, and other commodities. Recommended TFs are M15, M30, H1, H4, and D1.

Indicators:

Bollinger Bands (Period 20, Shift 0, Deviation 2) — green lines on the chart.
Bollinger Bands (Period 20, Shift 0, Deviation 3) — orange lines on the chart.

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How to buy by One-Two

Conditions of opening a buying position are as follows:

  1. Wait for the price to get between the lower green and orange indicator lines. Mark this candlestick as 0
  2. Wait for two more candlesticks to form. If they show a reversal upwards with close prices no lower than those of candlestick 0 — open a buying trade after candlestick 2 closes. Candlesticks 1 and 2 have white bodies, or the first one is a Doji and the second one has a white body.
  3. Place a Stop Loss 5 points below the lows of candlesticks 1 and 2.
  4. Take the Profit as soon as the quotes reach the middle line (red colour) of Bollinger Bands. Or, if the movement is strong, you can take the SL to the breakeven when the price reaches the middle line and wait for the quotes to grow to the upper green line of the indicator channel.


Closing thoughts

The One-Two trading strategy is based on the signals of a popular trend indicator Bollinger Bands with different parameters. The strategy is based on reversals of the quotes from the borders of the price channel that are used as dynamic support/resistance levels.

This strategy is rather universal and can be used for various instruments and on various TFs. Before trading for real, practising on a demo account is strongly recommended.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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RoboForex lowers margin requirements for trading Gold
 
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Dear Clients and Partners,
 
Effective 8 May 2022, the margin requirements for positions in the XAUUSD pair will be reduced by two. If you already have open positions in this asset or are planning to open new positions, please note the following changes.
 
How will this affect positions and orders?
 
On real MetaTrader 4 / MetaTrader 5 accounts:
  • On 8 May 2022, the margin requirements for positions opened in XAUUSD will be halved.
     
  • After this date, all new positions will be opened with margin requirements twice lower than before.
Pay attention to Expert Advisors (EA)
 
If you are using trading algorithms, check their settings to make sure they are working correctly after the lowering of the margin requirements for the XAUUSD instrument comes into effect.
 
The rest of the trading conditions remain unchanged. Please take this information into consideration when planning your trading activity.
 
Invest with RoboForex on Prime accounts
 
When trading on Prime accounts, you get the best conditions available in the company.
  • Low spreads from 0 pips
    Trade with the lowest average spread amongst all RoboForex account types.
     
  • Maximum leverage 1:300
    Choose the most suitable leverage value – from 1:1 to 1:300.
     
  • Reduced commission
    Pay less commission for the trading volume of Currencies, Metals, Indices and other instruments.
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Sincerely,
RoboForex team
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What Is Blockchain

Author: Victor Gryazin

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Dear Clients and Partners,

Today’s article is devoted to the blockchain technology: its history, work nuances, main types, and spheres of application – all main answers are given.

What is the idea of blockchain

Blockchain is a digital database accessed by most users online. It is an unchangeable distributed digital information register, containing data about transactions among other things.

This technology writes down the data in special blocks, inextricably bound to each other. Each block of the chain has certain containers for data storage that close as soon as they are full and get bound to a block received previously, creating the chain.

Each block of the chain gets an exact time mark as soon as it is added to the chain. As long as each block contains information about the previous one, the chain contains information about each operations ever carried out in the database.

Already-existing blocks cannot be removed or edited – only new ones can be added. This peculiarity makes hacking and editing the content of the register impossible.

blockchain-1.png

How blockchain works

  • Transaction is a data exchange between two people. All transactions within the network (money depositing and withdrawal) have a unique 256-bit number called “hash”. It normally looks like a random set of letters and digits. A sequence of hashes linked to each other create a safe interconnected chain.
  • Confirmation is a process of checking compliance of a transaction with the protocol. Transactions are checked in nods. Upon successful validation, the transaction gets written down into a block.
  • Examination is data control in a block. Before the block gets linked to the chain, the algorithm examines it for any past editing. The rules by which examination is carried out are called consensus.
  • Mining is a process of “solving the equation” (creating a new block) by variable selection. This algorithm is called Proof of Work.
  • Protection is eliminating from the chain a block that has been edited. Changes in one block lead to changes in all subsequent blocks. The system detects them fast and reacts accordingly.


blockchain-2.png

Where is blockchain used

The system is actively developing, taking root in various spheres of economy:

  • cryptocurrencies,
  • NFT,
  • banking sector and finance,
  • stock exchanges,
  • gaming industry,
  • cyber safety,
  • voting systems in election.


Bottom line

Blockchain is a data processing technology of processing, storing, and sending data. Every day it enjoys more and more demand. The system was created long ago but started developing after cryptocurrencies appeared and became popular. Today blockchain has become mainstream, integrated in various spheres of the society and sectors of global economy.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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How to Set Up Charts on MetaTrader 4

Author: Victor Gryazin

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Dear Clients and Partners,

This article is devoted to working with charts on a popular platform MetaTrader 4. Charts help to track and analyze quotes movements of financial instruments, as well as to forecast their future behaviour.

How to open chart window

A new chart on MetaTrader 4 can be created several ways:

  • Click File – New Chart, and then choose a financial instrument.
  • In the Market Watch window, choose a financial instrument, left-click and drag it to the work area of the terminal.
  • Right-click a ticker in Market Watch, and then click Chart Window.
  • Click Window – New Window – an instrument from the list.


mt4-charts-1-1067x630.png

Adding indicators to the chart

To add indicators to the chart click Insert – Indicators and choose the one you need. Alternatively, click an active button with a green cross in the upper menu.

MT 4 features many popular indicators of the following groups:

  • Trend
  • Oscillators
  • Volumes
  • Bill Williams
  • Custom (indicators added by the user).


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How to save chart template and profile

After editing is complete, you can save your settings as a template. Saved settings will then be applied to newly opened charts.

To save your settings, right-click the chart and choose Template – Save Template – enter name. The template can than be uploaded to the chart the same way: right-click – Template – Load Template – choose the one you need.

You can create different templates with various settings: chart design, indicators, and instruments. The whole set of open charts with their properties and templates is saved to a different profile.

To save the profile, click File – Profiles – Save As – enter name. Alternatively, click a button with the name of the active profile at the bottom of the terminal and choose the one you need from the unfolding list.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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4 Stocks for Trading in Uncertainty

Author: Eugene Savitsky

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Dear Clients and Partners,

Inflation, recession, stagnation, stagflation — and other scary words that investors keep hearing in the stock market. What else? Toughening of credit and monetary policy, cutting down on the CB balance, winding up the QE programme. With such news, it becomes hard to consider buying any stocks.

When stock indices drop abruptly

Normally, the stock market experiences panic and falling of indices right in the times when no one suspects any trouble. Investors are simply buying stocks and watching their profits grow.

Negative news does not always provoke immediate reaction: understanding the scale of a future disaster needs time. However, more experienced investors assess the situation fast and start acting at once.

As a result, the quotes in the stock market start going down and speeding up because other investors have no more time to think. Hence, stock indices drop when investors take their profit, not trying to make money on the decline.

What the market sentiment is now

The poll carried out in March by Investors Intelligence demonstrates that the number of those planning to buy shares had dropped to 30%, while the number of those who want to play short had grown to 34.5%. In other words, the current market is bearish.

Over the last 12 years, this has happened 6 times, and the quotes of S&P 500 always reached some lows from where it then started to grow. Market players either opt for cash or for short positions — and this is what stimulates growth of stock prices.

There is some saved cash that can support the stock market and increase the demand for shares. And there are sellers who will have to close their positions if the prices grow, which will also lead to an increase in quotes.

Union Pacific

The shares of Union Pacific Corporation (NYSE: UNP) are trading in an uptrend. and at the first glance, there are no hints on a decline. However, upon a more thorough investigation, it can be noticed that volatility of the shares has increased. Quite often, this means the trend is coming to an end.

UNP.jpg

Upon sky-rocketing to 280 USD, the quotes quite soon returned to 240 USD and have already broken through it. This is the key level for the bulls because they have been holding it since December 2021.

The bears had made 12 attempts to break through it but always failed – until this time. Now we should expect further falling of the quotes to the support level of 220 USD. The bears are also supported by the bad news around and high market volatility.

Closing thoughts

When fundamental analysis is no help to make investment decisions, tech analysis will save us. It shows a fight between bulls and bears, and a moment will come when we will understand who will win.

In such cases, a trader should stand on the stronger side and trade in this direction. When fundamental and tech analyses agree, the probability of making a profit increases. Note that today, the stock market sentiment is negative.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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How to Trade by Cup and Handle Pattern

Author: Victor Gryazin

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Dear Clients and Partners,

This article is devoted to the Cup and Handle graphic pattern, providing the main information, such as how it forms and how to trade it.

What one should now about Cup and Handle

Cup and Handle is a tech analysis pattern that forecasts the continuation of the current trend after the price stops consolidating.

The pattern was discovered and popularised by a famous trader and investor, author of several books on the stock market and the founder of a business newspaper Investors Business Daily William O’Neil.

Cup and Handle forms in an uptrend or downtrend; it is a correctional price movement that consists of two parts. The first part is the Cup and the biggest part of the correction, and the second part – the Handle – is the smaller finishing part.

The pattern can be bullish or bearish. The first one is the actual Cup and Handle that appears on the chart in an uptrend and signals about further growth of the quotes.

The bearish pattern is called Inverted Cup and Handle; it appears on the hart in a downtrend and signals about the continuation of the latter.

How does bullish Cup and Handle form

  1. After a downward correction starts on the chart, a price range forms that looks like a bowl or a rounded bottom. Ideally, the Cup has two same highs on both sides but this is a rare occasion.
  2. After the second high of the Cup forms, the price pulls back, forming the second correctional phase that resembles a Handle. This will be a minor decline (from 1/3 to ½ of the Cup) before a subsequent breakaway.
  3. An entry point for a buy appears when the Handle is complete and the quotes break the resistance level away upwards. It goes through the second high and links the Cup to the Handle.
  4. The first rough goal for the pattern after the breakaway will be the height of the Cup. Losses should be limited if the price drops below the low of the Handle.


Cup-bullish.png

How to use Cup and Handle for trading

William O’Neil who discovered the pattern used it for trading stocks and preferred longer timeframes. He stated that the pattern on D1 should take 7 to 8 weeks to form.

However, this pattern is rather universal and can be used on various TFs with currency pairs, stock indices, oil, gold, and other liquid assets.

There are several factors potentially supporting the pattern:

  • both highs or lows of the Cup are on more or less the same level;
  • the Handle is no higher than the ½ of the Cup;
  • the breakaway of the resistance/support level increases the volumes.


Example of buying by Cup and Handle

Bottom line

The Cup and Handle pattern became popular thanks to a famous trader and investor William O’Neil. This tech analysis pattern of trend continuation is quite a rare occasion on charts.

Cup and Handle can be used for trading stocks and other liquid assets. Before using the pattern for real, practicing on a demo account is recommended.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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How to Trade by EMA + Awesome Oscillator Strategy

Author: Andrey Goilov

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Dear Clients and Partners,

The medium-term trading tactics that unites a trend indicator EMA and Awesome Oscillator is a setup for working by the trend.

The authors decided against complicated solutions and supplied the advantages of a Moving Average, a most efficient instrument for determining the market trend, by the potential of an indicator confirming market entries – Awesome Oscillator.

It seems that a combination of a popular instrument and oscillator will always be the best solution for trading the trend.

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The strategy is meant for H1 and larger timeframes. This means the trader can work both intraday, letting the price reach its goal within a couple of hours, and leave trades for the next day.

The article describes the right way to combine signals from the EMA and AO on H1 and how to place the Stop Loss and Take Profit.

How to set up indicators

The authors of the tactics never specified which instruments are to be used for work, yet we are convinced that traders should use currency majors and any other assets that demonstrate good lengthy trends with deep corrections.

To go by the strategy, we need an Exponential Moving Average with period 200 and an Awesome Oscillator with standard parameters. These indicators can be easily found on any trading platform and added to the chart. In MetaTrader 4, the algorithm is as follows:

  • Insert – Indicators – Trend – Moving Average
  • Insert – Indicators – Bill Williams – Awesome Oscillator


How to use EMA

Closing thoughts

The strategy using EMA and Awesome Oscillator is a very simple option of trading the trend that also has quite simple rules.

To enter the market, the trader only needs to check signals from two indicators. The advantages of the strategy feature a small Stop Loss and availability of necessary indicators on most popular trading platforms.

The drawbacks of the platform include no chance of entering the market by the trend for the second time, because the signal forms only when the price breaks through the EMA line. While the price remains above this line, it gives no entry signal, and the instrument keeps going by the trend, so the trader loses a part of this movement.

Moreover, the authors leave the profit size to the trader’s discretion, giving just the minimum that equals the SL. Working by the strategy, the trader will understand that, firstly, a bar of the opposite colour on the Awesome Oscillator histogram is a good exit option, and secondly, the Asian trading session is not the best time for opening trades.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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RoboForex received awards in two prestigious nominations
 
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Dear Clients and Partners,
 
Our team continues developing and improving trading platforms, services, and financial products offered to the company’s clients. We’re very happy to announce that this year our activities were highly appreciated by the acknowledged experts of the industry.
 
RoboForex received two awards
 
The company was recognised as the “Most Transparent Broker” by the British magazine World Economic Magazine. Another business media, International Business Magazine, named RoboForex the “Most Trusted Broker”.
 
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We’d like to thank our clients for their choice and trust!
 
RoboForex cares about your investment interests
 
RoboForex supports its clients and creates trading opportunities that will help them in achieving their financial goals.
  • Over 12,000 instruments
    Stocks, Indices, Cryptocurrencies, and other assets.
     
  • Popular trading platforms
    Choose from reliable terminals, such as MetaTrader 4 and MetaTrader 5, or use a multi-asset platform named R StocksTrader.
     
  • Best trading conditions on Prime accounts
    Spread from 0 pips, 100+ instruments, leverage 1:300, execution from 0.1 sec.
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Sincerely,
RoboForex team
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RoboForex: upcoming changes to the trading schedule in view of the Whit Monday and holidays in the US and the UK
 
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Dear Clients and Partners,
 
We are informing you that changes will be made to the trading schedule due to the Memorial Day celebration in the US, the Late May Spring Bank Holiday in the UK and the Whit Monday in several European countries.
 
This schedule is for informational purposes only and may be subject to further change.
 
MetaTrader 4 / MetaTrader 5 platforms
 
Schedule for trading on Metals (XAUUSD and XAGUSD), US indices (US30Cash, US500Cash, and USTECHCash), the Japanese index J225Cash, and CFDs on oil (Brent and WTI)
  • 30 May 2022 – trading stops at 7:40 PM server time.
  • 31 May 2022 – trading starts as usual.
Schedule for trading on CFDs on US stocks
  • 30 May 2022 – no trading.
  • 31 May 2022 – trading starts as usual.
R StocksTrader platform
 
Schedule for trading on US stocks and ETFs
  • 30 May 2022 – no trading.
  • 31 May 2022 – trading starts as usual.
Schedule for trading on CFDs on US stocks and ETFs
  • 30 May 2022 – no trading.
  • 31 May 2022 – trading starts as usual.
Schedule for trading on CFDs on US indices (US500, US30, and NAS100) and the Japanese index JPY225
  • 30 May 2022 – no trading.
  • 31 May 2022 – trading starts as usual.
Schedule for trading on CFDs on the UK stocks and UK100 index
  • 2 June 2022 – no trading.
  • 3 June 2022 – no trading.
  • 4 June 2022 – trading starts as usual.
Trading schedule on CFDs on German, Austrian, Danish, and Norwegian stocks
  • 6 June 2022 – no trading.
  • 7 June 2022 - trading starts as usual.
Schedule for trading on Metals (XAUUSD and XAGUSD) and CFDs on oil (WTI.oil, BRENT.oil)
  • 30 May 2022 – trading stops at 7:40 PM server time.
  • 31 May 2022 – trading starts as usual.
cTrader platform
 
Schedule for trading on Metals (XAUUSD and XAGUSD)
  • 30 May 2022 – trading stops at 7:40 PM server time.
  • 31 May 2022 – trading starts as usual.
Please take note of the above trading schedule changes when planning your trading activity.
 
Sincerely,
RoboForex team
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How to Avoid Traps for Bulls and Bears

Author: Victor Gryazin

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Dear Clients and Partners,

You must have heard about traps for bulls and bears appearing on charts. This article tries to get into more detail of the issue, telling you how to detect places of such traps and how to avoid them.

What are traps for bulls/bears

A bullish/bearish trap is a chart situation when the quotes pretend to break through an important price level and then reverse sharply and go in the opposite direction. As such an important level, we can see support/resistance levels, trend lines, or graphic patterns. Bullish/bearish traps are frequent in financial markets.

The idea is that traders open their positions by formed price signals by the current price movement. However, for various reasons, the opposite side turns out much stronger and suddenly reverses the price in the opposite direction.

This makes traders panic and close initial positions, which only enhances the opposite movement. In other words, bulls or bears get trapped and close their positions at a sudden price reversal, thus supporting the movement in the opposite direction.

How to detect traps for bulls

Most often, bullish traps rest near important resistance levels that have already been tested by the price. The price seems to break through such a level upwards, and bulls open long positions, expecting the price to keep growing. However, it reverses and goes down.

The sign that the trap has been triggered is the return of the price to the area below the broken resistance level. Bulls are playing long and have to make decisions about closing their trades.

Reversing the quotes down, bears have proved their power and readiness to fight back. Bulls start closing their buying trades, Stop Losses get triggered, so the downward momentum gets stronger, and the trap locks.

Traps-bull-1-1321x828.png

Another place where a trap can form on the chart is a strong resistance line. The situation is similar to the one above: the resistance line is broken through upwards, bulls hurry to open buying trades, but all of a sudden, the quotes reverse downwards, and the price drops below the line. Then the decline may continue.

How to detect bearish traps

A trader can get into a bearish trap when they open a selling position at a breakaway of a strong support level. Inspired bears open short positions, counting upon further decline, but the quotes suddenly reverse and start going up.

Bears have open short positions that they need to close. As a rule, they do so if the price secures again above the support level, broken previously. Then bearish Stop Losses get triggered. As a result, the quotes get supported in their growth, and the trap locks.

Traps-bear-1-1322x828.png

Bottom line

Bearish and bullish traps are quite frequent on ptice charts. As a rule, they appear near important support/resistance levels or lines.

It is almost impossible to avoid traps altogether, but knowing their peculiarities, one can minimise chances of getting trapped and decrease possible losses.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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How to Buy NFTs

Author: Andrey Goilov

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Dear Clients and Partners,

NFT, or non-fungible token, is a new link in the evolutionary chain of cryptocurrency. It is a unique digital asset that can be anything like a piece of art or music, an extract from a movie, animation, or sports game, game items, etc.

Each such token gets written down in a blockchain under a unique ID with metadata — this exactly makes the file non-fungible. Today the article is devoted to the details of the NFT market: how and where to buy the tokens, and the details of work on trading platforms and with crypto wallets.

Where to buy NFTs

These days, there are plenty of marketplaces where one can not only buy but also sell NFTs. Each platform though has its rules and limitations.

Most of the markets are based on the Ethereum blockchain. Differences in most cases can be found in file formats and NFT prices. As a rule, these details are important for content creators, not buyers.

Platform types

  • Mass trading platforms. As a rule, these are the largest resources where any NFTs are available. An example is the OpenSea exchange founded in 2017, one of the first large platforms in the world.
  • Open marketplaces. These are free resources available to anyone. Content there differs in quality and themes because, again, it can be created by anyone.
  • Private marketplaces. Such platforms carry out accurate selection of NFT creators to provide for certain reputation and a catalogue of tokens. An example is SuperRare.
  • Game platforms. They exist thanks to computer games and virtual reality. An example is Sorare where one can play in a virtual football league, collect player cards as NFTs, and use them in competitions.
  • Sports marketplaces. These are popular websites where users can buy sports events as NFTs. An example is NBA Top Shot. It was launched in 2020, and since then there have been over 2 million purchases of NFTs there for more than $300 million.
  • Niche marketplaces. They specialise in trading one type of token, such as tweets, virtual land of the future, and other such quite special NFTs.


Which way one buys NFTs

Closing thoughts

Buying NFTs online is not as difficult as it might seem. One needs to register a crypto wallet, deposit it, register on a marketplace, and choose an NFT.

Experts forecast that the NFT market will remain popular, and its capitalisation will keep growing. However, there are risks: not all tokens grow, moreover — finding a suitable file for investing needs time. Also, make sure your transactions and asset storage are safe.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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How to Trade EUR/JPY

Author: Victor Gryazin

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Dear Clients and Partners,

This overview shares with you some important and useful information about the EUR/JPY currency pair: what it is, what trading characteristics it has, and how to trade it.

What is EUR/JPY currency pair

This currency pair is a cross rate of two popular Forex majors – EUR/USD and USD/JPY. They have already been described in our blog.

A cross rate is the price of a country’s currency expressed in the currency of another country and defined via the currency of a third one. As the latter, the US dollar is used, which is the main international reserve currency.

EUR/JPY represents the dynamics of the EU currency through the Japanese yen. The euro is the base currency of the pair, so the current price represents for how many yens one can buy or sell one euro. If the quotes of the pair go up, this means the European currency gets stronger. If the quotes go down, the euro gets cheaper against the yen.

eurjpy-1325x828.png

Ways of trading EUR/JPY

EUR/JPY is quite a universal pair, so various trading strategies are applicable to it. The most widespread ways of trading it are technical and fundamental analyses and indicator trading.

How to trade EUR/JPY by fundamental analysis

This approach means fundamental factors are analysed. Both short-term trading on important news and long-term trading on expectations of changes in the CB’s policy are possible.

Here is an example. At the beginning of 2022, due to the growing inflation the US and EU started winding up their QE programmes and gradually increasing interest rates to counter inflation. The US have already started increasing the rates, while the EU is getting ready for toughening the monetary policy.

Unlike these two, the Japanese economy has long rested in the state of deflation (the opposite to inflation), so the BoJ does not plan to increase the interest rate anywhere soon. Hence, the Carry Trade strategy has become popular again: it implies making a profit on the difference of interest rates, when a currency with a high interest rate is bought against one with a low interest rate.

Investors and traders started buying the USD and EUR against the JPY actively, hence, since the beginning of the year there has been a strong uptrend in the USD/JPY and EUR/JPY.
eurjpy-fundament-1319x828.png

Closing thoughts

EUR/JPY is the relationship of two very popular international currencies — the euro and the yen. Thanks to good volatility and a small spread, this currency pair is popular among traders. It can be traded by fundamental or tech analysis and with the help of indicators.

Beginners need to practice on a demo account first and switch to real trading only when they get a stable positive result.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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How to Use Accumulative Swing Index in Trading

Author: Victor Gryazin

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Dear Clients and Partners,

This article explains what Accumulative Swing Index is, what signals it gives, how it is calculated and set up in a trading terminal, and, naturally, how it is used in trading.

What Accumulative Swing Index shows

Accumulative Swing Index (ASI) was invented and made popular by a famous trader, financial analyst, and creator of several other indicators Wells Wilder. He described the work of ASI in detail in his book New Concepts in Technical Trading Systems, published in 1978.

For calculating ASI, prices of the current and preceding timeframes are used – Close, Open, High, Low. The results help to assess current price dynamics of the instrument in question. The indicator appears in a separate window under the price chart and looks like one main line.

The line allows seeing the direction of the current market trend and confirms (or not) breakaways and bounces off the support/resistance levels on the chart. Growing ASI confirms an actual uptrend and falling ASI indicates a downtrend.

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How to install Accumulative Swing Index to trading terminal

Accumulative Swing Index is not among standard indicators in most trading terminals, which means to use it in MetaTrader 4, one needs to download the installation file and install the indicator. The file can be found on, for example, MetaQuotes Ltd.

This is how ASI is installed on MetaTrader 4: Main Menu – File – Open data catalogue – MQL4 – Indicators – paste the file to the folder – restart the terminal.

This is how ASI is added to the price chart: Main Menu – Insert – Indicators – User – ASI.

Accumulative Swing Index is normally used with preset parameters (variable T = 300).

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Closing thoughts

Accumulative Swing Index is a price change indicator created by a famous market guru Wells Wilder. ASI helps to determine the direction of the current market trend and can become a good support to complex technical analysis.

For trading with the indicator, divergences and confirmations of support/resistance lines breakaways can be used. Before applying the signals for real, practising on a demo account is highly advisable.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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Fiat Currency: All One Needs to Know

Author: Andrey Goilov

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Dear Clients and Partners,

This article is devoted to the idea of fiat currency and everything behind this notion. What is fiat money? When and what for it appeared? What value does it have? Which advantages and drawbacks does it have? Answers to these questions and more are in the article below.

What is fiat money

Fiat money is the banknotes we keep in the wallet and the sums we look at happily, logging in the mobile app of our bank on the smartphone. It is not suported by the country’s gold reserves or other precious metals. It does not have any internal cost, and its face value is set and guaranteed by the state.

Today almost all popular currencies, such as the dollar and euro, are fiat. Their value is based on the opportunity to exchange them for goods and services, to be used as means of saving and account unit of the country’s economy.

Some think that as long as fiat money is not bound to any goods, a risk of inflation emerges, which, in turn, makes goods and services pricier. For example, in the times of gold standard, the amount of money depended on the amount of assets in the country’s reserves: more gold – more money.

Fiat money is substantilly influenced by the demand and trust of local people. If they stop believing in the national currency, they will reject it, and the demand for other assets and currencies will increase.

Advantages of fiat currencies

  • Fiat money is used for exchanging and storing value, which is essential for the functioning of the national economy;
  • Making fiat money is more economic than making currencies bound to certain assets;
  • Fiat money lets the government and Central bank stimulate the economy in times of crises and smooth out the aftermaths of sky-rocketing;
  • Fiat money is not a scarce or limited resource: the government can print as much as needed;
  • Central banks have full control over the supply of fiat money, which lets them manage liquidity and interest rates.


Drawbacks of fiat money

The strong economic crisis of 2008 demonstrated that Central banks cannot always hold back serious consequences of recession by directly regulating the money mass. Hence, global crises will come back from time to time, having absolutely different nature.

A currency bound to gold looks more stable compared to fiat money because of limited gold supply. Fiat money, on the contrary, has value as long as the government supports it. Tiniest problems in either economy or politics can provoke a surge of inflation.

There are examples of trying to get out of economic trouble by active money printing that le to hyperinflation and the national currency fully losing value.

Bottom line

Fiat money is not perfect as it has serious drawbacks, yet it has no better alternative that would fast and smoothly replace it as a means of exchange, payment, and value storage.

One could bring up cryptocurrencies that has been acquiring popularity recently. They are limited in quantity, its cost must be growing until the last coin is mined, and this is a victory over the inflation of fiat money. However, due to high volatility and virtuality this type of money has not yet become a full replacement for the “normal” one.

Experiments with tightly binding money to gold have not yet yielded satisfactory results either; and hyperinflation may occur to any printed currency. With all the drawbacks, however, fiat money lets the government and Central banks react timely to the changes of the economic environment and keep markets stable and makes it easier for consumers to buy and sell goods and services.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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How to Calculate Cost of Goods Sold: Formula and Examples

Author: Victor Gryazin

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Dear Clients and Partners,

This article is devoted to an economic index called Cost of Goods Sold: what it is, what it is used for, how it is calculated, and what accounting methods it has.

What is Cost of Goods Sold

Cost of Goods Sold (COGS) is an index that assesses the primary cost of sold goods. It accounts for the expenses on production of goods and services. Primary cost is often the second line in the profit and loss report that goes right after the earnings line. COGS helps to calculate the gross profit of a company.

Primary cost includes the main spending that have directly to do with production of goods and services:

  • expenses on crude materials and accessory, freight included;
  • expenses on wages for employees, including insurance and pension payments;
  • production expenses;
  • storage expenses.


In essense, the COGS is the cost of everything that needs to be done and bought to sell the product. However, the index does not account for indirect spending, such as on sales and marketing. Moreover, the COGS depends on the calculation method.

What COGS is used for

COGS is one of the most important indices in financial reports used for calculating gross profits. Gross profit is the difference between the earnings and primary costs and is one of the main profitability indices of the company. Thus, the COGS allows for assessing the dynamics of production spending and helps the management make well-weighted decisions.

Companies that are able to manage their spending on crude materials and workforce reasonably over the whole production cycle and to decrease the COGS when necessary, will have higher gross profits. Whereas if the company spends too much on production of their goods and services, and the COGS is too high, its gross profit will be falling.

With the Cost of Goods Sold, economists and investors can assess whether the company can manage its business efficiently. If the index grows, the net profit falls. This can be good for bringing down taxes on profits, yet the business will be less attractive for investors. So, as a rule, companies try to keep the COGS quite low and the net profit – rather high and thus more attractive for investing.

How COGS is calculated

An essential part of exact primary cost calculation is calculation and classification of goods in the inventory. This means the information needs to be updated regularly.

The task of the COGS is to demonstrate the primary cost of sales of a certain timeframe with account of what is left in stock. Indices necessary for calculations:

  • Beginning Inventory (BI) is the goods in stock at the beginning of the TF;
  • Purchases (P) for replenishing the stock;
  • Ending Inventory (EI) is the goods in stock at the end of the TF.


Calculation formula:

COGS = BI + P – EI

Example of calculating COGS

If the company has the BI = $5,000 at the beginning of the month, P = $3,000, and EI = $4,000 at the end of the month, the COGS will be $4,000.

COGS = 5000 (BI) + 3000 (P) – 4000 (EI) = 4000

Then we subtract the result from the monthly earnings and get the gross profit. Nowing the gross profit, we can find out the net profit by subtracting other expenses from the former, such as taxes.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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What One Needs to Know about REPO

Author: Maks Artemov

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Dear Clients and Partners,

This article is devoted to REPO — Repurchase Agreements — and everything about them: their peculiarities, advantages and drawbacks, risks and how to avoid them.

What are REPOs

REPO, aka Repurchase Agreement, is an agreement on selling securities that presumes their obligatory buyback at a certain price after certain time. Such agreements let the seller loan money quite fast.

A REPO consists of two part:

  • The owner of securities sells them to the buyer for a certain term and takes on the responsibility to buy them back as soon as the term ends. The term and the sum of the buyback are agreed upon by the parties beforehand.
  • When the term ends, the buyer is to give the securities back to the seller, receiving their money plus commission fee is exchange.


As a result, a REPO has two agreements inside: an operation with securities and a forward contract.

Advantages of REPOs

  • The seller can loan money quickly on market conditions without addressing a bank. Moreover, the operation itself does not take long.
  • The buyer can make a profit on short-term placement of free cash without the risk of losing it because they get securities in exchange. If the seller refuses to buy back their assets, the buyer can sell them freely in the stock market and get back their money.


Are there risks in REPOs

One of the risks is falling of the market price of the securities that the buyer has bought. In such a case, the seller can refuse to complete the second part of the agreement and never buy back the asset.

The seller will have to get rid of the securities at a lower price and suffer losses, or leave it in the portfolio and wait for the price to grow.

Another risk is the growth of the security price, so that the buyer can refuse to give them back.

Moreover, it might so happen that at the REPO expiry the buyer will have no necessary securities available. For example, they might have sold them at a better price. The buyer may always refuse to give the asset back to the seller for various reasons including bankruptcy.

Who gets dividends from shares in REPOs

All income from the securities — dividends, coupons, etc. — belongs to the seller because they own the shares. The buyer receives the securities as a temporary guarantee. That is why the buyer must pass all the income from the securities to the seller.

Also, the agreement can have other conditions, such as the buyer can receive dividends instead of the seller but the security price will fall accordingly.

Example of REPO

A market player has 100 shares of a company, 10 USD each. At a certain point, they need money, and they find a buyer ready to buy 100 shares right now but for 8 USD each.

Signing a REPO, the buyer agrees on selling (or returning) 100 shares for 8 USD each plus 10%. When the contract expires, the seller buys their shares back at the said price. As a result they got a loan for 10% a year, and the buyer got their money back and earned 10% of the whole sum.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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Bull Market: Characteristic and Trading Principles

Author: Victor Gryazin

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Dear Clients and Partners,

This article is devoted to the notion of the bill market: what it is, what peculiarities it has, and how to use it for trading.

What is the bull market

Bull market is a situation in a financial market when market prices are growing stably and investors are very optimistic. This term is more frequently used for the stock market yet it would be equally valid in the case of bonds, real estate, currencies, goods, and other financial spheres.

The term "bull market" describes lengthy time frames when most stocks grow stably and stock indices confidently renew highs. In other words, there is a long-term uptrend in the market: new highs and lows higher than the previous ones are set regularly. Normally, bull markets last from several months to several years.

Over history, the global stock market has passed through several such times. The longest of all started right after the mortgage crisis of 2008 in the US and ended with the COVID-19 pandemic in 2019. Over these years, the Nasdaq 100 stock index grew by more than 800%, while some popular share — by more than 1,000%.

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Characteristics of bull market

Such a state of things in the financial market quite often accompanies a growth cycle in the global economy. This is the most promising time for investors because companies and enterprises normally make a stable profit, and the unemployment rate remains low. In such times, people are ready to spend and invest more, and earnings in the stock market go up.

Main characteristics of the bull market:

  • Sustainable growth of asset prices. In the stock market context this means growth of market indices and stock prices. After minor corrections the quotes of securities and indices aim upwards again and regularly renew their highs.
  • Positive economic reports. Bull markets normally happen when the economy either starts growing after a crisis or is already strong. Interest rates are rather low, the GDP is growing, the unemployment rate falls, and companies report increased profits.
  • Demand exceeds supply. When economies are growing and the unemployment rate is low, investors try to buy and hold securities, hoping that their price will grow. A market appears that has more buyers who want to buy stocks than sellers.
  • Optimistic market players. When the stock market and economic indices grow, investors become more confident. They are more optimistic and interpret even bad news as temporary moves that can provide a better price for buying on corrections.


How to trade in bull markets

When the prices of most assets grow, it is easier to make a profit than when the market is uncertain. So here are some popular strategies for trading in a bull market.

Buy and hold

This is the most popular way to invest in a bull market: investors buy assets and hold them for as long as possible, until some evidence of the end of the uptrend appear. By this strategies, positions are held for really long — from several months to years. The longer the market grows, the more profit investors can make on their assets.

In case the investor buys stocks, they make money on their price growth and dividends from the issuer as well. Hence, securities with large dividend payments are most attractive to buyers.

The strategy also uses popular stock indices: they help diversify investments because they consist of many shares of various companies.

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Bottom line

The bull market is the gold age for investors: asset prices grow steadily, and all market players are optimistic. One can make a good profit, buying assets and holding them until they grow.

However, it should be realised that a reversal and the end to the bull market is hard to predict, so the rules of risk management are to be followed immaculately.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

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