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Not a fossilised relic just yet​


With the buzz around renewable energy and EVs following the announcement of Biden’s Green New Deal, oil and other traditional fossil fuels fell out of favour with investors – and this despite record low prices. Brent was trading at a more than twenty-year bottom of $9.12 at the height of the pandemic, but even by the US presidential election in November, it still hadn’t managed to rise above $40 a barrel. All the young Tesla and battery metal ETF investors laughed at the “silly boomers” buying into the United States Oil Fund LP, but they’re not laughing anymore. Brent oil currently sits at a 7 year high of $84.42, which represents a gain of more than 900% from last year’s lows. Indeed, the United States benchmark, WTI Crude, has gained 70 percent this year alone. It’s all part of a wider global energy crunch that is seeing prices pushed higher for all types of fuels, including natural gas and even coal.

As business all over the world return to normal, electricity demand is skyrocketing, and the low supply of key fuels, coupled with seasonal pressure, has led to a perfect storm on the energy market. Several Wall Street forecasters have stated that oil and gas prices are set to peak in the near future, while Goldman Sachs analysts have predicted that the per-barrel price could hold steady around $85 for a period of several years. Mecuria Energy Group Ltd., on the other hand, has suggested that we could see prices north of $100 a barrel this winter. There’s even a sizeable portion of traders who are betting on even greater increases. In fact, the most widely held option is one that pays out if oil tops $100 a barrel by the end of December. However, increasing numbers of options trades with strike prices as high as $200 by late 2022 have also been made lately. As senior market analyst Ed Moya put it: “Crude price volatility is here to stay as demand uncertainty remains elevated over the short-term” and options certainly are an excellent way to balance risk and reward during unpredictable times. Moya also added, however, that “given the relentless winning streak, oil prices are ripe for significant rounds of profit-taking,” which is undoubtedly true.

Gas and oil intertwined​

To really understand what is driving oil prices higher, we also need to look at its less glamourous cousin, natural gas. Much of today’s non-green electricity is produced by gas-fired generators. However, Europe’s biggest supplier of natural gas, Russia, has been artificially restricting supply to the EU in a bid to fast track the approval of its new Nord Stream 2 pipeline. In fact, Gazprom PJSC’s gas exports to these key markets have dropped to their lowest level since 2014 for this time of year. This is yet another factor boosting oil prices as many European nations are forced to increase oil’s share in their respective energy mixes in order to meet post-pandemic demand for electricity. The effect of this has been even more pronounced in light of the reluctance of OPEC+ to ramp up production as the high prices suit the cartel’s member states perfectly. Obviously, this means physical gas and oil (Henry Hub, Brent, WTI Crude) are still good investments, but even larger gains could be made by owning individual companies that not only own large amounts of these commodities, but which also make large, regular profits from their sale. Gazprom is an excellent example of one such company, especially if the Nord Stream 2 pipeline receives regulatory approval in the short to medium term. The Russian gas giant is already up 120% in a year and is still excellent value with its 8.13 p/e ratio and generous 3.42% dividend.

Make your mind up!​

So, which is it? Oil at $100, $200 by year end, or a steady $85 for the long haul? The short answer is: nobody really knows. The interesting thing about this energy crisis is that it is for the most part entirely in the hands of human beings. The supply shortfall would soon be nipped in the bud if OPEC+ would only increase its production at least to their pre-agreed targets. Similarly, the gas shortage in the EU would disappear in an instant if the EU gave Nord Stream 2 the green light to begin operations. In fact, some have said that, with China’s economy slowing down and the US recovery going through a rough patch just now, oil demand is not likely to rise significantly above its current level in the short term. Gas, on the other hand, could well continue to climb given the huge uptick in domestic heating-based demand that will doubtlessly flood in if the harsh, long winter that is expected comes to pass. Longer-term, the price climate is even harder to predict, but forecasts trend towards more price spikes until fossil fuels are phased out entirely. For instance, a recent report from the International Energy Agency found that in order for major world economies to become carbon neutral by 2050, oil use must peak no later than 2025. However, based on current investments, green power generation won’t be sufficient to supplant oil until 2035.

Know your options with Libertex​

Libertex allows you to practice your trading skills with the hot instruments on the demo-account before investing real money. For example, you might decide to buy WTI Crude or Brent and a few shares in Gazprom in the hope of some short to medium-term gains, but then purchase an option that would allow you to sell oil at say $70 in late 2022 when prices have probably normalised. Then, if gas and oil do the unlikely and start to trend down, you can quickly close these long positions and strike out your option to cover part or all of your losses. Trading CFDs is risky due to the complexity of the instruments. Diversifying your trading in this way is available for all users thanks to the award-winning Libertex app.

You can control all your positions from one, user-friendly interface and set automatic pending orders to ensure nothing is left to chance. For more information or to register your very own account, visit Libertex.com today!

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Spread Trading For Beginners – What is a Spread In Forex?


One of the key competitive assets of most brokers, in the Forex market, is the spread size for currency pairs.  A spread determines future costs a trader will have to face, which makes it a valuable term to learn.

In order to comprehend what a spread is, imagine any trading operation – buying clothes for resale. The difference between the price originally paid and the money received is called profit or income. A spread works similarly, and it is brokers who receive income in this case.

What is a Spread and How Does it Work?

Spread is the difference between a Bid and the Ask prices of each currency from a currency pair. In fact, this is a direct initial loss for the trader, which should be covered in the process of further trading.

Let's give an example on the popular EUR/USD pair with a hypothetical quote of 1.1152/1.1156. From the difference in the currency value, it can be seen that the spread in this case for one lot is 4 pips. To compensate for this loss, you want the currency pair quotes to change in your favor by at least 4 pips. Once this happens, you will start receiving a profit.



After making a transaction, you get a loss which equates to the spread. It happens because you acquired a currency pair at a price slightly higher than the market price (the gap between your price and the market price is already a broker's fee). Therefore, it becomes an inevitable compulsory commission.

How to Calculate Spread

Spread = Ask (the price a buyer is willing to pay) – Bid (the price at which a market maker is willing to buy). Once again, set in pips for convenient calculation.

For example, if the quote of the GBP/USD currency pair is, bid = 1.2920 and ask = 1.2923, then Spread = 1.2923-1.2920 = 0.003 USD or 3 pips.

Why Calculate the Cost of the Spread?

The calculation of the spread cost during the trading process is necessary for building proper trading strategies, primarily automated ones, and for technical analysis of the current situation. The spread cost in the amount of profit becomes more significant when the position stays open for less time and when the frequency of transactions in the trading system gets higher.



Spread cost = Spread size*Lot size*Number of lots

Let’s estimate the spread cost from the example above. The lot size is $100,000.

0.0003*$100,000*5 = $150.

What Affects a Spread in Forex Trading

Liquidity

The greater the number of market participants engaged in trading in a currency pair, the closer the prices at the time of the transaction. The spread size usually does not exceed 3-5 pips in the most popular pairs, and when trading rarer currencies, for example, the Canadian dollar or the Swedish krona, this figure can reach 50 pips and higher.

Current market situation

Important economic news, statistical information and the market's panic-crash generate an instant and significant change. Generally, the situation depends on economic and political factors in different countries and the world community as a whole. Any news can significantly affect the rates of leading currencies. For example, when, on one hand, a large number of buying orders withdraw from the market and, on the other hand, selling orders lag, it leads to an increase in the spread.

Broker's policy

Most brokers limit and guarantee the maximum spread size for given currency pairs within their commission schedule. But remember that this is how they make a profit and there cannot be brokers with zero spread accounts without them charging a commission.

Types of a Spread

There are two types of spread: fixed and variable. Below we explain their difference, advantages and disadvantages.

Fixed Spread

A Fixed spread is a constant value regardless of currency fluctuations. This type is set on the most liquid currency pairs where average spread fluctuations are not significant. In some cases, a spread can be increased by a broker manually depending on the investment, economic and financial forecasts.

Most often, a fixed spread is set for EUR/USD, EUR/GBP, USD/JPY, and GBP/USD currency pairs.

Advantages

- Fixed spreads allow traders to rely on a strategy without worrying about unexpected variables.
- Trading with fixed spreads works as a cheaper option because it calls for smaller regulatory capital. It is best for beginner traders who can’t afford to invest a lot of money when just starting out.
- It provides the trader with the predictability of initial costs in each transaction.

Disadvantages

- It cannot be used during scalping.
- You are likely to get requotes because your broker won’t be able to change the spread to accommodate new market conditions.

Variable Spread

A variable spread is set by the broker within the lower limit and may fluctuate or be influenced by changes in the currency value.

With a variable/floating spread, its value depends on the current market situation, including the volatility level. The size of a spread increases due to significant price movements. Most currency pairs have a floating spread.

Advantages

- Traders don’t have to worry about requotes because the variation in the spread takes into account changes in the market.
- It provides better pricing by dealing with prices from different liquidity providers – this leads to more profitable pricing due to the competition.

Disadvantages

- Trading risks increase significantly since a spread may look profitable but reverse in the blink of an eye.
- A variable spread widens in accordance with increased liquidity and is actually only low during market inactivity.
- It may even trigger protective stops and limits unintentionally.

Spread Trading Strategies

Spread trading strategies in the classical sense (that is, the difference between the Bid and Ask prices of the same asset) do not exist. Some novice traders take an integral hedging strategy on a spread, but this is a slightly different example of trading, and we use the words “spread” in a different way.

Spread trade with integrated hedging



Integral hedging on a spread is, first of all, a hedging strategy. The word “spread” here means a different definition and is rather a slang.

As part of this strategy, the trader chooses two interrelated assets and opens deals in opposite directions for them.

It can be, for example, EUR / USD and GBP / USD. On the first currency pair, you open a deal to buy, on the other – to sell. In this situation, you do not need to put stop-loss, since their installation can lead to additional losses. Protection against excessive risks arises from hedging.

If the main asset moves in the right direction, then at some point the trader buries the deal first for an additional one and then for the main instrument (when net profit appears on it).

The strategy of integral hedging on the spread was originally designed to trade shares of the stock market. There were fundamental prerequisites for this strategy: transactions were always opened to buy stocks of an industry leader (for example, McDonald's) and to sell shares of its main competitor (for example, KFC).

Next, there are two scenarios:

In a calm market, McDonald's shares will show about twice as much growth as KFC shares – this will be the profit of the trader.

In the event of a correction or a downturn in the market, the price of the shares of both companies will decrease, and the trader will close both deals to about zero.

Thanks to the CFD tool, the same transaction can be easily implemented in the Forex market.

Advantages

- Flexible system of protection against risks due to hedging.
- Stable profits in a calm market.
- Minimal losses (or lack thereof) in case of a market downturn.

Disadvantages

- Relatively low level of profit (10-20% per annum).
- The strategy is ineffective in the short term.

Conclusion

These are the basics of using spreads in trading, which will improve your trading skills. Having this expertise in your arsenal, apply it for your advantage to trade in Libertex. Even the most knowledgeable person won’t be able to trade well without a proper platform.

- Convenient interface and versatility. The Libertex platform was designed with the intention of keeping an already familiar basis but making access easier and more user-friendly. All assets are sorted by indicators of maximum growth and decline, which makes it possible to quickly find the right currency pairs.
- Improved graphical analysis. The tools for graphical analysis and a set of technical indicators surpass those available in the original MT4. Following the example of the original, there are three types of standard graphs in the working area.
- Best technical analysis. The set of standard indicators is significantly expanded with a total number of 43 (while even the biggest competitors have up to 30).

Learning new tricks is a step-by-step process, which takes some time and practice. Register a free Demo account to practice your strategy of choice!

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Elon Musk making headlines for all the right reasons


It seems like Tesla founder and CEO Elon Musk is never out of the news these days. First, it was his EV company's meteoric stock market rise during the pandemic. Then, it was his commercial space travel firm SpaceX's involvement in the race to bring extra-terrestrial travel to the masses. Now, it's that Musk himself is the richest man who ever lived. Not only has he beaten out his rivals Jeff Bezos and Richard Branson when it comes to developing superior space exploration tech, but he is also now the undisputed victor in the Battle of the Billionaires, raking in over $25 billion in one day following a bumper deal penned with Hertz for 100,000 Tesla electric vehicles.

Musk's crypto affinity

One thing that truly sets Musk apart from Branson and Bezos is the former's rather vocal penchant for crypto. It's no secret that the Tesla chief exec has an enduring interest in the original cryptocurrency, Bitcoin. In fact, his proclamations got to the point that he was able to move the markets with a single tweet. First, his announcement in February that customers would be able to pay for Tesla products in BTC sent the coin on an upward trajectory. Then, his move to transition away from Bitcoin due to concerns about the environmental impact of its mining led to a 20% decline. This begs the question: if Elon holds so much influence over the fate of the biggest and most mainstream digital currency around, what level of power could he potentially have over, say, a relatively minor altcoin?

Canine coins for the win

Perhaps the most significant altcoin to which Elon Musk has been linked is Dogecoin. The Tesla creator has been a staunch and very vocal supporter of the meme currency. He recently stated that one reason for his interest in the project was the number of ordinary Tesla and SpaceX workers that own it, explaining that "it felt like the people's crypto". However, a token spin-off of Doge, known as Shiba Inu, was also able to cash in on the Musk effect, rising over 360% in the space of just seven days following a tweet about the Tesla owner's new dog of the same breed affectionately named Floki Frunkpuppy.

Shiba Inu has since managed to cement itself among the top 20 cryptocurrencies by market capitalisation, gaining over $15 billion in value. In fact, SHIB has even generated its own spin-off, Floki Inu, which is up an incredible 72,471.2% in just three months!

Should investors go all-in on SHIB?

It's never a good idea to put all your eggs in one basket, and this is especially true of financial markets. Most investors consider that risk-weighted diversification is truly the key to success. Though FOMO makes it hard to resist when investor hears a visionary like Elon Musk talking about specific investments, in the words of the man himself, "don't bet the farm on crypto".

Cryptocurrencies undoubtedly deserve a place in any forward-thinking portfolio, but just be sure to keep their percentage weighting within reasonable limits (10-20% is a good maximum). Obviously, the bulk of any crypto holdings should be in established projects like BTC and ETH, with a smaller portion allocated to favoured altcoins like Doge, for instance. In fact, in a recent tweet, Musk himself confirmed that these three are the only digital assets he actually owns. Of course, investors need not limit themselves and can certainly include SHIB if they wish. Just heed Musk's central message and minimise your capital risk exposure accordingly.

Libertex for your crypto needs

So, if you're looking to bring your portfolio into the 21st century and add a bit of crypto into the mix, look no further than Libertex. Libertex offers all the big names like Bitcoin, Ethereum and Litecoin, as well as many of the most attractive altcoins, such as Dogecoin, Chainlink and, yes, even Shiba Inu.

The best thing about trading digital assets with Libertex is that you don't need to have a separate account with a crypto exchange or wrap your head around cryptocurrency wallets and the like. All Libertex digital currencies are CFDs, like the majority of its other instruments. This means that you can manage an ultra-diversified portfolio spanning stocks, commodities, Forex and crypto, all from the comfort of the award-winning Libertex app.

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What are Forex robots and do they really work?


Forex trading attracts a lot of people, and every one of them have their own unique approach. Some people feel comfortable when trading long-term, others find day trading or active scalping more interesting. Some people enjoy an automated process, others prefer to open each deal by themselves. Automated Forex Trading is carried out by Forex robots – special trading software which can be used without the help of the trader.

After you are done reading this article, you will have a clear understanding of what a Forex Robot is and how it works. You will also be able to identify whether or not it is effective for you, what the pros and cons are, and whether you should use such a program in Forex trading.

What is a Forex Robot?

A Forex Robot is a trading software which is installed on the trading platform. This program can independently open and close deals without a trader.

Each Forex robot is based on the trading system.

Usually, this system only gives signals to the trader, who then decides whether he should open a deal or not. If there is a bot based in such a system, it could take over traders functions and replace him.

How does a Forex Robot work?



Let’s take a closer look at the principles of robot trading, using a simple trading strategy with one moving average. If a trade, based on this strategy, is conducted manually without using the auto trading program, then the process would look like this:

1. A moving average with a period of 10 is plotted on the chart. This moving chart will show the average price for the last 10 time frames.
2. The price moves more sharply than the moving average and crosses it periodically.
3. If the price crosses the moving average from the bottom up – it is a signal to open a buy trade.
4. If the price crosses the moving average from top to bottom – it is a signal to open a sell trade.
5. An open deal is closed when the system signals in the opposite direction. Thus, the trade will be carried out constantly and the direction of the transaction will be selected depending on the direction in which the price crossed the moving average.

This strategy is given only for the sake of an example, as it’s the simplest and clearest. However, because of its primitive nature, it would be ineffective in real trading and would give a large number of false signals.

In order to create a robot that trades on this system, you need to create a program that will take all circumstances into account. Even a novice programmer can easily complete this task.

It is a little more difficult to create a robot based on a fully-fledged trading system with 3-4 indicators and the separate conditions for exiting the transaction with the help of stop loss and take profit. However, both of these programs should be similar in principle, only the number of conditions and lines of code will change.

When the robot is ready, the only thing left is to add it to the trading terminal. It can be done quite simple using the platforms of the Meta Trader family – they provide special functionality for robot trading. After that, the only thing that remains is to press the start button, and the bot will start working (meaning opening and closing the deals based on the trading system embedded in it). You can stop trading with one single button.

As a rule, the trader can always interfere with the trading of the robot. For example, if a trader believes that it is time to close a deal, even though the terms of the trading system require it to stay open, he can close it. After, the robot will simply wait for the signal for the next trade to be opened and continue trading in normal mode. However, this possibility has both pros and cons. Although the trader may notice factors that are not available to the robot, his decisions can be affected by human emotions, which always harms the trade and worsens its result.

How Effective Are Forex Trading Robots



It is hard to say whether Forex robots are effective or not. Every robot is based on a system, and system trading is the basis of success in Forex. However, it is not always enough to simply open and close deals on system signals to make a stable profit. Often, the trader is also required to conduct an additional analysis of the situation and make quick decisions, taking new factors into account – and the robot does not have this ability.

Indeed, patterns can be found in the financial markets. After studying these patterns, the analyst can create a system that will generate stable signals, and most of them will be profitable. That means that trading on such a system will bring more profit than losses, and the trader will be able to receive a stable income. You can make a robot that will also effectively trade and make a profit using this system.

A system that worked flawlessly yesterday could become unprofitable tomorrow. And since any system generates both true and false signals, it will not immediately become clear that the system has just stopped working. The robot, based on such a system, can continue trading for days and weeks and increase the loss of the trader until he realizes that this is not just a “black line”, but the final “death” of the system.

If the robot is launched quickly, then in theory, it may have time to bring enough profit that will cover the losses of its last days of trading, before it becomes clear that it is no longer effective. However, the market changes unpredictably, and sometimes a robot, which was based on a fresh system, will give more false signals than the right ones after just a couple of days of being created and implemented.

All of the above only applies to a situation where a trade, that is using a robot, analyses the market, creates systems, and writes software. Or if it’s all done by a team of professionals working together on a common project. If a trader buys a robot from third-party developers, chances of profitable trading with such a bot are minimal. Moreover, there are too many risks in such a scenario. First of all, only the creators know the true “age” of such a robot, but you have no idea of its expiration date. Additionally, most traders are not strong programmers, so it is unlikely that they will understand whether they’re buying a working tool, or an appealing fake that doesn’t contain real statistics.

Pros and cons of Forex robots

To assess the effectiveness of trading robots better, let’s consider their advantages and disadvantages. We will also compare them with manual trading.



As you can see, all factors considered, robot trading is not as effective and convenient as manual trading.

Conclusion



Trading with the help of Forex robots has its pros and cons, but the number of disadvantages exceeds the number of advantages. Although robots allow you to remove emotions from the equation and are able to process a large amount of information, their artificial intelligence is not enough to compete with human traders.

As a compromise, you can consider trading with expert advisors. This is a type of trading software. Its main difference from the robots is that it only gives signals to the trader, but does not make decisions and does not trade independently. In fact, the EA is a complex indicator that combines several formulas and gives the clearest and specific signals.

However, regardless of whether you are going to trade with the help of an expert advisor or decide to study the charts yourself, you will need a certain base of knowledge and skills. On the Internet, you can find enough information about Forex, binary and stock market trading. To practice and perfect your trading skills, consider using the Libertex trading platform. You can open a completely free demo account there. It has a user-friendly interface, which is designed for both expert traders and novices.

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What Is Forex Hedging?


When you buy a car, you want to protect yourself against the possibility of accidents and substantial financial losses. It is the reason people purchase auto insurance. In the Forex market, hedging is the equivalent of that but only for your trades. The first example of financial hedging occurred in the 19th-century in agricultural futures markets. What does it look like now, and how can one use it properly? Let's analyze the ins and outs of hedging and what strategies you can implement to protect your funds from pricing fluctuations.

What Is Hedging and How Does It Work?

Hedging means investing in trades that will protect your funds from risky situations. Technically speaking, you would make offsetting trades in assets with negative correlations. It means that one asset decreases as the other increases, and vice versa. Put differently, one investment can be hedged by another trade in the opposite direction.

As we have said earlier, hedging works similarly to an insurance policy. However, it is not as easy as just renewing insurance once a year – it takes more skill and involvement to implement it in financial markets. But this method is an unspoken rule among different types of traders and investors. Individual traders, portfolio managers, and corporations all use hedging techniques to varying degrees.

Hedging is meant to reduce the risk of adverse price movements. Even though it can’t prevent feared events from happening, it prepares you to deal with the consequences better. The impact of an adverse event will be reduced, and your losses will be limited to a known amount.

What Is Hedging in Forex?



A Forex trader can create a “hedge” using a variety of methods. You can open a partial hedging position to diffuse the impact from negative market moves to some extent. Alternatively, you can carry out a complete hedge to fully mitigate your portfolio’s exposure to fluctuating prices. You can also use different financial instruments, such as futures or options.

An important thing to note about risk reduction with hedging is that it also implies a decrease in profits. Naturally, risk management is not free. This technique does not earn you money but instead minimizes your losses. If your initial investment makes money, you will lose on the other investment that you hedge with. And the other way around – if the second investment brings profit, the initial one loses.

For example, let’s imagine you have the following open positions:

- One lot of EUR/USD (shorting)
- Two lots of GBP/CHF (shorting)
- Long one lot of USD/CHF (long position)

You have not been planning to close these trades, but you are sensing possible fluctuations with the U.S. dollar because of certain political events. Instead of closing your existing trades, you take on an additional position – selling USD/GBP. It reduces your risk since you:

- Sell U.S. dollars to buy pounds
- Have a long USD trade and short GBP.

If you want to entirely remove your exposure to the dollar by selling two lots of GBP/USD. However, it would affect your exposure to GBP, which could turn out to be positive. Your decision depends on your risk tolerance.

Advantages and Disadvantages of Hedging



Just like any trading tactic, hedging comes with a set of benefits as well as some drawbacks. In some cases, it pays off, whereas in others, it doesn't make sense. Before you can make an informed decision, let's take a closer look at arguments in favor and against this method.



Forex Hedging Strategies

All hedging strategies are designed to minimize risks of adverse price movements in one direction or another. However, every strategy approaches this issue differently. Here are some of the most common strategies that you can use in your trading activity.

Futures Contracts

Futures are one of the most commonly used derivatives when it comes to hedging, especially by companies or corporations, to minimize their risk exposure.

Let’s say there is an American-based company that is about to receive euros in several months. They can sell euro futures contracts on the exchange for the amount they are expected to receive. A U.S. company does not need euros, which is why the move is justified. Plus, the company may want to have a locked-in rate for the euros to protect itself from foreign exchange risk.

By the time the receipt day arrives, there might be two possible outcomes. If the euro drops in value, the company’s funds are protected since the transaction will be executed at the previous price. But if the euro appreciates, it will have lost on an opportunity to profit. So, before hedging, the company needs to decide which outcome is more important.

Forward Contracts

Another prominent hedging tool is forward contracts, which work very similarly to futures. The main differences are that forwards imply a private contract between parties rather than an exchange, and the contract is not standardized.

Let’s say company A buys AUD $10,000 for JPY from company B at a 74.9 rate, and the maturity date of the contract is by the end of the year. Some businesses, especially the growing ones, can't always predict and specify the time for settlement. Then they set up a flexible forward contract, which gives them the option of accessing a portion of the total value at any time before the final settlement date.

Company A may drawdown from the contract several times by the end of the year, in $2,000 installments. Despite currency fluctuations taking place within the year, the company will eventually buy 749,000 JPY for AUD $10,000 at the locked-in rate.

Direct Hedging

This strategy requires you to open two positions on the same currency pair in direct opposition to each other for the same period. You may have opened a long position on a pair, so you will need to enter a sporting trade for that asset.

Instead of exiting a position in fear of an adverse movement, you open another one and have two open positions at the same time. When strong market fluctuations die down, let's say after a postnews period, you can exit the hedging position.

For example, you have a long position on the AUD/USD currency pair and you expect a short-term drop in the value of the Australian dollar. In such a case, you can enter a short position on the same pair to offset your losses just in case.

Pair Hedging

With a pair hedge, you open two positions on different currency pairs. The first position should be on a pair that is rising, and the second one should be losing in value. These two positions automatically create a hedge since they are unlikely to be both losing.

To get into more details, these two opportunities should be almost identical and trading at irregular price points. Find currencies that are undervalued and overvalued to benefit from them moving closer to their fair pricing.

Make sure to find currencies that are in so-called "asset correlation", meaning they are considered to be in a close relationship or interdependent. For example, a Generalized Rule Induction (GRI) methodology indicates a correlation between Australian and Japan markets. So, whenever the currencies are moving in opposite directions, you can take advantage of that.

Tips for Forex Hedging



As an extra help for traders interested in hedging their positions, here are some tips to prevent some widespread mistakes:

- Hedging is not for complete beginners – While it is a commendable initiative, traders need to be familiar with Forex in general and acquire sufficient experience to handle it
- Choose a broader pip range – If you don’t want to bear losses because of commissions, make bigger leaps than you would usually do
- Don’t push it – Hedging is a protective strategy so your moves should not be motivated by what could bring the most profit
- Evaluate your trades continuously – Rather than blindly going through your transactions, make multiple assessments throughout the process, and adjust your next steps

Conclusion

Overall, any trader, big or small, institutional or private, investing or speculative, will want to limit their risks on any financial market. Such a volatile market as Forex requires risk management techniques even more so. There are many hedging strategies you can use, and the choice ultimately depends on your trading preferences.

Unfortunately, no method can protect your profits at all times, so trading will always bear some degree of risk. Make sure to constantly learn about Forex and improve your skills to make sound decisions. If you want to experiment risk-free and practice in real market conditions, set up a Libertex demo account. Our platform also allows you to try out different strategies to find the right one for you and maximize your potential future success.

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What Is EURO STOXX 50?


The EURO STOXX 50 Index is used to measure the current situation in the European economy. The calculation of this index takes into account 50 large companies in Europe. The selected companies are called "blue-chip", meaning they are well-established and financially sound. Similar to the Dow Jones 30 in the United States, it gives traders and investors information on the current trading opportunities.

What Is EURO STOXX 50?

The EURO STOXX 50 shows the share price performance of 50 companies with the highest capitalization. They account for 60% of the total cap in Europe, which is the majority of publicly available shares that are regularly traded. The companies cover 19 supersectors in 11 Eurozone countries.

STOXX Limited is a company that calculates stock indices. Indices they calculate are often used as financial instruments underlying financial products. Additionally, they are used to gauge risk.

Understanding EURO STOXX 50 Companies



The constituents within the Euro STOXX 50 composition are stable, yet dynamically developing companies. Therefore, the list of companies is reviewed annually in September for any changes. The table below demonstrates a part of the up-to-date index composition.



As has been said before, there are 19 supersectors as defined by the Industry Classification Benchmark (ICB). Companies are categorized depending on their primary source of revenue. Stocks are ranked based on the free-float market capitalization for each of the supersector. The largest stocks make the final selection list.

Factors Influencing the Euro STOXX 50 Index Price

The Euro STOXX 50 index is influenced by quite a lot of factors, both internal and external. These factors can cause the price to rise or fall, so any trader should keep an eye on them. It is mainly affected by:

- The economic indicators of the selected companies.
- Political and economic events in the Eurozone.
- Recent events with the Euro exchange rate movement.
- Monetary policy in the United States and other major market participants.

Advantages and Disadvantages of Euro STOXX 50

Working with Euro STOXX 50 can be a way even to increase your capital. The following factors increase your chances of profits:

- It is comprised of stocks with the highest liquidity and trading volume in European markets.
- Most of the companies in its composition are German and French enterprises, which are characterized by a stable economy.
- Includes many organizations within the industrial sector, which correspond to the most rapidly growing ones.
- It is more resistant to price drops compared to the stocks of individual companies.
- On the other hand, the index is not without its flaws.
- The index is affected by political events in the Eurozone.
- Severe performance deterioration (stock quotes) in even one enterprise in its composition often affects the entire index.
- Heavily dependent on currency rates.

EURO STOXX 50 CFD Trading



The Euro STOXX 50 CFD (Contract for Difference) operations are operated through speculation or by investing. Like any stock market index, it allows you to opt for different CFD strategies offered by your trading platform of choice.

What Is CFD Trading?

CFDs deal with differences in prices of various underlying assets that are traded in financial markets. The contract helps you profit from differences between current asset value and its value at the end of the contract. Bear in mind that it does not imply ownership of the underlying asset itself.

Before CFDs, you needed a large capital to trade on international trading exchanges since the associated fees were extremely high. CFDs opened access to exchange-traded instruments to more people with different funds.

Advantages and Disadvantages of CFD EURO STOXX 50

When discussing CFD Euro STOXX 50 trading, it is worth highlighting what makes it more profitable and effective in comparison with some other assets. The advantages of this method include:

- By working with the EURO 50 index CFDs, you get to expand your portfolio to the European market (if allowed by local regulations).
- You can trade in either direction, choosing between short and long positions. You make a profit both from growth and fall in prices.
- You reduce your financial risks from future price changes.

Before giving preference to CFDs, each trader should also consider the negative aspects associated with this route. The main drawback is often the high spreads, which reduce income and increase losses.

Also, this type of trading makes it impossible to own the asset and receive dividends. However, it is not a big obstacle as the majority of market participants are more likely to obtain speculative profit rather than own the asset.



EURO STOXX 50 CFD Trading Strategies

The Euro STOXX 50, as well as its constituents, are listed on the Frankfurt Stock Exchange. If you reside outside of Europe, you can work with this instrument in one of the following ways:

- Through a local broker registered in the eurozone or the USA.
- Through a foreign broker providing access to trade on this exchange.

The Euro STOXX 50 is often used for speculative trading and geopolitical investing since it’s a critical assessment of Europe’s market. Therefore, to speculate on changes in Europe’s economic situation, traders use:

- Bullish strategy – It is applicable at times when stock prices within the index have recently reached a peak and reversed. Remember to use stop loss to mitigate the risks.
- Bearish strategy – Use this strategy if the index price is relatively low, but the market news is favorable. The strategy fits long-tern as well as short-term trading.

Conclusion

The Euro STOXX 50 is one of the key indexes for the European Union stock market. Its calculation includes the main indicators of the current economic activity of the 50 selected largest companies. If you use this powerful indicator correctly, you can make good profits from changes in its dynamics.

The success of investing depends on the correct understanding of the asset you are working on and your predictions. But if you want to back your knowledge with practice, register a free Demo account on Libertex. Improve your skills and push yourself to become a better trader without risking real money.

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forex best

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Everything About Nikkei 225 – a Leading Japanese Stock Market Index


You may already know about the Dow Jones at the New York Stock Exchange or the FTSE at the London Stock Exchange. These indices are used to gauge the performance of a certain market sector and speculate on it rather than individual stocks. Similarly, the Nikkei 225 is an underlying index at the Tokyo Stock Exchange.


Nikkei Definition


Nikkei 225 is Japan’s most important index, which reflects business activity in the country. It contains 225 stocks from different companies traded on the Japanese Stock Exchange. The index itself displays the average arithmetic value of these stocks. It was introduced on September 7, 1950, meaning at that time, its value was published for the first time. It was named after a newspaper that calculated it.


There are different variations of the index: Nikkei 500, Nikkei Stock Index 300, and Nikkei All Stock Index. All of them display somewhat similar information, but the Nikkei 225 is still considered the leading, most widely used indicator.


The selection criteria are based on the price of the company’s stock rather than market capitalization, like in some other indices. Only the largest ones make it to the list of constituents. The higher-priced stocks have the largest influence on the index.


Understanding the Meaning of Nikkei





The Nikkei 225 consists of stocks selected from top-performing blue-chip companies based in Japan. The main criteria for being selected are the price of the stock, liquidity, and sector balance. Also, the stock must be listed on the Tokyo Stock Exchange First Section.


The composition of the Nikkei 225 is subject to an annual reexamination – a Periodic Review. This takes place in October, where every company is checked to determine whether it fits the criteria. And the process of changing the list of constituents is called an Extraordinary Replacement.





It is calculated based on the value of the 225 most liquid stocks of the Tokyo Stock Exchange. The formula was developed by the American company Dow Jones & Co., which differs from their European counterparts.


Factors Influencing the Nikkei 225 Index Price


It is commonly known that Nikkei 225 is extremely sensitive to not only local news and events but also those events occurring around the world. Traders who work with the Nikkei index should closely monitor:


- Japan’s macroeconomic indicators: inflation, deflation, unemployment rate, the number of new jobs, etc.
- Financial prosperity of individual companies included in the index
- The overall situation in foreign stock markets, but especially movement in the US market. If the Dow Jones index rises, Nikkei will react in a similar way
- World events, natural disasters, wars, political instability, and economic news The tight connection between the Japanese and American markets, particularly their main indexes, is attributed to Japan’s exports to the USA. Therefore, you should keep an eye on the dynamics of the S&P 500 and the Dollar Index as well as other US indicators.


Advantages and Disadvantages of Nikkei 225


The Nikkei 225 has specific differences that make it stand out from indices like FTSE or DAX. When contemplating whether you should invest in this instrument, keep in mind the following benefits:


- The simplicity of being a price-weighted index
- Ease of tracking the overall health of the economy
- Fixed spread
- Long trading hours
- Less risk than capitalization-weighted indexes


There is no financial instrument that is flawless and carries zero risks. In this context, here are some considerations regarding the Nikkei index:


- Significant effect of small firm stock changes
- No attention to the size of the industry sector
- Vulnerability to sudden drops in the bear market


What is Nikkei 225 CFD Trading


The Nikkei 225 remains the most widely quoted average in Japan because of good trading opportunities. However, the Nikkei index is not directly tradeable. Instead, there is a convenient option to trade this index using CFDs (contract for difference).


What is CFD Trading





CFD trading is based on price differences rather than acquiring the asset. The main goal is to gain speculative profits from the differences in underlying assets’ prices. CFDs are an easy and convenient way to invest in the securities market in either direction. Depending on what behavior you expect from the market, you will be able to adjust your strategy accordingly.


Advantages and Disadvantages of CFD Nikkei 225


Those familiar with CFD, in more detail, recognize the many positive aspects of this tool. In many cases, it proves to be more profitable and convenient than trading the underlying asset itself. The benefits include:


- You can significantly increase your initial capital with leverage
- Work with both rising and falling market
- Ability to trade international markets from one account
- Opportunity to hedge an existing shares portfolio
- The flexibility of timeframes and contract sizes


Novice traders who want to try trading CFDs should not forget that such trading still has certain risks:


- Losses associated with excessively large leverage
- Over-trading because of low capital requirements
- No rights as a shareholder


FTSE Nikkei 225 Trading Strategies


The Nikkei 225 has gained popularity among CFD traders due to its good volume and volatility. The index has earned a reputation of being the most volatile index due to sharp fluctuations in quotes. Analysts recommend that trading on the Nikkei Index be done by experienced and active traders. At the very least, you should feel prepared for different outcomes.


The index is usually growth-oriented. Sharp drops in value only occur during massive crises, that is, every five to 10 years. Once a year, you can expect it to sink by 10-15%. When trading in a bearish market, stay cautious, and always set up a stop-loss. All the other times, when the market is going up, stick to a bullish strategy. Setting a stop-loss is less crucial but still advisable.


Conclusion


Nikkei 225 Index is a leading stock price index in Japan. If you are looking for an investment tool to diversify your risks, it will be a suitable choice. The Japanese economy is still on the rise, and this directly affects the performance of the index.


With all this information in mind, it's time to use it to your advantage. Register for a free demo account on Libertex and try out your skills in trading any financial instrument. Real practice can only occur in a live market environment. You will familiarize yourself with the technical aspect of our platforms and become equipped to be able to make a good profit.

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Full What Is Interest Rate Guide for Forex Trader

The interest rate was introduced as a tool that allows you to get paid for submitting your funds for other parties’ usage. Interest rates were introduced in Ancient Greece and sometimes were represented as natural goods, not money. For example, those who took grain had to return more grain.

In any case, throughout the years, the interest rate was assumed to be something negative, so banks and lending organizations, as we know them now, became widespread and completely legal in the recent past. Today, taking out a loan is quite easy, and almost everyone has taken out a loan, at least once, so it is important to know more about the essence of the interest rate, as well as the different types.

What Is Interest Rate?

The interest rate can be called payment for receiving a loan. When you take out a loan, you need to return the total loan amount, plus interest rate, which is derived from the amount owed. For example, if you take a $100 loan and a 7% interest rate, you need to return the $100 principal and $7 in interest.

When Are Interest Rates Applied?



The interest rate is applied when you lend assets - fiat, crypto, etc. No matter whether you are an individual or act as an entity, the interest rate can be applied when you borrow funds. The interest rate can rise or decrease - it all depends on the terms of the loan.

How Is The Interest Rate Calculated?

There are different types of interest rates, and thus each type is calculated differently. Regardless of what interest rate amount is applied, it can always be represented in an equation. We will disclose below how to calculate simple and compound interest rates.

How to Calculate Simple Interest Rate

A simple interest rate is a basic type of interest rate. It considers that you need to repay a principal plus interest only. For example, when you take out a $100 loan, with a simple interest rate of 5% applied, you need to repay $105 in total.

However, usually, when you take out a loan, there is a specified term for which the interest rate is applied and payment periods. Usually, the interest rate is applied per annum, and the payment period is applied on a monthly basis. Thus, if you take $100 for three years, and a simple interest rate makes 5% per annum, you have to repay:

$100*(5%*3+100%) = $115

We take $100 as principal, multiply 3 by 5% as there are three years for the loan usage with a 5% interest rate per annum.

Your monthly payment will be:

$115/36= $3.19

We take the whole sum to repay, which totals $115, and divide it by the number of months in 3 years, which equals 36. Thus, you need to pay $3.19 if you take out a loan under the terms described above.

How to Calculate Compound Interest Rate

Compound interest is much more complicated than simple interest. An applied compound interest rate means that you pay interest on the principal, plus interest on the interest for the past time periods. In plain words, that means that if you take $100 for three years, with a 5% compound interest rate per annum, you will be charged by $5 interest for the first year, $5.25 for the second year, and $5.51 for the third year. The full interest amount will total $15.76, and the whole sum you need to repay will equal $115.75 ($100 of principal plus $15.76 in interest).

The compound interest you need to repay can be calculated using this formula:

CI=P*(1+IR)^n-P; CI - compound interest P - principal IR - interest rate

When you compare a simple and compound interest rate, it’s obvious that the second option is worse for the borrower if the same rate is applied. For example, we have provided the difference only equals $0.76 ($15,75-$15). However, if you take out a loan for a long period of time, like 20 years, the difference becomes much more significant.

Which Types of Interest Rates Are There?

Along with the simple and compound interest rates, there are other types of interest rates one should know about:

- fixed
- variable
- amortized
- prime
- discount

Fixed Interest Rates

A fixed interest rate considers that it won’t change no matter how the interest rate changes on the market. For example, if at the moment you take the loan at a 7%vinterest rate, with a medium interest rate on the market of 7%, it remains unchanged no matter what.

Most lenders prefer this type of rate because it allows you to plan your payments precisely. The main advantage of this kind of rate is stability. However, there are issues with it, as well. For example, your interest rate cannot be decreased if the interest rate on the market falls. On the other hand, it cannot rise if the interest rate on the market rises.

Variable Interest Rates

A variable interest rate means that the interest rate for the loan can change, and its size depends on the prescribed conditions. For now, in the US, the variable interest rate usually changes along with changes in the Cost of Savings Index. The good thing about this type of interest rate is that it can decrease. However, the bad thing is that it can increase as well, and thus you may have issues with repaying the loan. Generally, it is an antipode of the fixed interest rate.

Amortized Interest Rate

An amortized interest rate is about charging the principal remaining with the interest rate applied. Thus, an amortized interest rate considers that you pay more interest at the beginning of the loan period and less principal. As time passes, you pay less interest and more principal.

Prime Interest Rate

This kind of interest rate is usually applied to large institutions like banks or corporations. The prime interest rate is usually lower than the general interest rate and is only enforced for trustworthy parties.

Discount Interest Rate

A discount interest rate is applied for short term loans. It is calculated on the basis of the risks, borrower’s cash flow, and other temporary factors.

Comparison Rate for Decision-Making

When you have a choice of alternatives to choose from when taking a loan, your best helper in this decision making is the comparison rate. It is used to figure out the loan cost deriving the interest and all other costs that will be charged when you take the loan. For example, if the interest is 7%, while in the meantime, the fees and charges applied for this loan make 0.3%, the comparison rate will equal 7.3%. This indicator allows you to get a clear understanding of your true costs for loan repayment.

Thus, when you have several offers to take out a loan from, consider not only the interest rate but the comparison rate as well. Let’s take an example:

- One bank offers you a loan with an interest rate of 6%. Along with that, you are charged for loan insurance by 0.2% and a service fee of 0.6%.
- Another bank offers you a loan with an interest rate of 6.5%. There are no additional fees applied.

As you can see, although the first bank offers you a loan for 6%, your comparison rate will make 6.8%. Although the second bank offers a greater interest rate for the loan, it is still going to be a more profitable solution to take out a loan there as 6.8% is more than 6.5%.

What Is The APR

APR is the annual percentage rate. The annual percentage rate is a coefficient of the rate which is charged per annum. The APR is the basic and most widespread indicator used to evaluate the cost of the loan. Considering the APR is vital for decision-making purposes.

What Is the Difference Between Interest Rate and APR

There is actually no difference between the interest rate and APR. Actually, APR is one of the characteristics of the interest rate. As we already know, APR is the annual percentage rate, which means that it is the charge for the loan per annum. The interest rate is a figure that shows the charge for using the loan. Usually, when someone points out the interest rate, the period for which it is applied, is also underlined. For example, what we call interest rate can be applied per quarter or on a monthly basis. Though usually interest rate is applied per annum, so in the majority of cases, the interest rate equals the APR.

Let’s take an example. You take out a loan with an interest rate of 4% per quarter applied. If it is a simple interest rate, then you can say that the APR for this loan equals 16% as there are four quarters in a year.

Interest Rates and the Forex Market

Interest rates play a large role in the economics and financial markets, including Forex. The increase of interest rate usually considers that the economy has slowed down, while a decrease in the interest rate usually means that the economy is moving faster.

Depending on the assets and tools Forex traders deal with, there can be different effects upon a change of interest rate, on the global markets. An inadequate interest rate, no matter whether it is too low or too high, will cause instability and crises on the market, which should be considered by the Forex trader when one figures out a strategy.



How Do Interest Rates Affect Currencies?

The higher the interest rate, the higher the inflation will be. If you compare prices 20 years ago and today, it will be obvious that they have increased dramatically. That is all tied to inflation, so $10 today and $10 in the 1990s is a lot different.

If the central bank of a specified country has increased an interest rate, this will lead to the growth of inflation of the currency, and in the long or even short term, this factor will cause a falling trend for the specified currency.

Thus, for a trader, it will be valuable to have practice dealing with this factor. Track the changes in the currency price on the Forex after the release of news related to a change in interest rates.

Conclusion

Forex traders should be aware of interest rates, types of interest rates, policies of central banks, and other related subjects. The thing is, prediction of changes in interest rates in a given period can help a trader make better decisions.

Knowledge of interest rates on the mortgage or business loan markets and peculiarities of this subject will also be helpful. Considering the role interest rates play in the global economy and all of the industries, a trader who ignores this topic will be blind in one eye.

To figure out the best strategies for using information about interest rate changes in trading, use the Libertex trading platform. Here you can open a demo account and test various strategies to examine them for efficiency.

Consider registering an account and making demo orders upon receiving a change of interest rate news release. For example, try the EUR/JPY trading pair. Track the changes in interest rates of central banks and news related to this topic, and make orders (long or short) based on these changes. It is likely that, based on monitoring the interest rate, you will build a successful trading strategy on the Forex market.

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Dollar in the spotlight ahead of crucial FED meeting

The world's reserve currency, the US dollar, has experienced sustained demand in recent weeks as uncertainty grows amid rising coronavirus cases and runaway inflation. Mounting price pressure has led to louder calls for the central bank to tighten its monetary policy, with the US Federal Reserve hinting at this possibility several times over the past couple of months. Though the greenback has been trading slightly subdued following a sell-off across shorter-duration Treasury bonds, the consensus is that the Fed will announce the long-awaited start of its stimulus tapering at the regulator's upcoming meeting on Wednesday. Such a firm move towards a more hawkish stance will likely buoy the dollar, prompting a rise in demand for US Treasury bonds that should help the US national currency strengthen against the other majors.

Bad news for the Fibre

The EUR/USD pair has been on a protracted downtrend for some time and seems to have moved into a consolidation phase around 1.1600 this week. However, a combination of inflation woes and Fed stimulus tightening is likely to drive the euro down to new local lows over the coming weeks. In fact, Commerzbank's Team Head FICC Technical Analysis Research, Karen Jones, expects the pair to challenge the recent low of 1.1522, to begin with, before slipping to 1.1366 thereafter.

Let's not forget that Europe and the single currency have their own unique problems right now. First, there's the ongoing energy crisis that has seen natural gas (and, by extension, electricity) prices rise several-fold in the space of a few months. Then, there's the nascent COVID wave that threatens to plunge several European countries back into lockdown. Looking at the technicals, EUR/USD has just failed a smidge ahead of the 55-day MA at 1.1694 and the 1.1696 five-month downtrend. This suggests a decline is due, especially considering the fundamentals we've already covered.

In light of this and other cyclical concerns, the Fibre looks a solid short at the moment. To protect against intensifying volatility, however, it may also be wise to consider a small gold allocation.

Sterling rues missed opportunities

Things are not quite as negative for the British pound, despite the island nation facing similar issues surrounding energy prices and inflation. Some supporting factors include the positive sentiment over the future of post-Brexit Britain and the extremely high vaccination rate of the population, making a fresh lockdown unlikely.

However, GBP/USD has already failed to capitalise on the mild bearish atmosphere around the dollar, continuing to slip lower as investors gear up for pivotal Bank of England (BoE) and the Federal Reserve policy meetings. If a rate hike is ultimately announced by the US regulator, it will put even more downward pressure on the Cable. This effect is only likely to be amplified by the continuing uncertainty over the Northern Ireland protocol, which makes sterling inherently less attractive to investors.

According to FX Strategists at UOB Group, GBP/USD could be heading for its local support of 1.3625 in the weeks ahead as capital flows out of risk assets into safe havens such as the US dollar and precious metals. Much will depend on the extent of the central bank tightening on both sides of the pond, but the downtrend can be expected to continue, so shorting the Cable or simply buying the US Dollar Index could be a smart move. Perhaps consider waiting until after Wednesday or at least have a tight Stop-Loss set.

Not much to separate USD /JPY

The domestic situation in Japan is relatively stable compared to the West. Japanese Prime Minister Kishida's Liberal Democratic Party has just easily retained its majority in parliament, and the country has no energy supply crisis to speak of. In the short term, the yen is down from its 8-day high of 114.44, but this is largely due to slumping US Treasury yields ahead of this critical Fed decision.

It's easy to forget that the greenback isn't actually doing that well at all in the grand scheme of things; it's just that its competitors in Europe and elsewhere in the world are faring much, much worse. The Japanese yen is an interesting case as — unlike the other majors — it's also considered a defensive currency. This means that any strengthening of the greenback in response to a more hawkish Fed policy will also be reflected in the yen. As such, any gains for the dollar will be effectively cancelled out or at least diminished.

Estimates for the pair would appear to corroborate this theory as no significant swing is expected over the long term. Trading Economics have USD/JPY trading at 114.48 by the end of this quarter, rising to 115.89 in 12 months. As we've seen, factors like central bank tightening and general global uncertainty mean the yen and USD are fairly correlated at present. While there isn't likely to be much upside on the yen that the US Dollar Index won't equal, it's always wise to diversify to mitigate any potential US-specific negative factors. It might be a good shout to keep half your dollar cash in yen just to be on the safe side.

Experience you can rely on

Libertex has been connecting investors and traders with financial markets since 1997, so you can rest easy knowing your money is in good hands. As a forex specialist, we offer both long and short positions in a wide range of major and minor pairs, including EUR/USD, GBP/USD, USD/JPY and many more. Libertex's extensive offering of over 150 instruments includes currency-related commodities, such as gold (XAU/USD) and silver, enabling you to hedge your positions against increased volatility. Our commission is among the lowest on the market, and our spreads are some of the tightest. Try our multi-award-winning app for yourself and benefit from in-app trading signals, technical analysis and price alerts, as well as easy-to-use, intuitive pending order and position management.

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Ohh nice thank you guys for recommendations

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What Is Russell 2000 Index?

Stock indices are an important part of financial markets and provide information for a basket of stocks, not just one. Created in 1984, by the Frank Russell Company, the Russell 2000 index quickly became a household name.

While indices like S&P 500 act as a reference point for large-capitalization stocks, Russell 2000 reflects small-cap stocks in the United States.

Russell 2000 Definition

The Russell 2000 index measures the performance of approximately 2,000 smallest-cap American companies. The index is market-cap weighted, meaning the weight of its components changes relative to the total market capitalization.

The index is operated by FTSE Russell, of the London Stock Exchange (LSE) Group. The subsidiary also maintains other indices that it should not be confused with. The Russell 3,000 index lists the largest 3,000 US companies. The largest 1,000 companies, out of these, are listed on the Russell 1,000 index. The rest, which is small/mid-caps, is a subset of the smaller components within Russell 3,000 and belongs to Russell 2,000.

Understanding the Russell 2000 Companies



The constituents for Russell 2,000 are not chosen by a committee or the groups operating it. Instead, they are calculated according to a formula based on a combination of their market cap and current index membership.

Rebalancing takes place every June on the last trading day. The current composition includes 2,021 stocks; the top-10 companies are as follows:



Not all types of stocks are considered eligible to be included in the Russell 2000. These are the defining characteristics that all constituents must have – otherwise, they are excluded from the list:

- Must be traded on the U.S. exchanges
- No less than a $1.00 closing price on the rank day in May
- A total market capitalization of no less than $30 million
- More than an absolute 5% of shares available
- No royalty trusts, LLCs, limited partnerships, closed-end investment, and blank-check companies

Factors Influencing the Russell 2000 Index Price



Primarily, the value of the index is affected by whatever happens in the companies listed on it. Investors should also keep an eye on sectors reflected in the index constituents – it could be events occurring in healthcare, finance, technology, energy, etc.

Just like any financial asset, Russell 2000 does not exist in a vacuum. Therefore, multiple interrelated or even seemingly unrelated factors can play a significant role in its value. Since it is a barometer for the U.S. economy, the index receives influences by similar determinants: political news, market corrections, speculative behavior, dollar strength/weakness, demand for certain commodities, etc. It is also essential for traders to be aware of the U.S. geopolitical tensions with other regions, such as China, Middle Eastern countries, and South-East Asia.

Advantages and Disadvantages of Russell 2000

Before you can make the right decision on whether this type of trading is for you, thoroughly research the topic from both sides. Russell 2000 advantages include:

- Presents opportunities on the entire market rather than narrow sectors
- Outperforms bigger indices during periods of falling interest rates
- Offers a higher potential return for investing for investors
- Has the potential to grow easily

Here are the downsides of the Russel 2000 index:

- Associated with higher fees
- More volatile than large-cap stocks
- Appears to be slightly risky

What Is the Russell 2000 Index CFD Trading?



If you want to work with Russel 2000 or venture into financial markets in general, CFDs (Contracts for Difference) might be a match for you. But before that, you need to understand the technical side and consider its benefits as well as drawbacks.

What Is CFD Trading?

CFD is an instrument that lets traders speculate on the price changes across many financial markets such as indices, shares, currencies, bonds, etc. If you make correct predictions, you can profit from rising as well as falling prices.

The main difference of CFDs is that you never actually own the asset you are trading with. Instead of making the full physical purchase or sale, you mimic and receive the same profits (losses) as if you owned them.

Advantages and Disadvantages of CFD Russell 2000

Here are the main reasons to consider CFDs to make a profit on financial markets:

- Flexibility of trading in both directions
- Lower transaction costs
- Tax efficiency
- Ability to open trades with bigger value and leveraged gains
- Access to different types of indices and other assets

The negative aspects include:

- Inherent risks of trading in financial markets
- Leverage may amplify losses
- Not suitable for long-term strategies

Russell 2000 Stocks Trading Strategies

Typically, investors can rely on "financial rules of thumb” to provide guidance for investors. But an interesting fact about trading Russell 2000 is that conventional pearls of wisdom do not apply. With small-cap stock, it's advised to avoid the purest forms of market timing, unless you are a strategic and tactical investor:

- Bullish strategy – It has been noticed that small caps can outperform large ones in bull markets. However, you can expect periods of rising interest rates when the Federal Reserve stops decreasing to stimulate the economy.
- Bearish strategy – The most common advice on the time to purchase small-cap stocks is when the market seems to be going down for a long time. Active investors can benefit from buying at times when the Fed begins raising rates.

Conclusion

Adding small caps to your portfolio diversifies your investments, which is a universally accepted tactic. However, you should always be cautious about investing in any financial asset since past performance does not guarantee future results. Fortunately, platforms like Libertex make it possible to improve your skills without risking real money. By registering a free demo account, you can practice with whatever asset you want and then, you can enter the real market and maximize your gains.

Offline LibertexTopic starter

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What Are Gaps?

Generally, candlesticks on a Forex chart open at the same level where the last candle was closed after the end of the trading session. After that, a new candle is opened immediately.

That is what happens in typical situations. Despite that, when a gap performs on the chart, you see a possible divergence between the starting and the ending price of the two connecting candles.

A gap is a space of a chart where a security's rate changes with no trading activity happening in between.

What Is Gapping



Gapping is when a stock, or different trading tool, opens over or under the preceding day’s end, with no trading action in between.

For example, the share price picked at the level of $338.00 on Wednesday and opened at $356.40 on Thursday, and no trading happens in between this space. This unfilled interval looks like a gap on the chart.

What Causes Gaps in The Market?

Gapping in the market happens due to many factors. Here are the most common of them:

Political Events



Some of these events are essential. For example, the US dollar has decreased slightly after trading steady among other global currencies, presenting a small gap, after revealing the news about Trump’s impeachment. On 19 December 2019, the US dollar index DXY was trading at the level of 97.33.

Economical Events

Significant economic moves can change not only a single position on the Forex market. Some of them can affect the global economic landscape, such as Black Wednesday. In 1992, between September and December, the GBP/USD declined by about 25%, down to the level of 1.5057. Furthermore, there was no trading activity in that period.

Natural Disasters

The result of a natural disaster may cause a catastrophe for a country. Earthquakes, floods, and hurricanes hurt country's residents, confidence, and infrastructure. Besides, such disasters will also harm a nation's official currency.

For example, Harvey Hurricane had led to instability at the absolute worst time for the markets. A previously weak dollar dropped to a one-and-half-year low against a currency basket.

The USD index was falling at 92.501 value by 28th August 2017 and had earlier dropped to 92.372. It was the lowest position since early May 2016.

In brief, gaps are mostly built by significant changes, making it all the more valuable for traders to remain refreshed by the economic program, as well as other geopolitical matters.

Gap Types



There are four types of gaps, excluding the gap that happens because of a stock reinvestment. Each type has its unique implications, so it is crucial to be able to select between them.

Common Gaps



They can develop from a stock reinvestment when the trading volume is low. These gaps are common and typically get filled almost immediately. "Getting filled" means that the price action, in the last few days or weeks, usually returns at the least value to the previous day before the gap. It is also known as closing the gap.

A common gap appears typically in a range-bound or congestion zone, where it strengthens the apparent absence of interest in the stock at that time. It is frequently increased more by a low trading volume.

Being conscious of these types of gaps is useful, but it's questionable that they will provide trading opportunities.

Breakaway Gaps



It’s a new trend where the asset ‘gaps away’ from the price pattern. If a breakaway gap is followed by higher trading volume, it may be deserved to get a position long for a breakaway gap up, and short for a breakaway gap down, on the candlestick next to the gap.

Runaway Gaps



Runaway gaps may be termed as gaps caused by a raised interest in the stock. Runaway gaps usually describe traders who did not get in through the first move of the uptrend and, while waiting for a temporary reversal in price, decided that it wouldn’t happen.

Elevated buying interest appears suddenly, and the price gaps over the past day's ending. This kind of runaway gap describes a state of traders’ panic. Also, a good uptrend can have runaway gaps caused by significant news and events that produce new interest in the stock.

Exhaustion Gaps



In contrast to runaway gaps, there are occasions when the price does a final gap in the trend course, but then shifts. It is frequently caused by a crowd mentality of traders racing to the trend and pushing the stock into the overbought area.

Accordingly, skilled traders will be waiting for the withdrawal and get the opposite position to the previous direction.

All of these kinds of gaps can be full or partial gaps. Common gaps are usually partial gaps, as the rate doesn't move substantially. Though, in some cases, the cost may not change much; nevertheless, in the end, it will do a full gap. Breakaway, runaway, and exhaustion gaps conduce to become full gaps.

Gaps are classified as breakaway, exhaustion, common, or continuation. Classification is based on when they happen in a price pattern and the meaning of the signals.

Gap Trading Basics

After you’ve got acquainted with the various types of gaps, we will go on by telling you about a few strategies for trading gaps in Forex.

First, when trading gaps, it is essential to learn that price may not start rapidly moving in the expected place. In many cases, a healing move will arrive, filling part, or the entire gap space. Otherwise, you may even feel a false signal made by the gap. Let's review some different Forex gap trading methods, which will help you in making the decision.

Gap Trading Strategies

Some traders use gaps for analytics. For example, if a gap happens almost at the start of a trend, then it is a breakaway gap or a runaway gap. It lets the trader understand the price possible so he/she can run. Other traders use gaps for trading objectives. They may open positions after a gap happens. Let's take a look at some of the most effective strategies.

Buying the Gap



Traders usually notice this strategy as the "gap and go". A position could be taken at the moment the stock gaps with a stop order traditionally placed low under the gap bar. The gap should happen above a critical resistance and trade on heavy volume to enhance the possibilities of a successful trade. And conversely, traders could remain for prices to fill the gap and set a limit order to buy the stock almost before the preceding day's ending.

Selling the Gap



This strategy is related to the previous one. In this case, the trader opens a short position following a gap down.

Fading the Gap



Contrarians may apply a fading strategy to use gapping. Traders can get a trade in a different area of the gap, under the assumption that most gaps tend to be filled over time. A stop order is placed over the gap bar's high, developing a gap up, with a profit mark set near the preceding day's ending. For a gap down, the trader purchases put a stop loss under the gap bar's low and set a profit target near the previous day's close.

Gaps as An Investing Signal



Breakaway and runaway gaps can both indicate that there is more trend left to hold.

Consequently, following one of these gaps, a long-term investor may open a position in the area of the gap (usually watching for gaps above).

They may hold onto the trade until an exhaustion gap happens or till a trailing stop is gone, giving them a reason to quit.

There are three main trading strategies: Buying the Gap, Selling the Gap, and Fading the Gap.

How to Play the Gap in The Forex Market

Let's review all steps, using the example of common or weekend gaps. Forex fans trade the weekend gap by requiring Sunday's opening price to be a replacement for Friday's closing price. Here is one of the Forex gap trading strategies:

1. Open a chart with the common gap
2. Find a chart pattern
3. It will be nice if there is a nearby gap midnight
4. Following the price gaps, place the first candle above or below the base of the gap
5. Enter quickly (aggressive entry) or enter at the recess of the candle high (conservative entry)
6. Stops are set under or over the candle high/low
7. The target is the gap close or three pips above/below it

Gap trading is complicated, but if you understand which gaps are tradable and which are not, it should be more manageable. Try to find different gaps on your chart and examine how the price works after the creation of a gap. Finally, yet importantly, always keep the risks under control!

Tips and Tricks for Gap Trading



So, everyone's favorite part is tips and tricks. Here are the essential tips you need to learn when trading gaps:

- Be assured to watch the volume. High volume should be near the breakaway gaps, while low volume should happen in exhaustion gaps.
- In some cases, you will see that a gap happens within the structure of a classical chart pattern. When this occurs, it is essential to use a multiple period method and zoom into the lower timeframe. You will get a more visible picture of the chart pattern and, therefore, accurately control the trade.
- As price is running in your favor, focus on price interactions with the pivot points, particularly on the first interactions of the Pivot Point (PP), S1, and R1 Levels.
- If the price breaches a pivot point in the way of your trade, next, you should hold the trade, in expectation of a continuation of the pivot, until the next critical swing level or pivot level is examined. Still, if the price jumps sharply from a pivot point zone, you need to quit your trade and to get your open trade profits.
- When you start your trading day as a large gap trader, you will need to look for essential rates in the premarket price action to trade against. It will assist you in preparing for the trade and give you an advantage when things become real and working.
- For those traders who play large gaps, you will usually get useful information on daily charts. While browsing daily charts, look for spaces of more extended support and resistance. It will assist you in identifying large gaps where you can take the upper hand.

It's also essential when you trade with a small size. Large gappers can be hugely active. It means you can waste a lot of money immediately if you aren't armed.

Conclusion



Now, when you understand what large gap trading is and how you can take the upper hand, you should start practice trading. Discovering how to trade large gaps properly before you work with real money will encourage you to become a more skilled trader without risking your money.

So, you can easily use all of the provided knowledge in trading with Libertex.

Firstly, it’s a very profitable solution. You can trade stocks, indices, currencies, metals, and energy without any hidden fees.

Secondly, it’s simple; there is no need to understand the terminology, lots, and spreads.

Thirdly, you can get a convenient solution by blending all of the trading instruments into one platform.

Finally, Libertex provides the ability to trade from anywhere in the world, anytime you want. All you need is a laptop and a sober mind.

Ready to apply the acquired experience and knowledge in real trading? Register a free demo account right now!

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Libertex adds a hot CFD pair as the crypto dog fight hots up

They say every dog has its day. Well, there are currently not one but two puffed-up pooches in the digital spotlight, and neither one of them looks ready to step aside. Believe it or not, the entire crypto community has gone barking mad over these two tokens based on the same famously cute Japanese dog breed. Of course, we're talking about the prolific Dogecoin (DOGE) and Shiba Inu (SHIB), which have both seen spectacular growth in recent months. After much anticipation, Libertex has finally added CFD on this pair of pups to their list of tradable assets. All that's left for you to do now is decide which dog you want to back in this particular fight!

Many of you know that both Shiba Inu and Dogecoin started their lives with low expectations. One was launched as a deliberate joke and the other as a parody of that same joke. Now, their creators are still laughing…just all the way to the bank. That's because these two canine capers have – against all odds – made it into the top 10 largest cryptocurrencies by market cap to join legacy contenders like Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP). If the long-term performance of meme stocks like GameStop is anything to go by, these two coins could be a smart addition to your crypto portfolio. But before you can make your choice, you'll naturally need to see how these pups stack up next to each other.

Dogecoin: a technical overview

In many ways, Dogecoin works just like Bitcoin. Both networks are blockchain-based and verify transactions using proof of work consensus. That said, Dogecoin has some advantages of BTC for everyday payments since its transactions have faster processing times and lower costs than Bitcoin ones.

Dogecoin also has a much higher circulating supply than Bitcoin. DOGE's supply is theoretically limitless. With over 129 billion already in circulation, the supply is far more abundant than Bitcoin's 21 million capped maximum. Then, there's the issue of block rewards: 10,000 Dogecoin are mined every minute in the form of miner compensation.

As mentioned already, DOGE is a proof-of-work cryptocurrency, which means it shares many parallels with Bitcoin regarding how it uses computing power to secure its blockchain. What's more, DOGE is merge-mined with Litecoin. The upshot of this is that any miner of Litecoin or Dogecoin can choose to mine the other currency, stabilising its network power compared to solo-mined coins.

What about Shiba Inu?

The differences between these two pups start with the very system they operate, with Shiba Inu serving as a token on the Ethereum network. SHIB is what is known as a fungible token, which is assigned the ERC-20 protocol. Amid their widespread fame of late, many of you have undoubtedly heard of non-fungible tokens (NFTs), but these use the ERC-721 token standard.

The biggest advantage of being Ethereum-powered for Shiba Inu is multiplying smart contracts to generate its own decentralised financial products. DeFi has gained traction this year with tokens like yearn.finance, Uniswap and Aave, exploding in terms of price and adoption. Cryptocurrencies use smart contracts on Ethereum's blockchain to create decentralised exchanges (DEXs), lending protocols and even interest-bearing accounts. This could be a huge growth vector for SHIB going forward and certainly gives it an extra point for utility.

Shiba Inu has even made a foray into the NFT space with Shiboshis, a limited supply of 10,000 NFTs based on its Shiba Inu mascot. The decentralised programme leverages Ethereum's network to allow artists to auction off NFTs, supplanting the third party needed for transactions with smart contracts.

All about supply

Before looking at each coin's market performance and prospects, it would be remiss not to cover how SHIB and DOGE are issued and managed. After all, crypto coins and tokens are effectively currencies like the dollar or pound, and their supply (including its growth potential) is a huge factor determining yields on capital investment.

Let's start with the older of the two, Dogecoin, launched initially with a limited supply of 100 billion coins. By 2015, every last Dogecoin was mined, so the supply limit was changed so that a further 5 billion coins could be mined every year. Now, there's no established limit to how many Doge can be produced, meaning that DOGE is inherently inflationary. That said, as long as mining parameters remain unchanged, the inflation rate will decrease as a function of the extra coins in circulation.

Moving on to Shiba Inu, whose supply system is very different. Right from the outset, the total possible supply of SHIB was set at one quadrillion, after which 50% of the tokens were sent to crypto exchange Uniswap, with the other 50% given as a "gift/tribute" to Ethereum founder Vitalik Buterin. Interestingly enough, Vitalik opted to burn 90% of his SHIBA, donating the remaining tokens to the Indian Covid Relief Fund. SHIBA can't be mined to complicate matters further, and a portion of it is destroyed every time someone buys the token.

As such, SHIB differs from DOGE in being a deflationary currency, which should theoretically make it more likely to rise in value over time compared to its older rival. Remember that both of these coins have skyrocketed recently, and current valuations could thus be inflated.

What the charts say

As we've already touched upon, to say that these puppies have grown up incredibly quickly would be an understatement. SHIB, for instance, shot up by over 8,000% in the space of six months to reach $0.00008 in late October. Dogecoin, meanwhile, eclipsed even Shiba's impressive growth spurt, rising 12,000% from January to May 2021. Many astute investors would naturally expect a correction to ensue after such an incredible run. And that's what happened. Both coins are now down 50% and 65%, respectively, making them tempting buys just now. That's right, SHIB is currently hovering around $0.00004 per token, with DOGE available at a knockdown price of $0.38 at the time of writing. With both technical and fundamental factors suggesting a return to growth in the medium term, now could be a great time to add either one (or indeed both) to the portfolio.

Trading CFDs on SHIB and DOGE with Libertex

You guessed it, both these puppies are now available for trading on the award-winning Libertex trading platform, along with numerous other cryptocurrencies and digital assets. The only question that remains is which you think will prove the top dog? Truth be told, you shouldn't feel under pressure to pick a pup as both these assets could well have a place in a balanced and diversified investment portfolio. What's more, Libertex's new SHIB/DOGE CFD pair allows you to fight the competing dogs against each other. Choose your dog and Trade for More!

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MACD Indicator - Your Multifunctional Indicator

When you ask traders to name a good technical analysis indicator, no matter if they are newbies or professionals, they will undoubtedly mention the MACD indicator. MACD is one of the widely-used indicators that has many advantages.

The crucial benefit is that it gives many signals and can be used in different circumstances. Moreover, it’s free and doesn’t require any downloading. You can simply find it in MetaTrader and apply it to your chart. Let’s take a closer look at the best indicator’s implementation.

What Is the MACD Indicator?

MACD stands for Moving Average Convergence Divergence. It’s a momentum indicator that follows the trend and shows the correlation between two moving averages of the asset’s price.

Here, we need to clarify what the momentum indicator is. A momentum indicator calculates the change or speed of the price movement of the asset.

MACD indicator was developed by Gerald Appeal in the late 1970s. If the indicator is used for so many years, we don’t need any other proof of its effectiveness.

Look at the picture below. The MACD indicator consists of 2 lines: MACD and signal line, and one histogram (bars). A histogram is used to show the difference between the fast and slow moving average. Thus, when the distance between EMAs increases, the histogram rises. It’s called divergence. As soon as moving averages get closer, the histogram reduces. It’s called convergence. This explains why the indicator is called the Moving Average Convergence Divergence.



Calculation of Moving Average Convergence Divergence

The formula of the MACD is simple. MACD is a subtraction of the 26-period Exponential Moving Average (EMA) from the 12-period EMA.

MACD = 12-period EMA – 26-period EMA

If you don’t know what the Exponential Moving Average is, there is a simple explanation. EMA is the moving average that puts a greater weight on the most recent price points. That helps this type of moving average to stronger react to the recent price changes.

However, when setting the MACD indicator, you will see three numbers. For example, 12, 26, and 9, which are default settings. As we said above, MACD is the 12-period EMA minus 26-period EMA. MACD signal line is the 9-period EMA. MACD histogram is the MACD minus the MACD signal line.

How to Implement the MACD Indicator

This indicator is a standard tool in MetaTrader. That means you don’t need to buy it or download it additionally:

1. Go to MetaTrader
2. Click Insert – Indicators – Oscillators
3. Pick MACD

If you use any other platform, it’s likely that the indicator will be set by default. If not, you can always download it for free.
In the settings window, you can change the periods of the moving averages price, from close to open, high, low, and, of course, style. We would recommend you keep the close price. Also, you can change the MA periods. Remember that longer periods are better for bigger timeframes, while shorter periods are better suited to smaller ones.

How to Read the MACD Indicator

We are at the most important point of this article. Let’s look ar what signals the MACD indicator gives.

Crossover

The first and most common indicator function is the buy/sell signal. A buy signal appears when the MACD line breaks above the signal line. A sell signal happens when the MACD crosses the signal line upside down. The signal will be more influential within the sharp trend. In the case of a weak trend, the signal may turn out fake as the market will turn around.



Overbought/Oversold Zone

Don’t forget that MACD is an oscillator so, one of its functions is to determine market conditions. Both lines will be the crucial point you should consider. If they form significant tops or bottoms, it’s a sign of a close correction. There is no need to mention any specific level. You will understand when the rise or fall is more significant than usual.

If the lines reach the top, it depicts that the asset is overbought. Wait for the reversal down. If they form an extreme low, wait for a reversal up. In this case, you can combine the MACD with the RSI to get additional confirmation.



Zero-Line Crossover

Pay attention to the MACD histogram. If it rises above the 0 level, it’s a signal of the upward trend. If it falls below the 0 line, consider opening a short position. However, be careful. The signal works in a strong trend. In times of high volatility, the histogram can move up and down frequently, and that will lead to fake signals.



Convergence/Divergence

A MACD divergence/convergence is a difference between the direction of the price and the indicator. Bullish convergence happens when the price forms lower lows, while the MACD histogram sets higher lows. It’s a buy signal. Bearish divergence is formed, when the price sets new tops, while the MACD indicator’ extremums become lower. It’s a sell signal.



Benefits and Limitations of the MACD Indicator

Everything has two sides, and indicators are no exception. No matter how great the indicator works, it will have something that will affect its effectiveness.



Why MACD Indicator Matters 

MACD indicator signals traders whether a bullish or bearish movement is strengthening or weakening. It’s an important point. By having this knowledge, you will avoid unprofitable trades. The significant number of the applications makes the MACD indicator an irreplaceable trading tool.

Bonus. How to Avoid Mistakes Trading with MACD

There is no perfect indicator. Any indicator can give fake signals. However, sometimes the reason is not in the indicator – it’s in the trader. The lack of experience and understanding creates additional mistakes.

Histogram

The first mistake you can face is the wrong interpretation of the MACD histogram. What does the histogram show? It shows whether the market is bullish or bearish and the strength of either bulls or bears.

Some traders think that when the histogram rises significantly, showing the power of the buyers, it’s a good signal to buy. However, it will likely be a late signal. If the histogram shows the strength of either bulls or bears, it means that the recovery may happen soon. Thus, it’s too late to enter the current market. The best time to open a position is when the histogram is near the 0 level.

Crossover

The MACD crossover works well on a strong trend. However, you should remember that the market changes its direction quite often, especially on short timeframes. Thus, the crossover signals will not be accurate if the trend is weak.

Bonus. MACD Strategy: Follow the Trend

Here is how you can use MACD in trading:

1. The first step is to wait for the MACD to form a higher swing high. It’s essential the price forms the higher swing high, too. After that, we should look for a lower swing high. Again, the lower swing high of the indicator should be confirmed by the lower swing high of the price.
2. After we get two swing high points of both price and indicator, we need to connect them with a trendline.
3. The third step is to wait for the MACD breakout. The MACD line crossing the signal line from bottom to top is not enough. The indicator should break above the trendline we drew. It will be the entry point. Open a long position as soon as the MACD crosses the trendline bottom-up.
4. Remember about the stop-loss order. You should place the stop loss 5-10 pips below the latest low swing of the price.
5. Now, you need to wait for a good exit point. Close the position as soon as MACD crosses the signal line in the direction opposite to the entry point. It means from top to bottom. However, don’t close the trade immediately as soon as you notice the MACD crossover. Wait for a candlestick to close to be sure the crossover happened. Then you can close your position.

You can use the same rules but in reverse to open a short position.



Conclusion

We can say that the MACD indicator is one of the oldest, most effective, and easiest indicators you can apply for profitable trading. The most significant advantage is that it is multifunctional. If you read our article carefully, you remember that there are four situations when the indicator gives signals. Compare this number to other technical indicators, and you will understand that it’s a lot. The indicator can easily be applied to any timeframe. Thus, you can use it for any of your trading strategies.

It’s time to practice! Use the Libertex demo account to experience the advantages of the Moving Average Convergence Divergence indicator.

 

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