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1

What is the Bid and Ask?

The bid and ask prices are the most important ones to consider when trading in any market. This article will cover the way trading instruments are traded and how the bid and ask prices are relevant to trading strategies, trading costs, liquidity and the timeframe being traded.

What is a Bid Price, and What is an Ask Price



What is the Bid Price?

The bid price is the highest price the market is willing to pay for that trading instrument in any given market. If several buyers are willing to pay a different price, the highest of those prices will show as the bid.

What is the Ask Price?

The ask price is the lowest price at which the market is willing to sell a given trading instrument. Also known as the offer price. If several sellers have limited orders in the market, the order with the lowest price will show as the market's ask price.

What's the difference between the bid and ask price?

The following is an example of a forex quote:

GBPUSD: 1.27256/1.27272

In this example, the first price shown is the bid price, which will always be the lower of the two prices in a quote. As a seller, this will be the price at which you'll sell GBP for USD.

The second price in the example is the ask price, which is also the higher of the two. If you are a buyer, this is the lowest price at which you can buy GBP for USD.

On a trading platform, you may sometime sell prices quoted as follows, which can cause some confusion:

SellBuy

GBPUSD1.272561.27272

In this case, the bid price is labelled 'Sell', and the ask price is labelled 'Buy' because these are the prices you can sell and buy at.

Quote-Driven Versus Order-Driven Markets

To properly understand where bid and ask prices come from, you need to understand the two types of markets; quote-driven markets and order-driven markets.



Quote-Driven Markets

A quote-driven market is run by a market maker or broker. Their job is to maintain an orderly market by continuously quoting the bid and ask prices for each instrument they make a market for.

Order-Driven Markets

An order-driven market is made up entirely of buy and sell orders from market participants. There is no intermediary; instead, all orders are processed by a broker who charges a commission. Most stock markets are order-driven.

What is the Bid-Ask Spread?

The Bid-Ask Spread

The Bid-Ask spread is simply the difference between the ask and bid prices. In quote-driven markets, the spread is determined by a market maker or broker, whereas the spread for an order-driven market is determined by supply and demand.

Liquidity and the Bid-Ask Spread

A tighter spread signifies a more liquid market. Higher liquidity means more buyers and sellers and more market makers. As buyers compete with one another, the bid price rises, and the ask price falls as sellers compete. The result is a tighter spread between the bid and ask prices.

Orders Types and the Bid-Ask Spread

- Limit Orders

A limit order is placed in the market at the limit price and can only be executed at the limit price or better. All visible bid and ask prices in the market are limit orders.

If a limit buy order is entered, the order will be executed immediately if its price is equal to or greater than the market ask price. If it's lower than the ask price, it will be placed in a queue behind any existing limit buy orders with the same price. The opposite applies to limit sell orders.

- Market Orders

A market order is a buy or sell order which is immediately executed at the best available price in the market. A market buy order will immediately be executed at the market ask price. A market sell order will immediately be executed at the market bid price.

Which Type of Order Should You Use?

You can use a limit price to get a better price, but doing so may mean you miss a trade if the price moves away from you. A market order will ensure that you don't miss an opportunity, but your execution price won't be as good.

For this reason, it's important to look at the bid and ask prices and the last traded price, which is usually labelled 'Last' on trading platforms.



The table above shows the Bid, Ask and Last prices for four currency pairs on MetaTrader 5. By looking at the Last price, you can see whether the price is being traded on the bid or ask side of the bid-ask spread.

The top two currencies each had their last trade at the bid price. That means other traders were selling at the bid price. For the bottom two pairs, the last trades were at the ask price.

The colours also indicate whether the Bid, Ask and Last prices are higher or lower than their previous level. Blue means the price is higher, and red means it is lower.

Understanding the Bid and Ask in the Forex Market

When trading in the forex market, the bid-ask spread will have an impact on the strategies you use and the timeframes you trade on.



The above example from MetaTrader 5 shows the bid and ask prices for the EUR/USD pair, which is very liquid, and for the USD/TRY pair, which is far less liquid. The spread for the first pair is 0.9 pips, while the spread for the second is 90 pips.

For a trade to be profitable, the price needs to first move enough to cover the bid-ask spread. In the above example, if you buy at the ask price, the bid must move that much higher before you break even. For the EUR/USD pair, the bid needs to only move 0.9 pips, but for the USD/TRY pair, it needs to move 90 pips just for the trade to break even.

The tighter a spread, the lower the timeframe that can be traded. The EUR/USD pair can be traded on timeframes as low as 1 minute as the pair will move enough in a short space of time. A less liquid pair like the USD/TRY will need to move a lot further, probably taking a lot longer.

When considering a trading strategy, you need to consider the spread. If the average profit is less than the spread, you may not be able to trade the strategy profitably.

How to Use the Bid-Ask Spread when Trading CFDs

What is a CFD?

CFDs, or contracts for difference, are a type of trading instrument that allows traders to easily gain exposure in any market. CFDs can be traded on stocks, indices, commodities and cryptocurrencies. They can be used to open long and short positions, with or without leverage.



How the Bid-Ask Spread Affects CFD Trading

In most cases, when you trade CFDs on a trading platform, the quote you see will be a market maker quote. This means CFDs can be traded exactly like forex.

In some cases, you may be able to trade stock CFDs in the underlying stock market. You will see multiple bids and offers in this case, meaning the market is order-driven. An order-driven quote will look something like this:

Apple Inc. 800 194.57 194.60 600

400 194.56194.61 200

1000 194.55194.62 300

This example shows the best 3 bids and offers for Apple Inc's stock, along with the quantity being bid and offered at each level. In this case, the bid-ask spread is $194.57-$194.60. The bid volume is 800, and the ask volume is 600. If a trader wanted to buy more than 600 shares, they would have to buy 600 shares at $194.60 and then pay more for any other shares they wanted to buy.

Conclusion

The best way to learn about the concepts covered in this article is by following various trading assets and entering different types of orders. You can do that for free and without risk by opening a demo trading account.

You can open a free demo account with Libertex, an award-winning platform. Libertex is a broker which offers CFD trading on stocks, commodities, indices, ETFs and cryptocurrencies with leverage of up to 30 times for retail clients. The platform also offers free trading tutorials and state-of-the-art trading tools.

2

Elon Musk's Twitter takeover takes over the news

Tesla's eccentric South African CEO is no stranger to controversy. Everything from his crypto musings to political leanings and even love life seem to garner headline after headline. It's no secret that Musk has been less than pleased with what he views as outright censorship on Twitter for some time now, and this latest move appears to be his way of "saving" the legacy social media platform from what he sees as "wokeness" gone mad. Indeed, Elon himself has stated that his motivation for buying the company has always been about preserving free speech within the meaning assigned to it in law. As he put it: "Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated."

But naturally, the question on traders' and investors' lips remains the following: What does this mean for Tesla and Twitter share prices? Unfortunately, the answer is not as clear-cut as many would hope. In this article, we will seek to explain the reasons behind the immediate stock price movements following the deal and, with any luck, predict the future trajectories of these two companies' fortunes over the near term.

What's good for Musk isn't always what's good for TSLA

Now, anyone would probably agree that gaining control over what is one of the world's biggest and farthest-reaching social media platforms must be considered a coup for the individual who successfully completed such a takeover. However, that doesn't necessarily mean that such an individual's other concerns will receive the news quite as positively. In the immediate run-up to the deal's announcement, TSLA lost 12.2% (or almost $125 billion in share capital) as Musk was forced to sell personal stock holdings in order to fund his Twitter purchase. Many might say that this is just a routine temporary correction and things should normalise within a few weeks or months, but several analysts aren't so sure. Some suggest that this significant slump could pose problems for a $12.5 billion credit line the Tesla CEO took out against his own TSLA holdings. Their fear is that he might now be forced to sell even more shares in order to service this debt, which will, in turn, lead to further price declines. Not to mention that many view Tesla as extremely overpriced compared to the rest of the sector in general.

Twitter up, but trading suspended

As we have seen so many times in the past when underperforming companies have been taken over by corporate royalty, Twitter's stock price shot up by some margin to gain around 60% over the course of a month as rumours of Musk's takeover whirred around the internet. To the tristesse of prospective investors, trading was halted by the NYSE on the day that Twitter’s board announced it had accepted the deal and would submit it for approval by shareholders. This means that unless you were smart enough to buy in during the March doldrums, you have probably missed your chance to gain from what will likely prove to be the M&A of 2022. To make matters worse, it could well turn out that this is the highest level TWTR ever reaches as an independent equity of its own. Musk has made no secret of his intention to take Twitter private as this is the only way he can realistically make all of the changes he wishes to make to the social media platform. It could be good news for ordinary Twitter users, though, as Elon has pledged "to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans."

Libertex: giving you more than the rest

While trading in physical Twitter shares may be suspended on the NYSE, CFDs such as those offered by online CFD and stockbroker Libertex are unaffected. This means you can lock in the current price of $49.11 with Libertex, and, should any new development come to light that leads to trading in TWTR being reopened, you can then benefit from any potential future gains. Meanwhile, TSLA remains open for trading, and if Musk is successful in his stated aim to finally monetise Twitter effectively, it's hard to imagine a situation where TSLA doesn't benefit, particularly given this recent -10% net correction.


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Cryptocurrency instruments are not available to retail clients in the UK.

3

What is Online Trading?

Trade exchanges and investments have been a part of people's lives in all developed countries for years now. However, it doesn't mean that just anyone can become a trader. In fact, until recently, it was quite an arduous task to get inside of this business. Trades were held exclusively in exchange buildings, and one needed a licence to have access.

The internet made the entire process of trading on stock exchanges much easier for everyone. It gave birth to a whole new trend: online trading. For some, it became a hobby; for others, it's a full-time profession. And even though it has spread widely among, there still are many people who don't know what online trading is, why it's so popular and how everyday people can become traders.

Online Trading Definition: What Is Online Trading?

Online trading is trading in financial markets via the internet. Previously, all trading was held in an exchange building in person or by phone. Now, every trade is concluded with the help of an electronic platform.

All you need to start trading is a computer with internet access and a trading system installed.

How Online Trading Works

Online trading allows you to make trades on the financial market within minutes or seconds or even less. However, one thing still remains the same with pre-online times: a private trader still needs a broker in order to trade. A broker provides a trader with a trading platform, which is the software a trader uses to conduct their business.

It all goes like this:

1. A trader decides to make a trade (for example, to purchase 100 shares of Apple).
2. They find this asset (Apple stock) on the trading platform, select the quantity (100 shares or 1 lot) and place a buy order.
3. The broker gets a request from the trader and starts executing the order. The broker needs to find a counterparty, i.e., another trader who's willing to buy the same asset for the same price.
4. The broker looks for a counterparty on the stock exchange, and when the search is completed, the trade is made.

Nowadays, the trading platform does all the work to find a counterparty and clinch a trade. The trading process is fully automatic, which is why the time needed to make a trade is no more than a couple of seconds.

But it wasn't always like this. Previously, the whole process took a lot of time even though the "trader – broker – stock exchange – broker – trader" chain was the same. The trader used to call their broker and ask to open a trade. The broker would then personally try to find a counterparty on the stock exchange.

Leverage and Short Trading



One of the most significant and important innovations that online trading has brought is the possibility to trade using leverage and short trading. Before, traders could only make trades for the amount they actually possessed and that they deposited into the broker's account.

Now, private traders can conclude trades worth 100 times more than the capital they own.

One may ask, "how is this even possible?" This is when leveragecomes into play, and the broker presents additional capital. For a better understanding, take a look at the following scheme:

1. A trader wants to purchase 100,000 euros for dollars but possesses only 1000 dollars.
2. A broker provides the trader with the sum necessary for the trade. At a EUR/USD exchange rate of 1.2000, that would require 120,000 dollars.
3. The broker makes a trade on behalf of the trader. $1000 in his account becomes a pledge.
4. If the EUR/USD rate increases, the trader gets the profit. They can close the trade when the rate reaches 1.2100, for example. In that case, the trader will receive $121.000. The broker gets $120,000 plus a fee for concluding the trade and providing the leverage. The overall profit for the trader will be $1000 minus the costs. By doing so, the trader can double the sum in their account.
5. If the EUR/USD rate decreases, the trader loses money. His losses are limited by his security deposit. If the rate drops to 1.1900, the amount of working capital will decrease from $120,000 to $119,000. If this happens, the broker will have to forcibly close the trade to avoid further losses. The broker will take the remaining $119,000 dollars plus the $1000 that belongs to the trader to compensate for the loss. In this scenario, the trader can lose their entire deposit.

Thanks to leverage, it's now also possible to use the short-trading scheme. A trader can not only buy assets worth much more than his deposit but also sell assets they don't possess. For example, with only $1000 in their pocket, a trader can open a trade to sell euros (that the trader doesn't have) for dollars. In this case, the trader has to take leverage, not in USD but in EUR. The remaining part of the trade is quite the same.

Types of Assets You Can Trade Online



There are several types of assets that you can use in online trading. Some of them are categorised as 'classic', and they have been sold for hundreds of years now. Others appeared after the spread of internet trading. Let's take a closer look at each category of assets.

Stocks

Stock market shares are one of the oldest types of assets. A stock share is a specific share of a big company that is traded publicly. There are two possible roles for you when making trades in the stock market: the speculator and the investor.

1. A speculator makes short-term trades. Their main goal is to buy low and sell high (or vice versa, to sell for a high price, then buy for a lower one). Speculators don't care about any other factor. The only important thing is the difference between the purchase price and the sale price.
2. An investor doesn't just buy shares to sell them at a higher price. They invest money in a business that has issued the stock. A long-term investment is the highest priority for investors. The main source of income for an investor is a dividend. However, the increase in a stock's price also makes their portfolio more valuable, which is also very important in the long run.

Cryptocurrencies



Cryptocurrenciesare the newest assets in contemporary financial markets. To find out what they are, let's dig deeper.

Cryptocurrencies are digital assets created by a complex programme code. Bitcoin was the first and most popular cryptocurrency and served as the model on which many more were created. Today, there are more than 2000 different cryptocurrencies, and the number is still growing.

Cryptocurrencies differ according to their structure, ideology and values. Some of them are just a new way of completing financial transactions and are more reliable, more confidential and faster than bank transactions (though there are certainly some cons to this approach). But some cryptocurrencies, or crypto assets, represent platforms for making different applications with advanced features or a wide variety of other interesting projects.

Because cryptocurrencies are assets, their price is constantly changing, which means that they can also be traded. Just like with stocks, one can speculate on a cryptocurrency or invest in it (because almost every cryptocurrency has a value).

The main difference between stocks and cryptocurrencies is the latter's very high volatility:

1. The price of an average stock may rise by 20-30% in a year, which would be considered a very good result.
2. A cryptocurrency can rise by 200-300% in a month, then fall by 20-30% in a day, and this would be considered a normal trend.

Fiat currencies



Fiat currencies are the main assets in forex trading. Currencies are commonly used in currency pairs, such as EUR/USD, GBP/USD, etc. Trading is conducted in one currency relative to another. However, for everyone's convenience, the currencies in a currency pair don't switch places. For example, if a trader wants to buy USD for GBP, they should open a trade to sell GBP/USD.

Metals

Precious and non-ferrous metals are also very popular assets. Traders choose mostly gold and silver, and many brokers also allow trading platinum on their trading system. It's possible to make trades to buy or sell copper, nickel, aluminium and other precious metals. However, not all brokers provide access to such assets.

Indices

Indices are another tool used on the stock market. An index is formed by a certain number of stocks that are generally combined in one category. For example, the Nasdaq 100 index consists of stocks from the 100 biggest high-tech companies traded on Nasdaq.

There are also many other indices: DJ 30, S&P 500, Nikkei 225, etc. Stocks in an index are often united by the fact that they're traded on the same exchange, just like the Nasdaq 100 and Nikkei 225. The figures you see after the name of the index are the number of stocks that form the index.

The index's value changes according to the price movements of the individual stocks that form it. For example, if the majority of stocks on the Nasdaq 100 rise, the index's value will increase, too. The opposite is also true: if stock prices fall, the index's value will decrease, as well.

Agriculture

The agriculture category includes such assets as wheat, soybeans, beans and more. These are not the most popular assets because their prices don't change as often as the price of gold might, for example. However, the fundamental factors that affect agriculture prices are clearer and easier than when trading currencies or gold. That is why these assets have their own dedicated audience.

Oil and Gas

Oil and gas are the assets of the energy resources category. It's as popular as assets like gold and second only to general currency pairs.

ETFs

ETFs are investment funds that are similar to stock indices. ETFs are a combination of stocks and other assets whose value changes in accordance with the price changes of their counterparts.

Types of Investments

Aside from variable assets for online trading, there are several types of investments. Each type has its own approach, and the trader has to clinch the trade differently: markets, terms and the contract period will not be the same. Let's have a look at the most common types of investments.

CFDs

CFDs (Contracts For Difference)is the equivalent of a stock that can be traded on platforms. However, traders don't buy or sell the stock itself but rather a contract. The terms of the contract define their profits or losses in accordance with the price changes for this stock.

Here's how it works:

1. Trader A buys a CFD for a stock at a price of $10. Consequently, Trader B sells the CFD for a stock at a price of $10.
2. The stock's price reaches $11.
3. Trader A closes the CFD for a profit of $1 per share. But for Trader B, closing the CFD means a loss of $1 per share.

In the end, the traders received the same profits and losses as if they traded the actual stocks, but trading CFDs allowed them to use leverage and other advantages provided by forex brokers.

Binary Options

A binary option is a type of financial instrument where the trader has to define how the price will change within a specific amount of time.

In a standard binary option, there are only three parameters:

1. The direction of a price change (up/down)
2. Expiration date
3. Transaction volume (rate)

The trader needs the price to change at least one point in the specified direction and hold there until the expiration date. In that case, the trader will get 80-90% of their bid, which can be pretty high. Although the risks are also high, if the price goes in the wrong direction, even by one point, the trader will lose their bid.

For example, a trader has $1000 in capital. They can open an option for EUR/USD with the following parameters:

1. Direction – up
2. Period – 5 minutes
3. Rate – $100

If the price goes up even by one point during these five minutes, the trader will get 80-90 dollars profit (this depends on the conditions the broker set). If the price goes down, the trader will lose $100.

Futures Contract



A futures contract is a way to trade goods like oil, palladium or wheat as a document without directly exchanging goods for money. When concluding a futures contract, the seller undertakes to deliver the buyer certain goods in a certain time frame after making a trade (for example, in 3 months). However, the buyer usually doesn't need the actual commodities; they need the right to the commodities, so they can make a speculative profit from trading this product. As such, the buyer sells the futures to another trader.

Pros and Cons of CFDs and These Types of Investments

Let's take a closer look at the advantages and disadvantages of these types of investments so we can define the most profitable and promising approach to online trading.



As you can see, CFDs appear to be the most attractive option for online trading when traders are willing to take large risks for a potentially large profit. Moreover, contracts for the price difference are generic instruments that suit both investors and speculators.

Pros and Cons of Online Trading



Now that we know a bit more about online trading, it's time to evaluate it objectively and state its pros and cons.

Pros of online trading:

- Potentially unlimited income
- The possibility to set your own work hours, without a strict schedule or location
- Can be combined with your main job
- This kind of work can be interesting for people who like finances, analysis, etc.
- You can start trading even without a large amount of capital
- Constant self-development and new experiences

Cons of online trading:

- The risk of losing the whole capital when trading CFDs because of the complex of the instrument (Financial risks)
- You're your own boss, and you're responsible for your own actions.

Can Anyone Become a Online Trader?

Have a lot of patience and emotional stability, be ready to be a better version of yourself and pursue your goal.

There are a lot of people who have the potential to become good traders. Unfortunately, 99% give up in the early stages.

There is no common path to success, no one-size-fits-all plan on how to make anyone a professional and thriving trader. However, there are certain steps that are compulsory for anyone interested in starting to invest or trade:

1. Create an online trading plan. You've got to decide how and when you're going to trade and how much time you're prepared to spend. What are your goals? Will it be your main occupation or just a hobby?
2. Set up functioning risk management. Both trading and investments require risk evaluation beforehand. Even though you start with a demo account, you have to assess the risks. Allocate for investment only the amount of money you can afford to lose. You also have to calculate the risk for each and every trade or trading session.
3. Choose your trading style. A trader must have a trading strategy. That is why you have to know your methods of analysis, your market, type of assets and other nuances. You can start by using someone else's strategy, but eventually, you'll need to implement your own unique strategies to potentially make profitable trades.
4. Take your first trading steps in a demo account. When you choose a strategy, try it out using a demo account. It would be wise not to switch to a real account unless your demo account is steadily gaining profits.



Conclusion

Online trading is an interesting and potentially promising occupation. It allows you the possibility of gaining financial independence and spending your time how you want to. It involves a lot of learning and work before you can set out to become a online trader.

Please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital.

You can open a free demo account with Libertex, an award-winning platform. Libertex is a broker which offers CFD trading on stocks, commodities, indices, ETFs and cryptocurrencies with leverage of up to 30 times for retail clients. The platform also offers free trading tutorials and state-of-the-art trading tools.

4

STEPN: Libertex explains what you need to know about the 'move-to-earn' crypto trend

STEPN (GMT) is a so-called 'move-to-earn' crypto token that was launched back in the summer of 2021. However, the price of STEPN has recently picked up the pace and sprinted ahead, leaving competing cryptos in the dust. GMT price has surged over 3500% over the last month, going from just over $0.10 to $3.89, a jump of around 70% in the last week.

How STEPN works

According to the creators, STEPN is a Web3 lifestyle app with a move-to-earn business model that combines elements of metaverse technology, gamification and personal fitness. The project's crypto token with the ticker GMT was created on the Solana (SOL) blockchain.

You may have already heard of 'play-to-earn' cryptocurrencies such as Axie (AXS), which reward users for taking action inside a video game. Move-to-earn cryptos have a similar concept, but rather than awarding cryptocurrency for in-game activity; they reward users for physical activity in the real world. STEPN awards tokens to users for walking, jogging or running, offering a monetary incentive for personal fitness.

Move-to-earn is becoming a big trend in the crypto space, with strong selling points such as encouraging personal health and fitness, environmentalism (as users are incentivised to not use cars) and game elements that tie into the NFT and metaverse markets.

Here's how it works. STEPN offers virtual sneakers in the form of NFTs on its in-app marketplace. Purchasers of these sneaker NFTs get access to play the STEPN augmented reality game, which tracks physical activity and movement and rewards them with the in-game Green Satoshi Token (GST). The more they exercise, the more they earn. Users can then trade the GST reward for Solana (SOL) or USD Coin (USDC). According to STEPN, the company will use profits to "buy back and burn GMT on-chain from the secondary market", thus increasing the scarcity of the GMT token.

The move-to-earn crypto craze

Move-to-earn is generating a lot of buzz in the crypto space, although the concept is still relatively new, and it's too soon to tell if the concept of move-to-earn will stick around in the long term. Technology has become a bigger part of health and wellness culture in recent years as joggers and athletes integrate wearable fitness trackers or mobile apps into their fitness routines. Augmented reality apps such as Pokemon Go have also shown the effectiveness of gamified incentives for movement, although the famous game has yet to find a worthy successor to continue the trend. Cryptocurrency has the potential to bring a new selling point to this phenomenon.

STEPN isn't the only move-to-earn token on the market. Competitors include Genets (GENE) and dotmoovs (MOOV). The price of many move-to-earn tokens has surged lately, thanks to media and investor attention to STEPN after the company's recently released earnings report, in which it declared a  profit of $26.81 million from its NFT marketplace trading and royalty fees in Q1 2022.

For anyone interested in investing in move-to-earn cryptocurrencies, STEPN is the frontrunner in this race. CoinMarketCap data shows that the total market capitalisation of STEPN token has crossed $2.3 billion and currently ranks as the 45th largest crypto by market cap.

Trade crypto CFDs on Libertex

Libertex is an award-winning platform for trading CFDs on forex, metals, indices, cryptocurrencies and others. It offers fast, powerful and user-friendly apps for both mobile and desktop as well as your Internet browser so that you can manage your market activity from any device whenever it suits you.

If you're looking to trade STEPN CFD or any of the 70+ crypto CFDs available on the Libertex platform, then you can take advantage of one of the best crypto trading offers on the market. Libertex charges no commissions, swap, or exchange fees on crypto CFDs, making it a fantastically cost-effective place to trade the most popular cryptocurrencies. Will you be moving on the “move-to-earn” crypto?


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Cryptocurrency instruments are not available to retail clients in the UK.

Available for retail clients on the Libertex Trading Platform.

5

Short-Term and Long-Term Nvidia Stock Price Prediction

Nvidia Corporation is a multinational technology company founded in 1993 and based in Santa Clara, California. Its primary niche is processing units for the gaming and professional design markets, as well as chip units for the mobile computing and automotive markets. The company's revenue in 2020 was $7.10 billion, and the current number of employees is 18,100.

The NVIDIA stock history has seen a lot of ups and downs, so we'll need to take a closer look at it below. For our Nvidia stock forecast for 2022 and the more distant future, please continue reading.

All You Need to Know About Nvidia Stock

One of the roots of the name is the word invidia, which is Latin for 'envy'. Envy and vision are closely tied in mythology, with the eye or the gaze being a common symbol.

For more than 28 years, the company has been working on semiconductors, artificial intelligence, video games, consumer electronics and computer hardware. Its main products are graphics processing units, central processing units, chipsets, drivers, tablet computers, TV accessories, laptops and data processing units.

At the end of July 2021, Nvidia launched the eighth generation TensorRT™ 8. The product slashes inference time in half for language queries, allowing developers to build the world's best-performing search engines, ad recommendations and chatbots and offer them from the cloud to the edge.

During the last five years, TensorRT has been downloaded almost 2.5 million times. More than 350,000 developers across 27,500 companies in wide-ranging areas, including healthcare, automotive, finance and retail, have tried the product and were quite satisfied with it.

What Influenced Nvidia Stock Price in the Past

After losing about half of its value in 2018 due to struggles in the gaming business and slowing growth in the company's data centre platform, 2019 was a better period for Nvidia's share price. The company managed to return 76.9% of the loss, but that was not all. In the first half of 2019, the company recovered from its previous poor stock performance, and this recovery went much better than expected by experts.

After releasing new graphics processing units at the beginning of 2020, the situation changed dramatically. Data centres and gaming were two spheres with the biggest demand for new technologies, and Nvidia managed to give the market what it wanted. The segment hit a quarterly record of $2.27 billion in revenue in the third quarter of fiscal 2020.

Having published marvellous 2020 financial results at the beginning of 2021, NVDA stock earnings rocketed. Right now, Nvidia's chips are cutting-edge technology. In addition to this, Nvidia is also the leader in providing high-performance graphics processing units (GPUs), which are now in high demand.

Will the price of NVIDIA shares go up? Let's turn to our experts for their NVIDIA stock forecast and find out.

NVDA Stock Forecast for 2022 According to Experts

According to the experts from Tip Ranks and their analysis of 12-month price targets for Nvidia in the last 3 months, the average price target is $357.95 with a high forecast of $400.00 and a low forecast of $285.00.

Investor's Business Daily notes that NVDA stock analysis shows that the stock rallied on strong earnings and a stronger-than-expected outlook, but supply constraints remain.

The repeated mentioning of Nvidia's products in the media, especially in the technical and financial sphere, can't be left without attention. Nvidia has seemed to dominate headlines more frequently than many other chipmakers over the past year. Analysts still expect Nvidia's revenue to jump this year, thanks to robust demand for its gaming and data centre GPUs. But its growth rates would likely be even higher if it weren't facing a global chip shortage.

Forbes predicts significant appreciation in the future, and its analysts' report contains information that suggests that Nvidia is on its way to becoming a trillion-dollar company.

Gov Capital

Gov Capital experts expect stable revenue growth for the company, which ought to lead to a higher NVIDIA stock price target in 2022. It could well be a bumpy ride, with the NVDA price first climbing to $422.61 (maximum price) and then slowly retracting from there. By the end of December 2022, the closing price is predicted at an average of $372.56 ($316.68 min, $428.45 max).

Coin Price Forecast

The NVDA stock prediction price, according to Coin Price Forecast, will be $268 at the mid-year mark. The mark of $300 is expected to be crossed during the second half of the year, with the stock tipped to close the year at $389.

Long Forecast

As the Economy Forecast Agency claims, the NVDA price could see a slow recovery, eventually getting back to its normal position by September. By the end of the last month of 2022, the share price is forecast to be $327 (the closing price).

Technical Analysis of NVIDIA Stocks Prices



As you can see from the charts above, the current trend is considered strongly bullish, and NVDA is experiencing slight buying pressure. According to Financhill, NVIDIA stock price has been improving, but the signals are still mixed. It is also essential to notice that the score for NVDA was 49 at the end of January, which is 2% below its historic median score of 50 and infers higher risk than normal.

According to the simple moving average, exponential moving average, oscillators, and other technical indicators, NVIDIA Corp is overvalued.

NVDA Stock Forecast for 2023 According to Experts

It is very unlikely that NVDA will cross the $1,000 mark in 2023. Some experts do not even expect it to reach $500. However, no catastrophic declines are seen in most NVIDIA stock predictions.

Gov Capital

In January 2023, the price is forecast at $350-$400. The potential not-so-slow and steady price increases could see it reach $488.99 by the end of June. The end of 2023 ought to come without any panic or dramatic falls. The closing price of 2023 is projected at $596.47.

Coin Price Forecast

The next NVDA stock forecast claims 2022 will end with a price of $496. To put things into perspective, its mid-year price target for the stock stands at $414.

Long Forecast

The Economy Forecast Agency gives an NVIDIA stock forecast stretching just until the end of 2023. In its view, the year will begin at $342. It predicts that we will end the first half of the year with a price of $381, with December's closing price projected at an impressive $490.

NVDA Stock Forecast for 2025-2030 According to Experts

It is impossible to create a precise forecast for such a long time in the future, so these forecasts are only approximate. Multiple economic, social, and political events can have a great impact on the value of a share. You need to keep that in mind when planning a long-terminvestment.

The Gov Capital

According to the Gov Capital, 2025 will begin with NVDA at $870.48. By the end of the year, it is predicted to hit $1,181.57. By the end of the first half of 2026, it forecasts a price of $1,358.52. Finally, Gov Capital expects the $1,500 line to be crossed at the beginning of November 2026.

Coin Price Forecast

As you can see from the table below, experts from Coin Price Forecast are not as optimistic as the ones from Wallet Investor. Barely reaching $1,000, Nvidia is not expected to go anywhere near $1,500. The year 2025 is tipped to begin at around $600, with the price gradually crawling up thereafter. At the end of 2029, it is finally predicted to reach $1,000, with the price predicted to hit $1,053 by the end of 2030.



How Has The Price of an Nvidia Stock Changed Over Time?



Here are the main historical events that formed the current price of NVDA:

- The stock's strong run in 2017 was being fuelled by the graphics-chip maker's superb financial results. Nvidia had grown from a successful GPUs maker to a major player in GPUs for artificial intelligence applications, ranging from data centres to driverless cars to drones.
- In October 2018, the stock price dropped because the financial results that had been released before disappointed the market.
- In 2019, the GPUs sales dropped, taking down the NVDA stock price with them.
- In 2020, the pandemic, with its growing demand in online gaming as well as the elaboration of new technologies, made NVIDIA share prices pleasant for the investors again.
- At the beginning of 2022, Nvidia is in a bear market, although some speculate that it's just a temporary dip.

Is Nvidia a Good Buy Now?

Every potential investor must do their own research and see if investing in NVIDIA is a good idea for achieving their personal goal. According to experts, no enormous and outstanding growth is expected. However, some may say that growth is growth and is always a good sign, whether fast or slow. In order to save your money, register a demo account on Libertex. It is one of the best ways to start trading because:

- It can help you understand how to use the platform and invest.
- It is perfect for beginners: there are plenty of articles by leading experts on different topics.
- Educational materials are openly available.
- You won't lose your money while learning with the help of our special demo account.
- Price forecasts and technical analysis are up-to-date.
- Our client support is ready to answer all your questions; don't hesitate to ask at any time.

6

How to Invest in Facebook Stock

Facebook is a popular social media platform all over the world. In addition to that, Facebook, Inc. (Nasdaq:FB) is now one of the world's biggest companies, with its shares making a smooth, steady rise after its IPO. Since then, it has become more popular in the stock market. In this guide, you'll gain knowledge on what it takes to invest in Facebook stock and whether it's a good idea.

Overview: The History of Facebook

Most people only know that Mark Zuckerberg developed Facebook, but the truth is he wasn't alone. Facebook was founded by Mark Zuckerberg, Eduardo Saverin, Chris Hughes, Andrew McCollum and Dustin Moskovitz in their dorm at Harvard University back in 2004.

The team first developed Facebook for Harvard students only. But after some time, it was expanded into more areas until the website was opened in 2006 to anyone with a valid email address who was at least 13 years old. In 2012, Facebook raised about $15 billion in an Initial Public Offering (IPO), which valued Facebook at about $100 billion. In just three years, it had reached more than a hundred million users. Today, Facebook now has almost 3 billion active users.

Facebook, Inc. develops products that allow users to connect and share using tablets, mobile devices and computers. In addition to its main social media network, Facebook, the company has also acquired Instagram and WhatsApp and developed and launched Oculus and Messenger.

Why Invest in FacebookStock?

There are many reasons why investing in Facebook stock may be a good idea, including:

- Active users
- Sales growth
- Profitability and pricing power
- Stock valuation and performance

Active Users

Facebook has over 260 million active users in the US and Canada alone. The age of users is mostly above 18. Even if US and Canadian users are the smallest per cent of the total users of the social media company, each user still generates excellent revenue. Additionally, even though US and Canadian users make up only about 10% of total users, they generate revenue that's three times more than the revenue of Europe. Overall, the monthly active users of the platform increased to 2.8 billion last year.

Sales Growth

Facebook's revenue reached $84.2 billion in 2021, and net profit increased to almost $41 billion. The majority of Facebook's revenue is from ads on its platform. In 2021, the company's advertising sales hit $25.4 billion. Of that, $732 million came from streams on the platform, which involve the company's Oculus VR hardware and other minor business lines.

Profitability and Pricing Power

Among the various big social media platforms, Facebook's gross margin and operating margin are far better off. The gross margin includes direct costs from the business, and the operating margin includes R&D and salaries. Pinterest Inc. and Snap Inc. have negative operating margins since they're focused on rapid growth. They also lack gross margins. On the other hand, Facebook is at its critical mass phase in terms of users, so its gross margin is more consistent, and that's a good thing for the investor community.

Stock Valuation and Performance

When using old-school valuation metrics, Facebook isn't overvalued. Accordingly, its price-to-earnings ratio is at 21.54, according to Nasdaq. Its predicted P/E ratio for next year's earnings is 21.71, while the forward P/E for S&P 500 Index is at 21.56, and the Nasdaq Composite Index is 24.77.

Compared to these two, Facebook's P/E is normal relative to the broader market and is below similar platforms. This is reasonable since Facebook's growth has led many investors to grant a premium valuation above less dynamic stocks in other sectors.

How Much Does Facebook Stock Cost?

Facebook stock reached a market cap of $839.285 billion in late January 2022, which puts it among the top 5 most valuable companies in the S&P 500 index, alongside Apple, Amazon, Google and Microsoft. On 28 January, the stock cost $301.71.

Fundamental Analysis of Facebook's Stock

Based on ChartMill, Facebook has an overall fundamental rating of 8 out of 10 compared to another 383 networks in industries such as data processing, computer programming and other computer-related services. The fundamental analysis of Facebook stock involves:

Profitability

Facebook scored 4.5 out of 5 in profitability for these reasons:

- It has a 23.77% Return of Assets, which is one of the best returns in the industry, where the average is -2.42%.
- Its profit margin is at 35.88%, which is also significantly better than the industry average of -4.38%.
- It has a Return on Equity of 30.22%, which is still better than the average of 13.29%.

Valuation

In terms of valuation, Facebook garnered a 1.5 out of 5. This is because:

- Facebook is valued lower than the industry average P/E ratio of 21.54.
- The forward P/E ratio of FB is at 20.65, which shows that it's expensive.
- Its price-book ratio is in line with the industry's average book ratio of 6.29.

Growth

Scoring 4 out of 5, Facebook has:

- 65.41% growth in its Earnings per Share and is growing at an average of 34.17% each year.
- 42.23% growth in its Revenue for the past year.
- The EPS growth will decrease for the next five years.
- Comparing the growth rate of the revenue, the next few years will have a lower growth compared to the past years

Health

Facebook has a great health rating (4 out of 5) because of the following reasons:

- With its current ratio at 4.23, Facebook isn't having any trouble paying its short-term obligations. It's better than the industry average of 1.98.
- It has an Altman-Z score of 16.55, implying that Facebook is not near bankruptcy.
- The Debt to Equity ratio belongs to the industry averages.

Dividend payouts

This is the only 0 out of 5 rating of Facebook since Facebook doesn't offer dividends.

What Affects The Price of Facebook?

Since the price of Facebook stock fluctuates, there are some factors or things investors or traders usually look for. These factors can affect the price and include:

Active Users

Even though there are now billions of Facebook users, Munster predicted that it would reach a saturation point. According to this prediction, there will come a time when the number of new active users will decrease and stop, and the users will spend less time on the company's platforms.

Ad Revenue

Facebook is very reliant on ad revenue. In 2017, Facebook's ad revenue reached 98%, according to Statista.com. But the cost of advertising on the platform has increased to 219%, which means that some ad users get great results, but most don't. This shows that the company lacks revenue diversification. Relying on only one source of revenue is risky.

Competition

There are many rival platforms that continue to rise in the industry, and Facebook can't buy all of them like how they bought Instagram for $1 billion. As competition increases, some active users may turn away from Facebook or use it less.

Market Risks

This factor will probably have the biggest effect on all stocks. When the stock market experiences a crash or a crisis, there isn't much any company can do. For instance, during the dot-com crisis, Nasdaq lost over 75% of its value. Furthermore, it's hard to predict when another crisis may come.

Regulatory Risks

This factor can also affect the stock's price since social media is viewed as an unregulated market. These risks include the misuse of Facebook, like what happened in 2016, when the data of about a million Facebook users fell to the hands of foreign political operators after Facebook allowed Cambridge Analytica's political data firm to acquire the data. Instances like this may result in fewer users, leading to less ad revenue.

Facebook Stock's Historical Performance



In 2012, Facebook experienced three significant events:

- It was the first social network to reach over a billion users.
- With its Initial Public Offering, or IPO, Facebook raised up to $16 billion.
- The price of each IPO share reached $38, putting the company's valuation at $104 billion.

In the same year, the company acquired Instagram and WhatsApp after two years. In 2019, Facebook was considered one of the most popular social networks, resulting in a relatively high stock price.

Trading during the first year wasn't good for Facebook. The stock lost at least 50% of its first valuation and needed over a year to get it back to more than $100 billion. From $250 billion in 2015, it crossed $500 billion in 2017 and continued to rise.

How Is Facebook After the Coronavirus?

Despite COVID-19, Facebook is doing relatively well. Although many industries and companies were left devastated after the coronavirus, Facebook still had a relatively good year. As mentioned, its revenue grew by 22% and reached $86 billion. Its active users per month also increased to 2.8 billion.

Because of worldwide lockdowns, people are spending more time at home — and many are filling this extra time by scrolling through social media platforms like Facebook.

Businesses recognise that more people than ever are active on Facebook and are accounting for this in their marketing strategies. Companies are placing advertisements on Facebook to reach the widest possible target audience. As such, Facebook is raking in ad revenue, so one could even say that it benefitted from the pandemic.

Facebook 2021 Results



Facebook stock has been consistently high-performing over the years. According to Macrotrends, on 28 January 2022, Facebook stock experienced:

- A 52-week high stock price of $384.33, which is more than 27.4% of the current share price.
- A 52-week low stock price amounting to $253.50, which is about 16% less compared to the current share price.
- An average Facebook stock price of $325.32 for the last 52 weeks.

The all-time high closing price was 382.18 on 7 September 2021.

What to Expect in the Future

Based on Wall Street analysts, the consensus target price for Facebook stock is about $460 and implies some possible upside of over 50%. If Facebook performs well, it might join Apple in the group of corporations that have crossed the $1 billion market cap mark multiple times.

Technical Analysis of Facebook Stock

There are two main ways to analyse the potential of Facebook stock: through fundamental analysis and technical analysis. Fundamental analysis of Facebook stock has been discussed in this guide, and it focuses on the intrinsic value of the stock. However, with technical analysis, investors use the stock's statistics.

Technical analysis focuses on analysing trends and patterns in the current and future price fluctuations of the stock. Here are some more general indicators you might want to look at:

- Momentum and volume indicators
- Moving averages
- Oscillators
- Resistance and support levels

Pros and Cons of Facebook Stock

To determine whether Facebook stock is right for your portfolio, make sure to review the pros and cons of purchasing it.



How to Invest and Trade FacebookStock

When you buy Facebook stock, there are two major strategies: investing in it or trading it. When you invest, you buy the stock and wait for it to reach a significant amount or a certain period of time and sell it. It's a long-term strategy. But when you trade stock, you buy it and sell it again when the market conditions are great. This is a short-term strategy.

Investing in Facebook Stock

Investing starts with buying. Remember that Facebook trades on Nasdaq and is part of the S&P 500 index. And as mentioned, investing is a long-term strategy, so it's a better approach for people who have money to spare and for people who prefer keeping stocks as assets. Here are the steps you need to follow to invest:

1. Decide how much you would like to invest.
2. Choose and join a broker.
3. Deposit your funds.
4. Place an order to buy stock.

Trading Facebook Stock

Aside from investing, you can also trade Facebook shares using a contract for difference (CFD) or spread bets. Using these two, your results will depend on the full value of your position.

Technically, the steps you need to follow are the same as when you invest in Facebook stock. You choose your broker or platform, open an account, deposit your funds, and buy your stock. The only difference is when trading, you have an additional step, which is to sell or trade what you bought after a short period of time.

Specifically, when you trade CFDs, you're watching and observing if the price will go up or go down. And based on your prediction, you can go long or go short. If you expect the price to go up, you can go long. But if you expect it to go down, you can go short. And remember that with CFDs, you're exchanging the difference between the opening and closing difference of your position.

On the other hand, when you spread bet, you're betting based on the point on its share price movement. So, if you predicted correctly, it will result in a profit, and if you're wrong, you'll experience a loss.

Conclusion

There are various ways you can make use of Facebook stock. If you prefer a long-term approach, you can just invest. But, trading CFDs is also a good way to participate in the market since you can potentially get profit in a shorter period of time. Please note that trading CFDs with leverage can be risky and can lead to losing all of your invested capital. The best way for anyone to decide is to practice so that they can try whichever without any risk. And to practice, opening a Libertex demo account is always the best choice.

7

Navigating the new normal with Libertex

If the post-pandemic age has been defined by anything, it has to be the massive surge in activity across the financial markets. The numbers of ordinary people getting into trading and investing over the past two years have been absolutely unprecedented. In fact, it is now estimated that retail actors currently account for up to 25% of the total stock market, and these figures are even higher in developing markets.

After hitting new all-time highs at the tail end of 2021, cryptocurrencies are another asset class that has enjoyed record capital inflows and newfound popularity among institutional and retail investors alike. And it's easy to see why more and more men and women in the street are shunning the banks and opting for higher risk-to-reward options. Between near double-digit inflation and paltry savings account rates, the huge gains posted in the stock and crypto markets of late have been enough to tempt even the most conservative of savers. In this article, we'll look at what is driving the hype on the financial markets and how you can maximise your potential returns as a trader or investor.

The hidden tax

Sound financial planning and saving money have traditionally gone hand in hand, but the era of ultra-low interest rates had already begun to challenge that paradigm. Then, as super-inflation started to take hold, long-term cash savings became nothing more than a surefire way to economic ruin. If your savings account is paying you 2% APY on deposits, but prices are rising by 8% a year, it doesn't take a rocket scientist to work out that you're actually losing 6% of your wealth each year.

Contrast this with the amazing returns seen in the stock market over the past 12 months, and it becomes a no-brainer. Even conservative plays like Tesla (TSLA) or Alphabet Inc (GOOGL) would have netted you 65% and 38.5%, respectively. Certainly, many of the new entrants to the stock market were perhaps reluctant at first, but now they're confidently purchasing ETFs, indices and even individual stocks. Until inflation is brought under control — which could be many months (or even years) and multiple rate hikes from now — securities investments will be an absolute necessity for anyone below retirement age.

The digital revolution

Crypto has been one of the most hotly discussed asset classes of the past 24 months, making headlines in 2021 for its explosive growth, newly discovered utility and widespread adoption. The movements in this higher-risk market have been even more spectacular in their swings than stocks but come with much more uncertainty. For instance, while BTC was up over 90% at one point this year, it is currently down almost 40% from this recent all-time high.

However, with institutional investors now 'all-in' on crypto as an instrument class with staying power, it does appear as though these relatively young digital assets still have several growth cycles ahead of them. Despite their characteristic volatility, they are still touted as potential inflation hedges, and an increasing number of people are thus including portfolio allocations of Bitcoin on a par with gold, for instance. There are still many fraudsters and scam artists operating in this space, and it is wise to take the time to find a reputable broker like Libertex, with a secure and user-friendly app that allows you to store your crypto holdings alongside the rest of your stocks, currencies and commodities.

Caveat investor

With the rising popularity of trading and investing, the market has become quite saturated with companies offering financial services. Unfortunately, not all are made equal, and your choice of broker will have a significant impact on overall performance. Libertex, for example, offers commission-free crypto CFD trading, which means all you pay is the spread when buying or selling digital currencies. Most operators in this space charge transaction, exchange and commission fees on every single purchase or sale, reducing your potential returns by a significant margin.

And, if like many new crypto investors, you are predominantly a holder of equities or other more traditional assets, you might prefer having the option to store your entire portfolio in one easy-to-access location for added comfort and convenience. Luckily, Libertex has been connecting ordinary people with a range of financial markets for nearly a quarter-century and can give you access to all your holdings via its intuitive, multi-award-winning app.

Don't put all your eggs in one basket

As exciting as short-term trading may well be, some people reasonably prefer long-term investing. Well, now the company's new Libertex Invest account type enables you to make long-term stock purchases completely free of charge. That is to say, you won't be charged any transaction fees, commission or other costs. This means you can buy and hold individual stocks like Microsoft or Apple or even indices like the S&P 500 or Nasdaq under the most attractive terms. Even if you're a die-hard trader at heart, you have to admit, it's always good to have a lower-risk nest egg stashed away for a rainy day.

With this in mind, the brand-new Libertex Invest product now allows you to keep your active trading and passive investment portfolios conveniently separate, all the while providing you with fair conditions for both account types. So, if you are about to dive into one or both crypto CFD and investment worlds, trying Libertex and opening your very own dedicated account would be a rather wise choice!


Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please click here to read a full Risk Warning.

The value of an investment in stocks and shares can fall as well as rise, so you may get back less than you invested. Past performance is no guarantee of future results.

Indication Investments Ltd is deemed authorised and regulated by the Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority's website.

LIBERTEX is a trading platform used by Indication Investments Ltd., a Cyprus Investment Firm regulated and supervised by the Cyprus Securities and Exchange Commission (CySEC) with CIF Licence number 164/12.

Jurisdictional limitations: Libertex Invest is only available in EEA countries.

8

What is a Stop-Loss Order and How to Use it in Trading

Setting a stop-loss order is one of the most important and mandatory actions when trading CFDs. The conditions of placing a stop order must be spelt out in the algorithm of each professional strategy. Otherwise, this strategy cannot be considered complete.

However, some beginners who have started the trading do not fully understand what stop-loss is and why it should be exposed. In this article, we will examine all of the main points related to a stop-loss order and consider several effective strategies for placing stop orders.

Stop-Loss Definition

A stop-loss is an auxiliary order set to protect a trader from serious losses in a particular transaction.

If the price goes in the wrong direction from which a trader expected movement, and the trade becomes unprofitable, the stop-loss helps save the stock.

When the price reaches the stop-loss level, the transaction closes automatically. The trader is able to save the rest of their money and can begin developing a plan to return their losses. The trader himself assigns a stop-loss level before opening a trade. A stop-loss is always tied to a certain price (with the exception of a stop-loss on time, which will be discussed later).



For example, if a trader opens a EUR/USD trade to buy at a price of 1.2500, then the stop-loss can be set at 1.2490. It means that if the price goes down and a trader starts to suffer losses, the loss will be a maximum of 10 points. After that, the transaction will be closed, and a trader can make a new decision. For example, open a transaction for sale if the trend of price reduction continues.

Why Use a Stop-Loss in Trading and How to Place It Correctly

A stop-loss must be set in order to minimise and control possible losses during trading. Even the best trading strategy periodically gives false signals, and opening trades with these signals leads to losses. A stop-loss helps to reduce these losses to a minimum, which allows a trader to quickly compensate for the lost funds and again get a plus.

A stop-loss can be set both at the time of opening the transaction and later. It is better to place a stop order immediately because sometimes the price can make a sharp jump and move 20-30 points in just a few seconds.

If such a jump occurs in the opposite direction than the trader expected, a stop-loss will reduce losses many times. If a sharp price fluctuation occurs immediately after the opening of the transaction, in which the stop-loss was not set in advance (for example, a trader decided to do it a little later), the funds will be, to some extent, defenceless.



In practice, it is very easy to set stop-loss. For example, in the popular MetaTrader 4 trading platform, this can be done in at least two ways:

- When opening a new order, enter the stop-loss level in the price level at which you would like to place a stop-loss and close the trade.
- When the trade is already open, you need to hold down the left mouse button by hovering the cursor over the order line and dragging the line in the opposite direction to the open trade. For example, if you have opened a purchase transaction, you need to drag the line downwards or upwards for a sale.

How to Calculate Stop-loss

There are many ways to calculate the size of the stop-loss for each specific transaction. In most professional trading strategies, it is already written, under what conditions, and at what distance from the opening price of a transaction, a stop should be placed. There are also several universal tactics for calculating and installing a foot. We'll discuss them later in this article.

There is also one well-known rule that is recommended for all traders and for beginners in particular. The rule is this: losses in each individual transaction should not exceed 2% of the total capital. Based on this, you can calculate the stop-loss.

For example, a trader has a capital of $10,000 and opens a EUR/USD transaction with a volume of 1 lot. The calculation is as follows:

1. 1 lot EUR/USD = €100,000, one point of price movement will cost $10.
2. 2% of the capital of a trader is $200.
3. 200/10 = 20. So, a trader can afford a drawdown of a maximum of 19 points before forcibly closing trades and fixing a minus. The stop order must be placed at a distance of 20 points from the opening price of the transaction.

Types of Stop-losses



There are at least three types of stop-losses, each of which works differently and allows a trader to rely on a different result.

Basic Stops

The standard stop-loss that most brokers offer on their platforms works as follows:

1. A trader places a stop order at a specific price.
2. When the real market price reaches this mark, the transaction closes.
3. Stop-loss is set once and remains unchanged (if a trader does not change it himself, manually).

The main drawback of such a stop-loss is that it is subject to "slippage”. If the price makes a sharp jump of several points and the stop-loss "jumps", the transaction will close, not on the level indicated by a trader, but only on that level where the price jumped to. It means that a trader can lose a few points more than he allowed for according to this plan.

Guaranteed Stop-loss

Guaranteed stop works on the same principle as the base, but it has one significant difference. When a guaranteed stop-loss is triggered, the transaction will always be closed precisely at a price set by a trader.

In other words, the guaranteed stop is not subject to slippage. The broker undertakes to close the transaction at a certain price and assumes all the risks associated with volatility. However, for such a guarantee, the broker may assign an additional commission.

Trailing Stop

A trailing stop is different from the base and guaranteed that it can move after the price stops.

The trailing stop is not set at any particular price point. It is tied directly to the current price - for example, it might be set at a distance of 20 points.

If the price moves in the necessary direction a trader plans for, the trailing stop “pulls” behind it, always remaining at a distance of 20 points. If the price turns in the opposite direction, the stop-loss remains in place.

Using a trailing stop, a trader can not only ensure against excessive losses but also protect part of the profits. A trailing stop can be used as a method of taking profits, instead of the standard Take Profit.

Stop-loss Strategies

If your trading system does not provide any specific conditions for placing a stop order, you can use one of the universal strategies.

Percent Stop-loss

The percentage stop is set in a certain relation to constant values, such as the amount of capital or the level of a Take Profit.

This involves placing a stop order, based on the size of the capital, we have already considered earlier. The recommended ratio of stop loss to capital is 2:100 (i.e., 2%). For example, with a capital of $10,000, For example, if your capital is $10,000, it will be correct to put a stop loss at about $200. Binding to take profit is usually 1:2 or 1:3 - that is, the planned profit must be 2 or 3 times higher than the allowable loss.



The advantages of such tactics are obvious - the stop level is easy to calculate, and its goal is to ensure the profit in one transaction is many times greater than the loss (although, this goal is not always met). However, it is far from reasonable to set a stop-loss with such tight binding in every situation and to ignore the objective situation in the market.

If the stop-loss set in a ratio of 1: 3 to take profit is in front of a key level, the probability that the price will affect such an order is very high. In this case, the frequency of closing trades using stop-losses can negate the profit obtained due to the relatively large take profit.

Volatility Stops

Setting a stop-loss based on volatility is an effective technique since in this case a trader can take the stop beyond the main range of price fluctuations and ensure that the order that will be accidentally “touched”.



To determine volatility, simple indicators like Standard Deviation (SD) or Average True Range (ATR) are most often used. The calculation of the stop-loss is as follows:

1. A simple moving average (SMA) is set on the chart to determine the average price indicator.
2. Next, an ATR or SD indicator is installed to determine volatility.
3. To determine the price for a stop order, the last ATR (SD) value multiplied by 2 must be subtracted from the last SMA value.



Stop-loss on volatility may be the best option at the time of exposure, but its relevance decreases with each new candle on the chart. For medium and long-term trade, this method is not recommended.

Chart stop

When installing a stop-loss on the schedule, key levels (support and resistance), as well as local extremes are taken into account. They need to be determined before setting a trade open and setting a stop. This tactic to set a stop-loss is most effective when trading according to technical analysis. In this provision, the definition of levels, extremes, and other important elements occur in the general analysis of the graph.

Stop-loss should be set beyond the nearest level or local extreme. If the stop is set at the level itself or in front of it (relative to the price), the likelihood that it will be affected by random fluctuation increases.



Stop-loss by time

Stop-loss of this type is set based not on price indications but on time parameters. For example, a trading strategy may require a trader to close a trade at the end of the day, regardless of the outcome.

This stop-loss is not very popular and is used in rare cases.



Conclusion

A stop-loss is an important element of the trading system. It makes trading more secure and controlled. It can be difficult for a novice trader to understand all the nuances of placing a stop-loss immediately, so the best option would be to start with mastering the simplest techniques.

For trading training and working with stop-loss, the Libertex trading platform is perfect.

Unlike other trading platforms, it is very intuitive, and even a novice who has no trading experience will quickly learn how to navigate its functionality. In addition, you can open a demo account for free at Libertex and practice on it as long as it takes for you to improve you skills the platform.

For all its convenience and intuitiveness, Libertex offer a wide range of features and a large selection of assets and tools for analysis. On this platform, a novice trader will be able to try out all the strategies for placing stop-loss and, after evaluating the results, make an optimal selection.

9

Technical Analysis: Average True Range

Whether you're a short-term trader or a set-and-forget investor, technical analysis is always beneficial when it comes to picking the ideal entry and exit points for a range of different asset classes. After looking at Bollinger Bands in our previous educational article, we thought we'd show you another indicator that works great in combination with the MACD and RSI we reviewed in our first article of the series. Now, we'll take a look at J. Welles Wilder's Average True Range.

What is the ATR?

The Average True Range or ATR is a volatility indicator that works by decomposing the entire range of an asset price for a given period. The true range indicator is calculated by taking the greatest of the following: current high minus current low; the absolute value of the current high minus the previous closing price; and the absolute value of the current low minus the previous closing price. The ATR is thus a kind of moving average, one which generally uses a 14-day simple moving average of the true ranges. It was initially developed for use with commodities but is applicable to a range of instruments, including equities. While it is typically configured for a 14-day timeframe, it can easily be modified for traders with shorter-term targets by following the same calculation principle as given above.

To add it to this one-month Google chart (of course, you can use it with any instrument and timeframe you like), simply enter full-screen mode on the chart timeframe of your choice, hover over the indicators tab, select volatility and then click the Average True Range as shown below:



What's its purpose?

Essentially, a stock (or any other instrument) experiencing high volatility will have a higher ATR, while a low-volatility stock will be characterised by a lower ATR. This being the case, the ATR is clearly a volatility indicator, though it can be incredibly useful at confirming entry and exit points when combined with other indicators. Since it was developed as a more accurate measure of the daily volatility of an asset, it is thus inherently more common among day traders and other short-term market participants. The indicator does not give any indication of price direction and is instead used primarily to measure gap-induced volatility and limit moves up or down.

How is it applied practically?

The most common use of the ATR is as an exit method, one that is particularly versatile as it is not dependent upon how the entry decision was made. There is a popular method known as the "chandelier exit", which was developed by Chuck LeBeau. This exit involves placing a trailing stop-loss order under the highest high the instrument has reached since you entered the trade. The distance between the highest high and the stop level is defined as some multiple times the ATR. For example, we can subtract three times the value of the ATR from the highest high since we entered the trade and place a stop loss here. Naturally, this isn't a fool-proof method, but in day-trading, not much is.

If we want to use it as a breakout signal, then we need to combine it with other indicators like the RSI. As the ATR doesn't tell us which direction the breakout will occur, we need a trend confirmation (i.e., whether the given stock is overbought or oversold) in order to pick a direction for the trade. Let's look at that same Google chart now with both the ATR and RSI overlaid:



There are a few signals, but the single clear one is definitely high-quality. Notice the low point on the ATR below the main chart (circled in yellow)? This wouldn't be particularly useful on its own, but combine it with the RSI, and the signal becomes a strong one. Here, not only is the ATR at a low, the RSI is signalling overbought. Since the price is still at a low despite significant buyer presence, we can expect a powerful leg up in the near term. Lo and behold, just one day later, a vigorous move to the upside is initiated.

Keep on learning with Libertex

Like all the technical analysis tools examined in this segment, we're not suggesting that this strategy is complete, perfect or flawless. However, it's certainly a good string to your bow and can help select opportune moments to sell or buy. All the indicators we've covered so far can be used in combination with one another for greater accuracy, and Libertex clients may try this out for themselves using a free Libertex Demo Account.

10

Best Short-Term Investments for 2022

The average interest rate for savings accounts is only 0.19%, which is fairly low. If you crunch some numbers with Bankrate's simple savings calculator, you'll see the problem for yourself. Let's say you put €10,000 into a savings account and make a monthly deposit of €300 for the next 10 years. With a 0.06% APY, you'll only earn €532.61 in interest over the entire decade.

If you're trying to prepare for the future, it may be worth looking into other investment methods. There are many options available, but today we'll go over short-term investments.

Please note: we don't offer financial advice. Our guides are for educational purposes. We hope this article will serve as a launching point for you to do more research before, ultimately, choosing the path that's best for your individual situation.

What Are Short-Term Investments?

Short-term investments — also known as temporary investments or marketable securities — are investments that are highly liquid. This means that they can easily be converted into cash when it's needed. Some short-term investments, like a cash management account, are often used by traders who need money in 2 years or less. Others, like CDs, are better for a 3-5 year timeframe.

It may seem that 3-5 years is a long time, but it's relatively short in the world of investing. Long-term investments are typically held by individuals for 7-10 years (although there is no cut-and-dry period of time).

Check the table below to see the short-term investments covered in this article, sorted by their respective cash-out timeframes.



Now, we'll explain each type of investment; they're sorted based on the timeframe, so head to the section that best meets your savings goal.

Short-Term Investments: 2 Years or Less

Cash Management Accounts

Cash management accounts combine the features of checking, savings and investment accounts. They can be accessed from a single, convenient platform. These accounts are offered by non-bank financial organisations like mobile trading apps, robo-advisors and online investment companies.

With a cash management account, you can carry out normal banking tasks like paying bills and receiving direct deposits, but you can also invest through the account. Depending on the institution, you may receive a debit card, chequebook or both.

Unlike traditional banks, cash management accounts usually don't charge fees for their banking services. Instead, they make money via investment fees and through add-ons like financial coaching.

Cash management accounts at a glance:

- Potential interest rate: 0.25%-0.5%
- Risk: Low
- Liquidity level: High

Pros: Many accounts don't have fees and come with FSCS insurance on up to €1 million.

Cons: Investment returns may be lower than those of high-yield savings accounts.

High-Yield Savings Accounts

We mentioned earlier that the average savings account only offers a 0.06% APY. However, you can opt for a high-yield savings account. These usually pay 20-25 times more in interest.

So, why isn't everybody putting their money into high-yield savings accounts instead of regular ones? Well, the banks that offer these accounts usually have fewer features. Many don't provide checking accounts or ATM cards, and they may require all inflows and outflows to occur via electronic bank transfer. Furthermore, they may require a certain minimum balance as well as a monthly deposit minimum. If you want to open a high-yield savings account, make sure to compare multiple banks and find one with reasonable requirements.

High-yieldsavings accounts at a glance:

- Potential interest rate: About 0.5%
- Risk: Low
- Liquidity level: High

Pros: Up to €250,000 of your savings are protected by FSCS insurance. Your money can easily be managed on the go via mobile bank apps.

Cons: While savings accounts are highly liquid, you can only withdraw or transfer money a maximum of 6 times per month. Otherwise, your account could be closed.

Treasury Bills

There are three kinds of treasuries, but for very short-term investments, we're focusing on T-bills. These are very safe, as they're backed by the US federal government, which has an AAA credit rating.

You can purchase T-bills in increments of €100, and they are offered via TreasuryDirect or through a bank or broker. Most T-bills have maturity periods of 4, 13, 26 or 52 weeks — although there are certain types that reach maturity in just a few days.

Treasury bills at a glance:

- Potential interest rate: 0.05% - 0.4%, depending on the maturity period you select.
- Risk: Low
- Liquidity level: High

Pros: Treasury bills are very short-term and are considered to have very low risk.

Cons: The shorter the maturity date, the lower the interest rate will be.

Short-Term Investments: 2-3 Years

Short-Term Corporate Bond ETFs

Major corporations may issue corporate bonds, which are used to fund their investments. Usually, these bonds pay holders at regular intervals, such as twice per year or once per fiscal quarter.

You can buy a corporate bond from a single company, or you can opt for a bond exchange-traded fund (ETF). The latter compiles corporate bonds from multiple companies, typically including organisations of different sizes and industries. The main advantage here is that you get to diversify your portfolio. If one company tanks, you won't lose as much in a bond fund as if you had put all of your money into that company's bonds. What's more, bond funds pay more often: typically, you'll get interest once per month.

Short-term corporate bond ETFs at a glance:

- Potential interest rate: 2% or more
- Risk: Medium
- Liquidity level: High

Pros: Diversify your portfolio and get paid interest more frequently.

Cons: It's not insured by the government, so you could lose money.

Short-Term Government Bond ETFs

Government bonds work similarly to corporate bonds, but the US government and its agencies issue them. You can purchase individual government bonds or instead go with a government bond ETF: these will contain T-bills, T-notes, T-bonds and mortgage-backed securities.

Short-term US government bond ETFs at a glance:

- Potential interest rate: 0.05%-2%
- Risk: Low
- Liquidity level: High

Pros: Government bonds are backed by the US government and are considered very safe.

Cons: There aren't as many ETFs to choose from. There are 43 government bond ETFs compared to 86 corporate bond ETFs.

Money Market Mutual Funds

A money market mutual fund invests in bank debt securities, treasuries, municipal and corporate debt and other short-term securities. Investors can purchase shares of the fund either directly from the mutual fund company or via a broker.

Because this is a mutual fund, you'll have to pay an expense ratio to cover administrative and operating expenses. This fee is typically calculated as a percentage of the money you invest in the fund. For instance, if you invest €1,000 into a money market mutual fund in one year, and there was an annual expense ratio of 0.75%, you would need to pay €7.50. However, you won't get a bill in the mail for the expense ratio; rather, when you buy a fund, the money will be deducted from your returns.

Money market mutual funds at a glance:

- Potential interest rate: 1%-2%
- Risk: Medium
- Liquidity level: High

Pros: Some funds hold municipal securities that you won't have to pay state or federal taxes on.

Cons: Investors will have to pay an expense ratio, which reduces the rate of return. They are also not FSCS-backed.

Short-Term Investments: 3-5 Years

Bank Certificates of Deposit

A bank certificate of deposit (CD) is a product that credit unions and banks offer. If you agree to make a deposit and leave it untouched for a certain amount of time, you'll earn a premium interest rate on the money. Banks offer a wide range of CD rates, so shop around and find one with the best terms.

Bank certificates of deposit at a glance:

- Potential interest rate: 0.8%
- Risk: Low
- Liquidity level: Medium

Pros: Because CDs offer a guaranteed interest rate, this is an extremely low-risk short-term investment method.

Cons: If you withdraw money before the CD ends, you'll be penalised. Typically, the penalty ranges from 3-6 months of interest.

Is the Stock Market a Good Place for Short-Term Investing?

You may have noticed that we didn't include stock trading in our list of the best short-term investing methods. That's because trying to time the stock market can have devastating results. Some people dedicate decades to learning about short-term stocks and day trading — some are successful, while others lose it all.

During times of low interest rates, you may be tempted to try your hand at stocks to boost short-term returns. But unless you're a professional trader with years of education and experience, long-term investments in the stock market are more likely to be successful. Here's why.

- Withstand the highs and lows: Stocks are fairly volatile; it's not unusual for them to drop 10%+ in value over a short period of time. But more often than not, the prices recover. By investing in stock for the long-term, you'll get to ride out the highs and lows across many years and generate better returns. When you look at data from the 1920s until now, individuals have rarely lost money when investing in stocks for a 20-year time period. It can pay off to play it safe.
- Higher return rate: According to a study by Dalbar, the S&P 500 had a 6% APY for the time period of 31 December 2001-2021. But during that timeframe, the average investor experienced only a 2.5% APY. If they had held their stocks for the full 20 years, they would have experienced a 3.5% higher APY.
- Avoid emotional decisions: Emotional buying and selling are detrimental for traders. If you read up on trader psychology, you'll see how fear and greed sway people to buy high and sell low, thereby crippling their returns.
- Lower taxes: If you sell a security within one calendar year of purchasing it, the gains will be considered 'short-term capital gains', and they'll be taxed. The max tax rate for these gains is 37%. But if you hold the securities for over 1 year, the maximum you could be taxed is 20%. If you're in a lower tax bracket, you may even qualify for a 0% tax rate.
- More cost-effective: Besides your tax liability, there are other ways that short-term stock trades can cost you. The longer you hold stocks, the fewer fees you'll have to pay. But if you're constantly buying and selling stocks, you'll be charged transaction fees and commission.
- Take advantage of compounding: Some companies offer dividend stocks, in which holders are paid regular dividends on a regular basis — usually, once per quarter. You might be tempted to cash them out each quarter to boost your short-term returns, but it is usually more fiscally wise to hold off. Why? Because of compound interest! When you add your dividends to your stock portfolio, they'll start generating compound interest. This means that any interest you earn is added to your portfolio, and then your interest starts earning its own interest. It's one big snowball effect.



Investing Money Based on Timeframe

When deciding what investments to make, you'll need to decide upon a time horizon.

A short-term time horizon refers to investments that will last for 5 years or less. This is a common choice among people who need a certain sum of cash in the foreseeable future or who are getting close to retirement.

The medium-term time horizon refers to investments that are held for 3 to 10 years. This is popular among people who are saving up to buy their first home.

Lastly, the long-term time horizon refers to investments that are held for 10 or more years. The most common investments within this category are retirement savings.

Here are a few questions to help you determine your time horizon:

- What age-based financial events will you experience, and how far away are they? When are you planning to buy a home, fund a wedding, pay tuition for a child, etc.? If there are several years between now and your next big funding, then a medium-term or even long-term horizon could work. But if you're saving for a wedding that's in 2 years, it might be best to choose short-term investments.



- What does your income look like now? How about 5 years from now? Maybe 10 years down the road? What is going to change? You can think of your financial goals as a final destination, and your investments are part of the engine that drives you there. But your income is the fuel that powers that engine. If you're planning on switching career paths or climbing the corporate ladder, your income situation will change. Not only does this affect the size of your financial targets, but it can also speed up or slow down your timeframe.
- How much risk are you willing to accept? Short-term investments can earn you a lot more than long-term ones, but they can also lose you a lot more.

Perhaps you've decided that longer-term investments are a better fit for your lifestyle and goals. However, this guide is all about short-term investments, so, below, we've compiled some strategies for trading on timeframes of 5 years or less.

What to Know When Investing Money for Less Than 5 Years

When you make short-term investments, you'll need to do things pretty differently than with decades-long investments. Here are a few tips:

Focus on minimising risk

With short-term investments, there's not as much time for prices to recover after a crash. Let's say you put a huge chunk of money in stocks, and you're planning on buying a house in 2 years. However, there's a huge market crash, and you don't recover all of your money when the 2 years are up. You'd be in a really bad position. That's why it's important to focus on low-risk methods that are backed by the government or the FSCS. The shorter the time frame is, the less risk you should take on. Bank CDs are one of the best choices for safe short-term investments in 5 years or less because the interest rate is guaranteed, as long as you don't touch the money.

Recognise that not all short-term investments have the same risk and return

While bank products are backed by the FSCS, market-based products could end up declining over a short time frame. So, a high-yield savings account has much less risk than, say, short-term corporate bond ETFs.



Know what to look for in a short-term investment

When selecting a short-term investment, consider these factors:

- Risk: As mentioned above, when you need the money back soon, you can't take on much risk.
- Liquidity: Some short-term investments like CDs charge penalties if you withdraw money early. Your high-yield savings account might be shut down if you make more than six withdrawals in one month. So, ask yourself: how quickly will you need to access money? Is it important that you are able to withdraw it early if needed?
- Stability: If you're on the longer end of the short-term timeframe (3-5 years), you can afford a little bit more volatility in your investment choices. But if you need to get your money back in the next 6-12 months, stability needs to be a big priority.
- Costs: Some high-yield savings accounts charge monthly maintenance fees. With a money market mutual fund, you'll have to pay an expense ratio. Are these costs worth it to you? In the long run, they might be, but what about when compared to smaller short-term returns?

Synchronise assets that could potentially meet your goals

If you have narrowed down your specific time horizon to six months, for instance, look for products that offer returns in that period of time. Government bonds and AAA corporate debt bonds are both popular choices for the 6-month timeframe. If your timeframe is up to a year, you could look for products that have varying durations of 6-12 months. In this scenario, laddered CDs are a common choice.

Model short-term portfolios + risk levels



Conclusion

If you want to invest money in the short term, there isn't a lot of room for error. To ensure that your portfolio performs well before you hit the 1-, 3- or 5-year mark (or whichever time frame you decide on), it's best to go with less risky FSCS- or government-backed assets. Liquidity, low risk and stability are the most important qualities to evaluate when it comes to short-term investments.

Depending on your potential goals and exact timeframe, you can tweak the ratio of those factors. But, overall, high-yield savings accounts, bond funds, Treasuries and cash management accounts are popular options for short-term traders.

For more educational information on financial topics, check out the other posts on our blog! At Libertex, we regularly publish guides for investors learn about their options. From cryptocurrency predictions to CFD explanations, our online trading platform has an extensive resource library. Please keep in mind that crypto CFDs are not available for retail clients in the UK.

11

8 Most Popular Gaming Stocks for 2022

From The Legend of Zelda and Mario to Call of Duty and Dark Souls, video games have brought joy to players for decades. And with every year that passes, the market keeps growing at an astounding rate!

There are approximately 3.1 billion gamers across the world, meaning that around 40% of the globe's population regularly play video games on their consoles, desktops or mobile devices. The market stood at $203.12 billion in 2020, and it's predicted to reach $545.98 billion by 2028, experiencing a CAGR of 13.20%.

So, gaming is only going to get even more widespread. Now, if you're interested in investing, you're likely wondering if video game stocks will be a good addition to your portfolio. The market data above looks promising, but let's examine some top video game stocks and see what investment analysts have to say. In case you're new to the finance world, we'll also show you a few different ways to invest in game company stocks.

Investing in Video Game Stocks

Even if you've never invested in stock before, there's nothing to be afraid of. Investing isn't just for people who work on Wall Street. Nowadays, there are many platforms to choose from. Some offer demo accounts and educational materials. So, you can take your time, practice and learn about various stocks before buying a single share.

Once you've carefully analysed a video game company and feel confident in its stock, you can invest in one of the following ways:

Spread betting

Essentially, you're speculating on whether the stock's price will rise or fall. In some countries, it's a commission-free and tax-free activity. Investors often go with this method, as it allows them to speculate in bear and bull markets. The profit of a spread bet is equal to:

Your per-point stake x (Closing Market Price - Opening Buy/Sell Price)

For instance, in the scenario below, a trader set £10 per point at a sell price of £11,560. They closed the trade when the price hit £11,590. There were 30 points of movement, so the trader's profit was £10 x 30 = £300.



Gaming share basket

This is a type of order that contains shares from multiple video game companies. Typically, market analysts will pick out the shares within a basket. This can give investors exposure to several assets simultaneously.

CFD trading

Like spread betting, CFDs allow you to invest without actually owning an underlying asset. However, you aren't placing a stake per point of price movement with this method. Rather, a FTSE contract is equivalent to £10. So, you buy a certain number of contracts. For each point of upward movement, you'll make £10 x the number of contracts you purchased.



But CFDs don't just involve upward movement! If you're expecting a price to decrease, then you wouldn't buy the contracts; instead, you would sell an opening position.

Most Popular Video Game Stocks (as of 25.03.2022)

Capcom (OTC: CCOEY)

- Market Value: JPY814.03B ($6.68B)
- Price of Share: $12.44
- Semi-Annual Dividend Yield: 1.27%
- Semi-Annual Dividend Amount: $0.16
- Year-to-Date Price Change: +6.42%
- Analysts' Opinion: 6 Buy, 2 Outperform, 5 Hold, 0 Underperform, 0 Sell (source: MarketWatch )
- Analysts' Consensus: Buy

Capcom is a Japanese gaming firm that was founded in 1979. It's globally recognised for series like Monster Hunter, Street Fighter and Resident Evil. The company is currently doing really well in the video game market, especially because of this year's release of Monster Hunter Rise: Sunbreak. What's more, it's launching an upcoming DLC for Resident Evil Village.

Out of 13 investment analysts, 6 recommend buying CCOEY. Because of the 2 analysts giving an Outperform rating, the consensus tips over to Buy. Industry analysts predict that in 2023, CCOEY will report an earnings-per-share figure of 1.60 (high estimate), 1.30 (average estimate) or 1.04 (low estimate).



Take-Two Interactive (NASDAQ: TTWO)

- Market Value: $17.37B
- Price of Share: $150.50
- Year-to-Date Price Change: -15.74%
- Dividend: None
- Analysts' Opinion: 15 Buy, 3 Outperform, 6 Hold, 0 Underperform, 0 Sell (source: CNN Business)
- Analysts' Consensus: Buy

Take-Two Interactive is an American company founded in 1993. It's known for some super popular game franchises — most notably, Grand Theft Auto. So far this year, the company has experienced a 15% price drop, making it a good time to buy low. This price drop followed the company's announcement that it would acquire Zynga; a price dip is typical during acquisitions. The deal, though, may have a positive long-term effect, as it'll give Take-Two Interactive a strong foothold in the mobile gaming industry.

Out of 24 investment analysts, 15 recommend buying TTWO, bringing the consensus to Buy. There are currently 21 analysts offering 12-month price forecasts for TTWO. The high estimate is $232 in 12 months, the median is $210 and the low estimate is $102.



Microsoft (NASDAQ: MSFT)

- Market Value: $2.28T
- Price of Share: $304.10
- Annual Dividend Yield: 0.82%
- Quarterly Dividend Amount: $0.62
- Year-to-Date Price Change: -9.16%
- Analysts' Opinion: 34 Buy, 6 Outperform, 3 Hold, 0 Underperform, 0 Sell (source: CNN Business)
- Analysts' Consensus: Buy

While Microsoft's success is attributed to much more than its gaming sector, the company makes plenty of profit from the Xbox console and its games. One of Microsoft's most successful games is Minecraft, which the company actually bought back in 2011. Since then, Minecraft has gone on to be the highest-selling game of all time, at 238 million sales.

When investing in Microsoft, don't just consider its video game projects and acquisitions. You have to look at the company as a whole. The company has its hands in many pots, including operating systems, mobile devices, cloud servers and productivity solutions.

The stock price has dropped by about 9% this year, mainly due to the overall tech bear market. However, if you look at the company's historical price, you can see that it has a strong positive trend.



Out of 43 investment analysts, 34 recommend buying MSFT, bringing the consensus to Buy. There are currently 37 analysts offering 12-month price forecasts for MSFT. The high estimate is $425 in 12 months, the median is $370 and the low estimate is $306.55.



Electronic Arts Inc. (NASDAQ: EA)

- Market Value: $35.31B
- Price of Share: $125.57
- Annual Dividend Yield: 0.54%
- Quarterly Dividend Amount: $0.17
- Year-to-Date Price Change: -6.95%
- Analysts' Opinion: 19 Buy, 5 Outperform, 7 Hold, 0 Underperform, 0 Sell (source: CNN Business)
- Analysts' Consensus: Buy

Electronic Arts, better known as EA, has been around since 1982 and has published smash gaming hits like The Sims and FIFA. While EA has demonstrated excellent growth in stock price over the last couple of decades, it floundered in late 2021 and late 2022 — this was a combination of a disappointing game release (Battlefield 2042) and the overall market's risk-off tone. But, considering EA's excellent EPS growth, high CAGR and low capital requirements, analysts believe the company will bounce back.

Out of 31 investment analysts, 19 recommend buying EA, bringing the consensus to Buy. There are currently 28 analysts offering 12-month price forecasts for EA. The high estimate is $188 in 12 months, the median is $167.80 and the low estimate is $127.



Nintendo (OTC: NTDOY)

- Market Value: JPY 8.55T ($70.17B)
- Price of Share: $66.22
- Year-to-Date Price Change: +13.25%
- Dividend: None
- Analysts' Opinion: 13 Buy, 0 Outperform, 3 Hold, 0 Underperform, 2 Sell (source: CNN Business )
- Analysts' Consensus: Buy

Interestingly enough, Nintendo was founded back in 1889 as a playing card company — but, of course, it eventually transitioned to the world-renowned video gamingcompany responsible for hits like Animal Crossing and Mario.

Nintendo's share price has grown by 13% so far this year — but it might be worth buying now instead of waiting for a low. That's because Nintendo is notorious for releasing new consoles every couple of years, and it's approaching that point of the cycle. Every time a new Nintendo console is released (or even just announced), revenue skyrockets. The new consoles then generate demand for games, and revenue drives even higher.

Out of 18 investment analysts, 13 recommend buying NTDOY, bringing the consensus to Buy. There are currently 16 analysts offering 12-month price forecasts for NTDOY. The high estimate is $102.69 in 12 months, the median is $74.68 and the low estimate is $32.40.

Bilibili (NASDAQ: BILI)

- Market Value: $11.63B
- Price of Share: $30.31
- Year-to-Date Price Change: -34.72%
- Dividend: None
- Analysts' Opinion: 27 Buy, 4 Outperform, 6 Hold, 0 Underperform, 2 Sell (source: CNN Business)
- Analysts' Consensus: Buy

Bilibili is a Shanghai-based video-sharing website; it focuses on several aspects, including gaming, anime and comics. The company is showing incredible growth, with China's Gen-Z population being the main user base. What's more, China is a fairly low-inflation environment, which could both draw global equity investors to Bilibili and allow the company to sustain consumer demand.

Out of 39 investment analysts, 27 recommend buying BILI, bringing the consensus to Buy. There are currently 37 analysts offering 12-month price forecasts for BILI. The high estimate is $121.38 in 12 months, the median is $46.50 and the low estimate is $14.88.



Tencent Holdings (OTC: TCHEY)

- Market Value: HKD 3.74T ($4.78B)
- Price of Share: $46.21
- Year-to-Date Price Change: -20.65%
- Dividend: None
- Analysts' Opinion: Buy, Outperform, Hold, Underperform, Sell (source: CNN Business )
- Analysts' Consensus: Buy

Tencent Holdings is a Chinese technology and entertainment company that was founded in 1998. Like Microsoft, the company doesn't just deal in video games; it has a part in music, comics, video streaming, cinema, social media and even the medical industry. So, this is another company where you have to examine all of its projects and acquisitions. Right now, the stock is down after a recent announcement of strict Chinese gaming regulations. But analysts expect the price to rebound, especially considering Tencent's dominant market position, diversified revenue stream, and strong balance sheet.

Out of 50 investment analysts, 35 recommend buying TCEHY, bringing the consensus to Buy. There are currently 46 analysts offering 12-month price forecasts for TCEHY. The high estimate is $67.74 in 12 months, the median is $87.37 and the low estimate is $33.87.

Activision Blizzard (NASDAQ: ATVI)

- Market Value: $62.03B
- Price of Share: $79.62
- Year-to-Date Price Change: +18.10%
- Annual Dividend Yield: 0.59%
- Quarterly Dividend Amount: $0.12
- Analysts' Opinion: 10 Buy, 2 Outperform, 16 Hold, 0 Underperform, 0 Sell (source: CNN Business)
- Analysts' Consensus: Hold

Activision Blizzard is an American video game company that was founded in 2008. The company has published some incredibly successful games — including Overwatch, Call of Duty (CoD) and World of Warcraft. Now could be a good time to get ATVI shares; their annual CoD release is usually in early November. That time of year almost always leads to a surge in share price for the company.

Out of 28 investment analysts, 16 recommend holding ATVI, bringing the consensus to Hold. There are currently 24 analysts offering 12-month price forecasts for ATVI. The high estimate is $100 in 12 months, the median is $95 and the low estimate is $79.



Best Value Video Game Stocks

Out of all the video game stocks mentioned above, these are the ones offering the best value. We've selected ones with lower 12-month trailing P/Es (price-to-earnings ratio). Generally, ratios of 15 and below are considered cheap, while those over 18 are considered pricey. Actually, none of the most promising gaming industry stocks can be considered cheap per se, but these ones offer the most bang for your buck.



Fastest-Growing Video Game Stocks

Out of the top gaming sector stocks, these are the ones experiencing the best YoY revenue growth. This percentage indicates how much a company's revenue has increased over the course of one year. The higher the percentage, the more promising the company's stock will be. Generally, revenue growth of 10%-15% is considered good, so the companies in the table below are going above and beyond expectations.



Video Game Stocks With the Most Momentum

These video game stocks are exhibiting the most momentum, which is measured by their 12-month trailing total return on equity. Return on equity (RoE) is calculated by dividing a company's net income by the average shareholder's equity.

Net income = total income, net expenses, and taxes that the business generates in a time span (for a trailing 12-month metric, it would be over the last full fiscal year).

Shareholder equity = The total amount of money that would go to shareholders if the company liquidates (after all debts are paid).

A higher RoE means that the company efficiently uses equity to generate income, and anything over 14% is considered acceptable. So, once again, these companies are doing well above average.



Conclusion

The video game industry is only going to keep growing, especially as consoles get faster and offer higher resolution. Do you want to get in on it and add some gaming company stocks to your portfolio? Investment analysts expect the stocks in this article to perform well over the next 12 months. But before investing or trading, make sure to conduct your own research!

12

Libertex gets “Best CFD Broker, Europe” at the Global Brands Magazine Awards 2022

In recent days, UK-based Global Brands Magazine announced the winners of its world-renowned annual Award ceremony, which aims to highlight excellence in performance and reward Companies across a variety of different sectors. In this year’s honours’ list, the prestigious publication named Libertex “Best CFD Broker – Europe, 2022” to the immense pride of everybody connected with the brokerage. In this instance, Libertex was assessed on digital innovation and business development, defeating a plethora of famous competitors for the crown of this year’s Best CFD Broker in Europe.

Another year, another accolade

Libertex is no stranger to industry recognition, having just last year been named Best Trading Platform 2021 by Forex Report, Best FX Broker 2021 by European CEO and Ultimate Fintech’s Most Trusted Broker of Europe 2021.

Commenting on winning this latest award from GBM, CMO of Libertex Marios Chailis had this to say: "Largely in part due to its user-friendly app that is used by millions of satisfied clients, Libertex has amassed several 'Best of' awards over the years and this new award is further testament that we remain committed to providing our customers the best possible trading experience along with exceptional customer care."

Cutting commission for crypto CFD clients

Beyond maintaining the convenience and usability of its flagship app, Libertex is also tirelessly committed to providing its clients with the best possible trading terms and conditions, while ensuring an eclectic and exciting instrument offering in line with global market trends. It was with this key goal in mind that Libertex made all crypto CFD trades commission-free for its traders. Now, all they pay is the spread (mid-point between “Bid” and “Ask” price). No withdrawal fees, no transaction commission, and no hidden costs. With this new attractive scheme, Libertex is making strong headway in cementing its Best CFD broker title for years to come.

Save smart with Libertex Invest

But as much as Libertex is proud of its CFD brokerage pedigree, it recognises that not everyone is looking to be a trader. A rising proportion of the population is keen on long-term investment in equities as an alternative to the minimal interest offered by today’s savings accounts. It was with these new market participants in mind that Libertex launched its new Libertex Invest product – a revolutionary account type that offers users commission-free investing in a range of Stocks. Once again, there are no hidden fees and Libertex Invest clients can even receive any dividends to which their stock holdings entitle them!

For more information or to register an account of your own, please visit www.libertex.com

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.8% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please click here to read our full Risk Warning.

The value of an investment in stocks and shares can fall as well as rise, so you may get back less than you invested. Past performance is no guarantee of future results.

Indication Investments Ltd is deemed authorised and regulated by the Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority's website.

LIBERTEX is a trading platform used by Indication Investments Ltd., a Cyprus Investment Firm regulated and supervised by the Cyprus Securities and Exchange Commission (CySEC) with CIF Licence number 164/12.

Jurisdictional limitations: Libertex Invest is only available in EEA countries.

13

Crude Oil Price Forecast: Short-Term and Long-Term Predictions

Over the years, crude oil has often been compared to gold, with some even referring to it as black gold due to its secure financial position. However, this changed a couple of years ago, with crude oil's stability being completely undermined. This oil price forecast will look at the history of crude oil, factors that have affected its price and price predictions from experts.

What Is Crude Oil?

Crude oil is a fuel source in liquid form that can be found underground and extracted by drilling. Oil has many uses, including plastic and petroleum production, transportation, heat and electricity generation.

Because of oil's origins, it's considered a "fossil fuel". Simply put, crude oil was created hundreds of millions of years ago when plankton and prehistoric algae settled at the bottom of the ocean. The organic matter was covered with mud and layers upon layers of sediment; the resulting pressure heated the remains. For millions of years, the matter formed kerogen (a waxy substance), and after even more heat and pressure, it transformed into liquid oil.

Crude oil is a nonrenewable resource. When the world's current oil supply is used up, it'll take millions of years to create more oil.

A Closer Look at Crude Oil Usage

Crude oil has many uses. It's the base for gasoline, jet and diesel fuels. Furthermore, crude oil is the base for petroleum products, including paraffin wax, tar, asphalt and lubricating oils. Oil's use can even stretch as far as perfume, fertiliser, soap, vitamin capsules and insecticides.



While pretty much every country depends on oil, only a handful produce it. The top 5 countries that have the most oil are the US (17.9%), Saudi Arabia (12.4%), Russia (12.1)%, Canada (5.9%) and Iraq (5%).

Global oil consumption has risen steadily year to year over the last three decades. The only decline was during the financial crisis of 2008 and the COVID-19 crisis of 2020.



Crude Oil Types

There are two main types of crude oil: Brent and West Texas Intermediate (WTI).

WTI

West Texas Intermediate (WTI) crude oil is lightweight and has little sulphur. As such, it's high-quality and is often called "light, sweet" oil. Its properties make WTI ideal for producing gasoline, which is why it's the US's standard for crude oil.

Brent

Brent combines crude oil from over a dozen various oil fields from the North Sea. While it isn't as "light" or "sweet" as WTI, it's still good for making gasoline. It's the standard for Europe's and Africa's crude oils.

4 Factors Influencing Oil Price

Due to unexpected changes to the factors that affect oil prices, this commodity has become highly volatile. Later, we'll take a look at how exactly crude oil's price performed in 2020, but, first, we'll introduce four key factors that have had a significant impact on this black gold.

Diminishing Global Demand

The EIA estimated that the global demand for oil and liquid fuels was 92.2 million barrels per day. This was 9 million fewer barrels per day than in 2019. However, the EIA anticipates that the barrel per day rate will rise by 3.35 million in 2022.

Rising Production in the US

US producers of alternative fuels and shale oil have increased their supply. It has been gradual, with supply increasing slowly since 2015. Shale oil producers have found ways to extract oil more efficiently, mainly through keeping wells open, reducing the cost of capping.

In August of 2018, the US became the largest oil producer in the world. The next year, US crude oil production exported more oil than it imported for the first time since 1973.

Decreasing OPEC's Clout

While US shale producers have increased their market influence, they don't operate in OPEC's cartel-like manner. OPEC hasn't cut their output enough to support prices. The leader of OPEC, Saudi Arabia, desires higher oil prices, as that is where its government gets revenue from. However, this is offset by losing its market share to Russian and US companies. Furthermore, Saudi Arabia doesn't want to lose its market share to its archrival Iran.

Increasing Dollar Value

The value of the dollar has been driven up by FX traders ever since 2014. In times of economic distress, many traders consider USD to be a safe haven. For instance, from 2013-2016, the dollar's value increased as a response to Brexit and the Greek debt crisis. And the coronavirus pandemic caused USD to increase in value 3-23 March 2020.

So, how does this affect oil? All oil transactions are made in USD, and most oil-exporting countries maintain their currency's value at a fixed exchange rate to USD. As such, a 25% rise in the dollar's value comes along with a 25% decline in oil prices.

Crude Oil Price Performance in the Past

Over the last decade, the price of crude oil has been especially volatile. Crude oil is one of the most scrutinised commodity prices; its cost influences all stages of production and, therefore, alters the price of end-products, as well.

Why has crude oil been so volatile? Oil's inherent inelasticity in regards to short-term changes in supply and demand means that its prices are naturally erratic. What's more, the economic growth in BRIC countries (like India and China) and the use of horizontal drilling and hydraulic fracturing in the US have caused further changes to supply and demand, thus contributing to the heightened price volatility since 2009. The chart below shows the historical fluctuations in oil's price:



Some historical world market oil events reflected in the chart include:

- 3 May 1970: The delivery of Saudi Arabian's Trans-Arabian Pipeline was disrupted in Syria, which drove oil tanker rates to all-time highs in June-December.
- 1981: Saudis flooded the market with cheap oil in 1981, causing OPEC members to make unprecedented price cuts. In October, all OPEC members compromised on a benchmark of $32 per barrel.
- August 1990: Iraq invaded Kuwait, thus causing oil prices to soar.
- 1998: Crude oil reached its lowest price since the 1980s as a result of the Asian economic crisis.
- 2008: The globaleconomic collapse brought the price of WTI oil to an all-time high of $125.21 per barrel.
- 2020: The globalpandemic reduced oil demand. This and other factors brought the price of oil to negative territory.

How Was Oil Doing in 2020-2021?

Crude oil had a terrible year in 2020, and we don't say that lightly. The US's assassination of Iran's most powerful military commander, Qasem Soleimani, on 3 January 2020 led to heightened global tensions. Add COVID-19 to the mix, as well as the Saudi-Russia oil price war, and it's not surprising that oil's price shot down.

What nobody was expecting, however, was for the price to reach -$37.63. This occurred on 20 April 2020, plunging crude oil's price to negative prices for the first time in history.



As the commodity plummeted amidst immense oversupply and a drop in demand, investors fled. Since then, however, crude oil has managed to recover its losses and reach price levels of late 2019. On 11 February 2022, a barrel of WTI or Brent Crude was trading at over $93.96.



Crude Oil Price Forecast for 2022-2024

WalletInvestor has published Brent crude oil predictions for 2022-2024. After 2024, however, month-to-month predictions are too speculative to provide, so we'll give more general insights for later years.



Summary: Brent crude oil is anticipated to enter the second half of 2022 between $97.22 and $98.79. It may end 2022 between $90.18 and $91.65. Source: Wallet Investor



Summary: Brent crude oil is anticipated to enter 2023 between $91.65 and $92.84. It may end 2023 between $92.46 and $93.82. Source: Wallet Investor



Summary: Brent crude oil is anticipated to enter 2024 between $93.85 and $95.13. It may end 2024 between $94.76 and $96.13. Source: Wallet Investor

Looking to the Future: Oil Price Forecasts for 2025-2050

Developing an oil price forecast is so much more complicated than forecasting currency pairs or crypto because it depends so heavily upon environmental changes in addition to the global economy. Oil is a limited resource, so we'll eventually hit a plateau in production, and, afterwards, this commodity will become scarcer and scarcer. This implies that the price will skyrocket.

However, we must not ignore the push for renewable resources. If solar energy becomes the new normal, global oil markets will instead plummet. This is why it's futile to provide a price prediction for crude oil set decades in the future.

Wars, climate change and government policies will all influence oil's price, for better or worse.

Technical Analysis of Oil Price

When determining whether to buy or sell oil, it's crucial to create a technical analysis. We'll show you the top technical indicators to include in crude oil analysis, presented alongside an example.

First, you need to determine whether you want to trade Brent, WTI or both. They trade differently, so they each have their own technical analysis.

Next, choose the timeline that you want to look at. While it's possible to set up technical analysis for timelines as short as 30 minutes, it can also be useful to look at the bigger picture, such as in weekly increments.

You'll also want to decide which technical indicators to use. Some useful ones include:

- Simple Moving Average (adds recent prices and divides it by the number of days in the time period)
- Bollinger Bands (shows two price channels (or bands) above and below a centerline)
- Relative Strength Index (measures the change and speed of recent price movements)

Based on the weekly trend, the moving average and technical indicators indicate a strong buy.



Long-Term Oil Price Predictions by Experts

We've gathered several long-term price predictions from experts in the field.

EIA

The US Energy Information Administration (EIA) is one of the most reputable sources of oil price predictions. According to their short-term energy outlook, crude oil prices will hold steady.

As for their long-term opinion, the EIA predicts that the price of crude oil may follow three paths: the reference path, the high price path and the low price path. In a best-case scenario, crude oil's price could soar to $175+ by 2050. In a worst-case scenario, it could stay under $50 for the next several decades.



Kimberly Amadeo - The Balance

Amadeo is the President of World Money Watch; she has over 20 years of experience producing economic analysis. Amadeo predicts that Brent's price will rise to $89 per barrel by 2030 and then $132 per barrel in 2040. Her reasoning? By then, all the cheap oil sources will have been used up, making oil extraction more expensive.

McKinsey

In 2019, McKinsey released their Global Oil Supply and Demand Outlook, in which it predicted three paths for oil's future prices. While their recession path was not as drastically negative as what really happened in 2020, oil prices now match up with McKinsey's Base Case. McKinsey foresaw the stagnation, oversupply and OPEC issues that have plagued oil's prices in 2020 and 2021. So, what do they see for crude oil's price in the long-term?

They have several different long-term predictions, in fact, depending on which short-term scenarios are not remedied. In the best-case scenario, in 2035, there will be strong demand growth, and barrels will be worth over $100. If stagnation and oversupply remain, prices will be around $80-90 per barrel. If OPEC remains in control of the market balance, the price per barrel should be between $65 and $75. If there is long-term oversupply, the price per barrel would instead be $50-$60.

What to Do With Crude Oil: Trade or Invest?

Just as with any other market, there is no guarantee of profit when you invest in oil. Because of its often-fluctuating prices, crude oil is a very risky asset. Therefore, before making an investment decision, be sure to check out the latest expert opinions, market trends, and technical analysis. To build any trading strategy, it's crucial to inform yourself on economic goings-on as deeply as possible.

But what if you aren't ready to make a long-term investment commitment? With CFDs, you can make trades on the crude oil market in a shorter timeframe without waiting for years. With the Libertex Trading Platform, you can get started trading WTI and Brent Crude Oil CFDs.

14

Understanding Dividends

A vast majority of publicly listed companies regularly share their profits with their shareholders, a payment referred to as dividends. When a trade or investor searches for a company with high financial health to invest in, the dividend is an important part of their analysis and research.

This article offers an in-depth explanation of what dividends are, the reason why companies choose to pay their profits to shareholders, the various types of dividends and relevant dates regarding dividends. It also delves into the relationship between dividends and share prices before detailing dividend-paying companies.

If you want to get the gist of the article, scroll down to our FAQ section, which briefly covers significant details about dividends.

What Are Dividends?

Dividends are rewards, cash or otherwise, that a company pays to its investors who own its shares. When the company makes profits, it shares the profit with its shareholders in proportion to their investment in the company. This is one of the ways an investor can earn a return from the money they invest.

That being said, not all stocks pay dividends, so if you’re considering making a living off of dividends, you need to choose dividend stocks. Although dividends are usually paid four times a year, they can also be paid monthly or semi-annually. The company’s board of directors determines when a dividend is to be paid.

Although dividends, by their nature, are a regular payment to shareholders of a stock, they can be cut down during a financial crisis to preserve cash for the company.

Dividend Example

To further understand what dividends are, let’s consider an example. Suppose a public company announces a cash payment of $1 per share on its outstanding shares. The total outstanding shares of the company might be $3,000,000, for instance. This will make its dividends payable equal to $3,000,000.

Given below are the quarterly dividend payments by Apple Inc. in the year 2021. For the last three quarters of 2021, the tech giant issued cash dividends of $0.22 per share of its public stock.



Why Do Companies Issue Dividends?

Listed companies have several options when they make profits. They can invest the capital to help their business grow further or buy back some of their shares on the open market. Why is it then that companies choose to pay dividends to their shareholders?

- Paying dividends is a way for companies to express their gratitude to their investors for their support of the business.
- Furthermore, it acts as an incentive to not only the current shareholders to continue holding stocks but also to potential investors to consider investing in a business that regularly pays dividends.
- It also improves the reputation of a company since regular dividends are a sign of a company’s financial strength and confidence in its future performance.

How Do Dividends Work?

The decisions regarding a dividend are made by a company’s board of directors. The value of a dividend is determined on a per-share basis and shareholders belonging to the same class (for example, common and preferred) are paid equally.

Generally, these are the steps companies take.

1. A company generates profits and retained earnings it does not need to utilise in the near future.
2. The management makes a decision regarding the excess money: whether it should be reinvested or paid as a dividend to shareholders.
3. The board of directors approves the issuance of dividends and other relevant details.
4. The company announces the dividend on its declaration date along with information about the dividend, such as the value per share, payment date, etc.
5. The dividend is paid to the shareholder on the payment date.

Types of Dividends

While the payment of dividends is essentially the disbursement of profits, a dividend may not always be in the form of money. A company can pay various types of dividends to its shareholders. Detailed below are some of the most common types of dividends.

Cash

The most common type of dividend, a cash dividend, refers to the payment of cash to shareholders as a return on their investment. This dividend is paid regularly, and the shareholders can choose to reinvest this money to increase their investment.

Stock

A stock dividend is provided by giving the shareholders additional stock. This usually happens when a company doesn’t have enough cash to pay its shareholders or has other preferences to invest its cash. If the company issues less than 25% of the previously issued stocks, it is considered as a stock dividend. If the issuance is more than 25% of the previously outstanding shares, it is treated as a stock split.

Asset

As dividends are not always monetary, companies can ever offer assets as dividends. An asset dividend is recorded against its current market price. Since this fair value is likely to be different from the book value of the asset, the company could either record it as an incurred loss or a gained profit. This means that companies can deliberately issue asset or property stocks to alter their taxable income.

Scrip

Essentially a note payable, this type of dividend is issued when a company doesn’t have sufficient funds to pay its shareholders. Instead, it offers a promissory note to pay the dividend amount at a later date.

Liquidating

If a company decides to return the original capital invested by its shareholders, it offers a liquidating dividend. This is not a regular dividend and usually occurs when a company is about to wind up its affairs.

Special

Special dividends payout on all shares of a company’s common stock. However, these are not paid like regular dividends and are often issued to distribute profits that have accumulated over the years and which do not need to be used immediately.

Impact of Dividends on Share Prices

After the declaration of a stock dividend, the share price often increases. Once dividends are distributed, share prices usually drop. Let’s examine the impact dividends have on share prices.

As mentioned earlier, regular payment of dividends signals the good financial health of a company and improves its goodwill and brand value. This is why as soon as a dividend is declared and its payable date is announced, investors are interested in buying the stocks. Hence, the prices of the shares increase since many want to buy them and are willing to pay high prices in order to get the dividends later on.

Conversely, after the ex-dividend date, the interest in a company’s stocks decreases because even if someone buys shares at that point, they would not be eligible for the dividend. Therefore, no one is willing to buy the shares at high prices since they wouldn’t be able to benefit from them. Thus, share prices usually fall after the ex-dividend date and even the payment date.

What Is Dividend Yield?

The dividend yield is a financial ratio, expressed as a percentage, which calculates how much a company pays out in dividends relative to its current stock price each year. Thus, a dividend yield is an annual rate. The dividend yield is calculated according to the following formula.

Dividend Yield = (Annual Dividends per Share / Current Share Price) * 100

If a company has declared the dividend per share of $1 and its current stock price is $25, its dividend yield will be equal to (1/25 = 0.04 or) 4%.

This formula also makes it clear that dividend yield can vary a lot over a certain period of time. Given that the dividend is kept constant, if the value of a stock rises, the dividend yield will fall. Conversely, if the value of a stock sharply decreases, the dividend yield will drastically rise.

What Are Qualified Dividends?

As the name suggests, qualified dividends have to meet certain requirements and conditions put in place by the Internal Revenue Service. Qualified dividends are taxable at the capital gains tax rate, whereas regular dividends are taxed at standard federal income tax rates. These are generally from shares in either domestic companies or qualifying foreign corporations and have to be held for a specific minimum period, which is termed the holding period.

Since the tax rates on qualified and ordinary dividends often vary a lot, it can make a significant difference to an investor when receiving one type of dividend over the other.

Which Companies Pay Dividends?

The highest dividend-paying companies are usually large, established corporations with predictable profits and expected growth in the future. Such companies aim to maximise their shareholders’ profits. Although a company from any industry or sector can regularly pay dividends, many companies from the following sectors have been noted to be regular dividend payers.

- Oil and gas
- Healthcare
- Financial institutions
- Utilities
- Basic materials

In addition to this, companies that are structured as Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs) are also top dividend-paying companies since they are required to distribute their profits among their shareholders. Conversely, startups and other companies in their nascent stages might not be able to pay regular dividends owing to their high initial costs of running and expanding their business.

Dividend Dates to Look Out For

A company can decide to pay its dividends monthly, quarterly or even yearly. When it comes to dividend payment, the following three dates are important.

Declaration Date

This is the date when a company’s board or management team announces that a dividend will be paid. This is also called the "announcement date" and is not considered as important by investors as the other dividend dates.

Ex-Dividend Date

This refers to the date by which you must own a dividend-paying stock in order to be paid the dividend. This is usually one business day before a company decides whom to pay dividends to by checking its stockholder roster. If shares are bought on or after the ex-dividend date, the shareholder will not be eligible for the dividend. On the other hand, if shares are bought on or after this date, the dividend payment is still received.

Record Date

Shareholders are supposed to properly register their ownership of stocks by the record date in order to be eligible for the dividend. In most countries, the registration is automatic for shares purchased before the ex-dividend date.

Payment Date

This is the day when shareholders who held a dividend-paying stock on a company’s ex-dividend date receive their dividend payment. The dividend checks are mailed to shareholders or credited to brokerage accounts.

What Is the Difference Between a Dividend and a Buyback?

Now that we know what dividends are, let’s compare them to another financial term that comes into context when a company makes profits: buybacks. Also known as a "share repurchase", a buyback is when a company purchases its own outstanding shares in order to reduce its shares available in the stock market.

Dividends and buybacks have significant differences, as outlined in the table below.



Do Dividends Affect the Valuation of a Company?

Since dividends are not included in most of the metrics for valuing a company, they do not directly impact its valuation. However, that is not to say that it does not affect the valuation at all.

A company’s dividend activity and dividend yield move its stock price and affect investor sentiment, consequently impacting the company’s valuation. For instance, a high dividend might be taken as a positive signal that the company expects to grow and perform well, eventually increasing the valuation. Similarly, a dividend cut can be interpreted as a sign that the company is underperforming, which is likely to decrease its valuation.

Conclusion

Dividends are far more than just a reward from a company to its shareholders for their trust. Dividends can, at times, be a very steady stream of income for investors. However, to ensure this, one needs to exhaustively research the kind of stocks that offer regular dividends.

Dividends do not come without disadvantages and are not completely free money. Therefore, it is important to evaluate all of your options and be completely knowledgeable about dividends before putting your money into dividend-paying stocks.

15

Just how attractive is a long term, commission free investment with Libertex Invest?

Ever since the pandemic came and changed our lives forever, the financial markets have been seeing a huge influx of participants. Interestingly enough, though, these new entrants are coming for a potential profit but not looking to “get rich quick” through leveraged trading and meme investing. On the contrary, most of these predominantly young professionals are opting for a measured and regular long-term investment approach, depositing fixed sums each month in a bid to grow their capital in a sustainable and lower-risk fashion.

Noting the trend taking hold, multi-awarded online broker Libertex decided to create an entirely new account type in order to respond to the rising demand for lower-risk, unleveraged investment products for this future-minded wave of young investors. The brand new Libertex Invest account is available to all Libertex retail clients, and comes with a whole host of its unique features.

What makes Libertex Invest so unique?

Perhaps the most attractive feature of the Libertex Invest account is its zero commission, zero fee model. No commission, no SWAPs, no transaction charges. For those looking to make regular purchases of stocks over the long term, this could potentially become a great benefit and will help them save hundreds or even thousands in brokerage costs, which can then be reinvested for potential gains. Best of all, Libertex Invest clients have an option to choose stocks which generate dividends. They will be credited directly to clients’ Libertex Invest accounts and investors can also hold them for longer periods without worrying about overnight fees.

Libertex Invest includes all the big names like Amazon, Google, Apple and Tesla, with several industry options that range from the tech, automotive, industrial, healthcare, entertainment, medicinal cannabis and agrifood sectors. This means investors can build a highly diversified portfolio, minimizing risk while taking potential advantage of a large amount of upside.

Any fine print conditions?

It might seem like there’s some hidden catch. But really there isn’t! There are just a few small restrictions on the kinds of investments you can perform and that’s all. First, Libertex Invest users are only allowed to long positions on. They can’t sell short and they’re not allowed to trade Libertex’s other high-turnover asset classes CFDs. There are no stop loss, take profit and other pending orders with Libertex Invest either.

The idea is that these investments are to be held for months or even years and so the client will be able to close these positions at their leisure without the need for autonomous assistance. Last but by no means least, this new investment account does not offer “multipliers” or indeed leverage of any kind as the purpose of Libertex Invest is for investors to possibly grow capital with the minimum risks and not attempt to make multiples of one’s initial stake in a matter of days.

Build your own equities nest egg with Libertex Invest

Now that 2020-2021’s darling growth stocks have corrected more than 50%, the time is ripe to start building an equities nest egg. And with this incredible opportunity for commission-free investment, even the most committed day investors would be tempted to set aside a little each month for a rainy day. As savings account yields look set to remain well below inflation for the foreseeable future, a well-diversified,invest in quality stocks is a wise move – even more so when quality companies are available at knock-down prices. They say that the best time for investing for the long term is always yesterday and the next best is right now, but with today’s massive discounts on high growth stocks, there probably hasn’t been a better time since quite a few years ago.

Register your own Libertex account and see for yourself what makes it so unique!

The value of investment in stocks and shares can fall as well as rise, so you may get back less than you invested. Past performance is no guarantee of future results.

Jurisdictional limitations: Libertex Invest is only available in EEA countries.

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