Rising inflation all around the world has become one of the top concerns among policymakers, but also for institutions and the average person. Rising prices reflect a diminishing purchasing power of fiat currencies, which should prompt you to look for proper inflation hedges.

In doing so, you can preserve purchasing power, but all of this comes with several risks. The debate continues as to which asset is the best inflation hedge and in this article, the focus will turn to gold and cryptocurrencies.

Comparison of both markets

Since the pandemic has had a major impact on the global economy, as well as on asset prices, it would be appropriate to first see how gold and the crypto market performed during the past two years. At the March 2020 bottom, the price of gold in USD was around $1,450, later managing to climb above $2,000 for the first time in its history.

It peaked in August 2020, on the back of rising Treasury yields and a strong risk appetite, which led market participants towards other asset classes.

When looking at cryptocurrencies such as Bitcoin, volatility has been much more significant. The price of BTC bottomed at $4,000 and since then rose above $65,000 by November 2021. Some other altcoins have posted even larger returns, but traders should consider the risks involved were (and still are) larger.

Now that the financial industry has been democratized, trading via mobile apps is possible. This puts any individual in a position to get involved in any asset, without requiring a lot of capital or advanced hardware.

Risk appetite – an important factor?

Considering both gold and cryptocurrencies have risen in USD terms, you could conclude these are inflation hedges. An asset return, however, does not mean anyone can take advantage and generate income in the future. The risk profile is important and some traders might perform well when trading gold, while others will feel comfortable taking greater risks with cryptocurrencies.

A divergence of opinions is the case here because each individual is limited by their own beliefs, while in finance there are many different ways to hedge against inflation, each with both pros and cons.

A change of generation among market participants

Conflicting beliefs can also be attributed to the fact that traditional investors and traders, which have been in the industry for a longer period of time, show an appeal for gold, an asset that until 1971 has been at the core of the global monetary system.

On the other hand, as youngsters get involved in finance, they are attracted by digitalization, given they grew up with advanced technology all around them. Which camp will ultimately prevail? It is yet to be seen, but you should keep in mind that emerging industries, such as crypto, take time to mature, and are bound for elevated volatility until that happens.

All in all, diversification among different hard assets remains one of the most trusted ways to protect yourself against inflation risks. As long as interest rates are low and fiscal spending increases each time there’s an economic downturn, hard assets can outperform cash.

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Trading publications and the media are inundated with comments about “catching a stock or asset at the right price.” There is an obsession with share prices across the industry with a fair share of opinionated trading experts, analysist and seasoned investors talking about share prices.

For instance, Tesla’s stock price has been the subject of debate as at the time of writing, with key figures like Warren Buffet dismissing it as a distraction. In case you haven’t been watching the market, Tesla’s share price (TSLA) has more than doubled in the recently and is currently trading at over $800 per share.

Is there a perfect price to buy stocks? This post aims to demystify stock trading using share prices and how you can filter the noise to make some gains.

1.    The Perfect Buying Point

One of the best and safest strategies you can use to identify good stocks involves defining a buying point. The smartest investors often take time to watch a stock’s movement and only jump in when there is a rational and natural upward trend.

For instance, stock A has been trading on all-time highs for several weeks but takes a sudden tumble. A novice investor will jump on the stock as soon as they see its declining price. This is  to their detriment. A smart investor, on the other hand, will wait until the stock has reached a point where it starts to recover. This is a perfect example of stock trading using stock prices.

Identifying the perfect price to buy stocks requires a higher degree of patience and independent thinking. However, this is usually not the case as a majority of traders tend to rally behind a trend or trade based on emotion, external opinions, greed or fear. Oddly, it has always been agreed in trading circles that the period after a readjustment or correction is the best time to purchase a stock.

2.    The Importance of Setting Your Price

How would you know if it’s the best time to buy a particular stock if you don’t have your price? You would be surprised to know that many traders buy stocks without setting their prices.  Setting your price means analyzing the asset and estimating its ideal price based on your findings. That way you would know when a price is unreasonably high or when it’s below your value.

As a practical example, experienced traders would probably shy away from Tesla’s stock at the moment. This is because it seems to be way above the “consensus price” as many would agree. Compared to close competitors and the company’s financials, it could be hard to justify its price. Of course, astronomically high stock prices also attract another category of traders known as short-sellers.

You can also take advantage of the derivatives market to maximize profits when you are confident about your set price. For example, you can purchase options on a stock that you know is either undervalued or overvalued and potentially make significant gains when the price corrects itself.

3.    Long Trades Always Win

It’s possible to make small gains in the short-term doing day trading. However, real profits can only be made on long trades. Some stock prices do take ages to move in either direction. Blue chips and some tech stocks are known for this type of movement (think Coca-Cola, IBM, PepsiCo, GE and the like). Buying a stock at a perfect price point also means being able to hold them until they hit the perfect point so you can sell.

4.    Independent Thinking While Buying Stocks

Sometimes it’s best to mute all the noise and take the time to analyze the market. Listening to analysts, news, experts and other traders may drive you into adopting the herd mentality. Instead, it would help if you took the time to peruse the company’s reports, read their press releases, scrape the internet for new stories and also read the indicators. That way, you will be approaching the price with a clear understanding of its movements.

In A Nutshell

Buying and selling stock using price movements is possible. However, you must be ready to do your homework and know what a perfect stock price is when you see it.

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Everyone wants to earn a big profit in the Forex market. Trading has become a very popular craze among young investors as it offers financial freedom. But making a skilled trader and earning regular profit is a very tough task.  Those who are regularly losing money at trading don’t have the skillset to deal with the market dynamics. They are taking too much risk in each trade and losing a significant portion of the investment. To survive in the most complicated investment industry, you have to learn to trade this market with a balanced trading approach.

Creating a balanced trading method is not all tough. If you can follow the basic rules mentioned in this article, you can expect to learn the art of trading without losing too much money.

Start with a practice account

The first thing that you should do as a currency trader, is to start trading with the practice account. You don’t have to think about the trading method, profit factors or the losing trades. Explore all the features of the trading platform and see how the market reacts to different data. Most of the time, it is really hard to stay calm in the demo trading environment. But the demo trading account works like a blessing and it can change your life. Once you get familiar with the basic details of the market, you should start working on your trading method.

Crafting the trading strategy by using the demo account is a super complicated task. However, you can easily avoid stress by accepting the fact, learning to trade requires time. You should never trade with a tendency to get rich quick. Analyze your demo trading results and try to bring the necessary change to your trading method. If you feel comfortable with the trading approach, you should start working on the improvement of your trading method.

Trading with real money

Before you start trading with real money, use the copy trading mt4 service and see how the professional trade. Though you can make some decent profit by using the copy trading service still you should not forget about the trading method. Based on the expert trader’s approach, try to bring some positive change to your trading method. Once you do that, you should start trading the real market. Never try to earn a big profit without learning too much about this market. Focus on the longer time frame so that you won’t have to lose most of the trades. Act smart and take logical steps in each trade so that you can earn a big profit with losing too much.

Revising your trading method

After trading the real market for a few months, you might find faults in your trading method. But this is very common for the new traders. Instead of stick to the real account, get back to the demo trading environment. Try to fix the problems associated with your trading strategy. Though it’s a little bit complicated task still you should do it with patience. Never think you will be able to curate the best trading system in the first go. With time, you slowly learn to fine-tune the trading strategy. Stop thinking about the quick profit forget the fact, trading is more like a one-time investment. You should be trading as a professional businessman so that you can easily earn a decent profit without losing too much money.

Money management

The last thing that you need to focus on is the risk management policy. You might be able to find excellent signals still you are going to lose some trades. To deal with those losing orders, you have to come up with a unique risk management plan. Think about the long term goals and try to improve your skills over some time. Take your time and push yourself to learn more about this market.

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Despite global turmoil, implied EUR/USD volatility at all-time low.

If you haven’t noticed, the world is in a pretty turbulent state right now—one of the highest, according to geopolitical think-tank Policy Uncertainty, whose gauge places the current global economic uncertainty is at its highest point in 22 years—basically since the gauge was invented back in 1997. To gain a better understanding, just look at the daily headlines: Brexit, ongoing trade wars, ambivalent parliaments and sudden rises in power of populist politicians. The financially-minded are interested in how such times play out on the financial markets, which brings us to an interesting revelation: despite all the turmoil going on around the world, implied EUR/USD volatility is trading at its lowest since the euro was introduced 20 years ago. In fact, certain analysts have claimed info obtained from derivative contracts suggests that EUR/USD—the most traded currency pair on the markets ($400 trillion annually)—could move less than 6% in 2020.*

Trade ranges between the EUR/USD hit the narrowest point in 20 years, coming in at around 20 pips as of 25th November and placing implied volatility trading at 4.27%–the lowest on record, taken from option prices on a 3-month horizon.** What’s more, as of 14th November, the volatility implied by the cost of certain future contracts dropped below the rates of the otherwise tranquil days preceding the 2007 financial crisis. To borrow a phrase from the British, investors are generally keeping calm and carrying on.*

What’s the reason?

Well, there’s no hard and fast answer, but there are two possible explanations. The first is due to the monetary policies on both sides of the EUR/USD coin. In the US, response to global uncertainty saw the Fed tightening its purse strings back in 2013 and raising interest rates in 2015—then making a 180-degree turn by cutting rates for the first time since 2008 this past July. And in September of 2019, the European Central Bank slashed interest rates by half a percent. The end result saw the dollar go up and the euro go down, however now both the euro and the US dollar share a similar direction, which is what’s catching all the attention.*

The other explanation could be that investors don’t see things as all that bad by comparison to such events. Compared to what? Well, try the European sovereign-debt crisis—beginning in 2010—that caused some to fear that the euro would break up and which, by 2012, had even more thinking that there was a 70% chance a euro-zone member would leave as a result. The mere thought of such a collapse sent implied volatility skyrocketing.*

What could happen next?

The first thing some wonder is, will it stay this way? While the uncertainty caused by Brexit, the Hong Kong protests and various trade wars certainly isn’t going anywhere, there is additional reassurance in observing other signs of market progress. For example, talks of a euro break-up aren’t as prevalent or threatening as they once were. Also, the yield for Italy’s ten-year government bonds went from upwards of 7% in 2011 to just about 1%. Yet to quote The Economist, “As in the financial crisis, even when markets seem calm, volatility may come roaring back.”* while some regard this volatility in a positive light, all traders should remain vigilant and gather as much info on their chosen instrument as they can at financial sites like Vestle, where you can access live market rates and a real-time economic calendar, both on the desktop version as well as on-the-go via the Vestle IOS and Android app for mobile.

Vestle offers an innovative and intuitive online trading platform where you can trade popular currency pairs like EUR/USD as Contracts for Difference (CFDs) as well as hundreds of other instruments. We also provide free educational materials to help enhance your trading skills. Access the Vestle platform on our website, or trade anytime, anywhere with the Vestle IOS and Android app, giving you the entire range of tools and features at your fingertips.

Vestle (formerly known as ‘iFOREX’) is the trading name of iCFD Limited, licensed and regulated by the Cyprus Securities and Exchange Commission (CySEC) under license # 143/11. The materials contained on this document have been created in cooperation with Vestle and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.1% 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. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results.

Full disclaimer: https://www.vestle.com/legal/analysis-disclaimer.html

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When engaged in strategically, options provide traders with a profitable opportunity to engage in buying and selling of stocks. Options can also be used to reduce the risks of losses occurring. In this article, we will be looking at some of the benefits of engaging in this trade. We will also look at some of the drawbacks.

Let’s kick off with the advantages.

Benefits of Trading Options

• Options trade require a low financial commitment

This is just one of the many advantages of options trading over stocks trading. The cost of purchasing an option is way lower than the amount that would be required to pay for shares. Traders who have invested in options make payments that are way lower compared to stocks but if the trade works in their way, both traders stand a chance to reap equal benefits. 

• Options Investors are allowed to fix stock prices

Options contracts give the trader the freedom to fix stock prices at a certain level for a specified duration. This allows the traders to be able to buy/sell contracts at the desired price before the contract expires.

• Flexibility for traders

Options traders benefit from the flexibility that the trade offers. Before the expiration of a contract, the traders are given several strategies which they can put to use. The strategic moves include; buying shares and adding onto them into your portfolio or buying shares and later sell part or all of them. This and other moves can help you to reduce the possible risks of an options trade.

• Losses are limited to whatever is paid for

Whenever you call or put an option, you are not compelled to follow the trade through to the end. The case is different while trading in stocks. If your predictions in an options contract are incorrect and a loss occurs, you only make losses on the contract and the trading fee.

Downsides of Trading Options

• Traders must meet set requirements

Some set requirements must be met before traders can start this trade. Options traders must maintain a minimum balance of $2,000 in their accounts. The first requirement is that you apply for approval from your options broker. To grant you this approval, the broker will ask several questions aimed at verifying your financial and investment experience. 

Choose a broker whose terms are favourable to you.

• Limited time to make the next move

Although it has many alternative strategies, options trade is short term in nature. Trades normally take place within days or months and investors have to capitalize on the prevailing price movements. Traders have to study the trends and make the important decision of whether to buy, sell or walk away from a trade before the contract reaches the expiry. 

Things to Do That Can Help Minimize the Drawbacks of Options Trading

• Never stop learning.

Keep doing your research on trading as you wait for the trade hours to clock in. This will expose you to new techniques and tricks. It will also prevent you from making uncalculated trade decisions. Learn from trade webinars and read informative trading media.

• Delve deeper into specific patterns

Note down all indicators and all the elements that come with it. Scroll through past charts to see how the two affect each other.

• Initiate trading chats

Got some questions? Consider discussing them with fellow options traders or your broker. There is a lot that you can learn from other traders. Use this as a chance to educate yourself and to develop your skills further.

Summing It Up

It is important to choose an options broker. Apart from offering you a platform where you can trade in options, a broker offers you the professional advice that is required until you can make trade decisions independently.

The broker will give such advice like which trades to place and setting the appropriate expiry time. He will also give you a breakdown of the potential gains.

To make sure you develop your skills, the brokers have a platform where you can gain experience by practising trading on a demo account.

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