Forex Trading Versus Binary Options: Which One Is Better? (Part 2)

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“To be successful, you must keep in mind that the only way you can continue to operate is to protect your account from a major setback or, worse, devastation. Avoiding large losses is the single most important factor for winning big as a speculator. You cannot control how much a stock rises, but in most cases, whether you take a small loss or a big loss is entirely your choice. There is one thing we can guarantee: if you cannot learn to accept small losses, sooner or later you will take big losses. It is inevitable.” – Mark Minervini (Source: Tradersonline-mag.com)

This is just to debunk myths surrounding binary options (also called fixed odds), opening our eyes to facts.

Arguments in Favor of Binary Options
Because of its plausible simplicity, many people are attracted to binary options, thinking that Forex requires a bit of getting used to. In fact, many so-called binary options experts have documented some logical arguments in favor of binary options, and to some extent they’re partially correct.

Did you think binary options (BO) have some advantages over Forex? OK, let’s examine a few advantages the experts claim BO has and see whether the advantages aren’t in Forex.

Myth 1
BO is based on time and FX is based on price. Most FX traders overlook time factor in their trading while BO traders are time-conscious.

Reality
The market doesn’t care whether you trade it based on price or time. You may enter with a specific timeframe or a specific price in mind, but that doesn’t guarantee anything. It’ll do what it’ll do without having you in mind, and this can be in your favor or against you, whether you trade BO or FX. You timing may be wrong immediately or later or never. You timing may be correct immediately or later or never. This has little role to play in your success.

Myth 2
BO traders are forced to exit a position in a given timeframe either with win or loss. Since they’re forced to do this, they’ve an advantage over FX traders who can refuse to exit a position with win or loss because of greed and fear.

Reality
Yes novice FX traders can hold onto losing positions and abort winners, which is a bad trading approach. But disciplined traders cut their losses and give their winners some leeway. Being forced to exit at a given time doesn’t make you the richest trader; otherwise, automated systems would be second to none. Being forced to exit always at predetermined levels can’t help if your trading approach is bad and the market has an inherent negative expectancy. The discipline you enforce on yourself is much more satisfying than the discipline someone imposes on you.

BO traders suffer the disadvantage of being forced out against their will, though the most important issue is profitability, which still eludes many in spite of being forced out at expiry periods. In FX, we’re comfortable exiting at our convenient time. We may continue running a profit in order to maximize it. From March 3 – 11, 2015, I’d have gained about 500 pips in case I went long on USDCHF and I let my profit run.
Forex Trading Versus Binary Options: Which One Is Better? (Part 2)Myth 3
BO helps reduce emotions because risk and reward plus expiry are all fixed and predetermined.

Reality
All traders in all financial markets aren’t immune to emotions, so BO is no exception. Permanent success in trading includes a measure of managerial control of our positions. This isn’t possible in BO, for you remain helpless once a position is open, waiting for expiry.

Considering the myths and realities above, I’d like to chip in some fallacies some BO traders carry in their heads and the facts about the fallacies.

Higher Accuracy Fallacy
According to one source, BO by its nature requires a greater than win rate as each bet is factored 70% – 90% gain against 100% loss. So this means that you need to achieve as a BO trader a win rate above 50% on average 54% – 58% to just break even.

The fact is that in the long run no one can achieve more than 50% accuracy. 80%, 90%, 75% etc. hit rates are false in the end. They might be true in the hindsight, but not in live markets. Even scalpers who risk 500 USD to gain 2 USD per trade in FX trading would seem to have high hit rates, but this would drop significantly when the hit rates are reduced.

It is fallacious to think there are computer, automated, custom, alien, astronomical, spiritual, mental, discretionary, fundamental, manual, etc. strategies that enable us to get a hit rate which is higher than 50% in future. Marketers and novice traders would tell us so, but many people have lost money with systems that are promised to carry very high accuracy because the next moment (the future) can’t be predicted. Something that sounds great in theory can fail in practice and what looks like a perfect plan can be overturned by a factor beyond our control.

BO traders are often fooled into believing they can achieve a hit rate of 70% or more permanently. You might as well do that with a toss of a coin endlessly. No matter how good or how complicated your strategy or indicator is, you’re guaranteed only 50% hit rate or less in the long run. When tossing a coin endlessly, the share between heads and tails will balance off at 50/50.

Albeit, there can be times when heads will be hit more than tails within several weeks or months (or even years). You get heads 10 times, and tails 2 times. Then heads another 8 times and tails 3 times. Then heads 9 times and tails 4 times. This would give you a false impression that you’ve a trading approach with a high accuracy, without you being aware that it’s winning streaks that cause that. On a long-term basis, things would turn the other way and you get leveled at 50% because tails would begin to be hit more than heads (like getting tails 9 times and heads 2 times).

The only way to survive is to make more money in winning periods than you lose in losing periods. Does BO allow this?

Money Management Fallacy
Money management is very important in trading any financial markets, and so BO traders claim they can get ahead with good money management methods. The issue is this: can a good money management method help you in a game in which your risks will always be higher than your rewards? How can you survive in a game in which you’ll be paid only 70 or 80 USD for each 100 USD your risk?

If you win you gain 80 USD, but if you lose, you forfeit 100 USD. Does that appeal to you? What money management can you use?

It doesn’t matter whether you risk 1% or 0.5% or 2% per trade – you simply gain less than you stake no matter what you do. Money management makes sense only when your losses are smaller than your gains, not the other way round.

Let’s say you get paid 90 USD for each 100 USD (because this is the highest the most generous broker can give you) and you place 100 trades in a year.

Let’s use 100 trials with 90% payout ratio (most brokers pay only 50% – 80% of the capital risked). Let’s say you’ve a capital of about 10,000; assuming the money management is 1% per trade. 100 x 100 = 10,000.

You win 50%
90 USD X 50 = 4,500 USD

You lose 50%
-100 USD X 50 = -5,000 USD

Is this ever logical or rational?

In FX, we can risk 50 USD per trade to gain 200 USD. With this, we can lose 75% of our trades and still make money.

-50 USD X 75 = -3,750 USD (loss)

200 USD X 25 = 5,000 USD (win)

Doesn’t this make sense to you?
Forex Trading Versus Binary Options: Which One Is Better? (Part 2)The Gambler’s fallacy
The only way to enjoy longer term success in BO is to use Martingale position sizing methods, which make you double your next stake to cover the previous loss (and this doesn’t present any huge edge in itself). Please search for information on the Internet in order to know what Martingale is and how it works.

Martingale isn’t ideal for most traders because they don’t have enough money. This is a serious problem. Too many traders open accounts with too small funds, and under such circumstances, good money management can’t be practiced.

Unfortunately, those who’ve big accounts either don’t understand concepts of excellent position sizing or fail to respect the concepts.

This leads us to the Gambler’s fallacy. When you’re in a losing streak, you think your chances of winning improve with next positions, since your previous ones are losses. You think the winners are around the corner. Doubling your stakes with each loss increases your negativity and depletes your account quickly.

Maybe after 4 losing trades, which cost you 2,000 USD, you double your stake to 4,000 USD. You could have the 5th straight loss because you’re still in a losing streak.

Even if you wait for 4 losses in a row before risking 20% of your account to recover the recent losses, you still face a gambler’s problem because your next trade could be a loss, and this has nothing to do with what happened to you in the past.

The Grass Is Always Greener on the Other Side of the Fence
Some hate transport business and some love it. The risks in transport business (accidents, failures, low patronage, losses, problems with authorities, etc.) don’t deter some people from doing it because of its rewards. Some who fail at agriculture think sports is better. Some who fail at politics now want to try publishing, whereas publishing has its own challenges. Some who’ve been disillusioned with salaried jobs now want to try music industry; whereas it isn’t easy to be a celebrity or a promoter. Some who started their business has also seen that remaining profitable isn’t easy. Certain people don’t want to do anything with trading until they’re financially down, having exhausted all other alternatives. Is that the right time to become a trader?

Those who don’t make money with CFD believe spread betting is better. Those who hate shares markets consider futures markets. Those who have problems with FX think BO is better.

What do you want to do with your life? What do you want to do for a living? What can you do to put food on your table (or to feed your kids, if you’re a parent)? Life’s short: only 70 – 90 years, and some don’t even reach that age bracket. A short life is meaningful if one’s financially free and is fulfilled.
Caveat
I didn’t mean to anger BO traders. BO is good and it offers nice potentials, but people are also blinded to its pitfalls and inherent disadvantages. A business that always makes profits that are bigger than expenses will sometimes go thru turbulent times, how much more a business that makes profits that are always smaller than expenses!

If I made a business proposal to you, telling you that your income/profits from the business would be primarily, permanently less than your expenses and other costs of running the business, would you agree to the business proposal? Does that kind of business sound rational to you? Sadly, this is the permanent reality of BO.

It doesn’t make sense to run a business in which the costs will always be bigger than income. I’ll trade BO only when brokers start giving us the possibility of getting reward that is bigger than risk per trade. However, I sense that this may put them at a demerit.

Conclusion: The most exciting thing about market is its unpredictability. The unpredictability of our trading career isn’t always thrilling, however. We devise and strategize. We make trading plans, projections and proposals about what we’d like to see happen to our portfolios, but often they’re little more than our best guesses. We’ve no idea what a day, a week, a month or even a year might bring.

“Why don’t you just play around with the idea that you can be wrong and still be successful. Being right or wrong is a meaningless invention of your mind. Instead, what if you just developed a good system and practiced following it? A loss has nothing to do with being wrong. Instead, a loss has everything to do with following your system and not making a mistake…. So what if you just accepted losses when you got them, allowing them to be small losses and let your profits run when you have a good trade? Don’t you think that might be a good idea?” – Dr. Van K. Tharp (Source: Vantharp.com)

This piece was first posted on ADVFN

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Peter Thiel: A Foremost Investor

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WHAT YOU NEED TO KNOW ABOUT MASTER TRADERS – PART 1

“One of the secrets few know and fewer implement when it comes to trading success is that you have to really care about doing well. These days, I see a lot of traders not caring enough, not prioritizing learning about trading, and making pathetic weak-willed excuses.” – Chris Tate

Name: Peter Thiel
Date of birth: October 11, 1967
Nationality: German, American
Occupation: Businessman and investor
Peter Thiel: A Foremost InvestorA RARE GENIUS
Peter was born in Germany, but his parents took him along to the United States, where they settled. He studied philosophy at Stanford University, earning a B.A. (1989). He also got his J.D. from Stanford Law School (1992). He was very good at playing chess, even to the point of being rated a Chess Master.

With Elon Musk and Max Levchin, he co-founded Paypal. He co-founded Palantir, serving as its chairman. He was the first outside investor in Facebook, acquiring a stake which was worth 10.2% in 2004 for $500,000. Therefore he’s a member of the board of directors.

He presides over a hedge fund named Clarium Capital. The fund was worth $700 million. He’s also a managing partner in Founders Fund, a firm which was worth $2 billion. He also co-founded, chairs Mithril Capital Management and Valar Ventures.

In the year 2011, his position on Forbes 400 was 293rd, being worth $1.5 billion. As of August 2015, he was worth $3.3 billion.

Peter is interested in other intriguing issues, causes and futuristic ideas, participating in some of them, funding some of them and advocating some of them. He’s won awards, honors, and an honorary degree from Universidad Francisco Marroquin.

 Peter Thiel: A Foremost Investor

What You Need to Know:
1. Peter really has a Midas touch. Are you successful in other areas of life? You might want to try trading and/or investing. Perhaps you success in other fields might be translated to success in trading as well. As you can see, Peter Thiel has been successful in most of the ventures he took, including investing. He correctly forecasted the weakness of USD in the year 2003, plus forecasting that the strength in USD and energy would be strong in the year 2005.

2. You can’t be right always. Peter wasn’t always right. His hedge fund, Clarium, dropped in value within years 2008 – 2011. This was largely due to incorrect bets. However, you should be successful overall, just as Peter is.

3. In trading, courage is more important than genius. Brilliant traders are rare. No wonder there are so many losers.

4. Peter says monopoly is the condition of every successful business. This can be applied to trading. You just got to develop your own unique trading approach and stick with it. That unique trading approach is your edge, which will give you breakthrough that many millions of traders can only dream of.

5. Nobody cares about you unless you become a successful trader with years of a nice track record. Consistent profitability is an elusive thing, and once you can achieve that, more and more people would be interested in you, because you’ll appear unique. Without this, you’ll just be like many other millions of people who’re failures.

6. Don’t be afraid to fly in the face of a conventional trading wisdom. You trading approach is good as long as it makes money, no matter how odd it seems.

7. Always make sure that in a quarter or on annual basis, you make average profits that are bigger than average losses. Your few winners ought to compensate for your numerous losers.

Conclusion: When problems and challenges arise in your trading career, do you feel overwhelmed? I no longer feel helpless and without hope. Today, I can truly say I’m happy as a trader, although previously I never imagined it possible, I now feel that I can help others.

This piece ends with a quote from Peter:

“The most contrarian thing of all is not to oppose the crowd but to think for yourself.”

Firs published on ADVFN

 

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Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.

How to become good at options trading business

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Everyone wants to master the art of the options trading profession. After stepping foot into the trading world, people start thinking that options trading is the most efficient way to make a big profit. This statement is true to a certain extent when you don’t have big capital. You can predict the direction of the price for a short-term duration and manage to a decent profit. So, timing is very critical to your success in the options trading market.

Many novice traders often thinking predicting the market direction is an easy task. But it depends on many factors. To make the right decision at trading, you should be extremely careful with the overall trading process.
Improve your discipline
To trade the lower time frame, you should be extremely disciplined. If you break the common rules of trading, you should not try to trade the options market. Many novice traders think they know everything about the market. But if you carefully assess the actions of the rookie traders, you will notice that they don’t know anything about this market. To become good at trading, a trader has to follow the core rules of the investment business. And for that, they have to improve their discipline. It might take a while to become a disciplined trader but once they become disciplined with the trade execution process, it is just a matter of time they start making some big profit.

Trade with the trend
The professional options traders always trade with the existing trend. They never bet against the existing trend since they know it is a very risky approach. So, learn about the different phases of the market trend so that you can take better decisions without having any major faults. Take your time and learn to evaluate the different phases of the trend with an extreme level of caution. Once you become good at managing the trades, you will no longer fear trading in the options trading industry. So, take your time and learn to evaluate the trend in the demo account. Be confident with the trend trading approach before you start taking the trades in the real market.

Study the candlestick pattern
To take the trades in the lower time frame, you should learn to evaluate the candlestick pattern. Candlestick pattern trading strategy is very effective in the trade execution process. Study the single candlestick pattern at the initial stage and once you become confident with your trade execution process, you should become more comfortable in the trading method. Try to take your time and learn to evaluate the market data systematically. Forget about the aggressive approach and indicators. Just by learning to analyze the candlestick pattern, you should become confident with your actions.
Trade without any emotions
Being an options trader, you should never trade the market with emotions. Emotions are very lethal for the trade execution process. You might have extensive knowledge about this market but if you fail to evaluate the risk profile in a standard way, you will fail to execute high-quality trades. Take your time frame and learn to control your emotions. If you become greedy and focus on a high-risk trading strategy, you might make some big profit but in the long run, you will lose money. Never get frustrated after losing a few trades. Consider the losses as a part of your trading business and try to evaluate the risk profile in a standard way.

Learn to use the moving average
In the options trading profession, the use of moving average is very prominent. Most of the successful traders rely on the moving average to execute the trades with a high level of precision. Take your time and learn to deal with the market dynamics in a structured way. Once you become good at evaluating the data reading from the moving average, you can trade in the 1-minute time frame also. Note that the moving will also provide you critical information regarding the support and resistance level.

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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.

Perfect Crypto Investment Strategies – Part 1

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A LONG-TERM CRYPTO INVESTMENT STRATEGY

“…Cryptoassets were the biggest institutional revolution since the Industrial Revolution and they represented the investment of a lifetime.” – Van K. Tharp, PhD

What is the idea? What crypto coins should you buy?

For instance, you may want to invest in popular DeFi tokens.

According to John Hargrave, for the vast majority of DeFi projects, the layer is Ethereum. As he’s said again and again, the easiest way to invest in DeFi is to just buy and hold Ether. It’s the foundation of DeFi, and it’s the foundation of a smart DeFi investment portfolio.

Nonetheless, popular DeFi coins serve unique purposes and they can deliver great returns in future. So you may not want to restrict your opportunities to ETH only. Yes, there are tremendous opportunities to make money from other coins.

One of the DeFi tokens that stands out is Uniswap (UNI), created by Hayden Adams in November 2018. From September 2020 to May 2021, UNIUSD rose from $4 to $44. But that is just the beginning, for price is bound to rise from here, following the recent large bearish correction. Uniswap facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contract. In 40 years to this time, UNIUSD would be worth at least, $400,000.

This is just one of the numerous examples. You need to pinpoint cryptos whose value will go upwards exponentially in future.


FINDING THE NEXT UNICORN
Buy all the top 100 crypto coins.

Look at the top 100 coins. They are the 100 biggest coins in the world by market capitalization. That means they are currently popular, and it also means a lot of people have invested in them.

Most top 100 coins are promising, having excellent purposes and bright future.

Depending on your financial status, you can invest $1000 in each coin, making a total of $100,000.

Or you can invest $100 USD in each coin (a total of $10,000), or you can invest $10 in each coin (a total of $1000).

Then hold the coins forever.

No matter how expensive a coin is, like Yearn. Finance (FI) which is currently around $39,658, but which once reached a high of $90,000. Buy it.

No matter how cheap a coin is, like SHIBA INU (SHIB) which is currently around $0.000007151, but which once reached a high of $$0.000040151. Buy it.

THE ULTIMATE FATE OF THE TOP 100 COINS
Some coins will become crashing failures, and some coins will become roaring successes. Some coins will perform above expectations and some will perform below expectations. Some coins will neither make money significantly nor lose money significantly.

Within 2 years or 5 years or 10 years or 20 years, some of the coins that are currently in the top 100 would have been pushed out of the top 100, and some would remain within the top 100. Some which are below the top 50 or the top 80 would have been pushed up to the top 10.

By then, some currently unpopular coins would have become household names, and extremely successful.

On the other hand, some coins would have disappeared or become totally worthless or useless/seriously unpopular. That will also happen.

However, the coins that make money will by far, compensate for the losses you have on the coins that eventually prove worthless. The colossal gains you would make from the successful coins will make your losses on the eventually useless coins to pale into insignificance.

How viable is this investment idea?
A CASE STUDY IN STOCK MARKETS
James Altucher recently released an investment newsletter in which he mentions this:

Make a serious research to identify an industry with exponential growth; then buy many (if not most) stocks in the industry.

Since a man named Gordon Moore declared that computing power would double every 2 years, that prediction has proven to be correct, even 56 years later.

What did that mean if you were alive then? It means you could invest in computer companies.

For you to understand, please let me quote Altucher directly:

“Let’s say, from 1970 to 1990 you put just $1,000 into each of the next 100 computer companies to go public. And then you ignored them until today.

Which means you would invest $100,000 in total ($1,000 into 100 companies).

Many computer companies went bankrupt during this time. Do you remember Eagle Computer. Or Commodore?

Or the ElectroData Corporation? How could you forget the one-time third-largest computer manufacturer? The maker of the DataTron 203 that shipped for a price as cheap as $125,000. It weighed 3,175 pounds and had about 4k of memory.

Many companies went bankrupt. But how could that be if the computer industry was growing exponentially??

Let’s say that out of the 100 companies you invested in and forgot until this moment, 98 went bankrupt. Let’s say only Microsoft and Intel survived. The real facts are that many more than 2 of the 100 survived, but this is an extreme example.

So out of your $100,000 invested, $98,000 went down the drain. Only 2 companies, or $2,000 of your investment survived. That sucks, right?

Wrong! If you had done this strategy, you would have $3,500,000 today. In fact, you would have a lot more because many more than just two companies survived. But again, I use this as an extreme.

If you invest now in an exponentially growing industry, even if you invest small amounts, you will make an enormous amount of money. This is no joke.

But, you might say, “An industry like computers only happens once every 50 years.”

Because of the rise of the computer industry, computers now create exponential industries. There are many exponentially growing industries.” (Source: Jamesaltucher.com)

TIME TO GET RICH SLOWLY
You can see that the crypto investment strategy explained in this text works in any major industry with potentially exponential growth. It has proven to work in stock markets, crypto industry, etc.

Let’s take a factual, real example. I invested $200 in 2 coins ($100 for each coin), and less than 3 years later, one coin has gained over $11,700 for me; while the value of the invested $100 on the other coin has depreciated to $26.

“If you invest in crypto, then expect to live with huge volatility. No major institutions that I know of, however, have sold off their crypto investments,” says Dr. Van Tharp.

My $200 investment was then worth $11,726. Was that bad?

Actually you cannot lose more than what you have invested in a coin, but you can really gain more than what you have invested. Even that $74 depreciation on the second coin wasn’t a real life loss unless I cashed it out.

That is the beauty of crypto investment. Good, viable coins will eventually go up, irrespective of crypto winters and storms along the way.

I am a living witness to this truth as I myself began to get my feet wet in the crypto industry years ago. Some coins like BNB and ADA have paid handsomely, while some coins like ATB and ETN have become failures. Some coins like XRP and TRX have neither made serious money nor lost serious money.

Ultimately, you will be richly rewarded by the cryptos that make money.

CONCLUSION
This investment idea is great if you buy and hold forever. That is the best way to make money. Nonetheless, there is a killer short-term crypto investment strategy that will be revealed in the next article in this series.

That strategy enables you to make money by taking short-term positions in crypto markets, focusing on the top 100 cryptos only. The accuracy of the strategy is stunning and it is one of the strategies we use to generate signals in our Telegram channels.

Note: Learn2.Trade is not a financial advisor. Do your research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results

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  • The Lowest Trading Costs
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  • Award-winning Cryptocurrency trading platform
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Highly volatile unregulated investment products. No EU investor protection.

  • Over 100 different financial products
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  • Trade top Cryptos such as Bitcoin, Litecoin and Ethereum plus more
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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.

What Should Everyone Know About Investing?

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Before making any decision regarding investment, knowingly or unknowingly, you should ask yourself three questions. One is if your money would be safe. Second is if you would get your money back when you need it, and the last one is what return you would earn from it. These questions are about three important part of investment: safety, liquidity, and returns. These are what you should worry about while going through investing news and looking for a profitable asset to invest into. 

Keep in mind that you should consider all three elements at the same time. Let’s see what the result would be if you focus on just one. If you are after the most liquid options, then it is best to keep cash in the locker or in your savings or current account. However, when it is time to consider what would give the highest return, a conflict appears. In most cases, investments with the best returns do not offer the highest safety or liquidity. 

As you may have already realized, investing compels you to make tradeoffs. When you are investing in real estate, you trade off liquidity. By investing in stocks, you take on market risk and trade off safety. When you go for fixed deposit, you trade off high returns. 

There are three broad choices in financial investments: cash, equities, and bonds. Cash is the safest and it is also very liquid but the return is very low. Bonds or fixed income or debt brings moderate risk and it is less liquid, but offers a better return compared to cash. Equities have higher risk but it is easy to avail liquidity through markets. 

The returns are also expected to be higher than cash or bonds. Within the three classes, you can rely upon further sub-classes. Liquid funds are as good as cash but provide better returns than cash kept in the bank. Government bonds are more liquid and safer than corporate bonds, but provide lower returns than the latter. A diversified mutual fund is comparatively less risky than investing in just a couple of stocks or a sectoral fund. 

So, what should you choose for investment? 

The answer lies in your financial goals. So, first understand your objectives, and assess the time available for your investments to work and what return you need to meet your goals. Your investment choice would be decided based on these three factors. A good investment portfolio optimizes the three essential elements to obtain financial goals and build wealth.

Apart from knowing how to choose your investment, you should also pay attention to common investment mistakes. To avoid making those mistakes, know what they are:

Mistake 1: Not paying attention to asset allocation

A lot of random investments based on the advice from family and friends are what you build your investment portfolio with. So, one finds various fixed deposits, money-back and endowment insurance policies, mutual funds or stocks. However, it is not a smart decision to invest in all of these. You may think that you are investing a decent amount of money in right places, but all options may not be ideal for you. It is important to consider facts like your age, financial asset, and more. Asset allocation is the biggest weapon of an investor to create wealth. 

Mistake 2: Counting lots of activity as an investment strategy

Many young investors treat stock markets as a sort of a roulette machine to make money. However, it makes them lose money. It is also not wise to buy a new set of mutual funds every month as it causes over-diversification. It does not make sense to add another product instead of backing the winning products in your existing portfolio. If you find yourself spending a lot of time with your investment, then there is definitely something wrong and you need to get your investment strategy right. 

As a broad guideline, you can have long term goals to benefit from a mix of equity and bonds, while short term goals are better taken care of by cash or liquid investments. It is not that financial goals cannot be achieved by investing in fixed deposits or stocks. The only downside is that you may have to work a lot harder in these investments. Overall, if it is too much for you to decide, you can always consult your investment advisor. 

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Stop doing what doesn’t work for you as a trader

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When the Market Moves
Gains are made only when price moves. No price movement; no gains. While we cannot be sure of the next market volume and volatility, there are principles that can help us achieve our goals, no matter what the market does.

Pay attention to buying and selling pressure, relative to price movements and the major market bias. Maniacal movements are invariably followed by stronger buying and selling pressure. Anytime price goes somewhere briefly and then changes direction abruptly, that means profits are being taken by many short-term speculators.

When you trade for the long-term, watch the market momentum as it develops over time. A trading instrument that plummets by 800 pips in 3 days, and then takes 6 days to gain 400 pips, will undoubtedly, plummet again, plus it might drop further, far below the previous low.

A Solemn Assembly
There are golden rules that must be followed by all successful traders, especially those who aspire to long-term success.

How much did you make throughout last year? How many withdrawals did you make on your trading portfolios? Did you withdraw more than you deposited in total? Be honest with yourself and check your trading results.

Let us call a solemn assembly. Did you like the kind of results you got last year, as a trader? Would you ever want such results to be repeated this year? Do you want better results this year or do you want to continue like this? Think about how long you have been trading. Are you proud to call yourself a trader? Trading is hard: But have you found a way to be consistently profitable?

Reversing Destructive Trading Habits
What are you doing now that is not giving you the results you want? It is high time you ditched any trading styles or habits that are not giving you the results you want.

If risking high lot sizes (relative to your account balance) is affecting you too much, then stop that and start risking low amount per trade. If refusal to use stops occasionally wipes away profits you have accumulated over the weeks or months, then stat using optimal stops. If you’re fond of taking too many trades that usually overleverage your account, please stop that and begin to take fewer but high quality trades. If you tend to violate your good trading rules, often to your detriment, then you need to find ways to stick to those good rules, no matter what. You stick to them as if your existence depends on them.

Whatever you have been doing, which is affecting the health of your portfolio, please and please, I implore you to stop doing it, and begin doing the exact opposite. You will be surprised by the positive results you observe afterwards.

Here, I’d like to repeat my concluding note in TRADERS’ magazine (September 9, 2011)

“There will be challenges in your trading life that will separate you from your trading goals only if you allow them to. Trading success is not the birthright of a privileged few. Trading success is for me, trading success is for you. Trading success is for those who need it, and for those who are currently losing. It is for those who have given up trading, and for those who are yet to start trading.

The message is clear: Trading success is for everyone.”

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Stamps.com is a long-term buy at these beaten down prices

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US mailing and shipping solutions company Stamps.com (SMTP) reported stellar earnings in mid February but the shares nevertheless fell a whopping 19%.

Adjusted fourth-quarter earnings per share came in at $4.13, almost double analyst forecasts of $2.62.

Indeed, whichever valuation metric you choose to measure the firm on, it is among the best performers in its industry (software and IT services).

Price to book is 3.61, price to sales on 4.63 and enterprise value to EBITDA at 13.77, ranking it 40th in the industry out of 239.

The share price has dropped from $260 on the day of the earnings release to a low of $181 on 26 February. The bleeding hasn’t stopped. At the time of writing the stock is 4.7% lower, again testing its near-term low.

Markets famously hate uncertainty, so when the company refused to provide forward guidance to accompany the earnings report, it was met with the same response seen by investors elsewhere – sell, sell, sell.

stamps.com price chart
Stamps.com (SMTP) 1-day chart, 4 March 2021. Courtesy TradingView

Although the company did not indicate that it thought revenue might not hold up as the company moves beyond the pandemic, it did say there was “substantial uncertainty in 2021”.

The negative sentiment has for sure collided with wider selling off of tech stocks as investors to some extent rotate into consumer cyclicals.

However, on Tuesday the company announced that it has doubled its share buyback programme to $120 million, having executed the transaction on 26 February – but that hasn’t helped to lift the mood either.

Stamp.com’s exploding revenues

Let’s dig a bit deeper into those earnings results.

Stamps.com revenue jumped $758 million on a year-end view, for a 33% improvement. Certainly, the growth comps were slightly down year on year for the third to the fourth quarter (42% versus 28%).

If we look at the 4Q GAAP eps figure it was even better than the adjusted figure, up 108% year on year ($2.36).

The customer count rose by 25% to 1.02 million on a year on year basis in Q4 too.

This is not a growth company with lots of customers but no profits – quite the reverse.

Now let’s examine the business itself. The company has a clutch of brands that it operates through: Stamps.com, Endicia, ShipStation, ShipWorks and ShippingEasy.

Admittedly much of its operations are currently confined to the US but this should be seen as a positive given the opportunities for international expansion this opens up.

Clearly there are market participants who have determined that the e-commerce leap forward is well covered by the price, with little more to be had. Indeed, they would appear to be selling on the basis that the performance of 2020 will not be repeated in 2021, even if the company does hang on to all the new customers that it has captured.

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Low cost of expansion

Stamps.com caters mostly to small and medium-sized businesses and its offering is cheap, convenient and flexible. In the same way that a few years ago some sneered at Shopify’s turnkey solutions, it would be a mistake to underestimate the stickiness of its products.

Take Shipstation for example. It comes as a WordPress plugin which makes it readily accessible to literally millions of small businesses. Around half of the sites on the internet are built on the WordPress platform.

The service makes it a breeze to organise and manage inventory and shipping, where businesses can hook up with a variety of shippers, from Hermes to Royal Mail or in the case of the US, the US Postal Service (USPS).

The Stamps.com and Endicia brands, is USPS-only solutions for the mailing and shipping of packages. As with Shipstation and users are able to print electronic postage directly onto envelopes, labels or plain paper with a standard PC and printer.

Therefore the marginal cost of acquiring new customers is therefore very low for Stamps.com.

Balance sheet strength

Stamps.com has a Piotroski F score of 7 out of 9, indicating that is has an extremely healthy balance sheet, with no debt and $433 million of cash on hand.

From a quality perspective return on equity is impressive at 21.8% and its P/E for 2020 was 20 and the estimate for this year is 24.2, making it reasonably priced.

On valuation and quality alone the multiples are all flashing buy stock signals.

This stock is a screaming turnaround stock that currently presents an excellent entry point. However, current volatility on the Nasdaq means investors interested in gaining exposure may want to pound cost average in.

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Valuable Tips for the Forex Rookie Traders

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Fresher deals with different types of complications as he or she is not properly familiar with the market. When the traders will not understand the market properly, they will not able to take the right action depending on the situation. So, as a fresher, you need some suggestions from the professionals so that you can regulate your business properly. In the Forex market, the person needs to manage the risk properly by taking an appropriate decision. There are some important tips for the new investors which are being discussed here.

Manage the Risk
People should manage the risk to develop the account balance. An investor needs to set the stop-loss and take profit in the appropriate place so that he or she can avoid the probability of huge loss. Firstly, a person is required to identify the risk tolerance so that he or she can define the risk amount. People should not take a high risk with the expectation of making more profits. This totally depends on the capital of the investor. Professionals prefer to take the risk not above than 2% risk of their deposit per trade. You should try to increase the earnings to do more trade.
Choose a Good Mentor
A good mentor can show the right path of the trading which is very important for the new investors. Mostly, the newcomers feel the lack of proper guidance. So, they need an efficient mentor who can provide them good suggestions and motivate them for doing well in the market. Every individual investor has his or her own style. He or she should not change their style because of his or her mentor. In the Forex market, a trader has to make a strong position by showing his or her unique style. Once you know how to trade like pro, use the best trading platform from Rakuten Australia. By using the premium platform, you can take better decision and eventually improve your execution process within a short time.

Gain Knowledge about the Market
Businessmen need to gain the proper cognition about the different circumstances of the market. There are lots of things that are interrelated to the market. The price of the currency pair can fluctuate at any time based on the variables. So, the fresher needs to learn about every single factor of the market which influences the price movements. To identify the trend, a person needs to gather knowledge about the application of the indicators. On the other hand, to know about the microeconomic factors, he or she needs to know about the fundamental analysis.

Control the Emotion
Most of the time, the newcomers need to control the emotion as they are not accountable for the situation. People need to take the proper decision to take control of psychological complications. The traders are needed to find some emulsions of these emotions. Firstly, the person needs to find out which types of psychological factors emerge in the time of trading, and then find out the solutions to this. When a person will able to separate the emotions from the trading decision, he or she will able to act successfully.

Keep a Good Plan
Beginners should generate an effective pan which can help them to regulate the business accurately. People develop a plan considering the current position and several factors so that they can execute this properly at the appropriate time. Fresher can use the individual strategy or can use the other’s proven plan. Both of them can provide a good result. But, developing a new plan takes time. ON the other hand, before using the proven strategy, the investor needs to make some changes based on the present conditions.

If the new businessman can maintain these tips, he or she will able to make the position in the line of professionals. When you are going to adapt to new techniques, you should consider your own preferences.


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Tritax Big Box Reit and Segro are warehouse e-commerce winners

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We have two stock tips for the week ahead, both in the booming warehouse real estate segment.

Top of our list is Tritax Big Box REIT (BBOX), which has risen 5% today, followed by Segro (SGRO), the UK’s largest owner of warehouses with a substantial portfolio in continental Europe also.

Why warehouses? Well, among the biggest winners from the pandemic have been the e-commerce platforms that depend on warehouses and last-mile delivery services.

The market is taking notice. BBOX has jumped 5% this morning to 185p, and the bulls will likely have further to run over the coming months as the shift to online firms.

Last Thursday (14 January) it provided the market with a valuation update on its portfolio of logistics real estate assets.

The company says constrained supply and occupier demand for large premises, combined with what it describes as “a buoyant investment market” is increasing valuation for its prime assets.

As at 31 December the like-for-like increase in valuation rose 8% in the second half from 30 June.

It expects its European Public Real Estate Association net tangible assets (an industry metric that crystallises deferred tax liability on the assumption that REIT entities are buying and selling assets) to beat current analyst estimates, ranging from 152p to 166p by nine sell-side analysts, for an average of 159p.

BBOX focuses on ‘Big Box’ logistics assets greater than 500,000 square feet on long-term leases, which can be around 12 years. Rent’s can be reviewed, but on an upward-only basis, making its portfolio doubly attractive for investors.

PE multiple indicates BBOX is a good company at a bargain price

The stock is trading on a PE multiple of just 17 but its trailing twelve month (TTM) EPS growth is 25%.

For investors looking for the opportunity to secure some capital growth plus income, this could be a safe yet profitable place to park your cash in a balanced portfolio. Dividend growth was expected at 8% in 2020 and 6% for 2021 (ex date 22 October, paid on 13 November), on a current TTM of 5.58p per share.

This is a high-quality stock, with an operating margin of 141%, placing it ninth out of 57 companies in the residential and commercial REIT sub-sector, with a return on equity of 6.9%.

According to Nick Preston at Tritax, manager’s of the trust, “virtually every investor” was eyeing the sector. “Far-eastern investors, European institutions [and] private equity players wanting exposure to the sector,” Preston adds.

Investors should be aware that chairman of the board Sir Richard Jewson is retiring at the company’s next AGM in May 2021. Jewson led the company through its IPO in 2012.

Also, in December Aberdeen Standard Investments acquired a 60% interest in manager Tritax, but the Big Box team is “retaining autonomy and control over investment decisions”, said Sir Richard at the time.

The company’s portfolio continues to grow, with its most recent major acquisition taking place in November 2020, with the purchase of a prime temperature-controlled distribution unit on the south coast of England in a “core” location.

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Segro price momentum set for pick up

Investors who prefer not to buy into a stock that has seen a significant one-day appreciation and has already beaten its analyst consensus price target (176p), might prefer Segro, which also concentrates its portfolio around warehouses. It reported last week that it has collected 98% of rent in fiscal year 2020, ended 31 December.

In the first quarter it received 88% of the £63 million that was payable in advance by tenants. That was a higher collection level than seen in the corresponding time in each of the three previous quarters.

Segro’s share price is up just 0.23% today to 963p. It also has an impressive operating margin, that is in fact higher than BBOX, coming in at 187%, placing it third in the commercial real estate sector.

EPS growth has been declining though since 2018, but it is forecast to pick up this year with a 10% increase.

segro shares

Segro is a contrarian pick in that its price momentum has been poor of late, so taking a position depends on an assumption that the market starts to take notice of its valuable position in the e-commerce space in the Uk and across Europe.

It owns logistics warehousing properties in the valuable Greater London and Thames Valley regions and major footprints also in Germany, France and Poland. Segro owns other warehousing and light industrial units – in Spain, the Netherlands and the Czech Republic.

The company’s properties are used by a broad spectrum of clients in sectors including retail, parcel delivery, transport, technology, services and utilities. Interestingly, it’s warehouses include a number that are used as data centres, bringing another layer of diversification to its portfolio.

The analyst consensus price target is 1006p, a 4.34% premium on the current price.

 

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  • Over 100 different financial products
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  • Trade top Cryptos such as Bitcoin, Litecoin and Ethereum plus more
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The author is the financial editor at Finixio, the publisher of buyshares.co.uk, stockapps.com, learnbonds.com and insidebitcoins.com. Gary was the cryptocurrency analyst at the UK's second-largest investment platform, interactive investor, from 2017 to August 2020. Gary is the winner of the Best Cryptocurrency Writer 2018 ADVFN International Awards