TRADERS AND INVESTORS

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In the stock market there exist the concepts of trading and investing, which are often perceived as the same. In fact, they have some similarities, since a trader and an investor make transactions in the financial market with the aim to make a profit, but they do so in different manners.

Trading is a speculative activity the aim of which is to make a profit from the price changes of a tradable asset in a short period of time. A trader can make money both on the purchase and on the sale of an asset by using technical analysis of the market.

Investing is the investment of own funds in financial assets for a long period of time with the aim to make a profit in the form of dividends or interests.

The main differences between investing and trading:

• Firstly, they differ in terms of investments: investors make long-term investments and traders buy and sell assets several times within a day.
• Investors receive dividends and income from the rise in the prices of the assets bought by them, and traders make money on the difference of the prices by making speculative transactions.
• By choosing specific financial assets, investors use fundamental analysis to study the prospects of the increase of the prices of these assets. To determine the points of entry to the market and exit, a trader, as a rule, uses both fundamental and technical analyses to study the short-term price movements of the asset, as he is not interested what will happen to it in a year or two – he acts upon facts.
• A trader trades stocks, bonds, futures, options, currencies, precious metals, etc. Investors, as a rule, invest their funds in shares of various companies. In addition, for the diversification of their portfolios, they also invest in other financial instruments and real investments (purchase of a real capital).

In case of sufficient capital, the same person can be both a trader and an investor. Many, in case of a long-term portfolio on some instruments, hold short-term positions.

The world’s famous investors and traders

In 2008, one of the most famous investors Warren Buffett became the richest man in the world with a fortune of $62 billion. From the early ages, the future billionaire expressed interest in trading as his father was a stockbroker. From the very beginning of his professional career, Warren was investing his funds in stocks, which were quoted on the exchange lower than their actual prices were. His the most successful investment was the purchase of controlling block of shares of a textile company Berkshire Hathaway, which later became a holding company and now it includes companies from various sectors of the economy. In 2010, Warren transferred 50% ($37 billion) of his fortune to charitable foundations.

Famous futures trader Larry Williams started working on the stock exchange at the age of 22. He became popular due to the participation in Robbins World Cup tournament in 1987, when he managed to increase his capital from $10.000 to $1, 1 million by trading futures. Black Wednesday (September 16, 1992) became the luckiest day for George Soros. At that period of time, like many other traders, by anticipating the rejection of the Bank of England from interventions and the devaluation of the pound, Soros sold 5 billion pounds in exchange for the German mark, which allowed him to earn more than 1 billion dollars (according to various estimations up to $2 billion).

Stock Market Indexes

The stock market index is an indicator of the dynamical state of the security market. By comparing current market index value to its previous values it is possible to estimate the market behavior, its reaction to macroeconomic changes and corporate events (mergers, acquisitions, etc.).

The stock index is calculated on the basis of prices of a certain group of securities (index basket). The initial value of the index may be the sum of the prices or be equated to a random number (for example, 1000). The prices are often multiplied by special coefficients. The index price change over time is more important that its absolute value.

Depending on the index basket components, the index can characterize a market as a whole, a market of a certain kind of securities, industry market (for example, telecommunications, transport and more). Comparing the dynamics of various indices, we can give a comparative assessment of the development of various economic sectors. Stock market indices are more often calculated and published by news or rating agencies and stock exchanges. The name of the index often contains the number of securities included in the index (for instance, S&P 500, FTSE 100).

Stock market indices are also a basis for derivative instruments, such as futures and options, which are used for investment and speculative purposes, as well as for hedging to reduce risks. Moreover, the index value is interpreted as the price of this instrument.

There are several methods for calculating a market index; the main of them are methods of weighting by price and weighting by capitalization. The price-weighted index is the sum of all assets included in the index, divided by a coefficient (for example, the Dow Jones Index). The capitalization-weighted or "cap-weighted" index is calculated as a total market value of all assets included in the index, divided by a coefficient (for example, S&P 500). Most of modern stock market indexes are weighted by free-float weighting. The company's capitalization is the total value of securities issued by the company, calculated at the market price. The calculation parameters may change over time due to corporate events of companies and because of changes in the list of the securities, included in the index.

The very first stock market index was developed in 1884 in the United States - Charles Dow began to count the average change in market prices for 11 major industrial companies. Since 1928, the Dow Jones has been calculated for 30 companies.

The most popular indices in the world are the stock indexes of companies traded on the U.S. (DJI, S&P 500, NASDAQ 100) and European (DAX, CAC 40, FTSE 100) Exchanges, as well as the Japanese stock index called NIKKEI 225. Besides the main index, each of these stock market indexes has an index group differing by composition, economic sector, and other parameters too.

DAX Index - DAX FuturesThe DAX or DAX 30 Index (abbreviation for Deutscher Aktienindex) is the most significant stock index in Germany. The index is computed as a weighted average of value of prices of stocks of the 30 largest German stock companies (capitalization is calculated only for shares in free float). The DAX index takes into account the dividents on shares as well. Thus, the DAX 30 reflects the total income of the shareholders.  More

CAC 40 Index - CAC 40 Futures

The CAC 40 Index (abbreviation for Cotation Assistée en Continu) is the most significant stock index in France. The index is calculated as a weighted average of the value of the prices of the 40 largest French stock companies. Shares of these companies are in free float and are traded in Euronext Paris Stock Exchange. The CAC 40 Index does not consider stock dividends. More

FTSE 100 Index - FTSE futuresThe FTSE 100 Index (abbreviation for Financial Times Stock Exchange Index) - is the most significant stock index in Great Britain. The index is computed by the independent company FTSE Group. The FTSE 100 Index is computed as a weighted average of value of prices of stocks of the 100 largest stock companies, trading on the London Stock Exchange (LSE). Stocks of these companies are in free float. Total capitalization of these companies is 80% of capitalization of all stocks, traded on the LSE. More

Euro Stoxx 50 IndexThe Euro Stoxx 50 is the index of stocks of the 50 largest companies of Eurozone working in various sectors of the economy. The Euro Stoxx 50 characterizes the state of the stock market of the European Union. The index is calculated by Stocks Ltd, the global provider of indices, which is owned by the Deutsche Boerse Group. The Euro Stoxx 50 is computed as a weighted average of value of prices of stocks of the 50 largest stock companies trading on the Eurex Exchange. The Euro Stoxx 50 index takes into account the volume of paid dividends as well. More

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 Gold vs. USD

Gold has always had a crucial role in the international monetary system because it circulated as a currency in many countries of the ancient world before the paper money emerged. But nevertheless, this paper money was still linked to gold after it came to being.

Later on, in the 19th century, with the introduction of “Gold Standard”, which started roughly in 1870 and lasted till the beginning of the First World War, the money supply of a country was connected to gold. This meant that in case a country had a payments deficit it would consequently have an outflow of gold, then a cut in money supply, decreased price level, growth in competitiveness and finally, an improvement in deficit balance.

Gold vs. USD: the importance of Gold

Currently, in investments gold is used as a heaven asset and an asset to diversify portfolios. The use as a haven asset is related to gold’s historical role of an international store of value: historical evidence shows that in times of financial and economic crisis gold retains its value as inflation rises and currencies depreciate. Hence, when economic and financial uncertainties rise in a particular economy or globally, investors buy more gold as demand for haven assets rises. The use as a mean to diversify portfolios is explained by tendency of gold price to move inversely with equity prices. Therefore, when adding a small capital allocation in gold to portfolio holdings, it makes total portfolio return less volatile: when stock prices rise, a decline in gold price lowers the total portfolio return, but in time of a bear stock market, rising gold price raises total portfolio return. Therefore, a small gold allocation in portfolio reduces the difference in total portfolio returns compared with high portfolio returns without gold allocation in bull stock markets and low portfolio returns without gold allocation in bear stock markets. This is the benefit of asset diversification allowing to lower the variability of portfolio return, referred to as portfolio risk. The negative correlation between gold and equity prices was observed also during the 2008 financial crisis, particularly for the US stock market and gold.

Gold vs. USD price

It is important to realize that the XAUUSD price of gold, is affected not only by the US economic and financial conditions, but also by global economic and political factors and changes in global financial markets. As а global commodity traded in US dollars, the XAUUSD gold price is inversely related to the strength of US dollar: when the US dollar strengthens, as evidenced by rising ICE US dollar index USDX measuring dollar’s strength against a basket of six rival currencies, XAUUSD declines as gold grows more expensive for users of other currencies. Hence developments resulting in stronger US dollar such as stronger US economy or expected hike of US interest rates by Federal Reserve usually cause decline in XAUUSD. The fluctuations of gold vs. USD price are displayed on the XAUUSD chart, which displays both the present and the historical price movements of the instrument. By reading full characteristics of the XAUUSD and watching its performance on the charts will help traders and investors to more efficiently develop their trading strategies and make profit during XAUUSD trading.

Undeniably, of all the precious metals, gold is the most popular one as an investment. It has always been a substance of value for thousand years, and nowadays it still remains a valuable and an attractive commodity to invest in.

CFD Gold

Contract for Difference in prices for commodities or assets is a derivative financial instrument that allows trading assets and commodities without delivery or buy of commodities and assets. Contracts for difference are used for company stocks, stock indexes, commodities and raw materials.

Trading CFD instruments is similar to trading currency pairs on Forex markets- you also profit from speculative trading i.e. earn on price changes of assets and commodities. The difference of trading CFDs form trading actual assets and commodities is that there is no actual delivery or buy of commodities or assets.

CFD Gold As an Interesting Trading Instrument

One of the most interesting financial instruments from the investment and speculative point of view is trading Gold CFD. Recently we have witnessed a breakneck rally on the precious metal market. The uncertainty caused by euro zone debt, as well as the necessity to solve the question of the United States debt caused a situation where global investors were buying gold as a safe haven.

Gold has been gaining in price for about 10 years. On average, during the last five years, annual growth rate for gold has been 21,9%. Sharp rise of gold price has been caused by fears that the crisis may spread over Italy and Spain. Additionally, American Congress has been reluctant to raise the United States debt-ceiling which may have resulted in country default.

CFD Gold: Gold Instruments Trading

During instability of financial markets, gold is ideal for diversification of any client portfolio. It is worthy to mention that IFC Markets’ clients as opposed to clients of other companies have a unique opportunity to trade a whole group of financial instruments with conditional title “Gold Instruments.” This group includes instruments where base asset gold is quoted in units of silver, oil, and S&P 500 index. "Gold Instrument" quotations show the quantity of ounces of silver, oil contracts or contract for index that are necessary to exchange for an ounce of gold. The result of trading in quoted assets is transferred into the balance currency.

IFC Markets is a leading innovative financial company, offering private and corporate investors wide set of trading and analytical tools. The company provides its clients with Forex and CFD trading through its own-generated trading platform NetTradeX, which is available on PC, iOS, Android and Mobile. The company also offers MT4 platform available on PC, Mac OS, iOS, Android, Mobile and Smartphone. For comparison of the platforms, you can observe the advantages of both.

Fed rate hike caused downtrend correction of dollar | Weekly Market Ove...

Forex Trading Strategies

Entering the Forex market may seem quite easy at first sight, if of course, traders know what steps and measures to take to reach the best financial results. But in case of beginners, Forex market education first of all starts with the knowledge about Forex trading strategies. What are they needed for? Forex trading strategies are sets of analyses for traders to determine whether or not to buy a currency pair for a given period of time. Indeed, strategies vary a lot, and there is not at least one trading strategy that is assured to bring the best results. Mostly, the choice of a trading strategy depends on a trader’s personality.

Forex trading strategies: the basics

The classification of Forex trading strategies starts with the three main aspects of Forex market analyses:

• Technical analysis;
• Fundamental analysis;
• Market sentiment.

All of the above-mentioned types of analysis help to form trading strategies. They have different components and analysis tools which show the past or future market dynamics. And it is up to a trader which analysis to choose for higher income.

Forex trading strategies: the classification

1. Forex trading strategy based on technical analysis concentrates on past market action, that is past prices and past volumes. Thus, based on past market action it uses technical analysis charts and tools to determine and predict the future market movements. Technical analysts strongly believe that market’s future performance lies upon its past activities.

There exists a number of Forex trading strategies based on technical analysis:

• Forex Trend trading;
• Support and resistance;
• Forex Range;
• Forex charts;
• Technical indicators;
• Forex volume;
• Multiple Timeframe analysis.

2. Forex trading strategy based on fundamental analysis focuses on the core reasons which may affect the market direction. The difference between technical analysis and fundamental analysis is that in the first case the analysts do not need to know the reason of changes, while in the second case, analysts go deeper to find out why the changes occur. Fundamental analysts mostly use long timeframes and the reason for this is that the data they need are emerged more slowly than the data used by technical analysts.

3. Forex trading strategy based on market sentiment reflects investors’ attitude to the market or a specific security. This means that in this case people’s expectations and feelings, hence how these make them act in the Forex market are taken into account. Market sentiment can be bullish and bearish: respectively, prices increase and drop for each case.

Trading strategies also depend on the trading style, which can be various as well: day trading, hedging, portfolio trading, spread trading, order trading, etc. Moreover, trading order types are also very important: market orders, pending orders, limit orders, stop orders, etc.

In conclusion, traders should always keep in mind that all the mentioned information is to be taken into consideration before starting to trade. Truly, trading strategies vary a lot. Traders should choose the strategy that suits their character and personality in the best way! Moreover, in the course of time, with the right information and enough experience they are free to develop their own trading strategy for more brilliant results!

Forex trading for beginners

The foreign exchange market or Forex is a worldwide decentralized market where the currency of one country is exchanged for another. It has a long history based mainly on two major events: the creations of Gold Standard and Bretton Woods systems. Forex trading for beginners is not as easy as it may seem, perhaps, you need to have deep knowledge and understanding for reaching perfect trading results. If you are a beginner in Forex trading, take time to read various Forex trading tutorial PDFs. These tutorials will help you to have a better understanding of the Forex market and its advantages.

Forex trading for beginners: where to start from?

So, you have made up your mind to take up Forex trading, which is great as this is a widely-accepted way to earn good money in a short period of time. As mentioned previously, you need to have perfect understanding of what you are up to. Correct information will open up all of the aspects of Forex trading to you. This is very important as the concept of Forex market includes numerous terms, phrases, technical analysis tools, graphics, etc. you need to be aware of! Correct information and knowledge may become the best armor for you to reach the top in Forex trading.

Forex trading for beginners: Forex trading tutorial PDFs

Perhaps, you are now confused and impatient to start trading, but here is a hint to make your Forex trading more advantageous. Feel free to start with Forex trading tutorial PDFs. These tutorials will be of a great help to you as they cover the information you need: what Forex is, how to choose a reliable brokerage company, how to open an account, how to work with trading terminals, etc. Just start from the very beginning and cover the information gap on Forex trading. Generally, tutorials are introduced in a PDF format-Forex trading PDFs, since it has numerous advantages:

• The opportunity to learn whenever and wherever you want;
• The opportunity to stop for breaks and repeat the sections you need;
• Less time is needed for instruction;
• It works on any operating system;
• Easily integrates non-text elements (images, hyperlinks), which means they are illustrative as well;
• Its format is a commonplace, widely adopted all around the world. It is easy to view and share.

Forex trading is not something to be afraid of. Just grasp the necessary information and head to the adventurous trading world waiting for you!