The earlier that you start learning about the inner workings of money and the financial industry, the more successful and confident you will be when dealing with finances later in life. According to the best trading mentors, there’s no such thing as being “too late” when it comes to learning, but it’s always nice to get a head start. Proper education in financial literacy will help you take your first steps into this money-run world. There are various trading educators that can help you gain financial literacy, and if you want to become literate in the financial world. Review this blog for more on the best trading mentors marketplace.
Continue readingMonth: June 2022
5 Disadvantages of Using Stock Simulations
Many trading and investing platforms will often offer stock simulations to members. You’ll also hear many traders and investors advocate for these simulations. After all, that’s how most people in the stock world today got started.
These stock simulations can be an incredibly beneficial tool when used properly. For instance, newcomers benefit the most from using these tools. A stock simulator allows you to invest virtual money in a simulated stock market, enabling you to test strategies and learn how markets work. They’re also particularly useful because they help you learn how changing market conditions affect trading positions.
However, like all things in life, they also have some drawbacks. For starters, you’ll want to note that while stock simulations help you acclimate to the stock trading world, they’re not always accurate representations of real-world markets. Stepping up from stock simulations to real markets will make you realize that things have changed because it’s a different ballgame.
It’s important to be cognizant of the disadvantages of using stock simulations. Otherwise, you’ll step into the real-world markets thinking you’ve got everything covered, only to realize things don’t work as expected.
Disadvantages of Using Stock Simulations
While stock simulations can be incredibly beneficial tools, they have some disadvantages. They include but aren’t limited to the following:
Stock Simulations Can Lead to Complacency
One of the biggest dangers of using stock simulations is it can lull new traders and investors into a false sense of security and complacency. Stock simulations try their best to replicate real-world trading conditions. However, even the best stock simulations can only do so much. Furthermore, traders and investors approach stock simulations differently to real-world trading markets because they’re not risking real money. As a result, they’re bolder and riskier with their trades. Stringing together a hot streak of successful virtual trades often makes people think they’re ready for the real-world markets. However, they soon receive a reality check because real markets are significantly more challenging.
Unrealistic Trades
It’s no secret that stock simulations have come a long way since their early days. Today, stock simulations come extremely close to replicating real-world trading conditions. However, even the best stock simulations cannot perfectly mimic a real-time trading environment with volatile prices that change by the second. As a result, you’ll have to alter your trading strategy even if you were on a hot streak of successful trades in the stock simulation. Most stock simulations often feature a 15 to 20-minute lag, which doesn’t exist in real trading markets.
Dependence on Risky Strategies
Using stock simulations can also lead traders and investors to adopt bad habits. Traders and investors naturally try risky strategies in stock simulations because their hard-earned money isn’t at risk. Instead, they’re using virtual currency in a simulated trading environment. It’s not uncommon to see traders using risky strategies like momentum trading, leverage, and short sales in such conditions. However, using these strategies in the real world is far trickier.
Lack of Variables
Various factors can affect trading and investing decisions, including risk tolerance, investment horizon, investment objectives, taxation, diversification, etc. Most stock simulations cannot fully incorporate these variables. Traders and investors used to stock simulations are often shocked to witness the impact of these variables when trading in real-world markets.
Investor Psychology Isn’t at Play
Stock simulations also don’t consider investor psychology. Investor psychology can significantly affect trading and investing decisions. However, since real money isn’t at stake in stock simulations, investor psychology doesn’t come into play.
Learn More About Trading in Real-World Markets with Trading Mentor
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3 Ways to Avoid Emotional Investing
Ask any savvy trader or investor, and they’ll tell you about the importance of separating emotions from logic in financial markets. As human beings, we all have behavioral impulses that sometimes get the better of us.
Unfortunately, letting these behavioral impulses overcome rationality and logic can lead to disastrous effects in financial markets. It’s not uncommon for traders and investors to let their emotions reign supreme after closing successful trading positions in a row or losing their investment capital in a trade gone awry.
Continue readingWhat’s The Best Time to Trade in The Forex Markets?
Timing is everything in life, and that applies to financial markets too. Financial markets have always been popular with people because they promise excellent returns, provided you know what you’re doing. Traditionally, stocks were the financial market of choice for most people. Then, the internet came around, changing everything.
Forex trading has occurred for decades. The only difference is that previously it was limited to governments and institutional investors. Trading foreign currencies on the market wasn’t a viable option for most retail investors and traders. However, the internet’s advent proved a game-changer.
As a result, forex trading has become incredibly popular. All you have to do is scroll through your social media, and you’ll be inundated with numerous advertisements for forex trading platforms, courses, etc. It seems like everyone has hopped on the forex trading gravy train.
Today, people gravitate to the forex market for several reasons. Firstly, forex is the world’s most liquid and valuable financial market. In addition, many people get lured into forex trading. They think it’s an easy way to make money quickly. Unfortunately, that’s not true.
Forex trading has also become extremely popular because the market is open round-the-clock. You can log onto a trading platform in the middle of the night and start trading. However, that doesn’t mean you should hop onto a trading platform at odd hours and trade because timing matters.
Understanding the Different Markets Operating Hours
You’ll want to start by learning about the operating hours of the four different markets. They include:
New York
The New York forex trading market operates between 8 AM and 5 PM EST. It’s also the second-largest forex platform globally, attracting numerous foreign investors because the US Dollar is involved in 90 percent of forex trades.
London
London’s forex market operates between 3 AM and Noon EST. The Pound is also a popular currency, and London is considered by many the trading capital of the world. According to the BIS, London accounts for nearly 43 percent of global forex trades. It’s also worth noting that many forex trends often originate in London – something technical traders should know.
Tokyo
Tokyo’s forex market operates between 7 PM and 4 AM EST. It was the first Asian trading center to open. As a result, it’s more popular than forex markets in Hong Kong and Singapore. The Japanese Yen is also one of the most popular currencies, often featuring in various trading pairs.
Sydney
Sydney’s forex market is the smallest of the four major forex markets. However, it’s also the first to open, operating between 5 PM and 2 AM EST.
The Best Time for Forex Trading
Naturally, you might be wondering about the best time for forex trading. Ideally, you’ll want to trade when there’s an overlap between open markets. Overlaps result in higher price ranges, creating more opportunities for traders. Let’s assess these overlaps in detail:
New York and London
The heaviest overlap occurs between the New York and London forex markets between 8 AM and Noon EST. Statistics show that approximately 70 percent of trades happen when these markets overlap because the US Dollar and the Euro are the two most popularly traded currencies. Volatility and trading volume are also high when these markets overlap, making it the ideal time to trade.
Sydney and Tokyo
The Sydney and Tokyo markets overlap between 2 AM and 4 AM EST. This overlap isn’t as volatile as the New York and London overlap. However, it still offers higher pip fluctuation. Consider trading the Euro and Yen during these times.
London and Tokyo
The London and Tokyo markets overlap between 3 AM and 4 AM EST. This overlap has the lowest action and trading volume. The small-time overlap also makes it difficult to identify profitable opportunities.
Learn More About Forex Trading with Trading Mentor
Trading Mentor is one of the best online mentoring platforms around. The website houses numerous online trading training courses, making it the best trading platform for beginners. You can rely on Trading Mentor if you’re looking for the perfect trading mentor to help you with your stock, forex, or crypto trades. Consider checking out our website today.
A Comprehensive Guide About Decentralized Finance (DeFi)
Nobody expected the cryptocurrency sphere to blossom like it has today. When Bitcoin first arrived on the scene in 2009, most people shrugged it off as a fad. Few invested in the digital cryptocurrency from the get-go. However, those who studied Bitcoin’s White Paper knew that the currency would be a gamechanger. Today, the crypto sphere has expanded drastically. 2021 was a monumental year for cryptocurrencies. While 2022 has been disastrous as the crypto bubble burst, no signs indicate that cryptocurrency will go away soon.
While cryptocurrencies were envisioned as currencies people would use in the future, they’ve failed to actualize that vision. However, that doesn’t mean they don’t have their applications. The crypto and blockchain sphere has numerous projects and companies working on solutions with various use cases. You might have heard of some of them.
You’ve likely heard about decentralized finance if you’re even remotely interested in the crypto sphere. The Decentralized finance sector – commonly abbreviated as DeFi – is a niche within crypto that has gained significant steam in the past few years, and it continues to take the world by storm.
Statistics show cumulative revenues on DeFi protocols exceeded $4.5 billion in March 2022. According to the IDC’s analysis, overall spending on decentralized networks skyrocketed from $1.7 billion in 2019 to $6.6 billion in 2021.
Reading about such statistics might have intrigued you to learn more about DeFi. If that’s the case, we’ve got you covered.
What is Decentralized Finance?
Decentralized finance is a growing niche within the crypto sphere. It originated as an alternative to traditional finance because the latter has numerous issues and complications. Traditional finance is highly centralized, requiring people to go through financial institutions to store, send, or receive money. These traditional establishments hold and control your assets. In addition, they have stringent regulations with high transaction fees. As a result, traditional finance has several hurdles users must overcome before completing transactions, making the entire process cumbersome, expensive, and time-consuming.
Decentralized finance eliminates financial intermediaries like banks and lenders from the process. It achieves this through smart contracts recorded over blockchain networks. Since there are intermediaries in DeFi, users save time and money while gaining control and autonomy over their assets.
DeFi Use-Cases
Understanding DeFi’s use cases can help you understand how it works better. Here are some DeFi use cases:
Lending Platforms
The DeFi ecosystem has become particularly popular for lending and borrowing activities. DeFi applications allow users to borrow funds while keeping their cryptocurrency holdings as collateral. Other options like staking have also become popular activities in the DeFi space.
Payments and Stablecoins
Switching from traditional to decentralized finance is challenging. You’ll still need to use decentralized finance to make payments. The difference is you’ll now be using your DeFi application or protocol instead of a commercial bank. Unfortunately, cryptocurrency isn’t a viable payment option because not everyone accepts it. In addition, crypto’s price volatility makes it unusable in some instances. As a result, stablecoins have emerged, bringing stability to the DeFi market. Stablecoins are generally pegged to a fiat currency – usually the US Dollar. As a result, they don’t suffer from price volatility, making them viable options for online payments, deposits, etc.
Learn More About DeFi with Trading Mentor
Trading Mentor is one of the best online mentoring platforms around. The website houses numerous online trading training courses, making it the best trading platform for beginners. You can rely on Trading Mentor if you’re looking for the perfect trading mentor to help you with your stock, forex, or crypto trades. Consider checking out our website today.
Forex Market Predictions You Should Look Out For
Forex is one of the most active markets in the world and it continues to grow. Here are some forex market predictions you should look out out for:
Is It Possible for A Stock to Lose All Its Value?
Anyone with even a lick of experience in the stock market knows how inherently volatile it can be. It’s no secret that stock prices often fluctuate by the minute, if not second. After all, that’s how traders make their money. They capitalize on these market fluctuations to outperform passive investors.
Continue readingHere’s How Investors Can Profit from Bankrupt Companies
If there’s one word that traumatizes investors, it’s bankruptcy, and rightly so. Bankruptcies aren’t prominent, but they happen. You’ve probably heard of companies or individuals declaring bankruptcy. It’s not an ideal time because it means an individual or a company has reached financial insolvency. Most people try their best to avoid bankruptcy. However, what happens if you’re a shareholder in a company about to go belly up? Well, that’s not good.
It’s not uncommon for some organizations to file for bankruptcy after failing to pay their debts. For instance, the Administrative Office of the US Courts statistics shows that 13,160 companies declared bankruptcy in the 2022’s first quarter. This number decreased from the 14347 companies filing for bankruptcy in the fourth quarter of 2021, but it remains staggeringly high.
Continue readingWhat You Need To Know Before Buying Stocks
When you’re investing money in different financial securities, guaranteeing profits can be challenging. Here’s what you need to know before buying stocks:
How Do a Company’s Stocks Move During an Acquisition?
People often lump acquisitions and mergers together. However, they have numerous differences. For starters, acquisitions are more common in the business world than mergers. Mergers typically require two organizations of equal or near-equal size to join forces to form a single entity. Such situations are incredibly rare in the business world.
You’ll often see news articles mentioning companies merging. However, more often than not, one of these companies has acquired the smaller, less valuable one. There have been numerous acquisitions throughout history. The world’s largest acquisition, for instance, happened in 2000 when Vodafone Airtouch PLC took over Mannesmann for $183 billion. Today, that deal would be worth nearly $300 billion after adjusting for inflation.
Acquisitions inevitably affect a company’s stock. After all, acquisitions occur when one company purchases another organization. Since one company is purchasing another company’s stock to gain a controlling interest, it makes sense for both parties’ stock prices to feel the effects.
How a Company’s Stocks Move During an Acquisition
Here’s how a company’s stocks move during an acquisition:
Stock Price Volatility
It’s hard to prevent news from breaking out, particularly in today’s digital age. News reports about acquisitions – even rumors – are enough to cause volatility in the buying and targeted organization’s stock prices. Traders and investors try speculating on the deal. They try to establish how the deal affects their investing or trading strategy.
Likewise, they assess how much the buying organization will pay for the targeted company. Other factors for traders and investors to consider are whether the acquisition is friendly or hostile and whether an even bigger offer from a third party might occur.
The Target Company’s Stock Price
Generally, acquisitions cause the target company’s stock price to rise since the buying company is taking over by paying a premium. As a result, the target company’s stock will usually rise once news about an acquisition is afoot.
Eventually, information will also break out about the acquisition’s proposed price. The stock will usually converge at this price as traders and investors try to capitalize on a potential deal.
The Acquiring Company’s Stock Price
While most people expect the target company’s stock price to fluctuate during an acquisition, the buying company’s stock also feels the effect. This effect is usually more nuanced, depending on how shareholders and market traders view the acquisition deal for the company.
The buying company’s stock price will rise if shareholders and market traders consider the acquisition deal valuable. On the other hand, the company’s stock will decline if there’s uncertainty regarding a deal.
A good example of a buying company’s stock depreciating after the acquisition is the Microsoft-LinkedIn acquisition. Microsoft announced it would be acquiring the professional social networking website by paying a premium of over 50 percent of LinkedIn’s share price. Traders, investors, and shareholders reacted to the news negatively, forcing Microsoft’s stock to decrease by three percent.
Learn More About How Acquisitions Affect a Company’s Stock with Trading Mentor
Trading Mentor is one of the best online mentoring platforms around. The website houses numerous online trading training courses, making it the best trading platform for beginners. You can rely on Trading Mentor if you’re looking for the perfect trading mentor to help you with your stock, forex, or crypto trades. Consider checking out our website today.