RoboForex - roboforex.com

[Vlad RF]

How to Invest in Dow Jones?

Author: Victor Gryazin

Dear Clients and Partners,​

The Dow Jones Industrial Average is one of the oldest and most famous stock indices over the globe. It is included in the top-three US indices and boasts the best capitalization among them. In this overview, I will demonstrate to you the structure of Dow Jones and give some advice on investing in it.

History of Dow Jones

The DJIA was created in 1896 by a journalist, editor of the famous Wall Street Journal Charles Henry Dow alongside his business partner Edward Davis Jones. Charles Dow used the average for tracking the stock dynamics of US leading companies with high revenue. Initially, the index consisted mostly of industrial companies producing and selling oil, gas, sugar, tobacco, cotton, etc.

The index has changed several times. In 1916, the list of companies was extended to 20, in 1928 – to 30, and this is the number of companies it includes now. During the Great Depression of the 1930s, the list has been reshuffled because many companies went bankrupt. In 1932, 8 members of the index were replaced by such companies as Coca Cola, the Procter&Gamble Company, etc.

The calculation formula of the index was also updated. When the DJIA was created, it showed just the arithmetical mean of those 12 stocks it contained. Today, we use the Dow correction factor that accounts for structural changes in the companies.

Ways to invest in Dow Jones

The DJIA is a popular high-liquidity asset for trading and investing. For the latter, you can use various financial instruments depending on your strategy: stocks, options, futures, CFDs, ETFs.

Buying stocks from the index

If an investor decides to collect a portfolio of Dow Jones stocks on their own, they will need to buy at least one stock of each company from the index. This will be costly due to the price of certain stocks from the index. Moreover, you will have to watch the market constantly, re-balancing your investment portfolio. The positive side of this investment option is that you will also have your dividends paid to you.

Futures and options

Futures and options are standardized stock derivatives for the DJIA. Buying them can be interpreted as a trade with a whole portfolio of stocks from the index. Note that you do not get your stocks for real, only contracts for them.

Derivatives let experienced investors use complex strategies with different combinations of futures and options. As a rule, these instruments are used for rather short-term investments – six to twelve months. Long-term investments require changing contracts that are expiring for new ones, which might deteriorate your overall result.

Closing thoughts

The DJIA includes the stocks of the US 30 leading companies. It does not only identify the economic situation in the country but is also a popular investment instrument. Thanks to various financial instruments (stocks, futures, ETFs, options), you can use various strategies with the DJIA. The choice is yours, just never forget about risks.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

What is P/E, and How to Use It for Assessing Stocks?

Author: Victor Gryazin

Dear Clients and Partners,​

Before choosing stocks or packages of stocks for investments, investors study the charts and reports of companies but often miss an important coefficient/index – P/E (Price/Earnings). Let us try to find out what is this index and how we can use it.

What is P/E?

P/E is a multiplier used for checking if a company is overpriced or underpriced and shows its primary investment attractiveness for investors. Based on P/E, you can conclude how fast your investments in a company will pay off.

How P/E is calculated?

P (Price) is the company’s capitalization or, in other words, its exchange price. It is calculated by multiplying the price of one stock by the whole number of stocks in circulation.

For example, the X company has 1 million stocks in circulation; the current stock price is 2 USD. This means the company’s capitalization is 2 million USD.

E (Earnings) is the company’s net profit for the reporting period. Normally, for calculations, we use the data for the last calendar year. Also, in certain cases, we use the forecast profit that the company will receive in the future or sliding profit. Note that sometimes this index is overstated to make the company more attractive, but later, it might decline. To put it simply, P/E tells us how long it will take your investments to pay back.

The lower the index, the sooner it will happen.

However, things are not as simple as they seem. A low P/E value means that the company is underpriced, and its stocks will be moving towards a fair price, which will make the earnings of the investor in the long run. On the other hand, low P/E might mean some negative background or serious problems in the company.

A P/E value higher than the market average means that the company is overpriced, so investments in it might not pay back in the medium or long run.

3 ways of calculating P/E:

• Yearly (normal) is the P/E of the previous calendar year.
  
• Sliding P/E is the P/E of the previous four quarters, regardless of the quarter when it is calculated.
  
• Forward P/E is forecast P/E. The calculation is made at the beginning of the fourth quarter – for the future.

Example

Yearly P/E: in the new 2021, we calculate P/E based on the profit and stock rice in the previous 2020.

Sliding P/E: at the end of Q1, 2021, we form P/E based on three quarters of 2020 and the first quarter of 2021.

Forward P/E: at the beginning of Q4, 2021, we forecast P/E. The values of Q4, 2020 will be nonobjective due to the change in market conditions. Based on preliminary calculations and forecasts, we calculate the multiplier for the next quarter. The calculation will be conditional, however, it will show some perspectives of the company and make some forecasts.

How to use P/E?

To realize the perspectives of investments in a certain company, it is not enough just to know its P/E. You need to compare it with other indices as well.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, the ContestFX project is looking forward to seeing you in the following competitions:

The 119th competition of "Demo Forex" entered its second week.
The 296th competition of "Week with CFD" has just started.
429th competition of "Trade Day" will start on 10.02.2021 at 12:00.
345th competition of "KingSize MT5" will start on 11.02.2021 at 20:00.

We remind you that you can take part in any of your desired competitions after passing through a simple registration process and you can utilize the prize money received as a reward to kick off full-fledged trading on the Forex market without investing your own financial resources required as an initial deposit.

Good luck to all traders!

Sincerely,
RoboForex Contest

 

[Vlad RF]

VSA Method: How to Trade Volumes

Author: Maks Artemov

Dear Clients and Partners,​

The VSA Method was designed in the 20th century by a successful stock market player Tom Williams. Initially, Williams wanted to study a trading strategy called the Wycoff Method. However, later he got to know market mechanisms and the very methos so well that he improved the strategy and called it the VSA Method.

In essence, this is a simplified Wycoff Method based on volumes, closing prices of bars, and spreads (in this case, under spread we mean the difference between the high and low of the bar).

How does the method work?

VSA stands for Volume Spread Analysis. Theoretically, the market is always on one of the following stages:

• Accumulation is a sideways movement, during which large market participants accumulate positions.
• Decline/growth is the development of an up- or downtrend.
• Distribution is a sideways movement, in which major players close their positions selling the asset to smaller traders.

At the accumulation stage, the market situation is like a spring being compressed. The asset is accumulating volume for an upcoming movement. The price is in a flat that can last quite long. Major market players accumulate positions expecting a price impulse. The longer this stage takes, the wider the price will swing.

Decline/growth is the stage at which the spring is released. The quotations form a clear trend and reach their highs or lows on the visible part of the chart.

At the distribution stage, traders close their positions opened at the accumulation stage and take the profit. This stage can become another accumulation phase, and the cycle will repeat itself.

The idea of the method

The method is based on the idea that the market situation is controlled by major players who provoke large movements of quotations. In theory, things are simple: a major player bought a large volume of an asset, and the price for it headed up; then they sell a big volume, and the price heads down. But in fact, things differ.

If a large market participant decides to buy, say, a thousand lots of stocks (and one lot is a hundred stocks), sellers might simply lack such a volume. The market has liquidity, and accumulating positions might take long.

In the stock market, traders get the real volume and all the data connected to it. However, a question appears: where to take order volumes in Forex?

Among traders practicing the VSA Method, many use volumes from futures, however, the number of instruments for anaysis here is limited. Hence, what is left are volume indicators and tick volumes. Analysis shows that tick volume in MT4 suits well the VSA Method.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

RoboForex: changes in trading schedule (Presidents’ Day in the USA)

Dear Clients and Partners,​

We’re informing you that due to the public holiday in the USA, Presidents’ Day (Washington′s Birthday) on February 15th, 2021, several instruments will be traded according to the changed schedule*.

MetaTrader 4 / MetaTrader 5 platforms

Trading schedule on CFDs on US indices (US30Cash, US500Cash, USTECHCash) and Japanese index JP225Cash

• February 15th, 2021 – trading stops at 7:40 PM server time.
• February 16th, 2021 – trading starts as usual.

Trading schedule on Metals (XAUUSD, XAGUSD) and CFDs on oil (Brent, WTI)

• February 15th, 2021 – trading stops at 7:40 PM server time.
• February 16th, 2021 – trading starts as usual.

Trading schedule on CFDs on US stocks

• February 15th, 2021 - no trading.
• February 16th, 2021 - trading starts as usual.

R Trader platform

Trading schedule on US stocks and ETFs, CFDs on US stocks and ETFs

• February 15th, 2021 - no trading.
• February 16th, 2021 - trading starts as usual.

Trading schedule on CFDs on US indices (US500, US30, NAS100)

• February 15th, 2021 - no trading.
• February 16th, 2021 - trading starts as usual.

Trading schedule on Metals (XAUUSD, XAGUSD) and CFDs on Crude Oil (BRENT.oil, WTI.oil)

• February 15th, 2021 - no trading.
• February 16th, 2021 - trading starts as usual.

cTrader platform

Trading schedule on Metals (XAUUSD, XAGUSD)

• February 15th, 2021 – trading stops at 7:40 PM server time.
• February 16th, 2021 – trading starts as usual.

Please, take into account these changes in schedule when planning your trading activity.

* – This schedule is for informational purposes only and may be changed by the provider.

Sincerely,
RoboForex team

 

[Vlad RF]

GameStop. Short-Squeeze. Trading System

Author: Eugene Savitsky

Dear Clients and Partners,​

2021 took a cheerful start in the stock market. Stock indices were growing, US regulators kept pouring money into the economy and even promised support to the business as long as inflation remains under control. Things were calm and easy to forecast: one could buy stocks and wait for their profit.

All in all, things were boring, with the only exception of Elon Musk disturbing the stock market with his tweets. He added the hashtag of Bitcoin to his account, inducing steep growth of the cryptocurrency; at the presentation of the new design of Tesla Model 3, he “forgot” to close the intro of The Witcher 3 game on the dashboard, which made the stocks of the developer, CD Projekt SA (OTC Markets: OTGLY), grow immediately. Such a peace-breaker and merry-maker!

Reddit and GameStop

Out of the blue, investors switched their attention from Musk to a small, never before noticed group for traders in Reddit, the members of which decided to do better than Musk in influencing stock prices.

One user noticed a small company called GameStop Corp. (NYSE: GME) that sells DVDs, game consoles, and accessories for computer games. The company has been reporting losses for two years, and its income started declining as long ago as 2015. Nothing was interesting in the company in terms of buying stocks – except one tiny detail.

Short Float

A Reddit user noticed that there were too many short positions opened in those stocks – over 70% (over 120% now).

Selling the stocks of a company that had financial trouble and risked becoming a relic alongside other offline stores, seemed logical. Try to recall the last time you actually went to a shop to buy a movie on DVD. These days, we can watch even the latest releases online on a subscription or for a single payment.

To cut the long story short, Reddit users got an idea to scare off sellers, making them close their positions. In other words, they decided to provoke a short squeeze.

An example of short-squeeze in Tesla shares

In fact, the idea is as old as the stock market itself, and short-squeezes happen almost every week.

Have a look at the stocks of a world-famous company Tesla (NASDAQ: TSLA). There were also short-squeezes there because for 9 years (from the moment it carried out an IPO) the company remained losing, threatened by bankruptcy. Many Wall Street analysts recommended selling Tesla stocks, and investors played short carelessly.

There were plenty of short-squeezes in this stock. The brightest one happened in February 2020. In three days, the stocks grew by 67%. According to certain data, short positions in Tesla stocks lost over 5 billion USD then.

All in all, traders have always been using this method, only that social networks have made it easier for them to find each other and coordinate their actions. As a result, they shook the prices of many stocks worldwide. They pay major attention to companies with a lot of short positions open.

How to find such stocks?

Any trader can use this method, there is no secret to it. All you need is to open Finviz.com and choose Short Float above 30% in the scanner. On the list of companies, choose those with the highest Short Float.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, RoboForex's project called ContestFx invites everyone to take part in the following competitions:

The 119th competition of "Demo Forex" has gained "Cruise Speed".
The 297th competition of "Week with CFD"has just started.
At 12:00, February 17th, 2021, starts the 430th competition of "Trade Day".
At 20:00, February 18th, 2021, starts the 346th competition of "KingSize MT5".

All winners of our demo contests receive funds to their real trading accounts as a reward and with their help, they can make deals in the Forex market without investing their own money required as an initial deposit.

Do not miss your chance!

Sincerely,
RoboForex Contest

 

[Vlad RF]

Bumble in the Market: Is It New Love?

Author: Server Ametov

Dear Clients and Partners,​

Not so long ago, we told you about the upcoming IPO of Bumble and evaluated the global dating market. Let's see today what's going on with the stocks and whether the founder of the company is happy.

What's Bumble?

This is an online dating platform created in 2014 by Whitney Wolfe Herd and Andrey Andreev. In the app, users can find romantic love, meet new friends, or make useful business contacts.

Later the dating service joined the MagicLab holding structure alongside Badoo, Lumen, and Chappy. In 2019,the control package of the holding was sold to the Blackstone Group investment trust. The whole entity was estimated as 3 billion USD and renamed Bumble.

The Internet platform can boast a list of investors that proudly shows such names of venture organizations as Greycroft, Accel, and Bessemer Venture Partners.

How was the IPO of Tinder's rival?

The company planned to attract 1.8 billion USD, placing 50 million stocks for 37-39 USD each in NASDAQ on February 10th. Later the starting price of the stocks was increased to 43 USD. Thus by the IPO Bumble attracted 2.15 billion USD, increasing its capitalization to 8.2 billion USD.

The money is enough to pay off some debts and cover the expenses of the IPO.

Were first trades a success?

On February 11th, the stocks of Bumble (NASDAQ: BMBL) closed the trading session at 70.31 USD, growing by 63.5%. On the next day, they grew by 7.32% more to 75.46 USD.

The new youngest self-made billionaire

After the IPO, the founder and CEO of Bumble Whitney Wolfe Herd became the youngest billionaire who earned her capital herself. According to Forbes, she owns 11.6% of shares of the dating service, which amounts to 1.6 billion USD after the IPO.

Summing up

An online dating platform called Bumble entered NASDAQ and gathered almost 20% more than planned by the IPO — 2.15 billion instead of 1.8 billion USD. On the first days of trades, its stock price grew from 43 to 75.46 USD

The successful IPO helped the founder of the app not only appear on the list of women-billionaires but also become the youngest self-made billionaire. I think this is a bright start, and what do you think?

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

How to Trade by Return to Average

Author: Victor Gryazin

Dear Clients and Partners,​

In this article, we will review a popular trading strategy called the Return to Average. The idea of this strategy is that after a serious deviation (growth or decline), the price tends to return to its average.

What is the strategy based on?

The strategy is based on a popular statistical concept Regression towards the Mean. This theory, voiced by statistician Francis Galton, states that extreme deviations are usually followed by regression to normal values. Galton supported his theory by some research of human physical characteristics.

In the world of finance, the Return to Average presumes that the price of an asset (or profitability) tends to normalize with time. When the current market price is higher than average, we expect it to fall in the future, and when it is below average, we wait for it to grow. In other words, this strategy is based on the expectation that after a certain deviation from the average the price will return to it anyway.

The concept of the Return to Average gave birth to a whole range of similar trading strategies used for all sorts of instruments. The deviation of the price from mean values is usually shown by various technical indicators.

Advantages and drawbacks of the strategy

Like any other one, the strategy of the Return to Average has its advantages and drawbacks.

The advantages are:

• the strategy works well in a flat when there is no clear up- or downtrend in the market;
• it provides a lot of trading opportunities. Normally, markets are trendy some 30% of the time, while 70% of the time it is consolidating somehow, which is perfect for the strategy;
• positions are held shortly, unlike in trend strategies.

The drawbacks are:

• when the market demonstrates a strong trend, the strategy signals against it, which might lead to losses if the trend continues without a correction and never returns to the mean;
• profit per trade is smaller than in trend strategies;
• the strategy does not account for new information that might change the long-term estimation of the instrument. For example, if a company goes bankrupt, its stocks might fall and never return to their average price.

Suitable instruments

To give signals, the Return to Average strategy uses trend indicators, oscillators, and their combinations. Such oscillators as the RSI or Stochastic help to see if the instrument is overbought or oversold. They can suggest entry levels when your trade aims at the reversal to the average.

Trend indicators show the current state of the market – whether it is trendy or flat. The most popular trend indicators are various Moving Averages and complex indicators on their basis. They assess the current trend and how much the price has gone away from the average; also, they suggest levels for taking the profit. For example, the MA (200) can serve as a long-term landmark.

Examples of trading by the strategy

As I have said above, there are plenty of variants of the Return to Average strategy depending on which indicators they use. You can use a combination of simple trend indicators and oscillators or take a popular complex indicator. The examples we will discuss are based on a channel indicator called the Bollinger Bands.

The Bollinger Bands indicator appears directly on the price chart. The top and bottom lines of the indicator form a sort of a price channel, in which the price chart rests most of the time. For short-term trading by the Return to Average, you can use bounces off the upper and lower lines of the indicator that take the price back to the average line.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This last week of winter, the ContestFX project will, as usual, continue with the following competitions:

The 119th competition of "Demo Forex" has entered the "home stretch" stage.
The 298th competition of "Week with CFD" has just started.
431st competition of "Trade Day" will start on 24.02.2021 at 12:00.
347th competition of "KingSize MT5" will start on 25.02.2021 at 20:00 .

Let us remind you that to take part in any of your desired competitions, it is enough to go through a simple registration procedure just once, after which the participation in your chosen competitions will be available in just a couple of mouse clicks.

We're looking forward to your joining in and wish you good luck!

Sincerely,
RoboForex Contest

 

[Vlad RF]

What Is Herd Instinct in Forex, and How Does It Influence Trading?

Author: Andrey Goilov

Dear Clients and Partners,​

A trader must work alone – or at least, this is the opinion often voiced by experts. For example, the Oracle from Omaha (which is the nickname of Warren Buffett) says that an investor should not concentrate on the ideas of the majority but neither should they go against the crowd.

The majority might be mistaken, but when a person follows the crowd, they take off themselves a load of responsibility for a wrong decision. You can even notice that when people trade together, they open positions with much more ease than when they trade all alone, with no one else to consult. Acting counter the general opinion would also be a mistake because in such cases the trader does not make decisions based on analysis but just tries to spite others and prove themselves right.

It is hard to find two identical traders: everyone has their own investment horizons and risk limits. Some a ready to tolerate a drawdown by 100 points, while others will close a position as soon as the price drops slightly below the entry point. Profits also make people act in different ways: some close a position with a minimum profit, while others will squeeze everything they can out of it. Let us figure out how the herd

Unique skills of a trader

Bill Wolfe in his book on Wolfe Waves points at the knowledge and skills that a trader must have to succeed. They must acquire those skills on their own and bring them to perfection. This is what differs a good investor from all the rest. In that book, it is also mentioned that Wolfe Waves is not a very popular trading method, which is why it can lift a trader to a new level of work.

On the other hand, if a trader works in a group or reads forums and make decisions based on conversations there (for example, whether to buy this or that asset), they lose skills and use side noises for trading.

With this second approach, an investor might start working against their own ideas. For example, they expect EUR/USD to fall, but on forums and in the news the majority is buying or ready to buy the EUR because things are going poorly in the USA, and Biden has launched the printing machine again. This way, the investor might change their mind about the market, under the pressure of the crowd and the news. Here, the herd instinct is triggered: so many people cannot be wrong – and trading skills get shoved away for good.

Of course, a decision can be correct today, but will it be correct tomorrow? This is the main question. A trader can stop analyzing the market and make decisions based on their experience – and if so, all the advantages of experienced, important for reaching a long-term result, will be lost.

Trading is unnatural

In a psychology book by Thomas Oberlechner, you can find some questionnaires and tests distributed in a group of respondents. Analyzing the results, the author concluded that for people, it is much easier to tolerate losing trades than profitable positions.

As soon as a loss appears on the account, a person is ready to watch it grow, even if there is a minimal possibility of making a profit. With profitable trades, things are quite the opposite: most often, people are ready to take it immediately and never let it grow, even if this is highly probable.

Such polls and tests show that people cannot evaluate risks correctly and will hope for a reversal to the bitter end, while it is much wiser to close losing positions and let profitable ones grow.

However, a crowd will do just the opposite. This is most obvious in strong trends when market players start selling when the price is “too high” or start buying when the price seems “too low”.

The effect of lagging

The idea that “when a shoe shiner starts to buy stocks, it is time to leave the market” appeared in the 1930s during the Great Depression in the USA. When the majority begins buying stocks, get prepared for the stock market collapse. We could see a similar situation at the end of 2017 when Bitcoin reached its high at 20,000 USD and nothing seemed to predict a disaster.

However, a year later, its price dropped to 3,000 USD per coin, and the whole industry experienced a noticeable slump in activity. At the times of aggressive growth, when the quotations kept rising without a pullback, many people who had hardly ever been interesting in trading before kept an eye on the price of the asset and discussed its perspectives to overcome 100,000 USD. No family dinner went without a discussion of the Bitcoin future. As we know, the euphoria did not last, the Bitcoin collapsed alongside the hopes of individual investors. This example shows that the crowd actively buys at the top of the market. This behavior creates that very lagging when the majority enter the market too late and at an excessively high price.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

How to Estimate Companies' Price and Make Investment Decisions

Author: Maks Artemov

Dear Clients and Partners,​

The price of a company often influences your decision whether to invest in it or not. Of course, you can neglect this property and use, say, tech analysis; however, knowing the real market price of a chosen company, an experienced investor can make conclusions about the results of their investments in the long run.

In this article, I will not focus on evaluating and analyzing companies for speculative or short-term trading. My goal is to teach you to determine the price of the company and your perspectives of long-term investments. By long-term, I mean several years or even decades. This is how known-to-all Warren Buffett invests.

Underestimated companies will always be more profitable in terms of investments because their stock price is likely to grow in the future. As for overestimated companies, their perspectives are more modest or lacking at all. The stocks of such companies might soon correct, which will lead to unreasonable losses or freeze your investments.

Estimating the cost of a company

For a complex estimation of a company's price, several multipliers can be used:

P/E (Price to Earnings) is a multiplier showing the under- or overestimated state of companies. Using the P/E multiplier, an investor can forecast when their money will pay back. The smaller P/E, the sooner it will happen. We already discussed P/E in earlier articles.

P/S (Price to Sales ratio) is literally the price of the company in ratio to its annual revenue. Unlike P/E, it can be applied to losing companies. A P/S value below 2 is considered good, and the higher it is, the worse investment this will be. An almost perfect value is one.

P/BV (Price to Book) shows the size of the company's assets minus its commitments (debts). The multiplier compares the company's capital to its capitalization in the stock exchange. A P/BV value of 1 means that currently, its stocks cost less than in the exchange (are undervalued). If the value is between one and zero, the company is overpriced. If the multiplier is zero, this means that the company is not all right, and you should better ignore this investment opportunity.

Using multipliers, investors usually compare several companies from the same sector. For the estimation, the report of the previous period, current period, and forecasts are used. By comparing the data, we can conclude which company is more attractive for long-term investments.

Peculiarities of multipliers

If you use multipliers, you need to take into account the following:

• For new and developing companies, multipliers can be faulty.
• You cannot estimate the company by just one index; your approach must be complex.
• Comparing companies from one sector, take notice of their business, the number of employees, and debts.

There are plenty of resources for calculating multipliers on the Internet. See below which indices you can use on Finviz.com (the data is given for clearness).

On the website, you can single out companies depending on their business, stock price range, and the country of registration. Mind that it is for the investor to decide which data to base their decision on.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

The first week of spring already started and the ContestFx project will offer you the following competitions:

The 120th competition of "Demo Forex" and 299th competition of "Week with CFD" have just started.
432nd competition of "Trade Day" will start on 03.03.2021 at 12:00.
348th competition of "KingSize MT5" will start on 04.03.2021 at 20:00.

All of our winners receive funds as a reward to their real trading accounts, using which they can earn on the Forex market without investing their own financial savings.

Do you wanna be one of them? Join us!

Sincerely,
RoboForex Contest

 

[Vlad RF]

How to Use the Cycle Theory in Financial Markets?

Author: Andrey Goilov

Dear Clients and Partners,​

Traders are always looking for certain patterns in the market to try and make money on them. Some want complicated trading strategies and price patterns on the charts, others assess the length and height of price fluctuations. Moreover, one can assess the probability of a decline or growth based on the price cycle theory.

You can say that cycles account for periods when certain events take place – for example, the market trend changes. A cycle of growth changes for a cycle of decline, then another cycle of growth comes. There is a view that trends take some 30% of instrument behavior, while the remaining 70% are given for flats.

Quite often we trade without orientation on the time when our goals will be reached. On the whole, time-wise price estimations are not quite widespread. However, mind that some authors clench at this theory.

Bill Wolfe, the author of the Wolfe Waves, gives an idea of how to define the time when the goal will be reached. With this, an investor knows that they will have to wait several hours or even days and does not hope for a quick profit.

What cycles are there?

Life consists of cycles. John Murphy in his book “Technical Analysis of the Futures Markets” gives examples of cycle studies from as long ago as the 1940s. Cycle studies apply to the construction, stock markets, business, etc.

In trading and investing, we have the following types of cycles:

• Time cycles are meant for estimating price fluctuations time-wise.
• Seasonal cycles, by which we mean noticeable price fluctuations due to weather conditions.
• Event cycles, which means that certain events provoke certain price movements, and this behavior repeats.

Time cycles in the stock market

After the economic crisis of 2008, analysts expected the same situation to repeat itself in 2018. They claimed that the time cycle, in which a new crisis forms, provoking a massive decline in the stocks market, the growth of gold and the USD, lasts 10 years.

However, the evidence of a global crisis showed itself in 2020 only due to serious economic instability and the pandemic of the coronavirus. We can say that there happened a time lag but on the whole, the expectations were met.

The Dow Jones index dropped from 29,000 points to 18,300 points in 2020. On the chart of 2008, the decline was equally massive: the index dropped from 13,700 to 6,600 points.

Dow Jones started growing in March-April 2008, and the same happened in March-April 2020.

Hence, we can expect another serious decline of the index in 2028-2030, while its growth is just beginning. Clearly, you do not have to stick to these dates only: track the situation in the market and try to find confirmations of these forecasts. Keep in mind the time lag as well.

Bottom line

Every trader might have their own understanding and use of the cycle theory. Most often, investors assess the probability of certain events time-wise.

Prices go in cycles, so events will repeat themselves. You do not even need to look at the chart, provided that you have studied the behavior of the price and detected periods or events that form new cycles.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

RoboForex: changes in trading schedule (International Women's Day and switch to Daylight Saving Time)

Dear Clients and Partners,​

We’re informing you that due to the public holiday in Russia on March 8th, 2021, International Women's Day, USDRUB will be traded according to the changed schedule*.

In addition to that, on March 14th, 2021, the USA will transfer to the daylight saving time, while European countries will switch to the summer time on March 28th, 2021. Thereby, there will be more changes to the trading schedule*.

MetaTrader 4 / MetaTrader 5 platforms

Trading schedule on CFDs on US indices (US30Cash, US500Cash, USTECHCash) and oil (Brent, WTI)

• From March 15th to 26th, 2021, trading on CFDs on US indices and oil will be opened and closed 1 hour earlier than usual (server time).
  Trading session (server time): 02:00 AM - 10:15 PM.
• Starting from March 29th, 2021, CFDs on indices and oil will be available for trading within the operating range of the contract specifications.

Trading schedule on Metals (XAUUSD, XAGUSD) and CFDs on the JP225Cash index

• From March 15th to 26th, 2021, trading on Metals and CFDs on the JP225Cash index will be opened and closed 1 hour earlier than usual (server time).
  Trading session (server time): 12:05 AM - 10:55 PM.
• Starting from March 29th, 2021, Metals and CFDs on the JP225Cash index will be available for trading within the operating range of the contract specifications.

Trading schedule on CFDs on US stocks

• From March 15th to 26th, 2021, trading on CFDs on American stocks will be opened and closed 1 hour earlier than usual (server time).
  Trading session (server time): 03:31 PM - 09:59 PM.
• Starting from March 29th, 2021, CFDs on American stocks will be available for trading within the operating range of the contract specifications.

Trading schedule on USDRUB

• March 8th, 2021 – no trading.
• Starting from March 29th, 2021, the USDRUB currency pair will be traded according to a new schedule.
  Trading session (server time): 10:00 AM - 6:30 PM.

Please, note, that on March 19th and 26th, 2021, trading on all instruments, including Cryptocurrencies, will be closed at 11:00 PM server time. In addition to that, from March 15th to 26th, 2021, there might be short quoting stoppages on behalf of liquidity providers during the interval between 10:00 PM and 12:30 AM server time.

R Trader platform

Trading schedule on US stocks and ETFs, CFDs on US stocks and ETFs

• From March 15th to 26th 2021, trading on US stocks and ETFs, CFDs on US stocks and ETFs will be opened and closed 1 hour earlier than usual (server time).
  Trading session (server time): 03:30 PM - 10:00 PM.
• Starting from March 29th, 2021, US stocks and ETFs, CFDs on US stocks, and ETFs will be available for trading within the operating range of the contract specifications.

Trading schedule on CFDs on oil (BRENT.oil, WTI.oil)

• From March 15th to 26th, 2021, trading on CFDs oil will be opened and closed 1 hour earlier than usual (server time).
  Trading session (server time): 02:00 AM - 10:15 PM.
• Starting from March 29th, 2021, CFDs on oil will be available for trading within the operating range of the contract specifications.

Trading schedule on Metals (XAUUSD, XAGUSD)

• From March 15th to 26th, 2021, trading on Metals will be opened and closed 1 hour earlier than usual (server time).
  Trading session (server time): 12:05 AM - 10:55 PM.
• Starting from March 29th, 2021, Metals will be available for trading within the operating range of the contract specifications.

Trading schedule on USDRUB

• March 8th, 2021 – no trading.
• March 9th, 2021 – trading starts as usual.

Trading schedule on all currency pairs

• From March 15th to 26th, 2021, trading will be stopped for an interval 1 hour earlier than usual (server time).
  Interval period (server time): 11:00 PM - 11:15 PM.
• Starting from March 29th, 2021, currency pairs will be available for trading within the operating range of the contract specifications.

Please, note, that on March 19th and 26th 2021, trading on all instruments, including Cryptocurrencies, will be closed at 11:00 PM server time.

cTrader platform

Trading schedule on all currency pairs

• From March 15th to 26th, 2021, trading will be stopped for an interval from 10:55 PM to 11:05 PM (server time).
• Starting from March 29th, 2021, currency pairs will be available for trading within the operating range of the contract specifications.

Trading schedule on Metals (XAUUSD, XAGUSD)

• From March 15th to 26th, 2021, trading on Metals will be opened and closed 1 hour earlier than usual (server time).
  Trading session (server time): 12:05 AM - 10:55 PM.
• Starting from March 29th, 2021, Metals will be available for trading within the operating range of the contract specifications.

Please, note, that on March 19th and 26th, 2021, trading on all instruments will be closed at 11:00 PM server time. In addition to that, from March 15th to 26th, 2021, there might be short quoting stoppages on behalf of liquidity providers during the interval between 10:00 PM and 12:30 AM server time.

Please, take into account these changes in schedule when planning your trading activity.

* – This schedule is for informational purposes only and may be changed by the provider.

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, the RoboForex company's project called ContestFx offers you the following competitions on demo accounts:

The 120th competition of "Demo Forex" is gaining "speed".
The 300th competition of "Week with CFD" has just kicked off this morning.
433rd competition of "Trade Day" will start on 10.03.2021 at 12:00.
349th competition of "KingSize MT5" will start on 11.03.2021 at 20:00 .

Let us remind you that now it is easy to become a participant in our exciting competitions - just go through a simple registration procedure and then you can participate in any of your desired competitions with just a couple of mouse clicks.

We're looking forward to your joining in and wish you good luck!

Sincerely,
RoboForex Contest

 

[Vlad RF]

How Should a Beginner Prepare a Trading Plan?

Author: Victor Gryazin

Dear Clients and Partners,​

In this overview, we will discuss preparing trading plans. A trading plan helps evaluate the current market situation and make the trader’s plans come to life.

What is a trading plan necessary for?

A trading plan is something like a road map for traders. Based on the trading strategy that you use, a trading plan formulates existing trading opportunities and promising trades. Promising trades are those that have a high probability of a success; they are made in the right place, at the right time, with a moderate risk and a good potential profit.

A trading plan must describe your trading ideas, your analysis of the current situation in detail. It makes a “picture” of your view on the market on paper (or in a file). On the whole, successful analysis and a correct opinion about the market do not guarantee good trading by themselves, however, your current thoughts can show you the field where you can look for trading ideas.

Having a clear and easy-to-understand trading plan, a trader stops making chaotic emotional trades. They are no more a helpless wood chip on market waves. They set their sails and starts off towards their profit, finding and closing promising trades. Thanks to the plan their trading becomes more efficient.

Step 1: Technical picture

To evaluate the technical picture in an instrument, we use good old tech analysis. Open the chart of your financial instrument, check several timeframes (starting with larger ones and going down to smaller ones), and mark all the important factors:

• Trend direction, trend lines
• Support and resistance levels
• Tech analysis patterns
• Additional signals: Fibonacci levels, candlestick combinations, Price Action patterns, various original methods.

After you have marked everything on the chart, find suitable entry points on it by your strategy. Choose signals based on which you will open your position: a breakaway of or a bounce off an important level, exiting a price range, a complete tech analysis pattern, etc. Mark all the entry points and confirming signals in your trading plan.

Correcting your plan

During the day, depending on the dynamics of quotations, the plan might need certain corrections: additional signals might appear or, on the contrary, some of the signals might become irrelevant. This is absolutely normal, the market is influenced by multiple factors, including macroeconomic indicators. Make all the necessary corrections and go n following it.

At the end of the day, right down the results in your trader’s diary. This will show you if you have been following the plan or trading chaotically. Also, later you will assess the statistics, see the weak and strong points of your trading systems, and correct if necessary.

Closing thoughts

A trading plan is the trader’s main instrument and weapon. It is meant to evaluate the current situation in the market, plan and carry out promising trades. Having a well-prepared trading plan, the trader protects themselves from chaotic, emotional trading. Being disciplined and thorough about your trading plan, you will enhance your trading and your professional skills.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[Vlad RF]

USD in 2021: Hoping for Best, Ready for Worst

Author: Victor Gryazin

Dear Clients and Partners,​

As a result of 2020, the USD fell by 10% in pair with the EUR. Strategically though, the dollar grew by 10% in pairs with all world currencies, winding up a cycle of growth.

Strengthening mostly happened in the second half of the year when the world became less fear of COVID-19, realized that the pandemic could be taken under control, and got inspired by the idea of total vaccination. Then capital markets stopped using the dollar as a protective asset. Other currencies got a chance to recuperate and grow, while the world switched to hoping for the effect of the vaccination and soon economic restoration.

The Federal Reserve system decreased the intetest rate only once in 2020, in March, to the all-time low target level of 0-0.25% per annum, where it remains now. Soft credit and monetary policy works against the dollar in the long run, as well as talks about further stimulation. A new wave of the latter is expected in quite the nearest future, alongside the activation of trading between the USA and its partners, and vigorous growth in all key branches of economy. However, what will happen to the dollar?

How much will the dollar cost in 2021?

It is quite possible that 2021 will not be the most comfortable year for the dollar for several reasons. The first one is the Fed's soft credit and monetary policy. The package of stimulation measures will put more pressure on the dollar but support the whole system. Moreover, the need for the dollar as a safe-haven asset will decrease as soon as the pharma sector will find some cure for the coronavirus, and the global vaccination will show its effect. Also, do not neglect the foreign and domestic policy of President Biden that can play against the dollar as well.

The chart of the dollar index itself shows a complete third wave of growth to 103. Today, the market is trading parts of a classic A-B-C correction. A five-wave structure of wave A aiming at 89 is complete. Earlier, in 2020, the market completed wave B, performing a structure of growth to 103. Thus it has almost formed a Double Top pattern. If we get deeper into detail, the technical picture of the Double Top is interpreted as a consolidation range between 103 and 89. Now the whole wave of decline that started in March 2020 is lokked upon as a cycle of wave C. The aim of 86

How does COVID-19 influence the dollar in 2021?

It might happen that both domestic and foreign political courses will get in the shadow of the pandemic until the coronavirus issue gets solved strategically. The world has minimum three efficient vaccines, and the vaccination campaign goes on stably and aggressively. The faster goes the vaccination, the faster collective immunity will form. This means that the economy of the US will return to normal without lockdowns, social restrictions, and constant viral disturbances.

For now, the dollar is stable in this regard, but as soon as the risks of the coronavirus fade, the dollar will also step back.

Technically, this picture on the chart will look as the end of the second half of the declining wave, aiming at 89. When this level is reached, we expect a new wave of growth to 95 to develop. This aim can be reached at the end of May, 2021.

What can be a positive driver for the USD?

Any complications of the process might support the dollar: arguments between the Republicans and Democrats, pauses in the stimulation, scandals, arguments with foreign counterparts.

Moreover, do not forget about the market trend being usually unstable and the dollar — volatile. The market is a living and mobile phenomenon, reacting to all things around. However, for now, 2021 looks like a complicated year for the USD.

Let us have a look at technical issues. Tge chart suggests that another fifth wave in the declining cycle might start developing. Bouncing off 95, a new declining wave to 86 might start developing, winding up the potential of the A-B-C formation. This scenario might be completed in September.

When this level is reached, the technical picture will suggest a new wave of growth to 95 at the end of 2021, and by 2024, the wave might reach 106. This takes us back to the very first chart in the article.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team

 

[RoboForex Contest]

Dear traders!

This week, the ContestFx project will continue as usual with the following exciting competitions:

The 120th competition of "Demo Forex" has reached its "equator".
The 301st competition of "Week with CFD" has just started.
434th competition of "Trade Day" will start on 17.03.2021 at 12:00.
350th competition of "KingSize MT5" will start on 18.03.2021 at 20:00.

The winners of our contests become the owners of prize money received to their real trading accounts, which enables them to trade the whole variety of the Forex market without investing their own financial savings required as an initial deposit.

Do not miss your chance!

Sincerely,
RoboForex Contest

 

[Vlad RF]

How to Trade by the Shark Pattern?

Author: Maks Artemov

Dear Clients and Partners,​

Shark is a price pattern that consists of five impulses and promises soon trend reversal. This pattern is a rather recent phenomenon; it was first singled out and described in 2011 by Scott M. Carney. The pattern belongs to Harmonic trading designed by Harold M. Gartley and described in his book "Profits in the Stock Market".

Shark is simular to such graphic analysis patterns as Double Top and Double Bottom, but in essense, it is an updated 5-0 pattern. Detecting reversal points in the Shark pattern requires the use of Fibonacci lines that are essential for the pattetn: without them, we cannot be sure if the pattern has formed correctly.

In this article, we will discuss the rules by which the Shark forms on the chart and the principles, by which we open positions with this pattern.

How does the Shark pattern form?

The Shark pattern consists of five points: 0, X, A, B, C — that form on the chart one after tge other. A complete pattern looks like the shark's fin or its jaws swung open; to my mind, however, this is all very individual.

Seeing all the five points in the chart, a trader might conclude that here goes the shark; nonetheless, without Fibonacci levels, you cannot be 100% sure.

How to confirm a Shark pattern by Fibonacci levels?

All trading terminals feature an instrument called Fibonacci Lines with basic settings, but they do not suit us. To check your presumable Shart pattern, delete all the default levels (except "0") and write in 0.866, 1.13, 1.618, 2 24. See below this settings amendments in MetaTrader 4/5:

In more detail, you can read about Fibo levels in these two terminals in the following article:

How does a bearish Shark form?

A bearish Shark pattern forms in a mirror-like wave:

Upon testing point X, the quotations form a minor correction, and the pullback ends in point A. Upon testing point A, the quotations form another descending impulse, renewing the lows in point B. Upon testing point B, the quotations begin another correction that ends in point C. This wave of growth is the largest of all.

Read more at R Blog - RoboForex

Sincerely,
RoboForex team