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Top Stock Picks for 2019 – What Stocks to Buy?

Top Stock Picks for 2019 – What Stocks to Buy?​

This article includes an exploration of what is on the stock market including upcoming IPO’s, industries, growth and dividend stocks along with other information which is handy to know about the performance of the market.

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2019 is shaping up to be another great year for trading and investing in stocks. With the seemingly endless list of stocks and shares available to buy on exchanges and brokers, it can often be confusing which stocks to buy. In this article, we have laid out the best stocks and IPOs to look into and are likely to see positive price movements.

Upcoming IPO’s

This year brings opportunities with the IPO calendar filled with unicorns which is the Wall Street lingo for fast growing start up companies valued over $1 billion. Below we will list some new upcoming IPO’s as well recently listed.

Airbnb

This company had talks to go public later this year with Amazon veteran to serve as the company’s chief financial officer; however news through the most recent buzz indicated that the company may not be going public in 2019 after all. Nevertheless Airbnbcontinues to grow beyond basement apartments, spare bedrooms and second home rentals with a valuation of $31billion. The firm is a online marketplace which allows people to rent out spaces on a short term basis. As a private corporation last year the company raised $4.4 billion. There are strong ambitions to make Airbnb a global travel community which is built on experiences and content so if interested keep an eye out on the plans behind when and if the IPO will still be in process.

WeWork

Founded in 2010 WeWork is an American company that provides shared workspaces for start up firms, large and small businesses, entrepreneurs and freelancers. After a cash investment from the Japanese SoftBank, the company was valued at $47billion. We work is now in view of an IPO later this year a lot sooner than investors expected having filed paperwork with the SEC on 29th April. With an exceptional growth increase, the WeWork Company now operates three branches: The WeWork shared workplace provider, WeLive- a flexible apartment and rental provider and a WeGrow- an entrepreneurial school.  There has been some speculation on the exact IPO date and share price due to the fact that SoftBank reduced the initial funding proposal from $12billion to $2billion but despite this Weworks CEO has made clear that reduced funds will not affect the company’s IPO. The company has said to have turned over the $2billion during the course of one year. This IPO may provide an interesting opportunity for traders regardless of the concept of the company not being a new idea.  WeWork use of bars, events and fashionable interior seems to appeal to a larger audience than the more traditional providers such as the likes of Regus- a business which has been around for decades.

Palantir

Palantir is a data mining company co-founded by Peter Theil who is one of the brains behind the PayPal payment processing. Reports indicate an IPO in the second half of 2019. It was last valued at £20billion under fundraising around 2015. The company is known for being one of the biggest competitors in Big Data and has earned its reputation from being highly secretive. In 2017 a Guardian headline suggested that Palantir holds as much real-world power as Google, while a more recent Bloomberg article revealed that Palantir ‘knows everything about you’. Although the company may face challenges with going public particularly with concerns of transparency on how data is used, the 14-year-old company is predicted to turn a profit this year- a rare achievement for many tech IPOs.

Levi Strauss

The world-renowned jeans maker is expected to raise between $600 million and $800 million although this has not yet been confirmed. The business was listed for 13 years before being taken private for $1.4 billion in 1984 after experiencing a decline. Levi now wants to capitalise after working hard to improve its performance dramatically with debt reduced to over half in the period of a couple years. Revenue towards the ending of November 2018 had grown by 14%to $5.6 billion with a net income increasing to $283.1 million. Retail, particularly in fashion, is one of the most challenging industries at the moment, mostly due to online competition which in turn is starting to show signs of saturation. Levi has 2,900 stores but primarily sells through 50,000 partners across the world with 105 of its business considered to be online. Nevertheless, Levi believes there’s room for expansion in the likes of Asia, proving it with ample chances to grow.

Livongo

Founded in 2014, Livongo is a company in the health care industry that sells smart devices and software which is designed to help manage behavioural health, diabetes, hypertension and other chronic diseases. The corporation has integrated its platform with Apple, Fitbit and Samsung Smartwatches last month.   Investor interest in Livongo Health inc is considered to be hot, prompting the healthcare technology company to boost its price targets by 13% ahead of the offering taking place Thursday on the NASDAQ. Livongo plans to raise up to $320 million in an offering which could value at about $2.3 billion, that’s more than double of the company’s valuation of $850 million in April 2018. The company plans to sell $10.7 million shares to public investors for between $24-$26 per share and has also set aside $1.3 million to sell to underwriters.

Recently Listed IPO’s

Uber

Uber Technologies inc was one of the highly anticipated offerings of 2019 with a valuation over $80 billion. Uber went public in May at a price of $45 per share on the New York Stock Exchange (NYSE) – a price well short and lower than the anticipated $100 billion valuation. At the start of the year Uber and Lyft were in competition in launching their first IPO where Lyft won. Although the IPO was oversubscribed, Uber settled for a lower price to avoid a repeat of Lyft’s IPO experience late in March where prices were strong then later fell in trade. Uber placed orders for a lower price which fell in the lower end of the $44-$50 per share price range.

However, despite Uber making the efforts to moderate its IPO expectations, some still felt the stock was overpriced. Orders were also put in at a lower price to accommodate mutual fund.  Paypal holdings agreed to invest $500 million at the IPO price in a private placement where associations of the SoftBank Vision Fund, Toyota Motor Corp and Denso Corp would together invest $1 billion for Uber’s autonomous driving efforts adding more to Uber’s total intake.

Beyond Meat

Founded in El Segundo California 2009 this company took the Wall Street by storm when it went public in May making it one of the exciting IPO’s of 2019. Beyond Meat is a food company which makes plant-based meat where it’s premier product is the Beyond Meat which sells at Whole Foods and TGI Fridays to name a couple. Shares rocketed 163% higher on the first day of trading where the company managed to raise $240 miliion at $25 per share resulting in a $1.5 billion valuation.

Upcoming industries

Cannabis

With a push for legalisation in recent years, cannabis is one of the fastest-growing industries in the US with 33 states currently permitted to use medical cannabis and recreational use being legal in 10 states including Washington DC for adult use. This Cannabis boom is expected to affect more than just medical patients.  By 2020 more people are predicted to be working in the legal cannabis industry than the manufactory industry where revenue is expected to grow from $7.2 billion in 2016 to over 24 Billion by 2020. Investment activity boomed last year increasing to 13.8 billion in total value from $3.6 billion the year before.  As the industry is still moderately new and volatile, it allows plenty of room for companies with inventive growing and plant breeding techniques to shape the market. If the public continues to favour legalisation then the legal cannabis industry will most certainly continue to grow and thrive.

Artificial Intelligence

The global artificial intelligence market size is expected to reach $170 million by 2025 from $4065 million in 2016. The AI market is segmented by technology, geography and industry vertical. The ranges of technologies are broken up into machine learning, natural language processing, image processing and speech recognition. From driverless cars to virtual doctors, AI is transforming the way work, live, travel and how we do business in the 21st century.  In 2016 the machine learning category dominated the market in terms of revenue and is expected to maintain its trend in the upcoming years looking to increase in demand for artificial intelligence industry solutions. Based on industry vertical the market for artificial intelligence is categorised into media and advertising, telecom and IT, healthcare, retail, automotive and transportation whereby the IT and telecom sector is expected to dominate the global artificial intelligence throughout the forecast period. Geographically the market is analysed across North America, Asia-pacific and Europe. During 2017 the North America region contributed to the highest revenue share in the artificial intelligence market and is predicted to secure the leading position with presence of key companies and large investment in the AI market. Key corporations profiled include Google Inc, Apple, Microsoft Corporation, IPsoft and that’s just to name a few. AI have a Rapid growing presence in today’s world with applications ranging from heavy industry to education, it has become prevalent that this technology has the potential to revolutionise how the everyday world operates.

To name a few some of the most popular use of AI today includes Apples personalised assistant Siri which uses machine-learning technology in becoming smarter and better at predicting and understanding our natural language, questions and requests.  Alexa who was introduced by Amazon took the world by storm with its ability to decipher speech from anywhere in a room helping us to search the web for information, shop, schedule appointments, set alarms as well as many other things. It also helps power our smart homes and has been useful for those with limited mobility. Tesla which could possibly be the best car ever made has received so many rewards and recognition due to its predictive capabilities, self-driving features and technological advances. As time goes on these cars are only getting smarter thanks to their over the air updates. Netflixprovides highly accurate predictive technology based on customers choices and response to films. Netflix analyses billions of records allowing it to make recommendations to suit your film preferences and as the dataset grows, this tech will become smarter and adaptive.

While AI can be applied to most sectors once the technology advances enough there are many fields that will soon be reaping the benefits of AI if they already aren’t! According to Forbes industries that will soon be revolutionised by AI are the following:

  1. Cyber security
  2. DevOps and Cloud Hosting
  3. Manufacturing
  4. Healthcare
  5. Construction
  6. Education
  7. Retail
  8. Business intelligence
  9. Mental Health diagnosis and treatment
  10. Supply Chain Management

2018 Best Performing Stocks

When it comes to trading & investing, history typically repeats itself. It is important to look back at previous trends to give you a better understanding and picture of what is likely to happen. Here is a list of last years best forming stocks:

ABIOMED, inc.

This company made a gain of almost 120 per cent where at the start of the year investors could have more than doubled their money in the space of 10months. The company had later delivered successful earnings in November which had reversed a recent downtrend.

Advanced Micro Devices (AMD)

At the start of last year opening share prices for Semiconductor Company, Advanced Micro Devices were £10.42. Since then AMD stock has doubled during September and the stock actually managed to peak at $30 a share before it fell back down in October. However, once announcements were made that the company’s chips were being used by Amazon’s cloud computing diversion the stock increased.

TripAdvisor, Inc (TRIP)

During 2018 the stock rocketed up the charts. Although it remains inadvisable for investors or beginners to make stock picks based on this sites advice, investing in this company would have been a very wise move at the start of last year. Those who did would of ended up doubling every dollar they invested by Early November.

Netflix, Inc (NFLX)

During 2018 Netflix experienced a 60% gain in just 10 months and has shares well over $300 each as the company continues to stream money into its shareholder’s accounts.

HCA Healthcare (HCA)

HCA Healthcare is a company which operates small care hospitals and surgical services providing for patients at its 179 hospitals and 120 freestanding surgical centres. Its stock performance and earning last year allowed the company to add 60percent to its market value and as admissions arise this should continue to grow.

Best Stock picks for beginner investors

Finding the best stock to watch and buy comes from having basic understanding on stocks itself and knowing what a potential market winner looks like. Take a read on our beginners guide to stock trading to gain some enlightenment on exactly what stock trading is and how to invest in the market.

Doing your research is a huge part of investing in stocks, it is important to look for traits like increased earnings and sales growth, strong return on equity and a fast-growing and industry-leading product or service. When getting started sticking with company’s which you know can be a reasonable approach to take especially if you’re interested in a long term investment.  Here is a list of a few top-quality companies which everyone is familiar with worth investing in.

  1. Alphabet (Google)
  2. Apple
  3. Facebook
  4. Nike
  5. Disney

Best dividend stocks

dividend stock allows an investor to gain regular passive income simply from owning shares in a company. Historically stocks that pay dividends have outperformed those that don’t.  Businesses who are generating strong cash flow and who have strong financials are most likely to produce high returns which attract investors. Some of the best companies who pay dividends include:

Altria Group (MO)

The giant tobacco Altria Group is able to provide major capital back to its shareholders through dividend and buy  backs. Altria which owns Philip Morris USA (who also owns other brands) pays a huge 5.7% dividend due to strong margins, customer loyalty and low reinvestment requirements. Pursuing growth Altria Group invested $1.8 billion in a Canadian Cannabis Company known as the Cronos Group. Altria’s steadiness and ability to promptly take new growth opportunities make it a good investment for a dividend stock.

Target Corp.

With competitors such as Walmart and Amazon, Target offers something for their investors which none of its competition does and that a yield of 3.6%. Targets payout ratio sits on about 41% revealing that without a doubt the company can sustain its dividend payments while also retaining enough to reinvest in growth as well. Despite Amazon’s expansion, sales continue to grow and with a track record of increasing quarterly payments for 50 consecutive years why not invest in this stock which proves to be steady and reliable.

Starbucks

The company continues to undertake its massive international expansion, increasing its growth phrases and in turn rapidly boosting its dividend payouts. With a free cash flow of over $3.34 Billion and 8 years of uninterrupted payout growth, the company attracts a lot of investors looking for a company with dividend growth.

Aqua America Inc

Trading on the New York stock exchange this water company serves around 3 million customers in Ohio, New Jersey, Texas, Pennsylvania, Virginia, North Carolina and Indiana. With a quarterly dividend rate of 0.219 per share, Aqua America has an annual yield of 2.3%. Although the yield itself may not be exciting, investors who are risk averse should consider this company due to longevity and growth in its payout. Aqua America has been paying out quarterly cash dividends  for more than 73 years and in the past 27 years the company has consecutively raised its payout.

Johnson & Johnson

Aside from being a company to hold an AAA credit rating, this company has one of the safest dividend payouts in the world. Johnson & Johnson relies on its three businesses to bring something beneficial to the table which each individual segment lacks. With it’s business sectors broken down into healthcare products, medical device units and the pharmaceutical segment the company has been able to raise its quarterly payout for 57 consecutive years and has grown its adjusted earnings over the course of 35 years straight. The J&J 2.9% yield attracts investors with their continuous uninterrupted payouts.

NextEra Energy

One of the easiest ways of securing a safe and passive payout is through purchasing companies that deal with a basic need. Historically utilities are viewed as a defensive investment that is turned to when the stock market is struggling or when the economy is wavering as they are slow-growing.  Nevertheless, NextEra isn’t like your average utility stock as the company proactively develops the way utilities operate and is on the leading edge of a renewable energy shift.

Best growth stocks

Growth stocks are beneficial of outsized gains compared to the averages. When investing in the upside of stock investopedia has provided us with some main things to look out for. These include improving fundamentals, good entry points and a history of bullish trading patterns in the shares. The top five stocks viewed as long term potentials are as followed:

Chipotle Mexican Grill Inc

Chipotle has a very strong fundamental history which means that it supports a long term investment approach. The 2019 year over year revenue growth rate increased by +13.9% and the 2019 year over year diluted earnings growth rate was at an increase by +59.6%.  Considering the technical areas also referred to as good entry points a year to date outperformance vs the market indicates +49.12% vs SPDR S&P 500 ETF with recent bullish trading signals.

Facebook Inc, (FB)

With over 1 billion users on its platforms: InstagramFacebook and Whatsapp this company is considered a top social network platform. Facebook stock stands out due to the technical factors of:

  • The company has a year to date outperformance vs Market: +28.34% vs SPY
  • Year to date outperformance vs technology sector: +19.8% vs Technology Select Sector SPDR fund
  • Recent Bullish trading signals

Looking into the fundamental picture of the company it does support a long term investment with the 2019 revenue growth rate increasing by +26%  however the 2019 diluted EPS growth rate -50% which includes $3billion legal expenses related to the FTC.

Illumina, Inc

Illumina is a leading genome and DNA sequencing firm with a year to date outperformance vs market of +0.69% vs SPY and year to date outperformance vs healthcare sector of +10.63 vs health care select sector.  In addition to this Illumina’s growth rate has been impressive with a 2019 revenue growth rate of +8% and a 2019 GAAP net income growth rate of +11%

Paypal Holdings Inc

The leading e-commerce payment company which is also known for its payments through Venmo has a year to date outperformance of +19.96% vs SPY. The year to date outperformance vs technology sector equates to+11.10% vs XLK. Growing rates have been steady with a +12% revenue growth rate and +34% for GAAP EPS growth rate.

Visa Inc

This payment firm also known for being one of the largest globally has been a growth predator over the years. The technical’s’ of the company shows that the outperformance is +13.61% vs market (SPY) and the outperformance vs the financial sector is +17.22% vs Financial Select sector SPDR fund. The company’s stock has been up steadily since January and visa remains in growth mode with a 2019 net revenue growth rate of +8% net income per share growth rate of +17%.

These 5 companies discussed represent a potential buying opportunity for investors looking to take a long-term approach. Considering the strong historical revenue and earnings growth, along with the bullish usual trading signals which they all share; these stocks would be worth a place in the growth-orientated portfolio and a good buy.

Conclusion

To conclude, when getting involved in any investments within the stock market the most important thing to do is your research! Taking the initiative to do your background researches on companies allows you to track the organisation’s performances where you are then able to discover information which you were unaware of. Research allows you to make more of an informed decision on whether the investment is for you or not. Looking for traits such as a consistent increase in revenue growth and earnings in a company can help give you a gage of progression, although it is important to note that there is always risks in investments and some things can happen within an organisation unexpectedly and out of their control.

For guidance or any information related to the topics discussed in the article or trading and investing in the stock market, sign up to our FREE trading course. 

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7 steps to evaluating the value of a cryptocurrency ​

7 steps to evaluating the value of a cryptocurrency

We provide a detailed formula for evaluating a variety of cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP). By the end of this step-by-step guide, you will be able to evaluate and trade any cryptocurrency listed on the marketcap.

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Let’s talk about how to evaluate the thousands of tradable cryptocurrencies.

We will give you the tools and skills needed to figure out what matters and help you find the right tokens. There are fundamentally 7 factors when evaluating a cryptocurrency, to find out what actually makes a crypto company a good business and in turn worth investing into. 

Let’s dive into it.

1. The team behind the project

The first and most important business factor is the quality of the team behind the project. Whilst looking at the team what you want to see is a diverse mix of business and technical people, as crypto is the application of technology to business. What you also want to see is a good track record of somebody in the company, within the cryptocurrency or blockchain community. Preferably a highly technical individual who understands the blockchain. You can see if the team has previously built open source projects, for example, a site such as Github that can host open-sourced software.

Doing intensive research on the team behind the project is one of the main ways of determining if the crypto project is a scam. This is especially important when looking at a new/ promising Initial Coin Offering (ICO).

Many new cryptocurrency traders often make mistakes when assessing project teams, especially Hard and Soft Forks. For example, there is a lot of excitement around the forks of Ethereum and Bitcoin. It’s important to note that the fork isn’t necessarily the same team as the main/ core blockchainThe teams behind forked blockchains often lack the vision and technical skills of the founding teams behind the core blockchains, and as a result, are typically less attractive opportunities for cryptocurrency investors.

2. Product use case

The second most important factor is a product use case, does the digital asset have a strong use case to gain wide-scale adoption? Without adoption, a cryptocurrency is simply just a long string of code on the internet. Ask yourself if you would use this token in your daily life? Or can you see someone else using it? The main thing to remember when evaluating a cryptocurrency is whether or not the product behind the cryptocurrency solves or will solve an important problem for a vast amount of people. You want the cryptocurrency to solve a big problem for a broad number of people. Remember, the more a cryptocurrency is used, the higher the value. 

When trading or investing in any asset, especially cryptocurrencies, it is essential to not let your emotions overcome your reasoning and judgement. For example, as a cryptocurrency trader, you don’t want to invest in a project that is aiming to create sustainable energy specifically in Capetown, South Africa. Instead, you want a project that is aiming to create sustainable energy from the entire African continent or perhaps the entire world!

You must ask yourself two questions. Does the target market have the potential to grow? And, are there people out there who WANT and NEED this product right now?

Currently, the cryptocurrency market is heavily focused on products that solve problems for the existing crypto community rather than products that solve problems beyond the crypto community. For the cryptocurrency market is going to grow rapidly it needs to become much more diversified, a cryptocurrency exchange ICO pops up near enough every day. This niche has become very saturated unless this ICO has a plan to revolutionise cryptocurrency exchanges, why bother? You want to find projects that have the potential for wide-scale of adoption outside of the crypto/ blockchain space, in booming industries such as Transport, Education, Agriculture and Healthcare. 

3. Traction

The third factor is traction, how effective and efficient are the team delivering on their vision? In the best case, the team already would have a minimum viable product, at least some technology that they have put together. The company behind the cryptocurrency should have a roadmap that they are following strictly, which can usually be found on their website. A roadmap is similar to a business plan, outlining the business goals and deadlines for completion.

If for any reason the team is not following their roadmap or going, this is usually a red flag. Showing the team is not stable and has lost track of targets. This will cause FUD (Fear, Uncertainty and Doubt) for investors. Making them likely to sell their crypto holdings, driving the price down. As a trader, it is a great opportunity to either sell your holdings if the team is going of course on their goals or open a sell position to make a profit. 

However, if the team is delayed on a deliverable in the roadmap, but has been transparent with the community. This is a good sign and giving investors a sense of trustworthiness towards the team. 

4. Competition

The fourth factor is competition, did the team pick something new or are they entering an already crowded market? Since the cryptocurrency economy is still so new and in its infancy, there is a huge variety of opportunities for companies to build completely new and fresh ideas. However, you want to find an industry that the team is able to build a strong defensible position. Can the team be the best in their space? Is there some technology underlying the token that gives the token a long-term competitive advantage? 

You will often find crypto companies creating alternatives for existing companies in the traditional economy. Since blockchain technology allows us to make transactions faster, more secure, more accessible and transparent. 

5. Legal status

The sixth factor is one of the most important, the legal status of the company. Cryptocurrency regulation is somewhat confusing, to say the least, due to the decentralised nature of cryptocurrencies companies are often faced with challenges to get licenses to operate in certain countries. Some regulators such as the SEC have straight up banned ICOs int heir jurisdiction. I mean it can even be a headache for a cryptocurrency trader to work out how much tax to pay on their crypto

Researching where a companies legal status is will help you understand if the token or project is a fraud or scam and built completely out of thin air. You may what to also work out if the token a utility token or a security token. Read our STO explanation to understand the importance and differences. 

6. Investors

The seventh factor is other investors, who are invested in this company. Is the company only an Initial Coin Offering or has the team already been backed by a venture capital firm prior to the ICO? Typically a company that has already had a collection of legitimate and reputable investors will do better than one without. Clearly, the invested company has seen some value to this project and feel as though it will do well. 

7. Market cap

The last factor is the size of the market cap, ideally, you want to see a $1 Billion market. A high cryptocurrency market cap enables the team to try a variety of different things and products, whilst still maintaining a profit. 

Conclusion 

These 7 steps are just a simple framework to evaluate the fundamentals of token-based projects, we’re not trying to create complex formulas that define what the exact value of something should be. Following the steps outlined here and you will know which projects have long term value and which coins are just based on hype. 

Value is relative; we think that cryptocurrencies will continue to grow in value over the long-term and we also think there are tremendous misallocations right now between projects with in-the-moment value and projects with long-term fundamental value.  By focusing on fundamentals, we think it’s possible to benefit in the long-run.

Of course, all of these factors can also be applied to traditional markets and companies such as Forex and Stocks

For more insight in understanding, trading and investing, enrol in our free online trading course, which will help guide you through your journey to become a successful trader. 

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What is a Currency Pair? Forex Trading for Beginners

What is a currency pair? Forex trading for beginners

A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other.  Currency trading is conducted in the foreign exchange, also known as the forex or “FX” market.

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If you are starting to trade currencies in the Forex market, you are likely confused by all of the symbols and quotes blurring around on your screen. If you have done some research you would have seen the term pairs and wondered to yourself what on earth is a currency pair? When you trade in the forex market, you buy or sell in currency pairs.

A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency.

Forex currency pairs are written as XXX/YYY or simply XXXYYY. Here, XXX is the base currency and YYY is the quote currency. The currencies are listed as a three-letter code, which tends to be formed of two letters that stand for the region, and one standing for the currency itself. For example, GBP/ USD is a currency pair that involves buying the Great British pound and selling the US dollar.

Forex trading always involves selling one currency in order to buy another, which is why it is quoted in pairs. The price of a Forex pair is how much one unit of the base currency is worth in the quote currency. Essentially meaning how much currency you can purchase with another.

What is a base currency?

The base currency is the first currency listed in a forex pair. The base currency is the currency you are buying when you trade a Forex pair. If this Forex pair rises in value it means that the base currency has gained strength against the quote currency.

What is a quote currency?

The quote currency is the second currency listed in a forex pair and is used as the reference against the base. The base currency is the currency you are selling when you trade a Forex pair. If this Forex pair decreases in value it means that the quote currency has gained strength against the base currency.

If you buy a currency pair, you buy the base currency and implicitly sell the quoted currency. The bid (buy price) represents how much of the quote currency you need to get one unit of the base currency. Conversely, when you sell the currency pair, you sell the base currency and receive the quote currency. The ask (sell price) for the currency pair represents how much you will get in the quote currency for selling one unit of base currency.

Unlike the stock or commodity market, you trade currencies, which means you’re selling one currency to buy another. For stocks and commodities, you’re using cash to buy an ounce of gold or one share of Apple stock. Economic data relating to currency pairs – interest rates, gross domestic product (GDP) information, major economic announcements – affect the prices of a trading pair.

To keep things ordered, most providers split pairs into the following categories:

  • Major pairs. Seven currencies that make up 80% of global forex trading. Includes EUR/USD, USD/JPY, GBP/USD and USD/CHF
  • Minor pairs. Less frequently traded, these often feature major currencies against each other instead of the US dollar. Includes: EUR/GBP, EUR/CHF, GBP/JPY
  • Exotics. A major currency against one from a small or emerging economy. Includes: USD/PLN, GBP/MXN, EUR/CZK
  • Regional pairs. Pairs classified by region – such as Scandinavia or Australasia. Includes: EUR/NOK, AUD/NZD, AUG/SGD

Major currency pairs

There are as many currency pairs as there are currencies in the world. The total number of currency pairs that exist changes as currencies come and go. All currency pairs are categorized according to the volume that is traded on a daily basis for a pair. The currencies that trade the most volume against the U.S. dollar are referred to as the major currencies. All major pairs contain the U.S. dollar (USD) on one side and are the most frequently traded.

A widely traded currency pair is the Euro against the U.S. Dollar, also shown as EUR/USD. It’s actually the most liquid and most heavily traded currency pair in the world. The quotation EUR/USD = 1.2500 means that one euro is exchanged for 1.2500 U.S. Dollars. In this case, EUR is the base currency and USD is the quote currency (counter currency). This means that 1 euro can be exchanged for 1.25 U.S. dollars. Another way of looking at this is that it will cost you $125 to buy EUR 100.

All of the major currency pairs have very liquid markets that trade 24 hours a day every business day, and they have very narrow spreads.

Minors currency pairs

Currency pairs that are not associated with and do not contain the U.S. Dollar (USD) are referred to as minor currencies or crosses. These pairs have slightly wider spreads and are not as liquid as the majors, however, they are still very liquid markets nonetheless. The most actively traded minor pairs are derived from the three major non-USD currencies: EUR, JPY, and GBP. Some examples of crosses include the EUR/GBP, GBP/JPY and EUR/CHF.

Exotic currency pairs

Exotic currencies pairs include the currencies of emerging markets, such as Brazil, Mexico or Hungary. These pairs are not as liquid, much more volatile and the spreads are much wider. An example of an exotic currency pair is the USD/SGD (U.S. dollar/Singapore dollar).

Keep in mind that these pairs aren’t as heavily traded as the “majors” or “crosses,” so the transaction costs associated with trading these pairs are usually bigger.

It’s not unusual to see spreads that are two or three times bigger than that of EUR/USD or USD/JPY. So if you want to trade exotics currency pairs, remember to factor this in your decision.

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Why is Cryptocurrency so Volatile?

Why is cryptocurrency so volatile?

In this blog post, we will help explain why cryptocurrencies such as Bitcoin and Ethereum are so volatile and why it’s a big deal.

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Unlike traditional currencies such as the Euro and Great British Pound, which tend to fluctuate between 0.5%-1% on any given day, cryptocurrencies show large fluctuations sometimes shifting from around 5-10% per day. This volatility is important as purchasing and selling currencies at the correct times can lead to big profits for traders. It’s not uncommon to see trading periods where a catalytic event can trigger price fluctuations around 50% and in some major cases all the way up to 200-300%. Why is this asset class more volatile than any other liquid asset in the market?

It is hard to pinpoint why cryptocurrencies are so volatile with one exact reason, but rather a few which have been explained below:

1. No intrinsic value

Most cryptocurrencies don’t sell a product, earn revenue or employ thousands of people. They generally don’t return dividends, and just a tiny amount of the total value of the currency goes into evolving it. Because of this, it is extremely difficult to value. How do we know if it is fundamentally overbought or oversold? When is it a good value or overpriced? Without any fundamentals to base this information off of, we can only rely on market sentiment, often dictated by the media that makes money on viewership.

2. Lack of regulation

The lack of regulation in the cryptocurrency space can play a factor in the volatility of the price. This low level of regulation allows for market manipulation. Often done by placing orders with the intent to cancel, whereas in a regulated market such as the foreign exchange placing fake orders is illegal. Creating these false orders can lead to a misrepresentation of market behaviour which can cause volatility with the false orders encouraging uncertainty.

3. Supply and demand

Another reason the price of crypto is so volatile comes down to simple Economics. When the demand for an asset increases quicker than the supply, the price is likely to rise. We saw this come into play with Bitcoin during the Christmas period of 2017. The demand for Bitcoin was widespread due to the profit being made by traders throughout the year and the supply could not keep up with the massive uptake, which led to the price reaching an all-time high of around $20,000.

4. Lack of institutional capital

While it is undeniable that some pretty impressive venture capital companies, hedge funds and high net-worth individuals are both fans of and investors in crypto, as a segment, most of the institutional capital is still on the sidelines.

At the moment there has been little to no movement on a Bitcoin ETF or Mutual Fund, which is predicted to introduce much needed institutional volume into the cryptocurrency markets.

5. Market size

The cryptocurrency market is only roughly 10 years old and still an emerging market. The total size of the cryptocurrency market is currently $250B. Although this is a huge amount, it is a small figure when compared to the foreign exchange market which totals around $5T per day. This is why the foreign exchange market is able to keep stability even when there are massive movements in the market. The same cannot be said about the cryptocurrency market. This allows a few big traders who hold a lot of currencies (referred to as whales) have the ability to shift the market by making huge transactions.

When will volatility decrease?

Over time, we can expect more regulation, a greater diversity of investors, and a more mature outlook on the crypto market. We can also expect higher utility value as merchants find more accessible ways of accepting cryptocurrency, and the technology behind transactions also improves. While volatility may decrease, we can also expect a gradual but steady surge in the value of the cryptocurrency market as a whole. Just as the stock market has given way to long-term holders, so too will the cryptocurrency markets. At the very least, it appears to be something that is going to be here for the long run.

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What Is An Initial Public Offering (IPO)?

What is an initial public offering (IPO)?

An initial public offering (IPO) is one of the most popular terms when it comes to trading and investing in the stock market. In this guide, you will get to know everything about an IPO, how they work and how to participate in them.

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What is an initial public offering (IPO)?

Before an IPO, a company is considered private. A private company’s growth has occurred with a fairly small number of shareholders. This is likely to include early investors such as the founders, friends, family and any professional investors like angel investors or venture capitalists. Angel investors are individuals of a high net worth who provides financial help for small businesses or entrepreneurs in the start-up process in taking their first steps. Venture capitalists are investors who provide capital to businesses with high growth potential for success in exchange for an equity stake.

In order for a business to become a public company, the company must reach a stage in its growth process where it is able to get the necessary approvals and meet the listing requirements for going public. This will typically occur when a company has reached a private valuation of $1 billion, however, it is known for private companies with strong fundaments and proven profitability potential to qualify for an IPO. With the required approvals a company can then offer some of its shares for sale to the general public where once completed the company’s shares are openly traded on a stock exchange.

Initial public offering creates an immense opportunity for a company to raise more funds from the market both through debt as well as equity. This allows greater ability for growth and expansion. Favourably as a public company needs to meet strict reporting requirements there is increased transparency and share listing credibility in the sense that the market is completely aware of the company’s performance. Such a factor helps when seeking borrowed funds as lenders trust these companies

Largest initial public offerings

We have compiled a detailed list of the 6 largest IPOs in the world:

  1. Alibaba Group Holding Limited ($25 Billion): In 2014 the Alibaba group, a diversified online e-commerce company based in China choose the New York Stock Exchange as oppose to the Hong Kong Stock Exchange to go public and sell shares. This brought their total IPO to $25 Billion making it the biggest in the world.
  2. Agricultural Bank of China Ltd ($22.1 Billion): The Agricultural Bank of China also referred to AgBank is the second-largest recorded IPO around the world. The AgBank went public in 2010.
  3. General Motors ($20.1 Billion): This is the name behind one of the USA’s largest IPO’s which debuted 2010 after bankruptcy a year earlier.  General Motors owns Chevrolet, GCM, Buick and Cadillac.
  4. Visa ($19.7 Billion): Visa is a debit and credit card company which set a record in 2008 by raising $19.7 Billion when they entered the public market. Many investors liked the fact that Visa didn’t directly carry customer debt at the time of rising defaults.
  5. Enel SpA ($17.4 Billion): This Italian electric company went public in 1999 after raising $17.4 billion. The Italian company competes in the gas and electric market in Europe and America and works in 34 countries accumulating 72 million end users around the world.
  6. Facebook ($16.1 Billion): Facebook was one of the most hyped IPO’s in history. Traded in the NASDAQ it was listed in 2012 and raised just over $16 billion. The social media company’s launch came with trading issues and questionable information sharing breaches. However as of June 2018 Facebook has an average of 1.47 billion active daily users.

Steps to an IPO

When a company is interested in an IPO they first need to secure the services of an underwriter. Essentially an underwriter commits to sell a particular fraction of a company’s stock in line of a certain fee. The underwriter chosen by the company will lead the IPO process, participating in every aspect from due diligence, document preparation, marketing, filing and issuance. The company can choose one or several underwriters to manage different sections of the IPO process collectively however typically investment banks provide underwriting services.

Once an underwriter is chosen a formal underwriting agreement is made and IPO teams are formed consisting of underwriters, lawyers, certified public accountants and the Securities and Exchange Commission experts.

Information about the company is required for IPO documentation. The S-1 registration statement is the main IPO document which consists of two parts- information about the date of filing and the prospectus. This is known as a red herring prospectus which is a document that provides essential information about the company such as its business, the management, revenue and income over the last few years, important shareholders and so forth. The information giving in the prospectus can be subject to change as there is continuous revision throughout the process.

After the release of the red herring prospectus, a company would typically release its final version. Final information about the company is enclosed and underwriters and executives market the share issuance to calculate demand and establish a final offering price along with the period in which the public can apply for the shares.  However, throughout the marketing process underwrites can make revisions to their financial analysis as they see fit through changing the IPO price or issuance date.

Companies must take precaution in meeting the specific public share offering requirements and adhere to both listing requirements and the Securities and Exchange Commission (SEC) requirements for public companies.  The company can then issue its shares on an IPO date which concludes the typical process for an IPO.

IPO Advantages and Disadvantages

Advantages:

  • IPO’s provide companies with a huge financial opportunity to raise large amounts of capital. This can help towards funding research and developing or even used to pay off existing debts.
  • IPO’s promotes growth in public awareness which can subsequently lead to an increase in market share for the company through their products being known to new groups of customers.
  • Listing shares in the exchange increases company’s credibility in banking and money market which enables them to obtain loans cheaper and easier.
  • Shares offered to the public can be bought and sold in a transparent manner at prices determined by the markets supply and demand. Liquidity is provided to the shares and an important opportunity is presented to existing shareholders.
  • Being in the stock exchange market can promote global recognition through global press, data broadcasting and other visual broadcasting information.

Disadvantages:

  • Companies are required to disclose sensitive information about financial, tax, accounting and other factors previously discussed which reveals secrets and business strategies. This gives competitors an advantage.
  • Conducting an IPO is expensive and the cost of running a public company is ongoing and typically is unrelated to other costs of running the business.
  • Management for reporting requires an increase in time, effort and attention.
  • There’s the risk that required funding may not be raised if the market does not accept the IPO price.
  • There is a growing risk of legal issues such as private securities class lawsuits and shareholder actions.
  • There is a sense of loss of control and stronger agency issues due to new shareholders who have voting rights and have the power to control company decisions via the board of directors.

Investing in IPO’s

A company deciding to go public stems from careful consideration and high belief that an IPO will maximise the returns of early investors and raise the most capital for the business. With that being said, when an IPO decision is reached the potential for future growth is high with many public investors interested to get their hands on some shares for the first time. IPO’s are typically discounted to generate sales and ensure success on the IPO day. The IPO prices are based on the valuation of the company using strategic techniques. The most common technique adopted is the discounted cash flow which is used to estimate the value of an investment based on its future cash flow. Interested investors and underwriters analyse this value on a per-share basis. The prospectus provides a lot of useful information and should be available as soon as a company files for its S-1 registration. This should be the main source of information to analyse the fundaments and technical’s of a company’s IPO issuance. Investors should pay special attention to the quality of underwriters as well as a company’s management team and commentary. Most successful IPO’s are supported by large investment banks.

It is important to understand that there is a difference in the IPO offering price and the price you actually pay for your stock. Usually, the offering price is announced ahead of the IPO and a fixed price is allocated to a limited group of investors who meet certain eligibility requirements and the company’s employees. Orders are filled before the opening bells ring on IPO day and to entice investors the IPO price is lower than what the company believes shares will sell for in the open market. Investors in the public don’t become involved until the final offering day. This means that the price you pay will hugely reflect the demand for the stock the day it debuts and could differ dramatically from the offering price and the opening day hype only increases to the price volatility.

IPO’s Volatility

After an IPO there is usually a lock-up period which prevents insiders from trading stock immediately after the IPO. The lock period is essential to ensure that early investors such as CEO’s or venture capitalists are able to sell their shares which could also equally cause other shareholders to lose confidence in the company. Once the lock-up period is over which could range from 3-24months, shareholders are free to trade the company’s shares as they please. The enthusiasm and attention that the stock receives immediately after the IPO can cause wild volatility as early investors start selling their shares to take profits. Short-term fluctuations should not be disregarded as volatility can be used to find good buying opportunities for stocks that would like to be owned for the long term.

The monthly volatility of IPO initial returns is significant and fluctuates dramatically over time. Initial public offerings are underpriced on average where the secondary market trading price of the stock is much higher than on average than the IPO price.

IPO Trading Styles

IPO Long-term

The IPO opening day is recognised for having volatile returns which can attract investors looking to benefit from the discounts involved. On a long –term scale the IPO price will steadily settle into a value which can be followed by traditional stock price moving averages. The type of company going public and their future prospects should be the determining factor of whether to buy for the long-term. Getting a stock on the first day it goes public and being able to buy into the IPO price could be an investment of a lifetime, it just all depends on the stock. Imagine those who invested in Microsoft, apple or Google when they first went public and held onto their shares.  Investors who are interested in the IPO opportunity but are apprehensive about taking the individual stock risk may look into managed funds focused on IPO index funds.

IPO Short-term “Flipping”

Buying an IPO for the short-term makes sense if you’re interested in quick profits. Many investors consider this to be flipping which is a practice that is generally discouraged. However, on the flip side expert analysts and stock market researchers have observed that IPO returns on listing day tend to be higher than 1-3 years returns in most cases. This approach requires an investor to sell an IPO stock in the first few days to a week and is common when the stock is discounted and soars on its first day of trading due to the hype and attention. The flipper generally relies on the short-term volatility of the IPO in the hope of making a quick profit. As mentioned before it is important to invest where the long term prospectus of a company looks good. There are however opportunities where flipping your shares could be the most profitable move. This is advisable when the stock gains are ranging between 70-80% in the pre-market session. With such a high return it is best to exit as historically the IPO may not reach that height for a couple of years.

Five tips to investing in an IPO

  1. Do your research on the company you plan to invest in

Finding information on companies planning to go public can be difficult because although most companies do try to disclose all information regarding the business in the prospectus, it is still written by them and not by an unbiased third party so cracks in the corporate may be downplayed. It is advised to search online for the company you are planning to invest in and its competitors, past press releases, finances and its overall industry health. Even though information can be limited, researching as much as you can is a crucial step in making a wise investment. You may even discover through research that not acting on that investment opportunity is in your best interests.

  1. Pick a company with a strong broker

It’s best to select a company that has a strong underwriter. In general quality, brokerages bring good quality companies when going public. It is important to move cautiously when selecting smaller brokerages as they may be willing to underwrite any company.

  1. Read the prospectus

Although it is good to do your own research on the company you plan to invest in, always ensure that you read the prospectus as it lays out the company’s opportunities and risks along with the purposes of the money raised from the IPO whether that’s to repay loans, expand or conduct research find out what the money will be used for and how the company plans to generate revenues to increase the value of shares you are buying. In addition, keep a lookout for an overly optimistic future earnings outlook when reading a prospectus as those eager for market success in the past has made mistakes from over-promising and under-delivering. Always read the accounting figures carefully and thoroughly.

  1. Wait for the lock-up period to end

Waiting until the lock-up period is over where insiders are free to sell their shares is not a bad approach to take. One way to look at things is if insiders decide to hold stock after the lock-up period then it could be a signal that the company has a bright and sustainable future. It’s best to wait out and let the market run its course. A good company will still be a worthwhile investment regardless of if the lock-up period expires.

  1. Be weary

When approaching IPO’s it is important to be cautious as there is a lot of scepticism around the approach mostly due to the lack of information available. A broker approaching you with a recommended IPO is not the ideal opportunity to take a jump at as this can be an indication that most institutions and money managers have politely refused the underwriters attempt to sell the stock. In a situation like this investors are likely to be getting a stock that wasn’t wanted. It is very much unlikely for a company going public which is deemed to be a worthwhile investment to have shares available. Unless you are a favoured investor, chances are you won’t be able to get in.

Conclusion 

To conclude, when investing in IPO’s it is important to move cautiously simply for the fact that not all IPO’s guarantee returns. Although some investors who have brought stock have made good financial gains from the investment and have been rewarded from the company, in turn, it is difficult to find investments with the most potential in growing into success. With that being said when it comes to the IPO market, being a cynical and informed investor who moves cautiously will work more in your favour than someone who is not.

For more insight in understanding the financial markets, investing and trading strategies, register for our FREE online trading academy. 

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Stock Market Trading Hours

Stock market trading hours​

A stock market exchange is an open market where stocks are traded during specific hours on business days. Opening and closing times for stock market exchange varies from country to country, typically closing in the evenings.  In this article, we will explore some of the top stock exchanges in the world by market capitalisation.

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There are 60 major stock exchanges around the world, ranging in size and trading volume from well-known stock exchanges such as the New York Stock Exchange to small local exchanges.

Top stock exchanges around the world:

The New York Stock Exchange (NYSE)

Located on Wall Street in New York City, the NYSE is one of the largest stock exchanges in the world by market capitalisation ever since the end of World War 1 where it outpaced the London Stock Exchange. With a market capitalisation of over $20 trillion, the NYSE is almost 40% of the total world stock market value. Over 2400 companies are listed on the NYSE which represents sectors such as finance, healthcare, customer goods and energy. These are primarily United States-based companies and trade in the US dollar. The NYSE has normal trading hours from 9:30 am to 16:00 pm local time unless there is an early close due to a holiday.

National Association of Securities Dealers Automated Quotations (NASDAQ)

The NASDAQ stock exchange is also based in New York located in Times Square. NASDAQserves as a global electronic marketplace for securities trading. This stock exchange has always adapted a computer and telephone-based system of trading making it the first electronic stock exchange. This is the second-largest stock exchange reaching $11 trillion and has the largest market capitalization in technology stocks. Some of NASDAQ’s stop listed companies include Apple, Microsoft, Facebook and Tesla. The NASDAQ stock exchange normal trading hours are from 9:30 am-16:00 pm local time; however they run pre-market trading hours from 4:00 am to 9:30 am and after trading hours which extends from 4 pm-8 pm.

Tokyo Stock Exchange (TSE)

Tokyo Stock exchange is the largest stock exchange in Japan with a market capitalisation over $5 trillion. The Japan exchange group was formed in 2013 when there was an emergence between Osaka Securities Stock Exchange and TSE. TSE also has partnered with other exchanges around the world including the London Stock Exchange and has over 3500 listed companies. These include top companies such as Honda Motor Co, Toyota Motor Corp and Sony Corp. Japan’s Tokyo Stock Exchange trading hours are different from the other exchanges discussed as it has a daily hour closure for lunch break. Trading hours are from 9:00 am until 15:00pm and lunch break is from 11:30 -12:30 pm.

Shanghai Stock Exchange, China (SSE) 

The Shanghai Stock Exchange is one of three independent stock exchanges in China and is the largest. The other two stock exchanges are Hong Kong and Shenzhen. Shanghai Stock Exchange is the fourth largest stock exchange in the world where its history dates back to 1866 but it was suspended following the Chinese revolution in 1949. The Shanghai Stock Exchange was then founded in 1990 and now has a market capitalisation of over $4trillion. Stocks listed at SSE have ‘A’ shares which trade in local currency and ‘B’ shares which is priced at the US dollar for foreign investors.  SSE opens at 9:30 am local time and closes at 3 pm with a lunch break from 11:30 am- 1:00 pm.

London Stock Exchange (LSE)

London Stock Exchange is the primary stock exchange of the U.K and the largest in Europe. The history goes as far back as the 1700’s where services were no more than paper publications of market prices twice a week. This makes it one of the oldest stock exchanges in the world. The London Stock Exchange used to be the largest stock exchange in the world until the First World War when it lost its title to the New York Stock Exchange.  In 2007 the LSE merged with the Milan stock exchange, Borsa Italiana forming the London exchange Group. With a market capitalization of over $4 trillion, it is the most international stock exchange with over 3000 companies among 70 countries. Trading hours is from 8:00am- 16:30pm

Toronto Stock Exchange (TSX)

Toronto Stock Exchange is the largest stock exchange in Canada with over 1500 listed companies. Toronto stock exchange merged with Montreal Stock Exchange in 2009 and was renamed from the TSX group to TMX group with a market capitalisation over $ 2.2 trillion.  This makes it the ninth-largest stock exchange in the world. Canada’s Toronto Stock Exchange opens at 9:30 am and closes at 4 pm America/Toronto time zone with no break for lunch included.

Can I buy stocks outside of market hours?

In the past decade, extended trading has become increasingly popular due to the electronic communications network becoming more widely available and investors embracing this. In fact, a number of brokers now provide after-hours trading services for all their investors.

Pre-market and post-market trading

What some new traders may not know is that the stock market is also open before and after normal trading hours. The pre-market allows investors to trade stocks between the hours of 4 am and 9:30 am. Post-market trading can take place between 4 pm to 8 pm.

How do stock prices change after hours?

After-hours trading is the timeframe after the market closes where an investor can buy and sell outside normal trading hours. Post-market trading typically takes place between 4 pm and 8 pm while pre-market trading sessions end at 9:30 am. Before the 1990s, after-hours trading was reserved for institutional investors where the average trader could only trade during normal trading times. Fortunately, today’s market is more open than ever giving individuals the freedom to trade during the extended hours. This wouldn’t have been possible without electronic communication networks which match potential buyers and sellers without a traditional stock exchange. Trading after hours is seen as convenient as it allows investors to react immediately to breaking news however risks are also associated. After hour trading comes with less liquidity, there is more competition from institutional investors and more exposure to volatility which can impact dramatically the price you end up receiving for your shares. In general price changes in the after-hour trades have the same effect on a stock as to how changes in the regular market do. So a $1 or increase in the regular market is the same as a $1 increase during after-hours trading. That being said you can make gains off of trading during after hours if there is an increase in your stock price. However, it is important to note that once the regular market opens for the next day trading, the stock may not be open at the same price it was being traded for in after hours. Price change in the after-hours are much more volatile than regular hours prices so they shouldn’t be used as a reliable reflection of what a stock will trade for once the regular market opens. Instead, it is useful in the sense that it reveals how the market reacts to new information released after the regular market has closed.

Pros and cons to after-hours trading

Advantages: 

  • Flexibility: Some investors may prefer to trade at off-peak times. The after-hours trading market provides that additional option creating flexibility.
  • Trading with new information: After-hours trading gives you the opportunity to act quickly to breaking news stories or new information before the next day’s market opens.
  • Pricing opportunities: Despite the risk of volatility present in the after- hours trading market, it is still possible to find prices you find appealing and make profits. It is just important to approach with caution and do your research!

Disadvantages:

  • Less liquidity: During regular trading hours, there are plenty more buyers and sellers so trading after hours means there may be less trading volume for your stock. This makes it difficult to exchange your shares to cash.
  • More competition from institutional investors: Although individual investors now have the freedom to trade in the after-hours market the fact of the matter is that they must compete against large institutional investors who have the advantage of having access to more resources. Large investors also interact with anonymously, which gives them hidden agendas.
  • Volatility: After-hours trading is used less in comparison to normal trading hours which means that you are more likely to experience harsh price fluctuations which can have a huge impact on the price you end up receiving for your shares. With that being said it is important to use a limit order on any shares you buy or sell outside of normal trading hours. A limit order allows you to set a minimum or maximum price which you are willing to buy or sell. This gives traders more control especially when fearful of using the market throughout periods of heightened volatility.

Conclusion

To conclude after-hours trading can provide benefits to traders trying to profit on new information or allow the ability to buy or sell stocks if unexpected news is announced. However, regularly practising after-hours trading is not usually recommended for traders as the risks discussed throughout this article is associated. Normal trading hours offers efficient markets and better liquidity which makes all prices fair value.

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How To Trade Cryptocurrency On Coinbase

How to start trading cryptocurrencies on coinbase​

This guide provides an in-depth tutorial of how to trade (Buy/ Sell) cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) on Coinbase.

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So, you have thought of buying your first cryptocurrencies. The first thing you need to decide on is which exchange you are going to use to purchase these currencies on. This article will walk you through setting up an account to start buying and selling your own cryptocurrencies on one of the most popular cryptocurrency exchanges worldwide called Coinbase.

Cryptocurrency exchanges can vary in factors such as reliability, security, processing fees, exchange rates, and cryptocurrencies available for trading. We are covering Coinbase in this article because of the simplicity offered and ease of use for beginners to start trading cryptocurrencies.

What is Coinbase?

Coinbase is the most popular and respected digital currency exchange in the United States and several other countries worldwide. Coinbase supports trading in multiple different cryptocurrencies at the moment, including Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Ethereum Classic etc. and is adding more as time progresses. The exchange also offers a way to store all of your cryptocurrencies in one location by providing their users to make use of their software wallets.

The following article will guide you through step by step on how to get started trading cryptocurrencies on the Coinbase cryptocurrency exchange.

1. Register an account on Coinbase

  • So, the first step is setting up your trading account on the Coinbase exchange.
  • Simply head over to www.coinbase.com
    You will be presented with a page that looks similar to the following depending on your area of residence:
 
buy and sell cryptocurrency
Head over to the top right corner of the page and click on “Get Started”. After selecting get started, fill in your personal details in the pop-up provided.
 

Note that you can choose to open an individual account or a business account.

  1. After registering an account an email will be sent to you as to verify your email address and device used to register the account with. Just follow the links until all is confirmed and registered. You will also need to add your mobile number to receive an OTP (One Time Pin) to ensure you are a valid user.
  2. After registration, you will be able to sign into your account. Click on “Sign in “on the top right-hand side of the page and fill in your details of the account that you have just registered.

You have now finished setting up your account to the point of being able to get onto the exchange, the next step will show you the prerequisite steps before you can make your first deposit to start buying cryptocurrencies on the exchange.

2. Connect your bank account

Before you can start buying cryptocurrencies, you need to have the money to buy them. You do this by linking your bank account to your Coinbase account and depositing the amount of fiat currency (“regular” money) that you would like to spend, onto the exchange. This will enable you to exchange digital currency into and out of your local currency and vice versa all on the same platform.

  1. To start linking your bank account click on the Buy/Sell tab and on the sub tabbed called Payment Methods:
  2. You will then be able to click on “Link bank account “and the following list will appear:

Click on your bank of choice.

  • Your online banking username and password will then be requested – these are used for a one-time verification step. Additional security questions (as well as a PIN) may be requested depending on your selected bank’s security procedures. 

Just keep following the online prompts until verification is completed.

  • If you are not comfortable sharing your online banking username and password or the bank you use is not listed, you may still proceed by selecting ‘Other Bank’ from the main menu and electing for the deposit verification process or entering your bank’s information in the required fields. This process usually takes a bit longer than usual. 
  • After your bank account has been linked, you will be given a chance to either go through an instant verification process or a deposit verification process. Choose your option of choice and follow the steps provided.

After all these steps have been completed, you are now able to start buying cryptocurrencies. The next step will guide you through buying your first Cryptocurrency or a portion of one.

3. Purchase a cryptocurrency of choice

The following steps can be followed to purchase your first cryptocurrency after you have completed both steps 1 and 2 (Registering and Connecting your bank account).

  • Your first step is to go to the Buy/Sell page we used before.
  • Secondly, select the type of digital currency you’d like to buy.
  • After you have decided on which cryptocurrency you would like to purchase, you can now enter the amount you’d like to buy. There is an option to either enter the amount in the digital currency value or in your local currency, whatever makes you feel comfortable.
  • Select the cryptocurrency wallet you wish to have your funds deposited into. Note that Coinbase has its own cryptocurrency wallet.
  • Select your desired payment method. This can be the bank account you have just registered.
  • Lastly, confirm the order is correct and click Buy.

Congratulations, you have just bought your very first cryptocurrency.

Conclusion

Coinbase is one of the best cryptocurrency exchanges to start out for beginners. All of the information provided above is accurate until date, the exchange may be updated and some tabs can move around, but this will not have a big impact due to the site being quite basic. Coinbase offers a reliable service and a great user interface. This exchange is best used for buying cryptocurrencies with the idea of keeping them (Holding) them for large periods of time, and not trading them actively, although this can be done on this exchange.

Good luck and safe trading.

All imaged provided are under the ownership of Coinbase themselves.

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How to trade cryptocurrencies using fundamental analysis

How to trade cryptocurrency using fundamental analysis

This guide provides a detailed overview of the top tools and techniques of how to trade cryptocurrencies using fundamental analysis and in turn make a profit. 

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Trading in the cryptocurrency markets can be very daunting due to the infancy of the cryptocurrency space and the lack of a long history.

In traditional markets, such as the stock market, traders make decisions by looking at both technical and fundamental analysis techniques. 

However, a vast amount of cryptocurrency traders lack or dismiss the importance of fundamental analysis whilst trading cryptocurrency, this is why we have created a comprehensive guide to help you trade cryptocurrencies using the fundamental information available at this moment in time.

What is cryptocurrency fundamental analysis?

Before we go any further it is important to define the term “cryptocurrency fundamental analysis”. Cryptocurrency fundamental analysis is a forecasting method used to predict the price of a digital asset, typically in the mid to long-term. 

This method does not rely so heavily on the exact price at the moment but considers all the available information about that particular cryptocurrency and all the current and future factors that may influence the price.

Traditionally fundamental analysis is useless in short term. Stock investors for example apply this forecasting method to get the general picture of an asset’s value. In the case of cryptocurrencies, it can be seen as of little importance as to predict too far into the future as cryptocurrency markets changes in a very fast manner, thus whilst using cryptocurrency fundamental anaylsis we tend to focus in the range of mid to long term.

The following four points are traditionally used to summarize the workings and reasoning behind fundamental analysis:

  • The price of every asset changes due to a specific reason.
  • We can find this reason by analysing the asset and its interactions in detail.
  • Any news, rumours or events has consequences which can affect the price of the asset.
  • If one person knows all the facts and can make the right decision, that person is able to predict future price of that asset.

The above points relate to the cryptocurrency trading space as well, however, some traditional methods inside fundamental analysis needs to be changed to analyse crypto specifically. New tools need to be developed and the needed data and information is found in a variety of different areas.

Cryptocurrencies are similar to both currencies and stocks and thus has a combination of both’s features alongside the new features discussed above. All those specific features affect cryptocurrency fundamental analysis and make it unlike anything we had before.

Where to get your fundamental information and its importance

Looking at traditional investments such as stocks for example, fundamental analysis entails evaluating the financial health and viability of a company according to the contents and conclusions drawn from its financial statements, usually made available to the public by the company. If the conclusions look promising, meaning the company is in good financial health and growth is almost guaranteed, we state that the company has good fundamentals and we can, therefore, invest in it.

In the cryptocurrency space however, performing fundamental analysis is radically different due to the fact that there are no financial statements. This is due to the following reasons:

  1. A Cryptocurrency is not a corporation. Cryptocurrencies are not based on generating revenue such as corporations but is rather seen as a store of value within a network.
  2. Cryptocurrencies do not have a long history.  Due to the infancy of cryptocurrencies, almost all cryptocurrencies are in their development stage. This means that there are limited adoption and a limited track records available.

Due to the above-mentioned reasons, fundamental analysis of cryptocurrencies must be performed with a different methodology. A good understanding of a cryptocurrency’s fundamentals allows you to form your educated opinions and have data and information backing it, which is rare in the crypto world due to its complexity.

Here are a few ways on where to begin your fundamental analysis:

  • Cryptocurrency’s white paper

A cryptocurrency’s white paper is a detailed proposal, usually written or typed out, by the cryptocurrency’s development team. This paper outlines the purpose and ‘internal workings’  of the specific cryptocurrency and represents the main source of evaluating the fundamentals of the cryptocurrency. The white paper is one of the first things you must read while performing fundamental analysis on specific coins or tokens. Note that these papers can get very technical, it is good idea to understand the jargon if you are going to read these.

  • Cryptocurrency’s website, channel or blog

One of the next places you as an investor or trader would want to have a look at is the cryptocurrency’s website, channel or blog, depending on the platform used by the userbase. This could represent the official and main channel of communication of the core development team. Our cryptocurrency market cap is the best all-in-one tool to keep in the loop on any specific cryptocurrency activity, news or any form of communication.

These channels could also be on platforms such as Telegram, WhatsApp or Discord channels and it is necessary to join them and ask questions to get more information on the cryptocurrency you are analysing. This is also a great way to interact directly with the developers and find out if they are trusted and moving the cryptocurrency forward. Be sure to follow the updates given by the developers in their official blog to track the progress and see if the developers are truly following their roadmap usually found on their website.

  • Community Forums

This is probably one of the places traditional investors would’ve never considered on gathering information for their fundamental analysis but in the cryptocurrency space, forums are a great way to get a better understanding of the cryptocurrency, as well as the sentiments surrounding the cryptocurrency. This is also a great platform to speak with other possible investors in the cryptocurrency space and discuss and share information with each other.

What to look for in projects

Now that you know where to find the information or data on a specific cryptocurrency you are analysing. The next step entails which questions to ask and which information to look at whether to decide fundamentally if the cryptocurrency you are analysing is a good investment. Here are a few attributes to look at to determine whether it is a good investment or not:

  • Long-term Scalability

In the long term, one of the fundamental issues that needs to be solved in blockchain technology is the issue of scaling. The blockchain model depends on all connected nodes, miners, to process and agree on every transaction. This protocol quickly runs into limitations of how fast a payment can be distributed, stored and verified. Currently there are many cryptocurrency projects out there which claims they have solved these problems and promises close to a million transactions per second. It is important to note that almost all of these approaches are either impractical in real life or break the fundamental premise of a cryptocurrency being trust-less and decentralized. Thus, while doing your fundamental analysis it is important to look at the implementations the developers are performing to advance realistic scalability of their technology. For more information on how this could be done, read up on the concept of sharding.

  • Trust-less decentralization

The concept of trust-less value transfer or trust-less execution is one of the most important properties a cryptocurrency can have. This should be the backbone of the cryptocurrency you are analysing. For example, a transaction can be sent to anyone anywhere in the world without needing a bank or escrow involved.

Be aware of some cryptocurrencies with too simple implementations or a mirror of already established implementations as simple transactions are very basic and has a limited use-case. For example, it does not make sense investing in a cryptocurrency that does precisely the same as Bitcoin, as Bitcoin is already established and will be the best in that field. A project has to offer a unique and useful advancement on basic blockchain technology.

  • Usefulness of the cryptocurrency

Also, one of the most important factors to look at is for who the cryptocurrency is developed for and whether it truly enriches those peoples lives. There have been many cases where teams tried applying blockchain in a misguided manner to any and all systems to join in with the hype. This is obviously then useless, unless you need the very specific properties of a decentralized and trust-less system, Blockchain is no more than a different type of higher tier database.

Pros and cons of fundamental analysis

Fundamental analysis of cryptocurrencies has its advantages and disadvantages. One of the biggest advantages is that these forecasting methods allow you to understand the general situation on the crypto market and find the general tendency. Another advantage is that it lets the investor understand precisely what he/she is investing in and not speculating on the ‘product’.

One of the biggest disadvantages is the misinterpretation of any situation. When you deal with fundamental analysis, you risk misinterpreting every situation. For example, you may come to a conclusion that this or that event will increase crypto’s price, but the price stands still or even decline. Fundamental analysis in the cryptocurrency industry is even more subjective than technical analysis.

The second disadvantages discussed is that this forecasting method is difficult to conduct for beginners with limited knowledge in this field. You need not only to know how to gather information but also understand how to use it and what it means.

Conclusion

Hopefully, after reading this article you now have a better understanding of fundamental analysis and how it is performed in the cryptocurrency space. While there is a magnitude of innovation across the cryptocurrency space, caution is still strongly advised. It is advised to do further research on this topic and be 100% informed of everything there is to know about the cryptocurrency you would like to invest in.

If you would like to learn how to use fundamental analysis whilst trading cryptocurrencies than our trading academy and mentorship services are designed to support you into becoming a profitable trader.

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