Unfortunately, making good financial decisions is easier said than done, and it is easy for you to lose all your life savings if you don’t know what you’re doing. Therefore, the first investment you should make is in your education: learn how to read the market along with the specific direction a financial asset is taking.

how to spot a downtrend and how to trade it

Taking the first step in your education, we will discuss how to spot a downtrend plus what to do when you see one. Honing this ability will help you minimize your losses when the market takes a dive, and if you get really good at spotting downtrends, you can make huge profits off of it.

what you will need for this journey?

Before beginning our financial journey, we need to take a few things along with us: we need to familiarize ourselves with the lingo used by financial analysts as well as the tools they rely on. Not only will this facilitate matters for us, it will also help you in all your future excursions.

Another thing you need to know is that there are two main roads we can take: that of fundamental analysis and that of technical analysis. Fundamental analysis studies the asset itself and tries to compare the asset’s inherent value with its market value, whereas technical analysis is more concerned with the market price of the asset and how that’s changed over time. Throughout this article, we will be focused on technical analysis. Nevertheless, you should also explore fundamental analysis and learn how to combine both approaches

1. Important definitions:

a. technical analysis:

Technical analysis tracks the history of price movements in addition to the volume of trade, while completely disregarding the underlying asset. The main idea is that the price of an asset should ideally reflect all the relevant information about said asset. Moreover, prices of assets tend to move in what’s known as a trend. For example, if a price is going up, it will probably keep going up for a while before changing direction. Over and above, trends tend to be predictable, due in part to the fact that a main determinant of price is how investors and traders react to fluctuations and new information. These reactions aren’t that hard to anticipate, thanks to historical records.

b. Time period:

Seeing as technical analysis studies the price movements of an asset over a period of time, it comes as no surprise that we need to first define our period of time. For example, we could study how the price of an asset changes every day versus how the price of the same asset changes every hour. In the first scenario, our time period is a single day, while, in the latter scenario, our time period is an hour.

c. Price point:

A price point is basically the price of an asset at a moment in time. For any given time period, technical analysts hone in on four special price points:

i. Opening price: at the beginning of a time period, the price of an asset is recorded and dubbed the opening price.

ii. Closing price: at the end of a time period, the price of an asset is recorded and dubbed the closing price.

iii. High price: during a time period, the highest price an asset reaches is recorded and dubbed the high price.

iv. Low price: during a time period, the lowest price an asset reaches is recorded and dubbed the low price.

Let’s take a look at an example:

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Suppose that we have been studying the price of gold over a time period of a day. On the 27th of March, an ounce of gold cost 1247.20 dollars at the beginning of the day, which is the opening price. Conversely, at the end of the day, an ounce of gold cost 1258.8 dollars, which is the closing price. During the day, the highest price an ounce of gold attained was 1264.2, which was the day’s high price. On the other hand, the lowest price an ounce of gold hit that day was 1247.20, which was the day’s low price.

If you’ve been paying attention so far, you’ll have noticed that the opening price and the low price of gold was the same that day. This shows that on march 27th, the price of gold kept increasing that day, and the demand was higher than the supply.

d. Trends:

It is not particularly easy to agree on a definition for trends, but, all the same, here it goes: A trend is the general direction in which an asset’s price is headed. Naturally, the price of an asset rarely skyrockets in a single direction. Instead, the price of an asset tends to move up and down, with the general direction being consistent for a period of time. Bear in mind that this applies to any publicly traded security or commodity, including the Forex.

Trends can be divided in one of two ways: direction-wise or time-wise.

When it comes to directions, trends can go in one of three ways:

• An uptrend is when the price of an asset is generally increasing. It is usually marked by the fact that each high and low is higher than the one preceding it.

• A downtrend is when the price of an asset is generally decreasing. It is usually marked by the fact that each high and low is lower than the one preceding it.

• Sideway/ horizontal trends is when the price of an asset is generally neither increasing nor decreasing. In this case, an asset’s price might fluctuate, but its average price is more or less constant.

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On the other hand, analyzing trends according to their time length gives you three possibilities:

• A short term trend is one that takes place in less than a month.

• A medium term trend is one that takes place in a time frame between a month and three months.

• A long term trend is one that takes place for longer than a year.

You should bear in mind that the longer the trend, the more significant it is: it can be more trusted, and a reversal of this trend is a much more meaningful than the reversal of a shorter one. Also, each long trend consists of medium trends, which in turn are made up of short trends. It is for these reasons and more that trend analysis plays a huge part in technical analysis. If anything, the whole objective of technical analysis can be summed up in one notion: forecasting trends with a high level of confidence.

e. Position:

Let’s agree that a position is where an investor situates themselves relative to a particular asset. This will be made much clearer through the use of examples:

• An investor who’s secured a buy position intends to buy a specific asset at a particular price.

• An investor who’s secured a sell position intends to sell a specific asset at a particular price.

• An investor who’s secured a long position intends to bet on the asset. They plan to buy an asset and hold onto it for a period of time till it appreciates in value.

• An investor who’s secured a short position intends to bet against the asset. They plan to sell the asset today for its fair market value. Afterwards, when the asset depreciates in value, the same investor will purchase the asset at the reduced price, and their profit will be the difference between their sell price and their later buy price.

2. Important tools:

Having gathered some important definitions, let’s move on and construct a few useful tools:

a. Charts:

Our current focus on historical data compels us to consider ways of presenting this information in a more concise and digestible form. This is where compact visual representations, a.k.a. charts, come in.

There are numerous kinds of charts, but, for our purposes, we will focus on candlestick charts only.

The vertical axis of a candlestick chart represents the prices, while the horizontal axis denotes the time period. The horizontal axis could display how the asset changed price over a period of hours, days, weeks, months, or years, depending on the set time period.

However, the true value of a candlestick chart lies in the amount of information each candle gives off. Each candle is composed of a body and a wick and has a unique color that gives off a particular meaning hence giving you all the price points you could possibly need. To elaborate further, I’ll explain each aspect separately:

• The candle’s color symbolizes whether the price of the asset appreciated or depreciated over the time period of the candle. Assets that appreciate in value are usually symbolized by a body that’s colored green or left empty. On the flipside of the coin, assets that depreciate in value are marked by a candle body that’s colored red or black.

• The candle’s body represents the opening and closing price of the asset over the time period. If a candle has a green body, meaning that the underlying asset increased in value, then the bottom of the body represents the opening price and the top of the body represents the closing price. Naturally, the opposite would be true had the candle had a red body.

• The candle’s wicks represent the high and low prices of the time period. Needless to say, the upper wick represents the high price, regardless of the color of the candle. The same applies to the lower wick.

Besides giving off all the necessary price points pertaining to a time period, candlesticks tend to form patterns that can allude to future price movements. For example, a doji, which is a kind of candlestick, may signify something, yet a hammer can be screaming something else entirely. Moreover, groups of candlesticks can give off their own meanings also: a bullish engulfing and a rising sun are two completely different patterns, but they may have similar implications.

Nevertheless, you don’t have to worry about all of this; I will not ask you to remember any patterns or to memorize any shapes. Rather, I’ll give you a simple rule of thumb for you to follow:

Try comparing the body of a candle with its wicks. If the body is much larger than the wicks, then this signifies the certainty the market has in the value of the asset. As a result, it is a safe bet that whatever trend the asset is experiencing will continue. Conversely, wicks that are much larger than the body exhibit uncertainty, and there is a large possibility that a current trend will reverse. Of course, there are several shapes that go beyond this simple breakdown: a candle could have a long lower wick, a relatively small body, and a non-existent upper wick (in which case the candle is called a hammer). This type of candle may signify something unique, depending on the context. Yet, for all intents and purposes, our simpler rule of thumb will serve us just fine.

b. Support and resistance levels and trend lines:

When the price of an asset fluctuates, there is always method to the way in which this fluctuation happens. The price usually exhibits a certain sense of constraint that can be identified through support and resistance levels. In other words, a support or resistance level is a line which the price has been unable to break, despite trying more than once. So, a support is a line that prevents the price from dropping beyond a certain limit, and a resistance stops the price from rising above a certain limit.

The significance of a support or resistance line can be attributed to its predictive capabilities: when you see the price of an asset approach a support or resistance line, you can bet that the current trend is bound to reverse. In addition, should the price break through this support or resistance, the line’s role will be reversed. To put it in more solid terms, a support level that is broken becomes a resistance level, and the opposite tends to be true.

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So “how do we identify support and resistance levels?” I hear you say. Well, there are several methodologies:

• By drawing horizontal lines that touch the price chart in more than one place, we can discern support and resistance levels. Interestingly enough, round numbers tend to play a big role in this exercise; history tells us that round numbers tend to be excellent support and resistance levels. This may have something to do with our innate psychological dispositions plus our affinity for round numbers.

• Another tool is the use of Fibonacci retracement levels, but we won’t really delve into them here.

• You can also find support or resistance levels by drawing trend lines. Trend lines are lines that aren’t necessarily horizontal but confine the price chart one way or another. You can draw them by finding several reversal points that lie on the same straight line. Furthermore, you can draw a channel should you be able to draw a support trend line along with a resistance trend line.

(Click the image to see it full size)

Obviously, all of this seems good and well, but how can we have any confidence in these support and resistance lines? After all, we are the ones who draw them. Now seems the perfect time to introduce the concept of IRATE criteria, which are used to judge the dependability of a support or resistance line. IRATE stands for indicators, round numbers, age, and tested. You don’t have to know all of these criteria, yet it doesn’t hurt to at least understand most of them:

• Indicators:Momentum indicators, or forex trend indicators, give us clues about how strong a trend is as well as how likely it is to continue. Some examples of indicators are moving average crossovers, oscillators, and double Bollinger barrels.

• Round numbers:As mentioned earlier, round numbers usually play excellent support and resistance levels. Therefore, you should have much more faith in a support level at 50 dollars than another support level at 47.23 dollars.

• Age: Just as longer trends are more significant than shorter ones, older support and resistance levels are more significant than newer ones.

• Tested: When we ask ourselves how tested is this support or resistance level, we are trying to investigate how many times this level was able to halt the progress of the price. The more times the support or resistance level held firm, the more faith we have in it.

c. Other useful tools:

Having answered fundamental questions such as what is a trend? What is a trend line? How to identify a trend’s performance? How to draw a trend line? We can now build off of this information in numerous ways:

• We can choose to adopt trend following strategies, where we patiently wait and see where the market is heading and then ride that wave. This is known as using trend trading systems, and it is a valid way to play the market.

• For the more diligent among us, there are numerous chart patterns that derive their shape from their trend lines: head and shoulders, double top, and triple top, to name a few. Each chart pattern produces a market trend signal, if you will, that notifies traders of the next direction the current trend will take.

d. A platform to observe your assets from:

Apart from the knowledge, you will also need the technical tools that will enable you to observe your investments in action. If you choose to invest in the forex market, then I suggest you look for a good platform to trade on as well as monitor your money, such as Meta Trader 4. Conversely, if you choose to invest in the stock market, you’re better off depending on a reliable website like stockmarketwatch.

Time to go on your journey:

It hasn’t been an easy journey so far, but now that we have all the prerequisite information to start targeting downtrends, let’s take a look at what actually needs to be done:

1. Define your objectives:

Before you embark on your hunt, you need to be clear on a few topics:

• How much money do you have? How much of it are you willing to risk?

• How much risk are you willing to expose yourself to?

• Do you want to invest in a few assets or do you want to play the general market?

• How important is it for you to beat the general market?

Answering these questions may require you to include your significant other in the discussion.

2. Begin your search:

Depending on the objectives you’ve stated in the previous question, you can either choose to follow the progress of a few assets or choose to closely monitor the general market. In both scenarios, keeping a watchful eye is only part of the equation; you need to know what to look for.

I will suggest a strategy called price action trading, where you trade based off of the price itself. It is a simple strategy that is suitable for every beginner:

• Start by drawing the main trend lines. This should give you a much clearer view of where the asset is headed. You can try drawing horizontal support and resistance levels or more oblique trend lines. You should just remember the IRATE criteria in all cases.

• Pay attention to each individual candle, and try to figure out what it is telling you.

• Bear in mind that a single signal on its own is not nearly as potent as a group of signals taken together. It’s the same difference between judging a painting from just looking at the corner part versus taking the whole painting into consideration. Consequently, the more signals you are able to incorporate, the more of a holistic picture you’ll see.

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3. Identify the downtrend:

There are two types of downtrends to look out for:

• The first is the continuation of an ongoing downtrend.

• The second is the reversal of an uptrend.

Each type of downtrend can be identified in different ways:

• When an asset is in the middle of a downtrend, it isn’t that hard to spot. The trick is to know whether this downtrend will continue on for a while. Therefore, you have to answer questions like is the price close to its support levels? Do the candles display any sense of uncertainty in the market? If the answer to either one of these questions is yes, then you’re better off letting this downtrend go as it might reverse soon.

(Click the image to see it full size)

• When an asset in the middle of an uptrend, you should ask yourself very similar questions to the ones above: is the price close to its resistance levels? Do the candles display any sense of uncertainty in the market? If, and only if, the answer to both these questions is yes, then the asset is probably about to reverse and experience a downtrend.

4. Trade the downtrend:So how do you get started:

In this article, we’ve covered a lot of ground, which should give you the ability to start trading right now. However, there is a world of difference between understanding something and being able to apply it in real life. Hence, what you need now is practice.

My advice for you is to start small and experiment. You can start by looking for cheap stocks to buy, like penny stocks. Although penny stocks are usually unstable investments, think of them as practice for the real thing instead: finding trending penny stocks is no mean feat, and it can prepare you for bigger game. Pretty soon, you’ll be spotting stock trends like a pro.

Another thing to be wary of is how volatile the market can get. It happens. The trick is to have a system and stick to it. So long as you don’t panic, you’ll be fine.

In this tutorial, you’ve learnt the basics of technical analysis as well as how to spot a downtrend and trade it. These skills can prove instrumental when investing your money, especially when it comes to timing your entry or exit.

Please let us know what you think, and if you have anything to add, feel free to do so in the comments.

   

Almost everyone can write somehow which makes writing one of the most popular ways of earning alternative income. The main factor determining your probable success is how good you can write and how productive you can be. The good news is that you don’t need to be Shakespeare in order to make some supplemental income from writing. In fact, if you write for alternative income you must not be Shakespeare because most people will not understand your writing. If you want to make money by writing you must be able to write in simple, understandable and engaging style. That’s not as hard as it may look – most people who write blogs can do it. And you most probably can do it too.

What I want to answer here, however, is not whether you can write, but where and how to make money from your writing. There are many opportunities, some of which are really good earners.

Writing Jobs

You can chose to write for yourself and your own projects, or for someone else. Here, in the first section, I will cover the latter part; writing jobs, where you write for someone else. There are lots and lots of opportunities out there.

Write Per Hire

Most straightforward way to make money by writing (and by anything else, isn’t it?) is to write for someone and get paid for the job done. That isn’t the best way, but it’s the easiest because it doesn’t require a genius mind to find some writing work. Your options include but are not limited to:

• Paid blogging. There are lots of blog owners looking for quality writers. Check Problogger’s Job Board and you’ll see many open positions for professional bloggers. No, you don’t need to go into some office and work from 9 to 5 and yes, you will get paid for your writing.
• Getting freelance jobs. You can find a lot of writing projects on sites like Guru, Scriptlance and Elance. For more similar sites check Freelance Switch’s Monster List Of Freelance Sites.
• Writing for experts site. Sites like About.com and EHow.com are looking for expert writers for various topics and offer either a revenue share or fixed rate. The big advantage to write for such site as opposed to writing for your own blog or websites is that they already have huge auditory and good SE ranks. So it’s likely that a guide you write for About.com will make you more money than if you write the same guide on your blog. The experts that are accepted on About.com are paid $925+ monthly.
• Other writing per hire. You can also write for people who publish non fiction books and e-books – it’s common that some will just do the market research and invest some money and will outsource the content research and writing. You can make some money as a writer for newspapers and websites too.

On the writing per hire market supply exceeds demand which makes the prices low. There are cheap writers with decent English who will work for $2 – $3 per hour, so if you want to be paid well you need to find a way to distinguish yourself from the crowd.

With this method depending on your writing quality and talent you can expect to earn between $2 – $3 and $20 – $50 per hour (more if you are very good and productive).

Write your blog

A way to get better payment for writing gigs is to get known for your writing by establishing your own blog. But that’s not all – having a blog, of course, is also a direct method to earn alternative income. In my opinion, it’s one of the worst methods to make money for most people but regardless of that, some really talented (or just lucky) bloggers manage to make a lot more than living from it.

If you want to make money by writing your own blog, just good writing skills will not help you enough. You will need to put significant effort in networking with other bloggers, SEO, and advertising. You will probably need to write some posts that you don’t enjoy so much – like plenty of lists and controversial stuff – just to get some noise around your blog.

Writing a blog allows you to make money by advertising, PPC ads like Adsense, selling text links or selling affiliate products. Very often the bigger profits from blogging come in an indirect way. For example, as suggested in the beginning, your blog could bring you lucrative writing contracts (but that only if you are really good).

For more information on professional blogging better check Problogger.

You can expect to earn from $1 to $100,000 monthly or more – it all depends on how popular your blog will become. Unfortunately, the chances to earn $1 are much bigger

Write for your websites

Similar to managing your blog, you could write for your content websites and monetize them with advertising or affiliate marketing (that’s what most people understand as “make money online” anyway). The difference is that static or semi-static websites do not need to be updated constantly like blogs. Your focus will be more on providing useful and accurate information rather than on controversial and “hot” stuff.

Typically content sites are more “niched” and require serious search engine optimization work. The best thing about making static websites is that you can write 10-20 articles on a topic once and then enjoy the passive income for years. That’s at all not as simple as it sounds however – driving traffic and achieving good SEO positions is hard and becomes harder every day as competition grows. If you are planning to earn alternative income by writing mediocre or recycled content, most probably you will be disappointed.

After you create 4-5 static content sites you can expect to earn between $50 and $5,000 monthly depending on how good your writing and SEO work is and how lucrative the niches you have chosen are.

Write to sell

Finally there is more entrepreneur-ish approach to writing for alternative income. Instead of writing per hire for someone or writing for free and trying to earn from advertising like everyone else, you can try to sell your writing as a product. You can write and produce an e-book, paid report or self publish a paper book and sell copies yourself. Such a project requires more than just writing of course – you need to research the market for projects in demand, do the content research unless you are already an expert in the topic (and probably even then) and finally pack and promote the product.

The big advantage of writing to sell method is that you write once and sell many times. Recently this approach often evolves to selling access to information via membership sites. This model can be better than writing a book or e-book because you can start selling access even before you finish the entire product. You can monitor first users’ feedback and improve your site based on it. And the best thing, in terms of making money, is that when selling access you would typically charge a subscription fee rather than one time fee. If you think that means recurring income, you are right.

Everyone can make some money writing. The main question is how much you can make and whether it will justify the effort. The best way to understand that is to go ahead and try.

   

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What Commodities To Invest In In 2017

2017 has indeed proven to be a turbulent year and many investors are wondering what the markets may next have in store. Whether referring to the relatively fragile state of the Eurozone, the Brexit confirmation or the decidedly dubious track record of the Trump administration, some are looking to diversify into commodities to offset any unexpected open-market volatility. Which sectors do analysts believe will perform the best throughout the remainder of the fiscal year?

The Possible Glory of Gold

Many analysts are closely watching the prices of gold, and for good reason. Colin Cieszynski recently noted that the abandoned Trump healthcare bill has caused jitters across the markets; resulting in a slight (albeit perhaps short-lived) currency rally. While this would normally be counter-intuitive regarding bullish gold prices, other factors need to be considered. Notably, the levels of United States are predicted to jump from 77 per cent to an unsustainable 150 per cent over the next 30 years. Furthermore, political uncertainty in other major economies such as the United Kingdom will likely drive gold prices moderately higher. As this yellow metal already gained 7 per cent during Q1, further positivity is likely realistic. 

Industrial Commodities Set to Surge

The World Bank has predicted a sizeable surge in the prices of industrially backed commodities during 2017. The reasoning behind this observation is quite simple. The strengthening demand for energies and metals is quickly outstripping the present supply. There are two important takeaway points here which should be highlighted:
• Oil is set to rise to approximately $55 dollars a barrel; an increase of 29 per cent when compared to 2016.
• The price of metals is expected to increase by 11 per cent; a revision of the 4 per cent highlighted in October 2016.

Copper could be poised to make massive gains, as large economies such as China continue to demand larger amounts for industrial necessities. Some believe that the target of $2,600 dollars a tonne is perfectly reasonable. Still, this has yet to materialize.

Could Black Gold be a Golden Investment?

It is always wise to examine predictions surrounding oil, as this commodity tends to be a relatively accurate barometer in regards to economic performance in general. There are two factors to take into account. First, OPEC hopes that crude will top off at $60 dollars a barrel by the end of 2017. Considering that WTI crude is currently trading at just over $51 dollars, such a rise would be beneficial for investors.

However, we must also take into account plans within the Trump administration to emphasize fracking and to further stress the development of fossil fuels (in direct contrast to his predecessor). While it can be difficult to predict how many of these promises come to fruition, it is not altogether unreasonable to imagine that some short-term rallies within this sector will become possibilities soon. 

The Bottom Line

Commodities are predicted to perform moderately well throughout the remainder of the fiscal year. Should instability and uncertainty continue to impact short-term market sentiments, it would be wise to closely monitor these potentially valuable strategic options. 

   

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Emergency Cash: What You Need to Know

When people think of disaster, they think of hurricanes, earthquakes, tornadoes and so on. But disasters are never confined into one category. There’s one particularly infuriating and painful category of disaster: financial.

Millions of people got their first taste of financial disaster in 2008, when the Great Recession happened. It’s been close to a decade since then and therefore people who have recovered may have forgotten how bad it was. Even people who lost everything in 2008 barely think about the situation.

The Great Recession should always garner attention in life. Think about what you lost in those years. This can include jobs, houses, stock and hard-earned savings. Now, your financial situation might be slightly better. But think about whether your money will be safe against another recession. Can you face another Great Recession, and survive?

Emergency Cash

Financial preparedness refers your ability to survive the unexpected that can take your wealth away. These “unexpected” situations include personal ones, like getting laid off or larger narratives that are out of your control, like a market-wide financial crisis.

Here’s how you can protect your personal finances against the inevitable:

Have an Emergency Source of Funds

In addition to savings, everyone must have an emergency source of funds. If your car suddenly breaks down, or the roof caves in, or if you suddenly get ill, you will need quick access to money. You may be able to dip into your savings accounts, but this is not ideal in a scenario like emergency house repairs. For these small but very significant expenses, you need to keep an emergency fund ready. Invest in this fund as much as you would in a retirement account. An emergency fund will be your first line of defense against a personal financial crisis.

Invest in Gold

If the economy tanks tomorrow like it did during 2008, what will happen to your retirement account and investments like stock? They will plunge in value overnight, leaving you poorer than 24 hours ago. You may not want to anticipate such a scenario, but you do need to be prepared for it. The best way to save money when the currency value goes down is to invest in gold or any another precious metal. Gold prices go up when currency value goes down. In a case of a serious crisis, having gold in your investment portfolio can hedge your losses. You can consult with special brokers like Lear Capital precious metals on how to get your hand on some gold to save your money in the future.

Have More than One Source of Income

Don’t cross your fingers and hope to keep your job forever. It’s hard to predict what will happen in the future. Do not take your primary source of income for granted. There’s always a possibility of losing it, so you better have a secondary source of income to be properly prepared. You can earn part-time money with many things. You can take on a second job on the weekends, freelance from home or run a small one-person business in your spare time. Whatever you do, it should be able to help you in case of a sudden job loss.

Try one of the above tactics to be financially prepared as well as mentally and physically for the future. Emergency cash as a liquid source at the bank, gold with a broker, or extra income sources will help you ease your mind and be ready for the future.

   

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