Fibonacci Retracements are powerful technical analysis tools based on the Fibonacci Sequence which are widely used in the financial trading of virtually any and every asset.
Many traders use technical indicators – and sometimes entire strategies – built upon Fibonacci Retracements, while many others use the retracement levels as a guide to set their stop-loss and take-profit orders. But how can a sequence of numbers discovered in medieval times have any applications in trading today?

In this article, we will explore what Fibonacci retracements are, how they work, and how traders can make them part of their trading strategies.

What is the Fibonacci Sequence?

The Fibonacci Sequence is a mathematical sequence of numbers discovered in India and brought to Europe by Leonardo Fibonacci sometime during the 13th century.
The sequence begins with  0 and 1 and carries on with each following number being the sum of the previous two; so.. 0, 1, 1, 2, 3, 5, 8, 13, 21, and so on.
Mathematically speaking,  the Fibonacci Sequence and the relation between the numbers it contains can be found reflected everywhere in nature (for example in the shape of chicken eggs, many plants, flower petals as well as galaxies, and much more) but the reason it’s so interesting to traders is, intuitively, a different one.

What are the applications of the Fibonacci Retracements in financial trading?

In financial markets, traders use the ratios, derived from the Fibonacci Sequence, to predict the range and the extent of potential price retracements. Prices corresponding to these ratios are referred to as “Fibonacci Retracements”.

There are many ways and variations to use the Fibonacci Retracements and there is a myriad of technical indicators adopting each a slightly different way of showing the retracement levels on the charts -however- they are all more or less based on the same principle and pretty much all work in a very similar way.

Fibonacci retracements are plotted on a price chart as horizontal lines indicating potential support and resistance levels. The two main points used to draw these lines are the Swing High and the Swing Low. The Swing High represents a peak in price, while the Swing Low represents a trough. A retracement is then drawn between these two points, dividing the vertical distance by various Fibonacci ratios.

Traders use the Fibonacci Retracements’ levels to establish potential entry and exit points for their trades as well as their stop-loss and take Profit orders.
Naturally, even when using any Fibonacci retracement indicator, traders would still examine and confront the results of additional technical analysis tools (such as candlestick patterns and trend indicators), to confirm the probability of a reversal or continuation before opening a position.

What are the key Fibonacci Retracement Levels:

Fibonacci retracements rely on percentage levels derived from the Fibonacci sequence. The three most prevalent levels are 38.2%, 50%, and 61.8%. These are thought to represent levels of support or resistance, when price may stall or reverse. Traders also employ additional Fibonacci levels, such as 23.6% and 78.6%, in order to gain better insight into further price movements.

How are Fibonacci Retracements used when trading?

As we said, there are many methods to trade using Fibonacci Retracement; what follows is one of the most basic and most common of such methods.

To use and make Fibonacci Retracements part of your trading strategy, it must be remembered – and we can’t stress this enough – that no strategy should be ever based upon one single indicator and Fibonacci Retracements are no different.

In order to ensure to draw the Fibonacci Retracements in the right direction, a trader needs to consult and compare the results of other market analysis tools (technical and/or fundamental) to identify the current trend and a bias on the likelihood of potential changes.

What’s next?

Once that is done, a trader needs to identify the Swing Points (the high and low points on the price chart that mark the start and the end of significant moves) and use a Fibonacci Retracement tool to draw the lines from the swing low to the Swing High (in an uptrend) or from the swing high to the Swing Low (in a downtrend).

As you draw the line according to the current trend, most Fibonacci Retracement tools will display horizontal lines across the chart; each of these represents a different Fibonacci Sequence ratio and therefore a different Fibonacci Retracement level.

With the Fibonacci Retracement lines across the charts on his or her screen, a trader should now spend some time analyzing how price reacts when approaching each retracement level.
Very often, support and resistance areas can occur near these levels as well as retracement and price reversals.

Before opening a position, a trader should look for confirmation and confluence with other indicators. Confirming signals from multiple sources can strengthen any trading decision. This is why it’s advisable that traders combine Fibonacci Retracements with other technical indicators or chart patterns to increase the probability of the trade being successful

Let’s finish it off!

Once all of the above is done, all a trader needs to do at this point is to follow the results of his analysis and use the Fibonacci Retracement levels to set entry and exit points for his position (as well as stop-loss and take-profit orders) whilst keeping in mind that support and resistance levels, price reversals, bounce-backs, and pull-backs are all likely to occur around the Fibonacci Retracement levels.

Hope this helps!
Happy trades!

The post Fibonacci Retracements appeared first on Funded Trades Now For You - Stock Trading Prop Firm.

Have you ever had the impression of looking at the perfect setup on your screen, placing a trade with confidence, and witnessing price suddenly shooting in the opposite direction, taking out your stop-loss, and then, as if nothing ever happened, returning to the direction you originally predicted?

Well, that could be more than just a mere impression. According to some traders, It could be the result of Stop-Loss Hunting, an act of market manipulation by Smart Money, aimed at creating liquidity by pushing a stock price toward areas with a high concentration of retail stop-orders.

The objective of this article is to explain what it means to hunt stops, who is likely to be doing it, and how you can protect yourself from being stop-hunted.

What is Stop Loss Hunting?

Stop-loss hunting occurs when large market participants, such as institutional investors or powerful traders, intentionally manipulate stock prices causing temporary volatility and price movements able to trigger stop-losses placed by retail traders thus creating liquidity for their own larger trades.

How does Smart Money know where retail traders’ stop-losses are?

Estimating where most retail traders’ stop-loss orders are placed is not that complicated. A great number of them tend to use the same technical analysis strategies and indicators. This means that many traders would often end up placing their stop-loss orders around the same levels (for example, just below the support or just above the resistance levels of a trend). The result is the creation of at least two areas where a high number of Stop-Loss orders are highly concentrated.

When seen on a chart, it becomes quite easy for everyone to predict where these areas are and even more so for Smart Money traders.

How does Smart Money manipulate prices when hunting stops?

Large market participants often have huge amounts of capital to manage and, although it might sound counterintuitive, this does present some disadvantages compared to retail traders.

Smart Money traders can find it difficult to place large orders and see them fulfilled at the desired price. More often than not, they find themselves having to split big trades into smaller ones, place their orders across longer intervals of time, and distribute them amongst different brokers. However, these operations require time and it still can’t guarantee that any slippage would be limited.

Because their capital is so large, Smart Money traders can “sacrify” a small portion of it to rapidly buy or sell a large number of shares within one or two trades to push a stock price toward retail traders’ stop-loss and drive it far enough to trigger as many of them as possible.

Once triggered, stop-loss orders convert into market orders, and all positions are liquidated at the next available price. This means that when stop-losses below the support line are triggered, there will be a further sudden increase in selling pressure and price will keep dropping lower, whilst when the stop-losses above the resistance line are triggered, the opposite is true. It is at this point that Smart Money traders can take advantage of the abundance of liquidity and a lower price at which to open a long position or a higher price at which to place a short one.

The primary reasons behind stop-loss hunting are creating liquidity in the market to execute larger trades and obtaining a more favorable price at which to trade. By triggering stop-loss orders, these market participants aim to take advantage of the chain reaction created by so many stop-loss orders being triggered at the same time, whilst gaining a better price that enables them to accumulate or offload stock more efficiently.

What can you do to protect your trades from stop hunters?

Now that we have discussed what Stop Hunting is and why some larger market participants choose to adopt it as a strategy (despite clear laws forbidding it), it is only natural that traders ask themselves if there is anything at all they could be doing to avoid falling in a Smart Money’s stop-hunt trap, and… of course there is.

According to ICT’s Smart Money Concept, the consequences of Stop Hunting can be disastrous for traders who fail to manage their risk properly as well as for those who fail to realize that “Stop Hunts are real, can happen, and do happen”.

Traders use stop-loss orders as a risk management tool to protect their trades and investments. However, this reliance on stop-losses creates a vulnerability that can be exploited. Larger market participants may intentionally drive prices up or down to trigger these stop losses, causing panic buying and selling and causing further downward or upward pressure on a security’s value.

So… what are the recommendations to avoid being stop-hunted?

• Stay away from the mass

  One of the first things a trader should do is to learn technical analysis with particular emphasis on support and resistance levels. This knowledge will make it easy to estimate where most retail traders’ stop-loss orders are likely to be placed and the levels that price could attempt to breach during a Stop-Loss Hunt. A trader who chooses to place a stop-loss should do so well away from such an area.

  Traders can avoid falling victim to stop-loss hunting by using customized stop-loss levels for their positions, by placing stop losses at prices less likely to be hit by normal market fluctuations plus a little extra distance to also mitigate the risks associated with stop-loss hunting.

• Monitor market liquidity

  In the Stock Market, Market Liquidity refers to the ease with which a stock can be traded (bought or sold) without affecting the price. Keeping track of market liquidity conditions is crucial.

  During times of low liquidity, the risk of stop-loss hunting may increase. By paying attention to factors such as trading volume, bid-ask spreads, and market order imbalances, traders can get an insight into the liquidity level of the stock they are trading and adjust their strategies accordingly.

• Use different methods and strategies to set your stop-loss orders

  Many traders use specific technical indicators to set their stop-loss orders and this, amongst other things, can prevent them from falling victim to any stop-hunt taking place. The ATR is one such indicator.
  

  The ATR (Average True Range) is a technical indicator that measures the volatility of a security by indicating the average of the true range of a security over a specific period.

  Traders know that normal price fluctuation tends to remain within the ATR value and use this information to set their stop-loss orders accordingly. A stop-loss set at 1.5xATR or even 2xATR, for example, would give ample space to tolerate a stop-hunt without it breaching the stop-loss and automatically close the trade at a loss.

• Trade with the Smart Money

  If the concept of finding the market maker manipulation is understood, then the next move will be to find those levels, wait for the stop hunt to occur, and use that to your advantage.

Conclusion

Stop-loss Hunting is a practice used by Smart Money to take advantage of the stop-loss orders placed by retail traders. Understanding how it is done and why, and trying to take precautions by setting our Stop-loss order differently, can help us to reduce our risk and protect our capital.

So remember:

By being aware of support and resistance levels, using customized stop-loss, and avoiding smaller time frames in times of low liquidity,  it becomes possible to reduce our exposure to the risk of Stop-Hunting.

Hope this helps.

Trade on, traders.

The post Stop Loss Hunting appeared first on Funded Trades Now For You - Stock Trading Prop Firm.

In a past article – “The Seven ICT Concepts You Oughta Learn” – we talked about Inner Circle Trading’s (ICT) very own trading strategy and the seven concepts upon which it has been created.

In that same article, we said ICT’s seven concepts were Liquidity, Displacement, Market Structure Shift, Inducement, Fair Value Gap, Optimal Trade Entry, and Balance Price Range. Today, we are going to take a closer look at one of these concepts: the Market Structure Shift. We’ll explain what it is and how it is used within the ICT trading strategy.

What is a “Market Structure Shift”?

Whatever your skill level, as a trader, you are probably already used to watching charts and analyzing the flow of trends and patterns before your eyes and that alone is a great starting point to understand and easily spot Market Structure Shifts (MSS).

MSS are ICT traders’ way to identify an imminent reversal in a stock price and enter the market within the Fair Value Gap that the MSS helps to highlight.
The easiest way to describe the formation of an MSS would be to say that, as the name suggests, an MSS is the point in time (as well as on the charts) where the current trend or pattern suddenly changes.

In practical terms, however, it can be described as the level at which price extends past the last lowest low following a succession of higher highs and higher lows (in a bullish trend) or the last lower high following a succession of lower highs and lower lows (in a bearish trend).

ICT traders see a Market Structure Shift as the first indication of a trend change and, if this is confirmed, will often use this point to identify the right area in the chart to set entry and exit points upon which to base their trade. Once ICT traders have established and recognized the current trend, they need to keep monitoring the chart waiting for a break in the status quo and a Market Structure Shift is how this usually manifests.

Keep in mind that for an MSS to be recognized as such, price must break past a swing high or low with a full-bodied candle (rather than with just its wick); only in this case, the MSS  would be considered as signaling a potential change in the price direction. When confronted with any other scenarios (i.e. when it is the candle’s wick, rather than its body, that extends past the previous lower low or higher high), ICT traders would wait for other confirmation knowing that they might be in front of a simple Liquidity Grab rather than an actual Market Structure Shift. Liquidity Grabs, on the other hand, often result in just a brief pullback and do not offer any indication of an imminent reversal. As the name suggests, Liquidity Grabs are quick price movements created by smart money’s attempt to push a stock price to areas where traders’ stop loss levels are likely to be highly concentrated.

All in all, being able to recognize MSS properly makes it easier for traders to spot great trading opportunities, get a better insight into potential trend changes, and set better entry and exit points.

ICT’s Smart Money Concept Strategy includes a variety of tools and methods that can be used to spot and identify genuine MSS and good trade opportunities in the stock market; the three most effective and most popular amongst these are Order Blocks, Fair Value Gaps, and the good old RSI.

Order Blocks

Order Blocks show up as the footprint left behind by large market players in areas where they entered and/or exited the market in significantly large volumes. The importance of these zones derives from the fact that they can often become turning points for price movement direction. The ability to identify these areas gives ICT traders an advantage in being able to set suitable entry and exit points for their trades.

Fair Value Gaps

When clarity is concerned, arguably one of the easiest ways to establish that a genuine Market Structure Shift has taken place is the occurrence of a Fair Value Gap (FVG) or even a Double Fair Value Gap (DFVG).

When looking at a chart, a Fair Value Gap is represented by the space created by a stock price shifting between two points without any trading taking place in between. These gaps will be filled in the future more often than not and can reveal the market’s momentum and provide insight into potential future shifts.

By keeping an eye on where price extends past the last opposite swing point and leaves behind a Fair Value Gap, it becomes possible to try and predict a new trend change.

Relative Strenght Index

Some ICT traders prefer to use technical indicators to identify Market Structure Shifts and, among these, one that stands out for effectiveness and popularity is the Relative Strength Index indicator (RSI). A stock is considered to be overbought when the RSI shows a value equal to or higher than a value of 70 or oversold when it shows a value equal to or inferior then 30. It’s a hint that the market’s current trend may be exhausted. If and when one of these two scenarios coincides with a Market Structure Shift, traders would be faced with a strong indication that price movement may be about to change direction. Usually, traders would take advantage of the situation to place their trades on the right side of the market’s new course.

How to trade a Market Structure Shift

Trading an MSS begins – quite obviously – by identifying and confirming the presence of an MSS itself.

At the end of a bearish trend, the MSS is confirmed when the first higher high closes above the previous lower high (bullish MSS). On the other hand, at the end of a bullish trend, the MSS is confirmed when the first lower low closes below the previous higher low (bearish MSS).

Once the MSS is confirmed, traders will look for entry opportunities within the corresponding Fair Value Gap. They can then use Fibonacci levels to set their stop-loss and take profit levels. Those who prefer to set these levels manually would often place the stop-loss at the lowest level preceding a bullish MSS or at the highest level preceding a bearish MSS and their profit targets close to the highest level of the previous market trend before a bullish MSS or close to the lowest point of the previous market trend before a bearish  MSS.

Whichever way they choose to go about it, the simple act of learning to identify Market Structure Shifts would give traders the advantage they need to recognize imminent trend changes, reversals, and good trade opportunities and, of course, the same can be true for you.

As always, I hope this helps you to enrich your skills, improve your technique, and trade more effectively and successfully.

To start trading today join Funded Trades Now For You now!

The post ICT Concepts Explained – Market Structure Shift appeared first on Funded Trades Now For You - Stock Trading Prop Firm.

So… which one is it then?
Is penny forex trading a scam or a legitimate way to maximize and diversify our trading portfolio?

Well… you guessed it, that is the question we’ll try and answer for you in this article.
Let’s get going!

First of all…

What is penny forex trading in the first place?

Penny forex trading is a type of speculative trading in which traders buy and sell low-priced stocks, typically under $5 per share. These stocks are frequently linked with small or new companies with low market-cap and are traded on over-the-counter (OTC) or specifically small-cap exchanges.

Penny Forex Traders often use a variety of tactics and strategies to profit from these low-priced stocks’ price swings. Whilst some traders concentrate on short-term market volatility, hoping to profit from short-term momentum plays or price swings. Others buy in penny stocks with the expectation that a specific stock will experience tremendous growth in the future, potentially resulting in a huge profit.

What are some of the advantages and disadvantages of penny forex trading?

These are the three main advantages of penny forex trading:

Low entry barrier

Arguably, the biggest advantage of trading penny stocks is the low barrier to entry. These stocks often cost less than $5 a share, making them accessible to investors with smaller budgets. The low cost can be attractive for aspiring traders and investors seeking to gain exposure to the stock market without significant financial commitments.

Volatility and liquidity

Penny stocks are known for their volatility, and volatility, as we all know, creates opportunities for quick price changes. If things go according to plan, the larger the price movement, the larger the profit; it’s understandable then that the penny stocks’ is many traders’ favorite market.

Potential for high returns

Penny stocks are known for being able to offer high returns on investment. Because of their low price, even a slight upward rise might result in significant percentage returns. If timed correctly, the possibility for big returns can be very very attractive to traders searching for higher profits in a shorter time.

And these are some of the disadvantages:

High risk

While the prospect of high returns is appealing to everyone, trading penny stocks comes with a higher level of risk, and that is not appealing to everyone just as much.
Penny stocks often have no track record, making them difficult and challenging to analyze and evaluate. Determining their long-term viability sometimes becomes more a matter of opinion than clear indicators. And, as if this wasn’t enough already, penny stocks are vulnerable to manipulation and fraudulent activity, offering fertile grounds for possible fraudulent behavior.

Lack of information and transparency

Due to their small market capitalization and limited following, penny stock companies often provide minimal information and transparency. Traders and investors may struggle to find accurate financial data, making it really hard for traders to make good and informed decisions. This lack of reliable information can contribute to increased risks when trading penny stocks.

Low liquidity

Penny stocks have lower trading volumes than standard stock and that, sometimes, can lead to illiquidity. The lower volume can make it difficult to buy or sell shares at the chosen time and at the target price and annoying (and at times, expensive) slippage is often the result.

Price and news manipulation

These two last points – low liquidity and limited information low-cap companies – combined make very fertile ground for fraud and manipulation.

The small price and the low level of liquidity (caused by the limited number of buyers and sellers) mean that it is possible for groups of ill-intentioned fraudsters to increase the price of stock merely by buying it in large quantities. At the same time, the lack of sufficient information makes it hard for investors and traders to establish if these price increases are justifiable by the company operations or just the results of manipulation. The less-experienced traders often rely on internet influencers and “second-hand” analysis without realizing that, many a time, fraudsters would be one step ahead and often divulge fake news and information with the intention of strengthening public confidence in the penny stock they intend to manipulate.
Many influencers have already fallen “victim” to the SEC for exactly this kind of behavior.

Once the hype is built and the penny stock reaches the desired price, the manipulators would sell the many shares in their possession for a large profit in a very short period of time. The price of that stock would consequently drop rapidly and drastically leaving genuine traders and investors “holding the bag” (virtually worthless stock).
This process is called “pump and dump” manipulation and it’s the most common type of fraud present in the penny stock market.

Here are three penny forex trading strategies you can adopt right now

Momentum Trading

Momentum trading focuses on identifying penny stocks that are experiencing significant price movements and jumping in on the trend (trying to do so before it ends).

To use this strategy, penny Forex Traders often look for stocks with high trading volumes and sudden increases in volume and increases or decreases in price. They aim to profit from short-term price movements by buying stocks on the upswing and selling them quickly for a profit.

Catalyst trading

Penny Forex Traders pay great attention to actual and potential catalysts that may drive the stock price. This can include earnings releases, corporate news, regulatory approvals, or industry developments. Timing your trades around anticipated catalysts can help you take advantage and profit from short-term price movements and fluctuations

Short selling

Short selling is by far the most used strategy when it comes to the penny stock market.

As in any market, the process of short selling consists in borrowing shares from the broker and selling them immediately hoping to be able to rebuy them later at a lower price and returning them to the lander whilst pocketing the profit.

Given that the Penny Stock market is characterized by minor companies and lower market cap, it can sometimes be easier to spot stocks destined to decline than stocks that show promise and potential; this is probably why so many traders chose short-selling as their go-to strategy when it comes to penny stock.

Keeping up with news regarding both the company and the industry in which it operates is vital for a short-seller. Penny stock companies are way more vulnerable to micro and macro changes in the economic and social environments than other stocks. Any event that could obstruct the operation of a company (such as higher oil prices, reduction in material availability, and so on) as well as a sudden and unjustified stock price increase is often taken as an indication that a price drop is about to take place. Short-sellers would then go ahead borrowing and selling shares with the intention of rebuying them later as we explained above.

It is important to note that short-selling comes with a higher degree of risk. This is because it involves borrowed money that must be repaid whether your trade is a successful one or not. Also, stock prices could theoretically rise indefinitely which means short sellers face potentially unlimited losses.

Here are 3 good tips for penny stocks trading:

1. Be Thorough with your penny stock research

   The most important aspect of penny forex trading is the research.
   Research and analyze your pick of stocks extensively. Look for companies with solid financials, good management teams, and strong potential for future growth. Keep yourself updated with news, press releases, and industry and company developments that could affect the stock’s performance one way or the other.
   It is only by conducting meticulous research, that you can identify stocks with the potential to offer your well-deserved rewards.

2. Keep an eye on volume and liquidity

   Keep monitoring the average daily trading volume of your penny stock of choice.
   Stocks with low average volumes may experience wider bid-ask spreads, making it quite difficult to execute trades at your target price. Try to avoid illiquid stocks or you might have to hold on to them a little longer than you wish and intend.

3. Stay away from stock with excessive (and dubious) promotional activity

   Be wary of penny stocks that have aggressive promotional campaigns or pump-and-dump schemes. These manipulative tactics can artificially inflate stock prices, making it risky for traders who may get caught up in the hype. Critical evaluation is key here.

If only…

It seems pretty clear that penny forex trading can be a high-risk, high-reward way of doing things. While the lure of potential quick profits may be appealing, it is vital also to consider the risks associated with trading in the penny stock market.

If only there was a way to diversify our portfolio and take advantage of the huge rewards penny stocks are able to offer whilst also minimizing the risk of losing our own money at the same time…

Oh, but wait! There is!

Funded Trades Now For You is currently the only prop firm that allows its traders to dip their fingers in the penny stock and, just as they do for standard stock, they’ll share the profit with you but they will also protect you and your finances from any loss by taking it onto themselves. So you see, traders can still get all of the potentially amazing benefits without running any unnecessary risk.

Penny Stock Trading – Conclusion

The penny stock market is characterized by low-cap companies and low-price shares. This means that the market is easy to manipulate and often it is.

However, it can hardly be called a scam. The participating companies are generally genuine and just trying to grow. With the right mindset, thorough research, a good trading strategy, and a strong partner such as Funded Trades Now For You, it is certainly possible to take advantage of the market’s high volatility and make good good profits.

Really hope this helps.

Trade on, traders!

The post Penny Stock Trading – Scam or Legit? appeared first on Funded Trades Now For You - Stock Trading Prop Firm.

Hey guys, I’m Michael Katz, and I’m here to share some valuable insights on a topic that’s absolutely notorious in the world of trading – risk management. I’ve spent the last 15 years perfecting my risk management strategies. I want to help you understand the crucial role risk management plays in trading, whether you’re just starting out or looking to fine-tune your approach.

Trading as a Business

Before we dive into the charts and discuss specific trades, let’s start by establishing a fundamental principle: trading is akin to running a business. Whether you’re a day trader, swing trader, or a long-term investor, you’re essentially building your own trading business. This business involves various forms of investment and, you guessed it, risk.

Think about it for a moment. When you set up your trading station, you invest in hardware, such as computers and screens, and you pay for an internet connection. These are essential tools for your trading business. But here’s the catch – if the market doesn’t yield returns, you’re risking your investment in these tools.

Furthermore, when you open a trading account, whether it’s worth $10,000, $50,000, or more, you’re committing capital to the markets. This capital is at risk the moment you make your first trade. Before you even click that mouse key to execute a trade, you must understand that you’re risking your money.

Determining Your Risk Tolerance

So, how do you embark on this trading journey with the right mindset? The key is to have an open and honest conversation with yourself, and possibly your spouse, about how much capital you’re willing to invest and, more importantly, how much of it you’re willing to lose.

Let’s say you open an account with $50,000. At what point would you decide that trading might not be for you? When you’ve lost $20,000, $30,000, or $40,000? Knowing your risk tolerance is critical, and it’s a decision you must make before you even make your first trade.

Losses are an integral part of trading; it’s just how the game works. But with the right mentality and preparation, you can better cope with these inevitable losses. The goal is to make more money than you lose, but you must accept that losing is part of the process.

Applying Risk Management Strategies

Now, let’s shift our focus to how you can apply risk management strategies in your day-to-day trading. I’ve developed and refined these strategies over the years, and they form the backbone of our approach at Funded Trades Now For You.

Day Trading, Swing Trading, and Long-Term Investment

First, it’s important to recognize that risk management strategies may vary depending on your trading style. There are three primary trading styles: day trading, swing trading, and long-term investment.

• Day Trading: In day trading, you open and close positions within the same trading day. To apply risk management here, we allocate a daily loss budget. Let’s say you’ve opened an account with $50,000. Out of this, you might decide to risk 3% per day, which amounts to $1,500. This daily loss limit sets the stage for how much you can risk on each trade.
• Swing Trading: Swing trading involves holding positions for a few weeks to a few months. Your risk management approach should be similar but adjusted for a longer timeframe.
• Long-Term Investment: For long-term investments that extend beyond a year, the risk management process is also relevant. You should decide how much you’re willing to lose over the course of a quarter, half a year, or longer and allocate your risk accordingly.

The key is to divide your allocated risk into chunks that you can apply to individual trades.

Allocating Risk to Trades

To apply risk management effectively, you’ll need to determine how much of your daily or long-term loss budget you’re willing to risk on a specific trade. I like to use a scale based on the quality of the setup.

• A+ Setup: When you’re presented with an exceptional trade setup, where all the stars align, you might decide to risk 30% of your daily loss budget. For instance, if you’ve allocated $1,500 for daily losses, you could risk $450 on an A+ setup.
• B+ Setup: In situations where your confidence in the trade is slightly lower, you can reduce your risk. You might opt to risk 10% of your daily loss budget, or $150 in this example.
• Fills and Testing: Sometimes, you’ll enter trades where you’re not entirely sure of the outcome. These can be considered as fills or test trades. In such cases, you might only risk a small portion of your daily loss budget to gauge the market’s response.

Managing Trades

While risk management is crucial, it’s equally important to understand how to manage your trades effectively. This is where you can significantly impact your success as a trader.

For example, you might start a trade by entering a position and then add to it as the trade develops in your favor. However, it’s essential to be strategic about your entries and exits, considering factors such as support and resistance levels and historical data.

In some cases, it may be prudent to take partial profits along the way, especially if the trade is moving in your favor. This can help you secure gains and reduce overall risk.

Progress and Adjustments

As you gain experience and build confidence in your trading abilities, you can consider making adjustments to your risk management approach. If you notice consistent progress and profitability, you might feel comfortable increasing the amount you’re willing to risk per trade or per day.

Remember that risk management is a dynamic process. You can adapt and fine-tune your approach as you gain experience and understanding of the markets.

Risk Management – Conclusion

In conclusion, risk management is a cornerstone of successful trading. It’s the key to ensuring you can weather the inevitable losses and emerge as a profitable trader. Whether you’re a day trader, swing trader, or long-term investor, the principles of risk management apply to all.

So, before you start clicking those mouse keys to make money, sit down, determine your risk tolerance, and allocate your risk according to the quality of each trade setup. Manage your trades effectively and be open to adjusting your approach as you progress in your trading journey.

I hope these insights help you on your path to becoming a successful trader. If you have any questions or want to delve deeper into risk management strategies, feel free to reach out. Trading can be a challenging endeavor, but with the right risk management techniques, you can increase your odds of success.

Remember, trading is not about avoiding losses entirely; it’s about ensuring that your wins outweigh your losses in the end. Good luck, and may your trading journey be a profitable one!

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At Funded Trades Now For You, we always strive to produce articles that can help traders become more and more successful by introducing concepts and techniques that might be new or unclear to some people. We spoke about both fundamental issues such as GDP, Unemployment, the FED, the New Home Sales report, and much more (all of which you can find on our blog page) and different aspects of technical analysis such as candlestick and chart patterns clearly explained in our ebook (and you can also find that on our website).
We intend to carry on in these steps and provide even more value to our traders as we go on because helping traders, both economically and educationally, is excartly what we do!

That being said and with no further ado, let’s talk about today’s topic: Reading the Tape.

What does “reading the tape” mean in trading?

When traders talk about “reading the tape”, they are referring to a technique that involves analyzing and interpreting the information displayed on what is still called a “ticker tape”, which – even in today’s electronic format – represents movements in stock prices and trading volumes in real-time. It does that by displaying a continuous stream of data, including price updates, bid and ask prices, trade volume, and other very relevant information.

When traders “read the tape”, they observe and analyze data to gain a better insight and understanding of current market trends, price movements, and investor sentiment. It’s a matter of looking for patterns, significant price movements, or changes in trading volume that could indicate potential opportunities to meet Mr. Profit.

The three main factors you should look out for when reading the tape.

Price Movements:

Monitor how prices are changing in real-time. Look out for significant increases or decreases, breakouts from key levels, or even reversals.
These price movements can provide you with important indications of market sentiment and potential trading opportunities.

Trading Volume:

Observe the volume of trades taking place. You can get a pretty good idea of the interest level and participation in a particular stock or market.
Unusually high volume could indicate strong buying or selling pressure, potentially signaling a trend continuation in some cases or a reversal in others.

And…

Order Flow:

Pay attention to the bid and ask sizes and prices. You will be better positioned to understand the current market’s supply and demand dynamics.
Large or aggressive orders can indicate institutional buying or selling, which might influence price movements and offer you another chance to meet the same Mr. Profit from earlier.

Five “Tape Reading Tactics” to get you started.

Here are five of the most popular Tape Reading Tactics you can start familiarizing yourself with right now.

“Order Book Analysis” tactic.

Analyze the depth and size of the order book. This can help you identify areas of support and resistance that you can then draw on your chart. Look out for large buy or sell orders (“icebergs”); they often indicate significant buying or selling pressure which could confirm or reverse the current trend.

“Time and Sales Analysis” tactic.

Monitor the time and sales data, which displays real-time trade executions. Analyzing the speed and volume of the trades that you see, can provide you with a very interesting insight into market sentiment and potential short-term price movements.

“Volume Profile Analysis” tactic.

Make a point of examining the volume profile, which shows the trading volume at different price levels over a specified period. This analysis can help you to identify areas on the chart with a high level of trading activity which – again – you can use to determine potential level of support and resistance.

“Level 2 Data Analysis” tactic.

Simply put, the Level 2 Data Analysis tactic consists of analyzing information regarding the bid and ask prices and the order sizes outside of the best bid and ask. You can monitor the level 2 data to identify potential areas of interest, such as heavy buying or selling pressure at specific price levels.

“Tape Reading Pattern” tactic.

Experienced tape readers often develop their own set of patterns based on historical price and order flow data. These patterns may indicate potential reversals, breakouts, or the presence of institutional buying/selling. With time you’ll be able to do that in an expert manner too but, for now, nothing stops you from giving it a go and trying things out.

Could Tape Reading be a good strategy for you?

What do the studies say?

Numerous studies have been conducted on Tape Reading. These studies were mainly aimed at establishing whether Tape Reading offers any actual trading advantages compared to other techniques and strategies and, if so, to whom

It turns out, Tape Reading absolutely does offer numerous benefits. It can put traders in a much better position to “have a real-time feel” for exactly what is going on in the market right whilst it is going on!
Studies on Tape Reading also suggest that it is not a “do-it-all” strategy and that it’s not suitable for everyone. Tape Reading, as powerful as it might be, does come with its limitations (and what doesn’t?).
Interpreting the order flow’, for example, can be a very subjective business as different traders might interpret the same data differently. It can also be very hard, whilst Tape Reading, to distinguish and separate useful signals from the general chaos of random fluctuations.

Another thing that the Reading the Tape studies suggest is that this strategy is way more effective when it’s adopted and used in conjunction with at least another signalling method. Either a technical or a fundamental indicator would be appropriate. It is when different strategies or indicators confirm one another that Reading the Tape provides the best benefits.

Summary

Determining if tape reading is the best form of trading for you involves understanding the nature of tape reading and assessing how it aligns with your trading goals, personality, skill set, and risk tolerance.

Remember, trading is highly individualistic, and what works for one person may not work for another. Exploring different trading strategies and adjusting based on your strengths, preferences, and goals is essential for finding the most suitable approach for you.

Once again, hope this helps.
Trade on, traders!

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Swing trading is a popular trading strategy that involves taking advantage of short-term price movements in stocks. Unlike day traders and long-term investors, swing traders aim to profit by taking advantage of price movements within a few days or even a few weeks.
In the following article, we’ll quickly examine the reasons that so many traders choose swing trading as their favorite style, we’ll explore the main factors to consider in order to swing trade successfully and we’ll explain how swing traders go about picking their stock. So… let’s get started!

Is swing trading right for you?

Before answering questions such as this, it is essential for you to analyze and understand your current trading style. You need to Identify your risk appetite, know your exact time availability, and, most importantly, you need to clarify your goals and objectives.
Even if it’s based on a larger timescale than day trading, swing trading still requires active monitoring of the market, as well as quick decision-making. It is crucial for you to have a clear trading plan and you also must have a specific method on which to base your entry and exit price levels, your stop-loss orders, and your profit targets.
If this is at all similar to what you are already doing then yes, sure, swing trading could be an excellent style of trading for you too.

So why do so many traders choose to swing trade?

Swing trading is a common trading method utilized by many financial market participants. Swing trading allows traders to retain positions for several days to weeks, as opposed to day trading, which compels traders to execute trades inside a single trading day. This is probably the factor number one that makes swing trading so appealing to so many traders but… there is more.

Here are three more great reasons:

Flexibility and Time Commitment

Another reason traders opt for swing trading is the flexibility it provides.
Swing traders aren’t tied to their screens all day and have, therefore, more time for all other things life is made of.
Because swing trading strategies typically involve identifying potential price swings over the space of days, traders often use technical analysis to identify entry and exit points in advance and are then able to let their trades run, making swing trading less demanding in terms of time commitment than day trading.

Lower level of stress

Due to the fast speed and continual decision-making required in day trading, traders often found it more stressful than swing trading which, on the other hand, offers a slower pace trading environment and… more time to think.
Swing traders have more time to study markets and make sound decisions. They can also avoid being negatively impacted by unexpected market movements because they often use stop-loss orders to limit possible losses more often than day traders do.

Better Risk Management

Swing trading offers traders the ability to manage risk more effectively compared to day trading. By holding positions for a longer duration, swing traders typically use wider stop-loss levels and take-profit targets. This allows them to manage and withstand short-term market fluctuations and reduces the probability of being stopped out too early. Furthermore, swing traders can adapt their strategies to changing market conditions, allowing for more dynamic risk management.

How do swing traders go about picking the right stock?

Whilst swing traders use similar techniques as day traders to set their entry and exit points (i.e. technical indicators and oscillators, chart and patterns analysis, etc.), there are differences in the methods they use to pick their stock to trade.

When choosing stock, Swing traders must pay particular attention to these four important factors:

Liquidity level

Liquidity refers to the ease with which you can buy or sell a stock without significantly affecting its price. Or at least, that’s what it means if you are an institutional trader with a huge account. For retail traders, this usually means looking for stocks with a high average trading volume, as this ensures there are enough buyers and sellers in the market and a decent level of volume and volatility.

Price trends analysis

To choose stocks for swing trading, analyze price trends to identify potential opportunities. Technical analysis tools, such as moving averages, support and resistance levels, and chart patterns, can help traders in detecting current and future trends.
Look for stocks that have recently seen high levels of volatility, showing signs of upward or downward momentum and, once your bias is formed, use technical and fundamental analysis to set your entry and exit points.

Volatility level

Volatility is a crucial aspect of swing trading. Higher volatility indicates larger price swings, which can offer more significant profit potential. However, higher volatility also implies increased risk. Stocks with significant news, earnings releases, or events scheduled in the near future, tend to be more volatile than others. Consider the volatility of a stock based on historical price movements and news flow to select the suitable ones for your swing trading.

Market News

Keep up to date on market news, economic data, and company-specific events. News and events can have a big impact on the price of a company, generating chances for swing traders. Follow financial news websites, study corporate earnings reports, and keep an eye out for macroeconomic issues that may influence market direction. Being current on market knowledge will allow you to make more informed selections when choosing stocks for swing trading.

Swing Trading Conclusion

If you want to trade stock as a swing trader, you must remember that it requires a combination of technical and fundamental analysis, market trend evaluation, risk management, and being always up to date on market news.
By following the concept described in this article, you will be better equipped to spot potential swing trading opportunities and make informed decisions.

Remember that practice, patience, and continual learning are essential for success in swing trading and all other types of trading.

Hope this helps
Trade on!

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Do you ever have the feeling of being the constant target of “smart money stop orders hunting”?
Well, you are not alone, and the answer more and more traders are pointing to is ICT concepts.

The Inner Circle Trading philosophy has created what is now grown to become one of the most popular trading strategies around.

Unlike more traditional strategies, ICT disregards any momentum or trend indicators (other than those directly derived by price action), focusing instead solely on price action. It was originally created by Michael Huddleston to trade the Forex market but traders are using the same strategies to make profit in all and any market they trade.

In this article, we’ll explore the seven most important concepts this trading philosophy is based upon so that you, as a trader, can evaluate its potential.

ICT. If you haven’t heard of it before, you have now.
Let’s go!

The ICT Methodology

The ICT methodology relies on chart technical analysis and is based on the belief that – by analyzing price action, levels of support and resistance, as well as order blocks – it is possible, in some measure, to identify the specific areas with the greatest concentration of liquidity and therefore, to predict new trends.

ICT methodology and techniques mostly rest on seven key concepts: Liquidity, Displacement, Market Structure Shift, Inducement, Fair Value Gap, Optimal Trade Entry, and Balanced Price Range.

Let’s now take a look at each of these concepts.

 Liquidity

The first and certainly most fundamental concept in the ICT trading methodology is liquidity.
Liquidity comes in two forms: buy-side and sell-side.
The area on the chart where short-selling traders are most likely to place their stop orders is identified as the Buy-Side Liquidity. On the other hand, the opposite is also true of Sell-Side Liquidity which identifies an area where the bullish traders’ stop orders are instead concentrated.
Both the Buy-side and the Sell-side Liquidity are normally found towards the extreme of price volatility ranges – near the tops and bottoms of price patterns – because this, usually, is where most retail traders set their stop-loss orders or decide to close their positions.
The liquidity concept is the most vital part of the ICT methodology because – maybe somewhat more than the others, it attempts to mimic Smart Money’s trading behavior.

By setting their orders at levels with a high number of Retail Traders’ stop-loss orders, Smart Money has a higher probability of getting its orders fulfilled. And being able to predict what Smart Money is going to do next, gives ICT traders an insight into the upcoming trend.

Displacement

Displacement is a strong and sudden move in price either up or down that, on a chart, normally appears as a group of consecutive long candles with small wicks moving in the same direction.

There are two important things to remember about Displacement, according to ICT. The first is that a Displacement usually represents a sudden but powerful increase in buying or selling pressure and that this often occurs when price has reached a Liquidity level.

The second is that a Displacement almost always causes the creation of two things: a  Market Structure Shift and a Fair Value Gap.

Market Structure Shift

By “Market Structure Shift”, ICT traders refer to the point on a chart where the current trend is broken. In other words, it’s the lowest point of a lower low after a series of higher highs and higher lows (in a bullish trend) or the highest point of a higher high that follows a series of lower lows and lower highs.
ICT traders see a Market Structure Shift as the first indicator of a trend change and, if this is confirmed, will often use this point in the chart as the base for their trades.

Inducement

Inducements are found at the extremes of mini-counter-trends within a larger-scale trend. ICT traders consider these movements to be caused by stop-loss hunting actions on lower time frames by – you guessed it – Smart Money.

ICT traders base their trades on the belief that once an Inducement level is reached and the extra liquidity has entered the market, price will then reverse again and continue on its original trend.

Fair Value Gap

More often than not, when a Liquidity level has been breached and the trend has reversed, we are presented with what appears as a “gap” on our charts and this is what ICT traders referred to as a Fair Value Gap.

More specifically, a Fair Value Gap comes in the form of a sequence of three candles with a larger one at the center and a gap between its wicks and those of the adjacent candles.
Fair Value Gaps have the tendency to get filled sometime in the future and this is the very concept ICT traders take advantage of when setting their orders.

Optimal Trade Entry

Once an Inducement has created a Displacement and this, in turn, has created a Market Structure Shift and a Fair Value Gap, ICT traders use Fibonacci levels to identify their Optimal Trade Entry point before executing their trades. Normally Optimal Trade Entry points are found between the 61.8% and 78.6% retracement of an expansion range.

Balanced Price Range

A Balance Price Range is a double Fair Value Gap created by two Displacements of opposite directions in a short period of time.

During a Balance Price Range price often oscillates in range testing and retesting the extremes in both directions in its attempt to fill both Fair Value Gaps. ICT traders aim to trade from this volatility as well as from the belief that price is likely to continue its original trend once the extremes of the Balance Price Range are breached.

Conclusion

The ICT methodology is becoming more and more popular because it seems to be able to give Retail Traders some of the advantages enjoyed by the hands and the minds behind Smart Money.

Remember

These are just seven of the most important ICT concepts; there is much more to learn about ICT as well as about forex trading in general. Keep researching, keep learning, keep following our blog, and keep bringing in those pips!

The post The seven ICT concepts you oughta learn to trade with the big league appeared first on Funded Trades Now For You - Stock Trading Prop Firm.

In a fast-paced and dynamic environment such as the world of financial trading, success, and failure are often determined by a combination of knowledge and skills as well as a diligent analysis of one’s own trading habits. It is in fact for the latter that a trading journal can be an important tool that can greatly contribute to a trader’s success.

In this article, we’ll discover what a trading journal is as well as explore the importance of maintaining one and how it can dramatically improve a trader’s decision-making process, improve performance, and help build a long-term profitable trading career.

Why keep a trading journal at all?

Richard Kent – professor emeritus at Maines’ College of Education and Human Development – once wrote:

“A journal provides an athlete with a place to set goals, reflect, grapple with issues, keep track of training ideas, and record results as well as plan, scheme, ponder, rant, question, draw, and rejoice”.

Whilst the Professor was clearly referring to sports, the same can be said about any performance-based profession or activity, and that, of course, includes trading.

Many successful financial traders keep journals to document their trading activities, strategies, and personal reflections.

Some of the traders known for their journaling practices include names you might have heard before.

Jesse Livermore, a speculator from the early 20th century, believed in the importance of keeping detailed records of his trades. He documented all his wins, losses, and market observations in his journal.

Ed Seykota, a pioneer of computer-based trading systems, suggested all traders should keep a trading diary to “track emotions, market conditions, and important lessons learned”.

Paul Tudor Jones, a billionaire hedge fund manager, is known -amongst other things – for his disciplined approach to trading. He uses daily journaling to record market analysis, trading circumstances, and all his personal insights.

Remember, keeping a trading journal is a personal habit that can benefit traders of any level, not just the famous ones.

What is a trading journal and how does it help?

A trading journal is a detailed record of trades, the reasoning behind each of them, strategies, emotions, and lessons learned.

Trading Journals come in many forms; from the simplest spreadsheet to the most complex software on the market, traders will find (or create) the format that they are most comfortable using and the one that works best with their own method of trading.

Here are some of the many reasons traders (experts, professionals, and beginners alike) choose to keep a trading journal:

1. Records and Evaluation:

   Keeping a trading journal allows traders to maintain a full and complete record of all the trades they have opened and closed. By recording entries, exits, position sizes, and other relevant details, traders can then review and analyze their trading decisions objectively at a later time (and, possibly, with a cooler head). This can help to recognize and identify patterns, the trader’s strengths, weaknesses, and areas for improvement.

   Analyzing past trades is very important and extremely useful in improving or resting new strategies by taking data-based decisions rather than intuition or “gut feeling”.

2. Self-Reflection and Emotional Discipline:

   Trading can evoke a range of emotions such as fear, greed, frustration, and impulsiveness. A trading journal allows individuals to reflect on their emotional state before, during, and after each trade. By recording emotions and thoughts, traders can objectively assess their psychological biases and tendencies, identify patterns of behavior, and make necessary adjustments. This self-reflection process enables traders to develop emotional discipline, helping them make more rational and controlled decisions even in stressful market conditions.

3. Learning and Improvement:

   The trading journal serves as a valuable learning tool. It provides traders with a platform to document lessons learned from both the winning and the losing trades. By constantly reviewing past trades, traders can identify what worked and what didn’t, allowing them to refine and tune their strategies and avoid repeating mistakes over and over.

   The journal acts as a guide for traders to continually learn from their experiences, successes, failures, and great ideas as well as their mistakes so that they can refine their trading plans, and evolve their skills over time.

4. Risk and Money Management:

   As everyone knows (hopefully), effective risk and money management are crucial factors for successful trading. A trading journal allows traders to review and analyze their risk management strategies, including position sizing, take-profit stop-loss levels, and overall risk/reward ratios.

   By tracking their money management strategy through their own records, traders can identify any deviations or mistakes made in managing risk and apply the necessary adjustments to ensure optimal risk management practices thereafter.

5. Accountability and Consistency:

   A trading journal can also hold traders accountable for their decisions and actions, motivating and incentivizing consistency in their trading approach.
   Consistency is the key to developing a good trading discipline, refining strategies, and creating a solid trading plan.
   A trading journal often reinforces the trader’s commitment to their goals, helps them monitor progress, and highlights areas of weakness that require improvement.

   Being accountable (even if just to oneself) can drastically improve decision-making and creates fertile ground for a proactive commitment to achieving long-term success in the trading markets.

Is it better to make our own trading journal or use any of the software available ready-made?

Any trading journal, whether it is made using the good old pen and paper, a simple Excel document, or trading journal software, is bound to improve your trading results by at least some measure but… which is better?

Gone are the days when traders had to rely on a self-made spreadsheet able to hold only a handful of details and information about each trade. Sure, a self-made trading journal is still very useful but – to put it frankly – nowadays, we can get a much better and more all-rounder journal than any we could make ourselves AND… without the effort, of course!

Many Companies now produce and offer ready-made trading journals that traders can start using right away. They come in different forms and with many different features and are structured in a way that makes it easy to review and examine past trades and performances.

According to stocktrader.com, the best of such software currently are:
TraderSync: “Best overall trading journal”.*
Traderview: “Great for professionals, steep learning curve”.
Trademetria: “Simple design”.

Remember:

The Trading Journal is one of the most undervalued and underutilized tools at a trader’s disposal but it’s also amongst the most useful. It offers an immediate way to analyze trading habits, past mistakes, successes, patterns, and motivations and to learn from it all.

* Also, remember that you can get your very own TraderSync trader Journal when you Join Funded Trades Now For You!

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Introduction

We’ve been waiting and fantasizing about it for generations. Hundreds of sci-fi books, images, and movies have done nothing but boost our curiosity, eagerness, and impatience for a technological leap that wasn’t just new, useful, and exciting but also revolutionary.

The World is now so used to and reliant on the internet and the vast array of smartphones, smart TVs, smart homes, and smart everything to make the average American feel outsmarted by his own (smart) fridge. News of technological progress in science, medicine, engineering, entertainment, communication, and energy all feel new and important but maybe not quite revolutionary in the “BIG sense”.

Well, this might be different.
There is something about Generative AI that is seducing people and companies across the world into believing the technology to be absolutely all-changing.

In the following article, we’ll learn a bit more about Generative AI technology and we’ll find out:

• What it is
• Who is creating it, improving it, and investing the most in it
• The companies’ stocks that could represent the best opportunities for investing in AI technology.

Times have changed

I’m writing after growing up as a teenager in a generation that was confident that, by the year 2000, it would have seen people using electric flying cars to commute to work and humanoid robots doing all the house chores, babysitting the kids, going out for grocery shopping while also taking the dog for a walk and… (well… a lot of other things only a teenager could think of).

Yes, sure, some of the expectations have been let down so far (although definitely not for a lack of trying). Yet, it can hardly be denied that the 21st century is a highly technological one. Everyday life would seem almost impossible without the technology and gadgets that were not at all common just 30 years ago (if they even existed). Medicine, science, military, entertainment, information, education, energy, personal care,  design, architecture, manufacturing, food processing, construction, and sport have all been massively affected by technological discoveries, inventions, and applications. In fact, it would be impossible to name an industry or aspect of life that hasn’t.
No, I won’t see any flying cars if I look out of my window but if I look back instead, I can see and wonder at how far we’ve come.

A.I. (Artificial Intelligence)

For decades, ultra-sharp minds and well-founded companies have worked both in front and behind the scenes, and theirs is a success story that continues and will continue in the future.
We all learned to get used to the presence of AI technology in different aspects of our lives. Chatbots, for example, have become the norm in most internet websites’ help and support pages as well as on all search engines. It’s enough for us to start typing the beginning of a sentence, for the AI to be able not just to predict the rest of it but also to offer alternative possibilities.
This type of A.I. works by elaborating the always-growing amount of data entered by the programmers (just as any computer) added to the ability to “learn” new data by interacting with creators and users alike. A.I.

AI is able to learn and recognize our favorite music or movie genres based on what we usually listen to and watch. It’s also able to suggest other songs and movies that we might like. It learns which products and services we are most likely to be interested in and presents us (bombard us, more like) with specifically targeted advertisements.
One type of AI – the Conversational A.I. – is now very commonly used in gadgets such as Amazon’s Alexa, Apple’s Siri, and Google’s Google Assistant. It recognizes our voice and understands our words which allows it to comply with verbal instructions given to it.
But apart from the mundane, AI is also used to suggest probable diagnoses for patients in hospitals, to predict and anticipate enemies’ missiles’ trajectory on the battlefield, and also for things such as recommending the most appropriate spot to build a school in urban architecture.
The applications for AI are, in other words, countless and companies are still discovering and creating even more.

It is the ability to learn from new interactions and to use the information learned that, only a few years ago, made AI technology new and different and that allowed it to be incorporated in pretty much every aspect, industry, and sector of the market.

Generative AI though… is on a new level altogether!

What is Generative AI?

Generative AI is the newest leap in AI technology.
Where AI has the incredible ability to “improve” itself and its original programming through learning, Generative AI is capable of generating new data by recognizing patterns in existing data. In other words, Generative AI doesn’t just learn new data, it creates it.

In November last year, Open AI, one of the major players in the AI technology market, launched its newest (and world-first) Generative AI algorithm, ChatGPT, and the World felt immediately a little different.

It was left to ChatGPT – the AI – to introduce itself and explain its potential applications to the public and this is what it said of itself:

“Ready to take your creativity to the next level? Look no further than generative AI! This nifty form of machine learning allows computers to generate all sorts of new and exciting content, from music and art to entire virtual worlds. And it’s not just for fun—generative AI has plenty of practical uses too, like creating new product designs and optimizing business processes. So why wait? Unleash the power of generative AI and see what amazing creations you can come up with!”

Generative AI algorithms are now able to create original music and painting. They are able to artistically illustrate things described to them verbally. They can write novels and make movies. NetDragon, a Chinese video game firm has even made a Generative AI called Tang-Yu its CEO with the task of supporting decision-making across the company (and by the way, the Company share price went to the roof as soon as the news was released).

There is certainly a great deal of speculation about the future effect of Generative AI in the labor market and creative arts but we shall leave that discussion for another day. For now, we’ll focus on making the best of the investment and trading opportunities that Gerative AI technology can offer to us today.

Trading and Investing in AI technology

Currently, it is OpenAI that sits comfortably at the top of the artificial intelligence technology chain. Its InstructGTP, ChatGTP, and Dall- E2 algorithms have completely changed the rules of the game and the pace of the race.

OpenAI is an American artificial intelligence research laboratory founded in 2015 by Elon Musk, Ilia Sutskever, Greg Brockman, and Sam Altman with the declared intention of promoting and developing a friendly AI. It is a private company with no stock traded on the open market. It’s not possible to invest in OpenAI but a possible future IPO is definitely something to look forward to.

Not to worry though, for traders and investors interested in investing in ai technology, the opportunities are plenty for there are a number of other large companies that are working in and are heavily invested in AI.

These, for example, are all well-known companies in the US, that are running and investing in new Generative AI technologies (…whilst also doing what they are so well known for, of course):

Microsoft

Microsoft is directly involved in a partnership with OpenAI itself; a partnership in which it invested billions of dollars.
The company has helped OpenAI develop ChatGPT and has already incorporated AI into its search engine Bing, its internet browser Edge, and its flagship-software Microsoft Office 365.

Google

In 2022, Google’s Generative AI algorithm, LaMDA LLM, went as far as to convince an engineer of being sentient. He then went and exposed the fact online, naturally, creating much controversy and debate.
Google Cloud has also launched Generative AI products that offer its customers the ability to create GenApps (Generative AI applications).

Amazon

Alexa and Amazon Lex have given testimony to Amazon’s interest (and huge investment) in AI and now, eager not to be left behind in the Generative AI technology race, it has partnered with Hugging Face, a startup working on creating a worthy ChatGpt’s rival.

Meta

Meta has been directly working and investing in AI for at least 10 years with its attention more focused on finding possible applications than on creating and improving the technology itself. However, Meta did create LLaMA, a new set of foundation language models for AI.

XAI Corp

After co-founding OpenAI, Elon Musk has decided to found a new startup called XAI Corp with the primary intention of creating a new alternative to Chat GPT after complaining that AI technology is being programmed to be overly politically correct.

Conclusion

Ever since OpenAI’s ChatGpt was released, it seems, any company with AI on either its name or its mission statement, has seen its stock rise.

Some traders are already talking about a dot-com-style bubble. Some are looking forward to what they call “a once-in-a-generation opportunity”. Whatever you decide to do and whatever direction you decide to take, remember to do your own research first.

May the odds be in your favor.

Hope this helps.

Join Funded Trades Now For You now to trade the best ai technology involved stocks

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