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The following guest post is courtesy of Jens Chrzanowski, Member of the Management Board of Admiral Markets Group AS.
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The talk of the town, or at least the talk of traders’ town, is clearly about cryptocurrencies these days – especially the BIG FOUR – Bitcoin, Ether, Litecoin, and Ripple. Everyone is into buying or trading them, which you can now do with Admiral Markets!
The sky seems to be the only limit for cryptocurrencies. Is that an indication of a bubble? Well, one thing’s for sure, a 300% increase in price in just 12 months would be considered fantastic… but 5,000% growth is simply too good to be true! That’s what really happened recently when the price of Ether skyrocketed to its all time high (so far). But, the question remains – will the price continue to rise or, is it a bubble about to burst?
Like most bubbles, we’ll only know that it is one when it bursts. If it is a bubble, the remaining question is – when will it burst? The value of cryptocurrencies may continue to increase for a year or two, perhaps. A trader is looking for moves, up and down, and doesn’t appreciate stagnation. So, if you like trading and price fluctuations are your thing, why worry about potential bubbles? Even a 100% increase in price could make you believe in the existence of a bubble and think about dropping out of long-term investments. If you’ve done so in the past, it’s likely shown you that you missed the ongoing trend of an additional 200%.
I believe that any trader of leveraged products should focus on the right timing – when to trade, how long to hold a position, and when to close with a Stop-Loss order if the trade isn’t successful. The Take-Profit order is also dependent on time, if you’re to realise its potential.
The bubble question is less important if you see a bubble as a kind of supplier of movement. For standard and long-term investments, a potential bubble could be different. One way or another, it’s all about time. Timing is everything!
See you next week.
Feedback, concerns, requests, likes? Contact me via: [email protected].
Trading on margin carries a high level of risk, and this article should not be seen as advice or solicitation to buy or sell, but written for informational purposes.