Stock Market Index
The CAC40 makes +3%. The SP500 is down 5%.
OK, but what is the SP500 and the CAC40? They are stock market indexes.
A stock market index is a numerical measure of a group of stocks merged together.
Stock indixes are a summary of the value of the stocks they represent. The movements of the index is a good approximation of the changing value of the stocks included in the portfolio over time. There are different methodologies for calculating indexes, depending on the weighting given to the stocks in the basket
This measure is used to monitor the performance of the indicated group of stocks more quickly. In fact, the change in the unit of measurement gives a rough indication of the performance of the market we are monitoring or in which we have invested. In reality the number itself that we see does not indicate much in general and can be taken as a pure point of reference in certain analyses, but what we are interested in is the percentage of movement.
Indices are many and can represent the stocks of a country or a geographic area or an industry sector and investing directly in the index is feasible to get a return from the market.
Some indexes are among the best representations of a country's industrial performance, such as the SP500 for the united states
In contrast, some other list is not as representative because of the characteristics of the country's industrialization in particular. This characteristic can be applied to other countries that are affected by the same of type of industrialization or other types of economies that are more skewed toward particular sectors, such as banking or tourism.
To get a return from these markets you can buy index funds, which is equivalent to buying the total index. Sometimes it does not make sense to buy the individual stock but rather the total sector or country.
An index fund can be a mutual fund or etf that copies the stock composition of the index, this makes the investor, with this product, follow the market trend.
Of course we should not buy random things on the wave of enthusiasm, before we buy a basket we have to make sure what is in that 'index and understand its exposure. If we buy a technology index we will be exposed to all the risks of that sector, whereas if we focus on the Indian index, we will also be exposed to its country risk.
Then we have to consider how these indexes are created and how the various stocks within it are weighted.
What is a stock?
When we hear about financial markets and stock values on the news, we often pay attention only to the numbers and percentages, marveling at vigorous rises or destructive falls, but what do these numbers refer to when it comes to stocks?
What are stocks?
A stock, in finance, is a financial security representing a share in the ownership of a corporation. is a financial asset representing a percentage of ownership of a company.
So, as explained in the article on IPOs, companies sell their shares to recover funds. Kind of like what is done with bonds, but there are major differences. The only part in common is the need to drain funds for the company.
Since a stock indicates ownership of a piece of the company represented, the percentage you own depends on the number of those specific stocks you have in your portfolio.
the basic idea is quite simple
at the end of the year or at the close of the fiscal year, the money the company has made, after all expenses have been removed, is owned by the shareholders. These profits have to trickle down to the holders and have only two paths, dividends and capital growth
Assuming a profit of 10 million in the year just ended, the company may decide to split this figure in half. 5 million is distributed through dividends to shareholders while the other 5 million is reinvested into the company.
the company with this money can develop a new product or cheaper methods of production. this should lead to creating more profitability in the company and this has an effect on the price of the individual share, driving it up in price and allowing the small investor to sell it at a higher price.
Obviously as is easy to understand , having a preponderant amount of stock allows you to have a say in what the company does, being able to direct money management decisions. Shareholders must be happy.
Like any business sector, there are companies that are more or less solid and behave differently depending on the period. A health care company is different from one that makes cell phone apps.
Geographic location is also important, as a Western company will behave differently from one in a developing country.
Then there are two big definitions for stocks, namely growth stocks and value stocks
Growth stocks are stocks of young and small companies that have greater potential to grow in the future.
So-called value stocks are of established companies that have a history behind them and generally pay large dividends to shareholders.
Stock dividends are not to be considered the same as bond yields. In fact, dividends are a choice of the company to give money to its shareholders and not an obligation as in the case of bonds, an obligation that if not met leads to the default of the issuer.
Let's make it a million euros!
Let's make it a million euros! Or dollar if you prefer!
Everyone wants money, everyone wants million dollars accounts, everyone wants Lamborghinis and yachts full of happy and nice young ladies. Well almost everyone, maybe the girls don't. I dont know.
Anyway back to reality, how do you build a million dollars account?
Let's try to create a list of ideas to reach our goal. Let's start dreaming with a look at the practical side.
Boom!!! We win the lottery!!!!
Or no...
First we need to do the math. If we work we need to see how soon we can reach this figure with the earnings from our job, obviously taking out taxes, expenses, mortgage, vacation, etc.
If we don't work, well we'd better look for a job first.
After that we have to find a way to grow our money in the bank, so we have to start investing. But before investing, we need to study.
So let's read all the CyMood articles and watch all the videos.
Now that we are less stupid we can start putting some money in the market. And now comes the hardest part.
We have to change our mindset, we have to operate on our emotional side. We have to accept that there will be painful losses, financially speaking. We have to understand that we will experience bad times when our investments will be into the negative zone, written on our screen in a blood red color.
But here we will have to believe in ourselves and see ourselves in a much better future than we have now. This vision serves to stimulate and push us to do better and not let us get depressed.
We tell ourselves a little lie, only to fool our brain to push us where we want to go. It is something difficult and uncomfortable for us but it has to be done.
The emotional part is the most difficult side. You may know the theory just fine, but your actions will always be driven by panic, greed and fear of losing your money. You must make sure that these emotions are kept silent in your soul in order to approach problems without emotions. Turning big problems into smaller ones.
Emotion will kill your trading account.
And always remember to use stop losses.
Another element that must never be lacking is Patience.
Patience is the basis for everything. Wanting everything right away is useless,as well as impossible.
Studying is fundamental, giving yourself time to learn is the basement of success.
Patience and study create a tool that is fundamental. The ability to adapt. Capacity that is given by the perception of the market and what goes around it.
You cannot expect to make money if you do not understand the environment in which you operate.
Adapting therefore means improving yourself. And improving yourself is another key element. The more you grow, the more capable and good you will be.
After that you will have to be judicious and disciplined. Discipline will help you through all your phases, from the best to the worst.
You will also need luck. It is undeniable, but often what others call luck is really just the result of a lot of hard, stressful work done behind the scenes to make sure you are in the right place at the right time. Remember that you see the road you have traveled, while others see only the end result.
The road you have traveled is the real goal. Not the money.
You have come a long way, changed for the better, and developed skills and knowledge that you did not have before. The money is the logical consequence.
The downside of blockchain
By now we understand, the blockchain is a public ledger. So it's a ledger that everybody can look at, if they know how.
So it's a list of who owns what. Even if pseudonymous as Bitcoin, with a KYC within the network, I can know that my neighbor has a significant amount of money or not.
With normal bank accounts this does not happen, we do not know how much our precendent neighbor owns unless he tells us himself or someone lets us know. Not to mention possible hacks of the bank's databases, which should not happen.
Let us start with a basic principle, it is not smart to tell to everybody about our possessions. Whether you are talking about cryptocurrencies or fiat currency accounts. My preference is to always be on a low profile, without flaunting one's possibilities even if they are limited. The personal safety factor should always be understood and considered. There are times and places to flaunt one's favorite Rolex.
The blockchain, unfortunately, as it was conceived and created, has a big privacy problem, which in the coming years will absolutely have to be addressed and solved.
What is a blockchain? Learn more here.
FOMO
FOMOOOOOOOOOOOOOOOO
What does this word mean?
Today we're going to explain a term that you surely read often, but that also has a deep meaning in the psychology of every trader.
FOMO means fear of missing out, and we could translate it as fear of having missed an opportunity, sometimes unrepeatable.
We can also see it as a social anxiety for having missed an interesting and very profitable investment train.
Fomo is one of the many biases working against you.
This feeling that you will feel deep inside will be a mixture of discouragement, anger towards yourself and frenzy to jump on the market without ifs and buts, without thinking and without having any regard to money management.
It's a feeling that is present especially now in the social media era, thank to the continuous updating of what other people are doing, the lifestyle that the social media of certain characters are selling us and their wealth.
You see on twitter and instagram unknown kids becoming millionaires overnight, driving around Dubai sitting in bentleys and surrounded by fabulous models, all accompanied by articles and pictures of their bank accounts at various zeroes.
And you're in your bedroom, in your underwear, guzzling a cola. It's obvious that you want to do what they do and have their lifestyle.
However, this emotion of envy you're feeling leads you to follow some advice that could be bad for your wallet.
Right now you're susceptible to those articles in blogs with titles like "the 5 coins you can't not have in your portfolio" or "XX's untameable growth" or "expected 200% return with YY".
To which we have to add all the messages that you read in the various chats, which promote things never heard that in most cases are scams.
And then you enter in the optics that "now or never" on some unknown coin, you buy it exaggerating and you throw away all your past gains.
You don't have to do that, it's not a competition and you don't have to buy things that in a normal situation you would have never bought.
And on top of that you are left with the anger of having thrown money away and you can only take it out on yourself.
This is why we talk so often about managing emotions and anxiety.
If you had stopped to think, none of this would have happened or you would have allocated a much smaller amount.
You've gone overboard with your level of risk
Now let's face it, social media are fake.
They are a mirror of what we would like to be and that we somehow make others see. But that we are not.
When we see these millionaire kids, their success is exaggerated to sell you one of their products.
Most of the successes of those we follow on social are exaggerated narratives.
The cars, jewelry and private planes are definitely rentals and the incredible models are only friends of their cousin or prostitutes.
None of these champions talk about their mistakes and losses but all they talk about are the victories and the fantastic billions they are making. Some even get paid to foment fomo or to sell scams or useless courses or useless books.
Now back to us, generally the rule to earn is buy low and sell high, which is very logical but in most cases if a stock is low, mentally evaluate the situation as negative, if it is high it is positive and you think it will go up again.
This is possible, but what if the uptrend is over?
If everyone is rushing to buy Ethereum after a 200 percent rise, you are compromising your risk level just because you are following the crowd, you are following the hype.
And the hype is the enemy
You're acting on the urgency to do something and that's not good because as you know deep down, returns are not guaranteed.
The fomo, the frenzy doesn't make you think rationally and doesn't deepen what you're putting your money on.
If you get caught up in the frenzy to buy after you've seen a post on some social, stop for a moment and think
who is making the post on social networks? Is he a serious and reliable person, is he an idiot?
Is he someone who knows something about it or is he a bum with no experience at all?
These questions can stop you from making some careless purchases.
And always remember that limited time windows in most cases hide nasty surprises.
I don't doubt that some of the axles being touted could be the new Tesla, but being cautious is always best.
You might feel like an idiot for missing an opportunity or will you be an idiot for losing all your money?
Keep calm and study.
Bitcoin halving in May 2020
The bitcoin halving is an event that occurs every about 4 years and halves the remuneration of closing a block of the Bitcoin blockchain. It is one of the main features of bitcoin monetary management.
In order to better understand what we are talking about, however, we must review 3 fundamental points which are:
Bitcoin blockchain
Mining
And the total supply of money
Talking about the BlockChain, it is a live record of all bitcoin transactions. The blocks are made up of the transactions within them, and the blocks are linked together in an indissoluble way.
The block is created when a defined number of transactions are made and the block can contain a maximum number of that transactions. Reaching this number, the block is closed and added to the block previously mined and linked to it.
When a Bitcoin transaction occurs, the data is communicated to the network of computers that validate the transaction, add the transaction to the bitcoin ledger and transfer the ledger change to all computers on the network. Since there is a maximum of data that can be saved in a block, a block is closed approximately every 10 minutes
Mining is how transactions are verified within the coin network. The verification and creation of the blocks is created by the miners. Each group of transactions has a cryptographic hash of the previously published block and this connects all to the previously created blocks creating the blockchain. To accept a new block on the network, miners are required to follow a proof of work system that involves the creation of a new cryptographic hash to add to the new block. To be added to the register requires the creation of a new single hash which will go through a validation process and then will be passed to the next block and so on. To create a new hash, miners compete with each other using the computing power of their computers to be the first to have the 64 digit hexadecimal number or hash that is at the same target difficulty level as the network.
The thing to understand is that the miners are remunerated at the closing of each new block with new bitcoins created by the system and by the transaction fees, which are already circulating btc. The rewards are created to incentivize miners to participate in the bitcoin blockchain.
Learn more about Mining here..
The amount of money.
Bitcoin was created as digital gold. Satoshi deliberately created bitcoin with characteristics similar to the physical gold. The principle of mining bitcoin is similar to gold mining, which is long and difficult. Another feature is the maximum amount of bitcoins that can be created which has been programmed to be 21 million. This number was created to copy the inflationary stability of gold. In this case, the term inflation is used for the growth of the amount of money that is not covered by gold in a gold standard.
In the modern way of understanding the term inflation, bitcoin is deflationary because his purchasing power grows over time. Compare it to the gold extraction profile where in the future the cost of extraction will be increasingly higher and more difficult and therefore the previous quantity of gold extracted will increase in value because no more can be produced at low prices.
In the old concept of inflation, bitcoin is inflationary because, not being covered by gold, the quantity of bitcoin grows as the creation of blocks by miners increases. There are now 18 million in circulation. At the current rate, the last bitcoin will be created in 2140
Let's go into the halving detail
The halving referred to the bitcoin blockchain is the reduction of the closing reward of a block for miners to half the previous number. The current reward is 6.25 bitcoins per block.
The halving takes place every 210,000 closed blocks and therefore more or less every 4 years since a block is closed every 10 minutes. Initially, the block reward was 50 bitcoins, which dropped to 25 in 2012 and then 12.5 in 2016
But why does halving happen? Satoshi planned halving to lower bitcoin monetary inflation. In addition, the technological advancement factor of mining machines is also considered and for this there is an increase in the difficulty of creating new blocks to lower the validation speed.
With 12.5 bitcoins per block and 10 minutes of build per block, around 1,800 bitcoins are created daily. After May 2020 these dropped to 900 bitcoins per day.
Now returning to the previous parallel with gold.
It is considered one of the best stores of value due to the fixed presence and its scarcity which is imposed by nature.
The bitcoin algorithm is created to make it scarce. So as the demand for bitcoin grows, the value will grow. There have been major rises in btc prices months after each halving, but this is a trading strategy that you may or may not consider.
Bitcoin as it is created in its algorithm, is made to be scarce and therefore grow in value as long as people like you and me believe in its intrinsic philosophy.
Monero
Today we are explore a crypto coin that works really good on privacy.
Let's talk about Monero.
Monero is considered a Private decentralized crypto currency, a decentralized coin that bases its story on privacy and not on anonymity.
It is necessary to define these two different concepts.
The concept of Privacy in cryptocurrencies is based on the fact that you as a user do not want other subjects to know what you are doing. The action you do must be unknown, but the identity of the person who performs it is public.
In the other side, anonymity means that it doesn't matter if other users know what we're doing, but these users don't know who is doing these actions. In this case we have Public Actions and Unknown Identities.
If we take for example the most famous cryptocurrency in the world, namely Bitcoin, we would discover that it is not private. The actions made by users are Totally visible on the blockchain but the identities are anonymous. In reality partially anonymous, or rather pseudonym.
Monero, on the other hand, is a private crypto that does not expose who sends money, how much it sends and to whom.
The transactions are traceable and the subjects who benefit from them cannot be indicated. It is not possible to understand who the transaction started from or connect them with others.
The first thought of all very often is that with such coins, only Criminals can benefit from it. But that's absolutely not true.
Monero was created for those who want to maintain their personal privacy and security, for those who do not want to be tracked by the big data of the big companies of the internet age in their routine behaviors.
Monero is also a great way to Cover the presence of a large personal btc build-up that could be attacked.
Monero has a possible use also for market predictions.
If we knew the addresses of the exchanges, we could monitor the quantities of coins entering and leaving these addresses, using this information to create long or short strategies based on our analysis.
Monero then solves the question of the fungibility of a traceable currency.
Each coin or cash note, in the real world, is the same as the other and must not be of interest to you where it comes from. We know from many newspaper articles that some of the bills we handle to buy bread may contain traces of drugs or have been used to buy other illegal materials.
However, in the bitcoin blockchain you can trace the path of each coin since its creation, so it could happen that some government agency knocks on your door in case of some investigation. All this is pure abstraction but who knows, in theory it can happen and that is why virgin bitcoins exist
A completely private coin like Monero has a complete fungibility like the 50 euro just out of the ATM and does not have this problem.
The difference between other private coins such as Zcash and Dash is that these offer the option of private transactions while Monero only offers private transactions.
The monero protocol works by obfuscating the three parts of the transaction. So Who sends, who receives and the total amount of the transaction
The system is created to obscure those who send money via a system called ring signatures. whoever makes a transaction has their signature mixed with signatures of previous transactions, creating confusion and the inability to trace the starting address of the transaction.
The amount sent is obfuscated through the Ring C T or Ring Confidential Transaction, where the sender sends only a small piece of information and this is enough to verify that the amount is legitimate. I will not go into the technical details as they are very complicated, but you can find everything on the official website of monero.
The recipient of the transaction is protected by the so-called Stealth Adress, in fact when it is sent to a public address, in reality I am sending to another address of unique use that is derived from my public address.
This creates a separation between addresses and only my private key will be able to use the funds sent to my address
Monero is a Proof of work blockchain and CryptoNight is its algorithm
Monero can still be mined not only from very powerful PCs but from PCs of normal use and there is no limit to the creation of coins.
Learn more about Mining here.
Trading: the mistakes you will make. For Sure.
Trading is not a simple and straightforward activity. It is a long journey, made up of study, sweat, monetary blood spent every time a mistake is made. It is a solitary journey that not only involves our bank account, but also our most hidden inner part, awakening fears and invalidating our psyche. Every mistake you make is a source of pain but no one becomes a capable trader without going through this path.
Today we are going to see some of the mistakes you will surely make as a newbie trader.
The first mistake you may run into involves doing too much or too little paper trading. Here we need to understand how you are made at the level of psyche. Paper trading is a training system for traders that consists of creating sales and purchases on paper, without real money, to train and understand how it works. However, paper trading lacks a fundamental component which is anxiety about the use of real money. On a paper trading account we can also have 100 thousand or more euros invested, but not being real money, your behavior will be easily swashbuckling and arrogant. zeroing the trading account will not be a problem.
Zeroing the account doing paper trading is not actually a real problem, but if you analyze what and why it happened. The best thing to do would be to switch as soon as possible to trading with real money, with small amounts, to begin to get used to managing the tension of maintaining the position on the market and managing the emotional waves of seeing the value of the asset purchased increase or decrease. . More paper trading could serve those who are braver and more gamblers, while a more timid and calm person could leave earlier given his less aggressive disposition.
Another mistake that arises from the first is to use a too big size of the market position. Because there will be a time when we will be so confident in ourselves and our analysis, that we will put half of our portfolio on that stock that we are sure will go up.
And then after a short time to see it collapse sending us into total panic. At which we will have to decide whether to face the pain of losing money and defeating our beliefs or to hold the position ignoring what would be right to do, transforming a short-term trade into a long-term investment, without having any idea when it will be changing trend.
This error also brings with it the anxiety of having a lot of our money invested in a single position, anxiety that will be present even if our position is positive. In fact, anxiety will most likely get us out of the position much sooner than we should, making us bring home a meager income.
The second mistake is related to the third mistake, which is not having a trading plan. Having a trading plan means having an idea of what our goals are for earning and safeguarding the portfolio. It seems obvious but it is not, and above all having a plan helps us to discipline ourselves on the markets.
In fact, planning protects us from another mistake, which is over trading or exaggerating by taking positions. In fact, it can happen that after a series of particularly good and profitable trades our ego pushes us to risk more and more, in the belief that we are very good and we cannot make mistakes. If all the trades have been positive before, these will certainly be positive too, bringing us one step closer to wealth and happiness. On the contrary, in fact our ego is one of the biggest enemies we have, as it deflects our vision and perception of the market by endangering our account.
Being emotional is a mistake that we will always pay dearly for. Being cold and focused means seeing things as they are and not as we would like them to be. Emotion is the enemy of victory especially when it leads to greed. There are situations in which being satisfied is the right choice, in fact the emotionality will mean that we will still be inside the trade that we will have to sell, losing all the profits and going at a loss.
The emotionality leads to what is called FOMO, fear of missing an opportunity. We think it is an unmissable opportunity and we throw ourselves headlong without thinking about it and without analyzing, only to end up making a mistake that cost us part if not all of the trading account. The FOMO is that illogical and illusory push that deceives us and leads us into deception. Think about when prices are high and people who know nothing about it enter the market, buying pushed by the mass media. Think about when your hairdresser tells you to absolutely buy that specific action and that he was good at just taking it. Nothing against hairdressers, some know even more than me, but if your hairdresser knows nothing and tells you so, this is a great example of FOMO.
When you are filled with emotion, you don't have to sell or buy. You have to study, update, train but not trade. Emotions equate to losses.
You have to follow your take profit and stop loss. If you have put them on and you are not totally stupid there will be a reason, and if you have put them without a sense you are perhaps a beginner and it can even be there. Know them and not follow them, this is being stupid.
And being stupid is always waste of money and a loss of money is pain.
Trading vs Investing, with Bitcoin
In this article we talk about bitcoin trading, specifically seeing the difference between investing and trading.
First of all we need to define what bitcoin trading is.
Bitcoin trading is the exchange of fiat currency or other cryptocurrencies for bitcoin, on an exchange, with a short-term vision and then returning to fiat currency by exploiting the high volatility to gain in fiat currency.
We must understand that the difference between investing and trading refers specifically to the long or short term view. In fact, investing means buying bitcoin today and then reselling it in 3 4 or more years, regardless of its movements. Trading bitcoin, on the other hand, means taking advantage of its movements to make money.
The two views are both correct and are the result of two different points of view. Investors generally believe in the underlying technology and ideology of Bitcoin, seeing in it a possible bright future for the asset. Traders, on the other hand, may not be interested in technology but are interested in the short-term economic potential of the instrument, so ups and downs are welcome when positioning in a trend.
The two visions can be experienced simultaneously. Nobody forbids you to put some bitcoins away on a wallet for the long term and at the same time trade others for the short time.
A popular slang term in the bitcoin world is hodl, which refers to someone who has long-term invested in bitcoin. The term comes from a mistake that has become popular on the bitcoin talk forum.
At every big down fall, don't panic and hodl!
Traders not interested in bitcoin technology consider it an interesting asset for their work as the market is open 24 hours a day all year round. The volatility of the currency and its riskiness are the perfect fuel for day traders and swing traders.
One last observation. Don't turn a short-term trade into a long-term investment just because the market has gone in the opposite direction to what you thought and your loss percentage became important because you didn't use the stop loss.
Tax Havens
Today we lie down in the sun in full relaxation and talk about tax havens.
A tax haven is basically a low or no taxation country for resident businesses or individuals. They are considered refugees from states that have exaggerated taxation.
Generally the banking system allows transactions to be carried out that are covered by banking secrecy and the administrative management for the creation of companies is very quick and lean.
It must be understood that if tax havens exist, tax hells must exist somewhere.
Are tax havens legal? Yes.
Are tax havens fair? It depends on what our point of view is, which is obviously linked exclusively to companies operating in sectors that has no link to criminality.
If we look at the large sums being taken away from high-tax states, it is clear that tax havens are unfair. Countries like Panama don't have the needs and expenses of normal European countries. Companies operating in high-tax countries benefit from the state services of these countries and therefore should remunerate them.
From the other point of view, however, it is easy to understand that a country with low or no taxation gives to any company a competitive advantage given the saving of money from taxation, money that can be reused in research and development, higher salaries, bonuses and all that. which is needed for company and employees.
Another interesting point to understand is that there is now a competition between nation states in the world of globalization. There have been those who are administratively friendlier to companies, which offer greater advantages and which encourage companies to put their offices there. Places like Luxembourg, the Netherlands or Ireland have understood this dynamic and built a competitive advantage. Other countries, on the other hand, which have inefficient and expensive state welfare systems, are forced to over-tax their citizens.
In today's world, where competition is getting stronger and many barriers have been destroyed, it is easy to understand that every competitive advantage need to be used. States and governments that do not understand this are destined to lag behind on the international scene and with them their economies and the prosperity of their citizens. Being more inclined to favor companies by lowering taxes and bureaucracy, improving and decreasing the state machine, could be the ideal solution to make sure that tax havens no longer exist.