What is the Thin Market?

The thin market refers to any type of market where the current trading level is abnormally Thin. When there is a Thin market situation, the market will experience greater differences between the buying and selling prices that occur. Since there is almost no trading, it is believed that Thin liquidity.

A thin market is a pair of characteristics of any type of narrow market phenomenon where the current trading level is abnormally low. Both types of market conditions show Thin trading volume and are considered temporary. 

However, narrow markets usually produce large fluctuations in the price of the asset being traded, while thin markets tend to have a certain degree of volatility stagnant. However, it is not uncommon for some investors to use these two terms interchangeably. 

Experience This Phenomenon

Any type of market will experience this phenomenon. Disasters in economic conditions related to political or natural events can easily slow a prosperous market to the point that almost no transactions take place. This can happen in stocks, bonds, futures, and even currency transactions. No market can avoid becoming a weak market. Fortunately, a weak market usually shows signs of recovery in a relatively short period of time. Once the incentives for this activity have subsided.

When this happens, the thin market will quickly become a liquid market, which allows trading The participants are very happy that the market will reach its peak and then return to a stable but profitable state. Many investors choose to hold their current portfolio in a down market.

Temporary State Of Thin liquidity 

Their idea is to wait for a temporary state of low liquidity and stay calm. When economic indicators point to conditions conducive to market recovery, investors can start to consider releasing some assets for trading, or the stocks issued at low prices in the market start to rise to Start the acquisition before the price.

Thin market: where is thin, there is torn?

If we turn to the definition, then a thin market is a state when prices, which previously developed a strong trend, stop moving and begin to consolidate. Trading at this time calms down, and the number of active participants is sharply reduced.

It is worth distinguishing a thin market from a sluggish one, since a sluggish market mainly determines a flat, or, in other words, a sideways trend, and the number of participants may not decrease significantly. A thin market, or volatility depletion, is necessarily characterized by fewer participants. And if a sideways movement can occur quite often, without a time reference, then for a thin market, patterns in time can be identified.

Usually, the market becomes thin during the close of the European session and in the second half of the Asian session, before the release of important economic news, on bank weekends, holidays (especially Christmas holidays), in the summer period (August). At this time, the basic principle of supply and demand is almost not working on the market, and there is not enough liquidity, so there is no need to rely on the usual market constants.

So, in a thin market, a deal with a more or less good volume overcomes many more points than it would have overcome in normal times, so a trader who decides to trade in a thin market should be especially careful.

In general, experienced traders recommend not trading on a thin market at all, but rather wait until it becomes more active. Why? Because such a market is most unpredictable, and if you apply the saying “where it is thin, there it is torn” to trading in a thin market, then the impulse threatens just the trader’s deposit.

Thin Market: Tips for the Brave at Heart

But if you nevertheless decide to try yourself in trading on the thin market, in addition to courage, you will need something else. Since the usual laws of market physics do not work well or do not work at all in a thin market, such trading requires a special approach. Below are 4 tips on how not to lose, but make money in such specific conditions.

  1. Don’t go wrong with a trading strategy.
    Positioners in the thin market actually have nothing to do – it will take a very long time to wait for the optimal entry into a deal. Therefore, leave positional and intraday trading for better times, and practice scalping in a thin market. Moreover, the optimal timeframe for scalping will be five minutes, the maximum – an hour.
  2. Don’t give the toad a chance.
    Greed is a bad advisor in any kind of trading, but in a thin market, it is generally unacceptable. Remember that a thin market is a passive market, so expecting more than 15-30 points from the price movement is already greed. Such expectations are stupid and unjustified, the price will not jump by 100 points in a thin market.
  3. Don’t be smart with your feet.
    There is an opinion that it is better to set the stop loss further away so that stop hunters cannot reach it. The risk of getting caught by such hunters is rather vague, but the margin call is quite tangible. Therefore, do not experiment with stop losses, especially in a thin market. A price spike on it can occur at any moment, and in conditions of depletion of volatility, the price on such a spike can more easily overcome the seemingly iron support and resistance levels (there are few players, there is almost no one to resist).
  4. Be critical of indicators.
    The problem with indicators, price patterns, and volume signals is that in a thin market these same volumes are practically absent, respectively, figures and technical analysis signals give a lot of false positives, and it is not too far-sighted to rely on them if your goal is not to drain your deposit.

And, of course, important in such trading will be to maintain emotional balance, not to trade in a state of fatigue or nervous tension, and not to overdo it.

It will be much easier to control your emotions and actions even in such a difficult situation as a thin market if you first undergo high-quality training in trading with practice under the guidance of an experienced successful trader. This can be done at the Alexander Purnov School of Trading.

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What is the Commodity Pool?

The commodity pool refers to a fund that accepts investment from many investors for the purpose of trading commodities and futures options. Commodity pools are sometimes called managed futures funds. They have some common characteristics with mutual funds, but they operate in different ways. Commodity pools are an excellent way for small investors to join forces to participate in large investments. 

Commodity Pool Best Small investors

Commodity pools are an excellent way for small investors to join in and participate in larger investments. Just like mutual funds, investors who choose to participate in commodity pools can participate in transactions that they cannot make. 

This makes the use of commodity pools particularly attractive to smaller investors who cannot meet the margin requirements that are usually applicable in larger investments.

The common fund pool can bypass the margin requirements applicable to individual investors, and Their accumulated financial strength is qualified to trade and the ability to engage in commodity portfolio trading also helps diversify the degree of risk among multiple investors. 

Limiting the degree of risk helps to ensure that if the investment does not proceed as expected, the investor can still make up for the loss without major difficulties. Of course, the investment income will be shared by all parties. Through the efforts of investing in a commodity pool, the profit It is often considerable. 

Difference between Commodity Pools And Mutual Funds

There is another difference between commodity pools and mutual funds: mutual funds open commodity pools to the public is a closed investment opportunity, it is considered a private enterprise, composed of a group of carefully selected investors. 

Without the explicit approval of other members, no one may join the commodity pool. Commodity pools are an investment method that is usually used by a small group of investors who wish to jointly construct an investment portfolio. Family businesses sometimes use commodity pools as an integral part of their overall investment strategy, and only family members are eligible to participate.

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What is Dividend Capture?

Dividend capture refers to the strategy of buying and selling stocks that are almost ready to declare dividends. Generally speaking, a listed company will declare its dividend on a certain day. And then assume that the dividend will be paid to all shareholders on record on a certain future date. Those who try to buy the stock only for the dividend and then sell it It is said that it is implementing a strategy to obtain dividends or trading dividends.

Observing Trends Helps

Observing trends help to capture the dividends of stocks. Usually, during the board meeting, the company will announce earnings every quarter, and then distribute dividends authorized.

If the company has a profitable quarter. The news will then be announced through a press release or press conference. Larger companies will widely report this news through financial publications and TV stations for business news. 

Companies Usually Announce

Companies usually announce quarterly earnings to the public through press releases or press conferences. For example, Widget Inc. may announce a payment on June 1st. U.S. dollar (USD) dividends, June 30 may be paid to all shareholders with records on June 15.

Ex-Dividend Date

The deadline on June 15 is called the ex-dividend date, that is, the date when shareholders can no longer receive dividends. Therefore, those who wish to participate in the dividend will line up to buy this stock at the close of the market on June 14.

The Dividend Capture Strategy

The key to using the dividend capture strategy to profit is to be able to sell the stock at the price paid by traders, or at a price not lower than the actual price paid. Sell ​​stocks. In order to do this, traders usually want to wait as long as possible before buying to avoid large fluctuations in the market.

The only problem with this is that when the stock goes ex-interest, the amount paid is deducted from the stock value. Therefore, after the ex-dividend date, a stock will trade at $50 and will be valued at $49.

Use The dividend Strategy Bet 

Those who use the dividend strategy bet that the actual value of the stock is closer to the number before the ex-dividend date, and the stock will rebound and increase in a relatively short period of time.

Books Reference

Although in some books, the dividend capture strategy is considered to be a quick get rich in the stock market One way, but many financial advisers strongly advise against this strategy. This requires a lot of research and some luck. In addition, a highly volatile market will make the implementation of dividend capture strategies more difficult.

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What is Economic Life?

What is Economic Life: The economic life of an asset is a measure or prediction of the remaining time it can be used economically. This may be shorter than its actual service life because it may reach the point where its operating cost exceeds its productivity. 

What Is Economic life Principles

The principle of economic life is the same as that of depreciation, although these two figures may differ due to legal accounting restrictions. 

The economic life of an asset is a measure of the remaining time it can be used economically or the concept of predicting the economic life of an asset is familiar to anyone because it is scrapped for reasons other than wanting a new model or giving up driving As the car ages and needs more repairs, the number of cars will increase.

Increase Taxes Or Increase Insurance

 It may also increase taxes or increase insurance premiums. At the same time, if the car must travel at a slower speed or take more time to repair, then it may not be so useful. Ultimately, the driver will decide that the benefits he or she derives from owning the car do not justify the running costs. 

Physical Assets

A company will look at physical assets in the same way. In theory, a machine can still be used for several years at its operating cost after stopping production to prove its rationality. 

A computer can still work, but it may have slowed down so that its productivity is not enough to justify the time employees spend using it. Economic life is just a prediction, based on a general and predictable recession. Based on the model, unpredictable factors may affect the economic life of an asset. 

If the market price of small parts plummets, a small part manufacturing machine may become unusable overnight. Alternatively, the government may make it illegal to use small parts to make machines unless the dominant part is replaced by steel.

What Is Economic Life Factors Types

These types of factors are not always included in the economic life forecast, but there are some exceptions.

 For example, when an economist evaluates the economic life of an injection mold used to make a soda can and an injection mold used to make a specific mobile phone, he may predict that the latter will have a shorter economic life. 

This is because even if the price of mobile phones is higher, each model of the product is more likely to experience a decline in sales due to aging or even obsolescence, making this type of mold useless. The soda beverage market may remain relatively stable, and even if the popularity of individual brand changes, such molds may still be available.

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