Bites Of Trading Knowledge #14

What defines a Bear Market? -

A bear market is when a market or even individual securities experiences extended price declines. The condition observed in the equity markets is where securities prices fall 20% or more from recent highs triggered by negative investor sentiment and/or overall pessimism in the markets.

What defines a Bull Market? -

A bull market is the condition seen in a financial market or individual security in which prices are rising and/or are expected to rise. Commonly the rise in price is observed over an extended period of time and can last months or years.

What is Inflation? -

Inflation is a rise in prices and is often expressed as a percentage change over a period of time. Inflation could also be interpreted as a decline of purchasing power over time, meaning that a unit of currency buys less than it did in prior periods.

Common application of financial market instruments for managing risk and opportunities.

Diversification: Portfolio Risk Using FX Futures

Individual investors taking a portfolio approach with managed futures and spot foreign exchange could be entering into emerging market currency positions including for example Hong Kong Dollar, Singapore Dollar or South Korean Won.

Depending on the view of each of the currencies in the portfolio, it could be constructed to eliminate exposure to the U.S. Dollar.  However, there may be a time during which investors would like to introduce U.S. Dollar exposure and they could do so by using Mini US Dollar Index ® Futures with a contract value of $10,000. For example, the U.S. Dollar Index ® may be observed to be in a medium term uptrend and an investor may want to consider entering into a long position in the Mini US Dollar Index ® Futures based on their strategy of choice and exit the position when either their profit target is achieved or their loss limits are triggered.

Source: ICE Connect

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TRADDICTIV · Research Team

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