Crypto Academy

Recurring payments in investment strategy mode

Recurring payments

5 min reading

Do you have any understanding of recurring payments and their usefulness? Find out more in this article.

Recurring payments

Recurring payments in investment strategy mode

Recently, the recurring payment has become hugely popular with consumers. This is obvious, as it is simply an ideal option. You do not have to worry about having to make a payment on time. Funds are automatically deducted from your account and you, for example, continue to watch your favourite TV shows carefree or get your box of food for the day every morning. That’s what a recurring payment system is for. Keep reading this article to look more closely at this concept and to find out all things systematic investment.

What are recurring payments?

Let’s start with the concept of recurring payments. It is a procedure for a manufacturer or service provider to automatically debit your account for the purchase of a particular good or service at identical intervals. The payment schedule should be negotiated in advance and requires you to approve the withdrawal of further amounts. When first receiving the desired goods, you should provide the card details. After that, all other transactions take place automatically. In most cases, recurring payments are automated transactions that operate on a set date after the subscription has been made. There are other common cases associated with recurring payments, including membership fees, utility payments, online tutorials, etc. Their inevitability lies in the fact that they function according to a set schedule given by you, as being recurring transactions. As different business models evolve around the world, there is a necessity to streamline the billing process. Recurring payments create a great business environment for both merchants and you.

Types of recurring payments

Following, let’s consider what types of recurring payments exist. In general, there are regular and periodic (or irregular) payments. Regular recurring payments follow a fixed schedule. An example would be paying for certain services at the very beginning of the following month. The same applies to weekly, quarterly and annual payments. Periodic (or irregular) recurring payments follow a certain pattern. The service provider does not charge your account once a month or once a week, but when the time comes to provide the service. A recurring payment system could be involved for businesses as well as for ordinary customers. According to this, we can divide the payments into two other types: annuity payments and differentiated payments. An annuity payment involves paying off the debt in fixed instalments, making it particularly convenient to connect a regular charge-off. In the case of a loan agreement, a differentiated approach divides the debt into equal instalments. Payments take monthly or quarterly payments.

Advantages 

Recurring payments have a number of significant benefits. Of course, if you have not paid your utility bill on time, nothing serious will happen. However, if you don’t have money on your telephone or internet bill, it can unexpectedly interfere with your work. That’s why recurring payments are there to optimise your life as much as possible. Recurring payments, apart from mobile phone and internet payments, are handy for those who pay their insurance in monthly instalments. You can also set up these kinds of payments, for example, if you plan to go on holiday or a business trip. For instance, you can recharge your account every week with a certain amount and once you know the dates of the holiday, you can edit or cancel the automatic payment for that period. If there are no funds on your card, you can recharge it within a few days. If you set up a recurring payment, there is no need to re-enter your card details manually into the system – payments will be automatic.  

Possible risks in recurring payments

This payment system also carries a number of risks. Once you agree to a recurring withdrawal, there are risks that you should be aware of. Firstly, you may inadvertently forget you have registered for the service and given permission for a recurring withdrawal. Secondly, otherwise, any mistake made will be impossible to rectify. And thirdly, you may want to terminate the contract. This too may result in claims and negative perception in the future. So be careful whenever you do anything.

Systematic/recurring investment

And finally, we will discuss the topic of systematic/recurring investment. Systematic investing is a procedure whereby you can make regular, identical deposits into mutual funds, trading or retirement accounts. Systematic investing promotes the habit of saving regularly, and since purchases occur at varying market prices, you should essentially calculate an average purchase price for investments. While most investors gain systematic investment experience by participating in an employer-sponsored retirement plan, investment companies provide many programmes that allow shareholders to create their own individual systematic investment programmes. Such programmes include automatic investment plans and negotiated investment plans. Many investment institutions offer a similar plan. It is an investment programme where you can regularly (monthly, quarterly, half-yearly or yearly) invest small cash amounts. The money comes automatically from your current/savings account or salary. 

However, recurring payments are a useful and effective technical solution, just don’t forget to be aware of its drawbacks. The recurring payment mode helps to streamline anyone’s life by making routine payments automatic. With these kinds of payments, you can never miss out on anything, so you won’t have any trouble making your payments.

Conclusions

Dow theory

Dow theory

5 min reading

Technical analysis tools help traders to make a decision in the market. Learn more about this.

Dow theory

What’s the Dow theory?

Technical analysis briefly

Technical analysis is a universal method of analysis that applies to financial markets, stock markets, futures, options, and currencies. The basis of modern technical analysis is the Dow theory. Charles Doe was an American journalist, creator of the world-famous financial publication The Wall Street Journal and the Dow Jones Index, and co-founder of Dow Jones and Co.

History of Dow Theory

In the nineteenth century, Charles Dow was the founder and editor of the Wall Street Journal, as well as a co-founder of Dow Jones & Company. As a member of the corporation, he contributed to the development of the Dow Jones Transportation Index, the first stock index (DJT). He also described a market behavior hypothesis that is still in use today. The notion that the market could be anticipated only through the use of charts was innovative, and many 20th-century investors slammed it right away. What cannot be claimed now is that people make money in all kinds of markets using technical analysis based on Dow’s theory, supplemented with a variety of tools.

What is Dow Theory?

Charles Dow’s theory is a theory that describes the behaviour of stock prices over time. The postulates of this theory form the basis of the methods used by investors around the world, working both with the stock and index markets and with the foreign exchange market. At the heart of this theory are the studies of Charles Doe, which describe the behavior of stock prices that change over time. Such a concept as the Dow theory appeared after the death of Charles, and it was supplemented by other authors.

How Dow theory works

The Industrial and Transportation (Dow Jones) indices should confirm each other when the trend changes. If no such confirmation is observed, then there may not be a reversal. Trends should be confirmed by volume. Dow believed that a trend was confirmed if stock prices rose and trade increased with them. For a qualitative assessment of the market, it is always necessary to build a joint graphical model – a trading volume histogram on the price chart. The histogram structure includes bars of different heights. Each bar corresponds to its own trading period, which depends on the selected scale (1 minute, 5 minutes, 25 minutes, etc.). The higher the bar height, the higher the speed at which the market-maker updates the quotes. 

Each bar of the histogram corresponds to one chart figure (bar or candlestick), which determines the trading volume for the trading time (trading interval). The histograms are placed under the price chart.

The trend will continue until there are unambiguous signals of its termination. The author believes that the market will most often continue to move in the current trend, rather than change it. A trend change will occur only if there is an unambiguous signal about it: a breakout of trend lines and closing prices outside of it. There are three types of trends: primary (long-term), secondary (or intermediate), and small (or short-term). And a trend always has a direction. It can be: ascending, downstream and lateral (flat).

Principles of Dow Theory

Dow Theory consists of the following principles. A trend has three phases: accumulation, participation, and implementation. The accumulation phase is when investors start buying or selling an asset. But there are few such investors and they cannot contribute to the organization of the trend. At the stage of participation, traders begin to open deals on a new trend, which then gains strength.

And after the trend has arisen, the rush of buying or selling begins. When the price peaks, the investors close and get a good profit from it. After that, the trend starts to reverse. In the event that new traders support the trend, the trend will continue, if not, then a reversal will occur. The price takes into account everything. This means that the market price displays everything that can affect the supply and demand of the market. Indexes must be consistent. 

What is needed

The first thing you need to trade on the Dow Theory is a trading platform. Today there are a lot of companies that offer such services. Some of them even have a Demo mode that allows users to practice first. Dow theory states that certain stock indexes must be consistent with one another. This statement directly applies to indices such as the Dow Jones Industrial Average as well as the Dow Jones Transportation Index. According to the theory, the trend that has already formed and signals about its change should be confirmed by both indices. By the way, sometimes differences between the signals are allowed here, for example, one can come earlier than the other.

These principles are universal, and they must be studied by every trader who trades through technical analysis of the market since they are technically analyzed in the postulates of Charles Doe.

Formula

We would like to present you one of the possible variants for proving Dows axiom, based on the analysis of commercial structures profit on the real competitive market of goods and services, because the main goal of any commercial structure is profit and Forex is not far away from the real market of goods and services. It is known that the most obvious, simple, radical, reliable and unquestionable way to determine profit (P) is its representation as the difference between income (E) and all kinds of expenses (P):

P = E – P

Expenses (P) are variable (Pper), dependin on income (E), and constant (Ppos), independent of income:

P = Pper + Ppos

Therefore, the profit formula is usually represented as

P = E – Pper – Ppos

Using the definition of variable costs as Pper = K*D, we obtain, where K is the coefficient of proportionality, we write

P = (1-K)*D – Rpos

Expressing Profit (E) as the product of the volume/quantity of goods (V) and its selling price C, we obtain the following formula for determining profit in the traditional way

P = (1-K)*V*C – Ppost (1)

Any person looking at this formula (1) will exclaim: the profit depends on both the volume and the selling price of the commodity! And he would be right.

But, some sources shows how to derive an alternative formula for profit taking into account the provisions of the law of supply and demand, which coincides exactly with the traditional formula (1):

P = A*(Ts^2 – 2*Cp*C + Tsopt^2)/C (2)

Here, A, Tsr and Tsopt are constant coefficients calculated experimentally on the basis of actual trade data within selected data sample, where A>0 for monopolistic and A<0 for competitive markets, Tsr is market price and Tsopt is optimal sales price providing maximum profit.

Based on the absolute equality of the formulas (1) and (2), we conclude that the Dow prophecy in the form of the first axiom can be a proven theorem as it contains no other variables besides the price, and traders and market researchers can safely rely on the price analysis in their market research without being distracted by other market parameters.

Conclusions

RSI

RSI

5 min reading

Crypto investment has so many strategies. Let’s get to know one of the important tools for technical analysis, Relative Strength Index (RSI).

RSI

What is Relative Strength Index (RSI)?

What is RSI?

The Relative Strength Index (RSI) is a technical analysis tool and oscillator in the cryptocurrency sector that displays the strength of the price trend. It shows the intensity of the asset’s purchasing and selling and is regarded as one of the most effective analytical techniques for assessing the status of cryptocurrency. Traders who apply the indicator correctly may conduct a complete examination of the trend and use it to make credible forecasts of price changes.

That is, it is most successful when the market is reasonably tranquil. It displays a broken curve with points ranging from 0 to 100. According to this, there are some crucial points such as:

    • 70 to 100 points that the market is overbought and that a price decline is possible;
    • 0-30 indicates that the market is oversold and that a price increase is likely;
    • The middle zone is between 30 and 70. It means not to enter the deal since it could be dangerous with potential losses. Thus, opening orders when the chart exits the crucial zones 0-30 and 70-100 is the best option.

The RSI application is based on the usage of its patterns and models in the development of trading strategies. The tool displays the same values as the cryptocurrency price chart. Their interpretations, however, diverge. Traders pay close attention to the correlation or difference between the quotes and the data displayed by the RSI cryptocurrency indicator.

How to use it on bit4you?

However, the bit4you trading platform provides its users with all existing technical indicators. You can easily predict possible price movements and market trends by using different instruments. For example, after selecting an asset on bit4you, you will see a chart displaying how the price fluctuates over time. There is also a “Indicators” option above where you may locate RSI.

The indicator has 14 days and levels of 30 and 70 at first. If you wish to update them, you must first click on the edit button. Levels are occasionally modified for such combinations as 20 and 80, 40 and 80 for a bullish trend, and 20 and 60 for a bearish trend. You can also select a period ranging from 5 to 25. Keep in mind that when the number of periods reduces, the indicator becomes more sensitive to price changes. As a result, it will emit a large number of signals, some of which may be false. If you set the value 25, for example, the curve will become smooth, nearly without oscillations. Experts recommend setting the number of periods higher for a shorter time frame and lower for a longer one.

Connect the RSI chart’s tops and troughs and trade on the trend line’s breakout. Connect three or more points on the RSI line as it climbs to form an RSI uptrend line. Connecting three or more dots on the RSI line as it decreases creates a downtrend line. Indeed, RSI trendline breakthrough indicates a price continuation or reversal. Remember that an RSI trendline breakout frequently precedes a price chart trendline breakout, providing warning and an early opportunity to trade.

Formula

The RSI indicator formula consists of two equations. With the first equation, we will obtain the initial Relative Strength (RS) value, which is the ratio of average “Up Close” to average “Down Close” values across “N” periods. We use the formula below to get the data: 

RS = Average Up Close price / (Average Down Close price) for a given period.

The actual RSI value is calculated by indexing the indicator to 100 using the following formula:

RSI = 100 – 100 / (1 + RS).

In conclusion, the RSI indicator helps to determine the direction and strength of the trend, as well as its possible change and buying/selling signals. As a result, the indicator is suitable for both novice and advanced traders. By the way, we recommend you test how RSI works on Demo mode first. As a result, you will have a thorough understanding of how to apply this indication while avoiding the risks associated with real-world trading. Furthermore, RSI works well in conjunction with Bollinger Bands. 

Conclusions