Learning the friendly way

Balancer is an automated market maker (AMM), a recent innovation making up a large part of the greater DeFi ecosystem. Doing without order books and accounts, AMMs are underlying protocols for decentralized exchanges that use smart contracts to facilitate trading. Designed to be permissionless and frictionless, AMMs allow for quicker and more secure trading without having to rely on a third party. 

What is Balancer (BAL)?

Balancer, a popular choice for traders and liquidity providers in the crypto space, is an AMM platform built on the Ethereum network that functions as a self-balancing weighted portfolio, liquidity provider, and price sensor. 

Balancer pools

One of the unique features of Balancer is that it allows users to create customizable liquidity pools of digital assets, with the ability to set their own weights and ratios for each asset. This provides traders with more flexibility in terms of trading pairs and potentially earning higher returns.

Liquidity pools for liquidity providers

For example, a user could create a liquidity pool that is weighted 75/25 between ETH and DAI which will automatically adjust itself to keep the tokens equally weighted regardless of price changes. This allows traders to access more specific trading pairs and can potentially lead to more efficient trading prices.

Additional services offered

Additionally, Balancer offers a number of other features that make it a popular choice among DeFi enthusiasts including flash loans and smart order routing. Flash loans allow users to borrow assets without any collateral, useful for traders who need to access a large amount of capital quickly, while smart order routing helps traders find the best prices across different liquidity pools. 

Balancer pool tokens

Balancer (BAL) is the platform’s native token that is used as a governance token and can be earned through trading and providing liquidity in the Balancer pools on the platform. 

Balancer V2

The original version was launched in 2020, with Balancer V2 launched in 2021. Overall, Balancer V2 is a significant upgrade to the Balancer protocol, and is designed to improve the user experience and flexibility of the platform, while also making it more competitive in the rapidly-evolving DeFi ecosystem.

Who created Balancer?

Balancer falls under Balancer Labs which was created by Fernando Martinelli and Mike McDonald, who are both experienced blockchain developers and entrepreneurs. The project was incubated by blockchain investment firm Placeholder and received funding from a number of prominent venture capital firms.

Originally starting out as a research program at BlockScience, a software consulting firm, in 2018, Balancer Labs raised $3 million through a private funding initiative in 2020. 

How does Balancer work?

Balancer allows users to create liquidity pools of digital assets using smart contracts. These self-balancing index funds automatically adjust the proportion of assets in the Balancer pools to maintain their desired ratios, even as individual coin prices fluctuate.

For example, a Balancer pool might start with 25% ETH, 25% DAI, and 50% LEND. If the price of LEND doubles, the Balancer protocol will automatically reduce its LEND holdings in the pool to maintain the 50% allocation. The smart contracts then make the excess LEND available to traders looking to buy it.

What's more, liquidity providers still earn fees even as their index funds get rebalanced, which is different from traditional index funds where investors pay fees for rebalancing services.

Balancer offers various pool types, including public, private, and smart liquidity pools, each with its own parameters and features.

Public pools

Public Balancer pools are open to any user to provide liquidity and earn fees.

Smart pools

Smart pools have flexible parameters and can be programmed to perform additional functions, such as changing weights and altering swap fees.

Liquidity Bootstrapping Pools (LBPs) are a type of smart pool that enables projects with low capital to raise liquidity for their native tokens using a variable weighting system. This allows for constant downward pressure on the price to prevent market manipulation by bots and whales.

With Liquidity Bootstrapping Pools, the first buyers pay the highest price, and the weight gradually lowers over time to create efficient price discovery.

Private pools

Private Balancer pools, on the other hand, are useful for asset managers with large portfolios seeking to earn fees on specific assets. Only the pool creator can add or withdraw assets, and they can adjust all other parameters, including fees and weightings.

Overall, Balancer is a powerful DeFi platform that provides users with more flexibility and control over their digital asset holdings, with customizable index funds that automatically rebalance to maintain desired ratios, and various pool types to suit different needs and risk appetites of liquidity providers .

What is Balancer V2?

Balancer V2 is the second version of the Balancer protocol, released in May 2021, that includes a number of new features and improvements designed to make the platform more efficient, user-friendly, and flexible.

Assisting those looking to provide liquidity, engage in an automated market maker, or use the platform for alternative purposes, the new version has been well received by Balancer users and the greater crypto community.

Single-asset pools

One of the key features of Balancer V2 is the introduction of "single-asset pools," which allow users to create Balancer pools with only one asset. This can be useful for traders who want to provide liquidity for a single asset or for developers who want to use Balancer's infrastructure for other purposes.

Smart vaults

Smart vaults are customizable templates for liquidity pools that include a range of different settings and parameters. This can help simplify the process of creating and managing liquidity pools, and can potentially lead to more efficient and effective trading strategies for the liquidity providers.

Gas efficiency and speed

This Balancer protocol upgrade was designed to help reduce the cost and time required to execute trades on the platform. Additionally, Balancer V2 includes new integrations with other DeFi protocols and applications, which can help increase the liquidity and functionality of the platform.

What is the BAL token?

The BAL token is the native utility token for the Balancer protocol, which is used to govern the platform and incentivize liquidity providers. The token was launched three months after the initial platform launch following the success of the COMP token on the Compound network. 

Holders of BAL can participate in Balancer's governance process, including proposing and voting on changes to the Balancer protocol. They also receive a share of the trading fees generated by the platform, proportional to the amount of liquidity they provide.

The cryptocurrency has a maximum supply of 96 million tokens, 5 million of which were sold to investors and 25 million awarded to shareholders and employees after the initial funding round. 10 million BAL have been set aside, 5 million reserved for sales to future investors and the other half reserved for a fund used for contributors. 

How can I buy BAL tokens?

Users looking to trade using automated market maker (AMM) technology can tap into the Balancer (BAL) market by accumulating the governance token directly through the Tap app. Using a range of fiat and cryptocurrencies, users can buy BAL tokens which can be stored in unique wallets created specifically for the user. 

BAL tokens can then be stored for any amount of time, traded for other cryptocurrencies, sold for fiat currencies or sent to friends and family anywhere in the world. The Tap app provides a seamless solution to your crypto needs.

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There is no denying that innovation in the technology sector has amplified the fast-paced world of finance, instigating constant transformation from brands that want to stay ahead. As with any fast-paced industry, many trends emerge as companies fight to remain relevant. One such trend we will be exploring is the increase in white-label cards and the companies facilitating the issuing of them. 

The process of issuing white-label cards has emerged as a powerful solution in the fintech space, offering customized payment experiences that cater to the unique needs of both businesses and customers. In this article, we will delve into the world of white-label cards, exploring its benefits, applications, and why it has become such a popular choice for financial institutions and fintech companies.

Understanding white-label cards

White-label cards, also known as private-label credit cards, involve the practice of businesses providing other businesses with the opportunity to offer customized credit or debit cards to their customers. Trusted financial institutions or fintech companies issue these cards on behalf of the businesses, while still reflecting the company's branding.

This approach allows businesses to incorporate their logo and branding on the private label credit card, granting the business ownership and control over the card's identity, all without the burden of creating or designing it from scratch.

By partnering with an established financial institution or fintech company, businesses can save time, effort, and resources by leveraging ready-to-use payment solutions instead of going through the costly and complex process of obtaining licenses from companies like Mastercard or Visa.

The shift toward customized payment solutions

Traditional banking systems have often been perceived as slow in adopting new systems and embracing innovation. As the demand for personalized payment experiences continues to grow, businesses are leveraging the opportunity to keep up with the evolving needs of customers seeking customized payment solutions and private-label credit cards.

Consumers today seek customized solutions that align with their preferences and reflect the brands they trust. This shift in consumer behavior has paved the way for white-label cards and in turn, card issuers, which offers businesses the ability to tailor payment solutions and private-label credit cards to their customers' needs. 

Third-party establishments are now offering streamlined payment solutions to these businesses, allowing them to leverage this new technology without needing to complete extensive and costly onboarding processes. Instead, the card issuing companies undergo this process and once accredited are able to provide full-service payment options to their clients.

With co-branded private-label credit cards, customers can unlock a multitude of rewards, bonus points, and exclusive discounts that can be utilized across various services, retailers, and online shopping platforms. By offering these enticing benefits, businesses are able to enhance the overall purchasing experience for their customers, cultivating loyalty and satisfaction.

Private-label credit cards can also come in the form of virtual cards, allowing users to make online payments or use services like Apple Pay with their unique account that essentially acts as a bank account.

The advantages and benefits of private label credit cards

The advantages of businesses utilizing the services of white-label card issuers are numerous, benefiting not only businesses but individuals too. 

For businesses

Firstly, white-label card programs offer a cost-effective alternative to building an in-house card program. By partnering with established providers, businesses can save on upfront costs, development time, and ongoing maintenance expenses.

White-label card programs also offer flexibility and scalability, making them suitable for businesses of all sizes. Whether you're a startup looking to launch a branded payment card quickly or an established business seeking to enhance your payment offerings, the processing of white-label cards can be tailored to meet your unique requirements.

From a branding perspective, white-label card programs provide businesses with heightened visibility and customer loyalty. By issuing branded payment cards, businesses can strengthen their brand identity and foster a deeper connection with their customers. Customizable card designs, exclusive rewards programs, and personalized customer experiences all contribute to building customer loyalty and market competitiveness.

For consumers

For individuals, white-label cards bring convenience and security. These cards can be seamlessly integrated into existing payment ecosystems, enabling individuals to make secure transactions while enjoying the benefits and perks offered by the businesses they frequent. 

Whether it's earning loyalty points, accessing exclusive discounts, or tracking expenses, white-label cards empower individuals with a seamless and tailored payment experience.

Addressing security and regulatory concerns

As with any financial solution, security and regulatory compliance are paramount. Financial institutions and fintech companies offering white-label card programs implement robust security measures to safeguard cardholder data and prevent fraudulent activities. 

Compliance with industry regulations, such as PCI DSS (Payment Card Industry Data Security Standard), ensures that customer data is handled securely. Additionally, data privacy and protection measures are put in place to give cardholders peace of mind when using white-label cards.

Examples of brands that have launched a private label card

Below are two examples of prominent brands that have embraced the white-label card trend in its early stages.

Square

In 2019, Square, a prominent payment processing company, partnered with Marqeta's white-label card processing platform to introduce the Square Card, a business debit card designed specifically for Square's sellers. This strategic move allowed Square's business customers to gain immediate access to funds, reducing their reliance on traditional banking services. 

By leveraging Marqeta's solution, Square not only expanded its product portfolio but also strengthened its relationships with its existing customer base.

Shopify

Another notable fintech player, Stripe, offers businesses APIs to issue their own credit cards, debit cards, and prepaid cards. Shopify, a renowned e-commerce platform, utilized Stripe's card issuing services to create the Shopify Balance Card, designed to help businesses start, grow and run their operations.

This card enables over 1 million of Shopify’s merchants to access their earnings instantly through a smart money management tool. The response to the launch was immediate and overwhelmingly positive, as over 100,000 small businesses in the United States embraced Shopify Balance accounts within the first four months.

Through the implementation of Stripe's white-label solution, Shopify added significant value to its merchants, setting itself apart from other e-commerce platforms.

Benefits reported in the case studies

Companies that have implemented the processes to issue white-label cards have reported several potential benefits, including:

Speed to market

Utilizing a white-label solution enables companies to launch card programs more swiftly. These solutions handle critical aspects such as regulatory compliance, technology development, card design, and manufacturing, which can be time-consuming and costly to manage in-house.

Cost reduction

White-label solutions generally require less investment than building a card-issuing infrastructure from scratch. Consequently, companies can save costs associated with development, maintenance, and compliance.

Enhanced customer engagement and retention

By offering a branded payment solution, companies can build stronger customer loyalty. Customers appreciate the convenience and exclusive perks that come with these cards, leading to higher engagement and retention rates.

Creation of new revenue streams

Companies can generate additional revenue streams by offering supplementary services through the card, such as cash-back rewards, premium subscriptions, or lending services.

What businesses should consider before implementing

Implementing a white-label card program requires careful planning and consideration. While the benefits listed above have been reported by companies that have implemented these strategies, these outcomes are not guaranteed. Businesses need to collaborate closely with their chosen white-label card issuer to ensure a smooth implementation process. 

This involves outlining the desired features and functionalities, integrating with existing payment infrastructure and systems, and training staff to manage the program effectively. Technical requirements, such as API integrations and data synchronization, should be addressed to ensure a seamless user experience.

Future trends and innovations in white-label card programs

Looking ahead, the future of issuing white-label cards holds great promise, driven by several key factors:

Market demand

The ever-evolving demand for financial services presents a significant opportunity. Regardless of their size or industry, businesses are increasingly seeking to expand their service offerings with payment and financial solutions. 

This trend aims to cultivate customer loyalty and explore new revenue streams. As a result, the demand for issuing white-label cards is expected to continue its upward trajectory.

Technological advancements

Fintech advancements, such as the widespread use of APIs and enhanced security measures, are simplifying the adoption of issuing white-label cards for businesses. As technology continues to progress, platforms issuing white-label cards are poised to become even more efficient, flexible, and secure, providing a seamless experience for both businesses and customers.

Developments in financial institutions' regulations

The regulatory landscape in the financial services sector is undergoing significant changes. Regulatory bodies worldwide are displaying a willingness to embrace fintech innovation, with some jurisdictions creating "fintech sandboxes" that facilitate controlled testing of new financial products. Should this trend persist, it could streamline the process for businesses to launch the issuing of white-label card programs.

The future of companies issuing white-label cards faces challenges primarily from increasing competition in the market. With more companies entering the space, businesses may experience pricing pressures and difficulties in standing out from the competition. To succeed, businesses need to differentiate themselves through innovation, personalized experiences, and strong partnerships.

They must also navigate regulatory uncertainties, address cybersecurity risks, and employ strategies to seize opportunities and overcome challenges in this dynamic sector. Continuous monitoring, agile decision-making, and a proactive approach are essential for businesses operating in the white-label card-issuing industry.

Tap’s white-label card solution

Tap’s business portfolio offers a streamlined card-issuing service to businesses of all kinds. Fully accredited, Tap is able to offer its partnering companies Mastercard-powered private cards for a fraction of the cost and time it would take if done directly with the financial services company.

In 2023, Tap provided Bitfinex, the longest-running and most liquid major crypto exchange, with a white-label prepaid card solution. By providing the behind-the-scenes financial infrastructure, the established exchange provided its clients with a unique payment solution and created a new revenue stream for the business.

With the necessary card-issuing license and already-established in-house processing system in place, businesses can quickly create their own white-label cards through Tap’s fiat and cryptocurrency-to-fiat funded card programs and other innovative services.

Conclusion

White-label card issuing is revolutionizing the payment landscape, with its rise signifying a powerful solution in the fintech space, delivering customized payment experiences that cater to the unique needs of businesses and customers. 

As technology continues to drive innovation, white-label card programs offer speed to market, cost reduction, enhanced customer engagement, and the creation of new revenue streams. However, businesses should carefully consider implementation factors and address potential challenges, such as regulatory compliance and cybersecurity risks. 

The future of private-label credit card issuing appears promising, driven by market demand, technological advancements, and regulatory developments. To capitalize on this trend, businesses must differentiate themselves in a competitive landscape and adapt to evolving market dynamics. 

Tap's white-label card solution exemplifies the potential of such programs, providing businesses with streamlined card-issuing services and opening new opportunities for revenue growth. As the industry continues to evolve, white-label card issuing will play a vital role in shaping the future of finance, enabling seamless and tailored payment experiences for businesses and individuals alike. 

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Join us on this exciting journey as we reshape the landscape of fintech in Sweden. Tap into a world of financial possibilities with our intuitive Swedish app, designed to simplify your financial life and empower you to achieve your goals.

Generational wealth is not just about building a large stash of money, it's also about how you pass it on. Once you've paid off your debts and established various forms of income, the next step is to start to build generational wealth that can surpass your lifetime.

In this article, we explore what generational wealth is and how to start building it. As with any investment account, the earlier you start the better the end result. While building generational wealth is a great place to be, we encourage you to get your current financial situation in order and build your financial education before you start exploring this concept.

What is generational wealth?

Generational wealth, also called family wealth, is the transfer of assets from one generation to the next within a family. This may include multiple streams of income from financial investments like stocks and bonds, as well as valuable assets, real estate, and family businesses. These assets continue to generate financial value as opposed to just being a lump sum of cash.

It's important to note that when an individual is born into wealth, that wealth was created by a generation before them, whether that be decades or centuries before. This financial success can help eliminate financial struggles for generations to come, or if not handled correctly, could be eradicated by just one generation.

The key factor when it comes to passing on generational wealth

Creating wealth is not the hardest part, the hardest part is educating the next generations on how to manage this wealth. According to the Williams Group wealth consultancy, 70% of wealthy families lose their wealth by the second generation while a whopping 90% lose it by the third. 

Generational wealth is not about creating enough money to allow your children’s children to sit around all day, it’s about passing wealth down for generations to come to make the world a better place and empower the family tree. It's not about materialism or consumerism, it should be about financial education and philanthropy. Consider how important generational wealth is to you before embarking on building wealth for future generations.

The key steps to building generational wealth

There are two key components that need to come together in order to build generational wealth: firstly, building this wealth, and secondly, passing on this wealth. In this first section, we will cover the former. 

Creating generational wealth isn't going to happen overnight. It's a journey that necessitates time, purposeful planning, and commitment. There are no shortcuts when it comes to creating generational wealth, it's a marathon, not a sprint, no matter which financial assets or stock market you might choose to invest in.

It involves not only taking care of your personal finances through proper planning but also educating the next generation about financial literacy and personal finance. This legacy wealth could go on to fund a child's education or college education, or be used to build an impressive real estate portfolio or invest in family businesses.

It's not about inheriting a trust fund at a young age so that one can simply enjoy life, it's about learning how to be financially fit, understanding how to create wealth, and hopefully building a secure financial future for the next generation.

1. Build a solid financial foundation

First and foremost, you will need to build a solid financial foundation before you start to build generational wealth which means you need to get out of debt and establish an emergency fund (three to six months' worth of expenses).

Do not progress to step two until this step has been completed. In order to build wealth one needs a firm foundation, so set yourself up to weather any storms that might come your way before you embark on the journey to create generational wealth.

2. Start allocating 15% of your income to a retirement fund

Now that you are out of debt and have established an emergency fund, allocate at least 15% to your retirement fund. In this step, consistency is key. Determine what kind of investment account (whether using new-age financial assets or the stock market) you wish to use, consult a financial advisor if necessary, and start allocating 15% of your gross income to this tax-advantaged retirement account.

If you consistently do this for two to three decades you will have built enough wealth to live comfortably after retirement and pass some on. 

3. Build slowly and consistently

As we mentioned earlier, building generational wealth is a marathon, not a sprint. This is a long-term commitment that requires no rush and no pressure. Commit to consistently building your wealth for the rest of your life. 

4. Communicate with your family and educate them about money

Discuss your financial goals with your children and use the opportunity to share your knowledge about wealth. If your wealth creation involves investing in real estate, building a family business, or any avenue that requires active participation, ensure that you keep your descendants in the loop and provide them with the wisdom, knowledge, and skills to maintain and ideally continue to build generational wealth. 

By discussing money frequently, being open about mistakes you have made with finances, and demonstrating smart financial decisions in your own life, you can teach your children about the importance of managing their money wisely.

5. Officiate things by making them legal

When it comes to building generational wealth, a financial advisor is optional but including a lawyer is essential. This step ensures that the generational wealth you spent your lifetime building is distributed accordingly.

Ensure that you go through the necessary legal proceedings to make sure you're not only on the right side of the law but also that the generational wealth is passed on as per your intentions. 

How to pass on generational wealth

Now that you've put the processes in place to start to build generational wealth, the next step is to put in place the necessary steps to ensure a smooth handoff. Here are three key steps to ensure that your generational wealth remains a blessing and not a chaotic curse for those left behind. 

1. Create a will

No matter what earthly possessions or family wealth one has, a will is essential for everyone 18 years and older. This legal document outlines how your assets are distributed after you die. While consulting legal counsel is advised, there are plenty of templates and methods online for writing and establishing your will. Regardless of whether you create generational wealth or not, this step is important.

2. Establish an estate plan

Estate planning entails organizing your possessions and determining how they should be handled after you have departed. A will is a very important component, but if your net worth exceeds $1 million, consulting a professional could be wise to guarantee that all the details of your estate plan are in order. 

Expert estate planners can help with more complex situations, like a family business or intricate family wealth, as well as demonstrate tactics for diminishing federal taxes so you don't pay any more than necessary.

3. Put together a legacy drawer outlining your family wealth

Crafting your legacy drawer should be on everyone's to-do list, it is a place where you store important documentation and items that will become invaluable for your family (and family wealth) should anything happen. While there are many documents to consider keeping in this secure location, here are a few must-haves:

• Your will and estate plan
• Financial account information
• A copy of your monthly budget
• Life insurance policy
• Tax returns
• Account passwords
• Personal letters to loved ones
• Funeral instructions

Create lasting generational wealth

If you want to create lasting generational wealth and blessings for generations to come, it's time to put your head down and get started. Consider this a long-term journey that with the right investments and education will empower generations to come.

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Arbitrage is an alternative trading style where investors buy an asset on one marketplace and sell it on another for a higher price. Used across a wide range of asset classes in different markets, for example, the stock market like the New York Stock Exchange, financial markets, commodity trading, and cryptocurrencies. This style of trading can be very lucrative if you know what you're doing, but as always, there is a risk involved.

Below we explore what arbitrage is, what an arbitrage trade looks like, and what risks are involved.

What is arbitrage?

Arbitration is the process of profiting from differences in asset prices by simultaneously buying and selling the same asset in different markets. Arbitrage exists due to market inefficiencies, which it both exploits and resolves by bringing attention to the price difference. 

Traders that use this form of trading are called arbitrageurs and will typically look for arbitrage opportunities within one chosen asset class. Arbitrageurs look for unique circumstances usually across foreign markets that allow for the same goods to be traded for different prices. For instance, an arbitrageur will buy the same stock on the London Stock Exchange and sell it on the New York Stock Exchange and collect a profit.

While this sounds foolproof, the reality is that arbitrageurs require an in-depth knowledge of different markets, the skills required to spot arbitrage opportunities, and a keen understanding of the relevant news cycles. With notable risks involved, arbitrage trading is not advised for beginners. 

What are the risks involved with arbitrage trades?

While arbitrage trading may sound easy, it is quite complicated. Many things can go wrong if an investor does not fully understand the market and the variables involved before trying to make a quick profit.

Those with fewer resources and expertise are less likely to execute arbitrage because it requires a large amount of up-front cash as well as working knowledge of derivatives and margin trading. Arbitrage trading is not for every investor. Before you jump on any arbitrage opportunities, below are several risks involved in the practice:

Errors in market price differences

Considering that arbitrage trades are based on market inefficiencies, there is a high chance that the price could quickly take a turn, leaving the investor with a large amount of an asset. To overcome this unpredictability, arbitrageurs study financial markets, stay informed with the news, and build a deep understanding of the markets in which they invest. 

Fees and exchange rates

Brokerage fees, transaction costs and foreign exchange rates play a big role in unforeseen expenses when conducting arbitrage trading. These expenses should be factored into the cost calculations prior to taking on any arbitrage opportunities in order to best understand what you're getting into. 

Timing

Possibly the most crucial element to this trading technique, timing needs to be well calculated as it plays a role in whether you catch or miss the price discrepancies and ultimately profit from your trades. 

How does one get into arbitrage trading?

As arbitrage trading involved trading between international markets, the first place to start is by thoroughly monitoring and researching international markets and news. In doing so, the arbitrageur will look for any discrepancies in asset prices across the markets, and pinpoint a precise time to buy and sell the asset across the different markets. This is done at the same time so as not to miss out on price opportunities and be left holding onto an asset. 

An example of arbitrage

To assist you in better understanding what is arbitrage, let's take a look at an example of an arbitrage trade. Say you have your eye on a stock that is traded on both the London Stock Exchange and Tokyo Stock Exchange (TYO). From monitoring the price fluctuations you pinpoint the perfect moment to execute a buy-sell trades. Let's say you're looking at stocks in an automotive company as it's valued at $100 on the LSE and $75 on the TYO (obviously priced in their respective currencies).

Taking advantage of the price discrepancy, time difference and fluctuating circumstances of each market, you buy the cheaper version of the stock and simultaneously sell it on the higher-valued exchange. 

While the price discrepancy indicates profits of $25 per share bought and sold, the reality is that there will also be discrepancies in the currencies used and the fees payable for conducting these trades. The more shares you buy the higher your profits will be, so ensure that you calculate the earning potential before investing a large amount of capital. 

Should I get into arbitrage trading?

While the opportunity for profits sounds great, there is a lot of research and calculations required in order to be successful in this field. As with all investment strategies and trading techniques, arbitrage is no exception to the amount of risk involved. If you're willing to do the work and put in the hours, arbitrage trading could work in your favor. 

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There are plenty of certainties in life, and trading is no different. Whether you’re a novice trader or a professional, one of the few guarantees when it comes to any market is that there will be bear markets, and there will be bull markets.

It’s easy to get caught up in the highs of a bull market, but when it comes to navigating bear markets one needs to keep their wits about them. Below we outline 8 trading strategies to take with you through times of dropping price movements. 

Only invest what you’re willing to lose

The golden rule of investing: never invest more than you can afford to lose. It might sound grim, but the reality is that no market or asset is ever guaranteed to succeed so be wise with your investments. Whether in a bear market or a bull market, this golden rule should never be skipped.

Once you’ve set up your budget and determined your living expenses (rent, groceries, insurance, etc), only then can you establish how much money you can invest. Bear markets and price corrections can have a significant impact on your finances, never take a chance with your living expenses or by underestimating the importance of establishing what your risk tolerance is.

Embrace dollar cost averaging

Economic cycles will inherently go up and down, and a great way to minimize risk is to implement dollar cost averaging into your trading strategy. Ideal for traders with a 10+ year timeline, dollar cost averaging involves buying the same asset on a consistent basis no matter the price. With the varying price differences, investors typically accumulate more for less over a long period of time. 

This dollar cost averaging strategy is particularly useful during bear markets when the asset prices are typically undervalued, which leads us to the next point. 

Find undervalued assets

During a bear market, asset prices are often described as being pummeled and underpriced, presenting an excellent buying opportunity for the savvy investor. The trick here is to know what you’re looking for and to conduct adequate research. In a bear market, both good and poor companies have hammered down asset prices, ensure you do your research to determine the one from the other. 

Bear markets tend to also be a great time to accumulate more from the companies/assets you are already invested in, accumulating the assets for less than they’re worth. This is a common strategy used in the stock markets when stock prices are undervalued.

Market timing can mean everything whether you're in bear market territory or not, so make sure you have adequate information before engaging in declining markets.

Branch out with diversification

Bear markets are a great time to implement an asset allocation strategy and broaden your investment horizons. When asset prices are low (even during market volatility) it creates an excellent buy-in opportunity for investors to spread their portfolios across alternative investments such as bonds, different asset classes, cash, and stocks.

Regardless of whether it's a bear market or a bull market, always consider your risk tolerance and financial goals, and as always conduct your own research, as you explore different markets and determine whether they would be a good fit for your portfolio. 

Explore non-cyclical stocks on the stock market

Non-cyclical or defensive stocks are a type of investment that usually do well even when the overall stock market is down. These stocks are from companies that make things like toothpaste, toilet paper, and soap, items that people still use even during tough times and market downturn. They usually pay regular dividends and have stable earnings, which can make them a good choice for investors who want to reduce risk during stock market decline.

Treat bear markets like you would a bear

During a bear market sometimes the best thing to do is exactly what you’d do if faced with a real bear in the woods: play dead and don’t make any sudden moves. In the financial sense, this means moving your money to safe places and not making any sudden, irrational buy/sell trades.

This typically involves putting more of your money into safe investments that you can easily access, like certificates of deposit (CDs) or U.S. Treasury bills. By doing this, you can ride out the market's ups and downs without losing too much money

Leave your emotions out of it

On Wall Street, there's a saying that 'The Dow climbs a wall of worry,' which means that even when things seem bad, the stock market can keep going up. Applicable across all markets, as an investor, it's important to not let your emotions guide your decisions. Sometimes big problems turn out to be not so bad in the long run. Fear can make it hard to think rationally, so it's best to stay calm and carry on with your investment strategy.

Short selling

If prices are falling, there are ways to make money from the situation. One way is through short selling, where you borrow shares in a company, ETF or asset and sell them with the hope of buying them back at a lower price. Another option is using put options, which increase in value as stock prices fall and limit your potential losses. 

Inverse exchange-traded funds (ETFs) also let you profit from a falling bear market by increasing in value when major indexes go down. These can be easily purchased from your brokerage account without requiring margin accounts or advanced trading skills.

Not ideal for beginner traders, only implement these strategies if you feel confident to do so or have contacted the necessary professionals. 

In conclusion

Bear markets are an inevitable part of trading, and it's essential to be prepared with strategies to minimize losses and even profit from the situation. By only investing what you can afford to lose, embracing dollar cost averaging, finding undervalued assets, diversifying your portfolio, exploring non-cyclical stocks, leaving emotions out of your decisions, and potentially using short selling or inverse ETFs, you can weather the storm of any bear market. 

It's crucial to remember to stay calm, do your research, and seek professional advice if needed. With these strategies in mind, you can navigate a bear market with confidence and come out on top.

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