Master the Head and Shoulders Pattern: Unlock the Secrets.

Welcome back to the Strategic Trading Academy! In today’s lesson, we’ll focus on how to master the head and shoulders pattern. Previously, we covered trading the M and W patterns.

Why It Is Important to Understand the Basics of Patterns

Understanding the basics of patterns is crucial because it lays the foundation for successfully trading our strategies.

Inverted Head and Shoulders

To master the head and shoulders pattern, we must first recognize its appearance

on both support and resistance levels, acting as a reversal pattern.

An inverted head and shoulders pattern appears at a support trend, key level, or zone.

If this pattern appears elsewhere, it could be a trap set by market makers.

Master the Head and Shoulder Pattern

As I often emphasize on my YouTube channel, our Funds and Galore community focuses on high-probability setups

to gain an edge over the market and maintain consistency and profitability in the long run.

How to Capitalize on an Inverted Head and Shoulders Pattern:

To capitalize on an inverted head and shoulders pattern,

patience is vital. Allow the pattern to form in the support area. The sequence is as follows:

  1. The market drops to the support area, forming the left shoulder.
  2. Prices drop slightly lower, creating the head.
  3. The right shoulder forms at the same level as the left shoulder.
How to Master head and shoulder

This confirmation indicates that the market has created our bullish

inverted head and shoulders pattern, signalling high-probability buying opportunities.

To master this pattern, it is essential to backtest and understand these setups thoroughly,

ensuring you can capitalize on these high-probability opportunities.

How Do You Know When to Enter an Inverted Head and Shoulders Pattern?

A practical lesson will be available; to access it,

all you need to do is click the link provided in this blog post.

The question now is; how do we know when to place our entries?

The best way to approach this is by placing your entries after the break and retest

from the neckline of the head and shoulders pattern.

After this confirmation, you can place your buy entries until the end of the pattern (take profit),

and you can also place your stop loss just below the neckline.

How to Master Head and shoulder pattern

This will ensure you have an edge over the market by risking less than what you potentially stand to make. Click here to access the practical lesson.

Master the Head and Shoulders Pattern on the Resistance Area: Head and Shoulders Pattern

To master a resistant head and shoulders pattern, one should be aware that these setups

should only be traded on a resistance trend, key level, or zone.

If this pattern appears elsewhere, it could be a trap set by market makers.

As I often emphasize on my YouTube channel, our Funds and Galore community focuses on high-probability

setups to gain an edge over the market and maintain consistency and profitability in the long run.

How to Capitalize on a Head and Shoulders Pattern (Resistance Area): Unlock the Secrets to Profitable Trading!

To capitalize on a head and shoulders pattern that appears in the resistance area,

as I previously said, patience is vital.

Allow the pattern to form in the resistance area. The sequence is as follows:

  1. The market pushes up to the resistance area, forming the left shoulder.
  2. Prices then push further up above our left shoulder, creating the head.
  3. The right shoulder forms at the same level as the left shoulder.
Master head and shoulder pattern

This confirmation indicates that the market has created our bearish

head and shoulders pattern, signalling high-probability selling opportunities.

To master this pattern, it is essential to backtest and understand these setups thoroughly,

ensuring you can capitalize on these high-probability opportunities.

How Do You Know When to Enter a Head and Shoulders Pattern?

A practical lesson will be available; to access it, all you need to do is click the link provided in this blog post.

The question now is; how do we know when to place our entries?

The best way to approach this is by placing your entries after the break and retest

from the neckline of the head and shoulders pattern.

After this confirmation, you can place your sell entries until the end of the pattern (take profit),

and you can also place your stop loss just above the neckline.

Master the head and shoulder description

This will ensure you have an edge over the market by risking less than what you potentially stand to make. Click here to access the practical lesson.

Conclusion: Master the Head and Shoulders Pattern: Unlock the Secrets to Profitable Trading!

In conclusion, mastering the head and shoulders pattern is essential for profitable trading.

Understanding the basics of patterns provides the foundation for successful strategies.

Recognizing the head and shoulders pattern on support and resistance levels

helps identify high-probability setups. For an inverted head and shoulders pattern at support,

wait for the market to form the left shoulder, head, and right shoulder, signalling a buying opportunity.

Conversely, at resistance, a head and shoulders pattern signals a selling opportunity.

Patience and thorough backtesting are crucial for capitalizing on these patterns.

To know when to enter, look for a break and retest from the neckline, ensuring you risk less than your potential profit.

For practical lessons, follow the links provided in the blog post. Happy trading!

Secret of Success: Mastering M’s/W’s

Secret of Success: Mastering M’s/W’s

Welcome to the Advanced Trading Academy, where we will be exploring the secret of success in trading.

Our first lesson will primarily focus on patterns that the market tends to repeat over and over again.

secret of success

It is important for you to click the links provided in the upcoming headings because they will lead you straight to the practical lessons.


Always take notes to ensure you don’t forget any valuable information,

as this can be the difference between winning and losing in the long term.

Mastering M’s and W’s Patterns

The first rule for successfully trading M’s and W’s patterns is to understand

that these patterns occur at support and resistance areas.


As we always say, look for buying opportunities at the support areas and look for selling opportunities at the resistance areas,

as covered in the basic strategy of our academy.

Secret of Success: Mastering M Pattern

M patterns always occur at the resistance area, whether in a bullish trend,

bearish trend, or consolidation trend—the rule remains the same.

Secret of success


If you spot one anywhere else, you should not trade it,

as it could mean that market makers are trying to trap you.

By knowing this secret of success, you are already ahead of many traders

who have been attempting to trade this pattern but consistently fail to get it right.

Decoding the Secret: Importance of M’s

Understanding the importance of M patterns is crucial.

M patterns strengthen the continuation of a trend.

Trends that don’t experience reversal patterns like M’s at the resistance lack merit.

If you spot a trend without reversal patterns like M’s,

entering at the resistance means our trades won’t have high probability.

At Funds and Galore, we encourage our students to only place entries with high-probability setups.

Secret of Success: Mastering W Pattern

W patterns always occur at the support area, whether in a bullish trend,

bearish trend, or consolidation trend—the rule remains the same.

If you spot one anywhere else, you should not trade it,

as it could mean that market makers are trying to trap you.

Knowing this secret of success puts you ahead of many traders who consistently fail to get it right.

Watch how we successfully trade these patterns in the practical course, which will be presented to you shortly.

Decoding the Secret: Importance of W’s

Understanding the importance of W patterns is essential. W patterns strengthen the continuation of a trend.

Trends that don’t experience reversal patterns like W’s at the support lack merit.

If you spot a trend without reversal patterns like W’s,

entering at the support means our trades won’t have high probability.

At Funds and Galore, we emphasize that our students place entries with high-probability setups.

To do this successfully, you also need to master the skill of being a patient trader.

This will help you grow your account over time and balance trading with your personal life.

Professional traders don’t spend all day looking at the charts;

instead, we spend less than two hours in the market.

Secret to Success: How to Approach the Practical Lesson

The first practical lesson will show you how to trade these patterns effectively.

Stay tuned and prepare to put these insights into action.

Conclusion

Mastering the M and W patterns at their respective support

and resistance areas is fundamental for successful trading.


Understanding these patterns allows you to make high-probability

trades and avoid common traps set by market makers.


At Funds and Galore, we prioritize high-probability setups and emphasize patience and strategy.


By focusing on these principles and integrating them into your trading routine,

you can achieve consistent success and maintain a balanced lifestyle.

Stock Market Bubble History

The History of the Stock Market

Welcome to the second article in my series following the previous piece, “Our Financial History,” under the category of Forex and Stocks. In this article, we will dive into the stock market bubble history.

to uncover why our economy today is so intertwined with the stock market.

Some of you may have noticed my passion for stocks, evident in my trading activities.

For those unfamiliar with my background, I primarily trade indices—

these are groups of publicly traded stocks such as the Nasdaq 100, USA 30, German 30, and S&P 500.

The stock market is a platform where companies offer their shares to the public through an Initial Public Offering (IPO).

This allows investors, like you and me, to buy and sell company shares flexibly,

investing any amount of money we’re willing to risk to generate a return.

Now, let’s journey back to ancient Greece to trace the early practices of the stock market.

The Voyage of Pythons

History tells us that during ancient Greece’s maritime trade and exploration era,

ship captains realized the benefits of raising funds to finance their voyages.

These expeditions were expensive and risky.

Stock Market Bubble

The primary risk was that the captain’s ship might get lost at sea, never to return.

Another risk was the possibility of returning with nothing valuable.

Additionally, captains had to account for the costs

of ship maintenance, crew payments, supplies, and cargo.

The Importance of Investors: History of the Stock Market

Investors were the lifeline of these long and risky voyages,

providing the necessary liquidity to finance explorations.

However, their motivation was not altruism;

they were speculating that their investment would allow the captain

and crew to travel to distant lands and return with valuable goods.

Stock Market Bubble

These goods would be sold upon arrival, and the profits distributed accordingly.

If the voyage was successful, the investor, captain,

and crew would share the profits. However,

if the crew returned empty-handed or the ship was lost,

everyone, including the investors, would incur losses.

These agreements laid the foundation for what we now know

as venture capitalism and joint-stock companies.

Dutch East India Company of the 1600s: Stock Market Bubble

The Dutch East India Company, known as the Vereenigde Oostindische Compagnie (VOC),

was founded in the early 1600s in the Netherlands.

This company was one of the first to function as a joint-stock company.

Initial Public Offering (IPO)

What is an IPO, you may ask? Well, to put it simply,

an Initial Public Offering is when a private company decides to issue shares to the public for the first time.

Stock Market Bubble

This allows anyone with internet access to buy and sell shares of companies with each other in real-time.

In the modern day, anyone who has capital and internet access can buy and sell shares of publicly traded companies.

Why Private Companies go Public

The benefits of private companies going public include raising a large

amount of capital for expansion, such as building more factories,

which creates more jobs, paying off previous debts to improve balance sheets,

and increasing the company’s visibility to a larger audience.

Stock Market Bubble
You can have a good product, but if your business is not visible, you won’t drive sales.

IPOs have been around for far longer than we have existed.

This is why I stress the importance of referring back to our history;

through understanding our history, we become better adapted to forecast our present and our future.

The First Initial Public Offering (IPO)

During the early 1600s, the Dutch East India Company was interested in getting involved in international trade,

but the problem they faced was that the company did not have enough capital to finance the project.

So, the VOC issued the first IPO to raise funds beginning a stock bubble .

Over time, they were able to sell these shares to individuals or organizations that could afford to purchase them,

like merchants and affluent citizens. As more and more of these shares were sold,

it eventually reached a point where shareholders could buy and sell them from one another.

For example, if two merchants, Mr. Bakker and Mr. Achterberg, bought shares from VOC (let’s say 1 share = $50)

at the time they purchased these shares. Mr. Bakker buys 5 shares, and Mr. Achterberg buys 2 shares.

As more and more merchants and shopkeepers rushed to buy these shares, the demand increased,

causing the share price to rise from $50 to $85 per share.

Let’s work out Mr. Bakker and Mr. Achterberg’s profits if they were to sell at the current market price.

Step 1: Example of Share Purchase

  • Merchant Mr. Bakker buys 5 shares at $50 each.
  • Merchant Mr. Achterberg buys 2 shares at $50 each.

Step 2: Increase in Share Price

  • As more people rushed to buy shares, the demand increased, causing the share price to rise from $50 to $85.

Step 3: Calculating Profits

Mr. Bakker’s Investment and Profit:
  1. Initial investment: 5 shares × $50 = $250
  2. Current market value: 5 shares × $85 = $425
  3. Profit: $425 (current value) – $250 (initial investment) = $175
Mr. Achterberg’s Investment and Profit:
  1. Initial investment: 2 shares × $50 = $100
  2. Current market value: 2 shares × $85 = $170
  3. Profit: $170 (current value) – $100 (initial investment) = $70

Step 4: Summary of Profits

  • Mr. Bakker made a profit of $175.
  • Mr. Achterberg made a profit of $70.

By issuing the first IPO, the VOC was able to raise capital for its trading ventures,

benefiting early investors like Mr. Bakker and Mr. Achterberg from rising

share prices which lead to an early stock market bubble.

Share prices could fluctuate based on rumors,

and a drop from $85 to $30 per share could trigger panic selling, causing further declines.

Shareholders had limited liability, meaning they would only lose their investment

if the company went insolvent and wouldn’t be liable for the company’s debts.

VOC shares were traded on the Amsterdam stock exchange.

The Expansion of the VOC Empire

Profits from new projects, such as vast trade networks for spices, silk, and tea,

allowed the VOC to establish colonies and trading camps in areas

like the Cape Colony (South Africa), India, and Indonesia.

Stock Market Bubble

The company built a monopoly, including factories

and the ability to negotiate trade agreements with local rulers.

Stock Market Bubble History: Conclusion

The Dutch East India Company came to an end in 1799.

The government seized its vast monopoly colonies

due to the company’s long-term debt,

corruption, and increasing competition as rivals began issuing their own shares.

The VOC has left a lasting influence on today’s corporate world.

It’s important to note that when a company’s share prices dropped during that time,

only the shareholders and the company bore the consequences, not the entire economy.

In contrast, a stock market crash today affects the whole economy,

impacting everyone whether they invest or not.

The history of stock market bubbles reveals that while the fundamental mechanics

of investing and speculation have remained consistent,

the scale and interconnectedness of modern markets have drastically increased.

Understanding these historical events helps us grasp the roots of

today’s market dynamics and the potential risks involved.

By learning from past bubbles, investors and policymakers can better navigate the complexities

of modern financial systems, aiming to mitigate the impact of future market disruptions.

The Collapse of the Big Banks: Financial Crisis of 2008, Part 2

The Collapse of the Big Banks: Introduction

This article, “The Collapse of the Big Banks, Part 2,” continues from my previous piece titled “2008 Financial Crisis, Part 1.”

In the earlier article, we discussed laws passed in the ’90s, such as

the Community Reinvestment Act of 1977, amended in 1995,

which aimed to combat discrimination against lower-income home borrowers.

In 1999, President Bill Clinton passed the GLBA Act,

repealing key provisions of the Glass-Steagall Act of 1933.

The Collapse of the Big Banks

With these fundamental forces at play, Wall Street capitalized

on the opportunity by creating Collateralized Debt Obligations (CDOs).

In my previous article, I explained that a CDO works

like three cascading trays: the top tray being the least risky,

the middle tray moderately risky, and the bottom tray the riskiest.

Problems that Followed the Use of CDOs: Financial Crisis

As mentioned, CDOs were inherently risky because they mixed prime loans

with subprime loans. Before diving into the ensuing horror,

let’s consider the perspective of the institutions that issued CDOs.

When the government passed legislation like the Community Reinvestment Act of 1977,

it legally forced banks to lower interest rates to accommodate community

members who previously couldn’t afford these loans.

The collapse of the big banks

This exposed banks to high risks since subprime lenders are prone to defaulting.

A CDO allowed banks to pass some of the risk to investors who

purchased them while making billions in the process.

Credit Rating Agencies: The Collapse of the Big Banks

Rating agencies like Moody’s were heavily criticized and blamed for the 2008 financial crisis.

Notably, Warren Buffett’s Berkshire Hathaway owned 13.5% of Moody’s stock during the crisis.

This raises the question: How could a rating agency like Moody’s

be criticized when a renowned investor owned a significant stake?

The collapse of the big banks
Warren Buffett, a philanthropist and well-renowned investor known for his unique style of investing, is the CEO and chairman of Berkshire Hathaway.

The problem arose when institutions and lenders of CDOs allowed many

American citizens to obtain mortgages without proper oversight.

When the situation spiraled out of control, banks turned to

credit rating agencies to evaluate the risk associated with CDOs.

Instead of providing accurate evaluations, these agencies rated

the bundled investments as triple-A (AAA), the highest credit rating.

This AAA rating misled investors into believing these investments were safe,

even safe enough for pension funds. This should be considered one of the biggest financial crimes ever committed.

Why Did the Credit Rating Agencies Give False Ratings?

The reason why credit agencies rated the CDOs with a triple-A rating was twofold: firstly,

they didn’t want these institutions who issued them (investment banks, commercial banks, etc.)

to go to their competitors who might give them the triple-A

rating they wanted if they themselves did not do so.

Secondly, these rating agencies made billions

by giving these risky securities a triple-A (AAA) rating.

The collapse of the big banks

The CEOs of such institutions typically earned their salaries

in the form of salary, bonuses, and stock options.

Why Were Financial Institutions Adamant About Getting a Triple-A Rating?

Financial institutions aimed to mitigate their risk by selling CDOs to investors.

It was important for them to get the triple-A rating

because a triple-A rating meant that more investors would buy these risky securities.

The amount of money they got as compensation was enormous.

For example, the CEO of Lehman Brothers,

Richard Fuld, earned around $22 million in 2007, a year before the collapse of Lehman Brothers.

The CEO of Merrill Lynch, Stanley O’Neal, earned a staggering $161 million when he resigned in 2007.

The Creation of the Credit Default Swap: The Collapse of the Big Banks

The next part of the story is where everything gets even more chaotic with the invention of Credit Default Swaps (CDS).

According to Tim Vipond, a credit default swap is a form of credit derivative

that acts as protection against default for investors who purchase them.

He continues by stating that with the purchase of a CDS,

the purchaser agrees to make periodic payments to the seller until the credit maturity date.

Financial Crisis 2008

Therefore, in return, the seller agrees that if the debt issuer defaults,

the seller will have to pay, by agreement,

all the premiums and interest that would’ve been paid up to the date of maturity.

Allow me to make an example for clarity:

Mr. Stark gets a mortgage from ABC Bank to purchase a house, resulting in Mr.

Stark making his monthly repayments (principal + interest)

to ABC Bank. In this scenario, Mr. Stark is a subprime lender.

Financial scientists and mathematicians from Wall Street created

a CDS to act like insurance for ABC Bank.

An insurance company would offer this product to ABC Bank,

meaning that when the bank receives monthly payments from Mr. Stark,

ABC Bank would pay the insurance company a premium

(by giving the insurance company a portion of the interest made from Mr. Stark’s monthly payment).

ABC Bank didn’t mind this because it meant their risk was lower,

and if Mr. Stark defaulted on his payments,

the insurance company would have to cover Mr. Stark’s payments to ABC Bank.

How Big Was the Credit Default Swaps Market?

In 2007, the credit default swap market was estimated to be around $45 trillion, while the stock market averaged $22 trillion,

$7.1 trillion in mortgages, and $4.4 trillion in U.S. Treasuries. Alarming, isn’t it? But it gets worse.

The Collapse of the big banks

How Did the Big Banks Use CDS as a Hedge Against MBS: The Collapse of the Big Banks?

Mortgage-backed securities (MBS) were a bunch of bundled-up mortgages that banks issued as securities,

which were eventually sold to investors. So basically,

MBS was backed by mortgage payments from homeowners

(like Mr. Stark, for example), meaning that investors’ returns were

dependent on homeowners paying off their mortgages.

What happened next was that these institutions (the big banks) used

credit default swaps as a hedge against mortgage-backed securities.

They were betting against their own clients (borrowers of the mortgage loans). This created

a conflict of interest—banks were actively encouraging investors to purchase these MBS

while at the same time betting they would fail. Sounds like a script from a Hollywood movie.

The Big Banks Let Greed Consume Them: The Collapse of the Big Banks

By this time, the banks did not look like they were slowing down. They continued to bet way too much,

betting far more than they had in their reserves.

The reason these institutions were allowed to do so was because CDS were not technically insurance;

they were swaps, meaning that banks did not need all that money in

their reserves to back up their bets if they were wrong.

Consolidated Supervised Entity (CSE) Program

In 2004, the U.S. Securities and Exchange Commission (SEC), through this program,

allowed these big institutions to decide how much money they needed

to keep in their reserves to cover their bets when they went wrong.

This was a fundamental mistake created by the SEC (I’m wondering to myself why they allowed such).

This meant that banks now had even more freedom to reduce the amount

of reserves and maximize their investing and lending practices.

Leveraging

End of Part 2 of the Big Banks: The Collapse of the Big Banks

I know I left you on a cliffhanger, but this is not the end of the series on the financial crisis of 2008.

Another article will be posted. The reason for this is simply so that I don’t

force everything into one article. Now let’s do a quick recap of what we covered in this article.

In this part of “The Collapse of the Big Banks,”

we explored how risky financial products and poor oversight led to the 2008 crisis.

We discussed how Collateralized Debt Obligations (CDOs) mixed safe and risky loans, tricking investors.

Credit rating agencies like Moody’s rated these risky investments as very safe (AAA),

misleading many and making billions in the process.

Executives of big banks earned huge salaries and bonuses while pushing these dangerous products.

We also looked at Credit Default Swaps (CDS), which were supposed

to protect against defaults but ended up being used by banks to bet against their own clients.

Finally, we talked about how the SEC’s 2004 rule changes

let banks keep less money in reserves, allowing them to take on even more risk.

Mastering Technical Analysis: The Power of Price Action

Understanding Price Action

Mastering technical analysis requires a solid grasp of price action. Price action refers to the movement of the overall market price.

Retail traders utilize price action to discern whether the market is bullish or bearish, using this insight to make calculated trades.

When an index like the Nasdaq is bullish, it simply means the market is trending upwards. Conversely,

Mastering Technical Analysis

when the Nasdaq index is bearish, it indicates that the market is trending downwards.

Mastering Technical Analysis

Retail traders who understand price action study past market trends to predict future market movements, enabling them to make informed and strategic trades.

Mastering Technical Analysis

Technical analysis encompasses various techniques that retail traders use to make calculated decisions on whether to buy or sell forex pairs (e.g., EUR/USD, GBP/USD) or indices (e.g., S&P 500, Nasdaq 100).

How Do Retail Investors Know When to Buy or Sell?

The reason many traders fail to make a profit is that they struggle to apply technical analysis effectively.

This prevents them from identifying whether they are strong buyers or sellers. It is crucial to trade with the market, not against it,

because we do not control the market—we only follow it. To understand the flow of price, one must first recognize that the market moves in three trends.

Bullish Trend

A bullish trend indicates that a specific stock, index, or commodity is performing well.

For example, when we observe a bullish market in Apple (AAPL) stock using technical analysis, it signals that retail traders should ideally look for buying opportunities (trading with the market).

Conversely, traders seeking selling opportunities in a bullish market are essentially trading against the market.

I personally do not recommend trading against the market. While it is achievable through practice,

I wouldn’t advise it, especially for beginners. I will teach you how I trade personally, not strategies I don’t use.

Mastering Technical Analysis

Bearish Trend

A bearish trend, identified through technical analysis, informs us that a specific stock, index, or commodity is underperforming.

For instance, a bearish market in Tesla (TSLA) stock suggests that retail traders should ideally look for selling opportunities (trading with the market).

On the other hand, traders seeking buying opportunities in a bearish market are trading against the market. Again, I don’t recommend trading against the market. Though possible with experience, it’s not advisable for those just starting out.

Consolidation Trend

The last trend you may encounter is a consolidation trend, which occurs when the market is indecisive.

This trend signifies a balance between sellers and buyers. Seasoned traders often watch for these trends as they can also be profitable.

Typically, after a period of consolidation lasting a week or so, the market often breaks into a bullish or bearish trend.

What to Expect: Mastering Technical Analysis

It’s important to recognize that trading is a game. Just like playing FIFA with friends, sometimes you win, sometimes you lose. Forex trading operates on the same principle.

Your goal is to avoid letting losses affect your mindset. Similar to FIFA, where your objective is to equalize and then score to win,

Mastering Technical Analysis
A stop-loss and take-profit order empower you to manage your potential losses and gains effectively.

in forex, your goal is to outperform the market. How does one achieve this, considering only a mere 10% succeed? The answer lies in mastering technical analysis.

I’m excited to teach you how to use price action to your advantage, helping you become part of the successful 10%.

I will show you exactly how to trade in bullish, bearish, and even consolidation channels using technical analysis.

Mastering Technical Analysis: Support and Resistance

Support and resistance are areas in the market where traders look for buying or selling opportunities.

At resistance levels, traders typically look for selling opportunities because the market often reverses downward from these points.

Conversely, at support levels, traders look for buying opportunities because the market often reverses upward.

I continuously emphasize the importance of using stop-loss orders in my teachings.

Just as it is easy for us to identify these areas, market makers and institutional traders also target these zones to exploit traders who do not use stop losses,

are impatient, or do not know how to utilize these areas effectively. Market makers can legally manipulate these levels to close their own positions due to the size of their investments.

Warren Buffett once stated that the stock market is a transfer of wealth from the impatient to the patient, highlighting the importance of a disciplined and patient trading approach.

Impulse and Correction: The Power of Price Action

We have identified that the market moves in three trends: uptrend, downtrend, and consolidation trend.

While the market moves in these trends, it’s important to note that it also creates a series of impulse and correction moves.

An impulse move occurs when the price of a currency pair or index covers a wide distance in the market in a short period (buy/sell)

influenced by market volatility. Once you learn the technical approach required to successfully trade impulse moves, you will understand why I say volatility is your friend.

A correction, also known as a pullback or retracement, happens when the market temporarily changes direction to regenerate liquidity before continuing in its intended direction.

I sometimes place my entries (with proper timing and skill) during a correction (law: after a correction follows an impulse) to capitalize on the impulse move.

I will also cover advanced technical trading sessions later.

Conclusion: Mastering Technical Analysis: The Power of Price Action

Mastering technical analysis is about understanding the market’s movements and learning how to interpret price action to make informed trading decisions.

By recognizing bullish, bearish, and consolidation trends, and by strategically using support and resistance levels, retail traders can significantly improve their chances of success.

Remember, patience and discipline are crucial in trading, as highlighted by Warren Buffett.

Embrace the market’s volatility and learn to harness it through impulse and correction moves.

With dedication and the right approach, you can become part of the successful 10% of traders. Let’s embark on this journey together and master the power of price action in technical analysis.

Mindful Trading


Mindful Trading

Mastering mindful trading requires a deep understanding of your emotions.

Forex pairs and indices (stocks) can be highly volatile, with price fluctuations occurring in short periods.

To navigate this volatility effectively, start by practicing with a demo account.

Mindful Trading

Developing the right set of skills will enable you to trade with safety and precision,

leveraging market volatility to close large profits in a short amount of time.

Mindful Trading: Navigating Discouragement

In my four years as a student of the market, I’ve come across many instances

whereby I’ve had my fair share of people who supported me and those who tried to discourage me. Let us look at both of them.

Inspiring Influences in My Life: Positive Energy

In late 2021, I realized the importance of having someone guide me in trading professionally.

There were many moments when I felt stuck,

such as not knowing the best times to trade in my country (South Africa)

or how to determine if the market was bullish or bearish.

Bullish: When the market is rising (price increases).

Bearish: When the market is falling (price decreases).

Mindful Trading
You should aim to master trading both bullish and bearish markets because the market doesn’t always move in one direction. Being versatile and skilled in both types of markets can help you navigate and profit in any market condition.

Today, I look up to my mentors because they continuously motivate me to stay focused and never give up.

Their encouragement has been crucial in my journey to becoming a mindful trader.

I am also deeply grateful for the support from those close to me.

This positive energy helps me persevere and rise above challenges when the going gets tough.

It’s crucial to keep close those who support you, as their positive energy can motivate and help you

stay focused on your journey to becoming a mindful trader.

Navigating Discouragement: Dealing with Detractors in Your Trading Journey

On your journey to becoming a successful trader, you will inevitably encounter people who try to demotivate you.

These detractors can come from anywhere—friends, family, relatives, colleagues.

Always be aware of them and never let their words influence your path. This journey is yours and yours alone.

Overcoming Negativity: The Key to Success in Forex Trading

You might often encounter individuals who have tried trading but gave up

when they realized the forex market isn’t a get-rich-quick scheme.

They tend to project their negative experiences onto you. Be mindful of such individuals.

They might not mean harm; their negativity could stem from their failures, leading them to believe forex is a scam.

It’s crucial not to absorb their negativity, especially as you strive to become a profitable trader.

Some people discourage you simply because they lack knowledge about trading.

They base their judgments on the failures of others. Don’t let their ignorance derail your progress.

Importance of Back Testing: Mindful Trading

I remember the first time I backtested my trading strategy in 2021.

This was my chance to see the progress I had made since starting in 2020.

Back testing essentially tests whether your strategy can endure over time

Mindful Trading

Like farming, trading has its seasons of rain and drought. Skilled and experienced traders navigate these ups and downs

better than those without such skills. Developing your trading skills is essential.

When we get into the practical side of trading, I’ll show you how to back test the strategy I teach.

This will be a fun learning experience because you’ll test the strategy without the fear of losing real money.

It will also help train your subconscious to focus on sharpening your

technical trading skills. Eventually, you’ll be ready to test it out in the real market.

Remember to always have patience

When Should You Start Trading Your First Real Account?

While trading a demo account is essential, you should also start saving to trade your first real account.

This helps you understand how you engage with the market for real.

In the first quarter of 2022, I funded my first account after countless back tests using

Trading View (covered in Technical Trading Lessons). This tool allows you to gain years of experience in a short time.

My journey continued when I funded my first account with $53.20 (R1,000). By this time, I had honed my skills and felt confident.

I initially only traded the Nasdaq 100, an index consisting of the 100 most publicly traded companies.

According to Nasdaq.com, the top 10 most publicly traded companies include:

Microsoft (MSFT)
Alphabet Inc. Class C and Class A (GOOG, GOOGL)
Amazon.com Inc. (AMZN)
Tesla Inc. (TSLA)
Meta Platforms Inc. (META)
NVIDIA Corporation (NVDA)
PepsiCo Inc. (PEP)
Costco Wholesale Corporation (COST)
Apple Inc. (AAPL)
Broadcom Inc. (AVGO)

While trading the Nasdaq 100, I managed to flip my account, doubling it to $106.40 (R2,000) within a week.

The market provided countless setups that respected our price action strategy, leading to a streak of winning trades.

I withdrew my initial deposit of $53.20 that same week on Friday, just before my broker closed shop. That weekend,

I was excited and nervous—excited because I had flipped my account for the first time since 2020,

and nervous because it was my first time withdrawing money from my brokerage.

I remained patient, ensuring my emotions didn’t cloud my judgment.

On Tuesday at 10 AM, I received a notification from the bank confirming the deposit of $53.20 from my brokerage.

This was a turning point in my life, making me realize the potential of forex.

By not giving up, you can make significant progress in the world of trading.

Over time, consistency will enable you to see your growth as a retail trader.

Remember, just as it takes time to see progress when lifting weights for the first time,

Mindful Trading

Mastering your trading skills will develop based on your consistency.

A trader who makes the most mistakes will always outshine the one who does not, as long as they learn from their mistakes.

How Much Should You Fund Your First Account?

It’s ideal to start your trading journey by funding your account with anywhere from $53.20 to $159.61.(small account/mini accounts).

Small accounts help you worry less about blowing your account, especially when starting out.

When I first flipped my account and withdrew my initial deposit, I felt invincible, and my confidence soared.

After receiving my initial deposit, I started trading again, but this time things were different.

Understanding FOMO: Never Break Your Trading Rules

When I reopened Nasdaq and began analyzing, the market wasn’t giving the same setups as the previous weeks.

The market was not trending, meaning there were fewer opportunities.

I was unaware of this and let my judgment be clouded by the desire to flip my account again within a week.

Remember, there are times when the market gives, and times when the market takes.

We harvest at the end of a trending market and let it play out during a drought (choppy market).

A choppy market shows no clear trend, making small fluctuations in a short period.

It is when the price of a stock, currency pair, or commodity is indecisive.

During this time, the market gains liquidity by taking out impatient retail traders.

The elusive 10% of traders wait out the drought and emerge when the market trends again. I didn’t know this at the time.

Mindful Trading

All I could think about was flipping my account. I opened my trading platform and started analyzing Nasdaq again,

but this time the market wasn’t offering any high-probability buys or sells. Instead of avoiding the choppy market,

I was filled with a new emotion: FOMO (Fear of Missing Out). I didn’t like the idea of waiting because I thought if I waited,

I would miss out on an opportunity to capitalize on the market.

This impatience led me to lose 80% of my account. After this, I went back to the drawing board.

Keep in mind, I still had the $53.20 I had withdrawn. Instead of funding my reserves, I wanted to see what went wrong.

So, I back tested for a few hours until I realized I should not have entered the market.

This lesson taught me the power of back testing, testing a strategy with a small account, and differentiating between a trending market and a choppy market.

Conclusion: Mindful Trading

Remember, trading requires patience and a mindful approach. By funding a small account,

you can manage your risk better and learn valuable lessons without significant financial loss.

Always back test your strategies and understand market conditions before making trades.

This mindful approach will help you navigate the ups and downs of the trading world successfully.

Now that you are aware of the emotions you may encounter on your journey to becoming a mindful trader,

you are better suited to navigate your way more effectively than I did when I began my journey.

Next, we will delve into the practical side of trading—the fun part—where we’ll explore how to trade

using trend channels, support, and resistance levels and zones. Stay tuned for a lot of quality content designed to sharpen your skills. See you there!

Perfecting the Art of Trading Psychology Part 2

The Market: A Challenger Designed to Test You

Welcome back to part 2 of Perfecting the Art of Trading Psychology. Today, we continue our journey towards mastering the world of retail trading.


Consider this: In South Africa, approximately 4,000 individuals apply for aircrew training each year. Out of this sizable pool,

only about 30 will ultimately be selected. Interestingly, the world of Forex trading shares a similar narrative .

Did you know that a staggering 90% of all retail traders fail to turn a profit? That leaves only a mere 10% who manage to succeed.

Your objective? To become part of that elusive 10%. It’s challenging, but possible.

To thrive in the world of Forex trading, you must believe in your ability to prosper and adopt a mind-set of unwavering determination.

perfecting the art of trading psychology part 2

Remember, in Forex, it’s you against the market – always keep that in mind.

Importance of Demo Account: Perfecting the Art of Trading Psychology

A demo account is provided to you by the broker of your choice. This account simulates the market in real-time, allowing you to practice trading without financial risk.

perfecting the art of trading psychology part 2
The account type is normally displayed in the top left corner of the platform.

Additionally, brokers also offer real/live accounts, which involve actual funds and real market conditions.

perfecting the art of trading psychology
Real account: where you can trade with actual money

Remember in my previous article “Perfecting the Art of Trading Psychology” I stated that my excitement impatience (of money money) got the best of me?

Well if you have not checked it out CLICK HERE! Before continuing.

Why I Encourage You to Start Trading Demo Accounts Only: Art of Trading Psychology

When I first started trading in 2020, I didn’t have anyone to educate me about the importance of using a demo account.

So, weeks before I had my first call with Ethan, I began trading on a demo account.

At that time, I had no understanding of technical or fundamental analysis. All I knew was to buy when the market was low and sell when it was high.

I would create a $100,000 demo account, not realizing the importance of setting a realistic account size.

For example, I would trade the EUR/USD currency pair with a large lot size (5.00 lots). Since it was a demo account,

I wasn’t trading with real money and emotions weren’t involved. I would often forget about my trades, only to remember days later and find my account in significant profit.

I did this without any risk management strategy.
This is a common experience for many new forex traders. When you start with a demo account,

especially without proper guidance, it’s easy to make profits. However, the real challenge begins when you transition to trading with a real account.

perfecting the art of trading psychology part 2

As humans, we naturally feel euphoria when we gain money and sadness when we lose it, especially when it happens without our control.

This emotional response can significantly impact trading decisions. Trust me, it’s a common experience.

Even seasoned traders have gone through similar stages in their trading journey.
Remember, the goal is to develop the right skills and mind set to transition smoothly from demo trading to live trading.

With practice and proper guidance, you can turn your demo trading experience into a powerful tool for success in the forex market.

Turn Your Demo Account into a Profitable Machine with the Right Skills


Before funding a real account, it’s essential to have a fool proof strategy.

But what exactly is a fool proof strategy?
A fool proof strategy is one that has been thoroughly tested and proven to work over time.

Think of it like a pharmaceutical scientist testing a new drug: the drug must undergo numerous testing to ensure it’s safe for consumers.

perfecting the art of trading psychology part 2

Similarly, a forex or stock trader needs to test their strategy to ensure it works in the long term before using it with a real account.

I recommend starting with a demo account primarily so you can focus on mastering the strategy I’m going to teach you, rather than on making money.

When you focus on the skill, the money will eventually follow. However, if you focus solely on the money, it’s unlikely to come your way.

Once we’ve covered the practical curriculum (technical analysis), we can create demo accounts and start practicing to find the trading style that best suits your personality.

How to master your Fears? Perfecting the Art of Psychology


The emotion of fear is very common in forex or stock trading

and it is one of the main reasons a lot of trader’s fail to be profitable traders. Fear often presents itself in two stages:

Fear of losing your winning trade


In 2020, a month or two after I had blown my first real account, I found myself at my grandma’s house during the holiday season.

It was high school break, and I was visiting her and my cousins.
At that time, I was trying to grow my remaining account balance of $37.99,

hoping to recover my initial deposit of $270.06 USD The market had taught me a valuable lesson, and my fear of losing the rest of my account was at an all-time high.
I was somewhat familiar with a few key price strategies, like trends and the importance of using stop-loss and take-profit orders.

However, my trading skills were nowhere near what they are today. On my first trade, relying solely on trend lines,

the market moved in my direction by just a few pips. Instead of excitement, I was filled with fear.

The reason for this fear was the lingering memory of a USA30 trade that had caused me to lose $978 in profit within minutes.

This memory clung to my mind like Venom clings to Eddie Brock in the Marvel Movie Venom.

The fear was so intense that I could spend over two hours staring at the chart without even realizing it.

perfecting the art of trading psychology part 2

Today, I can spend a total of one hour in the market per day because I know exactly what I’m looking for in the market.

Another reason for my fear was that I did not set a stop-loss order, fearing that the market would retrace, stop me out, and then move in my desired direction.

I only set a take-profit order. Trading without a stop-loss is basically gambling; it’s not professional trading.

This behaviour heightens fear levels because, whether you realize it consciously or not, your subconscious is well aware that you could lose all your investments at any moment.
That’s why many inexperienced traders get glued to the charts all day like chart zombies, leading to unnecessary trades that eventually blow their accounts.

Fear of Losing a trade

By 2021, my trading style was starting to take shape. I had studied numerous price action strategies, such as trends, zones,

support and resistance, and had mastered the risk/reward ratio. After funding my fifth account (yes, I’ve blown many accounts),

I convinced myself to test trading with a stop-loss.
I funded my fifth live account, sacrificing new clothes and other expenses to stay committed to becoming a profitable trader.

Just as I was on the right path, I faced a new emotion: the fear of a pending loss.
This fear arises when you don’t fully trust your trading strategy.

The market often moves in the opposite direction before heading toward your target, testing your confidence in your strategy.

Here’s what happened to me: I caught a beautiful sell signal, but instead of the market falling, it pushed up, nearing my stop-loss.

Instead of letting the market play out, I closed the trade early, resulting in a loss. Ironically, after I closed my position, the market eventually sold off.

I felt so defeated that I even considered quitting trading altogether.
To manage this emotion, you must trust your strategy and let your trades play out.

Only by trusting in your abilities can you identify your mistakes and determine which setups work best for you.
This is why I emphasize the importance of practicing with a demo account. It allows you to focus solely

on mastering your skills, which better prepares you to handle the emotional aspects of trading.

End of Part 2: Perfecting the Art of Trading Psychology Part 2


Trading can be an emotional rollercoaster, especially when you’re just starting. It’s crucial to begin with a demo account

to build your skills without the pressure of real money on the line. By mastering a fool proof strategy and learning to manage your emotions,

perfecting the art of trading psychology part 2

you can transition to a live account with greater confidence and discipline.
Remember, the key to successful trading is not just about making money

but about developing a consistent and reliable strategy. Trust in your abilities, stay committed to your learning process, and don’t let fear dictate your actions.

Perfecting the Art of Trading Psychology

Welcome to Strategic Trading Academy: Perfecting the Art of Trading Psychology

At Funds and Galore, we’re excited to guide you on your journey to becoming a seasoned retail trader(Perfecting the art of trading).

Whether you’re new to trading or have some experience, you are welcome here. Our academy caters to all levels of traders.

We offer a comprehensive curriculum that covers both theory and practical lessons on our website and social media pages.

Beyond teaching you the skills to navigate the forex and stock markets, we will also host live streaming sessions featuring trading challenges.

These challenges are designed to encourage engagement and foster a learning community where we can all grow together.

Investing in yourself will definitely develop your personal growth. Start today and take the first step towards a better you!

Perfecting the Art of Trading Psychology

Before we get into the technical side of things, I would like to stress that it does not matter how good of a trader you are;

you will never be a profitable trader as long as you don’t have control over your emotions.

Psychology is the most important trait to have as a person wanting to harness well-calculated trades that align with a strategy that has stood the test of time.

Trading is Not a Get Rich Quick Scheme

My journey into trading began with a conversation with my friend Ethan in 2020. Though we hadn’t spoken in a while, our discussion quickly turned to the subject of trading.

Perfecting the Art of Trading

I was intrigued when Ethan mentioned a former schoolmate (Thabo) who had found success in trading. Ethan’s encouragement prompted me to reach out to this individual.

Thabo’s words of wisdom, especially “NEVER GIVE UP,” left a lasting impression on me.

Never Give Up: Success Requires Patience

At F&G, we approach teaching differently from traditional education. We believe in embracing mistakes as opportunities for growth.

Through trial and error, we learn which habits to avoid and which to adopt. Think of trading like learning to skateboard.

Just as a beginner skater seeks guidance from experienced mentors, aspiring traders benefit from mentorship and perseverance.

A mentor provides valuable guidance and direction in your journey to becoming a professional trader.

Success in both fields requires focus and consistency. Motivation alone is meaningless without the dedication to see it through.

In trading, as in skating, progress comes from persistence and learning from missteps. It’s a journey marked by falls and failures,

but with each setback comes invaluable lessons that propel us forward. With patience and perseverance, success becomes attainable,

transforming beginners into seasoned professionals.

The Market is Not Your Friend

In mid-2020, I studied how Thabo traded and managed to move out of his parents’ house by the age of 17.

Despite his success, he even went on to finish school. I yearned for that kind of freedom. It amazed me that someone living a seemingly ordinary life could achieve so much.

As I registered this, I realized that the road to success takes time. Thabo told me it took him over three years of consistent learning.

My brother Ethan confirmed that Thabo always sat at the back of the class around 2017, minding his own business and trading.

Little did everyone know, the boy at the back of the class was just a few steps away from success.

Lesson Learned: Perfecting the Art of Trading Psychology

During this time, I managed to fund my first real account with $270.06 USD (R5,000). I knew nothing about risk management or the importance of having a mentor.
This is where things get interesting. Thabo, at that time, was working on creating a platform to educate people on how to trade.

He charged me $33.25 (R612) adjusted for inflation to join.
I eventually saved up enough to join, and oh boy, was I excited and ready to learn.

perfecting the art of trading
Watch your emotions: Excitement too can lead to impulsive decisions

A few weeks passed, and the platform still wasn’t up.

Thabo was busy with exams, and while I understood that, my patience was wearing thin.

I was hungry to make money, dreaming about that BMW M4.
In my impatience, I made a fatal mistake that taught me a very valuable lesson.

Fatal Decision: Emotions Can Make or Break You

Thabo also had a signal group. A signal is a service provided by a professional trader, where they tell you when to buy or sell shares or currencies at what they believe is the right time to enter a trade.

In the heat of the moment, I asked Thabo to put me in his signal group instead of his mentorship package. Unfortunately for me, he agreed.

My goal was to mimic Thabo’s trades exactly. For example, Thabo would open five positions with a lot size of 0.01 (don’t worry, I’ll explain the lingo as time goes on for those who don’t understand)

for Nasdaq with a $271.48 (R5,000) account. He was over-leveraging his positions,

meaning that when he won, he stood to make over $1,086 (R20,000), and when he was wrong, he only lost the $271.48.

I wanted to do the same thing but didn’t understand that Thabo, unlike me, could easily fund another $271.48 if his trades didn’t go as planned.

It took me a long time to gather the $271.48 to fund my account, and I certainly didn’t have another $271 if my trade went south.

Impatience got the better of me as I waited for Thabo to send us another signal. After the first day without any communication,

I started looking for trades on my own, thinking Thabo was too busy to check the market, not realizing that good trades take time to develop.

All I understood was that you buy from the bottom and sell at the top. So when I opened my MetaTrader 4 app and saw the Nasdaq chart with candlesticks appearing at the bottom,

I, along with my cousin and little sister (my trading buddies at the time), concluded that I should buy. I opened a 0.03 and a 0.01 lot size to test the waters.

You wouldn’t believe what happened next. A few minutes later, Thabo sent a buy signal.

We went crazy and started entering 0.05, 0.02, and 0.01 lot sizes. Within three minutes, my account flipped from $271.48 to $978.22 (R18,000)

perfecting the art of trading
Even though over-leveraging is risky, with the right skills, you too will be able to master the skill.

adjusted for inflation. Never had I thought I’d make so much money in such a short period of time; this was when my love for the game started.

As exciting as it was, little did I realize the risk I had taken. I opened a total of 12 positions with a $271.48 (R5,000) account,

which was extremely risky. Lucky for me, Nasdaq prices soared without any market retracements.

In my excitement, I sent Thabo my results. I bet he thought, “Wow, this guy is crazy, so many positions without proper risk management.”

A few moments later, he sent us another signal to buy US30, and this is where my greed took full swing.

Keep in mind that the signals we received didn’t include a stop loss or take profit price level.

A stop loss is an order placed with your broker to sell at a specific price level to protect against large losses, and a take profit is an order to sell at a specific profit target.

Without these safety nets, I aimed to convert our new account balance of $978 to $2,714 (R50,000) with the US30 signal from Thabo.

I did exactly what I did with Nasdaq, but this time, the market sold instead of buying. In just under two minutes, I watched my account plummet from $978 to $37.99.

I couldn’t sleep that whole night. This was one of the hardest things to digest at the time. The market taught me a valuable lesson: Forex is not a get-rich-quick scheme.

End of Part 1: Perfecting the Art of Trading

As we continue this journey, I hope you now see the critical importance of having proper risk management if you want to survive long-term in the forex market.

Mimicking a professional trader’s style without proper guidance is a recipe for disaster.

As we just saw, I ended up losing the majority of my account all in one day. This was a lesson well learned because today,

I trade with proper risk management. Instead of flipping my whole account in one day,

it might take me a month or so to double it because I understand the value of risk management and patience.

At F&G Company, we are here to ensure you don’t make the same mistakes I did. Our goal is to provide you with the tools and knowledge to trade responsibly and successfully.

Through our comprehensive curriculum, live trading challenges, and a supportive community,

we aim to build not just skilled traders but disciplined ones who understand the art of trading psychology.

Stay with us as we dwell deeper into the strategies and mind-sets that lead to sustainable success in the trading world.

perfect art of trading

Together, we will navigate the highs and lows of the market, turning each challenge into a stepping stone toward mastery.

Welcome to Strategic Trading Academy, where your journey to mastering the art of trading psychology begins.

2008 Financial Crisis Part 1

Introduction: 2008 Crisis

The subprime mortgage housing market was the reason for the 2008 Financial Crisis.

During this time, millions of hardworking, tax-paying Americans bore witness to horror as their retirements, investment portfolios, and 401(k) plans plummeted in value.

What to Look Forward to: The 2008 Financial Crisis

We are going to examine the 2008 financial crisis because its outcomes had a profound impact on many countries worldwide.

As I discussed in my article titled “Our Financial History,” our financial systems are deeply interconnected.

I will also be discussing why the United States elites decided to use central bank interventions to bail out major banks from facing bankruptcy by injecting

liquidity into the market—and why the masses were against the actions taken by the government to bail out Wall Street.

We will also cover the viewpoints of the main individuals who were involved in bailing out the banks

and why they believed it was the right thing to do. Lastly, we will cover the few people who managed to make millions, if not billions, during this crisis.

Central Bank Intervention: 2008 Crisis

The question that most people ask is, ‘Can the central bank go bankrupt?’ And the simple answer to that is NO!

Central banks, unlike commercial or investment banks, cannot go bankrupt. Walk with me for a second.

In my previous article titled ‘Banking Through the Ages… Pt 1,’

I mentioned that back in the 17th century (Europe), goldsmiths used to act as banks.

Whenever citizens felt like their goldsmith was not honouring their agreement or their corporation was dealing with insolvency,

it would cause other clients from different goldsmith’s corporations (that were not dealing with

insolvency) to panic and believe their goldsmith’s corporation might be next to fall, eventually triggering a bank run.

The invention of central banks was to prevent such activities from happening.

2008 Financial Crisis

A central bank is a private institution responsible for stabilizing its financial system by issuing currency and managing a country’s monetary policy.”

Why Central Banks are not Government Institutions?

The reason central banks are not government institutions is simply because if politicians had the authority to print money as they pleased,

they would always print money to fulfill their campaign promises, ensuring they stay in power for a longer term and gain admiration from the public.

What this would do is cause an increase in the money supply in a country, which will affect the citizens’ purchasing power and the growth of a nation.

Central Bank Intervention in the 2008 Financial Crisis

Keep in mind that it took the United States government roughly 200 years to reach a trillion dollars in circulation within its economy.

In 2008, the U.S. government initiated the Troubled Asset Relief Program (TARP), authorizing $700 billion to stabilize the financial system during the crisis that year—crazy, right?

The government and the Federal Reserve took these measures to prevent a financial system collapse,

which could have led to a depression similar to the one that began in 1929 and lasted until the early 1940s.

This form of central bank intervention is known as Quantitative Easing (QE), where the Fed buys longer-term

securities to increase the money supply and encourage lending and investment.

2008 financial crisis
QE is a tool used by central banks to increase the money supply in a country.

How the Citizens Reacted to QE?

Quantitative easing (QE) was very unpopular in the eyes of some American citizens.

Many were angry at the government for bailing out the “too big to fail” institutions.

They argued that the government should have let these institutions collapse and file for bankruptcy

instead of buying $700 billion worth of troubled mortgage-backed securities with tax payer money to save the big banks.

These institutions, such as Lehman Brothers, JPMorgan, Bear Stearns, Citigroup, Merrill Lynch, Goldman Sachs, Morgan Stanley, Bank of America, Wells Fargo, and AIG,

were responsible for taking on a lot of risky speculations with their depositors’ money because they legally owned it.

This reckless behaviour led some of them to file for bankruptcy. This was one among many other reasons that led to the fall of President George W. Bush.

The Elites Involved in Injecting Liquidity to Stabilize the 2008 Financial Crisis

The three important individuals who played a significant role in stabilizing the markets were Hank Paulson (U.S. Treasury Secretary, 2006-2009),

Timothy Geithner (President of the NY Federal Reserve, 2003-2009), and Ben Bernanke (Chairman of the U.S. Federal Reserve, 2006-2014).

They worked alongside former U.S. President Bush by offering him guidance and support in navigating this crisis.

Former U.S. Treasury Secretary Paulson argued in one of his interviews that what they did was not for Wall Street but for the American people.

He continued by stating that he and the government should have done a better job explaining to people that the financial system is so interconnected

that if you want to stop the bleeding, you go for the source, and the source he was referring to is Wall Street.

Wall Street is a street located in New York City. The term ‘Wall Street’ is often used to refer to the institutions located in the lower district of Manhattan,

2008 Financial Crisis

where hedge funds, investment banks, and stock exchanges are situated. It’s important

to keep in mind that these institutions play a very important role in ensuring stability in global finance.

What Caused the 2008 Financial Crisis

2008, for me, was just another year full of fun, playing with my peers every day at school, and spending a lot of quality time with my family.

 Little did I know that the financial system was on the brink of collapsing. Even though the aftermath of it affected my nation’s economy too (South Africa),

I was too young to understand any of it.

I also understand that for some of us, this could be the first time hearing about this, which is absolutely fine.

 My goal is simple: to take this complex subject and simplify it as much as I can so that everybody can be on the same page.

Community Reinvestment Act of 1977

Let’s take a trip back to America in 1995. During this time, the U.S. government saw the need to fight discrimination against lower-income home buyers.

Their goal was basically to give low-income community members an opportunity to credit and banking services which were not available to them before with this law was passed.

The government saw fit to implement these reforms (CRA) of 1977 during 1995. Therefore, the banks could now offer reduced payment over a duration of time from their clients.

The Glass-Steagall Act of 1933

On November 12, 1999, the Gramm-Leach-Bliley Act (GLBA) was passed by President Bill Clinton.

2008 Financial Crisis

This act was implemented to repeal key provisions of the Glass-Steagall Act of 1933. What is the Glass-Steagall Act, you might ask?

Well, it is also called the Banking Act of 1933. The Banking Act of 1933 was a law passed as a means to fight and prevent the actions that led to the Great Depression.

This piece of legislation separated commercial banking from investment banking.

 The Glass-Steagall Act of 1933 restricted commercial banks (banks that issue loans and take deposits) from participating in the securities market and from dealing with stocks and bonds.

The reason it was passed was simply in response to the financial crisis that led to the Great Depression.

 Fast forward to 1999, the GLBA legislation passed by President Bill Clinton allowed commercial banks, insurance institutions,

and investment banks to yet again offer a bundle of financial services that had been prohibited under Glass-Steagall after 66 years.

What happened next was that some banks who used to manage their portfolios responsibly all turned to riskier investments and speculation competing against each other,

all in the efforts of generating the most return on investments and also adapting to changes within the housing market.

 In other words, banks were more concerned about making Wall Street profits than about their clients who entrusted them with their savings and investments.

The Dot-Com Bubble

During 1995, people were blown away by the internet. Many individuals were investing in the booming Dot-com bubble (Internet bubble),

and numerous institutions were also putting money into any company that had a “dot-com” at the end because they were making a lot of money doing that.

 In March 2000, we witnessed the burst of the market. Investors lost confidence in these dot-com companies that were publicly traded.

We saw an enormous decline in the value of many technology stocks during this time.

 What followed later were the 9/11 attacks, along with many other economic challenges.

It looked like America was heading toward a recession, but just before that, the central bank stepped in to save the day.

Central banks stabilized the markets by lowering interest rates down to 1%.

The outcome was that a lot more people were able to borrow money and were not paying high interest rates on their loans.

The economy recovered quickly, and life was good again.

Subprime Loans: 2008 Financial Crisis

Subprime loans are essentially a collection of loans given to individuals with bad credit scores,

insufficient credit history, and a higher chance of defaulting (high risk).

The institutions offering these subprime loans were banks, credit unions, finance companies, and mortgage companies.

As more and more people rushed to take out loans over time, these institutions began to decrease the lending requirements needed to secure loans.

2008 Financial crisis
Even people who didn’t have jobs could get a mortgage. These institutions became careless.

Eventually, they stopped verifying whether people actually had jobs or incomes to pay off these loans.

This caused a boom in the housing market, and many people were buying houses they previously couldn’t afford.

People didn’t worry because they believed that if they couldn’t afford their mortgage payments anymore,

they could simply sell the property, as home prices were skyrocketing.

Collateralized Debt Obligations (CDOs)

As time went on, Wall Street saw an opportunity that they could capitalize on.

 Since subprime mortgage lenders were taking all the risk of lending to subprime clients, they needed to find a way to mitigate their risk.

There was also demand for high-yielding investments (that were safe) at that time from institutional investors.

What followed was the creation of mortgage-backed securities.

 Mortgage-backed securities were a pool of subprime loans mixed with prime loans (individuals who had good credit history).

This bubble of mortgages was issued out as shares to investors.

 The goal of these shares was to provide a fixed safe income for the investors who purchased them.

That is when Wall Street decided to use a financial tool that was created in the late 80s (CDOs).

A CDO is a bundle of cash-flow-generating assets like commercial mortgages, car loans, student loans, etc., bundled together and sold to investors.

 Banks would make over 10 billion dollars monthly selling these shares to investors at a higher interest.

Think of these grouped cash-flow-generating assets as a box (CDO); every box sold has different levels of risk.

Jonathan Jarvis once explained on ColdFusion TV that a CDO operates like three cascading trays.

2008 Financial Crisis
Top tray: safest; middle tray: moderate; bottom tray: risky.

 As money flows in, it fills the top tray first, then spills over into the middle tray, and whatever remains fills the bottom tray.

This money originates from homeowners paying off their mortgages. If some homeowners default on their mortgages, less money flows in,

leaving the bottom tray potentially unfilled, which makes it riskier.

 Conversely, the top tray is safer. To balance this risk, the bottom tray offers a higher rate of return, while the top tray provides a lower but still attractive return.

This structure was designed to appeal to a range of investors, from those willing to take high risks to those preferring lower risks.

 While CDOs seemed promising in theory, the issue was that subprime loans were mixed with prime loans, increasing the overall risk.

Subprime borrowers were more likely to default, making the CDOs riskier investments.

End of Part 1: 2008 Financial Crisis

In part 1 of the “2008 Financial Crisis,” we briefly mentioned central bank interventions, specifically how the central bank lowered interest rates to 1%.

We also mentioned how President Bill Clinton passed a bill in 1999 that allowed banking institutions to partake in risky investments, among other things.

In part 2 of the “2008 Financial Crisis,” I will explain how all these factors I mentioned contributed to the market crash in 2008.

Banking Through the Ages Part 2

Banking Through the Ages

Banking Through the Ages: A Journey of Power and Influence part 2
A few years back, as I was growing up,

I always used to wonder how banks made a lot of money while waiting in line to withdraw money from an ATM.

The most common answer I received from people was that banks had these large vaults of depositors’ physical money stashed,

and that this money is used to lend out to other clients from the same bank, and the banks make money on the interest on the loan.


To a degree, this is true. Now, allow me to give a detailed breakdown of the formation of modern banks and later speak about the financial crisis they caused during 2007-2008.

In the last article, we spoke about the origins of banks. If you have not read part 1 of “Banking Through the Ages”,

I urge you to begin there before reading this article. Thank you.

The First Form of money: Age of Modern Banking


The first form of money is created by the government. There is about 3% of this form of money (notes and coins) created through the central bank.

Banking through the ages
Today, there is about 3% physical money in the form of paper and notes in the total money supply in most developed countries. 97% of it is all digital.

So basically, this physical money (3%) is sold to banks. For example, it roughly costs the central bank about 3 cents to print a $10 currency note.

The central bank then sells this $10 note to a bank at face value.


Banks can either buy this $10 or repay it back at a later stage. Banks then can finally use this physical money to meet their obligations,

like making sure they have enough money to meet the daily withdrawals of individuals belonging to that bank.

So now we understand where the money we withdraw on a day-to-day basis comes from.

Now the question is if it costs the central bank 3 cents to create a $10 note, what does it do with the $9.97 profit?

Well, the central bank uses this profit to add to the tax revenue of the government.

This is known as seigniorage. Seigniorage helps reduce taxes that we, as people, pay and also helps reduce government debt.

Private Banks (Fiat Currency)


Fiat currency is money that is backed by nothing, it does not have intrinsic value.

1971 former president Nixon put an end to the Bretton wood system and all currencies became fiat.

Banking Through the Ages
Ever since President Nixon took out the dollar from the gold standard, countries have had no restrictions in terms of how much debt they can accumulate.

When we look back in the 17century remember goldsmiths issued out receipts in exchange for gold coins

and these receipts were as good as gold because people believed it had value, so they continued to trade with it.

The same thing with us today. Fiat currency’s value is largely based on the public’s faith in the currency’s issuer(government).


In most developed countries, 97% of money is created digitally by the private banking sector,

even the 16th Chair of the federal reserve of the United States Jerome Powell mentioned in an interview that the fed prints the money digitally.

The reason for this is that banks have been exposed to bank runs many years ago.

A bank run is an occurrence whereby a lot of depositors simultaneously withdraw their deposits from a bank in fear of the bank being insolvent (not able to repay its depositors).


Remember in my previous article “Banking Through the Ages” part 1, I mentioned, back in the 17thcentury goldsmiths would give out receipts (notes) to borrowers.

The receipt details that the borrower promises to pay back the principle plus interest.


Goldsmiths would write out more receipts than they had gold reserve to back it up and this would often end in situations

whereby depositors would all want to withdraw their money e.g.

they heard a rumour that the goldsmith was using their gold deposits to finance their lavish lifestyle.

This situation would often leave goldsmith bankrupted crashing the whole system.

In the modern days we have digitized this agreement. Today this agreement is called debt

Banking Through the ages


For many years’ banks have been trying to pursue policymakers to allow them to create money digitally.

Banks highlighted the potential growth this might have for the future until they eventually pursued policymakers to create digital money.

Private Banking :Banking Through the Ages


Obtaining a banking license means a financial company adheres to strict government regulations. Only licensed institutions can be designated as banks.

To earn this license, a company must meet a comprehensive list of requirements, such as maintaining financial reserves and safeguarding data systems.

Therefore, when an institution is granted a banking license, it is authorized to issue loans and accept deposits. Let’s start by examining deposits.

What significance does our deposit hold for a bank?


Many people aren’t aware that once you deposit money into a bank, you’re no longer the legal owner of that money; it becomes the bank’s money.

“What do you mean I’m no longer the legal owner of my money?” you might ask. Well, allow me to explain.


Whenever you deposit money into a bank, that amount appears on the bank’s financial statement in the liability column, meaning the bank owes you that money.

In other words, the bank owes you money that you can legally claim back anytime.


However, banks can legally loan out 90% of your money and keep 10% in reserves.

For example, if Mr. Walker goes to ABC Bank and deposits $100, ABC Bank then takes $10 (10%)

and puts it in their reserves and loans out his $90 (90%) with interest to their other client, Jake.

Jake then takes the $90 and pays off his mechanic for fixing his car.
Then Jake’s mechanic goes to ABC Bank and deposits the $90,

and the cycle would restart again.

This is known as fractional reserve banking. Basically, there was $190 in money circulation, and the bank had only $19 in their reserve.

Today, we see this scenario in large volumes because the world is run by debt. The economy is driven by the backbone of debt.

Now allow me to break down the process step-by-step to ensure clarity:

Initial Steps:

  1. Mr. Walker’s Deposit:
  • Mr. Walker deposits $100 in ABC Bank.
  • ABC Bank keeps $10 (10%) in reserve.
  • ABC Bank loans out $90 (90%).
  1. Jake’s Transaction:
  • Jake receives a $90 loan from ABC Bank.
  • Jake pays $90 to his mechanic.
  • Mechanic deposits $90 in ABC Bank.
  • ABC Bank keeps $9 (10%) in reserve.
  • ABC Bank loans out $81 (90%).

Total Money and Reserves:

  1. After Mr. Walker’s Deposit:
  • Total Money Deposited: $100
  • Money Loaned Out: $90
  • Reserves Held: $10
  1. After Mechanic’s Deposit:
  • Total Money Deposited: $100 (Mr. Walker) + $90 (Mechanic) = $190
  • Money Loaned Out: $90 (Jake) + $81 (loaned out from Mechanic’s deposit) = $171
  • Reserves Held: $10 (from Mr. Walker) + $9 (from Mechanic) = $19

Breakdown of Circulation:

  • Initial Deposit (Mr. Walker): $100
  • Reserves: $10
  • Loaned Out: $90
  • First Cycle (Jake’s Payment): $90
  • Mechanic’s Deposit: $90
  • Reserves: $9
  • Loaned Out: $81

Verification of Money in Circulation:

  • Initial Money in Circulation:
  • Mr. Walker’s $100 deposit is part of the money supply.
  • Jake has $90 in circulation after receiving the loan.
  • Mechanic’s Deposit and New Loan:
  • Mechanic has deposited $90, which is now part of the bank’s deposits.
  • ABC Bank loans out $81 from the mechanic’s deposit.

Summary:

  • The total money in circulation increases as loans are made and deposited back into the bank.
  • After the initial deposit and first cycle:
  • Money Supply: $100 (initial deposit) + $90 (loan to Jake) = $190
  • Reserves Held by Bank: $19 (total reserves from initial and mechanic deposits)

Conclusion: Banking Through the Ages

The process of fractional reserve banking indeed leads to a multiplied effect on the money supply while maintaining the required reserves at each step.

banking through the ages

This scenario demonstrates how the money supply expands through repeated lending and depositing,

which is a fundamental aspect of how modern banking operates.


Banks today operate in an environment where there are policies in place to prevent them from becoming insolvent and collapsing the global system.

For many years, when too many depositors demanded their deposits back but the banks didn’t have enough reserves to service that outflow of liquidity,

unfortunately, the bank would have to file for bankruptcy and everybody would lose.
In the modern day, steps have been implemented to prevent bank runs like the establishment of Central banks.

They act as lenders of last resort because they have the muscle to inject liquidity directly into banks.

By doing so, they can stabilize the banking system given that there was perhaps a run on the bank

because people heard rumours or news that ABC Bank, for example, is going through financial instability.

My next article will focus on the 2008 crisis and the breakdown of central banks