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Forex notes for mba students types of momentum trading

Different Types Of Trading Strategies

Forex notes for mba students types of momentum trading Strategies Introduction to Swing Trading. Note that if you calculate a pivot point using price information from a relatively short time frame, accuracy is often reduced. They have found that the spread of the zero-cost momentum strategy is significantly larger in high RD states worldwide crisis state compared to low RD states. If you want a detailed list of the best day trading strategies, PDFs are often a fantastic place to go. History has proven that a what is bitcoin stock trading at ishares gold chf hedged etf of specific trading patterns occur before and after a split announcement. You simply hold onto your position until you see signs of reversal and then get. There are two reasons for. For example, it is only recently that Neely et al forthcoming argue for a role of combining macroeconomic and momentum indicators to better forecast the stock market risk premium, and Ahmerkamp and Grantforex trading cycles script examples a more closely related study, advocate for the combination of momentum and macroeconomic strategies. If a board of directors suddenly ousts an unpopular CEOfor example, a stock may exhibit short-term upward movement in celebration of the news. Furthermore, Figure 6 looks at this in a different way by showing the 10 worst monthly declines for the FX momentum strategy and the corresponding monthly return for the FX carry strategy. Second, a factor that impacts the price of one market or asset class will typically impact a different market or asset class in another manner, if at all. Keywords factor investing forex system FX anomaly momentum smart beta. Keep in mind, whatever strategy you choose, stops and money management are essential to your success. Figure 2 plots the cumulative daily performance of the FX carry strategy. A sell signal is generated simply when the fast moving average crosses below the slow moving average. Trading on fundamentals is more closely associated with a buy-and-hold strategy rather than short-term trading. After an asset or security trades beyond the specified price barrier, volatility usually increases and prices will often trend in the direction of the breakout. Some technical indicators and fundamental ratios also identify oversold conditions. Many trading strategists use sophisticated models for trading opportunities associated with events leading up to and following earnings announcements, analyst upgrades and downgrades, stock splits, acquisitions, takeovers, and reorganizations. To evaluate different combinations we consider three approaches. Cornell University School of Hotel Administration. In this article, we evaluate the impact of combining the two strategies, and focus on, in particular, two common foreign exchange trading strategies: momentum and carry. Fung, W. Beginner Trading Strategies Playing the Gap. Past performance is no guarantee of future results. Rights and permissions This work is licensed under a Creative Commons Attribution 3. Rumor and speculation are risky trading propositions, particularly in the case of acquisitions, takeovers, and reorganizations.

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An Introduction to Trading Types: Fundamental Traders

Our next step is to determine how to combine the two strategies. Published research seems to study each strategy independently, of which Zhu and Zhou and Moskowitz et al are recent examples evaluating the profitability of using moving average and time series momentum strategies. However, in the real world, it is clear that no one has perfect information, and rarely does everyone have the same information at the same time. Accessed Apr. This is why a number of brokers now offer numerous types of day trading strategies in easy-to-follow training videos. To evaluate different combinations we consider three approaches. For example, some will find day trading strategies videos most useful. In an independent and concurrent study, Ahmerkamp and Grant also investigate a similar question. Its profitability relies on the existence of sustainable price trends. Notes to Indicative Performance. Similarly, analyst upgrades best consumer durable stocks in india endexx pot stock downgrades may present a short-term trading opportunity, particularly when a prominent analyst unexpectedly downgrades a stock. To learn Trading on fundamentals may be risky in cases of euphoria and hype, but the astute trader can mitigate risk by using historical patterns to guide their short-term trading. In addition, the build-up of large investment or speculative ex-dividend date for stock splits macd day trading timeframes also results in large liquidity demands and promotes the presence of price trends. Analyst Upgrades and Downgrades.

To learn Since they are based on factors other than the price of the market being traded, their greatest weakness is that they can get out of sync with the market for long periods of time. Fundamental traders may use such quantitative data to identify trading opportunities if, for example, a company issues earnings results that catch the market by surprise. There are four main types of forex trading strategies: scalping, day trading, swing trading and position trading. Technical Analysis Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume. We find evidence that combining the strategies offers a significant improvement in risk-adjusted returns. They also tend to trade only the busiest times of the trading day, during the overlap of trading sessions when there is more trading volume, and often volatility. As a result of this value-added diversification, investors have increasingly embraced managed futures as a valuable component of a well-diversified portfolio. Table 3 summarizes the return characteristics for the FX carry strategy over the past 20 years. A sell signal is generated simply when the fast moving average crosses below the slow moving average.

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Notes to Period of Rebalancing. Figure 3 illustrates the rolling 3-year correlation of the two return streams. The books below offer detailed examples of intraday strategies. A sell signal is generated simply when the fast moving average crosses below the slow moving average. Period of Rebalancing. Spread betting allows you to speculate on lithium futures trading gann swing chart trading huge number of global markets without ever actually owning the asset. Strategy diversification: Combining momentum and carry strategies within a foreign exchange portfolio. The fundamental trader is often more concerned with obtaining information on speculative events that the rest of the market may lack. Yes - Currency investment styles factors like momentum and value have a low correlation to traditional equity market factor. Day trading For those that are not comfortable with the intensity of scalp trading, but still don't wish to hold positions overnight, day trading may suit. As scalping can be intense, scalpers tend to trade one or two pairs. Even if some traders have the same information at the same time, they will likely ihub penny stock jail time for ceo how to buy vietnam stocks and react differently according to their own preferences, expertise and circumstances. Thus, the trader is unlikely to buy stock in a speculative phase and hold it all the way to the actual announcement.

Alternatively, you can fade the price drop. It will also enable you to select the perfect position size. If you would like to see some of the best day trading strategies revealed, see our spread betting page. It is important to note that a momentum strategy can be defined by formulas that are applied to the price stream of a market. Day trading strategies for the Indian market may not be as effective when you apply them in Australia. Published : 16 January They can also be very specific. Independently, the momentum and carry strategies have a Sharpe ratio of 0. No surprise, the momentum anomaly is present also in the currencies. Lastly, developing a strategy that works for you takes practice, so be patient. If you disable this cookie, we will not be able to save your preferences. Fundamental trading is a method where a trader focuses on company-specific events to determine which stock to buy and when to buy it. Trade Forex on 0.

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Browse next Strategies. Notes to Number of Traded Instruments. Rebalance monthly. I agree. Notes to Period of Rebalancing. Research Report. Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings. Management Science. This page will give you a thorough break down of beginners trading strategies, working all the way up to advanced , automated and even asset-specific strategies. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Enable All Save Settings. Exchange-Traded Funds. Everyone learns in different ways.

Notes to Indicative Performance. Received : 16 December Day traders enter and exit their positions on the same day unlike swing and position tradersremoving the risk of any large overnight moves. Trade Start your trading journey. Notes to Period of Rebalancing. Published research seems to study each strategy independently, of which Bitmex swap fees and send to wallet in the usa and Zhou and Moskowitz et al are recent examples evaluating the profitability of using moving average and time series momentum strategies. This assumption is contrary to most traditional economic theories that assume that all agents 5 day vwap calculation understanding macd on kraken the economy have perfect information and that the current price reflects all known information. Figure 1. So, if you are looking for more in-depth techniques, you may want to consider an alternative learning tool. Viewing it the other way around, Figure 7 shows the 10 worst monthly declines for FX carry and the corresponding monthly return for FX momentum. Before we focus on fundamental trading, here's a review of the main types of equity trading:. Notes to Confidence in Anomaly's Validity. Requirements for which are usually high for day traders. Different Types of Traders. The breakout trader enters into a long position after the asset or security breaks above resistance.

Their first benefit is that they are easy to follow. It is particularly useful in the forex market. Secondly, you create a mental stop-loss. We find evidence that combining the strategies offers a significant improvement in risk-adjusted returns. You need a high trading crypto exchange for auto trading best gatehub backed up to even predicting intraday volatility co to the low risk vs reward ratio. Rights and permissions This work is licensed under a Creative Commons Attribution 3. Journal of Financial Economics 2 : — Managed futures is an alternative investment style with a long track record of providing investors with returns that have little or no correlation to traditional investments. However, it is still necessary to dedicate a few hours a day to analyse the markets. More precisely, their underreaction to the new information, failing to incorporate news in the prices. We are using cookies to give you the best experience on our website. Perhaps the most visible benefit of combining the two strategies is the overall improvement in drawdown for the combined portfolio. Figure 5. In short, unlike academic studies such as Ahmerkamp and Grantour selected momentum strategy is designed to be implementable in a very realistic setting so that the associated returns would have been achievable had the strategy been followed in real-time. The stop-loss controls your risk for you. Privacy Overview This website uses cookies so that we can provide you with the best user experience possible. You can take a position size of up to 1, shares. Another benefit is how easy they are to. Just like scalp traders, day traders rely on frequent small gains to build profits. If fundamental traders correctly identify the current position of stocks and subsequent price movements that are likely to occur, they stand a good chance of executing successful trades.

In another study, Burghardt et al found that a simple momentum strategy does a good job of replicating the performance of a typical managed futures fund and generates a return history with a 0. Technical Analysis Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume. As scalping can be intense, scalpers tend to trade one or two pairs. Number of Traded Instruments. For those that are not comfortable with the intensity of scalp trading, but still don't wish to hold positions overnight, day trading may suit. Fundamental traders may use such quantitative data to identify trading opportunities if, for example, a company issues earnings results that catch the market by surprise. Their first benefit is that they are easy to follow. Notes to Indicative Performance. Investopedia requires writers to use primary sources to support their work. Working Paper. Lastly, developing a strategy that works for you takes practice, so be patient. By continuing to use this website, you agree to our use of cookies. I agree that Quantpedia may process my personal information in accordance with Quantpedia Privacy Policy. Independently, the momentum and carry strategies have a Sharpe ratio of 0. To do that you will need to use the following formulas:.

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From a behavioral finance point of view, the rationale for price trends is even simpler. Deposit Fund your live trading account. Get Quantpedia Premium. Cumulative daily performance of the FX carry strategy. Swing Trading. University of Virginia Finance Seminar. You may also find different countries have different tax loopholes to jump through. Strictly Necessary Cookies Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings. Even if some traders have the same information at the same time, they will likely interpret and react differently according to their own preferences, expertise and circumstances. If fundamental traders correctly identify the current position of stocks and subsequent price movements that are likely to occur, they stand a good chance of executing successful trades. The primary reason why does the momentum anomaly work is simple; academics explain this anomaly by the irrationality of investors.

Plus, quantitative trading futures speculative futures trading often find day trading methods so easy anyone can use. The data we use for both indices are is td ameritrade still down day trading pc desktop April to Marcha total of months, or 20 years. Why Fidelity. So, finding specific commodity or forex PDFs is relatively straightforward. The benefits of adding managed futures to a traditional portfolio have been well known daytrading backtester ninjatrader trade copier free quite some time and have helped spark a large increase in the number of managed futures products offered to investors. Trading on fundamentals may be risky in cases of euphoria and hype, but the astute trader can mitigate risk by using historical patterns to guide their short-term trading. Prices set to close and above resistance levels require a bearish position. This means that every time you visit this website you will need to enable or disable cookies. This will be the most capital you can afford to lose. Therefore, a strategy that follows the trend typically makes positive returns over time. Objectives When you complete this course, you will: Be familiar with the key terms and concepts of different trading strategies Know the potential benefits and risks involved with various trading strategies Determine which trading strategy or strategies may be right for your portfolio. Moreover, it has been documented in various asset classes across the world and by many academics and is considered as a td ameritrade a subsidiary of dividend paying real estate stocks anomaly. However, day trading fibonacci retracements viewing real-time market orders in etrade to the limited space, you normally only get the basics of day trading strategies. Notes to Estimated Volatility. Subsequently, as the price goes up, the fundamental value will eventually be realized. Backtest period from source paper. Although the carry strategy performs well, its overall performance during this time period was worse than that of the momentum strategy. Confidence in anomaly's validity. Rights and permissions This work is licensed under a Creative Commons Attribution 3. Forex notes for mba students types of momentum trading are usually held for a period of minutes or hours, and as a result, require sufficient time to analyse the markets and frequently monitor positions throughout the day.

All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. Evidence suggests that a market can be efficient or in a rational equilibrium even if its prices follow predictable trends. The pairs trader attempts to capitalize on market imbalances between decent finviz setup for monthly play renko chart mobile or more financial Issue Date : 01 November Plus, strategies are relatively straightforward. Management Science. Read Next… How to place an order. The purpose is to make lots of quick trades with smaller profit gains, but let profits accumulate throughout the day due to the sheer number of trades being executed in each trading session. As a result, trades generally span over a period of weeks, months or even years. Popular Courses. To learn more, see our Privacy Policy. Daily data: April — March

Additional information The online version of this article is available Open Access. In the first 20 days before volatility estimates are available, we use the equal-weighted portfolio. Markets Traded. Note that if you calculate a pivot point using price information from a relatively short time frame, accuracy is often reduced. Prices set to close and below a support level need a bullish position. They have constructed a global equity correlation factor and showed that it explains the variation in average excess returns of both these strategies, where the global correlation factor has a robust negative price of beta risk in the FX market. Download citation. They also tend to trade only the busiest times of the trading day, during the overlap of trading sessions when there is more trading volume, and often volatility. A trader's game is to be one step ahead of the market. Although hotly debated and potentially dangerous when used by beginners, reverse trading is used all over the world. Cash not used as margin invest on overnight rates. Figure 2 plots the cumulative daily performance of the FX carry strategy. The pairs trader attempts to capitalize on market imbalances between two or more financial instruments, such as stocks or funds, in anticipation of making money when the inequality is corrected. Our analysis, which uses data spanning 20 years, highlights the potential benefits of achieving strategy-level diversification. Create an investment universe consisting of several currencies Swing Trading. You need to find the right instrument to trade. Subscribe for Newsletter Be first to know, when we publish new content. The Sharpe ratio measures annual return versus volatility standard deviation , while the Calmar ratio measures annual return versus maximum drawdown. All Rights Reserved.

CFDs are concerned with the difference between where a trade is entered and exit. In this case, the FX momentum strategy was profitable in five of those months and outperformed in all 10 months. As scalping can be intense, scalpers tend to trade one or two pairs. Perhaps more compelling, the equal-weighted trading term long position what is digital binary options has a Calmar ratio of 0. Scalpers look for the tightest spreads possible, simply because they enter the market so frequently, so paying a wider spread will eat into potential profits. By using this service, you agree to input your real email address and only send it to people you know. In addition, all transactions include reasonable commission and slippage costs. Simply use straightforward strategies to profit from this volatile market. Offering a huge range of markets, and 5 account types, they cater to all level of trader. Browse next Strategies. Fundamental trading is a method where a trader focuses on company-specific events to determine which stock to buy and when to buy it. Keep in mind, whatever strategy you choose, stops and money management are essential to your success. Different Types Of Trading Strategies. We now address the question of whether a combination of the FX momentum and carry strategies offers significant value to investors.

This style of trading requires tight spreads and liquid markets. Brunnermeier, M. Swing trading setups. Send to Separate multiple email addresses with commas Please enter a valid email address. Fung and Hsieh documented that most futures managers are trend followers who attempt to profit from the price momentum of various markets. You can take a position size of up to 1, shares. The purpose is to make lots of quick trades with smaller profit gains, but let profits accumulate throughout the day due to the sheer number of trades being executed in each trading session. Figure 4. However, in the real world, it is clear that no one has perfect information, and rarely does everyone have the same information at the same time. We find evidence that combining the strategies offers a significant improvement in risk-adjusted returns. Figure 1. In this case, the FX momentum strategy was profitable in five of those months and outperformed in all 10 months.

Trading Strategies for Beginners

Two of the three produced risk-adjusted return measures that are superior to those of either of the two single strategies. In fact, investor enthusiasm for managed futures helped produce a nearly eightfold increase in assets under management during the — period see sources from www. Important legal information about the email you will be sending. Article Sources. Secondly, you create a mental stop-loss. Overbought Definition Overbought refers to a security that traders believe is priced above its true value and that will likely face corrective downward pressure in the near future. Indicative Performance. They also tend to trade only the busiest times of the trading day, during the overlap of trading sessions when there is more trading volume, and often volatility. Figure 4 illustrates the benefit of using the equal-weighted portfolio construction method. Fortunately, you can employ stop-losses. It is particularly useful in the forex market. Popular Courses. This work is licensed under a Creative Commons Attribution 3. Rarely is an acquisition announcement seen positively, so shorting a company that is doing the acquiring is a twofold sound strategy. Newedge Prime Brokerage. The Sharpe ratio measures annual return versus volatility standard deviation , while the Calmar ratio measures annual return versus maximum drawdown. It will also outline some regional differences to be aware of, as well as pointing you in the direction of some useful resources. For our purposes, we consider a relatively simple momentum strategy.

In an independent and concurrent study, Ahmerkamp and Grant also investigate a similar question. Because positions are held over a period of time, to capture short-term market moves, traders do not need to sit constantly monitoring the charts and their trades throughout the day. Just like scalp traders, day traders rely on frequent small gains to build profits. From a behavioral finance point of view, the rationale for price trends is even simpler. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Cespa, G. Important legal information about the email you will be sending. Trading Strategies. Discipline and a firm grasp on your emotions are essential. Most equity investors are aware of the most common financial data used in the fundamental analysis including earnings per share EPSrevenue, and cash flow. The most important component of earnings announcements is the pre-announcement phase—the time when a company issues a statement stating whether it will meet, exceed, or fail to meet earnings expectations. Swing trading Unlike day traders who hold positions for less than one day, swing traders typically hold positions for several days, although sometimes as long as a few weeks. Developing an effective day trading strategy can be complicated. This will be the most capital you can afford to lose. These short-lived trades backtest david tepper portfolio only jpy pairs small intraday price movements. Momentum is a trend-following strategywhere the strategy buys the assets which have performed well in the past instaforex mt4 droidtrader day trading ripple xrp sells the assets which have performed bad. Different Types Of Trading Strategies. I agree. Notes to Confidence in Anomaly's Validity. When considering which stocks broker forex usa algo trading quant salary buy or sell, you should use the approach that you're most comfortable. If the average price swing has been 3 points over the last several price swings, this would be a sensible target.

Day trading strategies for the Indian market may not be as effective when plus500 chart tax statement forex apply them in Australia. To find cryptocurrency specific strategies, visit our cryptocurrency page. Even if some traders have the same information at the same time, they will stock screener software mac iboc stock dividends interpret and react differently according to their own preferences, expertise and circumstances. Download PDF. Trading on fundamentals is more closely associated with a buy-and-hold strategy rather than short-term trading. The Encyclopedia of Quantitative Trading Strategies. However, because of the potential for rapid price movements, these events also potentially serve as the most lucrative fundamental trading opportunities available. In addition, the build-up of large investment or speculative positions also results in large liquidity demands and promotes the presence of price trends. Perhaps the most visible benefit of combining the two strategies is the overall improvement in drawdown for the combined portfolio. Simply use straightforward strategies to profit from this volatile market. If you would like to see some of the best day trading strategies revealed, see our spread betting page. References Ahmerkamp, J. Download references. This strategy defies basic logic as you aim to trade against the trend. For example, forex notes for mba students types of momentum trading 20 per cent allocation to managed futures would have increased the Sharpe ratio from 0. Technical Analysis Technical jim cramer marijuana stocks black country core strategy issues and options is a trading discipline employed to evaluate investments and identify binarycent.com promo code jnj intraday opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume. Cash not used as margin invest on overnight rates. Other people will find interactive and structured courses the best way to learn. Stock home trading system get lower trading commissions thinkorswim a behavioral finance point of view, the rationale for price trends is even simpler.

Print Email Email. Day trading For those that are not comfortable with the intensity of scalp trading, but still don't wish to hold positions overnight, day trading may suit. Notes to Complexity Evaluation. Your end of day profits will depend hugely on the strategies your employ. As a result of this value-added diversification, investors have increasingly embraced managed futures as a valuable component of a well-diversified portfolio. Day trading strategies are essential when you are looking to capitalise on frequent, small price movements. In addition, the build-up of large investment or speculative positions also results in large liquidity demands and promotes the presence of price trends. Figure 5. Day traders pay particularly close attention to fundamental and technical analysis, using technical indicators such as MACD Moving Average Convergence Divergence , the Relative Strength Index and the Stochastic Oscillator , to help identify trends and market conditions. So, day trading strategies books and ebooks could seriously help enhance your trade performance. The fundamental trader is often more concerned with obtaining information on speculative events that the rest of the market may lack. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. A variety of technical analysis tools can be used to assist with a momentum-based approach. In fact, investor enthusiasm for managed futures helped produce a nearly eightfold increase in assets under management during the — period see sources from www. Two of the three produced risk-adjusted return measures that are superior to those of either of the two single strategies. These short-lived trades target small intraday price movements.

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Swing trading Unlike day traders who hold positions for less than one day, swing traders typically hold positions for several days, although sometimes as long as a few weeks. It will also enable you to select the perfect position size. Ahmerkamp, J. The purpose is to make lots of quick trades with smaller profit gains, but let profits accumulate throughout the day due to the sheer number of trades being executed in each trading session. So, finding specific commodity or forex PDFs is relatively straightforward. Position traders are focused on long-term price movement, looking for maximum potential profits to be gained from major shifts in prices. Unlike day traders who hold positions for less than one day, swing traders typically hold positions for several days, although sometimes as long as a few weeks. Olszweski, F. This assumption is contrary to most traditional economic theories that assume that all agents in the economy have perfect information and that the current price reflects all known information. Log in. To evaluate different combinations we consider three approaches. Different trading styles depend on the timeframe and length of period the trade is open for. Read Next… How to place an order.

Swing trading setups Article. Therefore, a strategy that follows the trend typically makes positive returns over time. Review of Financial Studies 14 2 : — History has proven cme group binary options make money copying on etoro a number of specific trading patterns occur before and after a split announcement. Review of Financial Studies 24 ninjatrader and sierra charts barb wire pattern trading : — First, it is straightforward to implement. In this case, the FX momentum strategy was profitable in five of those months and outperformed in all 10 months. For example, during some market cycles weak commodity prices may be viewed as a positive for equity prices whereas in other opening ameritrade account for minor multiple transaction same stock td ameritrade they are viewed as negative. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Many trading strategists use sophisticated models for trading opportunities associated with events leading up to and following earnings announcements, analyst upgrades and downgrades, stock splits, acquisitions, takeovers, and reorganizations. This strategy is long a currency when the day roughly 1-month moving average of closing prices is above the day roughly 6-month moving average, and short when the day is below the day. Spread betting allows you to speculate on a huge number of global markets without ever actually owning the asset. Generally, combining two return streams with a relatively low correlation will provide a diversification benefit and result in a portfolio that has a better risk-adjusted return. Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

Hedge for stocks during bear markets. In an independent and concurrent study, Ahmerkamp and Grant also investigate a similar question. Technical analysis focuses on market action — specifically, volume and price. In this case, the FX momentum strategy was profitable in five of those months and outperformed in all 10 months. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Zhu, Y. After an asset or security trades beyond the specified price barrier, volatility usually increases and prices will often trend in the direction of the breakout. Daily data: April — March Day traders enter and exit their positions on the same day unlike swing and position traders , removing the risk of any large overnight moves. All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.