RSS

A Chat With Josh Yudell Amazed Me About Day Trading

January 21, 2011 — 4:33 pm

According to my colleague Josh Yudell, when you procure or when you trade stocks and bonds or other fiscal assets in the same trading day that is called day trading. People who do this are called day traders. They take longer positions of their shares but at the right minute sell it for a benefit. Day traders most of the time, used to be bank investment personnel or guys from a fund management group. That was so then but as the on-line trading phenomenon began, things changed. Now even when you are at your home you can join the trading unlike the old custom wherein a trader is necessary to be on the trading floor to be able to join.

There are coaches, like my friend Josh Yudell, for employ in this phenomenon too. Lots of them are on the cyberspace offering comprehensive coaching for fees. Without a trainer though, one can do day trading as long as he or she knows the keys that are given by the online trader. These keys can unlock doors that can lead to successful trading. Technical aspect is one but it is not everything. Sure, these on-line traders grasp the technological aspects but not all. Bear in mind those are the citizens who do their trading in the market. In reality, on-line trading is when two or more citizens are involved in the dealing, from a distance.

A day trader is good at preparation. Businesses are planned and so is day trading. Investments ought be studied and analyzed so that the trader can make sensible and profitable moves. A respectable trader is not afraid of the risks. In fact they are yet able to tolerate loses in order to gain. Money is not everything in a trader’s degree of view when they are trading.

As the booming world economy increases the stock market of the globe will materialize fast too. Stock market investments via day trading, long term or commodities also grow bigger and more popular. Day trading is practiced by brokers and investors. We hear it being analyzed on the news but do we get a clear-cut idea how it works? Simplified in plain speech day trading is when a specific shares or stock is bought and sold among one day.

Bought stocks are not carried by the trader over to the succeeding day. To bring in earnings the trader capitalizes between the rise or the fall of the price of shares in a trading session. Day trading is a ordinary practice of brokers and investors alike. We hear about it on the news and in all the examination going on too but do we actually know what day trading means? Day trading in simple language is the buying and selling of a a variety of stock or shares within one period of trading i.e. one day.

If you are given the encounter to talk to a adept trader, like Josh Yudell, he can tell you that this kind of occupation needs flawlessness, enormous vision and experience. Ability is necessary in trading. It is not just a plain way to gain funds. It is a combining of art and skill. The stakes are lofty but the risk is of the same proportion.

More traders and beginners flock to usable software through the internet so they can get a chance to trade online. The software, although not limited to day trading, helps them rationalize and make predictions about specific stocks or shares. Day trading is regularly done through the net. Avail the software on the internet and ascertain how to trade without delay. If you had been thinking of getting into the stock market then it’s time for you to do it. Try trading today!

Day trading can be done through customary trading in the stock market via your agent or it can also be done online. There are many types of software usable on the net that not only let you trade but help you to trade advantageously. Surely you’ve been reasoning getting into the stock market. Well isn’t it about time you tried day trading for your wealth? Try day trading today!

0 response
Money Management
, , , ,
Hassam
 

If you like our blog, click on the "Like" button below. Once you do, you will get FREE Instant Access to the Magic Forex Candlesticks plus the Magic Forex Divergence Trading Guides.

 

Build Your Own Personal Budget And Get Started Toward Financial Wealth

November 28, 2010 — 2:00 pm

Setting up a private money management budget is an excellent spot to begin any money management plan. Our personal money management habits work out what we do with the money that we’ve got and earn. The way in which we handle our earnings is what will establish whether or not we reach our financial goals, and whether true financial independence is something that we will be able to sometime enjoy.

Our money management habits are how we spend, save, and invest our money. I use the word habit because that is essentially what money management is, it is our habitual spending, saving, and investing actions. Beginning and sticking with a personal money management budget is a good way to pick what habits you would like to create, and then follow them till they become natural and continual.

creating your own budget is not a tough action to take, the hard part is following it once it has been set up. However I’ll offer a little guidance on how you can keep a money management plan a bit farther.

To begin your financial position, you have to know exactly what amount of cash is coming in and the full amount of your required expenses. Write out your average cash income, and from that take away all your expenses. Not that you costs are necessary expenditures, not things that you can do without.

Now you have in front of you the amount that you have left over, after your living costs are taken care of. Without a budget you could be tempted to spend all of this extra money, but that wouldn’t be the financially savvy action to take. This leftover cash can be divided equally into 3 accounts, each with its own function.

The first account is the one that the general public already use, or at least they know they should. That is your long term savings account. This account should be opened in an interest bearing account, and this cash isn’t to be touched. It is left to grow and grow.

Another account should be used for your investment money. Making an investment in trusty places offers a great way to set up varied passive income streams. This can be regular investments, or it can be invested in business or other money making opportunities . The general public do not have enough bucks to invest right away, especially in real estate or other high cost investments. The point of the savings for investment account is to save enough funds that you can invest. While this account is amassing, learn about a selected field of investment that you would enjoy. This way when you have enough to invest, you can do it wisely.

The last account is the one that creates balance in your personal money management budget, and it will offset the drudgery of a strict savings plan. This is your fun money, and you can spend it however you want. This money can be spent every month, or you can accumulate it for a large purchase like a vacation or new car.

Get in the habit of budgeting and saving and it will serve you for life. A bad habit is easy to form yet hard to live with, a good habit I hard to form but easy to live with. Choose to create good money management habits, and you will live a financially free life.

People who are searching the Internet for more information about the niche of managed forex accounts, go to the page that was mentioned in this passage.

0 response
Money Management
Hassam

A Grim Reminder Of The EU Debt Crisis

November 16, 2010 — 6:48 am

The European sovereign debt problems have largely disappeared from the headlines in recent weeks, but time and again we see reminders that the problems are far from over. Last week, Ireland announced that it will step up its program to reduce its deficit, through spending cuts and tax hikes, from 32 percent of GDP to 3 percent by 2014. In the Rockwell Trading report, the revised budget calls for 8 billion euros in savings next year, roughly twice as aggressive as originally planned.

But without clearer details of where the savings will come from, investors aren’t buying the announcement. They don’t see it as a reaffirmation of Ireland’s commitment to cut debt and a faster solution to the country’s debt woes, but rather as a sign of desperation to combat an out-of-control deficit problem. The yield on 10-year Irish bonds soared to 7.6 percent, widening the spread between Irish and benchmark German bond yields to a record. This has caused the European Central Bank to buy Irish bonds to help stop their slide.

The borrowing costs in Greece, Spain, and Portugal, other members of the PIIGS countries, are also spiking again. The spread between Portuguese and German bond yields are also at a record 4.52 percentage points, not a great sign for Portugal’s upcoming bond auction of as much as 1.25 billion euros later this week. Even with a 750 billion euro in bailout funds committed by the European Union and the International Monetary Fund, investors remain very wary.

Ireland isn’t in as bad shape as Greece was because it has a decent amount of cash on hand, but the latest episode serves as a grim reminder that investors have jitters when it comes to the EU debt problems. Any sign of weakness will revive fears and could spark an exaggerated negative reaction in asset markets, creating a snowball effect.
javascript:void(0);
Ahead of the Group of Twenty (G20) summit in Seoul later this week, the rhetoric between the U.S. and China over the prickly trade and exchange rate issues appears to have toned down. With the House of Representatives having passed a decisionbar bill to open the door for potential increases in duties on Chinese imports and China taking a hard-line approach, it looked like there could be some fireworks during the summit. However, both sides seem to have taken a step back.

A softening of China’s previous warning about the potentially damaging effects of the Fed’s quantitative easing on emerging markets (that include China itself), China’s Vice Finance Minister Wang Jun described the Fed’s planned $600 billion debt purchase as something that could contribute “tremendously” to global growth. Still another authority, Vice Finance Minster Zhu Guangyao repeated China’s concerns that the additional $600 billion in quantitative easing will provide a “shock” to the global economy and increase money flowing into emerging countries, potentially creating asset bubbles. As China’s global importance continues to rise, there will be more finger pointing as each side accuses the other of pursuing selfish policies that damages other economies.

While most of its developed nation peers struggle with deficit woes, Australia is expected to forecast a surplus of approximately $3 billion (Australian Dollars) in the 2012-2013 fiscal year (starts on July 1, 2012), according to a leading Australia business newspaper. Even with a minor pullback, the Australian dollar, or the Aussie, remains above parity with the greenback — its highest level since it began trading freely against the U.S. dollar nearly 30 years ago. According to government officials, Australia has little exposure to Europe. Expect Australia to remain a rare bright spot among developed countries.

In case you are searching for info about forex trading, make sure to check out the URL which was quoted in this paragraph.

0 response
Money Management
Hassam

Keep A Portion, Give A Portion, Spend Some

October 18, 2010 — 2:05 pm

It isn’t ever too soon to begin teaching your kids personal finance skills. In fact, the earlier you start this important life lesson, the more efficient your child will be able to manage money through their life life as opposed to being trapped in the matrix of credit.

Three crucial aspects of dealing with cash involve saving cash for the future, giving money to charity, and spending money on wants and needs.

Children at a young age can figure out the importance of cash and simple money skills. As children get older, they can take on different levels of responsibility with money and figuring out how to budget and earn more. There are a lot of methods to help your child learn to handle his/her income. Here are some ideas to get you started.

Give a little money. If you go to a church, you have a great opportunity to show your kids the idea of giving. Give your kid his or her allowance or earnings before entering, then as you place your donation in the collection plate, help your kid figure out the percentage of his or her offering.

Giving to charity of any kind is critical to help your children understand. You may want to set up a donation jar for the kids. Every time your child receives their allowance or wages, make sure to help them take an amount to put into the money jar. Then, when it’s full, assist them in picking out a charity and make the donation.

Save a portion of the money. Even the youngest children love to gather and save pennies. Teach your child to value money at an early age by getting a piggy bank or money jar and letting your kid fill it with coins out of your pocket, or coins earned doing small tasks. Be sure to use only a certain portion of those pennies so you can teach your kid about the other aspects of money management.

Begin a savings account for an older child. Every time your young one receives their allowance or gets paid, take a trip to the bank and put in a set amount or percentage. Be sure you have the bank print out the balance regularly so your kid can watch the balance go up.

Enjoy a little of the money. Probably the most enjoyable part of your child’s money management will naturally be the spending part. None of us are saints, so we all like our little rewards for a job well done. Once the saving and giving is finished, your child now has a little money to spend on what they like or need. A younger child will, probably want to get a toy or some candy. An older child might want to go to the mall for some new clothes or music. Depending on the child’s age, some of the spending money might be for essentials as well as fun items. Getting a balance between needs and wants will take time, but your youngster will decipher it with your help.

Beginning a system of money management early in a child’s life will assist them in developing a sense of control. Wealth is something we all need to learn to manage, and the sooner we start, the more beneficial. Those are the skills that will last your child forever. You might have a hard job on your hands in the beginning, especially the “give and save” part of the lesson. But, it is a struggle well worth the effort to ensure a lifetime of money management skills.

Shortcut to helpful knowledge about money making ideas – please make sure to go through the webpage. The time has come when proper information is truly at your fingertips, use this chance.

0 response
Money Management
Hassam

Are All Your Income Eggs In One Basket?

August 24, 2010 — 10:31 am

If you are single and your only source of income is your job, all your income eggs are in one basket; that being, of course, in contradiction to the age old financial advice that you should never have all your eggs in one basket. This advice is promoted these days as a sort of short-hand for the wisdom of diversification as it applies to investing.

Diversification is a simple concept: It simply means that you invest a range of asset classes instead of just one or two. For example, if all your savings were invested in a single stock or all in cash, you would not be diversified.

On the other hand, a well-diversified investor would have some money in individual stocks, some money in mutual and index stock funds, some money in bonds, and some in cash.

But the wisdom of diversification also applies to income, as well. Income diversity is a more difficult outcome to achieve than investment diversification but, I think, even more important to your financial security.

If you are married, and you and your spouse are both employed, that is some level of income diversification (ID) right there. If one of you is laid-off or loses your job for any reason, you still have the other’s income to soften the blow and you still have some income, at least.

The way to truly diversify your income, however, is to create another one or more individual income streams independent of your full-time job. The income from your savings and investments, if any, is one possible source of additional income. And, in fact, the money one has saved is often the fall-back position when unemployed.

Obviously, then, the more savings, the better! And, ideally, your savings and investments would provide enough income to cover your expenses entirely. At that point, you will have achieved financial Nirvana—financial independence.

Financial independence the ultimate financial goal; and, if you think about it, once you have achieved financial independence, you could ditch paid employment entirely. You could retire, in other words!

Most people will work thirty or forty years or more to achieve financial independence and then shuffle off to a grey-beard retirement. But in the meantime, they are taking their chances and putting both their immediate financial security and their retirement at risk if they fail to adequately diversify their income.

Aside from building your savings, however, more ID is required. Perhaps the most straight-forward way to achieve the required diversification would be a second and part-time job.

There are only so many hours in the day, I know, but even as little as ten hours a week of “extra” work in a second job would be sufficient to achieve the goal of ID when combined with savings.

Ideally, your part-time job would be in a different field than your full-time job and with a different employer, as well. In that way, you would be learning and refining an individual set of skills and building a network apart from the network of peers and associates at your full-time job.

Most unemployed people find their next job by way of a personal referral; that is, someone they know refers them to someone they know. The second network of a part-time job is a valuable resource to have: Your second network and your first could both be tapped for job leads if the need ever was to transpire.

Also, income from your part-time job should be used only to build your savings; this is not income that you should become dependent on to meet your recurring monthly expenses. Instead, by devoting this income to savings, you are building your level of financial security and income diversification.

The second most-common way to enhance your level of ID is by being a small business owner. Building a profitable small business is not as easy as finding a part-time job, but the rewards can be greater and you will not have to live with the scheduling demands of both a full and part-time job.

Often a part-time small business can be started with a minimal investment and this is, in fact, the ideal. The internet can be an ideal venue for a small business and millions of entrepreneurs all over the world have a business online today. Starting a small business is a delicate balance between creating income and expending capital in start-up costs.

There is another side to the ID issue, however. The whole purpose of diversifying your income is as an insurance policy of sorts against the unintentional loss of your full-time job. It is said that many of us are only a few missed paychecks from being destitute, homeless, or worse! That is the situation you want to avoid and the way you do avoid it is by income diversification.

Think about what your situation would be if you lost your job today and were unable to replace that income for a period of six months. Do you have the savings to support yourself for that length of time or would your entire way of life be at risk? The other side of the income equation is expenses.

If your income and expenses are equal, your condition is that of living paycheck to paycheck. This is the most risky situation short of being in a situation where your monthly expenses exceed your monthly income: The only way to sustain that situation is to incur debt and even that will not work for long.

The lower your expenses are, the longer you will be able to live off your savings, if that ever becomes necessary. So, when considering ID, it is also prudent to examine your expenses before you are forced to do so by the loss of employment. And, also prudent, is to begin to look for ways to achieve income diversification and to implement a strategy to do so.

Perhaps the best place to begin your search for income diversification is to yourself: What is it you love to do? What would you do to stay active if you didn’t have to work for a living? What work would you do for free if you could, in fact, afford to work for free?

The extent to which your part-time job or small business entails work you enjoy, the less it will feel like real work. And the more likely it is that you will be successful at it! By building a business based on your passion or what you feel to be your calling in life, you are increasing the chance that someday you might be able to leave work you do not love behind you.

Imagine being able to love your work. It is much more likely that you will realize work you love as the result of concentrated effort on your part to build the life of your dreams than it is that it will happen by accident.

We should all seek to achieve income diversification; doing so, while at the same time doing work we love will allow you to achieve two goals with a single effort: income diversification that doesn’t feel so much like work!

Wallace R. Curiel is the author of Money Well Spent, The Debt Whisperer, and many other books available at amazon.com and other online retailers. You can see his complete list of titles at http://www.tmgbooks.com including his work in progress, Zen and the Art of Financial Independence, and more articles on financial independence, real estate, and personal financial management. You are invited to visit his blog:

http//www.financialindependenceextreme.blogspot.com.

If you are trying to find info about forex trading online, then visit the URL which is mentioned in this passage.

0 response
Money Management
Hassam

How To Avoid Common CFD Trading Mistakes

August 19, 2010 — 9:12 pm

Many amateur CFD traders start trading the hard way, without learning from experienced traders who have made many of the costly mistakes traders make on their way to success. To help you understand the most common mistakes made by traders and to prevent you from making the same errors with your own money we’ve outlined a number of common mistakes below.

1. Trading for the wrong reasons.
Most people commence trading with the aim of making a profit from day one. However, there are a few people who invest for entertainment. For anybody who is serious about making a profit, it is important that you treat your trading like a business. Those that trade for fun will be lucky if they make money in reality more often than not they’ll lose.

2. Over-Trading.
You should avoid the temptation to over-trade. Over trading is a risk for those traders that are not following a strategy, choosing to sit on the sidelines until a clear trend emerges is in itself a valid approach. You should avoid the mistake of fully gearing your positions just because you have got free equity available. It’s also imperative to ensure that you don’t trade with money that you cannot afford to lose.

3. Psychological and Emotional Errors.
Developing the mind-set that you should get each trade right can be a dangerous error to make if you can not acknowledge the very fact that you’re going to make mistakes and may find it hard to close out of a losing position. Instead, your mind will find ways to persuade itself that the trade will swing around and become profitable. There is a risk that subconsciously you could become blind to evidence that suggests that you’re wrong.

You need to recognize that you will not get each trade correct and that you don’t have to get each trade right, this will enable you to manage your trades effectively. Being wrong is something that we often feel bad about. We are taught through positive reinforcement that we should always feel good about being correct. This regularly presents problems when trading.

Losing trades may cause emotional distress and prevent you from correctly analyzing the market. This may present a danger that you’re going to commence over-trading so that you can make back losses or to “get even” with the market. On the flip-side, winning trades can create feelings of elation and invincibility. If you make the error of permitting this emotion to take hold, you might end up taking too much risk or making silly errors through negligence.

You should aim to keep your trading related emotions under control. Wise traders will concentrate on the downside risk potential of every trade and will make sure that this is within their pre-defined parameters outlined in their trading strategy.

4. Not understanding the suitability of Contracts for difference.
Trading CFDs has enhanced the trading possibilities for a great many retail traders. Contracts for difference are a perfect product for traders with a short-term time horizon as well as a desire to increase their market exposure on a small amount of funds.

CFDs are not always appropriate for long-term traders due to financing expenses which can build up over time. Furthermore traders who do not supervise their open positions will not find CFDs appropriate. You always need to ensure that the amount of money which you allocate to your trading account is an amount which you could afford to loose.

Before you begin trading Contracts for difference you ought to be familiar with the risks associated with the product. Like all leveraged financial products, the risks are going to be higher if you don’t take the time to understand the product.

For traders that understand how CFDs work and learn to minimize their risks, there are usually substantial benefits from CFD trading. Through the use of leverage plus the convenience of trading, retail traders now have greater opportunities than they have ever had before.

0 response
Money Management
, , , ,
Hassam

Find Out How To Use Stop-Loss Orders When Trading CFDs

July 29, 2010 — 11:20 pm

Like all financial products there are risks in buying and selling CFDs. Risk is usually related to profits, the riskier the investment the higher the possible returns, however if risk is managed correctly it can be considerably reduced. When buying and selling CFDs this can be done with the utilization of stop-loss orders and simple portfolio hedging. This short article explains the primary risks linked to trading CFDs and what can be done to decrease them without having a bearing on the significant returns that CFDs can provide.

Prior to trading CFDs you must recognize that CFDs are a leveraged product which enable them to work for you as well as against you. Like all leveraged products a small price movement can deliver substantial returns and also significant losses. The variety of order types offered to CFD traders allow the risks connected to adverse price changes to be considerably reduced as CFD traders are able to set their order at a price which they are prepared to close out their position and realize a loss. Common order varieties utilized to alleviate risk are stop-loss orders, trailing stop-loss orders and guaranteed stop-loss orders.

Stop-loss orders
This is the most common order type employed by traders to control risk. A stop-loss order is simply an order to shut an existing open position that is positioned at a price below or above the present market price. The order is placed at a price that the CFD trader is prepared to shut out their open position. It is essential to note stop-loss orders tend to be susceptible to slippage should the price of the CFD gap, this is a regular occurrence when trading share CFDs.

Trailing Stop-loss orders
Trailing stop-loss orders are similar to stop-loss orders with the exception that the price of the order moves in accordance with a pre-determined distance from the present trading price, this distance is set by the trader at the time of placing the order. It is important to note that the price of the order will only alter if the price of the instrument moves in a favorable direction, should the price move against the trader the price of the trailing stop-loss order won’t change. This order type works like a ratchet, in that it can be used to lock in gains as the position moves in favor of the CFD trader without the need for the trader to continually change the price of the stop-loss order.

Guaranteed Stop-Loss orders
Guaranteed stop-loss orders have become commonplace in recent times because of traders being able to predetermine their losses. This order type is generally used when trading share CFDs purely for the reason that share CFDs are prone to slippage and gapping during the opening phase of the market. It’s vital to note that when using guaranteed stop-loss orders your CFD provider will often charge you a premium, this is like an insurance premium guaranteeing that you’re going to be filled at the price your stop-loss order is placed.

Besides using orders to deal with your risk when trading CFDs many traders use other financial products such as shares and options to hedge their CFD positions.

Shares are normally used to hedge CFD positions or vice versa, these are regularly employed by traders that hold a portfolio of stocks and also a short term CFD trading account. CFDs are used to trade the short term price movement of the stocks within their portfolio without needing to sell the stocks and realize any capital gains.

Options are used by a number of CFD traders as a type of guaranteed stop-loss. Options have a bonus over guaranteed stop-loss orders in that they are often cheaper. Hedging CFD positions using options is a common strategy employed by more advanced traders that are familiar with the core components of an options contract and are familiar with how to choose the most suitable contract to hedge their CFD position with.

Other than managing risk using order types and hedging strategies all CFD traders should make certain that they adopt strict money management techniques, meaning that they should not utilize too much leverage or over expose themselves to one individual CFD or sector. Utilizing too much leverage is the single most frequent mistake made by novice CFD traders.

Prior to opening a real CFD account you ought to ensure that you practice trading on a demo account to so that you are familiar with how to make use of the many order types available which will help you deal with risk. Keep in mind CFD trading can be tremendously satisfying if the risks are controlled.

0 response
Money Management
, , , ,
Hassam

Do You Wanna Be Broke? Do A Budget!

December 2, 2009 — 8:48 am

Right now, I would like to discuss the newly controversial subject known as budgeting. Most, if not all of financial analyst will tell you that you must have one to succeed. This seems like a no brainer, but if it is that easy, then why is it that nobody does them?

Is it because people are just lazy? Is it because they have no discipline? Does a Budget even work?!! Consider the following material. Things are not always as they seem.

The Real Truth Behind Budgets

What most people don’t realize about personal finance is that it is not JUST a numbers game. Psychology has everything to do with whether or not you succeed at ANYTHING and finance is included. There is no bigger example out there to demonstrate what I just said than budgeting.

There are thousands of gurus out there who say that you should do a budget. As a matter of fact, you would be hard pressed to find any financial “expert” who doesn’t. Doing a budget seems easy enough but yet NO ONE seems to do them. The people who try to do them, in most cases, fail miserably! Why is this? And why do people keep giving out this same advice if it doesn’t work?

Well, first of all, there are a lot of reasons why budgeting fails. Some of it is lack of discipline. Some of it could be lack of commitment. Some of it is lack of money (I’ll explain this later). Some of it (in the case of family) is disagreement. Some of it is not allowing for unexpected expenses. But, do you know what is the biggest reason that budgeting fails?

It’s Because it’s a Budget!!!

Ladies and Gentlemen: A budget is something that you do when you are BROKE and struggling. Now, who wants to be broke and struggling? Let me throw this out there for all of my “Law of attraction” students. Budgeting is based on LACK. It keeps you focused on how much you DON’T have. When you focus on LACK, you will “attract” LACK into your life. Deep down inside most people know this. That’s why they can’t do budgets. Doing a budget makes you feel broke. As a matter of fact, while reading this very article, every time you read (and subconsciously hear) the word BUDGET, it probably makes your soul cringe. As a matter of fact, just by reading the first couple of paragraphs of this article, you may already be bogged down. Budget is truly a bad word. So then what should you do?

To read the conclusion of this article, you can go to Don’t Do A Budget! You can also subscribe to the free online monthly ezine and get valuable information such as how to improve your credit score.

Read pragmatic tips about the topic of forex investment – make sure to study this page. The time has come when concise information is truly within your reach, use this opportunity.

0 response
Money Management
Hassam

Rollovers in Forex Trading

October 23, 2009 — 8:07 am

Rollovers are unique to forex trading. Rollovers are transactions where an open position from one settlement date is rolled over to the next settlement date. Rollovers represent the intersection of interest rate markets and forex markets. Rollover rates depend on the difference between the interest rates of the two currencies in the pair that you are trading. Only remember that what you are trading is in fact the good old cash. Dont forget currency is money after all.

When you are long on a currency, it is like having a deposit in a bank account. If you are short, its like take a loan from the bank. Just as you would expect to earn interest on a bank deposit and pay interest on a loan, you should expect an interest gain or an interest expense on holding a currency position over time. Interest rate differential is the difference between the interest rates between the two currencies. You should think of the open currency position as one currency with the positive balance (the currency you are long) and one with negative balance (the currency you are short).

Because your accounts are in two different currencies, the interest rates of two different countries apply. You can find the interest rates of different countries from Wall Street Journal Online, Financial Times online or that matter any good financial website. You should look for the base or benchmark lending rates in each country. If you hold an open position past the settlement date or value date, rollovers are usually carried out by your forex broker. The smaller the impact of the rollovers, the narrower the interest rate differential! The larger the impact from rollovers, the larger the interest rate differential!

Some online forex brokers apply the rollover rates by adjusting the average rate of your open position. Other forex brokers apply the rollover rates by applying the rollover credit or debit directly to your margin balance. Rollovers are applied to your open currency position by two offsetting trades that result in the same open position. Rollovers are applied to open position after 5.00 PM EST change in value date. Rollovers are not applied if you dont carry a position over the change in the value date. For day traders, who usually close their positions at the end of each trading day, rollovers do not apply. Rollovers only apply to your over night open position carried over to the next day.

Rollovers can earn you interest income if you are long the currency with the higher interest rate and short the currency with the lower interest rate. Rollovers will cost you money if you are short the currency with the higher interest rate and long the currency with the low interest rates.

0 response
Forex, Money Management
, , , ,
Hassam

Forex Margin Call

— 7:55 am

Have you ever received the dreaded forex margin call? But contrary to the popular opinion that a margin call represents that worst case scenario for the currency trader, this is far from the truth. The risk that is assumed when trading aggressively the currency markets often results in receiving a margin call. The worst case could be far worse. To owe additional funds to the broker is actually the worse case scenario. A margin call is in fact a safeguard to protect a trader from losing 100% or even more of the money in the trading account. This uncomfortable position is largely avoided because of the existence of the margin call.

In stock trading, you will receive an actual call from the broker to add more funds to your margin account when equity is running low. Unlike the world of stock trading, a margin call is not actually a physical call from your broker in forex trading. The trading platform software automatically closes out all the open positions and immediately realizes all losses at the prevailing market rates when a forex trader no longer has enough equity in the trading account to keep the open positions viable in forex trading. You might be thinking cold hearted behavior of your forex broker.

There are good reasons for automated margin calls in forex trading, although this may seem a bit cold hearted. Prices can move extremely fast in forex markets and because of the high leverage used, every price move is magnified. The trading account can become depleted very quickly with not enough time to call for more funds when the traders equity runs low in forex trading. The forex margin call closes all open positions to help ensure that the trader does not lose the entire account or worse as a safeguard measure.

Lets make it clear with an example. Suppose you have $1500 in your trading account. So exactly when is a margin call triggered? This depends exactly on the number and the size of the lots being traded, the leverage chosen and the equity in the account. Suppose you use a leverage of 100:1 to trade in standard lots of $100,000. You want to trade one standard lot of EUR/USD. That is EUR 100,000. Suppose the EUR/USD exchange rate is 1.3465. You need to convert it into Euros since your account is in US Dollars. So you need $1346 to trade standard lot EUR 100,000. This is because with a leverage of 100:1, EUR 1000 are needed to control EUR 100,000.

Each pip is exactly equal to $10 in this case. Suppose you are very new and dont know about stop losses, you start trading without putting stop losses in place. Your trading account has $1500. The margin required to keep the trade open is $1346. When your equity drops below $1346, you will receive a margin call. You have $1500 equity in your trading account. Your open position will be automatically closed when you receive a margin call. That means once you lose the excess equity in your account above the margin required to trade a standard lot that is $1500-$1346= $154. This is equal to 15.4 pips loss (assuming no spread).

0 response
Forex, Money Management
,
Hassam
  • Page 1 of 2
  • 1
  • 2
  • >
RSS