When most newbie traders venture into the world of trading forex online, they have only one thing in mind: to make lots of money, and to make it quickly.  Money management is a concept many of them have never used and to which they certainly do not give much thought.

The truth is that without proper money management an otherwise profitable trading account can turn into a loss.

A money management system will help you decide how much to risk on any individual trade (usually as a percentage of your trading account), how many different trades to have open at any given moment and when you should exit both profitable and non-profitable trades.  It will also guide you regarding position sizing, i.e.  how many contracts of a particular trading instrument to buy or sell at various times during a trade.

Without a money management system, you could easily make mistakes such as risking all your money on one trade, exiting profitable trades too early or hanging on to losing trades until they become disastrous.

24
Jan

Currency trading is simply buying and selling currency for profit, and is centred on the foreign exchange market, known as ‘Forex’. When considering whether to buy or sell currency, skilful traders pay attention to world affairs, noting levels of inflation, how industrial production is faring and what is happening in the political arena, especially concerning international relations that are influenced by geographical factors. This is because exchange rates will rise and fall in response to such events.

As the currency exchange rate is normally quoted in pairs, it is common to see these described as, for example, GBP/USD – the British pound sterling against the US Dollar – and the rate quoted, say 1.56, is an indicator of the number of US Dollars that can be bought with one pound sterling. The aim is to buy a currency at a particular rate, and then sell it again when the exchange rate has risen, thus making a profit.

More and more people are keen to learn forex because it is relatively accessible and it is not necessary to have lots of money to begin trading.

Invoice finance includes both invoice discounting and factoring; these are methods of raising funds against the value of a company’s unpaid invoices, also known as ‘receivables’.  In many ways, they offer simpler routes to raising cash and do not require security or guarantees, as do many overdraft or bank loan arrangements.  The principal difference between the two is that invoice discounting services are entirely confidential, so that the company continues to control its own sales ledger and to collect payments directly from its customers.

As with factoring, the lender makes available a percentage of the total value of an invoice for the initial payment; this is normally between 80 and 90 percent.  Sometimes, protection from bad debt is included in the service.  Unlike factoring, however, copy invoices are not usually issued to the lender.  Instead, invoice discounting services are provided on the basis of the company supplying the lender with listings from its sales daybook.  This makes senses, as the company retains the sales ledger and remains responsible for chasing payments, issuing statements, etc.

Any funds collected by the company against the invoices are paid into a specially created bank account and the lender is notified.  The lender then pays the balance of the invoice totals, minus any charges for the service that have been agreed.  Service charges are negotiated with client companies, based on their annual turnover and interest on the funds that have been advanced.

Unlike factoring, where the lender takes over responsibility for credit control, customers generally remain unaware of the arrangement.

Many individuals would like to get into currency trading but they aren’t sure where to start. Step one is to get a basic understanding of the Forex market. The next step is to create a Forex account. However, there is more to an account than just a user name and password. You must decide which trading platform to use and whether you will deal directly or indirectly with a broker. These are two of the most important questions to research before even creating an account.

After choosing the right software or platform, you must familiarize yourself with how the software works. This helps you to trade correctly without making costly mistakes. Also, learn whether any commission or fees are taken out of individual trades. This prevents any confusion later on. The final component of a Forex account is the type of trading. You can use automated trading if you have a busy schedule, trust a money manager to handle your trades with your own specific instructions, trade yourself or do day trading only. Be aware that some accounts only allow one or two types of trading.

Factoring companies provide a prepayment against outstanding invoices.  Many invoices leave companies waiting as much as 90 days for payment.  When capital is needed quickly, factoring provides an almost immediate turnaround of cash flow.  The only catch is there is a cost for this service.

What Is Required

Factoring
companies handle all credit management for the business.  This means a company sends invoices to customers but includes instructions for paying the factor instead of the company.  A copy of the invoice is also sent to the factor for their records and debt collection. 

Receiving Funds

The factor and company agree upon a set percentage on which the company can draw.  The full amount of the invoice is not made available to the company.  Usually, as much as 85 per cent of an invoice is available within 24 hours after the factor receives the invoice. 

When the customer pays the invoice in full, the rest of the invoice total is then made available to the company.  The factor takes a set percentage of the invoice as a fee for their services.

17
Jan
stored in: Currency Trading, Forex, Forex Tips and tagged:

The Foreign Exchange Market, commonly known as Forex, involves investors trading in currencies to realise a profit from the fluctuation of exchange rates.  For example, they may exchange Dollars for Euros.  It is an extremely large, fast growing, quick paced global market place that relies on high-speed internet access to the Interbank Foreign Exchange Company.  Some transactions may be done in a matter of minutes.

Before becoming involved in the Forex Market, it is important to understand the risks involved.  Significant amounts of money can be made very quickly, but equally significant amounts of money can be lost.  It is therefore imperative not to use money that you cannot afford to lose.  It is a good idea to begin trading using a Demo Account, this provide an opportunity to become familiar with the pace and predicting the ups and downs of currencies.  No real money is invested, so cannot be lost.

It is also a good idea to enrol on a good quality Forex Education Course, to learn the basics of Forex and encourage successful trading.  The art of Forex is speculation.  Courses will help to teach successful strategies for speculating movement in exchange rates in order to see a good profit.

Choosing a good platform for trading is a key to success.  One example of a platform is CitiFX Pro.  It is important to read user reviews of platforms before choosing one and internet search engines can be good places to find CitiFX reviews, as well as reviews of other platforms.  Many platforms allow user flexibility, and it is important to choose one which is right for you.

Automated forex is forex trading carried out by a computer program or forex robot on your behalf.  Automated forex allows you to set your basic strategy, set your level of investment, and buy and sell orders; these are then automatically achieved in the market without your supervision.  Forex programs or robots are typically offered as part of a trading account you can open with a broker or dealer.

Advantages of Automated Forex

The main attraction of using automated forex is that you can potentially trade for 24 hours without needing to supervise the actual process.  You may, for example, have work or other responsibilities to attend to that will occupy most of your time during the day.  Automated forex will keep your account active regardless of what you are doing.

Also, automated forex can allow you to trade a large number of currency pairs – more than you could manage to trade on your own.  The automated system is much faster than any human being.

Stop Orders

Automated forex can work very well, providing you are aware of the risks.  Markets fall and rise, so the level of your investment can turn to losses or profits.  On the occasion that you are not able to personally monitor the market, you can use your forex programme, or robot, to place a stop order in a falling market.  A stop order automatically sells your investment at a predefined level, thereby halting your losses. 

15
Jan

While it is extremely useful to retain a positive cash flow and not to be burdened with unpaid invoices, invoice finance solutions are not offered for free. One consideration when choosing whether to use invoice factoring or discounting is the cost of the service. If you are losing more than you can afford, then it’s time to look for another option or loan provider. Most invoice finance solutions are, however, cost effective.

Early Termination Fees

While this doesn’t apply to all services, some factors require at least three months notice when you end the agreement. Some require as much as a year’s notice. Read the original agreement carefully to determine if there are any costs related to early termination.

Discount Charges

As with any loan, invoice discounting accrues interest. Most banks’ rates range from 1.5 per cent to 3 per cent over the base rate. This charge is calculated on a daily basis and is applied at the end of the month. The low interest rate makes discounting an ideal option for those wanting to collect on invoices early.

Factoring Fees

With invoice factoring, you will have credit management fees to pay. These cover the cost of the other company handling your sales ledger. On average, these fees range from 0.75 per cent to 2.5 per cent of turnover. This rate is calculated based upon your turnover rate, the number of invoices and how many customers the business has. Invoice discounting sometimes has credit management fees as well but they are far lower, because less of a service is actually provided.

Liability Protection

One problem with invoice finance is the fact the invoices must still be paid in full. If a customer doesn’t pay, you are still responsible for the outstanding amount. To prevent this liability, credit protection may be offered by your factor. By paying a set percentage of turnover, usually no more than 2 per cent, you protect yourself from bad debts.

The forex, or foreign exchange market is where national currencies are bought and sold internationally.  Most of the leading industrial countries in the world, including Britain, the United States, Japan, and the countries in the European Union, trade in the forex market every day.  International banks and corporations also use the forex market to perform transactions that involve transferring money from one currency to another.  For personal investors, trading on the forex market can be quite lucrative.

Placing Forex Trades

When purchasing currencies in the forex market, investors buy these currencies in relation to their value against another currency.  As an example, if an investor expects the value of the Euro to increase against the British Pound, the investor would trade the currency pair expressed as EUR/GBP.  The value of the Euro will be expressed in GB pounds (1 EUR = x GBP).  The goal for investors is to make a profit by purchasing currencies and then selling them back at a higher price.

Stock Market vs Forex Market

Forex day trading is very different from stock market trading.  For one thing, the forex market is open 24 hours a day, six days a week, while traditional stock markets open and close at set times each business day.  The ability to place trades during day or night can be quite convenient for investors but it can also expose them to significantly higher levels of risk since, currency rates can fluctuate at any time. 

Learning About the Market

There are several resources for investors who wish to learn more about the foreign exchange market.  Forex forums, training seminars, manuals, and online analyses may provide a wealth of information to help new traders become familiar with the world of forex investing.  Many forex brokers offer trial accounts that inexperienced investors can open, until they get used to placing trades in the currency market.

12
Jan

Although it is possible to trade in most major world currencies on the Forex market, there are some that dominate the vast majority of trades.  By far the three most common currencies that traders choose to speculate on are the Euro, Japanese yen and the United States dollar.  However, some trading combinations are more common than others are.  The two most frequently traded pairs are the US dollar and Euro, and the US dollar and the yen.  Trading in these combinations allows investors to leverage macroeconomic news to indicate how the EU economy is doing in comparison with that of the United States and how the US is doing in comparison with Japan. 

In addition to these three currencies, other world currencies that are very frequently traded include the British pound, the Australian dollar, the Canadian dollar and the Swiss Franc.

Since the Forex market is international, by its very nature, the question of regulation naturally arises.  When a currency exchange involves the Swiss franc and the Australian dollar, which nation should be in responsible for regulating the details of that exchange?  The answer is actually neither, at least in some cases.  Forex trades are subject to the regulations that exist in the country where the trading took place.  Therefore, if the trade took place on the Tokyo exchange, Japanese law would hold sway.

The major Forex exchanges are located in Sydney, Australia; Tokyo, Japan; London, UK and New York City, USA.