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MANAGE YOUR CURRENCY WELL AND YOU WILL SAVE MONEY

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David Johnson

A pertinent question for many businesses is: how can we effectively manage our currency needs? David Johnson, director at foreign exchange brokerage Halo Financial, shares the factors to consider.

Every company is different; the personnel, your experience, the markets you operate in, and the unique position you occupy within those markets will all affect how you manage your foreign exchange needs. Understandably, with such diversity, there isn’t a universal template for good currency management, but there are some common factors. Manage these well and you will improve your risk management as well as the exchange rates you achieve.

Those factors are broadly broken down into:

  • Your currency source
  • Risk management
  • Tools/contracts
  • Timing

Currency Source

David Johnson

David Johnson

Most companies evolving into international trade naturally gravitate to their bank when it comes to the foreign exchange aspects of that trade. However, as time passes, many choose to move to a specialist, external source such as a broker. There are advantages of using a bank; all funds are in one location and transfers across accounts or out from accounts can be made very simply. However, the facilities offered by banks can be very variable and the crucial elements of timing and flexibility are often lacking.

A good broker is one who will help with relevant and timely information, will provide a wider range of contract types (tools for the job) and offers swift and effective settlement.

Risk Management

When does your foreign exchange exposure start? Perhaps the exposure begins with your first order, first sale or first invoice, or maybe it is much earlier in the planning phase of the business or project. Whenever the amount and the currency can be determined, your funds are immediately exposed to the uncertainties of the foreign exchange market. Planning is the key to good forex management.

Your profit or loss will be determined by where you set your ‘cost’ level on the exchange rate. Sales directors don’t take kindly to seeing their hard earned gross profit wiped out by a currency fluctuation and the marketing department will wail if they have to reprint sales brochures due to exchange rate movement.

These sorts of hassles can almost always be avoided through the use of technical analysis of the currency pair in question. A well-positioned cost price will allow for some flexibility, but will be able to be protected by the right risk management measure. The days of ‘we win on some and lose on others’ need never return.

If you are an out and out gambler, you may decide to leave everything until the last moment. The risks of negative exchange rate movements are enormous and the effect that could have on your profitability are obvious. However, it is surprising how many businesses take this route.

The Right Tools

How you manage risk will be determined by your attitude to risk, the nature of your business and the market you are involved in, and by just how determined you are to cut out currency losses.

If you are risk-phobic, you can buy all your currency requirements as soon as you know the exposure exists. That can be done either for spot (immediate) settlement or for forward settlement; setting a settlement date for the contract some time into the future but agreeing an exchange rate today. Spot trades require that you have the cash-flow to be able to settle straight away whereas forward contracts can usually be secured with a minimal deposit and the balance settled at the delivery date.

If you are able to have a more flexible attitude to risk and the market conditions allow for it, you may wish to secure your cost level through an automated Stop Loss Order (SLO) or perhaps an Option which would leave the opportunity to take advantage of any beneficial exchange rate movements.

Stop Loss Orders and options act as a safety net below the current exchange rate, guaranteeing a worst case exchange rate. They differ in a few key areas. There is no charge for placing an SLO and if the market drops to your chosen exchange rate, the order will be triggered and you will have secured your currency even if the exchange rate bounces back.

With an option, you will either pay a premium or be locked into some less attractive clauses if you don’t pay a premium. However, you have the right to buy at your selected level but you are not obliged to do so. A note of caution: before entering into an Option, double check the caveats and conditions because some of the penalties can be onerous.

There is another automated order, which can be called a ‘Take Profit Order’ or a ‘Limit Order’. This is placed at a level above the current exchange rate and is used to target an advantageous price. As with the SLO, if the market rate reaches the required level, your order will be triggered and you will buy at the selected rate.

Automated orders are particularly attractive for the 24 hour nature of the cover they provide. Wherever in the world the order is triggered, you will achieve your desired outcome. Some of the most volatile times in foreign exchange trading occur when London is closed (London handles 40 per cent of the market liquidity) and during the transitions between markets.

Timing

As with good comedy, good currency transactions happen through good timing. $5.3 trillion travels through foreign exchange markets each day according to the Bank of International Settlements. So no one and no corporation can control the market. You can however, work with known trading ranges and a chartist (technical analyst) will be your greatest ally in determining expected highs and lows.

Using those forecasts to set target exchange rates or to trade at the tops or bottoms of ranges means you can not only aim for the tops of ranges, but can take advantage no matter when and where that order might be triggered.

Certainty

Ultimately, your success in managing currency risk will be determined by the facilities available to you, your strategy and the market movement itself. Some things you cannot change but it is a simple task to review and amend your procedures to ensure you aren’t susceptible to forex market volatility. Because, one thing that is certain: there will always be volatility in the world’s largest market.

For more information on Halo Financial, visit www.halofinancial.com.

Trading

Gold-i Integrates with CryptoCortex

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Has Cryptocurrency become the new digital gold?

Gold-i has integrated with CryptoCortex – an advanced digital asset trading platform from EPAM Systems, a leading global provider of digital platform engineering and development services. This provides financial institutions with increased access to multiple market makers and fully cleared cryptocurrency products available via Gold-i’s CryptoSwitch 2.0™, part of its Matrix multi-asset liquidity management platform.

The integration was completed following a request from a Gold-i client wanting to use the CryptoCortex platform to access liquidity from Hehmeyer and Shift Markets via Gold-i’s CryptoSwitch 2.0™.

Tom Higgins, CEO, Gold-i comments, “As digital asset trading continues to gain momentum amongst brokers, Prime of Primes and hedge funds, a key part of our strategy is to ensure that the cryptocurrency liquidity available through Gold-i’s liquidity management platform is easily accessible, regardless of which trading platform clients are using. CryptoCortex is one of the most advanced platforms for digital asset trading, therefore integrating with them was a logical step for Gold-i.”

“We are delighted to partner with Gold-i to provide our customers with real-time, event-driven processing and analytics that not only meets their essential needs but also delivers actionable intelligence,” said Ilya Gorelik, VP, Real-Time Computing Lab at EPAM. “Financial markets are among the fastest moving markets around, and with cutting edge tools – like CryptoCortex – that make data readily available, customers can quickly implement the best decisions possible.”

CryptoCortex is the most advanced institutional cryptocurrency trading platform on the market, providing a complete 360-degree solution for brokers/dealers, exchanges and buy-side trading firms. It has been developed by Deltix (now EPAM Systems), based on over 10 years’ experience in building, deploying and supporting institutional-grade intelligent trading across equities, futures, options, forex and fixed income.

Gold-i Matrix offers multiple routing and aggregation methods, leveraging connections with over 70 Liquidity Providers. It is super-fast and highly flexible, helping financial institutions worldwide to make more money and reduce risk.  It supports FX, CFDs and cryptocurrencies in a single solution which is fully compatible with the Gold-i Crypto Switch. Crypto Switch™ 2.0, provides brokers worldwide with a fully cleared cryptocurrency product and a cost-effective, efficient means of accessing multiple cryptocurrency market makers who can provide deep pools of liquidity as a CFD or physical asset. For further information, visit www.gold-i.com.

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5 Questions to Ask Yourself Before Trading Penny Stocks

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How to Invest in Stocks for Beginners

Anyone and everyone from all corners of the world can trade from their comfort of their own as all that is needed is a computer and an internet connection.

Many people chose to trade complex asset classes like crude oil futures. But penny stock trading is preferred to many new traders because it is a lot easier to understand the stock market than the global oil market. Trading penny stocks is also cheaper to get started as some brokers have no minimum deposit requirement.

So how do you know if trading penny stocks is right for you? Here are five questions you need to ask yourself first.

1.  Do You Have the Right Financial Motives?

Why exactly do you want to trade? If you want to trade to become a millionaire within a year or two despite little or no experience, trading most certainly is not right for you. Trading stocks involves risk but penny stocks could be even riskier.

Ask yourself if the money you want to risk trading penny stocks is needed for important expenses. Trading with rent money or your children’s education fund with the hopes of doubling is not the right mindset to have.

And forget about sustaining yourself with a guaranteed income at any point in your trading career. There is no magical number but you need enough money to cover at least six months’ worth of expenses while learning how to day trade.

But do you have a backup plan if your money runs out faster than expected? Can you call it quits earlier than expected and return to a regular job?

The appropriate and responsible path is to take a few months to learn how to properly and responsibly trade penny stocks. Learning the true ins and outs of penny stock trading strategies can unlock the potential for explosive returns.

2.  Do You Have the Right Schedule?

Trading penny stocks for many people is a full-time job. But some people can get away with trading penny stocks as a hobby if they are available at only certain times of the day.

It is absolutely vital for penny stock traders to be alert and at their trading station at least an hour before the stock market opens. During the pre-market session, a trader is scanning the large universe of penny stocks to evaluate what stocks they will be buying and selling.

They might be looking at the news for a biotechnology company that released results from an encouraging clinical study trial. Or, they are looking for a company that announced a major contract win that would double or triple their sales.

So once 9:30 AM ET hits and the trading session official starts, a trader is well prepared.

But someone who is only available to trade penny stocks as of say 9:15 AM may not have enough time to prepare themselves for the fast action.

Similarly, traders that start their day in the afternoon session will miss out on many of the early movers and there is simply less opportunity from 12:00 PM to around 3:30 PM.

Part-time traders that start early enough can get away with ending their trading session before noon.

If you don’t have the right schedule due to work schedule, family obligations or you are in a different time zone, then penny stock trading during the off-hours might be a tedious task that offers little reward.

5 Questions to Ask Yourself Before Trading Penny Stocks 1

Source: Google Finance. (Ticker $MREO, daily chart from Dec. 18): This shows how early traders were able to capitalize on the strong gains and late traders missed out on a major surge.

3.  Are You Motivated to Learn?

The day trading universe is open to anyone that wants to open an account and deposit money and no prior experience or knowledge is required.

But ask yourself first what do you really know about the stock market universe and how much are you willing to learn. Do you know how to read and understand Level 2 charts? Do you know the importance of SEC disclosures? What about evaluating what impact a poor earnings release will have on a stock’s movement.

It is OK not to know the answer to these dozens of other similar questions. But do you have the drive and dedication to learn from scratch? Do you have what it takes to read books and watch educational videos for weeks at a time? While this could be seen as an exciting process and an opportunity to learn a new skill, a lot of hard work and dedication is required to succeed.

4.  Do You Know the Difference Between Trading And Gambling?

The general public shouldn’t be faulted for correlating trading penny stocks with gambling. They may have seen headlines about how the global COVID-19 pandemic prompted many bored sports bettors to find excitement and action in stocks.

But there is a fine line between trading penny stocks and gambling. Do you know the difference between the two? Gamblers will pick a penny stock — any penny stock and buy shares and simply hope for the best. They have no knowledge of what the company does, nor do they really care. They either make money on a trade or don’t.

Penny stock traders on the other hand have a strategy that has been developed, revised, and improved on over months if not years. They know how technical analysis can be used to determine an entry point, how to analyze volume trends, and where to get their news and information.

Perhaps more important, they know how vital it is to have an exit strategy as part of every trade and then to just move on.

Gamblers on the other hand love to double down when they are losing. If you are a gambler that is fine. Just be aware that the individual on the other side of your trade knows way more than you do about stocks and will be happy to take your money.

Which one are you? If you are a trader and know how to be disciplined and cautious then trading might be right for you.

Conclusion: Be Honest with Yourself

Trading penny stocks involves risk and many new traders fail. Checking off a bunch of answers from a checklist is useless and meaningless unless you are honest.

At the end of the day, only you can determine if trading penny stocks is truly the best move for you professionally. A broker certainly won’t be asking you these questions. It is not their responsibility to do so.

So be honest with yourself. If you really want to trade penny stocks but recognize now isn’t the ideal time for financial reasons or you have the wrong mindset there is nothing preventing you from giving it a shot in six months or a year.

 

 This is a contributed article

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Why the rise of retail FX is here to stay

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Why the rise of retail FX is here to stay 2

By Michael Kamerman, CEO Skilling 

2020 has been a tumultuous year for both the world and for financial markets. The events of this year have changed the very course of how we’ll live our future lives. Alongside the disruption of daily routines, the coronavirus disease has disrupted the global financial markets at systemic levels kicking in a global stock market crash in February this year. Sure, things look good now, but remember how you felt in early March?

The Coronavirus Crash had sent financial markets plunging into the fastest, most precipitous fall ever recorded in history and the most devastating since the Great Crash of 1929  – signalling in turn the beginning of a worldwide Covid-induced recession.

Certain industries have been hard-hit with many businesses unfortunately falling into insolvency. Many others are still fighting to survive the global lockdowns that threaten their existence. The new realities inflicted by the pandemic have also given rise to a new set of consumer needs and have as a result driven surges of interest in some sectors.

While the headwinds of Covid-19 have made this a chaotic year, the changing lifestyles of consumers have fueled the growth of other more fortunate industries. These include, for example, online retailers, home-delivery services, pharmaceuticals and biotech, video streaming services as well as… online trading. And a sector experiencing outsized growth in online trading is retail FX and CFD trading. Yes, the novel coronavirus pandemic has jolted foreign exchange and CFD trading because of bust-and-boom movements brought on by extreme volatility in fear-led markets.

Volatility is the Mother of Opportunity

When it comes to trading, volatility is the mother of opportunity. It has always been the case for trading speculative markets. This explains why the global FX market daily turnover hit $6.6 trillion earlier this year, with a 40% increase in day-to-day trading volume compared to the last decade.

Pre-Covid-19, the forex industry was relatively muted. Economic outlook was more certain, with relatively subdued market volatility, while a steady stream of traders were trickling into the market. As such, industry focus was on diversification and future-proofing business models.

Volatility, the likes of which we have experienced this year, feels like a once-in-a-lifetime occurrence, and one effect has been a surge in customer acquisition numbers in FX. With trading platforms having spent recent years optimising their online capabilities, the proliferation of people looking for innovative ways to capitalise on market movements and take control of their finances while under lockdown has, in a sense, been the ultimate proof of concept for the industry.

A continuation of this trend is very likely as countries across the world fight to keep the virus under control. Even with a vaccine on the horizon, record levels of government debt, high unemployment, and negative interest rates are creating a cocktail that is driving many people to seek greater financial independence, whether they are novices or experienced traders. Turning to the retail trading market in these circumstances can make for extraordinary tales, both in terms of wins and losses.

A rise in trading in pursuit of financial independence

Michael Kamerman

Michael Kamerman

Undoubtedly, the world has never spent more hours in front of screens as it has this year with the importance of online access to practically anything taking center stage. Simultaneously, personal finance has been high on people’s agendas, with the impact of the pandemic posing an existential threat to the income of millions of people.

This has driven greater appetite to participate in online trading, and the unpredictability of the 24-hours news cycle has created both confusion, and a sense of opportunity with aspiring traders.

In the wake of widespread redundancies and pay-cuts, people’s outlooks are shifting towards wanting to best monetise their time. This entry of new players into the market has happened in tandem with more experienced traders and investors sensing an opportunity to grow their own portfolios. Thus, one outcome of this year appears to be a shared desire from people to take a far more active role in protecting and growing their finances.

An era of more experienced traders

A positive outcome of this year’s situation is that new entrants have been those keen to study and learn about the markets. Indeed, the challenges that the world has faced this year are so unique, that from an economic perspective, they warrant examination, and are being used as a learning exercise.

Reliable and trustworthy brokers have provided a safe environment for traders to both test and develop their trading strategies. In doing so, traders have been able to grow their skills by learning how to navigate volatility and beginning to execute more substantial trades. Time spent on practice is increasingly more valuable to protect oneself against riskier and lesser-known market variations, particularly in the current climate.

The next six months aren’t likely to be a smooth ride. Volatility is set to continue, bringing with it greater trading volumes and greater opportunities for trader upskilling.

Good news lies ahead – for the world, and the world’s traders.

It is unfortunate that traders and investors stand to capitalise on higher returns during devastating situations that create heightened volatility, but this is the truth nonetheless and part of the essence of investing. The outlook of markets remains to be an indication of where the world is also headed. And that is not all bleak. The stock market bounced back relatively quickly in March, with share prices rising sharply even though many of the world’s developed economies were and are still suffering one of the worst recessions in living memory. Why? This is because, theoretically speaking, share prices are based on anticipated future expectations and income streams.

A most recent example is seen in Airbnb’s extraordinary IPO, making it one of the greatest success stories in the 2020 stock market. The success is clearly not based on Airbnb’s growth in revenue over the past year (when travel basically came to a complete halt). Investor demand was fueled by the hope and anticipation that pre-pandemic life will return and the global travel industry will be revived.

The overall global long-term outlook is a positive one, and the pandemic and associated recession is expected to give way to an economic recovery. What is for sure though is that the road to recovery is a long one, and market participants are to actively assess and reassess their investment and risk management strategies. The key to being in a better position to exploit the opportunities that arise in the markets is to be better able to mitigate the higher risk that comes with the unpredictable volatility of pandemic times.

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