Monday, July 27, 2015

Tips for Making Big Money off Commodities

Trading commodities can be highly lucrative, provided you avoid the myths associated with these financial instruments.

The Benefits to Trading Commodities
Commodities are heavily traded on global financial markets. They include primary agricultural products or raw materials such as coffee, copper, gold, wheat, gasoline, oil, silver, cattle, aluminium and lumber. Even though commodities are the darlings of experienced traders, many casual traders and intermediate-level traders are hesitant to trade them.

Among others, various myths abound regarding the profitability of these tradable assets. In today’s markets, commodities are easily traded and they do not require traders to actively take physical possession any products. On a difficulty scale of 1 – 10, many traders are of the opinion that commodities rank highly in terms of difficulty, but nothing could be further from the truth.

The good news is that you can generate profits from commodities, whether the prices are rising or falling. By carefully watching market movements you can anticipate rising and falling prices and place call and put options accordingly. With a little insight and market savvy, it is fairly easy to understand commodities and profit off them accordingly. Every day, scores of traders generate windfall profits off commodities and this is entirely possible in bullish, bearish and volatile markets.

How Much Money is Needed to Trade Commodities?
Depending on where you trade, and what you trade it is relatively affordable to trade commodities. For example, some brokers will allow minimums of $2,500 to register accounts to trade commodities. Others may seek amounts of $5,000 or more. Since leverage is involved, the amount you deposit is only a fraction of the size of the position you can open.

There are other ways to trade commodities online in the form of binary options. This method of trading allows for speculation on a select group of commodities with traders making predictions on future price movements. Contract positions can be opened for as little as a few dollars per trade and it is possible for no leverage to be involved.

What to Avoid when Trading Commodities
One of the biggest mistakes that novice traders make is too much leverage. And this isn’t only for commodities, it’s for stocks, indices and forex too. Leverage allows traders to place as little as 3% of the value of the trade down, with the rest being provided by way of leverage. High leverage commodities are typically traded in futures contracts.

New traders are often overwhelmed by the trading power of leverage, since it allows you to open far greater positions than your available budget allows. A caveat is in order though: leverage has incredible upside potential, but so too is the downside. Traders should limit the number of futures contracts to the bare minimum when leverage is involved, since high leverage trades can wipe out your investment bankroll.

Since you are not required to take physical possession of the commodities you are trading, you only need to watch your trades to make sure you know when to enter and when to exit. Traders are advised to be sure to close futures contracts prior to the first notice day, several weeks prior to the contract expiry. One of the most important rules of commodity trading is to avoid making poor judgment calls time and again. If a strategy didn’t work the first time, it’s foolhardy to employ that strategy multiple times. Since it is not really a zero sum game, losers lose more on every trade and winners gain less on every trade.

The best advice is to start small, learn from guru traders and use a demo trading account to get your foot in the door. Commodity trading is a vocation that requires years of experience. As you increase the number of winning trades over time, so you will learn how to consistently generate profits trading commodities. Money management, education and the right strategy can go a long way towards success in the commodities markets.

Author’s Bio: Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise for the globally renowned spread betting and CFD trading company – Intertrader. 
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Tuesday, July 21, 2015

Sustainable Responsible Investing and its Benefits

Sustainable and Responsible Investing (SRI) focused asset managers are facing many challenges these days. Their main task is to screen socially responsible companies by doing extensive research. They are also entrusted with the task of identifying companies that have superior ESG practices in comparison to the other companies. When it comes to the roles and responsibilities, the SRI focused asset managers have to generate good returns while investing in firms that amalgamate aspects of social and environmental responsibility and corporate governance.  


For Sustainable and Responsible Investing research tasks, asset managers generally rely on consulting companies. These consultant companies adopt stringent processes for company analysis and help in identifying the right data sources for various ESG parameters. These companies perform extensive research across multiple information sources and generally follow the three-level quality process.  

Hiring a multilingual consultant company is always a good idea because such companies can hunt through local media when they are evaluating the most lucrative emerging markets. Most research companies will provide you with highly qualified professionals, but you will have to consider the turnaround time (TAT) as well. Most research companies will commit a few days for extensive research on the various companies.

Many people are not aware of the transition of responsible and sustainable investing, which actually was an offshoot of socially responsible investing. The former was an approach that generally included owning certain types of assets. There were some region-influenced socially responsible investing ideologies that refrained for buying sin stocks (those of pornography distributors, distilleries, casinos, tobacco producers etc.)  

Most financial experts will tell you that socially responsible investing is now a subsector of sustainable and responsible investing—which still excludes owning some categories of assets. Today, fund managers who are involved in SRI search for companies that are looking to minimize the carbon footprint. The synonyms used for sustainable and responsible investing are ethical investing, green investing and impact investing. 

There are innumerous investment opportunities for SRI investors. In fact, there are hundreds of SRI mutual and exchange traded funds that are offering the vivid investor fantastic investment opportunities in different areas of the market. It is important to have a deep understanding of SRI funds before investing in them. These funds generally invest in two types of stocks—growth stocks and value stocks. The main categories of SRI funds are large, small and mid-cap SRI funds. In addition to these, you will also find categories of domestic, foreign and global SRI funds.


SRI managers are an elite class of fund managers who believe in avoiding companies that don’t have potential to effect change. There are many investing companies that have SRI focused funds—in which you can invest. Before you get enthralled by the idea of investing in SRI funds, you will have to perform negative screening and perform an ESG indicators analysis. This involves in-depth screening of firms on different ESG parameters or criteria. You may have to also look at some growing trends in the European markets if you want to invest in the European firms.     

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Wednesday, June 10, 2015

What expects US dollar, gold and oil in 2015 year?

The past 2014 will undoubtedly take its place in the history. That year risks had been growing around Ukraine and the Middle East. One of the main events was the collapse of oil prices. As early as in June, 2014 barrel costed about 115$, but in the last days of the year quotes slumped to  56$.

What shall we expect in 2015 year?

Oil market

Main reasons of oil prices collapse in 2014:

- Increase of hydrocarbons production in the USA from 9.8 to 11.5 mln barrels per day;
- Recession in countries of the European Union led to decrease in consumption and prices of hydrocarbons;
- Growth of supply in Iran planning to increase production twice and Libya’s return to the market;
- Technological factor: improvement of technology of production and decrease of prime cost as the result.     

Now you can witness disproportion between demand and supply - each day, it is produced for 600-700 thousand of barrels more than is required by market.

Analytics of the US investment banks assume that within two first quarters of 2015 year this index can grow up to 1,25 mln barrels per day. This factor will put a strong pressure on oil quotations so that we can see how Lows of 2008 year are refreshed. At that time, cost of Brent was 36$ per barrel.

US dollar

The main global currency was boosted by growth of the US economy which was growing with the fastest pace for the last 11 years. US department of commerce revised its GDP estimation and defined it up to 5% per annum. Such estimation was justified by a higher consumer demand  and expenses of business. It was the fastest pace since 2003. It was reported earlier that US economy grew for 3.9%.
Its intensive growth in 2014 lays a solid foundation for 2015 and we can expect that the US currency will be consolidated against its major competitors.

Gold

In conclusion let’s talk about gold. Since there is no inflation risk in the USA and on the contrary, deflation presses Europe, there is no ground for traders to invest in gold: savings are not depreciated. It can make precious metals less popular and quotes of gold may get to 1100$ per ounce.

Confident growth of the US economy will support global markets through 2015, whereas low oil prices will have a positive effect for the economic growth in general.
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Monday, June 8, 2015

How to use Pyramiding for Better Forex Profits

As a retail forex trader, your end goal is always to get as much out of a successful trade as possible and minimise your losses on unsuccessful trades. Most beginner traders will essentially open up a position when they think they have seen a favourable entry point, then let it ride until it is time to close the trade. A more experienced trader will open a position then watch the price action on that trade and if things are moving favourably, they will increase the size of their position on that trade, somewhat similar to doubling down. This technique is called pyramiding and has the potential to greatly increase profits from a successful trade, without a concurrent increase in risk.


Pyramiding Explained
The simplest way to explain pyramiding as a forex trading strategy would be to say that when you’ve opened a position and the price has move successfully for you, you will then reinvest those profits back into the position. If the price keeps moving in a favourable direction, your profits are greater than if you had just kept the original trade amount. If the price then moves against you, you can simply close out the trade and not have lost any of your funds.

An Example Pyramid Trade
Let’s assume that USD/CAD is trading at 1.3215. Since the Canadian dollar has not been strong recently, there is a very strong uptrend in the USD/CAD pair. Your analysis of the market leads you to believe that this trend will continue, so you enter the market with a $1000 position.
Now, the price rises to 1.3315. At this point, you are up $1000. You move your stop loss up to 1.3215, and buy a second mini-lot. Essentially what has happened now is that you have a trade which risks only $1000 in total, but has a $2000 position. You have doubled your position without any increase in risk.

If the trend continued and the price moved to 1.3415 you could then move your stop loss up again – this time to 1.3315 – and buy a third mini-lot. You are now guaranteed a $1000 profit on your first mini-lot and to break even on your second mini-lot. Your risk on the third micro-lot is $1000. In other words, your total risk is zero – this is now turned into a free trade.

If the trend continues and you exit your position at 1.3515, you are well into profit. You’ve made $3000 on your first $1000, $2000 on your second $1000 and $1000 on your last $1000. That is double the profit you would have taken on your initial entry.

The Risks of Pyramiding
This technique is only viable in a strongly trending market, for obvious reasons. Also the stop loss here is hugely important, if you forget to set the stop loss, any market movement could completely wipe out your trade.

Lastly, as with all trades, have an exit point in your mind. Just keeping a position open and hoping for the trend to continue is not trading, that is gambling. Be disciplined, close your position when you plan, and enjoy having a profitable trading career.
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Saturday, June 6, 2015

Best Roth IRA Investments

The Roth IRA is an alternative to the Traditional IRA that originated in the 1990s in the United States. A Roth IRA differentiates itself from a Traditional IRA in that it is funded with after-tax dollars rather than pre-tax dollars. Due to this unique feature, distributions taken from a Roth IRA after one is 59.5 years of age or older are tax-free. (Distributions taken before age 59.5 are subject to a 10 percent penalty from the IRS).

A Roth IRA has many different investment options. This article will discuss the merits of investing in two specific investment options for a Roth IRA: mutual funds and stocks.



Mutual Funds

Mutual funds are the most popular investment option for a Roth IRA, chiefly because they provide so much diversification. Unlike stocks or bonds, which only invest in a single asset, mutual funds have their hands in multiple assets. Mutual funds-- both within and outside Roth IRAs-- reached $15 trillion in assets in the United States in 2013. 

An astounding 62% of all Roth IRA investments are done within mutual funds; the investment options within a Roth IRA mutual fund include funds with an equity, bond or balanced outlook. Of these three options, mutual funds with an equity outlook are by far the most popular-- 
according to the Investment Company Institute,they account for more than half (52%) of the mutual funds in Roth IRAs. Equity funds invest in both domestic and international stocks, and are either actively managed or track a stock index. Equity funds typically focus on growth rather than income, and are for more aggressive investors.

Bond funds and balanced funds follow equity funds with 27% prevalence each. Bond funds invest in bonds and alternative debt instruments; their aim is to produce income. Balanced funds fall somewhere in the middle in terms of risk, investing in a mix of stocks, bonds and money market funds.

Stocks
31 percent of Roth IRA investments are within individual stocks. Like equity mutual funds, there is the possibility of great appreciation over time. However, since individual stocks are volatile and rarely provide the diversification of mutual funds, they are very risky. They should only be invested in by individuals with a high risk tolerance and a long time horizon. Usually the stock market will provide consistent growth over time, but no guarantees are made.

Conclusion

There are a number of ways in which to allocate Roth IRA funds, but stocks and mutual funds are two of the more rewarding. Do your research, be patient, and stay on top of your investments, and you should be fine.
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