CURRENCY TRADING ON A MARGIN.
The overall sucess of the FOREX market is made possible today because of margin. Without this important principle, the average investor would not be able to participate in FOREX at all. So what is margin exactly?
1. Trading On A Margin
In order to trade on a margin, you must set up a margin account. With a relatively small deposit you can start trading large amounts of currency. Establishing a margin account with a FOREX broker enables you to borrow money from the broker to control currency lots that are usually worth $100,000. The amount of borrowing power your margin account gives you is the leverage. 100 – 1 means that with a single dollar you can control $100 worth of currency.
2. Increased Profits Also, Losses
As you might be able to extrapolate, you will be able to control $100,000 with just a $1,000 investment. Of course, you are borrowing money from the broker in order to do this, and any slip ups can end up costing you bigtime. The potential exists for the trader to lose more than his original deposit. Usually brokers will terminate a transaction that extends beyond the margin deposit.
3. The Benefits Of Margin Trading
With exponential buying power, your potential for more profits exists. FOREX currencies are traded in much smaller units than cash. The American dollar, for example, is traded in units down to 4 decimal places. Instead of $1.32 FOREX quotes are seen as $1.3256. The smallest unit in FOREX currencies is called the pip. Even a small change from 1.3256 to 1.3356 represents a difference of $100.
4. Wipeout!
You have to be extremely careful when working on a 1% margin account. A currency change in even a penny can lose your entire $1,000 investment, but if the opposite is true you can stand to make $10,000 dollars from one penny.
5. Limiting Your Losses
To limit your losses, you might want to set up a stop loss order. Stop loss orders automatically close your position if the value of the currency crosses a pre-determined point. One risk that is often overlooked is your broker closing your account on you. This can be potentially disasterous if the currency you invested in suddenly rises in price and you are unable to sell.
Whether you are investing in shares or Forex your main gains will be capital appreciation: The investor in this category is not interested in dividends but in seeing the market price of his stock increase or one currency improving against another.
There are three advantages to this kind of operation. First, if your judgment has been good, you make more money faster than by relying on dividends. For example, the man who buys 100 shares at $30 and sells even at a 10-point profit has $1,000 (less commissions) to show for his year’s work. This represents nearly seven years’ worth of dividends from the $30 stock yielding a conventional 5 per cent.
Secondly, if you hold your investment for more than six months, your profit is considered a long-term capital gain, taxable at a maximum 25 per cent rate for many people, a saving over straight-income rates.
Finally, if your stock doesn’t go up as anticipated, there is always the chance that it will at least be a decent income producer.
This is something of a rational residential, of course. There is no use pretending to be in the capital-appreciation business if a little mess of dividends is all you have to show for your efforts. The more consistent course is to drop the non-producing stock (losses, if any, are tax deductible) and shop around for a winner. This, to be sure, takes guts. There’s nothing like a couple of growth stocks that don’t grow to take the steam out of a capital-appreciation man
On the other hand, the gloriously rising market since World War II has simplified the task of discovering and getting aboard a company with promising prospects. And, as noted, an investor could wait five years for his 10-point gain and still be ahead of the plugger piling up dividends.
Capital appreciation, it should be noted, is an omnibus term covering any change or advance in a company’s position which might be reflected in the market price. It may mean the emergence of a new company in a new industry, the coming of age of a speculative youngster of a decade or two ago, or even new evidence of vitality in an
established veteran.
Recently for instance, the stock of Ampex, Inc., a bright little California company manufacturing top notch equipment for the booming tape-recorder industry, has more than doubled in value.
Dozens of small companies dealing in electronics, precision equipment, and other fruits of current scientific research (National Research, Beckman Instruments, etc.) are similarly attracting attention and consequent jumps in price.
Somewhat more established and riding crests of speculative interest are such stocks as General Dynamics, builder of atomic submarines and Convair airplanes; Owens-Corning , manufacturer of insulation, filters and textiles, and glass fiber boats, and Bendix Aviation, no infant, but investing heavily in diversification and new-product development. Dow and Minnesota Mining might also be grouped here, although possibly by now they should be….
GETTING THE BEST HOME OWNER INSURANCE.
How do you buy the best insurance cover?
If this sounds familiar you will have many options to choose from. The fact of the matter is that this sector of the insurance industry is very crowded.
If you are interested in buying home owner insurance you will not have to look for in order to find a company that is willing to work with you.
But before you can find the best home owner insurance you need to know what you are looking for.
If you do not you may end up with a home owner insurance policy that does not exactly suit you and your new property.
The question of which home owner insurance company is the best is one that is not easy to answer.
Generally speaking, the best home owner insurance company is the one that suits your needs.
If you take your time when searching for home owner insurance you should not have any problems finding the best.
There are many companies that offer good polices to home owners like yourself. To find the best home owner insurance you should look at a couple of different things.
First off, the best home owner insurance is a policy that offers a wide range of coverage options.
After all, if you are going to be paying for insurance you might as well get what suits your needs.
Another way to determine the best home owner insurance is to look at price. A lower price does not always mean a better policy, but it cannot hurt.
Just make sure that you do not buy your insurance based on price alone. If you do you may not end up getting what you need in the end.
Buying the best home owner insurance is not always a difficult task. The only thing that can make it tough is deciding what is best for you.
This can be hard because what is good for you may not be good for somebody else.
In order to make sure that you get the best home owner insurance shop around until you have a good idea as to what the industry has to offer.
The more that you know about home owner insurance the better chance you will have of getting the one that is best for you.
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