Lowest Margin Rates. Best Brokerage Margin Account (2020)

Former investment bank FX trader: some thoughts

Former investment bank FX trader: some thoughts
Hi guys,
I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert.
I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning.
When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions.
The first topic is Risk Management and we'll cover it in three parts
Part I
  • Why it matters
  • Position sizing
  • Kelly
  • Using stops sensibly
  • Picking a clear level

Why it matters

The first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.”
You have to keep it before you grow it.
Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around.
The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices.
Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners.

Capital and position sizing

The first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose.
Position sizing is what ensures that a losing streak does not take you out of the market.
A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples.
So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000.
We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be?
We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator".

https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14
So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital.
You should be using this calculator (or something similar) on every single trade so that you know your risk.
Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later.
The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work.
As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you.
Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints.
For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly:

https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b
To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you.
Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown.
It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance.
Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k.
Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money.
Do not let this happen to you. Use position sizing discipline to protect yourself.

Kelly Criterion

If you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number?
The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round.
This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet.
Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin.
Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips.
Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds.
Applying the formula to forex trading looks like this:
Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio
If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically.
If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss.
So that’s 0.3 - (1 - 0.3) / 3 = 6.6%.
Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit!
With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not.
Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account.
Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see.
This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders.
Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
  • How many live trades have you done? Often they’ll have done only a handful of real trades and the rest are simulated backtests, which are overfitted. The model will soon die.
  • What is your risk-reward ratio on each trade? If you have a take profit $3 away and a stop loss $100 away, of course most trades will be winners. You will not be making money, however! In general most traders should trade smaller position sizes and less frequently than they do. If you are going to bias one way or the other, far better to start off too small.

How to use stop losses sensibly

Stop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them.
A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter.
The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’.
This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK.
Why are stop losses so important? Well, there is no other way to manage risk with certainty.
You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter.
Learning to take a loss and move on rationally is a key lesson for new traders.
A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not.
Bruce Kovner, founder of the hedge fund Caxton Associates
There is an old saying amongst bank traders which is “losers average losers”.
It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong.
Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops.

Picking a clear level

Where you leave your stop loss is key.
Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible.

If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop
You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200.
The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up.
Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD.

https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802
If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend.
So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level.
There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section.
There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high.

https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81
Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument.
Here are some guidelines that can help:
  1. Use technical analysis to pick important levels (support, resistance, previous high/lows, moving averages etc.) as these provide clear exit and entry points on a trade.
  2. Ensure that the stop gives your trade enough room to breathe and reflects your timeframe and typical volatility of each pair. See next section.
  3. Always pick your stop level first. Then use a calculator to determine the appropriate lot size for the position, based on the % of your account balance you wish to risk on the trade.
So far we have talked about price-based stops. There is another sort which is more of a fundamental stop, used alongside - not instead of - price stops. If either breaks you’re out.
For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market.

Coming up in part II

EDIT: part II here
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Risk:reward ratios
Risk-adjusted returns

Coming up in part III

Squeezes and other risks
Market positioning
Bet correlation
Crap trades, timeouts and monthly limits

***
Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
submitted by getmrmarket to Forex [link] [comments]

PRPL KILLED earnings! Tendies can still be made. Here's how.

PRPL KILLED earnings! Tendies can still be made. Here's how.
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EDIT: At Top 100 Analyst at Oppenheimer just gave PRPL a price target of $19. Clearly, he reads wsb.
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tl; dr

Seriously, just go away. If you can't be bothered to read for 5 minutes before putting money on something, you don't belong here. You're not an autist; you're just a full blown retard.
What you should do first is go read the post where I called the price of the stock pre-earnings and as a great COVID Recovery Play: PRPL to $12-$14 by 5/12 and $20-$24 by end of Q1 2021.
After that, you need to go read how I predicted the beat on earnings consensus over the weekend here: Purple (PRPL) Earnings is Monday After Hours: Here's What to Expect.
Only after reading and understanding those two things will you be capable of making tendies as described below because you will actually know what you are doing.
If I've already exceeded your maximum word count, go back to reading the memes on the sub so you can cool your overheated brain.

Note: all quotes below are paraphrased from the earnings call. I am not transcribing that thing.

2020 Q1 Earnings Release

Earnings could not have gone better. PRPL is literally a brand new business that should catch your eye for investment. I am solidly in the $19+ camp from my last post based upon results and the guidance given. You can still make tendies on this play because PRPL builds its price action over time, which I will cover below. Let's look at some numbers first.

Consensus Actuals
Revenue $106.97M $122.4M
EPS $0.05 $0.11
A solid beat on Revenue, EPS, EBITDA and Adj. EBITDA. Just an amazing quarter, but the historical isn't the best part. The forward looking is amazing. Before we get into that, a few more numbers that matter.
Receivables
PRPL has a large wholesale business which means it has significant exposure to bad debts due to retail brick and mortar locations closing and retailers who are obviously cash starved. Joe told us on the call that their wholesale accounts are "largely current on their receivables" and Purple is "continuing to get paid almost entirely across the board".
Awesome. This means very little bad debt and the revenue earned will convert to cash.
Warrant Liability Accrual
Yeah, I called this one. It was material to the shift in EPS, but you are an idiot if you care. This stuff is equity and should be treated as equity. Yes, GAAP requires otherwise, but the FASB doesn't always make the best decisions.
Supply Chain
Our supply chain has not as yet been significantly affected by COVID-19. Currently, our domestic suppliers are able to continue operations and provide necessary materials when needed. Suppliers in China were temporarily closed as a result of the pandemic but we had sufficient inventory on hand. Many of our suppliers resumed production in March and are able to supply materials as needed. As a result, we don’t expect supply to have a material impact on our ability to meet anticipated demand.
There you have it. Pretty much no supply chain risk.

Forward Looking Guidance

PRPL did not provide formal guidance for the rest of the year, but the rest of the year is what they mostly talked about on the call, and the management team clearly wanted you to understand April with their "Second Quarter Preview". Let's look at what they said.
Cash
They ended Q1 with $26.4M in cash (down from Q4's $33.5M in cash); however, they ended April with $62.5M in cash! Management really wanted to call it out so they put the April cash number at the top with all of the Q1 numbers on the earnings release, which I thought was funny. In reality, they've done a fantastic job at managing expenses and converting inventory on hand into cash during the quarter. This should give you quite a bit of confidence in the management team. This is probably more cash on hand than they have ever had, which means they are well weathered to not just manage this storm (which is a storm that is cash flow positive for them), but to invest ahead of the competition for the future.
Hiring and Capacity
Joe confirmed that "the furlough is all but over" and Purple is "actually in hiring mode right now to bring people in fairly aggressively" in order to expand capacity. According to Joe, "demand has not waned at all". Purple is still selling very near capacity (they brought a new machine online and are expanding their hiring aggressively to fill the capacity).
PRPL announced previously, as a result of COVID, that they were deferring all capital expenditures.They've now done a 180 on that statement. PRPL is accelerating the completion of the Max 7 machine in order to increase capacity another 20% over last year, which should be done this quarter. The Max 8 & 9 machines are still happening, but because they are being built in their new east coast manufacturing facility, it is unknown whether they will get them done this year.
If you have been paying attention to my previous posts, you will remember that the Max 8 & 9 machines were not necessary to meet the pre-COVID guidance provided for the year. This is part of why PRPL is going to beat their original pre-COVID guidance this year. Read on.
Wholesale Sales
Wholesale is down dramatically. Duh. 85% of wholesale doors were closed during April, but they have seen through April that sequential wholesale orders have been increasing. Believe it or not, we are happy for wholesale to stay closed longer for PRPL. What!?! Yep. We'll get into that more in a second, but let's talk about the hedge to revenue that wholesale provides.
I strongly inferred in a previously post that PRPL can simply expand wholesale doors to make up for lost same store sells. Joe just came out and said it on the call: if wholesale sales are slow to recover on a same store basis, the could just expand to more doors.
Additionally, their wholesale partners burned through their safety stock of Purple mattresses. As wholesale doors are opening up, large orders are coming in to restock their inventory. The trend for wholesale remains to be seen as doors reopen and Memorial Day weekend comes in. Wholesale doors are achieving up to 85% of demand at most right now and this is a good thing.
This means our worst case scenario is that PRPL will meet their pre-COVID guidance for the year by simply expanding wholesale doors. The hedge.
Direct to Consumer Sales
THIS is why PRPL is going to BEAT their pre-COVID guidance for the year. I'm calling it now.
April DTC sales were up 170% YoY for the full month. 170%!!! Not only that, Joe explained that:
It has been remarkebly consistent. Briefly saw DTC retract at the end of March. PRPL saw pretty consistent DTC performance at the beginning of April, but a retraction in wholesale as stores shut down. About the time the stimulus checks hit, we saw a pretty significant increase in our DTC business**.** We did some surveying and we don't think its entirely related to the stimulus checks themselves, but really some sentiment and people settle into the new normal. Since that time, we've seen a consistent but eleveated performance on DTC. It has really be pretty remarkable on how consistent it has been.
This means the run rate exiting April was greater than 170% YoY for DTC (if the average of 170% includes half the month at a lower rate). Joe told us that this is more than offsetting the decline in wholesale.
PRPL will beat pre-COVID guidance for the quarter and for the year because:
  • They have a new Mattress Max machine as of the beginning of the quarter (20% increase over last year's unit manufacturing capacity)
  • They are still selling everything they can make.
  • They receive greater revenue and margin from every DTC unit relative to wholesale.
Therefore, we will see a revenue and earnings beat for the next quarter and likely the rest of the year.
PRPL management believes that unit demand never disappeared and that they've seen a shift of demand from their brick and mortar partners to online (which means PRPL makes more money per mattress).
Additionally, they've seen a decline in marketing acquisition costs as many competitors are struggling and overall advertising costs are dropping nationwide. The acquistion model online is much more simple than attempting to spend to get people to go into stores (for anyone who understands modern digital marketing, these means they will be able to scale their spend and revenue justifiably easier and faster). New customers as a % of all customers (in terms of traffic and purchases) has gone up as they have been able to cast a wider net digitally and had a higher conversion rate.
Joe's words about the boost in revenue caused by the shift to DTC are: "it is distorting revenue up". Joe, this is going to distort the stock price up too.
Lastly, Joe stated very clearly their plans for wholesale reopening offsetting DTC revenue in their manufacturing constrained world: "they would throttle their wholesale growth until they could continue to expand their capacity". DTC for the win!
A slow return to normal will benefit Purple by boosting per unit revenue and margin.
Like I said, this is a brand new business.

Forward Looking Price Action - More Tendies!

There are still opportunities to make tendies with PRPL tomorrow and over the next quarter. Here is why.
PRPL Builds Price Momentum
Because PRPL is a mid-market stock with not a lot of following and mid-market volume, its price actions are not immediate. The typical pattern after earnings is that the price adjustment builds slowly over the next day to whatever direction earnings dictates. Then, the price action continues to build over the next quarter. Look at the price action after the Q3 2019 earnings call if you want the most pronounced example of this.
Wherever we start tomorrow, I'll bet money that we end much higher.
PRPLW Lag
PRPLW warrants do not behave like your typical CBOE options where market makers have algorithms changing the bid/ask on every strike with every movement of the stock. Typical market makers accept those prices at every level because they are delta hedging with your play.
PRPLW warrants are OTC and there is no options chain currently, which means not a whole lot of market making. While this makes them less liquid, it also means that PRPLW warrants typically lag the price of PRPL stock on the way up as you are trading against other people. Plenty of scalping opportunities on big price movement days if you know what you are doing. If you don't know, it means you can usually get a good deal if you buy into a longer-term hold.
Short Interest
SHORT INTEREST INCREASED!!! The 4/30 numbers are out tonight and short interest increased a whopping 33.5%! That means we have a short float of 10.72%.
If you recall my weekend post, only 16.44% of float is left with non-institutionals. Those 2,439,121 short shares are going to get squeezed. The shorts got hurt today with ER and they are going to want to slowly exit their position over the next day or so, which is another reason why we may see momentum in the stock tomorrow. If there is a push behind it, we may see a much more dramatic squeeze.
https://preview.redd.it/yqo6ilxgv8y41.png?width=791&format=png&auto=webp&s=6bcdb6ded74c2d3281d7a98717e11aad72e17975
We still saw a significant amount of short volume through today. As the stock gaps up, margin calls are going to happen. As shorts cover and new buyers buy in, this will accelerate. Depending on your broker, margin calls could have days to cover, which means we will see upward pressure over a few days.
Press Coverage
PRPL is still not a well known stock. It will likely get some better press coverage over the next few days for two reasons:
  1. It slaughtered earnings better than most companies this season.
  2. Casper, a media darling, reports tomorrow morning.
It is Casper's first earnings release since IPOing. Whether or not it is a disaster, most reporters will start drawing comparisons to PRPL. More visibility through the day tomorrow and weeks to come will drive further new investment as people start to understand what is happening here.
Index Additions
PRPL gapping up and growing will only increase the number of indexes it gets added to and therefore funds that are required to buy in. More cash investment required over the next few months will only support a growing stock price.
Great Fundamentals
Lastly, this stock had great fundamentals before this huge earnings beat, and fundamentals always win in the long run.

Good luck tomorrow and let's get some tendies!

Positions

I have one share of PRPL. I made $2 on it today and am up $1.91 since open. In great wsb tradition, I'll probably do a gain post on that.
The PRPLW warrant prices don't update AH. That's where I ended the day. I had a steak dinner tonight to celebrate. The wife tried to give me a chicken salad from Panera, but I wasn't having it.
https://preview.redd.it/p8xftnpzz8y41.png?width=1242&format=png&auto=webp&s=005bd6c3156a79eeab3d4ec007858cb6efb94c73
submitted by lurkingsince2006 to wallstreetbets [link] [comments]

Day Trading API Questions

So I've recently become interested in automated Forex day trading using machine learning (My main experience is with deep-learning) and have been searching online for the best broker to start with. But the resources have been overwhelming and I thought to come here to talk with some more experienced people.
On that note, I'm looking for a Broker with...
-An accurate, fast API (I'm looking to pull historical and real-time data to train and use my network on respectively)
-Low-commission rates, I'm not pursuing this with massive capital, so I was hoping to get the lowest commission rate so as to not have my profit margins eaten up
-Decently trustworthy, cause I don't want to get screwed over
-Has Demo and Live accounts both available to the API, cause I would much rather prefer to test my network paper trading first, but not have a big headache over switching it to Live trading

Sorry if these conditions are too specific (Again, new), but any guidance would be really appreciated!

PS: For those with ML experience, I'm thinking about using a genetic algorithm simply because I haven't used them before, would they be complete trash at day trading?
submitted by TooManyUsernames456 to Forex [link] [comments]

Meet the Sharemarket's Corona Generation

https://www.afr.com/wealth/personal-finance/meet-the-sharemarket-s-corona-generation-20200610-p551dz
On Wednesday morning, moments before the market opened for trading, Will Bennett, a moderator of a popular Facebook stock trading group, made a "public service announcement".
The vast majority of the group's 23,700 members were just a few weeks into their trading careers and with SPI Futures pointing towards a 1.4 per cent fall, Bennett tried to prepare them for what he anticipated would be their first bloodbath session.
"Remember markets go up AND down," he said. "Don't make emotional decisions and DON'T PANIC SELL if selling is not part of your plan."
Not all the members of the group were worried. One trader's down day is another's top-up day and most were itching to buy more of their favourite stocks.
But as the session came to a close, the market had turned and rallied to end in the green.
"Today was meant to be the day that it came crashing down and it turned out to be just fine," the 25-year-old from South Melbourne told AFR Weekend with a mixture of surprise and guilt.
"I have no sensible stocks," admits Bennett, who had held blue-chip stocks for years until he sold out last September, only to re-enter the market with a bet on a penny stock which has crashed and burned.
Another trade in buy now, pay later (BNPL) player Zip Ltd has soared to cover his $4000 loss. Zip was more actively traded on Commsec this week.
"I should be getting punished. It should not be this easy," says Bennett.
Bennett has time on his hands and has been stuck at home. He doesn't drink or smoke – and the gyms are closed. So he watches the market all day.
He's also agreed to help as a moderator of the ASX Stock Tips Group that has grown from 15,000 to 23,700 members in 12 weeks to become Facebook's largest Australian share trading forum.
There they share ideas, memes and seek validation for the bets they're placing into a market that has gone up like a rocket, but which the experts have repeatedly warned is becoming detached from reality.
Market watchers say there's nothing particularly new or interesting about an influx of individuals being lured to the stock market in search of quick profits.
But the nature of the coronavirus outbreak – in crashing the market and confining entire populations to their homes – has unleashed forces of speculation the likes of which we have never seen before.
In the United States, millions of Americans have opened trading accounts with popular trading app Robinhood. But from the time the S&P500 bottomed on March 23, the number of active accounts has surged by 70 per cent to 37.1 million.

Zero-cost brokerage

Robinhood's model of zero-cost brokerage has made it cheap and easy for anyone to trade the market. Controversially, it makes its money by directing the orders to high-frequency trading firms that are in turn able to profit from the activity.
Meanwhile, Japanese investors are shedding their decades-long aversion to stocks while South Korean retail investors have also stormed back into the market.
Australia's market structure, in which one exchange dominates, makes it less conducive to the zero-cost brokerage model.
But that's done little to deter a new generation of young traders, nor has March's harrowing correction.
Since late March, Commsec, the largest retail broker, has grown its share of trading by an enormous 1.2 per cent to 4.8 per cent, according to the popular market newsletter, the Coppo Report.
The last time the market crashed badly, in 2008, middle men with margin loans swore off stocks for good after their Babcock & Brown shares blew up.
This time it has had the opposite effect. The coronavirus crash put the stock market on a once in a life-time introductory sale while the volatility added the potential to get rich quick.
So they may be holed up at home in their bedrooms, but newbie traders are having the time of their lives.
"Z1p your f**cking spacesuits up and give your wife's boyfriend one more kiss on the lips because we're going to the MOON today boys," wrote a poster on Reddit stock forum on Wednesday.
The newbies are enthusiastically gravitating to the BNPL darlings, like Zip and Afterpay that are up six times from their late March lows.
But they have also embraced the bargain-hunting tactics of value investors and have rushed to bet on a recovery in the beaten-up travel sector.
Broker activity shows a surge of trading from retail broker firms in stocks such as Flight Centre and Webjet.
Those businesses were forced to raise hundreds of millions of dollars of expensive emergency capital in the depths of the crisis.
But their share prices have since recovered to levels that seem to defy the reality of the situation.

Bloodbath arrives

That was until Thursday, when broker downgrades from the big end of town triggered a sell-off in the travel stocks,
And on Friday, the bloodbath arrived after Wall Street's worst session since March.
Flight Centre and Webjet were pulverised – falling by 12 per cent, while the big BNPL names were down 8 per cent before rallying to pare back half the losses.
"Suing whoever said stocks only go up," said one poster. "Good time to buy. but got no money. Deleting commsec for one month"
Bennett says the activity was chaotic, with many traders posting comments of denial and despair. Their anxiety wasn't helped by glitches on overloaded trading platforms.
"Many traders have only experienced the market rising, but they haven't followed the golden rule to diversify and now they're in for a nasty surprise."
Until this week, the little guy was well and truly sticking it to the big end of town.
An analysis by the Coppo Report showed retail stockbroking firms have been net buyers of $7.4 billion of stock since February 20, while institutional brokers were net sellers of $11.2 billion.
"To call them the 'dumb money' ... is just insulting" the report's author Richard Coppleson wrote.
The similarities to the US are uncanny.
While the world's greatest investor, Warren Buffett, dumped his airline stocks in March, retail investors have rushed in the sector, which has tripled from its lows.
The Oracle of Omaha, an inspiration for so many generations of investors, has degenerated into a meme, as day traders high on profits and low on humility openly mock him.
"The big sharks are dumb. The economy is in great shape, best it’s ever been," said one poster on the Facebook forum.
Robinhood traders also bid up shares of broke car rental company Hertz, which has gained an incredible 800 per cent since declaring bankruptcy in May and rendering the common stock all but worthless.
They also shifted their bets away from previously hot stocks like Elon Musk's Tesla in favour of the Ford Motor Company.
Australian novice traders are also finding their feet and learning that stocks can be bought and sold on the same day, but not in the evening.
These newbie traders want and need help but not from the experts, who haven't excelled themselves in calling the market.
The commentary that the stock market is overheated, they believe, is motivated by institutions that want to get back into the market at a lower price.
And Bennett agrees there are many on the sidelines that are "salty" they've missed the rally.
Some traders are not taking kindly to insinuations that they don't know what they're doing, or they need looking after.
An ABC segment carrying a warning from regulators about the risks facing inexperienced day traders was mostly met with ridicule on a Reddit site where it was posted.

'We know we're idiots'

"Tells people not to invest, then shows people making money," said one poster.
"I'm surprised they picked someone who is only up 35 per cent. There are a lot of people making way more than that. Hell, my zip is up 380 per cent and I didn't time it that well."
Another said the regulator and the government might be worried that ordinary Australians were going to work out how poorly their superannuation had been managed after discovering how easy it was to make money trading stocks.
"I know how much money I pay in each quarter and the shitty returns they’re making on my behalf."
As the market soared and more winners than losers have been created, a counter-culture of self-assured young day traders is forming.
One female who preferred to remain anonymous says she is concerned about the level of sexism among traders. There may be no physical trading room floor but she says she's put off by comments in the virtual trading community.
Another major concern, she says, is "young investors gambling $10,000 of their just released COVID support relief package out of their super".
"I’m not kidding, it is happening a lot at the moment," she says.
"There are people 'working from home' who are bored, have downtime, want to learn a new skill, are aware that the market is technically down, and I feel worried about the level they are gambling."
Lord of Ruin, who moderates the increasingly popular ASX_bets Reddit site, says he doesn't believe there's much difference between the traders of today and those that have made and lost their fortunes in the past.
With one exception, social media has brought more "introspection".
"Yes we're idiots, but we know we're idiots, now look at my meme about stodgy central bankers firing bank notes into a crowd of already rich people."
Lord of Ruin, who is in his mid-30s and still working in a technical field, says retail investors "are getting all the thanks" for the rising market.
He says the market remains a dangerous place for individual investors who are preyed on by pump and dumpers.
"Only they don't cold-call you from a boiler room anymore, they leave comments in your forums and subreddits while moderators play Whack-a-mole."
There are valid reasons why individuals have rushed into the market and why online forums like ASX Stock Tips, exuberance and all, have proved useful in guiding individuals into the stock market.
The last time the stock market crashed, Westpac was prepared to pay anxious savers 8 per cent to keep their money safe. This time the bank is paying you close to nothing. The opportunity cost of risking money in the market is lower than it has ever been.
"People have a heap of money. They have saved a heap in this lockdown and they don’t want to earn $2 a month at the bank," says Bennett.
"They are seeing other people making a lot of money and they feel they are missing out."
While he says he's not accessed his superannuation early, he admits it's been "tempting" and more bullish investors are tapping the banks for investment loans.
For many investors, the COVID crash gave them the confidence to put their savings to work as other investments such as a property remain out of reach for now.
Sian Gard from Bendigo, who is in her early 40s, has also embraced the share market and the exchange of ideas on the forum.
Gard works in media and after doing her finances late last year she was determined to find an alternative source of wealth creation so she would have enough funds to retire.
"I need to diversify my income stream and looked at the banking sector and what I was getting. It was quite depressing. This was not going to get me anywhere."
She admits being "petrified" making her first stock purchase, but a small position on Point Bet Holdings has worked spectacularly well – rising from $1.91 to $7.
"I didn't invest a huge amount but that's $3000 I haven't had to work for," she says.
Gard says she is "a risk-taker but it has to be calculated".
"I feel the same about the market and I try to make sensible decisions. I am trying to look after myself."
She says she's enjoying the intellectual challenge of working out which stocks to buy but in particular she's revelling in the "the financial empowerment".
"I am going to do this with my money, and if it bombs it's my fault."
submitted by HGCDLLM to AusFinance [link] [comments]

forex trading books

A forex broker, also known as a forex broker, or Retail Forex Their clients to access accounts and transaction through computer applications and platforms. A broker in the past was considered a single member of a profession and often worked at a unique agency called a brokerage house (or even merely a broker ). Commodities, derivatives and even insurance and property markets since the beginning of the modern era. And by phone , most brokers operated until the dawn of the internet age. Brokers would buy and sell, and clients can phone in their orders of transactions assets on behalf of the client's accounts. A concept for modern individual dealers is forex. Were much bigger, participants at the interdealer market were ready to Traditionally, foreign exchange has been traded on the interbank market by larger clients such as importers, exporters, banks and corporations who must trade currencies for industrial purposes and hedging from currency risks that were global. Forex is forex that is traded through traders, often Electronic Broking Services (EBS) system best uk forex broker.
The brokerages Could provide Around the year 2000, retail agents began offering online An intermediary who buys and sells assets to get a commission or a specific asset is meant by in commercial and financial trading, currency trading agent. Therefore, a broker may be considered as a salesman of assets. The source of this term is uncertain, though it is considered to stem from older French.Frequently taking another side of a trade in order to offer liquidity for traders. Before the emergence of forex brokerages, individual trading amounts less than US$1 million were discouraged from entering the market by spreads that are large. Accounts to investors, streaming costs from the and banks Brokers And Dealers Retail forex brokers allow traders Are higher for clients than they are in the interdealer By investors or smaller. These companies are also known by the term"retail aggregators." Retail forex trading started to become popularised in the late 1990s with the development of financial trading. Into company, dealers and retail forex brokers went at that time to allow smaller dealers to get into markets that were formerly limited to large scale companies and institutionsforex position size calculator.
Retail forex brokerages act in the role of dealers, Market, but they have been found to narrow as trading volume climbs. [4] The interdealer market, which will be dominated by banks. Since the transaction volumes Service by bundling many small trades together and strengthening them in Account with a limited amount of assets and let them trade online via internet-based trading platforms. Forex is done through the spot currency market, although some agents deal in derivative products such as options and futures. Forex trading has been popularised among individual traders since brokers have offered them the chance to trade with margin accounts. These enable traders to efficiently borrow thomascook forex capital to make a transaction, and multiply the main they use to trade by large amounts, up to 50 times their initial capital. [3] Provide liquidity for the brokers' rates that are accessible. Bid-ask spreads.
submitted by usamaali5050 to u/usamaali5050 [link] [comments]

Meet the sharemarket’s corona generation

Meet the sharemarket’s corona generation

by Jonathan Shapiro, afr.comJune 12, 2020 09:01 AM
Bennett has time on his hands and has been stuck at home. He doesn't drink or smoke – and the gyms are closed. So he watches the market all day.
He's also agreed to help as a moderator of the ASX Stock Tips Group that has grown from 15,000 to 23,700 members in 12 weeks to become Facebook's largest Australian share trading forum.
There they share ideas, memes and seek validation for the bets they're placing into a market that has gone up like a rocket, but which the experts have repeatedly warned is becoming detached from reality.
Market watchers say there's nothing particularly new or interesting about an influx of individuals being lured to the stock market in search of quick profits.
But the nature of the coronavirus outbreak – in crashing the market and confining entire populations to their homes – has unleashed forces of speculation the likes of which we have never seen before.
In the United States, millions of Americans have opened trading accounts with popular trading app Robinhood. But from the time the S&P500 bottomed on March 23, the number of active accounts has surged by 70 per cent to 37.1 million.

Zero-cost brokerage

Robinhood's model of zero-cost brokerage has made it cheap and easy for anyone to trade the market. Controversially, it makes its money by directing the orders to high-frequency trading firms that are in turn able to profit from the activity.
Meanwhile, Japanese investors are shedding their decades-long aversion to stocks while South Korean retail investors have also stormed back into the market.
Australia's market structure, in which one exchange dominates, makes it less conducive to the zero-cost brokerage model.
But that's done little to deter a new generation of young traders, nor has March's harrowing correction.
Since late March, Commsec, the largest retail broker, has grown its share of trading by an enormous 1.2 per cent to 4.8 per cent, according to the popular market newsletter, the Coppo Report.
The last time the market crashed badly, in 2008, middle men with margin loans swore off stocks for good after their Babcock & Brown shares blew up.
Z1p your f\*cking spacesuits up and give your wife's boyfriend one more kiss on the lips because we're going to the MOON today boys.* — Post on Reddit stock forum
This time it has had the opposite effect. The coronavirus crash put the stock market on a once in a life-time introductory sale while the volatility added the potential to get rich quick.
So they may be holed up at home in their bedrooms, but newbie traders are having the time of their lives.
"Z1p your f**cking spacesuits up and give your wife's boyfriend one more kiss on the lips because we're going to the MOON today boys," wrote a poster on Reddit stock forum on Wednesday.
The newbies are enthusiastically gravitating to the BNPL darlings, like Zip and Afterpay that are up six times from their late March lows.
But they have also embraced the bargain-hunting tactics of value investors and have rushed to bet on a recovery in the beaten-up travel sector.
Broker activity shows a surge of trading from retail broker firms in stocks such as Flight Centre and Webjet.
Those businesses were forced to raise hundreds of millions of dollars of expensive emergency capital in the depths of the crisis.
But their share prices have since recovered to levels that seem to defy the reality of the situation.

Bloodbath arrives

That was until Thursday, when broker downgrades from the big end of town triggered a sell-off in the travel stocks,
And on Friday, the bloodbath arrived after Wall Street's worst session since March.
Flight Centre and Webjet were pulverised – falling by 12 per cent, while the big BNPL names were down 8 per cent before rallying to pare back half the losses.
"Suing whoever said stocks only go up," said one poster. "Good time to buy. but got no money. Deleting commsec for one month"
Bennett says the activity was chaotic, with many traders posting comments of denial and despair. Their anxiety wasn't helped by glitches on overloaded trading platforms.
"Many traders have only experienced the market rising, but they haven't followed the golden rule to diversify and now they're in for a nasty surprise."
Until this week, the little guy was well and truly sticking it to the big end of town.
An analysis by the Coppo Report showed retail stockbroking firms have been net buyers of $7.4 billion of stock since February 20, while institutional brokers were net sellers of $11.2 billion.
"To call them the 'dumb money' ... is just insulting" the report's author Richard Coppleson wrote.
The similarities to the US are uncanny.
While the world's greatest investor, Warren Buffett, dumped his airline stocks in March, retail investors have rushed in the sector, which has tripled from its lows.
The Oracle of Omaha, an inspiration for so many generations of investors, has degenerated into a meme, as day traders high on profits and low on humility openly mock him.
"The big sharks are dumb. The economy is in great shape, best it’s ever been," said one poster on the Facebook forum.
Robinhood traders also bid up shares of broke car rental company Hertz, which has gained an incredible 800 per cent since declaring bankruptcy in May and rendering the common stock all but worthless.
They also shifted their bets away from previously hot stocks like Elon Musk's Tesla in favour of the Ford Motor Company.
Australian novice traders are also finding their feet and learning that stocks can be bought and sold on the same day, but not in the evening.
These newbie traders want and need help but not from the experts, who haven't excelled themselves in calling the market.
The commentary that the stock market is overheated, they believe, is motivated by institutions that want to get back into the market at a lower price.
And Bennett agrees there are many on the sidelines that are "salty" they've missed the rally.
Some traders are not taking kindly to insinuations that they don't know what they're doing, or they need looking after.
An ABC segment carrying a warning from regulators about the risks facing inexperienced day traders was mostly met with ridicule on a Reddit site where it was posted.

'We know we're idiots'

"Tells people not to invest, then shows people making money," said one poster.
"I'm surprised they picked someone who is only up 35 per cent. There are a lot of people making way more than that. Hell, my zip is up 380 per cent and I didn't time it that well."
Another said the regulator and the government might be worried that ordinary Australians were going to work out how poorly their superannuation had been managed after discovering how easy it was to make money trading stocks.
"I know how much money I pay in each quarter and the shitty returns they’re making on my behalf."
As the market soared and more winners than losers have been created, a counter-culture of self-assured young day traders is forming.
One female who preferred to remain anonymous says she is concerned about the level of sexism among traders. There may be no physical trading room floor but she says she's put off by comments in the virtual trading community.
Another major concern, she says, is "young investors gambling $10,000 of their just released COVID support relief package out of their super".
"I’m not kidding, it is happening a lot at the moment," she says.
"There are people 'working from home' who are bored, have downtime, want to learn a new skill, are aware that the market is technically down, and I feel worried about the level they are gambling."
Lord of Ruin, who moderates the increasingly popular ASX_bets Reddit site, says he doesn't believe there's much difference between the traders of today and those that have made and lost their fortunes in the past.
With one exception, social media has brought more "introspection".
"Yes we're idiots, but we know we're idiots, now look at my meme about stodgy central bankers firing bank notes into a crowd of already rich people."
Lord of Ruin, who is in his mid-30s and still working in a technical field, says retail investors "are getting all the thanks" for the rising market.
He says the market remains a dangerous place for individual investors who are preyed on by pump and dumpers.
"Only they don't cold-call you from a boiler room anymore, they leave comments in your forums and subreddits while moderators play Whack-a-mole."
There are valid reasons why individuals have rushed into the market and why online forums like ASX Stock Tips, exuberance and all, have proved useful in guiding individuals into the stock market.
The last time the stock market crashed, Westpac was prepared to pay anxious savers 8 per cent to keep their money safe. This time the bank is paying you close to nothing. The opportunity cost of risking money in the market is lower than it has ever been.
"People have a heap of money. They have saved a heap in this lockdown and they don’t want to earn $2 a month at the bank," says Bennett.
"They are seeing other people making a lot of money and they feel they are missing out."
While he says he's not accessed his superannuation early, he admits it's been "tempting" and more bullish investors are tapping the banks for investment loans.
For many investors, the COVID crash gave them the confidence to put their savings to work as other investments such as a property remain out of reach for now.
Sian Gard from Bendigo, who is in her early 40s, has also embraced the share market and the exchange of ideas on the forum.
Gard works in media and after doing her finances late last year she was determined to find an alternative source of wealth creation so she would have enough funds to retire.
"I need to diversify my income stream and looked at the banking sector and what I was getting. It was quite depressing. This was not going to get me anywhere."
She admits being "petrified" making her first stock purchase, but a small position on Point Bet Holdings has worked spectacularly well – rising from $1.91 to $7.
"I didn't invest a huge amount but that's $3000 I haven't had to work for," she says.
Gard says she is "a risk-taker but it has to be calculated".
"I feel the same about the market and I try to make sensible decisions. I am trying to look after myself."
She says she's enjoying the intellectual challenge of working out which stocks to buy but in particular she's revelling in the "the financial empowerment".
"I am going to do this with my money, and if it bombs it's my fault."
submitted by voipforfree to ausstocks [link] [comments]

Back to Basics: Real Estate Investing

Hi All,
First of all, I’m a data scientist by profession but a history major by training. So I’ve tried to cite all relevant data points with a () tag. This allows us to separate debating the data vs. the analysis. I’m also a complete newbie to real estate investing. One of the main goals in fact of this post is to organize my thoughts so far and solicit feedback from more knowledgable individuals.
As part of a balanced portfolio, I've invested passively in real estate for several years (both public REITs and a small amount in a private platform). As my assets have grown and I'm entering the age to buy a primary residence, I've been trying to educate myself on the housing real estate market. After all, even if you don't own any investment properties the purchase of a home is the largest single financial transaction you'll likely ever make. In fact, if you look at the chart linked below (1, see Sources below) you'll see housing is the single largest asset for households with net worth below 1 million dollars, i.e. ~90% of Americans (2). In fact, even in 2010 (in the midst of the Great Financial Crisis): "The primary residence represented 62% of the median homeowner’s total assets and 42% of the median home owner’s wealth" (3). In fact, reading the Economist recently (obviously in my slippers) I was surprised to discover housing is the world's largest asset class. This HSBC report (avoiding the Economist paywall) cites housing as a $226 trillion (!) asset class at the end of 2016 (4) out of a total net worth in 2018 of ~$360 trillion according to Credit Suisse.
 
Even with my casual research, it's clear that real estate is divided into multiple segments including residential, commercial, industrial, farm land, etc. Even the subsector of residential is divided into single family, multi-family, commercial, mobile homes, etc. These segments are further divided across geographies with wildly different tax, capital, and regulatory regimes. So far I’ve limited my research to the US residential sector: single family homes, multifamily, and small commercial apartment buildings. Therefore moving forward when I say real estate I will limit the scope to the above US residential housing market, i.e. acquiring individual or personal portfolio of US housing properties.
 
More formally, the purpose of my analysis below is:
Note: I considered posting this in /realestateinvesting, but ultimately my goal is to evaluate real estate vs. other asset classes. Obviously some people will simply prefer real estate for a variety of reasons, but personally my goal is to achieve the greatest return for the least risk and work. I should stress that I love my career (data scientist) and have no intention of quitting, so the last point is particularly important.
 
Analysis
 
One thing that immediately strikes me as an investor accustomed to public securities, e.g. bonds / stocks, is how odd the real estate market (in particular housing) is in comparison. Having a margin account from a broker, i.e. getting leverage, is often a difficult process reserved for “advanced” investors. In residential real estate, it’s considered “conservative” for an individual to have leverage of 4-5 to 1 (FHA loans, for example, only require 3.5% down in some cases!) . What’s even crazier is that the loan is often issued at only 2-4% over the 10 year US treasury rate. For example today, April 26th, the 10 year treasure is 0.606% while NerdWallet has a rate of 3.3% for a prime credit score, single family home, primary residence 30 year loan.
 
Perhaps because real estate is the only avenue available for newer investors to take on large amounts leverage immediately, I've seen extreme and, in my opinion, irrational positions on the subject. Even a cursory glance at BiggerPockets, /realestateinvesting, etc. uncovers multiple posts along the lines of either "real estate investing is the best investment ever!" vs. "the real estate market is a massive bubble and will crash soon". I've summarized a few of the common tropes I've seen below with my analysis.
 
Real estate is a huge bubble, and is going to collapse any day!
As noted above, real estate / housing has numerous segments that are further divided across geographies with wildly different tax, capital, and regulatory regimes. Saying that "real estate" will crash is like saying the “food industry” will crash. What segment and where? US soybean growers? Fast Food? Argentinian ranchers? McDonalds in particular?
Limiting our discussion to US housing: the Case-Shiller national price index (7) shows that home prices dropped ~27% from peak to trough in the Great Financial Crisis over a period of almost 6 years (Mid 2006 to early 2012). The reason this was such a catastrophic event is that housing had never decreased nationally in a significant way before in the modern era (see Case Schiller home price index). Of course, it’s worth noting that housing had rarely increased rapidly against inflation before.
Let’s assume we had an equivalent event occur. The Jan 2020 index was at 212, so home prices would decrease by 27% to ~155 (mid 2008 levels). Crucially though, this price drop would be expected to play out for years! During that time vested interests (more on that later) would lobby governments extensively for support, foreign and US investors could form funds to take advantage of the situation, etc. As a reference point there is ~$1.5 trillion available in US private equity funds alone as of January 2020.
However, it is worth pointing out that this is at the national level. Local real estate markets, particularly those dependent on select industries or foreign investors, could easily see more dramatic price movements. The US census has a really cool chart (22) that shows the inflation adjusted (as of year 2000) median home values every decade by state from 1940 to 2000. We see that Minnesota home values actually dropped from $105,000 in 1980 to $94,500 in 1990, a fall of more than 10%.
 
Everyone needs a place to live, therefore housing can never go down
Everyone needs a place to eat, but restaurants and grocery stores are famously low margin businesses (5). Farms supply an even more basic need, but many go bankrupt (6). The question isn’t whether housing will go down or not, but whether it will return an attractive rate of return compared to alternative investments.
It’s also worth pointing out that for most “retail” US housing real estate investors, they are investing in a narrow geographic area. Migration and births/ deaths can play a huge role in the need for housing in a given area. Case in point, NYC may have actually begun losing population to migration in 2017 / 2018 (23). Even more interesting, NYC has experienced a substantial loss due to domestic migration which is almost balanced by foreign immigration / new births (24). If foreign immigration decreases in the post-COVID we would expect NYC’s population to decline more rapidly given current trends.
It is entirely possible for national housing prices to modestly increase while expensive coastal markets decline significantly, for example.
 
It's supply and demand. There's a nationwide housing shortage so prices can only go up!
This one has some factual basis. Freddie Mac put out a study in Feb 2020 (18) which indicated that there is a shortage of housing units between 2.5 - 3.3 million units. Some interesting notes about this study is that they consider the “missing” household formation and extrapolate interstate migration trends. As noted below, the US builds ~1.3 million housing units a year, so this reflects ~2 years of housing construction. It’s also worth noting the geographic variation, with “high growth” states like Massachusetts, California, Colorado, etc. seeing ~5% housing deficits vs. states like Ohio, Pennsylvania, etc. seeing housing surpluses of ~2-4%.
However, a Zillow analysis on our aging population (11) points to a slightly different conclusion. Based on their analysis, an additional ~190,000 home will be released by seniors between 2017-2027 compared to 2007-2017. That number increases by another 250,000 homes annually between 2027-2037. Combined, this is about ~50% of the average annual homes constructed in the US between 2000-2009 at ~900,000.
Given these slightly conflicting reports, let’s get back to basics. First, let's separate housing into single family homes, multi-family units, and large apartment buildings. Single family homes, particularly near dense and economically vibrant metros, are far more supply constrained. In contrast, multi family units / apartment towers are, barring regulatory issues (see California), less constrained by available land. See Hudson Yards in NYC, the Seaport area in Boston, the Wharf in DC, etc. It's worth noting that due to costs / market demand most of these developments cater to the entry level luxury category and above, but they are new supply.
I actually wound up looking at US Census projections to get a sense of the long term outlook. By 2030 the Census estimates the population will grow from 334.5 million to 359.4, for a total increase of 24.9 million or an annual increase of 2.49 million (8). In 2019 the Census estimated 888,000 private single family units and 403,000 units in buildings w/ 2+ units were constructed for a grand total of 1,291,000 units (9). The average number of people per US household is 2.52 (10). Some simple math suggests that if we assume each new single family home contains the average number of Americans and each apartment conservatively contains only a single person we get 888,000 * 2.52 + 403,000 = ~2.64 million.
Now, talking about averages in a national real estate market reminds me of a joke about Mars: on average it's a balmy 72 degrees. But the point still stands that at a high level, theoretical sense there is sufficient "housing" for the US population. The question, as always, is at what price and location?
 
Real estate is a safer investment than the stock market!
This one honestly irritates me. While there are many advantages to real estate I can see, safety is not one of them. It is a highly leveraged, illiquid, extremely concentrated asset when bought individually (i.e not in a REIT). Let’s use an example here. Is there a financial advisoy in the world who would recommend you put your entire investment portfolio in Berkshire Hathaway? Of course not, diversification is the bedrock of modern personal finance. And yet Berkshire Hathaway is an extremely diversified asset manager with well run and capitalized companies ranging from Geico to Berkshire Homes to Berkshire Energy. Oh, and it also has $130 billion (with a B) in cash equivalents.
I honestly think this impression stems from 3 factors:
 
You won’t build your wealth in the stock market
One common theme I’m already noticing listening to podcasts, reading blogs, etc. is that many people started investing in the aftermath of the Great Financial Crisis (2009 - 2011). And, in retrospect, it was clearly a great time to buy property! But it was also a great time it turns out to buy almost every investment.
I plugged in the average annual return of the S&P 500 from December 2009 to December 2019 with dividends reinvested (and ignoring the 15-20% long term tax on dividends) (12). It was 13.3%. If you managed to buy at the market bottom of Feb 2009 it was 15.8%!
The long term annual average of the S&P 500 from 1926 - 2018 is ~10-11% (with dividends reinvested). (13). The S&P has never lost money in a 30 year period with dividends reinvested, see the fantastic book Stocks for the Long Run (14). In fact, if you’re investing before 30 the worst 35 year period (i.e. when you would turn 65) is 6.1% (15).
Housing, in general, has tracked at or slightly above inflation ( 16). Even a click bait CNBC article (17) about “skyrocketing” home prices states that homes are rising 2x as fast as inflation (i.e. ~4%). If you look at the CNBC chart for inflation adjusted prices, you’ll see a compound annual growth rate (CAGR) of 2.3% from 1940 to 2000. Let’s do this same exercise again with the Average Sales Price of Homes from Fred (i.e. Fed economic data) (18). In Q1 1963 the average sales price of a house was $19,300. In Q4 2019 it was $382,300. That is a CAGR of ~5.38% over ~57 years.
Another thing to keep in mind is that while real estate does have some tax advantages, there are also property taxes, maintenance, etc.
But it’s harder than that. Because real estate is an illiquid asset. In general, illiquid assets require higher returns than the equivalent liquid asset because of the inconvenience / risk of not having the ability to transact frequently.
 
Case study of real estate purchase:
I’d like to focus the rest of my analysis on an area that many members of BiggerPockets, /realestateinvesting, etc. seem to gloss over: credit. I was surprised to see that for first time home buyers, 72% made a down payment of 6% or less according in Dec 2018 according to (27). This would imply prices only have to decrease 6% to put these new homebuyers underwater, i.e. owe more after a sale than their mortgage. But this fails to take into account costs associated with buying a property, which are substantial at 2-5% for closing according to Zillow (28). Costs for selling a property are even more substantial, ranging from 8-10% according to Zillow (29). This means that sellers only putting down 6% could be underwater (in the sense that they couldn’t sell without providing cash during the sale) with even modest price decreases when taking into account these transactional costs.
 
Obviously there are ways to reduce these costs, so let’s walk through a hypothetical example of the median valued home of ~$200,000.
 
A young, first time home-buyer puts down 10%, or $20k, and takes out a mortgage for $180,000. They also pay (optimistically) closing costs of 2% for $4000. Luckily, they bought in a hot housing market and prices increased 5% (real) over the next 5 years. Their house is now worth ~$255,000. They sell their house and again, optimistically, closing costs are only 4%. This means they pay $10,200. Consequently, after netting out costs we calculate naively that they would make $255k - $10k - $4k - $200k (original purchase price of home) = $41k. Given they only invested $20k of their own money, this is a compound annual growth rate (CAGR) of ~15.4%, which is handily above the S&P 500’s average. This is the naive calculation I first made, but as we’ll see it is deeply flawed. First, let’s look at costs.
 
WalletHub has a really nice chart that shows (conveniently) property taxes on a $205,000 home across all 50 states (30). The average American household spends $2375 on property taxes, so let’s assume a little less and go for $1500. So 5 years x $1500 = $7500.
 
For home maintenance, the consensus seems to be ~1% annually for home maintenance with wide variation. We’ll assume that’s $2000 off the base price, so $2000 * 5 = $10,000. (31).
 
For homeowner’s insurance, Bankrate (32) provides a nice graph that shows the average annual cost for a $300,000 dwelling across all states and then a separate chart for costs based on dwelling coverage. For a $200,000 dwelling coverage we have a figure of $1806 per year, so over 5 years we have $1800 * 5 = $9000.
 
Finally we need to calculate the interest on the debt. One thing that I didn’t realize until I looked at an amortization table how front-loaded the interest payments are. Case in point, I plugged in the $180,000 loan into the amortization calculator (34) using a 3.5% interest rate and saw that we pay on average ~$6000 each year in interest vs. only ~$3800 to principal.
 
So lets’s run the new numbers.
You sell your home still for $255,000. After 5 years, your mortgage is now ~$160000 (i.e. you paid off 20,000 over 5 years, or ~$4k per year). So after the sale you are left with ~$95,000. The buying and selling costs remain the same as before, so we subtract the $14k for $81,000. We also then subtract $7500 (property taxes), $10,000 (home maintenance), $9000 (homeowners insurance) which gives us $54,500.
 
We paid ~$9,700 each year in mortgage interest + principle (~6000 interest and $3700 principal). So 5 * 9700 = $48,500.
 
So, net of everything we get $255,000 - $160,000 (remaining mortgage) - $48,500 (mortgage payments over 5 years) - $14k (buying / selling costs) - $7500 (property taxes) - $10,000 (home maintenance) - $9000 (home insurance) = $6000. And we put down $20,000 as a downpayment, for a net compound annual growth rate (CAGR) of negative $21.4%.
 
That is truly an astounding result. We had 10x leverage on an asset that went up 5% each year for 5 years and we somehow lost money on our “investment” of a down payment? Keep in mind we also used fairly optimistic numbers (particularly home price appreciation) and didn’t factor in PMI, etc. On the flip side, this home provided shelter, i.e. you didn’t pay rent. That’s a massive “avoided” cost and I don’t mean to minimize it. But the point here is that many homebuyers I’ve spoken to fail to account for the substantial costs of home ownership and expect their primary resident to generate a substantial return.
 
Now, of course, for real estate investing you would likely either a) hold the property for less time and attempt to flip it via forced appreciation or b) have tenants in the property. Let’s focus on b) because frankly that’s more of my interest. From what little research I’ve done flipping houses requires much more time that’s incompatible with my day job.
 
I went ahead and used the rental price calculator I found online at (36) to calculate the return. I used a rent of $1300 monthly, a bit lower than the average national rent of $1476 (35) because our home price was also lower than the national average. I assumed a low vacancy rate of 5%, and no other expenses beyond the ones cited above (i.e. I didn’t assume property management, higher loan interest rate, higher property taxes).
 
The calculator spit back a 5 year internal rate of return (a metric in this case useful to compare against the securities markets) of 27.79% return, i.e. a profit of $63k on an initial investment of $20k. The IRR as I understand it captures the time value of money, basically accounting for when you made various returns (37). E.g if an investment over 30 years pays nothing then gives you a lump sum payment at the end that’s very different than if it pays 1/30th of that lump sum every year. It’s useful in this case for comparing against the stock market because the IRR takes all future cash flows back to a net present value of 0, i.e. as if we invested all the money immediately.
 
&Now let’s do some scenario modeling (originally we had 10% down, 3.5% interest rate for an IRR of ~28%):
This scenario for me demonstrated a number of interesting properties.
 
 
401k analysis
As I mentioned above, one of the big questions around real estate investing that I rarely see asked is “is it an appreciably better investment than the alternatives”? For W2 workers, which is ~50% of private sector workers, this question becomes even more pertinent because 401ks have massive tax benefits. In fact, only 33% of US households own taxable accounts outside of a 401k, which means the vast bulk of US households either have no accounts, 38%, or own only a retirement account like a 401k, 29%, according to (39). Let’s assume we have a middle to upper middle class worker making ~70k (this puts them roughly at the 75% percentile). They want to invest, and see two options:
 
At a salary of $70k and assuming you took the $12k standard deduction, you would still see much of your income fall into the 22% tax bracket. While certain states charge no income tax, they generally make it up in much higher sales / property taxes, so let’s also assume a 3% state income tax (40). This means that if you invest $19,500 in a 401k (the maximum in 2020) that’s equivalent to only $14,625 post-tax (because the $19,500 would be taxed ~25% before it got to you). That leaves almost $6000 when compared with the down payment figure above, which is coincidentally the exact IRA contribution limit for 2020! The math for deductions for the IRA gets painful, but we can assume a deduction of ~$1500 (i.e. 25% of 6000). Now, if your work offers an HSA it gets even better, because those contributions are tax-free even from social security (which is typically a 6.2% tax) + medicaid (1.45%). This means that if you contribute the $3500 limit, that’s equivalent to only $2300 post-tax.
 
This is getting rather long, so for the sake of simplicity we can basically say that in lieu of putting down a $20,000 post-tax downpayment on an investment property you could instead invest $19500 + $6000 + $3500 = $29000 into the stock market. What’s more, fees for well managed 401ks through Vanguard, Schwab are often ~0.25% (i.e. $72 annually on the $29k above).
 
If we assume the average S&P 500 index returns of 10% (we’ll ignore the $72 annually in expenses and of course there are no taxes), we would see $29k compounded over 5 years = $47,809. Since we’re investing the money all immediately, this is (I believe) more or less equivalent to the IRR rate.
 
So, what do we need to achieve to beat that return with our investment property? Well, we previously assumed a blistering 5% real home price appreciation. With inflation at ~2%, that’s a nominal 7% home price appreciation. According to both Zillow and Core logic, Idaho is the state with the fastest home appreciation values pre-COVID at ~9%. We’re essentially predicting close to this level for 5 years, which is quite rare. In August 2019, US home prices nationally were gaining ~2.6% according to (41).
Let’s plug those numbers into our rental property calculator from above. At a 10% down payment, 3.5% interest rate, and 2.6% home price appreciation we see an IRR of 18% per year. Game, set, match, real estate, right?
 
Well, sort of. Right now we are assuming optimistic projections about maintenance (1%), closing costs (2%), and selling costs (4%). What if we bump those up to the averages cited by Zillow (3% and 8%)? Uh-oh, now we’re down to 12.38%. Okay, but what if we assume rent goes up by the same amount, ~2%? Great! Now we’re back up to 14% IRR. But if we assume all the other expenses like home insurance and maintenance go up 2% a year as well, we’re back down to 11%.
 
We could go on forever, but the point is that real estate (particularly for rental properties) are extremely sensitive to assumptions you make on a number of factors. Given the risk, illiquidity, and work involved with a real estate property I would want to see a substantially higher return than the tax advantaged, hands off 10% my 401k gives me. I didn’t even include the typical 3% match for the 401k, which would have added $2100 to the initial investment amount and increased the 5 year return to $51,272.
 
The bottom line in my mind is that for most W2 workers who have access to pre-tax investments, they should max them out first. If you’re lucky enough to be able to max out all of the above pre-tax accounts + get a 3% match (i.e. $31k total) every year, after 15 years at a 10% return you’ll have $1.2 million. In 30 years you’ll have $6.8 million. And again, keep in mind that maxing out your pre-tax accounts only “costs” you ~$20k, because that’s what you would get after taxes. And you’ll have “made” those millions without spending a single hour outside of your day job working.
 
Based on the above analysis and calculations, here’s what I’ve come away with as a newbie to real estate investing:
 
Some thoughts on the future:
Forecasting is always risky, but at the same time we all have to form an opinion on where the future is headed. My general thoughts are that crisis tend to accelerate existing trends rather than create new ones. There were already recession concerns in late 2019, and US GDP growth expectations had been downgraded to ~2.0% by the OECD even before COVID (45), albeit with slight optimism around the Phase 1 trade deal with China. Geopolitical tension and capital controls in China had led to mainland Chinese investors slowing their investments in US real estate and increasing dispositions (47).
From my point of view, I’m interested in seeing how the market reacts over the next 3-6 months. Do sellers react by rapidly putting properties on the market before it’s “too late”? Are there enough prime buyers given the tightening credit, particularly for expensive coastal markets, to absorb a spike in listings? As Warren Buffett once said: “"At rare and unpredictable intervals...credit vanishes and debt becomes financially fatal. A Russian-roulette equation--usually win, occasionally die--may make financial sense for someone who gets a piece of a company's upside but does not share in its downside.” We shall see.
Sources:
submitted by cooleddy89 to investing [link] [comments]

PRPL: More DD For You Autists

PRPL: More DD For You Autists
Purple. It's for investors who use mattresses for more than sleeping.
For those of you who have trouble making it through complete sentences: buy 15c (June, July, Oct or Jan strikes).
For those of you who prefer some level of Due Diligence before a play, I'd recommend some catch up reading before you tackle the below:
If you really want to dig in, feel free to read through my post history on PRPL over two years. I'll be compiling these into my memoirs soon: "How I made my first, second and third million."

The post below builds upon the previous DD. Today, we are going to chat about:
  • Short Interest in a Coliseum Capital World
  • Number of Job Openings
  • Insights from a Mattress Firm Manager
  • Verifying Sales Volume
  • Capacity Expansion
  • PRPL Options Have a Market Maker Now
I'm going to assume you read the previous DD and simply build on the previous without providing context. If you can be too lazy to go back and read, I can be too lazy to write it again.

Short Interest in a Coliseum Capital World

https://preview.redd.it/79vlkumtqi151.png?width=477&format=png&auto=webp&s=a7c4a03d15f88fa0cc10653f95afaa68e3007508
Short interest data on the stock was released last night by NASDAQ. We saw short interest increase 24.5% over the previously reported period!! This number was after earnings too at the beginning of the recovery from the secondary offering drop.
As we learned on my previous posts, Coliseum Capital ate up most of the secondary (they are on the board and are a buy and hold long-term player), which means the short interest as a % of non-institutional float just went up!
This is a GREAT thing! As PRPL does its run up starting in a week or so, we will likely see an even bigger squeeze than we expected before.

Number of Job Openings

https://preview.redd.it/9yyf3hnuqi151.png?width=145&format=png&auto=webp&s=785b39be72132c9a5280cef5a52eed8bf23ee3aa
As predicted and as explained on the earnings call, PRPL is in hiring mode again. It is only accelerating.

Insights from a Mattress Firm Manager

On another forum I participate on that has a thread focused on this stock, there is a Manager at Mattress Firm (with 15 years of experience in the mattress industry) on the forum that regularly posts. I don't know if he is corporate or at the store level, but he often posts great insights on Purple.
https://preview.redd.it/4ihuzctvqi151.png?width=579&format=png&auto=webp&s=613f5d911b0f145c9d767a0323c8820dac4e3f8b
A few things to note from his post:
  1. Memorial Day was recording breaking for mattresses: Purple was a stand out.
  2. Production at Purple for the cheaper original mattress has been halted to support demand for the higher end Hybrid "2, 3, and 4s", which are also much higher revenue and margin for Purple.
  3. Mattress Firm and likely Purple are sold out of inventory if delivery pipelines are at least 4 weeks long.
  4. Most importantly, OP lets us know that Karen won't get her mattress faster by talking to the manager.

Verifying Sales Volume

To verify the sales volume assertions from the Mattress Firm guy, I went on to Purple.com and attempted to go through the ordering process for a King bed. Purple had a conversion-killing popover like the below (if they are willing to kill conversion with this, you know they aren't hurting for sales and they've probably pulled back on marketing spend to a more efficient level).
Original Mattress (Cheapest)
https://preview.redd.it/vdbjitvwqi151.png?width=1526&format=png&auto=webp&s=275d521ded5bd4e9d8cea940f9465484ef1c2a23
Hybrid 2"
https://preview.redd.it/6q505gsxqi151.png?width=1409&format=png&auto=webp&s=3d5113606e8faa586b6d4ef5992f7a76fd15637a
Hybrid Premier 3"
https://preview.redd.it/2n5nypzyqi151.png?width=1618&format=png&auto=webp&s=f2e28eaf7d1882c19a6fece66ce5128f2faad2c5
Hybrid Premier 4"
https://preview.redd.it/5mu71exzqi151.png?width=1551&format=png&auto=webp&s=0e00621d981f17baa51bc566fc3755ba213b26e5
I'm sure a few of you are glad I've posted pictures so it makes it easier to follow. Too bad there are words on the pictures as well...
As an investor, I'm liking the fact that we sold out of our $75M in revenue value of inventory stock that we had in place at the beginning of the quarter. I'm also liking that Mattress Firm is four weeks delayed while the DTC site is less delayed: it shows that management is making good on their promise to prioritize higher margin and revenue DTC sales over wholesale partners for now (in the long run, we obviously want to keep our wholesale partners happy too).
It is the end of May already. This stockout pretty much guarantees a revenue maximized Q2 as the next two weeks into June have already been sold. If sales continue at a reasonable pace, this momentum carries into Q3. This stock should be worth much more right now.

Capacity Expansion

We learned from the earnings call that the 7th Mattress Max machine (the proprietary, built-in-house machines used to make their unique mattresses) will be online by the end of May. This machine represents an additional 20% increase in capacity over 2019 EOY capacity.
Through another forum on this stock, we've learned that the manufacturing team now has mandatory Sunday workdays, which were previously voluntary, which is another capacity expansion.
Back of the napkin, this brings us to 910 beds per day of average capacity. At an estimated average selling price of $2,200 (take the $1,863 Q1 2020 average selling price from the S-3, adjust for the 40% discount the beds are sold to wholesale at, and adjust again for the reduction in wholesale and shift to DTC), this gives PRPL a max manufacturing capacity of $182M or so in revenue for a full 91-day quarter. Realize that we only get one month of that, but we also had $42M in inventories (at an approximate $75M in DTC revenue value) at the beginning of the quarter.
Given that we know they are sold out of inventory, we should have a killer Q2 that may be closer to the top end of my previous estimates (especially if you include an estimated $15-$20M in revenue from ancillaries like seat cushions for all of your COVID stay at home butts that aren't subject to the same manufacturing constraints). Hey, it might even beat that top end. With lower marketing costs per DTC unit. Awesome.

PRPL Options Have a Market Maker Now

The PRPL options chain went live last Thursday, but have been plagued with ridiculously awful bid/ask spreads and little volume, which has resulted in very little open interest. I've probably had 2500 contracts worth of bids I've cycled through trying to get a reasonable price.
Based upon the reasonable bid/ask spreads yesterday (for a stock of this volume--remember this isn't an S&P 500) today, it looks like we got a market maker to pick up PRPL for us.
I was able to pick up 40 15c contracts at very reasonable prices for Jun and Oct. There is still a decent sized Bid/Ask, but not out of line at all with a stock of this volume.

Frequent Comments and Questions

I keep getting the same comments and questions on these threads and via PM, so I figure I would answer some here.
Why do you only post on PRPL?
Well, I'm over a million into this stock so it is important to me to keep a good eye on it. As a result, I know more about this position than any other position I'm holding. I'm trying to pay it forward to this community by spending the time to write decent DD in appreciation for all the money I have made off of others' DD here. Please do the same with the stocks you know best.
This is a pump and dump.
This is the antithesis of a pump and dump. First of all, I've been posting on this for over two years. Second of all, I've held almost all of my position that entire time (mostly added, but did a few sells in the last few weeks to play with PRPL options). Third, you are an idiot and don't have any money to play this anyways.
What is a warrant?
Warrants are simply options written by the company itself rather than another investor via CBOE. The warrants trade individually (instead of contracts of 100) under the ticker PRPLW. They are not available on some brokers (e.g. Robinhood). They have an expiration of 2/2023 and an exercise price of $11.50 (two warrants for one share). They are like super LEAPs.

My Positions

I own:
  • 1 share of PRPL
  • 30x 15c 6/19
  • 10x 15c 10/16
  • 521,400x PRPLW
https://preview.redd.it/alvcvt51ri151.png?width=1242&format=png&auto=webp&s=d6271fed7550fa0aeab2abe6acc7bc066a727f1a
This isn't investment advice. Do your own homework and talk with your advisor before investing.
submitted by lurkingsince2006 to wallstreetbets [link] [comments]

Bottom of Pyramid Microinsurance: Hungry for Innovation

Bottom of Pyramid Microinsurance: Hungry for Innovation

Credit: www.theguardian.com
A large majority of poor in developing nations work in informal sectors, with no access to insurance. They cannot afford to buy insurance nor can they access social protection (in health, disability or unemployment cover) provided by employers or co-financed by governments. Across socioeconomic clusters, this group is most vulnerable to financial shocks, and unsurprisingly least protected.
Microinsurance offers solutions to fill these gaps and deliver insurance that is affordable to match the needs of the poor. It protects them against specific risks in exchange for regular premium payments as per insurance principles. The risks commonly encompass illness, accidental injury, death and property or crop loss. Started off as community based and mutual insurance schemes, these are now increasingly offered by traditional insurance.
A number of players form part of the microinsurance supply chain. Ranging from insurance regulators to carriers, administrators, it comprises delivery channels, technology platform and service providers (such as health facilities or funeral organizations).

https://preview.redd.it/aqnyq503c6h51.png?width=667&format=png&auto=webp&s=27cdbcc2f139ed1e575efdfe22348117a6a75cdc
The opportunity for micro-insurance varies from region to region. The potential market has been estimated to be 3-4 billion policies generating $30 - $50 billion in annual revenue.
The popularity of products is also region dependent, basis the risks which affect the region the most - such as earthquakes in Chile or drought in Kenya. Microinsurers have been most successful in APAC, where two-thirds of the poor are to be found. India and Bangladesh are fastest growing, followed by China and Philippines. The countries in the right side of the below chart have favorable regulatory and business environment, both being vital enabling factors.
https://preview.redd.it/nbsdomamc6h51.png?width=804&format=png&auto=webp&s=3ae94962e03bb410c44ce6e298af414e73bda4c7
Microinsurance does not have any single definition as such. In South Africa, for instance, it is considered as a max benefit of R50k per insured life, while in Philippines, its the amount of premium that's less than10 percent of current daily minimum wage rate for non-agri workers.
Differences from traditional insurance are:
  • Presumes low awareness of insurance as a concept.
  • Assumes poorly educated customers, so communication must be straightforward.
  • Executed as conveniently and simply as possible, including eligiblity requirements, exclusions, payments anc and claims.
  • Relies on group pricing, due to lack of personal data
  • Links premiums to other payments, such as loan repayments.
History of Microinsurance
Microinsurance is likened to be an outgrowth of microfinancing projects developed by Bangladeshi Nobel Prize-winning economist Muhammad Yunus, that helped millions of low-income individuals set up businesses, buy houses.
American International Group Inc. (AIG) was one of the first carriers to offer microinsurance and sell policies in Uganda in 1997. It was soon joined by other large insurers including Swiss Re, Munich Re, Allianz and Zurich Financial Services. Today many innovative microinsurance products have been developed to protect the working poor against the financial impact of losses.
The growth of microinsurance
Despite almost 2 decades of focus on the under and uninsured, microinsurance is estimated to reach just under 300 million people across the developing world, ~10% of the potential market.
Partnership is one of the pillars of an effective microinsurance business model, but it is not an easy endeavour. Partners rarely have identical priorities and work with competing constraints which need to be overcome for a successul model.
Four business models prevalent as distribution channels are a)partner agent model provider driven model c)charitable insurance model d)mutual/cooperative insurance model
The partner-agent is the most common and includes MFIs, NGOs, cooperatives and retailers. It piggybacks on the partners infrastructure and trust, thus helping reduce costs and speeden time to market, facilitating scale. For this model to succeed, partner's staff need to be educated in insurance. Since the partner owns the client interface, the partnership requires intensive management. A good example is Hollard in South Africa that sells inexpensive funeral insurance through budget clothing retail chain Pep Stores.
The below chart of distribution mix in four growing microinsurance markets shows finance institutions are among most favorable distribution partners, particularly for MFI partners in India, Indonesia and Philippines. Agents and brokers are also a popular distribution network for microinsurance, followed by retail and commercial networks.
https://preview.redd.it/ac53kyd6f6h51.png?width=756&format=png&auto=webp&s=1d2ad3367805f7d38a07700be26982715a18bd7c
A key challenge facing microinsurers are availability of products designed to meet customer needs while meeting the carrier's operational and cost requirements. While simpler products are easier to market and administer, they also provide limited benefits. Trade-offs are inevitable and innovation is invaluable.
The below figure highlights the prevalence of credit life and life products, understandable as partnership with microfinance institutions is commonly a distribution medium. The high proportion of life insurance signifies the relative simplicity to develop this product. For the market to evolve, however, there is a need to move towards more complex products such as health and agricultural insurance.
https://preview.redd.it/eg6m2sgne6h51.png?width=784&format=png&auto=webp&s=eb12edaac6a6282a0bb30c79b0ad24eff8d7f54a
Challenges And Need For Innovation
When it comes to microinsurance, innovation is more than a response to customer demand for more convenient service - it is usually an operational imperative. Insurers leverage technology with the aim of offering simple, affordable products to mostly illiterate customers in locations difficult to reach.
We look below at few examples of carriers and their innovations that helped them overcome challenges.
Easy availability of mobile technology has been a major enabling factor in most markets. UAP Insurance in Kenya enables farmers to buy crop insurance by using their mobile phone to send in a photograph of the barcode on a bag of fertilizer or seed, and to pay premiums using M-Pesa mobile banking system.
Similarly, real-time connectivity with the carriers' system is an important factor to enable bulk processing and servicing of low-premium policies with minimal user invovlement and at lowest cost. An exmple is IFMR Trust Holdings that works with HDFC Ergo GIC in India to use radio-frequency identification tags on insured cattle to minimize claims fraud.
Pay-as-you-go insurance platforms that use cloud technology are a necessary means to achieve an adaptable and extendable microinsurance operating model. Max New York Life in India has extended their virtual network by distributing scratch cards through small retailers. Customers pay premiums by buying a card and texting the concealed code to the insurer.
Despite the strides being made by carriers, the operational challenges that continue to derail the best of efforts include:
  • Lack of information on consumers
  • Consumers beyond current reach
  • Different and new consumer needs
  • Consumers inexperienced with formal financial services
  • Constrained business models
Adoption of sophisticated technology can have a powerful impact, but managing the significant inhibitors effectively is undoubtedly imperative to succeed in this market.
Among common innovative solutions driven by insurers are index-based insurance, grants from governments and/or donors to develop infrastructure, partnering with weather stations to collect meteorological data, risk-spreading to multinational insurers and reinsurers, and technology to manage fraud.
Additionally, new technology enabled partnerships increase the distribution reach of insurance. Peer to peer insurance enables new operational models and product categories. Demand based insurance charges premium per use. Alternative and digital data allow for improved customer knowledge. For example, online consumer retail purchase history can better inform about a potential consumer's risk profile and premium pricing.
Leveraging digital infrastructure reduces marginal cost of insurance delivery. e.g. Saldo in Mexico uses blockchain to verify transactions to reduce fraud. Afrisure in Zimbabwe uses satellite data to enable provision of agricultural insurance at scale.
Sustainable Profitability
Profitability has not been easy to achieve in microinsurance, being a sophisticated offering to most consumers, who mistrust it and cannot easily understand. It is also an emerging area for insurers, who have limited knowledge to underwrite accurately. Over time, these are expected to smoothen out, insurers will learn from early mistakes and build more efficient distribution channels.
The key to profitability might just lie in the business model. In order to be profitable, a low margin/high volume philosophy will be the preferred path. Microinsurers will have a compelling need to price products accurately with low margins, and then sell large volumes. The challenges will manifest in that voluntary insurance products sold on an individual basis will be more expensive to distribute and service than mandatory group polices linked to loans. Nevertheless, as carriers manage to maintain growth in revenue greater than growth in incremental costs, they will derive profitability through scale.
submitted by riseofinsurtech to u/riseofinsurtech [link] [comments]

Forex Profit Signals

What is Forex Trading:
Forex Trading is trading currencies from different countries against each other. Forex is an inter-bank market that took shape in 1971 when global trade shifted from fixed exchange rates to floating ones. This is a set of transactions among Forex market agents involving exchange of specified sums of money in a currency unit of any given nation for currency of another nation at an agreed rate as of any specified date. During exchange, the exchange rate of one currency to another currency is determined simply: by supply and demand - exchange to which both parties agree.
Actually Forex is the financial game between BULLS and BEARS.
The Major currencies pairs are:
EUUSD GBP/USD USD/JPY USD/CHF USD/CAD AUD/USD
And these are the 6 best Forex Markets.
What are Forex Signals?
Forex signals are indicators that let you know when it's a good time to buy or sell a currency pair. They provide you with insight as to what's going on in the Forex market without the necessity to monitor Forex trends throughout the day. If you are self-employed or employed by another company, Forex trading is likely a part-time endeavor for you. You won't have time to sit at the computer and monitor the Forex market all day. Forex signals can be delivered to you throughout the day by professional Forex traders to give you a heads-up on what's going on in the market. You can receive the signals, and then place the signals for buy or sell.
Forex signals are basically "suggested" buy and sell points with price targets and stop-loss levels delivered by fx signal providers to traders. They may be delivered by email, instant messenger, cellphone, live currency trading systems or direct to your Forex signal metatrader on your desktop.
Forex trading is a risky business and it takes some time to master the art of Forex trading signals. There are a number of fx signal providers but before you choose, you need to make sure you have done your homework. Always ask for the Free signals to deliver for 3 to 5 days and test those signals in your Demo Account.
The main characteristics of Forex trading signals to be aware of are as follows;
Cost: monthly subscription Complexity: Simple "one email a day" OR Full-Service Control: You keep full control OR the signal provider trades your a/c for you
Most Forex trade signals charge a very modest subscription fee, usually in the region of USD $80 - $400 per month.
If you're new to Forex trading, you probably realize how important it is to make the right trading decisions. One wrong trading move can drastically harm your portfolio while a good move can bring tremendous profits. That's why trading signals are so important. Once you've tried a Forex demo account for practice and created a strategy that works for you, you can add trading signal services as a useful tool in your Forex trading.
With online Forex, finding a trading signal service is easier than ever.
In their simplest form a Forex trading signal will send you a Forex alert email once a day listing trade set ups for the next 24 hours.
Some Forex signal providers offer a free trial service, thus allowing currency traders to sample the signals to assess their worth. This is a helpful step, as it allows the trader to consider the quality and reliability of the signals before paying money. This is a crucial element in the research process, and weeds out the providers who want money upfront as they are not confident in their ability to call profitable trades. This is a good service that you can try for free for 3 to 5 days.
Various fx signal providers offer a few complimentary services along with the featured ones. Look for a fx signal company that provides email support, phone assistance and even mentoring to their clients. This is of great value, especially to new traders.
They assign their time assisting traders in taking buy/sell decisions. Forex traders depend upon and trust the recommendations of these professional signal providers, while making investing decision in the Forex market
Forex signals are not meant to be a magic solution to all your Forex problems. They are designed to inform you about the market.
Forex business timing is extremely crucial; a trader can earn millions or lose even more depending upon the his timely or untimely actions. Besides, being the biggest market on the face of earth - it generates business activity of almost 3 trillion USD, it operates around the clock, all over the globe, making it thus impossible for a trader to stay vigilant all the time about market fluctuation and probable changes therein. Therefore a trader needs alarms and indicators to get knowledge about the possible opportunities and probable pitch points. Hence the need for Forex signal or alerts. Basically Forex alert or signal is a communication or intimation to the trader indicating the ripe time to buy/sell and the suitable price to pay/ask. Most of the time, such signals and alerts are provided by trained professionals, either individual or companies.
When choosing a Forex signal service, be sure the company offers the type of signal alerts you need. Every person is different. Some require computer or email alerts, while others are not accurate Forex signals are made for both professional traders and although new traders. The best Forex signals trading system is going to cover multiple situations on the Forex market. For instance the best Forex trade signals is going to cover all major currencies like GBP, USD, and EUR at all times the market is open, not only for specific situation. Simply to get the full value of your Forex trade you must know what is happening in regards to all the major currencies. The Forex system should also be able to give you at least 1-3 Forex trading signal alerts a day.
Some Forex trading signals are high volume scalpers, calling many trades in a day aiming to profit a handful of pips on each. Others only call a few trades a day, aiming to profit 20 - 80 pips on each single trade. Forex trading signal providers help you in minimizing risks or losses in trading.
Forex signals are generally given on a daily updated basis and all are contingent on factual market analysis and behavioral flow and not on mere hearsay and other speculations.
The signals are calculated and generated by using different indicators such as trends, moving average, Elliott waves, Bollinger bands, Fibonacci series, etc. In spite of that, some uses strategies like:
Pip Maximizer Method 1 Pip Maximizer Method 2 Pip Reversal Method Pip Divergence Method Instant Pip Method Pip Retracement Method Quantum Pip Strategy
... to give profitable and accurate signals.
The following question I wish to raise, is the abundant selection of Forex signals from which we can choose. Because of the variety of service providers, they offer different services, of which we must be aware. The first type of Forex signal provider will just send out trade alerts by email, often daily, sometimes at several intervals throughout the day. Thus you need to have a laptop of email receiving device ready at all times, to gain the most from trading Forex signals.
The next type to consider are through EA/Expert Advisors. These types of signals are not good at all because those are the computer oriented programs which can ruin your money within a few trades. But fortunately this is not such a big problem today, as more traders have email reading devices. The most crucial aspect concerning the format you receive the signals, is to ensure that you receive them immediately, and have the capability to act on them straight away - so you have to have immediate access to your Forex brokerage account, and place the trade as soon as you humanly can.
A unique benefit of trading Forex signals is that it gives guidance and discipline in a Forex currency trader. Forex profit signals service providers send you alerts when the conditions are right for the trade. They use cutting-edge technology which constantly monitor all major currency pairs for generating technical indicators.
Forex signal generators produce Forex signals which are indicators of ideal trading opportunities. These are certain algorithmic patterns which have been evident in successful Forex trades throughout the years. These Forex signals are then fed onto the program of Forex automated EA or Expert Advisors. This program will then either make Forex trading decisions for the individual while s/he is away from the computer or advice the individual about what to do. Forex EAs act like wizards which monitor currency ratings through online Forex Trading Platforms. One can look at Forex signals as triggers of commands which allow the automated system to function.
Forex signals can immeasurably add to the profits of a Forex trader.
How to Receive Forex Signals: Forex signal services are available to provide signals to you around the clock. These services usually have professional Forex traders who monitor the market 24/7 and provide you with up-to-date information. These services often charge a monthly or yearly subscription fee for their services. The methods used to deliver the Forex signals to you can vary from one service to the next. Signals can be sent through email alerts, to your phone or cell phone, through your pager, or even through a pop-up software system that will show a screen on your computer each time a signal is sent. The services also vary in how they present information to you. Some will provide live charts to give you more insight as to what as happening in the market.
Time frame for which the Forex trading signals are generated is equally important. Few trading signals can be valid only for a few minutes or an hour; others may have recommendations that are valid for a day or more. If the Forex trading signal providers generate signals for shorter time frame, you need to monitor the market frequently.
Some Forex signal service providers offer add-on services like email or mobile alerts. The service provider should have end-to-end technical support for the customers.
Even with experienced traders calling your trades, it's prudent risk management to never ever risk more than 3% of your initial capital on any one trade, preferably only 1%. So, if for example your initial capital, (or to put it another way, the maximum you can afford to lose) is let's say 5,000, the position size you take on each trade should be such that if the trade hit your stop loss, your maximum loss would be no more than 1% x 5,000 = 50.
Forex signal providers render Forex business quite a bit easy for traders, especially those who are relatively new in the business. Forex signal generation and provision can be either manual or automated and it provides entry/exit points of the trade streak for major or already chosen currency pairs. In manual signal generation system a simple trade signal is provided by the single provider. In automated signal generation system, the Forex system not only intimates and alerts the trade to either enter or exit the trade, but some times makes the deal by operating in synchronization with the trader's bank or broker.
Initially Forex signals and alerts used to come in the form of telephone calls and facsimiles. Now as we have stepped into the era of information revolution which has brought forth amazingly advanced digital technology, Forex signals and alerts generation and provision system has also advanced and become much more sophisticated and quick. Now these alerts come in the form of e-mails, SMS (Short Message Service, a way of sending text messages to mobile devices), or desktop software. However with trading Forex signals, there is no such chance to over trade your account. It is absolutely possible to learn the mental aspects of trading, by following a set of rules, and not to deviate from those rules.
Many trading Forex signals provide you with a complete set of instructions in order to take the trade. Frequently the signal will have multiple exits, which enable a trader to take money off the table in small steps. So this enables the currency trader to input all of these prices into his trading platform when he gets the signals, and then to switch off the computer.
As for any purchase, it is essential that the Forex trader first does his research into the more effective trading Forex signal service for him or her. This involves a lot of careful research, and reading various reviews and testimonials of the service in question. Before I go, in conclusion, the trader is strongly advised to practice using the trading Forex signals on a demo account first, so that the Forex trader can totally test out the profitability of the signals. This has an supplementary benefit for a complete new, as it will enable the currency trader to become familiar with the trading platform, and reduce the possibility of making any mistakes.
Whenever possible, go for a free demo account and then try your forex signals for a few days before becoming a paid member. Forex trading does involve some planning and strategy building so be prepared for a steep learning curve before trading with real money! I'm going to start by telling you some cool facts about the FOREX market.
As you may already know, FOREX is the acronym for "The Foreign Exchange Market." This market concerns itself with the buying and selling of the currencies of just about every country on earth. This market is BIG! So big, in fact, it's hard to wrap your mind around the size of it.
Listen. The daily average volume of FOREX is:
Almost 5 TRILLION Dollars Per Day!
I'm going to try to bring that fact home for you: The New York Stock Exchange has a daily volume of approximately 50 billion dollars. That means the FOREX is 100 times larger than the NYSE
Actually, the daily volume of the FOREX is triple the size of all other investment markets combined!
In spite of its size, the FOREX does not have a physical location or a central exchange. It operates through an electronic network of people, banks and companies that specialize in trading one currency for another.
Almost all FOREX trades are executed on the internet by someone sitting at a computer with a high-speed connection. So, if you don't like working with a computer you may as well stop reading... because... you will be left out.
Still with me? Good.
The Only 24 Hour Financial Market In The Whole World Because the FOREX does not have a physical location or a central exchange, it is able to operate on a 24 hour basis leapfrogging from one time zone to another across the major financial centers of the world.
The FOREX market actually follows the sun around the globe... because... as one country is closing for the day, another is just opening up. This market is open 24 hours a day, six days a week from 5:00 PM Sunday (East Coast Time) to 4:00 PM Friday (East Coast Time). This 24 hour access combined with its huge trading volume makes this...
The Most Liquid Market On Earth! Except for Saturdays, you can enter or exit the FOREX market anytime night or day. This market has virtually no gaps whatsoever and your stop-loss orders are almost guaranteed.
Can you imagine that? The multi-trillion dollar liquidity, combined with 24-hour trading access virtually guarantees your stop-loss orders will be executed without slippage.
Just try to get that kind of guarantee from your stockbroker!
The stock, futures and options markets cannot offer you this guarantee because the limited trading hours create frequent gap opens. Nearly all Forex brokers make sure their hours of operation coincide with the hours of operation of the global FOREX market.
Let's see, what else? Oh, yeah, no one can corner the market. The FOREX market is so huge and has so many global participants that no single individual nor entity... not even a central bank... can control the market for any significant period of time.
Plus, There Is No Insider Trading! Because of the vast size of the global FOREX market and its non-centralized nature, there is no chance whatsoever for disruptions caused by insider trading. There is less chance for fraud in the FOREX than in any other investment market. Best of all forex can never become zero but stocks can become zero and majority of the options expire worthless.
There are no commissions. Yep, you read it right. No exchange fees, no closing fees, no government fees, no brokerage fees. This all adds up to a very low retail transaction cost. If you select your broker properly, your round-trip transaction cost could be as low as .07 percent.
And know this, a very desirable by-product of extremely high liquidity is almost instantaneous transactions executed with blinding speed. You can leverage your trades by a factor of 50 to 1, 100 to 1 and even 400 to 1.
Not only that, you can trade with a very low margin with relative safety compared to the disastrous potential of margin trading found in other financial markets. Also it is tax free income if the country you reside has no capital gain tax.
And finally, if you get really great at currency trading, your potential financial reward is so big it can make your head swim!
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Forex Overview

Each day, millions of trades are made in a currency exchange market called Forex. The word "Forex" directly stems off of the beginning of two words - "foreign" and "exchange". Unlike other trading systems such as the stock market, Forex does not involve the trading of any goods, physical or representative. Instead, Forex operates through buying, selling, and trading between the currencies of various economies from around the world. Because the Forex market is truly a global trading system, trades are made 24 hours a day, five days a week. In addition, Forex is not bound by any one control agency, which means that Forex is the only true free market economic trading system available today. By leaving the exchange rates out of any one group's hands, it is much more difficult to even attempt to manipulate or corner the currency market. With all of the advantages associated with the Forex system, and the global range of participation, the Forex market is the largest market in the entire world. Anywhere between 1 trillion and 1.5 trillion equivalent United States dollars are traded on the Forex market each and every day.
Forex operates mainly on the concept of "free-floating" currencies; this can be explained best as currencies that are not backed by specific materials such as gold or silver. Prior to 1971, a market such as Forex would not work because of the international "Bretton Woods" agreement. This agreement stipulated that all involved economies would strive to hold the value of their currencies close to the value of the US dollar, which in turn was held to the value of gold. In 1971, the Bretton Woods agreement was abandoned. The United States had run a huge deficit during the Vietnam Conflict, and began printing out more paper currency than they could back with gold, resulting in a relatively high level of inflation. By 1976, every major currency worldwide had left the system established under the Bretton Woods agreement, and had changed into a free-floating system of currency. This free-floating system meant that each country's currency could have vastly different values that fluctuated based on how the country's economy was faring at that time.
Because each currency fluctuates independently, it is possible to make a profit from the changes in currency value. For example, 1 Euro used to be worth about 0.86 US dollars. Shortly thereafter, 1 Euro was worth about 1.08 US dollars. Those who bought Euros at 86 cents and sold them at 1.08 US dollars were able to make 22 cents profit off of each Euro - this could equate to hundreds of millions in profits for those who were deeply rooted in the Euro. Everything in the Forex market is hanging on the exchange rate of various currencies. Sadly, very few people realize that the exchange rates they see on the news and read about in the newspapers each day could possibly be able to work towards profits on their behalf, even if they were just to make a small investment. The Euro and the US dollar are probably the two most well-known currencies that are used in the Forex market, and therefore they are two of the most widely traded in the Forex market. In addition to the two "kings of currency", there are a few other currencies that have fairly strong reputation for Forex trading. The Australian Dollar, the Japanese Yen, the Canadian Dollar, and the New Zealand Dollar are all staple currencies used by established Forex traders. However, it is important to note that on most Forex services, you won't see the full name of a currency written out. Each currency has it's own symbol, just as companies involved in the stock market have their own symbol based off of the name of their company. Some of the important currency symbols to know are:
USD - United States Dollar
EUR - The Euro
CAD - The Canadian Dollar
AUD - The Australian Dollar
JPY - The Japanese Yen
NZD - The New Zealand Dollar
Although the symbols may be confusing at first, you'll get used to them after a while. Remember that each currency's symbol is logically formed from the name of the currency, usually in some form of acronym. With a little practice, you'll be able to determine most currency codes without even having to look them up.
Some of the richest people in the world have Forex as a large part of their investment portfolio. Warren Buffet, the world's richest man, has over $20 Billion invested in various currencies on the Forex market. His revenue portfolio usually includes well over one-hundred million dollars in profit from Forex trades each quartile. George Soros is another big name in the field of currency trading - it is believed that he made over $1 billion in profit from a single day of trading in 1992! Although those types of trades are very rare, he was still able to amass over $7 Billion from three decades of trading on the Forex market. The strategy of George Soros also goes to show that you don't have to be too risky to make profits on Forex - his conservative strategy involves withdrawing large portions of his profits from the market, even when the trend of his various investments seems to still be correlating upward.
Thankfully, you don't have to invest millions of dollars to make a profit on Forex. Many people have recorded their success with initial investments of anywhere from $10,000 to as little as $100 for an initial investment. This wide range of economic requirements makes Forex an attractive venue for trading among all classes, from those well entrenched in the lower rungs of the middle class, all the way up to the richest people alive on the planet. For those on the lower end of the spectrum, access to the Forex market is a fairly recent innovation. Within the past decades, various companies began offering a system that is friendlier to the average person, allowing the smaller initial investments and greater flexibility that is seen in the market today. Now, no matter what economic position you are in, you can get started. Although it's possible to jump right in and start investing, it's best that you make sure you have a better understanding of the ins and outs of Forex trading before you get started.
The world of Forex is one that can be both profitable and exciting, but in order to make Forex work for you it is important that you know how the system works. Like most lucrative activities, to become a Forex pro you need a lot of practice. There are many websites that offer exactly this, the simulated practice of Foreign Exchange.
The services provided by online practice sites differ from site to site, so it is always a good idea to make sure you know all of the details of the site you are about to use. For example, there are several online brokers who will offer a practice account for a period of several weeks, then terminate it and start you on a live account, which means you may end up using your own money before you are ready to. It's always a good idea to find a site that offers an unlimited practice account. Having a practice account allows you to learn the ways of the trade with no risk at all. Continuing to use the practice account while you use a live account is also a beneficial tool for even the most seasoned Forex traders. The use of a no risk practice account enables you to try out new trading strategies and tread into unknown waters. If the strategy works, you know that you can now implement that strategy into your real account. If the strategy fails, you know to refrain from the use of that strategy without the loss of any actual money.
Of course, simply using a no risk account won't get you anywhere. In order to make money with Forex, you need to put your own money in. Obviously, it would be ridiculous to travel to other countries to purchase and sell different currencies, so there are many websites that you can use to digitally trade your money. Almost all online brokerage systems have different features to offer you so you have to do the research to find out which site you wish to create an account with. All brokers will require specific information of you to create your account. The information they will need from you includes information required to communicate with you, including your name, mailing address, telephone number, e-mail address. They also require information needed to identify who you are, including your Social Security number, Passport number or Tax Identification number. It is required by law that they have this information, so they can prevent fraudulent trading. They may also collect various personal information when you open an account, including gender, birth date, occupation, and employment status.
Now that you have practiced trading currency and set up your live account, it is time to truly enter this profitable yet risky world. To make money with Forex, you do need to have money to begin with. It is possible to trade with very small amounts of money, but this will also lead to very small profits. As is with many other exchange systems, high payouts will only come with high risks. You can't expect to start getting millions as soon as you put money in to the market, but you can't expect to make any money at all if you don't put in at least a 3-digit value.
As most Forex brokers will warn you, you can loose money in the foreign exchange market, so don't put your life savings into any one trade. Always trade with money that you'd be able to survive without. This will ensure that if you get a bad trade and loose a lot of money, you wont end up on the streets, and you'll be able to make a comeback in the future.
So how does trading currency work? Logically, trades always come in pairs. For example, a common trade would be the United States Dollar to the Japanese Yen. This is expressed as USD/JPY. The way to quote a trade is kind of tricky, but with practice it becomes as natural as reading your native language. In a Forex quote, the first currency in the list (IE: USD in USD/JPY) is the base currency, and in the quote the base is always one. This means if (hypothetically of course) One USD was worth Two JPY, that the quote would be expressed as 1/2.
When trading in Forex, we use pips. Pip is an acronym for "percentage in point". A pip a certain decimal place in a number compared to the same decimal place in another number. Using pips, we track the gains and losses of a currencies value compared to another's. Let's take a look at an example. Say a value is written as 1.0001/1.0004. This would indicate a 3-pip spread, because of the 3 number difference in the fourth decimal place. Almost all currency pairs go to the fourth decimal place. The only currency pair that doesn't is that of the USD/JPY, and it goes to the second decimal place. For example, a USD/JPY quote with a 3-point spread would look like this: 1.01/1.04.
A very common aspect to the foreign exchange is leverage. Leverage trading, also known as trading on margin, is a way to amplify the amount of money you are making. When you use leverage trading, you borrow a certain amount of money from your broker and use that to make your transaction. This allows you to trade with more money then you are actually spending, meaning you can make higher profits than you would normally be able to make.
There are risks associated with leverage trading. If you increase the amount of money you are using, if a trade goes bad, then you'll loose more money than you'd usually loose. The risks are worth it though, because a big win on margin means a huge payout. As mentioned before, it is definitely a wise idea to try out leverage trading on your practice account before you use it excessively on your live account, so you can get a feel for the way it works.
Now that you're an expert on the way Forex trading works there are some things about foreign exchange that you should know. Forex is just like the stock market in that there are many benefits and risks, but if you are going to invest your time and personal money into this system, you should be fully aware of all of the factors that may change your decision to invest in the currency market.
Generally speaking, Forex is a difficult subject to opinionate on, because of the different factors that may alter the currency over the years. "Supply and demand" is a major issue affecting the Forex organization, because the world is in constant variable to change, one significant product being oil. Usually the currency of all the nations around the globe is described as a huge "melting pot", because of the fact that all of the interchanging controversy, political affairs, national disputes, and possibly war conflicts, all mixed together as a whole, altering the nature of Forex every second! Although problems such as supply and demand, and the whole "melting pot" issue, there are a numerous amount of pros to Forex; one being benefited profit from long term stock. Because of the positive aspects of Forex, the percentage of the use of electronic trading in the FX market (shortened from Foreign Exchange) increased by 7% from 2005 to 2008. Despite the controversial realm of Forex, it is still recognized today by many, and is still popular amongst many of the nations in the world.
Of all the organizations that recognize Forex, most of them practice fiscal policy, and monetary policy. Both policies are dependent on the nation's outlook on economics, and their standards set. The government's budget deficits, or surpluses against the country, is widely affected by the country's economic status of trade, and may critically inflict the nation's currency. Another factor for the nation's deficit spending is what the nation already has, in terms of necessities for the citizens, and the society. The more the country already has, prior to trade, the greater the budget for other demands from the people, such as technology, innovations in existing products, etc. Although a country may have an abundance in necessities, greed may hinder the nation's economic status, by changing government official's wants, to want "unnecessary" products, therefore ruining or "wasting" the country's money. This negative trend may lead to the country's doom, and hurt the Forex's reputation for positive change. There are some countries which hold more of a product (such as oil stated above), the Middle East dominating that sector in the circle of trade; Since the Middle East suffers much poverty, as a result of deficit spending, and lack of other resources, they demand for a higher price in oil, to maintain their economic status. This process is known as the "flights to quality", and is practiced by many countries, wanting to survive in the trading network that exists today. Interest rate, and leveraged financing, is due to the inflations that occur in many parts of the world from one point to another. Inflations wear down purchasing abilities, causing the currency to fall with it. In some cases, a country may observe the trends that it takes, and beforehand, take action to avoid any mishaps that had been experienced before. Sometimes, the country will buy more of a product, or sell more of a product, otherwise known as "overbought" or "oversold". This may aid in the country's future, or devastatingly hurt the country, because of lack of thought, as a result of fraud logic. "What started out as a market for professionals is now attracting traders from all over the world and of all experience levels" is part of a letter of the chairman of Forex, and it is completely true. There is even a 30-day trial for Forex online if anyone interested in Forex wants to learn more about the company. Although affected by leveraged financing, interest rate, and causing an increase or decrease in exchange rate risks, Forex can be a great way for quick profits and integrated economy for the country. In investing in stocks that are most likely to be successful for a long period of time, and researching these companies for more reference and background that you need to know, Forex can aid in these fields. In the Forex market of different levels of access, the inter-bank market composed of the largest investment bank firm, which contains "spreads", which are divided into bid, and ask prices. Large amounts of transactions, with large amounts traded, and requesting a small amount of difference is known as a better spread, which is preferred by many investors.
In comparison to the Stock Market, the Forex organization is just as stable, and safe, if the users on it are aware, and decently knowledgeable about the topic. The Stock Market Crash in 1929 was a result of lack of thinking, because of the extremely cheap shares, replacing the shares originally costing thousands of dollars. When the Stock Market crashed, and the New Deal was proposed by Franklin D. Roosevelt, leveraged finance was present, and utilized to stabilize the economy at the time. The United States was extremely wealthy and prosperous in the 20s (prior to the depression), and had not realized what could happen as a result of carelessness in spending. This is a result of deficit spending, and how it could damage a society, in less than a decade! When joining Forex, keep in mind that with the possible positive outcomes, and negative ones, there are obstacles that must be faced to become successful.
As a result of many catastrophic events, such as the Great Depression that occurred in the United States, people investing in the Forex organization keep in mind of the dangers, and rewards that may come upon them in a certain point in time. With more work and consideration outputted by a person, or organization in the Forex program will there be more signs of prosperity as a result. In relation to individuals such as Warren Buffet and George Soros, they have become successful through experience, and determination through many programs, and research, for security purposes. Reserving some of the most riches people in the world, to others that are just test driving it to discover its potential for them, Forex is a broad topic that experiences different people everyday. Forex may not help everyone that invests in it, but if enough outputted effort is amplified in attempts to better the economy, it is most definitely something that any person should experience first-hand.
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How To View Your Available Margin For Trading: 5paisa App Tutorial in Hindi Highest Intraday Margin देने वाले Broker  Best Intraday Brokers 2020 Margin trading brokers?//share market Best #Broker for Options Selling in India 2020 2021 Highest Margin for CrudeOil Trading  Best Broker for CrudeOil

Best for: Margin traders. Investors with $100,000 in an account looking to trade with borrowed money will pay 3.89% on margin loans. Investors with $100,000 in an account looking to trade with Webull offers the next best combination of low margin rates along with $0 trading commissions. This online broker targets as customers stock, ETF, and options traders. Unlike Interactive Brokers, it welcomes beginners and long-term investors. Comparison of the best online day trading brokers 2020 with full reviews of trading platforms. Find the best broker for day trading with a platform that helps you trade profitably. We also list special offers and essential features for beginners. Margin can be a powerful tool, if used carefully. However, finding out which stock broker has the lowest margin rates can be time consuming. We've collected the most popular brokers and created a list of the best margin rates at various deposit amounts. I don't use margin that often, but my taxable accounts are margin based by default. Investopedia ranks the best online stock brokers for day trading. These trading platforms allow the trader to monitor price, volatility, liquidity, trading volume, and breaking news.

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How To View Your Available Margin For Trading: 5paisa App Tutorial in Hindi

Nonetheless, there are a few stockbrokers who assist with some margin in this trading segment. In this Hindi video, we discuss 6 such stockbrokers that provide good enough margin in delivery based... Track your ledger balance and available margin for trading in stocks in real-time. The best online stock broker, 5paisa ensures that the investors are at an ease when trading online through our ... Name list of broker, starting margin trading Facebook.com/sharemarketguidenbthapa #margintrading #marginlending #brokersofmargintradinglending #nbthapa Share... Best Online Brokers In Canada 2020 DIY ... Overview Trading Platform (हिंदी) High Margin Broker - Duration: 14:25. Tech & Finance 34,074 views. Trading in CrudeOil need good margin. Now choose best broker for high margin intraday trading in crudeoil. Open Demat account with your favorite broker from any of below links (Get Trading Course ...

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