How To Get Started In Investment Properties

One of the best investments that you can be involved in today is that which deals in real estate. Right now, real estate is moving very good and it is a good time to be dealing with it. Much money can be made in real estate transactions and the good news is that you can make a lot of money quickly - if your investments and selling techniques are made wisely. Here are a few things you need to know about getting started in this potentially lucrative field. 

Learn About It

Investments of any kind require that you learn about what you are investing your money in. Any other way of investing is only foolish, unless you have some really good financial counselors. But generally, the more you know the better off you will be. This is especially true in real estate, because the investments are large and the losses can be high. You should want to read all you can about it before you make any moves. Not only should you learn about how to choose a property that people will want, you also need to know how to research the local market to know what a property should sell for.

Types Of Property

There are a number of ways that you can get started in real estate. Largely this will be determined by how much money you have to get started with. If you do not have much money, you may want to start with foreclosures, or pre-foreclosures. These properties will be the cheapest, and, because of their value as opposed to their cost to you, could bring some excellent returns. You can buy them at less than market value, fix them up a little, and turn around and sell them at market value - for a good-sized profit. 

Other properties involve residential or commercial, large and small. Once again, you need to make sure you know what you are doing before you invest. Learn the secrets to investing that will make it worthwhile, and be able to recognize a bad deal when you see one.

For Sale Or Rent?

When you want to buy property is it so that you can turn around and sell it - or do you intend to rent it out? Residential renters have a great many needs and may disturb your sleep if they need to have something done right away. On the other hand, commercial renters have a tendency to take of small things for themselves just to be able to get back to their business. Renting property out is one way to ensure an income over a long period of time, but will require a percentage of outlay to keep the property up. Commercial property, if in a prime location, however, is always sure to remain in demand. 

While the real estate market is hot, there is a possible downside that you need to be aware of. Money that is tied up in real estate, while able to keep its overall value, could be tied up in that property for some time - not all property sells quickly. So you need to be able to figure in things like taxes, interest and other things that will eat at your profits over a period of time. 

The market is good and much money can be made in it. It is just waiting for the right investor.

Taking a Position in Futures Markets

Hedging programs are used by individuals and companies who want protection against adverse price moves which would affect the cash commodities in which they deal.

The Short Hedge

In a short hedging program, futures are sold. This strategy is used by traders who either own the underlying commodity or are in some way subject to losses if its price declines.

The Long Hedge

Suppose the miller knows in July that in September he will buy 10,000 bushels of wheat from a grain elevator operator for grinding into flour. He worries that wheat prices will rise in the meantime because he has already guaranteed a price at which to sell flour to a baker in October.
Because he does not have the wheat now, he is considered to be "short the actuals" or "short the cash market." Therefore, to hedge this risk in the futures market, he can buy two wheat futures contracts (each represents 5.000 bushels). In September the cash price of wheat rises, the value of his futures contracts will rise too. The profit on the futures "leg" of his hedge will be earned by selling the futures at a higher price than he paid when he initiated the position, and will offset the extra money he must pay the grain elevator operator for the wheat.

The Relationship Between the Hedger and the Speculator

Unlike the hedger, the speculator usually has no contact with the underlying commodity; he has no natural long or short position as in the case of the hedger. He is in the market to make profits by buying low and selling high. Speculators are very important to a market. They make it more liquid and often take the opposite side of hedgers' trades. In this way, they act as a type of insurance underwriter by bearing the risk which hedgers seek to avoid.

Spreads

Much of the non-hedging activity in the futures markets involves spread trades (also called straddles). These strategies generally carry less risk than outright long or short positions; hence, they usually have lower marginrequirements. Spreads involve the simultaneous buying and selling of futures contracts with different characteristics.
Compared to speculators, traders who put on spreads tend to make limited profits; they also suffer milder losses and likely enjoy a better night's sleep.

Which time frame to trade on

The difference between time frames

Japanese candlesticks: an introduction to the idea that a price chart is always shown on a particular time frame. This can range from as low as a 1 minute chart, where the candle is formed every minute, to monthly charts where the candle forms once every month.

It is important to stress that when you set a particular time period on your chart, it does not show the price over that time period. Rather, each individual candle takes that specified time to form.

For example, a five minute time frame does not show the price action over 5 minutes, but rather each individual candle on the price chart takes five minutes to form.

When looking at a price chart, a larger time frame, such as weekly chart, will show the price range over the course of a number of months, but each candle will take a day or a week to form.

Definitions of different time frames

Opinions differ on what defines a short-term time frame and a long-term time frame.

However, a good place to start in order to differentiate between different time frames is to consider that anything below an hourly time frame can be considered short-term; anything below a daily time frame can be considered medium-term; and anything that is daily and above can be considered long-term.

Choosing a time frame

A trader does not need to monitor every single time frame in order to be successful. A time frame should match the personality of a trader because there are different disciplines and techniques for different time frames. Someone with a lot of patience that prefers to trade the markets without high volatility may prefer trading on higher time frames. Someone who prefers to trade frequently with heightened market activity may prefer a shorter term time frame. No two traders are alike and a trader should choose the time frame that suits them best.

Short-term time frames

The duration of short-term trades generally lasts from several seconds to a couple of hours at most.

Scalping

A method in which a trader monitors a short-term time frame closely and enters and exits in a matter of seconds is known as scalping. The main objective is to make small but frequent trades.

There are several considerations that should be taken into account when choosing scalping as a trading method:

1. Scalping is very fast paced and requires a significant amount of attention throughout the day to find and take trades.
2. Complete attention is also required throughout the trade from open to close.
3. Scalping requires active market sessions. This is most frequently during the London and New York sessions.
4. It can be stressful and requires discipline to continually stick to a scalping system.

It is important to note that scalping does not guarantee a trader positive returns just because potential profits can be made quickly.

Day trading/Intraday trading

As the name suggests, day trading is a method where orders are opened and closed within a single day and the position is not carried overnight. Trading can take place in five minutes, fifteen minutes, hourly etc. However, day trading usually results in a few trades per day.

It does not rely as heavily on fast price action, such as scalping. The following aspects belong to day trading and should be considered before choosing it as a preferred method:

This method is slower than scalping, but not as long as other longer term types of trading, where you could wait for days or even weeks to find an entry.
A day trader should keep an eye on relevant economical developments as these can change the market conditions throughout the day.

Medium-term time frames

On medium-term time frames, a trader will watch four-hour or daily charts and will attempt to look at the overall picture, while potentially only finding a few trades per week.

Swing trading

A swing trader is a medium-term trader who may look at a daily chart to see underlying trends and decide on specific trades based on, say, a four-hour chart. Positions are generally held from a day to a few days.

With swing trading, stop losses and profit targets are generally higher. A swing trader needs patience and discipline to wait until the price reaches their take profit or stop loss orders.

Swing trading would suit those who:

Cannot monitor the market every day, but can dedicate at least some time to market analysis for finding entries.
Are patient in waiting for the correct entries, which may mean only trading a few times per week.
They trust their trading plan and do not change it every time there is an adverse price fluctuation.
A benefit of swing trading is that with larger targets, spreads have little impact. For example, a 3 pip spread is very affordable when projected profits are 50-100 pips. This also means that as a swing trader, you have a wider choice of currency pairs, including those that are less liquid with wider spreads.

Long-term trading

A long-term trader waits patiently for opportunities. The trades can be rare and are usually held for long periods of time – sometimes weeks, months or even longer.

Position trading

The method where daily, weekly and monthly charts are predominantly used is called position trading. Fundamental analysis can play a key role in making trading decisions because economic conditions may change over the time for which a trade is open.

However, technical analysis is extremely reliable on long-term position trading because many traders that trade large amounts of money use technical analysis to enter and exit trades, including financial institutions, commercial and central banks.

Position trading would suit traders who have:

1. A lot of patience to enter and exit a trade.
2. Discipline to refrain from changing the initial plan and are prepared for big price swings.
3. Larger starting capital because a long-term trading account generally has to be able to withstand larger losses.

Eyes to the East: Forex Magnates Examines Regulatory Surveillance in Asia

Regulators around the world are continuing to invest substantial resources in order to catch up with the digitalization and globalization that represents the very nature of the FX industry. The Forex Magnates Quarterly Industry Report for Quarter 3 of 2013 takes a close look at the increasing use of surveillance systems by regulatory authorities in the Asia-Pacific region, and the contribution which this is making toward safeguarding client interests.

In the days before electronic trading became so common, and customers of financial institutions operated less internationally, traded on fixed executing venues, or developed a relationship with a financial adviser, the regulatory monitoring was a less sophisticated and infinitely simpler task.

In fact, it was very rare that any investor, whether a large corporation or a private individual would enlist the services of a global firm, and even less likely that any such investor would deposit funds into a client account in one country, to fund a trading account in another, with a company with a head office in yet another location.

The growth of the FX industry has presented a very serious challenge to regulators, because the entire structure by which most authorities were established was somewhat inadequate to maintain a watchful eye over firms which operate globally, and which can provide services within seconds to clients thousands of miles away, and hold client data on server farms which are often hosted in the ether on increasingly popular cloud-based systems.

In order to meet this ever-growing challenge, regulatory authorities began using automated monitoring methods. One such regulator is the Monetary Authority of Singapore, whose Risk and Surveillance Head Jacqueline Loh oversaw a surveillance operation which resulted in the censuring of 133 institutional traders for manipulating FX benchmarks.

In June this year, the Hong Kong Monetary Authority (HKMA) joined the global movement to improve transparency and reduce counterparty risks in the OTC derivatives markets, which emerged after the global financial crisis in 2008.

The resultant reaction by regulators worldwide to the need to increase transparency was to instigate reforms to the OTC derivatives markets on various fronts. The reform measures adopted by the international regulatory community include, requiring all OTC derivatives transactions be reported to trade repositories (TRs) and all standardized OTC derivatives transactions be cleared at central counterparty (CCP) clearing facilities, therefore, the HKMA set this into effect in early July.

As is often the case in the Far East, the development of such procedures and implementation of systems for surveillance by the HKMA, has been a long and drawn out affair, the planning stage having commenced in December 2010.

Software Companies Develop Systems For Regulators

The advancement of automated systems by software firms which provide services to the financial sector has also been noticeable this year. One example being First Derivatives, a British company which provided its Delta Stream system to Australian regulatory body ASIC. Subsequent to the implementation of the Delta Stream system in December last year, ASIC has completed a series of enforcements against FX companies for irregularities in compliance procedures.

One such case was an enforceable undertaking by Halifax Securities in early April 2013, for inadequate risk management procedures, and then one week later a similar enforceable undertaking by City Index Australia, for lacking the correct care when handling client funds.

All of this automation contributes toward an even and non-discriminatory method of monitoring and according to software companies, a cost saving for regulatory authorities.

Forex Magnates spoke to Andrew Smith, CEO of British software company Cor Financial who explained this advantage: “The United States’ government issued fines of over $4 billion in 2008/2009, therefore it is more effective for firms to invest in systems that will help mitigate potential regulatory risks, than to later deal with the penalties.”

The full and in-depth insight into regulatory surveillance in the Asia-Pacific region is available in the Forex Magnates quarterly report for Q3 of 2013, expanding on this small excerpt and going into detail about Japan, Singapore, Hong Kong, Australia and New Zealand, showing statistics, case studies and each jurisdiction’s approach to the electronic monitoring of their respective FX firms.

This article is a precursor to a detailed and full investigation within our latest Quarterly Industry Report for Q3 (QIR), in which we examine in detail the use of surveillance within regulatory authorities across Asia. 

What Are Pips?

• Let’s start with the basics. In Forex trading, traders often use terminology which is specific to the industry. If you are new to Forex trading, you will often hear a conversation such as this:
• “I made 80 pips today.”
• “I am up by 50 pips so far.”
• So what does “pips” actually mean? The term “pip” is used to denote the term “percentage in point.” It is the standard term used to describe the smallest price fluctuation of a currency in relation to another currency. “Pips” should not be confused with the word “points” or “ticks.”

Value of a Pip

• As mentioned earlier, the pip is the smallest movement in the exchange rate of a currency pair. It is normally expressed as a change in the fourth digit to the right of the decimal point in a quoted rate. For example, let’s say that the EUR/USD is quoted at $1.3296. If the EUR/USD experienced an upward swing of 5 pips, the new rate will be $1.301 ($1.3296+$0.0005).
• Accordingly, the value of a pip is equal to 1/100 of a cent. Although this might seem small to you, take into consideration that Forex is normally traded in lots of $100,000. So a single pip would translate into a price difference of $10.
• Using the same example, let’s say you bought five (5) lots of EUR/USD at $1.3296 before the price rose to $1.3301. With an upward swing of five (5) pips in the exchange rate, you would have theoretically made a profit of $250 ($50 x 5 lots).

Pip Value for Japanese Yen Quotes

For currencies quoted in relation to the Japanese Yen, the exchange rate is quoted to two (2) decimal places only. This means that the value of each pip is 1 cent instead of 1/100 of a cent. If a EUR/JPY quote of 118.70 goes up by one pip, the new quote will be 118.71.

Relationship of Pips to Spreads

• Pips are important not only because they help traders determine how much money they have made, but also because they allow traders to determine the cost of their Forex transactions. In Forex, traders are not charged any commission by their brokers. Instead, traders have to pay for what is known as a “spread.”
• The spread is the difference between the selling and buying prices (Bid/Ask prices) of a currency pair. When you ask for a currency quote, you will be presented with two (2) prices:

  

Based on the quote given above, you will have to pay your broker $1.3296 for every Euro bought. On the other hand, if you want to sell the EUR/USD currency pair, you’ll only receive $1.3293 for every Euro sold. So instead of a commission, your broker is actually earning a spread of 3 pips. In other words, the 3 pips spread is the transactional cost of doing business with your broker. It is important to make sure that the broker you work with offers low spreads. You can look at our spreads here.

• Usually, currencies that are actively traded have lower spreads than exotic currencies, the latter of which are less frequently traded.

“Cross Currencies Pip Value”

• Earlier, we used the EUR/USD currency pair to calculating pip value, assuming that our trading account is denominated in US Dollars. As the Forex trading community is a global one, it is not surprising to find trading accounts denominated in other currencies. This means we have to translate the value of the pip to whatever currency our trading account is denominated in.
• In our EUR/USD currency pair examples, the value of a pip (per lot traded) was $10. Let’s assume that our trading account is denominated in British pounds (GBP). In order to get the value of the pip in GBP, simply divide the “found pip value” ($10) by the exchange rate for the GBP/USD.
• For example:
• Assuming the GBP/USD is quoted at 1.5590, the “found pip value” of $10 in GBP is:
• 10/1.5590 = 6.4143
• In other words, a single pip price movement in our EUR/USD quote is valued at 6.4143 GBP.
• You’re probably wondering if you’ll have to make these calculations often. The answer is NO. Your broker will normally calculate this for you. Nevertheless, it never hurts to know how these figures are arrived at.

Pipettes

Earlier, we also mentioned that currencies are quoted to four (4) decimal places (with the exception of the Yen). However, there are brokers who provide quotes at five (5) and three (3) decimal places. For example the EUR/USD could be quoted by some brokers at 1.32967 instead of the standard 1.3296. This is known as quoting in “fractional pips.” The smallest price movement for fractional pips is known as a “Pipette” (you won’t see this often).

Introduction to Currency Trading

The foreign exchange market (forex or FX for short) is one of the most exciting, fast-paced markets around. Until recently, forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of the internet has changed all of this, and now it is possible for average investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts.

Daily currency fluctuations are usually very small. Most currency pairs move less than one cent per day, representing a less than 1% change in the value of the currency. This makes foreign exchange one of the least volatile financial markets around. Therefore, many currency speculators rely on the availability of enormous leverage to increase the value of potential movements. In the retail forex market, leverage can be as much as 250:1. Higher leverage can be extremely risky, but because of round-the-clock trading and deep liquidity, foreign exchange brokers have been able to make high leverage an industry standard in order to make the movements meaningful for currency traders.

Extreme liquidity and the availability of high leverage have helped to spur the market's rapid growth and made it the ideal place for many traders. Positions can be opened and closed within minutes or can be held for months. Currency prices are based on objective considerations of supply and demand and cannot be manipulated easily because the size of the market does not allow even the largest players, such as central banks, to move prices at will.

The forex market provides plenty of opportunity for investors. However, in order to be successful, a currency trader has to understand the basics behind currency movements.