Why learn more about finance and trading?

Maybe you are not yet fully convinced that it's worth spending more time at GCM. Some reasons might be:

1. You want to be able to find a good way to invest your money.
2. You want to know enough to make your own decisions and avoid bad advice.
3. You are curious about day trading.
4. You are up for a new challenge and want to increase your skills & know-how.

Independent of your personal goal or motivation, one thing is true for sure:

Today, thanks to the Internet, there are now many opportunities for you to take things into your own hands. You can now trade and invest from home at a much lower cost. And at the same time, the financial world has become much more complex – which means you need more knowledge.

1. Invest smartly

If there is one thing the financial crisis showed: there is no such thing as a 'sure' investment!

The fact that the stock market has its ups and downs is common knowledge. But recent years showed that even perceived safe havens, such as state bonds, can turn poisonous.

However, inflation will eat your savings up if you don't invest it. So you also don't want to have your cash just sitting in your bank account.

So how do you make your money work for you? At GCM, we teach you about good investment strategies and how to analyse your options. And in our community, you will find advice on your goals and ideas.

2. Do you really trust your bank advisor?

Millions of people listened to their banks and believed the promises of safe investments with good returns. The financial crisis made many of them suffer from that.

And seeking professional financial advice is a costly process. Advisers may charge an hourly rate, resulting in their services running into thousands of dollars per year.

So, we believe that it is important that everyone can make their own decisions. This requires some knowledge, and here at GCMinc, we see it as our task to equip you with all the know-how and tools you need to be in charge of your own finances.

3. Explore the world of trading

The enjoyment of trading comes from experience, as well as success. Overcoming the challenges of predicting which way the market will turn, or discovering a pattern that can expose an opportunity can be both exciting and rewarding.

Trading does not have to be a full-time commitment, nor a huge gamble. Be educated and patient. Don't act on passion and impulse. This way, you can find a steady way to see your money grow.

Learn about the markets and build a trading system that suits your needs. Have the patience and determination to see it come to fruition. That way, you are fully in control of how much time and money to invest into your journey.

4. A new challenge – and lots of fun

If you understand global economics, you in turn discover how the world around you is structured. This can give you insights into how our global community operates and how you, as a trader, make a direct impact.

Trading has many aspects: psychology, numbers and people. Some people even see it as a kind of strategic game.

Here at GCM, we're convinced that trading and finance can be fun. Especially if you have success in learning and can quickly acquire new skills and know-how.

And that’s what we're here for!

• Explore our website, and look at what you might find interesting.
• Learn lessons on many different subjects such as trading psychology or the stock market.
• Pass our quizzes to check and track your progress.
• In our community, find other traders – beginners and experts alike.
• Make new friends and discuss tactics. Alter your approach and laugh about your experiences.
• Read the news that shake the world of finance and economy.

Forex: the Only True Global Market

With the decision to become a trader, you must also choose what type of market you will focus on and what instruments you will trade. Will it be shares of publicly traded companies, commodity future contracts like oil and gold, or currencies.

Most of the financial markets that exist in the world today are within the framework of a central exchange, and for that reason they are limited in their scope and daily trading volume. Every market except one, which is the foreign exchange currency market.

The foreign exchange (forex) market has no central exchange, and instead it exists only as a highly interconnected web of bank servers and individual brokers. The 'over the counter' type of trading tends to be much larger in scope than trading centered around a central exchange (such as the NYSE), and for the reason the forex market is hands down the largest financial market in the world with daily volume surpassing $2 Trillion USD.

The forex market is the only true global market that exists, as it is not based in one specific country and instead is created by the perpetual buying and selling of banks and financial institutions in every major city, 24 hours per day.

Unlike traditional exchange-based markets which have set times that they are open and closed, the forex market literally follows the span of daylight around the planet.

When you are a forex trader you need to be familiar with the term 'global trading day.' The global trading day begins with the London market open hours (about 3AM New York time) and continues across all the major cities and time zones.

There are three distinct times throughout the global trading day when there is the most trading activity (and consequently the most liquidity). These times are based around the open-hours of the three major cities in the world where the largest volume of forex activity takes place: London, New York, and Tokyo.

So what does this mean for you, the trader? Because the forex is a global market and there are no set open and closed times, it is possible to trade at any time during the day (except on weekends).

It also means that due to the level of daily trading volume, this market is very liquid and it is virtually impossible to get 'stuck' with an open position.

Because of these lucrative trading features, many firms and brokers have sprung up to cater to the large demand of forex market access. Many of these companies offer highly advanced trading platforms that feature very low commission trading and seamless market entry/exit.

All in all, forex trading is by far one of the coolest ways around to make money today, since all you really need is a broadband-enabled laptop and a funded trading account to make money from anywhere in the world.

So, what are you waiting for ? Get start to forex trading now by visiting us at http://www.gcminternationalinc.com/

How to buy bonds

Bonds are typically seen as a lower-risk accessory to a stock portfolio. But bonds aren't just for those nearing retirement: They have a place in every portfolio. The question that confuses investors is just how much of their savings should be in bonds.

Given bonds' relatively high trading costs, and with giant investors like pension funds dominating the market, the best way for most people to own bonds is through a mutual fund or ETF, which hold baskets of bonds, rather than competing for individual bond sales.

The most well-known bonds are those issued by the U.S. Treasury. There are short-term bills and notes and longer-term bonds and their inflation-protected versions called TIPS. You can buy government bonds through the TreasuryDirect program, but there is also a wide array of funds that specialize in Treasurys from which to choose.

Other types of bonds that can help diversify a portfolio include corporate bonds, junk bonds, municipal bonds and foreign government debt instruments.

Here are some of the caveats of bond investing: 

• Elusive pricing: Individual bonds do not trade like stocks so it can be difficult to find a specific issue's current market value. Besides inflation risk, bond pricing depends on time to maturity, interest-rate outlooks and whether the bond is "callable" by the issuer.

• Risk: Default risk is the biggest, the chance an issuer won't pay the interest or principal agreed upon at maturity. Interest-rate risk makes your bond less attractive when higher yields are available and you face reinvestment risk when your bond matures.

• Fees: Expenses cut bond returns even more than stocks. You have to watch your bond fund's charges carefully.

Introduction to Exchange-Traded Funds(ETFs)

Exchange-traded funds (ETFs) can be a valuable component for any investor's portfolio, from the most sophisticated institutional money managers to a novice investor who is just getting started. Some investors use ETFs as the sole focus of their portfolios, and are able to build a well-diversified portfolio with just a few ETFs. Others use ETFs to complement their existing portfolios, and rely on ETFs to implement sophisticated investment strategies. But, as with any other investment vehicle, in order to truly benefit from ETFs, investors have to understand and use them appropriately.

Understanding most ETFs is very straightforward. An ETF trades like a stock on a stock exchange and looks like a mutual fund. Its performance tracks an underlying index, which the ETF is designed to replicate. The difference in structure between ETFs and mutual funds explains part of different investing characteristics. The other differences are explained by the type of management style. Because ETFs are designed to track an index, they are considered passively managed; most mutual funds are considered actively managed. 

From an investor's perspective, an investment in an index mutual fund and an ETF that tracks the same index would be equivalent investments. For example, the performance of the SPDR S&P 500 ETF and a low-cost index fund based on the S&P 500 would both be very close to the to the S&P 500 index in terms of performance.

Although index mutual funds are available to cover most of the major indexes, ETFs cover a broader range of indexes, providing more investing options to the ETF investor than the index mutual fund investor.

Tips for successful trading

The first thing a trader must realize is that there is no system that will provide him a constant profit. Most tools of technical analysis (oscillators, moving averages, the chart patterns, etc.) works on the same principle: when X happens it is usually followed by Y. In most cases the implication is true, but in many cases not. So there is no rule or trading system that will always generate signals which make profit. Traders need to choose a system and stick to it. Maybe it will generate false signals, but system is good if it gains more than it loses.

Trade planning is essential to achieve success. Trader must create plan before entering a market: financial instrument to invest to, when to enter and exit market etc. When plan is created, trader should strongly stick to it.

Money should be spent moderately. A lot of beginners think that they can become a rich overnight. Investing large amounts of money at once in one security increases the risk of a loss, because if the decision was not good you will lose money in just a single trade.

When trading do not think about money. It is better to think about percentages of trading, potential profit and so on. Why? Because when you observe the losses through the money you look at it emotionally. It is better when you say "I have lost 10%" then to say "I have lost 1000$". Losses are part of trading and you should not take it emotionally.

Whatever the outcome of trading is, the only one responsible is trader himself. Often people blame something else for the failure: market, tools of technical analysis, trading systems and so on. But only one responsible is trader himself. He had to do analysis and to take into account all the factors and signals in order to determine the moments of entering and exiting the market. Failure is just result of wrong judgment.

Choosing the right words may be important to increase the calmness when trading. The word "loss" carries great weight and can adversely affect trader and bring emotional dimension into trading, which is not good. As already said trader should avoid the presence of emotions. Therefore, instead of a "loss" you can use the word "cost". It is similar with word "gain". It's perhaps better to use the word "income". So the trading can be described as income versus expenses. What sounds like a business.

Think less in order to gain a lot. People often want to get rich overnight, in one "good" trade. But it is better to earn less in more trades. Their accumulation leads to a large profit. Thus, for example, it is better to achieve five trades with gain of 10% then to wait for one trade with 50% of gain. The search for that "good one" trade can be a long and unsuccessful.

Forex Trading vs Stock Trading

I'm often asked why should any trader choose forex trading over stock trading. One of the biggest reasons is called forex leverage.

Leverage

In stock trading, you can trade with leverage 2:1 usually, and you have to fill out an application and be approved and there are very specific regulations on who can trade with leverage, etc.

Forex trading is very different. To qualify to trade with leverage you merely have to open a forex trading account and you're good to go. In the United States, you'll be stuck with 50:1 leverage, but in other countries you can get as much as 200:1 leverage for your trading. Regardless of the amount of forex leverage you can use in your country, it's going to be so much more than you would have been able to use in stock trading.

When you trade stocks, you are trading shares of companies that cost anywhere from a few dollars to hundreds of dollars. There is a reasonably limited amount of stock on hand, and you only have to be concerned with the company's ability to make money.

Trading currencies is another world compared to that. The supply of a country's currency can fluctuate, and there is always a large amount of currency available to buy or sell, this makes currency buying or selling extremely liquid. In currency trading, currencies are always quoted in pairs, so not only do you have to be concerned with the economic health of an entire country, but you also have to take into consideration the economic health of the country you are trading against.

Fundamental Considerations

When it comes to forex trading vs stock trading, the fundamentals are handled different. For instance, if you buy a share of Intel stock, all you have to care about is whether Intel stock will get more valuable, or if Intel will at least continue to make the same amount of money in the future. When you want to trade a currency whether it's buy or sell, you have to consider the country you are comparing it against. Does one country have more job growth than another, or better GDP, or political prospects? These are all things that can impact the value of a currency.

Liquidity

As mentioned before, outstanding shares of stocks are limited compared to the amount of a currency that might be out there floating around. A large stock purchase might be 10,000 shares, which may actually impact the stock price a little when you buy it. On the other hand, when it comes to currencies, it may take a 10 billion dollar purchase to impact the price of a currency.

Currency markets are also open much more often than stock markets. When trading stocks you are limited to whatever the hours of the exchange are. Forex trading can be done 6 days a week, 24 hours a day because there is no centralized exchange. This makes it much easier to get in and out of currency positions on a whim.

No Bear Markets in Forex Trading

When a stock market declines, you can make money by shorting, but it can be ultra risky and the regulations are very specific. In forex trading, you can go short on a currency pair just as easy as you can go long with no particular regulation restrictions. When one currency is in a "bear market" the other currency in the pair may be in a "bull market" so there are really no bear markets in currency trading.

More Freedom

Stock trading has many regulations and limits, forex trading does not have the same issues. There are some regulations in forex, but nothing like what regulates the stock market. Forex traders are free to make trades the way they want to, going long or short on a whim, and trading as large as they want to. With stock trading, there are limits on when you can place trades, how you can trade, and what you can say about it. Forex trading on the other hand is very unrestricted, and you have the advantage of using leverage.

It's your choice

When it comes down to it, it's your choice and sometimes it's just easier to trade what you know. Trading forex provides more opportunities than other similar markets, but requires a bit of learning curve for investors. It's something that every investor should at least consider as part of their overall trading plan.

How to Pick a Discount Stock Broker

How to Pick the Right Stock Broker

You have a wealth of choices in how to buy and sell stocks these days, but you always need a stock broker. You've probably heard a lot about online stock brokers who can discount your trades down to unbelievably low prices. Learn how to pick a online stock broker who will give you exactly the service level you want and ensure you don't overpay!

Due to the financial markets deregulation that began in the U.S. in the 1970's and today extends into many countries around the world, investors have more choices of stock brokers than ever before. However, with this wealth of choices comes the responsibility (some would say opportunity!) to choose just the right kind of stock broker to meet your needs.

Let's begin with explaining what a broker does. While you do choose and hire your broker, it's important to remember and understand that they are, at the end of the day, a salesperson. They work for a stock brokerage house who is out to make money for themselves and their sales staff (the brokers!). The broker's job is to carry out your transactions. Stock brokers are paid by salary, commissions on sales or a mixture of both.

In the U.S., to become a broker one must first pass two licensing exams called Series 7 and Series 63. If they successfully complete these exams, the broker is then allowed to advise you, solicit business from you, and to execute your transactions for you.

Got that? A broker can advise you, try to sell you, and do your trades for you. Now that you know that, it's easy to understand the basic difference between a full service stock broker and discount stock broker. Basically, full service brokers offer you advice and hand holding, whilst the discount folks just execute your trade orders and perhaps try to solicit more business from you.

Full-Service Stock Brokers

Full-service brokers usually offer a wide variety of financial products as well as investment advice and research. They charge higher fees than discount brokers. Full-service firms often offer bonds, derivatives, annuities and insurance in addition to stocks. Full-service stock brokers solicit business from you (e.g., call you up and say 'I think you should consider buying such-and-such stock because...'). Importantly, these stock brokers are mostly paid by commissions. This means he makes money when you buy and sell stocks. But he doesn't make money based on the performance of your portfolio or group of stocks making money for you! So his or her interests are not necessarily very aligned with yours.

Your Discount Stock Broker

Discount stock brokerages do not offer any advice or research - they just execute your trade instructions. At least that's the way it used to be with a discount stock broker. These days, however, there is a wealth of research from third parties that many discount stock brokers can offer you within your account at their website.

Because a discount stock broker doesn't have to hire expensive stock analysts and expensive stock brokers, discounters can charge considerably lower fees that full-service brokers. Most good discount houses also offer online computer order entry services. If you can handle ordering a book online from Amazon, you can use these firms online trading web interfaces - they are that easy. If you need to, you can speak with live brokers at these firms - the brokers are paid a salary usually, not commissions, so they are just there to help you, not to encourage you to make lots of trades.

Sound too good to be true? It isn't - you see, discount stock broker firms make most of their money by doing business in high volumes, competing mostly on price and the ease & reliability of their service. Life's not easy for online stock brokers.

A Warning

If you receive a call offering you the chance to buy shares at what is claimed a great price and that you're going to make money quickly and the price might 'go through the roof', beware! This is probably a 'boiler room' sales operation that is contacting you. Boiler rooms are sales operations that fleece the unsuspecting public by pitching them to buy stocks that have little merit - but that the boiler room probably bought earlier at a cheap price. Once they get you and others to buy in, driving the price up, they sell their position and leave you with stock that may well be worthless. Boiler rooms often break many laws and are always closing down one office and opening another.

Choosing Online Stock Brokers

It's essential that you determine the level of service you need. If you aren't willing to do your own homework on choosing investments in the stock market, then a full service broker might be for you. If you plan to mostly buy investments for the long term and hold on to them, then you won't be trading so often and the higher commissions won't matter so much in the big picture. It's not going to sound high tech, but a great way to find a good full-service stock broker is by word-of-mouth recommendations. Ask your friends if they know of a great broker, or know someone who would know a good stock broker.

On the other hand, if you are planning to trade more often, then you really should only be doing this if your investing your own time to carefully research & choose your trades - and, in this case, discount brokers are ideal for you. They give you the lower costs of trades, which matters a lot since you'll be trading more often.

An Introduction to Trading Strategy

Talking Points:

• There are three basic types of traders
• Traders should develop techniques to fit their trading style
• Once you have a trading plan, practice to perfect your strategy

Each trader must develop their own unique trading style. Normally traders will choose a style based off of the times they trade and the assets the select for trading. Ultimately these strategies will fall into one of three categories. Today we will briefly review the basis of range, trend, and breakout trading and what traders implementing these strategies look for.

Range Trading Strategies

First, range traders use technical analysis to trade sideways moving markets. This is done by identifying price trading horizontally between two areas of support and resistance. Once these values are found, traders can begin to trade between them. Normally ranges are known to occur during times during of low volatility.

The benefit of trading ranging markets is that traders can take a direction-less trading strategy. This means range traders will look to initiate both buy orders (at support) and sell positions (as price reaches resistance). As well risk can be clearly defined to exit ranging positions in the event of a price breakout.

To learn more about trading range bound markets, see The 3 Step Range Trading Strategy linked below.

Breakout Strategies

A Price breakout occurs when price action either rises above resistance or drops below support. Normally a breakout is preceded by a consolidating pattern or sideways movements such as a range mentioned above. Savy traders that are aware of these conditions can quickly adapt their trading plan and be prepared to take advantage of the next market move with a use of an entry order while waiting for a breakout.

The advantage of this style of trading is that breakout t traders have the ability to trade with entry orders. This means even if you are not in front of your computer, entries can be set to enter the market if price breaches a certain level. The idea is to enter the market on a surge in price in the direction of market momentum. In the event that price continues to consolidate these entry orders can easily be deleted and traders may then look for trades elsewhere.

The Retracement Strategies

Lastly, trend traders look to take advantage of strong directional movements in the market. Trading a retracement is probably one of the most popular methods of doing so. Retracements traders will wait patiently for a pullback in the trend and then enter into the market. In the uptrend depicted on Gold below, this would allow traders to buy at a cheaper price, as opposed to entering the market on a breakout towards higher highs.

Retracements can also be timed using oscillating indicators pictured below. These indicators use overbought and oversold levels to time momentum turning back in the direction of the trend. 

As you can see, there is a trading strategy for everyone! When you are ready to practice your selected trading strategy, register for a Free Forex Demo account with GCM. This way you can become comfortable with the market and finding trading setups in real time!

Why Investing Is a Better Idea Than Saving

People are well aware that they need to save money. That being said saving in itself is not really going to help you; you have to do something with the money. That means that you will need to invest your money. A lot of people are afraid to do this but there is really no reason to be afraid if you know what you are doing.

The main reason that investing is a better idea than simply saving your money is that it will allow your money to grow. In fact if you invest your money wisely you will likely find that you end up with a lot more in investment earnings than you actually saved in the first place. This is because of the huge power of compound interest which should not be underestimated. One of the basic rules of compound interest is that if you earn a ten percent return your money will double every seven years, clearly this is a powerful way to make money.

Of course investment and saving are not separate things; in order to have money to invest you will need to save it. The important point is that you are better off investing the money that you do save rather than simply putting it under your mattress. In order to make sure that you have money to invest you need to make sure that you have a savings plan. The best way to do this is to make it part of your monthly budget.

One of the reasons that people don't invest their money is that they are worried about losing it. While this is not an unreasonable fear it is important to keep in mind that not all investments are risky. In fact some carry virtually no risk at all. If you are worried that you are going to lose your money you will want to make sure that you stick to very safe products like certificates of deposit or guaranteed investment certificates. That being said if you are willing to take on a little bit more risk you will earn a much larger return. As long as you properly diversify your portfolio the risk should be minimal.

One other reason that a lot of people worry about investing their money is that they are concerned that they are going to need that money. Again this is a legitimate concern but not one that should unduly worry you. Certainly there are some investments that are not particularly liquid that can be a problem if you need money right away but you would be foolish to put all of your money into these investments anyway. It is important to make sure that at least some of your money is invested in things that you can easily get out if it if necessary.

What is social trading?

Social trading, also called mirror trading or copy trading, is a concept that involves automatically copying or mimicking the trades of other winning traders, who are able to replicate consistent results over a period of time. We generally refer to these traders as 'lead' traders.

As the lead trader places a trade, that same trade is opened and managed automatically on your own trading account.

Benefits of social trading

It is a good first step into trading as you can grow your capital safely while you learn.

It also allows you to grow capital even if you have very little time to learn or make investing decisions yourself.

You can also diversify your risk across several lead traders limiting losses if a certain lead trader or another investment performs poorly.

Benefits for a lead trader

Lead traders benefit by generating further income, which is why they become lead traders and allow others to copy their trades.

Once you gain enough skills and experience to become a lead trader yourself, you can receive payment from a broker based on the volume traded by your followers – different brokers offer different incentives.

Concerns of social trading

There are some things that you will learn to avoid or deal with. For example, looking out for a lead trader that risks far too much on their trades and avoiding you being exposed to the same risk. Or learning how to cut a lead trader from your portfolio if they lose their edge and become unprofitable.

However, as a first step into trading, we teach you how to follow someone else.

Trading - Carry Trade

Carry Trade

Another popular trading strategy among currency traders is the carry trade. The carry trade is a strategy in which traders borrow a currency that has a low interest rate and use the funds to buy a different currency that is paying a higher interest rate. The traders' goal in this strategy is to earn not only the interest rate differential between the two currencies, but to also look for the currency they purchased to appreciate.

Carry Trade Success

The key to a successful carry trade is not just trading a currency with high interest rate and another with a low interest rate. Rather, more important than the absolute spread between the currencies is the direction of the spread. For an ideal carry trade, you should be long a currency with an interest rate that is in the process of expanding against a currency with a stationary or contracting interest rate. This dynamic can be true if the central bank of the country in which you are long is looking to raise interest rates or if the central bank of the country in which you are short is looking to lower interest rates. There have been plenty of opportunities for big profits in the past in the carry trade. Let's take a look at a few historical examples. (To learn more, read Currency Carry Trades Deliver)

Between 2003 and the end of 2004, the AUD/USD currency pair offered a positive yield spread of 2.5%. Although this may appear small, with the use of 10:1 leverage the return would become 25%. During that same period, the Australian dollar also appreciated from 56 cents to close at 80 cents against the U.S. dollar, which represented a 42% appreciation in the currency pair. This means that if you were in this trade you would have profited from both the positive yield and the capital gains.

Figure 1: Australian Dollar Composite, 2003-2005

Source: eSignal

Let's take a look at another example, this time looking at the USD/JPY pair in 2005. Between January and December of that year, the USD/JPY rallied from 102 to a high of 121.40 before settling in at 117.80. This is equal to an appreciation from low to high of 19%, which was far greater than the 2.9% return in the S&P 500 during that same year. Also, at the time, the interest rate spread between the U.S. dollar and the Japanese yen averaged approximately 3.25%. Without the use of leverage, this means that a trader could have potentially earned as much as 22.25% in 2005. With 10:1 leverage and that could have been as much as 220% gain.

Figure 2: Japan Yen Composite, 2005

Source: eSignal

In the USD/JPY example, between 2005 and 2006, the U.S. Federal Reserve aggressively raised interest rates 200 basis points from 2.25% in January to 4.25%. During the same period, the Bank of Japan left interest rates at zero. Therefore, the spread between U.S. and Japanese interest rates grew from 2.25% (2.25% - 0%) to 4.25% (4.25% - 0%). This is an example of an expanding interest rate spread.

Conclusion

The main thing to look for when looking to do a carry trade is finding a currency pair with a high interest spread and finding a pair that has been appreciating or is in an uptrend. Also, understanding the underlying fundamentals behind interest rates changes is one of the keys to implementing a carry trade. The next section will introduce you to the all-important concept of money management within your forex account.