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Low investment, high rewards in forex trading

Show me the way! When we think of depositing into and withdrawing from our trading account, the idea is to have the former low and the latter high. But how exactly can we deposit relatively low amounts into our trading accounts with the view to make a generous return on our initial investment?

Understanding the use of leverage

Show me the way!

When we think of
depositing into and withdrawing from our trading account, the idea is to have
the former low and the latter high. But how exactly can we deposit relatively
low amounts into our trading accounts with the view to make a generous return
on our initial investment?

That is the dream
ticket, high returns on low capital investment.

This article will
highlight some key broker features to look out for to ensure you make yourself
as profitable a trader as can be.

Whether you are new
to trading or just getting started, you may want to consider a few features
that your prospective broker can offer you to boost your earning potential and
grow your portfolio.

Leverage

One core element
Forex brokers offer is leverage. Which varies from broker to broker and the
account types available.

You may be offered
high leverage going into the 1:200 mark but this may come at a premium. You may
have to pay ongoing account costs in order to have access to average leverage
so it is important to weigh up whether a broker is offering true value. Try and
find a broker which will offer high leverage options without a monthly premium.

Leverage is, in
essence, a loan within a trading account allowing investors to get involved in
markets they would traditionally be priced out of. Historically when going to
market, investors would have to come up with the full capital to buy a stock,
reserving trading for society’s elite.

For instance, a
trade worth $100,000 with no leverage would require the investor to stump up
the whole amount to obtain the stock/commodity. Thanks to leverage we can
dramatically reduce the size of investment yet trade the same volumes.

If we dig deeper
into the maths behind leverage we can see that a $100,000 trade using 1:500
leverage would require a $200 investment. 

$100,000 (volume) /
500 (leverage 1:500) = $200.00 (capital needed to invest in that trade)

So we can see from
the above, that virtually any trader can compete in the market by opening large
positions with low capital. A revolutionary feature for online trading
platforms.

New STP Broker EagleFX
offers maximum leverage of 1:500 on an array of Forex majors, crosses and
exotics with no ongoing account costs.

How should leverage be used?

Leverage allows
traders to invest low amounts with the potential to turn a large profit.
However, leverage should be approached with caution as it can also magnify
losses. That being said, the rewards can be BIG!

When approaching leverage,
it would be considered advisable for a trader to be honest with themselves in
terms of how experienced they are. 

Ask yourself:

  • How long have I been
    trading?
  • How successful am I at
    trading?
  • Am I a novice or expert?
  • Can I afford to magnify
    losses on an investment?
  • Will I monitor open
    positions closely to protect my investment?

More experienced
traders may be better suited to a higher leverage setting as they would be
considered better prepared to enter markets. Equally, it would be advised that
beginners use a lower leverage setting as to protect their investment and not
magnify losses.

Analysis

When entering a
particular market, whether experienced or not, traders must be equipped with
appropriate knowledge for them to take full advantage of high leverage options.

There are 3 core
areas of research and analysis that traders can adopt. It is useful to explore
a variety of sources whilst researching as to not get one sole opinion from one
media outlet – there may be an agenda attached to it. 

Technical analysis
is used by traders to study price movements in the markets. This can be done
using charts, data and graphs to review historical price movements of a certain
asset with a view to spotting future trends. Indicators such as Bollinger bands
are useful when conducting this type of research.

Fundamental
analysis is used to establish a general overview of how an economy is
performing. This includes interest rates, employment levels, and GDP. Traders
can develop a general understanding of the strength of a particular currency
based on this information and open Forex positions with added confidence. The
current stability of a country is useful to know when entering the Forex
market.

Sentimental
analysis draws on raw data of how many traders have opened a position on a
particular currency pair. It allows us to delve into the psychology behind the
interest in a market and the emotional state of traders within the Forex
market. Sentiment indicators are numerical indicators that show how a
particular group feels about a market. There are many available online.

EagleFX has a news feature section on its website which contains a
‘Daily Market Analysis’ section for you to review the latest market movements.
This feature coupled with the ‘Economic Calendar’ will help you stay informed
and ahead of the curve!

Demo accounts

A feature of a
responsible broker will be to provide a space where potential depositors can
practice using the functions and features of that platform. 

Using MT4 as a
beginner can be a daunting prospect. Although tried, tested and revered by
millions of traders around the globe, the award-winning platform should be
tested before going live. So, you as a trader can get the most out of it. 

It is of particular
significance to develop a trading strategy to suit you and your account budget,
especially when using high leverage. A demo account with like for like
conditions as a real account will allow you to chop and change leverage and
find a suitable setting for YOU.

Spread

The tighter the
spread the better as this represents the cost of a transaction on a platform.

A platform that
offers tight spreads is an ideal environment for scalpers looking to enter the market
and leave quickly with a profit. Scalpers need a tight spread as they will
place the most trades out of all trading strategies thus paying more
commission.

Customer support

Always ensure a
broker you choose offers a high standard of customer care. Beginners using
lower leverage settings as well as experts using high leverage will all need
some degree of support in unforeseen circumstances.

To sum up

Whether new to
trading or a seasoned pro, it is important to gauge our leverage setting to
suit you. 

Set yourself goals
whilst trading and try not to let emotions take over. Set a target profit and
stick to this. Do not let greed creep into trading decisions as this deadly sin
can be lethal to your account balance.

Use a demo account
and practice trading with leverage if this is a new concept to you. If you feel
like you’re not trading successfully and not seeing the ROI you dream of, then
there is no shame in going back to the drawing board and developing a new
strategy. 

Develop your
perfect strategy in pristine trading conditions today at https://www.eaglefx.com/

Join for free today
and starting trading with as little as $10.00.

This
article was submitted by EagleFX.

ForexLive

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Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

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Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

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Africa’s first Fairtrade certified gold co-operative offers hope to gold miners living in poverty

Syanyonja Artisan Miners’ Alliance (SAMA) has become the first artisanal small scale mining co-operative in Africa to become Fairtrade certified, bringing much needed hope to impoverished communities who risk their lives to mine the rich gold seam that runs around Lake Victoria.

SAMA is one of nine previously informal groups from Uganda, Kenya and Tanzania which has benefitted from a pilot project launched by Fairtrade in 2013. This innovative program aims to extend the benefits of Fairtrade gold to artisanal miners across East Africa.

In that short time, SAMA has undergone training in business and entrepreneurship, as well as safe use of mercury, internal control systems, labour rights and better working conditions, health and safety and more. Previously, daily contact with toxic chemicals used to process gold meant members risked disease, premature births and even death.  Fairtrade gold was first launched in 2011, and SAMA now joins Fairtrade certified gold mines MACDESA, AURELSA and SOTRAMI in Peru.

The co-operative produces just 5 kg gold per year, but nevertheless has the potential to significantly benefit many people in the local community through better conditions through certification. It is expected that Fairtrade and organizations like Cred Jewellery will support the miners, ensuring their gold can be refined and made available to jewellers in the UK and other markets.

Gonzaga Mungai, Gold Manager at Fairtrade Africa said: “This is a truly momentous and historical achievement and the realisation of a dream that is many years in the making. Gold production is an important source of income for people in rural economies. Congratulations to SAMA, it sets a precedent which shows that if groups like this can achieve certification, then it can work for others right across the African continent.”

The Fairtrade Gold Standard encourages better practice and changes to come in line with international regulation around the production and trade of so-called ‘conflict minerals’. Under the Standard, miners are required to:

  • Uphold a human rights policy preventing war crimes, bribery, money laundering and child labour
  • Clearly represent where the minerals were mined
  • Minimise the risks of conflict minerals through robust risk assessments and collaboration across supply chains
  • Report to buyers and trading partners regarding the risks of conflict minerals

Now in its second phase, the programme will focus on supporting other mining groups in the region to access affordable loans and explore a phased approach to accessing the Fairtrade market, allowing more mining co-operatives across Africa to participate in the programme.

Gonzaga added: “Sourcing African metals from smallscale miners in the Great Lakes Region is the responsible thing to do. For a long time companies have avoided buying gold from this region, with devastating consequences for impoverished communities who were already struggling. It has driven trade deeper underground, as unscrupulous buyers pay lower prices and launder illegal gold into legitimate supply chains. That’s why we have chosen to work with these groups to help them earn more from their gold within a robust compliance system that offers social, environmental, and economic protections.”

The Fairtrade gold programme offers a small but scalable solution to sustainable sourcing of gold from the region in line with Section 1502 of the Dodd-Frank Act in the US, OECD Due Diligence Guidance and recent EU Supply-Chain Due Diligence proposals which could come into effect in 2016. This means that up to 880,000 EU firms that use tin, tungsten, tantalum and gold in manufacturing consumer products could be obliged to provide information on steps they have taken to identify and address risks in their supply chains for so-called ‘conflict minerals’.

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