Selecting the Perfect Broker

Selecting The Perfect Broker

Choosing the perfect broker is as important as your money for this is the company that will be responsible for your development in the trading scene. It is because you need a total support from the firm because if you’re new, you might struggle. Asking for help or consulting a broker wouldn’t hurt at all. In fact, they will guide you and produce a rewarding result in the long term.

Perfect Broker

Doing Research

Research is essential when selecting a broker. In this way, you’ll get to know how trust worthy or just plainly worthy the company is in holding your funds for your investments.

  • First thing you should consider is how much advertisement it has around the web or just around. In this way, you will know how trust worthy it is. They can provide you more details in the process as well.
  • Look for brokers around your area so that you wouldn’t have a hard time going to their office just in case some matters persist.
  • When looking for a broker online. Do consider small things such as copies and designs. Like aforementioned, even the amount of ads or website linking to it matters. It boosts its trustworthiness.
  • If there are a lot of good brokers out there, better make a list of those who you would consider. In the end, you can compare one from another or pick maybe two that you can try out.
  • Having a friend who is already an investor can help you with the research. You can ask him for some recommendation on to which broker can provide the best guidance from your research. If he recommends a broker outside your list, do consider it still. Although you will have to research about it as well.

Read also: Things You Need to Know About an Online Broker

Good Broker

The Broker

How do brokers work? There some things that you should know about them as well: about how they work, how they function as a business and as a company. Here are some of the qualities that you should be looking.

  • It can be considered that a broker is a good broker if it offers classes, trainings and other programs that can train a new investors mind about the market. This will boost one’s trading skills and can help him on the latter when problems or other phenomenon comes.
  • Research about the trainings or programs that are presented. Find out if they’re relevant, helpful and applicable for you.
  • Do another research about their routine. On how they do their trades and handle clients, you will have to know this because this explains how their nature of work plays out.
  • Look for reviews. This is probably one of the best options you should do when doing a research. Here you can find their history, if they’re legit and if they’re worth trusting your money with.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Girl trading commodities

2 of the Best Ways to Make Money in Commodities

A commodity can be used in a lot of different ways. It can be a term referring to raw materials and produce, metals, and crops.

Commodities Produce

Commodities, grains against paper bills and coins.

Making money in commodities is not an easy task. One of the reasons that make it hard is that there is no such thing as a “right time” when it comes to entering or exiting the market.

It is essential for you to understand the market in order to make profits from it. You must also learn how economics can affect the commodity prices.

Let us tell you 2 of the best ways you can succeed and make money in trading commodities:

1.     Trade Physical Commodities

1.1.           Understand the transactions

Physical commodities are bought and sold in bulk for immediate delivery in different markets across the globe. These markets are known as the “spot” or “cash” market.

Most participants of the spot market are producers, and users of commodities who are able to finance and store large amounts of commodity. These commodities are those such as refinery purchasing crude oil, a flour miller buying wheat and corn.

Because of this, you should note that individuals rarely buy commodities. Unless what they’re buying is gold, silver, or palladium.

1.2.           Buy or sell the physical commodities

You can get your hands on physical commodities when you visit specific websites or exchanges where they are sold. Standard brokerages don’t normally sell them though.

It can prove to be a rather trying task to find a reputable market to buy in online. It’s important to look for well-known authorities when it comes to deciding where to buy.

1.3.           Store the physical commodities you own

It is highly advisable that you store your physical commodities in a secure location. Physical commodities must be stored until sale.

You can also buy insurance in order to protect yourself from complete loss in case they are stolen. But both of these cut into you potential gains while adding to the cost.

You should also note that there are some gold-selling companies that offer secure storage for buyers.

Commodities metal and oil

Oil and Metal commodities together against white background.

2.      Trade Commodity-Related Stocks

2.1.           Understand the commodity-related stocks

Commodity stocks are those that move with underlying commodity prices. The correlation is determined by the company’s relation to the production or use of the underlying commodity.

An example will be, if you decide to invest in gold futures, you could then buy stocks from companies that mine it. Your risk is lower this way but you’re still participating in the market.

2.2.           Identify the commodity-related stock

You can start investing in commodity-related stocks thru searching for one that you want to invest in. You can do this by first finding one that interests you or by following market news for information.

Locating related companies can be done by searching for them in market websites.

You can then begin by looking at companies that produce, refine, or ship the commodity you chose. Or you can look for companies that use your chosen commodity as primary input to production.

2.3.           Open account with a broker

There are a lot of online brokerages out there in the internet. Any type of online brokerage will actually give you access to buying and selling stocks.

Once you’re set up, you can just put in an order of the stocks you want to buy or sell. After buying it, make sure to track the stock’s price and the price of the underlying security so that you can determine when to sell.

You can earn bigger profits and execute better trades here at Trade12by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

word dividend on top of money

Dividend Stocks: Basic Terms and Strategies

Dividend stocks can help add to your savings if you know how to do it right.

Dividend business words concept

The word dividend with red background over other collection of words related to the business.

Just like anything out there, there are basic knowledge that you should consider learning.

Here are some of them:

Terms

  • Cash Dividend

These are usually paid using the company’s current earnings or accumulated profits. Cash dividends are cash payments made to stockholders. They are paid on a per share basis. Also, they are quoted as dollar amounts or percentage of current market value.

  • Date of Record

The date used by the company in order to ascertain its shareholders.

  • Declaration Date

The date a company’s board of Directors announces their upcoming dividend.

  • Dividend

This is a distribution of a certain amount of a company’s earnings which is then paid to its qualified shareholders. It can come in the form of cash, stock, or property,

  • Dividend Coverage Ratio

This is the ratio among a company’s earnings and its net dividend to shareholders.  It’s calculated through division of earnings per share and the dividend per share. This can help you, as an investor, to determine whether a company’s earnings are enough to cover its dividend obligations.

  • Dividend Yield

A ratio that shows the amount a company pays out in dividends per year relative to its share price.

  • Ex-Dividend Date

A date which denotes when a stock was traded with no previously declared dividend.

  • One-time Dividend

A special dividend paid aside from the regular cash dividends.

  • Payment Date

The date declared by the company for the dividend to be paid.

  • Shareholder

Any person, company or institution that owns at least one share in a company. Also known as stockholder.

  • Stock Dividend

These are dividends in the form of additional shares of stock instead of it being cash.

 

Strategies

  • Dividend Income

When using this strategy, your goal is to have a steady stream of liable income. This relies mostly on safe stocks that have consistent dividends. The percentage yield tends to be lower due to prioritizing sustainability instead of yield. This is advantageous to poor economies as lower yields are easier to maintain.

  • Dividend Growth

With this strategy, your goal is to be able to reliably grow your dividend return over time. This mostly involves choosing stocks that has been known to consistently pay and raise dividends.

  • Tax Strategy

This strategy aims to help you lower the burden of taxes on your income. There have been qualified dividends in the U.S. for the past few years that didn’t receive any tax. Tax efficiency should be one of the main topics you research on for your investment journey.

  • Dividend Yield

Your goal here is to maximize dividend yield. This can be filled with chasing stocks that have the best dividend yields. It’s a high possibility that you will have a lot of turnover in this kind of portfolio due to most of the highest dividend yields being unsustainable.

Read more about 4 Dividend Stocks Investing Mistakes You Need to Avoid.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Risk knob and risk levels

10 Types of Investment Risks

There are different kinds of investment risk that you can be exposed to after deciding to enter the market.

Trade12 - Road with street sign risk ahead

A road blurred by speed but with clear street sign that reads “Risk Ahead”.

Learn how to gauge your risk tolerance.

Let us discuss some of those potential risks and how it can affect you investment returns.

1.     Concentration Risk

This is when you put your investments in a small number of securities, sectors, or industries.  Remember that when you diversify, you also spread out the risk over different types of investments and geographic locations.

2.     Liquidity Risk

This refers to when you, as an investor, end up in a situation wherein you might not be able to buy or sell your investment when you want or in enough quantities due to opportunities being limited. When you decide to sell, you may need to settle for a lower price. There are also some cases where you won’t be able to sell your investment at all.

3.     Currency Risk

This pertains to when you invest in currencies, currency derivatives, or similar instruments. It also includes securities that use foreign currencies. The risk here lies in the possibility of losing money due to movement in the exchange rate.

4.     Equity Market Risk

This applies to investment in shares. Equity markets are subject to several factors. These factors include economic conditions, government regulations, market sentiment, local and international political events, and environmental and technological issues. This is the possible loss due to a drop in market price of shares.

Trade12 - Stopwatch invest in the middle of risk

A stopwatch with the hand stopped and pointed at investment which is in the middle of risks.

5.     Credit risk

This involves debt investment like bonds. This relates to government entity or company that issued the bond. The problem lies on the issuer running into financial difficulties. They will therefore no longer be able to pay the interest or repay the principal at maturity.

6.     Commodities Risk

Being exposed to commodities market can be more volatile compared to the traditional equity or fixed income securities. Changes in overall market movements, commodity index volatility, interest-rate changes, or events affecting a particular commodity or industry can change the value of a commodity.

7.     Foreign Investment Risk

Investments in foreign markets may present risks that are not usually found on domestic markets. These may be comprised of changes in currency exchange rates; less-liquid markets and less available information; less government supervision of exchanges, brokers, and issuers; increased social, economic, and political uncertainty; and greater price volatility.

8.     Interest Rate Risk

This applies to debt investments such as bonds. You can lose money due to a change in interest rate. The changes in interest rates can badly affect investments.

9.     Reinvestment Risk

This comes as the possible loss through reinvesting principal or income at a lower interest rate. This will not apply if you decide to spend the regular interest payments or principal at maturity.

Trade12 - Risk knob and risk levels

A knob pointed at minimum risk levels.

10.Inflation Risk

This will mostly affect your purchasing power if the value of your investments doesn’t keep up with inflation. Inflation has the power to wear down the purchasing power of money over time. This could mean that the same amount of money can let you buy fewer goods and services. This is mostly relevant if you own cash or debt investments like bonds. Shares are mostly covered due to the companies being able to raise the prices in line with inflation. Real estate also offers some protection because landlords can increase rent over time.

Read more about how to lower your investment risk.

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Trade12 - Chart in Forex market on LED

Pros and Cons of Forex Trading

Forex Trading has emerged as a popular career mostly for those people with financial background. It mostly owes its popularity to its high liquidity, easy accessibility, and 24/7 schedule.

Learn more about Forex here.

Having a career in forex trading sees to it that you are your own boss and has the comforts of making money through your laptop or mobile whenever convenient. This is enough motivation for most people – both young graduates and experienced professionals – to consider a career in forex trading.

Trade12 - forex rates charts and graphs

Tracking, forex trading, shown in charts and figures in LCD.

Read more about your chances to make money in forex trading.

Forex trading still comes with its own advantages and disadvantages.

Let us list them down for you.

Pros:

  • Accessibility

The forex market has proved itself to be one of the most accessible markets for individual traders. Traders can set their own forex accounts within a period of one to three days while beginning with a small amount of money.

Most brokerages that offer assistance are offered online. Traders can acquire access to real-time market pricing, news, price charts, tools, and strategies.

The forex market is also open 24 hours for 5 days per week. This could mean that forex trading is more adaptable to a trader’s schedule than some other type of trading.

Learn more: Tips for Choosing a Forex Broker

  • Low costs

Forex trading can have very low costs.

Even if you think about commissions, it does not really exist for brokerages since they mostly make profits from the spreads between forex currencies. Therefore, you won’t even need to worry about it. You no longer need to think about separate brokerage charges.

This makes it considerably low when compared to equities or other securities trading that has widely varying structures.

  • Liquidity

The forex market is considered to be the largest market globally by volume. Meaning that there is usually an abundance of liquidity when it comes to trading, especially in major currencies.

Traders who work with the trading desk model at forex brokerages will be propositioned with enough liquidity for trading most of the time. The brokerage itself will normally take up the position on the other side of a trade when liquidity has a chance of being small in other portions of the market.

Know more about the best way to trade forex.

Cons:

  • High Risk, High Leverage

Forex trading is available on high leverage, which can mean that you can have profit/loss exposure a couple of times of the trading capital.

Forex market lets you have a leverage of 50:1, so you will only need to have $1 in order for you to gain access to a forex position worth of $50. While you can also gain more with leverage, your loss can also be magnified.

Forex trading can easily turn into a loss-making nightmare, unless you have vast knowledge of leverage.

  • High Volatility

All markets have the possibility of volatility at one time or another. The forex market is no exception.

If you are hoping to gain short-term profits, you could be up for some disappointment. Frorex trading has the possibility of extreme volatility some times. This can end up making your trading strategies unprofitable.

  • Light Regulatory Protection

Forex trading is an over-the-counter type of trading. Trades are not carried out a centralized exchange and have limited regulatory oversight most times.

Due to this, you might need to know your own “due-diligence” investigation of your broker’s reputation and trading practices. Knowing such things is important before you sign up and create your account.

Depending on the country you live in, you may also have limited rights to recourse when you feel like you have been slighted by your broker.

See more: Reason Why Forex Traders Lose Money

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Trade12 - Stock Market Basics

Stock Market Basics

If you’re considering an investment in the stock market and the mere thought of losing money worries you, then don’t invest. The stock market is a web of complexity that is not suitable for the novice investor. Nonetheless, if you do decide to invest, there are some points you should keep in mind to prevent losses and rather increase your chances of making more money.

five basics of the stock market:
how they work and what do they react as they do.

And so we begin.

Trade12 - Stock Market Definition

  1. “Stock Market” Definition

Investopedia defines it as the market in which shares of publicly held companies are issued and traded in two ways: through exchanges or over-the-counter markets. The stock market is also one of the most essential gears of a free-market economy, being known as the equity market, and offers companies with access to capital in exchange for giving investors a part of ownership in the said company.

Plainly put, it is a complicated system where shares of publicly-traded companies are issued, bought and sold—to buy the stock, hold it for a time, and then sell the stock for more than you paid for it. Investors who hold stock for a minimum of fifteen years are the ones who usually succeed in the market. Stocks are long-term investments; however, there are no guarantees.

Does it seem like it’s a scary pit meant for gambling? Probably not—unlike in gambling where you lose everything you have at hand, when you invest in stocks, you will either win or lose just an amount. It is rare to lose it all, except for the instance you invested in a company that went bankrupt.

Be sure the company you’re buying is worth owning. Unless you simply love risk, you should probably refrain putting too much of your money in one stock.

  1. The Stock Market is an Adversary Trading System

The stock market is a group of millions of investors with, of course, utterly contrasting views and opinions. This is due to the norm that when one investor sells a specific security, someone else must willingly purchase it. And since both investors cannot be correct, it turns to be an adversarial system. One investor will profit, and the other will experience loss. So it is important to become knowledgeable and familiar on the investment you want.

  1. Factors that Make Stock Prices Rise and Fall

The media, opinions of renowned investors, natural catastrophes, risk, supply and demand, the shortage and surplus of alternatives, and political and social unrest are included in the many factors that determine the direction of stock prices. Quite complicated, actually.

Combining these factors and the all the relevant information that has been circulated, it produces either a bullish or a bearish sentiment, and a corresponding number of buyers and sellers. If there are more sellers than buyers, prices will go down. And of course, prices would go up when there are more buyers than sellers.

Trade12 - The Stock Market is Unpredictable

  1. The Stock Market is Unpredictable

An example for this number: Stock prices have been surging for a couple of years now. Investors think that a correction will come and stock prices will fall. The dilemma is this:  nobody knows what will be the cause of the selloff or when it’s going to happen.

Read about: How to Conquer a Volatile Market.

This causes investors to watch by the sidelines, holding cash, and jump as soon as the opportunity presents itself. Those who are willing to jump in despite the risk are triggered by the low cash return and it creates unease to earn apparently nothing while watching stocks move upwards.

The stock market’s unpredictability makes it almost impossible to know when to jump in when you’re on the sidelines, or when to get out when you’re in. This brings forth three issues for an investor to take into consideration.

  • Understanding the point at which stock prices are valued practically and fairly.

Market activity determines the actual price of a stock. When the decision comes whether to buy or sell, the investor often compares a stock’s actual price to its fair value. Overvalued stocks tend to repel the investor, if he were to make a practical choice.

Now, what is a fair value and how do measure it? Preferably, it would be based on a consistent formula. But there are many ways to calculate the number. One solution is to sum up the value of a company’s assets on its balance sheet, excluding liabilities and depreciation.  Due to the nature of these methods yielding slightly different results, sometimes it’s hard to identify if a stock is overvalued, undervalued, or fairly valued.

An important reminder as well is that overvalued stocks don’t always trigger the investor to sell and eventually drag the price down. A stock can stay overvalued for quite some time. This is why it is tricky to make buy or sell decisions based on where the price is in relation to some moving average.

  • The event that will prompt a slump, or a trend reversal.

To put in a simpler note: no one can predict what will happen and come in the future to cause a disruption and reversal in the trend.

  • Understanding the human decision-making process.

Humans oftentimes use logic to analyze a situation, and let emotions rule us in action.

In making investment decisions, you must be able to process the significant data and cast a good decision, since there will be investors on the other side prepared to buy what you’re selling and vice versa. It is impossible to know everything you would need to know and process it without a hint of bias, however, and thus it prompts us to make sub-par decisions at times. This happens even with the most logical and critical people.

  1. The Best Time to Buy and Sell

Benjamin Graham, the father of value investing, once said, “The buyer of common stocks must assure himself that he is not making his purchase at a time when the general market level is a definitely high one, as judged by established standards of common-stock values.”

The answer as to when to buy or sell stocks is this: the best time to buy is when others are pessimistic, and the best time to sell is of course, the opposite— when others are active and optimistic. Deciding on this matter is very crucial.

It should be remembered that when buying, the chance of a high return is bigger if you buy after its price has tumbled rather than after climbing, though it is still recommended to remain cautious. Why be attentive? Let’s say the stocks of Company A plummeted by 40 percent. The first thing to do is to ask questions—why did the stocks drop as it did? Did other stocks in the same industry experience a decline as well, was it severe? Did the entire market fall?  Assuming the other stocks in the same sector did relatively well, it can be assumed that the problem lies with Company A. It’s wise to take on and follow a buy or sell discipline.

It takes years to become knowledgeable and well-versed in the field of financial markets and stocks. While it may seem like an unnecessary cost, but we recommend finding someone you trust and ask for their guidance. After all, diving head first into unfamiliar waters alone without any proper experience may actually be more expensive.

Best of luck to you, Trader!

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Risk knob at minimum

Managing Risks in Cryptocurrencies

Ever since Bitcoin was first invented, the world of digital currencies has changed, making way to hundreds of cryptocurrencies. Managing these cyber commodities can sometimes prove to be a hard thing to do.

Giants from both tech and financial sectors that had once disregarded cryptocurrencies are now making huge investments in the industry. But seeing as the digital coin and token industries are still in their early stages, it is no longer surprising to see that it still is in a very volatile space.

Trade12 - Risk with illustration on chalkboard

Illustration of Risks written in chalkboard next to a coffee cup.

The occasional crashes and market dips that happen are things that you cannot avoid.

Read more about the risks and opportunities of investing in cryptocurrencies.

But we can help you manage such events with these following actions.

  1. Keep up with the news

Prices for any cryptocurrency tend to fluctuate wildly in a given week. One of the factors that hold heavy sway over these volatile changes is the news.

No matter how busy you might be, it’s vital for you to at least try to keep up with the current events. News can help on managing or determining whether you will make or break profits.

Knowing everything that happens to the coins you choose to invest in is as important as knowing why you invested in it in the first place.

The current events can assist you on deciding whether you should stay with your cryptocurrency investment or sell it now.

  1. Don’t give everything

No matter what kind of investment you get involved in, there will always be risks.

When you invest in a coin, you decided to take a chance on the possibility of it crashing or losing value. Investing on anything, especially these digital currencies, should always be thought hard on.

You should study up more if you think that there are still unknown risks that put you in bad positions. It’s important for you to know that you shouldn’t put everything you have in any investment.

Trade12 - people huddled together talking

People are huddled together, discussing the graphs and data they have gathered.

  1. Be vigilant

You should always know what’s going on around you.

Aside from the news, the people around you are also great sources of knowledge. You should not completely disregard their opinions or the things that they were able to glean from other people or news circulating in the market.

Though not always right, having other people’s input regarding your investments can actually help in managing some of the risks that investing brings in.

  1. Be agile

You should be able to make quick decisions once a crash in your investment comes along.

Your emotions might get in the way but that will be a fundamental mistake that you should avoid. Getting emotional over a failed investment will only hinder your logical judgment and make you hold on to something that no longer has any value.

Be quick on your feet and there will be little none that can surprise you.

  1. Know what’s relevant

It’s imperative for you to know why you decided to first take on the digital currency investment road.

What lured you in? Did other people have a say in your decision? What made you stay? Are things going well for your investments? What does the news say about your digital coin’s future?

These are some of the questions that you should be able to analyze and answer for yourself when it comes to managing the possible risks that a volatile, new market brings.

  1. Time can either be a friend or a hindrance

Whenever you hear people say that time is gold, know that it’s true.

Time is important when it comes to investing. In terms of cryptocurrencies, if you think that it will be a “get rich quick” scheme, then you will be disappointed. Just because you saw a currency rise 400 percent last month, doesn’t mean that it can happen again by tomorrow.

There are quite a number of bitcoin millionaires in the world. But what made them get to where they are now is time. They bought bitcoins back when they were still basically worthless and took them years before reaping what they’ve sown.

So when buying your coins, know that you should also let them mature with time. Also, if you see a dip – a small one – don’t be quick to sell off everything. You might end up losing money when the market swings back.

Trade 12 - Cycle of Risk Management

A chalkboard with the cycle of risk management written and illustrated on it.

  1. Always back-up

Do not ever forget to back-up your wallets. And don’t think that it’ll be a waste of time to double check the address you input in every single transaction.

A lot of people have lost their computer or wallet and were no longer able to gain access to their coins.

Print out your backup phrases and lock them up. Remember, it’s better to be safe than sorry.

Read more about Understanding the Risks in Cryptocurrencies.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Trade12 - Advantages of Expert Advisors

Advantages of Expert Advisors

What are Expert Advisors?

These are programs which allow automation of the analytical and trading processes in MetaTrader4 platform. These are also called “Robots.”

Should you consider using “Robots?”

EA basically makes things easier if you’re a busy trader who pursues personal endeavors or other main source of income. Robots also have their disadvantages, but this does not mean you shouldn’t consider it. Here are some reasons why you should actually consider using an Expert Advisor or Robot:

  • Robots can trade for you for 24 hours. Traders make time for their personal necessities, giving trading a rest so they can focus on other things. It is nearly impossible for a person to trade the entire day, bur with EAs, you can execute trades for 24 hours. This gives you the chance to not miss on any trading opportunities.
  • Expert Advisors react on opportunities faster based on coded rules and execute trades based on these rules within seconds. You no longer have to stare and keep a close eye on the chart since Robots can do the job for you.
  • They can consistently carry out the trading plan since most traders fail to stick to theirs. Robots are designed to stick to the plan without exceptions; no emotions for these programs to get carried away and it is the best way to be disciplined with your trades.

Bottom line

Robots or Expert Advisors can make your life easier. You no longer have to carry the weight of workloads and stress. These programs take over your tasks effortlessly and reliably.

Have our exemplary brokers to guide you! You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Trade12 - What is Bond Yields

What is Bond Yields?

Bond is an “I love You” given out by an individual when it needs to borrow money.

These entities require lots of funds in order to operate so they frequently need to borrow from banks or individuals just like you. When you possess a government bond, basically, the government has loaned out money from you.

“Isn’t that the same as owning stocks?”

One main difference is that bonds usually have a distinct term to maturity, in which the proprietor gets paid back the money he lent, ( identified as the principal) at a prearranged set date. Similarly, when an investor buys a bond from a firm, he gets paid at a indicated rate of return, also branded as the bond yield, at definite time breaks. These periodical interest payments are usually known as coupon payments.

Trade12 - Bond Yields

Bond yields speak of to the rate of return or interest paid to the bondholder although the bond price is the sum of money the bondholder pays for the bond.

Bond prices and bond yields are inversely connected. When bond prices increase, bond yields drop and vice versa.

Always remember that inter market relationships rule currency price action.

In this instance, bond yields really help as an excellent pointer of the strength of a nation’s stock market, that increases demand of the nation’s currency.

Demand for bonds frequently upsurge when investors are worried about the protection of their stock investments. This flight to safety drives bond prices up and, by virtue of their inverse relationship, drives bond yields down.

As many  investors stay away from stocks and other high risk investments, increased demand for “less-risky instruments” just like U.S. bonds and the safe-haven U.S. dollar drives their prices higher.

Another reason to keep in mind,  government bond yields is that they perform as an pointer of the overall direction of the country’s interest percentage and expectations.

Let’s say, in the U.S., you would pay attention on the 10-year Treasury note. An increasing yield is dollar bullish. A declining yield is dollar bearish.

It is necessary to be aware about the underlying dynamic on why a bond’s yield is increasing or declining. It can be based on interest rate anticipations or it can be established on market indecision and a “flight to safety” to less risky bonds.

Trade12 - High-Yield Bonds

After knowing how rising bond yields generally cause a country’s currency to increase in value, you probably want to know how this can be useful to forex trading.

Remember that one of our objective in currency trading,  apart from gathering plenty of pips, is to put together a strong currency with a weak one by first linking their respective markets.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best Forex broker for you, Trade12 review daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Big Investing Mistakes When the Market Crashes

When the stock market gives the first signals of a crash, investors get nervous and unsure. Unsure, because the chances of losing money are getting bigger. Because of this, they tend to commit ill-advised moves. There are definitely big investing mistakes to avoid in a crashing stock market.

You can’t conquer the market all the time, especially if you make mistakes.

In this article, we have listed some of the most common mistakes you have to avoid when the market falls. Read on!

Investors tend to commit big investing mistakes when the market dives headfirst.

Investors tend to commit big investing mistakes when the market dives headfirst.

Investing Mistake 1: Price anchoring

Investors usually set a price for theirs, and this price is their benchmark. You should know that this price is the purchase price. However, it could also be the highest level the stock has touched.

As an investor, you would base your future decisions on the stock on this price.

Now here comes the problem: anchoring on such prices leads investors to hold on to stocks longer than they should.

Why do they hold on to it? This is because the share price may have dropped below their benchmarks. They hold hopes that the price will go back to that level, even if they didn’t assess the fundamentals of the stock. You must avoid this.

The first thing you must do when the price has dropped is find out the reason. Then, if you think the reasons are valid, you can cut your losses and exit.

“Investors must realize that the price at which they bought the stock is not what the market has discerned as its fair value,” said Alok Churiwala of Churiwala Securities.

Investing Mistake 2: Buying more to the average

You must be careful not you pile up mistakes over mistakes. When the stock you bought has dropped, you must not buy more shares to lower your average buying price.

Remember that it only works when the stock’s fundamentals are strong and the drop is only outside the company. When the fundamentals have been rotting, averaging becomes a not-so-clever move. It would be like putting yourself in the way of a bullet.

In other words, the more you buy crap, the more your losses will be. There’s no point in throwing your bucks there.

“Averaging down is a good idea only if the underlying stock is of good quality. Even then, fix a limit to the extent to which you want to increase exposure,” says Kunj Bansal of Centrum Wealth.

Investing Mistake 3: Getting swayed by confirmation bias

When the stocks go on self-destruct mode, investors sometimes keep their noses on the news and reports. They keep overly magnified tabs on headlines.

In the process, they also look for signals, even remote ones, that support their views. In doing so, they often ignore other reports that opposes their beliefs. This bias slowly creeps way into investors when a market drops.

It can, and it will, corrupt your judgment. Lastly, it will make you commit bad decisions.

Do not close your mind to negative data, even though it means doom for you. In other words, don’t let emotions cloud your judgment.

Investing Mistake 4: 52-week low prices

When  a market drops, some investors transform into value pickers. They look for stocks that are trading near their 52-week low.

Why? Because these are thought to be good bargains. Why? Because they think that much of the downside has already been in the price.

On the contrary, these “opportunities” can become value traps. Why?

First, it is next to impossible to figure out if a stock has already bottomed out. The market can remain irrational for much longer than you expect.

But if you bet on it, and you have high convictions about it, just brace yourself for near-term losses. It sometimes takes time for markets to increase the value of stocks.

“The 52-week low may provide a starting point but it would be a mistake if used in isolation,” said Vikas Gupta, the CEO of Omni Science Capital.

Investing Mistake 5: Changing financial plans

A steep fall in the market sometimes convinces investors to change their plans or investments. Others may be pushed to ramp up their exposures to equity, thinking they will benefit from market correction.

The more conservative investors may take out all the money just to be on the safe side.

What we want to say is  that you must not base your investment decisions on the more famous market mood. Don’t forget that the market may turn the other way completely.

“At such times investors tend to forget asset allocation and lose patience. This can hamper wealth creation in the long term,” said Tarun Birani of TBNG Capital advisors.

Remember, you should avoid making spur-of-the-moment decision changes. It’s much better to focus on the long-term goals. Stay inside a well-defined roadmap.

Final Word

All people make mistakes. You can be excused when you commit one. Of course, it’s normal. But you must remember that in investing, a seemingly simple mistake might mean everything. It’s easy to lose one’s mind when the market appears diving headfirst to the ground. It’s easy to panic. That why you must be extra smart at the first signal of a crash.

If you find yourself already knee-deep in a crash, you may read about some ways to survive a market crash.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best Forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!