All About Financial Matters

Archive for May, 2008

If you are trading on the forex market or are considering doing so, you are already aware of the great profit potential that exists in forex. While the profits can be wonderful, they only exist because of the great risks also involved with forex trades. There are many systems that can be used which have demonstrated good results in back testing or previous live trading, but the reality is that no system is 100% and the market can move in any direction unexpectedly at any time. Therefore, it is essential to use proper money management techniques for long term growth potential to avoid large losses which may cause you to lose all or most of your investment capital.

These tips should help you to minimize losses while maximizing profits. Almost all forex traders will tell you that money management is the primary key to success in forex.

1. Always use a stop loss. Some traders may feel that they are sure of a trade based on several indicators pointing to a trend, and that they don’t want to use a stop loss to allow the trend to develop fully. While it may be true that eventually the price of any currency pair will reach a certain profit target, the fact remains that it may make a major move in the opposite direction first, which may lead to a margin call by your broker or other losses which cannot be sustained.

2. Determine the weekly or monthly profit level goals you would like to achieve based on the projected results for the system you are using. Take into account the success rate (percentage of winning trades) and average number of trading opportunities your system is likely to present. It is recommended to be conservative in your goals to allow some room for weeks or months when the results do not fully meet the projections.

3. Determine the risk you are willing to take or need to take to achieve the profit goals you set. Keep in mind both the percentage amounts of your total balance that you will risk in each trade and also the maximum you are willing to risk at any one time combining all of your open positions. Figure your stop loss according to your system, some systems will recommend a stop equal to or less than your profit target, others may recommend a a larger stop to allow some cushion before the price hits your profit target. Then, determine the number of lots you will trade so that if your trade is a losing trade, the amount of money lost will equal the percentage of your balance you are willing to risk on that trade.

4. Once you have these limits in place, execute your trades with these stops and targets every time. Stick to your plan, don’t get greedy when things are going well and don’t fear when some of the trades don’t go your way. Stick to your resolve and have faith in your system. All traders experience losses, you will be no different, but if you stick to a predetermined risk plan as a percentage for each trade, you will always live to trade another day.

Putting these tips into action will put you on the path to the discipline needed for success in forex. Believe in yourself and the rewards can be great for you, not only financially but personally as well.

For great resources and helpful information about trading in the Forex market, visit mymultipleincome.com mymultipleincome.com. Joe Phelps is a forex trader and successful entrepreneur specializing in developing multiple streams of income.

In every society, access to financial services for every citizen is a vital part of sustained economic development. More emphasis should be given to the roots of society: the rural sectors and working-class. But most of the time, it is very hard to identify financial institutions that provide these needed services, which could improve the livelihoods and reduce risk. Most commercial financial institutions do not provide the proper services needed to support these sectors, as it is not viable to provide cheap services to these communities. They are also unable to provide their services directly to the target group because of high transaction costs coupled with small transaction size and the higher perceived risk of financing clients without collateral.

Therefore, may countries today use alternative approaches instead. The goal is to bring all people into the country’s financial system so that they will have continuous and permanent access to affordable financial services.

There are several categories of financial providers

1) Formal Financial Institution: Professional entities such as licensed banks.
Problems: The small profits that can be earned may not compensate for the significant cost and effort involved in tailoring products and delivery systems, especially low-income people. Nevertheless, banks interested in this niche have successfully created a separate unit within the bank, or established a separate affiliated company before.

2) Informal Providers: Small member-managed entities that are not licensed.

3) Semi-Formal Institutions: NGO, small financial cooperatives, and community-based financial organizations

a) Cooperative Financial Institutions (Cooperative banks, credit unions to small village based cooperative entities)

b) Microfinance Non-Governmental Organizations

c) Community Based Financial Organizations (village savings, loan associations, savings and credit associations, self-help groups)

d) Traditional village-based providers (money lenders, small shops and input suppliers who provide goods on credit, and informal savings and credit groups)

The formal financial institutions approach focuses on building strong, stable financial systems that serve the entire population. This is the preferred approach when there are Labor banks, microfinance institutions, and financial cooperative/ credit union networks that are interested in broadening their outreach to the low-income society. The community-based institutions approach focuses on building strong informal or semi-formal community financial institutions, and then linking them with the formal financial sector.

The Purpose of Microfinance:

Microfinance is the provision of financial services, including savings, credit, insurance and payment services, to low income people. Typically, low-income people, especially those living in rural areas, have been unable to obtain quality services at a reasonable price from the formal financial sector. Microfinance is best supported through financial sector programs, however, in many countries where social funds operate there are no financial sector programs with a strong emphasis on access to finance issues, nor are there many viable microfinance institutions.

The Purpose of Social Funds:

Social funds are demand-driven mechanisms that channel resources to the poor and support subprojects that respond directly to the priority needs of the low-income population. They have been used in a growing number of countries to alleviate the social and economic effects of economic crises, cushion the impact of adjustment programs, generate short-term employment, and finance small-scale investments in poor communities. Access to micro-credit is not sufficient, the poor also need access to savings, insurance and payment services. Several wide-scale studies have been conducted on identifying lessons, best practices, and potential pitfalls; they include Panama, Yemen, and Eritrea.

Example Bosnia and Herzegovin:

The overall aim was to jumpstart the process of establishing a strong microfinance sector so as to help raise incomes, create jobs, and develop the smallest businesses. To provide access to credit to the economically disadvantaged, specifically low-income micro-entrepreneurs who had no access to credit from the commercial banking sector.

Problems in the past:

Government policy is oriented more towards creating employment and improving income in response to a crisis than toward long-term objectives. As such, social fund activities were not geared towards strengthening or reforming the microfinance sector, but rather towards using existing microfinance programs as channels for expanding employment. Further problems range from governments and donors using these organizations to channel cheap credit to rural populations to mismanagement of funds.

The Purpose of Credit Unions:

A credit union is a community based financial institution with representation from all socioeconomic levels. Main purposes are the economic, social, and political promotion of democracy and securing of financial stability, and to provide competitive and quality financial services responsive to the needs of its members to improve their livelihood. All credit unions operate within a common bond, such as employment- all members must work for the same group of employers or industry or in the same occupation. Credit unions are for service rather than for profits.

What is the right approach?

Consulting with communities to identify the demand for and supply of financial services among the working-class and rural areas to be covered. What financial services are provided, by whom, and how? What are the gaps in coverage, in terms of types of customers served, types of services provided, and geographical reach? Consider ownership structure, governance and management structure, financial products, customer base, ability to cover costs and existing relationships with professional financial services intermediaries

Peter Kopitz is currently living in Bangkok, Thailand after graduating with Honors from the University Of Chicago Graduate School Of Business with a Masters Degree in Business Administration. He is actively involved in researching economic and political development in Thailand, focusing primarily on property development, security analysis and investment banking. rentalsillustrated.com/homefinance Hawaii Home Loans | openhouseillustrated.com Honolulu Realtor | rentalsillustrated.com Hawaii Rentals