Sunday, December 20, 2020

The Operation of the Stock Market

Anyone investing in stocks makes long-term investments. In the fairy tale universe, pictures from movies like The Wolf of Wall Street" belong, even though they might be based on actual events.

We have gathered some information for you in order to make your entrance into the world of stock exchanges even easier. You'll learn on this page how to invest sensibly.


The Operation of the Stock Market


The price of defense varies gradually. Many variables depend on the supply and demand of a security and thus the price. On the one hand, that makes trading exciting, and on the other, risky. Investors will also benefit directly if they consider stock market investing as a long-term investment. Three opposing goals should be considered - seen in the investment triangle: yield, protection, and availability:

The magic investment triangle defines the three investment objectives: stability, income, and availability. It is evident from its composition that only two of the three objectives can be accomplished.

High-security investments and fast availability are not very profitable - e.g. B. Non-binding accounts for investments. High profitability and high-security investments are not available rapidly - e.g. B. Savings and bonds on long-term terms. And high profitability and fast availability investments are typically risky - e.g. B. Stocks and Choices.

 

The Road to Success: long-term commitment

 

The stock market can be downright risky if you are not a stock market professional and want to produce short-term profits. For example, the Nikkei index dropped 11.4 percent on October 16 during the financial crisis that began in 2007 - the second-largest daily loss in the index's history. With which you can mitigate your risk, you can learn about smart investment strategies.

 

9 tips on making healthy investments


1-Investing is worthwhile for the long term

 

Any overnight interest rate beats the growth of the DAX. This is why in times of low-interest rates, such as today, investing in securities is especially worthwhile. An example of a calculation: if you had invested 10,000 euros ten years ago in a call money account at 3% pa, you would have earned 13,439.16 euros at the end of the period. In the end, you would have gained about EUR 23,700 if you had invested the same amount in the DAX (observation period July 1, 2005, to July 1, 2015).

In such periods of time, however, losses - in some cases significant - are also probable. The DAX, for instance, halved from 8,000 to 4,000 points from July 2007 to February 2009. Fluctuations often occur frequently during shorter time periods. The entry time (time of purchase) and exit time (time of sale) are therefore definitive.

 

2-The risk of a stock market collapse is still there


The Dow Jones Index dropped by 508 points in one day in the event of a stock market collapse - within six and a half hours. On October 19, 1987, the "Black Monday" was the largest regular decline in the history of the stock market and meant a price drop of 22.6 percentage points. 15 months after the crash, at 2247 points, the Dow Jones had risen to its level before the stock market crash.

The DAX was introduced in Germany on 1 July 1988 - there have been many short-term crashes since then the last big one on 21 January 2008, when fears of a recession culminated in a 7.2 percentage point fall. The DAX has taken nearly four years to climb back to its old standard.

 

3-Typically high-risk investments return more than safe ones

When they take greater chances, investors expect a higher return. This may also be the case for stocks relative to bonds. You will produce higher returns in the long run. One thing applies if you choose to bet on bonds: the financial gain on your bonds can be small in the short term - owing to short-term market fluctuations. Long-term bonds can also be more worthwhile than short-term bonds for trading.


4-Earnings are the greatest factor affecting stock prices

 

Two sources of income are typically given by the stock: the dividend and the price benefit. If these rises or fall, often the share prices respond very quickly. Changing interest rates or investor sentiment are other variables.

 

5-A bad year for bonds is like good stock weather


Investors tend to take their money out of stocks as interest rates increase. They choose to spend it on bonds and other assets with fixed income. The reason: Compared to bonds, the revenue from it is more interesting and the investment risk is smaller. This causes stock prices to decline, while bonds are becoming more costly. On the other hand, investors usually bring their money back into stocks as interest rates fall again, with everything else remaining unchanged, and the previous pattern is reversed.

 

6-For bonds, rising interest rates are evil

 

As interest rates rise, bond prices decrease. This is because borrowers with a fixed interest rate of 6 percent pay less for an existing bond than for a new one, e.g. B. It brings in 7 or more percent. Conversely, bond prices increase at the same rate as interest rates decline This is most noticeable in long term bonds. Thus as interest rates grow, long-term bonds are more impacted than short-term bonds. Conversely, they benefit the most in value as interest rates decline.

 

7-The biggest threat to your long-term savings maybe is inflation

 

Inflation has caused your money to lose about 2% of its value per year in the past. And what is lost due to inflation, you rarely get back. That is why it is so important that for example, you invest in your old-age provision, where it can bring in the most in the long term: on the stock market. The risk of a stock market collapse lurks here, which could initially impact your shares in principle - but the stock market has consistently recovered and reached new heights so far. Predictions for the future, of course, are not realistic. It, therefore, relies on a balanced combination of personal knowledge, experience, and risk-taking ability.

 

8-Make your portfolio detailed

 

Diversification decreases the chance of losing money, spreading the money through various forms of assets. Even if some of your investments go down in value, others can go up in value and vice versa.


9-Index fund income also exceeds that of mutual funds with exchangeable portfolios by far

The fund manager brings his portfolio together with an index fund in such a way that it represents the market index (e.g. the DAX) rather than actively choosing the stocks to purchase. Experience has shown that the index funds in terms of results are always able to outperform the majority of funds actively managed. One explanation for this is that few actively managed funds can adequately outperform the market to cover the higher fees incurred. Below, we have outlined the most important facts for you about funds, stocks, and bonds.

 

In the universe of securities, stocks are just one type

 

There are a variety of other records, in addition to the classic security, the share. You will get to know the other forms of protection and their risks on this page. For example, bonds normally do not offer as much return as stocks in the short term but are associated with lower risk.

Best possible investor protection through risk classes

When you open a custody account, you will be asked to supply the following information:

  • Your past Securities experience
  • Your investment priorities
  •  The economic condition

 

As part of the statutory investment security provided for in Section 31 of the Securities Trading Act, each custodian institution asks you these questions (WpHG). Maxblue can independently assess a risk class on the basis of your knowledge. All securities up to this risk class can then be purchased. The risk class is not considered when selling safe.

 

Securities lots, seven risk groups

 

Internal risk classes have been established by Deutsche Bank for financial instruments (investment financial products) that are used for advisory purposes, but also for other sales of financial instruments and are based on an internal risk measure set up by Deutsche Bank (private and corporate customer bank).

The risk groups are aimed at making the risk content of the various financial instruments comparable. Accordingly, a financial instrument assigned to risk class 5 has a higher potential for failure than that assigned to risk class 4. A total of seven ranges form the risk groups. However, a financial instrument rated in the lowest risk class (1 of 7) does not constitute an investment that is risk-free.

In the case of risk classes, 1 to 5, the historical average probability for losses is used as a basis for the risk class classification. This is focused on past results. Past data is not a valid predictor of the potential for future losses. In specific, dangerous tools, such as B. On the basis of the historical loss potential, leverage items, options and futures should not be allocated to a risk class. Consequently, these are categorized into different risk groups 6 (increased risk of loss of capital) and 7 (potential of loss greater than the potential of the capital employed/security granted).

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Wednesday, December 9, 2020

What are the options? How do options work?

If you think trading options "dangerous" it is understandable.

Yet, is this the truth indeed?

As you learn more about this investment product, we think your mindset will change. Since options to mitigate risks are also used.

With the aid of choices, you too can restrict your risks. Simple knowledge about this product, however, is important.


 

What are the options? How do options work?


What are the options, and how do they work exactly?


You can understand the most significant terms after reading this post, understand the difference between call and put options, and what 'going long' and 'going short' means.

Themes addressed in this article:

 

  1. Relevant Words
  2. Options to call and options to position
  3. The Long & Short

 

A. Words important:

 

What are the options?

 

A choice is a derivative that offers the buyer the right at a fixed price at a given time to sell or purchase a specific good. The value of an option depends mainly on the price of the underlying asset, the duration of the options contract, and the volatility.

 

What is a call option?


A call option is a financial product that gives the buyer the right to purchase an underlying asset at a pre-defined price, such as a share ( exercise price ). Also, the date (the so-called expiry date) on or up to which the right can be exercised is specified. The price the option is traded for is referred to as the option premium.


What's the Put Option?

 

A put option is a financial product that gives the buyer the right, at a predetermined price, to sell an underlying asset, such as a share. Also mentioned is the date on which the right may be exercised or until (expiry date). The amount at which the option is being exchanged is called the premium of the option.

 

What is the option's underlying value?


The financial commodity on which the price of a derivative is based on the underlying asset. (e.g. a particular share, index, currency, or specific commodity). Options, futures, and leverage products are well-known examples of derivatives with an underlying asset.


What is the date of an option expiration?

 

The expiry date shows when a financial product expires, such as an option or a future. The default expiration date is the third Friday of the expiration month. However, there are also different closing dates for German and American options markets, such as for regular options and weekly options.

 

What is the option's strike price?

 

An option's strike price is the price at which the underlying asset can be sold or purchased by the holder of an option. After the expiry of the option period, the holder of the option shall decide whether to exercise his right to buy or sell at the price of the exercise.

 

B. Call and Put Options trading


There are two kinds of options used when selling options: call options and put options. A bought call option with a share as an underlying share gives the owner the right to buy shares on or before the expiry date of the option at a fixed price (the strike price). For this right, the investor pays an option premium.

The seller of the call option collects the premium and must sell shares at the exercise price while exercising the option. 'Writing an option' is often called selling an option.

 

For the right of a put option, the reverse is valid. A purchased put option with a share as an underlying option gives the purchaser the right on the expiry date to sell shares at the strike price. You may be allowed by the buyer of that option to purchase shares at the strike price with a written put option.

 

 

to buy

Sell ​​/ write

 CALL

 Right to buy stocks

 Duty to sell stocks

 PUT

 Right to sell stocks

 Duty to buy stocks

 

 

 

 

An investor with a call option exercises the right to purchase shares only if the price of the underlying asset is above the exercise price on the expiry date.

The holder of the call option will purchase the shares directly on the exchange at a lower price if the price is below the strike price. Please note: the buyer of the call option has the right, not the responsibility, to exercise the option. However as soon as the buyer of the option exercises it the seller should sell the shares.

In the case of put options, the reverse is valid. Only if the price of the underlying asset is below the exercise price does the investor exercise his option? In this case, by exercising the option, the investor can sell his shares at a higher price than the current price traded on the stock exchange. Here when the option is exercised, the seller of the option is bound to purchase the shares.


CALL OPTIONS

 

 Act of the buyer 

Seller's duty

 Price higher then the exercise price

 The buyer exercises the call option

 The seller is obliged to sell shares at the exercise price

 Price lower than the strike price 

 The buyer does not exercise the call option

 No

PUT OPTIONS

 

 Act of the buyer

 Seller's duty

 Price lower than exercise price

 The buyer exercises the put option

 The seller is obliged to buy shares at the exercise price

 Price higher then the exercise price

 The buyer does not exercise the put option

 No

 

C. Long & Short Options trading


The phrases long and short are very common when trading stocks, options, and futures. In the language of the stock market, a long position means that the investor has purchased a certain commodity and speculates on a price rise.

Therefore, going short on stocks suggests that an investor sells stocks he does not own to buy them back at a cheaper price at a later date.

The margin between the sale price and the stock's lower purchasing price is the benefit of the investor. As the price of the stock increases, a long position makes a profit and when the price of the stock falls, a short position makes a profit.

The long and short terms take on an extra dimension in the field of choices. If an investor in his portfolio has long call options, it suggests that he has acquired these call options. The same applies to long-placed options, irrespective of the fact that the purchased put options speculate that the underlying value price will fall.

For short call and short put options, the reverse is valid ( written options ). In the table below, this becomes clear:

option

 plot

 term

 Speculated on:

 CALL

 Bought

 Long call

 Rising underlying

 CALL

 Sold

 Short call

 Falling underlying

 PUT

 Bought

 Long put

 Falling underlying

 PUT

 Sold

 Short put

 Rising underlying


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Sunday, December 6, 2020

The Largest Market in the World

Recently, China has reduced its dollar reserves, but the Asian nation still has in its ranks a gigantic treasure chest of US currency. It should be clarified here which countries carry much greater quantities of the US currency and what impact this has on the global economy. What position Forex plays in this should also be considered.

 

The largest market in the world


Forex? Why is that important?

 

The first thing to do is to explain what trading in Forex is and how it works. All transactions that revolve around the purchase and sale of foreign currencies are referred to as the foreign exchange market or forex for short. This is already part of the chaos in the currency markets, even though you swap your euro for another currency before your next trip to Denmark.

International currencies are essentially foreign currency designations. You can now buy these foreign currencies in so-called lots from a dealer - uniform units - (usually 100,000 units). Using the trigger, it is likely that on average, the investor just needs to deposit between 0.25 and 5 percent of the traded volume. The remainder is given by the broker.

When the funds on the deposit are used up, the broker immediately closes the trade. This implies that private individuals may also engage in Forex with reasonably low risk. According to Statista, from just under US$ 1.2 trillion in 1995 to almost US$ 5.1 trillion in April 2016, the amount of sales that are transferred every trading day on the foreign exchange market has risen. This makes the largest and most liquid stock market in the world, the Forex market.

 

Payment transactions are in US dollars

 

In the global economy, the US currency has for decades been the undisputed reserve currency. The dollar is involved in over 87 percent of all foreign exchange transactions, according to a report by the Bank for International Settlements (BIS).

Global trade, meanwhile, is also overwhelmingly in dollars. Although Europe is three times as involved as the US in trade with the world, Europeans must repeatedly turn to the American currency for their exports. The so-called Swift statistics, which display foreign payment transactions, confirm this. It reveals that the dollar accounts for 44 percent of foreign payments at present. He drew or still draws a large part of his strength from exactly this consistency.

The value of the dollar has a significant effect on the global economy as a whole. If the FED raises the main interest rate, the demand for the dollar worldwide will increase. This implies that capital flows out of the emerging markets and causes volatility there.

In particular, if you have made an economic mistake and borrowed money in a foreign currency, in this case in dollars, there is a high chance of having trouble paying off your debt. The appreciation is twice as painful if the economy then struggles as a result of the outflow of money. In the past, such an increase has only occurred twice, and at the end of this year, a further increase in the US main interest rate may follow.

 

Countries by currency reserves or importance for the Forex

 

Although global foreign exchange reserves peaked at $11,685 trillion in 2013, they have dropped by nearly 10 percent since then. In 2016, it was just $10.715 trillion.

The following countries hold the largest currency treasures in their possession, according to the data prepared by Statista and provided to the International Monetary Fund for February 2017.

Currency reserves are assets of a central or issuing bank in foreign currencies, in precious metals, in special drawing rights, or in reserve positions in funds kept by the IMF to manipulate the currency market or cover foreign trade deficits.

Global foreign reserves were just 10.8 trillion US dollars five months ago instead of 11.06 trillion before, according to data from Reuters and the IMF. The US dollar share is just over 63 percent, which is equal to about 4.94 trillion in value. Around one percent is the Chinese yen. The euro makes up about 19.7 percent of the foreign exchange reserves.

 

Since 2010, China has been number two on the list of economies. In 2014, in terms of purchasing power, China also overtook the US. It has $ 3,2999 trillion in foreign exchange reserves, except Hong Kong. Economic growth is set at approximately 6.5%.

In the Middle Kingdom, the economy is highly export-oriented; in the past twelve years, foreign trade has risen by more than 1000 percent. China is home to the largest container port in the world with Shanghai and, without Hong Kong, is described two more times in the Top 10. In monetary policy, this results in tension. A too powerful yuan makes exports more costly and causes the export of goods to fall.

A yuan that is too poor is risky for the country's economy.

International investors withdraw their money if the value is too low. Currently, the Chinese government is seeking to boost the national currency against the dollar. To compensate for the fact that more and more Chinese citizens decided to diversify their assets and among other things, accumulated huge quantities of dollars, the Chinese central bank had to sell foreign currency reserves.

To prevent the yuan (renminbi) from devaluing too much against the US currency, this move was appropriate. The government wants to completely open up the currency for trade by 2020 and expose its value to supply and demand powers.

Shortly, state-owned companies are projected to be more market-oriented and more innovative, to broaden the country's value chain, and to specialize in strategic technologies such as information technology, biotechnology, or aerospace technology. Furthermore, the "green economy" and robot technology should be extended and supported.

However, it is still important to strengthen the investment conditions for foreign actors. However, talks are currently underway with the EU on a substantive investment agreement.

 

Japan, the third-largest economy in the world, holds In currency reserves, 1.2969 trillion, comes second.The highly export-oriented nation must also ensure that against the dollar, the yen does not appreciate too much. This will make the island nation's goods more costly and impact almost the whole Japanese economy.

In the areas of research, growth and manufacturing, electronics, machinery, automotive engineering, and the chemical industry, it is one of the world's strongest. That is why the monetary policy of the country is always careful to support, by weakening the yen, the export market. This dependence would continue to exist, given demographic growth and poor domestic demand.

On the Japanese stock exchange, a devaluation of the yen has only led to price rises. The export companies were as was to be expected, especially in demand. Before that, the yen's ten-month high against the dollar had triggered worries about the company's profits there. Among other items, the slight relaxation of North Korea and the decline of Hurricane Irma helped. The dollar had its lowest value since the beginning of 2015, a week earlier. The chaotic political situation in the USA is one of the reasons for this.

The money supply about GDP reached about 80 percent in 2016, thanks to a scheme to buy Japanese government bonds amounting to 700 billion euros annually since 2014. This figure is around 20 percent in the EU and around 21 percent in the USA. After hitting its high of US$ 206 billion in 2012, the amount of foreign direct investment dropped again to about US$ 170 billion in subsequent years. Overall, however, Japan benefits from Asia's entry into the global market and the strengthening of developing countries. The monetary policy of Japan and its outstanding position in the world market ensure that the JPY, together with the USD, is the second most widely traded currency pair with a forex market share of 13%.

 

There is already 0,7138 trillion US dollars on the credit side of the IMF in Switzerland. The Alpine Republic's unemployment rate is a low 3.3 percent and the inflation rate is -0.4 percent. The country is characterized by the banking sector and export-oriented, specialized industry. Moreover, it also makes a large income from selling raw materials.

Following the lifting of the 1.2 CHF per euro price relation to the euro in January 2015, the franc soared. The export industry and tourism were hit hard by this. It even achieved parity against the euro at times. In particular, the powerful euro bothers him. Because of the stable euro area economy and Draghi's declaration that he plans to discontinue the ECB's economic and securities buying program, the tide has changed.

At present, the Swiss franc has hit a low point and there is a call for 1,14 francs for a single euro. For example, watch manufacturers Swatch and Richemont, who sell a large part of their products internationally, profit from this in turn. Other specialist industries benefit from better export markets, such as those for medical precision instruments or those in the electrical industry.

For foreign investors, on the other hand, Switzerland is also a safe bank. This status may be jeopardized if the franc weakens too much. Companies manufacturing or purchasing in the EU are also finding it difficult. As a consequence, for them, expenditure increases and productivity suffers. Last but not least, Switzerland's people are affected. For them, papers from abroad or holiday trips would be considerably more costly than before.

However, Switzerland benefits from the fact that the variations in the exchange rate against the euro are helped by the fact that large Swiss stock-market fish, such as Roche, Nestlé, and Novartis, account for a large proportion of their income in US dollars. As a result, there was a net foreign trade surplus of about 37 billion Swiss francs in 2016.

 

Saudi Arabia ranks fourth after Switzerland. It is the Arab world's largest economy. It has roughly $0.4929 trillion in foreign exchange reserves. Saudi Arabia is one of the major producers of petroleum and the largest oil exporter in the world. Since oil is historically traded in US dollars, the economy of the country is highly dependent on the world reserve currency rate.

Last year the government's deficit was more than EUR 90 billion. That is why last year the ambitious "Vision 2030" reform was unveiled. It is important to diversify the economy and to sell 5 percent of the state oil company. The remainder is to be absorbed into the sovereign wealth fund, which will then expand to be the world's largest. Among other things, it is important to manufacture its plants for the development of renewable energy sources, reform the education system, gradually incorporate women into the labor force, and much more. In this way, even after the oil wells dried up the economic future of the desert state will be assured.

The Crown Prince wants his nation to become independent from oil in twenty years and to make it a big global investor. To this end, more locals, i.e. migrant workers, have to be absorbed into the labor market, which is now dominated by about nine million ex-pats.

Next year a five percent VAT will be added as well. It can be expected that if Saudi Arabia turns away from oil, it will be even more aggressive in the capital markets, most likely in the forex market as well.

 

In currency reserves, Hong Kong holds $0.4202 trillion. High foreign exchange reserves are largely because Hong Kong is one of Asia's most significant financial centers and has the world's fourth-largest container port.

In an extremely service-oriented economy, the unemployment rate is 3.5 percent. 90% of the gross domestic product is accounted for by the service sector, and every second employee is working in commerce, banking, logistics, or related industries.

In addition, tourism also plays a significant role. Hong Kong's currency is pegged to the US dollar.Therefore, it is only in the small currency market, which accounts for only about 10% of the foreign exchange market.

Most recently, the inflation rate was 2.4 percent. Also, Hong Kong is the most significant source of foreign investment and provides companies from mainland China with access to debt capital. In 2016, Hong Kong was the second-largest target market and the third-largest source of direct foreign investment.

 

With a backup of $0.403 trillion, Russia follows closely behind. Russia also has some foreign exchange reserves, accumulated primarily by the trade of commodities. The Russian economy is not so focused on the export of finished products that it produces 50 percent of its gross domestic product in the trade or service sector.

Moreover, raw materials, particularly oil and gas, are mainly exported, most of which are traded in US dollars. Just about 15 percent of GDP is in the manufacturing sector. In the recent past, to compensate for the depreciation of the ruble, Russia has regularly sold huge quantities of US dollars.

Russia had to part with US securities on a wide scale after the oil price dropped to $26 in early 2016, the Russian economy crashed and the ruble fell to an all-time low. The West's sanctions have made the situation even worse. Now the price of oil has risen again recently and is now back in the region of 50 dollars.

As a consequence, the creditworthiness of Russia has strengthened immensely again. The ruble also rallied, so there could almost be fear that the hesitant recovery would be slowed down. Russia has been able to extend its US bonds back to just under 100 billion US dollars in two attempts after Trump was elected US President in November last year.

Furthermore, Russia has recently managed to get around the free market sanctions. Russia sold $3 billion in government bonds at almost twice the rate of interest owed on US debt.

Now that the markets have restored confidence, it is possible to talk about resolving the crisis. This should not, however, mask the fact that Russia relies heavily on its raw materials and that there is an urgent need for significant structural reforms.

 

Next is South Korea, with a value of US$ 0.3739 trillion. The position that exports play in the country cannot be overestimated for producers such as Samsung, Daewoo, Hyundai, and LG, which are based in the tiger state.

As a result, to keep the rate of the Korean won low against the US dollar, the country needs to be able to control the foreign exchange markets. There was also no significant effect on the local economic situation from the diplomatic tensions across the Korean peninsula.

Within the last few weeks, the victory has scarcely moved. Global investment, however, dropped 41 percent in 2016 to $ 9.8 billion. In the Republic of Korea, there are currently about 7500 foreign companies working. International trade also dropped by 12.3 percent in addition to savings.

 

This is followed by Brazil, with currency reserves of at least $0.369 trillion. It is also part of the BRICS countries and one of the world's biggest developing countries. The country is suffering from low prices, especially for oil, because of its abundance of raw materials.

There is also hope that consumption in the country will increase slightly again, given the 18-month low in the inflation rate. The economy is getting better and the recession is hopefully over. The explanation for investors' loss of confidence and the resulting severe recession was due to a wide budget deficit that resulted from subsidies and increased government spending.

The domestic market is the most critical, with 200 million inhabitants and a foreign trade share of just 20 percent. Unemployment has risen to 12 percent there though. Industry, which has been grappling with shrinking demand since 2014, is the biggest weak point in the economy. As a consequence, the nation is not benefiting from its currency's low value.

This value rapidly recovered in the years that followed, after Brazil had a negative foreign trade balance for the first time in more than ten years in 2014. While overall trade volume has decreased, since records began in 1980, Brazil reported its highest surplus.

The situation concerning foreign investors changed again in 2016. US$ 79 billion in direct investment has flown into the country.

 

With a balance of $0,3669 trillion, the seventh-place went to India. The nation is one of the fastest-growing economies in the world and 7 have been published. Economic growth of 1 percent in the 2016/2017 financial year.

Similar numbers are expected this year. India is presently one step ahead compared to the other BRICS countries. Inflation on the subcontinent has declined from almost 10 percent to 3.5 percent between 2014 and now. India has seen significant growth in foreign investment because of the dedication of the Modi government to a market economy.

They hit a height of 40 billion US dollars between April 2015 and March 2016. Between 2000/01 and 2015/16, the share of foreign trade in GDP increased from 23 percent to 45 percent. The rupee has recovered against the dollar after its low point after the November 2016 currency reform and is now better off than before.

There are transportation deficits in India, but there are concrete plans to at least connect the economic centers of the country.

 

Then Singapore, as an asset-side thing comes with at least 0.2533 trillion US dollars. Singapore has the biggest container port in the world and its infrastructure is excellent. One of the most significant financial centers in the world is situated on the spot.

Furthermore, there are exceptionally low tariffs in Singapore and an uncomplicated customs system. Approximately 96 percent of all products are duty-free and only a limited number of goods require import licenses. The economy is very export-oriented and therefore highly dependent on foreign financial market developments.

In particular, the dollar and the euro play an important role. City-state monetary policy is therefore aimed at controlling exchange rates, especially against the US dollar. The Singapore dollar has marginally lost again recently after a long time of appreciation against the US dollar.

The sovereign wealth funds of Singapore are also of great significance. Firstly, Temasek, which in the last ten years has risen from 164 to 275 billion Singapore dollars. On the other hand, the GIC, officially priced at US$ 100 billion, but estimated by value analysts to be three and a half times that number.

Singapore, for investors, is a safe haven. The population is well educated, the economic atmosphere is very business-friendly, and there is a stable political situation and currency. Moreover, the SGD Dollar still offers interest rates in a positive, if very low range.

 

In eleventh place is the Federal Republic of Germany. She is also able to rely on a $0.1958 trillion treasure trove. Until 2008, Europe's largest economy was the world export champion, planning the entire economic structure accordingly. Global trade makes up almost every fourth worker in Germany.

The foreign trade quota was at 72.2 percent of the gross domestic product at the pre-crisis stage in 2015. It is all the more amazing because when it joined the euro, the nation effectively put its currency policy in the hands of the European Central Bank. It owes its high currency reserves to its trade surplus, which since 2014 has been well over EUR 200 billion per year. It also surpassed EUR 252 billion in 2016 and smashed the record for the third time in a row.

An end to this growth is not in sight yet. As a country depleted of natural resources, Germany is also dependent on energy sector imports. If the dollar were powerful, imports would become more costly, as raw materials are mostly exchanged in this currency. On the other hand, an overly strong euro makes exports of products more costly and puts employees at risk.

On the other hand, under the scheme of cheap money and zero interest rates, private insurance, savings, and social insurance are struggling. The latter are legally obligated to invest in secure but not very profitable investments at present. Forex trading will remain the most significant currency pair for private sector players, after all the euro and the US dollar.

 

The U.S. is the world's largest economy, but it has a comparatively limited currency reserve volume. This is primarily attributed to the reserve currency of the USD and has many reasons.

On the one hand, the dollar plays a vital role in the global economy, as has already been demonstrated. The United States therefore will trade even more often on the international market with its currency. It is not necessary to swap other currencies.

Companies benefit from the fact that no costly hedging transactions need to be performed by them. Nevertheless, in the vast majority of all foreign exchange trades, the US dollar is involved. With negative deficits of USD 502.3 billion and USD 552 billion, both the foreign trade balance and the budget indicate significant deficits. The debt burden of the state is reportedly a mammoth 20.165 trillion US dollars. With a weak dollar, they are seeking to compensate for this. That is why China and other nations are always pressing for the US to appreciate their currencies.

The Fed has also adopted a zero interest rate strategy for years and put vast sums of money into circulation, thus artificially decreasing the dollar rate. However, interest rates were boosted in December 2015 for the first time in nine years.

States rely on a large, well-developed country and the abundance of raw materials for their economic success. By 2020, the USA wants to be self-sufficient in terms of electricity. Moreover, with about 324 million people, the nation has a domestic sector.

The service sector produces almost 80 percent of GDP, the manufacturing sector accounts for the remainder, and agriculture accounts for 1 percent. The job market has almost hit full employment, with a 4.8 percent unemployment rate.


The UK also had currency reserves of $ 0.1635 trillion in 2016. London, ahead of New York, Hong Kong, and Singapore, is not only the capital of the United Kingdom but also the world's leading financial city.

In the field of derivatives and foreign exchange trade, London is a world leader. The British pound also accounts for 11.6 percent of foreign exchange trade, along with the dollar. The financial sector is overwhelmingly deeply entrenched, with a value-added share of 11 percent. Actually, not even the looming Brexit seems to jeopardize this role.

In general, the country is characterized by the service sector, with a 79 percent share of GDP. Here, in particular, the financial sector plays a key role. However, the British economy does not need to hide in the world market in many high-tech regions. These include telecommunications, information technology, defense technology, construction of automobiles, electrical engineering, biotechnology, and the pharmaceutical and chemical industries. However, 14 percent of GDP is still contributed by the manufacturing sector.

Nevertheless, the jobs rate in autumn 2016 hit a record high of 74.5 percent. At pre-crisis peaks, the unemployment rate is currently below 5 percent. The traditionally very strong pound has been plummeting since the Brexit referendum.It has lost a great deal of its value, especially against the euro. It was as poor as it was in March 2010, the last time. The 2.6 percent inflation rate was just announced.

So far, however, no new impetus has been given to the economy by the weak currency and exports have not risen as strongly as in previous periods of weakness. Despite the Brexit announcement, slight economic growth was reported, but this was due in part to higher consumption, which was partly financed by credit.

The United Kingdom has for decades had a deficit in international trade. The deficits in the exchange in goods cannot be accounted for by the surpluses in the balance of services. The deficit was $ 226.37 billion last year.

 

In terms of currency reserves, Australia is not that relevant, but the currency pair between the US dollar and the Australian dollar is the fourth most traded currency pair on the foreign exchange market. It ranks 37th among the countries with the largest currency reserves, with only 49,265 billion euros.

In return, for the longest time without a recession, the nation holds the world record. The economy has developed for more than 26 years in a row. 70 percent of GDP is accounted for by the service sector, including education and finance, tourism, real estate, and business services.

While agriculture and mining only account for 2% and 6% of GDP respectively, they account for 70% of exports together. In recent years, however, falling commodity prices have left their mark, as iron ore, coal, natural gas, and gold are the country's main export products.

As a consequence, in the third quarter of 2016, there was an unforeseen recession and there are rising indications that the economy could somewhat cool down. For example, by October 2017, the production of cars will be completely discontinued. For the supply firms, this would also have huge implications and the already declining number of workers in the manufacturing sector will continue to decrease.

40,000 jobs are likely to be eliminated, some of which would be replaced by building up a leading weapons industry. To offset the AUD appreciation, at the beginning of August 2016, the central bank reduced the main interest rate to 1.5 percent, which is the lowest level ever. However because the commodity markets have recovered, there is no expectation of a further fall in interest rates.

 

Canada is the 11th largest economy in the world, but it does not have strong currency reserves, at 83.13 billion US dollars. This is unique in that exports, especially to the USA, are heavily dependent on all branches of the economy.

Low oil and natural gas prices also have a negative effect on economic development and the national budget as a country with the third-largest oil reserves in the world. A large number of jobs have been lost in the most critical oil province of Alberta, as a result of the decline in oil prices. Canada still has a powerful and future-oriented economy, however.

The divisions of the automotive industry, aircraft construction, wood, and paper processing, the chemical industry, and also information and communication technology should be listed in the manufacturing sector. Canada, however, suffers from a shortage of qualified staff, which has a negative effect on the location of the industry. The economy is also burdened in some cases by the barriers which exist between the provinces.

In the construction industry, for example, non-provincial enterprises are disadvantaged or technical qualifications are often not recognized. Although Canada is a nation of exports and a free market, foreign investment in key areas has been limited. It is widely touted for international financial injections in other regions.

The main investor is the USA. As already stated, raw materials, metallurgical and chemical products, vehicles (parts), machinery, and fishery and forestry products are Canada's most important export goods.

On the other hand, imports were primarily machinery, vehicles, and consumer goods. The neighbor in the south is also responsible for 80 percent of exports. The United States is Canada's most important partner in trade. This explains, among other items, the place on the foreign exchange market of the CAD / USD currency pair. This is the fourth most-traded constellation, with a 5.6 percent share of the trading volume.

 

Conclusion

 

Economies have very different preferences and aspirations for exchange rates because of their economic systems. As a consequence, they must always realign themselves to one another. As Russia and China have demonstrated in the recent past, the forex provides a strong change screw in the hands of the monetary authorities.

It is possible to monitor reasonably precise investor flows and export performance through exchange rates. States can not only steer their fortunes in this way, they can also cause turbulence at the other end of the globe through global interdependence.

It remains to be seen if, soon, the BRICS states will shake the US dollar's global supremacy. The signs are rising that something is happening and that solutions are being pursued. In the long run, many states are no longer able to fund the United States beyond their means for their lives. However, as long as the yuan is not open to trade, major investors would not be able to invest their money in secure alternatives to the dollar.


You may be interested Forex Strategy-For Beginners



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Saturday, December 5, 2020

Forex Strategy-For Beginners

Without a forex plan and proper risk management, no trader in the world will be effective in the long run. While lucky coincidences can bring in large profits in the short term, everyone is left with luck. And you have to know how to support yourself with the right forex instruments if you want to have a long forex trading life. Each trader must, however, be clear - even the perfect strategy is not free of failure.


Forex Strategy-For Beginners


Forex Strategies for Beginners


 

There are very basic techniques for Forex beginners that they should stick to:


  • keep up with the trend
  • go against the trend
  • copy the strategies of professional traders



The classic trading strategies, so to speak, are the first two forex strategies. One tries to identify a certain pattern, a line that is currently forming in the exchange rate. There is another simple way of choosing the best trading strategy, however. Simply copy them from a specialist and trust their forex trading experience.


 

Set with the Trend


 

"Before that, you may have heard the saying "The Trend is your Mate. This ancient wisdom comes from the stock market world and suggests one would prefer to pursue a pattern rather than bet against it. Since there is a greater risk that the trend will be followed by a price than it will grow against it, betting with the trend among traders is considered reasonably secure. For total forex trading beginners, this is therefore the ideal strategy.


By evaluating the currency exchange rate trends, an attempt is made to define a trend. This can be positive i.e. a currency trend rise, but also negative - a decline. It is important for Forex prices to move either up or down along an imaginary or drawn line.


If the pattern is now set by a forex trader, he takes the short or long position that is acceptable. The trader is betting that along the trend line, the price will continue to move. To get in and out the trader has to locate and assess the optimal time. The forex trader should not, however, rely on his gut instinct here, but on the right analysis of technical trends.


 

Go against the trend



A risky game is being played by Forex traders who go against the trend. You bet the pattern is going to reverse or attempt to manipulate the fluctuations (consolidations). To do this, try to recognize intermediate and short highs so that by regressing to the trend line, you can make a profit. These forex traders are, mathematically speaking, playing with flames. A trend reversal is because the likelihood of a trend continuation is always greater.


In the short term, going against the trend can be enjoyable. This technology will not lead to success in the long term, however. Therefore for forex beginners, this trading strategy is not acceptable.

 


Copying a Trading Strategy from Trading Experts (Social Trading)


 

Many forex brokers offer the ability for their traders to copy one another. Forex beginners benefit from this in particular. You search for active traders with this trading technique, evaluate your trading style, and attempt to copy it. To let other forex traders and forex trading beginners share in his success, this effective trader naturally provides his data voluntarily.


To get started with Forex trading, this trading strategy is particularly useful. You can get to know several different trading strategies and benefit from success, in addition to the increased probability of initial gain.


You may be interested What is Forex Auto Trading?



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Monday, November 30, 2020

Libra Coin- A Global Currency from Facebook

It was just a matter of time before hyperscalers and their own currencies, cryptocurrencies, joined the business. Under the magnifying glass, dreams of a better future and trade clash.

What if everybody was invited to access the same financial resources in the global economy? Among blockchain advocates, this thinking pushes the visionaries, not just those who choose to follow Libra.


Libra Coin- The world currency from Facebook


  • Since 31% of the population of the world has to get by without a bank account. Furthermore, if they want to do foreign business, they have to consider even higher costs - the share costs about 7 percent if money has to be sent abroad.
  • Nonetheless, 85 of the foreign deals are in the form of currency. And cash has other drawbacks: transporting and storing is difficult, but easy to steal. Around $40 billion annually is lost by US retailers to cash theft.
  • As the poor do not have an account, they also pay $ 4 more to exchange cash every month.
  • Therefore, digital financial services that are open to all could have a significant impact on the economy, especially in developing countries. The paper predicts $3.7 trillion in additional turnover and the production of 95 million jobs.
  • Income capacity could be increased by 20% and extreme poverty could be decreased by 22%.

Also quickly mentioned are the prerequisites for success:

  • Sending and receiving money should be easy and possible from anywhere, regardless of income. Libra requires a smartphone or data connection.
  • Sending and receiving money, irrespective of income should be simple and possible from anywhere. Libra needs a link to smartphones or data.

Continuity should be maintained. For this a reserve (stablecoin) is created - this is not the case for every cryptocurrency and does not always guarantee unreserved approval.

Many of the cryptocurrencies on the market actually have no underlying assets to sustain them. The effects of Bitcoin are known to almost everyone: the value of these coins fluctuates - more than expected - just as their prices do.Since they should be able to sell a Libra Coin at any time at a value similar to the value of the corresponding reserve, this is intended to instill user faith. This is expected to safeguard Libra against speculation.

Libra users' balance sheets also decide the size of the reserve. For example, if Libra coins are purchased for EUR 100, then the EUR 100 will flow into the reserve fund controlled by the Libra Association. Libra is listed on the stock exchange as well. The exchange of coins - below or above the current value - should be possible for a small fee. How many Libra-Coins are in circulation or how many individuals want them to be sold or owned should be meaningless?

Therefore, Libra needs to resemble current currencies. The cryptocurrency could be secured by highly credit-rated government bonds. However, the inventors, using the strategies of central banks or "currency boards" forgo their own financial policy. And while central banks may print their currency at their own discretion, if enough foreign exchange markets accept the proposal to mint new coins and banknotes, a currency board typically only prints local currencies.


The Blockchain


The Libra blockchain is also a decentralized, programmable database, like other blockchain processes .

There is also a Libra blockchain development protocol, which focuses on developing a financial infrastructure that facilitates innovation, eliminates barriers to entry, and enhances access to financial services. The Libra core will be applied in advance to predict global integration and define possibilities for development in order to move the protocol.

This protocol helps many authorities - known as validators - to maintain a number of models and thus protect each other. Therefore the programming technology needed for this is used by different user accounts, which in turn have been tested by public-key cryptography. You are bound by the maker to do so. Adhere to the user-defined rules specified. The validators execute the transactions and connect with each other. This allows for a database status agreement.


The Language of the Blockchain


The transactions for Libra are based on the programming language "Move" The ability to describe user-defined resource types with semantic control through linear logic is its key feature. This helps to carry out aspects of the Libra protocol, including control of validation and processing of transactions.

In particular, it is used to describe the blockchain processes, such as the currency and membership in the validator network. These structures allow for the development of a governance structure that evolves within the first few days from the lower volatility and prestige of established institutions but can evolve over time into a totally open framework.

On the other hand, "LibraBFT" is a robust and well-organized replication system for state machines that was specifically designed for the blockchain.

It is based on the "Hotstuff" protocol, promoting scientific improvements to "Byzantine 

Fault Tolerance" (BFT) for several decades and maintaining good scalability and security.


Association & Council


The Libra Association is an autonomous association consisting of the validation nodes of the network. There are, first of all, foreign businesses, social partners, and academic institutions. Over time, any organization that operates validation nodes and has enough stakes in Libra will be included in the association.

The non-profit organization's job is to synchronize the validation nodes, to further grow the network, and to protect it. The Governance and Coordination areas include:

  • The technological development, including a roadmap, inside the open-source community
  • The financial security of the reserve and expenditure control for social purposes.


There were a few additional functions in the early years of the Libra Network:

  • Win Founding Members Members
  • Raise funds from participants and investors through the sale of Libra investment tokens
  • Implementation of programmes and principles for incentives
  • The distribution of dividends

If the Libra network has grown into a complete blockchain, these functions will no longer apply.

The governing body is the so-called Libra Council, made up of the members of each member of the Council. It is by voting that organizational and political decisions are made.

  1. The validation nodes listed have the highest authority in the council. The council transfers much of its administrative powers to the leadership of the club, but retains the right to override delegated decisions - but a two-thirds majority is needed for the most important decisions. What choices would be taken are decided in advance. For subordinate decisions, a simple majority is necessary.
  2. Preserving their worth is the key goal of maintaining reserves.
  3. The weight in the council of a voting right corresponds to the respective expenditure.
  4. To the world, decision making is clear.
  5. Financial interest must be available in order to become a member of the council.
  6. As already mentioned, the first or primary validation nodes are given by the founding members as well. To act as a node, by purchasing Libra Investment Tokens, a company should spend at least $ 10 million, as this amount is used to award one vote in the council.
  7. The association's goal is to make decision-making as effective as possible and to assist its members in the execution of their decisions to the maximum extent possible.

In the course of time, the composition of the Council can and should change. The investment, the position as a verification node, and compliance with the technical regulations decide who is eligible to become a member. The speed of change is decided by the Libra Association Board, as is the development of the network and technological milestones.

Depending on the sum of Libra and their use, the node operators retain a total of 20 percent of the voting rights. Regardless of the Libra shares and the Libra they carry, with a majority of 1 percent of the votes, a single founding member can only be represented on the council. For Validation For nodes that are not charter members and have joined the network through the purchase of Libra, the cap does not apply.

 

The Founders


Stripe, Visa, Mastercard, Pago, Paypal, Marcado, PayU, as well as eBay, Booking Holdings, Facebook, Lyft, Uber Technologies, Farfetch and Iliad, Vodafone Group, but also Bison Anchorage, Coinbase, Trails, Inc., Xapo Holdings Limited and Horowitz, Breakthrough I I Limited and Horowitz is the organizations that work on concluding the statutes and that will become founding members after their completion.

Non-profit, multilateral organisations and academic institutions still exist: Creative Destruction Lab, Kiva, Mercy Corps, World Banking for Women.


Membership


There are two hosting solutions open to businesses that choose to join Libra: self-hosted and cloud service-hosted.

Self-hosted validation nodes are hosted in data centers that this member of the organization runs and manages. At least half a rack should make up the disk room. The association does not expect the space to be used immediately, and further versions of Libra Core are expected to be able to use various servers. The node also requires a high-speed and redundant Internet connection.

In addition, an engineer must take care of the software and be able to secure the validator node, such as maintaining the node's functionality and protection and protecting it from, for example, DDoS attacks, server hosting validator node attacks, and data center attacks.

The association provides organizations involved in running a validation node via a cloud service provider with the tools and documentation to facilitate the deployment. Amazon Web Services' recommended hardware is of the m5.24xlarge instance sort.

On June 18, 2019, the Libra Coins idea was proposed and could become a fact or be tradable at the beginning of 2021


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