Posts Tagged ‘Investment Fundamentals’
One of the key points in the recently concluded election was about how the “would be president” then would tackle the ominous fiscal cliff. But many, especially non Americans, are still unfamiliar with the term.
The term “Fiscal cliff” was an expression that was used throughout the history especially on budget talks. According to research, the earliest reference to the term was traced back in 1957, when it was used in a New York Times article about home ownership.
At present, the term denotes the effect of a number of laws in the United States which may lead to spending cuts and tax increases. The whooping $7 trillion in spending cuts and tax increases was scheduled to take place at the beginning of this incoming year, 2013, which is approximately 35 days from now. The buzz word first entered the scene during a speech by Federal Reserve Chairman Ben Bernanke to the House committee on Financial Services last February 29,2012.
“Under current law, on January 1st, 2013, there is going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long run fiscal improvement without having it all happen at – at one date.”
The laws involved are the Bush tax cuts and the Budget Control Act of 2011. The Bush tax cuts or Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is an act centered on the two-year extension of the Economic Growth and Tax Relief Reconciliation Act of 2011 provisions which was intended to delay the return of tax rates similar to the Clinton administration. It was passed by the United States Congress back in December 16,2010 and was signed as law by President Barack Obama a day after. It is scheduled to expire at the start of 2013 which would result to tax increases.
Meanwhile, the Budget Control Act of 2011 is a federal statute and was signed as a law by President Barack Obama on August 2,2011 which mainly focuses on debt ceiling and deficit reduction. It is also scheduled to expire almost the same time as the Bush tax cuts and would result to spending cuts.
The two effects would lead to a reduction in the budget deficit in 2013. The abrupt deficit would then lead then to an increased recession on the same year which would greatly damage its present economic recovery.
It is at least imprudent to start trading on Forex not making strict rules and getting wise to the trading basics. Look before you leap – or so much time and nerves will be spent to no purpose. Before being flush with money right and left it is better to get insight into capital or money management.
1. Look for alternatives
- Look for beneficial investment objects, fish for information and keep in touch with professionals. Do you want to earn profit? Make efforts! Learn opinions, ratings, brokerage companies’ websites. The opportunities of a modern trader are wide enough and in order to embrace them you should know about them first.
2. Start from scratch
- Stock exchange investors use the averaged investment method which means the security papers purchase for the same amount of money in equal time frames. It helps to set limits and avoid serious financial slips. There are cent accounts on Forex, serving as a safe point for start.
And certainly, you should not rush to open a real account – have practice on demo accounts first.
3. Do not put your last money at stake
- Any investments are related to risk somehow, that is why the market environment is variable. Do not play with money which you cannot afford to spend. Remember why you came to Forex. Not for blowing off all your capital for sure.
4. Remember: the higher profit – the higher risk
Risk and profit are proportionally related to each other. It should be taken into consideration when forming an investment portfolio.
- Running trading on Forex, think well about the leverage usage provided by broker. Leverage will advance your financial options, and in case of success you will benefit from the whole amount deposited, but in case you lose – you risk blowing off all your funds.
5. Diversify risks and observe the fixed limits
- To continue the previous point, it should be emphasized that for reducing risks it is reasonable to use different investment tools. Moreover, the experts recommend applying not over 50% of funds available and involve 5-10% of them in one trade.
- In a currency market it is important not that how much you earn, but how much you manage to save while you trade. Apply “Stop loss” and “Take profit” instruments to protect your capital.
6. Develop your own strategy
It is better to have a bad strategy rather than none. In addition, all your decisions should be conscious; you have to comprehend market changes and your actions. If the events do not follow your scenario it is better to stand back for awhile. It is also essential to determine your opportunities and goals: what amounts you are ready to invest, how much you are ready to put at stake, and if there is a place for adventurism in your plan?
- To sum up – a piece of advice. Never invest the money you borrowed. It is always risky. Do not put money being influenced by emotions or giving way to somebody’s opinion. Also remember that excessive self-confidence will bring you no use. Always be aware of your rights and duties.
Added by InstaForex Staff