Choosing The Right Investment Company

What is a Traditional Brokerage?

You have surely seen brokerage firms advertising on television, billboards and the radio. They are the very large and well-known firms. You might find narrow niche markets within this kind of firm, such as focusing on socially responsible investing. They generally have 24/7 access for clients and are relatively inexpensive. However, you might find yourself paying more if you want additional advice, so this can be an issue for those who are investing on a tight budget and need additional information to make the right investments.

Investing with Your Insurance Company

Compared to a traditional SRI investment company, this is a much more limited option, but there are opportunities. For example, you can look into something like an annuity. The biggest issue with this option is that your long-term return can be very limited due to high costs. The personal attention is beneficial, as is the overall simplicity of working with this option. However, if you want to get the most return for your money, this may not be a solid option.

Credit Unions and Banks

While not used for investing in things like companies and stocks, you might consider this option for investing in things like an IRA. Credit unions and banks might also be able to give you some advice for things like insurance and building your investment portfolio. The limited scope of products is the biggest issue with this option. You get a lot of personal attention, especially if you have a pre-existing relationship with them, but if you want a very diverse portfolio, this might not be ideal.

Online Investment Companies

With a busy life, investing online gives you a chance to do it on your own time. The information and assistance is generally inexpensive too. You have a number of options and there are multiple reputable websites to choose from. However, since this is all done solely online, you are not getting the attention you get from other options. If you are new to investing, this might not be ideal because you are on your own and do not get a lot of time to learn from an experienced investor as you make investments.

Independent Investment Advisors

This is an option if you want tailored advice and a wealth of investment options. This type of service usually offers both investment monitoring options and direct financial advice. However, over time, your returns can be limited due to advisor fees. Make sure to compare the fees to your potential returns to ensure that it is a sound option.

Your Forex Leverage & How To Manage

One of the biggest drawbacks faced by traders on a daily basis is the failure to manage Forex leverage in an effective manner. Trading with leverage can go a long way in improving your returns, but it also raises the risk of losing big in case a trade failure occurs. Traders are al-lowed a leverage of nearly 400:1 in the currency market. In other words, you can trade $400 in borrowed money for every $1 sitting in your trading account.
But a majority of the traders generally prefer a significantly smaller leverage of 2:1. In other words, they can trade with $100,000 if they have $50,000 sitting in their trading ac-count.
If you are confused about the leverage you are using on your trading account right now, there is a simple formula to clear it up:
1.Consider the numerical value of all of your open positions.
2.And then divide it by the amount of money currently sitting in your trading account.
3.For example, if your open positions come up to $30,000 and your trading account stands at $5,000, then your effective leverage would be 6.
Once you understand the amount of leverage you are utilizing, you can go about assessing if it is optimal for your trading strategy or style. Aggressive traders with a high threshold for risk can have a maximum leverage of 10:1. Conservative traders usually limit themselves to utiliz-ing a leverage of around 2:1 or 3:1.
Forex brokers always advise traders to limit or reduce their leverage usage. A high lev-erage means a few bad trades will empty your trading account. This will eventually lead to a margin call or the loss of all of your positions.
Let us go through one such scenario. Assume that your trading account has $10,000 in it and that you are utilizing a leverage of 100:1. You are trading 10 mini-lots which are worth $1 million. Now if you were to make a 100 pip loss at this juncture, it will set you back $10,000. This means that your trading account has just been wiped out.
In a different scenario, assume that your leverage is just 10:1 and your trading account stands at $10,000. You are trading 5 mini-lots which are worth $100,000. In this case, a 100 pip loss would set your trading account back by only $5,000. This means that you will still have $5,000 left in your account at the end of the day.
Another compelling advantage of utilizing less leverage is the massive savings made from transaction fees. If your choice of trade comes with a five pip spread, the transaction fee will cost you $500, or a 5% cut of whatever is in your trading account.
In other words, you have already lost $500 before you have even gotten the chance to en-joy the profit you have made from your trade. The cost of transaction is directly proportional to the leverage you use. The bigger the leverage, the higher the transaction fee. The lower the leverage, the lower the transaction fee.