Archive for June, 2010
Today, we have more news than ever and its delivered in the click of a mouse and many traders want to trade it and make profits – after all it‘s the fundamental supply and demand situation that drives forex prices…
No it isn‘t!
Supply and demand fundamentals are not important by themselves – it‘s how they are perceived that determines price.
Here is a simple equation for market movement to illustrate the above:
Supply and Demand (facts and news) + Investor Perception = Price
From the above you can see that it is investors who determine price.
We all have the same facts to look at but we don‘t all draw the same conclusions from what we see and this is the problem when trading news stories. If you could win by trading the news, with today‘s quality of it and lightening communications, the percentage of traders who would win would be far greater but the fact is:
The same amount of people who lost in forex trading 50 years ago lose today and this statistic won‘t change because you can‘t trade news stories in isolation. The problems with trading news stories are greater today than they have ever been.
Why?
Because we all get the information quickly and it‘s instantly discounted by the market, we all have the information at the same time in any corner of the globe online and no one has an advantage of getting it first before the herd.
The problem that is always present and has been since markets started trading is:
You don‘t know how the traders are going to view the news because their all driven by their individual motivations and emotions furthermore, the news always reflects the views of the crowd and the crowd is always wrong.
Will Rogers once said:
“I only believe what I read in the papers“
He was joking of course, but it‘s surprising how many people read a paper or see a view on CNBC and think they can trade it and win – they can‘t.
FACT:
Markets collapse and turn when they are most bullish and rally when they are most bearish – this is nothing to do with the facts but how the investors perceive them.
News stories can be used but it‘s not in the way you may think. If a bullish piece of news fails to push market higher, or bearish news fails to push a market lower, then you may have a trend change at hand.
You need to check and to do this, look at a forex chart and see the technical view of price only. Here you are seeing the reality or the truth in black and white. This gives you a detached non emotional view of price and you can decide which way to trade. Using the news in this contrary fashion is a great way to spot situations which you can time entry with your technical indicators.
There is an old saying:
“ If you can hold your head, when everyone around you is losing theirs you probably haven‘t heard the news“
In the above instance you have – but you‘re not taking the view of the majority. If you use news in the above way and combine it with forex charts to time your trading signal, then you have a powerful combination for bigger forex profits.
For any financial plan, bonds are the core element to invest and grow wealth. It can be defined as a debt security. When you purchase a bond, you are lending money to an issuer such as government, municipality, corporation, federal agency or other entity. In return for that, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the face value of the bond when it “matures,” or comes due. It is best to invest in bonds because one will get a predictable stream of payments and repayment of principal, with interest.
There are different types of bonds for you to choose. It includes municipal bonds, corporate bonds, mortage-backed bonds, surety bonds etc.Surety bond is an agreement among three parties the principal, oblige and surety. In construction companies surety bonds are frequently used. A key term in nearly every surety bond is the penal sum, and it is specified amount of money which is the maximum amount that the surety will be required to pay in the event of the principal‘s default. This allows the surety to assess the risk involved in giving the bond; and the premium charged is determined accordingly. If the principal defaults and the surety turn out to be insolvent, the purpose of the bond is rendered futile. The principal will pay a premium in exchange for the bonding company‘s financial strength inorder to extend surety credit. In the event of a claim, the surety will investigate it and if it turns out to be a valid claim, the surety will pay it and then turn to the principal for reimbursement of the amount paid on the claim and any legal fees incurred. There are mainly two categories of bond types: contract bonds and commercial bonds. Contract bonds guarantee a specific contract and it includes performance, bid, supply, maintenance and subdivision bonds. Commercial bonds guarantee per the terms of the bond form and examples are license & permit, union bonds, etc.
A surety bond issued by an insurance company to guarantee satisfactory completion of a project by a contractor is performance bond. Many performance bonds give the surety three choices they are; completing the contract itself through a completion contractor ; selecting a new contractor to contract directly with the owner; or allowing the owner to complete the work with the surety paying the costs.
A bid bond guarantees the owner that the principal will honor its bid if awarded the contract. If the principal refuses to honor its bid, the principal and surety are liable on the bond for any additional costs that the owner incurs in reletting the contract. The penal sum of a bid bond is often ten to twenty percent of the bid amount. In the case of payment bonds it gives guarantee to the owner that subcontractors and suppliers will be paid the monies that they are due from the principal.
If you need a good return in your requirements for any of your needs then the best investment is in bonds.
If you are in business, whether a supplier, manufacturer or service provider, you will find more and more that you are being requested to prove that you have public liability insurance in force.
This is a form of commercial insurance that provides cover against your legal liability against any injury, illness, disease or damage that you, in the course of your business, may cause to any third party person or property. This can range from someone visiting your business premises and being injured (think of a restaurant insurance policy, where you need cover if someone trips over on your property) to you undertaking work at a third party location and causing damage.
There is no legal responsibility for you to have this cover. Unlike employers liability insurance, where you are legally required to have cover at a minimum limit of indemnity of £5,000,000 or risk a £2,500 fine per day you do not have the cover, the law does not insist on you having public liability.
What you will find though is that companies you work for, may only accept your products or services if you can prove that the cover is in place. We are also seeing more and more local authorities insisting on businesses, such as tanning salons, having this cover in place and being able to provide written proof in the form of a policy and schedule.
The question you will need to ask yourself is what level of cover you need to have in place. Public liability cover is provided in the form of a limit of indemnity, or put another way the maximum amount the insurers will pay in respect of any one loss. Obviously the higher, or bigger, the limit the more expensive the premium. Going back ten years, you could get limits of indemnity that started at £100,000 any one loss. As the cost of claims started to increase, these limits became obsolete. Nowadays, the most basic limit of indemnity you can get cover for is £1,000,000. This can be increased to the more usual £2,000,000. Most insurers will give you cover for limits up to £5,000,000 and you can then buy additional layers of cover up to £10, 15 or even £100,000,000.
You need to speak to your customer, that is asking you to prove the cover, to see what minimum level of cover they will accept. It may be that they simply ask you to prove the cover is in place and it is immaterial what limit you have. In these scenarios, you simply need to decide what level of cover you need in the event of a worse case scenario. As a business insurance broker, we always recommend a minimum limit of £2,00,000 for most businesses.
If you are asked to prove the cover and you have a valid package policy, you will more than likely find that you already have the cover. If not, you need to speak to a broker to get them to provide you with a range of quotations.