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Sunday, April 26, 2009

How To Carry Trade?

By Hass67

In currency markets, carry trading is done by many investors to take benefit of the basic economic principle that money flows where the returns are high. This constant flowing in and out of capital between the different markets is what makes carry trading profitable.

Carry trading is a popular trading strategy employed by professional forex traders. Hedge funds and investment banks use leveraged carry trading as one of the favorite strategies. Retail forex traders can also benefit from carry trading.

Carry trading means taking benefit of the interest rate difference between two currencies. Carry traders take benefit of the interest rate differential between two currencies by buying or going long on the high interest rate currency and selling or going short on low interest rate currency.

Lets make it clear with a simple example: suppose New Zealand dollar is offering an interest rate of 4.75% while the Japanese yen is offering an interest rate of 0.25%.

An investor will want to benefit from this interest rate differential. He/she will buy New Zealand dollars (NZD) and sells Japanese Yens (JPY). He/she can earn a profit of 4.75-0.25=4.5% so long NZD/JPY exchange rate does not change. If the investor can handle leverage and uses a leverage of 20:1, this 4.5% return will be magnified into 90%.

If the currency pair NZD/JPY appreciates, the investor can get a capital gain as well as a yield on the investment. When there is a carry trade opportunity, many investors jump on the bandwagon. The more investors carry trade, the more the currency pair appreciates.

However, carry trading depends a lot on the mood of the investors as a group. When investors have low risk aversion, carry trades will be profitable. But suppose the investors as a group suddenly develop high risk aversion and run to take refuge in safe haven currencies. In this scenario, carry trading will become unprofitable.

When an investor enters into a carry trade, an investor expects to profit from an interest rate difference between a currency pair. But in case, low interest currency appreciates considerably for different reasons, carry trade will become unprofitable.

Before carry trading, it essential that you identify the current trend of the currency pair and see whether it is moving in the right direction!

MACD (moving average convergence divergence) indicator can help you in identifying the trend. Enter the trade when MACD crosses the zero line from below and exit when it crosses the zero line from above. - 23208

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Currency Trading Made Easy - Top Strategies To Make Money From Forex

By Donald Saunders

The largest players in the Forex currency market are the financial institutions, banks and governments who are able to use their large stores of currency to influence the market. The remainder of the market is individual and often part time investors numbering in the hundreds of thousands from all over the globe.

In effect what we have is a mass market psychology which reacts to fixed strategies drawn up in the boardroom and mere human psychology. Some people might actually consider the Forex market predictable and to a certain extent this is true. You have to be able to visualize how the market reacts to political and economic events and where you can find the safe zones in the market. You must identify a currency pair that you are comfortable with and know which external and market factors are going to affect the behavior of this pair of currencies. Being able to predict movements in the currency market means that you are also able to develop Forex strategies that fit your needs.

in addition, you must have some form of a risk assessment system when you do enter live trading so that you know just what you are getting yourself into, have all of the angles covered and are prepared to get your money out when the clouds start to turn dark. Being able to take advantage of the market's liquidity is important as is the ability to shift your investment decisions within your overall trading strategy.

If you realize the dynamism involved in the Forex market you will be able to appreciate how decisions are taken and what has the greatest influence on the market. in the end it is all about being prepared. Just like any commodity market, reading the literature, studying and talking to current investors are all great ways of preparing you to succeed in the currency market.

The currency trading market may not be the answer to your prayers and is certainly not a dream market for these difficult times, but you will be able to make a great deal of money in this market as long as you are ready to do some homework and take intelligent trading decisions. Ensure that you are equipped with the knowledge you need, start out slowly while you are learning the ropes, find and listen to the successful traders and you will discover that it is possible to make a great deal of money very quickly in this extremely lucrative market. - 23208

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Forex Hedge Trading - HOG2 EURUSD-USDCHF Custom Indicator

By Sonja Schuyler

In this article we will review the latest entrant into the popular world of Forex Hedge trading methods. We will examine a manual system designed to trade the EURUSD-USDCHF Hedge. This Hedge is one of the most popular Hedges in the world of Forex in large part because of its high degree of negative correlation. In other words, most of the time, when the EURUSD trends in one direction - the USDCHF heads the opposite way.

An advantage of trading a Hedge is that it tends to reduce your risk. The challenge is that trading more than one currency pair at a time is difficult to track. You are at a definite disadvantage without the ability to track multiple pairs.

Gary at 4x-rox.com has created a set of custom indicators that track the total value of the EURUSD-USDCHF Hedge. This enables you to trade these two currency pairs as if they were one pair. Not only that, his indicators also track five market parameters outside the Forex market that gauge the value of the EURUSD-USDCHF Hedge and plot the predicted value relative to the current market value. This arrangement shows you the push or pull pressure on the Hedge and gives you an early warning when large reversals are likely to occur.

This Hedge trading system is called The HOG2 Custom EURUSD-USDCHF Hedge Indicator. HOG2 for short. The HOG2 runs inside the Metatrader 4 trading platform. It is composed of four indicators in three indicator windows.

The HOG2 tracks the EURUSD-USDCHF Hedge in real time. It shows you exactly what this Hedge is doing before you place your trades. The HOG2 features a color-coded custom histogram that gives you the sell or buy strength of this Hedge and indicates good entry and exit points. This arrangement shows you, at a glance, when this Hedge as a whole is over sold or overbought.

If you are accustomed to reading indicators, then learning to trading with the HOG2 will be very straightforward. If you have never traded Forex before, or never manually traded Forex, then you will want to go slowly. Do not live trade until you are completely comfortable. The HOG2 comes with good instructions and the company offers excellent support.

The HOG2 is not a robot. The HOG2 is not for you if you are looking for a Forex robot. If what you're looking for is a solid, effective manual trading system for trading the EURUSD-USDCHF Hedge then you won't find an easier or more workable system than the HOG2.

The HOG2 combines formulas for inter-market analysis with a unique compound indicator. The result is a highly effective manual trading system for this Hedge. The unique combination of the HOG2's one of a kind trend lines and Custom Histogram provides that all-important 'bird's eye view' of your Hedge trade.

Why not try out the HOG2 for yourself? When it comes to trading the EURUSD-USDCHF Hedge, the HOG2 combines formulas for inter-market analysis with a unique compound indicator and the result is a highly effective manual trading system for this Hedge. The unique combination of the HOG2's one of a kind trend lines and Custom Histogram provides that all-important 'bird's eye view' of your Hedge trade. - 23208

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Going With A Qualified Intermediary For A 1031 Exchange

By Eric T. Rightley

To start a 1031 Exchange, you first check with their CPA or accountant. You and your CPA need to figure out how much you would have to pay in taxes if you just sold the property outright. Your CPA can determine your adjusted basis in your property. Once your basis is known, you can then determine what the "normal" capital gain tax liability would be; and, also the amount of taxes that would be due to "depreciation recapture", which is currently taxed at maximum rate of 25%. Note: The rate of capital gains taxes is higher for the portion of the gain that is attributable to depreciation.

Likewise, your CPA or accountant will determine how much of the gain relates to normal appreciation from the natural increase in the value of the property. This appreciation is currently taxed at a maximum rate of only 15%. Your CPA will also determine if any state income tax or capital gains tax would be incurred. This would also include municipal tax liability.

After determining all of the tax liability from selling your property, you can decide to sell it outright or to sell it utilizing the tax advantages of a 1031 Exchange. Knowing all of the tax liability helps you to make a clear decision. Normally, the 1031 Exchange will result in a far less tax bill than if you sold the property outright.

The first step in taking advantage of a 1031 Exchange is to contact a Qualified Intermediary. The Qualified Intermediary will advise you of the need for a written purchase agreement signed by you as the seller and your purchaser. This agreement establishes your desire to sell your relinquished property as part of a 1031 Exchange.

It is a good idea to stipulate in your purchase agreement your desire to utilize the 1031 Exchange option. You have established that the purchaser agrees to cooperate with the 1031 Exchange. Also, you have established the groundwork for the closing. For an example of the cooperation clause go to www.1031podcast.com.

Finally, the closing can take pace and your sale will be competed. Once the deed crosses the table to the purchaser, and the net sales proceeds are paid directly to your QI, your 1031 countdown will begin. The day after the closing is considered "Day One" in the 45 day identification period that you have to identify in writing the properties you want to purchase as your replacement property. Also, it is the start of the 180 exchange period that you have to complete the 1031 Exchange and acquire your replacement property.

To sum up, from the beginning the you should first determine what capital gains tax bill (including deprecation recapture and state and local taxes) would be with your CPA or accountant, and decide if doing a 1031 Exchange will benefit you. Next, you should document your intent to sell the property to your purchaser, as well as your desire to complete a 1031 exchange by inserting text in your purchase agreement and contacting a qualified intermediary early - before closing on the sale of your relinquished property.

Having completed your 1031 Exchange, you have started the process of deferring taxes and keeping your money working for you. - 23208

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Investing in Fixed Annuities

By Leonard Maltby

Many people become interested in investing in annuities, and the thing to remember is that a fixed annuity is used to invest in government securities and high grade corporate bonds. Many people choose to invest in annuities because it is a potential savings choice for many people.

If you are one of these people, first, determine if an annuity is really the right investment option for you. Then, take a look at the different types of annuities that are available to today's investors like you.

Choosing between fixed and variable annuity is a must; while the former offers a guaranteed rate of return with fixed payments over the annuity's lifetime, the latter may offer greater returns, and yet at the same time put your investment at greater risk.

To many, investing in fixed annuity is more appealing, as it offers more security and guarantee. You should consider investing in fixed annuities if you are close to retirement or are already retired, you prefer a very low risk in your investment, and you want a fixed return.

There are also many advantages when investing in fixed annuities such as the flexible products it offers, guaranteed interest as well as tiered and indexed rates that it makes available.

Some products that fixed annuity offers are single or flexible premium deferred annuity, and single premium immediate annuity. What is nice about these is that you can choose depending on your own needs. Fixed annuity is very flexible, which makes it more appealing to many.

It is best to consult with an agent to help you understand how annuity works, as different annuities offer different rates of return. At such, an annuity broker will be able to help you choose which investment is best for you.

Do not limit yourself, as there are many, many choices to choose from, some even offering extras or bonuses. The options are many when investing in fixed annuities - 23208

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