Forex Brokers - Helping to Maximize Your Success

A Forex broker is a broker dealing in foreign exchange, just like real estate broker who deals in real estate and properties. Simply, a Forex broker is an advisor who advises you about the forex market. However, the Forex market is not the perfect place to play with as a novice and beginner as there are many criticalities involved along with much risk bearing capacities. Novices can very quickly get their fingers badly burnt. But inexperience is not the only reason to consider using a Forex broker to trade in the high-risk international currencies market.
So, the Forex broker is an advisor who advises you about the forex market and allows you to work for 24 hours a day with major currencies like EUR, JPY, GBP, CHF etc against the US dollar on the spot, i.e. according to the current prices on the forex international exchange market. But the level of profits depends only on your abilities as well as your timely decision.
Although the role of the Forex broker is relatively redundant as a result of technological advancement and increased awareness, we cannot completely underestimate his role. The new paradigm shift has had something of a democratizing effect on the financial markets, and in the years that have followed a plethora of banks and brokerages have extended the range of their services to a new market by packaging up their online trading systems for the retail market, enabling the more modest investor to trade from their own computer screen - even on the previously out-of-reach currency markets. This is where the real role of Forex broker starts.
PIP is nothing special but Price Interest Points. In the forex market, currencies are always priced in pairs. The quoted price is the level where we, acting as the market maker, are willing to buy/sell the currency pair. In the wholesale market, currencies are quoted out to four decimal places, with the last placeholder called a point or a pip. A pip in most currencies is one /10,000th of an exchange rate (in USD/JPY, it is one /100th, likewise you can find for others).
Let's see some more information about Spread. As with all financial products, forex quotes include terms like 'bid' and 'ask"'. The 'bid', in its simplest terms is the price at which a dealer is willing to buy (and clients can sell) the base currency in exchange for the counter currency. The 'ask' is the price at which dealer will sell (and clients can buy) the base currency in exchange for the counter currency. The difference between the bid and the ask price is referred to as the spread. The spread defines the trader's cost, which can be recovered with a favorable currency move in the market. The value of a pip is determined by the pair of currencies being traded, the rate at which the currency pair is trading and the size of the position being traded.
There are many great Forex brokers, like COESfx, who maintains tight, competitive spreads in the four major currencies against the Dollar, and a total of 17 currency pairs including USD/CAD and AUD/USD. Some of the major features of COESfx are:
Real-time streaming prices
Price certainty on market orders
Competitive pricing
Fixed 3-5 pip spreads

Internet Marketing VS Forex Currency Trading

Have you noticed that when someone's trying to sell you something - such as a system for making money - they always make it look far easier than it is?
Let's look at two Internet businesses, almost as diametrically opposed as it's possible to be - Internet Marketing and Forex Currency Trading.
You've probably heard the old Internet adage - build a better website and they will come. Well it ain't true!
You could put up a site advertising dollars for a dime and they still wouldn't come - because they wouldn't know where to look!
Let's look at what you need to have in place in order to build a successful Internet marketing business.
First of all, you need a product. If you've been reading the recent Internet marketing blurb you'll know you need a niche product.
Actually, the new thing is sub-niche but whatever they call it, you need a product for which there is high demand but low supply.
Finding a suitable niche is the hardest part of the whole process but let's say you have a killer product, what else do you need?
The List.
Ask any Internet marketeer and they will say that the most important part of your business is your opt-in list.
For people to join your list you usually have to give them something of value such as a free eBook or report on a subject related to your main product line.
To keep them interested, you need to keep in touch with them offering them additional information, advice and tips.
Website.
To promote your opt-in list you need a website (although there are other ways of promoting your list, too) with features that will encourage people to sign up to your list.
You also need a killer website with killer copy to describe - and sell - your killer product. This may or may not be the same as the one you use for your opt-in list.
Killer copy.
Maybe you're not a good copywriter. There are many eBooks on the subject that can help you or you can pay someone to write copy for you.
You need a domain name, preferably one with some relation to the product but good domain names are becoming increasing difficult to find.
Ads.
To get people to visit your website in the first place you need to register it with the search engines.
SEO (Search Engine Optimisation) is an art in itself. You can mug up on the subject or pay someone to do the job for you (but be aware that not all experts are!).
You might also want to place ads for your list in newsletters and ezines. The better ones will charge you although you might get a free ad in return for an article.
Autoresponder.
To automate your business you need an autoresponder. These clever devices automatically send emails to everyone on your opt-in list at predetermined intervals, and contain predetermined copy.
For example, you could create a series of emails containing, say, five parts of a free course to be sent one a day over the first five days.
Then emails would be sent once a week advertising a different product each time.
Whenever anyone signs up to your list they automatically start at the beginning so everyone gets the full cycle of marketing material.
We haven't even looked at affiliate sales and marketing but I'm sure you get the picture.
The basic idea of selling over the Internet sounds good but there's a lot more to it than most people realise.
Forex Currency Trading
Someone said that trading is the last frontier, the last place where men and women can stand up and pit themselves against the world.
It sounds very Wild Westish but most of it is true! You win or lose entirely by your own efforts and if you win, it's like having your very own bank.
However, even owning a bank is a business and you still have to work hard to put the money there - and to keep it!
Unlike Internet marketing where all your efforts, in one form or another, are geared towards making people join your list and then selling them stuff,
Currency Trading has no customers. That's worth repeating - with currency trading, you don't need customers.
No customers means you don't need any of the associated accoutrements that go with Internet marketing such as: Products Web site Domain name Opt-in list Ads eBooks and reports Autoresponder Any other marketing aids
So far so good, but what do you have to do and what do you need? Well, you need to know what currency prices are doing.
You can get a list of prices at the close of each trading day free from many web sites. If you want to trade during the day - intraday trading, you can get real-time prices for a nominal fee from several data suppliers.
In the foreign exchange currency market, commonly called forex, you can get this data and charting software free from many web sites.
Okay, that's the easy bit. In order to trade currencies, you need to analyse the data and determine which way price is heading.
In other words you need a system and this will require study and dedication.
There's lots of other stuff you have to know, too - trading terminology, margin, leverage, money management, order types, trader psychology and more.
But all of this is available in eBooks and courses and on the Net.
You also need some money upfront to fund your trading account. With forex you can begin with as little as $300-500 although you would be advised to start with more.
So while you don't have the ongoing quest for new customers, new products and inventive sales techniques, you do need some sort of education or training before you begin and you need discipline while you're trading.

Forecasting Forex Trading

What is Forex or Foreign Exchange: It is the largest financial market in the world, with a volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.
What about Forecasting: Predicting current and future market trends using existing data and facts. Analysts rely on technical and fundamental statistics to predict the directions of the economy, stock market and individual securities.
For those who trade using the Forex, or foreign currency exchange, knowing how to forecast the Forex can make the difference between trading successfully and losing money. When you begin learning about Forex trading, it is vital that you understand how to forecast the Forex trading market.
There are a few methods that are used when forecasting the Forex. Each system is used to understand how the Forex works and how the fluctuations in the market can affect traders and currency rates. The two methods that are most often used are called technical analysis and fundamental analysis. Both methods differ in their own ways, but each one can help the Forex trader understand how the rates are affecting the currency trade. Most of the time, experienced traders and brokers know each method and use a mixture of the two to trade on the Forex.
One method used in forecasting foreign currency exchange is called technical analysis. This method uses predictions by looking at trends in charts and graphs from past Forex market happenings. This system is based on solid events that have actually taken place in the Forex in the past. Many experience Forex traders and brokers rely on this system because it follows actual trends and can be quite reliable.
When looking at the technical analysis in the Forex, there are three basic principles that are used to make projections. These principles are based on the market action in relation to current events, trends in price movements and past Forex history. When the market action is looked at, everything from supply and demand, current politics and the current state of the market are taken into consideration. It is usually agreed that the actual price of the Forex is a direct reflection of current events.
The trends in price movement are another factor when using technical analysis. This means that there are patterns in the market behavior that have been known to be a contributing factor in the Forex. These patterns are usually repeating over time and can often be a consistent factor when forecasting the Forex market. Another factor that is taken into consideration when forecasting the Forex is history. There are definite patterns in the market and these are usually reliable factors. There are several charts that are taken into consideration when forecasting the Forex market using technical analysis. The five categories that are look at include indicators, number theory, waves, gaps and trends.
Most of these can be quite complicated for those who are inexperienced using the Forex. Most professional Forex brokers understand these charts and have the ability to offer their clients well-informed advice about Forex trading.
Another way that experienced brokers and traders in the Forex use to forecast the trends is called fundamental analysis. This method is used to forecast the future of price movements based on events that have not taken place yet. This can range from political changes, environmental factors and even natural disasters. Important factors and statistics are used to predict how it will affect supply and demand and the rates of the Forex. Most of the time, this method is not a reliable factor on its own, but is used in conjunction with technical analysis to form opinion about the changes in the Forex market.
For those interesting in being involved with Forex trading, a basic understanding of how the system works is essential. Understanding both forecasting systems and how they can predict the market trends will help Forex traders be successful with their trading. Most experienced traders and brokers involved with the Forex use a system of both technical and fundamental information when making decisions about the Forex market. When used together, they can provide the trader with invaluable information about where the currency trends are headed.
Always leave the forecasting to the pros unless you are playing the Forex as a hobby and don't have a lot of money invested...Or like most people you will learn the hard way.

Seminars: The Good, the Bad and the Ugly

Ask 10 people how they feel about seminars and you’re likely to get mixed reactions. For some, seminars provide a valuable tool for further education on topics not effectively covered by traditional educational institutions. For others, seminars are a black hole into which they throw their money in the hopes that they will learn the magic secret to wealth and happiness.
Real estate and investment education top the list of controversial seminar programs, and it’s no small industry. More than $2 billion is spent annually on real estate education and seminars, according to Real Estate Investors.tv. Many aspiring investors pay upwards of $5,000 to $20,000 for weekend or week-long “bootcamps” to figure out how they can tap into “real estate riches” and access “other people’s money.”
Seminars can provide great opportunities for learning about investmentsFull of buzzwords and empty promises, many of these seminars draw large crowds. Yet in the realm of real estate education, seminars are one of the only places where investors can get some hands-on training in real estate investing. The key to being a savvy investor is being able to filter through the good, the bad and the ugly of real estate seminars—before you spend your money.
The good
There are plenty of great seminars out there. Often these are put on by investment clubs, local professionals, title companies or universities. A good seminar will probably cost $200 to $500 per day and involve a knowledgeable expert in a specific field.
Good seminars focus on current topics and specific and applicable skill building. Seminars that provide hands-on learning are typically the best. Most of the information in seminars can be found somewhere in print. However, some people find more value in a live presentation than in reading a book. Just be aware of what that live presentation is really worth.
Some of the best and most qualified speakers in the world make $100,000 to $250,000 for a speaking engagement. With an audience of as little as 1,000 people, that amounts to $100 to $250 per person to cover speaking costs.
The bad
Bad seminars almost always involve the regurgitation of basic information and the prospect of big dollars. Investors can pay hundreds to thousands of dollars for material that would be better found in a book or on the Internet. Investors shouldn’t overpay to hear a lot of speaking about the investment lifestyle when what they need is to learn the right fundamentals.
Investors should be wary of seminars preaching ‘fast cash’Although the information may be sound, these bad seminars are able to make money by providing an emotional boost for investors. Do yourself a favor: Save your money. If you are going to become a successful investor, sooner or later you’ll realize that motivation stems from action, not emotion. If you wait around until you feel motivated to hit the gym, you’ll never get there. If you head to the gym diligently, you’ll see some results. Results are what drive sustainable motivation.
The ugly
Does anyone else see the irony in charging $15,000 for a seminar on no-money-down techniques?
There is a group of seminar speakers and promoters that have discovered selling what they call “education” to the masses is infinitely more profitable than actually investing themselves. If you don’t believe me, check out John Reed’s guru ratings. You may be surprised what Reed has uncovered in his investigative reporting on some familiar names in the seminar business.
Recently, Money magazine published an article about a real estate seminar company. I was particularly interested in the personal consumption habits of the company’s owner. The article talked about his 22,000 square foot home and his Ferrari, Lamborghini, Bentley and company jet. That sent up red flags for me. Why? Because someone who would spend more than $100,000 on three cars, when they can only drive one, clearly does not have the mentality of an investor.
What is clear to me is that most aspiring investors don’t really want to be investors. They want to be spenders. Thus they are attracted to seminars promoted by flashing expensive cars and homes that promise fantastic returns with little effort. So let me say this loud and clear: Great returns with little to no effort are not sustainable. It can work for short periods of time when markets are really hot. However, I am a firm believer in the saying that “a fool and his money are soon parted.” In essence, people who make their money through luck typically find a way to give it back. That’s why it’s not uncommon to hear about lottery winners who win millions and then lose everything.
In my opinion, 99 percent of the people willing to pay $15,000 for a week-long seminar are going to make lousy investors. They’d be better off using that money to actually purchase a property. The education they will get from doing one transaction should far surpass what they’ll retain from any seminar

HiFX: Foreign Exchange Services for Investors

With the U.S. facing a weakening dollar and a recession, many investors are interested in investing some money in foreign countries; the foreign exchange market, also known as forex or FX, is crucial in that endeavor. HiFX, Inc. is an international company that seeks to simplify the process of investing using the foreign exchange market.
"To a lot of consumers, foreign exchange markets...feel very complex. And we tend to help people get through that pretty easily," Ward Naughton, president of HiFX, said. HiFX offers "personalized service, because it's an important part of what you're doing [as an investor]."
HiFX offers its clients better exchange rates than banks offer. One reason they are able to do so is that they have lower costs than banks, Naughton said. "We don't have all the bank branches and all that infrastructure. We do everything through centralized locations and call centers, so our cost basis is less to begin with."
"We do $40 billion in FX a year...we get very, very competitive rates from our suppliers," he said. "We're almost like a Fortune 500 company working on behalf of our clients....It's almost like a Costco model. We get wholesale rates and we give [clients] better than straight retail rates that they would otherwise get on their own."
HiFX offers investors assistance with everything from emigration to importation. They have a variety of ways in which they can help investors purchase property overseas, including money transfers and mortgages. They offer mortgages for several European countries, Dubai and South Africa.
HiFX advises when to buy currency and can lock in a good rate"If you're buying property overseas, or you're making an investment overseas, and you need to move currency amounts—generally in excess of $5,000—overseas, we're the type of firm [that] can help you do that, and in a very cost-effective way," Naughton said. "If you're buying, say, property in Europe, what do you do? You try to go into a bank branch and you would never be able to do that very effectively. It would be very cumbersome."
HiFX can help both investors with defined timeframes for investment and those without. "If you're making an investment overseas and you know you're going to close in, say, 30 or 60 days on a piece of real estate...we can say, 'Based on what's going on in the market right now, where...the dollar is very weak...our expectation is that the U.S. currency could move anywhere between 2 and 4 percent against different currencies," Naughton said. "And so you can actually have an intelligent decision made on foreign exchange tied to that investment decision."
Alternatively, Naughton said, "If you say, 'Hey, look, in six months, I'm going to need this currency, but I don't want to lock it in today...we'll be watching that....We'll give you insight and input and then you can decide, 'Okay, I want to enter into execution of this contract.'"
In addition to offering its clients better exchange rates than banks offer, HiFX offers its clients the ability to lock in a particular exchange rate for up to two years. "We allow the client or investor to lock in what we call a forward rate. And that forward rate says you can lock in a rate for up to two years, based on whatever your needs are," Naughton said.
This forward rate could be beneficial for investors who are wary of the shifting and fluid global market and remove some of the risk that would otherwise deter some investors. "Let's say you're going to have a series of payments you're going to make over a two-year period, and you say 'I want to know what my exchange rate is. I don't want to be subject to market volatility,'" Naughton said. "We get a rate that will essentially be the rate that you can get over...whatever timeframe, up to two years."
"It removes the uncertainty in the marketplace...it's like an insurance policy," Naughton said. "There's a small spread built into that rate...it's basically an insurance premium, if you will, that's built into that [forward] rate."
The price of the small spread may be well worth it to investors who wish to not be subject to market volatility. "The Canadian dollar fluctuated 14 percent between October and November," Naughton said. "If you had had to send dollars to Canada during that period, you would have taken a significant hit as an investor. It would probably have destroyed your returns. We could have done a forward rate agreement that would have protected you against that."
The price of that protection, however, also means that investors who use the forward rate option do not benefit from market changes that would be in their favor because they are already locked in at a certain rate. "If rates move the other way, you don't get the benefit," Naughton said.
The process for investors who are interested in using HiFX's services is fairly straightforward. "They open up an application, they tell us what currency they're interested in [and] what timeframe, they tell us whether they want to do it spot—which means today—or whether they want to do it at a future date, and we basically enter that into our system and we watch that position," Naughton said. "We send the money right away to where you want us to designate it, so we don't sit on your money. All we are is basically a facilitator," Naughton said.
HiFX, Inc., which last year helped 30,000 people buy and sell foreign currency, according to their website, was founded in 1998. HiFX, Inc. is seeking licensure as a money transmitter in California. Investors in California who are interested in using HiFX's services can contact HiFX's affiliate, HiFX Plc.

Decline of the Dollar Spurs Diversification

What do supermodel Gisele Bündchen and the Organization of the Petroleum Exporting Countries (OPEC) have in common? Both announced a desire to begin dealing in currencies other than the U.S. dollar in November. They’ve joined a growing number of people, organizations and countries that have decided the dollar is—as Iranian President Mahmoud Ahmadinejad said Nov. 18—just a “worthless piece of paper,” according to The Washington Post.
U.S. investors could learn something from the likes of Bündchen and OPEC, not to mention billionaire investors William Buffet and Bill Gross, and the People’s Republic of China—all of whom have decided to say “so long” to the greenback.
“This is a time to be fully diversified....The world agrees the dollar must fall further, with oil producers having all but abandoned the buck,” Craig R. Smith, CEO of Swiss America and author of Rediscovering Gold and Black Gold Stranglehold, said.
But getting out of the U.S. dollar may be easier said than done, particularly for those uncertain of how to approach it. There are many options out there, and it may be difficult to know just how much a portfolio ought to be diversified.
Owning blocks of foreign currency can help protect investors from dollar devaluation“A strictly statistical approach says that the relative weighting of one currency block…should reflect a nation’s or group of nations’ contribution to gross world product,” Richard Olsen, founder of Olsen Limited, a Zurich-based e-finance technology and service provider, and one of the founders of OANDA FX Trade, a retail foreign exchange dealer, said. “So, if the United States accounts for about 25 percent of GWP, dollar assets should make up no more than one fourth of the portfolio.”
One method of getting out of the U.S. dollar is investing in foreign currency on the foreign exchange, or forex, market. (For more information, see our article on the Forex Investment Market.) As the dollar falls, owning blocks of foreign currency can help protect investors from devaluation.
“The euro is the second most liquid currency, and offset currency to the dollar. Therefore most diversified investment portfolios own a piece of euros,” Chuck Butler, president of the EverBank World Markets, said. The dollar was trading at an average of 0.69 Euro in November, a significant drop from January’s average of 0.77 Euro, according to Exchange-Rates.org.
Asian currencies are also recommended for investment. Asian currencies have intentionally been kept undervalued in order to encourage the exports that boost the countries’ economies, Butler said.
“Asian currencies and those economies with strong natural resources will outperform the U.S. economy because they have secular trends that work in their favor. As investors around the world begin to diversify out of dollars, they will necessarily apply buying pressure on attractive alternatives. And the resulting appreciation will generate additional buying pressure, driving up values,” Olsen said.
However, foreign currencies are not the only option available to investors looking to diversify out of the U.S. dollar. Smith said he recommends that investors have 5 to 15 percent of their portfolios made up of precious metals as a “foundation” before considering foreign currency.
“Precious metal prices have tripled since 2001 and may triple again over the next five to seven years because gold and silver represent an honest store of value,” Smith said. “Gold is fast becoming the global anti-dollar.” (See our articles on gold and silver for more information.)
Some investors consider precious metals the foundation of a strong portfolioThere are programs to help investors convert some of their dollars into gold and other precious metals. (For more information, see our article on Investing in Gold and Silver CDs.) Americans can diversify their retirement portfolios with precious metals through the use of a self-directed precious metal IRA, for example, according to Smith.
“Investors can roll over a portion of their paper assets into precious metals without any tax penalties or new contributions by converting an existing IRA, 401(k) or other retirement fund into a precious metal IRA,” Smith said.
Investors can also shed their dollars by purchasing foreign real estate. Foreign real estate stocks have outperformed other asset classes in the past, averaging a 30.6 percent annualized total return (ATR) in the last three-year period as of April, compared with U.S. real estate, which had an ATR of 21.9 percent; U.S. stocks, which had an ATR of 8.5 percent; and international developed country stocks, which had an ATR of 17.1 percent, according to Fidelity Investor’s Weekly.
“European and Asian property markets are generally healthy. Their building booms are likely to outlast ours. That suggests that you should switch money invested in domestic real estate funds and export it,” according to Kiplinger.
However, investors should not overload themselves with foreign property investments. “Several academic studies have found that the performance of global real estate securities has more to do with how real estate is doing globally than with any differences between American and overseas stock markets,” according to Kiplinger.
Investors may also wish to note that, although the numbers siding with Bündchen and OPEC are growing, some do not feel the urgency to escape from the falling dollar.
Ken Fisher, CEO of Fisher Investments and a Forbes columnist, said it is not important to diversify into non-dollar assets. “Unless someone has special skills in forecasting currencies, which are exceptionally rare, the history of currency movements among western nations shows that the costs of hedging eat up all the benefits.”
But for concerned investors, there is still time to get out. Olsen said he believes the U.S. dollar has some time before it loses its position as the world’s dominant currency. Consequently, investors shouldn’t be too worried about missing the proverbial boat.
“At the beginning of the last century the British pound was the world’s preeminent currency; its demise required more than 50 years,” Olsen said. “We expect the dollar’s fall from leadership will happen a lot faster than that, but not in the next few years....We believe there is still plenty of time to start the diversification process: The U.S. dollar has a long way to go.

2007's Top 10 Investments Under $25,000

There are many investment options outside the stock market that don't require hundreds of thousands of dollars. However, many investors shy away from alternative assets because they mistakenly believe that such investments, unlike traditional stocks or bonds, require large amounts of capital.
Many investments require only $25,000In fact, a variety of opportunities are available for less than $25,000 in real estate, business, currency trading, lending, commodities and more. Some of the investments below are cash only, while others utilize some sort of leverage. The days of easy money are nearing an end, so the amount of leverage available to investors is on the decline. However, with a reasonable down payment, investors can still enjoy the growth opportunities available though leveraging.
In today's volatile marketplace, both in real estate and stocks, there is heightened risk. With this in mind, NuWire has placed added emphasis on more predictable benefits, such as cash flow and profit in-hand, rather than more speculative investments focused on future appreciation and capital gain.
We also gave added value to investments that aid diversification and protect against the devaluation of the dollar. Gold, silver, timber and foreign currencies fall into that category.
After careful consideration of the many opportunities available for alternative investors in 2007, NuWire presents its Top 10 Investments Under $25,000:
1.
Invest in a single family or multi-family property
2.
Invest in gold and silver
3.
Invest in foreclosure properties
4.
Invest in mobile homes
5.
Invest in fractional ownership of timber
6.
Invest in loans
7.
Invest with partners on larger projects
8.
Invest in Japanese yen
9.
Invest in a business or franchise
10.
Invest in vacant land (domestic or foreign)

RefcoLive Overview

When placed, your order may be routed to an electronic exchange, a handheld device in a trading pit, a printer on the exchange floor, or an order desk. Exchanges currently available for trading via RefcoLive include:
Globex
CME
CBOT
A/C/E
eCBOT
NYBOT
NYMEX
COMEX
KCBT
MGE
MIDAM
Eurex
LIFFE
Benefits
Instant access to both open outcry trading pits and electronic exchanges throughout the world.
Low cost per contract (NO MONTHLY USER FEES)
24-hour technical and trading support in case of system or user access problem.
Enables traders, brokers and financial institutions to execute listed futures contracts on a global basis.
A flexible architecture which allows for customized private labeling. RefcoLive also has the ability to be multilingual.
A risk management system for real-time credit risk control (margin based)
Enables institutional managers overseeing a variety of trading accounts to monitor activity and exposure on an account-by-account basis in real-time.
Allows intermediaries to monitor margin requirements and credit exposure in real-time.
Real-time position management.
Support
Should you need assistance, your broker and our support staff are available to provide help around the clock. Both can help with order/account status and provide backup execution services. If you have technical problems, they will help you resolve the issue, coordinating with our technical staff if necessary

Futures Market

Market Order
The market order is the most frequently used order. It is a good order to use once you have made a decision about opening or closing a position. It can keep the customer from having to chase a market trying to get in or out of a position. The market order is executed at the best possible price obtainable at the time the order reaches the trading pit.
Limit Order
The limit order is an order to buy or sell at a designated price. Limit Orders to buy are placed below the market while limit orders to sell are placed above the market. Since the market may never get high enough or low enough to trigger a limit order, a customer may miss the market if he uses a limit order. (Even though you may see the market touch a limit price several times, this does not guarantee or earn the customer a fill at that price.)
When buying, if the order price is lower than (below) the current market price, it is a Buy Limit.
As an example, with the market trading at 7800, Buy 1 Dec DJIA 7700 on a Limit (or better…fill at 7700 or lower). Order can only be filled at the stated price (7700) or lower (better).
When selling, if the order price is higher than (above) the current market price, it is a Sell Limit.
As an example, with the market trading at 7800, Sell 1 Dec DJIA 7900 on a Limit (or better…fill at 7900 or higher). Can only be filled at the stated price (7900) or higher (better).
Stop Order
Stop orders can be used for three purposes:
to minimize a loss on a long or short position;
to protect a profit on an existing long or short position; or
to initiate a new long or short position.
A buy stop order is placed above the market and a sell stop order is placed below the market. Once the stop price is touched, the order is treated like a market order and will be filled at the best possible price.
When buying, if the order price is higher than (above) the current market price, it is a Buy Stop.
As an example, with the market trading at 7800, Buy 1 Dec DJIA 7900 Stop. Can only be filled at the Market, after the Market trades (or is "offered") at 7900 or higher.
When selling, if the order price is lower than (below) the current market price, it is a Sell Stop.
As an example, with the market trading at 7800, Sell 1 Dec DJIA 7700 Stop. Can only be filled at the Market, after the Market trades (or is "bid") at 7700 or lower.
Stop Limit Order
A stop limit order lists two prices and is an attempt to gain more control over the price at which your stop is filled. The first part of the order is written like the above stop order. The second part of the order specifies a limit price. This indicates that once your stop is triggered, you do not wish to be filled beyond the limit price. Stop limit orders should usually not be used when trying to exit a position. If a customer does not give a limit price, then the stop price and the limit price are meant to be identical.
Market If Touched Order (MIT)
MITs are the opposite of stop orders. Buy MITs are placed below the market and Sell MITs are placed above the market. An MIT order is usually used to enter the market or initiate a trade. An MIT order is similar to a limit order in that a specific price is placed on the order. However, an MIT order becomes a market order once the limit price is touched or passed through. An execution may be at, above, or below the originally specified price. An MIT order will not be executed if the market fails to touch the MIT specified price.
Good Until Canceled Order (GTC)
Good Till Canceled (or Open Order). Used in conjunction with a Limit or Stop order. Order will remain valid and worked until client cancels order, or it is filled, or contract expires.
GTC Order Does Not Cancel Automatically!
As an example, you are long 1 Dec DJIA and have a GTC order to sell 1 Dec DJIA @ 7700 Stop. You decide to sell your 1 long Dec DJIA on a Market order. Your GTC order must be canceled…or you will sell (short) 1 Dec DJIA if the market trades (or is "bid") at 7700 or lower.
If an order is not designated Good Till Canceled, it is a Day Order and will expire at the end of the current trading session unless filled or canceled prior to the close.
One Cancels the Other Order (OCO)
One (order) Cancels (the) Other.
As an example, with the market trading at 7800 you want to buy at 7600 Limit (lower), or on an upside breakout at 7900 Stop (higher), Buy 1 Dec DJIA 7600 on a Limit, OCO Buy 1 Dec DJIA 7900 Stop.
When one order is executed, the other is automatically canceled.
Market on Close (MOC)
This is an order that will be filled during the final seconds of trading at whatever price is available. PLEASE NOTE: A FLOOR BROKER RESERVES THE RIGHT TO REFUSE AN MOC ORDER UP TO FIFTEEN MINUTES BEFORE THE CLOSE DEPENDING UPON MARKET CONDITIONS.
Market on Opening (MOO)
This is an order that the customer wishes to be executed during the opening range of trading at the best possible price obtainable within the opening range. Not all exchanges recognize this type of order. One such exchange is the Chicago Board of Trade.
Enter and Cancel Order
All orders, except Market Orders, can be canceled and replaced with a different order unless filled prior to cancellation.
As an example, you are long 1 Dec DJIA and have a GTC order to sell 1 Dec DJIA @ 7700 Stop. With the market trading at 7800, you decide to sell your 1 long Dec DJIA on a Market order, Sell 1 Dec DJIA @ Market, Cancel selling 1 Dec DJIA 7700 Stop on GTC order No. 12345.
Spread Order
The customer wishes to take a simultaneous long and short position in an attempt to profit via the price differential or "spread" between two prices. A spread can be established between different months of the same commodity, between related commodities or between the same or related commodities traded on two different exchanges. A spread order can be entered at the market or you can designate that you wish to be filled when the price difference between the commodities reaches a certain point (or premium). For example: BUY 1 JUNE LIVE CATTLE, SELL 1 AUGUST LIVE CATTLE PLUS 100 TO THE AUGUST SELL SIDE. This means that the customer wants to initiate or liquidate the spread when August Cattle is 100 points higher than June cattle.
Or Better Order
The pit broker is obligated to get the best possible price for the customer. Putting an OB on an order does not cause him to work harder. If the price is NOT OB, the broker is irritated because he is paying special attention to a ticket that does not deserve it. Think of OB as MARKET with a LIMIT. If the price does not have an OB next to it, and the market is considerably better, the pit broker may question the runner to see if the order should have been a stop. They will return the order for clarification which could delay the filling of the order and possibly change the results of the fill. ONLY USE "OR BETTER" IF THE MARKET IS "OR BETTER."
Fill or Kill Order (FOK)
The fill or kill order is used by customers wishing an immediate fill, but at a specified price. The floor broker will bid or offer the order three times and immediately return either a fill or an unable.

Forex Investment - Delightful, But Have A Care

In an increasing variety of markets, ranging from spread-betting on stocks and shares to more exotic futures and derivative markets, internet technology has made it possible for a growing number of day traders situated around the globe to bet on the markets via online platforms from the comfort of their own home or office. Even the previously off-limits currency markets, which will be explored in this article, can now be traded online by the individual investor, and there is a growing list of banks, brokers and specialist firms offering these services.
Until relatively recently the foreign exchange market was strictly the preserve of institutional investors and hedge funds. Large minimum transaction sizes and stringent financial requirements dictated that only the largest and most capitalised investors could make bets on the direction of the world's currencies. However, in order to make any meaningful profits from these 'over the counter' currency bets, traders and money managers would frequently have to place positions the equivalent of millions of dollars, putting the world of forex trading way out of the reach of individual investors unless they invested through a currency fund.
But all that began to change when the internet revolution of the late 1990s swept through the financial markets and radically altered the way in which trades were executed in most markets. When placing a trade on a company's share or on a futures contract became as simple as a couple of clicks on the mouse, suddenly, the traditional broker/client relationship was no longer a pre-requisite and some of the barriers that prevented many investors from taking part in the financial markets began to tumble.
This has had something of a democratising effect on the financial markets, and in the years that have followed a plethora of banks and brokerages have extended the range of their services to a new market by packaging up their online trading systems for the retail market, enabling the more modest investor to trade from their own computer screen - even on the previously out-of-reach currency markets.
By offering clients high levels of leverage the banks and brokers give the small foreign exchange trader the opportunity to make some impressive gains for relatively little outlay. Of course, it also gives them a chance to make some pretty impressive losses. Therefore, any foreign exchange virgins who are considering making their next fortune via an online trading platform must understand the implications of leverage and the risks associated with these types of margin account.
Whilst leverage ratios can vary, typically brokers offer levels of anything up to 100:1, (far in excess of the leverage even the most experienced institutional investment managers are permitted) enabling traders to buy or sell foreign currencies in 'lots' of US$100,000, (or whatever the base currency of the trade happens to be). It means that the trader only has to put down $1,000 as margin to control $100,000 in the market place. The rest is effectively borrowed from the broker or market maker. Without this degree of leverage, it would be almost impossible for smaller traders to make any worthwhile gains in the currency markets.
So, by way of illustration, suppose a trader anticipates a rise in the US dollar against the Swiss Franc and buys 1 'lot' ($100,000) of USD/CHF at 1.2950 (thus controlling CHF129,500.) As expected, the USD/CHF rate rises to 1.3050, meaning the trader now controls CHF130,500 so the trade is closed out with a profit of CHF1,000. When converted back into dollars by dividing this profit with the rate at which the position is closed, the trader has realised a gain of $766. Until recently many trading firms have required that clients maintain a minimum balance of $10,000 in their accounts to ensure adequate protection against sudden swings, putting forex trading out of the reach of those without HNWI status. However, it is now common for clients to open trading accounts with many firms for as little as $500, although minimum opening balances of $250 are not unheard of. For these 'mini' accounts, smaller lot sizes of $10,000 have been created, and leverage ratios are often as high as 200:1. Many firms consider such products are too risky to offer.
In spite of the inherent risks of the foreign exchange trading, one of the major bonuses of currency trading is the sheer volume and liquidity of the market place. It is estimated that the average daily volume of transactions in the global currency markets is in the order of $1.5 trillion. Therefore, in theory, traders should face little difficulty having their trades filled at their desired price. Also, the vast majority of online forex platforms offer commission-free trading, although bid/offer spreads may be somewhat wider than the big players are used to getting.
The trading interfaces themselves are not so different to those used by money managers, and the live prices displayed on the client's user interface are said to be the same as those shown on the terminals of professional currency traders. The systems also enable users to place a variety of different market orders that are standard in the industry, such as stop losses (advisable in the often volatile currency markets) and limit orders.
Most trading platforms are also packed with a variety of other features to help the trader formulate his or her strategy, including charts with basic technical analysis features, live news feeds and reporting tools permitting the user to analyse trading performance. Many firms have also incorporated chat rooms into their platforms enabling one to share tips and experiences with fellow traders or seek advice from a company broker or expert.
While the currency markets have the potential to make traders quick and substantial profits they can be a high risk financial instrument. An increasing level of regulatory supervision of the financial markets designed to prevent the mis-selling of unsuitable investment products means that opening an online trading account will require at least some degree of investment experience. This ranges from about six months upwards, although accounts aimed at the HNWI will often stipulate a minimum of two years' trading experience. Money laundering and fraud regulations also make it necessary for providers to ask for proof of identity, most commonly a passport.

The FHA Loan’s Comeback Tour

As far back as the Great Depression, Federal Housing Administration (FHA) loans have been helping Americans with poor credit buy homes. Recently lost in the shuffle of skyrocketing housing prices and a wave of subprime loans, the FHA loan is back.
The late 1990s and early 2000s were not good to the FHA loan, as its stringent guidelines and mortgage limits were pushed aside by the easier-to-obtain subprime loan. The subprime loans offered lax qualifications such as higher debt-to-income (DTI) ratios and no-money-down options. In addition, subprime loans did not have as many strings attached to them such as the strict appraisal process. For most people, the subprime loan was clearly the more attractive choice, and the FHA loan began to fade into oblivion.
Federal Housing Administration (FHA) loans may become more popularRecently, though, a steep rise in foreclosures and subprime lenders filing for bankruptcy has had a negative impact on the once popular subprime loan. As the subprime loans are disappearing, the old FHA loan is now making a comeback. Most people who were familiar with the FHA loan prior to its virtual disappearance might not realize that the program as it exists today is very different.
A 2005 revision to the less attractive FHA loan rules may help to rebuild the loan's popularity; FHA loans slipped to just 4 percent of all home loans in 2006 compared to 18 percent in 1990, according to Mortgage Foundation. Among the changes, the FHA raised mortgage limits to comply with today’s home prices and eliminated a number of picky cosmetic requirements that were a part of FHA appraisals, such as repairing cracked windows prior to closing.
FHA loans are currently available only to homes that fit under the specified mortgage limits. In high-cost areas such as New York and Los Angeles, there is a loan limit for single family homes of $362,790, while low-cost areas such as Iowa and Kentucky have a loan limit of $200,160, according to FHA.com. Mortgage limits vary by county within each state; consult FHA’s website for the lending limit in a specific county.
Property owners purposefully avoided FHA loan buyers in years past due to the tough requirements of the program, but FHA’s renewed popularity should force them to reconsider. Although requirements have been eased, it is important to know that some still exist. FHA’s list of items that must be repaired includes leaking or worn out roofs and structural issues, such as excessive foundation settlement, among other things. FHA appraisers can also mandate repairs for faulty electrical or plumbing systems, standing water against the home’s foundation and hazardous materials on the property.
While some of these repairs may be expensive or time-consuming, failure to comply with all of the issues checked by FHA appraisers will automatically eliminate a property from consideration for an FHA loan. Investors whose properties fit within local FHA mortgage limits should take full stock of all of their property's issues, as it is very possible that some FHA loan endorsed buyers will come calling.
Although FHA loans do not offer the financial flexibility that was promised by the subprime loan, they still allow individuals to receive financing of up to 97 percent, according to FHA.com.
As FHA loans pick up the market share left by the fall of subprime loans, investors with qualifying properties should be sure to maintain them at least at the FHA minimum requirements, in order to ensure their properties won’t fail when willing buyers are at the doorstep.

Virgin Money Manages Friend and Family Lending

Many have, at some point in their lives, either heard or uttered similar words. Asking family or friends for money can be awkward, and “loans” that are never repaid can destroy relationships. But Virgin Money aims to manage private loans and help keep relationships from turning ugly.
Though it has officially been under the Virgin umbrella since just last October, CircleLending—as it was originally known—has been operating for six years and has helped customers do more than $200 million in loans, according to the company’s website.
CircleLending was founded by Asheesh Advani. While working at the World Bank and studying worldwide markets for informal capital, he discovered that there was a large amount of friend and family lending happening in North America, and that these loans had extremely high default rates averaging more than 14 percent, according to Helen Payne Watt, director of content for Virgin Money.
Formerly CircleLending, the service has managed over $200 million in loans“[Advani] realized that with a simple application of documents and servicing to those loans, basically giving it the structure that a bank would give it, that you could dramatically reduce the default rates,” Watt said. “Give it the credibility and structure [of a bank], but continue with the flexibility of the friends and family style.”
Before Advani created CircleLending, the options for those handling friend and family loans were few. An attorney can document the loan and an accountant can handle the servicing and reporting, or a promissory note can be printed and the lender can try to handle repayment, Watt said. “But...we’re the only business that can do the entire package for you. And we do it with customer support the whole way along.”
The people involved decide on the final terms of the loan, but Virgin Money can educate and guide them through the process. Virgin Money is there to inform individuals about tax laws, minimum and maximum interest rates and offer guidance and suggestions based on what has worked for others in the past, Watt said.
These services do have a fee. The initial price for setting up a real estate loan through Virgin Money is anywhere from $249 to $2,299, with services ranging from documentation to managing payments, handling the title search and creating an escrow account. Full Servicing—documentation and management of electronic payments—costs $699. Processing fees start at $9 per payment.
The idea is that, when managed correctly, loans between family and friends can ultimately benefit both the borrower and the lender.
Borrowing
When receiving a loan from friends or family, borrowers are likely to get a much better rate than they would on a traditional bank loan.
“Interest rates tend to correlate really closely to the closeness of the relationship,” Watt said. “So, if it’s a parent [and] child, you’ll have someone with a lower interest rate. You’ll even have zero percent in some cases. But if the relationship becomes more distant—say in a seller financing transaction, where you just have a real estate investor who’s turning properties and financing the borrowers as they come through—you’ll get higher rates.”
The national average rate on traditional mortgages is 6.35 percent for a 30-year fixed rate mortgage and 5.9 percent for a 15-year fixed rate mortgage, according to HSH Associates Financial Publishers.
In contrast, the average rate for a mortgage between family members managed by Virgin Money is 5.25 percent, according to Watt. Over long-term loans, rates lowered by even 0.5 or 1 percent can ultimately save thousands of dollars. The average rate on Virgin Money’s non-family mortgages is 7.5 percent, Watt said.
Another benefit for those choosing to borrow from friends and family is that, in cutting out the middleman, a great deal of time and stress can be saved. Traditional mortgage loans can take anywhere from seven to 30 days to process and close because they require credit checks, title searches and physical appraisals of the property before final approval is granted. This is not the case when the money comes from someone the borrower knows.
“When there are loans between individuals who know each other, there’s no application process, there’s no filling out of forms, there’s no credit check. All that is [satisfied] based on the relationship,” Watt said.
Payment plans can be established that meet the borrower’s specific needs. For example, if the borrower works in a seasonal industry, such as tourism, payments can be adjusted seasonally to reflect his or her cash flow, Watt said. And if a borrower comes upon hard times, it’s much simpler to go to the lender and receive a temporary deferral if there is a relationship. Lenders can opt to defer payments, move a particular payment to the end of the term or forgive it altogether, according to Virgin Money’s website. This allows for flexibility that is not possible when dealing with a bank or credit card company.
Automatic payments allow family members to not discuss loans unless necessary“Banks will foreclose on the property but parents will tend to restructure,” Watt said. “When you have a family relationship involved, the lenders tend to do as much as they can to avoid foreclosure, whereas you don’t have that incentive from a bank or a mortgage company.”
Borrowers can pay their lenders automatically with electronic payments through Virgin Money. With the entire process handled by a neutral third party, borrower and lender don’t even have to talk about the loan if they choose not to.
Lending
For those who may be thinking about lending to a family member, friend or acquaintance, conducting the transaction through Virgin Money can provide some much-needed security. It’s even possible that lending money to a friend in need could be more profitable than putting the same money into other investments.
The average return on certificates of deposit (CDs) is 4.33 percent for one-year CDs and 4.31 percent for five-year CDs, according to BankRate.com. 10-year Treasury Bonds are yielding 4.4 percent, according to CNN Money. In contrast, the average rate for a mortgage loan between family members through Virgin Money is 5.25 percent, with rates between non-family members averaging 7.5 percent, according to Watt. The rates for business and personal loans are in a range similar to the 5.25 percent and 7.5 percent rates for mortgages between family members and between non-family members, respectively, Watt said. Even at the lower family loan amount, the rate is still almost a full percentage point above the average rate for CDs.
And, with the added security Virgin Money offers, lenders can feel good about helping out a family member, friend or acquaintance while also feeling that their investment is safer than it would be if sealed by only a handshake. The default rate for loans through Virgin Money is approximately 5 percent, while the default rate on mortgages is between 0.5 and 1 percent, according to Watt.
“Our mortgages tend to be comparable to long-term fixed rate mortgages, as opposed to short term (ARM) mortgages,” Watt said.
Of course, though Virgin Money can help mitigate the stress caused by lending, there is still the possibility that the deal could go sour. Deciding what to do in the event the loan goes into default is up to the lender.
“It’s up to the lender...how they want to enforce the promissory note, which will have the clauses in it about default,” Watt said. “If they want us to go ahead and proceed with collections, we are able to work with a partner to send out a series of collection notices on behalf of the lender.”
When dealing with friends or family, lenders may feel reluctant to proceed with collections, but Virgin Money can work with both borrower and lender to restructure the loan so that it gets repaid.
Those interested in managing private loans through Virgin Money can contact them by phone or through their website. There may be special deals available for investors who choose to manage multiple loans, according to Watt. The company is also looking to expand their business loan offering into multiple products for business investors, Watt said.

Zopa U.S. Website Launched

Zopa, a U.K.-based peer-to-peer lending company, launched its U.S. website Tuesday, offering certificates of deposit (CDs) with a twist to help charitable U.S. investors earn money while giving back to others.
“Last year Americans donated $295 billion to charity,” Douglas Dolton, global CEO of Zopa, said. “And what we saw was a way for investors to be able to invest their money safely with a great rate of return, but still satisfy that need that we clearly have as Americans to share our money with other people.”
Zopa’s U.S. website will differ slightly from other U.S. peer-to-peer lending websites, such as Prosper and Lending Club, by offering CDs to partially fund the loans. (For more information, see our articles on Prosper peer-to-peer lending and Lending Club.) The CDs will assist Zopa’s loan borrowers in part, and investors’ money will be safely insured up to $100,000 by the National Credit Union Association, an organization similar to the FDIC.
The CDs will be handled by several U.S. credit unions, including First Tech Credit Union and USA Federal Credit Union, though Dolton said he expects to significantly expand the credit union network. Zopa only offers one-year terms for their CDs, and interest rates are capped at 5.1 percent.
“My experience in the financial services business is that you cannot continuously be the highest rate in the market,” Dolton said. “We intentionally did not set out to have the highest rate in the market. We intended to have a sustainable attractive rate.”
The front page of the U.S. Zopa websiteTo invest in a Zopa CD, investors must choose a borrower then adjust the rate they earn on their CD, sending their chosen borrower all or part of the interest earned. Investors who choose to receive the maximum interest rate on their CD will help borrowers less, while those who choose a lower interest rate will help borrowers more. Once the interest rate is calculated, it becomes a simple reduction in the net monthly loan payment that a borrower needs to pay.
“If a community church has an underprivileged student who’s going to school and all those members of the church opens up a $500 CD and take 3 percent...you can actually reduce the payments to $0,” Dolton said.
“From an investor perspective, it’s absolutely amazing to be able to get an insured guaranteed rate of return and still be able to help somebody," Dolton said. "We call it the loan that can make payments for you.”
If a borrower defaults on a loan, it does not affect the return from the CD, Dolton said. “The loans are made by the credit unions, so that individual credit union would bear that loss,” he said. “We have underwritten them in a very safe and consistent manner across the board, so we are expecting to see fairly even performance across all of the credit unions.”
Borrowers are required to have a minimum FICO credit score of 640, and neither borrowers nor lenders pay any fees, though borrowers who are slow to send in payments may be subject to late fees.
Investors have to register at one of the six credit unions that partner with Zopa to invest in the CDs. This offers higher visibility and expanded membership for the credit unions, according to The Wall Street Journal.
Zopa also recently launched a site in Italy. Its original U.K. site, launched in March 2005, now has 180,000 registered members.
A password-protected test version of the U.S. website was opened earlier this month to a select group to allow a pilot run of the lending program.
“As the world’s first peer-to-peer, and now the world’s first global peer-to-peer lending operation, we think it really is about the connection between people,” Dolton said. “That’s what our values are all about: people, community, innovation and integrity.”
Interested investors can visit Zopa's website to learn more.

Prosper: Peer-to-Peer Lending

It is common knowledge that banks make huge profits on the margin between the interest rates they charge borrowers and the rates they offer to savings account holders.
The sheer size of these institutions allows them to easily diversify among a huge pool of borrowers and account holders, and they have historically had a monopoly on the lending market. Prosper.com, the first major person-to-person lending service in the U.S., intends to change all that by connecting small-time lenders directly with borrowers.
Many investors were intrigued by the idea of replacing banks in the lending equation. “It was a very interesting idea to me,” Kevin Gillett, a Prosper lender and the author of , said. “I love the idea of cutting the banks out of the picture.”
Prosper “basically allows me to be the bank, which I really like,” said a Prosper lender who goes by the user name of Technologyguy and
Prosper has the advantage of independence from the stock market, “so even if it can’t blow the doors off returns that you might see hyped up about it, if it can return 10 to 12 percent and be orthogonal to the stock market, I think that alone is enough of a reason to invest in it,” Gillett said. Prosper is creating a “completely different asset class,” he said.
On Prosper, the process begins when a borrower posts a loan application that includes a requested dollar amount, maximum interest rate and other credit and personal information. Lenders can then bid on the loan in an auction-style format until the loan is fully funded or the auction time runs out, much like eBay.
Prosper requires just a $50 minimum bid on any single loan, so lenders can diversify their funds across many different loans. A standard $5,000 loan application may end up funded by 100 different lenders. “It’s important that you diversify your loan portfolio, although you clearly would rather find 20 great loans than 70 good ones,” Gillett said.
Certain financial information in a borrower’s application is verified by Prosper, such as credit history, homeowner status and whether the borrower holds a bank account.
Prosper gives each borrower a credit grade based on his or her Experian credit score. Much of the rest of the information contained in a loan application is personal information provided directly by the borrower, with no verification from Prosper.
Lenders vary in the ways they deal with that personal information. Some try to eliminate it completely from consideration and focus solely on the numbers. Technologyguy, for example, disables all images from the site and avoids reading personal information because he doesn’t “want to be subconsciously swayed by a cute smile or a slick writer.”
Some lenders use the personal information as a way to weed out undesirable borrowers. “The personal information that they give is not something I ever use as a mechanism for deciding to bid on a loan,” Gillett said. “What I use it for is a mechanism to not bid on a loan.” When reading borrower listings, Gillett looks for “inconsistencies or any other red flag that might cause me to think they wouldn’t pay.”
It seems that every lender who pays even a little attention to personal stories favors certain types of borrowers over others. Gillett, for example, is drawn to people who are starting a second business while maintaining a steady day job.
A Prosper lender who goes by the name of Ms. Ava said she prefers to lend to those who “have enough money to pay their bills” and who “just need this extra money for a particular situation,” such as a taxi driver wanting to buy his own cab or a truck driver wanting to add a second vehicle. She also likes borrowers who are consolidating debt.
The main attraction for lenders is the loan’s interest rate; lenders typically seek a high interest rate for the amount of risk the borrower presents. Prosper helps lenders analyze risk levels by providing default rate statistics from Experian for the various credit grades.
Gillett believes that many Prosper borrowers “are not capable of getting loans at other places,” and therefore Prosper’s default rates “are higher than average, for say the Experian data. But it’s unclear what they actually are.”
Comprehensive data on Prosper’s average default rates is not yet available because Prosper is a year-old company offering three-year amortized loans. Prosper makes a wealth of data available on its marketplace performance page, and lenders can elect to receive daily e-mails with the latest statistics.
Gillett carefully analyzes that information and frequently adjusts his lending strategy accordingly. “I’m trying to be cautious and follow what’s going on and track how I’m doing and understand the marketplace,” he said.
Most of Prosper’s 11,500 lenders are seeing competitive returns so far, according to Eric’s Credit Community, a website that analyzes the official data released by Prosper. After adjustments for default risk, 75 percent of all Prosper lenders are seeing a return of more than 10 percent, and 98 percent of lenders are achieving more than 6 percent.
Diversification increases results; of the borrowers with more than 25 loans, 81 percent are seeing returns of more than 10 percent, and 99 percent are achieving more than 6 percent.
Activity on Prosper is reflected in a borrower’s credit history, so borrowers who wish to maintain or improve their credit have an automatic incentive to stay current on their Prosper loans. Borrowers who already have good credit are in high demand.
“The numbers speak for themselves,” Ms. Ava said. “If a person has a history of paying their bills, there’s no reason to think they’re not going to continue that history.” However, borrowers with good credit do not generally offer very competitive returns; their interest rates are bid down quickly at auction.
Prosper also introduces a social networking concept intended to motivate borrowers to make their payments on time. Borrowers and lenders can join groups on Prosper. A group leader founds and organizes the group and may choose to take a cut of the group’s loans.
Ms. Ava became a group leader for what she calls “selfish” reasons; she wanted more direct access to borrowers and their information than she had as a lender. Many borrowers are willing to share information with their group leaders that they would not otherwise share with lenders.
Ms. Ava believes that groups make a person “feel doubly responsible to pay back the loan,” because they don’t want to let the group down. Groups receive starred ratings on a scale of 1 to 5, with 5 being the highest rating.
The quality of groups varies, and the ways in which group leaders verify member information vary widely as well. Ms. Ava said some groups are “totally automatic…the computer does everything.” She conducts interviews with her group applicants and screens them carefully, and she immediately calls any member who misses a payment.
Since the quality of group leaders can vary, some lenders are skeptical of groups. Gillett does not believe that many group leaders “perform the actions that would actually be worth more than what Prosper already provides.” He said he would be influenced by group membership only in cases where the group leader bids on the loan.
Prosper recently introduced an endorsement feature to allow borrowers and lenders to link to friends and family members on Prosper. Friends and family can write endorsements on a borrower’s loan posting, but Technologyguy and Gillett are both skeptical of that feature. They each noted that they would rather see a feature where lenders could receive notifications when their own friends and other trusted lenders placed bids on loans.
Technologyguy said he would like to see Prosper provide interest on money that sits in a lender’s Prosper account. Right now, he said, he receives no interest on funds that are not invested, and “the money sits around for a long time when it’s being transferred from your bank account into Prosper.”
He said after finding and bidding on a loan, it can take up to yet another month before the loan is fully funded, verified and active. Since the money receives no interest during those waiting periods, “it really cuts into the amount of gains that you can make.”
Lenders have the option of bidding manually or automatically through a standing order. Technologyguy said he uses manual bidding 95 percent of the time because he wants to get his money into a loan as quickly as possible to minimize the time it sits in his Prosper account without earning interest.
“Standing orders are good for a different reason,” he said. Some of the best loans get funded very quickly, and “if you don’t have a standing order ready and you’re not logged into Prosper, then you miss out on that opportunity.”
Gillett has relied mainly on standing orders and only recently began to experiment with manual bidding. He said recent changes in Prosper have made standing orders less effective. The problem, he said, is with loans that are not autofunding, which means that “as soon as they’re 100 percent funded, they continue to have the auction open and the bids continue to come in” and the interest rates get driven down.
Gillett said his standing orders “would fire and my money would be tied up in this loan that started off at a great interest rate and then by the time the loan actually closed, I was bid out of the interest rate.”
Manual bidders can search through loans by hand, but Prosper also has “a nice system for saving searches,” Technologyguy said. He uses saved searches to sort through loan opportunities on Prosper. When Gillett’s standing orders became less effective, he began using a saved search, which “is effectively a standing order that doesn’t actually bid,” he said.
In order for standing orders to become effective once again, Gillett said Prosper would need to add “time remaining criteria” in the standing orders.
“eBay has taught us all that the optimal auction strategy is to show up at the last two minutes and outbid everybody and win the listing,” Gillett said. “You weren’t in the loan early, no one knows you’re coming, and…that way, you get the best interest rate possible.”
“The time remaining criteria would allow my standing order to basically act as I’m acting in a manual bid, which is to say, watching the interest rates, watching the loans, and then when the loan gets within 30 minutes of the end of its auction, then to have the standing order fire,” Gillett said. Such a system “is absolutely necessary if you’re going to be a standing order bidder these days,” he said.
Lenders with multiple standing orders face special challenges, Gillett said. He uses five standing orders that build a bid ladder, but “they fire in completely random order and I have no control over the order that they fire in.”
Rather than bidding at the most attractive interest rate first, the orders fire randomly. “So I’d like a little bit more transparent control over when the standing orders fire,” he said.
Overall, Gillett and Technologyguy are positive about Prosper and its future. Gillett would “like to think that my Prosper account would continue to grow and at some point it would always be 5 percent of my portfolio,” or even 5 to 10 percent, he said.
“If I could buy stock in the company,” Technologyguy said, “I would.” He said he considers Prosper “an ideal business.”

Investment Myths

The foreign exchange market is one of the most popular markets for speculation, due to its enormous size, liquidity and tendency for currencies to move in strong trends. Presumably, these characteristics would enable traders to have tremendous success. However, success has been limited mainly for the reasons described below. Many traders come with false expectations of the profit potential and lack the discipline required for trading. Short-term trading is not an amateur's game and is usually not the path for quick riches. Though currencies may seem exotic or less familiar than traditional markets (i.e. equities, futures, etc.), the rules of finance and simple logic are not suspended. One cannot hope to make extraordinary gains without taking extraordinary risks. A trading strategy that involves taking a high degree of risk means suffering inconsistent trading performance and often suffering large losses. Trading currencies is not easy (if it was, everyone would already be a millionaire), and many traders with years of experience still incur periodic losses. One must realize that trading takes time to master and there are absolutely no short cuts to this process. The most enticing aspect of trading currencies is the high degree of leverage used. Leverage seems very attractive to those who are expecting to turn small amounts of money into large amounts in a short period of time. However, leverage is a double-edged sword. Just because one lot ($100,000) of currency only requires $1,000 as a minimum margin deposit, it does not mean that a trader with $10,000 in his account should easily be able to trade 10 lots or even 5 lots. One lot is $100,000 and should be treated as a $100,000 investment and not the $1,000 put up as margin. Most traders analyze the charts correctly and place sensible trades, yet they tend to over leverage themselves (take a position that is too big for their portfolio), and as a consequence, often end up forced to exit a position at the wrong time. If an account value is $10,000 and the trader places a trade for 1 lot, he is in effect, leveraging himself 10 to 1, which is a very significant level of leverage. Most professional money managers are not allowed to leverage even this high. Trading in small increments on the account will allow the trader to endure many losing trades without experiencing large monetary losses.

Microfinance Institution Reviews

Although it is widely recognized that microfinance alone will not end poverty, it is a vital step in that direction. Microfinance institutions, also known as MFIs, offer financial services to underserved, impoverished communities.
Previously, entrepreneurs seeking loans in these communities had to provide collateral to borrow from unlicensed lenders at inequitably high interest rates. A number of factors, including high administrative costs relative to small loans and small returns, had kept banks from setting up shop in impoverished communities when surer profits were to be had elsewhere.
The lack of an efficient financial services industry has held back many would-be entrepreneurs with viable business plans from realizing their own potential. Women, in particular, have been excluded as loan candidates in developing communities. The lending practices of many emerging microfinance institutions, such as the Grameen Bank of Bangladesh, have given people living in extreme poverty the opportunity to realize their potential in the business community.
But the benefits of establishing microfinance institutions go beyond microcredit services alone. Services offered by microfinance institutions include savings accounts, insurance, health care and personal development. When Muhammad Yunus, founder of the Grameen Bank of Bangladesh, saw the vast amount of latent human capital possessed by people living in impoverished communities, he realized these people had the potential to help themselves if given access to the benefits of efficient financial markets, particularly access to credit. What resulted was a new approach to solving the problem of widespread systemic poverty. Despite the formidable challenges involved in transforming impoverished communities, Yunus and others have proved that it can work.
Microfinance institutions also provide insurance and health care servicesBy reaching out to those people living in extreme poverty, Yunus was able to determine their concerns and interests. This understanding made it possible to arrange services in a way that made sense for each community. In his book Banker for the Poor, Yunus referred to some of the benefactors of his innovative banking practices. “When I visit center meetings, not only in Bangladesh but all over the world, in countries as diverse as Malaysia, the Philippines, South Africa, and the United States, I realize how resilient and creative human beings can be when given the chance.”
There are pros and cons for both for-profit and non-profit organizations. Some people are more comfortable with a non-profit because they are turned off by the idea of making a profit by helping impoverished people. In most cases, non-profits can provide for loans issued at lower rates than for-profits can.
Fostering strong, efficient financial markets is important in enabling communities to sustain economic growth. This is more likely to occur when profits are sought by microfinance institutions.
Start-up costs are significant and microfinance institutions often need help from non-profit organizations in getting off the ground, but the long-term success of any microfinance institution lies in its ability to attain profitability. They do not eliminate the need for charitable contributions any more than they promise to eradicate poverty. Instead, profitable microfinance institutions supplement existing non-profit charities by accessing far more capital than charity alone can gather.
Many of the organizations that support the establishment of microfinance institutions, such as The Grameen Foundation and Accion, are non-profit, but it is through their support that many microfinance institutions manage to achieve profitability. This profitability leads to greater access to capital and greater access to loan candidates.
Non-profits provide microfinanciers with more access to capital and loan candidates“[W]hile programs that reach out to the poorest clients perform less well as a group than those who reach out to a somewhat better-off client segment, their performance is improving rapidly and at the same pace as the programs serving a broad-based client group did some years ago. More and more microfinance institution managers have come to understand that sustainability is a precursor to reaching exponentially greater numbers of clients," according to MicrofinanceGateway.org.
Microfinance institutions first began to establish themselves with the help of big players and big money. With the growing popularity of microfinance and socially responsible investing, there came demand for a way to get involved as an individual investor.
By utilizing the networking power of the Internet, many organizations have made it possible for an individual to contribute to the growth of microfinance institutions, and provided the option to make loans to individual entrepreneurs from the comfort of a personal computer. On many websites, payments can be made with a credit card using PayPal, by mail or by phone.
Combining the sustainability of microfinance with the existing popularity of contributing from one individual to another seems to be a good match. Giving money away often has only a one-time benefit. Lending money at a fair price—the interest rate—can perpetuate benefits because lenders may choose to reinvest interest earned as well as the principal. Web-based organizations such as MicroPlace and Kiva have furthered access to loan monies for microfinance banks by catering to individual contributors. In investigating some of the organizations offering these services, here are three that are well established.
MicroPlace: A socially responsible brokerage specializing in microfinance investments, MicroPlace offers convenience for the individual investor through offering securities and the opportunity to earn returns—typically 1.5 to 3 percent—on their investments. MicroPlace is a registered broker-dealer with the SEC. The website offers some good information about what they do, convenient payment options and a wide range of regions throughout the world to choose from. While MicroPlace is a for-profit organization, most of the loans are made at low interest rates through non-profits such as Calvert and Oikocredit. This would appeal to the investor who is more inclined towards charitable yet sustainable investments.
Accion: There is an extensive amount of information available describing the work they do not just for individual investors but also for microfinance institutions. Accion, which boasts more than 30 years of success in microfinance, aims to help establish microfinance institutions to the point where they can be self-sufficient. Accion has a proven track record as a non-profit organization with roots in South America offering opportunities throughout the world. Accion has begun to market housing microfinance.
Microfinance improves business and infrastructure in target areasKiva: Another user-friendly platform that caters to the individual investor who may want a story to go along with their contribution. Individuals can choose a business to loan to and track the progress of that business over time. Kiva lists the microfinance institutions for each loan so individuals can choose to place their investment through a microfinance institution in the risk category they are satisfied with. Kiva has a wealth of information on their activities, including statistics for variables such as delinquency rate, default rate and other relevant figures across five differently-rated categories. Investors even have the option to purchase gift certificates and spread the word about microfinance.
FINCA International (Foundation for International Community Assistance): FINCA places both donations and investments to facilitate “Village Banking” groups. This strategy utilizes the strength of community by grouping people with similar interests in order to support each individual. Village Banking groups are able to collectively insure loans borrowed by individuals without needing to provide collateral. The website offers a number of ways to get involved. Tax-deductible donations can be made on a one-time basis or as a recurring gift. FINCA does not offer a person-to-person lending program, but with a high loan repayment rate and proven success in microfinance, benefactors can be sure that donations will help the working poor. Sponsors may also choose to make bequests through the Planned Giving Program.
In developed nations, part of what makes economies strong is local ownership of small business and thus the vested interest people have in their own communities. The growth of microfinance institutions is making this a reality for impoverished communities throughout the world. To find a microfinance organization or to learn more about microfinance, see a search engine that rates them and offers information on the various microfinance institutions. Two of the larger such search engines are MicrofinanceGateway.org and MixMarket.org.
The previously published version of this story contained errors about the status of MicroPlace as a for-profit organization and as a broker-dealer registered with the SEC.

Nicaragua Real Estate

When people travel to a foreign country like Nicargaua, real estate is typically not at the front of their mind. Very few can say that they have leased a property for business after visiting for just three days, but that’s just what Charles Southwell did nine years ago. Southwell is an investor and real estate developer who lived and worked in Costa Rica for years; he went on a trip to Nicaragua with a friend nine years ago. “Within a matter of 72 hours, I had leased a building for business and basically decided to move here,” Southwell, who now owns the RE/MAX Granada franchise in Nicaragua, said. “I could feel the opportunity.”
Owning oceanfront property on a sunny beach or a period home in an historic city are distant dreams for many people. Such properties seem beyond reach in most areas but are surprisingly affordable in Nicaragua. Nicaragua real estate is beginning to attract global attention because of its rare combination of stunning beauty, which includes long stretches of ocean beaches and cities featuring colonial architecture, and a low cost and high quality of living.
“We enjoy a lot more time because we’re able to afford help here in certain aspects of our living,” Jeff Finch, a real estate developer who moved from Virginia to Nicaragua, said. “We have two housekeepers. We have a gentleman and all he does is take care of our landscaping, he’s kind of our handyman. We also have a pool keeper and a nanny. They’ve become extended members of our family.” Finch pays each of his employees between $100 and $150 per month.
Other luxuries are bargain priced in Nicaragua as well. A high quality meal can cost as little as $10 per person; suites at luxury hotels can be had for $120 per night. Finch and his family pay about $12 per doctor visit and less than $5 per prescription. With prices such as these, it is easy to see why Nicaragua is growing in popularity as a vacation, investment and even retirement destination.
Simple geography is another reason many investors are turning to Nicaragua. “To get here from the States, it’s easy,” Southwell said. “It’s a pretty viable destination for somebody that lives in the States or Canada. It’s turned into quite a tourist mecca, and it has huge investment potential.”
Some, including Southwell, have drawn comparisons between Nicaragua and Costa Rica. Only a decade or two ago, Costa Rica was a poor, beautiful Central American country with limited infrastructure. The country made a conscious effort to market itself as a tourist destination and an inexpensive place to do business, bringing Intel, Microsoft and GE into the country.
The influx of businesses boosted employment, which led to the creation of a larger middle class in Costa Rica. “The countries that build the middle class are the countries that have long-term success, and that’s what’s happening here,” Finch said of Nicaragua.
Costa Rica now has a per capita GDP of $12,000, behind only the U.S. and Canada in the western hemisphere, and nearly $2,000 more than the worldwide average of $10,000, according to the CIA World Factbook. Costa Rica’s success has largely been the result of a stable democracy and investor-friendly policies.
Nicaragua is undertaking a similar effort to secure foreign investments and businesses by offering foreigners property rights equal to residents and granting substantial tax breaks and deferrals for tourism-related expenses.
“Law 306 was passed during the last 20 years for tourism investment incentive,” attorney Byron Mejia said. Mejia is a native Nicaraguan who spent 20 years working as an attorney for American Express in Miami. Mejia moved back to Nicaragua 10 years ago and has been specializing in real estate law there ever since.
“Specifically, they have 10 different categories of tourism-related projects in which the government gives tax incentives,” he said. “For example, if you want to establish a hotel or a bed and breakfast, they give you free import duties, you only pay 20 percent on your income tax, you pay no sales tax, and you pay no property tax.”
Nicaragua’s young population could also help lure foreign investments. Nicaragua’s median age is 20.9, and 96.9 percent of Nicaraguans are under 64, according to the CIA World Factbook. Nicaragua’s high percentage of young people means that it has a large population of workers available.
“The education system is booming ahead, and there’s going to be a really nice employment pool available here in the next five years,” Southwell said. “I think you’re going to have a really good opportunity to employ service industries, not to mention textiles and the tourism industry.”
Nicaragua has made great strides in recent years in shrugging off the perception many people have that it is a volatile and unsafe country. Still, many potential investors remain on the sidelines because they view Nicaragua as riddled with poverty and political unrest. According to Southwell, that’s just not true.
“It’s one of the safest countries in the hemisphere,” he said. “They really, really are kind, gentle people. They’ve been through hell and back. They want peace, they want prosperity.”
Though Nicaragua is the largest country in Central America, it is a poor country, with a per capita GDP of $3,000, according to the CIA World Factbook. It is the second-poorest country in the western hemisphere, trailing only Haiti. Its poverty was largely caused by the twentieth century’s political turmoil, suppression and revolution. This tumultuous environment left Nicaragua’s infrastructure badly damaged.
Many Americans are only aware of Nicaragua because of the Iran-Contra Affair, a political scandal from the 1980s. The Reagan Administration sold arms to Iran and used those profits to fund guerilla forces, called Contras, who were opposed to the leftist Nicaraguan revolutionaries, called Sandinistas.
Daniel Ortega was one of the leading Sandinistas in Nicaragua in the 1970s and 1980s; he served as president from 1985 to 1990, and was re-elected in November 2006 for another five-year term, much to the chagrin of many observers. They fear Ortega will revert to the leftist leanings he displayed in his past, which could hinder Nicaragua’s development and economic growth by alienating potential investors and causing the bustling tourism industry to grind to a halt.
Such a regression is not likely, according to Southwell. “Having been involved personally with the Sandinistas over the years—I lease two buildings from them and I know Daniel [Ortega] personally—I know that he’s probably going to be more interested in his legacy than in any of the things he was [interested in] in his leftist past,” he said.
Southwell is not alone in his optimism that Nicaragua is on the path toward stabilization and growth. “I don’t think they [the Sandinistas] want to go back to the past,” Mejia said. “We already had our civil war, and now it’s time to move the country forward.”
Concerns about private property rights, especially for foreigners, are keeping many investors at bay. During Ortega’s previous term, some private property was seized, leaving many wary about purchasing real estate in Nicaragua. That shouldn’t be too much of a concern anymore, according to Mejia. He has specific advice for investors concerned about title issues.
“What is advisable today is to stay away from municipal property, temporary titles or agrarian reformed titles, because even private banks do not make loans to these types of titles,” Mejia said.
Kevin Fleming, who moved to Nicaragua two years ago, is a real estate developer from Vancouver, Canada. He agreed that private property seizure is a thing of the past. “Daniel Ortega has gone on record many times as saying the days of stealing from the rich and giving to the poor, those days are gone. All that did was create poverty,” Fleming said.
Ortega has acknowledged that he must change his ways in order to help Nicaragua recover from its civil war and fulfill its potential. His efforts will be buoyed by two key economic events of 2005.
The G8—a coalition of the world’s seven leading industrial nations and Russia—granted foreign debt relief to Nicaragua in 2005. There are strings attached: in exchange for the relief, Nicaragua must strive to eradicate poverty, be forthcoming with the government’s finances, achieve political stability and support human rights.
Also, Nicaragua signed the Central American Free Trade Agreement (CATFA). Since signing CAFTA, which strengthened Nicaragua’s relationships with its Central American neighbors and the U.S., Nicaragua has exported 33 percent more goods to the U.S. than before. These events have allowed Nicaragua to grow its economy, and along with it, its infrastructure.
The biggest hurdle Nicaragua faces is updating its infrastructure. The country is devoting a lot of money and effort to improving infrastructure, particularly in areas most frequented by tourists.
“The airport in Managua has been rebuilt; it’s brand new. We have several ports in the Pacific that have been rebuilt and are ready to go,” Mejia said. “And it’s my understanding that there are plans of improving the inner roads of the country for production purposes.”
Few medical facilities are up to U.S. standards, but a state-of-the-art facility was recently opened along the Masaya Highway, which runs between two major cities: Managua and Granada. Managua, the capital, has better medical resources than most of the country. In addition, Managua’s airport is now one of the nicest in Central America, thanks to a recent $50 million overhaul.
Still, only one in four roads in Nicaragua is paved, and public transportation is substandard. The rainy season—from May to October—renders many roads useless. The government is focusing its building and repair efforts on the roads most often traveled by tourists, which is expected to boost tourism and create new investment opportunities.
Access to technology is also improving. “Now it is normal to see farmers riding on their horses on the backroads of the country with a cell phone on their hip,” Fleming said.
Technological development has made living and working in Nicaragua easier for Southwell than Costa Rica ever was. “Here, you can go down to the corner and get a cell phone, you’ve got three Internet companies to choose from—I mean, it’s just a lot easier to get things done here,” he said.
Electricity is sometimes spotty, but it is steadily improving. “The power used to go out here four to six hours a day, almost every day, before Daniel Ortega got elected,” Finch said. “Since he’s been elected, I can think of maybe three days that the power went out for maybe one or two hours. That’s because they’re building new substations.”
The new substations are only one component of the growth of Nicaragua’s energy infrastructure. Energy is undergoing a surge in development and investment popularity. “The government is promoting a lot of investment in energy,” Mejia said. “We are rich in rivers, volcanoes and other sources of energy revenue, such as wind power, solar power, geothermal power and hydroelectric power. Laws are being renewed to give investors sufficient incentive to invest in these types of energy products.”
The excitement and energy surrounding Nicaragua will grow as more people become aware of its potential. The right pieces seem to be in place for Nicaragua to catch up with its neighbors. A continued focus on building up infrastructure, combined with aggressive incentive and property rights laws to attract foreign investors, should provide a bright future for Nicaragua if the political climate remains stable.
From its natural beauty to its historical architecture, Nicaragua real estate has a lot to offer; if Nicaragua can capitalize on its potential, investors could see significant returns.