How to Avoid Debt When Investing

Whilst there are plenty of investors out there who are happy to accrue an amount of debt when starting off (be it down to hubris or confidence), if you’re just getting into trading you’re likely to be fairly debt averse. But you don’t have to get into debt when investing.

If you’ve managed to place yourself in a situation in which you have a large amount of money already, then there’s a huge number of options open for you. You could choose to go into Stock options, binary options, FX trading…just about everything except Spread Betting really. However, lets focus on those that do not have this resource available to them.

If you’re looking to avoid debt when investing, then what you’re really looking for is an investment vehicle with an extremely high potential for returns. Sticking money into FX, or stocks, is good if you happen to have enough capital to deal with the potential risk involved. Those that don’t have enough capital may not be able to spread shares over a varied portfolio, increasing their chances of making a loss.

Penny stocks are something to consider but you can only win if you are lucky enough to invest in a penny-stock that happens to go massive, but it’s not so great if you have a small amount of starting funds and the speculative nature of penny-stocks doesn’t appeal to you. In that case, your best option is probably Binary Options.

Binary Options are an odd choice to be suggesting you put your money into, and they certainly have a very mixed reputation, but hear me out. If you’re looking to avoid debt when investing, then the fact that binary options have predetermined risk whilst still having an incredibly high potential return on investment makes them the perfect choice. Some binary option platforms ensure that traders keep a percentage of their investment, even in the scenario that the trade was unsuccessful. This in many ways prevents the all or nothing nature of trading, giving the trader the opportunity to bounce back with some remaining capital.

Binary Options have, in the past, been associated with people wanting to ‘get rich quick’ – and their subsequent disappointment. As with any sort of investment, going into it blind is a great way to lose your investment. If, however, you go into Binary Options trading having done a great deal of research, then even with a small amount of money available to you, you can make some great returns.

I can’t over emphasize how important research is, in order to gain a crystal clear picture of how to invest your money. Binary Options should be used as a way to create yourself enough of a base to move onto other forms of investment, and as such it is crucial to get your first few investments right. Before you even think about choosing a broker, know everything there is to know about Binary Options, the market you’re investing in, anything that might make a big difference to the market, and the specific commodity that you’re investing in.

It is still very possible that you will lose a very large portion of your investment. That is just the reality of investing – it’s a high risk, high reward business, and doing so with a relatively small financial buffer and without allowing yourself to go into debt makes it even more difficult. But if you can, it’s worth it to successfully build yourself a good financial base with which to continue trading without risking all of your money.

As with any trading, a person should set themselves a limit of money they are willing to spend on investing. They should never use borrowed money or money they simply don’t have in order to get themselves back into black. Traders often set up separate trading accounts away from their current accounts to ensure they stay out of debt. In my opinion, to succeed in the trading business money must be thought about in a strategic manner, traders must not over extend themselves, putting themselves at risk. The most successful traders in all forms keep a level headed temperament, only using capital they can genuinely afford to risk.

Will Rises in Inflation Boost the Forex Market?

Doom for the Dollar?

Earlier this week, Richmond Fed President Jeffrey Lacker made an announcement signalling that U.S inflation is likely to ‘accelerate’ over coming years, following a sluggish period after the 2007-2009 recession.

Speaking at the Global Interdependence Center’s Central Banking Series conference in Paris this week, Lacker forecast that inflation would be close to 2 percent by 2017, “despite low recent inflation readings, FOMC (Federal Open Market Committee) participants generally expect that inflation will rise back toward 2 percent over the medium term”.

He continued to speculate that this would mean that interest rate hikes were likely to occur in two or three small increments, over a similar period of time. The dovish announcements from Lacker and other Fed members fuelled speculation that the dollar would suffer; be softer, less volatile and that Forex investors may seek to trade currencies that offered higher yields.

In addition to this, more downward pressure has recently been exerted on the dollar by the recovery of the AUD, CAD and NZD, who have been bolstered by the surge in the price of oil and by unexpected appreciations in the price of the EUR.

So How Does All This Work?

If interest rates rise, then this would be likely to attract foreign investment and, in turn, this inflates the value of the dollar. If interest rates remain low, however, then foreign investment is less likely and the value of the dollar would likely fall.

Other factors also feed into this equation and in particular inflation rates. Higher interest rates can mean that the rate of inflation rises also and this generally leads to a decrease in the value of the dollar. Striking a good balance between the rate of inflation and interest rates is key to ensuring that the dollar remains strong and can hold its own on the Forex markets.

It is important to consider that these rules only apply verbatim, if all other factors are equal, that is to say, if all countries are participating on a level playing field and of course this is not the case and world economics and politics all serve to make the overall picture less clear.

What Can Small, Independent Investors Do?

For small, independent investors who wish to trade on the Forex markets, the sheer pace at which the economical climate can change and the array of factors that need to be taken into account, can be a little bewildering and make it difficult to pinpoint trades that will result in profit.  Traders who are most successful, will achieve that success by investigating a number of avenues. A reliable trading platform, such as, ETX Capital is a good place to start, this will allow the trader to access many trading instruments, including Forex, but it doesn’t end there. Users will also be privy to a host of advice and information that will help them trade with confidence.

Further to this, traders need to have their eye on the world economic window, setting up news feeds that are fast and reliable. Social media can play a vital role in this, as can regular visits to websites such as The New York Times. Research is paramount, as is an in depth understanding of how Forex markets react to breaking news and events.

Another way to optimise the chances of success is for Forex traders to develop a disciplined trading strategy and to hone their technical skills. Accurate chart reading is an essential ingredient in any traders recipe for profit, as is using a strategy that includes things like stop loss orders.

So is it Really Doom for the Dollar?

In short the answer is no. The dollar did suffer a 1 percent loss against some major currencies after the announcements from Lacker, however it picked up again after only a two day sell off. Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey, was quoted as saying: “It looks to me like we have dissipated the dollar weakness from the Fed”. This is perhaps, in part, because the U.S is currently enjoying low unemployment and because improving domestic household finances are fuelling family spending, facts echoed by Atlanta Fed President Dennis Lockhart, who said: “Short of some big shock that turns consumer psychology on its head, I see no reason why consumer spending growth should not continue. I think the conditions supporting this engine of economic momentum are likely to hold steady”.

World Economic Stage

It is not only domestic economic conditions in the U.S that are supporting the dollar, uncertainty regarding global economics; concerns over conflicts in the British Conservative Party and the upcoming referendum on leaving the European Union (Britex) have triggered a slide in the strength of sterling. The on going slowdown of the Chinese economy, the pressure being felt throughout Europe in the face of the conflict in Syria and the humanitarian problems that are being caused as a result are just some of the factors that are worth bearing in mind. Germany has Europe’s strongest economy, but even it has strained under the weight of the influx of refugees fleeing to seek asylum in Europe. The world stage is far from stable and it is possible that in terms of Forex, Europe in particular may see some of its players exit stage left.

Forex Outlook

With the dollar currently looking only a little bullish in the medium term, Forex investors would be advised to take a cautious approach to investing in it. The Fed’s policy outlook is still far from set in stone and there is market scepticism regarding whether interest rate hikes will actually materialise. It is possible that inflation will rise without the accompanying interest rate rises needed to balance this. Furthermore there is still a risk that the domestic economy will slow down and recession will, once again, rear its ugly head. But let us not forget that ‘there is more than one way to skin a cat’ and traders are not obliged to adopt a bullish approach to Forex investing. One man’s loss, can be, another man’s gain and if the tables turn bearish, going short, may be a profitable consolation.