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Chapter 2, Part I. Why FOREX? - Q&A

Discussion in 'Complete Trading Education- Forex Military School' started by pragmatic, Aug 16, 2011.

  1. pragmatic

    pragmatic Corporal

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    Hello Sive!
    Since on the first page of the course it is said that you may answer questions abut banking industry, as well as forex, please advise me with this problem:
    Where should I keep my savings? Because:
    1. I do not trust the solidity of the banks in my country (former communist country)
    2. I do not have enough money to access a Swiss bank
    I think of keeping them with a Swiss broker since they have the same rigorous control and statute as a Swiss bank. Also, I can invest it, unleveraged, in a major currency that has a long term clear direction and change that currency with little cost.
    What do you think of this plan?
    How can I find a broker to trust it with my savings?
    Thank you!
     
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  2. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Pragmatic, I hope that I'll visit Bucharest sometime. People tell that it's beautiful...
    Well, there is one major question - do you want to safe your money or to make an interest on them.
    Very simple desicion is to buy swiss franc with some solid broker, as you've said, swiss broker. Just open an account and buy without leverage. It means that transfer 5000 USD for instance and buy ~5000 francs - that's all. 0.05 lot.

    Second possibility - you may hold money 50/50 between EUR and USD. Understand, that if US or EU will collapse - it will be collapse worldwide, and hardly some currency will benefit from that.

    Also it depends on sum. If it is small, do you really think that you need extended diversification?
     
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  3. pragmatic

    pragmatic Corporal

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    Hello Sive!
    Of course, you are very welcome in Bucharest! It is a very interesting place, especially if one is a foreigner. This is a serious invitation.
    I was serious about the savings too (about 70k hard worked). Please understand that in this country the average honest individual earn 500/month. This is official statistic not my opinion.
    I do not quite understand how the global meltdown works. You said that if EUR or USD will collapse there are no winners. Where will the money go then? Maybe it will be better for metals or real estate...
    Have a nice day!
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    I see,
    may be real estate is not bad decision - much will depend on price dynamic in Romania. Unfortunately I can't say anything useful here. The only problem is liquidity.
    Metals are expensive currently.
    EUR and USD are about 80-90% of world FX reserves. US is about 64%.
    Well, I do not see currently really strong reasons for collapse, but we discuss
    it hypothetically...
    Anyway, you may split them in 3 parts - CHF, EUR and USD.
    Think also about AUD - high rates, AAA, low gov. debt.
    Since your money are in USD you may just open an account with solid swiss broker and buy without leverage - EUR, CHF and AUD. If some stability will appear - swiss franc start to fall, but EUR gain. AUD also will, since this is commodity currency.
    Something like that. From the other side (if romanian banks have deposit insurance) you may just buy some EUR and open some long term deposits - in USD and EUR to get some interest. I think it will be more than 3-4%.
    70K is too few to deal with bonds.
     
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  5. pragmatic

    pragmatic Corporal

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    Thank you very much Sive!
     
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  6. jianean

    jianean Private

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    Hi Sive,

    Please can I ask: at the end of No2 above it finishes "...it is not great idea to enter the market with just $50), because"
    Is something missing?
    Thanks
     
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  7. ladybird

    ladybird Recruit

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    Hello, I have a question about leverage. Is it like that you choose as high leverage as you want or is that the brokers decision depending on your size of trading account? Is that one the reasons why not to enter the market with low amounts? Just very little fluctation can quickly close your position and you can loose your capital so easly. Im a correct?

    Thanks for your answer.
     
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  8. Pharaoh

    Pharaoh Colonel

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    Brokers assign default leverage based on account types. Some (not all) reduce leverage on larger accounts. Some (not all) allow you to request larger or smaller leverage.

    Trading with too much leverage, especially if you are not very experienced, it a very good way to wipe out your account in the blink of an eye.
     
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  9. ladybird

    ladybird Recruit

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    I see, thank you. But I still quite don´t get it :( What is the benefit of the broker giving you leverage?

    Thanks for answer
     
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  10. ladybird

    ladybird Recruit

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    Thank you :) but I still quite don´t get it. What is the benefit of the broker giving you leverage?

    Thanks for answer.
     
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