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I've read in a few trip reviews about people winning hundreds of dollars on the penny slots. When most people max bet on penny slots about winning big on pennies they max bet on penny slots go on a roll and have betting games large wins coupled with some small to mid sized wins. I go with a set amount of money to have fun, and if I win that makes it even more fun I would love to see these mystical slots where max bet is only five coins because it's been ages since I've seen those - max bet seems to be more 10 to 20 coins per line lately. A good payoff for a single coin per line bettor on a penny slot is a hundred dollars or so.

Financial spread betting tutorialspoint i horse betting 2

Financial spread betting tutorialspoint

As prices of these major currencies keep changing and so do the values of the currency pairs change. This leads to a change in trade volumes between two countries. These pairs also represent countries that have financial power and are traded heavily worldwide. The trading of these currencies makes them volatile during the day and the spread tends to be lower.

This is also the most traded currency pair in the world. Another important point is that this forex pair is not too volatile. Therefore, if you do not have that much risk appetite you can consider this currency pair to trade. The spread is the difference between the bid price and the ask price. The lower price Inversely, if you want to open a short trade sell , you will do so at the price of The higher price Simply put, a bull bullish market is used to describe conditions where market is rising and a bear bearish market is the one where market is going down.

It is not, a single day which describes if the market is in bullish or bearish form; it is a couple of weeks or months which tell us if the market is in the bull bullish or the bear bearish grip. In a bull market, the confidence of the investor or the traders is high.

There is optimism and positive expectations that good results will continue. So in all, bull market occurs when the economy is performing well — unemployment is low, GDP is high and stocks marketsare rising.

The bull market is generally related with the equity stock market but it applies to all financial markets like currencies, bonds, commodities, etc. Therefore, during a bull market everything in the economy looks great - the GDP is growing, there is less unemployment, the equity prices are rising, etc.

Conversely, the bull market generally leads to a decline in safe-haven currencies such as US dollar, the Japanese yen or the Swiss franc CHF. Forex trading is always done in pairs, where if one currency is weakening the other is strengthening. As you can trade both ways means you can take a long buy or short sell view in either currency pair, thereby allowing you to take advantage of rising and falling markets.

In forex market, bull and bear trends also determine which currency is stronger and which is not. By correctly understanding the market trends, a trader can make proper decisions of how to manage risk and gain a better understanding of when it is best to enter and exit from your trades. A bear market denotes a negative trend in the market as the investor sells riskier assets such as stock and less-liquid currencies such as those from emerging markets.

The chances of loss are far greater because prices are continually losing value. Investor or traders are better off short-selling or moving to safer investments like gold or fixed-income securities. Because a trader can earn great profit during bull and bear market considering you are trading with the trend.

As forex trading is always done in pairs, buy the strength and sell the weak should be your trade. A lot is a unit to measure the amount of the deal. Trading with the proper position or lot size on each trade is key to successful forex trading. The position size refers to how many lots micro, mini or standard you take on a particular trade. The standard size for a lot is , units of base currency in a forex trade, and now we have mini, micro and nano lot sizes that are 10,, 1, and units respectively.

Whenever you purchase buy a currency pair, it is called going long. When a currency pair is long, the first currency is purchased indicating, you are bullish while the second is sold short indicating, you are bearish. When you go short on a forex, the first currency is sold while the second currency is bought.

To go short on a currency means you sell it hoping that its prices will decline in future. A pending order in any trade is an order that was not yet executed thus not yet becoming a trade. Generally, while trading we place the order with a limit, means our order pending trade will not get executed if the price of a financial instrument does not reach a certain point. Pending order will automatically get executed once price reaches to the pending order position.

A pending order to buy a currency at a lower price whatever price trader wants to buy than the current one. A pending order to buy a currency at a higher price whatever price trader wants to execute than the current one.

A pending order to sell a currency pair at a higher price whatever price trader wants to sell than the current price. In this chapter, we will learn about leverage and margin and how these influence the financial market. Forex trading provides one of the highest leverage in the financial market.

Leverage means having the ability to control a large amount of money using very little amount of your own money and borrowing the rest. Your leverage, which is expressed in ratios, is now In such case, the trade goes in your favor. Your broker to maintain your position uses it. Margin is expressed as a percentage of the full amount of the position. Based on the margin required by your broker, you can calculate the maximum leverage you can yield with your trading account.

Hedging is basically a strategy which is intended to reduce possible risks in case prices movement against your trade. Trading costs, commissions, and leverage levels are flagged when you sign up for an account. Forex traders may see a swap charge against their account.

A swap fee is interest earned or paid on trades kept overnight. Over price charts are available on the platform with 21 timeframes, ranging from one-minute to one-month. This makes the platform suitable for analysing both short-term and long-term price trends. MetaTrader 5 is home to real-time international news streams and an economic calendar. The software also has a Depth of Market feature to see liquidity, plus one-click trading and a vast library of historical market information, such as NSE stock data.

MetaTrader 5 allows for separate accounting of orders and trades, plus support for all types of trading orders and execution models. The MetaTrader 5 web terminal has been designed with personalisation in mind. Note you can also personalise the look and feel of the platform, including choosing between the light and dark mode. Automated trading is available through expert Advisors EAs.

Following pre-determined criteria, algorithms will automatically execute trades on your behalf. The MQL5 programming language allows for the development, backtesting, and optimisation of expert advisors. The MQL5 Wizard helps beginners get started with trading robots. Expert advisors can also be bought directly from the Market or free downloads are available at Code Base. If you need to step away from your MacBook or Chromebook, the mobile app has everything a pro needs to operate.

You can access a complete set of trading orders, including pending orders and level 2 prices, with up to 32 quotes. Mobile traders also benefit from fast switching between financial instruments on charts, free financial news, push notifications, 30 technical indicators, and 24 analytical tools. Additionally, the History Center can be used to view price quote history. For iPhone users, head to the Apple App Store. Alternatively, the platform is available through the WebTrader login page on your mobile browser.

A tutorial for MT5 mobile beginners is offered by most brokers. Note the time zone is set by the broker and cannot be changed from your iPhone or Android device. The free MetaTrader 5 demo account is an excellent preliminary step to take before opening a real live account.

Beginners can get familiar with trend analysis and order execution. You could test a strategy on shares, for example, without risking real money. You could also play around with different lot sizes in a forex strategy, or try trailing stops and risk management tools. Note 1 lot equals , of your base currency while a mini lot equals 10, and a micro lot equals 1, For further guidance on demo accounts, see here. MetaTrader 5 is available at some of the best-established stock and forex brokers, particularly in the UK and US:.

Support is available to MetaTrader 5 customers through several avenues. To get complex topics explained and standard templates, user manuals and guides in PDFs or online videos are a good place to start. However, arguably the greatest source of support is the online MetaTrader 5 community.

Avid users are also great for updates on how to get the most out of the latest version of MetaTrader 5. The key difference is that MetaTrader 5 is geared towards the advanced trader. MT5 offers 38 technical indicators while MT4 has And MT5 has 21 timeframes while MT4 has nine. MetaTrader 5 is also considered a multi-asset platform, whereas MetaTrader 4 is primarily used by forex traders. Finally, MetaTrader 5 has two market orders, six pending orders, plus two stop orders, whilst MT4 offers two market orders and four pending orders.

So when it comes to the choice of MetaTrader 5 or MetaTrader 4, consider your needs. MT5 is probably the best fit for advanced traders seeking a state-of-the-art platform, but MT4 will suffice for most. For forex traders, there is a MetaTrader vs NinjaTrader debate.

Both platforms are aimed at experienced traders using sophisticated strategies. The benefit of NinjaTrader is that it promises more customisation than MetaTrader 5. This means less choice when it comes to brokers and a smaller online community. For experienced traders wanting a multi-asset platform and access to powerful trading tools, MetaTrader 5 is a sensible option. The server allows you to operate multiple accounts with different brokers. It also has excellent automated trading capabilities and copy trading.

Overall, for complex trading strategies, MetaTrader 5 is among the best. MetaTrader 5 is an online trading platform that connects retail investors to the financial markets. No — MetaTrader 5 is not a broker. MetaTrader 5 is a legitimate and well-regarded platform.

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Creation of provisions is legally necessary, but reserves are created to save a concern from the future losses and liabilities. Banking Company, Insurance Company, and Electricity Companies create secret reserves, where the public confidence is required.

In this case, to create secret reserve, assets showed at lower cost or liabilities at higher value. Without disclosing to its shareholders, it increases working capital of a concern, which is a clear indication of the sound financial position. With the help of secret reserves, directors can maintain the rate of dividends during the unfavorable time.

Due to non-disclosure of actual profit, financial statements do not presents true and fair view of the state of affairs. Due to secret reserves, chances for the concealment of worst position of a company are very high. Company will get very lower amount of claim of insurance at the time of loss of stock or other assets, as valuation of the assets are done at very low value to create secret reserve.

Specific reserves are created and utilized for the purpose only for which they are created, like dividend equalization reserve and debenture redemption reserve. General reserves are created for any future contingency or to utilize at the time of expansion of a business.

Purpose of creation of General reserve is to strengthen the financial position of the company and to increase the working capital. For the purpose to repay of any liabilities or to replace any fixed assets after particular period, sinking funds are created.

For this, some amount are charged or appropriated from the profit and loss account every year and invested in any outside securities. Without any extra ordinary burden, replacement of an asset may be done in a systematic manner or pay any known liability on maturity of the sinking fund. It is a controversial issue, whether a reserve should be invested in outside securities or not. Thus, to decide anything, it is important to study the need and requirement of a firm according to the financial position of a firm.

Therefore, investment in outside securities is justified only in a case where company has the extra fund to invest. In-spite of showing reserves on the liabilities side of a Balance Sheet, reserves are actually not at all any liabilities of a firm. Reserve represents as accumulated profits, which are available to disburse among the shareholders. Similarly, measurement of a business income is also an important function of an accountant.

In General term, payment received in lieu of services or goods are called income, for example, salary received by any employee is his income. There may be different type of incomes like Gross income, Net income, National Income, and Personal income, but we are here more concerned for a business income. To evaluate the activities, which give higher return on scarce resources are preferred. It helps to increase the wealth of a firm. Ascertainment of a net income is helpful for paying dividends to the shareholders of any company.

According to the American Accounting Association, to be as business income, income should be realized. For example, to be a business income, only appreciation in value of assets of a company is not enough, for this, asset has really been disposed of. For the measurement of any income concerns, instead of a point of time, a span of time is required. Creditors, investors, owners, and government, all of them require systematic accounting reports at regular and proper intervals.

The maximum interval between reports is one year, as it helps a businessman to take any corrective action. An accounting period concept is directly related to matching concept and realization concept; in the absence of any of them, we could not measure income of the concerns. On the basis of matching concept, expenses should be determined in a particular accounting period usually a year and matched with the revenue based on realization concept and the result will be income or loss of the accounting period.

The measurement of accounting income is the subject to several accounting concepts and conventions. According to the convention of conservatism, the policy of playing safe is followed while determining a business income and an accountant seeks to ensure that the reported profit is not over stated. Measurement of a stock at cost or market price, whichever is less is one of the important examples as applied to measurement of income. But it must be insured that providing excessive depreciation or excessive provisions for a doubt full debt or excessive reserve should not be there.

According to this concept, the principle of consistency should be followed in accounting practice. For example, in the treatment of assets, liabilities, revenues, and expenses to insure the comparison of accounting results of one period with another period. Therefore, the accounting profession and the corporate laws of most of the counties require that financial statement must be made out on the basis that the figures stated are consistent with those of the preceding year.

Proprietor and business are the two separate and different entities according to the entity concept. For example, an interest on capital is business expenditure, but for a proprietor, it is an income. Thus, we cannot treat a business income as personal income or vice-versa. According to this concept, it is assumed that business will continue for a long time.

Thus, charging depreciation on a Fixed Asset is based on this concept. According to this concept, an income must be recognized in the period in which it was realized and costs must be matched with the revenue of that period. It is desirable to adopt a calendar year or natural business year to know the results of business. In above value, an addition to capital will be subtracted and addition of drawings will be added while computing the business income of a firm.

Since, income is calculated with the help of Balance Sheet hence called as Balance Sheet approach. Transactions are mostly related to production or the purchase of goods and the sale of goods and all these transactions directly or indirectly related to the revenue or to the cost. Therefore, surplus collection of the revenue by selling goods, spent over for production or purchasing the goods is the measure of income.

This system is widely followed by the enterprises where double entry system adopted. Therefore, it can be defined as consideration, recovered by the business for rendering services and goods to its customers. We can say the cost that have been consumed in a process of producing revenue are the expired cost.

Expenses tell us - how assets are decreased as a result of the services performed by a business. Measurement of the revenue is based on an accrual concept. Accounting period, in which revenue earned, is the period of revenue accrues. Therefore, a receipt of cash and revenue earned are the two different things. We can say that revenue is earned only when it is actually realized and not necessarily, when it is received. Some expenditure, which are made prior to this period and has become expense of the current year.

Expenditure, which is made this year, becomes expense in the next accounting periods. For example, purchase of fixed assets and depreciation in next up-coming years. Expense of this year, which will be paid in next accounting years. For example, outstanding expenses. It is a problem of recognition of revenue during the year and allocation of expired cost to the period.

In this system, revenue earned is treated in the same manner as is used in any other credit sale. It is based on total estimated life of the contract. Matching of expired revenue and expired costs on a periodic time basis is the satisfactory basis of allocation of cost as stated earlier. Historical cost actually means - outflow of cash or cash equivalents for goods and services acquired. Further, expenses are compared with revenues on the income statement when the expenses expire or title has been transferred to the buyer, and not at the time when the expenses are paid.

Expenses are measured in terms of a historical cost and determination of expenses is based on a cost concept. Bill of exchange must be carrying certain amount and only in terms of money, and not in terms of goods or services. In case of same parties, will be reduced to two instead of three. Drawee agrees with the full content of the bill without any change and it may be conditional, which is called as qualified acceptance. Due date of foreign bill starts from the date on which Drawee sees it and accepts it.

Since date of payment is fixed, it is helpful for both debtors and creditors; and, they may manage their payment schedule accordingly. Being a negotiable instrument, promissory note is easily transferable from one person to another. In this case, bank charges some interest on bill amount according to waiting time. Entries will remain same as explained earlier. In case where the acceptor of a Bill of Exchange failed to pay the bill on due date of maturity or refused to pay, it is called as dishonor of a Bill of Exchange.

As a proof of dishonor of a Bill, payee may get a certificate from a Notary Officer appointed by the Government for this purpose. There may be a situation when the acceptor of bill may not be in position to pay the bill on due date and he may request drawer to cancel the old bill and draw a new bill on him i.

Renewal of Bill. Drawer of bill may charge some interest on mutually agreed terms and that amount of interest may be paid in cash or may be included in the bill amount. To manage several numbers of bills receivable, drawer sent those bills to the bank for collection and bank gives credit to the customer whenever a bill is collected from a drawee. A bill of exchange may be accepted to oblige a friend or any known person at the time of his need or to provide him a loan or else to accommodate one or more parties is called as accommodation bill.

In the form of materials or supplies to be consumed in the production process or in rendering of the services. Shortage of inventory may close down the business. Realization of profit from resale of an inventory makes valuation of inventory. Therefore, the point is that every business unit has to follow a proper method of inventory valuation.

Over valuation of closing inventory may overstate the profit figure and vice-versa. Therefore, proper valuation of an inventory is necessary to determine the true income and profit by the business concern. This method of stock valuation is also known as physical stock taking method or annual stock taking method.

Under this system of taking inventories, stock is determined by physical counting at the end of the accounting period i. This system is very simple and useful in small business organizations. This system of inventory valuation records every movement of stock on the receipt and issue of material reflecting running balances of different kind of inventories through preparation of store ledgers for raw material, work-in- progress, and finished goods.

To insure the accuracy of store records, a periodic reconciliation of records is done by taking physical inventories. An inventory is valued at a cost or market price, whichever is lower to ensure that the anticipated profit should not be accounted for and full provision for anticipated losses should be done. Where there is evidence that the utility of goods, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, the difference should be recognized as loss of the current period.

This is generally accomplished by stating such goods at a lower level commonly designated as market. FIFO is the most popular method of an inventory valuation, which is based on assumption that the material first received or purchased are the first to be sold or issued. It means, closing stock is out of the last or latest received or manufactured goods.

In above example, it is assumed that closing stock of items was out items purchased on As name suggests, closing stock is valued on the basis of oldest purchased or manufactured items. First time, this method was used by the U. In the above example, closing stock will be valued at items Rs.

Average cost method is used where identification of stock with rate or value of stock is not possible. It is of two types Viz…. So, if we want to choose average method then weighted price method should be followed under which valuation will be done as hereunder.

In the above example, Rs. This method is based on the assumption that the highest value of material always consumed first and closing stock will be valued at the lowest cost of purchased or manufactured material. This method of valuation covers normal losses, increasing price of purchases to calculate closing value of an inventory. For example, if units purchased for Rs. Under this method, where identification of items with price is possible, then closing stock will be valued accordingly.

Under this method of valuation, stock is valued at current market price. It is also called replacement price or realizable price method. The purpose of preparing a financial statement is not only to know the net income or losses of concern for the current year, but also to know the change in net income or losses of a firm in comparisons to the preceding years. There are two types of financial statements, which reflect two types of profits i. Under this chapter, we will discuss the reasons for changes in Gross Profit Ratio.

Gross profit means, excess of sales over cost of goods sold. This ratio also indicates the losses due to damage or mismanagement. More the ratio is high more it is good for a financial health of a concern. Higher gross profit provides leverage to the management to meet their indirect expenses and to spare net income for the distribution of profit and to increase the reserves.

There may be equal decrease or increase in selling price and cost of production without affecting gross profit of the current year. There is a possibility that given sales are inclusive of consignment sale due to any mistake or otherwise. Omission of purchase invoices in the books of accounts may also be one of the reasons for higher gross profit. It is necessary for survival and progress of any business to keep its margin of gross profit high as much as possible to enable it to cover its operative expenses as well as indirect expenses.

Analysis of changes in gross profit is the first step in determination of a net income. Due to increasing size of market, it is quite obvious that manufacturers or whole sellers cannot approach directly to every customer around the state or nation. To overcome this limitation, manufacturers normally appoint reliable agents at every desired location to reach the customers directly.

He makes an agreement with local traders who can sell goods on his behalf on commission basis. Here, ultimate ownership of the goods remains with the manufacturer or whole seller who handovers goods to his agent for sale on commission basis. Consignment is merely a transfer of possession of goods not an ownership. Since ownership of goods remain with the manufacturer consignor , consignee agent is not responsible for any loss or destruction of goods.

Consignee only gets re-imbursement of expenses incurred by him and commission on sale made by him, because sale that proceeds, belongs to owner consignor. On the other hand, the relationship between a consignor and a consignee is that of principal and agent. On the other hand, consignee may return the unsold stock of goods to consignor anytime. Invoice implies that the sale has taken place, but pro-forma invoice is not an invoice. Proforma invoice is a statement prepared by the consignor of goods showing quantity, quality, and price of the goods.

Such pro-forma invoice is issued by the consignor to consignee regarding the goods before the sale actually takes place. Statement showing the details of goods received, goods sold, expenses incurred, commission charged, remittances made, and due balance is called Account Sale and it is remitted by the consignee to the consignor of goods on a periodic basis. Over-riding commission is also calculated on the total sales. A del credere commission is paid by the consignor to his agent for taking additional risk of recovery of debts from the consignee on an account of credit sales made by him agent on consignor's behalf.

Expenses, which increases the cost of the goods and are of non-recurring nature and incurred till the goods reach the warehouse of consignee may called direct expenses. Warehouse rent, storage charges, advertisement expenses, salaries, etc. The distinctions between direct and indirect expenses are important especially at the time of valuation of the unsold closing stock. Valuation of unsold stock will be done like a closing stock of a Trading concern and should be valued at the cost or the market price whichever is low.

Here, proportionate direct expenses mean — all expenses incurred by the consignor and the expenses of consignee, which are incurred by him till the goods reach the warehouse. To know the actual profit, at the end of an accounting period, consignment account will be credited with excess price so charged. Value of the stock will also be adjusted to the extent of profit element. In this case, consignor usually directs consignee to sale goods on invoice price only.

It prevents different sale price to different customers. It is not separately shown in the consignment account, but included in the cost of goods sold and the closing stock by inflating the rate per unit. To calculate the value of unsold stock, following formula is used. It is credited to the consignment account to calculate actual profitability. Valuation of closing stock is done on the same basis as explained earlier i.

An association of two or more persons or we may say temporary partnership combined for the carrying out a specific business, and divide profit or loss thereof in agreed ratio is called a Joint Venture. Concerned parties to joint venture are known as co-venturers. Since they come together for a work on a specific project, it will termed as joint venture and each of them A and B will be called as a co-venturer.

Further, this venture will automatically terminate once the project is completed. The persons who run the business on partnership are called as partners and the persons who agreed to take the project as joint venture are called as co-venturers.

Partnership is governed under the Partnership Act, , whereas there is no enactment of such kind for the joint ventures. However, as a matter of fact in law, a joint venture is treated as a partnership. There is no limit specified for the numbers of co-venturers, but the number of partners is limited to 10 under banking business and 20 for any other trade or business. Liability of a partner is unlimited and may extent of his business and personal estate, whereas under joint venture, liabilities of co-venturers are limited to the particular assignment or project agreed upon.

On the other hand, the co-venturers of a joint venture share profits as per the agreed profit sharing ratio. On the other hand, funds are contributed by all co-ventures in a certain agreed proportion. On the other hand, if, everything goes smooth, consignment is a continuous process. If one of the co-venturers is appointed to manage the joint venture, he is awarded an extra commission or remuneration out of the profit for his services. Under this method, all co-venturers contribute their share of investment and deposit their shares in a Joint Bank account — newly opened for the specific purpose of the Joint Venture.

They may use this bank account to make any kind of payments and to deposit sale proceeds or any other kind of receipts. In addition to Bank account, a Joint venture account is also opened in the books to keep records of all transactions routed through this account. This category of accounts is a personal account of the each co-venturer. Separate Joint venture account and personal accounts of other co-venturers are opened under this method of accounting. Joint venture account is debited and bank account or creditor account is credited on the account of goods purchased or expensed.

Joint venture account is credited and a bank account or debtor account is debited in case of either cash sale or credit sale. Each co-venturer debits joint venture account and credits personal accounts of other co-venturer on the account of either goods purchased or expensed by other co-venturers. Joint venture account is credited and personal account of others co-venturer account is debited in case of sale made by other co-venturers.

Joint venture account is debited and commission account is credited if, commission is receivable, but if commission is receivable by other co-venturer, then the concerned co-venturer account will be credited instead of the commission account. If unsold stock is taken, then goods account will be debited by crediting Joint venture account.

On the other hand, if unsold stock is taken by any other co-venturer, then personal account of the co-venturer will be debited. Balance in the joint venture accounts represents profit or loss and later that amount of profit or loss will be transferred to the personal accounts of co-venturers.

Only one personal account is opened by each co-venturer in his book named Joint Venture account with…………… Name of other co-venturer. Same process will be followed by other co-venturer in his books of accounts. Only one personal account will be opened by each co-venturer irrespective of the fact, how many other co-venturers are exists. Each party will record only those transactions in his book, which are done by him; the transactions done by other co-venturers will be ignored.

Memorandum account is merely a combined account of personal accounts opened by each co-venturer. Debit side of personal account will be transferred to the memorandum account and the credit side of personal account will be transferred to the credit side of memorandum account. Transactions done by co-venturers among themselves including cash received or paid by one co-venturer to other will be ignored at the time of preparation of a memorandum account.

Balance of memorandum joint venture account will represent profit or loss of the particular business. Further, the profit or loss will be transferred to the individual co-venturer account in their profit sharing ratio. Some of the organizations or institutions are constituted to provide valuable services to the society with the objective not to earn profit.

These organizations normally offer the services such as education, medical, social clubs, charitable trusts, trade unions, etc. Maintenance of proper books of accounts is necessary to safeguard the money of its members and general public from any kind of misuse or misappropriations.

It is important to know the total receipts, total payments, and also to know financial status of an institution. Hence, the account opened and maintained for and by the organizations discussed above is known as Non-trading account. Normally, registration of members, minute book, cash receipt journal, cash payment journal, etc.

It is a real account. Basic rule of double entries is followed to prepare this account. It is prepared from a cash book at the end of the accounting period. Every transaction regarding the cash transactions is recorded in the Cash Book in a chronological order. We may say that the Receipt and Payment account is a summary of cash payment and cash receipts during the current year.

For example, if rent and salary paid on monthly basis all over the accounting period, and donation or subscription received during the current year recorded in a cash book date wise, but at the end of the accounting period, the Receipt and Payment account will contain total amount of rent paid, salary paid, subscription received and donation received. All cash receipt will be recorded on the debit side and all cash payment will be recorded on the credit side. Income and expenditure account is a nominal account and as an equivalent to Profit and Loss account.

Expenses and losses are recorded in the debit side of it and all incomes and gains are recorded on the credit side. It is based on a mercantile system of accounting, therefore, the income and expenses related to preceding years or subsequent years are excluded while preparing the income and expenditure account. The credit balance of an income and expenditure account shows surplus.

Further, excess of income over the expenditure and the debit balance of it show deficit i. The date on which a balance sheet is prepared, particulars of all the assets and liabilities are recorded in the same manner as we do in any other profit making firms. Its capital fund is made up of surplus income over expenditure and other incomes capitalized in the given period of time. Sometimes, two balance sheets need to be prepared viz…. Opening balance and closing balance of a receipt and payment account representing opening cash in hand, opening cash at bank, closing cash in hand, and closing cash at bank need to be ignored.

Items of capital receipts and capital payment will be excluded while preparing an income and expenditure account. All adjustment regarding the outstanding expenses, prepaid expenses, provision for bad debts, provision for depreciation, income received in advance, and income receivable will be done.

An income and expenditure relating to preceding year or subsequent year will be ignored, and the items only related to the current year will be considered. It is very clear from the above example that the balancing figure represents rent for the current year i. Following the same method, we can calculate the amount of any other expenses. Non-trading concerns may receive donations time to time. The treatment of donation depends upon nature of donation. The amount of such donation cannot be used for any other purpose.

It should be shown on liabilities side of the Balance-sheet and used only for the same purpose it is meant for. Donation of the big amount should be fairly treated as capital receipts and will be shown in the liabilities side of the Balance sheet. However, donation is of a small amount or a big amount may depend upon the size of a concern and amount.

Sometimes, as per the will of a person, an amount received is called as legacy. It is as good as donation. It is of a non-recurring nature, therefore should be treated as a capital receipt, and hence will be appeared in the liabilities side of a Balance sheet.

A club or society usually charge admission fees or entrance fees for the membership. In case of club etc. The life membership fees may be taken from the members of institution only once in their lifetimes. On the basis of lifetime membership, members may enjoy certain benefits. Normal subscriptions of the members may be transferred from the Life Membership Fees account to the subscription account as an income and the balance may be carried forward to the following years.

On the basis of average life of a member, the amount may be transferred to the income and expenditure account annually and rest will be carried forward towards the following years. Without any dispute, it will be treated as recurring income and will appear in the credit side of an income and expenditure account. Subscription is the major source of an income for the non-trading concerns. Subscriptions are received from the members of a club or institution.

Therefore, some adjustments require to calculate the subscription of the current year. Some special funds are created by the respective institutions for specific purpose. For example, a prize fund may be created to give the best player of the year award. Further, the balancing figure of this account will represent the amount of an income for the current year. It is very clear from the above example that balancing figure represents Subscription for the current year i.

As we know, there are two systems of recording transactions in our books of accounts. For every accounting transaction, everyone does not follow the principle of double entry system of accounts. Some of the small business units do not keep their books of accounts as per double entry system. In simple words, single entry system of accounts mean — the business unit, which does not follow the principle of double entry system. Double entry system followed for cash received from the debtors and the cash paid to the creditors.

Single entry system followed for expenses paid, purchases of goods, purchases of fixed assets etc. Single entry is an in-complete system of accounting, whereas double entry system DES is a complete system of accounting transactions. There is no reliability on books in a single entry system, whereas double entry system is a reliable accounting system. Checking of the arithmetical accuracy is possible in a double entry system through preparation of trial balance, whereas it is not possible under a single entry system.

Single entry system of accounts do not record two-fold aspects of each and every transactions, hence, it is not a scientific system of keeping accounting records. Checking of the arithmetical accuracy is not possible due to non-preparation of a trial balance. Preparation of a trial balance is not possible, because the method of double entry system is not followed for each business transaction.

Ascertainment of the actual profit of a concern is not possible, as nominal accounts are kept under single entry system. It is not possible to find the exact financial position of a firm in the absence of real accounts, because without real accounts, it is not possible to prepare the Balance sheet of a firm on a particular day.

In case where owner of the business wants to sell his business, ascertainment of exact value of the business is not possible, especially goodwill value of the firm. As stated earlier, in the absence of real accounts, it is not possible to prepare a Balance sheet. Statement of affairs should contain the income received in advance and the expenses paid in advance.

Basis for the valuation of fixed assets will be the purchased voucher and any other available evidence. Main difference between the statement of affairs and the Balance sheet is —reliability on first is prepared through incomplete information and on later is based on the scientific method of the double entry system of accounts.

For example,. Statement of affairs should prepare on the date on which the change need to be made. After the proper checking and verification of such balances from available records, all the balances like cash balance, bank balance, assets, liabilities, debtors, and creditors should appear in the statement of affairs.

Above entry will be a base entry to open all new books under the double entry system of accounts and all the future transactions will be booked according to the double entry system as explained earlier. To convert books of the last year from single entry to double entry system, it will be assumed that all the subsidiary books are maintained properly under the single entry system.

All the impersonal accounts as appeared in the cash book should be posted in the respective impersonal accounts, if it has not been done earlier. New impersonal accounts need to be opened through total of the subsidiary books. For example, with the total of sales book and purchase book, sale account will be credited and purchase account will be debited, vice versa in case of returns.

All the new account should be opened for the entries relating to discount, rebates, bad debts, etc. This procedure will give two-folds effect of such transaction as appeared in the personal accounts. Month-wise positing should be done to the ledger accounts through petty cash book, if, maintained by the firm.

After completion of the above procedure, a trial balance should be prepared to confirm the arithmetical accuracy of the books of accounts. As described earlier, an opening statement of the affairs should be prepared at the beginning of the period. All the real and nominal accounts as appeared in the cash book and not posted earlier in any account, should be posted in respective accounts.

In the field of real estate, leasing is a popular term because it is advantageous to own land and building. Today, most of the businesses run their offices on the leased premises. Lessor has an ownership right of assets, but still lessee has an unrestricted right to use that asset. The Accounting Standard 19, issued by the Council of the Institute of Chartered Accountants of India, covers the disclosure of appropriate accounting policies in the financial statements. One of the main reasons behind the popularity of leasing is its simplicity to both the parties i.

It is beneficial in terms of its documentation and also provides tax advantage. Selection and purchase of asset come under the purview of leasing company, and use and rent payment of the assets are the part of lessee. Since lessor remains owner of the assets, so he can claim for the depreciation in his books. Interestingly, he can enjoy the tax benefit against the depreciation. Similarly, lessee pays the rent and records such rent in his books as expenses for the purpose of tax benefit. Lessee can use the asset without actually purchasing it, means full finance without any margin money.

In the Balance sheet of a lessee, leased assets are not shown as asset or liability of the company, hence the credit capacity of the lessee remains un-affected. Leasing provides an opportunity to lessee to earn additional profit and to improve earnings per share. Without heavy investment, lease rent can be paid out from the income generated by the use of the assets.

Taking advantage of the full utilization of the asset is possible under a lease agreement; chances of ignorance are high, where company purchases asset as its own. Strict provisions of the financial institutions for acquiring an asset can be avoided through a lease agreement.

Leasing is not very much useful for some of the new businesses, as earning through the business comes much after the investment. Some of the incentives as provided by the state and the central government, cannot be enjoyed due to lease agreement. In case of variation clause in a lease agreement, rental structure can be changed due to change in the rate of interest, rate of depreciation, etc. Operating lease is an agreement wherein the lessor owner allows the renter lessee to use the agreed asset for a particular period.

Usually, the lease period is shorter than the economic life of the asset. Further, lessor does not actually transfer the ownership rights. The Lessor gives the right to the lessee to use the asset in return of regular payments for an agreed period of time.

An initial cost can be deferred to the lease period of the asset or may be booked as expenses in the year, in which actually incurred. In case where lease is able to secure for lessor the recovery of his capital outlays plus a reasonable return on the fund invested during the lease period is called financing lease.

Finance lease in non-cancellable contract and also, lessor is not responsible for any expenses and taxes of the leased asset. Total value of the investment plus income receivable on it will be treated as receivables in the Balance sheet. Direct expenses may be directly debited from the profit and Loss account in the year of expenses incurred or may be deferred up to the lease period.

Fair value of the leased assets should be considered as an asset and a liability in the finance lease. Sale and purchase of the securities is done through banks. The stockbrokers help people in trading by paying the amount of commission, stamp duty, and brokerage on it, which are the essential parts of security trading. At the time of selling of these securities, charges should be deducted from the sale, as proceeds to get the actual sale price.

Most of the time, market price is different from the face value of securities, which depends upon different regulating factors. If market value of the securities is equal to face value, it is called as at par ; if market value is less than face value, it is called as on discount ; and if market value is higher than face value, it is said to be on premium. Investment means either buying or creating an asset with the future expectation of capital appreciation, dividends profit , rents, interest earnings, or some combination of these returns.

However, normally, investment inherent with some form of risk, such as investment in equities, property, and even fixed interest securities, among other things, are the subject to inflation risk. Further, among all these, securities are held as long term investment to earn income. It is said to be fixed assets, but where objective of an organization is to sell and buy securities in short term fund to utilize its surplus fund, would come under the category of current assets.

Investment account is an account opened for the purpose of the investment. Further, if the number of investment is large, a separate account for each investment should be opened. Interest and dividend on the fixed investments accrued on regular interval, but payment of those are made only on fixed dates. Dividends are always paid to the persons, who are shareholder at the time of payouts. Suppose a shareholder sold his shares after keeping those shares in his hand up to ten months, then dividends on those shares will be paid to the buyer or we can say, to new shareholder.

Since, the sale price is inclusive of the value of a share and interest or dividend, therefore at the time of entry in the books of accounts, normal price of share should be booked in the investment account and the value of dividend or interest should be debited to dividend or interest account. At the time of receiving dividend or interest, dividend or interests account will be credited, debiting cash or bank account.

On the other hand, in the books of seller, normal price of the share should be credited to Investment account and the price of accrued dividend or interest should be credited to the dividend or interest account as the case may be. The buyer of shares when he is quoted ex-dividend is not entitled to receive the payment.

It is the interval between the record date and the payment date during which the stock trades without its dividend. Therefore, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock. Cum interest or dividend prices are inclusive of the interest or dividend accrued at the date of purchase, whereas in case of the ex-dividend, prices are excluding value of the dividend or interest.

The purchase price is higher than normal purchase price in case of Cum-dividend, whereas purchase price is the real price in case of ex-dividend. Nothing is payable additional in case of Cum-Interest, whereas separate amount of the dividend or interest has to be paid in case of the ex-dividend or ex-interest. Difference of debit and credit side of the investment account is Profit or Loss in case where all the investments are sold. In case where part of the investments are sold and the balance investments stand unsold, it should be carried forward to the next accounting period and remaining balance of the two sides debit and credit will represent profit or loss on the sale of investment.

In case where investments are the fixed assets, then the profit or loss will be of capital revenue or capital loss and should be treated accordingly. Purpose of the bonus share is to capitalize reserves of the company. Only number of the shares will be added in face value column, and principle or capital column will remain unchanged. As per Companies Act, right shares can be issued after two years of the establishment of a company or after one year of first issue.

Insolvency is a financial stringency i. Insolvency usually leads to insolvency proceedings, in which legal action can be taken against the insolvent, and assets may be liquidated to pay off the outstanding debts. Act of insolvency means, when a person debtor shows that he is not able to pay his liabilities.

An order of adjudication must be passed by the court of law, before legally declaring any person insolvent. To pass an order of adjudication by the court of law, a petition should be filed by any of the creditor or creditors or by the debtor himself. Petition by the creditor may be filled only in following conditions;.

After filing the petition, the competent court will fix date of hearing and then it may declares that the debtor is insolvent or not. If insolvency of a person starts from an earlier date, and not from the date of adjudication passed by the court. This is known as Doctrine of Relation Back. Under Presidency Towns Act, to conduct the insolvency proceedings, an official is appointed by the court is known as Official Assignee and in case of Provincial Insolvency Act, known as Official Receiver.

Order of discharge is an order issued by the court of law to the insolvent. Normally, this order releases the insolvent from all current and provable debts and liberates him from the legal obligations imposed on as insolvent. The order of discharge is issued on the basis of the report submitted by the official receiver and on the application of the insolvent.

As per the Presidency Towns Insolvency Act, any property transferred by the insolvent without any consideration during the two years preceding the order of adjudication shall be void. Companies Act, applies to Joint stock companies and the term liquidation is used instead of Insolvency. In case of insolvency, a person is not able to pay his liabilities but in case of liquidation, company may be liquidated even it has the sufficient amount to pay its liabilities.

To the insolvent — you are required to fill up carefully and accurately, this sheet and the several sheets, A,B,C,D,E,F,G, and H, showing the state of your affairs on the day on which the order of adjudication was made against you viz. Such sheets, when filled up will constitute your Schedule and must be verified by Oath or Declaration. Preferential Creditors as per List D Creditors for rent, taxes, salaries and wages, etc. Surplus from securities in the hands of creditors fully secured per contra.

Deduct: Creditors for preferential rent, rates, taxes, wages, etc. Trade creditors, stridhan ornament and personal belongings etc. Loan taken from wife is usually treated like any other loan taken and makes wife creditor of the insolvent.

In case, it is proved that loan is paid by wife out of amount received from insolvent, then be treated as the capital of insolvent. The creditors who have sufficient securities against their claims will be included in this list and after paying these creditors, balance amount will be shown on the asset side of the statement of affairs as available balance to distribute among other creditors.

Un-paid or unsatisfied amount of the partly secured creditors will be shown as expected to rank column as unsecured creditors, to be divided for unpaid amount. Following creditors comes under the category of preferential creditors and such creditors get preference over the un-secured creditors. Salary and wages for the service rendered for four months preceding the date of the presentation of the insolvency petition. Under Presidency Town Insolvency Act, one month rent comes under the category of preferential creditors, but rent is not at all comes under the preferential creditors category as per the Provincial Insolvency Act.

In case of an individual insolvent, no distinction will be made between the private assets and the business assets while preparing a Statement of Affairs. Personal assets are included in the Statement of Affairs to pay the business liabilities. In case of partnership firm, after paying personal liabilities from the personal assets of the partner, surplus if any, may be included in the statement of affairs of Partnership firm to pay the business liabilities. Value exceeding Rs.

Assets, as pledged against secured and partly secured creditors, may be shown in the statement of affairs only, if, became surplus after paying the fully and partly secured creditors. The bills discounted to be dishonored are included in the un-secured creditors as per the list A.

The value of assets is shown as books value as well as releasable value in the statement of affairs; however, it is shown as only book value as in the case of Balance sheet. In the Statement of Affairs, prepaid expenses and goodwill are not included, whereas all fictitious assets are included in the Balance sheet.

Statement of Affairs does not include capital, drawings, profit, or loss, interest on capital, whereas Balance sheet includes all such items. Balance sheet is prepared at the end of accounting period, whereas Statement of Affairs is prepared on the date on which order of adjudication is passed. Statement of affairs is prepared as per the rule of Insolvency Act, whereas Balance sheet is a routine work to maintain the accounting record.

Balance sheet of a firm does not include personal assets and liabilities, whereas Statement of Affairs includes the same as discussed above in this chapter. Statement of Affairs includes contingent liabilities, whereas in the Balance sheet, contingent liabilities are shown as footnote only. Net profit arising from carrying on business after deducting usual trade expenses, income or profit from other source i.

Net Loss arising from carrying on business after deduction from profit, usual trade expenses. From the above, it is clear that debit side of the deficiency account shows capital account and credit side of the deficiency accounts shows losses and drawing and the difference of two sides is a deficiency as shown in the Statement of affairs Account. Insolvency of the partnership firm differs from the insolvency of any individual or HUF Hindu undivided family. The assets of an individual are used to pay the business liabilities, but in case of partnership firm, assets of the partners are used to pay his personal liabilities first, and then balance, if any, may be utilized to pay the business debts.

In case, if personal asset of a partner is in possession of any creditor as security, still such creditor will get his dues first as unsecured creditor from the firm and then for the balance amount, he may sell the property, owned by him to recover his dues. Stock exchange is an organized market where sale and purchase of listed securities of all description i. It is a government approved market place where buyer and seller of securities of all kind find each other to buy and sell securities on the market price.

A stock exchange is a common and authorized point of exchange, which offers the services for stock brokers and traders to buy or sell stocks, bonds, and other securities of such kind. Further, it also provides facilities for issue and redemption of securities, other financial instruments, and capital events.

For example, payment of income and dividends. For doing business transaction i. Non-members are not allowed to do business transactions. Membership can be applied only when there is a vacancy in any stock exchange and after paying the prescribed fees of respective stock exchange, membership can be acquired. Members of stock exchange are called as brokers and commission charged by them for the transaction done is called as brokerage. Only a broker member can buy or sell securities, therefore, investors or speculators can do transaction through members only.

Anyone can sell and buy any industrial, financial, and Government securities. Stock Exchange is an organized ready market to do all this. Liquidity is provided by the stock exchange. Investors and speculators can buy and sell their securities at any time. Stock exchange provides collateral value to the securities that is helpful in borrowing from the bank on easy terms. Capital for the industrial growth is provided by the stock exchange that is helpful for the investor to participate in the industrial development.

Price list and reports are prepared and published in the newspapers and broadcasted through the TV channels by stock exchange. It is helpful in knowing the true value of the investments. With the help of this, an investor or speculator can get to know the fair market value of his securities as per the latest market trend. Listing of securities is encouraged by the stock exchange.

Jumping in head-first without a thorough understanding of exactly how this relatively new form of trading works is a recipe for disaster. Not surprisingly all of the spread betting firms in the market offer free tutorials - after all, they don't want customers blowing their life savings on their first trade. So what is spread betting? Spread betting is a leveraged tool that gives the investor the opportunity to back their judgement on the direction of a financial market.

Spread betting companies take the price of an underlying market and add a 'spread' to that price. The spread is the difference between the sell and buy price. Step 1: Choose the right company for you. Step 2: Open your account.

Usually this can be done on the same day. Some firms will carry out credit checks on you and will require that you call them from a landline to verify your identity. Step 3: Choose what you want to bet on. There is everything from indices, FX, commodities, shares to more complex financial products like ETFs and interest rates.

Start on something that you feel comfortable betting on and understand how the market is traded. Is it on each decimal point or is it each point movement? If you are unsure call them up or look on their market information sheet. Step 4: Do your research.

Use the charting software provided by your spread betting firm, look on Bloomberg, Reuters etc and other reputable financial news websites to get a feel for the market. Wait for the right entry point and choose your exit points and stop loss level in advance. Step 5: Place your trade.

Do it over the phone or online. Online is instant execution and is good for day trading, but if you want to speak to the traders and get a 'feel' for the direction of the market on a futures trade call them up. Remember that the traders cannot give out advice - if you want advice, speak to an independent financial advisor.

For traders who wish to have a trial run before they put their money where their mouth is, it makes sense to start off by opening a simulator or demonstration account one of the best ones is the Ayondo demo account , as this is a risk-free method of familiarizing yourself with the mechanics of spread betting.

When choosing between the various firms in the market, one aspect that investors should factor into their decision is the spread - the difference between the buy and sell price - offered by the different companies as some can be significantly better value than others.

The first thing that strikes you when setting up a spread betting portfolio is that as soon as you make each trade you're immediately in a loss situation, due to the dealing spread. For example, if the spread offered on Ryanair is - , this means that you can buy it for , but you're immediately down six points because you can only sell it for It's only when the share price rises by six points that you will be able to sell at the price you bought, because the spread will have moved up by that amount.

SILVIO LUIZ E MAURO BETTING RAJA

These pairs also represent countries that have financial power and are traded heavily worldwide. The trading of these currencies makes them volatile during the day and the spread tends to be lower. This is also the most traded currency pair in the world.

Another important point is that this forex pair is not too volatile. Therefore, if you do not have that much risk appetite you can consider this currency pair to trade. The spread is the difference between the bid price and the ask price. The lower price Inversely, if you want to open a short trade sell , you will do so at the price of The higher price Simply put, a bull bullish market is used to describe conditions where market is rising and a bear bearish market is the one where market is going down.

It is not, a single day which describes if the market is in bullish or bearish form; it is a couple of weeks or months which tell us if the market is in the bull bullish or the bear bearish grip. In a bull market, the confidence of the investor or the traders is high. There is optimism and positive expectations that good results will continue.

So in all, bull market occurs when the economy is performing well — unemployment is low, GDP is high and stocks marketsare rising. The bull market is generally related with the equity stock market but it applies to all financial markets like currencies, bonds, commodities, etc. Therefore, during a bull market everything in the economy looks great - the GDP is growing, there is less unemployment, the equity prices are rising, etc.

Conversely, the bull market generally leads to a decline in safe-haven currencies such as US dollar, the Japanese yen or the Swiss franc CHF. Forex trading is always done in pairs, where if one currency is weakening the other is strengthening. As you can trade both ways means you can take a long buy or short sell view in either currency pair, thereby allowing you to take advantage of rising and falling markets.

In forex market, bull and bear trends also determine which currency is stronger and which is not. By correctly understanding the market trends, a trader can make proper decisions of how to manage risk and gain a better understanding of when it is best to enter and exit from your trades. A bear market denotes a negative trend in the market as the investor sells riskier assets such as stock and less-liquid currencies such as those from emerging markets.

The chances of loss are far greater because prices are continually losing value. Investor or traders are better off short-selling or moving to safer investments like gold or fixed-income securities. Because a trader can earn great profit during bull and bear market considering you are trading with the trend. As forex trading is always done in pairs, buy the strength and sell the weak should be your trade. A lot is a unit to measure the amount of the deal. Trading with the proper position or lot size on each trade is key to successful forex trading.

The position size refers to how many lots micro, mini or standard you take on a particular trade. The standard size for a lot is , units of base currency in a forex trade, and now we have mini, micro and nano lot sizes that are 10,, 1, and units respectively. Whenever you purchase buy a currency pair, it is called going long. When a currency pair is long, the first currency is purchased indicating, you are bullish while the second is sold short indicating, you are bearish.

When you go short on a forex, the first currency is sold while the second currency is bought. To go short on a currency means you sell it hoping that its prices will decline in future. A pending order in any trade is an order that was not yet executed thus not yet becoming a trade. Generally, while trading we place the order with a limit, means our order pending trade will not get executed if the price of a financial instrument does not reach a certain point.

Pending order will automatically get executed once price reaches to the pending order position. A pending order to buy a currency at a lower price whatever price trader wants to buy than the current one. A pending order to buy a currency at a higher price whatever price trader wants to execute than the current one. A pending order to sell a currency pair at a higher price whatever price trader wants to sell than the current price.

In this chapter, we will learn about leverage and margin and how these influence the financial market. Forex trading provides one of the highest leverage in the financial market. Leverage means having the ability to control a large amount of money using very little amount of your own money and borrowing the rest. Your leverage, which is expressed in ratios, is now In such case, the trade goes in your favor. Your broker to maintain your position uses it. Margin is expressed as a percentage of the full amount of the position.

Based on the margin required by your broker, you can calculate the maximum leverage you can yield with your trading account. Hedging is basically a strategy which is intended to reduce possible risks in case prices movement against your trade. To protect against a loss from a price fluctuation in future, you usually open an offsetting position in a related security.

Traders and investors usually use hedging when they are not sure which way the market will be heading. These large banks are the key players for global FX transactions. The banks have the true overall picture of the demand and supply in the overall market, and have the current scenario of any current. The size of their operations effectively lay down the bid-ask spread that trickles down to the lower end of the pyramid. The next tier of participants are the non-bank providers such as retail market makers, brokers, ECNs, hedge funds, pension and mutual funds, corporations, etc.

Hedge funds and technology companies have taken significant chunk of share in retail FX but very less foothold in corporate FX business. They access the FX market through banks, which are also known as liquidity providers. The corporations are very important players as they are constantly buying and selling FX for their cross-border market purchases or sales of raw or finished products. Sometimes, governments and centralized banks like the RBI in India also intervene in the Foreign Exchange market to stop too much volatility in the currency market.

For instance, to support the pricing of rupees, the government and centralized banks buy rupees from the market and sell in different currencies such as dollars; conversely, to reduce the value of Indian rupees, they sell rupees and buy foreign currency dollars. The speculators and retail traders that come at the bottom of the pyramid pay the largest spread, because their trades effectively get executed through two layers.

The primary purpose of these players are to make money trading the fluctuations in the currency prices. With the advancement of technology and internet, even a small trader can participate in this huge forex market.

If you are new to the forex market and have just started trading Forex online, you may find yourself overwhelmed and confused both at a time by the huge number of available currency pairs inside your terminal like the MetaTrader4, etc. So what are the best currency pairs to trade? The answers is not that straightforward as it varies with each trader and its terminal window or with what exchange or OTC market he is trading.

Instead, you need to take the time to analyse different pairs of currencies against your own strategy to determine the best forex pairs to trade on your accounts. There is an international code that specifies the setup of currency pairs we can trade. The most traded, dominant and strongest currency is the US dollar.

The US dollar is the preferred base or reference currency in most of the currency exchange transactions worldwide. Below are some of the most traded high liquidity currency pairs in the global forex market. These currencies are part of most of the foreign exchange transactions. As prices of these major currencies keep changing and so do the values of the currency pairs change. This leads to a change in trade volumes between two countries. These pairs also represent countries that have financial power and are traded heavily worldwide.

The trading of these currencies makes them volatile during the day and the spread tends to be lower. This is also the most traded currency pair in the world. Another important point is that this forex pair is not too volatile. Therefore, if you do not have that much risk appetite you can consider this currency pair to trade. The spread is the difference between the bid price and the ask price. The lower price Inversely, if you want to open a short trade sell , you will do so at the price of The higher price Simply put, a bull bullish market is used to describe conditions where market is rising and a bear bearish market is the one where market is going down.

It is not, a single day which describes if the market is in bullish or bearish form; it is a couple of weeks or months which tell us if the market is in the bull bullish or the bear bearish grip. In a bull market, the confidence of the investor or the traders is high.

There is optimism and positive expectations that good results will continue. So in all, bull market occurs when the economy is performing well — unemployment is low, GDP is high and stocks marketsare rising. The bull market is generally related with the equity stock market but it applies to all financial markets like currencies, bonds, commodities, etc.

Therefore, during a bull market everything in the economy looks great - the GDP is growing, there is less unemployment, the equity prices are rising, etc. Conversely, the bull market generally leads to a decline in safe-haven currencies such as US dollar, the Japanese yen or the Swiss franc CHF. Forex trading is always done in pairs, where if one currency is weakening the other is strengthening.

As you can trade both ways means you can take a long buy or short sell view in either currency pair, thereby allowing you to take advantage of rising and falling markets. In forex market, bull and bear trends also determine which currency is stronger and which is not. By correctly understanding the market trends, a trader can make proper decisions of how to manage risk and gain a better understanding of when it is best to enter and exit from your trades.

A bear market denotes a negative trend in the market as the investor sells riskier assets such as stock and less-liquid currencies such as those from emerging markets. The chances of loss are far greater because prices are continually losing value. Investor or traders are better off short-selling or moving to safer investments like gold or fixed-income securities.

Because a trader can earn great profit during bull and bear market considering you are trading with the trend. As forex trading is always done in pairs, buy the strength and sell the weak should be your trade. A lot is a unit to measure the amount of the deal. Trading with the proper position or lot size on each trade is key to successful forex trading. The position size refers to how many lots micro, mini or standard you take on a particular trade. The standard size for a lot is , units of base currency in a forex trade, and now we have mini, micro and nano lot sizes that are 10,, 1, and units respectively.

Whenever you purchase buy a currency pair, it is called going long. When a currency pair is long, the first currency is purchased indicating, you are bullish while the second is sold short indicating, you are bearish.

When you go short on a forex, the first currency is sold while the second currency is bought. To go short on a currency means you sell it hoping that its prices will decline in future. A pending order in any trade is an order that was not yet executed thus not yet becoming a trade. Generally, while trading we place the order with a limit, means our order pending trade will not get executed if the price of a financial instrument does not reach a certain point. Pending order will automatically get executed once price reaches to the pending order position.

A pending order to buy a currency at a lower price whatever price trader wants to buy than the current one. A pending order to buy a currency at a higher price whatever price trader wants to execute than the current one. A pending order to sell a currency pair at a higher price whatever price trader wants to sell than the current price.

In this chapter, we will learn about leverage and margin and how these influence the financial market. Forex trading provides one of the highest leverage in the financial market. Leverage means having the ability to control a large amount of money using very little amount of your own money and borrowing the rest.

Your leverage, which is expressed in ratios, is now In such case, the trade goes in your favor. Your broker to maintain your position uses it. Margin is expressed as a percentage of the full amount of the position. Based on the margin required by your broker, you can calculate the maximum leverage you can yield with your trading account.

Hedging is basically a strategy which is intended to reduce possible risks in case prices movement against your trade. To protect against a loss from a price fluctuation in future, you usually open an offsetting position in a related security. Traders and investors usually use hedging when they are not sure which way the market will be heading. Ideally, hedging reduces risks to almost zero, and you end up paying only the broker's fee. The offsetting instrument is a related security to your initial position.

This allows you to offset some of the potential risks of your position while not depriving you of your profit potential completely. One of the classic example would be to go long say an airline company and simultaneously going long on crude oil. As these two sector are inversely related, a rise in crude oil prices will likely cause your airline long position to suffer some losses but your crude oil long helps offset part or all of that loss. If the oil prices remain steady, you may profit from the airline long while breaking even on your oil position.

If the prices of oil goes down, the oil long will give you losses but the airline stock will probably rise and mitigate some or all your losses. So hedging helps to eliminate not all but some of your risks while trading. This strategy may come handy where you do not want to directly trade with your portfolio for a while due to some market risks or uncertainties, but you rather not liquidate part or all of it for other reasons.

In this type of hedging, the hedge is straightforward and can be calculated precisely. A stop-loss is an order placed in your trading terminal to sell a security when it reaches a specific price. It is commonly used with a long position but can be applied and is equally profitable for a short position. It comes very handy when you are not able to watch the position. Stop-losses in Forex is very important for many reasons. One of the main reason that stands out is no one can predict the future of the forex market every time correctly.

The future prices are unknown to the market and every trade entered is a risk. Forex traders can set stops at one fixed price with an expectation of allocating the stoploss and wait until the trade hits the stop or limit price. Stop-loss not only helps you in reducing your loss in case trade goes against your bet but also helps in protecting your profit in case trade goes with the trend. You expect there will be a lot of volatility and USD will rise. Announcement comes and USD starts falling and suppose you have put the stop-loss at To protect your profit you can set stop-loss at If your stop-loss hit at The US Dollar dominates the world foreign exchange market heavily.

The US Dollar is the base or universal currency to evaluate any other currency traded on forex. Almost all currencies are generally quoted in US dollar terms. Most commodities metals, oil etc. As US dollar is considered as the safe-haven currency. Therefore, investors move towards the dollar when economic conditions deteriorate. The Euro is the second most dominating currency in the forex market.

This restricts the dominance of Euro in the global forex market. In the event of problems, EU leaders have a hard time finding common solutions that are beneficial to both the large and small economies. The Japanese yen is the most traded and dominating currency in the Asian forex market. The natural demand to trade the Yen comes mostly from the Japanese Keiretsu, the economic and financial conglomerates. The Japanese stock market,.

Because the Japanese economy is mostly an industrial exports economy, the Japanese currency JPY among traders and investors is considered as a safe-haven currency in periods when risk aversion hits the market. Low interest rates in Japan allows traders to borrow at low cost and invest in other countries.

Because japan is an export oriented economy, the central bank is constantly trying to weaken its currency. Until the end of World War II, the pound continued to have the same dominance in forex market what is US dollar today and was the currency of reference.

The currency GBP is heavily traded against the euro and the US dollar but has less presence against other currencies. The fundamental factors that affect the pound are as complex and varied as the British economy and its influence on the world.

Inflation, country GDP and the housing market influence the pound value. The Swiss Franc is the currency and legal tender of Switzerland. It is also, the only currency of a major European country that neither belongs to the European Union nor to the G-7 countries. Though the size of the Swiss economy is relatively small, the Swiss franc is one of the four major currencies traded in the forex market, closely resembling the strength and quality of the Swiss economy and finance. The CHF prices depend on the central bank policy.

The CHF tends to be more volatile compared to other major currencies due to lack of liquidity. The CAD is a commodity driven currency. This is because the Canadian economy is exportoriented and the main product of export is crude oil. Therefore, the Canadian Dollar prices are influenced by the price of crude oil. There are different ways in which trading is done in the global forex market.

The foreign exchange broker or the forex broker also known as the currency-trading broker unlike the equity or commodity brokers does not hold positions. The main role of these brokers is to serve banks. They act as intermediaries to buy and sell currencies at commissioned rates. Before the dawn of Internet, a majority of the FX brokers executed orders via phone using an open box system.

This way, banks also received all the business orders. In an open box system used by brokers, a trader is able to hear all the prices quoted; whether the bid was executed or the offer ask taken; and the price that followed. What is hidden from the trader is the amounts of particular bids and offers and the names of the banks showing the prices. The prices were confidential, and the buyers and sellers were anonymous.

In this age of Internet, many brokers have allowed clients to access their accounts and trade through electronic platform mostly through their proprietary software and computer applications. Direct dealing is based on the economy of mutuality. All participants in the currency market — a bank, establishing a price, thinks that the other bank that has turned to it will reply with mutuality, establishing its own price, when they turn to the bank.

Direct dealing provides freedom of actions than the dealing of the broker market. Sometimes traders take advantage of this characteristic. Direct dealing previously took place over the phone. This gave way to mistakes which could not be identified and rectified. The mids witnessed a transition from direct dealing to dealing systems. Dealing systems are computers that link the contributing banks around the world. Each computer is connected with a terminal. To connect to a bank through dealing system is much faster than connecting through a phone.

The dealing systems are getting more secure by each day. The performance of dealing system is characterized by its speed, safety and reliability. It is more comfortable with this information rather than to be heard during the switches, during the conversations.

Many banks use a combination of brokers and direct dealing systems. Both these methods can be used by the same bank but not in the same market. Matching systems are quite different when compared with dealing systems.

The different characteristics of matching systems are — speed, safety and reliability like the dealing system we have. One advantage in matching system is that credit lines are automatically managed by the systems. In the interbank market, traders deal directly with dealing systems, matching systems and brokers in a complementary fashion.

In this chapter, we will learn about the different types of market analysis. Fundamental Analysis: This is the analysis of social, economic and political factors that affect currency supply and demand. Sentiment Analysis: Apart from mini and micro analysis of data, this is the analysis of the mindsets and sentiments of traders and investors. Fundamental Analysis and Technical Analysis FA and TA go hand-in-hand in guiding the forex trader through the way the market prices may go under the ever changing market conditions.

Fundamental analysis is analyzing the currency price forming, basic economical and other factors influencing the exchange rate of foreign currency. It is the analysis of economic and political information with the hope of predicting future currency price movements. Fundamental analysis helps in forecasting future prices of various foreign currencies. The factors may also include various geopolitical aspects that may impact the price movement of a currency pair.

This analysis is not used to get the specific numbers for the exchange rates of various currencies. Instead, it helps in determining the trend of the forex spot market over a certain period. If the fundamental analysis hints at a positive outlook for a particular currency pair, it indicates that the price of that pair would experience an upward trajectory movement in the near future.

A negative outlook indicates a declining price movement of currency pair in coming future. Whenever a forex trader receives information about the state of a country, he conducts a fundamental analysis to gauge the impact of this on various currency pairs. Forex traders and investors always look into reports fundamental analysis reports based on critical economic data before trading particular currency pair on forex market.

These reports FA also enable them to minimize the risk factors involved in executing forex transactions. The Fundamental Analysis report for any market equity, commodity, FX etc. On the other hand, Technical Analysis provides information for short-term predictions. Information related to the status of the local and global economies can have huge impact on the direction in which the forex market trends.

Let us now learn about the key factors that influence fundamental analysis. The interest rates set by the central bank is one of the most important factors in deciding the price movement of currency pairs. A high GDP growth rate signifies an increase in the total wealth of the country. A high industrial growth in any country signifies a robust country economy. A country with robust economy encourages forex traders to invest in country forex currency. A strong retail sales figure shows that the domestic economy of a country is in strong shape; it points towards positive growth rates in the future.

Apart from these above points, the traders and investors also look into other factors of fundamental analysis like employment statistics, national debt levels, supply and demand balance, monetary policy, political situation, trade deficit, commodity prices, housing prices and capital market growth. Technical analysis helps in the prediction of future market movements that is, changing in currencies prices, volumes and open interests based on the information obtained from the past.

There are different kinds of charts that help as tools for technical analysis. These charts represent the price movements of currencies over a certain period preceding exchange deals, as well as technical indicators. The technical indicators are obtained through mathematical processing of averaged and other characteristics of price movements.

Technical Analysis TA is based on the concept that a person can look at historical price movements for example currency and determine the current trading conditions and potential price movement. Price is a comprehensive reflection of all the market forces. Price movements are usually trend followers. Price movements are historically repetitive. This results in similar behavior of patterns on the charts. The participants in every market, the traders and the investors have their own opinion of why the market is acting the way it does and whether to trade in the direction of market towards market trends or go against it taking contrary bet.

The traders and investors come with their own thoughts and opinions on the market. These thoughts and opinions depend on the position of the traders and investors. This further helps in the overall sentiment of the market regardless of what information is out there. Because the retail traders are very small participants in the overall forex market, so no matter how strongly you feel about a certain trade belief , you cannot move the forex markets in your favour.

Even if you retail trader truly believe that the Dollar is going to go up, but everyone else big players is bearish on it, there is nothing much you can do about it unless you are one of the big investment banks like — Goldman Sachs or some ultra-rich individual like Warren Buffet. Depending on this, a trader further decides how to play the perception of market sentiment into trading strategy.

Forex trading is all about trading based on a strategy. Forex trading strategies help you gain an insight of the market movements and make moves accordingly. We have already studied that there are three types of analysis methods. Each strategy holds equal importance and neither can be singled out. Many traders and investors prefer the use of a single analysis method to evaluate long-term investments or to gain short-term profit. A combination of fundamental, technical and sentimental analysis is the most beneficial.

Each analysis technique requires the support of another to give us sufficient data on the Forex market. These three strategies go hand-in-hand to help you come up with good forex trade ideas. All the historical price action for technical analysis and economic figures for fundamental analysis are there — all you have to do is put on your thinking cap for sentimental analysis and put those analytical skills to the test. In order to become a professional forex trader, you will need to know how to effectively use these three types of forex market analysis methods.

The foreign exchange market is a global online network where traders and investors buy and sell currencies. Foreign exchange markets are one of the most important financial markets in the world. Their role is of utmost importance in the system of international payments. Trustworthy is concerned with contractual obligations being honored. For example, if two parties have entered into forward contract of a currency pair means one is purchasing and the other is selling , both of them should be willing to honor their side of contract as the case may be.

Swaps, Future and Options are called the derivative because they derive their value from the underlying exchange rates. These are the quickest transactions involving currency in the foreign exchange market. This market provides immediate payment to the buyers and sellers as per the current exchange rate.

The spot market account for almost one-third of all currency exchange, and trades usually take one or two days to settle transactions. This allows the traders open to the volatility of the currency market, which can raise or lower the price, between the agreement and the trade.

There is an increase in volume of spot transactions in the foreign exchange market. The last category accounts for almost 90 percent of all spot transactions are carried out exclusively for banks. As per the Bank of International Settlements BIS estimate, the daily volume of spot transaction is about 50 percent of all transactions in foreign exchange markets.

London is the hub of foreign exchange market. It generates the highest volume and is diverse with the currencies traded. These banks are the major players in the market. Commercial and investment banks are the main players of the foreign exchange market; they not only trade on their own behalf but also for their customers.

A major chunk of the trade comes by trading in currencies indulged by the bank to gain from exchange movements. Interbank transaction is done in case the transaction volume is huge. For small volume intermediation of foreign exchange, a broker may be sought.

Central banks like RBI in India RBI intervene in the market to reduce currency fluctuations of the country currency like INR, in India and to ensure an exchange rate compatible with the requirements of the national economy. For example, if rupee shows signs of depreciation, RBI central bank may release sell a certain amount of foreign currency like dollar.

This increased supply of foreign currency will halt the depreciation of rupee. The reverse operation may be done to halt rupee from appreciating too much. Dealers are involved in buying low and selling high. The operations of these dealers are focused towards wholesale and a majority of their transactions are interbank in nature. At times, the dealers may have to deal with corporates and central banks.

They have low transaction costs as well as very thin spread. Wholesale transactions account for 90 percent of the overall value of the foreign exchange deals. In forward contract, two parties two companies, individual or government nodal agencies agree to do a trade at some future date, at a stated price and quantity. No security deposit is required as no money changes hands when the deal is signed. Forward contracting is very valuable in hedging and speculation.

The classic scenario of hedging application through forward contract is that of a wheat farmer forward; selling his harvest at a known fixed price in order to eliminate price risk. Similarly, a bread factory want to buy bread forward in order to assist production planning without the risk of price fluctuations.

There are speculators, who based on their knowledge or information forecast an increase in price. They then go long buy on the forward market instead of the cash market. Now this speculator would go long on the forward market, wait for the price to rise and then sell it at higher prices; thereby, making a profit. The forward markets come with a few disadvantages. In the first two issues, the basic problem is that there is a lot of flexibility and generality.

The forward market is like two persons dealing with a real estate contract two parties involved - the buyer and the seller against each other. Now the contract terms of the deal is as per the convenience of the two persons involved in the deal, but the contracts may be non-tradeable if more participants are involved. Counterparty risk is always involved in forward market; when one of the two parties of the transaction chooses to declare bankruptcy, the other suffers.

Another common problem in forward market is - the larger the time period over which the forward contract is open, the larger are the potential price movements, and hence the larger is the counter-party risk involved. Even in case of trade in forward markets, trade have standardized contracts, and hence avoid the problem of illiquidity but the counterparty risk always remains.

The future markets help with solutions to a number of problems encountered in forward markets. Future markets work on similar lines as the forward markets in terms of basic philosophy. There is no counterparty risk involved as exchanges have clearing corporation, which becomes counterparty to both sides of each transaction and guarantees the trade. An option is a contract, which gives the buyer of the options the right but not the obligation to buy or sell the underlying at a future fixed date and time and at a fixed price.

A call option gives the right to buy and a put option gives the right to sell. As currencies are traded in pair, one currency is bought and another sold. Currency options is a part of the currency derivatives, which emerged as an important and interesting new asset class for investors.

Currency option provides an opportunity to take call on Exchange Rate and fulfil both investment and hedging objectives. There are many advantages of trading forex over trading in other market instruments such as equity and derivative. If we consider trading forex market spot, normally there is no clearing fees, no exchange fees, no government taxes, no brokerage fees and no commissions.

In spot forex trading, there are no middlemen. In the spot forex market, there is no fixed lot size for trading, though there is a fixed lot size which you need to trade, if you are trading in forex future or option market. This is one of the big advantages of forex trading. Generally, brokers provide the option to buy in multiple lot sizes as per your client requirement or convenience.

Lot sizes differ broker to broker - standard lot, mini lot, micro lot or even nano lots. The foreign exchange market is large and has many participants, and no single participant not even a central bank can control the market price for a prolonged time period.

Therefore, the chances of sudden extreme volatility is very rare. We do not have to wait for the opening bell to ring to start trading in forex. The forex market starts, from the Monday morning opening of the Sydney session to the afternoon close session of New York session.

This allows us to trade anytime we prefers without giving much attention on what time it is. This is one of the factors, which drags more and more traders towards forex trading. Forex brokers permit traders to trade the market by using leverage and with low margin, which gives the ability to trade with more money than what is available in your account. This allows traders with less amount to trade with much higher value of trade. For example, a forex broker may allow you the margin of 50 to times your invested money.

Inversely, always be cautious while taking very-high leverage without risk management; especially if you are a beginner, as this may wipe-out your entire amount within a couple of minutes. Because the size of forex market is huge, it is extremely liquid in nature.

This allows you to buy or sell currency any time you want under normal market conditions. There is always someone who is willing to accept the other side of your trade. Several factors prove helpful in building long-term strength or weakness of the major currencies and will have a direct impact on you as a forex trader. Countries with strong economic growth will surely attract foreign investors and thereby strong currency value.

If the economic growth and outlook is positive, it indicates there is low unemployment rate, which in turn means higher wages to the people. Higher wages means people have more spending power, which in turn indicates higher consumption of goods and services. Thereby, this propels the economic growth of the country and there is an increase in the currency prices. Inversely, if the economic growth and outlook of a country is weak, it indicates the unemployment rate is high.

This shows that the consumers do not have the spending power; there are not too many business setups. The government central bank is the only entity that is spending. This leads to a decrease in the currency price. Therefore, the positive and negative economic outlook will have direct impact on the currency markets. All thanks to globalization and technological advances which have kind of provided wings to the market participant to invest or spend virtually anywhere in the world.

Capital flows means the amount of capital or money flowing in or out of a country or economy because of capital investment via purchasing or selling. We can check how many foreign investors have invested in our country by looking at the capital flow balance, which can be positive or negative. When a country has positive capital flow balance, it indicates more people have invested in the country than investments heading out of the country.

While a negative capital flow balance indicates investments leaving the country is much more than investment coming in. A higher capital flow means more foreign buyers have invested, which in turn increases the currency prices as investors want to buy your currency and sell their own.

Consider an example of USDINR currency pair - if on one particular month, capital flow is very large, directly it indicates that more foreign buyers are keen on investing in our home country. For this, they need local currency. In simple terms, if the supply is high sellers are more for a currency or demand is weak , the currency tends to lose value buyer are less. The Export and Import of goods from one country to another is a continuous process. There are exporting countries, which sell their own goods to other countries importing countries that are keen on buying the goods.

Simultaneously, the exporting country becomes an importing country when it in turn buys something from another country. The buying and selling of goods is accompanied by the exchange of currencies, which in turn changes the flow of currency, depending on how much we export value and import value.

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