Forex Education

Trading industry knowledge.

SEMrush
You are here: Home / Archives for Education / Forex Glossary / Forex terms

Toxic Flow in Forex Business

by

Everything You Ought To Know Regarding Toxic FX Flow

What Exactly Is Meant By Toxic FX Flow?

It is a fact that any particular flow which might appear to be toxic for any particular market maker might end up being rather beneficial for another person out there. At present, technology has become the center of the FX businesses, and it has a significant role to play when it comes to controlling the rules and regulations of the game to a great extent. The term “Toxic FX Flow” has got a direct connection on most occasions with the technology which is actually behind this liquidity factor.

SEMrush

However, the question here might arise regarding what exactly is the toxic flow in FX? Unfortunately, it is not possible to answer this question in a simple manner. In fact, the answer demands lots of things to take into consideration. To be frank, different types of forms can be taken by toxic flow right now. It might be in the form of trading on some unacceptable market prices, trading in the very same direction across more than one trading venue simultaneously at the very same time or even trading on the inadequacies of any FX technology which is not sophisticated by any means. In general, one can view Toxic flow as any predatory or unwelcome stuff but here we would like to mention that although something might appear to be rather toxic to any particular market maker, this does not imply that it is going to be the same for any other person out there. In fact, it might be rather beneficial for him in the long run.

Similar types of problems will be encountered by all those traders in the margin FX space who make an attempt to implement similar techniques that have been employed by them in the futures as well as the stock markets in recent times. The reason for this is the fact that there is an absence of any backup in the form of genuine items and also there isn’t any central exchange whatsoever. Under normal circumstances, when some person is winning the other will be losing out; however, irrespective of this, one can expect that all of the participants in the market will be playing by the regulations with the purpose of maintaining proper law and also avoiding any undesirable incident and chaos out there.

However, the unfortunate thing here is that you will come across individuals every now and then who like to pose challenges for the system or would like to take advantage of its weaknesses and drawbacks. In the subsequent paragraphs, we have provided a few examples of Toxic FX Flow that you should consider going through.


1. “Picking-Off” The Feed Or Latency Arbitrage

SEMrush

This can be considered to be a sort of trading at present which has been designed specifically to capture any deviation of the price. This is meant to involve placing trades on the application or technology which is known to be slow or latent to the market and after that, covering all these positions at a particular profit once the provider is able to catch up to the genuine market.

Instead of being trading on the marketplace, it is actually trading on somebody else’s incompetent technology and is a fantastic instance of predatory flow.

There is no secret about the fact that lots of market makers function at present without any sophisticated pricing engine and, because of this, it might become slow when it comes to updating the prices. This will leave ample room for every type of arbitrage out there.

2. Impact Made With The Market On Multiple Orders

It is possible for a market maker to stream liquidity to more than one price venue at the same time and this might, therefore, be vulnerable to getting “hit” at the identical price by the same customer, at the identical time, on more than one platform.

For instance, any financial institution might agree to offer “top-of-book” liquidity of as many as EURUSD 10 million to 5 platforms presuming that all those venues are going to stream their prices to a bigger and diverse customer base. Somebody (being aware of the fact that the price depicted here is only valid for EUR 10 million) might use this to their advantage and strike all of the 5 platforms in EUR 10 million simultaneously. Therefore, rather than presuming a position of EUR 10 million, the financial institution will be offered EUR 50 million at a top-of-book rate which was actually meant only for the EUR 10 million. Here, it has been possible for the customer to create at a particular price which had been “off-market” for one single EUR 50 million trade.


3. New Trading

It will be possible to make the financial institutions crazy by sending more than 1 or bigger-than-usual trades once the markets move on any particular news release or due to a global event which took place unexpectedly. At times, this might be possible by figuring out the precise timing of the movement of the price.

As many as 32 to 100 price updates are sent by the banks every second every currency pair, and it will be possible for the top-notch trading systems to identify the direction of the market within only the initial few updates. They can also place the trades accordingly. Financial institutions which have to face this kind of situation might not have adequate time for covering themselves in the marketplace before prices begin to move against their direction. As a result, they are going to fight against this kind of trading technique by either modifying or discontinuing their pricing to the customer, particularly before any significant news release.

Is it possible for the primary liquidity market makers (financial institutions) to reverse trades? Will they request the liquidity distributors to put an end to the trading? Obviously, they can. How frequently is this performed? The answer, in this case, will be “very seldom”.

All these above-mentioned facts are simply a few instances of what can be regarded by many individuals as toxic flow. There is no doubt that lots of innovative and interesting cases are arriving on the scene every single day, and it will be really intriguing to see what is in store for us in the near future.

Smoothed moving average

by

Smoothed moving average is a moving average that deals with a longer period, allowing for an easier price calculation and viewing and represents combination of simple moving average and exponential moving average. A smoothed moving average does not refer to a fixed period, but rather collects and enrolls all available data from the past. To calculate today’s moving average, you have to subtract the yesterday’s smoothed moving average from today’s price. After that, you have to add the result to the yesterday’s price.

smoothed moving average vs simple moving average


Properties

Period. This characteristic deals with the number of bars in the chart. In case of daily data, the period will stand for days, whereas for months, it will denote months, and so on. The app sets a default of 9, but for the user’s convenience, the period is lengthened, which allows you to view the data easier and create a general vision of the current price trend.

Aspect. Deals with the symbol field where the data series are calculated. As you enter the app to look for a symbol in the chart, it will be set to “default” which is identical to the “Close” symbol.

Smoothed moving average series (SMMA) calculation

The combination of simple moving average and exponential moving average is called smoothed moving average. The value of SMMA is approximately equal to the EMA value, with just the period as double of that of EMA. This smoothing technique allows the analysts to reduce volatility in a series of data. Since this technique takes input from past time periods that’s why it captures the economic scenario better than non smoothed graphs.

Some analysts take out all EMA, SMA and SMMA and then analyse the market trends. Anyways, it is always a personal choice as of how many parameters to consider.

The formula to calculate the SMMA is –

SMMA = (SMMA# – SMMA* + CLOSE)/N

Where

SMMA# – Previous bar’s smoothed sum

SMMA* – Previous bar’s smoothed moving average

CLOSE – Present closing price

N – Period of smoothing


How it works?

A smoothed moving average differs from a simple moving average in several aspects. The most important difference refers to the period taken into account while doing the calculation of the average. A simple study uses only the most recent data for generating the average, while a smoothed study takes also into account data from distant past, say a month or two months ago, which plays a role in determining a more accurate and relevant average. Still, older data and new data are not assigned the same weight, due to their relevance in establishing the current price. Price data collected one month ago, for example, will be given lower significance in calculating the smoothed moving average, due to its small impact on the current price trends. Nonetheless, it is not removed from computation process, as it fosters a long-term vision of the trading trends.

The main advantage of smoothed moving average is that it removes short-term fluctuations, and allows to view the price trends much easier.

Smoothed moving averages are widely used in trending markets. You are alerted about a new buy signal when the line that denotes a short term average crosses above the line that stands for a longer term average. At the same time, a sell signal occurs when short-term average crosses below the long term average. Marketing technicians suggest to use longer term averages while trading with two smoothed moving average that use the same signal.

Another approach in trading is to know how to manage the current price. If you have a current price that passes over the smoothed average line, you buy. When the current price gets below the moving average you simply remove the position. As regards a short position, you sell when the price crosses below the moving average. When it rises above, you remove the position.

If you want to become a successful trader, you should learn to tell simple from smoothed moving averages. While simple average works with a short-term period and processes only new data, smoothed average promotes a longer term study, assigning weight to old data, for a clearer view on price trends.

Measuring market trends and then investing in the right stock is the best way to make money, it is accepted by every investor out there. It is the sense of analyzing the trend which makes the difference.

There was a time, not very back when people used to buy and sell stocks according to their intuitions. But now, technical analysis has taken the market. There are several tools that consider the historical stock price data and give predictions based on that and this analysis has definitely increased the probability of your decision to be right.

Any tool cannot be perfect in analyzing the trends because the market never moves in a straight line, there are variations in the market every moment which one has to analyze which makes it a tedious task. The analysts take help of many parameters, out of which some are listed below –

Moving averages

This analysis technique is the most trusted and widely accepted because of its versatile nature. The most widely used form of moving average by the analysts is the 200-Day moving average. Here 200 days – moving average is plotted on a price chart, and whether the price of the stock is above the moving average line or below it, it is indicated that the stock should be sold or bought. Some analysts also consider 50 or a 10 day moving average.


There are two main types of moving averages –

1. Simple Moving Average

It is the most common method of taking out the average, it is taken out by adding the set of prices and then dividing it by the number of price data taken.

Let us take an example –

If following are 7 stock prices 10, 20, 30, 40, 50, 60, 70 and we want to take out the SMA then it would be

(10 + 20 + 30 + 40 + 50 + 60 + 70) / 7 = 40

So the simple moving average of this set of data is 40.

This data will prove to be very helpful in getting the clue of what might happen next in the market. It might seem to be a very simple technique but still, it has to face criticism from experts, this criticism is because of the “drop-off effect”.

Here what happens is that the latest prices make a very small impact while on the other hand the earliest prices sometimes make a very large impact. One needs to keep this in mind. The smoothed moving average can also be manipulated by discarding the earlier data. Any large change in the smoothed moving average can give wrong indications which can incur losses to the investor.

Also, there might be some older data that might be significant, which the simple moving average is not considering.

To eradicate these shortcomings of the simple moving average, analysts came up with the exponential moving average (EMA).

2. Exponential moving average (EMA)

It is a much versatile averaging technique used by the analysts. It values current prices more as compared to the past prices. It makes exponential moving average sensitive to recent price fluctuations.

Calculation of EMA also includes the previous recent EMA values.

The formula for calculating EMA is –

EMA = EMA# + SF*[P – EMA#] where

EMA# is the previous latest EMA value

P denotes the price in that period

SF stands for smoothing factor.

Because of its unique calculation, EMA follows prices more closely than an SMA

Smoothed moving average vs Simple moving average vs. Exponential moving average

EMA value is very sensitive to market trends, it can help the investor to take respective actions. For any investor who wishes to grasp the market trends quick, it will be much better to use EMA rather than an SMA value. But one disadvantage is that if there is a sudden spike or abnormal event in the market then EMA being very sensitive and prompt to market conditions will signal the investor to quit the stock making loss.

On the other hand, if the investor has a long term vision and is ready to wait and observe the market then SMA would be the best choice because of its smoothness. If a trend is set then it usually lasts for a long time that’s why choosing SMA, in this case, can be beneficial but since SMA shows a huge delay it will ignore good entry points and the investor might lose the opportunity to make profits.

Smoothed moving average as combination of SMA and EMA using smoothing technique allows the analysts to reduce volatility in a series of data and because of that smoothed moving average is SLOWER than SMA.

That’s why it is said that different trading patterns require different methods of analysis. One can never bank on any one analytical technique, one should use simultaneous techniques to get a broader perspective. Since trading is all about the probability that’s why you cannot be even sure that after so much of analysis you will achieve what you desired.

Trading is a game of chance and risks, one will have to devise their own methods, which suits them the most. Experimenting without fearing anything will be very beneficial in stock trading. The more you trade fearlessly the more sensitive you will become towards market trends. Even after so many analysis techniques, one should always listen to its gut feelings. After a certain period of time in trading people automatically develop the attitude of taking risks and start playing big, which pays them big as well as costs them big. Using smoothed moving average trader can get bigger picture of trend.

What is Return on Investment?

by

 

Understanding ROI

 

SEMrush

The financial world is riddled with jargon and a multiple of confusing words. Without the understanding of these, it may be difficult to survive in a world filled with bankers, investors and complexed corporate environments. So, without further delay, here is everything you need to know about Return on Investment (ROI).

Return on Investment is a measure of performance, as it is used to evaluate the efficiency of the investment of interest. It can also be used as a comparative tool, as it provides information about multiple investments in a manner that is easily understood and analyzed. This is achieved through the return on investment formula which gives a quantitative analysis of the amount of return of an investment in relation to its cost.

It provides an easily usable formula that has many practical uses. For example, one is able to compare the Return on Investment from a range of assets that are not generally compared. Therefore, one could compare performance on the stock market with that of a new niche start-up by simply plugging the correct financials into the Return on Investment equation.

 

The Return on Investment Formula example

In order to calculate this, the amount earned is divided by the cost of the investment. The result is expressed as the Return on Investment ratio. Mathematically, the Return on Investment equation goes as follows:

ROI = (earnings from investment – cost of investment) / cost of investment

Sample return of investment: Next, one needs to consider how to practically calculate a Return on Investment. To this end, a return on investment example should suffice: John invested $1000 in Nice Shoe Inc in 2010. Today, he wishes to sell those shares and he sells them for a total of $1400. If he wanted to know his return on investment, John would first have to calculate his profits. This is done by subtracting costs of investments from the cost of investment: $1400 – $1000 = $400. Next, the profit must be divided in order to get the return on investment $400/$1000 = 40%. Therefore, John’s return on investment is 40%.
These equations may be made much simpler with the use of online return on investment calculators. This can make life simpler when comparing multiple investment opportunities at the same time, allowing for a simpler path to seeing the opportunity costs associated with a respective business path.

Return on Investment calculator:

[CP_CALCULATED_FIELDS id=”6″]

How to calculate rate of return on investment in excel ?

We can calculate return on investment in excel sheet if we put equation as formula. You can download return on investment (roi) excel template.

 

Analysing the Results


Generally, any value that comes out of the Return on Investment equation as positive is considered a good return. An importance remains, nonetheless, on evaluating all options so that the investment chosen outweighs its associated opportunity cost. The opportunity cost is defined as the next best option that is forgone with the purchase of any good, service, or asset.
Consider this: John (from the example earlier) had the opportunity of purchasing shares in Nice Shirts Inc. For the same $1000 in investment, his Return on Investment would have equated 50% over the same time period. Therefore, John’s opportunity cost was greater than the profit he made buying shares in Nice Shoes Inc.
From this, one can see that opportunity cost plays an important role in decision-making. A comprehensive Return of Investment analysis may help dramatically in aid of this because, as stated in earlier, the equation provides a good basis for numerical comparison.

 

Return on Investment vs Return of Investment


 

Whilst doing these calculations, it is important to keep in mind that a return on investment does not necessarily mean a return of investment. Return on investment is speculative; Return of Investment is definite – cold, hard cash in your hands. The end goal of any investor must be to achieve Return of Investment

 

Limitations of the Return on Investment Analysis


 

Return on Investment is a profitability ratio. This means it is supposed to be an aid in the decision making of any investment opportunity. However, so that it can play a proper role in that situation, it is critical to establish that it does have limits. The equation does not take into account the time between the initial investment and the profit received. So, it may put investments that have different Rates of Return in the same category.
For example, the Return on Investment equation will say two 20% Returns on Investments are exactly the same. Even though the first investment may have achieved this in 6 months and the second in 2 years. Therefore, the Return on Investment analysis is not sufficient on its own and must be used alongside other crucial profitability measures. Such measures provide a better basis with which to make an investment decision. An example of such calculations would include the Net Present Value (NPV) and the Internal Rate of Return (IRR). These are not comprehensive and further research is suggested before making any critical decisions.
Furthermore, the Return of Investment analysis only provides historical data. This means that it cannot be a predictor of what an investment may do in the future. Although, certain implications may be drawn from this.

Criticisms of evaluating performance based on ROI include:
– Reject investment opportunities that are profitable for the company but have a negative impact on a manager’s ROI.
– Be put in charge of a business segment that includes committed costs over which a manager has no control.
– Take actions that increase ROI in the short-run at the expense of long-term performance.

Questions and answers:

 

Why is return on investment (roi) the most commonly used financial performance measure?

In every country, ROI is the most commonly used financial performance measure. Return on investment calculation allows managers of one organization to compare performance with that of other organizations.In order to increase return on investment (ROI), the company must increase sales, and/or decrease operating expenses or increase or increase unit sales.

What is good return on investment ?

What is considered a good return on investment is hard to tell. Each industry has its own average ROI. For example marketing and advertising for every $1 invested will bring you at least $2. On other side real estate and stocks can bring you cumulative high amount of profit but ROI is much smaller. See image below:
What is good return on investment

Share this Image about Good Return on investment On Your Site


 

Which investment offers the best combination of low risk and high return?


Investments like preferred stocks, utility stock, fixed annuities, brokered cds, offers the best combination of low risk and high return.
Stocks are typically high risk and high return, while bonds (especially government-secured bonds) are low risk and low return.

 

If the average return on investment is the same why buy mutual funds instead of stocks?

No. Stocks are typically high risk and high return and as an investment, bonds are less risky than stocks but generally have a lower rate of return. On the other side, one of the benefits of mutual funds is that their diversification reduces risk. Answer is : both can be risky, but average stocks investing is risky than average mutual fund investment. Most mutual funds are able to achieve a 5-7% ROI annually.

 

What is return on investment for stocks ?


As same as we calculate ROI for any other business, ROI = (gain from investment – cost of investment) / cost of investment.

 

How to Calculate an Annual Return With Stock Prices


 

Simple Return = (Current Price-Purchase Price) / Purchase Price
Annual Return = (Simple Return +1) ^ (1 / Years Held)-1

or if you have dividend:

Simple Dividend-Adjusted Return = (Current Stock Price-Dividend-Adjusted Stock Purchase Price) / Dividend-Adjusted Stock Purchase Price
Annual Dividend-Adjusted Return = (Simple Dividend-Adjusted Return +1) ^ (1 / Years Held)-1

 

Why is marketing return on investment so difficult to measure?


It can be quite difficult to measure marketing ROI, because marketing efforts usually result to intangible benefits for employees and customers.

 

What are the concepts of return on investment and risk ?


This question we have when we talk about investing and ROI. Risk increases if loss exceeds amount invested even if loss probability remains unchanged. SO higher risk corresponds to higher returns and lower risk corresponds to lower returns. Return on investment can not be only thing that we are looking for when we invest our money. Roi and risk we need to study together.

 

The Future for ROI


 

Recent times have seen the advent of the Social Return on Investments, a measurement system that takes into account the Triple Bottom Line: social environmental and economic factors. SROI helps the management of companies understand the scope of their decisions in a broader sense than just monetary policy.

Why Return on Investment Matters


Return on Investment calculations is important, as they show how your money is producing a profit. It does this in a manner that is able to show both the efficiency and the magnitude of the respective asset. Moreover, the Return on Investment analysis can act as an alarm bell, as negative products of the equation should see the immediate withdrawal of capital from the investment.
However, it must be remembered that ROI is easily manipulated and does not take into account certain crucial factors, time being an example. Despite this, it remains a critical weapon in the armory of the investor. A Return on Investment Analysis should form the foundation of any well-considered investment.

FxGiants Review

by

fxgiantsIntroduction
The organization is a global forex broker that provides financial services for online trading regarding currency exchange. FXGiants as well serves the retail investors as well as investors from institutions from more than 150 countries across the globe. It is the among the leading online forex and CFDs broker organization across the globe more especially in the countries of incorporation. The company was established in the year 2015 at the same time in two countries; the UK and Australia. However, the company has been Australia for a longer time and has been operating under a veteran forex trading company in the brokerage industry. It forms a registered brand for the IronFX Global company. FXGiants has two trading companies presently which were both once owned by IronFX but currently one is owned by GVS Pty Ltd in Australia and another one by 8Safe in UK. The organization’s headquarters is based on London in the UK. The official address for the organization is 51 Church Street on the 5th Floor of the Andrew’s Place in HM12 Hamilton, Bermuda. The company trades with a wide range of commodities such as over 80 currency pairs, more than 200 kinds of financial instruments to numerous clients who come from more than 150 countries worldwide. The committed focus of the organization is to offer a fulfilling trading experience for the financial services consumers with the integration of latest technology and provision of high standard services. The organization’s popularity is well felt in the Australian nation, in Europe as well as South America.

Company license and regulations

The company is under stringent regulations that are spanning the globe from the various regulators of the countries of regulation. With the organization’s commitment to offer services compliant to the highest standards, it operates under full regulation of the financial regulating authorities of the two countries of incorporation. In the UK, the organization is regulated by the Financial Conduct Authority (FCA) under the license number 585561 while in Australia it is regulated by the Australian Securities and Investment Commission (ASIC) under the ASFL number 417482. This therefore makes the organization a fully compliant organization for laws of the land in both UK and Australia. The licensing and regulations verifies that the organization is a legit forex trading broker in the financial services provision industry. The company also being a participant in the European Union market, it is a full compliant of the guidelines and authorities provided by the European Union. It also complies to the rules and regulations of the Financial Services Compensation Scheme of the UK since it is protected by the scheme. The scheme can give compensation to the FXGiants’ investors in the event when the company has not met its financial obligations to the agreed rates between the company and the compensation scheme.

FXGiants reliability

With the desire of every investor to ensure that every dollar invested produces a yield, nobody wants to be a victim of scam forex traders. Especially in the online platforms, the practice of scamming is very rampant since the offices are not sometimes physical identified or they are in abroad regions where some other local investors cannot easily access them. Therefore, legitimacy and authenticity of the forex trading brokers is a question of great concern for the investors. Despite the fact that the FXGiants broker is young in the industry and has been operating for less than four years in the market, its age does not affect its reliability. With this doubt about its age, the company has been motivated to work harder seeking to win trader and investor trust in the online community.

fxgiantsThe first evidence of reliability is seen in the company’s concerted efforts to secure regulation under two different jurisdictions in the two countries of operation. In a span of less than 2 years, the company has been able to be licensed under the Australian regulation and the UK regulation. This regulation gives assurance to the traders that any investment they make with the company is in safe hands. There is also constant supervision of the FXGiants company by FCA and ASIC thus ensuring that the company conducts its operations transparently and fairly which can assure the investors that they will be able to transparently see their investment performance as time goes. Additionally, the company has partnered with the Financial Services Compensation Scheme of the UK thus in any event of financial incapability or insolvency, the investors are assured of compensation amounting to a maximum of 50,000 pounds per every investor. The company also has an automated risk management system which manages the accounts of the investors thus they do not have to worry of their accounts running on negative state.

FXGiants trading platforms

Working in the financial brokerage industry, FXGiants company works solely on online platforms. Its specialization is inclined to forex trading with more than 80 currencies of operation. The company offers a wide variety of trading platforms that are compatible with Windows as well as Mac Operating Systems. The mobile compatible platforms are also available such as applications form tablets and smartphones which allow investors to access their accounts while even travelling. Any investor account offers unrestricted access to the company’s platforms at any time.

SEMrush

The major trading platform is the MetaTrader 4 (MT4) which is a software developed by the MetaQuotes Software company. The platform forms the major trading platform for the company since it is the most popular forex business platform in the forex trading industry. It is used as the main trading platform by over 80 percent of the companies that participate in the forex trading business. The MT4 trading platform is a highly popular platform that is user-friendly and robust thus supporting the forex trading business greatly since it is integrated with a charting package and other technical indicators which the investor can use to analyze the market thus guide informed investment decisions.
Another feature of the MT4 platform is the which is the most powerful feature is its capability to support automated trading with using the Expert Advisors. Those traders who are experts in computer applications can program the Expert Advisors to build an automatic trading on the platform. The platform is made available in various versions like MT4 for PC as well as MT4 for Mac. They both have features like activity reports, advanced charts, advanced security systems, real-time news feeds, real-time quotes, support trading signals, and support for various kinds of trading orders. The mobile trading platform has MT4 mobile compatible platform that can be downloaded from Google Play Store for android phones or the App Store for the iPhones. The traders can monitor their accounts or execute trades right from their mobile phones.

fxgiantsFXGiants transparency and trading conditions
The organization has strong transparency since it is regulated by two bodies which oversee its operations. The subjection to two kinds of regulations makes it achieve the highest standard of transparency as they move on with their operations. The organization has also specified the compensation limits for the investors in the event of financial difficulties or insolvency thus straightforward with the financial services that it offers. The accessibility of all their trading platforms with only one investor account also makes the trading to be highly transparent and makes the trading conditions convenient for every investor.
The company’s trading accounts
The company genuinely offers a meaningful and wide range of types of accounts from which the investor can choose from. Therefore, it is possible for an investor to open a market maker account or an account that deals with desk type on the basis of the commissions. There are five different types of accounts that from which the investor can choose from. The accounts are as follows

Micro account – The investor is able to choose between live fixed or live floating spread depending on the individual tastes and preferences. In any spread that an investor will choose, the minimum deposit remains to be $100 but an average of $500. The leverage range for this account ranges from 1:1 to 1:500 with variety of the currencies like AUD, EUR, GBP and many more. The benchmark for fixed spread is 2.2 while for the floating spread is at 1.1 with the freedom of opening one account with numerous base currencies. The min lot size for this account is 0.01 and the account is available for 24 hours for five days in a week. The transaction hotline is also available to sort out issues with investors.

Premium account – This also lies in the similar choice by the investor either live fixed or live floating spread. For either choice of the spread, the minimum deposit is $2500 with a benchmark spread of 1.2 maximum and a minimum of 0.7 USD floating rate. The highest leverage given for one account of this type is $500 and the account is also allowed to be opened with numerous base currencies. The min lot size for this type of account is 0.1 with also dedicated account manager in 24 hours in five days. It is therefore slightly below the micro account.

0 Fixed Spread account – This account can be opened with a minimum deposit of $500 with a minimum lot size of 0.01 and a minimum commission as from $18 per lot is charged on the account. The account manager for this account is also available for 24 hours for five days a week. A highest leverage of up to 200 base currencies which translates to around 1.8 pips of the currency pair used as benchmark.

STP/ECN No Commission account – This account’s deposit charge is similar to the minimum deposit for Micro account and 0 Fixed Spread account. Base currencies used in this account are also similar to the Micro account. The only difference is that the leverage caps for this account are at 1:200 other than 1:500 noted in the Micro account. Also there is no transaction hotline and also no account manager for the account. The minimum lot size is 0.01 with allowance for various base currencies as the Micro account.

STP/ECN 0 Spread account – The account has the same features like the STP/ECN No Commission account thus the two accounts can be opened interchangeably by the investors. This account forms the largest account in the company forex trading business thus can accommodate any investor who wants to invest huge amounts of money into the business.
Unique features with FXGiants

fxgiantsThe company offers its products and services on its trading platforms in 24 hours in 5 days every week. Their services are available for online platforms and compatible with either PC or smartphones. The major trading platform used is well-known to people and always user friendly for either the MetaTrader 4 platform or the Personal Multi Account Manager (PMAM). For the PMAM platform, it allows for the creation and management of multiple accounts by the user. The company is also always aimed at becoming semi-professional money managers which can manage investor assets on their behalf. In addition, the company has a group of professionals with a wealth of experience in the field of international finance and forex trading business. The team of professionals deal with markets analysis, business solution specialization, business developers and risk management. The company goods and services are spread in over 150 countries across the globe with more than 200 financial instruments. The company also has interesting bonus package which has initial bonus at 35 percent free. It also includes incentives such as 100% bonus maximizer and also bonus advantage of 20 percent for deposits amounting up to $2000.

Company special offers, promotions and bonuses
The company is delighted in rewarding its investors with an array of variety of promotions. The promotions range from Live and Demo Trading competitions to extraordinary bonuses which boost the investors’ trading needs. The FXGiants company rewards its traders every month with a trading competition. From month to month the price changes. For example, in the month of January 2018 the price of the reward was a vacation package to Europe or a $5000 token. However, the bonus is given to those investors who fully comply to the terms and conditions of the bonus. All the promotions and bonuses are aimed at boosting the needs of the investor as well as enhancing the company reputation as it engages in forex trading business.

Company commissions and spreads
The company commission charges are only applicable to the Fixed Spread account. The investors with this type of account are required to make a payment of $18 for every lot of trading. However, for the other accounts for trading in this company, the investors are required to make a payment of small spreads for any trade that they engage in. They can participate in the fixed or floating spread regarding their tastes and preferences. When using the Micro account, the fixed spread can be to the minimum of 2.2 pips while the floating spread can be to the minimum of 1.1 pips. On the other hand, the premium account the least floating is 0.7 pips while the least fixed spreads is 1.2 pips. However, the typical spreads are different for the various currencies as indicated on the company website.

Deposit and Withdrawals of money
This is a trading exercise which needs recharging of funds when they go below the required level and also withdrawal when the investment makes a profit. The first and important exercise is the deposit of funds to the investor account such that one can become an active participant in the business and also to fund the account for transactions. The company has a proprietary interface which makes process simple, enhanced and secure. The company does not take cash deposits from the investors. Instead, there are several options that can be used to make automatic deposits to the investor account such as the Visa or MasterCard credit cards, Neteller, Skrill, Fasapay, UnionPay China, Safecharge, EccomPay, and DotPay. The investors can also use alternative deposit method of using the bank wire transfer to deposit finances to their trading accounts in case they do not have access to eWallet of credit cards. All these methods have different fees with different terms and conditions of operation. Withdrawal can also be made through the same methods used to deposit funds to the trade accounts. The withdrawal fee varies from one method to the other but the least withdrawal fee applicable is $0.5 while the maximum applicable $30.

fxgiantsCustomer support
FXGiants offers 24-hour customer support services for 5 working days every week. The customer support staff is helpful in solving the customer complaints. The company’s customer support centers are based in London in the UK with the primary language in offering the support services being English but can also be translated to various languages which include Spanish, Italian, Korean, Chinese, Russian, Malay, Portuguese, Hungarian and Indonesian. Their customer support services can be reached through various mediums such as emails, telephone call, or a live chat at any time even in the instances when the market is busy. The company has also toll free contact numbers for customer support in specified countries such as China, Malaysia, Hungary, Spain, Poland, Indonesia, Italy, Thailand, Portugal, Russia, and Korea.

Education
The company is focused on the delivery of variety of assets that are easily tradeable by the investors in a simple execution of commands over the trading platforms. With this focus, the company therefore strives to educate its investors with an educational content that is always restricted to a forex trading glossary and the news releases for the company as well as other headlines that concern key economic performance across the globe and the region of operation. The company glossary despite being limited, it is useful to the investors to a great extent. The company website also has light educational materials regarding forex trading as well as basic economic news regarding forex trading market analysis that is fundamental to the investors.

Safety of finances
To curb insecurity issues, the company’s accounts are maintained in the top tier banks by the use of banking and treasury services that are applied at Westpac as well as other major high class institutions dealing with banking. The investor funds are in complete segregation with the other funds thus the customers can be sure that clarity, integrity and security is highly observed in dealing with their finances. Each investor account has a unique code which effectively guides depositing and withdrawal of funds from the account. The company is regulated and protected by recognized agencies in the lands of its operation thus very secure.

Pros and Cons
Pros
The company has variety of trading accounts (total of 5 types)
There is low deposit requirement for minimum initial deposit
The company is a regulated broker thus secure and legit
It has a wide range of financial instruments as well as products and services
Cons
The company lacks multi lingual support
They also lack local telephone customer support
They have no web based platform for trading
Only the MT4 trading platform is supported

Conclusion

With the company review, it is evident that the company has strong regulatory oversight, brilliant spreads and an array of accounts which the investors can choose from. It is true that is has been in operation for a very short period but it has managed to gain massive following and has accumulated a pool of loyal investors. The company has affordable accounts starting as low as $100 with amazing promotions and bonuses. Therefore, is it of no doubt that the company has proved itself as an investor friendly broker for those individuals seeking to begin their forex trading business.

What is Leveraged Buyout – LBO

by

Leveraged Buyout – LBO
Definition
When you borrow a significant amount of money in order to complete the acquisition of another company, then this will be termed as a leveraged buyout. Now, since the amount of loans taken for acquiring the company is pretty high, so to pay them off, the assets of the acquired company are put to use. They are often kept as a collateral for the loans to the creditors. Sometimes, the acquiring company also uses its own assets to keep as a collateral for the loans. Now, the main reason behind this buyout is to make sure that when a company is being acquired, the acquiring company is not committing a lot of capital.

Historical aspects regarding Leveraged Buyout

The infamous history of leveraged buyouts suggests that they hadn’t been much successful in the past. Most importantly, when the 1980s are kept into account, there were various much important buyouts that happened and led to the eventual bankruptcy of acquired companies. Mainly, this was because of the pretty high leverage ratio that amounted to almost 100%. The interest payments were also so large that the operating cash flows of the company just couldn’t make it to meet the exceedingly high amounts and thus, they eventually got bankrupted.
One of the largest LBOs on record was in 2006 when Kohlberg Kravis Roberts & Co. (KKR), Merrill Lynch and Bain &Co. acquired the Hospital Corporation of America (HCA). The three companies had to pay a whopping amount of $33 billion in order to acquire HCA.

What are the reasons behind LBOs?

When a company is taking so much loan just to acquire another company, it raises questions and puts the acquiring company’s finances at great risk. So, one does wonder the reasons behind such a buyout. Well, there are three important reasons as to why companies come to this point.

1. First reason is when the company wants to take over a public company and make it private
2. When someone is trying to sell a portion of his existing business for its spin-off.
3. The third reason might be the transfer of any private property, or the case where a small change is to be made in the ownership of a specific business.
However, in all the cases, there is one common requirement that the acquired entity must be a profitable and growing venture. So that, spending all the large amount and acquiring all the loans are worth it.

Break down of LBOs
Usually, there is a ratio of 10% equity to 90% debt in an LBO. Due to the excessive ratio, usually the bonds issued in this buyout are referred to as the junk bonds instead of the investment grade. Moreover, a lot of people are of the view that the tactic of LBOs is highly predatory and ruthless because the target company never actually sanctions it. Moreover, it is pretty much ironic that the assets responsible for a company’s success are actually being used against the same company by the predator company as a collateral.

The process of LBO
The leveraged buyouts often contain many complexities and hence they take some time for completion. For instance, consider the example of JAB holding company. It is a private firm which makes investments in healthcare companies, coffee and luxury goods. In May 2016, JAB holding company started the leveraged buyout of Krispy Kreme Doughnuts, Inc. The acquired company came at a whopping price of $1.5 billion, out of which there was a leveraged loan of $350 million along with a revolving credit facility of $150 million through the Barclays investment bank.
However, the Krispy Kreme Doughnut Inc. already had a debt on its balance sheet which was also needed to be sold. Barclays made it more attractive by adding an additional 0.5% interest rate to it. Thus, the LBO was made quite intricate and the deal was almost cancelled. Nevertheless, on July 12, 2016, they went through with the deal and closed it.

Attractive aspects of LBO

An LBO generally represents a win-win situation for banks as well as financial sponsors, thus they are quite attractive. In case of financial sponsor, he can employ the leverage and thus enhance the rate of returns on his equity. The banks can also make it different from the corporate lending and thus attain some significantly high margins by supporting the finances of LBOs. This is because the banks will be charging a much higher interest. Moreover, the banks can obtain security or collateral too as a proof or surety that they will get repaid.
How much amount can the banks provide for an LBO
As mentioned, the LBO requires a lot of debt and this depends on how much amount the banks are actually willing to provide for supporting an LBO. The amount varies and is dependent on several factors that are mentioned as follows:
• Overall economic environment
• The quality of the company that is being acquired i.e. whether the operating cash flows of the company are stable, its history, the prospects of growth and the hard assets etc.
• The experience and history of the financial sponsor.
• How much equity is being offered by the financial sponsor.
Characteristics of leveraged buyouts
The leveraged buyouts greatly differ in many aspects. However, some characteristics are there that hold true in almost every LBO mentioned as follows:
• Strong management team – The chief executives will have worked with each other and by rolling over their shares in the LBO deal, they might have some vested interests.
• Relatively lesser existing debt – The private equity firm will add up more debt in the capital structure of the company which is to be repaid over time. Thus, this results in a lesser effective purchasing price. If the company already has acquired a huge debt balance, then the deal is very tough to be closed.
• Relatively lesser fixed costs – the fixed costs are to be repaid even if the revenues of private equity firms decline, thus the fixed costs pose risk for the private equity firms.
• Stability in cash flows – the acquired company in the LBO must have a stable operating cash flow.

Do NOT follow this link or you will be banned from the site!