Category Archives: Education

FINRA: Following the Crowd Investing and Social Media

With zero commissions on trades and online trading platforms at our fingertips wherever we go, many investors are making investing and saving part of their routine. Investors have access to a variety of online sources to gather information to make investment decisions, from the news media to independent social media platforms to platforms associated with investment firms, among many others. No matter where you get your trading insights, and whether you are following a recommendation to buy stocks, bonds, options or something else, know this: where there is an opportunity, there is also risk.

Crowd Investing – Here are some tips and resources to consider.

  1. Consider your source. Independent social media platforms and some brokerage firms offer tools that analyze or aggregate information from social media sources to help investors make investment decisions. Depending on how it is presented, social sentiment information—particularly real-time discussion platforms and buy/sell indicators driven by social sentiment—can lead to emotionally-driven or impulsive investment decisions, which can be a risky way to approach investing. Learn more about Social Sentiment Investing Tools.
  2. Know the rules if you are day trading. Are you actively trading stocks? If so, it’s important to know what it means to be a “pattern day trader” because there are requirements associated with this kind of trading. And as the SEC’s Office of Investor Education and Advocacy noted in a recent Investor Bulletin, “[d]ay trading is serious business and not something you just dabble in for fun, particularly if you are using leveraged investment strategies or trading leveraged products.”
  3. Understand the costs and risks of margin investing. If you are trading in a margin account, your firm can force the sale of securities in your accounts to meet a margin call, sell your securities without contacting you, and increase its margin requirements at any time without providing you with advance notice. It’s also important to know you can lose more money than you deposit in a margin account. Learn more about Investing with Borrowed Funds.
  4. Know what to expect when trading is halted. Thousands of stocks are quoted and traded every day in U.S. securities markets, and most of this trading takes place without interruption throughout the day. But sometimes a stock may be subject to a short-term trading halt or longer-term trading suspension. To find out why and how trading halts occur, read When the Trading Stops.
  5. Get the basics on options trading. Options trading can be risky, and the options market has its own vocabulary and unique processes. Options A to Z: The Basics to the Greeks will help you become conversant in the language of options, and Trading Options: Understanding Assignment lays out how assignment—the fulfilling of the requirements of an options contract—works.
  6. Check your emotions at the door. In volatile markets it can be tempting to make rash decisions. One enduring truth about stock markets is that they go up, and they go down—and the steeper the rise or the fall, the more tempting it can be to derail a long-term strategy with a snap decision. Read more about Market Volatility.
  7. Stop and take three. Mindfulness is all the rage these days. Before you make an investment decision, be mindful of three things. First, ask yourself whether an investment aligns with your financial goals. Small dollar investments based on hype around a security might turn into big gains, but they can just as easily turn into big losses. Second, make sure your investment decision involves a level of risk you are comfortable with, and not the level of risk other people might be comfortable with. The problem with herd investing is that investing is personal: some people have the means to take risky bets, but many of us do not. Third, if you seek short-term returns, don’t sacrifice money you cannot afford to lose.
  8. Watch your wallet. Social media recommendations to buy the securities of a particular company may urge going all in through taking early withdrawals from retirement accounts or borrowing against one’s home. Be aware that leveraging long-term assets for short-term gains can have significant consequences—from fees and taxes to risk of loss and more.
  9. Focus on diversification. Speaking of going all in, remember that diversification—spreading out your investments both across and within different asset classes—can help you manage your risk.
  10. Contact FINRA to report misconduct. If you are aware of unfair practices or specific instances of abusive or prohibited conduct, FINRA wants to know about it immediately. File an investor complaint through the FINRA Investor Complaint Center or file a tip using our online regulatory tip form.

When significant market events occur, it can be challenging to sort out what is actually happening, especially with a 24-hour news cycle and constant chatter from social media channels. To protect investors and ensure the market’s integrity, FINRA works every day to ensure that everyone can participate in the market with confidence. If there is market manipulation or other misconduct by market participants, FINRA will investigate and hold wrongdoers accountable. Where we lack jurisdiction over those who engaged in misconduct, we coordinate and share any information we uncover with law enforcement and other regulatory agencies to help them do their jobs.

How to Pick a Forex Signal Provider

What is Forex Trading Signal?

A forex trading signal is specific information about a particular forex pair (EURUSD – USDJPY GBPUSD, etc.). The signal is a recommendation for entering a position on a currency pair, usually at a specific price and time, take profit and stop loss targets. The trading signal can also include extra information like charts, graphs and market analysis. A Forex signal provider is a service, usually on a subscription basis (monthly or yearly), where a provider sends forex trading signals to subscribers to trade on. A good FX signal service does all the research and analysis of the forex pairs trying to find the best trade setups, which are then transmitted in the form of trading signals to their clients. 

Categories of Trading Signal Providers

Foreign exchange signal providers may provide the signals for free, or they may require a weekly, monthly or yearly fee. Signal services use technical analysis to generate forex signals, or fundamental analysis to provide their trading fx signals.

Technical analysis is the analysis of graphs and forex charts, looking at moving averages, candlesticks, flags, areas of support and areas of resistance, and other technical indicators. Technical analysis believe that recent and historical price action as seen on price charts should be the primary means to determine forex future price direction of a forex pair. The most intellectual foreign exchange signal providers have their own prop trading systems that produce these signals based on years of historical testing and quant research.

Foreign exchange signals services that provide forex trading signals based on fundamental analysis rely on the fundamentals of the economy and news reports from FED or ECB such as interest rates, GDP, inflation rates, unemployment rates, and central bank announcements to help them make trading related decisions.

What to Look for When Choosing a Forex Signal Provider

Investors need to pay attention to all details regarding a signal service. So what are the factors to look for when trying to find the best forex signals provider? Here are some tips:

Age of the account

The first thing to look for when choosing a Foreign exchange signals provider is the age of the account. Start searching by looking at signal service providers who have a track record of at least three years. This will tell you the experience of the trader who is managing the signals. It will also show you how consistent the FX signal provider has been in the last three years of trading.

Check for verified trading results and proven track record




A track-record ensures that the claimed performance is real and is good if it is verified by an independent third-party, such as eToro , Myfxbook, FX Blue or ForexFactory etc. Some signal providers publish hypothetical or simulated track-records of their signals, which mean that their signals weren’t traded in the real market. Those records can be different from real track-records, and show that the FX signal provider doesn’t trade his own signals. Another major consideration is whether the signal provider uses a demo account or real account to trade the signals.

Consistent Profits – Signals have to be profitable

Before using any forex signals service, traders need to make sure it has a good track record. The best signals service provider must produce good, consistent trading results. Many signal providers claim to catch up to a few thousand pips per month, but without a verified track-record those numbers shouldn’t be taken seriously. Furthermore, if a provider “guarantees” a fixed amount of pips per month, you should delete that provider from your list. Nobody in this world can guarantee profits, and this is an early warning sign.

Performance

When comparing the performance of Forex signal services, you must look at the pips earned rather than percentage return. The reason for this is that percentage returns can be misleading as different leverage amounts will provide different percentage gain data.

You must check the number of positive pips per transaction and compare them to the number of negative pips per position. Then compare the results to the total win ratio. Also, you should check how many weeks on average a forex service provider has gains against how many weeks it has losses.

An important criterion is to find how many entry positions the forex signal service is offering. Most reliable signal providers will manage to balance the quantity of trading opportunities with the total transaction fees of the forex account. If the FX signal service is providing a big number of signals with arrow profit targets, you have to be cautious, this should be a warning and signals that making profits with that signal provider will be a difficult story.  

Win Rates

Most professional forex signal services will only provide an entry signal that has an advantageous return to risk profile. That is the correct approach to trade the forex pairs. So these investors can make steady profits even with 30%, 40% or 50% win rates. Reliable forex strategy services have a consistent performance record and obviously they are not profitable every month, but in the long term they show consistent positive results.

Traders must also analyze the average risk to reward in conjunction with win rate. There are strategies with 95% win rates that can lose money and there are also strategies with 25% win rates that can make money. It is all relative, so don’t let win rates fool you.

Drawdowns

Drawdown is the high-to-low decline in equity that an investor has in a certain period.  Some investors refuse to take the losses from a position failing to use any stop loss.  The trader keeps open the losing position waiting a reversal in the market.  Turning a negative position into a winner sounds great, but it will destroy your margin and may never turn to gains. 

Some signals look really good because they risk hundreds of pips to only make 5 or 10 pips in profit. This approach works well over a short period, but signals like this nearly always blow up eventually. A successful FX signals service will not only provide excellent returns in terms of portfolio growth but will accomplish this with reasonable drawdowns.

Demo and free trial

Any reliable signal provider must offer a free or at small fee trial period to test and verify their service. If you can’t get a trial period, most likely the services are not transparent, real and reliable. Try not to use such services. If anyone is confident in what he is doing, he will definitely offer you a demo account first.

Any graphs and analysis sent together with the signals is a great feature as they help in understanding the signals and offer valuable learning material. This learning material can also be used as a great educational resource to learn from, especially if you’re looking to become an independent forex trader. The signal service provider should also have strict risk management guidelines in place and keep you updated on any changes on the trade setup.

Money management

Many forex signal providers actually use a forex penny account. A cent account, as the name implies allows you to trade just in cents. This means that in trading there is very little risk. Copying trades from that kind of account to your real trading account with thousand USD in equity can be a bad investment. Pay attention to the trading equity of the FX signals provider.

Researching and analyzing how the signals service trades (based on their trading record) will give you a lot more insight. The bottom line is that traders need to also focus on the money management strategy of the signals provider and not just how much returns they generate.

Reliability

An important factor to consider also is the software and tools a forex signal service is using. Do they have robust software to send out signal notifications and are they offering different channels for you to receive the trading signals on time? Another factor to check is the details that the forex signals provide. Do the signals always provide profit targets and stop loss figures or do they only provide just entry points but no exit points?

Conclusion

The Forex signal provider first of all has to be profitable and have a verified track record, ideally by a third independent party. Even if the forex signal provider does have verified results, make sure to open first a free forex signals trial account to assess the quality of the signals in real-time trading. You also need to make sure that the type of trades and times at which they are sent out suit your personal trading style and time-zone.

Finally, always do your own research, check online reviews and get a free trial period before you buy any trading signal service.

Role of Forensic Accounting in Trading

What is ‘Forensic Accounting?’

Forensic accounting described as the integration of accounting, auditing and investigative methods to conduct an investigation into a company’s fiscal reports. Forensic accounting provides a financial analysis suitable for court. Forensic accountants are both a finance expert and a professional investigator who trained to look behind the accounting figures and deal with the business reality of a situation. They are frequently used in fraud cases by businesses, law firms, law enforcement agencies, investment companies and insurance agencies.

Alan Zysman, a noted forensic accountant since 1987, states, “Forensic accounting provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution”

Forensic Accounting in Trading

In today’s complex financial markets world with very complex financial instruments trading around the globe, investment firms, banks, hedge funds regulatory bodies and exchanges are often victims of financial crimes such as money laundering, employee theft, embezzlement, spoofing, price manipulation and insurance or securities fraud.

Forensic Accounting in trading can help a company investigate price fixations, stock market manipulations and at times even manipulation of the financial figures by the company’s Board to window dress the financial statements and profit and loss account figures to hide real facts from the shareholders and investment community, for the funds misused or misappropriated by the top management.

The real need for Forensic Accounting came in 2001-2002 with huge corporate financial frauds coming to light, like Enron, and World com.The forensic accountant should be well versed with all business and investment laws (MIFID II) at national and international level as financial fraudsters have become more intelligent in their activities exploiting loopholes in the statutes and laws across major financial centers.

The forensic accountant in trading and investments uses all modern techniques and tools in gathering all the data necessary and relevant for his purpose. The various techniques and tools include data mining, finger print identification, order book analysis, laboratory analysis, forged cheques and altered cheques identifying tools, electronic surveillance, email communications etc.

Forensic accounting also requires a great deal of creativity, since one must often explain complex financial concepts (derivatives, forex, cryptocurrencies) to an audience that lacks basicaccounting knowledge. It is not surprising that the American agency, the Federal Bureau of Investigation (FBI)confirmed that ‘one key element was the creation of a standardized, professional investigative support position known as the forensic accountant in 2009’.



Forensic Accounting in trading may be subdivided in four categories:

1.Litigation support

2.Investigative and assisting in the disputes

3.Frauds Detection and finally

4.Forensic Data analysis

The litigation support is provided to lawyers by giving support of documentary evidence to support or rebut a claim. Also assisting in designing relevant questions to be asked at the time of trial in courts of law.

Under the second category the Forensic Accountant helps in minimizing future damages and risk of loss. Because of their financial expert knowledge he is effectively used in fraud detection.

Today Forensic Accountants have become part of all major accounting firms, and all big investment companies such as banks, mutual funds, hedge funds, brokers specializing in fraud detection and prevention and helping the courts of law by giving evidence of the financial crime. Courts depend on the expertise of forensic accountants in all financial litigations and disputes.

The important skills needed for the role of a Forensic Accountants includes:

They should understand the business and the technology used in the organizations, the software used, as he is dealing with the management as well the technical and software departments of the company.

Should have sound technical knowledge to get the source of required information from the storage and other computer equipment’s and for following the trial of information needed for investigation.

Forensic Accounting in trading role not only includes unearthing a fraud but also to find out why the fraud occurred.

Helpful Resources

  1. Forensic Accounting Careers – Careerherd.com
  2. Forensic Accountants to the Rescue – Strategic Finance
  3. How Forensic Accountants Fight White Collar Crime
  4. The Advantages of Having a Forensic Accountant Within an Organization | Chron.com

How Traders Measure Liquidity

By Dave Lerman

The investment community usually defines a liquid investment as something that can be easily turned into cash. Selling a house is an example of an illiquid investment.  It could take weeks or months to close on the transaction and receive your money.  Stocks, however, tend to be very liquid because they can be sold on a moment’s notice. Moreover, you can sell large amounts of stocks in seconds and receive your money rather quickly.

Unlike the investment community, futures traders measure liquidity in terms of how easy it is to buy and sell the futures contracts they are interested in. They usually use volume, open interest and a narrow bid/offer spread as primary gauges of liquidity. Futures contracts like U.S. Treasuries and Eurodollars trade millions of contracts a day and have open interest exceeding 1,000,000 contracts or more.

Additional gauges of liquidity would involve examining the depth of order book, how many contracts are bid for and how many are offered (often referred to as size). A futures contract that is one up (one contract bid for and one on the offer) is much less liquid than a contract that is one tick wide and 100-up (100 on the bid and 100 on the offer). Some new, or less liquid, futures contracts might have bid offer spreads of several ticks or more and are only a one-up market.

Traders tend to gravitate toward futures contracts where liquidity is optimal, thus reducing slippage, a primary part of overall transaction costs.

About the Author

David Lerman, the Senior Director of Education at CME Group, gives seminars and workshops to retail and institutional audiences focusing on risk management and trading using Equity Index futures and options.

Mr. Lerman is the author of Exchange Traded Funds and E-mini Stock Index Futures (published by John Wiley and Sons).

Prior to joining the CME in 1988, Mr. Lerman traded futures and options on U.S. Treasury Bonds at the Chicago Board of Trade and was Senior Portfolio Manager at Zavanelli Portfolio Research. Mr. Lerman taught investment management at Harper College and has lectured at the Northwestern University Kellogg Graduate School of Management.

9 Things To Keep In Mind When Attending An Out Of State College

If you are planning to attend college soon, then you should think of joining an out of state institution.  This will give you the opportunity to widen your horizons by interacting with people who might share different viewpoints and lifestyles than your own. However, be sure to keep the following points in mind when looking to join an out of state college.

Scholarships

Contrary to popular belief, there are colleges that do provide scholarships for out of state students. And one of the main reasons this is done is to increase the diversity of the college campus since multiculturalism is seen as something to be promoted by such institutions. As such, if you find a particular out of state college interesting, be sure to inquire about the scholarship options available to you as a student of another state. And if you belong to an ethnic or cultural minority group, then your chances of getting such a scholarship becomes very high.

Check The Staying Location

When you find an affordable place to live off campus, make sure to check out the surrounding regions. Ideally, the place should be close to the college so that you don’t have to waste too much time traveling between them. In addition, the region should also be very promising in terms of part-time employment opportunities if you plan on earning money by taking up odd jobs. Plus, if you do have hobbies like dancing, art etc., make sure that there are interest groups located in the area where you can join in and meet like-minded people to improve your talents.

Emergency Money

Always keep some money aside that will allow you to quickly travel back home in case of any emergencies. Many students make the mistake of using all their monthly earnings and never saving anything. While saving a big amount is not at all necessary, you need to understand that there will be situations when you will have to travel to your home state. And if don’t have money on hand to make the trip, then you will have to borrow it from someone else. This is obviously not a good habit since you must try to keep your borrowings to your minimum. So, put some money in your bank account and don’t touch it until and unless you need it for such types of emergencies.

Regional Reciprocity Exchanges

You can also take advantage of regional reciprocity exchange agreements to attend an out of state college for the same tuition you would pay for a college in your state. For example, the Western Undergraduate Exchange (WUE) will allow you to attend an out of state college for just 150% of in-state tuition even though such colleges will generally charge up to 300% of in-state tuition to students who come from other states. However, such programs do have very strict criteria as to who gets selected for the benefits. But if you have excellent grades, then you must definitely look into the reciprocity exchanges.

Military Dependents

If you are from the military or have a family member who has served in the military, then you are eligible to get in-state tuition for any out of state public colleges across the US. This facility was only available in a few states until 2014. But then the HR 3230 was signed into effect, widening this benefit and making it applicable on all states. Check with the college how you can benefit from the program.

Get Out From Nostalgia

Never get too nostalgic about your home state in front of people who are from a different state. Remember that it was your decision to move to a new state. If you keep reminiscing about your home state in an idealistic manner while making negative or derogatory comments about the current state even in the form of sarcasm or a joke, then the people who hear you will slowly start to dislike you. And you will find it incredibly tough to form any long-lasting friendship. So, remember to respect the qualities and quirks of the people of the state you move into and try to accept it as their culture and lifestyle.

Alumni Association

Sometimes, you may not be able to visit an out of state college to decide whether to join there or not. And even if you do visit, you might still have doubts as to whether you will end up liking the college or hating it. In such situations, it is better to hear out the opinions of any alumni of that college who lives near your place. If you are unable to find anyone, contact the alumni office of the college and they should be able to get you in touch with someone near you who has attended the college.

State Residency

Another way to lower the tuition of an out of state college is to become a legal resident of that state. So, if you wish to go to a university in California, you can be eligible for in-state tuition if you do become a resident of California. Normally, you are required to have lived in a particular state for about a year to be considered eligible for resident status. So, if you think that a particular state offers more employment opportunities, then it may be in your interest to start looking at becoming a resident of that state before you apply to college.

Application

Finally, be sure to make your application look as exciting as possible. Colleges will mostly be trying to get the best students they can when they accept out students from out of states. As such, the best way to get an admission in an out of state college is by highlighting your skills and differentiating yourself from the regular applicants. One way to do so is by showcasing your extra-curricular and academic achievements. And if you can find instances where you have done community services and displayed leadership qualities, then your chances of getting an admission into an out of state college will increase vastly.