What is a Forex Trading Strategy?

Let us begin by addressing the most basic question. What exactly is a Forex trading strategy? Traders use certain methods that help them in making a decision regarding the buying and selling of any currency pair. A trader is required to use certain trading techniques for the generation of profits. Trading strategies are of various kinds, and can often be looked at as manual or automated signals for trading.

Manual strategies are those where traders manually look for signals, for example through a computer. Automated strategies are those where there is no human input required and the work is done by an algorithm. The algorithm finishes the job of locating signals and executing them.

It is unsurprising that according to experts, a majority of forex traders end up losing their capital very quickly. If we go looking for reasons, a blatant one is the absence of trading strategies. While from hearing the words forex trading strategies, one may feel that it is a one fit for all thing- a wiser person would know that forex trading strategies are rather unique for everyone.

Undoubtedly, these seemingly complex words can hardly be called some no-brainer, but the common person also does not need to be so frightened of them. It’s important for any individual to first realize that long term wealth cannot be acquired without creating a strategy for their own. The profits without that strategy will only be short term.

To help you achieve your goal, here’s a list of the top forex trading strategies.

Candlestick strategy
One of the most profitable and used Forex trading strategies is the Candlestick trading strategy. One must keep in mind that this strategy is built on the spring principle of price movement. What you’ll essentially require is a chart plus a W1 timeframe. The size of the of the candle bodies has to be estimated. Different currency pairs like AUDCHF, AUDUSD, GBPCHF being some examples. Now by pick the longest distance from candle’s opening to the close. Long position means a bearish candle, whereas short indicates bull. This has to be done within a week of the candle.

Scalping
This strategy is considered a very advanced trading strategy among all the forex trading strategies. The span of these trades is extremely short, sometimes only being a couple of minutes. Scalpers rapidly try to beat the bid. For profit, they only skim some pips before they exit. Usage of low time-frame charts is common in this strategy. An example of this advanced forex trading strategy is the Forex-1 minute Trading Strategy.

Parabolic profit
This is another typically adopted forex trading strategy which fetches people profit. You will be required to set three moving averages and the Parabolic indicator. Use different colors to help make the analysis more convenient. In case you want to open a buy deal, ensure that the Parabolic is at the bottom. It should be on top, however, if the position is short.

Bollinger Bands Trading Scheme
This forex trading strategy utilizes Bollinger Bands, which are tools for technical analysis. They use standard deviation for establishing where the band lies. They’re useful for giving immense information on topics like periods of market consolidation and trend continuation, as well as potential price targets. There are three bands in total, and they revolve around SMA, or the simple moving average. the default value for this is 20. There are two default boundaries- lower band and upper band, and the price generally lies between these two.

Fibonacci trading
Another profitable forex trading strategy that traders tend to adopt involves the use of Fibonacci retracements. These are generally used for the identification and trading of the support and resistance levels. These are helpful in locating exactly where orders for market entry should be placed. Since every trader has their unique strategy, many prefer the Fibonacci style for how it suits them. There is usage of hard data only and close to zero emotional interference. A trader can use these strategies for both short and long term trades.

Is the strategy effective?
While you cannot stick to one forex trading strategy and call it the best or the top, there are some rather distinct differences that tell an effective strategy apart from the others.

The accuracy – an effective forex strategy will not be chockfull of lagging indicators. You will find accuracy through this strategy and can trust it.

Understanding – do you actually understand the strategy? It’s essential for a trader to not fall for the trap of seemingly impressive formulas and stick to something that actually makes sense to them. You must have a thorough understanding of your strategy.

Uniqueness – As we have established, it’s important that your circumstances align with the trading strategy. If it isn’t inherently working out for you and your character, it’s not going to fetch you the profit you want. Your trading strategy should be tailored according to your needs.

Types of Forex Trading Strategies
As previously established, there is no one strategy that works universally. What works for one trader may not suit the other. Thankfully, there are various strategies that traders can choose from, and below are some of the types of the forex trading strategies you can go through for tailoring your own strategy. Some of the common types of strategies are discussed below:

Trend trading – beginning with something incredibly easy to understand, this forex trading strategy is not only reliable but also simple to understand. Through this strategy, we try to get positive returns by taking the advantage of the market’s directional momentum.

Price Action Trading – we study historical prices here and formulate strategies that are technical and can be utilized both with an indicator and on its own.

Carry Trading – here, one currency is borrowed at a rate which is lower, and then we invest in another currency for a comparatively higher rate.

Range Trading – this strategy involves the detection of support and resistance points. Technical analysis is a chief feature of this strategy. Trades are placed around the key levels.

Day trading – this strategy is for short term. It is primarily designed for trading financial instruments within the same day so positions close before the market closing.

Why you must choose wisely
While many of the popular choices that are available have been outlined above, it’s crucial to keep in mind that you need to be wise while making this decision. If you’re not, you’ll end up in huge risks were not worth taking. Analysis of trading strategies is recommended, along with the analysis of the risk-reward ratio. It’s also necessary that you see how much time investment will be required in the strategy that interests you. Whether you’re more open to risk or averse to it also makes a huge difference.

Conclusion
Where most traders end up in losing out on long term success is that they limit themselves to an economic calendar only for fundamental analytics. Which is why creating a unique forex trading strategy is important for thriving in the Forex market. If you’re determined to go ahead in this market, it’s crucial that you brush up with the novelties and dedicate your time to studying ready-made schemes for trading. Emphasis has to be given on your individual action plan.

How an SIP can help build your child’s higher education corpus?

Planning for your child’s higher education corpus may look quite daunting at the beginning to gather such a large amount of funds considering the increasing inflation rate. Still, it is achievable, provided you are planning early and start your investments with SIP i.e. systematic investment plan in a mutual fund. Plan your financial journey according to your child’s future needs to achieve your desired goals.

Hypothetical example is given below -

Ms. Varma is a single mother of a child who will graduate in 10 Years. Ms. Varma wants her son to pursue Law. Let’s assume today’s cost is Rs 3 lakh; and now we need to calculate an estimated cost for the same in next 10 years based on assumed at 6 % p.a. inflation rate. So the cost of the education in the next 10 years is Rs. 5.37 lakhs. This goal can easily be met through SIP provided a regular investment of Rs.2334 is made on a monthly basis assuming the rate of return is 12 % p.a. (Please note this is based on the SIP and inflation calculator, however, it is not a guaranteed rate of returns)

Thus, it is most essential to plan and prepare to ensure your child gets access to the best of colleges. If you plan early, you may not have to compromise on your child’s future

Below is the step-by-step guide given to plan your SIP journey that helps build your child’s aspirations

Step 1: Decide Your Time Horizon

As stated in the earlier example, time is a crucial factor to determining your goals. Estimate the number of years left for your child’s graduation. The longer the time horizon, the better it is for you to plan and invest. Start early, invest wisely.

Step 2: Estimate the Cost of Education

You need to decide whether he or she wants a global exposure for education or a nearby well-renowned institute for their child. Also, which area of education do you want your child to graduate in is another important parameter to check. Depending on such points, you should be able to figure out an estimated cost of education. While keeping this in mind, it is thus important to determine future cost of school/ college.

Step 3: Assess Your Existing Assets and Liabilities

Make a list of all your assets and liabilities to help you assess your financial health and you can choose to plan better for your child‘s future goals. In a typical case, depending on your age, income and other significant criteria, you may need to prioritize your child’s education loan over the cost of a dream car or perhaps choose to delay your retirement planning depending on assessing your expenses and income (add a full stop)

Step 4: Estimate for the Amount to Be Saved

After calculating and assessing your assets and liabilities, the next step is to estimate our savings. Depending on that, you can choose your investment corpus. Decide how much you need to save now or whether a monthly contribution is required to achieve this goal on or before time. The easier way is to put aside some money towards each goal in a systematic manner. You can either opt for the Systematic Investment Plan in mutual funds or choose any other mode of investment options. An SIP is a preferred way to manage your investments. A disciplined and a planned approach will always make your journey easy.

Step 5: Choose your investment plan

Choose judiciously and invest wisely should always be your mantra. Asset allocation strategy is a boon to your investment journey. You may need to invest your hard-earned money in different investment avenues that depend on your risk appetite that aligns with your goals. Make sure you use the diversification strategy and continue to rebalance your portfolio at timely intervals. An SIP in mutual fund helps you do just that. You can choose from various assets such as equity, debt, gold, hybrid, etc. Ensure you analyze all the risks involved before investing, for example: Market risk, changes in Government policies, financial or economic crisis, etc.

Step 6: Prepare Yourself For The Unexpected

Make sure you are prepared for the additional costs that may or may not be included in the education cost, for example – tuition fees, hostel stay, books and stationery, etc. Remember to add them while preparing the cost analysis. None the least, start your investments today, Don’t delay. The earlier, the better.

Thus, with proper planning you are able to envision your child’s education expenses and help him or her achieve their dreams.

Taxation in Debt Mutual Funds

Debt Mutual Funds significantly invest the money in fixed-income securities like government securities, debentures, corporate bonds and other money-market instruments. These products carry the low risk compared to Equity. They have low volatility and have potential to generate modest returns over time.

Tax on Debt Funds

Like other Funds, Debt Funds are also subject to capital gains tax, Short-Term Capital Gains Tax (STCG) & Long-term Capital Gains Tax (LTCG). If Debt funds are held for less than 3 years, then STCG is levied and if more than 3 years then LTCG is levied. Presently, the LTCG levied is 20% with indexation and STCG is taxed as per the investor’s tax slab. If the Investor’s Income Tax Slab is 20%, then the same will be levied on the Debt Funds gains in the case of STCG.

Indexation Benefits

Indexation is a tool that is applicable to long-term investments. It helps an investor to adjust inflation while gauging the returns of the invested amount.

As inflation is gradually rising, what’s worth Rs. 1000 could be worth Rs.1100 sooner in the near future. Thus inflation is reducing the purchasing power of our money. The same amount will be enabling the investor to buy lesser and lesser goods.

So how does indexation help us? To understand that, let us first understand what capital gains is. Capital gains are nothing but the increase in the value of an investment over a specific period of time. If a NAV of a fund was Rs. 10 when you invested and is now Rs.15 while you plan to redeem it, that difference of Rs.5 is called capital gains. So we are yielding a capital gain of Rs.5unit when we redeem.

In the case of debt funds, we arrive at long term capital gains after indexing the purchase price of the investment. When subjected to indexation, it lowers the long-term capital gains tax, which brings down your taxable income. Indexation is the reason why debt funds are looked upon as an excellent fixed-income investment option.

How does Indexation Work?

The rate used for inflation in indexation is obtained from the Government’s Cost Inflation Index (CII). The Central Government determines the values of the index and is updated on the Income Tax Departments Website. The data is available from 19981 onwards.

Let us consider the below example to understand how indexation works:

Imagine you invested Rs.1,00,000 in May 2015 in a debt fund of your choice. Today you choose to redeem your money. So you have gained Rs. 1,50,000 on your investment. Since your holding period was beyond 3 years you will not need to be required to pay tax on the entire amount of Rs.1.5 lakhs. You will need to arrive at the indexed cost by using the formula:

ICoA = Original cost of acquisition * (CII of the year of sale/CII of year of purchase)

So the indexed cost will be 1,00,000 (240/301) = 79,734.

So our Capital Gains will now be 1,50,000-79,734 = 70,266.

Using indexation, we have managed to reduce the income subjected to tax, which would be Rs. 14,053.2.

The benefit of indexation works best when your holding period is longer. For a holding period of 5 years, on average, the long-term capital gains tax on debt funds can come down efficiently. Thus indexation helps us to save tax on Long-Term Capital Gains and increases our earnings.

Remember, indexation is only subjected to Debt Funds & not applicable to Equity Funds.

Successful Ways Of Achieving Your Project Management Objectives With A Management Consultant

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Project management is the achievement of goals and objectives within the preexisting constraints. No matter how many approaches or studies one undertakes, there are many project management strategies to study. Project management changes with the achievement of different goals and strategies. This is very essential to understand, as some approaches to achieving goals and objectives are different from other goals and objectives. In other words, a strategy that may work for one company, may not work for another company.

What are the typical constraints to the project manager?

A project manager needs to understand the limitations under which he/ she is expected to work. He/ she should be aware of all possible constraints from the top level to the bottom. Typical constraints encountered are:

Time: Project management professionals ideally are managers of time. They need to understand the success of tasks within the given time frame or duration of the project. Any project delays could only mean a loss of valuable time, assets, resources and money. It gets extremely difficult to re-evaluate project delays and they can never be justified for the sake of lack of time.

Budget: Budget constraints or financial constraints sometimes go hand in hand with time constraints. For the longer the project takes, the longer the manager spends on resources and equipment. Apart from delays in project deadlines, the major constraints posed by budget are the inability to add other goals and objectives. It is often ideal for the project manager to finish the existing goals and objectives of the project before moving on to others.

Scope: The scope of the project entails the entire time and budget aspect of the project. Once, the outlines scope of the project with the other parties involved in the success of the project, he/ she will be able to outline the time and budget for completing the project.
They usually conducts an analysis of all the three constraints with the other parties involved in the completion of the project. Project management involves the inclusion of parties such as interdepartmental managers, vendors or clients. For the success of any outlined project, it is advised to hire a management consultant to study the time, budget and scope of the project.

Benefits of Hiring a Project management Consultant

A project management consultant is the best person to study the given goals and objectives within the preexisting constraints. This consultant will be able to give an all-round view of the scope, time and budget of the project.

A management consultant will have the sole objective of ensuring that the project complies with the goals and objectives of the company. He/ she will study the best and unique approach for the company and not that is generally practiced. There are other benefits that can be derived from hiring a management consultant. These are:

Analyzing successful routes or approaches for project execution through the planning and design.
Implementing international strategies and standards to existing processes
Restructuring the existing systems
Success in the project execution
Ensuring strict and timely monitoring and control
Assisting the top management for achieving the goals and objectives of the company
Ensuring complete success of the company’s goals and objectives
Apart from these essential qualities of project management consultants, they have the ability to guide the top management on strategy management. As he/ she has studied the successes and failures of other organizations in project management, the management consultant will be the ideal person to guide the project manager

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