Archives for February 2018

Where to put my stop loss?

A stop loss is an order that simply closes out your position at a specific, predetermined price. It is an excellent risk management tool, which limits your losses on any trade where it is used.

This can sometimes feel like the million-dollar question. We all know that horrible feeling when we place a trade, which then drops, hits the stop loss, only to almost immediately reverse and trade significantly higher. However, stop losses should definitely not be placed at random, there is plenty of theory for you to digest before deciding which stop loss strategy is best for you. The best price for a stop is at a level where the market has sufficient rom to fluctuate but not to get you out before the price trends higher (in a buy example).

What can I risk?

One way of determining the stop loss is to decide how much you are willing to risk on your trade. For example, if you wish to have a maximum loss of $20, you do the calculation to work out where the stop should go. For example, trading GBP/USD trade size 10,000, the price can move 20 ticks from say $1.4045 to $1.4025 and your position should be closed (with a precise fill) and your loss will be $20.

However, this method only takes into account what you are willing to lose and not what the price action in the market might be around that price level, so you could find this method is more counterproductive than useful.

Swing low method

One of the most widely used and simplest ways of deciding where to put a stop loss to put it just below a recent “swing low” (when going long) or a “swing high” when going short. These can be identified when looking at the chart. A swing low is where the price has fallen and then bounced off a certain price. This basically is where the price has found support. A swing high is the reverse.

As an alternative, technical analysis could be another way of finding stop loss levels. Fibonacci retracement levels are often used in this way.

Which Broker?

The most important point here is that you should be clear as to how which strategy you will use for your stop loss placement. This needs to be in your trading plan and followed strictly.

Finally, when considering which broker to use, look for an ECN broker, such as Vantage FX. As an ECN broker they offer some of the tightest spreads in the industry and superior execution. This is important when your stops are being filled, as too many slips could make the difference between a winning and a losing account.

How to Recover from the January Slump

By Frugaling Leave a Comment

Analyzing Financial Data, Dave Dugdale, CC2.0

If you’re anything like me, you’re still recovering from a January slump in finances. It happens to a lot of people, and the experts even have a name for it: a “holiday debt hangover.” You’re not alone, the holidays get the better of all of us. We take time off work, and at the same time overspend. In the grips of the January blues, many would rather not face the reality of our situation. We avoid statements and log out of online banking.

Before you know it, February has come and gone, and finances are still not moving. You start to feel like you are behind before the year has even started, like Usain Bolt in this race against Kevin Hart. You know you could win if given a fair start, but you are already playing catch-up.

The recovery begins now! It’s time to start living frugally again. Leave the holiday period, which can be a lavish time, a time for eating and drinking and giving without prejudice. It’s time to come back to reality and stay within budget. Only spend what you can afford and reduce unnecessary costs and spending.

Take stock of your situation. This is a necessary step to recovering from the January slump. Be honest with yourself about how much money you have, how much your business earns, your assets and your outgoings. Understand and accept your situation.

Next, set up a budgeting plan. You can do this yourself using one of many online templates or seek the guidance of an expert if needed. Offset your financial obligations against your earnings to see how much income you have at your disposal. The more accurate and realistic you can be, the better.

If you have accumulated debt over the holiday period, you also need to be honest with yourself about that. Don’t add any more debt to the pile, even if it means hiding or cutting up your credit cards. Just pay with a debit card or cash and try to spend according to your budget.

Set up repayments for your debts based on what you can afford. It can be tempting to pay back the minimum on everything, but this means that you only end up paying off the interest and not the balance. Pay back more if you can and focus on the higher interest debt first. If you have small debts, then you might want to pay them off quickly for a psychological victory. Always seek help if your debts become too much to handle.

Finally, start setting SMART goals based on your situation and financial goals. They should be specific, measurable, attainable, realistic and time-sensitive, but also personal to you. Do you want to pay off a specific amount of debt? Generate a new stream of income? Or start saving a specific amount per month? You can look back and adjust your goals as you are going along.

January is, for many people, a tough month financially. After time off and increased spending over the holidays, we often find ourselves spending most of the beginning months of the year trying to catch up and get back on track. Now is the time to take back control of your finances. No more overspending, no more pretending, just solid planning and action!

Don’t Give Up On Your Financial Resolutions

By Frugaling Leave a Comment

After a long and indulgent holiday, most people are ready to leave the excesses of the season behind and start fresh in the new year.But that ambition only lasts so long. Despite their best intentions, only 20 percent of those who make New Year’s resolutions keep to them. The remaining 80 percent of goal-setters give up by the time Valentine’s Day hits. Unless you’re one of the inspired minority, then your motivation to keep on track is probably at an all-time low and you run the risk of giving up. If your tank is on empty, here are some tips to find the fuel you need to check off your overdue resolution.

Don’t be discouraged

There is no such thing as a perfect run at your goal. There’s always going to be an obstacle (or few) that stands in your way. It’s important you find the strength to stay committed to your goal despite them. So what you caved and upgraded to the iPhone X, the world’s most expensive phone? Don’t throw in the towel just because you made one mistake.

Take it slow

It’s human nature to want to wash your hands clean of all your debt as fast as possible, but this speedy repayment schedule can actually sabotage your success. Most people assume they can cut out every unnecessary purchase from their budget, so all their excess cash can go towards debt relief. While ambitious, this strategy is also unrealistic. Going cold turkey increases the chances of going back to your spendthrift ways with more intensity than before. It’s like trying a diet that cuts out every sugar and carb from your diet. At first you can follow your new healthy way of life, but two weeks later you’re binge eating that tray of Oreos.

To avoid overspending out of sheer boredom, start applying restrictions on your spending gradually. Begin by eliminating your daily latte if you grab one on your way to work. Get used to making your own coffee at home before you try cutting out your weekly takeout. When you give yourself time to adjust to these frugal ways, you’ll have a better chance at sticking to them.

Don’t be afraid to treat yourself

Though it may seem at odds with your savings goals, buying yourself small treats throughout your progress can help you stay on track. Rewards are a great motivator when used correctly. The trick is to keep them small, infrequent, and tied to certain objectives. For example, let’s say you aim to have half of your Mastercard balance paid off within seven weeks. Your reward for hitting this target could be treating yourself to seeing Black Panther in theatres, splurging on takeout, or purchasing a brand new pair of sneakers. Choose whatever experience or item would motivate you to keep to your goal, and only pay out if you’ve reached it.

Keep calm

Let’s say those obstacles from before aren’t of your own making but the result of a frozen pipe, a faulty furnace, or a broken suspension. These necessary repairs can’t be ignored for long, but your stressed budget may not be able to handle these emergencies on top of your debt repayments. If you used your credit cards as a back-up in the face of financial emergencies in the past, learn how to avoid extra debt before the next bill, fine, or household repair blindsides you and your budget. It may take some research but eventually you’ll find a solution that works with your situation. Whether it’s the addition of a part-time job or a personal loan, there’s a way to manage these temporary cash shortages.

The bottom line

Paying off debt from the holidays or any other special occasion isn’t fun. It takes a lot of hard work and dedication as you reorganize your finances and limit your spending. With such an focus on your budget, it’s easy to get bogged down by the negative aspects of your goal. If you do, it’s the fastest way to lose sight of why you’re cutting back: living a debt-free life. Instead, take a breather when it gets to much and embrace rewards. These tricks may be the only way you can successfully tick your resolution off your list.

I have a somehow strange way of managing my money. I don’t mind foregoing every day spending in search of a greater reward. As such, I almost never shop for clothes, or I go to a thrift store. My latest find was a $150 pair of snow shoes that I paid $7 for, and a goose feather winter coat from Calvin Klein that cost me $3. Both were barely used and I couldn’t care less if someone wore them before. One wash and they’re just like any other clothes I used myself.

I hate waste, I’ll go crazy if you leave the fridge door open longer than necessary or leave the lights on when you exit the room, I’ll go through great length to reuse and recycle everything, food and leftovers come to mind, but I’ll also turn old clothes into rags or food containers into Tupperware.

Yet at the same time, I like to splurge on exceptional things. I own various luxury items that cost me a pretty penny, but give me great enjoyment day in, day out. I bought my last house cash. I travel the world for months on end and never think twice when it comes to experiencing a new restaurant, sampling a new beer or staying in a nice city.

I don’t know if my priorities are right for everyone, but they sure are for me. And when people start asking how I can possibly afford such extensive travels and leisure, I try to explain that it comes naturally to me to save on other things in life, because I’d rather travel the world in my thrift store clothes than stay at home in my brand new jeans.

These kinds of discussions are usually followed by a list of excuses why people can’t do the same. No time to look for bargains, or to cook after work, bla bla bla. I’m not here to convince you, and I couldn’t care less about how you spend your own money. You’ve earned it, you can spend it the way you want.

However, if you want to add a little luxury to your life, look at this infographic that Oliver’s Travels created. It shows how you could afford little or big luxuries by changing one habit in your life. Instead of buying seven lattes at Starbucks, you could buy an oyster and Champagne dinner. Neat, don’t you think?

3.5 months of cable amount to a nice dinner in a Michelin restaurant. 4 nights out in town could buy you a trip to Iceland to see the Northern lights. See how it works? Little amounts add up, and you probably won’t remember that random Friday night you spent at a bar, whereas that Iceland trip will leave you long lasting memories. So what will you choose? Luxury isn’t that expensive if you plan and save for it.