An Introduction to Forex: Part 2 [Guest Post]

In the first part of our Introduction to Forex we talked about basic concepts and characteristics of Forex trading. In this part the focus is on the different types of Forex brokers. This should give you a clearer picture of how the Forex machine works, and how to select the right broker.

There are three main types of Forex brokers out there, namely Market Maker brokers, Electronic Communications Network (ECN) brokers and Straight Through Processing (STP) brokers. Each type operates and makes money in a different way, and it is important to know the difference before deciding which one to use.

Market Maker Brokers

Market Maker brokers are the most common. They are named Market Makers because they essentially “make” the market for their customers – they buy when a trader wants to sell and they sell when a trader wants to buy. Using a Market Maker broker, you will never see the real market quotes, because all your trades will be routed via the broker’s dealing desk. These brokers make money in two different ways. The first way is by quoting fixed spreads (the difference between buy and sell price). The second way is by hedging against their clients’ trades. This means the broker makes money every time you make a loss. Ridiculous, right?

The only real benefits of using a Market Maker broker are the low amount of funds required in order to open an account, and user-friendly trading platforms. The low amount required is mostly due to the high leverage offered, so you should put that into consideration before deciding to invest.

Electronic Communications Network Brokers

ECN brokers provide direct market access. That means you get access to the market where all of the players (i.e. banks, financial institutions, and individual traders) trade against each other in real-time. The price displayed by the broker is the actual inter-bank rate, and the spread is variable – sometimes the buy price can even equal the sell price. All of the placed orders are matched between the participating parties in real-time, and there is no dealing desk routing. Simply put, you gain access to the true Forex market. These brokers don’t make money by setting a spread, but rather by charging a commission on every trade executed. The height of the commission depends on the broker and on the amount traded.

The benefits of using an ECN broker are quite obvious. First of all, there can be nospread/price manipulation by the broker, since the price is quoted directly from the inter-bank market. Next, the spread is variable and that can be used to the trader’s advantage. Last but not least, your broker is not trading against you, like the evil Market Makers do. The only two flipsides worth mentioning are the high amount of funds needed in order to open an account, and a not-so-user-friendly platform.

Straight Through Processing Brokers

STP brokers are a sort of a hybrid between Market Makers and ECNs(but not really). They don’t route the orders via a dealing desk, meaning they send them directly to the liquidity providers – banks, for example.Traders gain access to real-time market quotes, and can execute trades without the intervention of dealers.The brokers make money not by charging commissions, but by adding markups to the spread.

The main benefit of using STP brokers lies in the bypass of dealer desks, which means the broker won’t profit when you make a loss – how decent of them. That being said, STPs still don’t grant the trader direct inter-bank access, which puts them at a disadvantage when compared to ECNs.

Which One Is Best?

So which one to choose? If you have enough money you are willing to invest, and don’t mind the increased complexity of their trading platforms, ECN brokers are definitely the way to go. They are superior to STP and Market Makers in almost every way, making them the right choice for anyone who wants to get serious about trading.

The above article is written by iMoney. Reproduced with permissions. All rights reserved.

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Shipping sector on a recovery

I've posted before that the shipping industry may be on a recovery. First post was on June 20 here and second post was on July 14 here.

I've wrote about the Baltic Dry Index (BDY) and how it is related to the shipping industry. In simple terms, the BDY tracks the cost to transport raw materials. The higher the cost, the higher the index. A higher cost to transport means shipping firms get to earn more on each route.

The BDY has risen by another 25% since the first time i posted about it. Look at the chart here. Dry bulk shipping stocks have already anticipated the move and is on the rise now.

Manufacturing data from the US, China and the Eurozone is showing expansion also. Demand for goods is picking up.

There are 2 shipping stocks listed in the US that have already doubled in price.

The first one is Dryships (DRYS). From a low of 1.49, it has risen to about 2.88 now.

 The second is Diana shipping (DSX). From a low of $6.20, it has risen to about $12.50 now.

How about shipping stocks listed in the Singapore exchange? I've not seen any major movement on shipping stocks listed in Singapore yet. Maybe this would be an opportunity to buy them now at low prices and anticipate the move up. I will never know what will happen. It is purely a speculation. 

Speculation or not? I'll still be watching out for shipping stocks now. There are pretty good fundamental shipping stocks like marco polo marine. Singapore owned NOL may benefit from the recovery also. A caution is NOL has been struggling for many years and we won't be sure whether they can come out of it. 

Let's see what will happen by the end of the year. It is the time to research and watch it carefully now. 

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Recession Heroes Ep 4 - Got retrenched at a young age of 23 but still full of passion in life

This episode really encourages and motivates me. The guy in this story is Ken Chee. I've saw his name somewhere before and i thought his face looks really familiar. The i realised he's the one who started a company called 8 investment. His company runs the millionaire investor program in Singapore and it teaches value investing. I've never attended the program so i'm in no way related to it and this is not an advertisement for the program.

Back to this person. I thought he looked and sounded really humble and i felt he's someone who's willing to help others. He grew up in a poor family as his father lost a lot of money in the stock market. His grandma had to come out from a semi retirement state and go back to work just to support the family. He started working at a very young age as his dad could not give him much allowance. When he graduated, he got a job in an IT company but during the Dot Com bubble crash, he was fired at a young age of 23. This woke him up to the reality of life. You can watch this episode here. The story is really heartening.

What caught me was this is another story of someone losing lots of money in the stock market. The financial loss not only impacted one person but the whole family. Its really saddening to hear that. People would say that stocks are dangerous and do not dabble in stocks because you can burn your fingers and lose a lot of money. This is true. I've heard many cases of it and even have friends who experienced it. They are as young as me. Many are much older than me with family to support.

On the other extreme, there are people who know that stocks are risky and never invest in stocks at all. The problem is they are also struggling in their finances. I realised many people have poor financial management and poor saving habits. Indeed, without knowledge and good habits, people struggle in life.

The purpose of setting up my blog is to educate readers on how to properly manage their money and also learn the proper way to invest. I hope i can do my part in this society and make it a better place. It is saddening to keep hearing stories of how people suffer in life just because they were taught the wrong financial habits or because of the lack of knowledge in investment. Many times its due to greed where people wants to get rich quick. Getting rich quick has nothing to do with financial freedom. Financial freedom is not about money. It is about the ability to choose what we want to do in life without having to worry about money.

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Market update - Substantial rise in treasury yields

Update of Treasury yields in the US

2yr Treasury Yields - 0.51%
10yr Treasury Yields - 2.98%
30yr Treasury Yields - 3.88%

What do these numbers means? A rise in yields implies a fall in bond prices. If you have investment in bonds,  most likely you'll see a drop in your portfolio value. Short term yields have already more than doubled from 0.24 to. 0.51.

This also means that interest rates are rising. Those with floating rate loan packages will feel the effect of higher interest rates. If you have substantial loans like housing and car loans, do take note of the impact.

The good news is a rise in interest rates usually signify a economic recovery. Money is flowing out of bonds(which is considered a safer asset) into equities and other more risky assets.

Dry bulk shippers have bottomed out from its low and have risen substantially the past one month. Baltic dry index (BDI) is also rising indicating an increase in shipping freight rates. Will Singapore shipping stocks start to recover as well? This will need to be monitored further.

Reits and property stocks will be negatively impacted by the rise in interest rates. Reits generally have high debt to service ratios which means they borrow a substantial amount of money.  Higher interest rates will impact a reit's profit.

There may be an adverse effect as some Singaporeans are overleveraged on debt. Some with debts of more than 60% of their income. Will there be more loan defaulters and bankruptcy? That we'll not be sure and need to see how the situation develops.

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What's with the WhatsApp craze?

While i was on the bus, i realised that a lot of people were busy typing out on their phones. I took a peek at the people around me and saw that almost everyone was using WhatsApp. I have to admit i'm one of them too. People use to pay for messages in the old days and many young people were sending too many SMSes which caused their phone bills to burst. I used to hear my friends complaining that their parents cancelled their mobile line just because they send too many messages. Sometimes more than 1000 messages when there was only 500 free. Now, we don't have to worry about the cost of sending too many messages. I think i'm sending out more than a few hundred messages a day now just because there's WhatsApp. Its a great way to chat and connect with people.

Why is everyone using it now? Even my uncles and aunties are using it. So it's not really a young person thing. I have to say WhatApp messaging has almost totally replaced normal messaging in our lives. SMS has sort of become a history. It is a very simple app but many people are using it. I wonder why?

How many WhatsApp messages are being sent out everyday? It is about 8-12Billion messages everyday. That is really amazing. The CEO of WhatsApp is Jan Koum. Watch the interview with him on how WhatsApp was started. Throughout the interview, he kept saying how he can improve the lives of people and how he can improve the services and solve people's problems. That i think is a key to success. If you can add value to people's lives, the chances of success is higher.

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China Minzhong acquired by PT Indofood. Share price shoots up by 112%

China Minzhong has gotten out of its pit. Its trading halt was lifted today and from a low of 0.53, it shot up to 1.12. Reason was because it got an offer from PT Indofood to acquired its shares at 1.12. China Minzhong has offered its shareholders a mandatory cash offer at an offer price of 1.12.

Previously, a negative report by Glaucus Research caused it share price to drop by more than 50%. This caused fear to investors who own China Minzhong shares as they see their portfolio value plummet. There were rumours that China Minzhong could be forever suspended and shareholders could never get back their money. There were many S-chips or so called china stocks which suffered that fate so its understandable that a fear is there.

So what does a mandatory cash offer means? It means all shareholders have to sell their shares and the company will buy it at a price of 1.12. You can sell it now or wait for the mandatory cash offer letter to be mailed to you and accept the offer.

I've received one mandatory cash offer before and it was by the company sakari. It was known as straits asia trading beforehand. It does feel good to see your stocks jump up in value. How to know if a company will be acquired? I have to say there is no sure way to tell but investing in undervalued companies increases the probability by a lot.

Learning how to pick stocks is the best knowledge that you can acquire. In fact, by learning how to analyze a company, i've picked up skills in business management and economics. I've also learnt the skills of accounting. There is so much to learn in the investing world. One can never get bored of learning and lifelong learning is one of the keys to success. It is not just about making money but its about a journey towards financial freedom.

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My 8 days Taiwan trip all under $800

I did blog before that i liked travelling. Most people would say that travelling requires a lot of money. However, the good news is that with airlines competing for customers and the SGD staying strong, travelling is by far getting cheaper and cheaper.

I calculated my total expenses for my 8 days Taiwan trip. Not just slightly below $800 but way below it. It came out to be $705/pax inclusive of airfares. I don't know if you think that this is expensive or cheap but i have many friends who say that they would never be able to achieve that. Is it because i spend little when i'm overseas and still save on food and shopping? No, you're absolutely wrong. I did not even think of saving money when i was overseas. I just spend and spend. I have included my hotel list and 8 days itinerary below. So read to the end to find out more. 

Well, the secret is to keep your initial travelling cost low. By that i mean cheap flights and cheap hotels. Most people travel on budget airlines but how many people get the flights on discount? I got my tickets at 50% discount during a 4 day promotion period at only $212. This is inclusive of both ways. I travelled by Scoot Airlines.

Hotel wise, i asked around for cheap and good hotels to stay in. It was through recommendations by friends and family that i got the cheapest deal. My hotel in Taipei cost only $35 per night per room shared by 2 person. This works out to only $17.50 per person per night. Well, its not exactly a hotel by an apartment or what they call min su in chinese. The location was near to the MRT line so it was not bad at all.

The break down of cost for my whole trip:

Airfare: $212/pax
Hotel: $156/pax
Transport within Taiwan: $202/pax
Meals: $62/pax
Buying stuff and miscellaneous: $73/pax

Total: $705/pax

For my meals, i'm surprise to have only spent $62 for the whole of 8 days. I had 2 days of breakfast and dinner provided by the hotel in Cingjing farm somewhere in central of Taiwan. I had another 2 days where breakfast was provided by the hotel in Hualien and Taipei. Maybe that's why i didn't spend much on meals. But i do know that every meal was good and i was very very full.

Transportation wise, i took trains and buses with occasional taxi rides because we were too tired to walk.

Places covered in Taiwan for 8 days:

Taipei (Ximending, wufenpu, shilin night market, rao he night market)
Taichung
Cingjing Farm
Hualien and Taroko Gorge
Yehliu
Jiufen
Jingguashi
Keelung
Beitou hotspring area
Wulai hotspring area
Danshui


This is my itinerary for the 8 days:

Day 1
Arrived at taipei at 6am. Proceed to hotel and spend one day in taipei. Went to wu lai hotsprings area and also bought the necessary train tickets for the next day to Cing Jing. Spend the night in taipei at Chen Tai minsu.

Wu Lai Hotspring 

Wu Lai Hotspring 

Day 2
Travel to cing jing farm. Took a train to taichung then a bus from taichung straight to cing jing farm. Tour the grassland at cing jing farm before proceeding to hotel to check in. Stay the night at cing jing farm at Winlu vacation farm.

See how comfortable the train seats are. This is the newest additional to the express trains in Taiwan. It's called Puyuma 

Qing Qing Grassland where the sheeps roam around freely

It was really foggy and raining on that day

Day 3
Continue tour at cing jing farm. Can tour the small swiss garden or just enjoy the scenery at the mountains. I was stuck at the mountains due to the typhoon. Stayed another night at cing jing farm at the same resort.

This was the view taken just outside Win Lu Vacation farm

Day 4
Hired a private taxi to pick us up from cing jing farm to Hualien. Tour package includes famous spots like hehuanshan and also taroko gorge. Lucky still could tour these places right after the typhoon pass. The water streams at Taroko Gorge were quite scary due to the rain but road conditions were still good though. After tour, proceed to hua lien to check into hotel around 6pm. Same taxi took us to night market in hualien and back to hotel again for the night. Stay the night in hualien at lien jian hostel.

Taroko Gorge

Qi Mu Bridge

Yan Zi Kou

Day 5
Had a half day tour of hualien with the same private taxi and toured various places including the famous qixintan beach area. Went to local famous mo chi place to buy some mo chi and pineapple tarts. After that, took a train back to taipei at 3pm. Upon arrival at taipei, went back to same minsu to put our stuff before heading to shi lin night market. Spend the night at chen tai minsu.

Yun San Shui, which literally means cloud, mountain and water. This was a private residential area bought by a very rich person

Yun San Shui

Qi Xing Tan, a beach at Hualien

Qi Xing Tan, a beach at Hualien

Day 6
Travel to yeh liu geo park by bus. Took a bus at taipei main bus station. After that, went to kee long for lunch before heading to jing gua shi and jiu fen. From jiu fen, took a taxi straight back to taipei minsu. Rest for awhile before heading to wu fen pu and rao he night market. Spend the night at chen tai minsu.

Famous Queen Head at Yeh Liu Geopark

Unique rock formations at Yeh Liu Geopark

Jing gua shi, a gold mine area near Jiu Fen

View of Jiu Fen

Rao He Night Market

Apparently, we met this young band called Beyond 5 at the night market. They were trying to eat smelly Tou Fu

Day 7
Transfer to another hotel near ximending. Hotel name is chair man hotel.  Went to ximending for shopping before going to the beitou hotspring around 3pm. After hotspring,  went to dan shui area for the old street and night market. Didn't manage to visit fishermen wharf area near dan shui. Stayed the night at taipei chair man hotel.

Ximending, a shopping district in Taipei. Similiar to Bugis or Orchard road in Singapore

Entrance to Ximending

The famous Ah Zhong Mian Xian at Ximending

Night view of Danshui

Night market in Danshui

Day 8
Had breakfast at hotel. After breakfast, went to ximending again for shopping before going back to hotel and check out. Proceed to airport for flight back to Singapore at 4pm.

These are the hotels that i stayed in:


Chen tai minsu : http://taipeichenhouse.blogspot.sg/2011/06/blog-post_4606.html
This is a cheap minsu. Place is quite small and no lifts inside. If your room is on level 4 you'll have to climb the stairs which is quite cramp. Room is quite small also with bathroom inside. It'll be a good place if you're on a budget. Location is good as its quite near the MRT station and one stop away from taipei main station. Many eateries around the area and minsu lady is very friendly. If its your first time staying there, do let them know so they can meet you on that day. No service reception in the minsu itself. Do note you'll have to book the minsu in chinese communicated by email.

Chair Man hotel
This hotel i booked in www.agoda.com. Got a family room for 4 person at S$90 plus. This is a simple hotel with breakfast included. Room is not bad considering the price and the location. Only 5 mins walk to ximending and taipei main station.

Lien Jan Hostel
This is the hotel i booked in hua lien through www.agoda.com also. Got 2 double room for S$80 plus. This is sort of a backpacker's hostel. There are lifts in it and room is quite comfy. I'm not sure about the location because i booked a private taxi throughout so location doesn't really matter to me.

Winlu vacation farm :http://www.winlu.com.tw/
This is the place i stayed in cing jing farm. Room is very spacious and environment is very nice like a resort. The owner of the place is very nice and they will pick you up anywhere at cing jing farm area to the resort. The location is quite secluded and is not accessible by public transport. Just make arrangements with the owner to travel around. Really breathtaking sceneries at the farm itself. Kids will love the qing qing grassland with sheeps roaming around freely.


It was an enjoyable holiday. A good time for me to relax. Now back to work and my part time studies :)

Travelling can be done in a budgeted way. If you'll like to know more information on transportation, hotels and other stuff on Taiwan, you can send me an email at sgyounginvestment@gmail.com. I'll be willing to share the information with you. 

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Other travel escapades:
1. 8 days Hanoi, Halong bay Sapa trip for $600