Your Questions About Forex Capital Markets

Nancy asks…

why do brokers not like their clients winning.?

ok this is regarding the forex market.ive read a lot about how forex brokers dont like theyre clients winning so much from proffesional investors..but they never say why.a person who keeps on winning will likely build their capital and probably trade at a greater volume. this greater volume will give the brokers a bigger cut of money due to the bid/ask spread……so why dont they like this then.does it cost them a lot to procces the transaction or something…any opinions would be appreciated

kenspong answers:

A broker in the strictest sense is someone who arranges transactions between a buyer and a seller and gets a commission when the deal is executed. The more you are trading, the more you are paying. So they don’t really care whether you are winning or not, just so long as you are constantly placing trades. However, unless you have superior trading abilities, the more you trade the more money your going to loose, thus you will tend to loose as brokers win.

However I believe you may be referring to spread betting??? Such companies are not market makers, they agree to be on the opposite side of your bet. If your making money, they are paying out and visa versa.

Dealer market makers do hold assets in-between trades. The spread you pay is to take into account the volatility of the asset. It is to account for the risk that the asset price may go against the market maker during the period in which they hold the asset. So i guess the market maker would hope for you to sell them the asset immediately before a market rise and subsequently buy the asset from them immediately before a market fall.

Joseph asks…

I am very decent trading in Forex. How can I make money without any of my own?

I have done research in it for maybe a little over two years now.I have traded several demo accounts and have always done very well, in my last account, 50k went to about 75k in a week of intense research, focus, and trading. Every trade resulted in profits, there were I think over 20 trades, some going on together with others, some 5 days, others 1 hour, etc.

I want to make big money trading real money, but I don’t have any money to invest with because I am a broke student. I am wondering how I can still make money in the market because I believe I have the ability to do so, without having the start up capital myself.

Thanks in advance for any helpful advice.

kenspong answers:

Find a partner who has money and convince them you got the stuff.

Me: I’m pretty skeptical myself.

Maybe you’re just lucky. Maybe you makin’ it up. Maybe you’re a genius.

Michael asks…

Investing as a sole proprietorship vs individual for tax purposes?

If I wanted to set up a sole proprietorship company for my day-trading/investing in the stock market/forex

Can I write off all of the stuff I would need (a % of utilities, courses, new computer to trade with, etc) as business expenses and claim the investment revenue as Capital Gains so that 50% of it is automatically tax free right off the top, or would I have to declare it as business revenue and pay based on the full amount?

If I can’t offset expenses as a company but claim the earnings as capital gains then it probably isn’t worth it, right?

kenspong answers:

Whether your day trading/investing as “sole proprietorship vs individual” is the same for tax purposes, i.e., reporting the transactions on your personal tax return (T1 return), rather than in a corporation tax return (T2 return).

If you are serious in your day trading business (proven stock knowlege, # of trading transactions daily and time involved), and if your trading has a reasonable expectation of profit (making money), you may deduct a reasonable share of expenses mentioned by you. However, that means you have to report the gain 100%, not 50%.

On the other hand, if the CRA considers that your day trading has no reasonable expectation of profit, it may deny all your “business” expenses.

Capital gains are generallly for stock investments with a buy and hold strategy, rather than for day traders who flips their stocks daily or within a short time (known as “adventure in the nature of trade” in taxation). Under the capital gain scenario, you may deduct your interest or margin charges for the stock purchases.

Robert asks…

how should I invest, or what business should I run as a finance/accounting student?

I have a bit of capital I can invest towards starting a home based business or investing (about $2500), and I would like to get some ideas on how I can make some money online, through home business, or personal investments. I have a very analytical mind, and I would like to put it to use.

I have a weakness in advertising/marketing, but I am very good with budgets, margins, and things to do with numbers. Should I invest the money in the stock market or forex? If so, what kind of return would be “reasonable” for a novice? What other business/money making ideas do you have??

kenspong answers:

My advice would be for you to look over this website, it is full of invaluable information that would pertain to your question.

Ruth asks…

1 Million $ in 10 years ?

Is it possible to accumulate liquid funds of 1 million $ over a timeframe of 10 years ?
If yes, which of the following ways would be the best way to achieve this: (initial capital 10,000$)
1. creating a business
2. Investing in the stock market
3. trading commodities
4. trading forex
5. real estate
6. start an online retailing business
7. create an online affiliate website
8. buying and selling on ebay
9. Something else ?
winning the lottery is not an option !.
Happy New Year. Is your new year’s resolution also to steer towards financial freedom ?. Start now ! Ponder my question.

kenspong answers:

You would need an average return of about 47 percent per year to achieve your goal. It is possible but not easy. What can work includes items 1, 2, 3, 4, and 5. With all of them you would have to take a lot of risk. You may just hit a lucky stock or a series of great commodity trades, or find a piece of real estate that increases many fold because of some development nearby that drastically changes its value. Your probability of reaching your goal is relatively low, but that does not mean you shouldn’t try.

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