How do I know where to place my stop loss on a forex trade?
Question: How do I know where to place my stop loss on a forex trade? Answer: Kathy Lien, Director of Currency Research, GFT I am so glad you are asking this question, because the number one rule of trading is “always use a stop.” This is particularly true when trading forex, because trends can last…
What is the loan to value ratio of a share?
Question: What is the loan to value ratio of a share, and how does this change as the share price changes? Response: A loan to value ratio or Lending Value Ratio (LVR) is a percentage measurement of the amount that can be borrowed against a share or a managed fund, using a margin loan. For…
How to make extra income on your shares
Question: They tell me that I can earn extra income from dividends when buying warrants rather than shares, how does this work? Answer: Instalment warrants gives holders the ability to gain exposure to price movements in underlying shares by making an initial payment and an optional second payment on expiry. There are a number of…
Why is return on equity such an important measure for a company?
Why is return on equity such an important measure for a company? How does a good ROE help prove that the company is performing well? Response: One of the most important profitability metrics is Return on Equity, or ROE for short. ROE reveals how much profit a company earned in comparison to the total amount…
What happens to a CFD short position during a capital rising like a rights issue or placement?
We will use a hypothetical example to illustrate. Ronnie undertook research on the Australian market and following his research he took a negative view of XYZ Department Stores Ltd. He believed the future for XYZ was quite bleak because their buildings were run down, staff were currently striking due to a pay dispute, and to…
What happens when a warrant is out-of-the-money, or in-the-money?
What happens when a warrant is out-of-the-money, or in-the-money? Can you give me an example of both please. Response Warrants are financial instruments that derive their value from another underlying instrument and are issued by banks, governments and other institutions. They are commonly and broadly split into two categories; investment style warrants, which are longer…
How do I select the size of each trade?
Hello Experts – should I always trade the same size or different sized amounts, and should the size of the trade depend on the risk? Can you give me ideas of how other traders deal with this. Your help is appreciated. Clive Dear Clive and readers, Your question touches on a concept that is one…
What happens if the stock that I have margin lent against falls off the approved list?
Brokers from time-to-time may reduce or remove the Loan to Value Ratio (LVR) on particular stocks. If this does occur to you and your Loan to Security Ratio (LSR) increases to a level higher than your margin call LSR, then a margin call will trigger and you will required to reduce your gearing level by…
What happens if your CFD stock gets suspended from trading or worse, goes under?
What happens to your CFD trade if the stock that you’ve gone long or short gets suspended from trading or worse, goes under? In the Australian Securities Exchange (ASX), listed companies can either voluntarily or be ordered by the exchange, to have their securities placed in to a status where trading is restricted. This status…
What is the ideal mix of companies?
There is no such thing as a universally ideal share investment, because all investors are different. In particular, different investors have different attitudes to risk, liquidity and investment horizons. Brokers often try to help their clients choose stocks by producing lists of companies classified in various ways – for example, growth companies and value companies….
