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Stock brokers - Your way to Forex Trading

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This article is published in collaboration with Scutify, where you can find real-time markets and stock commentary from Robert Marcin, Cody Willard and others. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

Finance, which can also be defined as the science of money management, describes the creation and study of money, assets and liabilities, banking, credit, investments which make up financial systems. The three kind of finance sub categories include:

  • Public finance:

It is the study of the role of the government in the economy, whose main objective is to regulate the important sectors of the country like foreign trade, agriculture, transport and trade. It also facilitates the economic activities of the private sector and the government.

  • Corporate finance:

It involves the managing of assets, revenues, debts and liabilities of the businesses.

  • Personal finance:

Planning of personal finance generally involves analyzing of current financial position of an individual, short term and long term needs and execute a plan in order to fulfill the needs.

Some of the most important personal finance aspects include:

Calculating and filing of taxes

Planning for retirement

Buying of insurance in order to protect from risks

Accessing one's current financial position

Investments and savings

Scope of the financial management:

The effective and efficient management of money, in order to accomplish the objectives of the firm is called as the financial management. It includes the planning and controlling of the firm's financial resources like how to raise and allocate the capital. Financial management not only defined to long term budgeting such as capital budgeting but also the allocation of current liabilities which are of short term. It includes the study of:

  • Real assets which are again divided into tangible and intangible. Tangible assets are those which can be seen and touch like cash, land and buildings, vehicles, furniture. Intangible assets are those which cannot be seen and touch like copy rights, patent rights and goodwill. Another asset whichinvolves the management of securities such as shares, bonds and debentures is a financial asset.

  • Equity and borrowed funds, where equity is considered as shareholders' funds such as share capital, profits, retained earnings. Borrowed funds are outside fundsdebt such as mortgages, bank loans.

  • Financial decisions:

Following are the types of financial decisions:

  1. Investment decision:

Spending of capital on the assets that yields higher return in a specific period of time for the company is investment decision. As the future is uncertain there may be changes or difficulties in the calculation of expected return. The decision of utilizing the funds by selling the assets is also part of investment decision.

Investment decisions can be classified into two groups:

Long term investment decision also referred to as the capital budgeting is the process of making investment decisions related to capital expenditure such as land and buildings, furniture, vehicles.

Short term investment decision relates to the allocation of funds.

  1. Financial decision:

As the firms regularly make new investments, it is very important to make wise decisions like how, where and when should a business acquire funds.

  1. Dividend decision:

Dividend is referred to the part of company's profits; it is distributed among the shareholders. By maximizing the wealth of the shareholders, the higher rate of dividend may raise the shares market price.

  1. Liquidity decision:

Finance manager maintain the liquidity of assets in order to meet day today transactions.

Other functions include marketing which is related to advertising, production, and human resources like selection, training and recruitment.

Financial markets:

A financial market is a place where trading of commodities and financial securities take place. It is divided into capital and money markets.

  • Capital market which is a long term market is an organized mechanism of money capital.It is again divided into:

  1. New issues market or initial public offering is a primary market

  2. Secondary market, where company issue shares through stock exchanges.

  3. Financial institutions, which provide medium and long term loans for big businesses in easy installments.

  • Money markets which are of short term include:

  1. Treasury bills

  2. Mutual funds

  3. Commercial paper

Stock exchanges:

A place where trading (buying and selling) of securities takes place with certain rules and regulations is a stock exchange.

  • Speculators in stock exchange:

A person who trades commodities, bonds, currencies, derivatives with a higher risk in return, in the hope of making quick and large gains and is not interested to hold securities for longer period is a speculator. The four types of speculators are:

Bull, an optimistic speculator who expects rise in price of securities in future, purchase the shares with the intention to sell them at a profit in future.

Bear, a pessimistic speculator who expects fall in price of securities, sell them at present with a view to purchase them at lower prices.

Stag, a cautious speculator who apply for shares in new companies expecting to sell them at premium if he gets an allotment.

Lame duck, when a bear finds it difficult to fulfill his commitment, he is said to be struggling like lame duck.

Trading:

Exchange of goods or service for money or an equivalent good or service is trading. When comes to finance a trade is an exchange of securities like commodities, derivatives, stocks, bonds for cash which is typically a short dated promise.

Forex trading:

Also called as foreign exchange is the trading of currencies. It works through financial institutions, and some of the participants in this market are:

Banks

Companies

Individuals

Hedge funds

Retail forex traders

Investors

Licensed broker:

A person or a company who acts as an intermediary between buyers and sellers is called as a broker. There exist many types of brokers in the financial world such as full service licencÄ"ts brokeris, commodities broker and a floor broker. Stock brokers are licensed professionalsusually associated with the brokerage firm, not only buy and sell stocks but also deal with other securities. They work for both retail and institutional clientsthrough stock exchanges. They are expected to be fluent in options, bonds and stocks. Some of the benefits of the stock licencÄ"ts brokeris are:

As they are trained, they can offer an advice, on how to manage, grow and maintain the money.

Execute trades for a customer or client

Record keeping as one of the biggest benefit,will save the records of monthly statements, deposits, trade confirmations,withdrawals.

Being an experienced professional, he can provide the deep insight of the advantages, disadvantages and risks.However, investors should also consider the higher commissions of the brokers while entering into the market. Therefore, brokers who play a pivotal role, arethe most important people who bring buyers and sellers together to create liquidity and efficiency in the market.


This article was written by Adam Monson for on .

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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