5 Practical Tips for Lifelong Financial Sustainability

Sustainability is usually a term about environmental issues. Lately it’s become more of a personal finance term as well. That’s because financial decisions need to be sustained over the long term. To sustain you and your family over time, Financial Sustainability means planning and flexibility. Having Plans B, C and D is a necessity.

Here are a few tips for those who want to see their money stay around as long as they do.

Save Before You Invest

It’s a good idea to secure at least nine months of living expenses saved before even thinking about investing. As you plan your savings strategy, make sure you contribute enough to your retirement funds, particularly if your employer still offers a 401(k) match. Once you have your emergency fund, keep on saving. A good goal is to put aside at least 10 percent of your earnings each month (or as you can afford it). By retirement, you’ll have a nice chunk of money to nest in.

Keep Credit History Good

Being a habitual bill payer signals to banks and issuers that you are a risk worth taking. Paying credit cards or mortgages late will lead to negative consequences that damage your credit score and overall credit health. Banks and issuers consider payment history when evaluating your credit risk. A long-standing history of on-time payments suggests you are responsible and reliable borrower; a poor history suggests you many not repay debts and could result in a costly loss. Remember that a credit report is like an adult report card.

Spend for Retirement

A simple trick for saving: spend less than you earn. That might not be easy if you are already having trouble keeping up with bills. A spending plan would take care of that. Some people call this a budget, but since we’re referring to retirement as something to buy, a spending plan is more appropriate. Think of a budget not as a means to the end of buying a 60-inch television but a budget that will sustain over decades that will put you out ahead financially once you’re deep into retirement.

Savings Plans Are Still Good If You Can Get Them

If your company still offers a traditional retirement plan like a 401 (k) plan, it’s a good idea to put in your money up to the point where the company stops matching your contribution. Even if the funds within the 401 (k) don’t make great gains some years, at least you know you have the company match that doubled your contribution. A fairly high interest rate will come out of that. You might not have doubled your money by the time you are allowed to take it out, but it’s going to be a lot higher than what you could make on any other investment.

Make the Most of Income Sources Other than Savings

Choices of when to start taking Social Security can cut your retirement income by 25 percent or boost it by an additional 32 percent. Married couples can use strategies like claiming spousal benefits to increase income substantially. Factor in maintenance expense if your income comes in the form of rental properties. There’s a tremendous amount of benefit that some smart planning can do for you that will help over the long haul.

4 Tips for Making Your Forex Journal Actionable

Keeping track of your Forex trading – whether digitally or with pen and paper – is critical for your growth as a trader. And for many, the start of a new year is the perfect time to revisit the previous 12 months of trading. Looking back on your trades will help you determine what worked, what didn’t and what could use improvement.

Yet, it’s difficult to know what you should do with your personal data. What exactly should you be looking for? And how can you use your journal to improve your trading? Here are a few quick tips for using your yearly trading data to improve your strategy:

1. Look Over All Your Data Once

Start by examining the full year of data. Look for your milestones: Your biggest wins, your biggest losses, and missed opportunities. Also, be sure to calculate your profits, losses, and the bottom line. This will help you set a baseline for your trading and serve as the point that you want to improve upon in the coming year.

2. Develop Goals For Moving Forward

Once you’ve examined your trading data, you can begin to set goals for the upcoming year. This will ensure that the data you’re reviewing becomes actionable. So how exactly should you set goal? Look for common mistakes you made over the previous year. Did you miss out on profits because you entered trades too late? Focus on how you can adjust your strategy to enter trades earlier.

3. Be Sure to Include Positive Data

As you look over the previous year, the negatives will probably jump out at you. But there’s always more to the data. Be sure you are incorporating positive points into your analysis. You shouldn’t just focus on your mistakes, your biggest losses, or your missed opportunities. You must include the positives: Your most profitable trades, your clever trading strategies, the times you entered trades effectively, your winning trade streaks, etc. By balancing your losses and wins, you’ll be able to better focus down on the areas you need to improve.

4. Keep Better Records

Moving forward, you should make it a goal to keep more thorough trading records. Are you incorporating the fundamental and technical analysis that helped you determine a trade? Do you note the thinking that you used to enter a trade? If not, you should be. The more information you provide in your Forex journal, the easier it will be to improve. Why? Numbers alone only tell one side of the story. But incorporating the steps, analysis and thoughts that encouraged you to enter a trade will help you spot the holes in your thinking.

Forex Strategy: Calculating the Size of Your Trading Positions

Forex day traders must master a number of skills before they should begin trading real money. But calculating the size of a position is one of the most critical. Why? Success in Forex trading is all about managing risk, and properly sizing your trading positions will ensure you’re managing risk wisely.

To calculate your position size, you must know several key pieces of information. You must know:

Your Account Balance
Currency Pair You Wish to Trade
% of Balance You’re Willing to Risk
Where You Will Set Your Stop Loss
Currency Values

Once you’ve determined this information, you can begin to calculate how much currency you will buy.

Determine Your Risk

Your account balance is easy enough to figure out. But then, you must calculate the amount of that balance you’re willing to risk. Typically, the majority of traders tend to risk 1-3 percent on a single trade. It’s very rare for a trader to risk a greater percentage, as the losses can add up quickly and completely wipe out his or her trading account.

For example, if you had $10,000 USD in your trading account, you could risk between $100 to $300 USD per trade. If you were risking 10 percent of your account – or $1,000 USD – a string of 10 losses would wipe you out completely. With 1 percent risk, it would take 100 losses in a row to do the same.

Setting Stop Loss Amounts

There are many different ways to determine stop losses for specific trades. Some day traders use market swing analysis to set these points, while others use volatility indicators. But those are just a few examples; there are hundreds.

Yet, it’s critical you have a stop loss value set before calculating your trading position. For example, if you were trading EUR/USD, and the price was 1.1000 and you set your stop loss at 50 pips, you would stay in the trade until the value dropped to 1.0950. Once you’ve determined the stop loss in pips, you can calculate your position size.

Position Sizing

Calculating position size is fairly simple. Say you had an account balance of $10,000 and you were willing to risk 1 percent, or $100 USD, per trade. Additionally, you know that you will set your stop loss at 50 pips. You would calculate thusly by looking at the value per pip, and to find this you must note the size of the lot you will be trading.

There are standard (100,000 units), mini (10,000 units) and micro (1,000 units) lots. With standard lots in EUR/USD, one pip equals $10, and it’s $1 per pip in a mini lot. In the micro lot, it’s $.10 per pip.

Thusly, if your stop loss was 50 pips in a EUR/USD, that stop loss would equal $50 if you were trading a mini lot. Therefore, you could leverage your trade and buy 2 mini lots and still stay within your risk factor of 1 percent. Once you have the pip value – in this case, it would be $100 / 50 = $2 per pip – you narrow down the size of your trading position.

What Is Fibonacci Trading?

Many day traders use Fibonacci retracement lines to determine entries and exits into the markets, as well as stop loss and take profit targets. Fortunately, the strategy is fairly easy to understand, but first, you’ll want to learn about the numbers it is based on.

Essentially, the retracement lines are derived from the Fibonacci Sequence – which was discovered in the 13th Century by Italian mathematician Leonardo Fibonacci. The sequence is a series of numbers that occurs naturally in many different processes in the natural world. The first two numbers in the series are 0 and 1. Then, you can calculate the subsequent numbers by adding the last two numbers in the series together. Thusly, the sequence is:

0+0 = 0
0+1 = 1
1+1 = 1
1+2 = 3
2+3 = 5
3+5 = 8
5+8 = 13
And it continues on in this manner

Finding the Golden Ratio of Fibonacci Trading

Using these numbers, you can derive a series of ratios, which are very important in Fibonacci trading. You can find the “Golden Ratio” by dividing any number by the subsequent number in the series. For example, 13 divided by 21 is .619 and 21 divided by 34 is .617. In other words, the Golden Ratio is roughly 61.8 percent.

Additionally, two other ratios .382 and .236 are also used in Fibonacci Forex trading. These numbers are found by dividing two alternating numbers to find .382, like 144 and 377, and the .236 ratio is found by dividing a number by the third number to its right, like 5 and 21. So that’s the basic idea behind the Fibonacci Sequence.

But now, you’re probably wondering how the series and ratios are used in Forex trading.

Using Fibonacci Ratios in Forex Trading

To successfully use the Fibonacci retracement lines, you first need to do some technical analysis on recent charts. For example, if you use the 1-hour chart, take a look at it and see if you can find an uptrend or a downtrend. Once you’ve found a mature trend, you should draw a line at the top and bottom of the trend. This represents 0 and 100 percent. Then add in the Fibonacci retracement lines at 23.6 percent, 38.2 percent and 61.8 percent.

If it’s an uptrend, the lines will start from the top – with 23.6 percent nearest the top of the chart – and for a downtrend, the Fibonacci lines start near the bottom, with 23.6 nearest to the bottom.

These retracement lines serve as support and resistance levels. So, if the trend was at the top of the chart, in theory, it would dip towards the 23.6 percent resistance level. If it does not break this level, you know that it’s likely to jump back up, before retesting the 23.6 percent level. If the 23.6 percent line is broken, the next support level becomes 38.2. Thusly, the value of the currency pair would test the 38.2 level.

In other words, the retracement lines serve as reference points on the charts to help day traders determine entries, exits, stop loss and take profit targets.

3 Currencies That Declined Against the USD in 2015

The U.S. Dollar had a strong year in 2015. The U.S.’s improving economy and steady job growth, as well as the December interest rate hike by the Federal Reserve, helped the greenback gain in value.

The same wasn’t true for the world’s other major dollars: The Canadian, Australian, and New Zealand dollars. Thanks to sagging commodity prices, as well as the Chinese downturn, these currencies declined in value compared to the USD. In Canada, for instance, the Canadian central bank cut interest rates twice in 2015 in an attempt to boost crude exports. Yet, the effects of Canada’s strategies have yet to be seen, as the CAD hasn’t yet started to rally. In fact, the country’s currency dipped to 12-year lows compared to the USD, and some experts have speculated that the Loonie might continue its downward trend before reversing course.

Here’s a quick look at why the AUS, NZD and CAD all underperformed in 2015:

Loonie Reaches Decade-Plus Low: It was a rough year for the Canadian dollar. In September, the Loonie declined to its lowest valuation in 11 years compared to the U.S. Dollar, before declining to 12-year lows by the end of the year. Weak oil prices were a major driver of the year-long decline of about 20 percent compared to the greenback. As energy prices continue to hover around rock-bottom prices, the Canadian dollar won’t likely to start its rebound. Plus, even as oil prices start to tick up, which many are speculating with come in Q2 of 2016, it will be a slow uptrend for CAD.

Australian Dollar Declines on Export Prices: Like the Canadian dollar, the Aussie similarly dropped due to weakening export prices. But the Australian economy isn’t nearly as reliant on energy as Canada. In Australia, commodities like ore, gold and other metals, as well as wheat, are the primary exports, and throughout 2015, commodity prices cooled off. Additionally, Australia was also affected by the sluggish Chinese economic growth, as the two economies are closely tied. Due to these circumstances, the Aussie declined about 12 percent compared to the USD.

Dairy Prices Drag Down Kiwi: In New Zealand, diary accounts for roughly 30 percent of the country’s commodity exports. Throughout the year, dairy prices were sluggish and in decline, and as a result, the Kiwi took a hit against the U.S. dollar. In 2015, the Kiwi was down about 12 percent compared to the USD.