#205 Bola Abdul – Investing Education

Investing Education with Bola Abdul Bola Abdul has plenty to say about investing education, financial education and advice, and foreign exchange. In a nutshell, Bola is a self-starter and has learnt a lot about the financial market and the foreign exchange market. Investing education: starting as a young 'un Bola started learning about the finance and foreign exchange market when he was 18 - 8 years ago. He's still a kid! How did he get into it? http://thenext100days.org/wp-content/uploads/2019/12/How-much-money-do-you-need.mp4 Surprisingly, it's quite a low entry point to get into this market. Bolo says it's because the brokers introduced LEVERAGE. That enables you to trade on a higher volume, relative to your count size. The low end is 1 to 30. For example, you might have a $10 million account and you're trading 1:30. If you wanted to buy pounds versus the US dollars, and have a stake of £10, for every single point that the market goes up or down you would either gain or lose £10. How it works is, with a 1:30 leverage, you're capped as to the stake size that you can do. Now, this is a bit tricky to understand so here's another example. If you opened an account NOW, with a 1 to 30 leverage, there is a maximum you can stake. Let's say you cannot stake anything above £10. Contrastingly, if you opened up an $10 million account with a leverage of 1 to 400 a point, you would be able to do a significantly higher stake size. Points and pips Pip - this is a term used in the foreign exchange market. "It moves in pips". This is an abbreviation for Price Increment Point. Now, we're talking about the pound-dollar exchange rate. It's quoted in 4 decimal places. For example, let's say it was quoted at 1.3001 - if it changed to 1.3002 it would have moved one point. If it moved to 1.3003, that's two points. However, the brokers have their spreads - how the brokers make their money I based on the spread they give people like Bola (retail traders). E.g. Let's say you are earning £10 a point and the spread is 2 pips. Instantaneously, the broker makes £20 pocketed, regardless if that trade is a winning or losing trade. If it was £100 a point, and the spread was two pips, the broker would make £200. http://thenext100days.org/wp-content/uploads/2019/12/Pips-and-Points-explained.mp4 Ultimately, the trick is to figure out that, regardless of what you're paying a broker, you're betting that the outcome of the trade will appreciate considerably because of some event. Is this trade about events then? Bola says you must think about what the demand for currency is today. Because the market works by supply and demand. If we were on an island with US dollars and pound sterling, and there was a high demand for USD, you would have to give away sterling to acquire the USD. There are sporadic events - for example, Nov. 2016 where Trump was inaugurated - that can make an impact. You've always got to think about what the market participants expect. If the market participants expected the USD to go up in value, that will make a difference to the foreign exchange rate. So, to answer the question, yes the market can be impacted by big events in society...most likely political. However, these are SPORADIC. What the market is based on, and what is most important and influential, is supply and demand. There are many ways in which market participants base their trade ideas: Supply and demand Technical analysis Sporadic events (thinking political shifts in power). More on technical analysis Within the market, there is also something called support and resistance, which fits in with demand and supply. Essentially, supply sits within the support zone and demand sits within the resistance zone. Where supple = demand, is what is called equilibrium. Equilibrium is where market participants like the put their orders in - it's where a fair value is placed. How technical analysis works is price gravitates ...