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The Role Of Foreign Exchange In The Economy

How you can benefit from Forex exchange begins with understanding the following.

Jeff Broth

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Forex-exchange

We began the year 2016 with commodity prices going south and stock markets fluctuating randomly; leaving investors with little room to navigate through the murky financial markets waters.

The cooling off of demand in Europe and China served only to worsen the already bad situation, hence dampening the hopes of having a quicker recovery in the markets. However, as the economy faced challenging moments that it is trying to get out of in the second quarter of 2016, traders in the forex markets continued to make money all through.

This market presents a good option to invest your money in even when the global economy is on a gloomy mood.

To get into this exciting financial markets segment and start making money there, you will however need some basic forex education to help you understand how the market works.

Related: Enko Education Investments Matches Money With Passion

The forex market is the largest market segment in the financial world with approximately a daily turnover of about 5 trillion dollars. With millions of traders located in different time zones, the market is usually open on a 24 hour basis hence enabling traders to make money round the clock.

The beauty of forex trading is that it is not regulated by a central body such as we have the Financial Services Board in South Africa that regulates capital markets and the central bank that regulates the commercial banks and their activities.

In the forex markets, there are unwritten protocols that are followed by all the market players and the whole market is considered to be self-regulating.

Forex markets are not just there by chance by they are there to play a very critical role in facilitating international trade. The term forex by itself it is a short form for “Foreign Exchange”, which simply is the exchange of a local currency for a foreign currency or vice versa.

There are a myriad of reasons why one would like to exchange their local currency for a foreign currency but the major reason is to make international payments.

Multinationals operating in different countries across the world have to buy raw materials and other inputs for their subsidiaries in the foreign countries. In addition, they have to pay their utility bills for their subsidiary offices and pay their employees too.

All the above payments have to be made in the local currency in the country where the subsidiary is located. If the parent country is located in South Africa and the subsidiary is located in the United States of America, then the parent company will need to convert the South African Rand into US dollars for the payments to be made in the US.

Related: Understanding Total Return of Investment

This creates a demand for US dollars which the forex traders will provide to the South African parent company at a given exchange rate. The company will then use the dollars to make payments in the US subsidiary.

In other cases, you may want to travel as an individual to another country either for business or for tourism. If for example you are travelling to Kenya to go and enjoy a Safari Tour in the wilderness of Maasai Mara, you will need Kenyan shillings for all your transactions while you are there.

This again creates the need for an exchange of the local currency with the Kenyan shillings and hence a forex trader is involved in the exchange process.

Governments too borrow from oversees in foreign currencies and they need the foreign currencies for repaying both the interest and principle amounts of the loan when they fall due.

This again creates a demand for the foreign currencies and the exchange happens through the forex markets. When governments and institutions are involved in import and export businesses, again the currency of payment is usually the local currency of the exporter and therefor the importing party has to exchange its own local currency to the currency of the importing country in order to make the payment.

Foreign-trade-advice

With millions of such transactions described above happening every day, the forex market has undoubtedly to be the largest among all financial market segments.

The trades are usually connected by computer systems and they do all the transactions online. For an individual investor, you get into the market as a speculator who aims to gain from the currency fluctuations.

The exchange rate of a given currency is always determined by the forces of demand and supply. For example, if more dollars are being demanded to make international payments and for imports, the value of the dollar goes up against the South African rand; and when the local currency is being demanded more, then the South African rand appreciates in value against the dollar.

Related: What Are Tax-Free Investments?

As a speculator you get to the market to capitalise on these changes in prices and make a gain. Your involvement is however through an online forex broker who provides the platform on which you trade and you pay them a commission for the services.

Speculators exist in the market to create liquidity but they are not the fundamental reason why the forex market exists. The basic foundation of forex markets is to facilitate international payments and cross-border movement of individuals.

Jeff Broth, a business writer and advisor. Consulted for SMB owners and entrepreneurs for 7 years now. Mainly covering finance, stocks and emerging fintech trends.

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1 Comment

1 Comment

  1. Fred Johnson

    Jun 20, 2016 at 19:22

    Interesting but what are the charges/fees these traders and banks make? If it’s a digital process then surely they should be small?

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(Infographic) The 10 Things You Should Cover In Every Investment Pitch

If you want to wow potential investors, you need to cover your bases.

Matthew McCreary

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If you’ve ever watched Entrepreneur’s original series, Elevator Pitch, then you’ve probably seen smart founders make dumb mistakes while pitching their ideas to potential investors. They might flub an answer or get tongue-tied, or they might just be a little boring. Other times, you might notice that something seemed off about a pitch, but you can’t quite put your finger on why.

Investors are gambling every time they put money into a new project or idea. Your job when pitching is to prove to them that you’re worth the risk. That means you’ll need to not only show them the possible upside of what they have to gain, but also be clear about what they could possibly expect to lose and their odds. In other words, you need to give them a holistic view of what you do, not just the one good idea.

You might have pitched an investor yourself and thought you crushed it, only to hear that the investor isn’t interested. If that’s the case, there’s a chance the pitch was missing one of 10 essential elements.

This infographic by Buffalo 7 breaks down 10 slides you should have in your next investment pitch deck. If you’re not presenting formally, though, you can still keep track of these aspects in your head and make sure you cover each one. They include:

  1. The vision, where you concisely explain your idea.
  2. The problem. Why is your vision necessary or helpful?
  3. The opportunity. What is the market size, and how can you position yourself to earn a share of it?

Related: How To Pitch Your Business, Product Or Idea To Industry Experts

This is just the start, though. Check out the infographic below to see the rest of the slides you need when pitching investors.

1541174287_investment-pitch-infographic

This article was originally posted here on Entrepreneur.com.

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‘Shark Tank’ Investors Reveal Top 5 Tips To Make Your Business Famous

Is your business worthy of fame? If so, pay attention to what the Sharks have to say …

Eric 'ERock' Christopher

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Shark Tank

Shark Tank enters its tenth season as popular as ever. Over the past decade, millions of people have watched fascinated as entrepreneurs pitched their business ideas and startups in the hopes of winning an investment and support from self-made millionaires and billionaires.

The multi-Emmy® Award-winning reality-based show has had a tremendous impact on the business world and has been a major influence on the increased popularity of becoming an entrepreneur. Over the years, the show has evolved into one of the world’s top platforms to launch a business and recently reached an astonishing $100 million in deals offered in the Tank.

I was recently invited to attend a private event hosted on the set of Shark Tank to celebrate their 10th season and met with all the Sharks and most of the guest Sharks for the current season. This year’s guest list includes luminaries:

  • Charles Barkley, Hall of Fame NBA star and TV analyst
  • Alex Rodriguez, legendary baseball player and businessman
  • Rohan Oza, an iconic brand builder and marketing expert
  • Sara Blakely, founder and owner of SPANX brand
  • Matt Higgins, the co-founder and CEO of RSE Ventures and vice chairman of the Miami Dolphins
  • Bethenny Frankel, TV celebrity, author, and founder of Skinnygirl brand
  • Jamie Siminoff, the CEO of RING, who rejected an investment offer in season 5, but went on to sell his company to Amazon for a whopping $1 billion.

My better half was also invited, and we arrived promptly on time at Studio 24 inside of Sony Pictures Studios in Culver City, CA. We were greeted by the cordial staff who informed us that the Sharks were still filming the last takes of the day. After several minutes, we were invited to chat with the Sharks on the main floor where nervous entrepreneurs excitedly pitch their companies to the investors under the bright lights of the studio set.

I was curious to know what excited the Sharks the most about their tenth season and what they believed to be the best advice for an entrepreneur to help make their business famous.

1. Create an ingenious product

When asked, Lori Greiner said, “It’s a mix, right? Of smart marketing and ingenious product. For example, Scrub Daddy was a technology. So, taking that one sponge, which was revolutionary, changed the whole sponge arena. We now have, to date, 20 different SKUs, and we have 30,000 new retail locations and 170 million in sales. That’s what takes it from one idea to a global brand.”

Of course, skillfully promoting your product on a platform like QVC is another excellent way to make your business famous. The day after the Scrub Daddy episode aired, Greiner helped CEO Aaron Krause sell their entire inventory of 42,000 sponges in less than seven minutes on QVC.

Related: 6 Great Tips For A Successful Shark Tank Pitch

2. Leverage social media marketing

barbara-corcoran

During my chat with Bethenny Frankel, she stressed, “Social networking is so important. Also being a little bit disruptive now … and you have to be creative. You have to be creative. The President was the most disruptive candidate that there’s probably ever been in history. He got people’s attention, and young entrepreneurs need to get people’s attention in some way. So be a little disruptive.”

Matt Higgins responded, “I’d say that you have to understand social and digital marketing. You can’t survive unless you understand Instagram, Snapchat or all the tools out there. You have to be contemporary.”

Barbara Corcoran claimed, “Every one of us successful entrepreneurs, for the last two years, were phenomenal at social media. It’s true. No exceptions.”

No smart entrepreneur will deny the power of social media when it comes to making your company famous. With more than 2 billion people worldwide using some form of social media, any business can put their business in front of a large audience, especially if they can create content that goes viral.

3. Build a community

Daymond John stressed the value of building a community. “You’ve got to build a community,” stated John. “Nobody needs to buy anything new in this world. They only buy it because there’s some form of community and/or need that you are supplying for them.”

John speaks from experience. He built a successful clothing empire by creating a vast community of his own via his clothing brand FUBU. John wisely invested in celebrity endorsements, making him an early pioneer of modern influencer marketing.

If you lack the resources to build your own community from scratch, you can leverage the power of others. Partnering with influencers who have cultivated their own communities allows you to introduce your product or service to larger audiences. In fact, some consider Shark Tank to be the world’s largest business influencer platform.

4. Devise a publicity hook to win earned media coverage

Barbara Corcoran also said, “I’d say you need a publicity hook. Some hook, angle or gimmick that grabs the attention unfairly from your competitors.”

Remember, Shark Tank is a unique combination of reality television, business acumen, and entertainment. Doing something unique, different, or disruptive can get you significant media attention and abundant free publicity… especially if you’re able to leverage that publicity and captivate the show’s producers, who decide your fate as to whether you’ll appear on the show.

Regardless if you want to appear on Shark Tank or not, being featured in the media is a way to differentiate your business from the competition and reach a broader audience. Be creative and willing to take educated risks when it comes to getting noticed by the media. You should always be actively building relationships with media representatives and ask for their insights when formulating your plan.

Related: Shark Tank Funded Start-up Native Decor’s Founder on Investment, Mentorship And Dreaming Big

5. Know your strengths and stay focused

When I asked for billionaire Mark Cuban’s insights, he thoughtfully replied, “Knowing your unique advantages, play to that, and your strengths. And focus. You know, what happens is very often people start with an idea, get a little bit of traction, then it gets hard. And when it gets hard, they start looking for other things to do as opposed to playing to their strengths. Because businesses aren’t supposed to be easy. You know, if they were easy everybody would already be rich, and we’d all be sitting on a beach somewhere. And so, when it gets tough, you gotta dig in and work hard. I’d say the final thing I’d add is that sales cures all. There’s never been a business that succeeded without sales. So, if you focus on selling … if you’re able to sell … and that’s something that is one of your core competencies, then you’ll be okay.”

These are wise words from one of the world’s few billionaires.

This article was originally posted here on Entrepreneur.com.

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The Best Way To Get Your Teenager To Start Investing Right Now

Jeff Rose advises a young fan on where to start his investment journey.

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In this video, Entrepreneur Network partner Jeff Rose talks about receiving a letter from a young investor, who is looking for advice on how to begin investing.

Rose talks about the act of actually doing the investing versus worrying about reading books or asking others about the process. Taking action gets the most results, since you are able to make mistakes and start the learning process. Taking action also leads to more experience, which is to say if you begin investing as a teen, you will be much more savvy about investing as a twenty-something.

In answering this young investor’s concern about investment direction – the fan hopes to balance short-term gain and long-term gain, as well as to establish some padding for a future business – Rose turns him in one specific direction: A Roth IRA. When he was younger, Rose didn’t even know what a stock was until far into his college years; during this time, he discovered the Roth IRA and learned of its compounding power, as well as the accessibility of an initial investment.

As another route, Rose also mentions starting a business. This path, Rose explains, will help you achieve the most return on investment.

Related: Making International Investing Simple And Transparent – CybiWealth Digital Platform

Click on the video to hear more tips for a younger investor.

This article was originally posted here on Entrepreneur.com.

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