How to trade Foreign Currencies using Fibonacci Retracements and Fibonacci Profit Targets.

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A money market account (MMA) is a high interest savings account, which can be opened quickly and easily at almost any bank, like any regular savings account. MMA pays higher interest than a regular account, has higher minimum balance requirements, $1,000 to $2,500, and allows three to six withdrawals per month.  

The money deposited in a money market account is invested through the bank or credit union, which collects the return. The interest paid to the account beneficiary is left in the account, but the bank loans that money to other accounts by charging a slightly higher interest for the loan than the interest paid to the account beneficiary. Therefore, the bank makes money by selling money, but it offers the flexibility to the account beneficiary to get the money quickly and easily and without having to pay any sort of penalties. 

A certificate of deposit (CD) is issued by commercial banks and brokerage firms, with specified interest rate and maturity date. Maturity date may be from three months to five years and the funds may not be withdrawn on demand before the maturity date. At the end of the term, which is typically three months up to one year, the deposit is returned with interest.  

Certificates of deposit are relatively safe and account beneficiaries know the return they will receive before maturity date. CDs have higher returns than savings accounts and they protect the beneficiary from the fluctuations of the stock market. On the other hand, the returns are lower than other investments, including money market accounts and the money is tied up until maturity, without the option to get it out without paying a harsh penalty.  

Money market accounts provide greater liquidity than certificates of deposit since the beneficiary may withdraw the money at any time without penalty, but they tend to have lower interest rates than certificates of deposit. On the other hand, a certificate of deposit is purchased for quite long time. Investors know that penalties for early withdrawal are expensive depending on how much money is invested in the CD. Also, by withdrawing the money before maturity means that investors lose as much as 6 months of the interest that the investment has already earned. 

Conclusively, certificates of deposit offer an easy solution for risk-adverse investors, who want only to maintain their capital as they can calculate expected earnings on maturity. However, money market accounts are preferable. The reason is that brokerages firms automatically sweep the uninvested cash into money markets to earn interest between investments. This is ideal for the regular investors, who can use the funds immediately to purchase stocks, bonds, or mutual funds.

I work as a financial and investment advisor but my passion is writing, music and photography. Writing mostly about finance, business and music, being an amateur photographer and a professional dj, I am inspired from life.

Being a strong advocate of simplicity in life, I love my family, my partner and all the people that have stood by me with or without knowing. And I hope that someday, human nature will cease to be greedy and demanding realizing that the more we have the more we want and the more we satisfy our needs the more needs we create. And this is so needless after all.

Article Source:http://www.articlesbase.com/investing-articles/the-difference-between-money-market-accounts-and-certificates-of-deposit-854186.html

Trading with commodity futures requires specifying in detail the exact nature of the agreement between the buyer and the seller in order to make sure that the two parties will meet the contract. The largest exchanges on which futures contracts are traded are the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME). Commodity futures include pork, bellies, live cattle, sugar, wool, lumber, copper, aluminium, gold and tin. 

When developing a new commodity futures contract, the exchange must specify in detail the asset, the contract size, where delivery will be made and when delivery will be made. Sometimes alternatives are specified for the grade of the asset that will be delivered or for the delivery locations. As a general rule, the party with the short position (the seller of the commodity) will choose what will happen when alternatives are specified by the exchange. Particularly, for commodity assets, there may be quality variations of what is offered in the marketplace. Therefore, when the asset is specified it is essential that the exchange stipulates the acceptable grade or grades of the commodities. 

The contract size specifies the amount of the asset that has to be delivered under one contract. If the contract size is too large, investors with small exposure cannot hedge or speculate through the exchange. In the contract size is too small, investors engage in expensive trading as there is a cost associated with each contract traded. 

Delivery arrangements are also specified by the exchange. This is particularly important for commodities that involve high transportation costs, which affect the delivery place. Also, a futures contract is referred to by its delivery month. The exchange must specify the precise period during the month when delivery can be made. Typically, the majority of futures contracts are not delivered because most traders choose to enter into the opposite type of trade that the original one (close out their positions) prior to delivery period specified in the contract. 

For most commodity futures contracts, daily price movement limits are specified by the exchange. A limit move is a move in either direction equal to the daily price limit. If the price moves down by an amount equal to the daily price limit, the contract is said to be limit down. If the price moves up by the limit, it is said to be limit up. Typically, trading ceases for the day once the contract is limit up or limit down.

Price limits and positions limits aim to prevent large price movements deriving from excessive speculation. However, they can also become an artificial barrier to trading when the price of the underlying commodity is increasing or decreasing swiftly. 

To illustrate how commodity futures are settled, let’s suppose that John believes the domestic fall production of oats has been under estimated in mid-summer, while Peter thinks the domestic fall production of corn has been over estimated in mid-summer. Using the commodity exchange as a market place, since John believes corn prices will decline, he sells a futures contract, and Peter buys a futures contract because he believes the price is going to increase. Assume that John and Peter sell and buy their contracts for the same price and they are held by each other, and in three months, John must buy back his contract and Peter must sell back his contract. By both individuals ending up with no obligations, this clears the market and there is no credit risk involved as cash flows are spread until the underlying commodity reached maturity. Furthermore, the contract price is allowed to freely change in value during the three months depending on the change in supply and demand for the underlying commodity.  

Now, depending on what happens to prices during the following months, the contract will remain unchanged in value, appreciate, or depreciate: (1) if the value doesn’t change, neither person benefits, (2) if the value appreciates, Peter would earn a profit by selling back his contract at the new higher price and John would lose money by buying back his contract back at the new higher price, and (3) if the value depreciates, Peter would lose money by selling back his contract at the new lower price and John would profit by buying back his contract at the new lower price.  

Overall, trading with commodity futures is a good way to make money, but there are also pitfalls involved. Commodity markets are highly volatile and are likely to remain volatile mainly because of geopolitical concerns, contracted demand-supply fundamentals, growth and inflation pressures and many other factors that put pressure on the global commodity market. On the other hand, in majority, commodity markets are broad and liquid and transactions can be completed quickly. This eliminates the risk of adverse market moves, which can be made between the time of the decision to trade and the trade’s execution.

I work as a financial and investment advisor but my passion is writing, music and photography. Writing mostly about finance, business and music, being an amateur photographer and a professional dj, I am inspired from life.

Being a strong advocate of simplicity in life, I love my family, my partner and all the people that have stood by me with or without knowing. And I hope that someday, human nature will cease to be greedy and demanding realizing that the more we have the more we want and the more we satisfy our needs the more needs we create. And this is so needless after all.

Article Source:http://www.articlesbase.com/investing-articles/the-abcs-of-commodity-futures-854182.html