What is Bill Discounting?

(This article was First published by Myforexeye Fintech Pvt Ltd)

Bill Discounting is a method of trading the bill of exchange to the financial institution before it gets matured, at a price that is in a smaller amount than its par value. The discount on the bill of exchange will be based on the remaining time for its maturity and also the risk concerned in it.

Bill discounting is a discount/fee which a bank takes from a seller to release funds before the credit period ends. This bill is then conferred to the seller’s client and the full amount is collected. Bill discounting is mostly applicable in scenarios when a buyer buys goods from the seller and the payment is to be made through a letter of credit. It is an arrangement whereby the seller recovers an amount of sales invoice from the financial intermediaries before it’s due. It is a business vertical for all kinds of financial intermediaries such as banks, financial institutions etc.

Bill discounting is a major trade activity. It aids the seller’s get funds earlier upon a small fee or discount. It also helps the bank earn some revenue. When the due date of the credit period comes, the borrower or (seller’s) customer can pay money then.

Bill discounting refers to a method of working capital finance for the seller of goods. It refers to a fee charged by the bank from the seller of the goods to release funds before the end of the credit period. The bill is presented to the customer and the amount is collected by the bank. It is mostly applicable in cases where letter of credit is used as a mode of payment. Bill discounting is also commonly known as invoice discounting or the purchase of bills. It is a major trading activity wherein the seller of the goods gets funds before the term of the letter of credit expires for a small amount charged by the bank as fees.

The fee paid by the seller to the bank or the financial intermediary usually depends upon the time left before maturity of letter of credit for which the bill is discounted and the risk perceived. It also depends a great deal over the credit worthiness of the seller and the past payment history of the buyer of goods.

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Forex Services

Definition: Forex Services

Forex services related to trading of currencies in the globally decentralized or over the counter (OTC) foreign exchange market are forex services. These services are provided for buying, selling or exchanging currencies at determined prices or current currency prices. Since the volume of this financial market is high, there is high fluctuation or volatility in the prices of these currencies.

Participants who avail these Forex Services are financial institutions, exporters or importers, traders, venture capitalists, private equity investors, inbound/outbound travelers, students, etc.

The forex market assists in international trade and investments as it converts currency. So it permits a business in India to import goods from United States of America and pay in US Dollars, USD even though its income is in Indian Rupees, INR. The market supports speculation and evaluations relative to the currency value and the carry trade speculation, based on the interest rate differential between the two currencies. This conversion happens through a forex services provider.

The forex service providers aim to give access to real-time currency rate information to the client in order to ensure transparent transactions when the client exchanges their receivables or payables with the banks. Many a times, the bank charges a margin over and above the currency rates. When there is no cross-check of real-time rates, the banks generally tend to quote a price in favor of the bank thus levying an extra margin to the client.

(This article was first published by Myforexeye Fintech Pvt Ltd)

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8 Forex Money Management Tips You Need To Know

Forex Money Management Tips

Managing forex money is important to increase profits and reduces losses which can arise if not monitored. In the highly fluctuating forex market, the movement of one currency against the other creates opportunities which traders take advantage of Many a times, the risks are overlooked by the amateur traders and they land up losing all their capital. The problem deepens when the invested capital is used as margin and larger sums of money is traded in the currency market looking at possible profits without analyzing the pitfalls. For a beginner in the currency market, it’s iamportant to understand the basics and stick to them to avoid such scenarios.

Some of the key points to know while managing forex money management are –

Wait for right opportunity and do not chase the market – often the new traders in the forex market, are excited seeing the fluctuation in the market and tend to trade more than required. It may leave one with a bitter experience and heavy losses. Trading is not meant to be done every day. Rather studying the market to determine the direction gives clarity. Thus one should not chase the market for opportunities but study the trend and then invest or trade.

Determine risk per trade – the amount one is ready to risk in a single trade is the risk per trade. One should not go more than two-three percent of the account on one trade in order to have a cushion when the markets go against the investment.

Losses should be booked before they accumulate – not all market calls will prove to be fruitful and lead to profit. Not often do we hear of all trading calls being right. To be on the safer side, one should cut the losses short and the profit making investments can be continued. Entering a trade position is just as important as exiting the same. Unless timely action isn’t taken, one losing trade call can erase the profits made from many previous calls. Pinning the hope on a trend reversal may encourage the traders to book profits early and also hold on to losing trades.

Be cautious while leveraging – while leveraging is a good tool for increasing your profits manifolds, it also equally enhances the chances multiplying your losses. Every time a trade is entered into, before looking at the possible profits, one must understand the losses which may have to be booked. Protecting one’s capital should be the main principle than seeing soaring profits.

Always use stop loss orders – in order to improve the profitability while managing the risk, the market order ideally should be with stop losses. This helps to understand the possible gains and losses even before they occur. Pre-determined stop losses ensure that the loss making open positions are squared before they get in deep red.

Trailing stops to lock-in profits – to maximize the benefit of profits, a combination of different stop loss orders should be used. A trailing stop loss is used to book profits when the market trend is strong. This automatically keeps locking the profits while the trend is a friend and the trailing stop loss level will move the stop loss levels.

Read more detail Source Reference: Remarkable step of Money Management Forex