Selecting A Forex Broker – Part 2

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The Forex market moves fast and you need “up-to-the-last-second” information to guide you in your trading decisions. It is urgent to have a high-speed Internet connection if you plan to trade online. A quality Forex broker should be able to offer you real-time quotes and enable you to enter and exit the market quickly. These are only the minimal requirements of any trading software. Brokers offer upgraded software packages for extra fees.

Very small “mini accounts” and even smaller “micro accounts” for as low as two hundred dollars are now offered by brokers. These very little accounts are an affordable way to get started and test your trading skills. This is an inexpensive way to gain experience on forex trading. When choosing the right online forex broker for you, you should first examine carefully their features and policies. Firstly, you should get a confirmation that it offers the seven major currencies at minimum. Costs of transactions should be calculated in pips. Traders can make more profit if broker requires lower number of pips per trade. If the major requirement is lower (meaning higher leverage), the chances for bigger profits and losses are greater.

The minimum trading size requirement may vary from broker to broker. A standard lot consists of 100,000 units, while a mini lot consists of 10,000 units. A micro lot consists of 1,000 units and some brokers even offer fractional unit sizes. These are called odd lots. These allow you to create your own trading size.

How do you determine the rollover charges? This is done by getting the difference between the interest rate of the country of the base currency and the other country’s interest rates. The rule here is the bigger the interest rate difference between the two currencies, the bigger the rollover charges.

Almost all brokers give interest on a trader’s margin account. The interest rates are unstable and fluctuate with prevailing national rates. If you extend your break from trading, money in margin account accrues interest and brokers do not allow interest accruals unless margin requirement is at least two percent. Brokers observe trading hours. Almost all brokers align their time with the time of the Global Forex Market. When examining a prospective broker’s fine print section of the application, be on the lookout for nuances that broker may impose on the new trader.

The above features and policies of a prospective broker should be examined thoroughly. Finding the right broker is not easy and requires some real efforts on the part of the would-be trader. Do not just pick out the first one that looks okay to you, instead keep on requesting for demos until you find the broker that you are comfortable with and you feel is the right one for you.

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Selecting A Forex Broker – Part 1

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Before you can start trading in the Forex market, you need to open an account with a forex broker. A broker is a middleman, an individual or company that buys and sells orders that the trader will decide upon. Brokers charge fees for their services. It is significantly important that you choose the right broker to handle your account. Selecting a broker will require some research work. Find out the available services and fees charged by several brokers.

When choosing a Forex broker, find out if it is regulated and which regulatory agency it is registered with. Regulatory agencies were made to protect the public against fraud, manipulation and abusive trade practices. Among the registered firms, select the ones with clean records and stable, solid finances. Always remember, beware of non-regulated firms.

The NFA is putting more efforts to educate investors on retail forex trading. A brochure on “Trading in the Retail Off-Exchange Foreign Currency Market” is made available and NFA advises that it be read carefully before deciding on investing in the Forex market. A “Forex Online Learning Program” was also developed by NFA to guide would-be traders before opening a forex account. This program is interactive and self-directed. It explains how retail forex contracts are traded and the risks involved in trading. It also guides individuals on the steps to take before opening a forex account. Take advantage of these benefits. Both brochure and program are free to the public.

What about customer service? The quality of support from broker to broker varies so it is best to check this out before choosing your broker. Do they give 24-hour support if needed? Forex market works 24 hours. Find out if the firm is easily accessible by phone, email, etc. Check if they know their job well. You can probably get the answers to your questions by choosing several online brokers and contacting their “help desks.” How they promptly answer your questions, how they respond to your needs and the politeness you get, may be used as gauges in order for you to estimate the quality of the broker. You can more or less ascertain if they can be trusted with your investment.

The strength of any trading platform is their ordering system. This makes trading software very significant. Find the option available to you by requesting a demo account at some online brokers. Examine carefully the broker’s screen layout. Can it view real-time currency exchange rate quotes? Does it show an account summary of your current account balance indicating realized and unrealized profit and loss, margin available and any margin locked in open positions? Most trading platforms are either Web-based or a client-based programs that you can install in your own computer. You can choose whichever version you prefer. With the Web-based software, you can trade from any computer that has an Internet connection. A client-based software program is one that you can download and install, and will allow you to trade through your own computer.

The “download and install” program runs faster. However, if your broker offers on a Microsoft Windows and you are a Mac user, you cannot install the application and you will have to use your broker’s Web-based platform. The Web-based or Java-based software programs are popular among brokers because they believe it is safer and reliable against viruses and hackers during transmissions. Before opening a real account, make it a point to open a demo account first where you can practice on, and test your broker’s platform first.

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How Do You Profit In Forex Trading – Part 3

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To put the above ideas in actual instance, let us say your observation and analysis brings you to think that the Euro will further go up against the U.S. dollar and you want to buy Euros in exchange for U.S. dollars, expecting the former to appreciate. You may elect to open a lot (100,000) and buy the Euros with it at a margin of 1%. If the exchange rate for EUR/USD is 1.25, you will in effect be buying 100,000 Euros at a price of 125,000 U.S. dollars. Since the margin is 1%, then the amount to be set aside in your account is 1% of 125,000, which is US$1,250. This means that your $US1,250 made you in control of 100,000 Euros. If your analysis is correct and the euro appreciated over the dollar, let us say, to 1.2550, then you will have earned 50 pips or $500. A pip is the tiniest price movement in a currency and more about this will be discussed in the next chapter. Should you decide to close the position, the deposit you previously made will go back to you and profits or losses you made will be credited to your account after calculations.

It is worthy to note that positions that are still open by the broker’s cut-off time equate to a rollover interest, which the trader will either pay or earn depending on his position. A borrowed currency would entail the trader to pay interest and a bought currency earns a trader interest. The cut-off time is usually at 5:00pm, Eastern Saving Time (EST). It would be better to close the account before the end of the trading day in order for the trader not to earn or pay interests. Your broker/dealer may be able to give you the specific details you need to know regarding rollover. Many brokers adjust their rates (rollover rates) depending on factors such as lending rates and account leverage. It would also be helpful for you to know that each currency is designated its own rate. U.S. dollar rate is .25%, Euros are 2%, Australian dollars are 4.25%, Japanese Yen are 0.10%, Swiss Francs are 0.5%, Canadian dollars are 1%, New Zealand dollars are 5% and the British Pounds are 1.5%.

If is highly advisable that traders do not go into trading with real money immediately. They may do some practicing by opening a demo account first before delving into the real world of forex. This demo account is free and allows the new trader to gain the full capabilities of a real account. Brokers offer these demo accounts for free to lure them to love the trade and eventually open a real account with them. It favors the brokers in terms of advertisement but it also favors the new trader since he manages to learn the ins and outs of forex trading without the actual risk. Any forex trading expert would advise a new trader to make use of these demo accounts before the real thing.

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How Do You Profit In Forex Trading – Part 2

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Another set of words to be remembered when trading currencies are the words “bid” and “ask.” The dealer’s “bid” is actually the price he is willing to pay to buy the base currency in exchange of the quote currency. It therefore means that the bid is the amount at which you will sell. On the other hand, the “ask” is the dealer’s price at which he will sell the base currency for the quote currency. The “ask” therefore is the amount at which you will buy. The difference between the two is called the “spread.” If you already start forex trading, you will see how user-friendly this bid and ask process is as formatted by the forex trading. All the trader needs to do is click on the icons when he decides to either bid or ask or buy or sell and he is well on his way to the next transaction.

Now one would ask where he/she will base what currencies to buy or sell. Forex trading is not a game of cards wherein a lot is based on luck. Decisions on whether to buy or sell currencies are based largely on what is happening in the economies of the nation where the currency involved came from. It also depends on many factors that have direct or indirect effects on a nation’s economy. It is therefore important to be aware of what is going on and be vigilant of updates and news around the world, or at least of the news about the country whose currency you want to trade with. It is wiser however to generally have a knowledge of what is going on in the world for what happens in one country may have a domino effect and thereby affect other countries. The current recession for example is not limited to certain nations only, but the whole world.

To illustrate again, let us use USD/JPY this time. The base currency in this example is the U.S. dollar and the quote currency is the Japanese yen. The U.S. dollar therefore is the basis for the buy and sell. It is important for the trader to study the current economic situations of these countries to wisely make the move of either buying or selling. If you, as the trader, think that the Japanese yen is going to weaken since the Japanese export industry needs help, then it would be a wise move to execute a BUY USD/JPY order. This means buying the dollars thinking that the value will appreciate over the yen. If, however, your analysis brought you to thinking that the Japanese investors are taking money from the U.S. market and turning the dollars into yen, thereby hurting the U.S. dollar, then you should execute a SELL USD/JPY order. This means selling your dollars expecting that the yen’s value will go down.

For new traders who have a capital that is not too big and want to buy currencies, but do not have enough money, is trading still possible for them? The answer is yes. This could be done via margin trading. Simply put, margin trading is trading with the use of borrowed capital. It is trading on credit. It is through this technique that a trader with as little as $1,000 can open positions worth $10,000 to $100,000. Margin trading is quantified according to “lots” in the forex market. A “lot” is the minimum price of the currency you need to buy. In forex trading, it is not usual to talk retail, as in buying 1 dollar or selling 1 euro. Forex transactions are done in “lots.” To analogize, you do not buy a couple of grapes, you buy them in bunches. We do not usually buy one or two eggs; we buy them by the dozen. That is how you will use a “lot” in forex. Depending on the account you have, a lot is 10,000 for a mini account and 100,000 for a standard account.

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How Do You Profit In Forex Trading – Part 1

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For those with experience in trading the stocks or futures, forex trading will be easy to understand. It is basically the buying or selling of currencies. The main goal in forex trading is to exchange or buy one currency for another currency, with the expectation that the price of the currency you bought or exchanged will have an increased value compared to the currency you sold or exchanged it with. That is how you make money from forex trading.

To illustrate, let us say for example that you bought 100,000 Euros at the EUR/USD exchange rate of 1.20. Then after a week, you exchange back those 100,000 Euros to dollar, this time at an increased rate of 1.25. EUR100,000 multiplied by 1.20 is US$120,000 and EUR100,000 multiplied by 1.25 is US$125,000. The difference between the two is your profit. If millions instead of hundreds of thousands are involved, then bigger profits are earned. Both rates 1.20 and 1.25 are the ratios of one currency over the other. Using the same example, it simply means that 1 euro can purchase 1.2 or 1.25 US dollars. This is just an example and it does not mean that these are the actual and present exchange rates of the two currencies.

You may ask why currencies are always quoted in pairs. This is because in every forex transaction, you buy one currency the very same time that you are selling another. Let us use another illustration, considering the sample “forex quote” we used above, EUR/USD=1.2500. The euro in this equation is called the “base currency.” The US dollar on the other hand is the “counter or quote currency.” If you will buy a currency given this example, the exchange rate dictates how much you need to pay in units of the quote currency (which is the dollar in this example) to purchase one unit of the base currency (the euro in this case). Therefore, you have to pay 1.25 U.S. dollars to purchase 1 euro. If you will be selling, the same principle applies. Only this time, again using the same example, the exchange rate dictates how many units of the quote currency (dollar) you will get if you will sell one unit of the base currency (euro). This means that you will have 1.25 U.S. dollars for every euro you sell.

The basis for buying and selling in a forex trading market is the “base currency.” If you say you will buy EUR/USD, it means you are buying the base currency (euro) and at the same time selling the quote currency (dollar). The base currency is also the basis of the trader’s movement in forex. If he thinks the base currency in a pair will go up, then it is a wise move to buy the pair. If, on the other hand, he thinks that the base currency will go down, then it is wise to sell the pair.

In forex trading lingo, two of the most important words to remember are “long” and “short.” “Long” and “buy,” as well as “short” and “sell” are respective synonyms. When you buy, it is already in your mind and in your expectation that the base currency will rise in value so that you could, in turn, sell it at a higher price. This is what the traders call taking a “long position” or “going long.” If selling, you expect the base currency to depreciate so that you could buy it back at a lower price. This now is what is called by traders as a “short position” or going short.

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A Quick Introduction To Some Forex Trading Basics

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Foreign Exchange (Forex) trading is considered as one of the most financially rewarding professions ever to exist. Being good at it takes time and energy but it nevertheless happens. There are many ways to learn the tricks of this trade. One of the most comprehensive means, not to mention cheapest, is by learning from the various forex tutorials and forex e-books being offered for free via the Internet. This particular article series aims to give a beginner a glimpse of the basic things he needs to know about foreign exchange trading.

Forex education cannot be incorporated in any single book or article. Not only is it very broad, it cannot be explained through words alone. Basic education that can be studied through books, word-of-mouth advices from experienced traders, and continuous learning as experienced by the new trader himself will make up a truly comprehensive forex education. Even long years of experience shouldn’t stop a trader from still learning something new from the business.

Forex education is best treated like a school course. Level by level, the beginner will slowly learn and understand the forex trading business and everything else that affects it or it affects. It would be wise to take the education in divisions, like that of a student. There will be information to be learned on the pre-school level, elementary level, middle school level, high school level and the college level. These several numbers of levels are not surprising since the subject of foreign exchange market is such a broad matter that it could not be summarized in a single manual or pamphlet.

In fact, this article series will only be discussing the very basic data that a beginner should know. It will actually be presenting only the pre-school level of forex education. Although not all the things that a newcomer in forex trading need to learn will be found in this e-book, it is however necessary to learn the basics to serve as the foundation for the more complex information that a new trader will later learn regarding forex trading. After learning the basics by heart, the beginner is now equipped with ample, although still far from enough, knowledge, that would enable him to proceed to learn and understand further information about forex trading.

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Forex Secret Trading

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When it comes to Forex secret trading the big secret is that there is no secret! All the information you need to learn to trade Forex successfully is readily available.

Those looking for information on Forex secret trading are most likely those who are just starting out in Forex trading and are led to beleive that their is some, mystical, magical formula or a “holy grail” of Forex trading. If some wrote a book called, “Forex Secret Trading” or “Forex Trading Secrets” it would probably fly off the bookstore shelves.

If there is one thing that some may consider to be a “secret” it is the affect that trading can have on you emotionally. While this really is more of an “unknown” to those who have yet to trade, it is very much worth mentioning because emotions can cause you to lose your trading discipline. Without discipline profitable forex trading will be difficult, if not completely impossible. It is easy for this secret to catch new traders off guard because emotions and discipline may not seem tangible enough factors to be concerned with.

A real danger in searching for Forex trading secrets is that all you may do is search…never finding that “perfect” Forex trading system you are seeking. This is a very common form of beginning Forex trader’s “paralysis by analysis”. This can also lead a beginning trader to abandon a perfectly good trading strategy and continue searching for the “holy grail”.

In the long run, you will be much better off to stop looking for Forex trading secrets and focusing on learning practical Forex technical analysis techniques. The key here is to always educate yourself in the effective techniques of Forex trading. You can start trading with a simple strategy and then continue to repeat your success by sticking o your strategy and let it profit over and over again.

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Use a Forex Trading System Course to Learn Forex Trading

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A quick study of beginning of Forex trader behavior shows that most are searching for things such as “Forex secret trading” or “Forex tip trading” or even “free Forex trading systems”. Not nearly enough are for searching for ways to learn Forex trading and profit in the long term.

A Forex trading system course can be an excellent way to jumpstart your understanding of the Forex market. By learning how to trade Forex you’re placing your self heads and shoulders above most other “would be” Forex traders on the planet. There’s a very good reason for this. Those who want to learn Forex trading understand that Forex trading is not a get rich quick scheme. They understand that successful trading in Forex is a journey and not just a destination. For these reasons and more smart traders prepare themselves to be successful and among those smart traders some will even become very, very wealthy.

So how do you go about finding a good Forex trading system course? Here are several places to start looking:

Your Forex Broker — many Forex brokers have a good selection of learning materials for those who are beginning as well as intermediate and advanced traders. This is not at all a bad place to start although it is advised to seek additional Forex education outside of your broker is well.

A Recommendation from a Friend or Associate — one of the best places to start is with someone that you are already familiar with. Finding a friend or associate to recommend a good Forex trading system course to you can really be of tremendous help. If your friend is having Forex trading success with a particular Forex course ask them for further details and if he thinks the course might benefit someone at your experience level.

Online Forex Courses — an online Forex course can be very convenient for you as you may take the course from the privacy of your home or office. Many online Forex courses take the form of a “webinar” which is an online equivalent of a Forex trading seminar. This can actually be quite interactive and extremely informative.

Local Forex Seminar — local Forex seminars are typically held at larger hotels that have facilities to accommodate conferences. This setting can be excellent as it provides an opportunity to interact not only with the instructors, but with fellow attendees as well. Seminars can be an excellent place to network with those interested in sharing trading ideas and strategies.

Which ever type of Forex trading system course you choose make certain that you do your due diligence so that you can feel comfortable knowing that you have competent instructors. The level of knowledge and skill of instructors will most likely vary widely. Be certain to avoid those courses and instructors who try to lead you to believe that Forex trading is a riskless venture. Find those who focus on creating consistent profits for long-term Forex trading success.

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The Importance of Controlling Your Forex Trading Risk

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One statement holds true in Forex trading and that is “there is no reward without risk”. Experienced Forex traders realize that there is risk with every single trade that they take. Successful traders know that risk is a very natural part of any speculative venture and Forex trading is definitely speculation.

One of the first important concepts to embrace is that there will be losses in your trading. While this may not sound good to beginning Forex traders, successful Forex traders around the world recognize that this is par for the course. Losses are a natural part of trading.

There were many people who will start off trading and will do everything in their power to avoid losses. Successful traders understand that this is an exercise in futility and while beginning traders are busy trying to avoid any and every loss successful traders are racking up profits.

New Forex traders place themselves in a very sticky situation. Because new traders often try to avoid losses they will find themselves stuck in “paralysis by analysis”, constantly searching for the proverbial Forex trading holy Grail. The question on the new traders mind is often, “how can I trade Forex with no losses and no risk?”. This question is often answered by those selling commercially available Forex robots and the answer is often, “by buying my super, duper, never-lose Forex robot”. In the end the new Forex trader will learn more about losses and risking Forex trading than they wanted imagined.

The question that new traders should be asking themselves is, “how can I trade Forex successfully and build equity over time?”. By asking this question the trader doesn’t open themselves up to getting sucked in by ridiculous claims of riskless Forex trading.

With the example above of asking yourself the right question you’re on your way to controlling your risk and reaping rewards in Forex trading. One of the most successful methods of risk control is knowing your level of risk prior to initiating a trade. By consciously evaluating your potential risk before your trade you have prepared yourself for the inevitable losses you will encounter no matter how successful Forex trader you become. The determination of how much you will risk on each trade will all be dictated by your well-thought-out, thoroughly-researched Forex trading system.

One successful risk control technique is to risk only a certain percentage of your available equity on each trade. For instance, if your choosing a relatively conservative percentage of equity such as 1 to 3% you are allowing yourself to conserve your equity. With small percentages such as these a trader can afford to have a number of consecutive losses without being taken out of the game. The 1 to 3% percentages quoted are simply an example. As stated previously your Forex trading strategy will determine what your individual risk level per trade should be.

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Forex Trading for Beginners — Pros and Cons

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If you have never traded Forex before, but would love to get started then you’re in exactly the right place at the right time. What we’re going to cover here are some of the pros and cons of Forex trading for beginners.

First let’s cover the pros. The information that follows is not listed in order of importance.

Leverage — one of the best things about the Forex market is the leverage that traders are able to use to their advantage. Leverage of up to 100 to 1 is very common in the Forex market. This basically means that a $1000 deposit in your trading account can control a Forex contract worth $100,000. The advantage here is that relatively small moves in the Forex currency pairs price can mean huge profits for you.

Account Capital Requirements — although no one is recommending that you should, you could if you so desired open up a Forex trading account with as little as $100. Opening up a small account is an excellent way to practice and get a feel for the Forex market before committing a larger amount of funds. If you’re serious about Forex trading then you will prepare yourself by adequately capitalizing your account based upon your particular goals for your Forex trading success.

Virtually a 24-Hour Market — you can trade the Forex market virtually 24 hours a day five days a week. This is extremely advantageous because it means that you can trade and the market will be open in whatever time zone you happen to be in. For those want to trade Forex part-time you will definitely have the flexibility you need because of the market hours of Forex.

Liquidity — the Forex market has trillions of dollars in turnover every day making it the most liquid market in the world. This means that the ease of entering and exiting trades is greater because of the sheer volume of transactions.

Now let’s briefly cover the cons. The information that follows is not listed in order of importance.

Leverage — at this point in time you may be wondering why leverage is listed as a pro and then now as a con. Simple… leverage has its own positive as well as negative attributes. While leverage works for you in a profitable trade it has the opposite effect when you’re in a losing trade. It is the improper use of leverage in Forex trading that gets almost every beginner into hot water.

Myths and Misinformation — unfortunately they Forex trading arena is filled to the brim with myths, misinformation, and hype. This has caused many well-intentioned beginning Forex traders to have unrealistic expectations about virtually every aspect of Forex trading. These unrealistic expectations can range from expecting astronomical returns on a monthly basis to not thinking that any level of skill is necessary in order to successfully trade Forex.

The list of pros and cons we have just covered is by no means all-encompassing. Hopefully, however, is enough to get you started as you continue your journey to successful Forex trading.

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