There are many different advantages to trading forex instead of futures or stocks, such as:
1. Lower Margin
Just like futures and stock speculation, a forex trader has the ability to control a large amount of the currency basically by putting up a small amount of margin. However, the margin requirements that are needed for trading futures are usually around 5% of the full value of the holding, or 50% of the total value of the stocks, the margin requirements for forex is about 1%. For example, margin required to trade foreign exchange is $1000 for every $100,000.
What this means is that trading forex, a currency trader's money can play with 5-times as much value of product as a futures trader's, or 50 times more than a stock trader's.
When you are trading on margin, this can be a very profitable way to create an investment strategy, but it's important that you take the time to understand the risks that are involved as well.
You should make sure that you fully understand how your margin account is going to work. You will want to be sure that you read the margin agreement between you and your clearing firm. You will also want to talk to your account representative if you have any questions.
The positions that you have in your account could be partially or completely liquidated on the chance that the available margin in your account falls below a predetermined amount.
You may not actually get a margin call before your positions are liquidated.
Because of this, you should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit downside risk.
2. No Commission and No Exchange Fees
When you trade in futures, you have to pay exchange and brokerage fees. Trading forex has the advantage of being commission free. This is far better for you. Currency trading is a worldwide inter-bank market that lets buyers to be matched with sellers in an instant.
Even though you do not have to pay a commission charge to a broker to match the buyer up with the seller, the spread is usually larger than it is when you are trading futures.
For example, if you are trading a Japanese Yen/US Dollar pair, forex trade would have about a 3 point spread (worth $30). Trading a JY futures trade would most likely have a spread of 1 point (worth $10) but you would also be charged the broker's commission on top of that. This price could be as low as $10 in-and-out for self-directed online trading, or as high as $50 for full-service trading. It is however, all inclusive pricing though.
You are going to have to compare both online forex and your specific futures commission charge to see which commission is the greater one.
3. Limited Risk and Guaranteed Stops
When you are trading futures, your risk can be unlimited. For example, if you thought that the prices for Live Cattle were going to continue their upward trend in December 2003, just before the discovery of Mad Cow Disease found in US cattle.
The price for it after that fell dramatically, which moved the limit down several days in a row. You would not have been able to leave your position and this could have wiped out the entire equity in your account as a result. As the price just kept on falling, you would have been obligated to find even more money to make up the deficit in your account.
Friday, October 23, 2009
Forex Trading Tips - Brokers That You Need To Avoid
Just like there are brokers that you want, there are also brokers that you will want to stay away from. For example brokers who are prone to prematurely buying or selling near preset points (commonly referred to as sniping and hunting) are trifling things that are committed by brokers who only seek to increase profits.
Obviously, no broker would actually admit to doing this, but there are ways to know if a broker has committed this offense.
Unfortunately, the only way that you can really determine which brokers do this and which brokers don't is to talk to fellow traders. There is no actual list or organization that reports this kind of activity. The point here is that you have to talk to others in person or visit online discussion forums to find out who is an honest broker.
Strict Margin Rules
When you are trading with borrowed money, your broker should have a say in how much risk you are able to take. With this in mind, your broker can buy or sell at its discretion, which can be a really bad thing for you.
Let's just say that you have a margin account, and your position takes a headlong nosedive before it begins to rebound to all-time highs. Even if you have enough cash to cover it, some brokers will liquidate your position on a margin call at that low. This action on their part can cost you dearly. You talk to others in person or visit online discussion forums to find out who the honest brokers are.
Signing up for a FOREX account is a great deal like getting an equity account. The only major difference is that, for FOREX accounts, you are obligated to sign a margin agreement.
This agreement basically says that you are trading with borrowed money, and, because of this the brokerage firm has the right to interfere with your trades in order to protect its interests. Once you sign up, all you have to do is fund your account and you'll be ready to trade right away.
Obviously, no broker would actually admit to doing this, but there are ways to know if a broker has committed this offense.
Unfortunately, the only way that you can really determine which brokers do this and which brokers don't is to talk to fellow traders. There is no actual list or organization that reports this kind of activity. The point here is that you have to talk to others in person or visit online discussion forums to find out who is an honest broker.
Strict Margin Rules
When you are trading with borrowed money, your broker should have a say in how much risk you are able to take. With this in mind, your broker can buy or sell at its discretion, which can be a really bad thing for you.
Let's just say that you have a margin account, and your position takes a headlong nosedive before it begins to rebound to all-time highs. Even if you have enough cash to cover it, some brokers will liquidate your position on a margin call at that low. This action on their part can cost you dearly. You talk to others in person or visit online discussion forums to find out who the honest brokers are.
Signing up for a FOREX account is a great deal like getting an equity account. The only major difference is that, for FOREX accounts, you are obligated to sign a margin agreement.
This agreement basically says that you are trading with borrowed money, and, because of this the brokerage firm has the right to interfere with your trades in order to protect its interests. Once you sign up, all you have to do is fund your account and you'll be ready to trade right away.
Forex Trading Tips - Basic Forex Strategy : Technical Analysis
Technical Analysis
Just like their counterparts in the equity markets, technical analysts of the FOREX trading market analyze price trends. The only real difference between technical analysis in FOREX and technical analysis in equities is the time frame that is involved in that FOREX markets are open 24 hours a day.
Because of this, some forms of technical analysis that factor in time have to be modified so that they can work with the 24 hour FOREX market. Some of the most common forms of technical analysis used in FOREX are:
* The Elliott Waves
* Fibonacci studies
* Parabolic SAR
* Pivot points
A lot of technical analysts have a tendency to combine technical studies to make more accurate predictions on your behalf. (The most common method for them is combining the Fibonacci studies with Elliott Waves.) Others prefer to create trading systems in an effort to repeatedly locate similar buying and selling conditions.
Just like their counterparts in the equity markets, technical analysts of the FOREX trading market analyze price trends. The only real difference between technical analysis in FOREX and technical analysis in equities is the time frame that is involved in that FOREX markets are open 24 hours a day.
Because of this, some forms of technical analysis that factor in time have to be modified so that they can work with the 24 hour FOREX market. Some of the most common forms of technical analysis used in FOREX are:
* The Elliott Waves
* Fibonacci studies
* Parabolic SAR
* Pivot points
A lot of technical analysts have a tendency to combine technical studies to make more accurate predictions on your behalf. (The most common method for them is combining the Fibonacci studies with Elliott Waves.) Others prefer to create trading systems in an effort to repeatedly locate similar buying and selling conditions.
Forex Trading Tips - Understanding Forex Spreads Part 2
Spreads should always be considered in conjunction with depth of book. Oddly enough, when it comes to economies of scale, forex doesn't even act like most other markets. On the inter-bank market, for example; the larger the ticket size, the larger the spread is. So when you see a 1-pip spread on an ECN platform, you have to wonder if that spread valid for a $2M, $5M or $10M trade, which it probably isn’t. In many cases, the tight spread that is offered applies only to a capped trade sizes that are very inadequate for most of the common trading strategies.
Spread policies change a great deal from broker to broker, and the policies are often difficult to see through. This certainly makes comparing brokers much more difficult. Some brokers actually offer fixed spreads that are guaranteed to remain the same regardless of market liquidity. But since fixed spreads are traditionally higher than average variable spreads, you are paying an insurance premium during most of the trading day so that you can get protection from short-term volatility.
Other brokers offer traders variable spreads depending on market liquidity. Spreads are tighter when there is good market liquidity but they will widen as liquidity dries up. When it comes to choosing between fixed and variable rates, the choice depends on your individual trading pattern. If you trade primarily on news announcements that you hear, you may be better off with fixed spreads. But only if quality of execution is good.
Some brokers have different spreads for different clients based on their accounts. For example; those clients that have larger accounts or those who make larger trades may receive tighter spreads, while the clients that are referred by an introducing broker might receive wider spreads in order to cover the costs of the referral. Some offer the same spreads to everyone.
Problems can come up when you are trying to learn about a company's spread policy because this information, along with information on trade execution and order-book depth is rather difficult to get. Because of this, many traders get caught up in all of the promises they hear, and take a broker's words at face value. This can be dangerous. The only real way to find out is to try out various brokers or talk to those who have.
Spread policies change a great deal from broker to broker, and the policies are often difficult to see through. This certainly makes comparing brokers much more difficult. Some brokers actually offer fixed spreads that are guaranteed to remain the same regardless of market liquidity. But since fixed spreads are traditionally higher than average variable spreads, you are paying an insurance premium during most of the trading day so that you can get protection from short-term volatility.
Other brokers offer traders variable spreads depending on market liquidity. Spreads are tighter when there is good market liquidity but they will widen as liquidity dries up. When it comes to choosing between fixed and variable rates, the choice depends on your individual trading pattern. If you trade primarily on news announcements that you hear, you may be better off with fixed spreads. But only if quality of execution is good.
Some brokers have different spreads for different clients based on their accounts. For example; those clients that have larger accounts or those who make larger trades may receive tighter spreads, while the clients that are referred by an introducing broker might receive wider spreads in order to cover the costs of the referral. Some offer the same spreads to everyone.
Problems can come up when you are trying to learn about a company's spread policy because this information, along with information on trade execution and order-book depth is rather difficult to get. Because of this, many traders get caught up in all of the promises they hear, and take a broker's words at face value. This can be dangerous. The only real way to find out is to try out various brokers or talk to those who have.
Forex Trading Tips - Understanding Forex Spreads Part 1
Forex is always priced in pairs between two different types of currencies. When you make a trade, you have to buy one currency and sell another at the same time. If you want to exit the trade, you must buy/sell the opposite position. For example, when you think the price of the Euro is going to rise against the US Dollar. In order for you to enter a trade, you will have to buy Euros and sell US Dollars.
If you want to leave the trade, you will have to sell Euros and buy back US Dollars. You will be hoping that you were right in your guess and that the exchange rate for EU/USD has actually risen, which means that you will get more Euros back than when you bought them, which is how you will make a profit.
These days just about every forex broker is claiming to have the tightest spreads in the industry. But marketing does have the ability to be deceiving. The topic of spreads in the forex spot market is very complicated and often not easy to understand. However, nothing affects your trading profitability more.
First of all in order to understand the spread, you need to know what it is. A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) that is quoted in the pips. If the quote between EUR/USD at a given moment is 1.2222/4, then the spread equals 2 pips. If the quote is 1.22225/40, then the spread is going to equal 1.5 pips.
The spread is how brokers make their money. Wider spreads will result in a higher asking price and a lower bid price. The consequence to this is that you have to pay more when you buy and get less when you sell, which makes it more difficult to realize a profit
Brokers generally don’t earn the full spread, especially when they hedge client positions. The spread helps to compensate for the market maker for taking on risk from the time it starts a client trade to when the broker's net exposure is hedged (which could possibly be at a different price).
Spreads are important because they affect the return on your trading strategy in a big way. As a trader, your sole interest is buying low and selling high (like futures and commodities trading). Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't necessarily sound like much, but it can easily mean the difference between a profitable trading strategy and one that isn’t profitable.
The tighter the spread is the better things are going to be for you. However tight spreads are only meaningful when they are paired up with good execution. Quality of execution will decide whether you actually receive tight spreads. A good example of this is when your screen shows a tight spread, but your trade is filled a few pips to your disadvantage or is mysteriously rejected.
When this occurs repeatedly, it means that your broker is showing tight spreads but is effectively delivering wider spreads. Rejected trades, delayed execution, slipping, and stop-hunting are strategies that some brokers use to get rid of the promise of tight spreads.
If you want to leave the trade, you will have to sell Euros and buy back US Dollars. You will be hoping that you were right in your guess and that the exchange rate for EU/USD has actually risen, which means that you will get more Euros back than when you bought them, which is how you will make a profit.
These days just about every forex broker is claiming to have the tightest spreads in the industry. But marketing does have the ability to be deceiving. The topic of spreads in the forex spot market is very complicated and often not easy to understand. However, nothing affects your trading profitability more.
First of all in order to understand the spread, you need to know what it is. A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) that is quoted in the pips. If the quote between EUR/USD at a given moment is 1.2222/4, then the spread equals 2 pips. If the quote is 1.22225/40, then the spread is going to equal 1.5 pips.
The spread is how brokers make their money. Wider spreads will result in a higher asking price and a lower bid price. The consequence to this is that you have to pay more when you buy and get less when you sell, which makes it more difficult to realize a profit
Brokers generally don’t earn the full spread, especially when they hedge client positions. The spread helps to compensate for the market maker for taking on risk from the time it starts a client trade to when the broker's net exposure is hedged (which could possibly be at a different price).
Spreads are important because they affect the return on your trading strategy in a big way. As a trader, your sole interest is buying low and selling high (like futures and commodities trading). Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't necessarily sound like much, but it can easily mean the difference between a profitable trading strategy and one that isn’t profitable.
The tighter the spread is the better things are going to be for you. However tight spreads are only meaningful when they are paired up with good execution. Quality of execution will decide whether you actually receive tight spreads. A good example of this is when your screen shows a tight spread, but your trade is filled a few pips to your disadvantage or is mysteriously rejected.
When this occurs repeatedly, it means that your broker is showing tight spreads but is effectively delivering wider spreads. Rejected trades, delayed execution, slipping, and stop-hunting are strategies that some brokers use to get rid of the promise of tight spreads.
Wednesday, October 7, 2009
Forex Learn Trade Online And How to Make Big Money Trading Forex
Get Into the Forex and Start Earning Big Money Today!
How much do you earn? Is that a question you might feel uncomfortable to answer? Or you just don’t want to even think about it because let’s accept it, you probably think you earn less than the next guy. Perhaps you are among the endless number of people who are always in the lookout for a part-time work, a freelance job or anything just so you can add a few dollars to your name. Well, let me tell you a little secret. If you could just Forex learn trade even a little bit of it, I’m telling you, you’ll be leaving your full-time job and start working comfortably at home.
That is all true. The Foreign Exchange Market or the Forex as it is commonly and simply called, is a highly lucrative market. Well, you might say every market is but the Forex is so much different. Why? Well, if you Forex learn trade, the possibilities of hugh profits is endless!
I’m sure you will be feeling more interested and excited if I tell you that there are professional Forex traders out there who are earning as much as six figures a month. That’s right! And they’re doing it right in their homes, through the Internet after they did a few Forex learn trade by themselves.
Perhaps it is best if I tell you a little bit something about what the Forex is and why having an Internet can help you earn big time.
You see, years ago, the Foreign Exchange Market is were international currencies are traded. Investors earn profits through the various movements of the currencies in the market. The Forex was initially dominated only by the banks, trading agencies, ultra-rich investors and traders, and other financial organizations.
There was no chance for a simple guy like us to even partake a crumb of that huge money-making pie. Then the 1990s brought forth the Internet. It became easier for a lot of people to Forex learn trade. It even allowed Forex trade agencies to offer their services to virtually everyone, even to individuals who don’t have huge investing capital.
How are you going to Forex learn trade, you might ask. Well, the Internet is a great resource for that. There are websites offering how-to’s and basic information about the Foreign Exchange Market. There are forums where you can ask professional traders questions about the Forex. There are dozens of ebooks about the subject.
There are websites where you can participate in a virtual Forex where you can pretend that you’re a trader engaging in currency trades with other people. You can basically learn by your own. But if you want, there are also excellent sites that offer tutorials and one-on-one sessions to help you understand more about the Foreign Exchange Market and what it’s like to earn great profits through it.
You can be a successful trader yourself. All you need is to Forex learn trade, invest a small amount at first just so you can get your feet wet in the market and I’m sure that you will be on your way to earning your big bucks!
How much do you earn? Is that a question you might feel uncomfortable to answer? Or you just don’t want to even think about it because let’s accept it, you probably think you earn less than the next guy. Perhaps you are among the endless number of people who are always in the lookout for a part-time work, a freelance job or anything just so you can add a few dollars to your name. Well, let me tell you a little secret. If you could just Forex learn trade even a little bit of it, I’m telling you, you’ll be leaving your full-time job and start working comfortably at home.
That is all true. The Foreign Exchange Market or the Forex as it is commonly and simply called, is a highly lucrative market. Well, you might say every market is but the Forex is so much different. Why? Well, if you Forex learn trade, the possibilities of hugh profits is endless!
I’m sure you will be feeling more interested and excited if I tell you that there are professional Forex traders out there who are earning as much as six figures a month. That’s right! And they’re doing it right in their homes, through the Internet after they did a few Forex learn trade by themselves.
Perhaps it is best if I tell you a little bit something about what the Forex is and why having an Internet can help you earn big time.
You see, years ago, the Foreign Exchange Market is were international currencies are traded. Investors earn profits through the various movements of the currencies in the market. The Forex was initially dominated only by the banks, trading agencies, ultra-rich investors and traders, and other financial organizations.
There was no chance for a simple guy like us to even partake a crumb of that huge money-making pie. Then the 1990s brought forth the Internet. It became easier for a lot of people to Forex learn trade. It even allowed Forex trade agencies to offer their services to virtually everyone, even to individuals who don’t have huge investing capital.
How are you going to Forex learn trade, you might ask. Well, the Internet is a great resource for that. There are websites offering how-to’s and basic information about the Foreign Exchange Market. There are forums where you can ask professional traders questions about the Forex. There are dozens of ebooks about the subject.
There are websites where you can participate in a virtual Forex where you can pretend that you’re a trader engaging in currency trades with other people. You can basically learn by your own. But if you want, there are also excellent sites that offer tutorials and one-on-one sessions to help you understand more about the Foreign Exchange Market and what it’s like to earn great profits through it.
You can be a successful trader yourself. All you need is to Forex learn trade, invest a small amount at first just so you can get your feet wet in the market and I’m sure that you will be on your way to earning your big bucks!
Forex Trading Strategies for the Best Money Investment on the Foreign Exchange Market
Forex means foreign exchange and a forex trading markets are the biggest markets that can be found today. In forex, the trade markets are located in different countries all over the world. What happens is forex is simply an exchange in one currency for another. Learning forex may not be easy for a starter but when you already have a grasp of the forex trading strategies, you will learn that it is not that hard to deal with.
In choosing the right strategy, you must first know the situation. Also you should know what your aims are. You may be the type who wants to earn quick money or one who prefers to look at the long term goals. For you to know the situation of the trades, you may take notes and the journal will help you analyze what you can do about your situation.
In doing your own strategy, often it is only a strategy done by others. Doing what others have done will help you come up with a successful strategy of your own. Learning from others is common in finding the best forex trading strategies that can be applicable for you. Alteration of other’s strategy may not be very helpful if you do not know much on how the situation really works. Thus, it would still be better to do your part through what others have already done.
In choosing the right strategy, you must first know the situation. Also you should know what your aims are. You may be the type who wants to earn quick money or one who prefers to look at the long term goals. For you to know the situation of the trades, you may take notes and the journal will help you analyze what you can do about your situation.
In doing your own strategy, often it is only a strategy done by others. Doing what others have done will help you come up with a successful strategy of your own. Learning from others is common in finding the best forex trading strategies that can be applicable for you. Alteration of other’s strategy may not be very helpful if you do not know much on how the situation really works. Thus, it would still be better to do your part through what others have already done.
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