Forex Trading Brokers: Assisting You with Your Trading Needs
If you have already been trading in the Forex market before and/or if you’re still doing it, you may have heard the term Forex broker a lot of times. As an individual trader, you may want to know what is a Forex broker and what they do.
Forex brokers are individuals or companies that assist individual traders and companies when they are trading in the Forex market. These individuals can really give you that extra edge you need for being successful in Forex. Even though they will be trading your funded account, all the decisions remain yours if you want to. Forex Set: Professional Trader Education Value Pack for Forex Trader 2010
Forex trading brokers are there to assist you with your trading needs in exchange for a small commission from your earnings. Here are some of the services you can expect to receive from a broker:
• A Forex broker can provide advice regarding on real time quotes.
• A Forex broker can also suggest what to buy or sell by basing it on news feeds.
• A Forex broker can trade your funded account basing solely on his or her decision if you ask them to.
• A Forex broker can also provide you with software data to help you with your trading decisions.
Searching for a good Forex broker can be a very tiresome task. Since there are a lot of information in the internet about Forex brokers, traders get confused on which broker they should hire. With all the brokers out there offering high Forex trading income and quotations, you will find it hard to decide for a good and reputable Forex broker.
With a little research, you can find the right Forex broker who can be trusted. If you do not have referrals for Forex brokers, you can try and do a little research of your own. The first thing you need to find out about a particular Forex broker is the amount of clients they handle. The more persons they serve the more chances that these brokers are trustful. You should also know the amount of trades these brokers are conducting.
Knowing the broker’s experience in The Forex Market is also a great way to determine if he or she is the right broker to hire. Working with an experienced Forex broker will increase your chances of earning money from the Forex market.
If you have questions or complaints, you should feel free to call or email the company and ask questions regarding their trading system. You should never feel uncomfortable doing this. Anyway, they will be the one who will manage your money. And, you have the right to know about what they are doing with your money.
When choosing a Forex broker, you should also take in mind their trading options. You should also know that Forex brokers can offer different services. They differ in platforms, spreads, or leverage as in services. You have to know which of the trading options is very important to you in order to be comfortable when you trade in the Forex market.
Most online brokers offer traders with a demo account. This will allow you to try out their trading platform without really risking money. You should look for a demo platform that works exactly like the real thing and you should also decide if you are comfortable with the trading platform.
Look for the characteristics you want in a trading platform in order for you to know what to expect if you hire them. If you are comfortable with a trading platform, you should consider hiring them, and if you are not, take them out your list. This is a great way to test their trading platform and not risk your money.
If a Forex broker is reluctant to share financial information about their company, you shouldn’t trade with them because of this reason. They should answer your questions regarding on how they manage their client’s money and how they trade.
Always remember that if you see an offer that’s too good to be true by Forex traders, it probably is too good to be true. Forex is a very risky market and Forex brokers must warn you about certain risks associated with when trading in the Forex market. The Forex broker who says that trading in Forex is easy and a very good money making market with very low risks, you must avoid them.
These are the things you should consider when you seek for a Forex broker. If you find that right broker, you can be sure that your money is safe.
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Managing Capital in foreign exchange Trading
One area of currency exchange that is rarely discussed, regardless of how critical it is, is the capital that any investor requires if they want to enter the market. Without capital, you have nothing to invest and thus it is inconceivable to foray into the forex market. FXEducator – Forex Trading with Ed Ponsi
Even once you do have capital though, there’s more concerned with managing capital than most folks ever think about. For one thing, regardless of how much capital you have, you want to understand how to make that capital work for you else it will just be wasted.
End of the day, this boils down to an issue of information : How much do you actually know about the foreign exchange market? Did you know the different sorts of trades that may be accomplished? Did you know how to place limits and stop orders? Did you know what sorts of trades are most profitable? Forex Set: Professional Trader Education Value Pack for Forex Trader 2010
And most significantly : Do you know how to cut your losses when you should?
All these questions must be answered affirmatively before you can actually delve into the foreign exchange market with your capital. Without the necessary understanding of the details of the market, you’re going to be essentially going into it blind, and that is a certain recipe for disaster.
Mind you, even when you have sufficient data to go into the foreign exchange market, there is more that you need to think about. For starters, all of the information in the world can’t protect you from unaccountable fluctuations that often take place.
By nature, the foreign exchange market is partially predicted. But at the same time, it is also in part unpredictable and no matter how savvy an investor you are ultimately you’re going to come up against a situation that you actually could not envision in any way.
When that occurs, knowing that you should cut your losses is vital, but more importantly, handling your capital from the get go so a single freak situation does not cripple your investments is equally as important.
Imagine if you were to invest all your capital into a single trade that went bad. Even if you managed to sell before things really hit the all-time low, you’d find that you’ve lost a large percentage of your capital.
Whereas if you’d managed your capital effectively and only invested a little portion of it, you’d have lost a lot less.
Naturally the common argument against this is that by investing less you’re reducing your potential for profit . Definitely, this is true, but at the same time putting all your eggs into one basket, whatever how attractive-sounding it might be, is never a smart idea.
Remember : Your capital is your lifeline, and you must try to manage it as effectively as possible. Split it into little groups and invest carefully. After you get the knack of it, you can start investing larger groups.
By smartly handling your capital in the currency market, you stand to gain a lot, with greatly reduced risk.
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How Currencies are Traded
Forex Trading
ONE of the best advantages in FOREX Trading is the amount of money you need to place a trade (known as “margin”) is all that can be lost !
You have to know, that despite the super-high leverage offered by some Forex brokers up to (400:1); meaning if you put up $ 1000 the broker will allow you to trade like you really have $400.000).
Forex trading is still less riskier than Stock or Futures Trading, where you can loose more than you have deposited in your account.
This type of LEVERAGE does NOT EXIST in the equities or futures market
In the Equities or Futures markets, very often, sudden and dramatic moves occur, against which you can’t protect yourself, even by having placed your protective stops.
Your position may be liquidated at a loss, and you’ll be liable for any resulting deficit in the account.
But because of the FX market’s deep liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are almost eliminated.
Orders are executed quickly, without slippage or partial fills. And finally, there are no margin calls. For your protection, the broker will automatically close out some or all of your open positions if your account equity falls below the level required to hold the positions.
Think of this as a final, automatic stop, always working on your behalf to prevent a debit balance.
Currencies are traded in dollar amounts called “ LOTS”
In Forex trading, with most Brokers, you have the choice between 2 different lot sizes.
Standard Lots or Mini Lots.
One Standard lot is equal to $100,000 in currency. The margin requirements, using a 400:1 Leverage, would be US$ 250, in other word you control $100,000 worth of currency for only 250 US dollars.
You mean, depositing $250 with a broker, I could trade 100,000$ worth of currency ???
NO, be aware, that your account size has to be more than the required margin of US 250. For example, if you place an order to buy 1 Standard lot ( @100,000) of USD/JPY and USD/JPY is quoted as 112.10/112.13, you buy USD/JPY at 112.13.
Your account balance would be $220, because you paid 3 pips or $ 30 for this trade.
If you would close this trade immediately, you have to sell it at 112.10 (the bid price) , for a loss of $ 30.
In fact you could not get executed on this trade, as the brokers trading platform would reject your order, for the reason of having insufficient funds in your account).
So, your account balance has to be minimum $280. $250 for margin and $30 for the trade.
BUT….IF, after you have initiated the trade to buy USD/JPY at 112.13, and the USD/JPY falls the next second 1 pip ( approx. $8), your position would be closed automatically, because of margin deficit.
I will explain later about having an adequate account size to trade the Forex Market.
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded.
The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Some of the most common symbols used in Forex are:
USD – The US Dollar
EUR – The currency of the European Union “EURO”
GBP – The British Pound or cable
JPY – The Japanese Yen
CHF – The Swiss Franc
AUD – The Australian Dollar
CAD – The Canadian Dollar
There are symbols for other currencies as well, but these are the most commonly traded ones.
A currency can never be traded by itself. So you can not ever trade the USD by itself. You always need to BUY one currency and SELL another currency to make a trade possible.
Some of the most traded currency pairs are:
EUR/USD Euro against US Dollar
USD/JPY US Dollar against Japanese Yen
GBP/USD British Pound against US Dollar
USD/CAD US Dollar against Canadian Dollar
AUD/USD Australian Dollar against US Dollar
USD/CHF US Dollar against Swiss Franc
EUR/JPY Euro against Japanese Yen
The currency left of the / is called the base currency.
The currency right of the / is called the counter currency.
When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD.
If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency.
The best way to remember is, by just thinking of the entire currency pair as one item.
If you buy it…you buy the fi
rst currency and sell the second currency. If you sell it…you sell the first currency and buy the second currency.
That means you would to be able to short-sell with no restrictions so you could make money when the market drops as well as when it rises.
The problem with traditional stock market or commodity trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
Reasons to Trading Forex
More and more well informed investor and entrepreneurs are diversifying their traditional investments like stocks, bonds & commodities with foreign currency because of the following reasons:
1) FOREX is the largest financial market in the world.
With a daily trading volume of over $1.5 trillion, the spot FOREX market can absorb trading sizes that dwarf the capacity of any other market. In fact, when compared with the $50 billion daily market for equities or the $30 billion futures market, it becomes quickly apparent this gives you, and millions of other FOREX traders, almost infinite trading liquidity and flexibility.
2) FOREX is a True 24-hour market.
The FOREX Market never sleeps. Trading positions can be entered and exited at any moment around the globe, around the clock, 5.5 days a week. There is no waiting for an opening bell as in the case of trading stocks. It is a 24- hour, continuous electronic (ONLINE) currency exchange that never closes. This is very desirable for you if you want to trade on a part-time basis, because you can choose when you want to trade: morning, noon or night.
3) There is never a Bear Market in FOREX.
You can have access to a seamless exchange of currencies. Currencies trade in “pairs” (for example, US dollar vs. JPY (YEN) or US dollar vs. CHF (Swiss franc), one side of every currency pair (for example, USD/CHF) is constantly moving in relation to the other. Thus, when you buy a particular currency, you are actually simultaneously selling the other currency in that particular pair. As the market moves, one of the currencies will increase in value versus the other. Of course, it is up to you to choose the correct currency to be long ( you bought) or short( you sold).
4) High Leverage – up to 400:1 Leverage.
You are permitted to trade foreign currencies on a highly leveraged basis – up to 400 times your investment with Fenix Capital Management, LLC and with some other brokers.
Standard 100,000- US$ currency lots can be traded with as little as 0.25% margin, or $250.
Mini FX accounts are permitted to trade with just 0.25% margin, meaning, just $25 allows you to control a 10,000-unit currency position.
Futures traders, who are accustomed to margin requirements generally equal to 5-7%-8% of the contract value, will immediately recognize that the FOREX market provides much greater leverage, and for stock traders, who must post at least 50% margin, there’s no comparison. If you’re looking for an efficient use of trading , trade the Forex Market.
5) Price Movements might be Highly Predictable.
Currency prices in the FX market generally repeat themselves in relatively predictable cycles, creating trends. The strong trends that foreign currencies develop are a significant advantage for traders who use the “technical” methods and strategies.
Unlike stocks, currencies have the tendency to develop strong trends. Over 80% of volume is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. As a technically-trained trader, you can easily identify new trends and breakouts, to enter and exit positions.
6) YOU don’t pay commissions or fees to trade FOREX
When you trade FOREX, through Fenix Capital Management LLC (FCM) you can do it totally FREE of commissions and fees , regardless of your account size.
Fenix Capital Management LLC, requires a very low minimum amount to open a brokerage account, only US$ 200 and they do not charge commissions or fees to trade or to maintain an account, regardless of your account balance or trading volume.
7) YOU don’t have to pay trading fees or exchange fees.
There are none of the usual fees, which futures and equity traders are accustomed to pay:
NO exchange or clearing fees,
NO NFA or SEC fees.
Because currencies trade over-the-counter (OTC), via a global electronic network, in FOREX, what you see on your trading screen, is what you get, allowing you to make quick decisions on your trades without having to worry or account for fees that may affect your profit/loss or slippage.
In the equity and commodity markets, you must pay both a commission and exchange fees. The over-the-counter structure of the FX market eliminates exchange and clearing fees, which in turn lowers transaction costs.
HOW to Forex brokers make money if they don’t charge commissions?
Like all traded financial products, over-the-counter currency trading involves a bid/ask spread, which represents the prices at which your counterpart is willing to trade. Your broker will receive a part of this bid/ask spread.
Because the currency market offers round-the-clock liquidity, you receive tight, competitive spreads both intra-day and night. Stock traders can be more vulnerable to liquidity risk and typically receive wider trading spreads, especially during after-hours trading.
9) Market Transparency.
Market transparency is highly desired in any trading environment. The greater the market transparency, the more efficient the market becomes. Unlike other markets where transparency is compromised (like in the many recent scandals), FOREX markets are highly transparent (i.e., analyzing countries, and having access to real-time research / news, is easier than analyzing companies).
Because of this transparency, as an FX trader, you will be able to apply risk management strategies in accordance to your fundamental and technical indicators.
10) Instantaneous Order Execution
The FX market offers the highest level of market transparency out of all the financial markets. Because of this, order execution and fill confirmation usually occur in just 1-2 seconds.
In Forex, order execution is all-electronic and because you’ll be trading via an Internet-based platform, instantaneous execution is routine.
Why is Forex so Popular?
Forex and Forex Market
Because you can trade from anywhere. From your kitchen table, bedroom, garage or from the nearest Starbucks coffeehouse ( most of them have wireless Internet connection).
If you have or like to travel, take your laptop with you and you can trade the FOREX anywhere in the world where you have an Internet connection.
When you want to start trading the Forex Market nobody is asking you for a diploma, a formal license or a proof of how many hours you have spent studying the Foreign Exchange Market and/or Banking Industry.
FOREX Trading is Economical and Start-up Costs are Low!
You can open an account to trade Forex with as little as US$ 200 at he most brokerage firms.
I personally do recommend Fenix Capital Management, LLC, which offers a state of art Trading platform, that allows you to place orders directly by clicking on the chart.
The Main Benefits of Trading the FX Spot Market are:
YOU don’t pay commissions or fees!
YOU can trade 24-hours a day !
YOU can trade up to 400:1 Leverage !
YOU can have FREE Streaming executable Price quotes and live charts!
It is important to know the differences between cash FOREX (SPOT FX) and currency futures.
In currency futures, the contract size is predetermined.
With FOREX (SPOT FX), you may trade electronically any desired amount, up to $10 Million USD.
The futures market closes at the end of the business day (similar to the stock market).If important data is released overseas while the U.S. futures markets is closed, the next day’s opening might sustain large gaps with potential for large losses if thedirection of the move is against your position.
The Spot FOREX market runs continuously on a 24-hour basis from 7:00 am New Zealand time Monday morning to 5:00 pm New York Time Friday evening.
Dealers in every major FX trading center (Sydney, Tokyo, Hong Kong/Singapore, London, Geneva and New York/Toronto) ensure a smooth transaction as liquidity migrates from one time zone to the next.
Furthermore, currency futures trade in non-USD denominated currency amounts only, whereas in spot FOREX, an investor can trade in almost any currency denomination, or in the more conventionally quoted USD amounts.
The currency futures pit, even during Regular IMM (International Money Market) hours suffers from sporadic lulls in liquidity and constant price gaps.
The spot FOREX market offers constant liquidity and market depth much more consistently than Futures.
With IMM futures one is limited in the currency pairs he can trade. Most currency futures are traded only versus the USD.
With spot FOREX, you may trade foreign currencies vs. USD or vs. each other on a ‘cross’ basis, for example: EUR/JPY, GBP/JPY, CHF/JPY, EUR/GBP and AUD/NZD
RISK WARNING:
Risks of currency trading: Margined currency trading is an extremely risky form of investment and is only suitable for individuals and institutions capable of handling the potential losses it entails. An account with an broker allows you to trade foreign currencies on a highly leveraged basis (up to about 400 times your account equity). The funds in an account that is trading at maximum leverage may be completely lost if the position(s) held in the account experiences even a one percent swing in value, given the possibility of losing one’s entire investment. Speculation in the foreign exchange market should only be conducted with risk capital funds that, if lost, will not significantly affect the investors financial well-being.
5 Forex Trading Tips
Forex Trading Tips
Jumping into Forex trading with both feet? Here are five must-know tips on forex trading and mini forex to help you stay afloat in the Foreign Exchange currency market.
Forex Trader
Know your forex trading market.
Educate yourself about the currencies that you trade. The more you know about the country whose currency you’re trading in the forex market, the more accurately you’ll be able to predict which way the money will move.
Pick a forex trading system – and stick with it.
Savvy forex traders will tell you that system is everything. Forex trading by system lets you automate your trades based on history, following the traditional peaks and valleys. Set up a system and live with it to make the most of your forex trading.
Practice makes perfect – but it’s not the real world.
Practice forex trading accounts are great for learning how a particular trading account works – but they’re not the real world. Many experienced traders recommend starting off with a mini forex account to minimize your losses while you get acclimated.
Keep your eye on the margin.
Margin trading is a great way to lose a lot of money quickly. Stay away from forex margin trading until you’re sure you know what you’re doing.
The only win that counts in forex trading is the bottom line.
In forex trading, the bottom line is how much money you made at the end of the day. Don’t count won or lost trades – only dollars and cents.
